Public Prosecutor’s Office demands Fines for underground banking Financial Services Without a License Are Punishable
Last week, the public prosecutor of the BES Public Prosecutor’s Office demanded fines of $40,000 and $10,000, respectively, against two individuals during the hearing of a criminal case. These individuals were suspected of providing financial services for years in collaboration with each other and a third party, without the required license from De Nederlandsche Bank (DNB).
This practice is commonly referred to as underground banking. Following reports received from the Financial Intelligence Unit, the Dutch Caribbean Police Force conducted an extensive investigation into these money transaction activities. The investigation revealed a total transaction volume exceeding $2.2 million USD. It also confirmed that both individuals had been systematically providing financial services without the mandatory DNB license. Under Article 2:1 of the BES Financial Markets Act, conducting money transaction activities without such a license is prohibited.
The financial services provided by these money transfer offices involved accepting cash in Bonaire, transferring it (minus commission) to an account in the Dominican Republic, and subsequently making the funds available to beneficiaries in that country.
In January 2023, a house search was conducted as part of the criminal investigation. At that time, the money transaction activities were still ongoing but were subsequently ceased.
Engaging in money transaction activities without the required license constitutes unfair competition against licensed money transfer offices that comply with legal obligations. The absence of legal money transfer offices in the BES region does not negate the criminality of these actions. Illegally operating money transfer organizations create easy channels for laundering proceeds from criminal activities, as cash payments are difficult to trace, and legally required customer due diligence is bypassed. This jeopardizes the integrity of the financial system.
For this reason, it is crucial for financial services to be conducted under government supervision. DNB serves as the supervisory and licensing authority for such services. Additionally, financial service providers can report unusual transactions to the Financial Intelligence Unit (FIU).
The Public Prosecutor’s Office considers a fine to be an appropriate penalty in these cases. Firstly, because the financial services have now ceased, and the suspects cooperated with the criminal investigation. Moreover, in the context of administrative enforcement, fines would likely have been imposed instead of criminal prosecution.
Finally, the Public Prosecution Service has announced plans to initiate a forfeiture procedure to recover the financial gains obtained by the suspects.