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Major Money Laundering Countries


International Narcotics Control Strategy Report
Bureau of International Narcotics and Law Enforcement Affairs
March 2007
Report
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Every year, U.S. officials from agencies with anti-money laundering responsibilities meet to assess the money laundering situations in 200 jurisdictions. The review includes an assessment of the significance of financial transactions in the country's financial institutions that involve proceeds of serious crime, steps taken or not taken to address financial crime and money laundering, each jurisdiction's vulnerability to money laundering, the conformance of its laws and policies to international standards, the effectiveness with which the government has acted, and the government's political will to take needed actions.

The 2007 INCSR assigned priorities to jurisdictions using a classification system consisting of three differential categories titled Jurisdictions of Primary Concern, Jurisdictions of Concern, and Other Jurisdictions Monitored.

The "Jurisdictions of Primary Concern" are those jurisdictions that are identified pursuant to the INCSR reporting requirements as "major money laundering countries." A major money laundering country is defined by statute as one "whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking." However, the complex nature of money laundering transactions today makes it difficult in many cases to distinguish the proceeds of narcotics trafficking from the proceeds of other serious crime. Moreover, financial institutions engaging in transactions involving significant amounts of proceeds of other serious crime are vulnerable to narcotics-related money laundering. The category "Jurisdiction of Primary Concern" recognizes this relationship by including all countries and other jurisdictions whose financial institutions engage in transactions involving significant amounts of proceeds from all serious crime. Thus, the focus of analysis in considering whether a country or jurisdiction should be included in this category is on the significance of the amount of proceeds laundered, not of the anti-money laundering measures taken. This is a different approach taken than that of the FATF Non-Cooperative Countries and Territories (NCCT) exercise, which focuses on a jurisdiction's compliance with stated criteria regarding its legal and regulatory framework, international cooperation, and resource allocations.

All other countries and jurisdictions evaluated in the INCSR are separated into the two remaining groups, "Jurisdictions of Concern" and "Other Jurisdictions Monitored," on the basis of a number of factors that may include: (1) whether the country's financial institutions engage in transactions involving significant amounts of proceeds from serious crime; (2) the extent to which the jurisdiction is or remains vulnerable to money laundering, notwithstanding its money laundering countermeasures, if any (an illustrative list of factors that may indicate vulnerability is provided below); (3) the nature and extent of the money laundering situation in each jurisdiction (for example, whether it involves drugs or other contraband); (4) the ways in which the United States regards the situation as having international ramifications; (5) the situation's impact on U.S. interests; (6) whether the jurisdiction has taken appropriate legislative actions to address specific problems; (7) whether there is a lack of licensing and oversight of offshore financial centers and businesses; (8) whether the jurisdiction's laws are being effectively implemented; and (9) where U.S. interests are involved, the degree of cooperation between the foreign government and U.S. government agencies. Additionally, given concerns about the increasing interrelationship between inadequate money laundering legislation and terrorist financing, terrorist financing is an additional factor considered in making a determination as to whether a country should be considered an "Other Jurisdiction Monitored " or a "Jurisdiction of Concern". A government (e.g., the United States or the United Kingdom) can have comprehensive anti-money laundering laws on its books and conduct aggressive anti-money laundering enforcement efforts but still be classified a "Primary Concern" jurisdiction. In some cases, this classification may simply or largely be a function of the size of the jurisdiction's economy. In such jurisdictions quick, continuous and effective anti-money laundering efforts by the government are critical. While the actual money laundering problem in jurisdictions classified "Concern" is not as acute, they too must undertake efforts to develop or enhance their anti-money laundering regimes. Finally, while jurisdictions in the "Other" category do not pose an immediate concern, it will nevertheless be important to monitor their money laundering situations because, under certain circumstances, virtually any jurisdiction of any size can develop into a significant money laundering center.

Vulnerability Factors

The current ability of money launderers to penetrate virtually any financial system makes every jurisdiction a potential money laundering center. There is no precise measure of vulnerability for any financial system, and not every vulnerable financial system will, in fact, be host to large volumes of laundered proceeds, but a checklist of what drug money managers reportedly look for provides a basic guide. The checklist includes:

  • Failure to criminalize money laundering for all serious crimes or limiting the offense to narrow predicates. 

  • Rigid bank secrecy rules that obstruct law enforcement investigations or that prohibit or inhibit large value and/or suspicious or unusual transaction reporting by both banks and nonbank financial institutions. 

  • Lack of or inadequate "know-your-client" requirements to open accounts or conduct financial transactions, including the permitted use of anonymous, nominee, numbered or trustee accounts. 

  • No requirement to disclose the beneficial owner of an account or the true beneficiary of a transaction. 

  • Lack of effective monitoring of cross-border currency movements. 

  • No reporting requirements for large cash transactions. 

  • No requirement to maintain financial records over a specific period of time. 

  • No mandatory requirement to report suspicious transactions or a pattern of inconsistent reporting under a voluntary system; lack of uniform guidelines for identifying suspicious transactions. 

  • Use of bearer monetary instruments. 

  • Well-established nonbank financial systems, especially where regulation, supervision, and monitoring are absent or lax. 

  • Patterns of evasion of exchange controls by legitimate businesses. 

  • Ease of incorporation, in particular where ownership can be held through nominees or bearer shares, or where off-the-shelf corporations can be acquired. 

  • No central reporting unit for receiving, analyzing and disseminating to the competent authorities information on large value, suspicious or unusual financial transactions that might identify possible money laundering activity. 

  • Lack of or weak bank regulatory controls, or failure to adopt or adhere to Basel Committee's "Core Principles for Effective Banking Supervision", especially in jurisdictions where the monetary or bank supervisory authority is understaffed, under-skilled or uncommitted. 

  • Well-established offshore financial centers or tax-haven banking systems, especially jurisdictions where such banks and accounts can be readily established with minimal background investigations. 

  • Extensive foreign banking operations, especially where there is significant wire transfer activity or multiple branches of foreign banks, or limited audit authority over foreign-owned banks or institutions. 

  • Jurisdictions where charitable organizations or alternate remittance systems, because of their unregulated and unsupervised nature, are used as avenues for money laundering or terrorist financing.

  • Limited asset seizure or confiscation authority.

  • Limited narcotics, money laundering, and financial crime enforcement and lack of trained investigators or regulators.

  • Jurisdictions with free trade zones where there is little government presence or other supervisory authority.

  • Patterns of official corruption or a laissez-faire attitude toward the business and banking communities.

  • Jurisdictions where the U.S. dollar is readily accepted, especially jurisdictions where banks and other financial institutions allow dollar deposits.

  • Well-established access to international bullion trading centers in New York, Istanbul, Zurich, Dubai and Mumbai.

  • Jurisdictions where there is significant trade in or export of gold, diamonds and other gems.

  • Jurisdictions with large parallel or black market economies.

  • Limited or no ability to share financial information with foreign law enforcement authorities.

Changes in INCSR Priorities for 2006

Jurisdiction moving from the Primary Concern Column to the Concern column: Hungary.

Jurisdictions moving from the Concern Column to the Primary Concern Column: Iran, Kenya.

Jurisdictions moving from the Other Column to the Concern Column: Iraq, Moldova, Senegal.

In the Country/Jurisdiction Table on the following page, "major money laundering countries" that are in the "Jurisdictions of Primary Concern" column are identified for purposes of statutory INCSR reporting requirements. Identification as a "major money laundering country" is based on whether the country or jurisdiction's financial institutions engage in transactions involving significant amounts of proceeds from serious crime. It is not based on an assessment of the country or jurisdiction's legal framework to combat money laundering; its role in the terrorist financing problem; or the degree of its cooperation in the international fight against money laundering, including terrorist financing. These factors, however, are included among the vulnerability factors when deciding whether to place a country in the "concern" or "other" column. This year, the movement of Iraq from the Other Column to the Concern Column was based on its vulnerability to terrorist financing.

Note: Country reports are provided for only those countries listed in the "Other/Monitored" column that have received training or technical assistance funded directly or indirectly by INL in 2006. A report on Kosovo and the newly independent country of Montenegro also appears in this year's INCSR but a decision regarding their placement on the County/Jurisdiction Table has been postponed until next year.

Country/Jurisdiction Table

Countries/Jurisdictions
of Primary Concern

Countries/Jurisdictions
of Concern

Other Countries/
Jurisdictions Monitored

Afghanistan

Paraguay

Albania

Poland

Andorra

Mali

Antigua and Barbuda

Philippines

Algeria

Portugal

Anguilla

Malta

Australia

Russia

Angola

Qatar

Armenia

Marshall Islands

Austria

Singapore

Argentina

Romania

Azerbaijan

Mauritania

Bahamas

Spain

Aruba

Samoa

Benin

Mauritius

Belize

St. Kitts & Nevis

Bahrain

Saudi Arabia

Bermuda

Micronesia FS

Bosnia and Herzegovina

Switzerland

Bangladesh

Senegal

Botswana

Mongolia

Brazil

Taiwan

Barbados

Serbia

Brunei

Montserrat

Burma

Thailand

Belarus

Seychelles

Burkina Faso

Mozambique

Cambodia

Turkey

Belgium

Sierra Leone

Burundi

Namibia

Canada

Ukraine

Bolivia

Slovakia

Cameroon

Nauru

Cayman Islands

United Arab Emirates

British Virgin Islands

South Africa

Cape Verde

Nepal

China, People Rep

United Kingdom

Bulgaria

St. Lucia

Central African Republic

New Zealand

Colombia

United States

Chile

St. Vincent

Chad

Niger

Costa Rica

Uruguay

Comoros

Syria

Congo, Dem Rep of

Niue

Cyprus

Venezuela

Cook Islands

Tanzania

Congo, Rep of

Norway

Dominican Republic

Cote d'Ivoire

Turks and Caicos

Croatia

Oman

France

Czech Rep

Uzbekistan

Cuba

Papua New Guinea

Germany

Dominica

Vanuatu

Denmark

Rwanda

Greece

Ecuador

Vietnam

Djibouti

San Marino

Guatemala

Egypt

Yemen

East Timor

Sao Tome & Principe

Guernsey

El Salvador

Zimbabwe

Equatorial Guinea

Slovenia

Haiti

Gibraltar

Eritrea

Solomon Islands

Hong Kong

Grenada

Estonia

Sri Lanka

India

Guyana

Ethiopia

Suriname

Indonesia

Honduras

Fiji

Swaziland

Iran

Hungary

Finland

Sweden

Isle of Man

Iraq

Gabon

Tajikistan

Israel

Ireland

Gambia

Togo

Italy

Jamaica

Georgia

Tonga

Japan

Jordan

Ghana

Trinida and Tobago

Jersey

Korea, North

Guinea

Tunisia

Kenya

Korea, South

Guinea-Bissau

Turkmenistan

Latvia

Kuwait

Iceland

Uganda

Lebanon

Laos

Kazakhstan

Zambia

Liechtenstein

Malaysia

Kyrgyz Republic

Luxembourg

Moldova

Lesotho

Macau

Monaco

Liberia

Mexico

Morocco

Lithuania

Netherlands

Netherlands Antilles

Macedonia

Nigeria

Nicaragua

Madagascar

Pakistan

Palau

Malawi

Panama

Peru

Maldives



Introduction to Comparative Table

The comparative table that follows the Glossary of Terms below identifies the broad range of actions, effective as of December 31, 2006 that jurisdictions have, or have not, taken to combat money laundering. This reference table provides a comparison of elements that define legislative activity and identify other characteristics that can have a relationship to money laundering vulnerability.

Glossary of Terms

  1. "Criminalized Drug Money Laundering": The jurisdiction has enacted laws criminalizing the offense of money laundering related to drug trafficking. 

  2. "Criminalized Beyond Drugs": The jurisdiction has extended anti-money laundering statutes and regulations to include nondrug-related money laundering.

  3. "Record Large Transactions": By law or regulation, banks are required to maintain records of large transactions in currency or other monetary instruments. 

  4. "Maintain Records Over Time": By law or regulation, banks are required to keep records, especially of large or unusual transactions, for a specified period of time, e.g., five years. 

  5. "Report Suspicious Transactions": By law or regulation, banks are required to record and report suspicious or unusual transactions to designated authorities. On the Comparative Table the letter "M" signifies mandatory reporting; "P" signifies permissible reporting. 

  6. "Financial Intelligence Unit": The jurisdiction has established an operative central, national agency responsible for receiving (and, as permitted, requesting), analyzing, and disseminating to the competent authorities disclosures of financial information concerning suspected proceeds of crime, or required by national legislation or regulation, in order to counter money laundering. These reflect those jurisdictions that are members of the Egmont Group. 

  7. "System for Identifying and Forfeiting Assets": The jurisdiction has enacted laws authorizing the tracing, freezing, seizure and forfeiture of assets identified as relating to or generated by money laundering activities. 

  8. "Arrangements for Asset Sharing": By law, regulation or bilateral agreement, the jurisdiction permits sharing of seized assets with third party jurisdictions which assisted in the conduct of the underlying investigation. 

  9. "Cooperates w/International Law Enforcement": By law or regulation, banks are permitted/required to cooperate with authorized investigations involving or initiated by third party jurisdictions, including sharing of records or other financial data. 

  10. "International Transportation of Currency": By law or regulation, the jurisdiction, in cooperation with banks, controls or monitors the flow of currency and monetary instruments crossing its borders. Of critical weight here are the presence or absence of wire transfer regulations and use of reports completed by each person transiting the jurisdiction and reports of monetary instrument transmitters.

  11. "Mutual Legal Assistance": By law or through treaty, the jurisdiction has agreed to provide and receive mutual legal assistance, including the sharing of records and data. 

  12. "Non-Bank Financial Institutions": By law or regulation, the jurisdiction requires nonbank financial institutions to meet the same customer identification standards and adhere to the same reporting requirements that it imposes on banks. 

  13. "Disclosure Protection Safe Harbor": By law, the jurisdiction provides a "safe harbor" defense to banks or other financial institutions and their employees who provide otherwise confidential banking data to authorities in pursuit of authorized investigations. 

  14. "States Parties to 1988 UN Drug Convention": As of December 31, 2006, a party to the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, or a territorial entity to which the application of the Convention has been extended by a party to the Convention.[1

  15. "Criminalized the Financing of Terrorism." The jurisdiction has criminalized the provision of material support to terrorists and/or terrorist organizations.

  16. "States Party to the UN International Convention for the Suppression of the Financing of Terrorism." As of December 31, 2006, a party to the International Convention for the Suppression of the Financing of Terrorism, or a territorial entity to which the application of the Convention has been extended by a party to the Convention.

 

_______________________ 

[1] The United Kingdom extended its application of the 1988 Convention and the United Kingdom Terrorism Order 2001 to Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat, Turks and Caicos, Isle of Man, Jersey, and Guernsey. The International Convention for the Suppression of the Financing of Terrorism has not yet been so extended.

Go to Comparative Table


 



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