Today Newspaper St. Maarten

St. Maarten Airport regional hub for illegal money transports

POSTED: 01/18/12 12:22 PM

Ipol crime analysis report

GREAT BAY /By Hilbert Haar – St. Maarten offers countless possibilities to import and export large amounts of money and other contraband, the Ipol crime report notes in the chapter about money laundering. The Princess Juliana International Airport functions as a real regional hub for criminals.
“There are a few mail order companies that engage in transporting large amounts of illegal money. Respondents indicate that these companies organize daily flights with small pleasure aircraft between Princess Juliana International Airport and islands in the eastern Caribbean that transport unreported money in regular parcel-post packages.”
Regular companies like DHL, FedEx and UPS are abused for these transports “because they are able to fly packages to and from St. Maarten practically uncontrolled.” Private jets are also able to take money into and out of the country uncontrolled.

Moving large amounts of cash around this way is in general the first stage of money laundering. Customs reported fourteen unreported money- transports with a combined value of $608,000 over the past three years. For six transports customs issued a standard 10 percent fine.
“Most likely these six transports did not involve criminal money,” the report states. Customs confiscated money four times on the suspicion that it stemmed from criminal activities. From the $178, 000 officers confiscated, $100, 000 was “wrapped up cunningly.”
In 2010 the Coast Guard confiscated $180, 000 it found about a speed boat, a so-called go-fast. The suspect renounced the money and information from the investigation suggests that it stemmed from criminal activities.
The Customs Department did not do any further investigation into these transports.
“It is unusual that these transports were not reported. In some cases this oversight is due to ignorance on the side of transporters about legal guidelines for money transports. In other cases transports were not reported to facilitate moving criminal capital,” the report states.
The report also mentions smurfing as a method to move large amounts of cash. In such cases several people fly to St. Maarten and they all carry a part of the money, whereby each part stays under the reporting limit for Customs.
The money-laundering industry further involves money remitters, and underground banking systems. Three money remitters operate with a license: Western Union (three branches), Union Caribe (two branches) and Moneygram. These companies are under supervision of the Central Bank of Curacao and St. Maarten. Everybody who wants to transfer money to other countries through these companies is obliged to show identification and the companies are obliged to report unusual transactions.
There are also “four or five unlicensed money remitters active,” the report states. Several respondents told the report’s authors that several people use these illegal offices to move cash from St. Maarten to other countries.
The unlicensed money remitters do not report unusual transactions to the Center for Unusual Financial Transactions (MOT). The MOT installed reporting software at one of these companies, but according to the report, it has not reported any unusual transactions so far.
The report refers to the report the Scientific Research and Documentation Center (WODC) of the Dutch Justice Ministry published in 2007 about organized crime for a statement about underground banking. This so-called WODC-report mentions “suspicion of several sources that money is laundered via the Hawala banking system. The IPOL-investigation did not reveal any new information.
“But several respondents indicate that it is still possible to use the system because there is hardly any effort to supervise possible abuse. The large group of Indian entrepreneurs in St. Maarten uses the legal banking circuit sparingly and they also hardly use money remitters to send money.”
The researchers, Sally Mesu and Ewout Stoffers, base this conclusion on the registration of outgoing unusual transactions that are registered at the MOT. In those registrations India hardly appears as target country, while the countries of origin of other entrepreneurial migrant groups do appear. Examples are the United States, China, Haiti, Jamaica, Brazil and the Dominican Republic.

The Hawala system (also called hundi) is entirely based on the honor system. Wikipedia describes how the system works as follows: “In the most basic variant of the Hawala system, money is transferred via a network of Hawala brokers, or hawaladars. It is the transfer of money without actually moving it. In fact, a successful definition of the Hawala system that is used is: ‘money transfer without money movement’. A customer approaches a Hawala broker in one city and gives a sum of money to be transferred to a recipient in another, usually foreign, city. The Hawala broker calls another Hawala broker in the recipient’s city, gives disposition instructions of the funds (usually minus a small commission), and promises to settle the debt at a later date.”

The unique feature of the system is that no promissory instruments are exchanged between the Hawala brokers; the transaction takes place entirely on the honor system. As the system does not depend on the legal enforceability of claims, it can operate even in the absence of a legal and juridical environment. Trust and extensive use of connections, such as family relations and regional affiliations, are the components that distinguish it from other remittance systems. Informal records are produced of individual transactions, and a running tally of the amount owed by one broker to another is kept. Settlements of debts between Hawala brokers can take a variety of forms, and need not take the form of direct cash transactions.
In addition to commissions, Hawala brokers often earn their profits through bypassing official exchange rates. Generally, the funds enter the system in the source country’s currency and leave the system in the recipient country’s currency. As settlements often take place without any foreign exchange transactions, they can be made at other than official exchange rates.

Hawala is attractive to customers because it provides a fast and convenient transfer of funds, usually with a far lower commission than that charged by banks. Its advantages are most pronounced when the receiving country applies distortive exchange rate regulations (as has been the case for many typical receiving countries such as Pakistan or Egypt) or when the banking system in the receiving country is less complex (e.g. due to differences in legal environment in places such as Afghanistan, Yemen, Somalia). Moreover, in some parts of the world it is the only option for legitimate funds transfers, and has even been used by aid organizations in areas where it is the best-functioning institution.
Furthermore, the transfers are usually informal and not effectively regulated by governments; this is a major advantage to customers with tax, currency control, immigration, or other concerns. In some countries however, Hawalas are actually regulated by local governments and hawaladars are licensed to perform their money brokering services.”

In 2006 two law students at the University of the Netherlands Antilles in Curacao published their thesis Organized Crime in the Netherlands Antilles; Counterfeiting and Money laundering in the Windward Islands. Beatriz Doran-Scoop and Margriet Vink concluded in their work – that later became a part of the WODC-report.
“The fact that many counterfeit products in the Netherlands Antilles are sold in shops that are run by Indians (Hindus) seems to be a realistic indication for a link between counterfeiting and the Hawala system (informal banking system predominantly used by Indians – ed.). The fact that Indian merchants were involved in practically all examples of counterfeiting we have mentioned, supports this suspicion.”