COMPLIANCE IN THE DUTCH CARIBBEAN
Curacao considers how the US deals with compliance
Compliance is essentially about systems and procedures at corporations, banks, funds, trust offices, insurance companies and the like, to ensure that their officers and employees are aware of and take steps to comply with the relevant laws and regulations. It is also referred to as ‘regulatory compliance’. Compliance is nowadays, in the aftermath of, Enron, for example, which collapsed in 2001, of the utmost importance. I will briefly discuss several compliance related issues below, however one should keep in mind that the concept of compliance is extremely broad.
The Netherlands Antilles has many laws and regulations which must be observed. Banks, for example, are under an obligation to know their clients (KYC principle), however they also have reporting obligations.
Other examples: an investment institution must, from the moment it is granted a license, meet certain requirements relating to expertise and trustworthiness, financial resources, management and business operation and information and reporting, on a continuous basis. Any financial service provider acting in the course of a business or profession is under the obligation to report unusual transactions to a particular governmental body. A corporation has to convene its annual general meeting within the period prescribed by the corporate code (corporate compliance). Providers of telecommunication services must comply with the regulations of the Telecommunications Bureau requiring them to provide services on a non-discriminatory basis and to file reports on a routine basis involving traffic flows, operating results etc.
The Netherlands Antilles Central Bank supervises inter alia, banks, trust companies, insurance companies and funds. One of the tasks of the Central Bank is monitoring compliance with supervisory laws and issuing licenses and exemptions as prescribed therein. It also formulates rules, directives and guidelines based on discretions granted it by the relevant supervisory laws, and subsequently monitors compliance with such rules, directives and guidelines.
Laws and regulations differ from county to country. However, given the fact that many of the types of organizations mentioned here carry out activities in various countries or deal with organizations established in such countries, it does not suffice to adhere to the laws and regulations of their own country. Many organizations voluntarily want or feel the pressure to meet the requirements of laws and regulations of other countries, the United States in particular, even when the requirements in their own jurisdiction are less strict. The laws, regulations and practices of the US are more or less the international standard, or at least worth taking into account. Almost everyone has heard of the Sarbanes-Oxley Act, especially designed for listed companies and primarily dealing with financial statements and their reporting. Key compliance issues are, a.o., CEO & CFO certification, auditor independence, reporting on internal controls, whistleblower protection and the code of ethics.
Other rules are also of relevance, for example, the Recommendations of the Financial Action Task Force (FATF) addressed to the governments of all countries. The FATF calls upon all countries to take the necessary steps to bring their national systems for combating money laundering and terrorist financing into compliance with its Recommendations, and to effectively implement these measures.
According to FATF Recommendation 15, financial institutions should develop programs against money laundering and terrorist financing. These programs should include: (a) the development of internal policies, procedures and controls, including appropriate compliance management arrangements and adequate screening procedures to ensure high standards when hiring employees; (b) an ongoing employee training program and (c) an audit function to test the system.
In an organization several bodies and officers deal with compliance issues, not just the compliance officer. Compliance is first and foremost the responsibility of the organization’s managing board. The required compliance to laws and regulations also affects many other stakeholders: the audit committee, the internal and external auditors, account managers, investors, attorneys and regulators (Central Banks, SEC).
Not only is the concept of compliance extremely broad, many compliance related issues are also rather complex. It is not without reason that many organizations involve external experts on a continuous basis, experts like compliance lawyers and accountants, to advise them on such issues, to help develop and implement compliance programs and to carry out legal and other audits. Given the current global regulatory climate, no organization can allow itself to lose focus on compliance matters.
Karel Frielink
Attorney (Lawyer) / Partner
