Dear Editor,
In 2012 St. Maarten underwent a Caribbean Financial Action Task Force (CFATF) Mutual
Evaluation and its results were alarming. St. Maarten will be reviewed once more by a team of international assessors from the CFATF, starting September 16, 2024, for about two weeks. This review considers St. Maarten’s compliance with the Financial Action Task Force’s (FATF’s) 40 Anti-Money Laundering and Counter-Terrorism Financing Recommendations and the FATF as part of a coordinated worldwide approach to fighting organized crime, corruption, and terrorism.
Understanding the CFATF
Through the Kingdom of the Netherlands, St. Maarten participates in the FATF, which sets international standards to guarantee national authorities can efficiently pursue illegal funds connected to drugs trafficking, the illicit arms trade, human trafficking, cybercrime, money laundering and other major crimes.
As a full member of the Caribbean Financial Action Task Force, the FSRB (FATF-Style Regional Bodies) for the Caribbean region, St. Maarten not only has to follow the 40 recommendations regarding prevention and detection of money laundering and terrorism and proliferation financing, but also has to demonstrate that the particular actions taken are successful. FATF issues their recommendations according to four levels of compliance: Compliant (C), Largely Compliant (LC), Partially Compliant (PC), Non-Compliant (NC), or could, in exceptional cases, be marked as not applicable (NA). NC and PC represent the lowest ratings a country can obtain.
Concerns from 2012
In 2012 St. Maarten received ratings of PC and NC on 14 of the 16 core and key recommendations. St. Maarten was also rated partially compliant or non-compliant in 20 of the 24 non-core and non-key recommendations. Regarding compliance with the 9 special recommendations to counter terrorism financing, 4 were rated as PC and 5 as NC in St. Maarten. In 2012, evaluators found that St. Maarten had no regulatory and supervisory anti-money-laundering and counter-terrorism-financing authority for casinos and online casinos. That remains true in 2024, 12 years later.
The evaluators were extremely concerned about the lack of qualified law enforcement officials to investigate money-laundering as well as the limited and relevant investigations by the Prosecutor's Office.
In 2022, a well-known casino’s bank accounts were closed due to a change in risk profiles that did not match the bank’s risk appetite. The harsh reality is that the delays in Parliament by several factions over the years contribute to why the CFATF recommendations and regulations have not been met as yet. On the floor of Parliament PFP has sounded the alarm during the previous administration regarding these issues, to be met with silence and inaction.
What this means for St. Maarten now
Most local banks handle international financial transactions for their clients (i.e. when an individual or business wants to send funds to another country), and they need overseas correspondent banks to do this process. The FATF pressures foreign correspondent banks to employ a risk-based strategy when doing business with local banks and conduct risk assessments to see if high-risk customers/businesses will utilize them.
If the correspondent bank finds that the local bank has high-risk customers who do not comply with FATF’s recommendations or their own anti-money-laundering national laws, it will end the relationship and advise other correspondent banks not to do business with them, leaving local banks unable to process overseas transactions for clients. To avoid this, local banks impose strong anti-money-laundering compliance regulations on their clients, which can close their accounts. Correspondent banks, among others, will now be very interested to see how St. Maarten will be evaluated in September 2024. They will have in mind the hefty US $150 million penalty that the New York State Department of Financial Services (DFS) issued in July 2020, to Deutsche Bank AG.
Final Thoughts
This will not only impact clients who heavily rely on financial products on our island but regular people such as caretakers who transfer money between countries, students in school outside of the Kingdom, and the everyday St. Maartener who is considered at risk for banking. This decision also impacts our ability to easily negotiate digital payments (i.e. Paypal) and bring St. Maarten into the future with banking. Additionally, this will have a severe impact on our country’s financial, economic and investment environment and products. We all have to work together to get St. Maarten to pass through this CFATF 2024 evaluation.
Along with regulating taxation and tendering, we at PFP believe that attaining a positive compliance result from the CFATF is an important step toward ensuring financial access and opportunity for all St. Maarteners. With a voice in Parliament, I will be able to continue to champion these improvements and remind us of these approaching deadlines. As a legal professional, it is my hope to see the country raise our standards and take our place amongst our peers.
Raeyhon Peterson
