Sint Maarten is a young country learning to stand on its own. The date that we celebrate as 10-10-10 gave us a new position of autonomy within the Dutch Kingdom. Sint Maarten now has a greater level of independence compared to the situation before 10-10-10. At the same time, this autonomy comes with new responsibilities. Now more than ever, Sint Maarten is seen as a major international player in the Caribbean. Although we as locals are very critical of Sint Maarten, Sint Maarten has been developing at an exponential rate. This, in itself, is a significant development. This rate of growth also means that the international community expects that St. Maarten maintains high standards, including having a financial sector that manages the risk of a growing economy. This article is meant to give you insight into St. Maarten’s new responsibilities regarding an up to code financial system. With the focus being on the urgent need for updated laws relating to anti-money laundering and terrorism financing.
What are anti-money laundering and terrorist financing measures?
Worldwide many institutions create, implement or monitor measures to prevent money laundering and terrorism financing such as the International Monetary Fund, the World Bank, the European Union. And locally, regional organizations such as the Caribbean Financial Action Task Force, the Central Bank of Curaçao and Sint Maarten, the Ministry of Justice of Sint Maarten and the local financial institutions such as banks.
But what do these parties actually do and why is this important?
These organizations define what kind of financial activities contribute to crime and what can be done to combat this.
Let’s begin with understanding what this means in regards to money laundering & terrorism financing.
Generally, measures to combat money laundering and terrorism financing make it difficult for criminals to make use of the financial sector to benefit from or further their illegal activities.
If someone is involved in criminal activities and make money from it and in turn, they use that money to purchase property, this act is called money laundering. Usually, when we hear the word property, we think of real estate; however, it is much broader than this. The term property refers to goods and property rights. Goods are the physical objects susceptible to human control, whereas property rights are abstract, such as owning a share in a limited liability company (Naamloze Vennootschap or N.V.).
“When money laundering laws are being put in place, we have to consider that people are smart and will look for ways to get around the law, resulting in rules that are useless.”
Known methods that are applied to launder money are:
– Assisting transactions in which it is clear that the origin of money is from illegal activities.
– Concealing the true nature, source or location of funds gathered from criminal activities and using it to purchase a property.
– Purchasing property on behalf of someone else who is involved in criminal
– Creating companies to create the appearance of legal activities while funding the activities of this company with funds that originated from illegal activities.
Let us begin with first understanding the seriousness of an act of terrorism.
‘An intentional act aimed to causing extensive destruction to a Government or public facility or an information system that is likely to endanger human life or result in major economic loss, is defined as a terrorist act. Terrorist act also include: attacks upon a person’s life which may cause death; attacks upon the physical integrity of a person or kidnapping or hostage taking.’
“See articles 1 to 4 of Council Framework Decision 2002/475/JHA, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2002:164:FULL&from=EN”
Sint Maarten is fortunate not to have been a victim to a major terrorist act as is seen daily in many countries in the world. However, there is a significant risk that terrorist organizations can make use of St. Maarten’s financial sector to finance terrorist activities in other countries. This risk then makes Sint Maarten liable (albeit indirectly) for facilitating their activities.
The common methods that are applied to launder money are also used to finance terrorism (see above).
This means that Sint Maarten, as an autonomous country within the Kingdom, has the responsibility of putting safeguards in place to prevent that the island is used to facilitate terrorist financing.
Measures to combat money laundering and terrorist financing
Above the simple and in many cases easy to monitor methods of money laundering and terrorist funding are listed. However it’s a lot more difficult to understand how this work. The people who create laws try to explain what measures should be taken and ends in rules that are hard to understand. This has as a result that, even if a financial institution wants to comply with the law they can not be sure if they are really following the law. This also creates room to willingly not apply the law. This grey area is what needs to be further defined with updated laws, because this is the area where activities of criminals tend to be centered.
The international community takes this seriously. They will not wait on Sint Maarten to update their laws. With every passing day, money can be laundered, which could be used to finance terrorism by making use of the weaknesses in Sint Maarten’s financial sector.
What these international organizations do is what is referred to as de-risking. This means that they put Sint Maarten on a blacklist and advise financial institutions to make use of other countries for payment transactions.
These institutions will advise Sint Maarten on what to do, but they will not force Sint Maarten to do what needs to be done and work around Sint Maarten.
The result of being placed on an international blacklist is that it becomes difficult for Sint Maarten to access the global financial markets. This results in a higher cost for every transaction on the island. Making it difficult to attract investors, which becomes difficult for the Government of Sint Maarten to make international financial agreements or for non-public companies to make agreements with the international community.
For the person on the road who is trying to make a living, it means that it becomes hard to get a loan and loans become more expensive. So for example, if you want to get a mortgage, it’s harder for you to qualify because international investors also fund banks and these investors will be reluctant to do business with Sint Maarten. It can also mean that credit card companies can make it difficult for tourists to use their credit cards on Sint Maarten. Which would result in loss of business.
So where do we go from here?
Sint Maarten needs to update its laws relating to anti-money laundering and terrorist financing as soon as possible or run the risk of being blacklisted by the international financial community.
It is impossible to outline the urgent need for updated laws relating to anti-money laundering and terrorist financing, in one article. So the Unleashed Potential Group Foundation will be releasing a series of articles that are meant to inform you about this complicated topic.
We will be addressing topics such as the importance of customer due diligence, (also known as “Know Your Customer” rules), onboarding of clients procedures, transaction monitoring and de-risking: The withdrawal of correspondent banking services.
This article was written by LLM. Carlvin Brooks
- He is the Chairman of the Unleashed Potential Group
- He has a master’s degree in Financial Law from the University of Leiden in the Netherlands.
- He is a law teacher for the department of AD. Accountancy by the Rotterdam Academy (Rotterdam University of Applied Sciences).
- He specializes in complex payment systems.
- Born and raised on the island of Sint Maarten.
Carlvin Brooks was assisted by the following UPG members in the creation of this article: