Aruba’s AML/CFT Regime Lacks Coherence and Effectiveness, Says Report

A recent report on Aruba’s anti-money laundering (AML) and combating the financing of terrorism (CFT) measures has highlighted several weaknesses in the island nation’s regulatory system. The report, released in December 2008, concludes that Aruba’s AML/CFT regime lacks coherence and effectiveness, and recommends several steps to strengthen it.

Weaknesses Identified

Criminality and Money Laundering

• The level of criminality in Aruba is generally low, but has increased significantly over the past decade due to its geographical location and travel facilities.
• Money laundering is primarily linked to drug trafficking, and risks have been identified in the real estate and jewelry sectors, as well as through the misuse of exempt companies.

Economic System

• Aruba’s economic system is largely based on tourism and oil refining, but has actively sought to diversify its economy by developing offshore activities such as banking and company registration.
• However, measures to ensure transparency and integrity in these vehicles are inadequate.

Lack of Effectiveness

Criminalization of Terrorist Financing

• Aruba has chosen not to criminalize terrorist financing as required by international standards, citing existing provisions in its Criminal Code.
• The assessment team rejects this argument and urges Aruba to urgently criminalize terrorist financing as a separate offense.

Recommendations for Improvement

Review of AML/CFT Regime

• Aruba should review the structure of its AML/CFT regime, including legislation and resource allocation.
• Clearly defined tasks and priorities should be provided to agencies responsible for implementing these measures.

Unregulated Entities

• Many financial activities are being performed by unregulated entities, creating potential opportunities for money laundering and other criminal activity.

Legislative Gaps

Basic Preventive Legislation

• Aruba’s basic preventive legislation for AML/CFT is set out in two state ordinances.
• The report argues that these laws have gaps relative to international standards and lack clarity and consistency.

New Legislation

• The report recommends that Aruba prepare new and coherent legislation that implements all FATF requirements.

Supervision of Financial Institutions

Inefficient Supervision

• The supervision of financial institutions by both the MOT (Aruban FIU) and the Central Bank of Aruba is inefficient and overlapping.
• The report recommends that supervision be reorganized and strengthened.

Central Bank Role

• The Central Bank should supervise all types of financial institutions for their AML/CFT obligations, with regular consultation with the FIU.

International Cooperation

Enhancements Needed

• While a basic system for international cooperation is in place, Aruba should introduce enhancements at both judicial and administrative levels.
• Reviewing and updating legislation to ensure compliance with international standards is also recommended.