Suriname’s AML/CFT Scams: Which Sectors Are Most Vulnerable?

Suriname, a vibrant South American nation under President Chandrikapersad Santokhi's administration, is enhancing its anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts. The government aims to reduce reliance on cash-based economies and promote a transparent financial system. It also addresses scams and illicit schemes linked to money laundering and terrorist financing, reflecting a global commitment to tackling these complex issues.

Due to its trade routes, Suriname, a key player in the Caribbean Financial Action Task Force, is crucial for maintaining secure financial systems. Strengthening its AML/CFT framework is essential for preventing sanctions and enhancing its ability to engage in global trade and finance.

This piece unmasks the vulnerable sectors in which financial scandals are most active. It references real-world scenarios, allowing readers to gain a deeper insight into the subject matter.

Image source: President Santokhi

The Context

Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) are critical components of global financial security. These measures help prevent illicit activities such as money laundering and terrorist financing, which can destabilize economies and threaten national security.

Suriname's history with the Financial Action Task Force (FATF) underscores the importance of AML/CFT. The country was placed on the FATF grey list, indicating deficiencies in its AML/CFT frameworks. However, under President Chandrikapersad Santokhi's leadership, Suriname has implemented significant reforms to address these issues, including strengthening legal frameworks and enhancing public-private partnerships.

The Vulnerable Sectors

Suriname's financial sector is vulnerable due to its reliance on cash transactions, which complicates monitoring and controlling money laundering activities. High-risk areas like casinos and gaming require stricter AML/CFT regulations. Suriname's informal economy, including remittance services and trade, presents challenges in enforcing anti-money laundering and combating terrorism financing. Gaps in regulatory oversight and enforcement can hinder the detection and prevention of financial crimes. The broad sectors are as follows:

Financial Sector

face scrutiny for their role in anti-money laundering and combating financing terrorism due to deficiencies in their compliance systems. Despite improvements, these institutions struggle to implement robust measures, leading to concerns about their ability to prevent illicit financial activities. The lack of adequate infrastructure makes the banking sector vulnerable to money laundering and terrorist financing, undermining the financial system's integrity.

Image source: Central Bank of Suriname

Suriname's banks and financial institutions are working to improve their compliance frameworks, but progress is slow and systemic issues related to financial crime remain. The global community closely monitors the country's financial sector, evaluating and recommending improvements in AML/CFT practices and strengthening financial institutions' defenses.

Role of Compliance Failures and Regulatory Gaps

Compliance Failures: Inadequate bank compliance mechanisms, including insufficient Know Your Customer (KYC) processes and a lack of regular audits, have been a significant factor in facilitating scams.

Regulatory Gaps: The issue was exacerbated by weak regulatory oversight, which allowed these activities to go unnoticed for extended periods, and the absence of stringent penalties and enforcement actions.

Image source: Money laundering

Non-Banking Financial Institutions (NBFIs)

Examples of money laundering through insurance companies, credit unions, and microfinance institutions are:

Insurance Companies: Life insurance policies have been used to launder money by making large premium payments and prematurely cashing out the policies.

Credit Unions: Credit unions are more vulnerable to money laundering due to their lower regulatory requirements than traditional banks.

Microfinance Institutions: Microfinance institutions have been accused of funneling illicit funds under the guise of small business loans.

Impact of Weak Oversight and Internal Controls

Weak Oversight: Insufficient oversight mechanisms for Nonbank Financial Institutions (NBFIs) have made them attractive targets for money launderers, as regulatory bodies often lack the resources and expertise to monitor these institutions effectively.

Internal Controls: NBFIs often face issues with internal controls, including inadequate transaction monitoring systems and insufficient staff training on AML/CFT protocols, which facilitates undetected illicit activities.

Case Studies of Major Scams Involving Local Banks

In 2021, several banks were implicated in a massive money laundering scheme uncovered through irregular transactions flagged by international partners, leading to a comprehensive investigation. The scandal primarily revolved around Hakrinbank, De Surinaamsche Bank (DSB), and Finabank. In 2022, the Central Bank of Suriname (CBvS) came under investigation when high-ranking officials were implicated in unlawful transfers and attempts to hide the origins of illicit funds.

Image source: Suriname Bank Selects Tookitaki to Ensure Sustainable Financial Compliance Monitoring

Real Estate

Suriname is grappling with a growing issue of real estate scams, particularly in the areas of anti-money laundering and combating financing of terrorism. The sector, often vulnerable to money laundering, is exploited by criminals to hide illicit funds through property transactions. Despite efforts to improve AML/CFT measures, the real estate sector remains a key area for criminal activities, necessitating stronger regulations and improved transparency.

Image source: Real estate laundering

Suriname has made progress in addressing its AML/CFT deficiencies through new financial sector regulations but still faces challenges in financial supervision effectiveness and strategic deficiencies. Strengthening the legal framework and regulatory compliance is crucial for improving the country's overall performance.

Challenges in Tracking Illicit Funds in Property Transactions

Complex Ownership Structures: The use of intricate ownership structures, such as trusts and offshore companies, complicates the identification of property owners.

Lack of Transparency: Insufficient transparency in property transactions and inadequate record-keeping practices hinder tracking illicit funds.

Limited Resources: Regulatory bodies often lack the resources and expertise to monitor and investigate suspicious property transactions effectively.

Property Market Manipulations

Some instances of money laundering through real estate investments are:

Case 1: High-Value Property Purchases: Wealthy individuals have been known to purchase high-value properties using illicit funds, often through shell companies or third parties, to obscure the true ownership.

Image source: Shell companies

Case 2: Overvaluation and Undervaluation: Properties are sometimes deliberately overvalued or undervalued in transactions to launder money. This manipulation helps in transferring illicit funds while appearing legitimate on paper.

Trade and Commerce

Suriname faces a significant challenge in combating Trade-Based Money Laundering (TBML), which involves criminals moving illicit funds across borders under the guise of legitimate trade. These practices can distort trade figures and reduce tax revenues. To combat this, Suriname is strengthening customs and border control, improving screening procedures and reporting mechanisms. These efforts align with broader AML/CFT initiatives to reduce financial crime in trade and commerce.

Trade-Based Money Laundering (TBML)

Some techniques used in TBML are:

Over-Invoicing: Inflating the value of goods on an invoice allows additional funds to be transferred to the exporter, such as a company exporting goods worth $100,000 but invoiced at $150,000.

Under-Invoicing: This technique involves undervaluing goods on invoices to retain funds in the importing country, such as $1 million worth $900,000, allowing the importer to keep $100,000 of illicit funds.

Image source: Invoice fraud

Multiple Invoicing: Issuing multiple invoices for the same shipment can justify multiple payments, potentially processing them through different banks to avoid detection.

False Description of Goods: Misrepresenting the type or quality of shipped goods, such as exporting counterfeit goods as genuine items or vice versa.

Customs and Border Control

Some efforts to strengthen customs regulations and prevent TBML are:

Enhanced Screening Procedures: Advanced screening technologies and risk assessment tools are being implemented to detect suspicious trade transactions.

Training and Capacity Building: The government conducts regular training programs for customs officials to identify and respond to TBML indicators.

Image source: TBML - an illustration

International Cooperation: The initiative involves collaborating with international organizations and neighboring nations to exchange intelligence and best practices in combating TBML.

Regulatory Reforms: To develop the economy, stricter regulations and penalties for trade-related offenses, such as mandatory reporting of high-value transactions and enhanced due diligence requirements, are introduced.

Notable Cases and Their Economic Impact

The Trading Scandal: In 2022, a Suriname-based trading company was implicated in a TBML scheme, resulting in significant economic losses and damage to the country's trade sector due to regulatory gaps and over-invoicing.

Export Fraud: In 2023, authorities discovered a network of companies involved in multiple invoicing and false goods descriptions. This led to millions of dollars in illicit fund laundering, which resulted in tax revenue loss and increased international trade partner scrutiny.

Trade-Based Money Laundering (TBML) poses significant risks to Suriname’s financial integrity, given the complexity and international nature of this illicit activity. Strengthening AML/CFT frameworks is crucial to addressing TBML vulnerabilities, particularly through enhanced financial monitoring and regulatory compliance. Continued cooperation with international bodies and implementing targeted policies can mitigate these risks and ensure a more robust financial system.

Cryptocurrency and Digital Assets

Cryptocurrencies pose a significant threat to Suriname's Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) efforts due to their anonymity and cross-border transaction capabilities. Regulatory frameworks in Suriname are still catching up with the rapid evolution of digital assets, leaving gaps for criminals to exploit. The decentralized nature of cryptocurrencies hinders enforcement actions, and recent cases of digital asset scams have underscored the economic and security risks.

Emerging Threats

Cryptocurrencies, despite their anonymity and ease of cross-border transactions, have been linked to illicit activities in Suriname due to the absence of comprehensive regulations.

Regulatory Challenges and Enforcement Actions

Regulatory Challenges: Suriname faces challenges regulating cryptocurrencies due to their rapidly evolving nature and lack of a dedicated legal framework. The Central Bank of Suriname has not yet implemented specific regulations.

Enforcement Actions: Despite regulatory gaps, efforts are being made to combat illegal cryptocurrency activities through international collaborations to prevent the misuse of digital assets.

Case Studies

Some specific incidents involving digital asset scams are:

Case 1: Ponzi Scheme: In 2022, a Ponzi scheme involving a cryptocurrency investment platform was discovered. The scheme promised high returns but ultimately collapsed, causing substantial financial losses for investors.

Image source: Ponzi scheme

Case 2: Fake ICOs: Several fake Initial Coin Offerings (ICOs) have been reported, where fraudsters raised funds from investors for non-existent projects. These scams exploited the lack of regulatory oversight and the growing interest in digital assets.

Public Sector and Government

Suriname's corruption scandals involving government officials have damaged public trust and hindered anti-money laundering (AML/CFT) enforcement. The country struggles to meet global standards and faces international tension. President Santokhi's administration has introduced reforms to strengthen institutional capacity and legal frameworks, but corruption persists at various government levels, with some officials complicit in money laundering schemes. Further reforms and enforcement measures are needed to restore public trust and secure international cooperation.

Cases of Corruption and Fraud

Some high-profile cases involving government officials are:

Case 1: Former Minister Scandal: A former minister was implicated in a 2021 corruption scandal. Public funds were misappropriated, and the official diverted substantial funds for public projects into personal accounts.

Image source: A bribery scenario

Case 2: Customs Bribery Case: In 2022, several customs officials were arrested for accepting bribes to facilitate smuggling, highlighting systemic corruption within the department and prompting a significant overhaul.

Impact on Public Trust and International Relations

Public Trust: High-profile corruption cases have significantly damaged public trust in government institutions, leading to frustration and disillusionment due to a perceived lack of accountability and transparency.

International Relations: Corruption scandals in Suriname have led to increased international scrutiny, impacting foreign investment and cooperation in various sectors.

Amusement, Gambling, and Recreation

Suriname's government is focusing on improving its AML/CFT frameworks to prevent money laundering in its recreational activities, including gambling. Casinos and betting industries are often targets for money laundering schemes, where illegal funds are disguised through gambling. The government is enhancing oversight in these sectors to detect and prevent fraudulent transactions linked to money laundering. While these activities offer economic and social benefits, they must align with international AML/CFT standards to prevent misuse by criminal organizations.

Image source: AML/CFT

Suriname is taking significant steps to strengthen its AML/CFT (Anti-Money Laundering and Combating the Financing of Terrorism) frameworks, particularly in sectors like gambling and casinos, which are often vulnerable to money laundering activities. Here are some key details:

Enhanced Regulatory Measures

The government is introducing stricter licensing requirements for casinos and betting establishments, including thorough background checks on owners and operators to prevent criminal activities. Additionally, casinos must implement robust transaction monitoring systems to detect suspicious activities.

As a rule, gambling establishments in Suriname report suspicious transactions to the Financial Intelligence Unit (FIU), including those avoiding reporting thresholds. The country collaborates with international organizations like the Financial Action Task Force (FATF) to align its AML/CFT measures with global standards and receive technical assistance.

Training and Awareness

Staff Training: Gambling sector employees are trained to identify and report suspicious activities, including understanding criminal methods for laundering money through gambling.

Public Awareness Campaigns: The government is launching public awareness campaigns to raise awareness about the risks of money laundering and the significance of AML/CFT measures.

Technological Integration

Blockchain Technology: Blockchain technology is being explored for its potential to improve transparency and traceability in the gambling sector by providing a secure, immutable record of transactions, thereby preventing illicit activities from going unnoticed.

Image source: Blockchain

Digital Identification Systems: Digital identification systems can enhance customer identity verification and prevent the use of fake or stolen identities in gambling activities.

While the gambling industry can provide economic benefits, such as job creation and tourism, these activities must be conducted within a framework that prevents misuse by criminal organizations. By aligning with international AML/CFT standards, Suriname aims to create a safer and more transparent environment for operators and patrons.

International Cooperation

Strengthening international cooperation involves establishing data-sharing agreements with other countries to exchange trade information and detect cross-border TBML schemes. Additionally, participating in joint operations with international customs and law enforcement agencies is crucial for effective combat.

Suriname has made significant strides in combating money laundering and terrorist financing through international cooperation with organizations like the Financial Action Task Force and the Caribbean Financial Action Task Force. However, challenges remain in implementing recommended reforms. Extradition and legal assistance agreements have been instrumental in addressing cross-border financial crimes, but gaps in mutual legal assistance and judicial cooperation hinder effective international efforts. Current efforts aim to strengthen international relationships and improve compliance with global AML/CFT standards.

Cases of Extradition and Legal Assistance

Some examples of cross-border legal actions and their outcomes are:

Case 1: Desi Bouterse: Desi Bouterse, former military dictator and president of Suriname, was convicted and sentenced to 20 years in prison for the extrajudicial killing of 15 political opponents in 1982, showcasing international legal cooperation.

Case 2: Customs Bribery Case: In 2022, several customs officials were arrested for accepting bribes to facilitate smuggling, necessitating cross-border cooperation to track and prosecute the involved individuals.

Summary of Key Findings

To sum up, the key findings are:

Financial Sector: Major bank and NBFI scams reveal significant compliance failures and regulatory gaps, allowing money laundering activities due to weak oversight and internal controls.

Real Estate: The property market has been exploited for money laundering through high-value transactions and valuation manipulations. However, tracking illicit funds remains challenging due to complex ownership structures and lack of transparency.

Trade and Commerce: Trade-based Money Laundering (TBML) techniques such as over-invoicing and under-invoicing are prevalent. Strengthening customs regulations and international cooperation are crucial to combating TBML.

Image source: Cryptocurrency

Cryptocurrency and Digital Assets: Cryptocurrencies are being used for illicit activities, posing a growing threat despite ongoing regulatory challenges and ongoing enforcement efforts.

Public Sector and Government: The Santokhi administration addresses corruption through legal reforms and transparency initiatives, addressing high-profile cases that have damaged public trust and impacted international relations.

Amusement, Gambling, and Recreation: Suriname's growing amusement, gambling, and recreation sectors pose significant risks for money laundering and terrorist financing due to large-scale fund flow. The Caribbean Financial Action Task Force (CFATF) has scrutinized Suriname's Anti-Money Laundering and Counter-Terrorism Financing measures. Still, the country is strengthening its regulatory framework to control these risks.

International Cooperation: Suriname's AML/CFT frameworks have been aligned with global standards through partnerships with international bodies like FATF and CFATF, leading to successful UN-supported projects and establishing the National Human Rights Institute.

Measures Taken by the Government

The measures include aligning Suriname's laws with international FATF standards to prevent money laundering and terrorism financing, improving Know Your Customer policies, introducing regular audits for suspicious transactions, implementing advanced monitoring systems for real-time tracking, and developing a comprehensive training program for financial institution staff to detect money laundering and terrorism financing schemes.

The Central Bank of Suriname plans to enhance collaboration with financial institutions to ensure compliance with AML/CFT regulations. They will establish an independent financial intelligence unit, enforce stricter penalties for non-compliance, require financial institutions to maintain detailed transaction records for at least five years and implement risk-based approaches to AML/CFT.

Image source: Financial Intelligence Unit (FIU)

The strategy aims to raise public awareness about Anti-Money Laundering and Countering the Financing of Terrorism regulations, improve digital infrastructure for efficient data sharing, establish clear reporting channels for suspicious activities, ensure NBFIs adhere to strict compliance standards, and enhance cross-border collaboration with regional organizations like CFATF.

The government has implemented measures to combat money laundering in real estate. These include increased due diligence requirements, public-private partnerships, legislative reforms, and training programs. The government has introduced stricter reporting requirements for high-value transactions and verified buyer identities. The collaboration between government agencies and private sector entities aims to share information and best practices for detecting and preventing money laundering. Additionally, new laws and regulations are being introduced to strengthen the legal framework.

A new project aims to establish a central registry for beneficial ownership information, ensuring transparency in corporate structures and enhancing public access to this information.

Image source: Public-private partnership

The Santokhi administration has strengthened legal frameworks by introducing new anti-corruption laws and amending existing ones, imposing more stringent penalties for corrupt practices. Independent anti-corruption agencies have been established to ensure impartiality in investigating and prosecuting corruption cases. Public-private partnerships are being formed to enhance transparency and accountability through joint training programs and best practices.

The government enhances transparency through mandatory asset disclosure and contract and expenditure publication. It also actively participates in global anti-corruption initiatives, collaborating with international bodies and neighboring countries to share information and best practices in corruption prevention.

Suriname's Bi-Annual Country Implementation Plan for 2024-2025, signed with the UN, aims to address policy and capacity gaps, while the National Human Rights Institute strengthens human rights and inclusivity. Despite these achievements, Suriname still faces resource and capacity constraints, hindering the efficient provision of basic services and governance in remote regions.

Suriname is partnering with the Financial Action Task Force and the Caribbean Financial Action Task Force to improve its AML/CFT frameworks and align regulations with international standards. In 2023, the UN provided $10 million for development projects.

Government measures include encouraging financial institutions to adopt advanced compliance technologies, performing national risk assessments to pinpoint vulnerabilities in the financial sector, enhancing transparency in beneficial ownership to curb illegal activities, working with international organizations such as the IMF for technical support in strengthening AML/CFT frameworks, and improving coordination between law enforcement agencies and financial institutions.

Recommendations for Strengthening AML/CFT Frameworks in Suriname

To further strengthen Suriname's AML/CFT (Anti-Money Laundering and Combating the Financing of Terrorism) frameworks, several key recommendations can be considered:

Enhance Regulatory Framework

Update Legislation: The AML/CFT laws should be regularly updated to comply with international standards, such as those set by the Financial Action Task Force (FATF).

Comprehensive Coverage: The aim should be to ensure that all financial institutions and designated non-financial businesses and professions (DNFBPs) are covered under AML/CFT regulations.

Improve Supervision and Enforcement

Strengthening supervisory bodies to monitor compliance and conduct regular audits and inspections of financial institutions and DNFBPs to ensure adherence to AML/CFT requirements is significant.

Enhance Financial Intelligence

The objective must be to improve the effectiveness of regulatory bodies like the Central Bank of Suriname (CBvS) and international bodies like the Financial Action Task Force (FATF) in monitoring and enforcing AML/CFT regulations across all sectors. Additionally, the goal is to enhance compliance mechanisms in financial institutions and NBFIs, including regular audits and improved Know Your Customer (KYC) processes.

Image source: Know Your Customer (KYC)

The Financial Intelligence Unit (FIU) must be strengthened by providing adequate resources and training for effective analysis and dissemination of financial intelligence and improving data-sharing mechanisms.

Increase Transparency and Beneficial Ownership

The Financial Crimes Enforcement Network (FinCEN) introduced a rule in August 2024 to enhance transparency in the U.S. residential real estate sector. The rule requires individuals involved in high-risk transfers to report such transactions. Other nations, including Suriname, are preparing to adopt the same. The government must focus on implementing this measure at a rapid pace.

Strengthen International Cooperation

There should be measures to enhance mutual legal assistance and extradition frameworks, and international information exchange networks should actively participate in combating cross-border money laundering and terrorist financing.

Enhance Risk-Based Approach

Regular national risk assessments must be conducted to identify and mitigate emerging AML/CFT risks. Tailored measures based on the risk profiles of different sectors and entities should be implemented.

Image source: Automated risk assessment tools

The enforcement approach must include the implementation of risk-based screening procedures to identify high-risk shipments and transactions and the use of advanced technology, such as X-ray scanners, automated risk assessment tools, and blockchain, to track and verify trade transactions.

Capacity Building and Training

Improving training programs for law enforcement, regulatory agencies, and financial institutions on best practices for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) is essential. Concurrently, implementing public awareness campaigns will help educate citizens about these issues.

Image source: Capacity building

Customs officials must be trained on TBML detection techniques, red flags, and trade-based financial crime trends. For global best practices, they should collaborate internationally with organizations such as the Financial Action Task Force and the International Finance Corporation.

Leverage Technology

Advanced analytics and artificial intelligence can detect suspicious transactions, while blockchain technology is being explored to enhance transparency and traceability in financial transactions.

Implementing these recommendations can significantly enhance Suriname's ability to combat money laundering and terrorist financing, ensuring a more secure and transparent financial system.

Public-private partnerships

Public-private partnerships are vital for enhancing collaboration between financial institutions and regulatory bodies in sharing information about suspicious trade activities, raising awareness about Trade-Based Money Laundering, and promoting compliance with reporting requirements, thereby enhancing defense against financial crime. Accountability could increase through such alliances.

Data Management

The fight against Trade-Based Money Laundering (TBML) relies heavily on comprehensive record-keeping and reporting. Authorities maintain extensive databases of trade transactions, enabling them to track and analyze trade flows, identify unusual patterns, and detect inconsistencies. Mandatory reporting ensures prompt investigation of potential TBML activities, while enhanced reporting mechanisms facilitate collaboration with banks and financial institutions.

Image source: Data management

International Cooperation

Conclusion

Suriname is highly vulnerable to Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) scams across various sectors. The financial sector, including banks and remittance services, is particularly vulnerable due to large transaction volumes. Real estate and high-value goods markets, like jewelry and art, are also susceptible to money laundering schemes.

Due to a lack of strict regulations, the mining industry, particularly gold, is vulnerable to illegal financial flows. Regular government monitoring is crucial to prevent misuse. The proliferation of digital currencies increases scam risks, and corruption in private and public sectors may create vulnerabilities for AML/CFT enforcement. Strengthening legal frameworks and international cooperation is essential to minimize these risks.

Suriname's AML/CFT vulnerabilities are widespread across traditional and emerging financial sectors, necessitating a comprehensive and proactive approach to combating financial crimes.

The Santokhi administration has been implementing proactive measures. The regulatory framework needs strict implementation over the coming decades. Perseverance on this could catapult Suriname’s place in the world to a much higher level.

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