IIEffective Insolvency and Creditor Rights Systems
There is insufficient publicly available information regarding the Dominican Republic's compliance with the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. Although there is a legal insolvency framework based upon the Commercial Code and a 1956 law aimed at conciliation between debtor and creditor interests, it is very rarely used and has been described in the 2006 publication by the law firm Pellerano and Herrera as "obsolete." The Commercial Code is modeled on the 1807 French Commercial Code, and Part III of the Code sets forth a complex bankruptcy/insolvency procedure. Any business that fails to meet its obligations is considered bankrupt by law, and debtors may face further, criminal penalties, if they are found to have caused the bankruptcy through negligence or fraud.
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NCInternational Financial Reporting Standards
Since January 1, 2000, enterprises in the Dominican Republic must apply International Financial Reporting Standards (IFRSs) when preparing statutory financial statements. According to a 2004 World Bank assessment, in a resolution dated September 14, 1999, the Institute of Chartered Accountants of the Dominican Republic mandated the use of international standards instead of the national standards and principles previously in existence. However, the World Bank clarified that IFRSs do not apply to certain sectors which adhere to specific rules issued by the respective regulatory agencies: the Superintendency of Banks (SB), the Superintendency of Insurance (SIS), and the Superintendency of Pensions (SIPEN). These rules, the report noted, differ significantly from IFRSs. The World Bank, therefore, recommended harmonizing regulatory accounting principles for banks, insurance companies and pension funds with IFRSs in the medium term, implying the next 1 to 2 years. Despite the recommendation, as of April 2006, the situation in the Dominican Republic had not changed. A 2006 presentation by Agustin Lizardo reiterated that companies regulated by the SB, SIS and SIPEN still adhere to rules set by the respective regulators. Dominican small and medium size enterprises (SMEs) are required to use IFRSs in preparation of financial statements, and the World Bank recommended amending the legal framework to ease off the regulatory burden on such entities.
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IIPrinciples of Corporate Governance
A 2004 World Bank assessment of the Dominican Republic accounting and auditing practices observed that corporate governance is at an "incipient stage" and that the existing Dominican corporate governance framework suffers from many weaknesses. For instance, the World Bank noted that audit committees are not mandated in law and that external auditors are not legally required to attend the shareholders' annual general meeting. Also, there is no provision under the law for civil or criminal penalties to deter fraudulent or misleading financial reporting by boards of directors and/or management. More recently, a 2007 IMF paper finds the protection of minority shareholders to be weak. A code for corporate governance does not yet exist in the DR. A 2007 Latin American Venture Capital Association "scorecard" on the Dominican Republic's corporate governance and related practices observed that the DR adopted International Financial Reporting Standards; however, enforcement and sanctions remain weak. Nonetheless, overall, the publicly available information does not directly assess the DR's compliance with the Organization for Economic Co-operation and Development Principles of Corporate Governance.
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ENInternational Standards on Auditing
As stated in a 2004 World Bank assessment of Dominican accounting and auditing practices, since the official adoption in 1999, International Standards on Auditing (ISAs) are mandatory for all audits in the Dominican Republic. More recently, a 2007 Institute of Chartered Accountants of the Dominican Republic (ICPARD) self-assessment confirmed that the Dominican Republic adopted the International Auditing and Assurance Standards Board (IAASB) pronouncements without any modifications. Furthermore, the self-assessment explained that the IPCARD uses the Handbook of International Auditing Assurance and Ethics Pronouncements, translated by the Mexican Institute of Public Accountants and the version in use is the 2006 edition. The World Bank commended the DR's adoption of international standards on auditing; nevertheless, it observed that systemic weaknesses due to the lack of resources, practical and technical expertise, and effective monitoring and sanctions regime hindered compliance with ISAs. Therefore, the World Bank recommended strengthening the monitoring and enforcement regime in the Dominican Republic. It advised that Dominican authorities should require enterprises to file annual audited financial statements and establish an oversight body for the audit profession. The World Bank also found the accounting and auditing requirements for small and medium-size enterprises to be too stringent and recommended easing off the regulatory burden on these entities.
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IIAnti-Money Laundering/Combating Terrorist Financing Standard
According to a 2008 report by the U.S. Department of State, the government of the Dominican Republic has been enhancing its legislative framework to combat money laundering, however, weak implementation of anti-money laundering (AML) legislation makes the DR susceptible to criminal financial activity particularly given the fact that it is a major transit country for drug trafficking. The report adds that although legislative and oversight provisions are in place in the financial sector, there persists a lack of coordination among various authorities responsible for AML activities. Most significantly, the U.S. DoS report points out that the DR has not enacted a specific piece of legislation criminalizing the financing of terrorism. Since in 2005, the UIF was replaced by the UAF as the financial intelligence unit of the Dominican Republic, the report notes that there is confusion with regard to the roles and functions of the former and the current Financial Intelligence Unit in the Dominican Republic. Despite the above descriptive information, none of the publicly available sources of assessment explicitly address the Dominican Republic's actual compliance with the Financial Action Task Force's 40+9 recommendations for AML and special recommendations for terrorist financing.
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IDCore Principles for Systemically Important Payment Systems
The Payments System in the Dominican Republic (SIPARD) is the central payments system in the country. The 2002 Monetary and Financial Law governs the SIPARD. Per Article 27 of the Law, the Central Bank of the Dominican Republic (BCRD) is the final settlement agent as well as the supervisor of the SIPARD. In 2005, the Dominican Republic launched a Financial Sector Technical Assistance Project with a World Bank loan in the amount of USD 12.5 million. A 2003 World Bank Project Appraisal document on the then proposed loan mentions that one of the key project components is the reform of the payments and settlement systems in the DR along with a reform of the legal and regulatory framework and establishment of a clear oversight function and capacity for the BCRD. The reform, per the BCRD website, is based on the Core Principles for Systemically Important Payment Systems established by the Committee on Payment and Settlement Systems. The project is expected to reach completion in 2008. A 2007 World Bank report on the Status of Projects in Execution in the Dominican Republic notes that the BCRD formally launched the payment system reform project and is in the process of establishing a real-time gross settlement system. A draft of the new regulatory framework that will govern the SIPARD has also been prepared. The BCRD is an active member of the Central American Monetary Council, which is developing a regional project titled "Strengthening and Harmonization of Payment Systems," to strengthen the payments systems within and support regional financial integration of the member countries, as mentioned on the BCRD website.
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