Strengthening Financial Integrity: The Santokhi Administration’s AML/CFT Initiatives in Suriname

Suriname, a vibrant South American nation, is steadily strengthening its anti-money laundering (AML) efforts under President Chandrikapersad Santokhi's leadership. Since 2020, the current administration has been committed to enhancing enforcement measures and improving regulations to reduce reliance on a cash-based economy. These ongoing efforts reflect the government's dedication to creating a more transparent and robust financial system, positioning Suriname as a nation determined to tackle money laundering head-on.

This piece focuses on the efforts of the current administration with President Santokhi in leadership.

Suriname's projected real GDP growth rate for 2024 is 3.0%, and its projected consumer price inflation rate is 20.7%. The outstanding purchases and loans from the IMF are 290.4 million SDR (as of June 30, 2024), and its Special Drawing Rights (SDR) are 105.68 million. 

The Santokhi administration in Suriname has been enhancing financial integrity through Anti-Money Laundering and Combating the Financing of Terrorism initiatives. They have implemented regulatory reforms to comply with international standards and address strategic deficiencies. They are also enhancing customer due diligence requirements and the effectiveness of the financial intelligence unit.

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Suriname’s AML/CFT Measures 

Suriname is enhancing its Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) framework to strengthen financial integrity. The government has introduced legal reforms and regulatory mechanisms to combat illicit activities and align with international standards. The initiatives, led by the Santokhi administration, aim to increase transparency in the banking system and promote compliance with global AML/CFT protocols.

Background on AML/CFT Challenges in Suriname

Suriname's financial system is under scrutiny due to its vulnerability to money laundering and terrorist financing, primarily linked to illicit activities like drug trafficking and the informal economy. The U.S. Department of State has classified the country as a jurisdiction of primary concern for money laundering, requiring urgent government action.

The picture is incomplete without mentioning the previous government, which was dictatorial in governance. The Desi government's Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) measures were criticised due to potential misuse of laws, particularly targeting NGOs like Amnesty International and Greenpeace. The Financial Action Task Force (FATF) emphasised the need for enhanced supervision in non-financial sectors, arguing that frameworks may not adequately address persistent vulnerabilities and risks in the overall financial system. It is to be noted that former president Desi Bouterse of the National Democratic Party (NDP) was convicted (for drug trafficking and murder) in absentia for drug trafficking in 1999.

Santokhi Administration's Initiatives

Image source: H.E. Chandrikapersad Santokhi

Since July 2020, President Chandrikapersad Santokhi's administration has focused on AML/CFT sector reforms, seeking technical assistance and funding from international financial bodies to enhance compliance frameworks.

Notably, the Santokhi administration has worked on:

Strengthening Legal Frameworks: The administration is working to establish laws that enhance the criminalisation of money laundering and terrorist financing in line with international standards.

The Santokhi administration in Suriname has introduced measures to improve the legal framework against money laundering and terrorist financing. In November 2022, they enacted a new Anti-Money Laundering and Combating the Financing of Terrorism law and amended existing legislation to strengthen customer due diligence requirements.

The government is focused on amending existing AML/CFT secondary legislation and related sectoral laws to address loopholes and improve enforcement mechanisms. The regulatory oversight framework for financial institutions is being developed, including a risk matrix for assessing and mitigating money laundering and terrorism financing risks.

Suriname is implementing capacity development projects to train law enforcement and regulatory authorities to implement and enforce new AML/CFT measures effectively. The emphasis on customer due diligence in financial transactions has led to financial institutions actively monitoring and reporting suspicious activities.

Regulatory Improvements: Existing regulatory regimes have been amended to improve customer due diligence practices and the effectiveness of the financial intelligence unit (FIU).

Collaboration with International Bodies: The administration has sought technical assistance from the IMF and collaborated with the CFATF to address the strategic deficiencies previously identified.

International Support and Funding

The $688 million loan secured by the Santokhi administration from the IMF in December 2021 served as a crucial lifeline for Suriname's struggling economy.​ By providing financial support under the Extended Fund Facility, the loan facilitated essential economic reforms to restore fiscal sustainability and stabilise the financial system. It specifically targeted improvements in the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework, bolstering institutional capacity to address corruption and enhance governance.

As a result, the loan not only helped to mitigate immediate fiscal pressures but also laid the groundwork for longer-term economic recovery, contributing to a gradual stabilisation of public finances, external balances, and the overall economy.

Progress in AML/CFT Compliance

Suriname's 2023 Mutual Evaluation Report assessed compliance with the Financial Action Task Force's 40 Recommendations. The report indicates Suriname "Compliant" for three recommendations and "Largely Compliant" for eleven, showing some progress. However, it remained "Highly Effective" for none and "Substantially Effective" for zero effectiveness ratings.

Effectiveness of Measures Implemented

The Santokhi administration has implemented several initiatives to improve the AML/CFT framework. Still, the effectiveness of these measures remains a concern due to ongoing challenges in implementing these frameworks, particularly in addressing strategic deficiencies and legislative reforms.

Continued Vulnerabilities: Suriname's casinos, real estate, and informal economy are vulnerable to money laundering due to inadequate enforcement and oversight. With only ten casinos regulated, unregulated operations pose significant risks, allowing illicit activities to thrive. This lack of regulation hinders progress in combating financial crime and corruption.

The Santokhi administration faces challenges in implementing private sector reforms due to historical corruption and political complexities within the coalition government. The presence of influential figures with questionable backgrounds complicates governance efforts, making it difficult to enforce regulations and secure institutional reforms. This lack of flexibility may lead to missed opportunities for public-private cooperation, hindering the government's ability to implement innovative solutions and potentially exacerbating administrative challenges, affecting economic progress and integrity initiatives.

Photo by Michał Parzuchowski on Unsplash

Public corruption: Public corruption erodes public trust, complicating the implementation of AML measures and creating systemic obstacles for reform efforts due to its intertwining with money laundering activities. 

The current coalition government's efforts to combat Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) have been hindered by challenges in implementing reforms. The coalition lacks the agility to make necessary adjustments, leaving gaps in compliance and enforcement. A future single-party government could enact robust legislation, streamlining requirements and enhancing regulatory effectiveness, potentially bolstering the country's ability to combat financial crime and improve financial sector governance. 

The current coalition government is making progress but has not adjusted enough, and the hope is that a single party will successfully pass the necessary laws in the next elections in 2025.

The Role of Financial Intelligence Units

Suriname's AML/CFT strategy includes establishing an efficient Financial Intelligence Unit (FIU) to enhance compliance with AML obligations. However, the FIU's effectiveness depends on adequate funding, trained personnel, and political support for investigations and prosecutions, particularly with designated non-financial businesses and professions.

Challenges Faced By the Government

Suriname's AML framework has faced political instability and institutional inefficiencies, leading to inconsistent regulation implementation. The 2005 FATF Mutual Evaluation Report highlighted significant deficiencies in Suriname's AML/CFT frameworks, which sometimes hinder the establishment of necessary legal and regulatory frameworks to combat financial crime effectively.

Corruption in Suriname hinders the implementation of robust AML/CFT measures due to high levels of procurement and public sector operations, making the environment vulnerable to illegal financial activities. The lack of transparency in governmental processes further exacerbates these challenges. President Santokhi's administration has recognised the need to combat corruption and promoted transparency initiatives within governance structures.

Image source: Transparency increases accountability

Suriname's financial intelligence unit (FIU) is facing capacity limitations, hindering its ability to analyse and investigate suspicious financial activities. The Santokhi administration is working to improve the FIU's capacity and engage with non-financial businesses and professions to understand compliance requirements. They are also aligning the FIU with international best practices, including exploring membership in the Egmont Group.

The CFATF has noted that Suriname has not made sufficient progress in addressing strategic deficiencies in the AML/CFT framework, prompting the Santokhi administration to engage in international cooperation to redefine its Action Plan. This includes focusing on measurable outcomes and regular consultations with international partners to ensure collective support in overcoming challenges.

The Santokhi administration must consistently implement international-sanctioned AML/CFT measures to strengthen the regime. Monitoring and evaluating these processes are crucial for mitigating money laundering and terrorist financing risks. Coherent strategies involving stakeholder involvement, public awareness initiatives, and transparent governance are needed for successful implementation in Suriname.

Measures Taken By the Santokhi Government

Any economy needs resolute and prudent measures to emerge from debt. Growth at a sustainable rate is also crucial. The Santokhi government has acted to lay a foundation for generations to come. Here are the actions taken:

Debt Restructuring: Suriname faced a severe debt crisis in 2020, leading to an initial default. In June 2022, the government restructured its debt with the Paris Club, and in May 2023, plans to restructure bonds were announced, completed in November 2023.

Fiscal Consolidation: The government reduced expenditure by prioritising essential services and increased revenue through improved tax collection and tax base expansion.

IMF Program: Suriname partnered with the International Monetary Fund (IMF) to stabilise its economy, providing technical assistance and financial support.

Results: The bond exchange in November 2023 stabilised spreads, boosting investor confidence. The measures brought economic balance to the budget and economy, as noted by the IMF. Expanded social protection programs protected vulnerable populations, ensuring economic stability and setting the stage for future growth in Suriname.

Success Stories of the Santokhi Government

The Santokhi administration has made significant strides in implementing effective Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) measures, demonstrating the effectiveness of operational and regulatory frameworks in combating financial crime and international standards.

Suriname was removed from the Financial Action Task Force's grey list in November 2021 for significant improvements in its AML/CFT framework, demonstrating the country's commitment to enhancing financial integrity.

Suriname's November 2022 AML/CFT law strengthened the legal framework and addressed deficiencies, improving compliance and enforcement measures.

The government has initiated capacity development projects, including training programs for financial institutions and regulatory bodies, to ensure the effective implementation of AML/CFT measures.

Suriname’s AML/CFT Regulatory Improvements

Under the Santokhi administration, Suriname has significantly improved its AML/CFT compliance regime, including criminalising money laundering and terrorist financing and strengthening customer due diligence requirements. This has significantly enhanced its compliance with the Financial Action Task Force (FATF) recommendations.

Risk-Based Supervision Framework Implementation

Suriname is implementing a risk-based supervision framework for AML/CFT measures, meeting international standards. This robust strategy monitors financial activities posing risks of money laundering or terrorist financing, demonstrating the government's commitment to enhancing the country's financial integrity.

Impact of Blacklisting on the Private Sector

International financial bodies like the FATF could blacklist Suriname's private sector, increasing scrutiny and compliance costs and hindering international financing and partnerships. This can deter foreign investment, limit global market access, and increase transaction costs. Reputational damage can also affect tourism and trade, straining the economy. Therefore, Suriname must maintain robust AML/CFT measures to avoid such consequences.

Image by the author (with AI)

Counter-Terrorism Financing Efforts

Suriname has made significant progress in combating terrorist financing, particularly through identifying and monitoring Designated Non-Financial Businesses and Professions (DNFBPs), which are crucial for detecting and preventing money laundering and terrorist financing, thus strengthening Suriname's defence against financing terrorism.

Balancing Compliance with Financial Inclusion

The administration acknowledges the potential negative impact of strict AML/CFT measures on financial inclusion. It focuses on preventing them from causing individuals to resort to informal financial systems, which may pose higher risks. The administration is working on a balanced approach to protecting financial systems while promoting accessibility.

The Santokhi administration has successfully implemented effective AML/CFT measures, demonstrating its commitment to combating financial crime and promoting a secure financial environment.

Future Outlook and Recommendations

The Santokhi administration should continue to enhance its regulatory framework and strengthen AML/CFT measures. Moving forward, several key recommendations can be made:

Enhanced Training and Resources: The government should allocate funds for training personnel across various sectors, including law enforcement, legal systems, and financial institutions, to enhance their understanding of AML/CFT regulations.

Image source: Legal system

Increased Transparency and Accountability: To foster public trust in the AML/CFT system, efforts should be made to establish transparent processes and increase accountability.

Ongoing Collaboration with International Bodies: Collaboration with international organisations like the IMF and CFATF is crucial for ensuring global standards are met and providing technical assistance tailored to Suriname's specific needs.

Public Awareness Campaigns: Public awareness campaigns on money laundering implications and the importance of compliance can increase societal support for anti-money laundering (AML) measures.

Recommendations

Considering the issues at the levels of the nation, the regional premise, and the global range, we have a few proposals:

The Santokhi administration must complete the necessary legislative reforms to align Suriname's AML/CFT laws with international standards set by the Financial Action Task Force (FATF). This includes ensuring the comprehensive criminalisation of money laundering and terrorist financing and implementing robust customer due diligence and reporting obligations for financial institutions and designated non-financial businesses and professions (DNFBPs).

Suriname's Financial Intelligence Unit must be enhanced to detect and prevent financial crimes by providing more resources and training, and adopting advanced technologies for analysing suspicious activity reports. Partnering with international bodies like the Egmont Group can also enhance knowledge sharing and collaboration.

Collaboration among governmental agencies in AML/CFT efforts is crucial. Regular meetings and a centralised information-sharing platform can promote a coordinated approach to combating financial crime. Utilising frameworks like the U.S. Interagency Statement on Sharing Bank Secrecy Act (BSA) Resources enhances resource pooling and cooperative initiatives.

Public awareness campaigns on money laundering and terrorist financing can educate citizens and businesses about risks, enforce compliance with AML/CFT measures, and encourage reporting suspicious activities. Collaborating with governmental agencies and developing a centralised platform can promote coordinated combat.

Image by the author (with AI)

The Suriname government should conduct regular risk assessments to identify financial system vulnerabilities, especially in money laundering and terrorist financing, to develop targeted strategies and policies. Participating in international forums and partnering with global organisations can enhance local authorities' compliance capabilities.

The proposed measures include strengthening the AML/CFT framework, improving financial intelligence, promoting transparency, collaborating with international bodies like the FATF and IMF, and fostering public-private partnerships to improve governance. These measures aim to regain credibility by implementing robust laws and regulations, enhancing financial intelligence, and fostering cooperation between the government and private sector to implement best practices.

Robust whistleblower protections can encourage individuals to report suspicious activities without fear of retaliation, facilitating the flow of critical information for effective AML/CFT enforcement efforts in both the public and private sectors.

A transparent registry for beneficial ownership can help identify individuals controlling companies, combating money laundering and terrorist financing by increasing financial transparency and aiding in identifying corporate entities.

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Conclusion

Suriname's Santokhi administration is enhancing its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) measures to combat corruption, money laundering, and financial crime. They've collaborated with international organisations like the IMF and CFATF, but challenges persist in their effectiveness and implementation, necessitating ongoing monitoring and reforms.

The 2021 removal from the FATF grey list marked a significant achievement in financial sector reforms, boosting investor confidence and improving the business environment. Public-private partnerships have led to infrastructure improvements and economic development projects, showcasing resilience. Eco-tourism efforts have attracted international visitors, contributing to economic diversification and growth.

The Santokhi government has made significant progress in improving Suriname's AML/CFT measures, but further efforts are needed to address weaknesses and foster collaboration. Implementing international practices and fostering a safer financial environment can enhance economic stability and integrity.

The Santokhi administration is enhancing Suriname's financial integrity, promoting a safer and more transparent financial landscape through anti-money laundering and counter-terrorism financing initiatives. These measures meet global financial norms and boost investor trust and international collaboration. Suriname is establishing itself as a bulwark against financial crime through collaboration with regulatory organisations and creative measures. The emphasis on accountability ensures long-term financial sustainability for Suriname's bright future.