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2010 International Narcotics Control Strategy Report (INCSR)--Volume II: Money Laundering and Financial Crimes Country Database--Comoros through India


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Bureau of International Narcotics and Law Enforcement Affairs
May 4, 2010

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All Money Laundering and Financial Crimes Countries/Jurisdiction: Comoros through India

Comoros

The Union of the Comoros (Comoros) consists of three islands: Ngazidja (Grande Comore), Anjouan and Moheli. Although Comoros lacks homegrown narcotics, the islands are used to transit drugs, mainly from Madagascar. The presidency of the Union rotates among the three islands. An ongoing struggle for influence between the Union and the island presidents continued into 2009. Comoros is not a financial center for the region.

Offshore Center: Yes

Both Moheli, pursuant to the International Bank Act of 2001, and Anjouan, pursuant to the Regulation of Banks and Comparable Establishments of 1999, licensed more than 300 offshore banks. Neither island required applicants for banking licenses to appear in person to obtain their licenses. Anjouan required only two documents (a copy of the applicant’s passport, and a certificate from a local police department certifying the lack of a criminal record) to obtain an offshore license and accepted faxed copies of the required documents. In addition to licensing shell banks, Anjouan sold the right to issue bank licenses. All of the shell banks and other entities are located offshore and have no permanent presence in the Comoros. Neither jurisdiction had the expertise or resources to effectively regulate an offshore banking center. Anjouan delegated most of its authority to operate and regulate the offshore business to private, non-Comoran domiciled parties. Offshore banks operating in the autonomous islands of the Union of the Comoros without prior authorization from the Union Finance Minister operate illegally. Because the involved computer servers and illicit “entities” are located outside the Comoros, the Union government lacks the jurisdiction and capacity to act beyond the announcements and warnings regarding the illegal entities. During 2008, Comoros closed many of the illegitimate financial institutions.

In addition to offshore banks, both Moheli, pursuant to the International Companies Act of 2001, and Anjouan, pursuant to Ordinance Number 1 of March 1999, licensed insurance companies, internet casinos, and international business companies (IBCs). Moheli claims to have licensed over 1200 IBCs. Moheli law permits bearer shares of IBCs. Anjouan also allows trusts, and will register aircraft and ships without requiring an inspection of the aircraft or ship in Anjouan.

Free Trade Zones: No

Criminalizes narcotics money laundering:

An anti-money laundering (AML) law addressing many of the primary AML issues of concern was passed by Presidential Decree in 2004. However, the 2004 law does not meet international standards. Also, while legally applicable to all three islands, the AML law was not enforced on Anjouan prior to March 2008. In addition, Comoran authorities lack the capacity to effectively implement and enforce the 2004 AML law, as the three islands in the Comoros retain a great deal of autonomy, particularly with respect to their security services, economies, and banking sectors. As of December 2008, the Union had a draft of a new AML law before the Parliament. Until that law is promulgated, Comoros will use its 2004 federal-level AML law.

Criminalizes other money laundering, including terrorism-related: Yes

See above

Criminalizes terrorist financing:

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

No information available.

Know-your-customer rules:

No information available.

Bank records retention: Yes

The 2004 law requires financial and related records to be maintained for five years.

Suspicious transaction reporting: Yes

The 2004 law requires non-bank financial institutions to meet the same reporting requirements as banks, and requires banks, casinos and money exchangers to report unusual and suspicious transactions (by amount or origin) to the Central Bank. Comoros does not have an operational financial intelligence unit (FIU).

Large currency transaction reporting: No

The 2004 law prohibits cash transactions over Comoran francs 5 million (approximately $16,500).

Narcotics asset seizure and forfeiture: Yes

The 2004 law permits assets generated by or related to money laundering activities to be frozen, seized and forfeited.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

The 2004 law requires residents to declare all currency or financial instruments upon arrival and departure, and non-residents to declare all financial instruments upon arrival and all financial instruments above Comoran francs 500,000 (approximately $1,650) on departure.

Cooperation with foreign governments:

The 2004 lawpermits provision and receipt of mutual legal assistance where a reciprocity agreement is in existence and confidentiality of financial records is respected.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Moheli and Anjouan no longer issue banking licenses to offshore entities. Current legal licensing authority rests with Union authorities, and the Anjouan and Moheli counterparts are under Union control. However, the already established offshore entities remain outside Union control. The entity to which the Anjouan authorities sold licensing authority may still be issuing licenses in the name of Anjouan. The Comoran government has solicited the law enforcement authorities in the United Kingdom and France to locate and arrest the perpetrators, who were reportedly in Europe.

Foreign remittances from Comorans living abroad in France, Mayotte (claimed by France), and elsewhere remain the most important influx of funds for most Comorans. A 2008 African Development Bank report estimated total annual remittances at $100 million, with two-thirds arriving via informal means.

A grossly inadequate budget, dysfunctional ministries, and a nonfunctioning judiciary limit AML effectiveness. The lack of capacity severely hinders progress on AML issues, despite apparent high-level political support.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

Comoros is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

Comoros has observer status in the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force (FATF)-style regional body. The country is moving toward full membership in ESAAMLG, which will commit Comoros to adherence to the FATF’s international standards.

Recommendations:

The Government of the Union of the Comoros (GOUC) should ensure the draft anti-money laundering legislation meets international standards, and pass the legislation, which will apply to the three islands that comprise the federal entity. Authorities should ensure their activities relating to the implementation of the law, when promulgated, take place in all three islands. Authorities should establish an FIU with jurisdiction over the entire country and prohibit bearer shares. Authorities should circulate the list of individuals and entities included on the United Nations 1267 Sanctions Committee’s consolidated list to Comoran banks. Comoran authorities should ensure that resources are targeted at FIU development and regulatory and law enforcement capacity.

Congo, Republic of

The Republic of Congo (also called Congo-Brazzaville) is not a regional financial center. Neither drug trafficking nor money laundering are significant problems. The Bank of Central African States (BEAC), the regional Central Bank of the Economic and Monetary Community of Central African States (CEMAC), to which Congo-Brazzaville belongs, supervises Congo-Brazzaville’s banks, which are still recovering from the looting and neglect they experienced during Congo’s civil unrest in the 1990s.

Offshore Center:

No information available.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering:

See below.

Criminalizes other money laundering, including terrorism-related: Yes

Congo-Brazzaville strengthened its laws against money laundering in 2007. As a member of the CEMAC, it adopted CEMAC’s April 2007 regional anti-money laundering/counter-terrorist financing (AML/CFT) regulations. These rules establish penalties of both fines and imprisonment for money laundering and terrorist financing and also regulate the operation of banks, money changers and casinos.

Criminalizes terrorist financing:

See above.

Know-your-customer rules:

No information available.

Bank records retention:

No information available.

Suspicious transaction reporting:

No information available.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture:

No information available.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

Travelers may not enter or leave the country with more than 1,000,000 FCFA (approximately $1,980).

Cooperation with foreign governments:

Congo-Brazzaville is a party to the multilateral Antananarivo Convention on Matters of Justice of 1961.

U.S. or international sanctions or penalties:

No information available.

Enforcement and implementation issues and comments:

It is unknown whether Congo-Brazzaville circulates to its financial institutions the list of individuals and entities included on the UNSCR 1267 Sanctions Committee’s consolidated list.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

Congo-Brazzaville has bilateral extradition treaties with France, the Democratic Republic of Congo and Cuba.

Congo-Brazzaville is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

Congo-Brazzaville is not a member of a Financial Action Task Force-style regional body.

Recommendations:

Congo-Brazzaville should continue to work with the CEMAC to strengthen its AML/CFT efforts. Congo-Brazzaville should become a party to the UN International Convention against Corruption and to the UN Convention against Transnational Organized Crime.

Costa Rica

Costa Rica is not a major regional financial center but remains vulnerable to money laundering and other financial crimes. Illicit proceeds from fraud; trafficking in persons, arms and narcotics (mainly cocaine); corruption; and unregulated Internet gaming likely are laundered in Costa Rica. While local criminals are active, the majority of laundered criminal proceeds derive primarily from foreign criminal activity. The Government of Costa Rica (GOCR) reports that Costa Rica is primarily used as a bridge to send funds to and from other jurisdictions using, in many cases, companies or established banks in offshore financial centers.

Offshore Center: No

As a result of the entry into force of the Superintendent General of Financial Entities (SUGEF) Agreement 8-08, dated December 18, 2008, financial groups that had offshore banks either received a Costa Rican license to operate or they are now under the supervision of a foreign banking authority. Prior to this agreement there were six offshore banks operating in Costa Rica. Since December 2008, four of those offshore institutions transferred their assets/liabilities to local banks (two of those four actually merged with local banks); one no longer operates in Costa Rica; and one received its license to operate in compliance with articles 44 and 72 of the SUGEF Agreement.

Free Trade Zones: Yes

There are 28 free trade zones (FTZs) within Costa Rica, used by approximately 251 companies. Costa Rica’s Foreign Commerce Promotion Agency (PROCOMER) manages the FTZ regime and has responsibility for registering all qualifying companies. PROCOMER’s qualification process consists of conducting due diligence on a candidate company’s finances and assessing the total cost of ownership. PROCOMER reports there were no evidence of trade-based money laundering activity in the FTZs in 2009.

Criminalizes narcotics money laundering: Yes

In 2002, the GOCR enacted Law 8204, which criminalizes the laundering of proceeds from crimes carrying a sentence of four years or more. In theory, Law 8204 applies to the movement of all capital. However, its articles and regulations have been narrowly interpreted so the law applies to those entities involved in the transfer of funds as a primary business purpose, such as banks, exchange houses and stock brokerages. It does not cover entities such as casinos, dealers in jewels and precious metals, insurance companies; intermediaries such as lawyers, accountants or broker/dealers; or Internet gaming operations. It also cannot be used to add an additional offense to the predicate crime (e.g., a drug dealer who is convicted on drug charges cannot also be prosecuted for money laundering). Even with these limitations, in recent years, 10 convictions have been obtained under the anti-money laundering provisions.

Criminalizes other money laundering, including terrorism-related: Yes

In March 2009, Costa Rica passed Law 8719, an anti-terrorist financing/money laundering regulation to address Law 8204’s weaknesses and close money-laundering loopholes.

Criminalizes terrorist financing: Yes

In March 2009, Costa Rica passed Law 8719, an anti-terrorist financing/money laundering regulation to address Law 8204’s weaknesses and close money-laundering loopholes.

Know-your-customer rules: Yes

The requirements to prohibit anonymous accounts, conduct ongoing customer due diligence, and identify beneficial owners are generally well covered by Act 8204.

Bank records retention: Yes

Law 8204 obligates financial institutions and other businesses to retain financial records for at least five years.

Suspicious transaction reporting: Yes

Law 8204 obligates financial institutions and other businesses to report suspicious transactions, regardless of the amount involved to Costa Rica’s financial intelligence unit (FIU), the UIF. In 2009, the UIF received 518 suspicious transaction reports (STRs).

Large currency transaction reporting: Yes

Law 8204 obligates financial institutions and other businesses to report currency transactions over $10,000 to the UIF. The UIF does not directly receive cash transaction reports (CTRs). Each supervisory entity that receives CTRs holds them unless it determines that further analysis is required or the UIF requests the reports.

Narcotics asset seizure and forfeiture:

Articles 33 and 34 of Law 8204 cover asset forfeiture and stipulate that all movable or immovable property used in the commission of crimes covered by the Law shall be subject to preventative seizure. The banking industry closely cooperates with law enforcement efforts to trace funds and seize or freeze bank accounts. In July 2009, Costa Rica enacted a civil forfeiture procedure (Act 8754) to forfeit the assets of any person who cannot demonstrate, under a reversal of the burden of proof, that the origin of the assets is legal. Also, by Act 8719 of 2009 the FIU was given the power to administratively freeze assets or accounts that are subject to investigation, without a prior Court order (judicial confirmation must be obtained after seizure). This provision was used in several money laundering cases involving bulk cash smuggling during 2009. In addition, Act 8204 art. 33 included an administrative seizure and forfeiture provision for assets of persons listed in the UNSC Resolutions. During 2009, officials seized over $2.4 million in narcotics-related assets.

Narcotics asset sharing: No

It is unclear whether the GOCR will assist other countries in obtaining non-conviction-based forfeiture since, until 2009, its domestic laws only provided for conviction-based forfeiture. However, based on Act 8754, such assistance should be possible in future cases.

Cross-border currency transportation requirements: Yes

Declaration forms are required; all persons carrying over $10,000 when entering or exiting Costa Rica are required to declare it to Costa Rican officials at ports of entry. Cash smuggling reports are entered into a database and are shared with appropriate government agencies.

Cooperation with foreign governments (including refusals): Yes

No known impediments exist to cooperation. Articles 30 and 31 of Law 8204 grant authority to the UIF to cooperate with other countries in investigations, proceedings, and operations concerning financial and other crimes covered under that law.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Costa Rican authorities cannot block, seize, or freeze property of suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee consolidated list and the list of Specially Designated Global Terrorists designated by the United States pursuant to Executive Order (E.O.) 13224 without prior judicial approval.

No assets related to designated individuals or entities were identified in Costa Rica in 2009. However, according to the GOCR there is some evidence of FARC (Revolutionary Armed Forces of Colombia) money laundering operations here. In April 2008, based on information obtained from a laptop used by FARC leader Raul Reyes, Costa Rican authorities raided the residence of a university professor and his spouse and found $480,000 in cash that was believed to be a “cash reserve” for the FARC in Costa Rica. However, at that time the anti-terrorist financing law (Law 8719) was not in place and no charges were filed at that time. There has been no further action by the prosecutor’s office against this couple.

U.S.-related currency transactions:

There are over 250 Internet sports book companies registered to operate in Costa Rica. The industry, which normally moves $12 billion annually and employs 10,000 people, estimates their transactions have decreased by 20 percent this year.

Records exchange mechanism with U.S.:

Costa Rica fully cooperates with appropriate United States government law enforcement agencies investigating financial crimes related to narcotics and other crimes. Costa Rica’s FIU exchanges financial information related to money laundering and terrorist financing with other Egmont Group members, including the United States.

International agreements:

Articles 30 and 31 of Law 8204 grant authority to the UIF to cooperate with other countries in investigations, proceedings, and operations concerning financial and other crimes covered under that law. There are memoranda of understanding (MOUs) between Costa Rica and Panama and the Bahamas to allow easy information exchanges. The GOCR has supervision agreements with its counterparts in both countries, permitting the review of correspondent banking operations.

Costa Rica is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Costa Rica is a member of the Caribbean Financial Action Task Force (CFATF). Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Recommendations:

The Costa Rican legislature should pass the pending bill to better regulate casinos and other gaming establishments, including online gaming companies. The Government of Costa Rica should take steps to provide for the timely seizing and freezing of property of suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee consolidated list and the list of Specially Designated Global Terrorists designated by the United States pursuant to E.O. 13224.

Côte d’Ivoire

The Republic of Cote d’Ivoire is an important West African regional financial hub. Laundered proceeds are reportedly derived from regional criminal activity, such as the smuggling of consumer goods and agricultural products. Reportedly, most of the smuggling networks are organized by nationals from Nigeria and the Democratic Republic of the Congo. The outbreak of the rebellion in 2002 increased the amount of smuggling of goods across the northern borders, including cocoa, cashews, timber, textiles, tobacco products, and light motorcycles. Reportedly, there has also been an increase in the mining and smuggling of diamonds from areas in the north.

Due to the abnormal political situation in Cote d’Ivoire, rule of law implementation remains poor. As a result, Ivorian and other West African nationals are becoming increasingly involved in criminal activities and the subsequent laundering of illicit funds. National authorities have been redeploying, but the Forces Nouvelles retains de-facto control over the northern borders and of revenue generated in its zone. Smuggling of agricultural products, cars, and pirated DVDs occurs in the government-controlled south and is motivated by a desire to avoid taxes (principally value-added taxes). Smuggling over Cote d’Ivoire’s porous borders generates illicit funds that are primarily laundered via informal money services businesses and exchange houses. In addition, authorities believe criminal enterprises use the formal banking system and the used car and real-estate industries to launder funds. Public corruption also poses concerns.

The extent to which Ivorian territory is involved in the growing use of West Africa as a transshipment point for drugs from South America to Europe is largely unknown but is of concern to law enforcement officials. Ivorian law enforcement authorities have little control over the northern half of the country. The ongoing de facto division of the country makes it difficult to assess Ivorian involvement in narcotics trafficking, as well as its possible role as a center for the laundering of narcotics proceeds.

Offshore Center: No

Free Trade Zones: No

There are no free trade zones in Cote d’Ivoire. However, in June 2008, after securing funding, the Government of Cote d’Ivoire (GOCI) began negotiations to purchase a site to build a free trade zone for information technology and biotechnology in Grand Bassam.

Criminalizes narcotics money laundering: Yes

The penal code criminalizes money laundering related to drug trafficking, fraud, and arms trafficking.

Criminalizes other money laundering, including terrorism-related: Yes

In November 2005, the National Assembly adopted the West African Economic and Monetary Union (WAEMU) common anti-money laundering (AML) law. With this law, Cote d’Ivoire adopted the all-crimes approach to money laundering, making it a criminal offense regardless of the predicate offense.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

Ordinance 367 of December 2009 defines the legal framework for counter-terrorist financing in Côte d’Ivoire by implementing the United Nations Conventions on the suppression of terrorist financing. The ordinance also strengthens the whole national system for the fight against transnational financial crime, and particularly money laundering.

Know-your-customer rules: Yes

The AML law mandates standard know-your-customer requirements for banks and other financial institutions. The law also imposes certain customer identification and record maintenance requirements on casinos and exchange houses. Bearer shares are authorized for banks and companies.

Bank records retention: Yes

All Ivorian financial institutions must maintain customer identification and transaction records for ten years. Law enforcement authorities can request access to these records to investigate financial crimes through a public prosecutor.

Suspicious transaction reporting: Yes

In addition to the AML law, new money laundering controls apply to non-bank financial institutions such as exchange houses, stock brokerage firms, insurance companies, casinos, cash couriers, national lotteries, non-governmental organizations, travel agencies, art dealers, gem dealers, accountants, attorneys, and real estate agents. All Ivorian financial institutions, non-financial businesses, and professions subject to the scope of the money laundering law are required to report suspicious transactions. The Ivorian banking code protects reporting individuals. Ordinance 367 of December 2009 extends the suspicious activity report (SAR) filing requirement to suspected terrorist financing.

The AML law provides for the establishment of a financial intelligence unit (FIU) known as “Cellule Nationale de Traitement des Informations Financieres” (CENTIF). Since its inception in January 2008, CENTIF has received approximately 98 SARs and forwarded four cases to prosecutors. To date, no arrests or convictions have resulted.

Large currency transaction reporting: Yes

The Central Bank of West African States (BCEAO) requires banking officials in member countries to report all deposits over CFA 5,000,000 (approximately $11,363) to the BCEAO, along with customer identification information.

Narcotics asset seizure and forfeiture: Yes

The AML law includes both criminal and civil penalties, and permits the freezing and seizure of assets, which can be both instruments for and proceeds of crime. Legitimate businesses are among the assets that can be seized if used to launder money or support terrorism or other illegal activities. Authorities cannot seize substitute assets, as assets can only be seized if there is a relationship between the assets and the offense.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

When traveling to another WAEMU country, Ivorian and expatriate residents must declare the amount of currency being carried out of the country. When traveling to a destination outside WAEMU, Ivorian and expatriate residents are prohibited from carrying an amount of currency greater than the equivalent of 500,000 CFA francs (approximately $1,136) for tourists, and two million CFA francs (approximately $4,545) for business operators, without prior approval from the Ministry of Economy and Finance. If additional amounts are approved, they must be in the form of travelers’ checks.

Cooperation with foreign governments:

The AML Lawprovides a legal basis for international cooperation.

U.S. or international sanctions or penalties: Yes

In October 2009, the United Nations Security Council extended sanctions previously imposed on Cote d'Ivoire; the sanctions include an arms embargo and the ban on any country importing rough diamonds from Cote d'Ivoire. The country has been split by a long-running civil war with a rebel-held north and a government-held south.

Enforcement and implementation issues and comments:

The banking sector is active, but because it caters to large commercial enterprises rather than small-account holders, many Ivoirians use informal money couriers, money transfer organizations similar to hawaladars and, increasingly, goods transportation companies to transfer funds domestically, as well as within the region. The absence of banking services in northern Côte d'Ivoire during the political/military crisis led to an even greater use of informal transfers in that area of the country. There is no regulation of domestic informal value transfer systems. Informal remittance transfers from outside Cote d’Ivoire violate BCEAO money transfer regulations.

The Economic and Financial police report an ongoing rise in financial crimes related to credit card theft and foreign bank account fraud. These include wire transfers of large sums of money primarily involving British and American account holders who are the victims of Internet-based advance fee scams. Cote d’Ivoire has no law specifically targeting Internet scams. Cote d’Ivoire is ranked 154 out of 180 countries in Transparency International’s 2009 Corruption Perceptions Index.

Hizballah is present in Côte d’Ivoire and conducts fundraising activities, mostly among the large Lebanese expatriate community. In 2009 the GOCI took steps to restrict the fundraising efforts of Lebanese Hizballah operating out of mosques in Abidjan. In May 2009, pursuant to Executive Order (E.O.) 13224, the Department of the Treasury designated Abd Al Menhem Qubaysi, an Ivorian-based Hizballah supporter and the personal representative of Hizballah Secretary General Hassan Nasrallah. Qubaysi departed Cote d’Ivoire and has since been barred from returning.

In 2009, there were no arrests or prosecutions for money laundering or terrorist financing.

The BCEAO and the GOCI report that they promptly circulate to all financial institutions the names of suspected terrorists and terrorist organizations on the UNSCR 1267 Sanctions Committee’s Consolidated List and those on the list of Specially Designated Global Terrorists designated by the U.S. pursuant to E.O. 13224. To date, no assets related to terrorist entities or individuals have been discovered, frozen or seized.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

Other than the authority granted to CENTIF by the AML law, the GOCI has neither adopted laws nor promulgated regulations that specifically allow for the exchange of records with the United States on money laundering and terrorist financing. However, the GOCI has demonstrated a willingness to cooperate with the United States in investigating financial or other crimes.

International agreements:

CENTIF can share information with other FIUs in WAEMU and with those of non-WAEMU countries on a reciprocal basis and with the permission of the Ministry of Finance.

Cote d’Ivoire is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

The GOCI participates in the Intergovernmental Group for Action against Money Laundering (GIABA), a Financial Action Task Force-style regional body. GIABA had scheduled a mutual evaluation for Cote d’Ivoire for November 2009, but it was postponed by the Ivoirians. Once an evaluation is completed and published, it will be found here: http://www.giaba.org/index.php?type=c&id=24&mod=2&men=2

Recommendations:

The Government of Cote d’Ivoire should work to improve implementation of their AML and CTF laws in line with international standards. The Ministry of Finance should continue to build human and technological capacity at CENTIF to maximize effectiveness in FIU functions, especially analysis, outreach, and information sharing. CENTIF should continue to work toward becoming a member of the Egmont Group. Cote d’Ivoire’s law enforcement and customs authorities need to implement measures to diminish smuggling, trade-based money laundering, and informal value transfer systems. Government of Cote d’Ivoire (GOCI) authorities should also take steps to halt the spread of corruption that permeates both commerce and government and facilitates the continued growth of the underground economy and money laundering. The GOCI should become a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Cuba

Cuba is not considered an important regional financial center.  Cuban practices and U.S. sanctions prevent Cuba’s banking system from fully operating in the international financial system.  There is a significant black market in Cuba that operates as a supply and demand market parallel to the heavily subsidized and rationed formal market controlled by the state.  The black market, including mostly goods obtained locally but also some smuggled goods, is primarily funded by the nearly $1 billion in remittances sent to Cuba every year.  These funds, mostly in US dollars or euros, are traded for Cuban pesos at government foreign exchange houses.  The Government of Cuba (GOC) does not report estimates of funds received through remittances, but estimates from international and Cuban sources range between $500 million and $1 billion.  Most of these remittances come from Cuban-Americans and are delivered to family members.  Historically, only 10-20 percent is carried by formal remittance carriers (i.e., Western Union) due to previous U.S. restrictions on the dollar amount and frequency of remittances.  Cuba continues to have one of the most secretive and non-transparent national banking systems in the world.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Law 87 of February 26, 1999 added money laundering to the penal code.  Article 346 of Chapter II of Law 87 states that any person who acquires, converts, or transfers property, or attempts to carry out such transactions, or conceals property, knowing or who should have known, that such property is the direct or indirect proceeds of acts connected with illicit trafficking in drugs, arms or persons, or with organized crime, shall be liable to a penalty of imprisonment.  

Criminalizes terrorist financing:

Law 93 of December 20, 2001: Law against acts of terrorism.  In regard to the financing of terrorism, Chapter IX states that any person who directly or indirectly collects, transports, provides or has in his power financial or material funds or resources with the intention or knowledge that they are to be used to carry out terrorist offenses, shall be subject to imprisonment.  The same penalty applies to any person who, directly or indirectly, makes funds, financial or material resources, or services of any other kind, available to any person or entity who uses them to carry out terrorist offenses.

Instruction 19 of May 7, 2002:  “Guidelines for the struggle against financing terrorism” was issued for the purpose of enforcing the provisions in Cuban Law 93 of 2001, the UN Convention for the Suppression of the Financing of Terrorism, UNSCR 1373, Financial Action Task Force (FATF) Recommendations, Cuban Resolution 91 of 1997, and Cuban Instruction 1 of 1998.

Know-your-customer rules:

Resolution 91 of March 9, 1997 provides for the application of “Guidelines for members of the national banking system relating to the detection and prevention of movements of illicit capital”.  Instruction 1 of February 20, 1998 establishes 19 steps to implement the general guidelines in Resolution 91, including know-your-customer requirements, monitoring large cash deposits and withdrawals, and identifying company accounts as the most likely vehicle for money laundering.  Instruction 19 of 2002 states that special attention should be paid to operations made by non-profit organizations.  The GOC heavily regulates the small non-profit sector.

Bank records retention:

The National Banking System should keep records for five years from the conclusion of transactions.

Suspicious transaction reporting:

Resolution 27 of December 7, 1997 provides for the creation of the Central Risk Information Office (CIR), which compiles and processes information on suspected or actual instances of money laundering.  The resolution requires all banks and non-bank financial institutions to report such information on a monthly basis.  

According to Cuban Instruction 19 of 2002, banks are required to report immediately to the Ministry of Interior and the CIR about any “complex transaction of an unusual amount” or those that do not appear to have any legal economic purpose; that demonstrates unquestionably that a money laundering operation is in progress; or is suspected terrorist financing.  According to press reports, the Central Bank through Instruction 1 of 2009 now requires banks also to determine if a given financial transaction corresponds to a (state or foreign) company’s approved corporate or social purpose.  Resolution 91 of 1997 indicates a statutory reporting threshold of CUP 10,000 (equivalent to $10,000 at the time).

Large currency transaction reporting:

The international press reports that cash transactions are now only authorized for salary payments.  All other cash transactions require authorization from the bank president or his representative.  The GOC has not made any public announcements or statements about these new rules, which as of December 2009 were still not officially published. 

Narcotics asset seizure and forfeiture:

Banks are authorized by Instruction 19 to block or freeze the financial assets of Cuban or foreign individuals or legal persons under suspicion for money-laundering (including as the result of drug trafficking) transactions.  The penal code provides that anyone convicted of money laundering or terrorist financing will forfeit any proceeds.  The penal code further provides that authorities may seize and confiscate not only financial assets but proceeds and any property instrumental to the offense.  The GOC has not made public any information regarding narcotics-related, terrorism-related, or other criminal-related financial assets frozen or seized in 2009.

Narcotics asset sharing authority:

No information reported.

Cross-border currency transportation requirements:

Travelers to Cuba must fill out a customs declaration if they are carrying cash in excess of $5,000 or the equivalent in other currencies.  Travelers departing Cuba are only permitted to export convertible currency and other valuables exceeding an amount of $5,000 if the amount had been previously imported and declared; or the amount was lawfully acquired in Cuba, which must be proven through presentation of relevant bank documents.

Cooperation with foreign governments:

The GOC provides U.S. authorities access to Cuban counter-narcotics efforts on a case-by-case basis, including providing investigative criminal information.  Similar cooperation on counter-terrorism activities does not exist.  On August 25, 2009, the GOC granted U.S. authorities permission to serve U.S. notices of forfeiture on three Cuban-American brothers suspected of defrauding the United States out of more than $100 million in illegal Medicare claims.  In October 2009, Cuba participated through the World Customs Organization (WCO) in Operation ATLAS (Assess, Target, Link, Analyze and Share), the largest multilateral operation in history targeting cash smugglers.  

U.S. or international sanctions or penalties:

The Cuban Assets Control Regulations, 31 CFR Part 515, were issued by the U.S. Government on July 8, 1963, under the Trading With the Enemy Act. The regulations impose restrictions on travel and remittances to Cuba and prohibit import of products of Cuban origin or, with some exceptions, export of goods from the U.S. to Cuba. Additionally, all assets of the Cuban government or Cuban nationals in the U.S. are frozen. In 2009, some of the restrictions related to family travel and remittances were relaxed, however, the broad trade embargo enforced by the regulations remains in place.

Enforcement and implementation issues and comments:

The Cuban economy operates in two currencies:  the Cuban peso (CUP) and the Cuban convertible peso (CUC).  The currencies are traded at 24:1 in government foreign exchange houses, but the official exchange rate of 1:1 is used in government statistics, making it nearly impossible to reconcile Cuban official monetary statistics.  The GOC released no information about any arrests, prosecutions or convictions for money laundering or terrorist financing within Cuba in 2009.

We have no knowledge of whether the GOC has circulated to its financial institutions the list of individuals and entities included on the UN 1267 sanctions committee’s consolidated list, or any other UN, U.S., or third party list.

U.S.-related currency transactions:

A large volume of remittances occurs in US dollars.  The circulation of the US dollar has been prohibited since 2004.  The Cuban government tightly controls all currency exchange and charges a ten percent commission on US dollar exchanges.

Records exchange mechanism with U.S.:

The United States has no bilateral counter-narcotics, anti-money laundering, or counter-terrorism agreements with Cuba.

International agreements:

The GOC maintains that it has close ties to regional counter-narcotics initiatives.  The GOC reported that in 2009 it was a party to two memorandums of understanding and 56 judicial assistance agreements.  

Cuba is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Cuba is not a member of a FATF-style regional body or the Egmont Group of Financial Intelligence Units.

Recommendations:

Cuba should increase the transparency of its financial sector and increase its engagement with the anti-money laundering/counter-terrorist financing community in order to increase its capacity to fight these illegal activities. If it is not doing so, the Government of Cuba should circulate to financial institutions the list of designated terrorists and terrorist organizations.

Cyprus

Cyprus has been divided since the Turkish military intervention of 1974, following a coup d’état directed from Greece. Since then, the Republic of Cyprus (ROC) has controlled the southern two-thirds of the country, while a Turkish Cypriot administration calling itself the “Turkish Republic of Northern Cyprus (TRNC)” controls the northern part. Only Turkey recognizes the “TRNC.” The U.S. Government recognizes only the Republic of Cyprus. This report primarily discusses the area controlled by the ROC but also includes a separate section on the area administered by Turkish Cypriots.

Cyprus is a major regional financial center with a robust financial services industry and a significant amount of nonresident businesses. A number of factors have contributed to the development of Cyprus as a financial center: a preferential tax regime; double tax treaties with 44 countries (including the United States, several European Union (EU) nations, and former Soviet Union nations); a sophisticated telecommunications infrastructure; and EU membership. In 2003, Cyprus introduced tax and legislative changes effectively abolishing all legal and substantive distinctions between domestic and offshore companies. Cyprus has also lifted the prohibition from doing business domestically and companies formerly classified as offshore are now free to engage in business locally.

Like any financial center, Cyprus remains vulnerable to money laundering and illicit finance activities. Simple financial crime constitutes the biggest threat for domestic money laundering and tax evasion internationally. There is no significant black market for smuggled goods in Cyprus. What little black market trade exists is typically related to small scale transactions, typically involving fake clothing or cigarettes across the UN-patrolled buffer zone separating the ROC from the “TRNC”.

Offshore Center: Yes

International business companies are allowed to be registered in Cyprus but their ultimate beneficial ownership must be disclosed to the authorities. Cyprus has a system in place allowing full access to information on the beneficial owners of every registered company. This includes companies doing business abroad and companies with foreign beneficial owners and shareholders. Bearer shares are not permitted in Cyprus. Nominee (anonymous) directors and/or trustees are not allowed. There are over 220,000 companies registered in Cyprus, many of which are non-resident. The same disclosure, reporting, tax and other laws and regulations apply equally to all registered companies. Cypriot authorities are aware of the risks posed by the large number of non-resident businesses and monitor potential money laundering activities. Companies not registered in Cyprus may open bank accounts here, but the banks must perform appropriate due diligence and follow Know-Your-Customer (KYC) regulations.

Free Trade Zones: Yes

Cyprus has three free trade zones. The first two, located in the main seaports of Limassol and Larnaca, are used only for transit trade, while the third, located near the international airport in Larnaca, can also be used for repacking and reprocessing. These areas are treated as being outside normal EU customs territory. Consequently, non-EU goods placed in free trade zones are not subject to any import duties, VAT or excise tax. Free trade zones are governed under the provisions of relevant EU and Cypriot legislation. The Department of Customs has jurisdiction over all three areas and can impose restrictions or prohibitions on certain activities, depending on the nature of the goods.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Law for the Prevention and Suppression of Money Laundering Activities (LPSMLA) passed in 2007. The LPSMLA consolidated and superseded Cyprus’ initial anti-money laundering legislation. The LPSMLA criminalizes all money laundering, with the definition of predicate offense being any criminal offense punishable by a prison term exceeding one year, including narcotics related money laundering.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

Sections four and eight of Ratification Law 29 (III) of 2001 criminalize terrorist financing. The implementing legislation criminalizes the collection of funds in the knowledge that they would be used by terrorists or terrorist groups for violent acts. The LPSMLA criminalizes the general collection of funds with the knowledge that terrorists or terrorist groups would use them for any purpose (i.e., not just for violent acts); and explicitly covers terrorist finance.

Know-your-customer rules: Yes

The LPSMLA establishes know-your-customer (KYC) regulations that apply to traditional financial institutions as well as many designated non-financial businesses and professions (DNFBP), such as auditors, tax advisors, accountants, and in certain cases, attorneys, real estate agents, and dealers in precious stones and gems. The LPSMLA describes the method and timeline for applying customer due diligence and identification procedures, as well as enhanced due diligence. Central Bank money laundering directives place additional obligations on banks, including requirements on customer acceptance policy and the updating of customers’ identification data and business profiles. Banks must have computerized risk management systems to verify whether a customer is a politically exposed person (PEP) and have adequate management information systems for on-line monitoring of customers’ accounts and transactions.

Bank records retention: Yes

Obligated entities must retain client identification data, transaction records and business correspondence for five years upon termination of the business relationship or date of the last business transaction.

Suspicious transaction reporting: Yes

Bank employees must report all suspicious transactions to the bank’s compliance officer, who determines whether to forward a report to the Cypriot financial intelligence unit (FIU) for investigation. Banks also must file monthly reports with the Central Bank indicating the total number of STRs submitted to the compliance officer and the number forwarded by the compliance officer to the FIU. Reporting individuals are fully protected by the law with respect to their cooperation with law enforcement authorities. Failure to report suspicious transactions is punishable under the law. Between January 1 and December 1, 2009, MOKAS, the Cypriot FIU, received 387 STRs.

Large currency transaction reporting: Yes

All banks must report to the Central Bank on a monthly basis individual cash deposits in any currency exceeding 10,000 euro (approximately $15,000).

Narcotics asset seizure and forfeiture:

Cyprus has enacted comprehensive legislation and established systems for identifying, tracing, freezing, seizing, and forfeiting narcotics-related assets and assets derived from other serious crimes. Like most EU countries, though, Cyprus has no provisions allowing civil forfeiture of assets. The Police and the FIU are responsible for tracing, seizing and freezing assets and they fully enforce existing legislation. Cyprus has an independent national system and mechanism for freezing terrorist assets, and has also engaged in bilateral and multilateral negotiations with other governments to enhance its asset tracking and seizure system. In March 2009, MOKAS was designated officially as Cyprus’ Asset Recovery Office. Cyprus’ asset forfeiture fund is managed by the Law Office of the Republic. Seized assets are passed on either to victims of the pertinent crime or to the government’s consolidated budget. In 2009, MOKAS issued two confiscation orders for a total of approximately €5.5 million ($8.2 million), 16 Freezing orders, 3 registrations of foreign freezing or confiscation orders, and 18 Administrative Orders for postponement of transactions.

Narcotics asset sharing authority: Yes

Cyprus has enacted laws for the sharing of seized assets with foreign governments.

Cross-border currency transportation requirements: Yes

All travelers entering or leaving Cyprus with cash or gold valued at more than 10,000 euro (approximately $15,000) must declare it to Customs. Cash declaration and smuggling reports are entered into a database maintained by Customs, and shared with the Cypriot FIU and other government agencies.

Cooperation with foreign governments (including refusals): Yes

There are no legal issues hampering Cyprus’ ability to assist foreign governments in mutual legal assistance requests.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Since 2004, there have been 261 prosecutions for money laundering derived from police and MOKAS investigations, eight of which took place in 2009 by MOKAS investigations. Of the 261 prosecutions, 132 have resulted in convictions.

The “TRNC’s” lack of an adequate legal and institutional framework to provide effective protection against the risks of money laundering and terrorist financing could contribute to

U.S.-related currency transactions:

There is no information relating to whether currency transactions involving international narcotics trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States or that otherwise significantly affect the United States are occurring in Cyprus.

Records exchange mechanism with U.S.:

Cyprus and the United States are parties to a bilateral mutual legal assistance treaty that provides for exchange of information. The Cypriot FIU is able to share information with other FIUs without having an MOU in place.

International agreements:

Cypriot law allows MOKAS to share information with other FIUs without benefit of a memorandum of understanding (MOU).

In July 2009, a new amending law (N 73(I)/2009) came into effect amending the structure, responsibility and powers of the Cyprus Securities and Exchange Commission (CSEC). The amendment allows the CSEC to cooperate fully with foreign regulators and to obtain information regarding the beneficial owners of any Cypriot-registered company.

Cyprus is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Cyprus is a member of the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body (FSRB). It’s most recent mutual evaluation can be found here: www. coe.int/t/dghl/monitoring/moneyval/default_en.asp

Area Administered by Turkish Cypriots

The Turkish Cypriot community continues to lack the legal and institutional framework necessary to provide effective protection against the risks of money laundering, although significant progress has been made over the last year with the passage of laws better regulating the onshore and offshore banking sectors and casinos. There are currently 22 domestic banks in the area administered by Turkish Cypriots and Internet banking is available. The offshore sector consists of 13 banks and 34 companies. The offshore banking sector remains a concern. The offshore banks may not conduct business with residents of the area administered by Turkish Cypriots and may not deal in cash. Under revised laws passed in 2008, the “Central Bank” took over the regulation and licensing of offshore banks from the “Ministry of Finance” thereby improving oversight. The “Central Bank” audits the offshore entities, which must submit an annual report on their activities. The new law permits only banks previously licensed by Organization for Economic Co-operation and Development (OECD)-member nations or Turkey to operate an offshore branch in northern Cyprus. Despite the 2009 promulgation of more strict laws, the 23 operating casinos remain essentially unregulated due to the lack of an enforcement or investigative mechanism by the casino regulatory body and efforts to de-criminalize any failure by casinos to follow KYC regulations.

The Turkish Cypriot community is not part of any FSRB and thus is not subject to normal peer evaluations. In 2007, FATF conducted an informal review and found numerous shortcomings in AML laws and regulations as well as insufficient resources devoted to the effort. After including the northern part of Cyprus as an area of concern for money laundering in February 2008, FATF found “significant progress” had been made by its October 2008 meeting and subsequently removed the northern part of Cyprus as an area of concern in February 2009.

Adoption of essential laws and regulations:

Turkish Cypriot authorities have taken steps to address the risk of financial crime, including enacting an anti-money laundering “law” (AMLL) for the area and formally establishing an FIU equivalent. The “law” aims to reduce the number of cash transactions in the area administered by Turkish Cypriots as well as improve the tracking of any transactions above 10,000 Euros (approximately $15,000). Under the AMLL, banks must report to the “Central Bank” and the “Money and Exchange Bureau” any electronic transfers of funds in excess of $100,000. Such reports must include information identifying the person transferring the money, the source of the money, and its destination. Under the new “law,” banks, nonbank financial institutions, and foreign exchange dealers must report all currency transactions over 10,000 Euros (approximately $15,000) and suspicious transactions in any amount to the “Money and Exchange Bureau”. Banks must follow a KYC policy and require customer identification. Banks also must submit STRs to a five-member “Anti-Money Laundering Committee” which decides whether to refer suspicious cases to the police and the “attorney general’s office” for further investigation. The five-member committee is composed of representatives of the “police,” “customs,” the “Central Bank,” and the “Ministry of Economy”. According to the Turkish Cypriot authorities, 102 STRs were received by the “FIU” in 2009.

Cross border currency transportation requirements:

The AMLL requires individuals entering the area administered by Turkish Cypriots to declare cash over 10,000 Euros (approximately $15,000) and prohibits individuals leaving the area administered by Turkish Cypriots from transporting more than 10,000 Euros (approximately $15,000) in currency. However, “Central Bank” officials note that this “law” is difficult to enforce.

Recommendations:

The Government of the Republic of Cyprus has put in place a comprehensive anti-money laundering/counterterrorist financing regime, which it continues to upgrade. It should continue its planned improvements.

The Turkish Cypriot AMLL provides better banking regulations than were in force previously, but without ongoing enforcement its objectives cannot be met. A major weakness continues to be the many casinos, where a lack of resources and expertise leave the area essentially unregulated, and therefore, especially vulnerable to money laundering abuse. A “law” to regulate potential AML activity in casinos is currently being considered for amendment that would essentially decriminalize failure to implement KYC rules. The largely unregulated consumer finance institutions and currency exchange houses are also of concern. The Turkish Cypriot authorities should continue efforts to enhance their “FIU,” and adopt and implement a strong licensing and regulatory environment for all obligated institutions, in particular casinos and money exchange houses. Turkish Cypriot authorities should stringently enforce the cross-border currency declaration requirements. Turkish Cypriot authorities should continue steps to enhance the expertise of members of the enforcement, regulatory, and financial communities with an objective of better regulatory guidance, more efficient STR reporting, better analysis of reports, and enhanced use of legal tools available for prosecutions.

Czech Republic

The Czech Republic is a small, open, export-oriented economy. However, the Czech Republic’s central location in Europe and its status as a functional market economy leave it vulnerable to money laundering. Also, despite the development of modern payment techniques, the economy is still heavily cash-based. Various forms of organized crime (narcotics trafficking, trafficking in persons, fraud, counterfeit goods, embezzlement, and smuggling) remain the primary sources of laundered assets in the country. Major sources of criminal proceeds include criminal offenses against property, insurance fraud, and credit fraud. Two leading insurance houses detected frauds amounting to CZK 285 million (approximately $29 million) during the first nine months of 2009. Domestic and foreign organized crime groups target Czech financial institutions for laundering activity, most commonly by means of financial transfers through the Czech Republic. Banks, investment companies, real estate agencies, and casinos and other gaming establishments have all been used to launder criminal proceeds. Currency exchanges in the capital and border regions are also problematic.

Connections between organized crime and money laundering have been observed mainly in relation to activities of foreign groups, in particular from the former Soviet republics, the Balkan region, and Asia. They often enter the country by first opening various front companies, then receiving residency permits for employment in their own companies. Alternatively, immigrants start business companies, which in many cases create the base for illegal migration, creating a personnel base for criminal organizations.

Offshore Center:

The Czech Republic is not considered an off-shore financial center.

Free Trade Zones:

There are 11 Free Trade Zones operating in the Czech Republic.

Criminalizes narcotics money laundering: Yes

The laws cover all serious crimes, including narcotics money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

A July 2002 amendment to the Criminal Code introduces a new independent money laundering offense with a wider scope than previous provisions; it also allows prosecution for self-laundering. The most recent amendment to the Criminal Code, which goes into effect on January 1, 2010, stipulates punishments for the legalization of proceeds from all serious criminal activity, and calls for the forfeiture of assets associated with money laundering. Section 216 of the Criminal Code explicitly criminalizes money laundering. New amendments to the Criminal Code expand the definition of “criminal activity” to cover negligence.

Criminalizes terrorist financing:

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The Czech Republic has specific laws criminalizing terrorist financing and legislation permitting rapid implementation of UN and EU financial sanctions, including action against accounts held by suspected terrorists or terrorist organizations. In November 2004, the Czech Government amended the Criminal Code and enacted new definitions for terrorist financing. An amendment to the AML law in 2000 requires financial institutions to freeze assets that belong to suspected terrorists and terrorist organizations on the UN 1267 Sanctions Committee consolidated list.

Know-your-customer rules:

Act No. 61/1996, Measures Against Legalization of Proceeds from Criminal Activity (AML Act), provides the general preventive anti-money laundering (AML) framework. The latest amendment, Act No. 253/2008, came into force September 1, 2008. Act No. 253/2008 requires customer identification for all transactions exceeding 1,000 euros (approximately $ 1,500). For transactions above 15,000 euros (approximately $22,650), customers are required to provide more extensive information, including details of the purpose and nature of the intended transaction. The law also calls for more stringent controls of financial transactions involving politically exposed persons (PEPs) and their immediate family members.

In 2002, the Government of the Czech Republic (GOCR) amended existing legislation to abolish all existing bearer passbooks by December 31, 2012. While account holders can still withdraw money from the accounts, they do not earn interest and cannot make deposits. Since 2002, about CZK 117 billion (about 97%) has been withdrawn from anonymous passbook accounts. As of July 2009, the Czech Republic has about 2.6 million anonymous deposit passbooks containing CZK 3.08 billion (approximately $174 million). During the first six months of 2009, approximately CZK150 million (approximately $8.7 million) was withdrawn from these accounts.

Bank records retention:

Act No. 253/2008 requires institutions to keep internal records of all transactions exceeding 10,000 euros (approximately $ 15,000) for a period of at least ten years. Records of transactions lower than 10,000 euros (approximately $15,000) must be kept for a period of five years (AML Act, Sec. 16).

Suspicious transaction reporting:

Under Act No. 253/2008, a wide range of financial institutions, as well as attorneys, casinos, realtors, notaries, accountants, tax auditors, and entrepreneurs engaging in financial transactions, to report all suspicious transactions, and those that might be linked to terrorist financing, to the financial intelligence unit (FIU). In 2008, 2,320 suspicious transaction reports (STRs) were received, 78 of which were forward to the police for investigation. Only 1,509 STRs were received during the first nine months of 2009.

Large currency transaction reporting: Yes

Narcotics asset seizure and forfeiture:

Asset forfeiture was introduced into the criminal system in 2002 and allows judges, prosecutors, or the police (with the prosecutor’s consent) to freeze an account or assets if evidence indicates the contents were used or will be used to commit a crime, or if the contents are proceeds of criminal activity. A 2006 amendment to the Czech Criminal Procedure Code and Penal Code allows for the freezing and confiscation of the value of any asset (including immovable assets). These provisions allow the police and prosecutors to seize assets gained in illicit activity previously shielded by family members. The law allows for the seizure of substitute assets as well as equivalent assets not belonging to the criminal. In the first five months of 2009, the police seized assets totaling CZK 363 million (approximately $21.1 million).

The FIU is authorized to freeze accounts for 72 hours.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

Under the provisions of the AML Act, anyone entering or leaving the Czech Republic with more than 10,000 euros (approximately $14,000) in cash, traveler’s checks, or other monetary instruments must make a declaration to customs officials, who are required to forward the information to the FIU. Similar reporting requirements apply to anyone seeking to mail the same amount in cash to or from the country.

Cooperation with foreign governments (including refusals):

No known impediments to cooperation exist.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In practice, the effectiveness of the cross-border currency declaration procedures is difficult to assess. As a result of the Czech Republic’s December 2007 entry into the Schengen zone, all passport and customs stations on the borders are closed, therefore, detecting the smuggling or transport of large sums of currency by train or highway is difficult.

Both the FIU and the police face staffing challenges. Despite numerous requests by the FIU for an increase in staffing, to date, the GOCR has not yet approved the FIU’s request. The police have faced even bigger challenges due to changes in police retirement rules that incentivize early retirement during a three-month window. Many of the most senior and experienced police officers have retired or will retire in the near future. The dissolution of the Financial Police, created in 2004, and with a good track record of investigating and prosecuting money laundering and terrorist financing cases, has also had a negative impact on financial crime investigations.

An ongoing issue in criminal prosecutions is that law enforcement agencies must prove the assets in question were derived from criminal activity. In 2008, the police investigated 37 cases; 19 were prosecuted. During the first nine months of 2009, 40 cases have been investigated and 18 are being prosecuted. No data is available regarding the number of convictions in 2009.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

The United States and the Czech Republic have a Mutual Legal Assistance Treaty (MLAT), which entered into force on May 7, 2000. In May 2006, the United States and the Czech Republic signed a supplemental MLAT.

International agreements:

The Czech Republic has signed memoranda of understanding on information exchange with 23 countries, the most recent being Paraguay. According to the FIU, the existing AML legislation is sufficient for the purposes of international cooperation (AML, Section 33), and no negotiations on new memoranda are currently being held.

The Czech Republic is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

The Czech Republic is a member of the Council of Europe’s Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Czech_en.asp

Recommendations:

The Czech Republic has taken several steps in 2009 to enhance its anti-money laundering/counter-terrorist financing (AML/CFT) regime. The most pressing challenge currently relates to the burden on law enforcement to prove a link between seized assets and criminal activity. The government of the Czech Republic (GOCR) should consider amending its legislation to reverse the burden of proof. The Czech Republic should take steps to ensure the police and the FIU have sufficient resources to effectively implement and enforce the AML/CFT measures. In addition, the GOCR should ratify the UN Convention against Transnational Organized Crime and UN Convention against Corruption.

Denmark

Denmark is not a major financial center and, although authorities do not believe Denmark is very often viewed as a particularly attractive place for money laundering, there have been some instances of placement of proceeds in banks in situations where neither the victim nor the perpetrator resided in Denmark. Major sources for proceeds are drug trafficking and economic crimes, particularly VAT and investment frauds, smuggling of goods, and violations of intellectual property rights. Outlaw motorcycle gangs have been involved in a range of offenses, including narcotics-related offenses, smuggling of goods, and various financial crimes. Denmark is geographically vulnerable to serving as a transit country for smuggling into Sweden and Norway. The proceeds of crime are typically transferred out of Denmark soon after offenses occur.

Offshore Center: No

Free Trade Zones: Yes

The only free trade zone in Denmark is the Copenhagen Free Port, which is operated by the Port of Copenhagen. The Port of Copenhagen and the Port of Malmö (Sweden) in 2001 merged their commercial operations, including the Free Port activities, in a joint company named CMP (Copenhagen Malmö Port). The facilities in the free port are mostly used for tax-free warehousing of goods imported, for exports, in-transit trade, and distribution. Tax and duties are not payable until cargo leaves the Free Port.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering is criminalized via the Consolidated Act no. 442 of 11 May 2007 on Measures to Prevent Money Laundering and Financing of Terrorism, as amended in June 2008 (Act no. 442). Money laundering is also covered in criminal law by section 290 of the Danish Criminal Code on the acquisition of proceeds obtained by punishable violation of the law. Self laundering is not covered. Denmark has adopted an all crimes approach by making its money laundering statute applicable in the case of any punishable violation of law.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

Denmark criminalizes terrorist financing via Act no. 442. Terrorist financing is a punishable offense under section 114b of the Danish Criminal Code. According to this provision, it is forbidden directly or indirectly to provide financial support to, procure or collect funds for or place money, other assets or financial or other similar services at the disposal of terrorists.

Know-your-customer rules: Yes

Companies must maintain legal ownership information for other than bearer shares. Know-your-customer requirements apply to financial institutions and company and trust service providers. Accounting information for all entities is required to be kept in accordance with the Joint Ad Hoc Group on Accounts standards.

Bank records retention: Yes

Company financial audits are required each year and those records must be kept for a minimum of five years.

Suspicious transaction reporting: Yes

Reporting entities including banks, non-bank financial institutions and designated non-financial businesses and professions are required to file suspicious transaction reports (STRs) to the Money Laundering Secretariat (MLS), Denmark’s financial intelligence unit (FIU). Between January 1, 2009 and December 6, 2009, the Office of the Public Prosecutor for Serious Economic Crime (PPSEC) reported that 2,029 STRs had been submitted. The majority of STRs come from money remittance operators (46%), while banks (35%) and currency exchange operators (18%) make up most of the remainder.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

In 2007, the PPSEC set up an interdisciplinary unit to trace proceeds from crime with the aim of confiscation. The Asset Recovery Group investigates the money flow in cases concerning complicated economic crime. There is no asset forfeiture fund.

Narcotics asset sharing authority: Yes

Denmark’s Law on Enforcement of Certain Criminal Decisions in the European Union (EU), which went into effect in 2005 and implements recent EU Framework Decisions (including the Framework Decision on the application of mutual recognition to confiscation orders), provides inter alia for the sharing with EU member states in some instances. Under Sections 42 and 43 of the Law, amounts of money or assets valued at less than 10,000 euros fall to the Danish National Treasury but amounts in excess of the 10,000 euro threshold are shared equally.

Cross-border currency transportation requirements: Yes

Under the Customs Act any person physically entering or leaving or sending or receiving covered items in or out of the Danish tariff area, must declare, on their own initiative, all cash and negotiable instruments exceeding a value of 15,000 euros. Cash, travelers checks, other monetary instruments such as securities, precious metals and gold are subject to declaration.

Cooperation with foreign governments:

Denmark regularly cooperates in international efforts to combat money laundering and terrorist financing. The Asset Recovery Group cooperates with similar groups in the other Nordic countries, and is part of the so-called CARIN network (Camden Asset Recovery Inter-Agency Network), which is a European network for similar asset recovery offices.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Reporting requirements for casinos are covered by the Gambling Casino Act. Unfortunately, this law’s definition of casino omits gaming establishments with electronic gaming machines having restricted wagers and payouts from the Danish anti-money laundering/counter-terrorist financing (AML/CFT) regime. Additionally, the two legal providers of Internet gaming - the public benefit lottery “Klasselotteriet” and the state gaming agency Dansk Tipstjeneste Group - are not covered by AML/CFT provisions.

A Money Laundering Steering Committee has been operational since 1993. It meets twice a year and has representatives from Police agencies and the FIU.

U.S.-related currency transactions: No

There are no indications that currency transactions in Denmark involving international narcotics trafficking proceeds include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States or that otherwise significantly affect the United States.

Records exchange mechanism with U.S.:

In 2001 and 2002, two U.S.-Europol agreements were concluded to allow U.S. law enforcement authorities and Europol to share both strategic information as well as “personal” information (such as names, addresses, and criminal records). In June 2003, the United States and the EU signed two treaties on extradition and mutual legal assistance (MLA). On September 1, 2009, Denmark and the United States exchanged Instruments of Ratification and signed Protocols of Exchange thereof, with respect to the MLA and extradition agreements. A customs mutual assistance agreement between the U.S. and Denmark has been in effect since 1991.

International agreements:

Denmark is a member of the EU’s Money Laundering Contact Committee in Brussels.

Denmark is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Denmark is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation report can be found here: http://www.fatf-gafi.org/dataoecd/1/26/37588381.pdf

Recommendations:

The Government of Denmark has a comprehensive AML/CFT regime and should continue to enhance its laws and regulations as necessary to adhere to international standards. Denmark should extend its AML/CFT requirements to cover gaming establishments and Internet gaming providers.

Djibouti

Djibouti is one of the most stable countries in the Horn of Africa. It is a financial hub in the sub-region, thanks to its U.S. dollar-pegged currency and its unrestricted foreign exchange. Over the past three years, Djibouti’s economy has undergone a substantial transformation due to a surge in foreign direct investment inflows—primarily from the countries of the Gulf Cooperation Council (GCC)—in the port, construction and tourism sectors. Officials from the Central Bank have not reported any recent instances of money laundering. Informal and black markets for goods remain important. Smuggled goods consist primarily of highly taxed cigarettes and alcohol. Due to Djibouti’s strategic location in the Horn of Africa and its cultural and historical trading ties, Djibouti-based traders and brokers are active in the region

Offshore Center: No

Djibouti currently hosts no offshore banks, but its banking laws explicitly permit offshore institutions.

Free Trade Zones: Yes

The Djibouti Free Zone (DFZ), managed by Dubai’s Jebel Ali Free Zone and inaugurated in 2004, has now almost reached capacity. A new larger free zone and separate heavy equipment and automobile free zone are under construction.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Anti-Money Laundering Law No. 196 of 2002 (AML Law) applies to financial institutions of all kinds, as well as to professionals involved in financial matters. Regulated activities include money deposits, insurance, investment, real estate, casinos, and entertainment.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The AML Law criminalizes the financing of terrorism, consistent with UNSCR 1373.

Know-your-customer rules: Yes

The AML Law requires financial institutions to verify customer information, including current residence.

Bank records retention:

No information available.

Suspicious transaction reporting: Yes

Obligated entities are required to forward suspicious transaction reports (STRs) to the Djibouti financial intelligence unit (FIU). The FIU works with a newly established Subcommittee on Money Laundering and Terrorist Finance, under the National Counterterrorism Committee.

Large currency transaction reporting:

All transactions above a ceiling of one million Djiboutian Francs (approximately $5,650) must be declared to the FIU.

Narcotics asset seizure and forfeiture: Yes

The AML Law allows for the freezing or seizing of assets in suspected terrorist finance cases.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements:

No information available.

Cooperation with foreign governments:

The Anti-Money Laundering Law stipulates that Djibouti will cooperate with other countries by exchanging information, assisting in investigations, providing mutual technical assistance and facilitating the extradition process in money laundering cases. The FIU may enter into agreements with foreign FIUs to share information, if the foreign FIUs are bound by similar rules of confidentiality and secrecy. At the regional level, the FIU works in collaboration with FIUs from member states of the Intergovernmental Authority on Development (IGAD).

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Expertise in investigating and prosecuting financial crimes is minimal.

The government regularly circulates the names of individuals and entities included on the UNSCR 1267 Sanctions Committee’s consolidated list.

U.S.-related currency transactions:

The Djibouti economy is dollarized.

Records exchange mechanism with U.S.:

Djibouti does not have an agreement with the United States government to exchange information on money laundering, but Central Bank officials have repeatedly indicated they would fully cooperate if requested.

International agreements:

The Djibouti FIU is not a member of the Egmont Group.

Djibouti is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Recommendations:

While Djibouti took a positive step by adopting anti-money laundering legislation and establishing an FIU, enforcement of the law remains a major challenge. Though Djibouti makes an effort to control all formal transaction points, greater resources and independence could improve the oversight capabilities of the Central Bank and the FIU. Corruption is also a concern. While customs transparency has greatly improved under Dubai Ports World management of the customs service, the Government of Djibouti should continue to focus on improving customs controls on cross-border currency movements, especially at land borders. Finally, Djibouti must also ensure its anti-money laundering regime is effectively applied in all current and planned free zones, and to all professionals involved in financial matters.

Dominica

Dominica is a major offshore center with a large international business company (IBC) presence and internet gaming. Dominican officials believe most of the money laundering cases under investigation involve external proceeds from fraudulent investment schemes. There has also been evidence of advance fee fraud schemes. Domestically driven money laundering primarily has a nexus to drug-related activities. There has been a surge in the placement of euros in the banking system related to questionable activities in Guadeloupe and Martinique. Money remitters have also been used to transfer funds to questionable locations.

Offshore Center: Yes

Dominica’s financial sector includes two offshore banks, 14,955 IBCs, 21 insurance companies, nine money services businesses, and four internet gaming companies. Under common banking legislation enacted by its eight member jurisdictions, the Eastern Caribbean Central Bank (ECCB) acts as the primary supervisor and regulator of onshore banks in Dominica. The ECCB, in conjunction with the Financial Services Unit (FSU), supervises Dominica’s offshore banks. The ECCB assesses applications for offshore banking licenses, conducts due diligence checks on applicants, and provides a recommendation to the Minister of Finance. Offshore banks are required to have a physical presence and are forbidden from opening client accounts before verifying the beneficial owner of the bearer shares and/or companies.

The International Business Companies Act (IBCA), enacted in 1996 and most recently amended in 2001, requires that bearer shares be kept with an approved fiduciary, who is required to maintain a register with the names and addresses of beneficial owners. The Act also requires previously issued bearer shares to be registered. Dominica permits “shelf companies” or ready-made offshore companies that have already been incorporated with a nominee director and nominee shareholder, and are for sale for immediate use. IBCs are not required to have a physical presence and are restricted from conducting local business activities. Internet gaming entities must register as IBCs.

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The 2001 Money Laundering Prevention Act (MLPA) applies to all onshore and offshore financial institutions including banks, trusts, insurance companies, money transmitters, regulated businesses, and securities companies. In Dominica, all serious offenses are predicate offenses for money laundering.

Criminalizes terrorist financing: Yes

In 2003, Dominica enacted the Suppression of Financing of Terrorism Act. Terrorist financing offenses extend to any person who willfully provides or collects funds by any means, directly or indirectly, with the unlawful intention that they be used or in the knowledge that they are to be used, in full or in part to carry out a terrorist act; by a terrorist organization; or by an individual terrorist.

Know-your-customer rules: Yes

Regulations require the establishment of the true identity of the beneficial interests in accounts, and mandate the verification of the nature of the business and the source of the funds of the account holders and beneficiaries.

Bank records retention: Yes

Obligated entities must keep customer identification and business transaction records for a period of seven years.

Suspicious transaction reporting: Yes

The financial intelligence unit (FIU), established under the MLPA, became operational in August 2001. The FIU analyzes suspicious transaction reports (STRs) and forwards appropriate information to the Director of Public Prosecutions. In 2009, the FIU received 94 STRs, up from 73 in 2008.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

The MLPA provides for the freezing of assets for seven days by the FIU, after which time a suspect must be charged with money laundering or the assets released. All assets that can be linked to any individual or legitimate business under investigation can be seized or forfeited, providing the amount seized or forfeited does not exceed the total benefit gained by the subject from the crime committed. The court can order the confiscation of frozen assets. In 2008, $47,552 was seized. No funds were seized in 2009.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

Cooperation with foreign governments:

Dominica cooperates on international money laundering and other financial crimes investigations on a case-by-case basis. The FIU supported the Attorney General of Dominica to provide evidential information to the Dresden Public Prosecutors Office of Germany under the aegis of the Mutual Assistance in Criminal Matters Act No. 9 of 1990. This evidential information significantly contributed to the successful prosecution of three persons in Germany for a fraudulent investment scheme.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Under Dominica’s Economic Citizenship Program, individuals can purchase citizenship and obtain passports for approximately $75,000 for an individual and $100,000 for a family of up to four persons. There is no residency requirement and passport holders may travel to Commonwealth countries without a visa. An application for economic citizenship must be made through a government approved local agent and requires a fee for due diligence or background check purposes. An in-person interview is also required. In the past, subjects of United States criminal investigations have been identified as exploiting this program. In 2008, 16 individuals acquired economic citizenship; 70 were granted in 2009.

There are no known convictions on money laundering charges in Dominica, and there were no arrests or prosecutions for money laundering or terrorist financing in 2009.

The Government of the Commonwealth of Dominica (GOCD) circulates pertinent terrorist lists to financial institutions. To date, no accounts associated with terrorists or terrorist entities have been found in Dominica.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

In 2000, a mutual legal assistance treaty between Dominica and the United States entered into force. Dominica’s FIU is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

Dominica is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

Dominica is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Dominica is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation report can be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Recommendations:

The Government of the Commonwealth of Dominica (GOCD) should fully implement and enforce the provisions of its legislation and provide additional resources for regulating offshore entities, including immobilizing the bearer shares of shell companies and stringently regulating internet gaming entities. Dominica also should take measures to update its anti-money laundering regulations and guidance notes to reflect current international standards. Additional awareness training for financial institutions, specifically banks, to ensure their understanding and compliance of STR reporting requirements would significantly strengthen the GOCD’s regulatory framework. Furthermore, the GOCD should either commit to engage in scrupulous due diligence on economic citizenship applicants, or eliminate the program. The GOCD also should move expeditiously to become a party to the UN Convention against Corruption and the UN Convention against Transnational Organized Crime.

Dominican Republic

The Dominican Republic (DR) is not considered an important regional financial center. However, the DR has the largest economy in the Caribbean and it is a major transit point for narcotics. The existence of six international airports, as well as several seaports and a long frontier with Haiti, at which security is poor, present the authorities with serious challenges. Financial institutions in the DR engage in currency transactions involving the proceeds of international narcotics trafficking, including significant amounts of currency derived from illegal drug sales in the United States. The smuggling of bulk cash by couriers and the use of wire transfer remittances are the primary methods for moving illicit funds from the United States into the DR. Once in the DR, currency exchange houses, money remittance companies, real estate and construction companies, and casinos are commonly used to facilitate the laundering of illicit funds. The lack of a viable financial intelligence unit exacerbates, and the proposed creation of an offshore financial center may worsen the Dominican Republic’s vulnerability to money laundering.

Offshore Center: Legally authorized

In December 2008, the DR passed a law allowing for the creation of “International Financial Zones” (IFZs) in which the full range of financial services can be conducted completely separately from traditional monetary, banking and financial regulatory oversight. The IFZs will have their own regulatory and supervisory authority, which is independent from that of the domestic financial system. This appears to create a risk that IFZs cannot be regulated on anti-money laundering/counter-terrorist financing (AML/CFT) matters. The 2008 law has not yet been implemented.

Free Trade Zones: Yes

The Dominican Republic has approximately 50 Free Trade Zone parks, focused on textiles, tobacco, small electric devices, and medical and pharmaceutical products.

Criminalizes narcotics money laundering: Yes

Money laundering in the DR is criminalized under Act 17 of 1995 (the 1995 Narcotics Law) and Law No. 72-02 of 2002. Under these laws, the predicate offenses for money laundering include illegal drug activity, trafficking in human beings or human organs, arms trafficking, kidnapping, extortion related to recordings and electronic tapes, theft of vehicles, counterfeiting of currency, fraud against the state, embezzlement, and extortion and bribery related to drug trafficking. Law 183-02 also imposes financial penalties on institutions that engage in money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

See above. Terrorist financing is also a predicate offense for money laundering.

Criminalizes terrorist financing: Yes

In August 2008, the Government of the Dominican Republic (GODR) criminalized terrorist financing with the enactment of the Anti-Terrorism Law 267-8.

Know-your-customer rules: Yes

Under Law No. 72-02 and Decree No. 288-1996, numerous financial and non-financial institutions are subject to anti-money laundering provisions. Obligated entities include banks, currency exchange houses, stockbrokers, securities brokers, cashers of checks or other types of negotiable instruments, issuers/sellers/cashers of travelers checks or money orders, credit and debit card companies, remittance companies, offshore financial service providers, casinos, real estate agents, automobile dealerships, insurance companies, and certain commercial entities such as those dealing in firearms and precious metals.

Bank records retention: Yes

Records must be maintained for a minimum of five years.

Suspicious transaction reporting: Yes

In 1997, the DR established a requirement that reporting entities in the financial sector file suspicious transaction reports (STRs).

Large currency transaction reporting: Yes

Reporting entities must report all currency transactions exceeding $10,000.

Narcotics asset seizure and forfeiture:

The 1995 Narcotics Law allows preventive seizures and criminal forfeiture of drug-related assets, and authorizes international cooperation in forfeiture cases. Law No. 78-03 permits the seizure, conservation and administration of assets that are the product or instrument of criminal acts pending judgment and sentencing. However, there is a lack of regulations to implement the legislation which has led to ineffective asset inventory and management. In addition, according Dominican Republic officials, the Civil Code (articles 1131, 1349, and 1350) provides for the annulment of agreements or contracts entered into to disguise the ownership of property. However, there is no indication that these provisions have yet been used.

In December 2009, over 20 DR properties worth millions of dollars were seized from a Spanish citizen linked to an international network of narcotics traffickers that used the country to launder hundreds of millions of dollars.

Narcotics asset sharing authority: Yes

The GODR has bilateral agreements with other countries and is in the process of enhancing asset tracing, freezing and seizure abilities. The United States is negotiating an Asset Sharing Agreement with Dominican Republic officials in light of several multi-million joint forfeiture cases which are pending.

Cross-border currency transportation requirements: Yes

Individuals must declare cross-border movements of currency that are equal to or greater than the equivalent of $10,000 in domestic or foreign currency.

Cooperation with foreign governments: Yes

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The absence of political will and corruption continue to be major factors limiting enforcement efforts. For example, large sums of bulk cash are allowed to transit the country by corrupt military and law enforcement, in return for a fee. Also, a significant market exists for smuggled, counterfeit, copied and stolen goods, especially pharmaceuticals. There is virtually no enforcement of regulations to prohibit the sale of smuggled goods, and patent/copyright laws only call for civil penalties.

In 1997, the DR created an FIU. Subsequently, in 2002, a second FIU was established that was given the mandate to receive STRs from both financial and non-financial reporting entities, as well as present leads to the prosecutors’ office. According to the GODR, the second entity has replaced the original FIU as the official FIU of the Dominican Republic. This duplicity of FIUs caused, and still causes, confusion among obligated entities regarding their reporting requirements. Also, the DR lost its membership in the Egmont Group in November 2006 as its present FIU is not the legally recognized FIU of the Dominican Republic. The DR does not currently have representation in the Egmont Group.

From January 2004 to July 2009, there have been 50 money laundering investigations and 12 convictions.

U.S.-related currency transactions:

A tremendous amount of bulk cash smuggling takes place, representing the proceeds of narcotics that transit the DR.

Records exchange mechanism with U.S.: No

The DR and the United States do not have a mutual legal assistance treaty in place. The United States continues to encourage the GODR to sign and ratify the Inter-American Convention on Mutual Assistance in criminal matters, and to sign related money laundering conventions.

The 1909 U.S.-Dominican Extradition Treaty lists crimes for which suspects or fugitives may be delivered to the other nation. These crimes include embezzlement, “obtaining [or] receiving money [etc.] knowing the same to have been unlawfully obtained” and fraud.

International agreements:

The Dominican Republic is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption – Yes

The DR is a member of the Caribbean Financial Action Task Force (CFATF). Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/Dominican_Republic_3rd_Round_MER_%28Final%29_English.pdf

Recommendations:

Weak implementation of anti-money laundering legislation leaves the Dominican Republic vulnerable to criminal financial activity. Resources dedicated to combat money laundering need to be increased and roles need to be clearly defined in enforcement efforts. Moreover, it does not appear that the Dominican judiciary is well prepared to handle complex financial crimes. There should be enhanced supervision of money service businesses. The Government of the Dominican Republic (GODR) should bolster the operational capacity of the fledgling FIU and ensure a full transition of FIU functions. The FIU should have budgetary independence. The GODR should not establish International Financial Zones, which will greatly increase the risk of all-source money laundering. Specific steps should be taken to combat orruption within both government and industry.

Ecuador

Ecuador is a major drug transit country, and with a dollarized economy and geographical location between two major drug producing countries, Ecuador is highly vulnerable to money laundering. Because only major banks have active money laundering controls in place, and because a large number of transactions take place through unregulated money exchange and remittance companies, there is no reliable way to judge the magnitude of such activity in the country. There is evidence that money laundering is taking place through trade and commercial activity, as well as through cash couriers. Weakly regulated casinos and deficient financial supervision serve as additional vulnerabilities for money laundering. Large amounts of unexplained currency entering and leaving Ecuador indicate that transit of illicit cash is also a significant activity. Though smuggled goods are regularly brought into the country, there is no evidence they are significantly funded by drug proceeds. Recent allegations have surfaced about the possibility of Colombian drug traffickers’ use of Ecuador’s financial system to launder drug proceeds through pyramid or Ponzi schemes.

Offshore Center: Yes

Licensing requirements and regulations are essentially the same for onshore and offshore banks, with the exception that offshore deposits no longer qualify for the government’s deposit guarantee. Also, offshore banks are required to contract external auditors pre-qualified by the Superintendency of Banks. These private accounting firms perform the standard audits that would generally be undertaken by the Superintendency. Anonymous directors are not permitted.

Free Trade Zones: Yes

According to Ecuador’s Internal Revenue Service (SRI) there are seven free trade zones (FTZ) in Ecuador distributed throughout the country, including in major cities Guayaquil, Quito, Cuenca and Manta. FTZs are regulated by Ecuador’s Customs Authority. Companies operating inside an FTZ can be owned by domestic or foreign individuals or corporations.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Law 2005-12 of October 2005 criminalizes money laundering. The law amends the Narcotics and Psychotropic Substance Act of 1990 (Law 108) and criminalizes the laundering of illicit funds from any source. The 2005 law also criminalizes money laundering in relation to any illegal activity, including drug trafficking, trafficking in persons, and prostitution; however, there is no criminal liability for legal persons, and the law lacks effective criminal sanctions. The law states that money laundering is an autonomous crime so no previous conviction for a predicate offense is required to prosecute it.

Criminalizes terrorist financing: No

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The financing of terrorism has not been criminalized, and Ecuador lacks adequate legislation to identify, freeze or seize terrorist assets.

Know-your-customer rules: Yes

On July 17, 2008, the Banking Board of the Republic of Ecuador issued Resolution No. JB-2008-1154 that establishes substantial new customer due diligence obligations.

Bank records retention: Yes

Obligated entities must maintain financial transaction records for ten years.

Suspicious transaction reporting: Yes

The 2005 law establishes Ecuador’s financial intelligence unit (FIU), the Unidad de Inteligencia Financiera (UIF). All entities that fall under the 1994 Financial System Law, including banks, savings and credit institutions, investment companies, stock exchanges, mutual funds, exchange houses, credit card administrators, money transmitters, mortgage companies, insurance companies and reinsurance companies, are required to report all suspicious transactions to the UIF. Cases that are deemed to warrant further investigation will be sent to the Fiscalia. In 2009 the UIF received a total of 240 suspicious transaction reports (STRs) of which 15 were submitted to the Fiscalia. Financial institutions are not required to report suspicious transactions related to terrorism or terrorist financing.

Large currency transaction reporting: Yes

Obligated entities must report cash transactions over $10,000 (including structured transactions amounting to more than $10,000 over a 30-day period).

Narcotics asset seizure and forfeiture: Yes

Ecuador’s legal system provides for asset forfeiture upon conviction; however, civil forfeiture is not permitted and Ecuador is unable to seize or confiscate assets of corresponding value or assets registered under another name unless a direct connection can be made to a target. The National Council against Money Laundering is responsible for administering the freezing and seizure of funds that are identified as originating from illicit sources. However, it is difficult for Ecuadorian authorities to track and locate assets, and they lack information on the management and disposition of property seized. In 2009 the dollar amount of narcotics-related, terrorist-related and other criminal-related assets frozen, seized, and/or forfeited was approximately $34 million.

Narcotics asset sharing authority:

In 1994, the U.S. and Ecuador established asset sharing when they signed the Agreement in Recognition of the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of December 20 Relating to the Transfer of Goods, Assets and Instruments.

Cross-border currency transportation requirements: No

Any person entering Ecuador with $10,000 or more in cash must file a report with the customs service; however, this requirement is currently not being enforced.

Cooperation with foreign governments:

Ecuador cooperates extensively with Colombia and the United States to track, identify, and seize assets related to narcotics trafficking.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2009, there has been a significant positive change in the enforcement against undeclared currency. In February 2009, the Ecuadorian National Police concluded a major money laundering investigation that resulted in the arrests of seven defendants and the seizure of $30.4 million worth of assets, including businesses, properties, and vehicles. The prosecution of the case is in process. In 2009, bulk cash seizures were almost double those from 2008 and totaled just over $2.5 million, including a sizeable bulk cash seizure of $282,000 made by Customs specialized anti-money laundering unit. The majority of the cash seizures, or about $2 million, were done at the two international airports in Quito and Guayaquil. To date, all of the persons arrested or detained as a result of these seizures have been subject to prosecution.

Ecuador’s Ministry of Tourism calculates that, at a national level, there are at least 182 casinos and gambling venues. The National Association of Casinos reports that there are 30 legal casinos and over 100 illegal casinos that have not been authorized by the Ministry of Tourism. In May 2009, the Government of Ecuador (GOE) issued Decree 1726, which brings more power to the Ministry of Tourism to control legal casinos.

Existing laws may conflict with the detection and prosecution of money laundering. For example, the Bank Secrecy Law severely limits the information that can be released by a financial institution directly to the police, and the Banking Procedures Law reserves information on private bank accounts to the Superintendency of Banks. In addition, the Criminal Defamation Law includes sanctions for banks and other financial institutions that provide information about accounts to police or advise the police of suspicious transactions if no criminal activity is ultimately proven. The law also does not provide safe harbor provisions for bank compliance officers. The UIF is seeking legal reforms to address at least some of these issues. According to the Fiscalia, five money laundering convictions were obtained in 2009.

The Superintendency of Banks has cooperated with the U.S. Government in requesting financial institutions to report transactions involving known terrorists, as designated by the United States as Specially Designated Global Terrorists pursuant to Executive Order 13224, or as named on the consolidated list maintained by the UNSCR 1267 Sanctions Committee. No terrorist finance assets have been identified to date in Ecuador.

U.S.-related currency transactions:

Ecuador is dollarized.

Records exchange mechanism with U.S.:

Ecuador and the United States are parties to a bilateral Agreement for the Prevention and Control of Narcotics Related Money Laundering that entered into force in 1993, and a 1994 Agreement to Implement the United Nations 1988 Drug Convention as it relates to the transfer of confiscated property, securities and instrumentalities. There is also a Financial Information Exchange Agreement (FIEA) between the GOE and the United States to share information on currency transactions. In general, Ecuador’s cooperation with the U.S. on money laundering and financial crime has improved from 2008.

International agreements:

The UIF is not a member of the Egmont Group. However, it is empowered to exchange information with other FIUs on the basis of reciprocity and has entered into agreements with several countries to do so.

Ecuador is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

The GOE is a member of the Organization of American States Inter-American Drug Abuse Control Commission Experts Group to Control Money Laundering (OAS/CICAD). Ecuador also is a member of the Financial Action Task Force (FATF) for South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.gafisud.info/home.htm

Recommendations:

The Government of Ecuador (GOE) has made progress in combating money laundering in recent years; however, the GOE should fully implement and amend the existing legislation, and apply anti-money laundering/counter-terrorist financing ( AML/CFT) obligations to all financial sectors – particularly with respect to money remitters, the securities sector, currency exchanges, and unregulated cooperatives. Internet gaming also should be subject to appropriate AML/CFT controls and oversight. The GOE should ensure that a supervisory authority is designated to oversee and monitor compliance with AML/CFT obligations imposed on the additional financial sectors not already overseen by the SBS, and ensure that reporting requirements are enforced. The GOE should ensure the UIF becomes fully functional and meets both the international standards and those of the Egmont Group. The GOE should criminalize the financing of terrorism to adhere to the UN Convention to which it is a party; such a step would also enable its FIU to apply for membership in the Egmont Group. The GOE should harmonize its legislation to eliminate conflicts that hinder successful money laundering investigations and prosecutions. The GOE should make a dedicated effort to train judges, prosecutors and investigators so they understand and are able to apply the new concept of allowing the prosecution of money laundering absent a conviction for a predicate offense. Finally, it is important for the GOE to take all necessary steps to comply fully with international anti-money laundering and counter-terrorist financing standards to which it has formally committed through its membership in the UN, the OAS and GAFISUD.

Egypt, Arab Republic of

Egypt is not considered a regional financial center or a major hub for money laundering. Egypt still has a large informal cash economy, and many financial transactions do not enter the banking system. As part of its ongoing economic reform plan, the Government of Egypt (GOE) continued financial sector reform in 2008 and 2009. Few money laundering cases have made it to court in the last several years; two in 2005 and two in 2007 of which three resulted in convictions. Illegal dealings in antiquities, corruption, misappropriation of public funds, smuggling, and the use of alternative remittance systems, such as hawala, increase Egypt’s vulnerability to money laundering.

While there is no significant market for illicit or smuggled goods in Egypt, there is evidence that arms are being smuggled across Egypt’s border with Gaza. The funding source is unclear, as is the destination of the proceeds. Other than arms smuggling, authorities say the under-invoicing of imports and exports by Egyptian businessmen is still a relatively common practice. The primary goal for businessmen who engage in such activity is reportedly to avoid taxes and customs fees. Customs fraud and invoice manipulation are also found in regional value transfer schemes. The number of businesses and individuals filing tax returns as a result of June 2005 tax reform continue to rise. Nevertheless, a large portion of the Egyptian economy remains undocumented and tax evasion is commonplace. Cash remains by far the preferred means of payment in Egypt and, despite efforts by the Egyptian authorities, modern means of payment remain underdeveloped.

Offshore Center: No

Free Trade Zones: Yes

Egypt has nine public free zones, 250 private free zones, and one special economic zone. Public free zones are outside of Egypt’s customs boundaries, so firms operating within them have significant freedom with regard to transactions and exchanges. The firms may be foreign or domestic, may operate in foreign currency, and are exempt from customs duties, taxes, and fees. Private free zones are usually limited to a single project such as mixing, repackaging, assembling and/or manufacturing for re-export. The special economic zone allows firms operating in it to import capital equipment, raw materials, and intermediate goods duty-free and to pay only half the normal corporate and personal income taxes. All banks and non-financial institutions operating in such zones are subject to Egypt’s anti-money laundering law provisions.

Criminalizes narcotics money laundering:

The Anti-Money Laundering Law No. 80 of 2002 (AML Law), updated in 2003 and 2008, criminalizes laundering of funds from narcotics trafficking, prostitution and other immoral acts, terrorism, antiquities theft, arms dealing, organized crime, and numerous other activities. The law did not repeal Egypt’s existing law on bank secrecy, but it did provide the legal justification for providing account information to responsible civil and criminal authorities.

Criminalizes other money laundering, including terrorism-related: Yes

Egypt takes a list approach in designating predicate offenses for money laundering. Using this approach, Egypt, in addition to having 18 designated offenses under international standards, has also included as predicate crimes illicit gains (targeting public officials who acquire unexplained wealth) and crimes of receiving money contrary to Law No. 146 of 1988 (Law regarding Companies Receiving Funds for Investment). Individuals acting as financial intermediaries, such as lawyers, accountants, and cash couriers, are not currently subject to AML controls, although EMLCU officials have indicated that the law will soon be amended to cover the activities of these individuals.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The GOE extended its original counter-terrorism law, an emergency law enacted in 1981, until the spring of 2010. The GOE is working on a new comprehensive law that will reportedly include specific measures against terrorist financing. Currently, Article 86 of the Egyptian Penal Code criminalizes the financing of terrorism.

Know-your-customer rules: Yes

Know your customer (KYC) regulations have been issued by the Egyptian financial intelligence unit (FIU) for banks supervised by the Central Bank of Egypt, the Post office, insurance companies, securities firms, leasing companies, factoring companies, mortgage finance companies, foreign exchange companies and money transfer companies. Numbered or anonymous accounts are prohibited. These regulations implement the AML Law, and supervisors can use their powers to impose administrative sanctions where violations are identified.

Bank records retention: Yes

Under the AML Law, banks are required to keep all records for five years. The Central Bank also has issued an instruction to banks requiring them to examine large transactions.

Suspicious transaction reporting: Yes

The Egyptian Money Laundering Combating Unit (EMLCU), Egypt’s FIU, has the full legal authority to examine and analyze all suspicious transaction reports (STRs). Reporting of suspicious transactions is required by all banks and non-bank financial institutions. The AML Law provides the authority, by Prime Ministerial Decree, to add businesses to the list of entities subject to the requirements of the Law, including the reporting of suspicious transactions. Real estate brokers and dealers of precious metals and stones were brought under coverage by Prime Minister’s Decree 2676 of 2008, and are now subject to the record keeping, reporting and other requirements of the AML Law. In the first six months of 2008, 275 STRs were filed and three were forwarded to the Public Prosecutor. For the size and nature of the economy and the information available about the nature and character of crime in Egypt, the overall numbers of STRs and overall effectiveness of the program is low.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Although the AML Law does not specifically allow for seizure and confiscation of assets from money laundering, the penal code authorizes seizure of assets related to predicate crimes, including terrorism. All assets are subject to seizure, including moveable and immoveable property, rights and businesses. Assets can only be seized with an order from the Public Prosecutor, and the agency responsible for seizing the assets depends on the predicate crime. Typically, the Central Bank seizes cash and the Ministry of Justice seizes real assets.

Narcotics asset sharing authority: Yes

Confiscated assets are given to the Ministry of Finance, and the executive regulations of the AML Law allow for sharing of confiscated assets with other governments. The Public Prosecutor’s office is currently engaged in negotiations to enhance cooperation with other governments on asset seizure and confiscation.

Cross-border currency transportation requirements: Yes

The threshold for declaring foreign currency at borders is $10,000 or the equivalent in other currencies. The declaration requirement applies to travelers leaving as well as entering the country. However, enforcement of this provision is not consistent. Authorities claim that the terrorist attacks of the past several years have given extra impetus to law enforcement agencies to thoroughly scrutinize currency imports/exports. Egyptian Customs Authorities now pass all reports of foreign currency declarations at the border to the EMLCU and also alert the European Union border guards of individuals crossing the border with large amounts of cash.

Cooperation with foreign governments:

Because of its historical problems with domestic terrorism, the GOE has sought closer international cooperation to counter terrorism and terrorist financing. The GOE has shown a willingness to cooperate with foreign authorities in criminal investigations related to terrorism or narcotics. Egypt also provides legal and judicial assistance and extradition on the basis of either the principle of reciprocity or international comity or “courtesy” (Article 18 of the AML Law).

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Although money laundering investigations are conducted by law enforcement agencies, the principal authority in the investigation of both money laundering and terrorist financing is the Supreme State Security Prosecution Office (SPO). The Public Prosecutor’s office controls the primary conduct of investigations, provisional measures and confiscation action. Similarly cross border interdiction of cash and negotiable instruments, while the responsibility of the Customs Authority, is sent to the Public Prosecution office for decision as to any further action. Although accurate and current law enforcement statistics are difficult to obtain, it is believed the number of successful investigations, prosecutions, and convictions for money laundering is low.

Informal remittance is a potential means for laundering, but Egyptian authorities claim these systems are not a large phenomenon in Egypt, and therefore, do not monitor or regulate them. Due to lack of regulation and investigations, it is unclear if and to what extent money laundering is actually occurring through these systems. Expatriate Egyptian workers sometimes use informal underground remittance systems due to cost and lack of access to official banking procedures. The latest figures from the Central Bank indicate that overseas workers remitted approximately $7.8 billion in fiscal year 2008-2009.

The Central Bank circulates to all financial institutions the names of suspected terrorists and terrorist organizations on the UNSCR 1267 Sanctions Committee’s consolidated list and the list of Specially Designated Global Terrorists designated by the U.S. pursuant to Executive Order 13224.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

The United States and Egypt have a Mutual Legal Assistance Treaty. Law enforcement cooperation in the area of financial crimes is good. The EMLCU is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

The GOE has entered into a number of bilateral agreements and mutual legal assistance treaties. Egypt also has agreements for cooperation on money laundering issues with the UK, Romania, Zimbabwe, Russia, and Peru.

Egypt is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Egypt is a founding member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here:

http://www.menafatf.org/images/UploadFiles/MER_Egypt_ForPublication.pdf

Recommendations:

The Government of Egypt (GOE) will not have a successful anti-money laundering/counter-terrorist financing regime until it has successful prosecutions and convictions commensurate with the size and nature of its economy and the nature and character of crime in Egypt. Improved investigative capacity in financial crimes is a prerequisite. Egypt should consider ways of improving the EMLCU’s feedback on STRs to reporting institutions. It should improve its enforcement of cross-border currency controls, specifically allowing for seizure of suspicious cross-border currency transfers. Egyptian law enforcement and customs authorities should examine and investigate trade-based money laundering, alternative remittance systems, and customs fraud. The GOE should ensure its updated law against terrorism specifically addresses the threat of terrorist financing, including asset identification, seizure and forfeiture. The GOE should seek to strengthen its use of forfeiture in both money laundering and predicate crimes.

El Salvador

Located on the Pacific coast of the Central American isthmus, El Salvador has one of the largest and most developed banking systems in Central America. The growth of El Salvador’s financial sector, the increase in narcotics trafficking, the large volume of remittances through the formal financial sector and alternative remittance systems, and the use of the US dollar as legal tender make El Salvador vulnerable to money laundering. From January to August of 2009, approximately $2.8 billion in remittances were sent to El Salvador through the financial system. The quantity of additional remittances to El Salvador via other methods is not known. The Central America Four Agreement between El Salvador, Guatemala, Honduras, and Nicaragua allows for free movement of the citizens of these countries across their respective borders without passing through immigration or customs inspection. As such, the agreement represents a vulnerability to each country for the cross-border movement of contraband and illicit proceeds of crime. Most money laundering is conducted by international criminal organizations. These organizations use bank and wire transfers from the United States to disguise criminal revenues as legitimate remittances to El Salvador. The false remittances are collected and transferred to other financial institutions until sufficiently laundered for use by the source of the criminal enterprise, usually a narcotics trafficking organization.

Offshore Center:

No information available.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering: Yes

Decree 498 of the 1998 “Law Against the Laundering of Money and Assets,” criminalizes money laundering related to narcotics trafficking.

Criminalizes other money laundering, including terrorism-related: Yes

Decree 498 also criminalizes money laundering related to other serious crimes, including trafficking in persons, kidnapping, extortion, illicit enrichment, embezzlement and contraband.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The Government of El Salvador (GOES) passed counter-terrorism legislation, Decree 108, in September 2006. Decree 108 further defines acts of terrorism and establishes tougher penalties for the execution of those acts. Article 29 of Decree 108 establishes the financing of terrorism as a criminal offense. The law also grants the GOES the legal authority to freeze and seize assets associated with terrorists and terrorism. However, there are shortcomings in the legislation.

Know-your-customer rules: Yes

Under Decree 498, financial institutions must identify their customers.

Bank records retention: Yes

Decree 498 mandates that obligated entities maintain records for a minimum of five years.

Suspicious transaction reporting: Yes

Decree 498 establishes the Unidad de Inteligencia Financiera (UIF), the financial intelligence unit (FIU). Obligated entities are required to file suspicious transaction reports (STRs) with the FIU. These entities include banks, finance companies, exchange houses, stock exchanges and exchange brokers, commodity exchanges, insurance companies, credit card companies, casinos, dealers in precious metals and stones, real estate agents, travel agencies, the postal service, construction companies, and the hotel industry.

Large currency transaction reporting:

Decree 498 mandates that all currency transactions exceeding approximately $57,000 or its equivalent must be reported to the FIU.

Narcotics asset seizure and forfeiture: Yes

The GOES has established systems for identifying, tracing, freezing, seizing, and forfeiting narcotics-related and other assets of serious crimes. Salvadoran law currently provides only for the judicial forfeiture of assets upon conviction, and not for civil or administrative forfeiture. A draft law to reform Decree 498 to provide for civil forfeiture of assets, currently in the national legislature, has run into resistance from businessmen and others who are fearful that a civil asset forfeiture regime could lead to a crackdown on tax evaders, or possibly be misused for political purposes.

Narcotics asset sharing authority: No

No legal mechanism exists to share seized assets with other countries.

Cross-border currency transportation requirements:

Decree 498 requires all incoming travelers to declare the value of goods, cash, or monetary instruments they are carrying in excess of approximately $11,400. Falsehood, omission, or inaccuracy on such a declaration is grounds for retention of the goods, cash, or monetary instruments, and the initiation of criminal proceedings. If following the end of a 30-day period the traveler has not proved the legal origin of the currency and property, the Salvadoran Government has the authority to confiscate the assets. In 2009, the GOES confiscated $938,845 in undeclared cash from travelers transiting Comalapa International Airport and international land border crossings adjacent to Honduras and Guatemala.

Cooperation with foreign governments:

The GOES has cooperated with foreign governments in financial investigations related to narcotics, money laundering, terrorism, terrorist financing and other serious crimes. Salvadoran law does not require the FIU to sign agreements to share or provide information to other countries.

U.S. or international sanctions or penalties:

On June 5, 2009, the Egmont Group of FIUs formally suspended El Salvador because the country lacks adequate terrorist financing legislation.

Enforcement and implementation issues and comments:

In 2009, the FIU undertook a total of 15 investigations of suspected money laundering and/or financial crime. The Attorney General’s office indicates it brought six money laundering cases to trial, and obtained three convictions. The FIU froze a total of $819,000 in funds suspected of being related to money laundering. In subsequent judicial proceedings, however, the presiding judges opted to return all of the seized funds to the purported owners.

The UIF appears to be underused, and lacks institutional direction and analytical and investigative capacity. Because of its suspension from the Egmont Group, the UIF cannot exchange information with its counterparts through the Egmont Secure Web. Despite demonstrating a greater commitment to pursue financial crimes, the GOES still lacks sufficient prosecutorial and police resources to adequately investigate and prosecute financial crimes.

The GOES has circulated the names of suspected terrorists and terrorist organizations listed on the United Nations (UN) 1267 Sanctions Committee consolidated list to financial institutions. These institutions are required to search for any assets related to the individuals and entities on the consolidated list.

U.S.-related currency transactions:

The US dollar is legal tender in El Salvador. The US dollar is also the currency of choice in the illicit economy.

Records exchange mechanism with U.S.:

There is cooperation on a variety of law enforcement and financial crimes matters on a case-by-case basis. For example, the GOES worked with the USG to complete the extradition of a fugitive financier apprehended in Miami, Florida. He was subsequently extradited to El Salvador in October 2009.

International agreements:

El Salvador is a party to the Treaty of Mutual Legal Assistance in Criminal Matters signed by the Republics of Costa Rica, Honduras, Guatemala, Nicaragua, and Panama. El Salvador has signed several agreements of cooperation with financial supervisors from other countries to facilitate the exchange of supervisory information, including permitting on-site examinations of banks and trust companies operating in El Salvador.

El Salvador is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

El Salvador is a member of the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation report can be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Recommendations:

El Salvador must strengthen its ability to investigate and prosecute financial crime and terrorist financing, and improve its mechanisms for seizing and sharing assets. The Government of El Salvador should ensure the passage of the civil asset forfeiture legislation that is currently under consideration by the legislature. Remittances remain an important sector of the Salvadoran economy and as such should be far more carefully supervised. The GOES should improve supervision of cash couriers and wire transfers and enact legislation requiring supervision of nongovernmental organizations to comport with international counter-terrorism financing standards. The GOES also should ensure sufficient resources are provided to the Attorney General’s office as well as to the financial crime and narcotics divisions of the National Civilian Police. In addition, the GOES should amend its terrorist financing law and work to restore its good standing in the Egmont Group.

Equatorial Guinea

Equatorial Guinea (EG) is not a major regional financial center. Implementation of its anti-money laundering laws is not complete, and EG is still vulnerable to money laundering and terrorist financing. EG’s greatest concern in terms of money laundering and terrorist financing is cross-border currency transactions and the illegal international transfer of money by companies. Equatorial Guinea is a member of the Economic and Monetary Community of Central African States (CEMAC), and shares a regional Central Bank (BEAC) with other CEMAC members. The Government of EG also is a member of the Banking Commission of Central African States (COBAC) within CEMAC.

Offshore Center:

No information available.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering:

No information available.

Criminalizes other money laundering, including terrorism-related:

CEMAC member countries formed the Central African Action Group Against Money Laundering (GABAC) to draft a common anti-money laundering law for all CEMAC countries. The regulations are supranational and enforceable in all member states without specific legislation in each country. In 2007, EG adopted an anti-corruption law criminalizing the diversion and misappropriation of funds; the legislation also governs funds involved in money-laundering and terrorist financing. Money laundering and other financial crimes are criminal offenses in EG.

Criminalizes terrorist financing:

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

No information available.

Know-your-customer rules:

COBAC and GABAC have established procedures requiring banks to record and report the identity of customers engaging in large transactions.

Bank records retention:

Banks must keep records of the transactions for which they must identify customers for at least five and up to ten years.

Suspicious transaction reporting:

No information available.

Large currency transaction reporting:

Transfers exceeding €5000 (approximately $7,000) to bank accounts outside EG require the permission of the government regulator and transfers through agencies such as Western Union or Money Gram exceeding CFA 1,500,000 (approximately $3,500) require the permission of the Ministry of Finance.

Narcotics asset seizure and forfeiture:

No information available.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

No information available.

Cooperation with foreign governments (including refusals):

No information available.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

To date, there have been no arrests in EG related to financial crimes.

COBAC is also responsible for circulating to its financial institutions a list of individuals and entities on the UN 1267 Sanctions Committee’s consolidated list, or other groups identified by the United States or the European Union.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

Equatorial Guinea is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - No
  • the UN Convention against Corruption - No

EG is not a member of a Financial Action Task Force-style regional body.

Recommendations:

The Government of Equatorial Guinea should work with the CEMAC and BEAC to establish a viable anti-money laundering/counter-terrorist financing regime. The EG should become a party to the 1988 UN Drug Convention and the UN Convention against Corruption.

Estonia

Estonia has one of the most transparent, developed banking systems of the new European Union (EU) countries. Estonia has adopted the universal banking model, which enables credit institutions to participate in a variety of activities such as leasing, insurance, and securities. Transnational and organized crime groups are attracted to the territory due to its location between Eastern & Western Europe. Analysis of suspicious transaction reports (STRs) discloses incidents of transferring the proceeds of Internet crime to Estonia. There have been no reports of terrorist financing in Estonia.

Offshore Center: No

Free Trade Zones: Yes

There are three free trade zones (FTZs) in Estonia—at the ports of Muuga and Sillamae and on the border with Latvia. In the FTZs, VAT and excise duties do not have to be paid on goods imported and later exported. The main supervisory authority responsible for monitoring and checking the movement of goods in the FTZs is the Estonian Tax and Customs Board (ETCB). There are strict identification requirements for companies and individuals using tax free zones. There is no known evidence trade-based money laundering schemes or financiers of terrorism are active in these zones.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering was added as a criminal offense to the Criminal Code in 1999, at the same time the Money Laundering Prevention Act (MLPA) came into force. Amendments to the MLPA and Penal Code (which replaced the Criminal Code) that took effect in September 2002 made money laundering committed by a legal entity a crime.

In 2008, the Government of Estonia (GOE) enacted the Money Laundering and Terrorism Financing Prevention Act (MLTFPA). The MLTFPA introduced substantial changes such as the expansion of the definitions of money laundering and financial institutions. Designated non-financial businesses and professions are now covered under the law. The MLTFPA harmonizes Estonian law with the EU third directive on money laundering (2005/60/EC) and its implementing directive 2006/70/EC.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The Penal Code was amended in 2007 to make terrorist financing a distinct criminal offense. In 2009 an amendment was made to the Penal Code criminalizing the financing and support of acts of terrorism.

Know-your-customer rules: Yes

According to the MLTFPA, all covered entities and persons are obligated to apply due diligence measures. These include identification and verification of the natural and legal persons participating in a transaction; identification of the beneficial owner; and acquisition of information about the purpose and nature of the business relationship and transaction.

Bank records retention: Yes

Under the MLTFPA, an obligated person shall preserve copies of the documents identifying and verifying a person as well as copies of the documents establishing the business relationship for no less than five years after termination of the business relationship. Further the MLTFPA stipulates that an obligated person shall preserve the documents on reportable transactions and the documents serving as the basis for notifying the financial intelligence unit (FIU) for no less than five years after conclusion of the transaction or FIU notification.

Suspicious transaction reporting: Yes

The MLTFPA considerably expands the list of obligated persons, including all credit and financial institutions. Estonia’s legislation requires all obligated persons to immediately notify the FIU about any activity or circumstance which may be an indication of money laundering or terrorist financing, or if the obligated person has a reason to suspect that money laundering has occurred. In 2008 the FIU received 13,861 STRs. Through September 2009, the FIU received a total of 23,802 STRs; 1,158 STRs related to suspected terrorist financing.

Large currency transaction reporting: Yes

All obligated entities, except for credit institutions, must notify the FIU of any cash transactions which exceed 500,000 EEK (approximately $50,000) or an equal amount in another currency. The same notification requirement applies to credit institutions unless the credit institution has a business relationship with the person participating in the transaction.

Narcotics asset seizure and forfeiture:

The Estonian penal code establishes asset seizure and forfeiture, with special provisions for money laundering. In 2007, Estonia established an Asset Recovery Unit under the FIU to concentrate on organized crimes, detecting criminal assets from serious crimes and identifying criminal assets transferred to foreign countries.

Narcotics asset sharing authority: Yes

Estonia allows asset sharing with cooperative foreign jurisdictions.

Cross-border currency transportation requirements: Yes

Estonia is member of the EU. There are mandatory currency declarations for those natural persons entering or departing the European community and transporting euros 10,000 or more (approximately $13,700). There are no reporting requirements when crossing the border to or from another EU member country.

Cooperation with foreign governments:

As most suspicious transactions are Russia-related, in 2008 a memorandum of understanding was signed between the Estonian Financial Supervision Authority and Russian Central Bank providing a legal framework for closer cooperation between these two countries. In August 2000, Estonia ratified the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds of Crime. In October 2001, the GOE signed a cooperation agreement with Europol.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The FIU is operationally independent; however the FIU does not possess budgetary independence.

As of September 2009, Estonian courts convicted a total of six individuals for money laundering.

The GOE has circulated among its financial institutions the list of individuals and entities included on the UN 1267 sanctions committee’s consolidated list. To date, no related assets have been identified.

U.S.-related currency transactions:

There are no indications that currency transactions in Estonia involving international narcotics trafficking proceeds include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States or that otherwise significantly affect the United States.

Records exchange mechanism with U.S.:

A mutual legal assistant treaty is in force between the United States and Estonia and, on April 7, 2009, a new extradition treaty between the United States and the GOE came into force.

International agreements:

Estonia is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

The ratification law of the UN Convention against Corruption passed its first reading in the Parliament in October 2009.

Estonia is a member of the Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force-style regional body. Estonia’s most recent mutual evaluation report can be found here:

http://www.coe.int/t/dghl/monitoring/moneyval/Evaluations/round3/MONEYVAL%282008%2932Rep-EST3_en.pdf

Recommendations:

The Government of Estonia has a comprehensive anti-money laundering/counter-terrorist financing regime that comports with international standards. The GOE should continue to enhance its legislation and procedures as necessary. The GOE should provide budgetary independence for its FIU and consider extending the large currency transaction reporting requirement to credit institutions regardless of the nature of the relationship with the person conducting the transaction.

Ethiopia

Due primarily to its archaic financial systems and pervasive government controls, Ethiopia is not considered to be a regional financial center. Ethiopia’s location within the Horn of Africa region makes it vulnerable to money laundering-related activities perpetrated by transnational criminal organizations, terrorists, and narcotics trafficking organizations. Sources of illegal proceeds include smuggling; trafficking in narcotics, persons, arms, and animal products; and corruption. As the economy grows and becomes more liberalized, federal police investigation sources report expectations that bank fraud, electronic/computer crimes and money laundering activities will continue to rise.

Offshore Center: No

Free Trade Zones: None.

Criminalizes narcotics money laundering:

Approved in May 2005, article 684 of Ethiopia’s Criminal Code criminalizes money laundering. Under Article 684(1), an offender could be criminally liable either for both the predicate acts and money laundering offenses or for the principal criminal act.

Criminalizes other money laundering, including terrorism-related: Yes

On November 16, 2009, the Ethiopian parliament passed a Prevention and Suppression of Money Laundering and Financing of Terrorism proclamation. The bill entered into effect on December 16, 2009. This legislation includes a provision mandating the establishment of a financial intelligence unit (FIU).

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

See above. The National Bank of Ethiopia (NBE) has the authority to identify, freeze, and seize terrorist finance-related assets, and it has done so in the past.

Know-your-customer rules:

Banks keep general customer information, but there are no formal know-your-customer directives in effect.

Bank records retention:

Most banks retain records for ten years.

Suspicious transaction reporting: No

Although the NBE mandates that banks report suspicious transactions, most records and communications are not yet computerized and record-keeping of individual transactions is spotty and limited. NBE has not yet established clear, specific regulations dictating transaction accountability or transparency safeguards, nor has it established thresholds for suspicious transactions which must be reported.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

The new 2009 anti-money laundering (AML) legislation provides for asset freezing and seizure.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

Foreign exchange controls limit possession of foreign currency, but you must be in possession of proper documentation proving the legitimate source of the foreign currency. The government has periodically seized illegal quantities of foreign currency carried by travelers at Bole International Airport.

Cooperation with foreign governments:

The 2009 AML legislation provides for judicial cooperation with foreign governments in investigations, to include seizure of assets involved in foreign crimes.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There have been no significant arrests for money laundering or terrorist financing in 2009.

The lack of data and systematic study make it difficult for the Federal Police to identify trends in money laundering. Further, inadequate police training and lack of resources significantly diminish their investigative abilities. Federal Police investigative sources indicate that alternative remittance systems, particularly hawala, are widely used. The GOE has closed a number of illegal hawala operations and attempts to monitor hawala networks within the country.

Since government foreign exchange controls limit possession of foreign currency, most of the proceeds of contraband smuggling and other crimes are not laundered through the official banking system. High tariffs also encourage customs fraud and trade-related money laundering. Strict foreign exchange controls encourage the use of hawala, and trade manipulation is often used between hawaladars to effect counter-valuation or a means of balancing books.

NBE routinely circulates to its financial institutions the names of suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee’s consolidated list. During the period from 2007-2009 no assets linked to these persons or entities have been identified.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

Ethiopia is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - No
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Ethiopia is not a member of a Financial Action Task Force-style regional body.

Recommendations:

The Government of Ethiopia should expeditiously assign resources to the new FIU, so it can begin to draft specific anti-money laundering/counter-terrorist financing directives take steps to comply with international standards and Egmont Group membership requirements. Adequate resources should be given to police the country’s porous borders. Ethiopia should become a party to the UN Convention against Transnational Organized Crime and the UN Convention for the Suppression of the Financing of Terrorism.

Fiji

Fiji is a small country with a population of less than 1 million. It is not a regional financial center. Fiji enjoys a relatively low level of crime. The country’s geographical location makes it a convenient potential staging post for Australia and New Zealand. This has been demonstrated by some significant drug related cases and a noted increase in the number of human smuggling cases. Cross-border crime gangs involving individuals from neighboring Asian countries are operating within Fiji.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Government of Fiji (GOF) criminalizes money laundering via the Proceeds of Crime Act 1997 (POCA), as amended in 2004; the Mutual Assistance in Criminal Matters Act 1997, as amended in 2004; and the Financial Transactions Reporting Act of 2004 (FTRA); and implementing regulations of 2006.  Fiji legislation takes an “all serious crimes” approach regarding predicate offenses, including terrorist financing.  Section 3 of the POCA defines as a serious offense any offense for which the maximum prescribed penalty by law is imprisonment for not less than six months or a fine of not less than $500.

Criminalizes terrorist financing:

The POCA criminalizes terrorist financing and introduces several provisions to deal with restraining and forfeiting terrorist property.

Know-your-customer rules: Yes

Customer due diligence measures are contained within Fiji’s Financial Transactions Reporting Regulations (2006).

Bank records retention: Yes

Obligated entities must retain records for seven years from the date of obtaining information about a customer’s identity, any transaction or correspondence, and account closing.

Suspicious transaction reporting: Yes

Banks and other obligated entities, including foreign exchange dealers, money remittance service providers, law firms, real estate agencies, and accountants must file suspicious transaction reports (STRs) with Fiji’s financial intelligence unit (FIU). The FIU has operational independence, but is administered financially by the Reserve Bank of Fiji. There is no information available on STR filings for 2008 and 2009.

Large currency transaction reporting: Yes

There is a $10,000 cash transaction reporting requirement.

Narcotics asset seizure and forfeiture: Yes

The POCA provides the main legal framework for identifying, tracing, freezing/seizing and confiscating the proceeds of crime. In addition, there are confiscation/forfeiture provisions in various statutes that relate to specific offenses. The law allows both civil and criminal forfeiture.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements: Yes

Part 5 of the FTRA came into force on January 1, 2008.  Pursuant to the FTRA, all travelers into and out of Fiji are required to declare to customs officers, at point of entry and departure, if they are carrying currency or negotiable bearer instruments of $10,000 or more or its equivalent in foreign currency. Customs and authorized officers now have authority to seize and detain currency or negotiable bearer instruments carried by travelers, which they reasonably suspect to be related to a serious offense, terrorist financing or money laundering, or when the travelers make a false declaration to authorities. 

Cooperation with foreign governments:

There are no known impediments to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The FIU does not have budgetary independence.

Fiji has circulated to its financial institutions the list of individuals and entities included on the UN 1267 sanctions committee’s consolidated list.

U.S.-related currency transactions:

There are no indications that currency transactions in Fiji involve international narcotics trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States or that otherwise significantly affect the United States.

Records exchange mechanism with U.S.:

The Fiji FIU is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

Fiji became a member of the Egmont Group of FIUs in May 2009, and signed a cooperation agreement with its Indonesian counterpart in July 2009.

Fiji is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - No
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

Fiji is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body. Its most recent mutual evaluation report can be found here: http://www.apgml.org/documents/docs/17/Fiji%20DAR%20Final.pdf

Recommendations:

Fiji should continue to implement anti-money laundering and counter-terrorist financing measures that adhere to international standards.

Finland

Finland is not a regional center for money laundering, financial crime or illegal commerce. Over the past decade, Finland repeatedly has placed first or second on Transparency International’s Corruption Perceptions Index (CPI); in 2009, Finland ranked sixth on the list. The major sources of illegal proceeds in Finland relate to financial crimes and the majority of suspicious financial activities investigated have an international dimension. These funds are normally laundered through currency exchangers and gambling establishments. The number of organized crime groups has grown slightly in the past few years, as has the number of their members. Terrorism related fund-raising, to the extent it exists, appears to be less of a problem than in other European countries.

Offshore Center: No

Free Trade Zones: Yes

Finland has four Free Zones and four Free Warehouse areas. The four designated Free Zones are located in Hanko, Hamina, Lappeenranta, and Turku. The four Free Warehouses are located in Helsinki, Naantali, Kemi, and Oulu. In Finland, the duty-free free zone and warehouse licenses have, in most cases, been granted to municipalities or cities; however, one or several commercial operators, approved by the customs districts, are usually in charge of warehousing operations within the area. Finnish free zones often serve as transit points for shipments of goods to and from Russia. Many goods originating in East Asia and destined for St. Petersburg or Moscow are transported via the Lappeenranta Free Zone.

Criminalizes narcotics money laundering: Yes

See below.

Criminalizes other money laundering, including terrorism-related: Yes

In 1994, Finland enacted legislation criminalizing money laundering related to all serious crimes. Amendments to the Penal Code and the Money Laundering Act in 2003 broaden the definition of money laundering to include, inter alia, negligence and terrorist financing.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The Penal Code of Finland was amended at the end of 2002 with the addition of a new chapter on terrorism (Chapter 34 a). According to Section 5 of the amendment, a person who directly or indirectly provides or collects funds in order to finance a terrorist act, or who is aware that the funds shall finance a terrorist act, commits a punishable offense. The Act on Preventing and Clearing Money Laundering and Funding of Terrorism (503/2008) (ML/TF Act) came into force on August 1, 2008, criminalizing planning and support for terrorism.

Know-your-customer rules: Yes

Under the 1998 Act of Preventing and Clearing Money Laundering (MLA) a covered party must identify customers and exercise due diligence. A covered party must identify the client and verify the client’s identity when establishing a permanent client relationship or if the value of an occasional transaction or related transactions exceeds 15,000 euro (approximately $20,400); customers conducting occasional wire transfers must be identified when the transfer of funds is made with cash and the individual amount exceeds 1,000 euros (approximately $1,340). If someone acts as an agent on behalf of the actual client, the agent must be identified and his/her identity verified in addition to that of the beneficial owner. Enhanced due diligence measures are applied to politically exposed persons, their family members and close business partners.

Bank records retention: Yes

Banks/financial institutions are required to maintain records that could be used in a financial investigation for five years. In practice (and according to accounting regulations), these records are kept for at least seven years.

Suspicious transaction reporting: Yes

The MLA compels credit and financial institutions, investment and fund management companies, insurance brokers and insurance companies, real estate agents, pawn shops, betting services, casinos, and most non-bank financial institutions to file suspicious transaction reports (STRs) to Finland’s financial intelligence unit (FIU). Subsequent amendments to the MLA add management companies, custodians of mutual funds, apartment rental agencies, auditors, auctioneers, lawyers, accountants, and dealers in high value goods as covered entities. Also included are businesses and professions that perform other payment transfers, such as hawala. The ML/TF Act adds tax advisory and financial management services, repossession agents and bankruptcy ombudsmen. From January to June 2009, the FIU received 13,386 STRs, of which nine were suspected terrorist financing; in the same time frame, 757 STRs resulted in criminal investigations.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Finnish authorities do not have national authority to permanently suspend transactions or forfeit assets independent of a judicial process. According to the Penal Code, the proceeds of crime shall be given to the injured party. If a claim for compensation or restitution has not been filed, Finnish authorities can order forfeiture. With some exceptions, only the proceeds of a crime can be forfeited. Legitimate businesses can be seized if used to launder drug money or support terrorist activity. The FIU has the ability to freeze a transaction for up to five business days in order to determine the legitimacy of the funds. Funds can remain frozen for an extended period when linked to a criminal investigation. According to the Coercive Measures Act, all restraining and freezing orders must be presented to the court every four months. A new order can be given for a “reasonable time,” but it is yet unclear how long that time can ultimately be. From January to June 2009, the FIU issued five orders to freeze assets/suspend transactions with a total value of $181,692. With these orders, the FIU recovered $82,041 of criminal proceeds.

Narcotics asset sharing authority:

Finland has enacted laws for the sharing of seized narcotics assets, as well as the assets from other serious crimes, with other governments.

Cross-border currency transportation requirements:

As of June 15, 2007, Finland implemented the European Union (EU) regulation on controls of cash being transported over the EU Community Border. According to the regulation (EC 1889/2005), persons carrying 10,000 euros (approximately $13,400) or more will be required to declare cash upon entering or leaving EU territory.

Cooperation with foreign governments:

Finland ratified the 1959 European Convention on Mutual Legal Assistance in Criminal Matters and its 1978 Additional Protocol. Finland and Russia signed an agreement on cooperation in fighting drug trafficking in October 2008. In January 2008, Finland and Estonia signed an agreement aimed at closer cooperation between law enforcement authorities to fight organized crime. Additionally, Finland has concluded numerous other bilateral law enforcement cooperation agreements. Finland does not have a national mechanism to give effect to requests for freezing assets and designations from other jurisdictions.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

A working group was appointed by the Ministry for Foreign Affairs in February 2008 to study the possibility of establishing an administrative system for freezing terrorists’ funds separately from the criminal investigative system. This working group concluded in February 2009 that Finnish authorities on the whole have good means for freezing terrorists’ funds found to be in a Finnish financial institution. Finland has not, to date, conducted any terrorist financing investigations or prosecutions.

U.S.-related currency transactions:

There have been no reports of Finland’s financial institutions engaging in currency transactions involving international narcotics trafficking proceeds that include significant amounts of United States currency or currency derived from illegal drug sales in the United States.

Records exchange mechanism with U.S.:

The U.S. and Finland signed a bilateral extradition and mutual legal assistance treaty (MLAT) in December 2004. The U.S. and the EU signed bilateral extraditions and mutual legal assistance (MLAT) treaties in December 2003. The Finnish Parliament ratified the agreements (HE 86/2005) and approved the necessary implementing bilateral instruments in December 2007. In December 1990, TIAS 12101, a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital, entered into force between Finland and the U.S. Finland has also concluded a customs mutual assistance agreement with the United States.

International agreements:

Finland has, in conjunction with the other Nordic Countries, prepared and concluded treaties with certain offshore financial centers concerning the exchange of information on tax related matters. The treaties are part of the tax haven project, set out by The Nordic Council of Ministers. Finland has signed bilateral treaties on information exchange and taxation with Gibraltar (October 2009), Aruba and Netherlands Antilles (September 2009), British Virgin Islands (May 2009), Bermuda and Cayman Islands (April 2009), Jersey and Guernsey (October 2008) and Isle of Man (October 2007). The FIU may exchange information with other FIUs and with bodies engaged in criminal investigations. Although no Memorandum of Understanding (MOU) is required for this purpose under Finnish law, MOUs have been concluded with Albania, Belgium, Bulgaria, Canada, France, Indonesia, Israel, Latvia, Lithuania, Luxembourg, Poland, Romania , Russia, South Korea, Spain, Switzerland and Venezuela. MOU negotiations are going on with Belarus, Japan, Mexico, Peru, and Ukraine.

Finland is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Finland is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/infobycountry/0,3380,en_32250379_32236963_1_70408_43383847_1_1,00.html

Recommendations:

The Government of Finland has a comprehensive anti-money laundering/counter-terrorist financing regime and should continue to enhance its laws and regulations as necessary to adhere to international standards.

France

France remains an attractive venue for money laundering because of its sizable economy, political stability, and sophisticated financial system. Narcotics trafficking, human trafficking, smuggling, and other crimes associated with organized crime are among its vulnerabilities.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

France criminalizes money laundering through Articles 222-38 (2002) and 324-1 through 324-6 (2002) of the Penal Code and Article 415 of the Customs Code.

Criminalizes other money laundering, including terrorism-related: Yes

France criminalizes money laundering through Articles 222-38 (2002) and 324-1 through 324-6 (2002) of the Penal Code and Article 415 of the Customs Code. The legal procedure for criminal conspiracy applies to money laundering crimes. The Third European Union (EU) Money Laundering Directive is implemented by Ordinance No. 2009-104 of January 30, 2009. Decree No. 2009-874 of July 16, 2009, and Decree No. 2009-1087 of September 2, 2009 have been enacted in order to make the EU Directive effective.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

Terrorist financing is a criminal offense under Article 421-2-2 of the Penal Code (2001).

Know-your-customer rules: Yes

Before entering into a contractual relationship or assisting a customer in the preparation or conduct of a transaction, financial entities subject to transaction reporting requirements must identify their customers and verify their identities via presentation of a document bearing a photograph of the client. Financial entities must identify and verify the identity of occasional customers with respect to transactions above euro 8000 or rental of a safe-deposit box. For casinos and other gaming entities, the threshold is euro 1500. Know-your-customer (KYC) regulations also apply to credit institutions, financial institutions, casinos, and insurance companies and brokers.

Bank records retention: Yes

Financial entities are required to retain all documents relating to the identity of their regular and occasional customers and documents pertaining to transactions for five years following the closing of the account or the termination of the business relationship, or the date of completion of the transaction.

Suspicious transaction reporting: Yes

Obligated entities are required to submit suspicious transaction reports (STRs) to the Unit for Treatment of Intelligence and Action Against Clandestine Financial Circuits (TRACFIN) France’s financial intelligence unit (FIU). TRACFIN received 14,565 STRs in 2008... The FIU referred 359 cases to the judicial authorities in 2008.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Law No. 96-392 of 1996 institutes procedures for seizure and confiscation of the proceeds of crime. French law permits seizure of all or part of property. In cases of terrorist financing, France has promulgated an additional penalty of confiscation of the total assets of the terrorist offender.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Travelers entering or leaving the EU and carrying any sum equal to or exceeding euro 10,000 (approximately $14,000) or negotiable monetary instruments are required to make a declaration to the customs authorities. No reporting is required when crossing country borders within the EU.

Cooperation with foreign governments: Yes

There are no known impediments to international cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

French law enforcement authorities actively investigate money laundering and terror finance.

French authorities have moved rapidly to identify and freeze financial assets of organizations associated with al-Qaida and the Taliban under UNSCR 1267.

U.S.-related currency transactions:

Currency transactions involving international narcotics trafficking proceeds do not appear to include significant amounts of U.S. currency.

Records exchange mechanism with U.S.:

The United States and France entered into a mutual legal assistance treaty (MLAT) in 2001. Through MLAT requests and by other means, France and the United States have exchanged large amounts of data in connection with money laundering and terrorist financing. TRACFIN has an information-sharing agreement with the U.S. Financial Crimes Enforcement Network (FinCEN).

International agreements:

TRACFIN may exchange information with foreign counterparts that observe similar rules regarding reciprocity and confidentiality of information. TRACFIN has information sharing agreements with 32 foreign FIUs, including FinCEN. France is a party to various information exchange agreements and is an active participant in international efforts to combat global money laundering, terrorist finance, and transnational crime.

France is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • UN Convention against Corruption - Yes

France is a member of the Financial Action Task Force (FATF). It is a Cooperating and Supporting Nation to the Caribbean Financial Action Task Force (CFATF) and an Observer to the Financial Action Task Force of South America (GAFISUD), both FATF-style regional bodies. Compliance with the FATF recommendations was evaluated in a report prepared by the International Monetary Fund’s Financial Sector Assessment Program. The report can be found here: http://www.imf.org/external/np/fsap/fsap.asp#

Recommendations:

The Government of France (GOF) has established a comprehensive anti-money laundering/counter-terrorist financing (AML/CFT) regime and is an active partner in international efforts to control money laundering and the financing of terrorism. France should continue its active participation in international organizations and its outreach to lower-capacity recipient countries to combat the domestic and global threats of money laundering and terrorist financing. The GOF should enact a compulsory written cash declaration regime at its airports and borders to ensure that travelers entering and exiting France provide, in writing, a record of their conveyance of currency or monetary instruments.

Gabon

Gabon is not a regional financial center. The Bank of Central African States (BEAC), a regional Central Bank that serves six countries of Central Africa, supervises Gabon’s banking system. The actual monitoring of financial transactions is conducted by the Economic Intervention Service that harmonizes the regulation of currency exchanges in the member States of the Central African Economic and Monetary Community (CEMAC).

Offshore Center:

No information available.

Free Trade Zones:

Gabon maintains a free trade zone (FTZ) that comprises a portion of the city of Port Gentil. The zone is utilized only rarely due to infrastructure issues and geographic remoteness. It is under the authority of an individual who enjoys a close family relationship to President Bongo.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related:

The BEAC Board of Directors has approved anti-money laundering and counter-terrorist financing regulations that apply to banks, exchange houses, stock brokerages, casinos, insurance companies, and intermediaries such as lawyers and accountants in all six member countries. The BEAC regulations treat money laundering and terrorist financing as criminal offenses.

Criminalizes terrorist financing: See above

Know-your-customer rules: Yes

BEAC regulations require banks to record and report the identity of customers engaging in large transactions.

Bank records retention: Yes

Financial institutions must maintain records of large transactions for five years.

Suspicious transaction reporting:

BEAC regulations require financial institutions to file suspicious transaction reports (STRs).

Large currency transaction reporting:

The threshold for reporting large transactions has been set by the CEMAC Ministerial Committee at levels appropriate to each country’s economic situation.

Narcotics asset seizure and forfeiture:

No information available.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

Cooperation with foreign governments:

Gabon cooperates well with other CEMAC members.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In September 2005, Gabon created the Agence Nationale d’Investigation Financière (ANIF), a body designed to lead the fight against money laundering and terrorist financing. Though ANIF is now functional, it lacks the necessary resources (both human and financial) to be completely effective in its mission.

The judiciary remains inefficient and susceptible to inappropriate influence. Police inefficiency, corruption, and impunity remain serious problems. Additionally, official corruption is widespread. Oversight efforts to reign in corruption are weak, making it possible for public officials to exploit their positions for personal enrichment.

U.S.-related currency transactions:

There are no indications that currency transactions in Gabon involve international narcotics trafficking proceeds or include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States or that otherwise significantly affect the United States.

Records exchange mechanism with U.S.:

No information available.

International agreements:

Gabon is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Recommendations:

The Government of Gabon should work with the Bank of Central African States (BEAC) to establish a viable anti-money laundering/counter-terrorist financing regime.

Gambia

The Gambia is not a regional financial center, although it is a regional re-export center. Goods and capital are freely and legally traded in the Gambia, and, as is the case in other re-export centers, smuggling of goods occurs. Customs officials cooperate with counterparts in Senegal to combat smuggling along their common border, although The Gambia has limited capacity to fully monitor its porous borders. The lack of resources hinders law enforcement’s ability to combat possible smuggling despite political will. Though money laundering is thought to take place on a small scale, The Gambia is not a known money laundering hub in the region. It is unknown to what extent laundering is related to narcotics proceeds. However, the rapid growth of banks in The Gambia is disconcerting.

Offshore Center:

No information available.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering: Yes

See below.

Criminalizes other money laundering, including terrorism-related:

In 2003, the Government of The Gambia (GOTG) passed the Money Laundering Act (MLA). The MLA states that money laundering is a criminal offense and establishes narcotics trafficking as well as blackmail, counterfeiting, extortion, false accounting, forgery, fraud, illegal deposit taking, robbery, terrorism, theft and insider trading as predicate offenses.

Criminalizes terrorist financing:

The Anti-Terrorism Act 2002 provides for measures to combat terrorism and criminalizes terrorist financing.

Know-your-customer rules: Yes

The MLA requires banks and other financial institutions to know, record, and report the identity of clients engaging in significant and/or suspicious transactions. In 2007, the Central Bank (CBG) distributed Customer Due Diligence manuals to the banks to increase awareness of suspicious transactions.

Bank records retention: Yes

The MLA requires banks to maintain records for at least six years.

Suspicious transaction reporting: Yes

Reports of suspicious transactions must be filed with the CBG, which created a standard format for suspicious transaction reports.

Large currency transaction reporting:

In 2007, the CBG also created a standard reporting format for large cash transaction reports. The current reporting threshold for cash transactions is $10,000.

Narcotics asset seizure and forfeiture:

The MLA empowers the GOTG to identify and freeze assets of a person suspected of committing a money laundering offense.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

The customs department is tasked with investigating when sums of money exceeding $10,000 are brought into the country. However, Customs officials have not been properly trained.

Cooperation with foreign governments:

The Gambia is a party to the Economic Community of West African States (ECOWAS) Protocol for the Mechanism for Conflict Prevention, Resolution, Management, Peace Keeping and Security. Among other things, this Protocol provides for close cooperation among member states in combating money laundering.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The Gambia’s financial intelligence unit (FIU) was established within the CBG’s Financial Supervision Department and is not an independent entity. Officials have identified staffing and training issues as constraints to the effectiveness of the FIU in its first years of operation.

The CBG is unable to meet its desired examination schedule because of personnel constraints.

The CBG circulates lists of terrorists and terrorist entities designated by the USG under Executive Order 13224 among Gambian banks and other financial institutions, including insurance companies. There have been no arrests and/or prosecutions for money laundering or terrorist financing since 2003.

Only banks and insurance companies are currently subject to MLA requirements.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

The Gambia is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - No
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

The Gambia is a member of the Intergovernmental Action Group against Money Laundering in West Africa (GIABA), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.giaba.org/index.php?type=c&id=24&mod=2&men=2

Recommendations:

The Government of The Gambia should examine its re-export sector to determine whether it is being used to launder criminal proceeds. The Gambia also should expand its anti-money laundering legislation to include a comprehensive range of predicate offenses and designated non-financial businesses and professions. The GOTG should provide adequate resources and capacity to its law enforcement, supervisory and customs personnel so they are able to effectively fulfill their responsibilities. Its fledgling FIU should be given autonomy and should be strengthened both in terms of personnel and training to help it operate effectively. The GOTG should become a party to the UN International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Corruption.

Georgia

Georgia is not considered an important regional financial center, nor is it a money laundering center.   The bulk of criminal proceeds laundered in Georgia are derived from domestic criminal activity, in most cases related to financial crimes, organized crime and corruption.  A small portion of money laundering in Georgia is related to narcotics trafficking.  According to the Georgian Financial Monitoring Service (FMS), most money laundering occurs in the formal financial sector through private banks.  There is no evidence of terrorist financing in Georgia.  Government authorities consider the number of financial crimes in Georgia to be decreasing.  This does not include the territories of South Ossetia and Abkhazia, where little is known about the trend in money laundering. 

Offshore Center:

Georgia is not considered an offshore financial center. There are no offshore casinos or internet gaming sites. However, the separatist regions of Abkhazia and South Ossetia are believed to act in some respects as offshore financial centers. The Government of Georgia (GOG) has de jure jurisdiction over these territories, but has had no de facto control since 1991.

Free Trade Zones: Yes

The adoption of the law on free industrial zones by the Georgian Parliament in July 2007, and establishment of rules for the creation, design and functioning of such zones by GOG Decree 131 of 2008 was followed by the creation of free industrial zones in Poti (GOG decree #72 of April 16, 2009) and in Kutaisi (GOG Decree #106 of June 5, 2009).  

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Money Laundering is criminalized in the Criminal Code of Georgia (Article 194) under the title Legalization of Illicit Income. In 2007, Georgia broadened the definition of illicit income to include illicit and/or other undocumented property in the ownership or possession of an individual. In March 2008, the Georgian Parliament criminalized simple possession, purchase, use or realization of laundered proceeds which requires the element of knowledge to be proven (Article 194, prima). Criminal liability of legal persons was introduced in the Criminal Code in August 2006.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

In June 2006, the Parliament passed an amendment to the Criminal Code (Article 331, prima), specifically criminalizing terrorist financing.

Know-your-customer rules: Yes

Georgian law requires customer identification for transactions that exceed 3,000 GEL (approximately $2,130) or are more than 1,500 GEL (approximately $1,050) and use a Society for Worldwide Interbank Financial Telecommunication (SWIFT) or similar system.

On February 24, 2009, the New Instruction on Opening Accounts in Banking Institutions of Georgia was approved under Decree #18 of the Head of the Financial Supervisory Agency of Georgia (FSA). The Instruction defines types of bank accounts and includes lists of documents needed when opening bank accounts.

Bank records retention: Yes

Under Article 7 of the anti-money laundering law financial institutions are obligated to retain the information/documents on all transactions for a period of not less than six years. The provision includes all transactions and not only those subject to monitoring.

Suspicious transaction reporting: Yes

Obligated entities including banks, non­bank financial institutions, and designated non-financial businesses and professions, including casinos, are required to file suspicious transaction reports (STRs) with the FMS – the Georgian financial intelligence unit (FIU).  Between January and December, 2009, 10,197 STRs were received by the FMS and eight were referred to law enforcement for investigation.  Entities in South Ossetia and Abkhazia are non-compliant.  

Large currency transaction reporting:

The threshold for reporting transactions is 30,000 GEL (approximately $17,960). In 2009, approximately 41,920 currency transaction reports (CTRs) were filed.

Narcotics asset seizure and forfeiture:

A forfeiture mechanism allows for the confiscation of illicit proceeds and instrumentalities of crime. Since July 2007, civil procedures of confiscation have been extended to legal persons as well. In 2009, 400,000 euros (approximately $540,540) were confiscated. The total amount frozen in 2009 was 1,738,200 euros (approximately $2,348,918).

Narcotics asset sharing authority:

Georgia has not completed asset sharing agreements with other countries, but cooperation is possible on a case-by-case basis.

Cross-border currency transportation requirements:

Customs authorities are tasked with monitoring cross-border movement of monetary units and valued items exceeding GEL 30,000 (approximately $17,700) or its equivalent in other currency, and forwarding this information to the FMS. Persons carrying items subject to monitoring have an obligation to fill out a customs declaration on their own initiative. Undeclared items are subject to confiscation.

Cooperation with foreign governments:

Under the anti-money laundering law, the FMS was given authority to conclude agreements with agencies of other countries regulating exchange of information and other issues in the field of money laundering and terrorism financing. It also has authority to exchange information without such agreements.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2009 there were six indictments and one conviction for money laundering.

Because the legal regimes regulating banking in Abkhazia and South Ossetia are undeveloped, these jurisdictions are particularly vulnerable to being used by organized crime groups. The GOG has raised concerns about Abkhaz banks’ alleged involvement in money laundering.

The FMS publishes lists of terrorists and persons supporting terrorism in the Georgian Legislative Bulletin, part IV, on a regular basis.  Updates made by the UN 1267 Sanctions Committee are reflected in the list published by FMS.  Georgia did not identify, freeze, seize, and/or forfeit related assets in 2009. 

U.S.-related currency transactions:

There are no indications that currency transactions in Georgia involving international narcotics trafficking proceeds include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States or that otherwise significantly affect the United States.

Records exchange mechanism with U.S.:

Georgia has excellent law enforcement cooperation with the U.S. although there is no official agreement with the U.S. on money laundering cooperation.

International agreements:

Georgia is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Georgia is a member of MONEYVAL, a Financial Action Task Force-style regional body. The most recent mutual evaluation report can be found here:

http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Georgia_en.asp

Recommendations:

The Government of Georgia should continue to enhance its legislation and procedures, as appropriate.

Germany

Germany is one of the largest financial centers in Europe. Most of the money laundering that occurs in Germany relates to white-collar crime. Although not a major drug producing country, Germany continues to be a consumer and a major transit hub for narcotics. Organized criminal groups involved in drug-trafficking and other illegal activities are an additional source of money laundering in Germany.

Offshore Center: No

Free Trade Zones: Yes

Free Trade Zones of Hamburg, Bremerhaven, and Cuxhaven

Criminalizes narcotics money laundering: Yes

The German Criminal Code Section 261.

Criminalizes other money laundering, including terrorism-related: Yes

German Criminal Code, Sections 261 (“Money Laundering: concealment of Unlawfully Acquired Assets”), 129 (“Formation of Criminal Organization”), 129a (“Formation of Terrorist Organizations”), and 129b (“Criminal and Terrorist Organizations Abroad”). Section 261 was incorporated into the Criminal Code through the “Act on Suppression of Illegal Drug Trafficking and other Manifestations of Organized Crime” which became effective in 1992. Since 1992, the Act has been amended several times, mainly to extend the list of predicate offenses for money laundering. In 2002, terrorist financing was added to the Criminal Code as a predicate offense for money laundering.

In August 2008, the passage of the Act amending the Money Laundering Suppression Act updated and replaced the original 1993 Money Laundering Act. It also incorporates the requirements of the Third EU Money Laundering Directive into German law and provides an enhanced legal definition for terrorist financing.

Criminalizes terrorist financing: Yes

(Please also refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/.)

See previous section.

Know-your-customer rules: Yes

In August 2008, new legislation entered into force that contains further provisions on customer due diligence and other internal risk-management measures to prevent money laundering and terrorist financing. The new regulations apply to banks, insurance companies, and a number of professional groups (e.g., financial services providers, lawyers, notaries public, tax advisors, and other business operators).

Bank records retention: Yes

Covered institutions are obligated to record all details obtained for the purposes of identification. The information obtained is to be recorded in the data files of the institution or a copy of the identity documents may be made and retained. In addition to the recording and retaining of customer identification data, along with the accompanying contractual and/or account opening documents and relevant correspondence, institutions must also keep a complete record of the information pertaining to all transactions effected by the customer within the scope of a business relationship.

Suspicious transaction reporting: Yes

Financial and non-financial institutions must file suspicious transaction reports (STRs) when there are suspicions that a transaction serves or – if accomplished – would serve the purpose of money laundering or of financing a terrorist group. There is currently no currency reporting threshold for suspicious transaction filing. Reporting is mandated by a variety of entities, including notaries, accountants, tax consultants, casinos, luxury item retailers, and attorneys. Information for 2009 was unavailable, but in 2008, obligated entities filed 7,349 STRs, generating 2,197 indications of potential criminal offenses.

Large currency transaction reporting: No

No requirement exists for systematic reporting of large cash transactions.

Narcotics asset seizure and forfeiture:

German law provides for the tracing, freezing, and seizure of assets. An amendment to the Banking Act institutes a broad legal basis for Germany to order frozen assets of EU residents suspected as terrorists. Authorities primarily concentrate on financial assets. Germany’s system allows immediate identification of financial assets that can be potentially frozen, and German law enforcement authorities can freeze accounts for up to nine months. However, unless the assets belong to an individual or entity designated by the UNSCR 1267 Sanctions Committee, Germany cannot seize money until authorities prove in court that the funds were derived from criminal activity or intended for terrorist activity. Germany participates in United Nations and EU processes to monitor and freeze the assets of terrorists. The names of suspected terrorists and terrorist organizations listed on the UNSCR 1267 Sanctions Committee’s consolidated list and those designated by EU or German authorities are regularly disseminated to financial institutions. A court can order the freezing of nonfinancial assets. Germany has taken the view that the EU Council Common Position requires, at a minimum, a criminal investigation to establish a sufficient legal basis for freezes under the EU 931 Working Party process. Proceeds from asset seizures and forfeitures go into the federal government treasury.

Narcotics asset sharing authority:

Legislation implementing the EU Council Framework Decision 2006/783/JHA, on the application of the principle of mutual recognition of confiscation orders, entered into force on October 22, 2009. The legislation amended the law on International Cooperation in Criminal Matters and allows for assets to be shared with other EU member states. The new legislation also makes it possible for Germany to share confiscated assets with non-EU member states on a case-by-case basis.

Cross-border currency transportation requirements: Yes

As of June 15, 2007, travelers entering Germany from a non-EU country or traveling to a non-EU country with 10,000 Euros (approximately $14,559) or more in cash must declare their cash in writing. The definition of “cash” includes currency, checks, traveler’s checks, money orders, bills of exchange, promissory notes, shares, debentures, and due interest warrants (coupons). The written declaration must also include personal data, travel itinerary and means of transport as well as the total amount of money being transported, its source, its intended purpose, and the identities of the owner and the payee. If authorities doubt the information given, or if there are other grounds to suspect money laundering or the funding of a terrorist organization, the cash will be placed under customs custody until the matter has been investigated. Penalties for non-declaration or false declaration include a fine of up to one million Euros (approximately $1,455,900).

Cooperation with foreign governments (including refusals):

No legal issues hamper the government's ability to assist foreign governments in mutual legal assistance requests

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There are no known implementation issues.

U.S.-related currency transactions:

Currency transactions related to international narcotics trafficking do not evidence an extensive connection to the United States nor do they involve a significant amount of U.S. currency.

Records exchange mechanism with U.S.:

Germany and the United States are parties to a bilateral mutual legal assistance treaty (MLAT) that entered into effect on October 18, 2009, that provides for exchange of information. Germany exchanges law enforcement information with the United States through bilateral law enforcement agreements and informal mechanisms, and the United States and German authorities have conducted joint investigations. Instruments of ratification to implement the Second Supplementary Treaty to the Treaty between the U.S. and Germany concerning Extradition were exchanged in 2009 and the agreement will enter into force on February 1, 2010. The German FIU does not have a memorandum of understanding (MOU) in place with FinCEN, and German law does not require that an MOU be in effect prior to exchanging information with foreign financial intelligence units.

International agreements:

The German government has mutual legal assistance treaties in criminal matters with numerous countries.

Germany is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Germany is a member of the Financial Action Task Force (FATF). When the FATF reviews and adopts Germany’s third round mutual evaluation report in February 2010, it will be posted on the FATF website: www.fatf-gafi.org

Recommendations: The Government of Germany’s AML laws and its ratification of international instruments underline Germany’s continued efforts to combat money laundering and terrorist financing. Germany should amend its wire transfer legislation to ensure that originator information applies to all cross-border transfers, including those within the EU. Germany should also consider the adoption of large currency transaction reporting requirements. It should also amend legislation to waive the asset freezing restrictions in the EU 931 Working Party process for financial crime and terrorist financing, so that the freezing process does not require a criminal investigation; as well as amend its legislation to allow asset sharing with other countries. Germany should ratify the UN Convention against Corruption.

Ghana

Ghana is not a regional financial center, but as it develops economically, its financial sector is becoming more important regionally. Most of the money laundering in Ghana involves narcotics or public corruption. Ghana is a significant transshipment point for cocaine and heroin transiting from South America to Europe. Public corruption is a major source of money laundering in Ghana, occurring mainly through public procurements and the award of licenses. Police suspect that criminals use non-bank financial institutions, such as foreign exchange bureaus, to launder the proceeds of narcotics trafficking. Criminals also launder illicit proceeds through investment in banking, insurance, real estate, automotive import, and general import businesses, and reportedly, donations to religious institutions. Financial crimes such as advance fee fraud, known as Sakawa in Ghana, and stolen credit and ATM cards originating in Ghana continue to increase.

Informal financial activity accounts for about 45 percent of the total Ghanaian economy. Some traders import counterfeit goods or smuggle goods to evade taxes. In most cases the smugglers bring the goods into the country in small quantities, and Ghanaian authorities have no indication these smugglers have links to criminals who want to launder proceeds from narcotics or corruption. Trade-based money laundering is sometimes used to repatriate “profit” and also for payment of lower customs duties and other taxes.

Offshore Center: Yes

In September 2007, following amendments to the Banking Act six months earlier, Barclays Bank set up the first offshore banking facility in Ghana. Regulations governing domestic and offshore banks are largely similar. Both are required to perform customer due diligence and file suspicious transaction reports (STRs).

Free Trade Zones: Yes

Ghana has designated four free trade zone (FTZ) areas, but the Tema Export Processing Zone is currently the only active FTZ. Ghana also licenses factories outside the FTZ area as free zone companies. Free zone companies must export at least 70 percent of their output. Most of these companies produce garments and processed foods. The Ghana Free Zone Board and the immigration and customs authorities monitor these companies. There are identification requirements for companies, individuals, and their vehicles in the free zone; however, monitoring and due diligence procedures are lax.

Criminalizes narcotics money laundering: Yes

In January 2008 the Parliament passed Ghana’s Anti-Money Laundering (AML) law. Accompanying regulations to the law have also been passed. The law identifies institutions subject to reporting and disclosure requirements; establishes customer identification and record keeping requirements; and institutes rules for required suspicious transaction reporting.

Criminalizes other money laundering, including terrorism-related: Yes

See above. The AML law takes an “all serious crimes” approach to predicate offenses for money laundering.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

On July 18, 2008, Parliament passed the Anti-Terrorism Act. The law addresses terrorist acts, support for terrorist offenses, specific entities associated with acts of terrorism, and search, seizure, and forfeiture of property relating to acts of terrorism.

Know-your-customer rules:

The AML law establishes customer identification requirements. The “Guide to Account Opening” for banks provides checklists for use when opening accounts for individuals and legal entities. However, it appears requirements are insufficient in relation to obtaining information on the purpose and intended nature of the relationship or source of funds. There is no obligation for financial institutions to conduct ongoing due diligence on their customers

Bank records retention: Yes

Section 24 of the AML law requires customer identification and transaction records and STRs to be kept for a period of not less than six years after the date a transaction is concluded or the termination of the business relationship.

Suspicious transaction reporting:

Under Section 6 of the AML law, the Financial Intelligence Center (FIC) – the Ghanaian financial intelligence unit (FIU) – is given the mandate to receive, analyze, and disseminate STRs. The FIC has not been established. In the interim, it is believed that some STRs are being filed with the Bank of Ghana (BOG). There is no threshold for STR reporting.

Large currency transaction reporting:

Banks report to the BOG on a weekly basis transactions equal to or greater than the equivalent of $10,000. Under Section 33 and 34 of the AML law and the Foreign Exchange Act, 2007, the report can be filed with the BOG and the FIC.

Narcotics asset seizure and forfeiture:

The Narcotic Drug Law of 1990 provides for the forfeiture of assets upon conviction of a drug trafficking offense. The AML law has provisions for freezing assets but the FIC, not yet established, will be agency to implement them.

Narcotics asset sharing authority: No

Ghanaian law does not provide for the sharing of seized narcotics assets with other governments.

Cross-border currency transportation requirements: Yes

Ghana has a cross-border currency reporting requirement. However, Ghanaian authorities have difficulty monitoring cross-border movement of currency. In a 2008 operation, the national security office discovered that millions of dollars in repatriated foreign currencies has been entering Ghana through the Togo-Aflao border. An individual transports money from Ghana undeclared and then returns through the same border, but declares the money on the Foreign Exchange Declaration Form. This maneuver allows the individual to take the money out of Ghana legally. In a bid to curb this, the Bank of Ghana issued a directive effective October 20, 2008, stating that the highest sum of money permitted to be carried by an individual arriving in the country is $10,000 or its equivalent. However, the Bank of Ghana’s instructions include a number of options and circumstances that conflict with the stated $10,000 limit, which has reportedly resulted in some confusion regarding the allowable amount for cross-border transportation vis-à-vis bank transfer.

Cooperation with foreign governments:

The Narcotic Drug Law of 1990 includes provisions for the sharing of information, documents, and records with other governments. It also provides a basis for extradition between Ghana and foreign countries for drug-related offenses.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There are six law enforcement agencies involved with investigating money laundering and financial crimes. There were no arrests, prosecutions, or convictions for money laundering or terrorist financing in 2009.

While the Bank of Ghana has circulated the list of individuals and entities on the UNSCR 1267 Sanctions Committee’s consolidated list to local banks, there is no procedure, guidance or regulation to guide financial institutions on how to implement the provisions of the Anti-Terrorism Act. No Ghanaian entities have identified assets belonging to any of the designees.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

Ghana has cooperated with the United States on financial crimes matters on a case-by-case basis.

International agreements:

Ghana has bilateral agreements for the exchange of money laundering-related information with a number of countries.

Ghana is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Ghana is a member of the Inter-Governmental Action Group Against Money Laundering and Terrorist Financing in West Africa (GIABA), a Financial Action Task Force-style regional body.  Ghana’s most recent mutual evaluation report can be found here: 

http://www.giaba.org/media/M_evalu/GHANA%20-MER%20-English-1%5B1%5D.pdf

Recommendations:

The Government of Ghana (GOG) should move swiftly to implement the AML and Anti-Terrorism laws. Ghana should improve capacity among the agencies impacted, and establish its FIU. The GOG should make every effort to pass asset seizure and forfeiture legislation that comports with international standards as soon as possible. Once the laws are in place, Ghana should take the necessary steps to promote public awareness and understanding of financial crime, money laundering and terrorist financing activities. Additionally, the GOG should institute a beneficial ownership identification requirement and require that the true names of all onshore and offshore entities and their beneficial owners be held in a registry accessible to law enforcement. The GOG should increase cooperation and information sharing with other governments. Ghana should also become a party to the UN Convention against Transnational Organized Crime.

Greece

Greece is becoming a regional financial center in the rapidly developing Balkans as well as a bridge between Europe and the Middle East. Anecdotal evidence of illicit transactions suggests an increase in financial crimes in the past three to four years. Greek law enforcement proceedings indicate that Greece is vulnerable to narcotics trafficking, trafficking in persons and illegal immigration, prostitution, cigarette and other forms of smuggling, serious fraud or theft, illicit gambling activities, and large scale tax evasion. Criminally-derived proceeds historically are most commonly invested in real estate, the lottery, and the stock market. Criminal organizations from southeastern Europe and the Balkan region execute a large percentage of crime generating illicit funds. The widespread use of cash facilitates a gray economy as well as tax evasion. Due to the large informal economy – estimated by the OECD to be between 25 and 37 percent of GDP – it is difficult to determine the amount of smuggled goods into the country, including whether any of it is funded by narcotic proceeds or other illicit proceeds. There is increasing evidence that domestic terrorist groups are involved with drug-trafficking.

Offshore Center:

Greek authorities maintain that Greece is not an offshore financial center. Under Law 3427/2005, foreign and domestic companies may provide specific services to enterprises not established in Greece. These companies must employ at least four employees and have at least 100,000 Euros (approximately $144,000) in annual operating expenses in Greece. These entities must apply for a special license with the Ministry of Finance (MoF). They do not receive a tax exemption and must comply with anti-money laundering/counter-terrorist financing (AML/CFT) requirements. Pursuant to Article 10 of Law 3691/2008, the MoF will need to obtain and catalog additional registry information.

Shipping companies, known for their complex corporate and ownership structures, and which reportedly can be used to hide the identity of the beneficial owner, are not governed by Law 3427, but rather by Laws 27/1975 and 378/1968. Although companies must keep a receipts and expenses book, they have no obligation to publish financial statements. These firms frequently fall under the authority of non-Greek jurisdictions and often operate through a large number of intermediaries, potentially serving as a vehicle for money laundering. Greek law allows banking authorities to check these companies’ transactions, but authorities need the cooperation of other jurisdictions for audits to be effective.

Free Trade Zones: Yes

Greece has three free trade zones, located at the ports of Piraeus, Thessalonica, and Heraklion, where foreign goods may be imported without payment of customs duties or other taxes if they are subsequently transshipped or re-exported. There is no information regarding whether criminals use these zones in trade-based money laundering (TBML) or in terrorist financing schemes.

Criminalizes narcotics money laundering: Yes

See below.

Criminalizes other money laundering, including terrorism-related: Yes

On August 5, 2008, Greece passed Law 3691/2008 that clearly defines money laundering (a criminal offense) and includes as predicate offenses all offenses punishable by a minimum penalty of more than six months imprisonment and which generate any economic benefit. The law makes a money laundering conviction possible without a conviction for a predicate offense and extends the definition of illicit proceeds to include any type or value of property involved.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

Law 3691/2008 stipulates that terrorist financing is both a stand-alone offense and a predicate offense for money laundering. An amendment of the penal code extends the scope of terrorist financing to include individual terrorist acts and individual terrorists. The law does not require that a terrorist act actually occur or that funding be used to finance a particular act, only that funds be used to finance terrorist organizations or groups, or individual terrorists or terrorist acts.

Know-your-customer rules: Yes

Law 3691/2008 mandates a risk-based approach for all financial institutions, now inclusive of bureaux de change, money remitters, brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators, and designated nonfinancial businesses and professions, with enhanced due diligence for some clients and politically exposed persons. The law also mandates identification of beneficial owners, defined as individuals who own or control 25 percent plus one share of a legal entity. Per rule 109/2008 issued in December 2008, all customer due diligence provisions (CDD) now apply to insurance intermediaries, such as brokers and agents. Under a March Decision by the Bank of Greece, offshore companies and special purpose vehicles as well as nonprofit organizations with bank accounts in Greece are designated as high risk and subject to enhanced due diligence.

Bank records retention: Yes

The law requires that banks and financial institutions maintain adequate records and supporting documents for at least five years after ending a relationship with a customer, or, in the case of occasional transactions, for five years after the date of the transaction.

Suspicious transaction reporting: Yes

Law 3691/2008 mandates that banks, nonbank financial institutions, and designated non-financial businesses must submit suspicious transaction reports (STRs) for any unusual or suspicious transactions or attempted transactions where money laundering or terrorist financing is suspected. Of the 2,899 STRs received in 2008, 1,102 were investigated, 103 of those resulted in prosecution, and ten resulted in the issuance of freezing orders by the financial intelligence unit (FIU). In 2009, of the 2,304 STRs filed, 1,514 were investigated, 81 resulted in prosecution, and 118 resulted in the issuance of freezing orders by the FIU.

Large currency transaction reporting:

No information provided.

Narcotics asset seizure and forfeiture:

Law 3691/2008 provides for freezing, seizing, and confiscation of direct and indirect proceeds of a crime, or in the attempt of a crime, and empowers the FIU to freeze direct and indirect assets of persons involved in money laundering cases. In addition, the FIU can now freeze assets in urgent money laundering and terrorist financing cases without first having to open a criminal investigation. According to Article 46 of Law 3691, assets derived from a predicate offense, acquired directly or indirectly out of the proceeds of such offenses, or the means that were used or were going to be used for committing these offenses shall be seized and, if there is no legal reason for returning them to the owner, shall be compulsorily confiscated by virtue of the court’s sentence.” A total of 14.55 million Euros (approximately $20.9 million) in assets were frozen by the FIU in 2009.

With regard to terrorist financing, Article 49 of Law 3691 provides that by administrative decisions of the Minister of Finance, assets of any nature of persons (natural or legal), entities or groups listed in the United Nations Security Council Resolution (UNSCR) 1267 Sanctions Committee consolidated list, European Union (EU) catalogues, and EU regulations or decisions may be immediately frozen upon identification. Moreover, the judicial authorities and the Greek FIU may order the immediate freezing of any assets which appear to be linked to terrorist activities in general.

Narcotics asset sharing:

There is no information on whether Greece has enacted laws for sharing of seized assets with other governments.

Cross-border currency transportation requirements: Yes

According to the Government of Greece (GOG), EU Regulation 1889/2005 on cross-border declaration and disclosure is applicable in Greece. Customs exercise cash controls by persons entering or leaving the country. As such, they make use of the mandatory declaration system at borders. They have the legal authority to impose sanctions (25 percent of the undeclared amount). If the funds prove to have money laundering or terrorist financing roots, they are seized according to Law 3691.

Cooperation with foreign governments (including refusals): Yes

No known impediments exist.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues/comments:

The Greek authorities indicate the FIU finalized a new STR form in June 2009 for the banking and financial sector; however, such forms are still not available for the remaining entities. The FIU claims it is in the process of finalizing such a form for the non-bank financial sector. Additionally, the FIU has insufficient physical and electronic security systems in place to securely protect the information it holds. Although the FIU has established a database to track STR submissions, it is insufficient to meet the FIU’s needs, as STRs are hand delivered to the FIU on paper.

In 2008, there were 247 money laundering cases under investigation, 42 prosecutions, and 34 convictions; for the first half of 2009, there were 219 cases under investigation, an unknown number of prosecutions, and 20 convictions.

U.S.-related currency transactions:

Currency transactions involving international narcotics-trafficking proceeds do not appear to include significant amounts of U.S. currency.

Records exchange mechanism with U.S.:

Greece exchanges information on money laundering through its mutual legal assistance treaty (MLAT) with the United States, which entered into force November 20, 2001. The Bilateral Police Cooperation Protocol provides a mechanism for exchanging records with U.S. authorities in connection with investigations and proceedings related to narcotics trafficking, terrorism, and terrorist financing. Cooperation between the U.S. Drug Enforcement Administration and the GOG has been and continues to be extensive.

International agreements:

Greece has signed bilateral police cooperation agreements with 19 countries. It also has a trilateral police cooperation agreement with Bulgaria and Romania, and a bilateral agreement with Ukraine to combat terrorism, drug-trafficking, organized crime, and other criminal activities. The Greek FIU cooperates smoothly with its counterparts internationally. The FIU has enhanced its cooperation with other FIUs bilaterally by signing memoranda of understanding (MOUs).

Following an initiative of the Bank of Greece, a multilateral MOU was signed, on high-level principles of co-operation and coordination, by the banking supervisors of Southeastern Europe. As of August 2008, the signing parties were: the Bank of Albania, the Bank of Greece, the National Bank of the Republic of the Former Yugoslav Republic of Macedonia, the National Bank of Romania, the Bulgarian National Bank, the National Bank of Serbia, the Central Bank of Cyprus, Bosnia and Herzegovina, and the Central Bank of Montenegro. Regarding money laundering and terrorist financing, the signing parties will co-operate to ensure that the cross-border banking groups apply effective CDD policies and procedures across their operations. In addition, the parties will exchange views on trends and methods (typologies) of money laundering and/or terrorist financing prevailing in the region with a view to developing guidance for the institutions under their supervision.

Greece is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption -Yes

Greece is a member of the FATF. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/2/55/38987373.pdf

Recommendations:

The Government of Greece should make available adequate human and financial resources to ensure the FIU is able to fulfill its responsibilities. The GOG should ensure the FIU gets the necessary funding and training to develop an improved data management system capable of meeting the needs of the FIU. This includes improving its technical standards and capabilities so that analysts can effectively use its database. In addition, Greece should dedicate additional resources to the investigation and prosecution of money laundering cases, and increase specialization and training on money laundering and terrorist financing for law enforcement and judicial authorities. The GOG should ensure adequate regulation and supervision of lawyers, notaries, and nonprofits, and should ensure that supervision carried out by the supervisory bodies is effective. The GOG should issue clear guidance to financial institutions and DNFBPs on freezing assets; improve their asset freezing capabilities, and develop a clear and effective system for identifying and freezing terrorist assets. Greece should also ensure uniform enforcement of its cross-border currency reporting requirements and take further steps to deter the smuggling of currency across its borders; and explicitly abolish company-issued bearer shares. Greece also should ensure that companies operating within its free trade zones are subject to the same anti-money laundering/counter-terrorist financing (AML/CFT) requirements and CDD provisions as in other sectors and bring charitable and nonprofit organizations under the AML/CFT regime. Finally, Greece should ratify the UN Convention against Transnational Organized Crime.

Grenada

Grenada is not a regional financial center. As a transit location, money laundering in Grenada is primarily related to smuggling and drug trafficking. Money laundering activity occurs through the banking system or money remitters, as well as the purchase of real estate, boats, jewelry, and cars.

Offshore Center: Yes

In 2008, the Government of Grenada (GOG) announced plans to redevelop an offshore financial sector. Grenada’s previous offshore regime collapsed after a multimillion-dollar fraud scheme and its 2001 listing as a Non-Cooperative Country or Territory (NCCT) by the Financial Action Task Force (FATF). There are no offshore banks registered in Grenada, nor is there any evidence of money laundering taking place within the International Business Companies (IBCs) that are registered in the country. As of November 2008, Grenada had 1,580 international business companies (IBCs). The GOG has repealed its economic citizenship legislation.

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

The Money Laundering Prevention Act (MLPA), enacted in 1999, criminalizes the laundering of narcotics trafficking proceeds and all serious crimes.

Criminalizes other money laundering, including terrorism-related: Yes

Under the Proceeds of Crime Act No. 3 (POCA) of 2003, the predicate offenses for money laundering extend to all criminal conduct, which includes illicit drug and weapons trafficking, kidnapping, extortion, corruption, terrorism and its financing, and fraud. According to the POCA, no conviction on a predicate offense is required to prove that certain goods are the proceeds of crime. This legislation applies to banks and non-bank financial institutions, as well as the offshore sector.

Criminalizes terrorist financing: Yes

The GOG criminalizes terrorist financing through the Terrorism Act No. 5 2003.

Know-your-customer rules: Yes

Regulations require covered institutions to establish and maintain identification procedures.

Bearer shares are strictly prohibited from use in offshore banks, but they may be allowed for international companies. Registered agents are required by law to verify the identity of the beneficial owners of all shares. In addition, the International Companies Act requires registered agents to maintain records of the names and addresses of company directors and beneficial owners of all shares. There is no legal barrier to disclosure of client and ownership information by domestic and offshore services companies to bank supervisors and law enforcement authorities.

Bank records retention: Yes

Obligated entities must maintain records for seven years.

Suspicious transaction reporting: Yes

Banks and non-bank financial institutions (including money remitters, the stock exchange, insurance, casinos, precious gem dealers, real estate intermediaries, lawyers, notaries, and accountants) are required to report the identity of customers engaging in significant transactions; however, there is no statutory threshold. In addition, a reporting entity must monitor all complex, unusual or large business transactions, or unusual patterns of transactions, whether completed or not. Once a transaction is determined to be suspicious or potentially indicative of money laundering, the reporting entity must forward a suspicious transaction report (STR) to the Supervisory Authority within 14 days.

The Grenada financial intelligence unit (FIU) is an investigative-style FIU located within the Ministry of National Security. The FIU receives STRs from the Supervisory Authority for analysis and investigation. From January to December 2009, the FIU received 64 STRs and investigations commenced for all STRs received.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Under current law, all assets can be seized, including legitimate businesses if they are used in the commission of a crime. The banking community cooperates with law enforcement efforts to trace funds and seize or freeze bank accounts. The time period for restraint of property is determined by the High Court. Presently, only criminal forfeiture is allowed by law. No assets were seized in 2008 or 2009.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

The GOG regulates the cross-border movement of currency. However, there is no threshold requirement for currency reporting. Law enforcement and Customs officers have the powers to seize and detain cash that is imported or exported from Grenada.

Cooperation with foreign governments:

In 2003, the GOG passed the Exchange of Information Act No. 2, which strengthens Grenada’s ability to share information with foreign regulators. The Grenada FIU has the authority to exchange information with its foreign counterparts without a memorandum of understanding (MOU).

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2009 there were four arrests for money laundering, three involving theft and one drug related.

The GOG circulates to the appropriate institutions the lists of individuals and entities included on the UNSCR 1267 Sanctions Committee’s consolidated list. There has been no known evidence of terrorist financing in Grenada.

U.S.-related currency transactions:

The U.S. dollar is commonly used in the licit and illicit economies of Grenada.

Records exchange mechanism with U.S.:

Grenada has a Mutual Legal Assistance Treaty (MLAT), Tax Information Exchange Agreement and Extradition Treaty with the United States. The GOG cooperates fully with MLAT requests and responds rapidly to U.S. Government requests for information involving money laundering cases. Grenadan officials have regularly assisted the U.S. Internal Revenue Service on investigations.

International agreements:

Grenada is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

Grenada is a member of the Caribbean Financial Action Task Force, a FATF-style regional body. Its most recent 2009 mutual evaluation report is located here: http://www.cfatf-gafic.org/downloadables/mer/Grenada_3rd_Round_MER_%28Final%29_English.pdf

Recommendations:

Although the Government of Grenada (GOG) has strengthened the regulation and oversight of its financial sector, it will need to remain alert to potential abuses and steadfastly implement the laws and regulations it has adopted. The GOG should adopt its pending forfeiture and confiscation bills and establish mechanisms to identify and regulate alternative remittance systems. It also should establish border declarations and large currency transaction reporting requirements for financial institutions and designated non-financial businesses and professions. To improve the conduct of money laundering investigations, the FIU should improve coordination with other law enforcement bodies. The GOG should take advantage of opportunities for law enforcement and customs authorities to initiate money laundering investigations targeting regional smuggling. To strengthen its legal framework against money laundering, Grenada should move expeditiously to become a party to the UN Convention against Corruption and should not redevelop its offshore financial sector.

Guatemala

Historically weak law enforcement and judiciary systems coupled with endemic corruption and increasing organized crime activity contribute to a favorable climate for significant money laundering in Guatemala. According to law enforcement agencies, narcotics trafficking and corruption are the primary sources of money laundered in Guatemala; however, the laundering of proceeds from other illicit activities, such as human trafficking, contraband, kidnapping, tax evasion, and vehicle theft, is substantial.

Offshore Center: Yes

In June 2002, Guatemala enacted the Banks and Financial Groups Law (No. 19-2002), which placed offshore banks under the supervision of the Superintendence of Banks (SIB). The law requires offshore banks that belong to a Guatemalan financial group to be authorized by the Monetary Board and to maintain an affiliation with a domestic institution. It also prohibits an offshore bank that is authorized in Guatemala from conducting financial intermediation activities in another jurisdiction. Banks authorized by other jurisdictions may do business in Guatemala under certain limited conditions. By law, no offshore financial services businesses, other than banks, are allowed. There are no exchange controls and dollar accounts are common. Some larger banks conduct significant business through their offshore subsidiaries.

Free Trade Zones: Yes

Guatemala’s relatively small free trade zones target regional “maquila” (assembly line industry) and logistics center operations and are not considered by officials to be a major money laundering concern, although some proceeds from tax-related contraband may be laundered through them. The Ministry of Economy reviews and approves applications for companies to open facilities in free trade zones and confirms their business operations meet legal requirements.

Criminalizes narcotics money laundering: Yes

Decree 67-2001, the Law against Money and Asset Laundering, criminalizes money laundering in Guatemala. Conspiracy and attempt to commit money laundering are also penalized.

Criminalizes other money laundering, including terrorism-related: Yes

The law applies to money laundering from any crime where illegal proceeds are generated and does not require a minimum threshold to be invoked.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

In June 2005, the Guatemalan Congress passed legislation criminalizing terrorist financing, the Law Against the Financing of Terrorism. Implementing regulations were enacted by the Monetary Board in December 2005. The counter-terrorist financing legislation also clarifies the legality of freezing assets in the absence of a conviction where the assets were destined to support terrorists or terrorist acts. The Law Against the Financing of Terrorism also requires remitters to maintain name and address information on senders (97 percent are U. S. based) of transfers equal to or over $2,000.

Know-your-customer rules: Yes

The Guatemalan Monetary Board’s Resolution JM-191, which approved the Regulation to Prevent and Detect the Laundering of Assets (RPDLA), establishes anti-money laundering requirements for financial institutions including know-your-customer provisions. Financial institutions are required to keep a registry of their customers. In 2009, the FIU developed a list of Politically Exposed Persons (PEPs) and began requiring individuals on the list and their immediate family members to explain the source of deposited funds.

Bank records retention: Yes

Financial institutions must keep customer registries and records of transactions for five years.

Suspicious transaction reporting: Yes

Financial institutions are also mandated by law to report all suspicious transactions to the financial intelligence unit (FIU). The FIU received 330 suspicious transaction reports (STRs) in 2008 and 214 from January to October 2009.

Large currency transaction reporting: Yes

Financial institutions must keep records of cash transactions exceeding $10,000 or more per day. Cash transaction reports are forwarded to the FIU. As of June 1, 2009, the FIU issued new regulations requiring all individuals and legal entities involved in the purchase or sale of real estate, motorized vehicles (including cars, tractors, motorcycles, and boats), jewelry, gems, precious metals, art and antiques to report transactions in cash above $10,000.

Narcotics asset seizure and forfeiture: Yes

Current law permits the seizure of any assets linked to money laundering. The FIU, the National Civil Police, and the Public Ministry have the authority to trace assets; the Public Ministry can seize assets temporarily in urgent circumstances, and the courts (administered by the Supreme Court of Justice) have the authority to permanently seize assets. In 2006, Guatemala passed an Anti-Organized Crime Law. The Anti-Organized Crime Law also provides for a summary procedure to forfeit the seized assets and allows both civil and criminal forfeiture.

In 2009, the Legislative and Constitutional Affairs Committee of Congress developed a draft Asset Forfeiture Law with the aim of creating a civil forfeiture process that would be complimentary to the provisions in the Anti-Organized Crime Law. The draft bill has not yet been presented to the full Congress.

Narcotics asset sharing: No

The international sharing of seized assets is not permitted.

Cross-border currency transportation requirements: Yes

Decree 67-2001 obligates individuals to declare the cross-border movement of currency in excess of approximately $10,000 at the ports of entry. The declaration forms are provided and collected by the tax authority at land borders, airports, and ports. The Law Against the Financing of Terrorism penalizes the omission of a declaration with a sentence from one to three years in prison.

As of late 2009, approximately $727,000 has been seized at the airports – a very small sum that suggests that proceeds from illicit activity are transported across Guatemalan borders. There is little official monitoring of compliance with cross-border currency reporting. Further complicating cross-border currency reporting is the Central American Four Agreement, which allows free movement of the citizens of Guatemala, Honduras, Nicaragua, and El Salvador across their respective borders.

Cooperation with foreign government: Yes

Guatemala is leading an effort within the Caribbean Financial Action Task Force (CFATF) to develop a regional list of persons and entities involved in money laundering as well as a method for sharing information among regional FIUs. Guatemala has cooperated, when requested, with U.S. law enforcement agencies.

U.S. or international sanctions or penalties:

In 2009, the Organization for Economic Co-operation and Development (OECD) placed Guatemala on its list of countries that have committed to the internationally agreed tax standard but have not yet substantially implemented the standard. The ability of companies to issue bearer shares as well as strong bank secrecy rules have made it difficult for Guatemala to enter into tax information exchange agreements with OECD member countries.

Enforcement and implementation issues and comments:

At the end of 2009, the FIU referred 18 complaints and 12 reports to the anti-money laundering (AML) Unit in the Public Ministry. In 2009, the AML Unit detained 13 individuals and received sentences against 11.

There is no central tracking system for seized assets, and it is currently impossible for the Supreme Court to provide an accurate listing of the seized assets it is holding in custody. The lack of access to the resources of seized assets, and the failure of the judiciary to share seized assets with law enforcement entities, has made sustaining seizure levels difficult for the resource-strapped enforcement agencies.

Gambling is not legal in Guatemala, however, a number of casinos, games of chance and video lotteries began operating in 1993, both onshore and offshore. There is no regulatory oversight or legal framework for their operation, therefore the Superintendence of Banks and the Superintendence of Tax Administration are not able to supervise or audit gambling operations. Unsupervised gambling represents a severe money laundering vulnerability.

In September 2009, the FIU uncovered a trade based money laundering scheme involving 13 companies, many of which could be fictitious, that exported cardamom to seven countries in the Middle East (Saudi Arabia, Bahrain, United Arab Emirates, Iran, Egypt, Israel, and Iraq). The case involved approximately $120 million of suspicious goods movements from September 11, 2008 to April 28, 2009. The Attorney General’s office is investigating the entities and movements.

The GOG has fully cooperated with U.S. efforts to track terrorist financing funds and distributes the UN 1267 sanctions committee’s consolidated list to Guatemalan financial institutions. No reports or cases of terrorist financing were reported in 2009.

U.S.-related currency transactions:

Guatemala is a major transit country for illegal narcotics from South America, revenues from illegal drug sales in the U.S. and precursor chemicals from Europe and Asia. Mexican drug traffickers are increasing their presence in the country. The U.S. dollar dominates the regional narcotics trade.

Records exchange mechanism with U.S.: Yes

Guatemala and the United States are party to a bilateral mutual legal assistance treaty that provides for exchange of information. The FIU is able to exchange financial information on money laundering issues with the U.S. Financial Crimes Enforcement Network (FinCEN).

International agreements:

The FIU has signed a number of memoranda of understanding regarding the exchange of information on money laundering issues, some of which also include the exchange of information regarding terrorist financing.

Guatemala is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption -Yes

Guatemala is a member of the Caribbean Financial Action Task Force, a Financial Action Task Force-style regional body. Its most recent mutual evaluation was conducted in June of 2009 and will be available to the public in May 2010 here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html#

Recommendations:

The Government of Guatemala (GOG) should eliminate the use of bearer shares and regulate both on-shore and offshore gaming and casino establishments. The GOG should also continue efforts to improve enforcement of existing regulations, establish units to execute undercover operations and controlled deliveries authorized in the Anti-Organized Crime Law, and pursue much needed reforms in the law enforcement and judicial systems. Guatemala should increase its capacity to successfully investigate and prosecute money laundering cases. Additionally, the GOG should create an asset forfeiture fund and a centralized agency to manage and dispose of seized and forfeited assets, at least a portion of which should be provided to law enforcement agencies to provide the resources necessary to successfully fight money laundering, terrorist financing, and other financial crimes. In addition, the GOG should enhance its pursuit of confiscation and forfeiture of the proceeds of arms smuggling, human trafficking, corruption, and other organized criminal activities, and should enact domestic laws permitting international sharing of confiscated assets.

Guernsey

The Bailiwick of Guernsey (the Bailiwick) encompasses a number of the Channel Islands (Guernsey, Alderney, Sark, and Herm). A Crown Dependency of the United Kingdom, it relies on the United Kingdom (UK) for its defense and international relations. Alderney and Sark have their own separate parliaments and civil law systems. Guernsey’s parliament legislates in matters of criminal justice for all of the islands in the Bailiwick. The Bailiwick is a sophisticated financial center and, as such, it continues to be vulnerable to money laundering.

Offshore Center: Yes

The Bailiwick is an offshore financial center. As of September 2009, the financial services industry consisted of 45 banks, all of which have offices, records, and a substantial presence in the Bailiwick. The banks are licensed to conduct business with residents and nonresidents alike. The approximately 18,800 companies registered in the Bailiwick do not fall within the standard definition of an international business company (IBC). Guernsey and Alderney incorporate companies, but Sark, which has no company legislation, does not. Companies in Guernsey must disclose beneficial ownership to the Guernsey Financial Services Commission. In 2008, there were approximately 714 international insurance companies and 829 collective investment funds.

Free Trade Zone: No

Criminalizes narcotics money laundering: Yes

Money laundering involving drug trafficking is covered by the Drug Trafficking (Bailiwick of Guernsey) Law 2000, as amended (DTL).

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering is criminalized with the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999, as amended (POCL). The POCL covers proceeds of all serious offenses.

Criminalizes terrorist financing: Yes

Terrorist financing is criminalized by the Terrorism and Crime (Bailiwick of Guernsey) Law 2002, as amended (TCL).

Know your customer rules: Yes

The Bailiwick does not permit bank accounts to be opened unless there has been a know your customer (KYC) inquiry and the customer provides verification details. The Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (Bailiwick of Guernsey) Regulations 2007, as amended (2007 Regulations) set forth customer due diligence (CDD) obligations for financial services businesses and the Criminal Justice (Proceeds of Crime) (Legal Professionals, Accountants and Estate Agents) (Bailiwick of Guernsey) Regulations 2008 (2008 Regulations) apply to prescribed businesses: lawyers, accountants and estate agents.

Bank records retention: Yes

Financial services businesses and prescribed businesses are required to maintain CDD information pursuant to the 2007 and 2008 Regulations. CDD information, suspicious transaction reports, and transaction documents should be kept for five years.

Suspicious transaction reporting: Yes

The Disclosure (Bailiwick of Guernsey) Law 2007 makes failure to disclose the knowledge or suspicion of money laundering a criminal offense. The duty to disclose suspicious activity extends to all businesses. The Financial Intelligence Service (FIS) is the Bailiwick’s financial intelligence unit. The FIS serves as the central point for the receipt, collection, analysis, and dissemination of all financial crime intelligence.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Guernsey authorities approved further measures to strengthen the existing anti-money laundering/counter-terrorist finance (AML/CFT) regime with the passage of numerous legislation, regulations, and ordinances in 2008 including a comprehensive civil forfeiture law.

Narcotics asset sharing authority: Yes

There are currently no specific legislative provisions relating to the sharing of confiscated assets with other jurisdictions. Asset sharing is negotiated on a case-by-case basis. With regards to sharing with the U.S., the 1988 U.S.-UK Agreement Concerning the Investigation of Drug Trafficking Offenses and the Seizure and Forfeiture of Proceeds and Instrumentalities of Drug Trafficking, as amended in 1994, was extended to the Bailiwick in 1996.

Cross-border currency transportation requirements: Yes

Those carrying euro 10,000 (approximately $14,100) or greater, or the equivalent amount in any currency, must complete and submit a cash declaration form to Customs upon entering or leaving the Bailiwick.

Cooperation with foreign governments: Yes

Guernsey cooperates with international law enforcement on money laundering cases. The FSC also cooperates with regulatory/supervisory and law enforcement bodies. The Criminal Justice (International Cooperation) (Bailiwick of Guernsey) Law, 2000 furthers cooperation between Guernsey and other jurisdictions by allowing certain investigative information concerning financial transactions to be exchanged. In cases of serious or complex fraud, Guernsey’s Attorney General can provide assistance under the Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law 1991.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Not all designated nonfinancial businesses and professions are covered by the AML/CFT regulations.

U.S.-related currency transactions:

No information provided.

Records exchange mechanism with U.S.:

The 1988 U.S. - UK Agreement Concerning the Investigation of Drug Trafficking Offenses and the Seizure and Forfeiture of Proceeds and Instrumentalities of Drug Trafficking, as amended in 1994, was extended to the Bailiwick in 1996. On September 19, 2002, the United States and Guernsey signed a Tax Information Exchange Agreement, which came fully into force in 2006. The agreement provides for the exchange of information on a variety of tax investigations, paving the way for audits that could uncover tax evasion or money laundering activities. The FIS shares information with the U.S. Department of Treasury’s Financial Crimes Enforcement Network.

International agreements:

As a British Crown Dependency, the Bailiwick is not empowered to sign or ratify international conventions on its own behalf. However, following a request by the Guernsey Government, the UK may extend ratification of any convention to the Bailiwick. Application of the 1988 UN Drug Convention was extended to the Bailiwick in 2002. The UN Convention for the Suppression of the Financing of Terrorism was also extended to the Bailiwick in 2008 as was the UN Convention against Corruption in 2009.

Guernsey’s compliance with the FATF recommendations was evaluated in a report prepared by the International Monetary Fund’s Financial Sector Assessment Program. The report can be found here: http://www.ogbs.net/evaluations.htm.

Recommendations:

Guernsey should continue to amend its legislation to meet international AML/CFT standards and should ensure complete implementation of its new 2008 legislation. Guernsey also should take steps to ensure the obliged entities uphold their legal obligations, and the regulatory authorities have the tools they need to provide supervisory functions, especially with regard to non-financial businesses and professions not currently regulated. Guernsey should ensure all obliged entities receive the UN 1267 Sanctions Committee’s consolidated list of entities and individuals.

Guinea-Bissau

Guinea-Bissau is not a regional financial center. Increased drug trafficking and the prospect of oil production increase its vulnerability to money laundering and financial crime. Drug traffickers transiting between Latin America and Europe have increased their use of the country. Guinea-Bissau is often the placement point for proceeds from drug payoffs, theft of foreign aid, and corrupt diversion of oil and other state resources headed for investment abroad. A recent boom in the construction of luxury homes, hotels and businesses, and the proliferation of expensive vehicles, stands in sharp contrast to the conditions in the poor local economy. It is likely that at least some of the new wealth derives from money laundered from drug trafficking. Banking officials also think the country is vulnerable to trade-based money laundering. Transparency International’s 2009 Corruption Perception index ranks Guinea-Bissau 162 out of 180 countries.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The legal basis for Guinea-Bissau’s anti-money laundering/counter-terrorist financing (AML/CFT) framework is the Anti-Money Laundering Uniform Law No. 2004-09 (AML Uniform Law). As the common law to be passed by the members of the West African Economic and Monetary Union (WAEMU), all member states are required to enact and implement the legislation. The legislation largely meets international standards with respect to money laundering. Guinea-Bissau has an “all crimes” approach to money laundering. It is not necessary to have a conviction for the predicate offense before prosecuting or obtaining a conviction for money laundering. Criminal liability applies to all natural and legal persons.

Criminalizes terrorist financing:

Article 203, Title VI of Guinea-Bissau’s penal code criminalizes terrorist financing. However, because the penal code only criminalizes the financing of terrorist groups or organizations, and only when the money is used to commit terrorist acts, the legislation does not address financing of a single or individual terrorist.

Know-your-customer rules: Yes

Obligated institutions include financial institutions and nonbank financial institutions such as exchange houses, microfinance institutions, securities firms, brokerages, cash couriers, casinos, insurance companies, charities, nongovernmental organizations (NGOs), and intermediaries such as lawyers, accountants, notaries and broker/dealers.

Bank records retention: Yes

Financial institutions must keep records and documents relating to transactions and to client identification for a period of ten years.

Suspicious transaction reporting: Yes

The law requires obligated entities to file suspicious transaction reports (STRs) with the financial intelligence unit (FIU). No STRs were filed in 2008, and the operations of the FIU have been suspended, pending identification of new premises.

Large currency transaction reporting: Yes

Narcotics asset seizure and forfeiture:

Legal authorities have the powers to identify, freeze, seize and confiscate goods or funds obtained from the proceeds of major offenses. Articles 16 and 17 of the Drug Law provide for confiscation of the instrumentalities and proceeds from drug trafficking and money laundering. Further, Article 45 of the AML Uniform Law provides for the confiscation of assets resulting from money laundering offenses, and Articles 41 and 42 provide for the confiscation of the instrumentalities of the crime as well as the proceeds.

Narcotics asset sharing authority: Yes

Although the law provides for the sharing of confiscated assets, a lack of coordination mechanisms to facilitate requests for cooperation in freezing and confiscation from other countries hampers cooperation.

Cross-border currency transportation requirements: No

There is no reporting requirement for cross-border currency transportation within the WAEMU internal border area. Currency importation from outside the WAEMU boundaries is not limited, although if the value exceeds 300,000 CFA it must be brought to a licensed intermediary within eight days. Currency exportation should be disclosed when the value exceeds 2 million CFA. However, there is no cash declaration system, and no universal written declaration.

Cooperation with foreign governments (including refusals):

No information available.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The Commission Bancaire, the entity responsible for bank inspections, does not execute a full AML examination during its standard bank compliance examinations.

The AML Uniform Law does not comply with international standards concerning politically-exposed persons (PEPs), and lacks certain compliance provisions for nonfinancial institutions.

Reportedly, banks are reluctant to file STRs because of the fear of “tipping off” by an allegedly indiscrete judiciary. Article 26 of National Assembly Resolution No. 4 of 2004 stipulates that if a bank suspects money laundering it must obtain a declaration of all properties and assets from the subject and notify the Attorney General, who must then appoint a judge to investigate. The bank’s solicitation of an asset list from its client could also amount to “tipping off” the subject.

Reportedly, corruption in the Customs agency exacerbates problems with porous borders and cash smuggling.

Despite the 2004 AML Uniform Law, no operational FIU exists in the country. Lack of capacity, corruption, instability, and distrust (particularly of the judicial sector), could significantly hamper progress in the FIU’s development. The Attorney General’s office houses a small unit to investigate corruption and economic crimes, but the ability to use special investigative measures is limited to drug trafficking and distribution. In 2008, no money laundering investigations were initiated. There are no known prosecutions of money laundering.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

Guinea-Bissau and the United States are not parties to a bilateral mutual legal assistance treaty that provides for exchange of information.

International agreements:

Multilateral Economic Community of West African States (ECOWAS) treaties deal with extradition and legal assistance.

Guinea-Bissau is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - No
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

Guinea-Bissau is a member of the Financial Action Task Force-style regional body, the Intergovernmental Action Group against Money Laundering in West Africa (GIABA). While Guinea-Bissau has undergone a mutual evaluation the report has not yet been published. When it is published, it will be found here: www.giaba.org

Recommendations:

The Government of Guinea-Bissau (GOGB) should continue to work with its partners in GIABA, WAEMU and ECOWAS to establish and implement a comprehensive AML/CFT regime that comports with all international standards. The GOGB should speed up the establishment of an operational FIU that could exchange information and share intelligence with other law enforcement bodies, both inside and outside the country. It should establish and staff the FIU and ensure that resources are available to sustain its capacity. The GOGB should ensure the sectors covered by its AML Uniform Law have implementing regulations and competent authorities to ensure compliance with the law’s requirements. The GOGB should clarify, amend or eliminate Article 26 of the 2004 National Assembly Resolution that appears to mandate actions resulting in the tipping off of suspects. It also should adopt and enact a comprehensive WAEMU Uniform Law related to terrorist financing and amend the definitions in its penal code to comport with the international standards regarding financing of individual terrorists and terrorist groups engaging in acts other than terrorism. The GOGB should work to improve the training and capacity of its police and judiciary to combat financial crimes, and address any issues resulting from a lack of understanding of money laundering and terrorist financing. Guinea-Bissau should undertake efforts to eradicate systemic corruption and become a party to the UN Convention for the Suppression of the Financing of Terrorism and the UN Conventions against Corruption and Transnational Organized Crime.

Guyana

Money laundering in Guyana is perceived as an increasingly serious problem and has been linked to narcotics (principally cocaine) and firearms transshipments from Latin America to Europe and North America. Popular perception routinely links high-level public officials to trafficking and money laundering operations. Guyana has a large informal, cash-based economy containing significant amounts of contraband goods and narcotics, the proceeds of which are laundered primarily through non-bank money-transfer operations. A recent boom in residential & commercial construction and a proliferation of importers of consumer goods, all without corresponding growth in the economy, strongly suggests trade-based money laundering is widespread in Guyana. Black markets exist in consumer goods, fuel, currency and gold. Narco-trafficking is widely believed to finance these markets.

Offshore Center: No

Offshore banks and businesses are permitted under the laws of Guyana, yet very few, if any, appear to exist. The effectiveness of oversight of these firms along with reliable statistics is unavailable. Anonymous directors do not appear to be proscribed under Guyanese law. No offshore casinos/Internet gaming sites are known.

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Anti-Money Laundering and Countering the Financing of Terrorism Act of 2009 (AMLCFTA) replaces – and is a material improvement over – the Money Laundering Prevention Act (MLPA) of 2000. Improvements include an expansive definition of money laundering, provisions designating terrorist financing as a specific crime, and strong enforcement tools, including asset forfeiture. For the first time, money transfer agencies are regulated and subject to government supervision.

Criminalizes terrorist financing: Yes

The AMLCFTA criminalizes terrorist financing in accordance with the UN International Convention for the Suppression of the Financing of Terrorism and UN Security Council Resolution 1373. The AMLCFTA reflects an “all serious crimes” approach to defining money laundering, and terrorism/terrorist financing are specifically stated in the law as being serious crimes.

Know-your-customer rules: Yes

The consistent implementation of customer due diligence and know-your-customer guidelines is questionable.

Bank records retention: Yes

Currency transactions above the equivalent of $10,000 are routinely recorded. Under AMLCFTA all reporting entities are required to maintain records necessary to reconstruct significant transactions. Financial institutions must keep business transaction records for a period of seven years after completion of the transaction and records of suspicious transaction reports (STRs) for six years.

Suspicious transaction reporting: Yes

The AMLCFTA now broadly imposes similar reporting on designated non-financial businesses and professions (DNFBPs) and non-bank financial institutions. Banks, offshore banks, finance companies, currency exchange houses, insurance companies, money transmission services, factoring companies, leasing companies, trust companies, and securities and loan brokers are required to report suspicious transactions to the financial intelligence unit (FIU). Lawyers, casinos, notaries, and accountants are among those entities exempt from financial regulatory control. The number of STRs has declined significantly since 2006. Only a total of 44 STRs were submitted to the FIU for the years 2006 and 2007. The Government of Guyana (GOG) has reportedly not released statistics on the number of STRs received in 2008 or 2009 by the FIU. No DNFBPs have submitted STRs. The FIU has never referred a case of money laundering for law enforcement investigation.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture:

The AMLCFTA expands the scope for asset forfeiture, but corresponding regulations need to be established. With respect to seizures, it appears that further legislation and regulation are needed - no established processes currently exist. Guyana has no domestic laws authorizing the freezing of terrorist assets.

Narcotics asset sharing authority:

The AMLCFTA appears vague on sharing seized assets with foreign countries. The law authorizes the execution of searches and seizures on behalf of foreign governments, but only if Guyana has entered into a mutual legal assistance treaty (MLAT) with the government requesting assistance. No further language addresses the disposition of seized assets.

Cross-border currency transportation requirements: Yes

Undeclared or falsely declared cross-border movement of currency exceeding $10,000 is a customs violation. While customs declarations are made, investigations are rarely, if ever, performed concerning the individuals and businesses carrying the cash.

Cooperation with foreign governments:

There are several pieces of legislation which provide a legal framework for cooperation.

Pursuant to section 6(2) (d) of the Financial Intelligence Unit Act (FIUA) of 2003, the FIU may provide information relating to the commission of an offense or concerning STRs to any foreign FIU.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Value transfer occurs outside the formal financial system in a variety of ways. Couriers routinely carry large sums (over $100,000) of cash to the U.S. via commercial air flights, and likely gold and diamonds as well as these commodities are both mined in Guyana. Cross border smuggling is a widespread problem in part due to high import duties and taxes. Illegal drugs, consumer goods and fuel are all commonly smuggled items. Trade-based money laundering is a common by-product of narco-trafficking, financing a wide variety of purchasing by consumer goods importers. These actions all occur virtually unchecked, despite occasional arrests.

The GOG made no arrests or prosecutions for money laundering in 2008.

Implementing rules and regulations must be put in place by the Ministry of Finance before the FIU can begin to exercise its new powers under the AMLCFTA.

The FIU director disseminates the names of suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee’s consolidated list to relevant financial institutions.

U.S.-related currency transactions:

The US dollar is widely used in both the licit and illicit economies.

Records exchange mechanism with U.S.:

Guyana does not have a MLAT with the United States but is a party to the Inter-American Convention on Mutual Legal Assistance. The GOG has not cooperated in any meaningful way with USG law enforcement agencies investigating financial crimes related to narcotics, terrorism, terrorist financing and other crimes.

International agreements:

Guyana’s FIU currently does not meet the membership requirements to join the Egmont Group.

Guyana is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Guyana is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering and the Caribbean Financial Action Task Force (CFATF), a FATF-style regional body. Guyana’s most recent mutual evaluation report can be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Recommendations:

The Government of Guyana should provide appropriate resources and awareness training to its regulatory, FIU, law enforcement, and prosecutorial personnel. Guyana should make it a priority to adopt the necessary rules and regulations to fully implement the 2009 AMLCFTA. The GOG should establish procedures for asset seizure and forfeiture. Guyana’s FIU should take the necessary steps to apply for Egmont Group membership. Guyana also should take action to curb the rampant smuggling and use of trade-based money laundering in the country, partially by stringently enforcing its cross-border currency transportation declaration requirements.

Haiti

Haiti is a major drug-transit country with money laundering activity linked principally to narcotics trafficking and kidnapping. Official corruption also generates illicit proceeds. While the informal economy in Haiti is significant and is partly funded by illicit narcotics proceeds, smuggling is prevalent and predates narcotics trafficking. Haiti’s geographical location, lack of an efficiently functioning judiciary system, poorly controlled land and sea borders, inadequately-sized police force (less than one police officer per 1,000 inhabitants), insufficiently resourced anti-money laundering prosecutorial unit, and endemic corruption create favorable conditions for money laundering. Banks and casinos, as well as foreign currency and real estate transactions, facilitate money laundering and other financial crimes. Dire economic conditions and an unstable political situation inhibit the country from advancing the development of its formal financial sector.

Offshore Center: No

Haiti’s commercial law does not allow incorporation of offshore companies.

Free Trade Zones: No information provided.

Criminalizes narcotics money laundering: Yes

The 2001 Law on Money Laundering from Illicit Drug Trafficking and other Crimes and Punishable Offenses (AMLL) criminalizes money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

See above.

Criminalizes terrorist financing: No

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

Haiti has yet to pass legislation criminalizing terrorist financing, although counter-terrorist financing legislation has been drafted with USG assistance.

Know-your-customer rules: Yes

The AMLL regulations were amended in 2008 and require financial institutions to verify the identity of customers who open accounts or conduct transactions that exceed 400,000 Haitian Gourdes (HTG), equivalent to approximately $10, 000. The regulations also require exchange brokers and money remitters to compile information on the source of funds exceeding 120,000 HTG (approximately $3,000) or its equivalent in foreign currency.

Bank records retention: Yes

Banks are required to maintain records for five years. Bank secrecy or professional secrecy cannot be invoked as grounds for refusing information requests from authorities.

Suspicious transaction reporting: Yes

The AMLL establishes a wide range of financial institutions as obligated entities, including banks, money remitters, exchange houses, casinos, and real estate agents. Insurance companies, which are only nominally represented in Haiti, are not covered. Haiti’s financial intelligence unit (FIU), the Unité Centrale de Renseignements Financiers (UCREF), receives the reports submitted by financial institutions. The number of suspicious transactions reports (STRs) is very small. The financial sector’s compliance with its anti-money laundering obligations is not properly supervised.

Large currency transaction reporting: Yes

Financial institutions, including banks, credit unions, exchange brokers, lawyers, accountants, and casinos, are required to file a cash transaction report (CTR) with UCREF for all transactions exceeding 400,000 HTG (approximately $10,000). Money transfer companies, given the high risk associated with them, must file CTRs for all transactions of 120,000 HTG (approximately $3,000) or more. Failure to report such transactions is punishable by imprisonment and/or a fine.

Narcotics asset seizure and forfeiture:

The AMLL contains provisions for the seizure and forfeiture of assets; however, the Haitian government cannot seize and declare the assets forfeited until there is a conviction. The Government of Haiti (GOH) has expanded the legal interpretation of conviction to include convictions obtained in foreign jurisdictions. In the fourth quarter of 2008, Haitian authorities, with U.S. Drug Enforcement Administration assistance, began seizing properties in Haiti belonging to drug traffickers incarcerated in the United States for use or disposal by the GOH. In 2008, there were 14 properties including residences, businesses and bank accounts, valued at approximately $16.44 million, seized and forfeited to the GOH based on U.S. convictions. An additional 20 other properties are the subject of this new initiative. In 2009, $23 million and some 16 properties with an estimated value of $8.27 million were seized.

During 2009, President Preval was instrumental in adopting official pre-seizure planning guidelines to attempt to better regulate the management of the increasing number of assets seized for forfeiture. Corruption and provisional use (official use before final forfeiture) continue to be of concern in this area. Despite the numerous seizures made, Haiti has not yet obtained a final order of forfeiture with respect to any assets.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

The AMLL does prohibit cash transfers of more than 200,000 HTG (approximately $5,000). Enforcement of this prohibition is a major challenge, except at the Port-au-Prince airport. The customs administration regularly seizes funds subject to this prohibition, but several of these seizures have been overturned by the courts, to the detriment of the legitimacy of the legal framework.

Cooperation with foreign governments:

The AMLL introduces measures for cooperation on mutual legal assistance and extraditions. These provisions seem to be in line with international standards. However, inadequate criminalization of money laundering is a constraint because of the dual criminality principle. International legal assistance cannot be provided for terrorist financing since it is not a crime in Haiti. In practice, Haiti has yet to engage in international legal assistance. International cooperation by the National Police of Haiti is based primarily on Interpol and operational relations with foreign authorities.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There has been a reassignment of all criminal investigative responsibilities to the Bureau of Financial and Economic Affairs (BAFE), a component of the Haitian National Police Office of Judicial Police. A number of prosecutions are currently in the investigation stage. No convictions have yet been obtained. Prosecutions focus on predicate offenses and deal with money laundering in connection with drug-trafficking only.

The integrity of the police and the courts is often described as inadequate and the Haitian authorities have recently undertaken an ambitious program of reform and renewal. The police and the courts are also suffering from a lack of capacity that has not yet been remedied as they have received only sporadic training in fighting money laundering.

The AMLL may provide sufficient grounds for freezing and seizing terrorists’ assets; however, given that there is currently no indication of terrorist financing in Haiti, this has not yet been tested.

U.S.-related currency transactions:

The U.S. dollar is commonly used in both the formal and informal economies. The dollar is the currency of choice for smuggling.

Records exchange mechanism with U.S.:

Haitian authorities provide evidence to support prosecutions in the United States. The UCREF and the BAFE are currently assisting the United States in three major investigations that have lead to the indictments of persons prominent in the Haitian telecommunications industry.

International agreements:

Mutual legal assistance is allowed. The UCREF is not a member of the Egmont Group of financial intelligence units but has memoranda of understanding (MOUs) with the FIUs of the Dominican Republic, Panama, Guatemala and Honduras.

Haiti is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - No
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Haiti is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/

Recommendations:

The implementation of the Government of Haiti’s (GOH) existing anti-money laundering/counter-terrorist financing regime is insufficient, ineffective and weakly coordinated. It is not sufficient to fight the money laundering and terrorism financing risks facing the country. The key institutions necessary to the satisfactory functioning of the legislative framework are in place, but they have not yet sufficiently used the tools provided by the AMLL. The GOH should move to enact the draft pieces of legislation pertaining to anticorruption and the new Customs Code bill. Haiti should update its criminal code and reform the civil tax code. Other areas in need of improvement include the country’s ineffective court system, weak enforcement mechanisms and poor knowledge of current laws governing this area. The GOH should expedite prosecution of corruption, narcotics trafficking and money laundering cases. This would send a positive message that financial crimes will be punished to the fullest extent of the law and also help garner broader public support for the rule of law – something that is beginning to occur with the recent asset seizures. Finally, initiatives are needed to enhance the UCREF’s capacity to provide timely and accurate reports on suspicious financial activities and meet Egmont Group membership standards.

Honduras

Honduras is not an important regional or offshore financial center. Money laundering in Honduras stems primarily from significant narcotics trafficking, particularly cocaine, throughout the region. Human smuggling of illegal immigrants into the United States also constitutes a growing source of laundered funds. Money laundering in Honduras derives both from domestic and foreign criminal activity, and the majority of proceeds are suspected to be controlled by local drug trafficking organizations and organized crime syndicates. Laundered proceeds typically pass directly through the formal banking system, but laundering funds through remittance companies, currency exchange houses, the construction sector, and automobile and real estate front companies may be increasing. These factors, combined with the country’s current political crisis, vulnerabilities of a lack of resources for investigations and analysis, and corruption within the law enforcement and judicial sectors, contribute to a favorable climate for significant money laundering in Honduras. There is not a significant black market for smuggled goods; however, there is some smuggling of items such as firearms, gasoline, illegally caught lobster and cigarettes.

Offshore Center: No

Free Trade Zones: Yes

Most foreign companies are located in export processing zones and free trade zones (FTZs). There are 102 registered export processing zones in Honduras. Companies include manufacturers of apparel, sporting goods and textiles, as well as electronic and automotive assembly operations. There are no standard due diligence procedures or requirements for those who use FTZs. Nevertheless, companies of Asian origin undergo greater scrutiny and are required to produce a letter from a parent company to verify legitimacy.

Criminalizes narcotics money laundering: Yes

Law No. 27-98 criminalizes the laundering of narcotics-related proceeds and contains various record-keeping and reporting requirements for financial institutions.

Criminalizes other money laundering, including terrorism-related: Yes

Decree No. 45-2002, enacted in 2002, supersedes the original money laundering laws established in 1998 and expands the definition of money laundering to include transfer of assets that proceed directly or indirectly from trafficking of drugs, arms, human organs or persons; auto theft; kidnapping; bank and other forms of financial fraud; and terrorism, as well as any sale or movement of assets that lacks economic justification.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The reform of the Honduran Penal Code, enacted on April 24, 2009, includes terrorist financing as a crime.

Know-your-customer rules:

Banks are required to know the identity of all their clients and depositors, regardless of the amount of deposits.

Bank records retention:

According to Decree No. 45-2002, reporting institutions must keep a registry of reported transactions for five years.

Suspicious transaction reporting:

All transactions exceeding $10,000 are treated as suspicious under the law. Banks and financial institutions are required to report all suspicious transactions to the financial intelligence unit (UIF). Amendments to the anti-money laundering legislation in 2008 expand the scope of entities required to file suspicious transaction reports (STRs) to include real estate agents, used car dealerships, antique and jewelry dealers, pawn shops, remittance companies, armed car contractors, and non-governmental organizations. The UIF received 354 STRs in 2009.

Large currency transaction reporting: Yes

See above.

Narcotics asset seizure and forfeiture:

The Government of Honduras’ (GOH) asset seizure law has been in effect since 1993. The law allows for both civil and criminal forfeiture, and there are no significant legal loopholes that allow criminals to shield their assets. Under the law, the Office of Seized Assets (OABI) is responsible for identifying, tracing, freezing, seizing and forfeiting seized assets.

Under separate authority, the Ministry of Foreign Affairs is responsible for instructing the National Banking and Insurance Commission (CNBS) to issue freeze orders for organizations and individuals named by the UNSCR 1267 Sanctions Committee, and those organizations and individuals on the list of Specially Designated Global Terrorists by the United States pursuant to Executive Order 13224. CNBS has reported that, to date, no accounts linked to the entities or individuals on the lists have been found in the Honduran financial system.

Narcotics asset sharing authority: No

The de facto regime that took power following the 2009 coup d’état does not have diplomatic relations with any other country and there are therefore no ongoing negotiations to enhance asset tracing, freezing, and seizure.

Cross-border currency transportation requirements:

Decree No. 45-2002 requires all persons entering or leaving Honduras to declare (and, if asked, present) cash and convertible securities they are carrying if the amount exceeds $10,000 or its equivalent. However, citizens of Honduras, Guatemala, El Salvador, and Nicaragua, are permitted inspection-free movement across their respective borders under the Central American Four Agreement, and there is no requirement for reporting border declarations and seizures to the financial intelligence unit. There is a lack of adequate implementation and enforcement.

Cooperation with foreign governments:

Before the June 28, 2009 coup d’état, Honduras cooperated, when requested, with law enforcement agencies of the U.S. Government and other governments investigating financial crimes. The new de facto government was not recognized by any foreign government. This limited Honduras’ ability to engage with other countries and international organizations in efforts to combat money laundering.

U.S. or international sanctions or penalties:

Following the June 28, 2009 coup d’état, Honduras was suspended from the Organization of American States, and the de facto government was not recognized by any other countries.

Enforcement and implementation issues and comments:

The CNBS’ capacity to conduct compliance investigations is limited due to insufficient staff and infrequent training. Similarly, the UIF is fully operational but inadequately staffed. The UIF is closely supervised by the CNBS and does not have operational and budgetary independence.

The OABI is a poorly administered organization, and is constrained by a lack of coordination with public prosecutors who must bring cases to trial before seized assets can be distributed or auctioned. The public prosecutor has said it is no longer working with OABI because of disputes over final forfeiture of assets and disbursement of monies from auctioned assets or bulk cash seizures. Equitable sharing of seized monies has been a continuing problem, and appears at times to be controlled by political influence. Despite Public Ministry guidelines on distribution, police entities involved in the original investigations rarely see an equitable share of the assets seized. In some cases, entities that have nothing to do with the investigation receive a portion of the funds.

Lack of coordination at all levels is a key area preventing a higher success rate in investigations and prosecutions. At the ministry level, the Interagency Commission for the Prevention of Money Laundering and Financing of Terrorism (CIPLAFT) was created in 2004 but never got off the ground. Contact is sporadic and personality-driven, and there is a significant backlog of cases.

U.S.-related currency transactions:

Honduran law allows dollar denominated bank accounts and such accounts are common.

Records exchange mechanism with U.S.:

No specific written agreement exists between the U.S. and Honduras to establish a mechanism for exchanging adequate records in connection with investigations and proceedings relating to narcotics, terrorism, terrorist financing, and other crime investigations.

International agreements:

The UIF has signed memoranda of understanding to exchange information on money laundering investigations with Panama, El Salvador, Guatemala, Mexico, Peru, Colombia, the Dominican Republic, Costa Rica, Bolivia, Haiti, Argentina, Saint Vincent and The Grenadines, St. Kitts and Nevis, Belize, and the Cayman Islands. Before the coup d’état, the UIF reported that bilateral cooperation and information sharing was good across the board. However, the international isolation of the post-coup de facto government has impeded information sharing on counternarcotics and other issues.

Honduras is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Honduras is a member of the Central American Council of Bank Superintendents. Honduras also is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Group of Experts to Control Money Laundering, and the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force-style regional body. Its most recent evaluation, conducted by the World Bank, can be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Recommendations:

Unless the Government of Honduras takes action to improve the coordination and cooperation among law enforcement, the FIU and prosecutors it will not be able to successfully investigate and prosecute financial crimes, including money laundering and terrorist financing. Adequate resources should be devoted to fully staff the CNBS and FIU, and to raise the capacity of all entities so they can fulfill their responsibilities.

Hong Kong

Hong Kong, a Special Administrative Region of the People’s Republic of China, is a major international financial center.  As of October 2009, with a total market capitalization of $2.18 trillion, Hong Kong’s stock market was the seventh largest in the world and third largest in Asia.  Hong Kong was also the world’s 15th largest banking center and the world’s sixth largest foreign exchange trading center.  In July 2009, Hong Kong launched a pilot program whereby Hong Kong banks with correspondent relationships in mainland China can engage in Chinese Renminbi (RMB) trade settlement.

Hong Kong’s low and simplified tax system, coupled with its sophisticated banking system, shell company formation agents, and the absence of currency and exchange controls facilitate financial activity but also make Hong Kong vulnerable to money laundering. The primary sources of laundered funds in Hong Kong are corruption, tax evasion, fraud, illegal gambling and bookmaking, prostitution, loan sharking, commercial crimes, and intellectual property rights infringement. Criminal proceeds laundered in Hong Kong are derived from local and overseas criminal activities, but Hong Kong law enforcement authorities attribute only a small percentage of these to drug-trafficking organizations.

Offshore Center: Yes

Hong Kong does not make a distinction between onshore and offshore entities, including banks. Its financial regulatory regimes are applicable to residents and nonresidents alike. All companies must be incorporated or registered under the Companies or Trustee Ordinances and file information annually with the Companies Registry, including annual accounts, details on registered offices, directors, company secretary, etc. Companies require licensing to engage in asset management or fund advisory activities in Hong Kong. As of October 2009, 715 corporations held licenses. No differential treatment is provided for nonresidents, including taxation and exchange controls. Bearer shares are not permitted.

Free Trade Zones: No

Hong Kong is a free port without foreign trade zones. Hong Kong's modern and efficient infrastructure supports Hong Kong's role as a regional trade, financial and services center

Criminalizes narcotics money laundering: Yes

Narcotics money laundering is a criminal offense in Hong Kong under the Drug Trafficking Recovery of Proceeds Ordinance (DTROP) and the Organized and Serious Crimes Ordinance (OSCO). Introduced in 1989, the DTROP provides that it is a criminal offense for a person to deal in property “knowing or having reasonable grounds to believe” that the property “in whole or in part directly or indirectly represents any person’s proceeds of drug-trafficking.” There have been no recent amendments to this law.

Criminalizes other money laundering, including terrorism-related: Yes

DTROP and OSCO criminalize the laundering of proceeds from all indictable offenses. Laundering, to include self-laundered money, of any property that represents in whole or in part, directly or indirectly, the proceeds of crime are an offense.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

Terrorism and terrorist financing were criminalized in 2002 with the enactment of The United Nations Anti-Terrorism Measures Ordinance (UNATMO), Cap. 575. An amendment to the legislation in 2004 provides for the freezing of terrorist related assets. However, the offense is viewed as being narrow in scope and certain key provisions of this ordinance are not yet in force. Not covered in the current legislation is terrorism directed at an international organization or where the financing is in the form of assets other than ‘funds’.

Know-your-customer rules: Yes

Banking, securities and insurance entities must identify and verify the identity of customers, including any beneficial owners, before establishing a business relationship. Only basic customer-due-diligence obligations are in place for money remitters and money exchange companies, and there are no due-diligence obligations for money lenders, credit unions and financial leasing companies. Guidelines impose obligations on banking and insurance institutions to exercise enhanced due diligence with respect to politically exposed persons. However, these guidelines do not specify that senior management approval is required to continue a business relationship with a customer discovered to be a politically exposed person. A supplement to the Banking Guidelines issued in November 2007 added the requirement of obtaining the purpose and reason for opening an account.

Bank records retention: Yes

Financial institutions are required to know and record the identities of their customers and maintain records for five to seven years. Remittance agents and moneychangers must register their businesses with the police and keep customer identification and transaction records for cash transactions above a HK 8,000 (approximately $1,032) threshold for at least six years.

Suspicious transaction reporting: Yes

Hong Kong’s reporting obligations require the reporting of suspected money laundering or terrorist financing irrespective of the amount involved. The legal obligations for all persons, including financial institutions, to file suspicious transaction reports (STRs) are articulated in the DTROP for narcotics proceeds, OSCO for the proceeds of indictable offenses and organized crime, and UNATMO for terrorism finance. As of October 2009, Hong Kong’s financial intelligence unit (FIU) received 13,553 STRs and referred 1,926 to law enforcement agencies for further investigation.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Under the DTROP and OSCO, a court may issue a restraining order against a defendant’s property at or near the time criminal proceedings are instituted. Property includes money, goods, real property, and instruments of crime. A court may issue confiscation orders at the value of a defendant’s proceeds from illicit activities. Cash imported into or exported from Hong Kong that is connected to narcotics-trafficking may be seized, and a court may order its forfeiture. However, restraint and confiscation provisions are limited in their availability as they can be used only for those indictable offenses listed in OSCO and restraint may only occur where the amount involved is over HK 100,000 (approximately $12,900). Some types of instrumentalities are subject to forfeiture. According to Hong Kong government statistics as of September 30, 2009, the value of frozen assets was $324.2 million while the value of assets under a court confiscation order but not yet paid to the government was $14.62 million.

Under DTROP section 28, the Chief Executive may promulgate orders designating countries whose confiscation orders can be considered as though they were made pursuant to DTROP (with some modifications). The net effect of such designations is to confer legal recognition upon confiscation orders of certain other countries. Pursuant to this power, the Chief Executive has promulgated the Drug Trafficking (Recovery of FATF/ME (2008)4 186 Proceeds) (Designated Countries and Territories) Order.

Narcotics asset sharing authority: Yes

Hong Kong’s Mutual Legal Assistance Ordinance (MLAO), DTROP, and various administrative measures provide a platform for the sharing of seized assets with other governments. Bilateral agreements generally incorporate provisions on asset sharing that provide for assets to remain with the requested jurisdiction, subject to sharing on a case by case basis. In practice, realized funds over a threshold of HK$10million (approximately $1,290,000) are shared equally.

Cross-border currency transportation requirements: No

Hong Kong does not require reporting of the movement of any amount of currency across its borders.

Cooperation with foreign government: Yes

UNATMO, DTROP and OSCO enable information sharing with relevant authorities outside Hong Kong to prevent and suppress the financing of terrorist acts, drug-trafficking and other crimes. 

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The formal banking sector is believed to be the primary means of money laundering in Hong Kong. For 2008, Hong Kong police reported 4,653 cases of deception; 20 business fraud cases; and 1,190 forgery and coinage cases. Crime statistics for 2009 were not available. From January to September 2009, Hong Kong prosecuted 340 persons for Money Laundering. One significant case involved the arrest and prosecution of 16 persons for money laundering by the Hong Kong Customs and Excise Department.

No provisions are in place for forfeiture of proceeds and instrumentalities of terrorist acts or terror finance. There were no prosecutions for terrorist financing as of September 2009.

U.S.-related currency transactions:

No information provided.

Records exchange mechanism with U.S.:

Hong Kong’s mutual legal assistance agreements generally provide for asset tracing, seizure, and sharing. Hong Kong signed and ratified a mutual legal assistance agreement (MLAA) with the United States that came into force in January 2000. Law enforcement cooperation remains a central pillar of U.S. - Hong Kong relations.

Legislative amendments to DTROP and OSCO in 2004 now allow the financial intelligence unit to disseminate information derived from STRs to overseas counterparts and non-counterparts for the purposes of combating crime, without the need for any reciprocity.

International agreements

As of November 2009, Hong Kong has signed bilateral MLAAs with 27 jurisdictions.  Hong Kong has also signed surrender-of-fugitive-offenders (extradition) agreements with 18 countries, including the United States, and has signed agreements for the transfer of sentenced persons with ten countries, also including the United States.  Hong Kong authorities exchange information on an informal basis with overseas counterparts and with Interpol.

Hong Kong is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes

  • the UN Convention against Transnational Organized Crime - Yes

  • the 1988 UN Drug Convention - Yes

  • the UN Convention against Corruption - Yes

The above conventions apply to Hong Kong through mainland China’s participation in the conventions.

Hong Kong is a member of the FATF and the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. It’s most recent 2008 mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/19/38/41032809.pdf

Recommendations:

Hong Kong should institute mandatory oversight for the designated non-financial businesses and professions and money remitters.  Hong Kong should establish mandatory cross-border currency reporting requirements.  The anti-money laundering/counter-terrorist financing framework should be further enhanced with the establishment of threshold reporting requirements for currency transactions and by putting into place “structuring” provisions to counter evasion efforts.  As a major trading center, Hong Kong should seriously examine trade-based money laundering.

Hungary

Hungary is not considered a major financial center and is not generally viewed as a high-risk country for money laundering; however, its pivotal location in Central Europe - as a European Union (EU) member, but also a link between the former Soviet Union and Western Europe - as well as its cash-based economy and well-developed financial services industry make it attractive to foreign criminal organizations. The preponderance of money laundering cases appears to stem from financial and economic crimes, such as fraud, embezzlement, tax evasion, and tax and social security fraud, although narcotics trafficking, prostitution, trafficking in persons, and organized crime also contribute. Other prevalent economic and financial crimes include real estate fraud and the copying/theft of bankcards. There have been several cases involving foreign organized crime groups from Russia, Ukraine, Lithuania, China and Vietnam. There is a sizeable black market for smuggled goods in Hungary, primarily related to customs, excise, and value-added tax evasion. Illegal products are currently estimated to account for ten percent of the market. No international terrorist groups are known to operate in Hungary. Funding sources for the extreme right-wing Hungarian Arrows are currently unknown but under investigation.

There are numerous indicators that trade-based money laundering occurs in Hungary. Several Hungarian-based companies engaged in trading commodities such as natural gas, metals, and fertilizer, as well as a large pharmaceutical firm, are owned by offshore entities where beneficial ownership information is unclear, or whose owners have reported ties to individuals associated with Russian and Ukrainian-based organized crime groups, reportedly entrenched in Hungary, and/or with high-ranking politicians in Russia, Ukraine, and/or Hungary. Several of these companies employ transfer pricing and/or intercompany loan schemes involving networks of similarly shadowy international companies to obscure the sources of funds and the true beneficiaries of their profits. Several such companies also maintain relationships with banks in Hungary.

Offshore Center: No

Free Trade Zones: No

As of May 1, 2004, the date of accession of Hungary to the EU, “free zones” may be established or operated in Hungary only in accordance with the relevant EU legislation. The Government of Hungary (GOH) may designate such a free zone. However, Hungary has not issued any authorizations for free zones since its accession.

Criminalizes narcotics money laundering: Yes

Section 303 of the 1978 Hungarian Criminal Code makes money laundering a criminal offense. Predicate offenses include all “activities punishable by imprisonment”. As amended by Act XXVII of 2007, provisions cover the transfer of proceeds to a third party, disguise or concealment of the true origin of funds, and self-laundering.

Criminalizes other money laundering, including terrorism-related: Yes

In December 2007, a new anti-money laundering/counter-terrorist financing (AML/CFT Act) law entered into force (Act CXXXVI of 2007 on the Prevention and Combating of Money Laundering and Terrorist Financing). The AML/CFT Act expands the scope of coverage to further professions, including real estate agents/brokers, auditors, accountants, bookkeepers, tax consultants and advisors, casinos, traders of precious metals or articles made of precious metals, lawyers, notaries, and all natural or legal persons trading in goods by way of business, including postal financial intermediation and money transfer services.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The GOH criminalizes terrorism and all forms of terrorist financing with Act II of 2003. Act XXVII of 2007 on the Amendment of Act IV of 1978 on the Criminal Code and Other Criminal Law Related Acts introduces new provisions on terrorist financing. The Act ensures that providing or raising funds to finance terrorist activities constitutes a criminal offense.

Know-your-customer rules:

The AML/CFT Act introduces a risk-sensitive approach regarding customer due diligence (CDD) and establishes detailed rules, including simplified as well as enhanced CDD for low or high-risk customers or business relationships, such as appropriate procedures to determine whether a person is a “politically-exposed person”. Banks and other financial institutions are required to apply CDD measures when establishing a business relationship and when carrying out transactions amounting to 3.6 million forints (approximately $20,000) or more. Currency exchange booths are under the same obligations for transactions amounting to 500,000 forints (approximately $3,000) or more. In order to avoid repetitive procedures, certain service providers may rely on third party CDD.

Bank records retention:

Banks and financial institutions are required to keep on file any data and documents for eight years from the time of entry into the records or the time of notification or suspension, even if the business relationship has been terminated.

Suspicious transaction reporting:

The AML/CFT Act requires covered institutions to file suspicious transaction reports (STRs) to the Hungarian Financial Intelligence Unit (HFIU) whenever money laundering or terrorist financing is suspected. When submitting STRs, service providers are obligated to suspend the suspicious transaction(s) until notified by the FIU that no criminal proceedings will be commenced or, absent such notification, for one day in the case of a domestic transaction, or two days for a foreign transaction. There is no minimum threshold for filing an STR. In 2008, the HFIU received 10,091 STRs and initiated criminal investigations in 18 cases. During the first half of 2009, the HFIU received 2,610 STRs and initiated criminal investigations in 16 cases with 59 STRs. In the first half of 2009, 14 transactions were suspended on the basis of STRs, all of which were carried out by the reporting entities. The HFIU initiated a criminal investigation on the basis of one of these suspensions.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Judicial and law enforcement authorities are empowered to freeze, seize and confiscate assets in connection with criminal proceedings. Act XIX 1998 on Criminal Proceedings establishes the procedures for freezing and confiscating assets in connection with a criminal procedure. According to the Hungarian Criminal Code (HCC), instrumentalities of crimes and substitute assets can be seized and forfeited. Legitimate businesses may be seized if used in connection with criminal activity. The HCC presumes all assets owned by a criminal organization are subject to forfeiture and places the burden on the defendant to prove the assets are legitimate and unconnected with criminal activity. Hungarian law does not provide for civil forfeiture; it does, however, allow for in rem confiscation of criminal assets in situations where the perpetrator may not be able to stand trial (e.g., absconded, deceased, mentally unfit, or a minor). According to the General Prosecutor’s Office, during the first half of 2009, $3.5 million was frozen and $1.7 million was seized.

Hungary’s Act on Criminal Procedure does not provide separate procedures for persons suspected of committing terrorist acts. Act CLXXX of 2007 provides for the freezing of financial assets and economic resources of terrorists by administrative measures. On the basis of this Act, service providers must immediately contact the HFIU which will then suspend the questionable transaction and either block or freeze any relevant assets.

Narcotics asset sharing authority: Yes

Hungary has implemented European Council Framework Decision 2006/783, which mandates the sharing of seized assets in certain cases with other EU governments. Asset sharing occurs on a case by case basis with non-EU countries.

Cross-border currency transportation requirements:

Travelers entering or leaving the EU and carrying any sum equal to or exceeding euro 10,000 or negotiable monetary instruments are required to make a declaration to the customs authorities. No reporting is required when crossing country borders within the EU.

Cooperation with foreign governments (including refusals):

Hungary’s national provisions on international cooperation in criminal matters can primarily be found in Act XXXVIII of 1996 on International Legal Assistance in Criminal Matters, according to which Hungarian judicial authorities do not require treaties to provide such cooperation. Hungarian legislation allows cooperation both on the basis of reciprocity and in the absence of it.

The Hungarian National Police and Budapest Police Department partnered with the U.S. Drug Enforcement Administration to disrupt and dismantle a major world-wide money laundering network.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Considering the thousands of STRs filed every year, relatively few criminal investigations are initiated, and of these only a handful of cases eventually make it to the Prosecutor’s Office as indictments. As of December 4, 2009, there were 17 individual arrests in 2009 for money laundering in connection with three criminal investigations. Five individuals have been prosecuted and two have been convicted. There have been no cases involving terrorist financing.

International organizations have criticized Hungary for keeping insufficient and often inconsistent data.

The GOH routinely disseminates information on UN, EU and USG designations to the HFIU and to financial institutions. There have been no identifications, freezes, seizures, or forfeitures of terrorist-related assets in recent years.

U.S.-related currency transactions:

Funds laundered through Hungary’s financial system do not appear to involve U.S. currency or funds derived from illicit drug sales in the U.S.

Records exchange mechanism with U.S.:

Hungary and the United States have a Mutual Legal Assistance Treaty (MLAT) and a nonbinding information sharing arrangement designed to enable U.S. and Hungarian law enforcement to work more closely to fight organized crime and illicit transnational activities. Two bilateral agreements concluded in 2008 specifically provide for sharing of personal and biometric data of criminal and terrorist suspects and perpetrators. In May 2000, Hungary and the U.S. Federal Bureau of Investigation (FBI) established a joint task force in which FBI officers work side-by-side with National Bureau of Investigation counterparts to combat Russian organized crime groups.

International agreements:

Hungary has signed bilateral agreements with numerous countries to allow for direct information exchanges between competent authorities in combating terrorism, drug trafficking, and organized crime. Section 26 of the AML/CFT Act provides the basis for HFIU information exchanges with international authorities. The HFIU is authorized to share information for AML/CFT purposes, and for the purpose of investigating the following eight crimes: acts of terrorism, unauthorized financial activities, money laundering, tax fraud, embezzlement, fraud, and misappropriation of funds.

Hungary is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - Yes
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - Yes

Hungary is a member of the Council of Europe’s Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Hungary_en.asp

Recommendations:

Hungary has worked continuously to improve its money laundering enforcement regime, in particular to strengthen its legal and institutional framework. Despite this progress, additional government efforts toward improved implementation would aid in combating money laundering and terrorist financing. The Government of Hungary should take steps to increase cooperation and coordination among law enforcement entities and the prosecution service to more effectively investigate and prosecute money laundering cases. Prosecutors, judges, and law enforcement personnel also require enhanced knowledge to promote the successful prosecution of money laundering cases. Improved supervision, outreach, and guidance by Hungary’s supervisory bodies, particularly with regard to designated nonfinancial businesses and professions, would help ensure that STR reporting obligations are fulfilled. Increased AML/CFT training for the employees of financial institutions and other obligated entities is also necessary to further improve the quality of filed STRs, in particular those related to terrorist financing.

Iceland

Iceland is not considered an important regional financial center. Money laundering is not considered a major problem in Iceland. Money laundering in Iceland is related primarily to narcotics smuggling and trading. Criminal proceeds tend to derive from domestic organizations with linkages to foreign groups. As of late 2009, investigators were looking into the collapse of Iceland’s financial system and re-examining allegations that its banks may have been involved in money laundering. Documents relating to such allegations have circulated between officials in Iceland, Denmark and the Serious Fraud Office in London. A wide-ranging inquiry into the collapse of Iceland’s banks has started to unravel a complicated network of unconventional loan agreements between the banks and high-level business people.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Icelandic Penal Code 19/1940, enacted in 1940, criminalizes money laundering regardless of the predicate offense. In June 2006, parliament passed the Act on Measures to Counteract Money Laundering and the Financing of Terrorist Acts (Act 64/2006) to replace 1993 legislation. Act 64/2006 was adopted to harmonize Iceland’s domestic anti-money laundering framework and expands upon previous AML requirements from 1993 and1999. Amendments were made to Act 64/2006 in 2008 (Act no. 77/2008).

Legal provisions proposed in a new bill passed by parliament on December 18, 2009 broaden the definition of money laundering in order to make the law more comprehensive, and will be a powerful tool for confiscating property in narcotics cases. The bill also includes a reversed burden of proof clause, so the person or entity under investigation must prove that the money involved was legally attained.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

According to Regulation 122, passed on January 20, 2009, parties in Iceland and abroad are prohibited from financing terrorism actions of any kind. No one can raise funds or acquire other assets for the purpose of financing terrorist activity. A party can neither give money, either directly or indirectly, nor can it support terrorism in any way, e.g., helping out with weapons, offering a place to stay, or organizing or participating in any activity related to terrorism.

Know-your-customer rules: Yes

Act 64/2006 requires banks and other financial institutions, upon opening an account or depositing assets of a new customer; for individual transactions amounting to 15,000 euros (ISK 2.78 million) or more; or when making currency exchange amounting to 1,000 euros (ISK 185,000) or more, to have the customer prove his or her identity by presenting personal identification documents.

Bank records retention: Yes

All records necessary to reconstruct significant transactions are maintained for at least seven years.

Suspicious transaction reporting: Yes

Act 64/2006 covers a broader range of designated non-financial businesses and professions (DNFBPs), including attorneys, auditors, real estate dealers, trust and company service providers, and dealers in any high-value items over euro 15,000 (approximately $20,500). These DNFBPs are “reporting entities” and have the same obligations as financial institutions. All obligated entities are required to file suspicious transaction reports (STRs) with the financial intelligence unit (FIU). According to 2008 figures, 520 STRs were sent to the FIU; none of the notifications were suspected cases of terrorist financing.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture: Yes

The Criminal Code allows for the freezing or seizure of funds based on reasonable suspicion of criminal activity. There are no significant obstacles to asset seizure in practice. The Icelandic legal system allows for criminal, but not civil, forfeiture.

Narcotics asset sharing authority: No

Iceland does not have any specific agreement or memoranda of understanding for coordinating seizure and confiscation actions with other countries. However, informal arrangements exist.

Cross-border currency transportation requirements: Yes

According to Article 27 of the Customs Act 88/2005, travelers and crew members arriving in or departing Iceland are to voluntarily declare cash in their possession exceeding an amount equal to euro 15,000. Although the term “cash” is used, bearer instruments and traveler’s checks are included.

Cooperation with foreign governments:

Iceland is party to the 1959 European Convention on Mutual Assistance in Criminal Matters, the 1957 Convention on Extradition and the 1970 Convention on the International Validity of Criminal Judgements. The law enforcement community in Iceland is able to provide international cooperation to its foreign counterparts through a number of fora, including Interpol and Europol, as well as direct police to police contact.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There were no money laundering convictions in 2008. Figures for 2009 are not available.

The Ministry of Justice publishes announcements via the National Gazette on individuals or legal entities (companies) whose names appear on the UNSCR 1267 Sanctions Committee’s consolidated list or on the European Union clearinghouse list, and whose assets or transactions are subject to reporting and freezing by Icelandic financial institutions.

U.S.-related currency transactions:

The Icelandic krona (ISK) is not traded abroad. Drug trafficking occurs predominantly with European countries, not the United States.

Records exchange mechanism with U.S.:

The Icelandic FIU is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

Iceland is party to several regional agreements and conventions which facilitate extradition and mutual legal assistance.

Iceland is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

Iceland is a member of the Financial Action Task Force. Its latest mutual evaluation report can be found here: http://www.fatf-gafi.org/dataoecd/54/38/37706239.pdf

Recommendations:

The Government of Iceland (GOI) has improved its anti-money laundering/counter-terrorist financing system through the enforcement of existing laws, and review and implementation of international standards. A domestic mechanism should be implemented to be able to designate terrorists at a national level as well as to give effect to designations and requests for freezing assets from other countries. The GOI should continue to enhance its program, as appropriate. Iceland should become a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

India

India’s emerging role in regional financial transactions, its large system of informal cross-border money flows, large underground economy, widespread use of hawala, and historically disadvantageous tax administration and currency controls all contribute to the country’s vulnerability to money laundering activities. While much money laundering in India aims to facilitate widespread tax avoidance, criminal activity contributes substantially. Common sources of illegal proceeds in India include: narcotics trafficking, illegal trade in endangered wildlife, trade in illegal gems (particularly diamonds), smuggling, trafficking in persons, and income tax evasion. Corruption, both in the private and public sectors, is also a potential source of money laundering. Money laundering methods are diverse. In domestic crimes, the most common money laundering methods are opening multiple bank accounts, intermingling criminal proceeds with assets of a legal origin, purchasing bank checks with cash, and routing through complex legal structures. In transnational organised crimes, offshore corporations and trade based money laundering may be used to disguise the criminal origin of the funds. Money laundering also takes place in India through charities and non-profit organizations. Because of its location between the heroin-producing countries of the Golden Triangle and Golden Crescent, India continues to be a drug-transit country. The 2008 terrorist attacks in Mumbai intensified concerns about terrorist financing in India. Major sources for terrorist financing include: funds/resources from organizations outside India including; extortion; counterfeiting of currency; use of formal channels, and new payment methods.

Offshore Center: No

India does not have a traditional offshore financial center but does license offshore banking units (OBUs) to operate in the Special Economic Zones (SEZs). Nine OBUs have been set up in specific zones, although they can provide services across the entire network. These units are prohibited from engaging in cash transactions and are restricted to lending to the SEZ wholesale commercial sector. Although located in India, they essentially function as foreign branches of Indian banks. India licenses and regulates OBUs the same way as domestic commercial banks, and they are subject to the same anti-money laundering/counter-terrorist financing (AML/CFT) provisions as the domestic sector.

Free Trade Zone: Yes

Special Economic Zones (SEZs) are being established to promote export-oriented commercial businesses, including manufacturing, trading and services (mostly information technology). As of December, 2009, approximately 350 SEZs had been proposed throughout India. The SEZs have defined physical boundaries, with access controlled by Customs officers. In November 2009, the Government of India (GOI) gave permission to various investigative agencies to conduct searches, inspect, seize and investigate the consignments inside the SEZs without permission from the SEZ development commissioner.

Criminalizes narcotics money laundering: Yes

The Prevention of Money Laundering Amendment Act (PMLA), 2009 [No. 21 of 2009] criminalizes narcotics-related money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

PMLA amendments introduced a new category of predicate offenses, cross-border crimes such as fraud and theft, with no threshold amount for prosecution. Offenses under the Unlawful Activities (Prevention) Act (UAPA) relating to terrorism and terrorist financing are included as predicate offenses, as are insider trading and market manipulation. Offenses relating to human trafficking, smuggling of migrants, counterfeiting, piracy, environmental crimes, and over- and under-invoicing under the Customs Act have become punishable under the amended PMLA.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/)

The UAPA was amended in 2004 to criminalize terrorist acts, including raising funds for terrorism. However, the Act did not provide a comprehensive framework for dealing with the tripartite offenses of terrorism, namely, financing of terrorism, terrorists acts and terrorist organizations. In December 2008, India’s parliament enacted an amendment to the UAPA containing provisions to address the legal authority and enforcement mechanism for freezing the funds of terrorist entities, including an explicit authority to freeze the funds of terrorist entities designated under UNSCRs 1267 and 1373. In August 2009, the government issued orders to implement the UAPA for terrorist-related predicate offenses. India has seized, attached and forfeited property of Dawood Ibrahim Kaskar, a designated individual, valued at more than INR 1.5 billion.

Know-your-customer rules: Yes

In October 2009, the Reserve Bank of India (RBI) strengthened its “Know Your Customer (KYC) Norms/Anti Money Laundering Standards/Combating of Financing of Terrorism” guidelines by issuing notifications to all banks and financial institutions on appropriate procedures regarding customer identification and verification. Entities covered by KYC regulations include banks, securities firms and broker dealers, insurance companies, authorized money changers (money remitters, bureaus de change, money changers) and payment systems operators. In November 2009, the RBI tightened the KYC norms for authorized money transfer service agents, requiring enhanced due diligence for new customers based on a customer’s risk profile and increased monitoring of receipts considered especially risky based on indicators such as country of origin, sources of funds, and type of transaction. The RBI also has directed banks to take additional precautions on customers’ business transactions with entities or banks from Iran, Pakistan, Uzbekistan, Turkmenistan, and Sao Tome.

Bank records retention: Yes

The PMLA obligates every banking company, financial institution, and intermediary of the securities market (such as stock brokers) to maintain records of all transactions and customer verification for ten years.

Suspicious transaction reporting: Yes

In June 2009, amendments to the PMLA came into force, adding additional entities to those subject to reporting requirements, including: casinos, authorized money changers; money transfer service agents (Western Union); and, international payment gateways (e.g., Visa and Master Card). Following a listing in the Official Gazette in November 2009, charitable trusts including temples, churches, mosques, non-governmental bodies, and educational institutions, even if registered as non-profit organizations, are under the purview of the amended PMLA. These entities need to disclose their source of funds and must report both suspicious transactions and large monetary transactions. Obligated entities are required to submit suspicious transaction reports (STRs) to India’s financial intelligence unit (FIU). According to the FIU’s 2009 fiscal year Annual Report, the FIU received 4,409 STRs, of which 2,450 were shared with relevant law enforcement agencies. According to FIU officials, income tax evasion has been readily detected in the STRs and has also led to the arrest of suspected terror operatives.

Large cash transaction reports: Yes

The PMLA requires every bank, financial institution and intermediary to furnish to the FIU information relating to cash transactions of more than 1 million rupees (approximately $21,700), or its equivalent in foreign currency. Indian outlets of wire transfer services and casinos have also been ordered to report their transactions every month. Individual cash transactions below 50,000 rupees (approximately $1,080) need not be reported.

Narcotics asset seizure and forfeiture: Yes

The 1973 Code of Criminal Procedure, Chapter XXXIV (Sections 451-459), establishes India’s basic framework for confiscating illegal proceeds. The Narcotic Drugs and Psychotropic Substances Act (NDPSA) as amended in 2000, requires the tracking and forfeiture of assets that have been acquired through narcotics trafficking and prohibits attempts to transfer and conceal those assets. The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act of 1976 (SAFEMA) allows for the seizure and forfeiture of assets linked to Customs Act violations. The Competent Authority (CA), within the Ministry of Finance, administers both the NDPSA and the SAFEMA. The 2001 amendments to the NDPSA allow the CA to seize any asset owned or used by an accused narcotics trafficker immediately upon arrest; previously, assets could only be seized after a conviction.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

A declaration must be made upon entering India with an aggregate value of Indian currency notes, bank notes, or traveler’s checks exceeding $10,000 or its equivalent, and/or an aggregate value of foreign currency notes of $5,000 or its equivalent.

Cooperation with foreign governments: Yes

The GOI routinely cooperates with other jurisdictions in anti-money laundering and financial crimes investigations. India’s Customs Service shares enforcement information with countries in the Asia/Pacific region.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

India’s widespread informal remittance systems, such as hawala, and its large underground economy are non-transparent and resistant to money laundering countermeasures. According to Indian observers, funds transferred through the hawala market are equal to between 30 to 40 percent of the formal market, totaling between $13 and $17 billion. The RBI estimates that remittances to India sent through legal, formal channels during fiscal year 2009 (ending March 31, 2009) amounted to $46.4 billion.

Smuggled goods such as computer parts, gold, and a wide range of imported consumer goods are routinely sold through the black market. However, the volume in business-related smuggled goods has fallen significantly. Nonetheless, private analysts estimate India’s black market to range from $2.1 - $2.5 trillion.

India is one of the most active members of the Asian Clearing Union (ACU), a regional clearing house based in Tehran for participants to settle trade transactions in Euros and dollars. The ACU could be used for financing trade with countries such as Iran and Burma, while avoiding U.S. sanctions.

The GOI requires charities to register with the Registrar of Societies but enforcement of GOI regulations governing charities remains weak. The Foreign Contribution Regulation Act (FCRA) of 1976 regulates the use of foreign funds received by charitable/nonprofit organizations. Their coverage under the PMLA is a good step toward more effective oversight but is too recent to evaluate. Some religious trusts and charities operate as sources of funds for terrorist organizations under anonymous/fictitious names. There are over a million charitable and private organizations registered in India. There is insufficient integration and coordination between charities’ regulators and law enforcement authorities regarding the threat of terrorist financing.

To date, India has had very few money laundering prosecutions, particularly for a country and financial sector of its size.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

The FIU is able to exchange financial intelligence with the Financial Crimes Enforcement Network (FinCEN).

International agreements:

India is a party to various information exchange agreements. Authorities can share information or provide assistance to foreign jurisdictions in matters relating to money laundering or other financial crimes without need for a treaty. The FIU has signed bilateral MOUs to further facilitate and expedite financial intelligence information sharing.

India is a party to:

  • the UN Convention for the Suppression of the Financing of Terrorism - Yes
  • the UN Convention against Transnational Organized Crime - No
  • the 1988 UN Drug Convention - Yes
  • the UN Convention against Corruption - No

India is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body. India’s mutual evaluation report can be found here: http://www.apgml.org/documents/docs/8/India%20ME1%20-%20Final.pdf

Recommendations:

The Government of India (GOI) amended the PMLA in order to strengthen its AML/CFT regime. However, the GOI should extend the PMLA to dealers in precious stones and metals; real estate agents; lawyers, notaries and other independent legal professionals; and accountants. Further tax reform, loosening of currency controls, and facilitating the development of money transfer services should enhance the availability of legal alternatives to hawala and reduce ML/TF vulnerabilities. Given the fact that in India hawala is directly linked to terrorist financing, the GOI should take action to provide increased transparency in alternative remittance systems. India should take measures to demonstrate that it is also applying the full range of its AML/CFT measures to transactions conducted under the Asian Clearing Union with Iran and other participating countries. India should become a party to the UN Conventions against Transnational Organized Crime and Corruption. Also, India should pass the Foreign Contribution Regulation Bill for regulating nongovernmental organizations, including charities. India should devote more law enforcement and customs resources to curb abuses in the diamond trade. It should also consider the establishment of a Trade Transparency Unit (TTU) to promote trade transparency; in India, trade is the “back door” to underground financial systems.

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