Aruba: Law of Offshore
Table of Statutes
Aruban law is essentially similar to the law of the Netherlands Antilles, from which it separated in 1986; in turn, both jurisdictions draw their law from Holland, and when there is not specific local legislation, Dutch law will apply.
This is a non-exhaustive list of the main Aruban statutes affecting offshore and non-resident business. The statutes are listed in alphabetical order – click on the statute for a fuller description of the statute, the legal regime it forms part of, or in some cases the text of the law.
Central Bank Ordinance 1985
The Commercial Code of Aruba
National Ordinance on Penalization of Money Laundering 1996
National Ordinance on Profit Tax
The New Fiscal Regime 2002
State Ordinance on Foreign Exchange Transactions
State Ordinance on Supervision of the Credit System 1998
The Government of Aruba has issued several decrees on money laundering that include increased oversight of casinos and insurance companies. In October 2009, the Financial Action Task Force (FATF) issued an unfavourable Mutual Evaluation Report, which cited an incomplete and incoherent AML/CFT framework. To improve the situation, the government created an AML/CFT strategy group, presided over by Aruba’s Prime Minister. With the assistance of an external consultant, a plan of action to remedy the identified deficiencies in the AML/CFT framework was drafted. The State Ordinance on the Prevention and Combating of Money Laundering and Terrorist Financing (AB 2011 No. 28) Ordinance contains, inter alia, customer due diligence, reporting and record keeping requirements, directed at financial service providers, and non-financial service providers. It also contains provision for reporting requirements for cross-border currency movements in excess of Afl25,000 (approximately USD13,966). The Ordinance entered into force on June 1, 2011.
In its 2007 annual report, the Central Bank of Aruba (CBA) revealed that proposals were being drawn up to strengthen the supervisory ordinances for the banking and insurance industries. The CBA said that it intended to submit final proposals before the end of 2008 (instead of the original target date of mid-2008) to the Minister of Finance and Economic Affairs for his approval, after which the legislative process can commence.
The new target date was set mainly in view of the follow-up OFC assessment by the IMF. A legislative proposal to bring stock exchanges under supervision has been drafted, and the CBA said that its supervisory scope may be expanded to company services providers. Depending on the outcome of the assessment, additional amendments to these ordinances may be proposed.
In August 2006, the CBA issued a revised policy rule for the admission and licensing of banks and insurance companies. Under this new policy rule, a foreign bank or insurer is allowed to operate via a branch office (or an agency in the case of an insurer) only if it is an international bank or insurer with a balance sheet total of at least USD10bn and an “A” rating issued by Standard & Poor’s or a comparable rating agency.
Foreign banks or insurers that already operate in the Aruban market via a branch office or agency and did not meet the aforementioned conditions were required to establish a separate legal entity in Aruba before 1st July, 2007, through which they could continue their banking or insurance activities in this market. The deadline of 1st July, 2007, was later extended to 31st December, 2007. However, despite this extension, the Central Bank said in its 2007 annual report noted that none of the institutions concerned had fully complied with the revised policy rule. It is expected that all companies will be able to complete the whole process in the course of 2008.
The CBA further tightened its policy rule on the admission of credit institutions in 2009. A major condition was added that only financial institutions with solid financial strength and reputation and subject to comprehensive consolidated supervision are allowed as a major shareholder in a credit institution established in Aruba.
On February 5, 2009, the State Ordinance on the Supervision of the Credit System (SOSCS, see below), the State Ordinance on the Supervision of the Insurance Business (SOSIB), and the State Ordinance on the Supervision of Money Transfer Companies (SOSMTC) were amended. The major changes in these ordinances are the inclusion of new articles explicitly authorizing the CBA to issue directives in the area of anti-money laundering and combating financing of terrorism and to oppose the appointment of an external auditor, as well as extending the possibility of imposing administrative sanctions to the SOSCS and the SOSIB.
On the same date, reporting obligations to the Reporting Centre for Unusual Transactions (RCUT) were extended to include accountants, lawyers, and notaries, as well as traders in high value products in addition to banks, life insurance companies, money transfer companies, free-zone companies, casinos, and the post office. Meetings between the RCUT and the CBA are held at least twice a year to discuss general findings of the examinations conducted in this area.
Also on February 5, 2009, the State Ordinance on the Supervision of Trust Service Providers (SOSTSP) became effective, entrusting the CBA with its execution and the licensing of trust service providers. The SOSTSP is focused mainly on maintaining the integrity of the trust service providers’ sector. In accordance with international standards, the CBA intends to extend its supervisory scope to other sectors to protect both domestic and foreign investors. Its proposal regarding the supervision of (electronic) stock exchanges has been approved by the Minister of Finance and Economic Affairs and was in the legislative process in 2009. Before the end of 2009, the CBA will also draft a proposal to regulate collective investment schemes and investment advisors.
However, it was concluded after a Financial Action Task Force (FATF) mission to Aruba in November 2008 that, despite some progress the Aruban AML/CFT framework needs to be strengthened further to fully meet the 40+9 FATF recommendations.