Entities should demonstrate to the regulator that they have robust anti-money laundering measures in place.
Time is running out for Curaçao entities to implement strict policies and procedures around financial compliance. This is because an island-wide assessment is coming in 2024.
It’s not just an individual firm’s reputation that’s at risk, but also Curaçao’s valued place in the international financial system. Should the Dutch Caribbean island fail to satisfy regulators that its laws, financial systems, and companies are all compliant, it could lose the ability to conduct international business and transact with global banks.
For this reason, firms and their executives should not be complacent. In June 2024, agents from the Caribbean Financial Action Task Force (FATF) are expected to visit Curaçao to assess the island on the implementation of anti-money laundering (AML) policies. Reputational risk, and an inability to carry on doing business with the wider world are the potential consequences of failing to adhere to the FATF standards.
What’s the background to the FATF assessment in Curaçao?
In 2012, the FATF conducted a National Risk Assessment (NRA) of Curacao’s compliance with international anti-money laundering (AML) standards. The result was a requirement to implement a series of recommendations to ensure that Curaçao meets those AML standards. The June 2024 FATF assessment will determine whether the island has taken the necessary actions to comply with the international AML standards.
Who is affected by the FATF assessment in Curaçao?
The Financial Intelligence Unit of Curaçao (FIU) together with the Central Bank of Curaçao and Sint Martin (CBCS) have been proactive about informing firms of the upcoming assessment and of their obligations to detect and prevent international money laundering, the financing of terrorism, proliferation, and the misappropriation of funds.
Failing to satisfy the task force could have negative consequences for Curaçao. It could become more expensive to do business in Curaçao because international transactions will become more expensive. Also, international banks may be reluctant to transact with banks based on the island because they will be required to carry out extra due diligence.
The Curaçao financial sector is one of its most important economic pillars—and if the assessment doesn’t have a positive outcome, it won’t be the only sector affected. The entire island will feel the consequences—and therefore all sectors need to engage for the FATF assessment to be positive.
Who needs to be compliant?
Non-financial and financial service providers, regulators, and the Curaçao government all have their part to play. All organizations where financial transactions take place need to be compliant—this includes companies with accountants, notaries, real estate agents, as well as construction firms, and entities that trade jewelry or cars.
The results from the NRA have illustrated that many of these organizations don’t yet have policies and procedures in place on AML regulations, nor are the staff being trained accordingly. For some, the reason is that they didn’t fall under the remit of the regulator, or are not aware of what exactly they should comply with. However, entities in the non-financial sector need to be aware that the high standards around financial transactions apply to them too.
At the highest level, the FATF will be liaising with the regulators and the Government of Curaçao to ensure that AML regulations have been put in place, after which it will visit individual firms at random. It will be assessing whether organizations are compliant and have incorporated the AML rules and regulations into their policies and procedures, and whether they have measures in place to control and detect fraudulent or illegal activities and report them. They will also assess if the required training is provided to the staff.
The regulator’s goal is to ensure that all organizations are compliant, and inform these organizations on the subject. Nevertheless, if non-compliance persists, fines of up to USD $100,000 may be levied, which also carries reputation risk.
What is the goal of the FATF?
Overall, the task force will want to see that compliance measures are in place to detect suspicious transactions; this is an area in which the non-financial sector, which is unused to such checks, will face the greatest scrutiny.
The process can be time-consuming and expensive, but the penalties for non-compliance are potentially much worse. While organizations may see complying with these regulations as burdensome, it is necessary for Curaçao to remain a player on the world financial stage.
To manage the process, some entities use a third-party service provider who can review their procedures, identify gaps or weaknesses, and introduce measures to ensure they are fully compliant. A good service provider can help with AML training for staff, which is also a regulatory requirement.
Outsourcing brings other benefits, such as minimizing IT costs and software costs, as the mandatory screening of clients and personnel can be done by another party.
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