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


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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: Montenegro through Suriname

Montenegro

Montenegro is not considered an important financial center. Independent since 2006, Montenegro is still developing capabilities to prevent money laundering and terrorist financing. The Montenegrin authorities consider drug-related crimes the most serious source of illicit proceeds in the country. Montenegro is a part of the East-West transit corridor for drugs. Montenegro continues to have a significant black market for smuggled goods, particularly stolen cars, narcotics, cigarettes, imports which avoid customs duties, and counterfeit goods; many of these items are trafficked by organized criminal groups. Proceeds from illegal activities are invested heavily in all forms of real estate. Montenegrin authorities do not consider Montenegro to be exposed to terrorism or a haven for terrorist finance. Corruption is a significant problem and continues to affect all law enforcement bodies and the judiciary. While the government has made efforts to eliminate corruption, these efforts have yet to produce significant results.

Offshore Center: No

Free Trade Zones: Yes

In June 2004, Montenegro passed a Free Trade Zone Law, which offers businesses benefits and exemptions from custom duties, taxies and other duties. The Port of Bar is currently the only free trade zone (FTZ) in Montenegro. The Port of Bar Holding Company operates the FTZ. The general business rules of the Bar free zone require each FTZ user to come to an agreement with the Customs Authority of Montenegro on the form of customs records to be maintained about the flow of goods.

Criminalizes narcotics money laundering: Yes

The money laundering offense is criminalized by Article 268 of the Criminal Code.

Criminalizes other money laundering, including terrorism-related: Yes

The Law on the Prevention of Money Laundering and Terrorist Financing entered into force in December 2007. The law takes an “all crimes” approach to money laundering predicate offenses and criminalizes self-laundering. Liability of legal persons is provided for in the Law on Criminal Liability of Legal Entities for Criminal Acts.

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 financing of terrorism is criminalized in Article 449 of the Criminal Code, which also makes terrorist financing a predicate offense for money laundering.

Know-your-customer rules:

On March 17, 2009, Montenegro issued the Regulations on Risk Analysis for Prevention of Money Laundering and Financing of Terrorism. On the basis of the Regulations, the financial intelligence unit (FIU) issued the Guidelines on Risk Analysis for Prevention of Money Laundering and Financing of Terrorism, which entered into force on September 25, 2009. Banks and other financial institutions are required to know, record, and report the identity of customers engaging in suspicious, significant transactions, including currency transactions equal to or above the equivalent of 15,000 euros (approximately $22,730).

Bank records retention:

Banks and other financial institutions are also required to maintain records for ten years.

Suspicious transaction reporting:

Transactions that raise suspicions of money laundering or terrorist financing shall be reported to the FIU before the execution of the transaction. If there are serious grounds for money laundering or terrorist financing, the FIU may block the transaction for 72 hours and send the report to the police administration or prosecutor’s office. During the first ten months of 2009, 63 suspicious transaction reports (STRs), involving 59 cases, were filed with the FIU. During the same period, the FIU processed 86 STRs. The FIU referred 94 cases to law enforcement.

On October 16, 2009, Montenegro issued an updated List of Suspicious Clients and Transaction Indicators. It included lists of indicators for banks, capital markets, Customs Administration, public revenue collectors, leasing companies, auditors, accountants, and lawyers. There were no reports on terrorist financing.

Large currency transaction reporting:

Covered institutions are required to report to the FIU all transactions exceeding 15,000 euro (approximately $22,730)

Narcotics asset seizure and forfeiture:

Criminal Code Article 268 provides for the mandatory confiscation of money and property related to money laundering. Criminal Code Article 449 provides for mandatory confiscation of funds intended for terrorist financing. On August 19, 2009, the GOM adopted a new Criminal Procedure Code (CPC) which envisages provisional seizure of objects and property, and proceedings for confiscation of property whose legal origin has not been proved. Instrumentalities and substitute assets are subject to confiscation. Civil forfeiture is allowed. The CPC also covers the freezing of terrorist funds. General guidance on the freezing of funds has been issued but there is no specific guidance on the freezing of terrorist funds. The GOM has established systems for identifying, tracing, freezing, seizing, and forfeiting narcotics-related assets as well as assets derived from, or intended for, other serious crimes. However, the implementation of the legislation has just begun.

Narcotics asset sharing authority:

Article 28 of the Law on International Legal Assistance in Criminal Matters, adopted in January 2008, provides for asset sharing.

Cross-border currency transportation requirements:

Resident and non-resident individuals are allowed to carry in or out of Montenegro the cash equivalent of €2,000 without reporting to the customs authorities. Montenegro uses a declaration system whereby the Customs Administration provides the FIU data on any money, checks, bearer securities, precious metals and precious stones transported across borders exceeding a value of €10,000 or more. Montenegro does not record details of amounts between €2,000 and €10,000 since there is no sub-legal act which would regulate keeping such information.

Cooperation with foreign governments:

Article 50 of the same law stipulates that all information about crimes and perpetrators involved in counterfeiting and laundering money, producing or trafficking drugs and/or human beings shall be delivered to the National Central Bureau of INTERPOL.  Mutual legal assistance can be undertaken provided there is reciprocity or if the foreign state executes a letter rogatory for international legal assistance.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Lists of United Nations 1267 Sanctions Committee designated entities are being distributed to reporting entities; however, an effective mechanism to freeze such funds still needs to be created. There were no investigations for terrorist financing in 2009.

The supervision and monitoring of designated non-financial businesses and professions is deficient.

Although customer due diligence is adequately addressed in the law, actual implementation of the legal provisions, in particular regarding beneficial owner identification, politically exposed persons, and the verification that a person has the relevant authority to act is weak. In particular, casinos and real estate agencies do not follow identification procedures.

There has been a significant decrease in STRs from 2005 (507) to 2006 (186), 2007 (116) and 2008 (46), which the Montenegrin authorities attribute to a decrease in foreign investment. Despite provisions in the law, the GOM does not keep full statistics on the number of STRs that result in investigations, prosecutions and convictions.

U.S.-related currency transactions:

There has been no indication that Montenegro's financial institutions engage in narcotics-related transactions involving significant amounts of US currency or otherwise affecting US interests.

Records exchange mechanism with U.S.:

On October 21, 2008, the Montenegrin FIU and FINCEN signed a Memorandum of Cooperation outlining the procedure for exchange of information, operational data, and intelligence.

International agreements:

In April 2008, the FIUs from Montenegro, Serbia, Albania, Slovenia, Croatia, Macedonia and Bosnia and Herzegovina signed a regional protocol on suppressing money laundering and terrorist financing. During 2009, the Montenegrin FIU signed similar agreements with FIC EULEX Kosovo, Ukraine, United Arab Emirates and Bermuda.

By virtue of the principle of state succession from the State Union of Serbia and Montenegro, Montenegro 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

Montenegro is a member of the 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. Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Evaluations/Evaluation_reports_en.asp

Recommendations:

The Government of Montenegro has enacted legislation to deter money laundering and terrorist financing. However, its full implementation of that legislation must be addressed. In particular, Montenegro must provide guidance to and adequately supervise and monitor designated non-financial businesses and professions. Additionally, customer due diligence requirements regarding beneficial owners and politically exposed persons must be enforced. Law enforcement and customs officials should be provided with sufficient capacity and resources to enable them to effectively investigate money laundering, terrorist financing and smuggling. The GOM should adopt procedures for the timely freezing of the assets of designated terrorists or terrorist organizations. Finally, the GOM should develop systems and programs to compile and disseminate statistics on its money laundering and terrorist financing investigations and prosecutions.

Morocco

Morocco is not a regional financial center but is well integrated into the international financial system. Money laundering is a concern due to its narcotics trade, vast informal sector, trafficking in persons, and large level of remittances from Moroccans living abroad. Cash-based transactions in connection with cannabis trafficking are of particular concern. Morocco remains the world’s principal producer of cannabis, with revenues estimated at over $13 billion annually. While some of the narcotics proceeds are laundered in Morocco, most proceeds are thought to be laundered in Europe. Only three in ten Moroccans use banks; and credible estimates of Morocco’s informal sector range between 17 and 40 percent of GDP. In 2007, remittances from Moroccans living abroad totaled more than $7 billion, approximately nine percent of GDP. The predominant use of cash, informal value transfer systems and remittances from abroad help fuel Morocco’s informal sector. Criminal activities of particular risk include bulk cash smuggling, and unverified reports of trade-based money laundering, including under-and over-invoicing and the purchase of smuggled goods. Most businesses are cash-based with little invoicing or paper trails. Unregulated money exchanges remain a problem in Morocco and were a prime impetus for Morocco’s anti-money laundering legislation. Although the legislation targets previously unregulated cash transfers, the country’s vast informal sector creates conditions for this practice to continue.

Offshore Center: Yes

Offshore banks are located in the Tangier free zone. They are regulated by an interagency commission chaired by the Ministry of Finance.

Free Trade Zones: Yes

Morocco has a free trade zone in Tangier, with customs exemptions for goods manufactured in the zone for export abroad. There have been no reports of trade-based money laundering schemes or terrorist financing activities using the Tangier free zone.

Criminalizes narcotics money laundering: Yes

Morocco criminalizes money laundering under the anti-money laundering (AML) Law No. 43-05, issued on April 17, 2007. The law stipulates money laundering shall be added to the section of felonies and misdemeanors related to money in the penal code. The proceeds of narcotics are a specified unlawful activity under the law.

Criminalizes other money laundering, including terrorism-related: Yes

According to article 1 of the AML law, Morocco follows the list system in relation to the predicate money laundering offenses, but the current law has significant shortcomings. Chapter 574-2 of the Penal Code includes the crimes of trafficking in drugs and psychotropic substances, trafficking in persons, smuggling of migrants, illicit arms trafficking, bribery, treachery, exploitation of influence, embezzlement, terrorist crimes, and counterfeiting. Moreover, article (32) of the AML Law makes it a crime to launder property when its source is related to a terrorist crime or the purpose is financing terrorism. According to Chapter 218-4 of the Penal Code, terrorism finance is deemed a form of terrorist crime in Morocco.

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 2003, Morocco adopted a comprehensive counter-terrorism bill. The bill provides the legal basis for lifting bank secrecy to obtain information on suspected terrorists, allows suspect accounts to be frozen, and permits the prosecution of terrorist financing-related crimes. The 2007 AML law further clarifies the counter-terrorist financing statute. However, the forms of terrorist financing defined in the law are not consistent with all the forms of terrorist financing stipulated in article (2) of the Terrorist Financing Convention.

Know-your-customer rules: Yes

Article (12) of the AML law obliges the reporting entities covered by the law to take internal measures concerning prudence, detection and monitoring regarding customer identification, due diligence, and record keeping.

Bank records retention: Yes

The entities covered by the AML law are obliged by Article (7) to keep the documents related to their customers’ transactions for ten years commencing on the date of their execution.

Suspicious transaction reporting: Yes

The law requires the filing of suspicious transaction reports (STRs) by all responsible parties, both public and private, who in the exercise of their work, carry out or advise on the movement of funds possibly related to the covered predicate offenses. The central bank and the Ministry of Economy and Finance embarked on a major campaign to publicize the law in 2007, but delays in promulgating the decrees to implement the legislation meant that the Financial Intelligence Unit (FIU) that is designated to receive, analyze and disseminate the STRs did not become operational until late 2009.

Large currency transaction reporting: No

Morocco has not considered the utility of implementing a currency transaction reporting system.

Narcotics asset seizure and forfeiture:

The AML law allows the partial confiscation of funds used to commit the crime and the proceeds of crime.

Narcotics asset sharing authority: No

Morocco has not enacted any laws for sharing of seized assets with other governments.

Cross-border currency transportation requirements: No

There are foreign currency controls that require declarations to be filed when transporting currency across the border. However, the controls are intended to better regulate the Moroccan foreign exchange markets. They are not designed or implemented to combat money laundering or terrorist financing.

Cooperation with foreign governments:

The Kingdom of Morocco has a legal framework that allows for judicial cooperation for requests for judicial assistance, exchange of information and extradition of criminals. Basically, the international conventions are considered as bilateral conventions for mutual judicial cooperation and for the exchange of money laundering related financial information by the FIU, and priority is given to related requests.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

While there have been no verified reports of international or domestic terrorist networks using the Moroccan narcotics trade to finance terrorist organizations and operations in Morocco, investigations into the Ansar Al Mahdi and Al Qaeda in the Islamic Maghreb (AQIM) terrorist organizations are ongoing. At least two suspects arrested as part of the Ansar Al Mahdi cell were accused of providing financing to the cell. Moroccan authorities believe the funding sources for the 2003 and 2007 terrorist-related explosions in Morocco are more likely to be based abroad, but concede that internal funding mechanisms for terrorist actions may exist in the form of money transfers, theft and other criminal activities.

Moroccan authorities report that at least 11 money laundering investigations have been initiated in 2009, with at least two cases proceeding to court. However, there were no prosecutions for money laundering in Morocco in 2008 or 2009.

Morocco has a relatively effective system for disseminating UNSCR terrorist lists to the financial sector and law enforcement. Morocco has provided detailed and timely reports requested by the UNSCR 1267 Sanctions Committee and some accounts have been administratively frozen.

The AML law currently does not allow the mandatory confiscation sentence to include properties and other proceeds of crimes related to terror financing.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

There is a mutual legal assistance treaty (MLAT) between Morocco and the United States. There is a working exchange of information between Moroccan and U.S. law enforcement agencies on a case by case basis.

International agreements:

The FIU can share information in the framework of the international conventions where the Kingdom of Morocco is a party, or on the basis of the principle of reciprocity.

Morocco 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

Morocco is a charter member of the Middle East 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/TopicList.asp?cType=train

Recommendations:

The Government of Morocco (GOM) should continue to implement anti-money laundering/counter terrorist financing (AML/CFT) programs and policies that adhere to international standards, including ensuring the effectiveness of an FIU that receives, analyzes, and disseminates financial intelligence. The size of Morocco’s informal economy is likely to produce new challenges for the authorities as they implement the new AML/CFT regime. Police and customs authorities, in particular, should receive training on recognizing money laundering and terrorist financing methodologies, including trade-based money laundering and informal value transfer systems. Morocco should implement cross-border currency reporting requirements that adhere to international standards. Morocco needs to closely examine both formal and underground remittance systems.

Mozambique

Mozambique is not a regional financial center. Money laundering is believed to be fairly common and is linked principally to customs fraud and narcotics trafficking, although press reports suggest there may be links to terrorist groups as well. Authorities believe the proceeds from these illicit activities have helped finance commercial real estate developments, particularly in the capital. Most narcotics are destined for South African and European markets; Mozambique is not a significant consumption destination and is rarely a transshipment point to the United States. Local organized crime controls narcotics trafficking operations in the country, with significant involvement by Pakistani and Indian immigrants. While money laundering in the banking sector is considered to be a serious problem, foreign currency exchange houses, cash couriers, and the hawala remittance system also play significant roles in financial crimes and money laundering. Much of the laundering is believed to be happening behind the scenes at foreign currency exchange houses. The number of exchange houses operating in Mozambique surpasses the number required for normal business. The government has banned the opening of any new exchange houses. Black markets for smuggled goods and financial services are widespread, dwarfing the formal retail and banking sectors in most parts of the country.

Offshore Center: No

Free Trade Zones: Yes

Criminalizes narcotics money laundering: Yes

Money laundering has long been a criminal offense in Mozambique.

Criminalizes other money laundering, including terrorism-related:

The 2002 Anti-Money Laundering Act (AMLA) contains specific provisions related to narcotics trafficking, in addition to a wider range of offenses considered predicates for money laundering.

Criminalizes terrorist financing: No

Mozambique has not explicitly criminalized the financing of terrorism. Its 1991 Crimes against the Security of State Act criminalizes terrorism, but financing is not addressed. The AMLA does list terrorism finance as a serious crime subject to the scope of the law, but elaborates no further (Article 4).

Know-your-customer rules: Yes

Under the AMLA and the implementing 2004 regulations, obligated entities are required to identify customers.

Bank records retention: Yes

The AMLA requires institutions to keep records of customer identification. Banks and exchange houses are required to keep transaction records for 15 years.

Suspicious transaction reporting: Yes

Under the AMLA and the implementing 2004 regulations, the following reporting entities are required to file suspicious transaction reports (STRs): banks and credit companies; securities companies and exchanges; debt collectors, leasing and rental companies; gaming facilities; capital/asset management concerns; payment and currency exchange operators; insurance brokers; and overseas subsidiaries or branches of Mozambican financial institutions. The reporting entities are required to report any suspicious transactions immediately to the Attorney General’s office. The Attorney General, in turn, is required to determine within 48 hours whether to permit the transaction. Once the financial intelligence unit (FIU) is fully operational, the reporting entities will be required to file STRs with the FIU instead of the Attorney General’s Office.

Large currency transaction reporting: Yes

Entities must immediately report to the Attorney General’s office any cash transaction valued at 441 times the monthly minimum wage, or about $23,000 at current exchange rates. In addition, exchange houses are required to turn in records of all transactions on a daily basis. All credit card transaction attempts over $5,000 must also be reported and can only be processed with approval from the Central Bank.

Narcotics asset seizure and forfeiture:

The AMLA contains provisions authorizing the seizure and forfeiture of assets, including those of legitimate businesses used to launder money. In such a case, the Central Bank would be responsible for the initial tracing of assets and the Attorney General would be responsible for freezing and confiscating assets. The law allows for both civil and criminal forfeiture. Despite this legal framework, the institutions authorized to implement the law do not have an established system for identifying and freezing narcotics-related assets, and no assets have been seized to date.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

The 1996 Money Exchange Act requires any individual carrying more than $5,000 across the border to file a report with Customs. Taking more than 500 meticais (approximately $17) out of the country is prohibited.

Cooperation with foreign governments:

Mozambique’s lack of a clear terrorist financing law could hinder efforts to investigate such activity or to identify and seize terrorism-related assets.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There were no money laundering arrests or prosecutions in 2008/2009.

The law to establish the Financial Intelligence Office, Mozambique’s FIU, was approved by the Parliament in July 2007. The Director General of the Financial Intelligence Office was appointed in September 2008, and recruitment of staff is ongoing. By law, the FIU was required to commence operations by January 8, 2009, but this target date was moved back.

Authorities acknowledge that alternative remittance systems are common in Mozambique, many of which operate in exchange houses that, on paper, are heavily regulated but in fact can easily avoid reporting requirements. There are no serious legislative, judicial, or regulatory measures being considered to address this problem.

Financial institutions do not have direct access to the names of persons or entities included on the UN 1267 Sanctions Committee’s consolidated list or the list of Specially Designated Global Terrorists designated by the United States pursuant to Executive Order 13224; these lists are distributed only to the Central Bank, the Attorney General, the Ministry of Finance, and the Ministry of Foreign Affairs. Authorities in these institutions have not positively identified any of the persons or entities on these lists as operating in Mozambique; therefore, no assets have been identified, frozen, or seized.

U.S.-related currency transactions:

There are no U.S.-related international currency transaction restrictions in Mozambique. While companies may charge for goods or services in U.S. dollars, all receipts and invoices must be issued using the local currency.

Records exchange mechanism with U.S.:

Cooperation with the United States has taken place on an informal basis.

International agreements:

Mozambique has entered into a series of formal agreements with neighboring countries to share financial information required by law enforcement bodies.

Mozambique 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

Mozambique is a member of the Eastern and Southern Africa Anti-Money Laundering Group, a Financial Action Task Force-style regional body. Mozambique has not yet been subject to a mutual evaluation.

Recommendations:

The Government of Mozambique has taken steps to deter money laundering and financial crime. The GOM should explicitly criminalize terrorist financing. Mozambique should monitor closely the exchange houses and alternative remittance systems in use throughout the country and should bring the latter entities under the AMLA requirements. Strengthening and enforcement of reporting requirements should be undertaken. The GOM should move swiftly to bring its FIU into full operation. Finally, the GOM should distribute the UN 1267 Sanctions Committee’s consolidated list to all financial institutions.

Namibia

Although Namibia has one of the most highly developed financial systems in Africa, it is not considered a regional financial center. Sources of potential money laundering in Namibia are related to both regional and domestic criminal activities. The regional activities include falsification or misuse of identity documents, customs violations, trafficking of precious metals and gems, trafficking in illegal drugs, and stolen vehicles - mostly from South Africa. Organized crime groups involved in smuggling activities generally use Namibia as a transit point - particularly for goods destined for Angola. Domestically, real estate as well as minerals and gems are reportedly used as vehicles for money laundering. Namibian authorities believe the proceeds of these activities are laundered through Namibian financial institutions, but such money laundering takes place on a small scale.

Offshore Center: No

Free Trade Zones: Yes

The Namibian government has set up Export Processing Zones (EPZ). The Ministry of Trade and Industry’s Offshore Development Company (ODC) is responsible for the monitoring, regulation and promotion of EPZs. According to the ODC, Namibia’s EPZ regime is unique in that it is not location-bound. EPZ registered companies are free to locate anywhere in the country and are not restricted to specific geographical zones. Specially designated industrial zones and parks have been established at Walvis Bay, Oshikango and Katima Mulilo.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Namibia criminalizes money laundering in the Prevention of Organized Crime Act (POCA). Money laundering under POCA applies to all proceeds of any unlawful activity and not just drug trafficking. There is no threshold minimum sentence required to make a crime a predicate offense for money laundering or to institute forfeiture proceedings. In July 2007, the Financial Intelligence Act (FIA) was passed. Both POCA and the FIA entered into force in May 2009. The FIA and the POCA serve as the cornerstones of Namibia’s anti-money laundering/counter-terrorist financing (AML/CFT) regime.

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/)

An Anti-Terrorism Bill has passed the drafting stage but has not been tabled in Parliament.

Know-your-customer rules: Yes

The FIA requires both banks and non-bank financial institutions to identify customers if a business relationship is to be established. When there is no established business relationship, accountable institutions are required to identify the client if a single transaction exceeds 5,000 Namibian dollars (approximately $650). Casinos or gaming institutions are responsible for identifying a client for a single transaction exceeding 25,000 Namibian dollars (approximately $3,200).

Bank records retention: Yes

Under FIA, banks and other financial institutions are required to maintain records for five years.

Suspicious transaction reporting: Yes

Under FIA, AML/CFT controls must be applied to non-bank financial institutions and designated non-financial businesses and professions, such as exchange houses, stock brokerages, cash couriers, casinos, dealers in jewels and precious metals, insurance companies, pawn shops, realtors, high-value dealers in art and vehicles; and intermediaries such as lawyers, accountants, notaries, or broker/dealers. The Financial Intelligence Centre (FIC) has analytical duties and responsibilities under the FIA. Since the FIA entered into force, accountable institutions have filed approximately 100 suspicious transaction reports (STRs) with the FIC.

Large currency transaction reporting:

The FIA mandates large currency transaction reporting requirements but they have not yet been implemented by enabling regulations.

Narcotics asset seizure and forfeiture:

The POCA provides for a wide spectrum of forfeiture measures, including confiscation, restraint orders, preservation orders, and civil forfeiture. Under POCA, the government can seize assets and intangible property such as bank accounts, including the instrumentalities and proceeds of crime, as well as substitute assets.

Narcotics asset sharing authority: No

Namibia has not yet enacted any laws for the sharing of seized assets with other governments, but may be able to do so pursuant to an international agreement or treaty.

Cross-border currency transportation requirements:

The FIA has provisions for monitoring the cross-border transportation of currency and monetary instruments, namely, threshold reporting requirements for cross-border conveyances of cash, but the reporting regime has not yet been implemented.

Cooperation with foreign governments:

Namibia has cooperative agreements with countries in the Southern African Development Community.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Since the POCA and FIA entered into force in May 2009 there have not yet been any arrests or prosecutions for money laundering.

The Bank of Namibia routinely circulates to its financial institutions the list of individuals and entities included on the UN 1267 sanctions committee’s consolidated list as well as the lists of those designated under relevant authorities by the U.S. and the European Union.

U.S.-related currency transactions:

There is little evidence to suggest financial institutions engage in currency transactions involving international narcotics trafficking proceeds that include significant amounts of US 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.:

Namibia has not reached any bilateral agreement with the United States authorities on a mechanism for exchange of records in criminal matters.However,Namibia has made substantial efforts to cooperate with the United States in the area of law enforcement, especially in the area of extradition.

International agreements:

Namibia is not yet a member of the Egmont group. The FIC is in the process of entering into information sharing agreements with other FIUs.

Namibia 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 - Yes

Namibia became a party to the 1988 UN Drug Convention by accession on March 6, 2009.

Namibia is a member of the Eastern and Southern Africa Anti-Money Laundering Group, a Financial Action Task Force-style regional body. Its most recent mutual evaluation report can be found here: http://www.esaamlg.org/userfiles/Namibia_detailed_report.pdf

Recommendations:

Namibia should continue to implement the POCA and the FIA and should pass the pending anti-terrorism bill. As part of the implementation process, the Government of the Republic of Namibia (GRN) should ensure sufficient resources and training are provided to supervisory, analytical, investigative, prosecutive and judicial entities with responsibilities under the laws. The GRN should become a party to the UN Convention for the Suppression of the Financing of Terrorism.

Nauru

Nauru is a small Central Pacific island nation with a population of approximately 10,700. It is an independent republic and an associate member of the British Commonwealth. The Republic of Nauru is an established “zero” tax haven, as it does not levy any income, corporate, capital gains, real estate, inheritance, estate, gift, sales, or stamp taxes. The currently insolvent government-owned Bank of Nauru acts as the Central Bank for monetary policy. Nauru’s legal, supervisory, and regulatory framework has provided significant opportunities in the past decade for the laundering of the proceeds of crime. There is no known criminal activity in Nauru that generates laundered funds.

Offshore Center: Yes

Eleven offshore financial institutions are registered in Nauru, overseen by the Nauru Agency Corporation.

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Nauru has had a progression of anti-money laundering laws, with Banking (Amendment) Act 2004; Anti-Money Laundering Act 2004 (AMLA 2004); Mutual Assistance in Criminal Matters Act 2004; Proceeds of Crime Act 2004; and the Counter-Terrorism and Transnational Organized Crime Act 2004 being the most recent.  A proposed replacement law has been under parliamentary consideration since 2008.

Criminalizes terrorist financing: Yes

Nauru criminalizes terrorist financing via the Counter-Terrorism and Transnational Organized Crime Act 2004.

Know-your-customer rules: Yes

Bank records retention: Yes

Suspicious transaction reporting: Yes

In addition to banks and non-bank financial institutions, the AMLA 2004 expands the coverage and scope of anti-money laundering requirements to money remitters, securities and investment businesses, insurance, real estate agents, dealers in precious metals and stones, trust or company service providers, and legal entities. All are required to submit suspicious transaction reports (STRs) to the Nauru Financial Intelligence Unit (FIU) located within the Ministry of Finance. However, no STRs have been reported.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture:

The AMLA 2004 provides for the tracing, freezing, seizing and forfeiting of narcotics-related assets and assets derived from or intended for terrorist financing and other crimes.  There is no civil forfeiture.  The Government of Nauru has not had occasion to enforce existing asset seizure and forfeiture laws.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements: No

It is prohibited to transport more than Australian dollars $2,500 (approximately $2,250) out of Nauru.  There are no amount restrictions on inbound money. 

Cooperation with foreign governments:

The AMLA 2004 allows mutual assistance with foreign states in relation to anti-money laundering investigations.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2009, there have not been any arrests or prosecutions for money laundering or terrorist financing.

U.S.-related currency transactions: No

There are no known currency transactions in Nauru 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.

Records exchange mechanism with U.S.:

There are no record exchange agreements.

International agreements:

Nauru 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 - No
  • the UN Convention against Corruption - No

Nauru is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body, and the APG will conduct a mutual evaluation of Nauru in 2010.

Recommendations:

The Government of Nauru should establish and implement reporting requirements for inbound currency and negotiable instruments. The GON should become a party to the UN Convention against Corruption and the UN International Convention for the Suppression of the Financing of Terrorism, and to all UN Conventions pertaining to terrorism. Nauru also should ratify the UN Convention against Transnational Crime and accede to the UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.

Netherlands

The Netherlands is a major financial center and consequently an attractive venue for laundering funds generated from illicit activities. These activities are often related to the sale of cocaine, cannabis, or synthetic and designer drugs (such as ecstasy). Financial fraud is believed to generate a considerable portion of domestic money laundering, and there is evidence of trade-based money laundering. There are no indications of syndicate-type structures in organized crime or money laundering, and there is virtually no black market for smuggled goods in the Netherlands. Although under the Schengen Accord there are no formal controls on national borders within the European Union (EU), the Dutch authorities run special operations in the border areas with Germany and Belgium to keep smuggling to a minimum.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

The Netherlands has an “all offenses” regime for predicate offenses of money laundering that includes narcotics money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

In 2008, the Netherlands amended its original anti-money laundering (AML) legislation and approved the new Prevention of Money Laundering and Financing of Terrorism Act (WWFT). The WWFT implements the Third EU money laundering directive into national law and combines existing AML legislation into one single act. Any terrorist crime automatically qualifies as a predicate offense under the Netherlands “all offenses” regime for predicate offenses of 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/)

In August 2004, the Act on Terrorist Crimes became effective. The Act makes conspiracy to commit a terrorist act a criminal offense. Involvement in financial transactions with suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee’s consolidated list or designated by the EU is also a criminal offense. The 2004 Act on Terrorist Offenses introduces Article 140A of the Criminal Code, which criminalizes participation in a terrorist organization, and defines participation as membership or providing provision of monetary or other material support.

Know-your-customer rules: Yes

The WFFT incorporates the previous separate acts on identification and reporting and institutes a more risk-based approach to customer identification. It also establishes the requirement for all obligated entities to verify the identity of a transaction’s ultimate beneficial owner as well as politically exposed persons. Banks, exchange offices, casinos, money service businesses, lawyers, notaries, and tax specialists are all covered under know your customer regulations.

Bank records retention: Yes

Financial institutions are required by law to maintain records necessary to reconstruct financial transactions for five years after termination of the relationship.

Suspicious transaction reporting: Yes

The Netherlands has established an “unusual transaction” reporting system. Banks, bureaux de change, casinos, financing companies, commercial dealers of high-value goods, notaries, lawyers, real estate agents/intermediaries, accountants, business economic consultants, independent legal advisers, tax advisors, trust companies, other providers of trust-related services, life insurance companies, securities firms, stock brokers, and credit card companies are required to file unusual transaction reports (UTRs) with the Netherlands’ financial intelligence unit (FIU) on any transaction that appears unusual (applying a broader standard than “suspicious”) or when there is reason to believe that a transaction is connected with money laundering or terrorist financing. The FIU reviews UTRs and forwards them to law enforcement for criminal investigation; once the FIU forwards the report, the report is then classified as a suspicious transaction (STR). In 2008, the FIU received 388,842 UTRs and forwarded 54,605 STRs, totaling approximately 0.8 billion Euros (approximately $1,143,000,000).

Large currency transaction reporting: Yes

Banks, bureaux de change, casinos, financing companies, commercial dealers of high-value goods, notaries, lawyers, real estate agents/intermediaries, accountants, business economic consultants, independent legal advisers, tax advisors, trust companies, other providers of trust-related services, life insurance companies, securities firms, stock brokers, and credit card companies in the Netherlands are required to report cash transactions over certain thresholds (varying from 2,000 to 25,000 Euros or approximately $2,900 to $36,000).

Narcotics asset seizure and forfeiture: Yes

The Asset Seizure and Confiscation Act, as amended in 2003, enables authorities to freeze, seize and confiscate assets that are illicitly obtained or otherwise connected to criminal acts. All law enforcement investigations into serious crime may integrate asset seizure. Authorities may seize any tangible assets, such as real estate, that were purchased directly with proceeds tracked to illegal activities. Assets can be seized as a value-based confiscation. Legislation provides for the seizure of additional assets controlled by a drug-trafficker. Proceeds from narcotics asset seizures and forfeitures are deposited in the general fund of the Ministry of Finance. Statistics provided by the Office of the Public Prosecutor show the assets seized in 2008 amounted to 23.5 million Euros (approximately $33,570,000).

Increasing seizures of criminal assets is a priority. In 2009, the Dutch Minister of Justice proposed a new law in parliament to further enhance the GON’s ability to confiscate and recover assets. The draft legislation includes a key provision transferring the burden of proof to the defendant to demonstrate assets were acquired legitimately.

UNSCR 1267/1390 is implemented through Council Regulation 881/02. In the Netherlands, Sanctions Law 1977 also addresses this requirement parallel to the regulation.

Narcotics asset sharing authority: Yes

The United States and the Netherlands have had an asset-sharing agreement in place since 1994.

Cross-border currency transportation requirements: Yes

In June 2007, the Netherlands implemented EU regulation 1889/2005 which requires natural persons to declare to customs authorities when they enter or depart the EU carrying 10,000 Euros (approximately $14,300) or more in cash. However, the EU has no similar declaration obligation when transiting within the EU. The Dutch Tax and Customs Administration makes all these declarations available to the FIU. In 2008, the financial intelligence unit received 1,807 reported declarations totaling almost 78 million Euros, and declared 39 of these reports suspicious.

Cooperation with foreign governments (including refusals):

No legal issues hamper the government's ability to assist foreign governments in mutual legal assistance requests when a bilateral treaty is in place.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In practice, Dutch public prosecutors move to seize assets in only a small proportion of money laundering cases. This is due to a shortage of trained financial investigators and a compartmentalized approach where the financial analysts and operational drug investigation teams often do not act in unison.

In June 2008, the Netherlands Court of Audit published its investigation of the Government of the Netherland’s policy for combating money laundering and terrorist financing. The report criticizes the Ministries of Interior, Finance, and Justice for: lack of information sharing among them; too little use of asset seizure powers; limited financial crime expertise and capacity within law enforcement; and light supervision of notaries, lawyers, and accountants. The ministries agreed in large part with these conclusions and are taking steps to address them.

In 2009, specially trained dogs found four million Euros (approximately $5,750,000) in passenger luggage at Schiphol airport. Dutch authorities arrested two people at Schiphol airport in February 2009 with one million Euros (approximately $1,440,000) concealed and another two people in September 2009 attempting to smuggle 500,000 Euros (approximately $720,000) into the Netherlands.

In 2008, the Public Prosecution Office served a summons to suspects of money laundering offenses in 1041 cases. The Netherlands Court of Audit reported in June 2008 that 63 percent of money laundering cases referred to the Office of Public Prosecution resulted in a conviction.

In a notable conviction, a Rotterdam court sentenced seven men in April 2009 for cocaine trafficking and laundering at least 22 million Euros (approximately $31,650,000). Authorities confiscated twenty properties as well as $3.6 million and 900,000 Euros (approximately $1,295,000) in cash. In August 2009, the Public Prosecutor’s office in Maastricht confiscated 134 properties and pieces of land from a real estate dealer suspected of money laundering, cannabis cultivation and tax fraud. This is reportedly the largest judicial seizure of property ever in the Netherlands.

U.S.-related currency transactions:

Several Dutch financial institutions engage in international business transactions involving large amounts of United States currency. However, there are no indications that significant amounts of U.S. dollar transactions conducted by financial institutions in the Netherlands stem from illicit activity.

Records exchange mechanism with U.S.:

The United States enjoys strong cooperation with the Netherlands in fighting international crime, including money laundering. A mutual legal assistance treaty (MLAT) between the Netherlands and the United States has been in force since 1983. The Netherlands also has ratified the bilateral implementing instruments for the U.S.-EU MLAT and extradition treaties. The U.S.-EU MLAT is expected to come into force in February 2010. One provision included in the U.S.-EU legal assistance agreement will facilitate the exchange of information on bank accounts. The Dutch Ministry of Justice and the National Police work together with U.S. law enforcement authorities in the Netherlands on operational money laundering initiatives. Through a memorandum of understanding in place since 2004, the FIU shares information regularly with the Financial Crimes Enforcement Network, the U.S. FIU.

International agreements:

The Netherlands has a fairly comprehensive set of bilateral and multilateral treaties that provide for mutual legal assistance and extradition in money laundering and terrorist financing matters. Mutual legal assistance is available for both negligent and intentional conduct, and when the investigation or proceeding relates to a predicate offense and money laundering, and to money laundering alone. Without a treaty, assistance is limited to specified measures not requiring coercion.

The Netherlands 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 Netherlands is a member of the Financial Action Task Force (FATF) and the Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. In lieu of an evaluation by the FATF, the International Monetary Fund (IMF) prepared a Report on the Observance of Standards and Codes. The report can be found here: http://www.imf.org/external/pubs/ft/scr/2004/cr04312.pdf

Recommendations:

The Government of the Netherlands (GON) should intensify its focus on confiscation of criminal assets. Although resources dedicated to investigating financial crimes have increased in recent years, the GON should continue its drive to increase the expertise within its enforcement authorities to handle more serious and complex cases. For example, the GON should follow through on its commitment to add more special investigators for financial crimes. The GON should devote more resources toward getting better data and a better understanding of alternative remittance systems in the Netherlands, and channel more investigative resources toward tracing these systems. The Ministries of Interior, Finance, and Justice should take steps to improve information sharing, increase the use of asset seizure powers, and enhance supervision of notaries, lawyers, and accountants.

Netherlands Antilles

The Netherlands Antilles is considered a regional financial center and a transshipment point for drugs from South America bound for the United States and Europe. The Netherlands Antilles is comprised of the islands of Curacao, Bonaire, Dutch Saint Maarten, Saba, and Saint Eustatius. The Netherlands Antilles is a semi-autonomous entity within the Kingdom of the Netherlands (KON), with control over its internal affairs. The Kingdom retains authority over defense and foreign affairs. Money laundering is primarily related to proceeds from illegal narcotics. Money laundering organizations can take advantage of banking secrecy and use off-shore banking and incorporation systems, economic zone areas, and resort/casino complexes to place, layer and launder drug proceeds. Bulk cash smuggling is a continuing problem due to the close proximity of the Netherlands Antilles to South America (Venezuela, Colombia, etc). Additionally, “contrabanding” (using bulk cash to buy actual products which are shipped to South America and sold, thus legitimizing the profits) from an Economic Zone in the Netherlands Antilles is a known method of laundering in the region. Structuring is a relatively common occurrence in the Netherlands Antilles, but does not represent high-level money laundering activity, which is accomplished almost exclusively through wire transfers between the Netherlands and the Netherlands Antilles. A significant offshore sector and loosely regulated free trade zones, as well as narcotics trafficking and a lack of border control between Saint Maarten (the Dutch side of the island) and St. Martin (the French side), create opportunities for money launderers in the Netherlands Antilles.

Offshore Center: Yes

The Netherlands Antilles has an offshore financial sector which in 2008 had 84 trust service companies providing financial and administrative services to an international clientele, which includes offshore companies, mutual funds, and international finance companies. As of September 2007, there were a total of 14,191 offshore companies registered with the Chamber of Commerce in the Netherlands Antilles, as is required by law. The laws and regulations on bank supervision provide that international banks must have a physical presence and maintain records on the island. The Netherlands Antilles permits Internet gaming companies to be licensed on the islands. In 2008, there were four operator member and nine non-operator member licensed Internet gaming companies.

Free Trade Zones: Yes

In February 2001, the Government of the Netherlands Antilles (GONA) approved proposed amendments to the free zone law to allow e-commerce activities into these areas (National Ordinance Economic Zone no.18, 2001). Goods no longer have to be physically present within the free trade zone (FTZ) as was required under the former free zone law. Seven areas in the Netherlands Antilles qualify as “Economic Zones” (e-zones), five of which are designated for e-commerce. The remaining two e-zones, located at the Curacao airport and harbor, are designated for goods. These zones are minimally regulated. In 2009 the FTZ authority (Curinde), in cooperation with other entities, introduced an anti-money laundering manual for the FTZ. The manual was made in anticipation of the possible introduction of regulatory laws by the local government.

Criminalizes narcotics money laundering: Yes

Money laundering was outlawed in 1999, but the statute required a specific unlawful act to institute a statutory penalty.

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering is a criminal offense in the Netherlands Antilles pursuant to the National Ordinance on the penalization of terrorism, terrorism financing and money laundering. The law applies to all criminal offenses, including drug-related money laundering. Netherlands Antilles takes an “all rimes” approach, i.e., all acts which are indicated as crimes in the Criminal Code.

Criminalizes terrorist financing: Yes

The Criminal Code of the Netherlands Antilles has been amended to include terrorist financing as a criminal act. The National Ordinance on the penalization of terrorism, terrorism financing and money laundering (O.G. 2008, no. 46) entered into force in June 2008.

Know-your-customer rules: Yes

The National Ordinance Identification when rendering both financial and non-financial services (O.G. 1996, no. 23) requires customer identification. International corporations may be registered using bearer shares. Either the bank or the company service providers maintain copies of bearer share certificates for international corporations, which include information on the beneficial owner(s). Bearer shares are not permitted in the insurance sector.

Bank records retention: Yes

Banks are required to maintain records for ten years and all other financial intermediaries must maintain records for five years.

Suspicious transaction reporting: Yes

National Ordinance Reporting of Unusual Transactions (O.G. 1996, no. 21) requires both bank and non-bank financial institutions, such as company service providers and insurance companies, to report suspicious transactions to the FIU. Amendments to the Ordinance in 2009 added designated non-financial businesses and professions, including lawyers, accountants, notaries, jewelers and real estate agents to the list of entities obligated by law to report unusual transactions to the FIU. Obligated entities also are required to report suspected terrorist financing activity. In 2008, approximately 20,000 unusual transactions (a lower standard than “suspicious” transactions) were reported to the FIU, and approximately 4,000 suspicious transactions were disseminated to the Public Prosecutors Office.

Large currency transaction reporting: Yes

Depending on the sector and the type of transaction, obligated entities also are required to report cash transactions over NAF 20,000 (approximately $10,000) and NAF 250,000 (approximately $142,000).

Narcotics asset seizure and forfeiture:

In 2000, the GONA enacted the National Ordinance on Freezing, Seizing and Forfeiture of Assets Derived from Crime. The law allows the prosecutor to seize the proceeds of any crime proven in court. Civil forfeiture is not permitted. The GONA enacted legislation in 2002 allowing a judge or prosecutor to freeze assets related to the Taliban and Usama Bin Ladin, as well as all persons and companies connected with them. The legislation contains a list of individuals and organizations suspected of terrorism. The Central Bank instructed financial institutions to query their databases and to immediately freeze any assets found. In October 2002, the Central Bank instructed the financial institutions under its supervision to continue these efforts and to consult the UN website for updates to the list.

Narcotics asset sharing authority:

The Agreement between the KON and the United States of America regarding mutual cooperation in the tracing, freezing, seizure, and forfeiture of proceeds and instrumentalities of crime and the sharing of forfeited assets is extended to the Netherland Antilles.

Cross-border currency transportation requirements: Yes

National Ordinance Obligation to Report Cross-Frontier Money Transportations (O.G. 2002, no. 74) requires everyone entering or leaving one of the island territories of the Netherlands Antilles to report to customs officials money equal to or exceeding NAF 20,000 (approximately $10,000). The Customs Officials will immediately forward these reports to the FIU.

Cooperation with foreign governments (including refusals):

Pursuant to article 7, paragraph 2, of the National Ordinance Reporting Unusual Transactions, the furnishing of data to foreign authorities shall take place only by treaty or an administrative agreement.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Law enforcement agencies conducted various investigations which resulted in two Economic Zone companies being charged with money laundering in 2008-2009. Several companies, their directors, and other associates were convicted in court on money laundering and drug trafficking charges.

There have been limited seizures of bulk cash of several thousand dollar increments throughout the past year which intelligence reflects were en route to South America or inbound to one of the e-zone facilities.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

The Mutual Legal Assistance Treaty between the KON and the U.S. applies to the Netherlands Antilles; however, the treaty is not applicable to requests for assistance relating to fiscal offenses addressed to the Netherlands Antilles. A tax information exchange agreement (TIEA) between the KON and the U.S. with regard to the Netherlands Antilles, signed in 2002, entered into force in March 2007. The FIU of the Netherlands Antilles has signed a memorandum of understanding (MOU) with FinCEN, the FIU of the United States.

International agreements:

The Netherland Antilles is a party to the Agreement between the KON and the Republic of Venezuela regarding the prevention, control and combating of the abuse of, the illicit trade in and the illicit production of narcotics, psychotropic substances and related chemical assets The FIU of the Netherlands Antilles has expanded its international information network to 46 countries; no MOU is needed for the exchange of information with other Egmont recognized FIUs.

In cooperation with Antillean authorities, Dutch officials from the Netherlands established the Hit and Run Money Laundering (HARM) Team during 2003. Since its inception, the team has concentrated on identification of the most prominent launderers, their means of laundering money, and law enforcement cooperation.

Netherlands Antilles 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

The KON has not yet extended ratification of the UN Convention against Corruption to the Netherlands Antilles.

Netherland Antilles is a member of the Caribbean Financial Action Task Force, a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Recommendations:

The Government of the Netherlands Antilles (GONA) has demonstrated a commitment to combating money laundering. The Netherlands Antilles should continue its focus on increasing regulation and supervision of the offshore sector and free trade zones, as well as pursuing money laundering investigations and prosecutions. The GONA should ensure that anti-money laundering regulations and reporting requirements are fully implemented for designated non-financial businesses and professions. The Netherlands Antilles should work to fully develop its capacity to investigate and prosecute money laundering and terrorist financing cases.

New Zealand

New Zealand is not a major regional or offshore financial center. Most financial activities are domestic transactions. It has a small number of banks and financial institutions, mostly Australian and New Zealand-owned, whose operations can be effectively monitored by government authorities. There is evidence that some money laundering does take place, although not to a significant extent. Most money laundering occurs through the financial system. Based on the combined value of suspicious transaction reports (STRs), profits from drug sales and other financial-related crimes experts estimate the value of money laundering is roughly one billion dollars annually. Narcotics proceeds and fraud-associated activity (primarily Internet-banking fraud) are the primary sources of illicit funds. International organized criminal elements do operate in New Zealand.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering is criminalized under the Crimes Act 1961 and Misuse of Drugs Act 1975. As amended in 2003, the law applies to all serious crimes and negligence. New Zealand enacted the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Bill in October 2009. The law sets forth reporting requirements for financial service providers and casinos, a risk-based approach to tracking potential money laundering and terrorism financing activities, and an enforcement regime with new civil and criminal offenses.

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 Terrorism Suppression Act, enacted in October 2002, criminalizes terrorist financing, defines a terrorist act and establishes a mechanism to designate persons or groups as terrorist entities. The Act gives the Government of New Zealand (GONZ) wider authority to designate entities as terrorist organizations and freeze their assets. A 2007 amendment determines that entities designated as terrorist entities by the UN 1267 Sanctions Committee are now automatically designated as terrorist entities by New Zealand. The AML/CFT Bill of 2009 further strengthens terrorist financing countermeasures.

Know-your-customer rules: Yes

The Financial Transactions Reporting Act (FTRA) sets out customer due diligence requirements, which apply to all financial institutions. Financial institutions are required to verify the identity of both permanent and occasional customers, regardless of whether they are natural persons, legal persons or legal arrangements.

Bank records retention: Yes

The FTRA requires identification records relating to a customer, or a person on whose behalf the customer has acted, to be retained for not less than five years after the person ceases to be a customer. Any other records relating to the verification of any person must be retained for not less than five years after the verification is carried out.

Suspicious transaction reporting: Yes

Obligated entities must file STRs with the New Zealand Financial Intelligence Unit (NZFIU). The FIU has intelligence functions only; it disseminates to law enforcement STRs it believes warrant investigation. In 2008, 4,229 STRs were filed with the NZFIU.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

New Zealand’s confiscation regime is generally effective and frequently used. The Proceeds of Crime Act 1991 allows for a person convicted of a serious offense to be deprived of criminal proceeds through a forfeiture order and/or pecuniary penalties.

The GONZ has also recently introduced legislation (Criminal Instruments and Proceeds Bill) that would allow the Serious Fraud Office to freeze and confiscate funds generated from crimes, even when a person is not convicted, where a person cannot demonstrate the assets were acquired in a legitimate way.

Narcotics asset sharing authority: Yes

Asset sharing is possible in New Zealand and is governed by the provisions of any applicable treaty and the New Zealand Guidelines on Asset Sharing. The Guidelines have a presumption of returning 50% of the confiscated assets to the requesting country.

Cross-border currency transportation requirements: Yes

New Zealand operates a declaration system for incoming and outgoing physical cross-border transportations of cash equal to or exceeding NZD 10,000 or the equivalent in foreign currency (approximately $6,900) being carried by a person or in accompanying baggage.

Cooperation with foreign governments:

The GONZ regularly cooperates in international money laundering and terrorist finance initiatives and investigations.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

According to New Zealand Police records, between December 31, 2003 and June 30, 2008, 197 investigation files associated with money laundering were created. Over 75% of the cases related to fraud-associated activity (predominantly Internet-banking fraud). Drug-related money laundering activity is the second most investigated offense, making up 10% of the total money laundering associated files.

U.S.-related currency transactions:

There are no indications that currency transactions in New Zealand 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.:

The GONZ and the United States do not require a bilateral mutual legal assistance treaty to enter into a mutual assistance relationship. The United States has been designated as a ‘prescribed foreign country’ in New Zealand’s Mutual Assistance in Criminal Matters Act 1992, enabling New Zealand to process requests for assistance from the United States on a reciprocal basis. In practice, New Zealand and U.S. authorities have had a good record of cooperation and information sharing in this area. The GONZ and the United States signed a bilateral extradition treaty in 1970.

International agreements:

New Zealand 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

New Zealand is a member of the Financial Action Task Force (FATF), the Asia/Pacific Group on Money Laundering, a FATF-style regional body, and the Pacific Islands Forum. Its most recent mutual evaluation report can be found here: http://www.fatf-gafi.org/dataoecd/1/61/43998312.pdf

Recommendations:

The Government of New Zealand should continue to enhance its legislation and procedures as appropriate. The GONZ should ratify the UN Convention against Corruption.

Nigeria

Nigeria remains a major drug trans-shipment point and a significant center for criminal financial activity. Individuals and criminal organizations have taken advantage of the country's location, porous borders, weak laws, corruption, lack of enforcement, and poor socioeconomic conditions to launder the proceeds of crime. The proceeds of illicit drugs in Nigeria derive largely from foreign criminal activity rather than domestic activities. One of the schemes used by drug traffickers to repatriate and launder their proceeds is through the importation of various commodities, predominantly luxury cars and other items such as textiles, computers, and mobile telephone units. Nigerian financial institutions are also reportedly used for currency transactions involving US dollars derived from illicit drugs.

Proceeds from drug trafficking, illegal oil bunkering, bribery and embezzlement, contraband smuggling, theft, and financial crimes, such as bank fraud, real estate fraud, and identity theft constitute major sources of illicit proceeds in Nigeria. Advance fee fraud, also known as "419" fraud in reference to the fraud section in Nigeria's criminal code, is a lucrative financial crime that generates hundreds of millions of illicit dollars annually. Money laundering in Nigeria takes many forms, including: investment in real estate; wire transfers to offshore banks; political party financing; deposits in foreign bank accounts; use of professional services, such as lawyers, accountants, and investment advisers; and cash smuggling. Nigerian criminal enterprises are adept at devising ways to subvert international and domestic law enforcement efforts and evade detection.

Offshore Center: Yes

The Central Bank of Nigeria (CBN) licenses off-shore banks; however, it performs background checks on all applicants. Two off-shore banks operate in Nigeria—Citibank Nigeria Limited and Standard Chartered Bank Limited. The same regulatory rules apply to both domestic banks and off-shore banks. However, additional regulation is applied to off-shore banks.

Free Trade Zone: Yes

Free Trade Zones (FTZs) exist in Nigeria. Eleven are operational and mostly belong to the Federal Government. The FTZs are licensed by the Nigeria Export Processing Zones Authority (NEPZA), responsible for the regulation, operation and monitoring of FTZs’ activities in Nigeria. Standardized procedures exist for FTZs, including a registration process involving the identification of companies and individuals who want to use the zones. Nigeria has not reported any cases of misuse of the FTZs for money laundering or terrorism financing.

Criminalizes narcotics money laundering: Yes

The Money Laundering (Prohibition) Act (MLPA), 2004 criminalizes narcotics-related money laundering.

Criminalizes other money laundering, including terrorism-related: Partially

The MLPA criminalizes money laundering related to the proceeds of all financial crimes. However, terrorism and terrorist financing are not specifically identified as predicate offenses. Money laundering controls apply to banks and other financial institutions, including stock brokerages and currency exchange houses, as well as designated nonfinancial businesses and professions (DNFBPs). These institutions include dealers in jewelry, cars and luxury goods, chartered accountants, audit firms, tax consultants, clearing and settlement companies, legal practitioners, hotels, casinos, supermarkets and other businesses that the Federal Ministry of Commerce (FMC) designates as a money laundering risk.

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 Economic and Financial Crimes Commission (EFCC) Act does not provide a comprehensive framework for dealing with the tripartite offenses of terrorism, namely, terrorist financing, terrorists act and terrorist organizations. While provision or collection of funds to be used to carry out a terrorist act is covered, provision or collection of funds to be used by a terrorist organization or individual terrorist is not. The Act does not criminalize terrorist financing, nor does it reference terrorist financing as a predicate offense for money laundering. A comprehensive bill for the prevention of terrorism that includes a more expansive provision related to terrorist financing, is currently pending before the National Assembly.

Know-your-customer rules: Yes

Financial institutions subject to KYC regulations include banks, community banks, mortgage institutions, development finance banks, financial service companies, bureaus de change; the insurance, and securities and investment industry; as well as any individual body, association or group of persons, whether corporate or incorporated, which carries on the business of a discount house, finance company, money brokerage, and whose principal object include factoring, project financing, equipment leasing, debt administration, fund management, private ledger services, invest management, export finance, pension fund administration and project consultancy.

The MLPA requires financial institutions to identify individuals and legal entities before opening an account or establishing any other business relationship with the person and specifies the types of documentation and information to be obtained.

Bank records retention: Yes

The MLPA provides the legal framework requiring financial institutions and designated non-financial institutions to preserve records of transactions for a period of at least five years. Details of the records to be kept include origin of funds, destination of funds, purpose of the transaction, and the identity of the beneficiary.

Suspicious transaction reporting: Yes

The MLPA requires suspicious transaction reports (STRs) to be submitted by financial institutions and DNFPs, and gives the Nigerian Financial Intelligence Unit (NFIU) the authority to receive them. An August 2006 Central Bank of Nigeria circular requires all financial institutions to forward STRs for potential terrorist financing transactions. Between January and September 2009, the NFIU received a total of 826 STRs, 55 of which were developed and disseminated to relevant authorities for investigation.

Large currency transaction reporting:

Only transactions involving the transfer to or from a foreign country of funds or securities exceeding $10,000 in value are reportable to the NFIU. All financial institutions and designated nonfinancial institutions are required by law to furnish the NFIU with details of these financial transactions.

Narcotics asset seizure and forfeiture:

Nigeria has established a legal framework and regulatory systems for identifying, tracing, freezing, seizing, and forfeiting proceeds of crime. The National Drug Law Enforcement Agency Act (NDLEA Act) includes provisions for the forfeiture of a variety of assets acquired with the proceeds of illicit drugs and enumerates the powers of the NDLEA to seize, freeze and confiscate proceeds of illicit drugs. Furthermore, under the MLPA, assets connected to money laundering offenses are also subject to forfeiture. These provisions cover both foreign and domestic drug proceeds and instrumentalities, as well as the conveyance of real properties used for drug cultivation, storage, and trafficking. All means of conveyance, including aircraft, vehicles, or vessels used or intended to be used to transport or facilitate the transportation, sale, receipt, possession or concealment of economic or financial crimes, are likewise subject to forfeiture. The MLPA authorizes forfeiture of assets of corporate bodies involved in money laundering activities. NDLEA can immediately freeze assets but has a difficult time in initially tracking them down.

Forfeiture is possible only as part of a criminal prosecution. There is no comparable law providing for civil forfeiture. A non-conviction-based forfeiture statute is now pending in the National Assembly. From January to December 2009, NDLEA reported it seized a total $1,631,789 in currency and real estate.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Nigeria has adopted a declaration system for all persons entering or leaving Nigeria in possession of currency and bearer negotiable instruments in excess of $5,000 or its equivalent.

Cooperation with foreign governments (including refusals):

No known impediments exist to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Nigeria’s failure to criminalize terrorist financing limits its ability to inhibit terrorism-related activity.

Corruption continues to be a significant problem. Despite its past success, in 2009, the EFCC faced significant challenges in fulfilling its mandate to fight financial crimes and money laundering. An apparent lack of political will to enforce the laws and continuous delays within the justice sector has hindered the progress of many prosecutions and/or investigations. As a result of these challenges, the EFCC has not prosecuted any money laundering related case, nor secured any convictions in the past year.

Nigeria does not have an asset forfeiture fund. Consequently, seized assets remain in the custody of the seizing agency until they revert to the GON. Due to lack of proper accountability, forfeited assets are sometimes lost or stolen.

From January 1, 2009 to September 30, 2009, the NDLEA handled a total of 25 money laundering investigations resulting in 16 arrests. No drug-related convictions were obtained but there are 18 pending cases in the courts.

U.S.-related currency transactions:

Nigerian financial institutions are reportedly used for currency transactions involving US dollars derived from illicit drugs.

Records exchange mechanism with U.S.:

The United States and Nigeria entered into a mutual legal assistance treaty (MLAT) in 2003.

International agreements:

Nigeria is a party to various information exchange agreements with countries in addition to the United States; 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. Nigeria has signed memoranda of understanding with Russia, Iran, India, Pakistan and Uganda to facilitate cooperation in the fight against narcotics-trafficking and money laundering. Nigeria has also signed bilateral agreements for information exchange relating to money laundering with South Africa, the United Kingdom, and all Commonwealth and Economic Community of West African States (ECOWAS) countries.

Nigeria 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

Nigeria is a member of the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA). Its most recent mutual evaluation can be found here: http://www.giaba.org/

Recommendations:

The Government of Nigeria (GON) should work to ensure that its anti-money laundering legislation complies with international standards and covers all of the recommended predicate offenses, including terrorist financing. The GON should ensure the autonomy and independence of the EFCC and NFIU from political pressure. The GON should also strengthen its supervision of designated nonfinancial businesses and professions. Moreover, the GON should ensure that the NPF has the capacity to function as an investigative partner in financial crimes cases, as well as work to eradicate any corruption that might exist within law enforcement bodies. Nigeria should re-invigorate its anti-corruption program and support the EFCC, as well as the ICPC, in their mandates to investigate and prosecute corrupt government officials and individuals. The National Assembly should adopt the proposed Special Courts Bill that will establish a special court with specific jurisdiction and trained judges to handle financial crimes. The National Assembly also should adopt the Non-Conviction Based Asset Forfeiture Bill and a comprehensive anti-terrorism bill that includes prohibitions on terrorist financing in line with international standards. Nigerian authorities should work toward full implementation of a regime capable of thwarting money laundering and terrorist financing.

Norway

Though Norway sustains a high activity economy through its booming petroleum sector, the jurisdiction is not considered an important financial center in a regional context. Norway’s significance in terms of money laundering is very low. There are illicit proceeds related to narcotics sales and production, prostitution, robberies, smuggling, and white collar crimes like embezzlement, tax evasion and fraud. Criminal proceeds laundered in the jurisdiction derive primarily from domestic criminal activity, often by foreign criminal gangs or guest workers who in turn remit the proceeds home. Money laundering and terrorist financing primarily occur through exchange houses and banks, but also to an increasing degree, through alternative remittance systems such as hawala.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering is a criminal offense, and the law does not only apply to drug-related money laundering. The Norwegian Money Laundering Act (ML Act) and associated regulations entered into force on April 15, 2009. The ML Act implements the Third European Union (EU) Money Laundering Directive (Directive 2005/60/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/)

On June 28, 2002, Norway enacted its legislation to criminalize terrorist financing (Endringslov nr. 54).

Know-your-customer rules: Yes

Bank records retention: Yes

Bank records and identifying data must be maintained for a period of five years after the account is closed.

Suspicious transaction reporting: Yes

Anti-money laundering/counter-terrorist financing (AML/CFT) controls, including the reporting of suspicious transaction reports (STRs), are mandatory for financial institutions, non-bank financial institutions, and designated non-financial businesses and professions. STRs are submitted to Norway’s financial intelligence unit (FIU). The Norwegian FIU received 9,026 STRs in 2008. The unit produced 243 intelligence reports and 27 formal complaints, based on information from 660 STRs.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture:

Norwegian police agencies share responsibility for identifying, tracing, freezing, seizing, and forfeiting narcotics and terrorist financing related assets. As a general rule, the police may seize direct proceeds from criminal acts. However, Norwegian law also allows for seizing instruments of crime, but a relationship to the crime must be proven. Norwegian law allows both criminal and civil forfeiture.

Narcotics asset sharing authority: Yes

Norwegian law allows for sharing of seized assets with other governments (Straffeloven §37d).

Cross-border currency transportation requirements: Yes

Cross-border currency transportation is regulated and monitored. Declaration forms are used at border crossings.

Cooperation with foreign governments:

Norway actively cooperates with other governments to combat money laundering and terrorist financing.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In December 2009, a Swedish painter was convicted of laundering of $2.5 million in the construction industry. The man had issued invoices, signing off on payments for work that had never been performed. The man confessed and was sentenced to prison. Two partners are also on trial in the same case for money laundering, misappropriation of funds and tax fraud totaling $7 million.

In 2009, a Norwegian district court sentenced a man to one year in prison for contributing to money laundering through his unregistered hawala-type payment institution. The man set up the illegal transaction service in 2007 and helped fellow Afghanis transfer approximately $3.5 million in small installments. The business was uncovered when the man was pulled into an ongoing narcotics investigation, and it was revealed he had laundered narcotics proceeds. This is only the second sentence in Norway relating to hawala.

U.S.-related currency transactions: No

Records exchange mechanism with U.S.:

Norway’s FIU is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

Norway 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

Norway is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/61/55/35535328.pdf

Recommendations:

The Government of Norway should continue to enhance its AML/CFT regime, as appropriate.

Oman

Oman is not a regional or offshore financial center. Money laundering in Oman is not believed to be a significant problem. However, the country’s financial system remains susceptible to criminal activity and Oman’s long coastline and relatively porous borders remain vulnerable to illegal transit by migrant workers, smugglers, human trafficking victims, terrorists, and individuals involved in the traffic and sale of illegal drugs. There is a robust smuggling network with Iran across the Strait of Hormuz via small fast boats, and smuggling in general across Oman’s borders and coastline remains a concern, especially because Oman sits along key narcotics trafficking routes.

Offshore Center: No

Free Trade Zones: Yes

Oman is developing the Salalah Free Zone.

Criminalizes narcotics money laundering: Yes

The Law of Narcotics and Psychotropics Control issued by Royal Decree 17/99 on March 6, 1999 criminalizes narcotics money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

In March 2002, Royal Decree No. 34/2002 establishes The Law of Money Laundering. This law strengthens existing money laundering regulations by detailing bank responsibilities, widening the definition of money laundering to include funds obtained through any criminal means, and providing for the seizure of assets. Royal Decree 72/2004 of July 7, 2004, promulgates the implementing regulations for the Law of Money Laundering.

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/)

Royal Decree 8/2007 of January 22, 2007 sets forth the Law on Combating Terrorism. Under this law, individuals found guilty of funding terrorist organizations are subject to imprisonment. Acts of terrorism are considered crimes under article 132 of the Omani Penal Code. Reportedly, Omani authorities are currently working towards finalizing a draft comprehensive counter-terrorism financing law.

Know-your-customer rules: Yes

Regulations set forth by the Central Bank of Oman (CBO) require banks to know their customers. Individuals have to be resident in Oman in order to open an account and transfer funds. For foreign bank transfers, Omani banks require complete documentation of the source of the funds before approving the transaction. In addition to financial institutions, Ministerial Decision 82/2008 issued by the Ministry of Commerce and Industry on September 23, 2008 requires dealers of precious metals and stones, real estate brokers, and accounting services to verify the identity of their clients and document transactions, including the personal data of each client and date and details of the transaction.

Bank records retention: Yes

Ministerial Decision 82/2008 requires covered entities to maintain client and transaction records for a period of at least ten years and to keep all relevant correspondence and documents for at least five years.

Suspicious transaction reporting: Yes

Obligated entities are required to file suspicious transaction reports (STRs) with the financial intelligence unit (FIU).

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture:

Narcotics and money derived from the illegal trade in narcotics are seized and forfeited to the Royal Oman Police.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

No information available.

Cooperation with foreign governments:

Oman is a member of the Gulf Cooperation Council (GCC). No formal mechanism exists for information sharing among the Central Banks or financial crimes units of the GCC members, although a banking supervision committee within the GCC issues broad guidelines for financial institution oversight. The Royal Oman Police’s (ROP) Financial Crimes Directorate has indicated it enjoys a good relationship with GCC counterparts in the exchange of information on suspicious transactions.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Informal lending societies reportedly have emerged in recent years as an alternative to the formal banking sector in Oman. These societies provide interest-free loans as a means for Omanis to purchase homes and cars or service bank debts. The informal lending societies are particularly attractive as they accord with the tenets of Sharia. The societies have been the target of three separate warnings from the Ministry of Social Development, calling on Omanis to avoid these financial entities. Transactions in these societies are made in cash, and the societies are not registered with or regulated by any government agency or institution. While this business constitutes only a fraction of overall financial transactions in Oman, it has merited greater scrutiny on the part of ROP and CBO authorities.

A current problem in Oman concerns individuals from outside the Gulf who establish shell companies, complete with bank accounts, aided by an Omani sponsor. Omani sponsors are commonplace due to the Foreign Investment Law which requires foreign businesses to obtain an Omani partner with at least a 30% share in the business. The Omani sponsor oftentimes is unaware of the day-to-day activities of the company he is sponsoring and simply receives a percentage of the profits; therefore, Omani sponsors are unaware when a company is a front for money laundering. Despite the actions taken by the ROP and the CBO in recent years, such suspicious financial transactions continue to occur.

Oman distributes the UN 1267 Sanctions Committee lists to all banks and other financial institutions for checking against their accounts.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

Oman 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

Oman is a member of the Middle East North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. There is no mutual evaluation report yet.

Recommendations:

The Government of Oman should continue to implement its anti-money laundering program and work to ensure cooperation among its various legal and financial enforcement agencies. The government should also dedicate adequate resources to the training of criminal investigators to launch money laundering investigations from the field. Detecting money laundering through smuggling networks should be a primary concern. Oman also should become a party to the UN Convention for the Suppression of the Financing of Terrorism and the UN Convention against Corruption.

Pakistan

Pakistan continues to suffer from financial crimes related to narcotics trafficking, terrorism, smuggling, tax evasion, corruption, counterfeit goods and fraud. Pakistan is a major drug-transit country. The abuse of the charitable sector, trade-based money laundering, hawala/hundi, and physical cross-border cash transfers are the common methods used to launder money and finance terrorism in Pakistan. Pakistan’s real estate sector also is a popular destination for illicit funds, as many real estate transactions are poorly documented. Pakistani criminal networks play a central role in the transshipment of narcotics and smuggled goods from Afghanistan to international markets. Pakistan does not have firm control of its borders with Afghanistan, Iran and China, facilitating the flow of smuggled goods to the Federally Administered Tribal Areas (FATA) and Baluchistan. Some consumer goods transiting Pakistan duty-free under the Afghan Transit Trade Agreement are sold illegally in Pakistan. Madrassas (Islamic schools) have been used as training grounds for terrorists and for terrorist funding. The lack of control of madrassas, similar to the lack of control of Islamic charities, allows terrorist and jihadist organizations to receive financial support under the guise of support of Islamic education.

Money laundering and terrorist financing are often accomplished in Pakistan via the hundi/hawala alternative remittance system; most illicit funds are moved through these unlicensed operators. The State Bank of Pakistan (SBP) requires all hawaladars to register as authorized foreign exchange dealers and to meet minimum capital requirements. Despite the SBP’s efforts, unlicensed hawaladars still operate illegally in parts of the country (particularly Peshawar and Karachi). Fraudulent invoicing is typical in hundi/hawala counter valuation schemes. However, legitimate remittances from Pakistani expatriates residing abroad now flow mostly through the formal banking sector.

Offshore Center: No

Free Trade Zone: Yes

Pakistan has established a number of Export Processing Zones (EPZs) in all four of the country’s provinces. Although the Government of Pakistan lists a total of ten EPZs, only four are operational (Karachi, Risalpur, Sialkot, Saindak). No definitive evidence exists to link the use of EPZs to money laundering; however, claims of trade-based money laundering, in particular the use of invoice manipulation is commonly reported.

Criminalizes narcotics money laundering: Yes

Pakistani law has in force two offenses of money laundering related to narcotics, including the general offense of money laundering as stipulated in section 3 of the Anti-Money Laundering Act (AMLA) of 2009, and an explicit criminalization of narcotics money laundering in section 12 of the Control of Narcotics Substances Act (CNSA) of 1997.

Criminalizes other money laundering, including terrorism-related: Yes

The AMLA criminalizes money laundering. Terrorist financing is included in the Schedule to AMLA, thus making it a predicate offense to money laundering. Additionally, section 11K of the Anti-Terrorism Act (ATA) of 1997 includes an autonomous offense of laundering terrorist related property.

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/)

Pakistan has specifically criminalized various forms of terrorist financing under the ATA. Sections 11H-K provide that a person commits an offense if he is involved in fund raising, uses and possesses property, or is involved in a funding arrangement intending that such money or other property should be used, or has reasonable belief that they may be used, for the purpose of terrorism; however, it is unclear whether criminalization extends to individual terrorists, un-proscribed terrorist organizations, or terrorist acts against foreign governments or populations.

Know-your-customer rules: Yes

Regulations require financial institutions to take all reasonable measures to determine the true identity of every prospective customer, and provide that the institutions establish specific procedures for verifying identities, ascertaining a customer’s status and the source of earnings, and for monitoring accounts on a regular basis.

Bank records retention: Yes

SBP Regulation M-3 on Record Retention obligates banks and designated financial institutions (DFI) to maintain a record of transactions for a minimum period of five years, including the retention of records five years after the termination of a business relationship.

Suspicious transaction reporting: Yes

Section 7(1) of the AMLA requires every ‘financial institution’ to submit suspicious transaction reports (STRs) to the Financial Monitoring Unit (FMU), the financial intelligence unit (FIU) of Pakistan no later than seven days after forming a suspicion that the transaction: involves funds derived from illegal activities or is intended or conducted in order to hide or disguise proceeds of crime; is designed to evade reporting requirements; has no apparent lawful purpose; or, involves financing of terrorism. The volume of STRs actually filed is not available.

Large currency transaction reporting: Yes

Currency transaction reports (CTRs) are authorized by the AMLA; the SBP issued Circular Letter No. 39 of 2009 mandating the reporting of currency transactions in excess of 2.5 million rupees (approximately $30,000). CTRs are filed with the FMU.

Narcotics asset seizure and forfeiture:

There are specific powers for the seizing and forfeiture of assets related to narcotics under the CNSA. While trying an offense under the CNSA, the Special Court can order the freezing of assets related to the accused, his relatives and associates, if reasonable grounds of criminality are apparent. Section 37(2) of the CNSA empowers designated authorities to freeze assets and, within seven days, to notify the Court. Once assets are frozen and the accused is found guilty, the courts are empowered to forfeit assets to the federal government.

AMLA sections four, nine, and ten provide powers for the forfeiture of assets of any person convicted of money laundering. Section 9 provides for the power to freeze property related to money laundering. However, the ability to freeze and forfeit assets under the AMLA is untested and may prove challenging to enforce in the courts.

Narcotics asset sharing authority: Yes

Both the AMLA and the CNSA provide for the sharing of assets related to narcotics. CNSA section 40 also provides Pakistan the power to share assets with a foreign government following the conviction of a person in a foreign country. The offense must also be punishable under the CNSA.

Cross-border currency transportation requirements: Yes

Pakistan has a currency control regime that restricts the transportation of Pak Rupees and the outbound transportation of foreign currency. Pakistan does not place any restrictions or require declarations on inbound foreign currency. People leaving and entering Pakistan may not carry more than 3,000 rupees (approximately $35). Carrying currency in violation of this regulation is punishable by imprisonment or heavy fines. For foreign currency, anyone transporting more than $10,000 or the foreign currency equivalent out of Pakistan must obtain permission from the SBP before traveling. There are joint counters at international airports staffed by the SBP and Customs to monitor the transportation of foreign currency.

Cooperation with foreign governments: Yes

There is no overarching mutual legal assistance regime in Pakistan, but there is offense-specific assistance under the AMLA (money laundering) and CNSA (narcotics). Section 26 of the AMLA allows for assistance with regard to money laundering investigations, as long as an agreement with the “contracting state” has been established. Analysis of these provisions suggests there are too many legal impediments for the AMLA to be an effective tool. Sections 56 and 59 of the CNSA allow for mutual legal assistance with regard to narcotics investigations. Unlike the AMLA, the CNSA does not require a prior agreement to be established and can be used to undertake searches, produce records, extradite, and freeze and confiscate proceeds related to narcotics offenses. Mutual legal assistance under the CNSA is subject to dual criminality.

U.S. or international sanctions or penalties: No

Pakistan is still included on the Financial Action Task Force’s (FATF) list of countries posing significant anti-money laundering and terrorist financing risks. In February 2008, FATF issued a statement warning financial institutions to be aware that deficiencies in Pakistan’s anti-money laundering/counter-terrorist financing (AML/CFT) system constitute money laundering and terrorist financing vulnerability in the international financial system. In October 2009, the FATF reaffirmed this statement.

Enforcement and implementation issues and comments:

Operational independence and autonomy of the FMU is an issue, especially with regard to the FMU’s ability to utilize its budget and manage staffing needs. Moreover, there appear to be restrictive information sharing rules with foreign counterparts which do not meet the Egmont principles of information sharing or comply with international standards for non-judicial international cooperation.

Pakistan has the ability to freeze bank accounts and property held by terrorist individuals and entities. Pakistan has issued freezing orders for terrorists’ funds and property in accordance with UNSCRs 1267 and 1373. The SBP circulates to its financial institutions the list of individuals and entities that have been included on the UN 1267 Sanctions Committee’s consolidated list.

The ATA also allows the government to bar a fund, entity or individual on the grounds that it is involved with terrorism. This done, the government may order the freezing of its accounts. Section 11B of the ATA specifies that an organization is proscribed or listed if the GOP has reason to believe it is involved with terrorism. There have been some deficiencies concerning the timeliness and thoroughness of the asset freezing regime.

U.S.-related currency transactions:

U.S. currency is widely used in the underground economy.

Records exchange mechanism with U.S.:

Pakistani and U.S. law enforcement agencies cooperate on a case-by-case basis.

The FMU is not a member of the Egmont Group, nor does it have an MOU or exchange of letters with the Financial Crimes Enforcement Network (FinCEN), the FIU of the United States.

International agreements:

Pakistan 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

Pakistan is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Pakistan’s mutual evaluation report, prepared by the World Bank and the APG, can be found here: http://www.apgml.org/documents/docs/17/Pakistan%20MER%20-%20final%20version.pdf

Recommendations:

Although progress has been made, pervasive corruption and a lack of political will continue to be the two primary obstacles to an effective AML/CFT regime in Pakistan. Pakistan incorporated a multitude of recommendations in the new AMLA 2009; yet legislative shortcomings still persist and should be addressed accordingly. Pakistan’s FMU needs to be strengthened and should be given operational autonomy rather than be subject to the supervision and control of the General Committee, which is comprised of political ministers. The FMU also needs a strong IT infrastructure to aid in the core functions of collection, analysis and dissemination. New legislation and regulations should include robust preventative measures for all financial and non-financial businesses and professions both within the formal financial sector and those currently missing from the formal sector. Suspicious and currency transaction reporting should be fully implemented. Pakistani law enforcement should not, however, become dependent on these reports to initiate investigations; rather, law enforcement authorities should be proactive in pursuing money laundering and terrorist financing in their field investigations. In light of the role private charities have played in terrorist financing, Pakistan must work quickly to conduct outreach, supervise, and monitor charitable organizations and activities, and close those charitable organizations that finance terrorism. Pakistan should implement and enforce cross-border currency reporting requirements and focus greater efforts on identifying and targeting illicit cash couriers. This work can be enhanced by sharing declaration reports with the FMU. Pakistan should also become a party to the UN Convention against Transnational Organized Crime.

Panama

Panama’s economic and geographic proximity to drug-related activity from Colombia, Venezuela, and Mexico, as well as lack of enforcement by the Government of Panama (GOP), make Panama a natural location for laundering money derived from the sale in the United States and Europe of cocaine produced in Colombia. Panama’s land border with Colombia consists of approximately 60 miles of unguarded, dense jungle. Sea and air law enforcement along Panama’s borders has historically been ineffective. As part of a recent plan to build up to 11 naval stations on the Pacific and Atlantic coasts in order to better police drug trafficking routes, in December, 2009 Panama opened a naval operations station in the Pearl Archipelago that has long been a site for drug-trafficking activity.

The very factors that have contributed to Panama’s economic growth and sophistication in the banking and commercial sectors - the large number of offshore banks and shell companies, the presence of the world’s second-largest free trade zone, the spectacular growth in ports and maritime industries, and the use of the U.S. dollar as the official currency—also provide an effective infrastructure for significant money laundering activity. The funds generated from illegal activity may be laundered through a wide variety of methods, including trade in merchandise, the Panamanian banking system, casinos, pre-paid telephone cards, debit cards, insurance companies, and real estate and construction projects. Substantial bulk cash smuggling facilitates the money laundering.

Offshore Center: Yes

Panama is an offshore financial center that includes offshore banks and various forms of shell companies that have been used globally by a wide range of criminal groups to launder money. Panama, through its Bank Superintendent, licenses offshore banks, and through the Public Registry offshore corporations may be formed. The Banking Superintendent requires a list of a bank’s shareholders as part of the licensing process. Of the 90 commercial banks in Panama, 72 are specifically either non-Panamanian or are designed to service offshore clients. Business licenses may be obtained through a newly created online system. The onshore and offshore registration of corporations is also handled by the Public Registry. There is no requirement to disclose the beneficial owners of any corporation or trust. Bearer shares are permitted for corporations, and nominee directors and trustees are allowed by law. Approximately 39,294 new offshore corporations were registered in Panama from October 2008 to October 2009.

Free Trade Zones: Yes

The majority of money laundering activity in Panama is narcotics-related or the result of transshipment of smuggled, pirated, and counterfeit goods through Panama’s major free trade zone, the Colon Free Zone (CFZ), the second largest free trade zone after Hong Kong. Panama, particularly in the CFZ, suffers from substantial transshipment of smuggled or pirated goods, including counterfeit apparel, pharmaceuticals, and pirated DVDs. From January to October of 2009, the CFZ imported and exported over $16 billion in goods. The CFZ currently has over 2,879 businesses and 20 bank branches, employs approximately 29,000 people, and continues to expand. The large volume of international business within the CFZ creates an environment amenable to many types of money laundering for many different purposes.

Criminalizes narcotics money laundering: Yes

Money laundering is a criminal offense under Panama’s Penal Code.

Criminalizes other money laundering, including terrorism-related: Yes

Law 14 (Article 284) of May 17, 2007, amends the Penal Code to expand the predicate offenses for money laundering beyond narcotics-trafficking to include criminal fraud, arms trafficking, trafficking in humans, kidnapping, extortion, embezzlement, corruption of public officials, terrorism, and international theft or trafficking of motor vehicles. Additionally, Law No. 45 of June 4, 2003, establishes criminal penalties of up to ten years in prison and fines of up to $1 million for financial crimes that undermine public trust in the banking system, the financial services sector, or the stock market. The legislation criminalizes a wide range of activities related to financial intermediation, including illicit transfers of monies, accounting fraud, insider trading, and the submission of fraudulent data to supervisory authorities. Law No. 1 of 2004 also adds crimes against intellectual property as a predicate offense for money laundering. The National Assembly approved Law 68 of 2009 that increases the maximum sentence for committing multiple crimes from 35 to 50 years, and expressly applies to money laundering.

Criminalizes terrorist financing: Yes

Panama’s Law 16 of 1982, Article 389, and Law 50 of 2003, Article 264, both criminalize the financing of terrorism as contemplated by UN Security Council Resolution 1373.

Know-your-customer rules: Yes

Under Panamanian law and regulations, financial institutions (banks, trust companies, money exchangers, credit unions, savings and loan associations, stock exchanges, brokerage firms, and investment administrators) must adhere to “know your customer” (KYC) practices for identification of customers, exercise of due diligence, and retention of transaction records.

Bank records retention: Yes

Panamanian law requires all financial institutions to maintain for five years records concerning their anti-money laundering procedures, including information regarding their customers and any information derived as part of the KYC regulations and cash or suspicious transaction reports relating to customer identification.

Suspicious transaction reporting: Yes

Financial institutions must report suspicious financial transactions to the financial intelligence unit (FIU), regardless of amount.

Large currency transaction reporting: Yes

Financial institutions, including casinos, CFZ businesses, pawnshops, the national lottery, real estate agencies and developers, and insurance and reinsurance companies must report currency transactions in excess of $10,000. Article 248 of 2000 requires indigenous alternative remittance systems, such as hawala operations, to adhere to the reporting requirement for cash transactions.

Narcotics asset seizure and forfeiture:

Panamanian Law 38 of August 10, 2007 provides for the tracing, freezing, and seizure of assets derived from criminal activity. Responsibility for tracing, seizing and freezing assets lies principally with the Drug Prosecutor’s Office of the Attorney General’s Office. Upon an arrest, assets are frozen and seized. In the event of a conviction, assets derived from money laundering activity related to narcotics trafficking are delivered to the National Commission for the Study and Prevention of Narcotics Related Crimes (CONAPRED) for administration and distribution among various GOP agencies. Seized perishable assets may be sold and the proceeds deposited in a custodial account with the National Bank. Panamanian law provides for criminal but not civil forfeiture.

Narcotics asset sharing: No

Panama has not enacted any law for sharing seized assets with other governments.

Cross-border currency transportation requirements: Yes

Under Panamanian customs regulations, any individual bringing cash in excess of $10,000 into Panama must declare such monies at the point of entry. If such monies are not declared, they are confiscated and are presumed to relate to money laundering.

Cooperation with foreign governments: Yes

No impediments exist.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Panama has comprehensive laws against money laundering and financial crimes, but lacks the investigative and judicial infrastructure to prosecute cases. Panama provides substantial cooperation with U.S. law enforcement agencies in combating drug trafficking and making drug seizures, but has not prosecuted a money laundering case in recent years. As long as money is properly declared, there appears to be little scrutiny by Panamanian customs. US law enforcement agencies have indications that possibly tens of millions of dollars are declared upon entry at Panama’s Tocumen airport on a monthly basis and generally pass through customs without investigation.

The FIU is overworked and lacks adequate resources, institutional knowledge and the ability to enforce reporting requirements. The number of CTRs and STRs submitted to the FIU remains extremely low, despite the large number and value of cash transactions taking place in Panama. Between January and November of 2009, 368 reports were forwarded to the Attorney General’s Office for further action.

Between January and November of 2009, the Financial Fraud Prosecutor’s Office investigated 285 cases related to financial crimes. These included credit card fraud (214), bankruptcy (six), money laundering (nine), financial crimes (50), and other (six).

U.S.-related currency transactions:

The US dollar is legal tender in Panama.

Records exchange mechanism with U.S.:

Panama and the United States have a Mutual Legal Assistance Treaty that entered into force in 1995. The FIU has signed a memorandum of understanding (MOU) with the Financial Crimes Enforcement Network (FinCEN).

International agreements:

The FIU has signed more than 43 MOUs with FIUs from other countries. The FIU also has online access to financial information with foreign analogs through the Egmont Secure Web.

Panama 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

Panama 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/

Recommendations:

The Government of Panama should increase its efforts to prevent, detect, investigate, and prosecute money laundering and terrorist financing. Despite Panama’s considerable financial resources, a judicial system capable of prosecuting money laundering cases is still a work in progress. As a result, there is little disincentive to committing these crimes within Panama’s borders. The GOP’s ability to investigate and prevent money laundering and terrorist finance would improve with better training and pay of its law enforcement personnel and customs officers, in addition to the elimination of corrupt officers. The UAF needs increased staffing, better training and greater transparency. Financial and other institutions should be regularly audited for compliance with reporting obligations. The issuance of bearer shares is a primary concern and the GOP should take adequate steps to eliminate or immobilize these instruments. The GOP should fully implement computer systems with electronic records for all CFZ commercial and financial transactions, and implement an electronic customs database that can be accessed by the FIU. Additionally, the GOP should devote more human and technological resources to combating bulk cash smuggling and trade-based money laundering in the CFZ.

Papua New Guinea

Papua New Guinea (PNG) is not considered a major financial center. It has a relatively stable banking system closely integrated with the financial systems of Australia and New Zealand. Smuggling and public corruption are problems in PNG but there is no evidence these activities generate substantial funds that are laundered. PNG is developing anti-money laundering/counter-terrorist financing countermeasures.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: See below

Criminalizes other money laundering, including terrorism-related:

PNG passed the Proceeds of Crime Act 2005 (POCA) to criminalize money laundering and set out preventative measures. The POCA does not reference terrorist financing or any specific predicate offenses.

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/)

There is a counter-terrorism act before PNG’s parliament, but it is unclear if it covers terrorist financing.

Know-your-customer rules:

Part 2, section 20 of the POCA provides for customer due diligence measures by financial institutions, insurance and securities companies, and designated non-financial businesses and professions.

Bank records retention: Yes

Financial institutions are required to retain bank records seven years from the day when the initial business relationship takes place, according to Part 2, section 19 of the POCA.

Suspicious transaction reporting: Yes

The POCA requires a covered entity to file a suspicious transaction report with the financial intelligence unit (FIU) if it has reasonable grounds to suspect that information it has concerning the transaction may be relevant to the investigation or prosecution of a person for a serious offense.

Large currency transaction reporting: Yes

The POCA requires covered entities to report any international wire transfer or transaction of K10,000 (approximately $3,700) or more in cash to the FIU, unless the counterparty is another covered entity.

Narcotics asset seizure and forfeiture:

The POCA provides for the forfeiture of property used in connection with the commission of offenses, and deprives persons of the proceeds and benefits derived from the commission of offenses and related purposes. PNG has executed a number of illegal cargo and equipment seizures over the past several years.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

PNG has customs regulations which limit the amount of currency and negotiable instruments that can be brought into and taken out of the country at any given time. Information regarding possession of currency and other liquid assets is explicitly requested on customs declaration cards.

Cooperation with foreign governments:

There are no known impediments to cooperation. The PNG works closely with Australian authorities.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2009, there were three money laundering investigations underway but no successful prosecutions.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

PNG 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 - No
  • the UN Convention against Corruption - Yes

PNG became a member of the Asia/Pacific Group on Money Laundering, a Financial Action Task Force-style regional body, in 2008. There are is no mutual evaluation report.

Recommendations:

The Government of Papua New Guinea should continue its work to develop procedures to conform to international anti-money laundering/counter-terrorist financing programs and procedures. The PNG should criminalize terrorist financing. Papua New Guinea should become a party to the UN Convention against Transnational Organized Crime and the 1988 UN Drug Convention.

Paraguay

Paraguay is a major drug transit country and money laundering center. A multi-billion dollar contraband trade occurs in the border region shared with Argentina and Brazil, called the Tri-Border Area, and facilitates much of the money laundering in Paraguay. While the Government of Paraguay (GOP) suspects that proceeds from narcotics trafficking are often laundered in the country, it is difficult to determine what percentage of the total amount of laundered funds is generated from narcotics sales. Trade-based money laundering and the trafficking in counterfeit goods are widespread. Weak controls in the financial sector, open borders, bearer shares, casinos, a plethora of exchange houses, lax or non-enforcement of cross border transportation of currency and negotiable instruments, ineffective customs inspection and control at the borders, and minimal enforcement activity for financial crimes allow money launderers, transnational criminal syndicates, and possible terrorist financiers to take advantage of Paraguay’s financial system.

Ciudad del Este (CDE), on Paraguay’s border with Brazil and Argentina, represents the heart of Paraguay’s underground or “informal” economy. The area is well known for arms and narcotics trafficking and violations of intellectual property rights—and the illicit proceeds from these crimes are a source of laundered funds. Some proceeds have been forwarded to terrorist organizations. A wide variety of counterfeit goods, including household electronics, cigarettes, software, computer equipment, video games, and DVDs are imported from Asia and transported across the border into Brazil, with a smaller amount remaining in Paraguay for sale in the local economy.

Offshore Center: No

Free Trade Zones: Yes

Paraguay is a landlocked country with no seaports. However, it has been granted free trade ports and warehouses in neighboring countries' seaports for the reception, storage, handling, and transshipment of merchandise transported to and from Paraguay. Paraguayan free trade ports are located in Argentina (Buenos Aires and Rosario); Brazil (Paranagua, Santos, and Rio Grande do Sul); Chile (Antofagasta and Mejillones); and Uruguay (Montevideo and Nueva Palmira). To date, the three Brazilian free trade ports, Nueva Palmira in Uruguay, and the two Chilean free trade ports are in full operation. About three-fourths of goods are transported by barge on the large river system that connects Paraguay with Buenos Aires (Argentina) and Montevideo (Uruguay). The Paraguayan port authority manages the free trade ports and warehouses.

Criminalizes narcotics money laundering: Yes

A new penal code with enhanced penalties for money laundering crimes came into effect in July 2009 with law 3440/08 that modified various articles in law 1160/97. The new penal code makes money laundering an autonomous crime. The new code establishes predicate offenses for money laundering, but does not require a conviction for the predicate offense before initiating money laundering charges. The new code also allows the state to charge financial sector officials who negligently permit money laundering to occur.

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/)

Paraguay does not have laws that criminalize terrorist financing or provide law enforcement agencies with the authority to freeze, seize, or forfeit assets. The Secretariat to Combat Money Laundering (SEPRELAD), presented a draft anti-terrorism finance bill to Congress, but it was withdrawn in late 2009 due to pressure from human rights groups. SEPRELAD has stated that it will present the draft anti-terrorism finance bill to Congress once again in the first quarter of 2010.

Know-your-customer rules: Yes

Banks, finance companies, insurance companies, exchange houses, stock exchanges and securities dealers, investment companies, trust companies, mutual and pension fund administrators, credit and consumer cooperatives, gaming entities, real estate brokers, nongovernmental organizations, pawn shops, and dealers in precious stones, metals, art, and antiques are required to know and record the identity of customers engaging in significant currency transactions. However, little personal background information is required to open a bank account or to conduct financial transactions. Bearer shares are permitted in Paraguay, exposing the country to money laundering risk. A significant portion of corporations issue bearer shares and no measures are in place to ensure that such entities are not being misused for money laundering. Shell companies and trust funds structures are legal but seldom used. Paraguay is also an attractive financial center for neighboring countries, particularly Brazil.

Bank records retention: No

There is no legal obligation for financial institutions to maintain records.

Suspicious transaction reporting: Yes

Banks, finance companies, insurance companies, exchange houses, stock exchanges and securities dealers, investment companies, trust companies, mutual and pension fund administrators, credit and consumer cooperatives, gaming entities, real estate brokers, nongovernmental organizations, pawn shops, and dealers in precious stones, metals, art, and antiques are required to file suspicious transaction reports (STRs) with Paraguay’s financial intelligence unit (FIU) within SEPRELAD. There is no reporting threshold. As of September 2009, SEPRELAD processed 585 STRs and sent 7 cases to the Attorney General’s office.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: No

Paraguayan law does not provide for the tracing, freezing, and seizure of many criminally derived assets. Enforcement agencies have limited authority to seize or forfeit assets of suspected money launderers. Assets seized or forfeited are limited to transport vehicles, such as planes and cars, and normally do not include bank accounts. Law enforcement authorities cannot dispose of these assets until a defendant is convicted. They can only freeze assets of persons under investigation for a crime in which the state risks loss of revenue from furtherance of a criminal act, such as tax evasion. The law does not permit assets to be maintained or repaired. New asset forfeiture legislation is required to make improvements in this regard.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements:

Cross-border reporting requirements are limited to customs declaration forms issued by airlines at the time of entry into Paraguay. Persons transporting $10,000 into or out of Paraguay are required to file a customs report.

Cooperation with foreign governments: Yes

There are no known impediments to cooperation. The Egmont Group of FIUs notified Paraguay about the need to comply with its international commitments regarding anti-terrorism finance legislation. If Paraguay does not show reasonable progress in enacting anti-terrorism finance legislation, it could face suspension and ultimately expulsion from the Egmont Group.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues:

Prosecutors handling financial crimes have limited resources to investigate and prosecute. In addition, the selection of judges, prosecutors and public defenders is largely based on politics, nepotism, and influence peddling. According to GOP authorities, as of November 2009, the General Attorney’s office has processed 37 money laundering cases, 11 of which resulted in convictions. These cases reinforce the fact that convictions are possible, although difficult, under the current legal framework. The lack of cooperation among Paraguayan law enforcement is also a large impediment to effective enforcement.

Some former government officials have been accused of involvement in the smuggling of contraband or pirated goods. Although there are ongoing criminal investigations, there have been few convictions for smuggling contraband or pirated goods.

The nonbank financial sector operates in a weak regulatory environment with limited supervision. The organization responsible for regulating and supervising credit unions, the National Institute of Cooperatives, lacks the capacity to enforce compliance. Exchange houses are another nonbank sector where enforcement of compliance requirements remains limited. It is estimated that in CDE alone there are more than 100 illegal exchange houses.

There are no effective controls or laws that regulate the amount of currency that can be brought into or out of Paraguay. Customs declaration reports are seldom checked. Customs operations at the airports or land ports of entry provide no control of cross-border cash movements.

In cooperation with the U.S. Department of Homeland Security’s Immigration and Customs Enforcement (ICE), a Trade Transparency Unit (TTU) was established in Paraguay to examine trade discrepancies that could be indicative of customs or tax fraud, trade-based money laundering, or terrorist financing.

Law enforcement agencies have no authority to freeze, seize, or forfeit assets related to terrorist financing, which is not a criminal offense under Paraguayan law. The current law also does not provide any measures for thwarting the misuse of charitable or nonprofit entities that could be used as conduits for terrorism financing. However, the Ministry of Foreign Affairs provides the Central Bank, SEPRELAD, and other government entities with the names of suspected terrorists on the UNSCR 1267 Sanctions Committee’s consolidated list.

U.S.-related currency transactions:

Most high-priced goods in Paraguay are paid for in U.S. dollars. In addition to bulk cash smuggling, the non-bank financial sector (particularly exchange houses), is often used to move illicit proceeds both from within and outside Paraguay into the U.S. banking system. Large sums of dollars generated from normal commercial activity and suspected illicit commercial activity are also transported physically from Paraguay through Uruguay and Brazil to banking centers in the United States. The GOP is only beginning to recognize and address the problem of the international transportation of currency and monetary instruments derived from illegal sources.

Records exchange mechanism with U.S.:

Paraguay and the United States are not parties to a bilateral mutual legal assistance treaty that provides for exchange of information. Paraguayan and U.S. law enforcement agencies cooperate on a case-by-case basis. SEPRELAD is able to exchange information with the U.S. Financial Crimes Enforcement Network (FinCEN).

International agreements:

Paraguay is a party to various bilateral and multi-lateral information exchange agreements, including the Inter-American Convention on Mutual Legal Assistance in Criminal Matters. To date the Paraguayan FIU has signed 29 MOUs with other FIUs and is in the process of signing six more.

Paraguay 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

Paraguay is a member of the “3 Plus 1” Security Group with the United States and the Tri-Border Area countries. Paraguay is a member of Financial Action Task Force against Money Laundering in South America (GAFISUD), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/document/35/0,3343,en_32250379_32236869_34355875_1_1_1_1,00.html

Recommendations:

The Government of Paraguay (GOP) took a number of positive steps in 2009 to combat money laundering, particularly with the passage of the bill to strengthen SEPRELAD. However, it should continue to pursue other initiatives to increase its effectiveness in combating money laundering and terrorist financing. The GOP should enact legislation and issue regulations to enable law enforcement authorities to more effectively investigate and prosecute money laundering and terrorist financing. Paraguay does not have a law criminalizing terrorist financing; and it should take steps as quickly as possible to ensure that comprehensive counter-terrorism and counter-terrorist financing legislation is introduced and adopted. The GOP should ensure adequate licensing/registration and supervision of nonbank financial institutions. Further reforms in the selection and accountability of judges, prosecutors and public defenders are needed, as are reforms in customs to allow for increased inspections and interdictions at ports of entry. Now that the penal code has been amended, it is critical to Paraguay’s future prosecutorial successes that judges and prosecutors enhance their knowledge regarding the successful prosecution and adjudication of money laundering cases. The GOP should develop strategies targeting the physical movement of bulk cash and combating trade-based money laundering. Additionally, Paraguay should reform its asset forfeiture regime, including the management of seized and forfeited assets.

Peru

Peru is not a major regional financial center. Peru ranks as the world’s second largest producer of cocaine. The Government of Peru (GOP) estimates that approximately $3 billion moves illegally through the Peruvian financial sector, which is approximately 2.4 percent of Peru’s gross domestic product. Eighty-three percent of this amount relates to drug trafficking, drug operations and businesses, and the remaining 17 percent relates to fiscal fraud, corruption, and illegal gun dealing. As a result, money laundering occurs on a significant scale to integrate these illegal proceeds into the Peruvian economy. The most common methods of money laundering in Peru involve real estate sales, business investments, and high interest loans. Other vulnerabilities to money laundering include Peru’s cash-based and heavily-dollarized economy with a large informal sector, pervasive corruption, and the lack of effective regulatory supervision of non-financial businesses and professions, such as informal remittance and wire transfer services.

Offshore Center: No

Free Trade Zones: Yes

Peruvian law currently covers two types of free trade zones: export, transformation, industry, trade and services zones (CETICOS), located at Ilo, Matarani and Paita, with one authorized but not operating at Loreto; and a free trade zone (ZOFRATACNA) in Tacna. The rules and tax benefits applying to these zones are the same for foreign and national investors.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Law 27.765, enacted in 2002, criminalizes money laundering in Peru and expands the predicate offenses for money laundering to include the laundering of assets related to all serious crimes, such as narcotics trafficking, terrorism, corruption, trafficking of persons, and kidnapping. There does not have to be a conviction relating to the predicate offense; rather, it must only be established the predicate offense occurred and the proceeds of crime from that offense were laundered. The law’s brevity and lack of implementing regulations, however, limits its effectiveness in obtaining convictions. In addition, revisions to the Penal Code criminalize “willful blindness” and impose a prison sentence for failure to file suspicious transaction reports (STRs).

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/)

Terrorist financing has not yet been specifically and fully established as a crime under Peruvian legislation in a manner that would conform to international standards. The only reference to terrorism as a crime is in Executive Order 25.475, which establishes the punishment of any form of collaboration with terrorism, including economic collaboration. There are several bills pending in the Peruvian Congress concerning the correct definition of the crime of terrorist financing.

Know-your-customer rules: Yes

Obligated entities are required to know and record the identity of customers engaging in significant currency transactions, and personal background information is required to open a bank account, conduct financial transactions, and claim prizes in casinos.

Bank records retention: Yes

Obligated entities must maintain reports on large cash transactions. Individual cash transactions exceeding $10,000 or transactions totaling $50,000 in one month must be maintained in internal databases for a minimum of five years and made available to the UIF upon request.

Suspicious transaction reporting: Yes

The financial intelligence unit (FIU), Unidad de Inteligencia Financiera del Peru (UIF), is responsible for receiving, analyzing and disseminating STRs filed by obligated entities. The entities obligated to report suspicious transactions include banks, financial institutions, insurance companies, stock funds and brokers, the stock and commodities exchanges, credit and debit card companies, money exchange houses, mail and courier services, travel and tourism agencies, hotels and restaurants, notaries, the customs agency, casinos, auto dealers, construction or real estate firms, notary publics, and dealers in precious stones and metals. Law 28.306, enacted in 2004, extends STR filing requirements to terrorist financing and expands the UIF’s functions to include the analysis of reports related to terrorist financing. The UIF received 2,379 STRs in 2008 and 7,710 in 2009.

Large currency transaction reporting: No

Obligated entities must maintain reports on large cash transactions but only report to the UIF upon request.

Narcotics asset seizure and forfeiture:

In 2007 an asset forfeiture law went into force and the GOP modified the penal code to provide more comprehensively for seizure of assets, money, earnings, or other products or proceeds of crime.

Narcotics asset sharing authority:

No information was provided on Peru’s ability to share forfeited assets with foreign governments.

Cross-border currency transportation requirements: Yes

Individuals or entities transporting more than $10,000 in currency or monetary instruments into or out of Peru must file reports with the customs agency, and the UIF may have access to those reports upon request. The UIF is authorized to sanction persons and entities for failure to report the transportation of currency or monetary instruments. These reporting requirements, however, are not being strictly enforced by the responsible GOP entities.

Cooperation with foreign governments:

No known impediments exist to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The UIF sent 781 suspected cases stemming from STRs to the Public Ministry for investigation in 2009, a significant increase from 2008 in which 123 STRs were sent. Currently, 308 of these intelligence reports are at various stages of investigation and prosecution in the Peruvian legal system as compared to only four last year. To date, there has not been a money laundering conviction in Peru. Convictions tend to be for lesser offenses which are easier to prosecute and win a conviction.

Corruption remains an issue of serious concern in Peru. The GOP estimates the public budget loses 15 percent per year due to corruption. In July 2009, former president Alberto Fujimori was convicted on corruption charges. Also in 2009, the Peruvian National Police Anti-Drug Directorate arrested the Mayor of Pucallpa and 13 others on charges of laundering drug trafficking proceeds through commercial enterprises.

Some obligated entities remain unsupervised. For instance, only money remittances made through electronic fund-transfer businesses (ETFs) that do more than 680,000 soles (approximately $200,000) in transfers per year are supervised. As a result, informal remittance businesses, including travel agencies and small wire transfer businesses, are unsupervised.

The casino sector continues to be a difficult sector to regulate since as much as 60 percent of the sector operates informally. An assessment of the gaming industry conducted by GOP and U.S. officials in 2009 identified deficiencies in oversight, including that there are no restrictions on cash-to-cash, cash-to-check, or cash-to-wire transfer transactions in casinos. Approximately 750 establishments and 60,000 slot machines operate in Peru. The licensing process lacks any significant background investigation component and the Gaming Board has little enforcement authority.

Some requests by the FIU for reports of transactions over $10,000—such as deposits into savings accounts—are protected under the constitution by bank secrecy provisions and require an order from the Public Ministry or SUNAT, the tax authority. A period of 15 to 30 days is required to lift the bank secrecy restrictions.

U.S.-related currency transactions:

Peru’s economy is heavily dependent upon the US dollar. Approximately 75 percent of the economy is informal and approximately 65 percent is dollarized, allowing traffickers to handle large bulk shipments of US currency with minimal complications. Currently, the GOP maintains no restrictions on the amount of foreign currency an individual can exchange or hold in a personal account.

Records exchange mechanism with U.S.:

Although an extradition treaty between the United States and the GOP entered into force in 2003, there is no mutual legal assistance treaty or agreement between the two countries. In 1991, an MOU for the exchange of information was signed between the Department of the Treasury and the Superintendent of Banks and Insurance companies. Additionally, the UIF is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

Peru 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 GOP is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Money Laundering Experts Working Group. Peru is a member of the Financial Action Task Force (FATF) on Money Laundering in 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 Peru faces several notable challenges to strengthening its anti-money laundering/counter-terrorist financing regime and ultimately conforming to international standards. Peru should pass legislation to criminalize terrorist financing as well as to allow for administrative and judicial blocking of terrorist assets. Bank secrecy should be lifted to allow the UIF to have access to certain large cash transaction reports in a timely fashion. There are a number of bills under review in the Peruvian Congress that would lift bank secrecy provisions for the UIF in matters pertaining to money laundering and terrorist financing and the GOP should ensure their expedient passage. Peru should expand its supervision and regulation of financial institutions and designated non-financial businesses and professions, and the GOP should permit Peru’s UIF to work directly with law enforcement agencies. The UIF should be given greater autonomy and the capacity of law enforcement and prosecutors should be raised in order to facilitate investigations and prosecution. Additionally, enhanced collaboration between the various oversight entities and with the tax authority should remain a priority for the future. Anti-corruption efforts in Peru should also be a priority. Peru’s gaming law needs to be amended to include strengthening licensing provisions and giving the Gaming Board taxing, enforcement and investigation authority. Amendments to appropriate legislation should be made to require the reporting of large currency transactions and prohibited transactions within the gaming industry.

Philippines

Although the Republic of the Philippines is not a regional financial center, the illegal drug trade in the Philippines has evolved into a billion dollar industry. The Philippines continues to experience an increase in foreign organized criminal activity from China, Hong Kong, and Taiwan. Insurgency groups operating in the Philippines partially fund their activities through local crime and the trafficking of narcotics and arms, and engage in money laundering through ties to organized crime. The proceeds of corruption are also a source of laundered funds. Smuggling, including bulk cash smuggling, continues to be a major problem. The Federation of Philippine Industries estimates lost government revenue from uncollected taxes on smuggled items is over $2 billion annually, including substantial losses from illegal imported fuel and automobiles. The Philippines has a large expatriate community, and remittances are also channels for money laundering.

Offshore Center: Yes

There are seven offshore banking units (OBUs). The Central Bank exercises regulatory supervision over OBUs, and requires them to meet reporting provisions and other banking rules and regulations.

Free Trade Zones: Yes

Criminalizes narcotics money laundering: Yes

Republic Act (RA) 9160 of 2001, as amended by RA 9194 of 2003 (the Anti Money Laundering Act, “AMLA”) criminalizes money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

The AMLA criminalizes money laundering beyond narcotics money laundering. However, many significant crimes (including arms trafficking, racketeering, and sexual exploitation) are not currently classified as predicate crimes and the proceeds of these illegal activities are therefore exempt from the AML law.

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/)

Terrorist financing is not criminalized as a separate offense under Philippine law. While there is no crime of terrorist financing, a person who finances the commission of terrorism may be prosecuted as a terrorist either as a principal by inducement pursuant to Article 17 of the Revised Penal Code or as an accomplice pursuant to Section 5 of the Human Security Act. This flawed approach requires a terrorist act to have occurred and does not encompass general financial support to terrorist entities for other purposes (recruiting, training, social welfare projects, etc.).

Know-your-customer rules: Yes

Section 9(a) of the AMLA requires banks, trusts, insurance companies, securities dealers, foreign exchange dealers, money remitters, and dealers in valuable objects or cash substitutes to establish and record the true identity of clients.

Bank records retention: Yes

Section 9 of the AMLA requires covered institutions to record the identity of all clients and requires covered institutions to maintain records of all transactions for five years from the date of the transaction or the date the account was closed.

Suspicious transaction reporting: Yes

The AMLA, as amended in 2003, requires the filing of suspicious transaction reports (STRs). Through 2008, the financial intelligence unit (FIU) had received more than 15,553 suspicious transactions reports (STRs). The requirement to report transactions linked to terrorism is not comprehensive enough, however.

Large currency transaction reporting: Yes

The threshold for currency transaction reports is 500,000 pesos (approximately $10,600). Through 2008, the FIU had received 135,790,318 CTRs.

Narcotics asset seizure and forfeiture:

Philippine law RA 9165 provides for the seizure and forfeiture of drug related assets. However, the Philippines has no comprehensive legislation pertaining to civil and criminal forfeiture. Various government authorities have the ability to temporarily seize property obtained in connection with criminal activity. Money and property must be included in the indictment, however, to permit forfeiture. Upon conviction or conclusion of the criminal case, funds left over after paying court and administrative costs are given to the Dangerous Drugs Board to further its campaign against illegal drugs.

The FIU has the ability to institute civil actions for forfeiture of monetary instruments or property involved in any unlawful activity defined in the AMLA. No prior criminal charge or conviction is necessary. Through the end of 2008, funds amounting to almost 1.4 billion Philippine pesos (approximately $30 million) were frozen by the FIU, including funds frozen at the request of the UN Security Council, the United States, and other foreign governments. However, 960 million Philippine pesos have been returned to victims and investors in investment scams.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements: Yes

Any amount in excess of the equivalent of $10,000 of cash or negotiable instruments must be declared upon arrival or departure. However, based on the actual amount of foreign currency exchanged and expended, authorities realize there is systematic abuse of the currency declaration requirements and a large amount of unreported cash entering the Philippines.

Cooperation with foreign governments (including refusals):

A Supreme Court of the Philippine’s decision requiring prior notice and hearing into the application for inquiry into bank deposits will have significant adverse consequences for Philippines law enforcement in extending international cooperation to its partners. As it stands, the FIU will have to prematurely divulge to account holders the fact of the investigation and the basis for inspecting the bank records.

There has been at least one recent U.S. Drug Enforcement Agency drug case in which the Philippine government refused extradition and instead has opted to pursue its own investigation/charges against the defendant wanted by the U.S.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Except in instances of serious offenses such as kidnapping for ransom, drugs and terrorism-related activities, the FIU is required to secure a court order to examine bank deposit accounts related to unlawful activities enumerated in the AMLA. Likewise, the FIU must obtain a court order to freeze assets of terrorists and terrorist organizations placed on the UN 1267 Sanctions Committee’s consolidated list, the list of Specially Designated Global Terrorists Designated by the United Sates pursuant to E.O. 13224 and the lists of other foreign governments. This requirement is inconsistent with the international standard, which calls for the preventative freezing of terrorist assets “without delay” from the time of designation.

The AMLA does not cover casinos, nonprofit organizations or designated nonfinancial businesses and professions, except trust companies.

U.S.-related currency transactions:

The amount of drug trafficking between the U.S. and the Philippines is not of a high volume; therefore, the amount of drug money flowing between the two countries is not believed to be at a high volume level. The Philippines does have a large expatriate community, with resulting remittances from the U.S.

Records exchange mechanism with U.S.:

The Philippines and the United States have been parties to a bilateral mutual legal assistance treaty that provides for exchange of information since 1996. The Philippines FIU and FinCEN signed a memorandum of understanding in December 2005.

International agreements:

The Philippines is a party to various information exchange agreements with countries in addition to the United States; 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 executed 19 MOUs with foreign counterparts.

The Philippines 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 Philippines 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 can be found here: www.apgml.org

Recommendations:

Since 2005, the Government of the Philippines (GOP) has continued to make progress enhancing and implementing its anti-money laundering regime, however the GOP needs to take immediate steps to comprehensively criminalize terrorist financing. Accountants, casinos, nonprofit organizations and designated nonfinancial businesses and professions should be fully regulated and supervised for anti-money laundering/counter-terrorist financing compliance and required to file CTRs and STRs. The GOP should enact comprehensive legislation regarding freezing and forfeiture of assets that would empower the FIU to issue administrative freezing orders to avoid funds being withdrawn before a court order is issued. In addition, as an investigative measure, law enforcement should be given the authority to have direct access to financial records without the need for a court order.

Poland

Poland lies directly along one of the main routes between the former Soviet Union republics and Western Europe used by narcotics traffickers and organized crime groups. According to Polish Government estimates, narcotics trafficking, organized crime activity, auto theft, smuggling, extortion, counterfeiting, burglary, and other crimes generate criminal proceeds in the range of $3 - $5 billion each year. According to the Government of Poland (GOP), evasion of customs duties and taxes is the largest source of illegal income. Fuel smuggling, by which local companies and organized crime groups seek to avoid excise taxes by forging gasoline delivery documents, is a major source of laundered proceeds. Money laundering through trade in scrap metal and recyclable material is a growing trend, as is the increasing activity of organized crime in the financial services area (internet banking, credit cards and electronic systems for money transfers). There are a growing number of cases involving entities located in tax haven countries. It is also believed that some money laundered in Poland originates in Russia or other countries of the former Soviet Union. The GOP estimates the gray economy, used primarily for tax evasion, may exceed 15 percent of Poland’s gross domestic product (GDP) for 2009. The GOP estimates the black economy comprises only one percent of GDP. Poland is not considered an important regional financial center, nor is it considered a particularly important international destination for money laundering. The GOP considers the nation’s banks, insurance companies, brokerage houses, and casinos to be important venues of money laundering. The Finance Ministry maintains that the effectiveness of actions against money laundering involving transfer of money to so-called tax havens is limited.

Offshore Center:

No information available.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering: Yes

(Criminalizes other money laundering, including terrorism-related: Yes

The Criminal Code criminalizes money laundering for all serious crimes. Article 299 of the Criminal Code addresses self-laundering and criminalizes tipping off. A new anti-money laundering/counter-terrorist financing (AML/CFT) law, the Act on Counteracting Money Laundering and Terrorism Financing (AML/CFT Law) that came into force on October 21, 2009, amends the Polish Penal Code, extending it to give greater coverage of money laundering and the financing of terrorism.

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 has been amended to provide for an autonomous offense of terrorism financing as part of the new AML/CFT Law. According to the new legislation, provision of funds for a terrorist organization for any purposes, even legitimate ones, can be considered as a form of participation in the criminal group and incur criminal liability.

Know-your-customer rules: Yes

The November 2000 Act on Counteracting Introduction into Financial Circulation of Property Values Derived from Illegal or Undisclosed Sources and on Counteracting the Financing of Terrorism, as amended, (the 2000 Act) requires customer identification, record keeping and reporting by covered entities.

Bank records retention: Yes

The 2000 Act requires banks to keep records for five years.

Suspicious transaction reporting: Yes

Reporting entities must file suspicious transaction reports (STRs), regardless of the size of the transaction with the financial intelligence unit (FIU). Entities subject to the reporting requirements include banks, the National Depository for Securities, post offices, auction houses, antique shops, brokerages, casinos, insurance companies, investment and pension funds, leasing firms, private currency exchange offices, real estate agencies, notaries public, lawyers, legal counselors, auditors, and charities, as well as the National Bank of Poland in its functions of selling numismatic items, purchasing gold, and exchanging damaged banknotes. In 2008, the FIU received a total of 17,227 STRs of which 17,214 were money laundering-related and 13 reported suspected terrorist financing. As a result of its analysis, the FIU demanded the suspension of one transaction for PLN 9,000 (approximately $3,200) and the freezing of 319 accounts worth an estimated PLN 20.5 million (approximately $7,300,000). Altogether, the FIU submitted 246 notifications to the Public Prosecutor’s Office under Article 299, representing an estimated PLN 1.03 bln (approximately $370,000,000).

Large currency transaction reporting: Yes

The law requires casinos to report the purchase of chips worth 1,000 euros (approximately $1,500) or more, and covered institutions must notify the FIU of all transactions exceeding 15,000 euros (approximately $22,500).

Narcotics asset seizure and forfeiture:

Article 45 of the criminal code reverses the burden of proof so that an alleged perpetrator must prove his assets have a legal source; otherwise, the assets are presumed to be related to the crime and the government can seize them.

The total value of all money laundering-related property seized in 2008 was approximately PLN 65.4 million (approximately $23,300,000). In 2008, the DFI froze 202 accounts worth an estimated PLN 10.3 million (approximately $3,700,000).

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

As of June 15, 2007, travelers entering Poland from a non-European Union (EU) country or traveling to a non-EU country with 10,000 euros (approximately $15,000) or more must declare their cash or monetary instruments in writing. Poland’s customs law requires travelers to complete and present a customs and currency declaration if they are transporting more than the threshold amount upon entry.

Cooperation with foreign governments (including refusals):

No legal impediments exist to cooperation. Polish law requires the FIU to have memoranda of understanding (MOUs) with other international competent authorities before it can participate in information exchanges.

U.S. or international sanctions or penalties:

As of June 2008, the European Commission (EC) was pursuing an infringement action against Poland for failing to adopt and implement the Third EU Anti-Money Laundering Directive into national law by the mandated deadline. In January 2009, the EC made the decision to refer Poland to the European Court of Justice over its non-implementation of this Directive. The GOP believes the anti–money laundering legislation which became effective in October 2009 satisfies the requirements of the Third EU Directive.

Enforcement and implementation issues and comments:

The Polish Bar mounted a challenge against certain provisions of the legislation, and submitted a motion to the Constitutional Tribunal to determine the consistency of various regulations with ten articles of the Polish Constitution. On July 2, 2007, the Constitutional Tribunal issued a ruling that lawyers are allowed to refrain from notifying the relevant authorities of suspicious transactions when they provide legal assistance to and determine the legal status of a client.

The efficient processing and analysis of the large number of filed reports is a challenge for the understaffed FIU.

From January to July 2009, Polish Prosecution brought money laundering (ML) charges against 89 persons in 37 cases. In seven cases, evidence was not sufficient to bring ML charges. Through July 1, 2009, 25 indictments were issued and 97 people were accused of ML offenses. In the same period of time, the courts pronounced ten sentences, finding 29 people guilty of ML. No terrorist financing prosecutions have been undertaken.

Poland has also created its own terrorist watch list of entities suspected of involvement in terrorist financing. The list contains the names of suspected terrorists and terrorist organizations listed on the UNSCR 1267 Sanctions Committee’s consolidated list, the names of Specially Designated Global Terrorists designated by the U.S. pursuant to Executive Order 13224, and the names designated by the EU under its relevant authorities.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

A Mutual Legal Assistance Treaty (MLAT) between the United States and Poland came into force in 1999. A MOU between the Polish FIU and the U.S. FIU was signed in fall 2003.

International agreements:

Poland has signed bilateral MLATs with Sweden, Finland, Ukraine, Lithuania, Latvia, Estonia, Germany, Greece, and Hungary. The DFI has been diligent in executing MOUs with its counterparts in other countries and now has 39 MOUs.

Poland 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

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

Recommendations:

Over the past year, the Government of Poland (GOP) has gone to great lengths to strengthen and harmonize its AML/CFT legal and regulatory tools and institutions with international standards. The creation of the autonomous offense of terrorist financing was a commendable step forward. However, work remains to ensure effective implementation. Poland should ensure promulgating regulations for compliance with the Third Money Laundering Directive are fully effective. The GOP should promote additional capacity building in the private sector and continue to improve communication and coordination between the FIU and relevant law enforcement agencies. Police and customs authorities, in particular, should receive training on recognizing money laundering and terrorist financing methodologies, including trade-based money laundering and informal value transfer systems. The FIU should be provided with sufficient resources and personnel to efficiently handle the large volume of reports it receives. The Code of Criminal Procedure also should be amended to specifically allow the use of special investigative measures in money laundering investigations, which would assist law enforcement in its efforts to attain a better record of prosecutions and convictions.

Portugal

Portugal is an entry point for narcotics transiting into Europe, and officials of the Government of Portugal (GOP) indicate the majority of money laundered in Portugal is narcotics-related. Its long coastline, vast territorial waters and privileged relationships with countries in Latin America and Africa make it a gateway country for Latin American cocaine and a trans-shipment point for drugs coming from North Africa entering Europe. Portuguese authorities have also detected criminal funds being placed into the financial system from smuggled commodities, particularly tobacco products. Authorities have also noted significant criminal proceeds from corruption, traffic in works of art and cultural artifacts, extortion, embezzlement, tax offenses, and aiding or facilitating illegal immigration. Currency exchanges and real estate purchases are often used for laundering criminal proceeds.

Offshore Center:

The Madeira International Business Center (MIBC), on the island of Madeira, has a free trade zone, an international shipping register, offshore banking, foreign trusts, holding companies, stock corporations, and private limited companies. The latter two categories, similar to international business corporations, account for approximately 6,500 companies registered in Madeira. Foreign trusts recognized by Portuguese law are submitted to a specific Commercial Registry and are forbidden from performing banking, insurance, and securities activities. All entities established in the MIBC maintain beneficial tax status until 2020. Companies in Madeira can also take advantage of Portugal’s double taxation agreements. Decree-Law 10/94 permits existing banks and insurance companies to establish offshore branches. Twenty-seven banks are currently licensed to operate within the MIBC. Like domestic banks, the credit and financial institutions established in the MIBC are supervised by the Bank of Portugal (BoP). Although Madeira has some local autonomy, Portuguese and European Union (EU) legislative rules regulate its offshore sector, and the competent oversight authorities supervise it, including for anti-money laundering/counter-terrorist financing (AML/CFT) purposes. There is no known evidence the MIBC has been used for money laundering or terrorist financing.

Free Trade Zones: Yes

See above.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Portugal has a comprehensive AML/CFT regime that criminalizes the laundering of proceeds of serious offenses, including terrorism, arms trafficking, kidnapping, and corruption. The Criminal Code, amended by Law 59/2007 of September 2007, defines money laundering, expands the list of crimes related to money laundering, and makes legal entities criminally liable. In June 2008, Portugal enacted Law 25/2008, the new AML/CFT Law, which enhances the AML/CFT system and also covers all banks, financial institutions, insurance companies and trusts registered in the MIBC. Portugal employs an all-crimes approach to 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/)

Portugal’s anti-terrorism law, Law 52/2003, as amended by Law 25/2008, defines terrorist acts and organizations and criminalizes terrorist financing as an autonomous offense. It also addresses the criminal liability of legal persons for terrorist financing.

Know-your-customer rules: Yes

All financial institutions must identify their customers and demand written proof from customers regarding the origins and beneficiaries of transactions that exceed 12,500 euros (approximately $17,000). Designated non-financial businesses and professions (DNFBPs) such as casinos, property dealers, lawyers, accountants, lotteries and dealers in high-value assets, must also identify customers engaging in large transactions, maintain records, and report suspicious activities. Law 25/2008 includes enhanced due diligence requirements for entities dealing with politically exposed persons (PEPs).

Bank records retention: Yes

All financial institutions must maintain customer records for a minimum of seven years.

Nonfinancial sectors such as casinos, property dealers, lotteries and dealers in high-value assets, must also maintain records.

Suspicious transaction reporting: Yes

Financial institutions are required to file suspicious transactions reports (STRs). Law 25/2008 broadened the GOP’s AML regime by mandating credit institutions, investment companies, life insurance companies, traders in high-value goods, and other entities also file STRs. Portugal’s Unidade de Informação Financeira, or Financial Intelligence Unit (FIU) is responsible for gathering, processing, and publishing information pertaining to investigations of money laundering, tax crimes, and terrorist financing. In 2007, the FIU received 870 suspicious transaction reports (STRs). The FIU also received over 21,800 other reports, primarily from the General Inspectorate for Gaming.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Portuguese laws provide for the confiscation of assets connected to money laundering and terrorist financing and authorize the Judicial Police to trace illicitly obtained assets (including those passing through casinos and lotteries), even if the predicate offense occurs outside of Portugal. The law allows the Prosecutor General’s Office to request a lien on the assets of individuals under prosecution in order to facilitate asset seizures related to narcotics and weapons trafficking, terrorism, and money laundering. In 2009, Portugal enacted several laws governing the seizure and confiscation of assets to comply with its European Union and other international obligations. While these laws are not directly related to AML/CFT, they will have an indirect impact on enforcement. Law 88/2009, for example, relates to the issuance and execution of confiscation decisions of criminal assets.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Decree-Law 295/2003 sets out reporting requirements for the cross-border transportation of cash, non-manufactured gold, and certain negotiable financial instruments, such as travelers’ checks. Under Decree-Law 61/2007 travelers entering Portugal with more than 10,000 euros (approximately $13,600) worth of such assets, coming from a non-EU country or leaving Portugal for a non-EU country, must declare the assets to Portuguese customs officials. If the traveler comes from an EU country, the traveler is required to declare sums of 10,000 euros or more, if requested by an official.

Cooperation with foreign governments: Yes

Portugal’s ability to co-operate internationally in criminal matters is outlined in Article 229 of the Criminal Procedure Code and more specifically in Law 144/99. Portugal is a party to a number of multilateral and bilateral agreements governing law enforcement and financial crimes.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2008, Portuguese authorities pursued 141 investigations and 33 prosecutions and obtained 15 convictions for money laundering. During the first six months of 2009, Portuguese authorities conducted 62 investigations and 10 prosecutions.

Names of individuals and entities included on the UN Security Council Resolution 1267 Committee’s consolidated list, or that the United States or EU have linked to terrorism, are passed to financial sector entities through the BoP, the Securities Market Commission, and the Portuguese Insurance Institute. For DNFBPs, the lists are passed through the oversight entities. Although Portugal does not have an administrative procedure to freeze assets, judicial procedure exists for the Prosecutor General to open a special inquiry and to freeze assets immediately at the request of a foreign country. To date, no significant assets have been identified or seized.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

The United States and Portugal are parties to a mutual legal assistance treaty and actively cooperate in information exchange. Portugal’s FIU is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

Portugal 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

Portugal is a member of the Financial Action Task Force. Its most recent mutual evaluation report can be found here: http://www.fatf-gafi.org/dataoecd/55/49/37708742.pdf

Recommendations:

The Government of Portugal (GOP) has implemented a comprehensive and effective regime to combat money laundering and spent several years strengthening its capacity to investigate and prosecute money laundering and terrorist financing cases. Legislative measures have consolidated the AML/CFT legal framework, imposing on financial and non-financial institutions obligations to prevent the use of the financial system for the purpose of money laundering and terrorist financing. With the passage of laws on seizure and confiscation, Portugal continued to implement these measures in 2009 to combat effectively money laundering and terrorist financing. The GOP should work to correct identified deficiencies in its asset freezing regime and improve its mechanisms to determine beneficial owners in the public registers.

Qatar

Supported by energy-driven double-digit economic growth in recent years, Qatar is an increasingly important banking and financial services center in the Gulf. Despite the growth of the banking sector and increasing options for financial services, Qatar still has a largely cash economy. Traditionally, Qatar has had a low rate of financial crime, although crime rates have increased in recent years. Moreover, there are several trends which make Qatar increasingly vulnerable to money laundering, including: a large number of expatriate laborers who send remittances to their home countries; the growth in trade and the financial sector’s expansion; liberalization and growth in the real estate sector; increases in the price of precious metals; uneven corporate oversight; and, an apparent lack of financial crimes enforcement.

The Qatar Financial Center (QFC) allows major international financial institutions and corporations to set up offices with 100 percent foreign ownership. Currently, there are a variety of banks, investment companies, insurance houses, and related professional services. QFC firms are limited to providing services to wholesale clients, except for insurance companies that can provide services to both wholesale and retail clients. The QFC has a separate, independent regulatory authority, the QFC Regulatory Authority. There are plans underway to create a unified regulatory authority for the country, though it remains unclear when the necessary legislation and oversight board will be in place, and also how Gulf Cooperation Council (GCC) plans for a unified currency and central banking system sometime after 2010 will affect Qatar’s regulatory plans.

Offshore Center: No

Free Trade Zones: Yes

Companies operating at the Qatar Science and Technology Park (QSTP) can import goods and services duty free. Qatar is also planning to establish three free-trade zones, but no definite time frame has been announced for their establishment.

Criminalizes narcotics money laundering:

Qatar’s anti-money laundering/counter-terrorist financing (AML/CFT) legal framework is currently based on the Anti-Money Laundering Law (28) of 2002 (AML Law), as amended by Decree Law (21) of 2003, which criminalizes money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

According to Article 2 of the AML Law, money laundering offenses involve the acquisition, holding, disposal of, managing, keeping, exchanging, depositing, investing, transferring, or converting of funds from illegal proceeds. The AML Law does not appear to cover all predicate offenses designated in international standards, and it does not give authorities jurisdiction over predicate offenses that were entirely committed in another country, even if there is dual criminality. Qatar is currently undergoing a self-assessment of AML risk.

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/)

In February 2004, the Government of Qatar (GOQ) passed the Combating Terrorism Law. According to Article Four of the law, any individual or entity that provides financial or logistical support, or raises money for activities considered terrorist crimes, is subject to punishment.

The law’s effectiveness has yet to be tested, as there have been no prosecutions for money laundering or terrorist financing crimes since its enactment. Authorities have investigated terrorist activity in Qatar, but no measures were taken to investigate their funding.

Know-your-customer rules: Yes

Banks are required to know their customers; the banking system is considered open in that, in addition to Qatari citizens and legal foreign residents, nonresidents can open an account based on a reliable recommendation from his or her primary bank. Anonymous accounts or accounts in fictitious names are allowed. Preventive measures for financial institutions in the domestic sector fall short of addressing a vast majority of international customer due diligence standards.

Bank records retention: Yes

The AML law requires all financial institutions to report suspicious transactions to the Financial Information Unit and retain records for up to 15 years.

Suspicious transaction reporting: Yes

In October 2004, the GOQ established a financial intelligence unit (FIU) known as the Qatar Financial Information Unit (QFIU). The FIU is responsible for receiving and reviewing all suspicious and financial transaction reports and recommending actions to be taken if suspicious transactions or financial activities of concern are identified. There is no obligation imposed by primary or secondary legislation to report suspicious transactions related or linked to terrorist financing. The most recent published information available on the number of suspicious transaction reports (STRs) filed is from 2008. The FIU reports that close to 100 STRs were filed in 2009. The FIU does not protect adequately the information received nor does it conduct a periodic review of the effectiveness of its systems to combat money laundering and terrorist financing; reportedly, the quality of STR analysis also needs improving.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Qatar adopted a comprehensive confiscation, freezing, and seizing framework under the AML Law which enables the authorities to remove all assets linked with a money laundering offense or its predicate. Confiscation is mandatory and must be applied even when it has not been requested by the prosecutors. Provisional measures have been taken in some instances (which all related to the freezing of bank accounts), but no confiscation has been ordered because no money laundering charges have been brought before the courts.

Narcotics asset sharing authority: No

The authorities have not considered establishing an asset forfeiture fund nor have they considered the sharing of confiscated property with foreign jurisdictions whose coordinated actions have led to the confiscation.

Cross-border currency transportation requirements: No

Qatar does not have mandatory cross-border currency reporting requirements. In suspicious cases, customs officials are given authority to require travelers to fill out forms declaring currency or other negotiable financial instruments in their possession. Officials then forward the traveler’s information to the QFIU for evaluation. The current system is neither implemented nor effective.

Cooperation with foreign governments: Yes

Article 17 of the AML Law specifically provides that legal assistance, coordination, joint cooperation and extradition should be provided in money laundering investigations in accordance with the international agreements concluded by the State of Qatar.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Qatar has designated a number of competent authorities to investigate and prosecute money laundering and terrorist financing offenses. However, the various agencies do not appear to be sufficiently structured, funded, and resourced to effectively carry out their functions. There has been a lack of successful AML/CFT investigations, prosecutions, and convictions.

Qatar has a National Counter Terrorism Committee (NCTC) to review the consolidated UN 1267 terrorist designation lists and execute the obligations stated in UN Security Council’s 1373, its successor resolutions, and other UN resolutions related to terrorism; it also recommends any necessary actions against individuals or entities found in Qatar. The committee and the Central Bank circulate to financial institutions the individuals and entities included on the UN 1267 Sanctions Committee’s consolidated list.

Regarding Iran-related terrorism and proliferation transactions, the Central Bank ordered financial institutions to freeze any assets of entities listed in UNSCRs 1737, 1747, and 1803, and prohibits them from carrying out any transactions with listed entities. However, Iran’s Bank Saderat—an entity of concern in UNSCR 1803—was allowed to open a second branch in Doha in June 2008.

Hawala transactions are prohibited by law in Qatar, though informal remittance systems do exist and the largely undocumented nature of these networks makes it difficult to judge prospective money laundering activity.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

The GOQ exchanges information with the United States on a case-by-case basis. The QFIU is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

Qatar 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

Qatar is a member of the Middle East and North Africa Financial Action Task Force (MENA-FATF) a Financial Action Task Force-style regional body. In lieu of a mutual evaluation, the International Monetary Fund (IMF) conducted an assessment. The report can be found here: http://www.menafatf.org/images/UploadFiles/QatarMER1.pdf

Recommendations:

The Government of Qatar (GOQ) should continue to implement AML/CFT policies and procedures that adhere to international standards. Qatar should review and amend its legislation, as necessary, to ensure its money laundering and terrorist financing laws comport with international standards. Additionally, the GOQ should enhance its customer due diligence requirements and assure all relevant financial institutions and nonfinancial businesses and professions are subject to record keeping and reporting requirements. The GOQ should enhance training for law enforcement, prosecutors, and customs authorities so they can improve their capabilities in recognizing and pursuing various forms of terrorist financing, money laundering and other financial crimes. The FIU should continue its efforts to address deficiencies in the AML/CFT regime.

Romania

Romania’s geographical location makes it a natural transit country for trafficking in narcotics, arms, stolen vehicles, and persons by transnational organized criminal elements. As such, the nation is vulnerable to financial activities associated with such crimes, including money laundering. Tax fraud, fraudulent claims in consumer lending, and trans-border smuggling of counterfeit goods are additional types of financial crimes prevalent in Romania. Laundered money comes primarily from international crime syndicates who conduct their criminal activity in Romania and subsequently launder their illicit proceeds through illegitimate front companies. Another source of laundered money is the proceeds of illegally smuggled goods such as cigarettes, alcohol, gasoline, and other dutiable commodities. Commercial transactions have been the main method of money laundering, primarily through use of shell and off-shore companies; this primarily involves fraudulent claims for value added tax (VAT) reimbursement. Romania also has some of the highest rates of cybercrime and online credit card fraud in the world. Studies have found Romanian servers to be the second largest source of cybercrime transactions worldwide. Although a majority of their victims reside in the United States, Romanian cyber-criminals are increasingly targeting victims elsewhere in Europe as well as in Romania itself.

Offshore Center: No

Free Trade Zones: Yes

Romania has one free trade zone, located at the Port of Constanta. Law 84/1992 and its subsequent amendments regulate free zones under the authority of the Free Zone Administration. According to European Union (EU) legislation, free zones will be allowed to exist until January 1, 2011.

Criminalizes narcotics money laundering: Yes

Romania’s Law No. 21/99, on the Prevention and Punishment of Money Laundering, criminalizes money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

The Law on the Prevention and Sanctioning of Money Laundering (Law 656/2002) stipulates an “all crimes” approach for predicate offenses.

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 Romania's (GOR) legislation, as amended by Emergency Ordinance 53/2008, provides that the production or acquisitions of means or instruments, with intent to commit terrorist acts, are offenses of the same level as terrorist acts themselves. Romania has a uniform approach to combating and preventing money laundering and terrorist financing and requires reporting entities to file suspicious transaction reports (STR).

Know-your-customer rules: Yes

In 2006, the National Bank of Romania (BNR) widened the scope of its know-your-customer (KYC) norms by extending their application to all other nonbanking financial institutions under its supervision. It also requires banks to undertake proper due diligence measures before entering into international correspondent relations and prohibits them from opening correspondent accounts with shell banks. Emergency Ordinance 53/2008 establishes simplified and enhanced due diligence requirements, prohibitions on anonymous bank accounts and a reporting category for politically exposed persons. The financial intelligence unit’s (FIU) Governing Board has also issued regulations implementing KYC standards for nonfinancial reporting entities (casinos, notaries, real estate brokers, etc).

Bank records retention: Yes

According to Law 656/2002 and BNR Rule 9/2008, credit institutions must maintain copies of documents establishing individual clients’ identities and legal status for at least five years from the termination of their business relationship with the client.

Suspicious transaction reporting: Yes

In addition to financial institutions, Romanian anti-money laundering legislation requires non-financial institutions such as art dealers, travel agents, privatization agents, postal officials, money service businesses, and real estate agents to file STRs with the FIU. The FIU receives and processes intelligence and notifies the General Prosecutor's Office, or the Romanian Intelligence Service (SRI), if the case involves suspected terrorism financing. During the first ten months of 2009, the FIU received 2,658 STRs compared to 1,452 STRs received in the first nine months of 2008.

Large currency transaction reporting: Yes

Reporting entities, including financial institutions and intermediaries, must report cash transactions over 10,000 euros (approximately $13,600) to the FIU. During the first eleven months of 2009, the FIU received 43,461 currency transaction reports (CTRs), down from 61,372 CTRs for the same period in 2008.

Narcotics asset seizure and forfeiture:

Article 118 of the Romanian Criminal Code allows for asset seizure and forfeiture, including in cases of money laundering and terrorist financing. Additional asset seizure and forfeiture provisions are found in the Law on Combating Corruption, No. 78/2000, and the Law on Preventing and Combating Tax Evasion, No. 241, introduced in July 2005.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Romania's National Customs Authority has been submitting to the FIU on a monthly basis all cash declarations by individuals of foreign and/or domestic currency equal to or exceeding 10,000 euros (approximately $13,600).

Cooperation with foreign governments:

Romania regularly cooperates in international money laundering and terrorist financing investigations and information exchanges. Romania is a member of and host country for the headquarters of the Southeast European Cooperative Initiative’s (SECI) Center for Combating Trans-border Crime, a regional center that focuses on intelligence sharing related to criminal activities, including terrorism. In addition to a number of regional initiatives to combat terrorism, Romania has worked within the South East Europe Security Cooperation Steering Group (SEEGROUP), a working body of the NATO initiative for Southeast Europe to coordinate counter-terrorist measures undertaken by the states of southeastern Europe.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Since its establishment, the FIU has faced numerous political and operational challenges, including low staffing levels. The FIU is now working to improve its operations, emphasizing quality rather than quantity when analyzing suspicious transactions. Thus far, investigations have resulted in only a handful of successful prosecutions. Efforts to prosecute cases have been hampered by the lack of specialization and technical knowledge of financial crimes within the judiciary.

The BNR circulates to banks and financial institutions the lists of individuals and terrorist organizations provided by the United States, the UNSCR 1267 Sanctions Committee, and the EU. The law on terrorism provides for the forfeiture of assets used by or provided to terrorist entities, together with finances resulting from terrorist activity. To date, no terrorist financing arrests, seizures, or prosecutions have been reported.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

A Mutual Legal Assistance Treaty (MLAT) between the United States and Romania entered into force in October 2001. The Romanian FIU has signed a memorandum of understanding (MOU) with the Financial Crimes Enforcement Network.

International agreements:

Romania is a party to a number of MLATs; and the FIU has signed 47 bilateral MOUs with counterpart FIUs. In December 2009, SECI’s 13 member states signed a new agreement, the Southeast European Law Enforcement Center (SELEC) Convention, which will enter into force once formally ratified by all members.

The GOR 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 GOR 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/Evaluations/round3/MONEYVAL%282008%2906Rep-ROM3_en.pdf

Recommendations:

The Government of Romania (GOR) should continue its efforts to ensure that nonbank financial institutions are adequately supervised. Additionally, the knowledge level of the sector should be increased regarding its reporting and record keeping responsibilities and the identification of suspicious transactions. The GOR should continue to improve communication between reporting and monitoring entities, as well as between prosecutors and the FIU. In order to improve the rate of money laundering prosecutions and convictions, Romania should not become overly reliant on STRs and other forms of financial intelligence but rather empower law enforcement and customs authorities to detect and investigate money laundering at the street level and at borders and ports. Romania should improve implementation of existing procedures for the timely freezing, seizure, and forfeiture of criminal or terrorist-related assets. Romania should continue to make progress in combating corruption in government and commerce.

Russia

Russia is a regional financial center with a relatively small, but growing, number of depositors. Money laundering (ML) and terrorist financing (TF) are prevalent in Russia, where there is a high level of organized crime and corruption. Criminal elements from neighboring countries extensively use Russia’s financial system to launder money. Domestic sources of laundered funds include organized crime, evasion of tax and customs duties, fraud, public corruption, and smuggling operations. Criminals invest and launder their proceeds in real estate and security instruments, or use them to buy luxury consumer goods. Criminal elements from Russia and neighboring countries continue to use Russia’s financial system and foreign legal entities to launder money. Russia has been a repeated victim of terrorism, and some TF schemes involve the misuse of alternative remittance networks by foreign and North Caucasian terrorist groups. Despite making progress in combating financial crimes, Russia remains vulnerable to such activities because of the many large-scale financial transactions associated with its vast natural resources, the heavy direct and indirect roles of the state in the economy, porous borders, Russia’s role as a geographic gateway to Europe and Asia, and under-funding of regulatory and law enforcement agencies, which contributes to both corruption and lack of regulatory and law enforcement capacity.

Offshore Centers: No

Free Trade Zones: Yes

To date, six Special Economic Zones have been established pursuant to legislation passed in 2005: in Zelenograd and Dubna in the Moscow region (focused on micro-electronics and nuclear technology, respectively); St. Petersburg (information technology); Tomsk (new materials); Lipetsk (appliances and electronics); and Yelabuga (auto components and petrochemicals).

Criminalizes narcotics money laundering: Yes

Russia criminalizes money laundering through articles 174 of the Criminal Code (CC) (regarding money laundering), 174.1 CC (self-laundering) and 175 CC (acquisition of property obtained by crime).

Criminalizes other money laundering, including terrorism-related: Yes

Russia takes an “all crimes” approach to money laundering predicate offenses, with the exception of six financial crimes (such as insider trading and stock market manipulation). To partly remedy these exceptions, Law 241-FZ was passed on October 30, 2009, to criminalize insider trading, stock market manipulation, and other similar crimes. There is no criminal liability for corporations; only a natural person is subject to criminal liability.

Criminalizes terrorist financing: Yes

Russia criminalizes terrorist financing in 205.1 CC, which targets any support or contribution to terrorist activity. The terrorist financing offense covers the provision and collection (“raising”) of funds. The low number of investigations and convictions under the terrorist financing provisions in proportion to the prevalence of terrorism in Russia suggests that these provisions are not being used effectively.

Know-your-customer rules: Yes

Developing customer due diligence practices among financial institutions makes up a large portion of Russia’s anti-money laundering (AML) improvement efforts. Due diligence is supported by both a legal framework and guidelines issued by the Central Bank of Russia (CBR), and is stringently enforced. Federal Law No. 115-FZ prohibits credit institutions from opening, and thus maintaining, new accounts (deposits) registered in the name of anonymous holders, i.e., without the requisite identification documents. The CBR requires financial institutions to update customer information every one to three years, depending on the perceived risk of money laundering. According to Law 121-FZ, effective December 7, 2009, transactions over RUR 15,000 (approximately $500) cannot be conducted without proof of identification.

Russia has established unified anti-money laundering/counter-terrorist financing (AML/CFT) requirements for financial institutions and the majority of designated non-financial businesses and professions (DNFBPs), such as casinos and gambling outlets, jewelers’ businesses, real estate agents, and pawnshops. A draft law currently being considered by the State Duma contains legislative amendments to fully extend the customer identification, record keeping and reporting requirements to lawyers, notaries and auditors.

Russia improved its legislation regarding politically exposed persons (PEPs) in Law 121-FZ, dated June 3, 2009, by allowing financial institutions to identify foreign PEPs, requiring written permission to perform services for foreign PEPs, and permitting financial institutions to determine the sources of monetary funds or other property owned by foreign PEPs. Law 273-FZ and RF Presidential Decree No. 557 established a means for monitoring the incomes of Russian PEPs.

Bank records retention: Yes

In accordance with Law 262-P, banks must obtain information regarding individuals, legal entities and the beneficial owners of corporate entities and retain it for a minimum of five years from the date of the termination of the business relationship.

Suspicious transaction reporting: Yes

Law 115-FZ (AML/CFT Law) requires the reporting of suspicious transactions. Article 7 of the AML/CFT Law includes a requirement to file suspicious transaction reports (STRs) in the case of suspected terrorist financing. Any transaction involving an entity or person included on the Russian government’s list of those involved in extremist activities or terrorism must be reported as a suspicious transaction. Institutions legally required to report suspicious or large transactions include banks, credit organizations, securities market professionals, insurance and leasing companies, the federal postal service, jewelry and precious metals merchants, betting shops, companies managing investment and nongovernmental pension funds, real estate agents, lawyers and notaries, and persons rendering legal or accounting services that involve certain transactions. Between January 1 and October 1, 2009, 2,706,610 STRs were received by the FIU.

Large currency transaction reporting: Yes

Financial institutions are required under the AML/CFT Law to file large currency transaction reports (CTRs). A CTR is filed if a transaction equals or exceeds RUR 600,000 (approximately $20,000). Real estate transactions that are valued at RUR 3,000,000 (approximately $100,000) or more must be reported.

Narcotics asset seizure and forfeiture: Yes

Russian legislation provides for the tracking, seizure and forfeiture of all criminal proceeds. Russia uses two instruments for confiscations: the Code of Criminal Procedure (CCP) Article 81, 104.1 CC, and 104.2 CC. Both articles 81 CCP and 104.1 CC provide for the confiscation of instruments, equipment or other means of committing an offense or intended to be used to commit a crime. The Russian confiscation regime does not make any distinction between money, valuables or any other property. Investigators and prosecutors can apply to the court to freeze or seize property obtained as the result of crime, although there are some exceptions in the law restricting seizure of property identified as a primary residence.

Russia has established a system for freezing terrorist assets to comply with UNSCRs 1267 and 1373, as well as subsequent resolutions. Russia maintains both domestic and international terrorist lists. During the first nine months of 2009, there were 253 cases involving the freezing or seizure of property in Russia. Approximately RUR 282,780,000 (approximately $9,340,000) worth of assets was frozen or seized, and RUR 59,692,000 (approximately $1,970,000) was confiscated.

Narcotics asset sharing authority: Yes

Russia has a number of bilateral and multilateral arrangements with foreign counterparts regarding matters of seizure and confiscation and is able to share assets with foreign countries. Russia can recognize and enforce foreign non-criminal confiscation orders.

Cross-border currency transportation requirements: Yes

Russia has implemented a declaration system, which is not fully identical for incoming and outgoing passengers. According to the Currency Control and Regulation Law, all incoming persons are obliged to declare any foreign or Russian currency, as well as travelers’ checks and securities, if the amount exceeds the equivalent of $10,000. According to the same law, the term securities includes domestic security documents related to the securities market and “other securities” which covers all other bearer negotiable instruments. Outgoing travelers must declare cash between $3,000 and $10,000. The export of amounts exceeding $10,000 in foreign and domestic currency is prohibited, unless otherwise licensed on the incoming declaration form. In March 2009, the Federal Customs Service proposed changes designed to improve the system of controlling the flow of cash and bearer negotiable instruments across the Russian border.

Cooperation with foreign governments (including refusals):

The general provision on (international) information exchange is set out in article 10 of the AML/CFT Law. Even though all agencies concerned can act internationally on their own initiative, most of the international cooperation takes place through the financial intelligence unit (FIU). As Chair of the Eurasian group on combating money laundering and financing of terrorism (EAG), Russia’s FIU continues to play a strong leadership role in the region and provides technical assistance, including staff training for FIUs and other interested ministries and agencies involved in AML/CFT efforts in the region

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Although both domestic and foreign PEPs are subject to enhanced due diligence, Russian PEPs are not monitored as closely as foreign PEPs. There is no specific provision that prohibits financial institutions from maintaining existing accounts under fictitious names, although, in practice, the Central Bank believes it is unlikely that accounts under fictitious names could operate in the system.

Russia has been criticized for being vulnerable to criminal ownership of financial institutions, and some banks are in fact still believed to be owned and controlled by (suspected) criminals and their front men. To date, the authorities appear to lack the necessary supervisory instruments/legal authorities to prevent criminals from controlling financial institutions, although a draft action plan for the banking sector, and draft legislation, contains provisions to address this problem.

Between January 1 and October 1, 2009, 2462 individuals were charged with money laundering. As of December 1, 2009, the Central Bank had revoked the licenses of nine banks for failure to comply with AML regulations. Additionally, in the first nine months of 2009, the licenses of 14 securities, investment, and pension funds were annulled.

U.S.-related currency transactions:

The U.S. dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent. In accordance with the annual report the Russian Central Bank provides to the State Duma, the dollar has lost the status of the basic reserve currency. According to the U.S. Department of the Treasury, Russia became one of the largest creditors of the U.S. administration last year. Russia increased its investments in the debt securities of the U.S. Treasury from $32.7 billion as of December 2007 to $116.4 billion as of December 2008.

Records exchange mechanism with U.S.:

A Mutual Legal Assistance Treaty between the United States and Russia entered into force on January 31, 2002. Although Russia has assisted the U.S. in investigating cases involving terrorist financing, Russia and the U.S. continue to have differing opinions regarding the purpose of the UN 1267 Sanctions Committee’s designation process. These political differences have hampered bilateral cooperation in this forum. U.S. law enforcement agencies exchange operational information with their Russian counterparts on a regular basis.

During the 2009 Summit in Moscow, Presidents Obama and Medvedev approved the development of a U.S. – Russia bi-lateral initiative aimed to significantly increase the use of financial intelligence and law enforcement tools to stop the illicit financial flows related to drug trafficking in Afghanistan. The initiative will include an operational component to target the trafficking and the illicit networks that support it.

International agreements:

The FIU has 39 memoranda of understanding (MOUs) with other FIUs, including the United States.

Russia 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

Russia is a member of the Financial Action Task Force (FATF) and the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. It also hosts and funds the Secretariat of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), a FATF-style regional body, and through this effort has contributed to improving the region’s capacity for countering money laundering and terrorist financing. Its most recent mutual evaluation report can be found at: http://www.fatf-gafi.org/document/32/0,3343,en_32250379_32236982_35128416_1_1_1_1,00.html

Recommendations:

Through aggressive enactment and implementation of comprehensive AML/CFT legislation, the Government of Russia (GOR) has established much of the legal and enforcement framework to deal with money laundering and terrorist financing. The GOR should enact the draft law amendments to fully extend the customer identification, record keeping and reporting requirements to lawyers, notaries and auditors, and to provide the legal and supervisory authorities to prevent criminals from controlling financial institutions. Although Russia continues to establish and develop anti-corruption measures, corruption continues to be a problem. The GOR should continue to aggressively pursue corruption; similarly, it should continue to pursue increased transparency in the financial sector. The GOR should ensure that domestic PEPs are monitored on a par with foreign PEPs and prohibit the establishment of accounts in fictitious names. Russia has successfully spread awareness of AML/CFT efforts and has weeded out noncompliant financial institutions; however, significant discrepancies still remain between standards of international and local banks. Further efforts could be made to bring AML efforts of all Russian banks to a more sophisticated level. Finally, Russia should continue to play a leadership role through sustained involvement in the regional and international bodies focusing on AML/CFT regime implementation.

Saudi Arabia

The Kingdom of Saudi Arabia is a growing financial center in the Gulf Region. Entities in Saudi Arabia continue to serve as an important source of funds for Sunni-based extremist groups. Saudi officials acknowledge difficulty in following the money trail with regard to illicit finance due to the preference for cash transactions in the country. Money laundering and terrorist financing are known to originate from Saudi criminal enterprises, private individuals, and Saudi-based charities. It is believed the proceeds of crime from stolen cars and counterfeit goods are substantial, but there is no indication of narcotics-related money laundering. There is an absence of official criminal statistics, but reportedly, there was no significant increase in financial crimes during 2009.

Offshore Center: No

Free Trade Zones:

There are no free trade zones for manufacturing, although there are bonded transit areas for the trans-shipment of goods not entering the country.

Criminalizes narcotics money laundering: Yes

In 2003 Saudi Arabia approved a new Anti-Money Laundering Law (AML Law) that contains criminal penalties for money laundering, including the proceeds of narcotics. The law bans conducting commercial or financial transactions with persons or entities using pseudonyms or acting anonymously; and requires banks and financial institutions to report suspicious transactions.

Criminalizes other money laundering, including terrorism-related: Yes

The 2003 AML Law criminalizes the proceeds of criminal activity and the financing of terror.

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 addition to the AML Law, 2007 regulations state that “whoever funds terrorists or terror organizations is considered to be committing a crime of money laundering.”

Know-your-customer rules: Yes

In May 2003, the Saudi Arabia Monetary Authority (SAMA) issued updated anti-money laundering/counter-terrorist financing (AML/CFT) guidelines for the Saudi banking system. The guidelines require banks to have mechanisms to monitor all types of “Specially Designated Nationals,” as listed by SAMA; fund transfer systems to be capable of detecting specially designated nationals; banks to strictly adhere to SAMA circulars on opening accounts and dealing with charity and donation collection; and banks to be able to provide the remitter’s identifying information for all outgoing transfers. The guidelines also require banks to use software to profile customers to detect unusual transaction patterns and establish a monitoring threshold of 100,000 Saudi riyals (approximately $26,700). SAMA also issued know-your-customer guidelines, requiring banks to freeze accounts of customers who do not provide updated account information.

Bank records retention: Yes

The AML Law requires financial institutions to maintain records of transactions for a minimum of ten years.

Suspicious transaction reporting: Yes

In 2005, the Saudi Arabian Government (SAG) established the Saudi Arabia Financial Investigative Unit (SAFIU), which acts as the country’s financial intelligence unit (FIU). Saudi banks are required to file suspicious transaction reports (STRs) with the SAFIU. The SAFIU collects and analyzes STRs and makes referrals to the Bureau of Investigation and Prosecution, the Mabahith (the Saudi Internal Security Service), and the Public Security Agency for further investigation and prosecution. Statistics for suspicious transaction reporting are not available.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

SAMA is responsible for the tracing, freezing, and seizing of assets related to financial crimes. The banking community cooperates with SAMA regarding the tracing of funds as well as seizing and freezing of bank accounts. Existing laws on asset seizure and forfeiture are enforced by SAMA.

Narcotics asset sharing authority: No

There are currently no laws that allow the sharing of seized assets with other governments.

Cross-border currency transportation requirements: Yes

In June 2007, the SAG enacted stricter regulations on the cross-border movement of money, precious metals, and jewels. Money and gold in excess of 60,000 Saudi riyals (approximately $16,000) must be declared upon entry and exit from the country using official Customs forms. However, it is unclear to what degree these procedures have been implemented or how effective they have been. Cash declarations as well as smuggling reports are entered into a database.

Cooperation with foreign governments:

The AML Law allows for the exchange of information and judicial actions against money laundering operations with countries with which Saudi Arabia has official agreements.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Hawala and money service businesses outside banks and licensed money changers are illegal in Saudi Arabia. Some instances of money laundering and terrorist financing in Saudi Arabia have involved hawala. To help counteract the appeal of hawala, particularly to many of the approximately six million expatriates living in Saudi Arabia, Saudi banks have taken the initiative to create fast, efficient, high quality, and cost-effective fund transfer systems that have proven capable of attracting customers accustomed to using hawala. In 2005, in an effort to further regulate the more than $16 billion in annual remittances that leave Saudi Arabia, SAMA consolidated the eight largest moneychangers into a single bank.

Saudi individual donors and unregulated charities have reportedly been a major source of financing to extremist and terrorist groups over the past 25 years. However, the Final Report of the National Commission on Terrorist Attacks Upon the United States, known as The 9/11 Commission, found no evidence that either the Saudi Government, as an institution, or senior Saudi Government officials individually, funded al-Qaida. A Government Accountability Office (GAO) report released on September 24, 2009 came to the same conclusion.

Although not directed at the SAG, in June 2008, the U.S. Department of the Treasury designated the Al Haramain Islamic Foundation (AHF), including its headquarters in Saudi Arabia, under Executive Order 13224 for having provided financial and material support to al-Qaida. Previously, the SAG joined the United States in designating several branch offices of AHF at the United Nations and, due to actions by Saudi authorities, AHF had largely been precluded from operating in its own name. Despite these efforts, AHF leadership attempted to reconstitute the operations of the organization, and parts of the organization continued to operate. AHF has long been aligned with many of the activities of the Muslim Brotherhood, with chapters in Western Europe, the Balkans, the United States, and Canada.

Banking rules implemented in 2003 that apply to all charities include stipulations that they can only be established in Saudi riyals; must adhere to enhanced identification requirements; must utilize one main consolidated account; and must make payments only by checks payable to the first beneficiary, which then must be deposited in a Saudi bank. Regulations also forbid charities from using ATM and credit cards for charitable purposes, from making cash contributions, and making money transfers outside of Saudi Arabia.

SAMA circulates to all financial institutions under its supervision the names of suspected terrorists and terrorist organizations on the UNSCR 1267 Sanctions Committee’s consolidated list.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No bilateral treaty exists between the United States and the SAG. The United States has experienced significant difficulty in obtaining documents and bank records pursuant to formal mutual legal requests made to the SAG.

International agreements:

The SAFIU became a member of the Egmont Group in May 2009.

Saudi Arabia 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

Saudi Arabia is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a FATF-style regional body. Saudi Arabia underwent its first mutual evaluation in February 2009; once adopted the report will be found here: http://www.menafatf.org/TopicList.asp?cType=train

Recommendations:

The Saudi Arabian Government is taking steps toward enforcing its AML/CFT laws, regulations, and guidelines. However, Saudi Arabia has yet to fully implement its UN obligations, and individuals and entities within the borders of Saudi Arabia continue to be a significant source for terrorist financing. The SAG needs to take concrete steps to improve charities oversight, including oversight and control of Saudi entities with overseas operations. There is still an over-reliance on suspicious transaction reporting to generate money laundering investigations. Law enforcement agencies should take the initiative and proactively generate leads and investigations, and be able to follow the financial trails wherever they lead. The public dissemination of statistics regarding predicate offenses and money laundering prosecutions would facilitate the evaluation and design of enhancements to the judicial aspects of the AML/CFT system. The SAG should work to improve its ability to share bank and other financial information with foreign law enforcement pursuant to formal mutual legal assistance requests. Saudi Arabia should become a party to the UN Convention against Corruption.

Senegal

A regional financial center with a largely cash-based economy, Senegal is vulnerable to money laundering. Reportedly, most money laundering involves domestically generated proceeds from corruption and embezzlement. In fiscal year (FY)2008 and FY2009, the International Monetary Fund discovered significant amounts of extra budget expenditures and debts to private businesses that the government has been told to repay. Also of concern are criminal figures who launder and invest their personal and their organization’s proceeds from the growing West Africa narcotics trade. There is also evidence of increasing criminal activity by foreigners, such as narcotics trafficking by Latin American groups and trafficking in persons involving Pakistanis.

Dakar’s active real estate market is largely financed by cash. Property ownership and transfer are not transparent. The continued building boom and high property prices suggest there is an increasing amount of funds with uncertain origin circulating in Senegal. The growing presence of hawala or other informal cash transfer networks and the increasing numbers of used imported vehicles also suggest the existence of both money laundering and illicit cash couriers. Trade-based money laundering (TBML) is centered in the region of Touba, a largely autonomous and unregulated free-trade zone under the jurisdiction of the Mouride religious authority. Touba reportedly receives between $550 and $800 million per year in funds repatriated by networks of Senegalese traders and vendors abroad. Other areas of concern include the transportation of cash, gold and gems through Senegal’s airport and across its porous borders.

Offshore Center: No

Free Trade Zones: Yes

A free trade zone under the jurisdiction of the Mouride religious authority operates largely autonomously.

Criminalizes narcotics money laundering:

The legal basis for Senegal’s anti-money laundering/counter-terrorist financing (AML/CFT) framework is “la Loi Uniforme Relative a la Lutte Contre le Blanchiment de Capitaux” No. 2004-09 of February 6, 2004, or the Anti-Money Laundering Uniform Law (AML Law). All member states are bound to enact and implement the common law passed by the members of the West African Economic and Monetary Union (WAEMU). Senegal has an “all crimes” approach to money laundering. The law does not require a conviction for a predicate offense, and intent may be inferred from objective factual circumstances. Self launderers may be prosecuted; and criminal liability applies to all legal persons as well as natural persons.

Criminalizes other money laundering, including terrorism-related: Yes

See above.

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 Central Bank of West African States (BCEAO) released a Directive against Terrorist Financing directing member states to enact a law against terrorist financing; similar to the AML Law, the BCEAO law is a common law to be adopted by all WAEMU members. Each member’s legislature must enact enabling legislation to adopt it. On January 27, 2009, Senegal’s National Assembly approved the WAEMU CFT uniform law “la loi Uniforme Relative a la Lutte Contre le Financement du Terrorisme (LUCFT),” that criminalizes terrorist financing.

Know-your-customer rules: Yes

The AML Law requires banks and other financial institutions to record and report the identity of any individual or entity engaged in significant transactions, including the recording of the origin of any deposit greater than 5 million CFA (approximately $10,400) for a single individual account and 20 to 50 million CFA (approximately $40,000 to $100,000) for any business account. Commercial banks in Senegal are enhancing their know-your-customer (KYC) procedures.

Bank records retention: Yes

Obligated entities must retain documents relating to customers’ identity for ten years following the closing of their accounts. They must also keep records and documents relating to transactions for ten years from the end of the financial year during which the transactions were conducted.

Suspicious transaction reporting: Yes

Obligated entities must file suspicious transaction reports (STRs) with the Cellule Nationale de Traitement des Informations Financieres (CENTIF), Senegal’s financial intelligence unit (FIU). In 2008, CENTIF received 58 STRs and referred 30 cases to the Prosecutor General. In turn, the Prosecutor General passed ten cases directly to the investigating judge.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

The AML Law provides for the freezing, seizing, and confiscation of property by judicial order. In addition, the FIU can order the suspension of the execution of a financial transaction for 48 hours. The BCEAO also can order the freezing of funds held by banks. The AML Law allows explicitly for criminal forfeiture; there is no provision for civil forfeiture.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Partially

Senegal’s currency control and reporting requirements are not uniform and are reportedly laxly enforced. They are geared towards currency control and not anti-money laundering. Upon entry, nonresidents must declare any currency they are transporting from outside the “zone franc” greater than 1 million CFA (approximately $2,000) and all monetary instruments denominated in cash in any amount. When departing Senegal, nonresidents must declare any currency from outside the zone franc greater than approximately $1,000 and all monetary instruments from foreign entities. The law does not require residents to declare currency on entry; on exit, they must declare amounts of any foreign currency and any monetary instruments greater than approximately $4,000. All declarations must be in writing. There is no publicity regarding currency declaration requirements at major points of entry.

Cooperation with foreign governments:

No impediments to cooperation are known to exist. BCEAO, based in Dakar, is the central bank for the eight countries in the WAEMU, including Senegal, and uses the CFA franc currency. The Government of Senegal (GOS) has worked on international anti-crime operations with INTERPOL, Spanish, and Italian authorities.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

CENTIF reportedly does not share or disseminate information or financial intelligence to law enforcement. Official statistics regarding the prosecution of financial crimes are unavailable. There has been only one known conviction for money laundering since 2005, which led to the confiscation of a private villa.

The GOS is attempting to discourage its civil servants from using cash by depositing salaries into formal bank accounts, and the Banking Association has undertaken a publicity campaign to encourage the populace to use the formal banking system. Western Union, Money Gram and Money Express are associated with banks and compete with Senegal’s widespread informal remittance systems, including hawala networks and cash couriers. Small-scale, unregulated and unlicensed currency exchange operations are common, especially outside urban centers. The Banque de l’Habitat du Senegal (BHS), a Senegalese bank, has affiliates licensed as money remitters in the United States. New York State authorities have brought enforcement action against BHS New York for failing to comply with AML regulations.

The BCEAO and the FIU circulate the UN 1267 Sanctions Committee consolidated list to commercial financial institutions. To date, Senegalese authorities have not identified any designated entities. The WAEMU Council of Ministers issued a directive in September 2002 requiring banks to freeze the assets of any entities designated by the Sanctions Committee.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

The Senegalese government and law enforcement agencies are generally willing to cooperate with United States law enforcement agencies.

International agreements:

Senegal has entered into bilateral criminal mutual assistance agreements with France, Tunisia, Morocco, Mali, The Gambia, Guinea Bissau, and Cape Verde. Multilateral Economic Community Of West African States (ECOWAS) treaties address extradition and legal assistance among the member countries. Under the AML Law, the FIU may share information freely with other WAEMU FIUs. CENTIF has signed memoranda of understanding (MOUs) for information exchange with a number of FIUs and is open to information exchange on the basis of reciprocity. CENTIF shares information with the FIUs belonging to the Egmont Group without the requirement of a MOU. CENTIF’s application for membership to the Egmont Group was approved in June 2009.

Senegal 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

Senegal 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 is available here: http://www.giaba.org/media/M_evalu/GIABA__Mutual_Evaluation_Report_of__Senegal_Feb%200209%20%28English%29%5B1%5D.pdf

Recommendations:

The Government of Senegal (GOS) should continue to work with its partners in GIABA, WAEMU and ECOWAS to develop a comprehensive AML/CFT regime. Senegal should work on achieving transparency in its financial and real estate sectors, and continue to encourage the populace to use the formal banking system. Senegal should continue to battle corruption and increase the frequency, transparency, and effectiveness of financial reviews and audits of financial institutions. Senegal should establish better uniform control of the cross-border flow of currency and other bearer-negotiable instruments for both residents and nonresidents. Senegalese law enforcement and customs authorities need to develop their expertise in identifying and investigating both traditional money laundering and money laundering within the informal economy. CENTIF should perform more outreach to obligated non-bank financial institutions to ensure a better understanding of the content and filing requirements for STRs. CENTIF, law enforcement and Ministry of Justice authorities should work together to coordinate roles and responsibilities with regard to case investigation and assembly, and develop a deeper interagency understanding of money laundering and terrorist financing.

Serbia

Serbia is not considered a regional financial center. Serbia is on the major trade corridor known as the “Balkan route,” and confronts narcotics trafficking, smuggling of persons, weapons and pirated goods, money laundering, and other criminal activities. While the bulk of seizures are of heroin, the Government of Serbia (GOS) advises trafficking of cocaine of South American origin is on the rise and is expected to continue increasing as organized crime groups restructure their operations. Corruption and organized crime also continue to be significant problems in Serbia.

Serbia continues to be a black market for smuggled goods. Illegal proceeds are generated from drug trafficking, corruption, tax evasion and organized crime, as well as other types of crimes. Proceeds from illegal activities are invested in all forms of real estate and, increasingly, into sports, particularly football (soccer). Some money flows to Cyprus, reportedly as payment for goods and services; however, GOS officials believe this has become less of a factor over the past few years. Banks in Macedonia, Hungary, Switzerland, Austria and China have emerged as destinations for laundered funds. Trade-based money laundering, in the form of over- and under-invoicing, is commonly used to launder money. There are reports the purchase of some private and state-owned companies was linked to money laundering activity.

Offshore Center: No

Free Trade Zones: Yes

Serbia has four designated free trade zones (FTZs) (Subotica, Pirot, Zrenjanin, and Novi Sad) established to attract investment by providing tax-free areas to companies. Business activities conducted in these areas receive benefits such as unlimited imports and exports, preferential customs treatment and tax relief. Goods coming in or out of the FTZs must be reported to the customs authorities and payments must be made in accordance with regulations on hard currency payments. Companies must provide information to the Administration for Free Trade Zones and, other than the financial benefits described above, are subject to the same laws and supervision as other businesses in Serbia.

Criminalizes narcotics money laundering: Yes

In September 2005, Serbia codified an expanded definition of money laundering in Article 231 of the Criminal Code.

Criminalizes other money laundering, including terrorism-related: Yes

In 2009, Serbia enacted the Law on the Prevention of Money Laundering and the Financing of Terrorism (AMLL). Banks, attorneys, auditors, tax advisors and accountants, currency exchanges, insurance companies, investment managers, pension funds, casinos, securities brokers, real estate agencies, and persons dealing with postal communications are required to comply with the AMLL provisions. The AMLL also applies to branches and subsidiaries outside Serbian territory. In September 2009, Serbia amended Article 231 of the Criminal Code, which adds the crime “group act of 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/)

The AMLL criminalizes terrorist financing.

Know-your-customer rules:

The AMLL sets out know-your-customer (KYC) obligations for covered entities. The National Bank of Serbia (NBS) has also issued a KYC-specific regulation that further elaborates on KYC procedures required for banks, voluntary pension funds, management companies, financial leasing providers, insurance companies, brokerage companies, agency companies, and insurance agents. All obligors under the AMLL are required to conduct customer due diligence when: establishing a business relationship; carrying out a transaction equal to or greater than the equivalent of euro 15,000; when there are reasons for the suspicion of money laundering or terrorist financing; and when there are doubts about the veracity of previously obtained data about a customer or beneficial owner. Under the provisions of the AMLL, Serbian financial and non-financial institutions are also required to conduct risk-based assessments of clients and businesses.

Bank records retention: Yes

The AMLL requires records to be maintained for ten years.

Suspicious transaction reporting: Yes

Suspicious transactions in any amount must be reported to the financial intelligence unit (FIU),. Under the AMLL Serbian financial institutions and obligated reporting entities are required to develop and apply a list of indicators to help them identify suspicious transactions.

Large currency transaction reporting: Yes

Both the AMLL and previous anti-money laundering (AML) legislation require obligated entities to report to the FIU all cash transactions equal to or more than euro 15,000 (approximately $22,500), or the dinar or foreign currency equivalent.

Narcotics asset seizure and forfeiture:

The 2008 Asset Forfeiture Law (AFL) became effective on March 31, 2009. Prosecutors are empowered to initiate seizure and forfeiture proceedings. Decisions to seize would be rendered by a competent investigative judge, a judge presiding over the trial panel of judges, or a trial panel of judges handling the criminal case against the persons whose assets are the subject of proceedings, depending on the phase of criminal proceedings at which a request for seizure is filed. Forfeiture proceedings are exclusively handled by the trial panel of judges or the president of the trial panel. Assets that can be forfeited include goods of any kind, tangible or intangible; revenue or gain generated, directly or indirectly, from a criminal offense as well as any goods into which it is transformed or with which it is co-mingled; instrumentalities; or substitute assets. Under the AFL, the burden of proof is shifted to the accused, an heir/legal successor, or a third party to prove that assets have been legitimately earned. Asset forfeiture proceedings are separate proceedings from those conducted on criminal charges. The FIU has the authority to freeze transactions for a maximum of 72 hours.

Narcotics asset sharing authority: Yes

The AFL provides for cooperation with other governments in tracing, freezing and seizure even without the existence of an international treaty.

Cross-border currency transportation requirements: Yes

The Law on Foreign Exchange Operations, adopted in 2006, criminalizes the use of false or inflated invoices or documents to facilitate the transfer of funds out of the country. The AMLL introduces a cash declaration system, which came into effect in September 2009. Individuals can bring in and take out dinars up to the equivalent of euro 10,000. Larger amounts can only be brought in if there is documentation they were purchased in a foreign bank. When departing Serbia, residents are not permitted to take out foreign currency in excess of euro 10,000 unless they can prove they are emigrating. Nonresidents can take out higher amounts of cash if they meet the following conditions: they declared such amounts upon entry into Serbia, if the foreign currency was withdrawn from a foreign currency account or passbook within Serbia, or if the foreign currency was purchased by selling dinars through the use of a payment card. Individuals are permitted to bring any amount of foreign cash into Serbia, as long as they declare all currency or checks in amounts exceeding euro 10,000 (approximately $14,500).

Cooperation with foreign governments (including refusals):

International cooperation is now defined in Articles 61 to 66 of the Law on Anti Money Laundering and Terrorist Financing (adopted in March 2009). The law allows the exchange of information related to AML and terrorist financing between the GOS and foreign governments. International cooperation is also defined in the Law on International Legal Assistance in Criminal Issues adopted in March 2009, which applies to money laundering activities, narcotics, and terrorism.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

A 2004 law governs gaming rules and the Administration for Games of Chance was established on January 1, 2005. The law sets a maximum of ten casino licenses, and requires existing casinos to reapply for licenses. Two casinos were issued new licenses pre-2009; a tender for a third license closed on November 23. There are also a number of clubs with gaming machines that do not require licenses. The gaming supervisory authority has very limited resources, and the political will to enforce the law is weak.

The Law on Investment Funds and the Law on Securities and Other Financial Instruments Market, both enacted in 2006, provide the Securities Commission (SC) with the authority to “examine” the source of investment capital during licensing procedures for broker-dealers, management companies, authorized banks, custody banks, and investment funds. The SC is also charged with monitoring its obligors’ compliance with the AML laws. Regulations to implement requirements set out by the AMLL currently are being developed.

Most designated non-financial businesses and professions (DNFBPs) have not implemented any of the requirements of the AMLL nor the previous AML law, which included them as obligors.

The FIU circulates the UNSCR 1267 Sanctions Committee’s list of designated individuals and entities. No terrorist-related assets were identified in 2009.

U.S.-related currency transactions:

There is no evidence of significant US currency flows through Serbia, licit or illicit.

Records exchange mechanism with U.S.:

Serbia does not have a mutual legal assistance arrangement with the United States, but information exchange via a letter rogatory is standard. The 1902 extradition treaty between the Republic of Serbia and the United States remains in force. The treaty does not require extradition of nationals, and Serbia currently does not extradite Serbian citizens to the United States. The FIU actively participates in information exchanges with counterpart FIUs, including FinCEN.

International agreements:

The GOS has bilateral agreements on mutual legal assistance with 31 countries. The FIU has signed information sharing agreements with 15 countries, and anticipates signing two more by the end of 2009.

Serbia 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

Serbia is a member of 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/Serbia_en.asp

Recommendations:

The Government of Serbia (GOS) has taken a number of steps to improve its anti-money laundering/counter-terrorist financing (AML/CFT) regime over the past year. Serbia should ensure its securities firms and other DNFBPs are adequately supervised and are provided with guidance to ensure they understand and are able to comply with their responsibilities under the AMLL. The GOS should adopt regulations and bylaws to help money service businesses and DNFBPs understand and implement all requirements of the current AMLL. The National Bank of Serbia and other supervisory bodies as well as investigative agencies, the FIU, prosecutors, and judges need enhanced capability and additional resources. The gaming laws should be fully enforced and the Administration for Games of Chance provided with adequate resources and authority.

Seychelles

Seychelles is a not a major financial center. The Seychellois authorities consider drug trafficking, parallel market operations, theft and fraud as the major sources of illegal proceeds.

Seychelles is a consumer country for narcotics. Tight exchange control regulations have facilitated a parallel market for foreign currency exchange based on evasion of exchange control regulations. To diversify its economy beyond tourism, the Government of Seychelles (GOS) developed an offshore financial sector to increase foreign exchange earnings and actively markets itself as an offshore financial and business center that allows the registration of nonresident business companies; these activities make the country vulnerable to money laundering. In its 2007-2017 Strategic Plan, the GOS proposes to facilitate the further development of the financial services sector through active promotion of Seychelles as an internationally recognized offshore jurisdiction, with emphasis on international business companies (IBCs), mutual funds, special license companies and insurance companies.

Offshore Center: Yes

As of January 2009, there were 57,205 registered IBCs and 312 trusts that pay no taxes in Seychelles and are not subject to foreign exchange controls. These are used mainly for private wealth management and real estate investments. The practice among some operators in the offshore sector is to sell IBCs in bulk to foreign intermediaries for consumption by end users on whom very little or virtually no information is available in the Seychelles. IBCs may issue bearer shares. There is little information about the possible use of IBCs in the Seychelles for money laundering or terrorist financing purposes. In addition to IBCs and trusts, Seychelles permits offshore insurance companies, mutual funds, and offshore banking. Seychelles has two offshore banks and three offshore insurance companies: one for captive insurance and two for general insurance. In November 2006, the GOS established the Non-Bank Financial Services Authority to regulate these sectors. The Financial Institutions Act 2004, amended in 2008 and 2009, regulates both domestic and offshore banking. The International Corporate Service Providers Act 2003 is designed to regulate all activities of corporate and trustee service providers. The Seychelles International Business Authority (SIBA), a body with board members from both the government and the private sector, registers, licenses and regulates offshore activities. Offshore banks are specifically addressed by the Anti Money Laundering Act 2006. No offshore casinos or Internet gaming sites are licensed to operate.

Free Trade Zones:

The International Trade Zone Act 1995 and the International Trade Zone Regulations 1995 provide for the establishment of free trade zones. The existing International Trade Zone (SITZ) on Mahe is established under the Act. Activities within the Zone are governed by SIBA, which issues licenses to incoming companies.

Criminalizes narcotics money laundering: Yes

The Anti-Money Laundering Act 2006 (AMLA), which criminalizes narcotics money laundering, came into force in May 2006. This legislation replaced the 1996 Anti-Money Laundering Act.

Criminalizes other money laundering, including terrorism-related: Yes

Under the AMLA, anyone who possesses, conceals, brings into Seychelles or engages directly or indirectly in a transaction involving money or other property associated with a crime, knowing or having reasonable grounds to know that the money or property is derived from an illegal activity, is guilty of money laundering. In addition, anyone who aids, abets or conspires with another person to commit the crime is likewise guilty of money laundering.

Criminalizes terrorist financing: Yes

In 2004, the GOS enacted the Prevention of Terrorism Bill. The legislation specifically recognizes the government’s authority to identify, freeze, and seize assets related to terrorist financing. The AMLA applies the law to suspected terrorist financing transactions.

Know-your-customer rules: No

Customer due diligence (CDD) requirements are sporadically enforced. There is no requirement on financial institutions to perform CDD measures on existing customers if they have anonymous accounts or accounts in fictitious names. The AMLA requires reporting entities to take reasonable measures to ascertain the purpose of any transaction in excess of Seychelles rupees 100,000 (approximately $9,000), or, in the case of cash transactions, rupees 50,000 (approximately $4,500), and the origin and destination of the funds involved in the transaction. However, it leaves open exceptions for cases “as may be prescribed.”

Bank records retention: Yes

Pursuant to the provisions of section 6(1) and (2) of the AMLA, a reporting entity must maintain identity records, transaction records and correspondence relating to the transactions for a minimum period of seven years from the date on which evidence of a person’s identity is obtained, of any transaction or correspondence, or on which the business relationship ceases.

Suspicious transaction reporting: Yes

The financial intelligence unit (FIU) was established under Section 16 of the AMLA. The FIU is the focal point for receiving and analyzing suspicious transaction reports (STRs) and disseminating the analysis to the appropriate law enforcement and supervisory agencies in Seychelles. According to the AMLA, the reporting entities include domestic and offshore banks, credit unions, insurance companies, money transfer companies, securities companies, trust and company service providers, dealers in precious metals and stones, casinos and gaming establishments, and real estate agents. The legislation has been extended to cover designated non-financial businesses and professions, to include lawyers, accountants, notaries and other independent legal professions.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

The courts have the authority to freeze or confiscate money or property. Judges in the Supreme Court have the authority to restrain assets upon the request of a law enforcement officer. The Court also has the authority to determine the length of time for the restraint order and, as needed, the disposition of assets. Law enforcement may seize property subject to a restraint order to prevent its disposal. Both civil and criminal forfeiture are allowed under current legislation. A Civil Assets Recovery Unit was established after the Anti-Money Laundering (Amendment) Act came into force in August 2008.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

There is no limit set for cross-border transportation of currency nor is there a declaration or disclosure requirement system in Seychelles.

Cooperation with foreign governments: Yes

The Mutual Assistance in Criminal Matters Act of 1995 empowers the Seychelles Central Authority to provide assistance to another jurisdiction in connection with a request to conduct searches and seizures relating to serious offenses under the law of the requesting state. The Prevention of Terrorism Act extends the authority of the GOS to include the freezing and seizing of terrorism-related assets upon the request of a foreign state. To date, no such assets have been identified, frozen, or seized.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There have been no arrests or prosecutions for money laundering or terrorist financing since 1998.

Seychelles circulates to relevant authorities the updated lists of 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.:

No information available.

International agreements:

Seychelles 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 Government of Seychelles is a member of the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force-style regional body. Its most recent evaluation can be found here: http://www.esaamlg.org/reports/view_me.php?id=189

Recommendations:

Government of Seychelles should work to improve the implementation of its AML/CFT framework, including the analysis of STRs and the pursuit of investigations and prosecutions for money laundering and terrorist financing. Seychelles should continue to work with its FIU to ensure it has the training and resources needed for outreach, analysis and dissemination. Seychelles should expand its anti-money laundering efforts by prohibiting bearer shares, anonymous accounts and accounts in fictitious names, and clarifying its law regarding the complete identification of beneficial owners. The GOS also should amend the AMLA to state explicitly that all offshore activity is regulated in the same manner and to the same degree as onshore. The GOS should also consider codifying the ability to freeze assets rather than issuing restraining orders, and develop a cross-border currency reporting requirement.

Sierra Leone

Sierra Leone has a cash-based economy and is not a regional financial center. Money laundering activities are pervasive in the diamond sector. Despite tighter regulation, monitoring, and enforcement, in some areas significant diamond smuggling still exists. Drug smuggling is also a problem in Sierra Leone, as evidenced by the seizure of a plane at an airport outside Freetown in July 2008, carrying cocaine worth $54 million. Real estate and car dealerships are also sectors vulnerable to money laundering activities. Loose oversight of financial institutions, weak regulations, pervasive corruption, and a widespread informal money-exchange and remittance system contribute to an atmosphere conducive to money laundering. In 2009, authorities attempted to strengthen oversight and regulatory frameworks, including in the mushrooming financial sector.

Offshore Center:

No information available.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering:

The Anti-Money Laundering Act (AMLA) took effect in July 2005. However, the AMLA has significant flaws in the wording of the money laundering offense and its related definitions. The Government of Sierra Leone (GOSL) is reviewing the AMLA with stakeholders, and has drafted an amended law.

Criminalizes other money laundering, including terrorism-related:

See above

Criminalizes terrorist financing: No

Know-your-customer rules: No

Although the AMLA includes know-your-customer (KYC) provisions, there are no rules concerning customer due diligence measures and ineffective implementation of KYC guidelines. However, measures are being taken to resolve the deficiencies.

Bank records retention: No

There is no effective implementation of money laundering reporting requirements beyond basic customer identification and little bank record retention.

Suspicious transaction reporting: Yes

The AMLA applies to depository and credit institutions, money transmission and remittance service businesses, insurance brokers, investment banks, securities and stock brokerage houses, currency exchange houses, and designated non-financial businesses and professions such as casinos, realtors, dealers in precious metals and stones, notaries, legal practitioners, and accountants. A financial intelligence unit (FIU) exists but is only marginally functional. The FIU’s role is to receive and analyze financial information and intelligence, including suspicious transaction reports (STRs), and disseminate information regarding potential cases to law enforcement agencies for investigation. There is no threshold amount for STR filing. No STRs were filed in 2009.

Large currency transaction reporting:

The AMLA mandates currency reporting for deposits larger than 25 million leones (approximately $6,250).

Narcotics asset seizure and forfeiture:

The AMLA empowers the courts to freeze assets for 72 hours if a suspect has been charged with money laundering or if a charge is imminent. Upon a conviction for money laundering, all property is treated as illicit proceeds and can be forfeited unless the defendant can prove that possession of some or all of the property was obtained through legal means. There is no provision for the seizure of instrumentalities of crime.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

The AMLA calls for cross-border currency reporting for cash or securities in excess of $10,000; however, the mandated reporting has not been implemented. A currency declaration form (CDF) has been designed and is being implemented by the Customs and Excise Department of the National Revenue Authority (NRA). The FIU has developed and issued to the CDF, procedures for handling currency or negotiable bearer instruments declared at entry or exit points.

Cooperation with foreign governments: Yes

The AMLA provides the basis for mutual assistance and international cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The FIU lacks the capacity to effectively monitor and regulate financial institution operations. The AMLA charges the Central Intelligence Security Unit (CISU) and the Attorney General’s Office with investigating reports made by the FIU, but CISU cannot undertake complete investigations or effect arrests. The Attorney General’s Office has neither investigative nor arrest powers in its mandate. The Sierra Leone Police (SLP), National Revenue Authority, or Anti-Corruption Commission could be tasked by either entity with investigating reported money laundering crimes; however, it is not clear if this happens in practice. Limited resources hamper law enforcement efforts in all arenas. Lack of training on this subject is also a considerable hindrance to prosecutions. In 2009, there were no prosecutions under the AMLA.

Sierra Leone lacks the institutional mechanisms for the implementation of UNSCRs 1267 and 1373.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

Sierra Leone 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

Sierra Leone is a member of the Groupe Intergouvernemental d’Action contre le Blanchiment d’Argent en Afrique de l’Ouest (GIABA), a Financial Action Task Force-style regional body (FSRB). Its most recent mutual evaluation can be found here: http://www.giaba.org/index.php?type=c&id=24&mod=2&men=2

Recommendations:

Although the Government of Sierra Leone (GOSL) has enacted anti-money laundering (AML) legislation, the GOSL need to take action to ensure its AML regime is effectively implemented. The GOSL should place a high priority on enacting the proposed revisions to the law to correct deficiencies in the original act and include provisions for combating terrorist financing, bringing the legislation in line with international AML/counter-terrorist financing (AML/CFT) standards. Authorities should ensure the revised law is harmonized with other relevant legislation, including the revised Anti-Corruption Act (2008), National Drug Control Act (2008), and Anti-Terrorism Act. The GOSL should ensure its penalties for terrorist financing are proportionate and dissuasive. Sierra Leone should also ensure the regular distribution to financial institutions of the UNSCR 1267 Sanctions Committee’s consolidated list, and implement and enforce provisions for immediate freezing of assets of individuals on the list. The GOSL should increase the level of awareness and understanding of money laundering issues and allocate the necessary human, technical, and financial resources to implement its AML/CFT regime. Sierra Leone’s FIU should work to build capacity by increasing its resources and striving to organize itself and perform according to international standards. Sierra Leone should continue its efforts to counter the smuggling of diamonds and narcotics, and regulate sectors which are vulnerable to money laundering. Sierra Leone should continue to take steps to combat corruption at all levels of commerce and government. The GOSL should ratify the UN Convention against Transnational Organized Crime.

Singapore

As a significant international financial and investment center and, in particular, as a major offshore financial center, Singapore is vulnerable to money launderers. Stringent bank secrecy laws and the lack of routine currency reporting requirements make Singapore a potentially attractive destination for drug traffickers, transnational criminals, terrorist organizations and their supporters seeking to launder money. Additionally, there are terror finance risks. The authorities have taken action against Jemaah Islamiyah and its members and have identified and frozen terrorist assets held in Singapore. Structural gaps remain in financial regulations that may hamper efforts to control these crimes, and financial crimes enforcement needs strengthening. To address some of these deficiencies, Singapore is implementing legal and regulatory changes to better align itself with the international standards for anti-money laundering/counterterrorist financing (AMLCTF) regimes.

Offshore Center: Yes

Singapore has a sizeable offshore financial sector. As of December 2009, there were 42 offshore banks in operation, all offshore foreign-owned. Singapore does not permit shell banks. Singapore has increasingly become a center for offshore private banking and asset management. However, due to the global financial crisis, total assets under management in Singapore declined 26 percent in 2008 to $864 billion.

Free Trade Zones: Yes

Singapore has five free trade zones (FTZs), four for seaborne cargo and one for airfreight, regulated under the Free Trade Zone Act. The FTZs may be used for storage, repackaging of import and export cargo, assembly and other manufacturing activities approved by the Director General of Customs in conjunction with the Ministry of Finance.

Criminalizes narcotics money laundering: Yes

Singapore’s Corruption, Drug Trafficking, and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) has undergone many revisions, with the latest occurring in February 2008. The key amendments add several new categories to its “Schedule of Serious Offenses.” The CDSA criminalizes the laundering of proceeds from narcotics transactions and other predicate offenses.

Criminalizes other money laundering, including terrorism-related: Yes

Included in the CDSA are crimes associated with terrorist financing, illicit arms trafficking, counterfeiting and piracy of products, environmental crime, computer crime, insider trading, rigging commodities and securities markets, transnational organized crime, maritime offenses, pyramid selling, importation and exportation of radioactive materials/irradiating apparatus, customs offenses, and falsification or use of false Singapore passports.

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 Terrorism (Suppression of Financing) Act that took effect in 2003 criminalizes terrorist financing. In addition to making it a criminal offense to deal with terrorist property (including financial assets), the Act criminalizes the provision or collection of any property (including financial assets) with the reasonable belief that the property will be used to commit any terrorist act or for various terrorist purposes. The Act also provides that any person in Singapore, and every citizen of Singapore outside the country, who has information about any transaction or proposed transaction in respect of terrorist property, or who has information that he/she believes might be of material assistance in preventing a terrorist financing offense, must immediately inform the police. The Act gives the authorities the power to freeze and seize terrorist assets.

Know-your-customer rules: Yes

The Monetary Authority of Singapore (MAS) has issued a series of regulatory guidelines (“Notices”) requiring banks to apply know-your-customer standards. Banks must obtain documentation such as passports or identity cards from all individual customers to verify names, permanent contact addresses, dates of births and nationalities. Banks must also check the bona fides of company customers. The regulations specifically require financial institutions to obtain evidence of the identity of the beneficial owners of offshore companies or trusts. Similar guidelines and notices exist for finance companies, merchant banks, life insurers, brokers, securities dealers, investment advisors, futures brokers and advisors, trust companies, approved trustees, and money changers and remitters. In May 2009, MAS issued a public consultation paper proposing amendments to clarify the current AML/CFT requirements on Simplified Customer Due Diligence and Performance of Customer Due Diligence Measures by Intermediaries.

Bank records retention: Yes

Sections 36 and 37 of the CDSA requires financial institutions to maintain all “financial transaction documents” for at least five years after the date on which the transaction takes place or the account is closed.

Suspicious transaction reporting: Yes

The CDSA also mandates specific reporting requirements and outlines examples of suspicious transactions that should prompt reporting. Section 39 of the CDSA requires any person who, in the course of his/her professional or business duties, knows or has reasonable grounds to suspect that any property may represent the proceeds of drug trafficking or criminal conduct to report to the Suspicious Transaction Reporting Office (STRO), Singapore’s financial intelligence unit (FIU).

Large cash transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Singapore law provides for the tracing, freezing, and seizure of assets.

Narcotics asset sharing authority:

As ancillary to a foreign criminal prosecution, Singapore may provide assistance to foreign governments in the enforcement of a foreign confiscation or restraint order if the property is reasonably believed to be located in Singapore.

Cross-border currency transportation requirements: Yes

Singapore requires in-bound and out-bound travelers to report cash and bearer-negotiable instruments in excess of Singapore $30,000 (approximately $21,400).

Cooperation with foreign governments: Yes

Singapore’s rigid bank secrecy is sometimes an impediment to effective international cooperation in financial crimes enforcement.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

According to Singapore authorities, domestic corruption is minimal. Singapore has consistently ranked in the top five nations in Transparency International’s Corruption Perception Index (CPI). In 2009, Singapore was rated third out of 180 countries in the CPI.

In 2008, there were a total of 23 prosecutions and 24 convictions for money laundering offenses.

U.S. related currency transactions:

No information available.

Records exchange mechanism with U.S.:

In November 2000, Singapore and the United States signed the Agreement Concerning the Investigation of Drug Trafficking Offenses and Seizure and Forfeiture of Proceeds and Instrumentalities of Drug Trafficking (Drug Designation Agreement or DDA). The DDA is a limited bilateral mutual legal assistance treaty (MLAT) between Singapore and the United States. The DDA facilitates the exchange of banking and corporate information on drug money laundering suspects and targets, including access to bank records. It also entails reciprocal honoring of seizure/forfeiture warrants. This agreement applies only to narcotics cases, and does not cover non-narcotics related money laundering, terrorist financing, or financial fraud.

The Financial Crimes Enforcement Network (FinCEN) entered into a memorandum of understanding with the STRO on September 2, 2004.

International agreements:

For a number of years, Singapore’s only mutual legal assistance agreements with other countries covered drug offenses. In April 2006, the Mutual Assistance in Criminal Matters Act was amended to provide a bilateral case-by-case initiative that would be available to all countries in all instances in which Singapore and the foreign government would agree to provide the same type of assistance in a similar reciprocal request. The STRO has signed MOUs with 13 counterparts.

Singapore 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

Singapore is a member of the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering, a FATF-style regional body. Its most recent mutual evaluation can be found here:

http://www.fatf-gafi.org/dataoecd/36/42/40453164.pdf

Recommendations:

The Government of Singapore (GOS) should continue close monitoring of its domestic and offshore financial sectors. The government should add tax and fiscal offenses to its schedule of serious offenses. The GOS should continually work to strengthen its AML/CFT enforcement abilities. Singapore police are fairly successful at identifying domestic predicate offenses; however, given the potential attractiveness of Singapore as a large, stable and sophisticated financial center through which to launder money, the STRO and criminal investigators are encouraged to more strongly focus on the identification of money laundering that originates from foreign sources and offenses. The conclusion of broad mutual legal assistance agreements is also important to further Singapore’s ability to work internationally to counter money laundering and terrorist financing. Singapore should lift its rigid bank secrecy restrictions to enhance its law enforcement cooperation in areas such as information sharing and to conform to international standards and best practices. Singapore should also strictly enforce border controls and give greater attention to trade-based money laundering.

Slovak Republic

Slovakia’s geographic, economic, and legal environment with respect to money laundering are not atypical of a changing central European economy. Its geographical location makes it a transit and destination country for trafficking in drugs, people, and a variety of commodities. The statistics on money laundering cases investigated by Slovak law enforcement authorities indicate the most frequent predicate offenses for money laundering are financial crimes and crimes against property. According to data from reporting entities, in 2008, the most commonly reported forms of suspicious activity were Internet fraud by Romanian and Russian nationals involving funds originating in the United States; phishing involving funds originating in Germany and the United Kingdom; use of tax havens and offshore companies for transfers of funds; the use of front persons within companies for the purpose of tax evasion and value-added tax (VAT) fraud; and trafficking in nonferrous metals and investment gold.

Offshore Center:

No information available.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering: Yes

The Penal Code (Act No. 300/2005 Coll., as amended) criminalizes money laundering through Section 233 (legalization of income from criminal activity). Slovakia’s legislation does not provide for the criminal liability of legal persons.

Criminalizes other money laundering, including terrorism-related: Yes

Slovak legislation does not specifically list the predicate offenses for money laundering; rather, the law applies to proceeds and means of all criminal acts. The criminal offense of money laundering can be prosecuted if criminal prosecution is already pending for a predicate offense. Act No. 297/2008 Coll., “On the Protection Against Legalization of Income from Criminal Activity and Protection Against the Financing of Terrorism,” which took effective in September 2008, is the most recent legislation addressing money laundering. The 2008 law defines basic notions such as “legalization,” “terrorist financing,” and “unusual transaction”. It also includes more precise definitions of “reporting entities” and “politically exposed person”; and contains separate provisions on lawyers and notaries; and auditors, accountants and tax advisors.

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/)

In December 2009, the Government of the Slovak Republic (GOSR) passed an amendment to the Penal Code, which the President signed into law on December 16, to establish the autonomous criminal offense of financing terrorism. In addition to this recent criminalization of terrorist finance, previously existing law (Act No. 297/2008 Coll.) defines the financing of terrorism as the supply or collection of funds with the intent to use them or with the knowledge of the intent to use them to create, contrive to create or support a terrorist group, or the criminal offense of terrorism, or other criminal offenses referred to in Section 3(1)(b) of the law.

Know-your-customer rules: Yes

Act No. 297/2008 Coll. sets out the detailed conditions for performing customer due diligence, simplified due diligence and enhanced due diligence. Reporting entities have a duty to perform customer due diligence that includes client identification and verification as well as identification of the beneficial owner in the case of legal persons or property associations. For corporations, it includes the identification of ownership and management structure if the customer enters into a business relationship, or performs an occasional transaction with a value of at least 15,000 euros (approximately $22,500) outside of a business relationship,

Bank records retention:

No information available.

Suspicious transaction reporting: Yes

The Slovak Financial Intelligence Unit (SFIU) receives and evaluates unusual transaction reports (UTRs), gathers additional information, and refers cases of suspected money laundering to regional financial police departments, other law enforcement authorities or tax administrators, as appropriate. Act No. 297/2008 Coll. requires reporting of suspected terrorist financing activity. Through the first 11 months of 2009, the SFIU had received 2,379 UTRs amounting to 4.08 billion euros (approximately $6.16 billion). Based on these reports, 96 cases were submitted directly for prosecution, 764 were referred to law enforcement authorities for further investigation, and 386 to the tax administrator. Although the SFIU has not received any UTRs with the specific suspicion of terrorist financing, the SFIU assessed the reports it received and by the end of October 2009, referred 43 cases for possible terrorist financing activity.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture:

The Code of Criminal Procedure establishes the authority to seize, freeze and confiscate property. Reporting entities have a duty to halt the execution of unusual transactions for a maximum of 48 hours either on the basis of their own finding or upon written request from the SFIU.

All competent authorities in the Slovak Republic have full authority to freeze or confiscate terrorist assets consistent with UNSCR 1373. The GOSR has agreed to immediately freeze all accounts owned by entities included on the UNSCR 1267 Sanctions Committee Consolidated List of terrorist entities, the EU’s consolidated lists, and those provided by the United States under Executive Order 13224. The GOSR posts the lists online but does not distribute them.

Narcotics asset sharing authority:

Act No. 650/2005 Coll. on the execution in the European Union (EU) of orders to seize property or evidence makes it possible to execute seizures for proceeds or instrumentalities of crime in Slovakia, based on the recognition of a seizure order issued by a judicial authority of another member state of the EU.

Cross-border currency transportation requirements:

No information available.

Cooperation with foreign governments (including refusals):

No impediments to cooperation are known to exist.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2008, 17 persons were subject to criminal proceedings for the criminal offense of money laundering pursuant to Section 233; of these, ten were convicted. Statistics for 2009 are not yet available.

The Law on Proving the Origin of Property came into force on September 1, 2005. According to the law, an undocumented increase in property exceeding an amount 200 times the minimum monthly wage must be investigated and the property may then be subject to confiscation. The law was challenged in Parliament on the grounds that its retroactivity and shifting of the burden of proof to the suspect are in conflict with the Constitution of the Slovak Republic. The Constitutional Court suspended application of the law on October 6, 2005. On September 3, 2008, the Constitutional Court issued a finding which determined the law is not in conformity with the Constitution. The National Council of the Slovak Republic had a six-month time limit to repeal or replace the law. Since neither of these actions was taken within the specified time frame, the law automatically became null and void in 2009.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

The SFIU has signed memoranda of understanding with Slovenia, Canada, Belgium, Czech Republic, Poland, Monaco, Australia, and Albania; cooperation protocols with Czech Republic and Ukraine; and cooperation agreements with Russia and Romania. Slovak law does not, however, require that the SFIU sign a memorandum of understanding to be able to fully cooperate with FIUs in other countries.

Slovakia 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

Slovakia 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 Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Evaluations/Evaluation_reports_en.asp

Recommendations:

The Government of the Slovak Republic has made progress over the past year, although there is still room to improve several areas of its anti-money laundering/counter-terrorist financing (AML/CFT) regime. Slovakia should also provide capacity enhancing materials to nonfinancial businesses and professions and improve supervision of these entities to ensure they meet their obligations under the law. The GOSR should implement formal AML/CFT supervision of currency exchange houses. Slovak authorities should encourage and enable police to pursue money laundering and financial crime even when it does not involve organized crime activities. Authorities should adopt criminal sanctions for money laundering in relation to legal persons, establishing corporate criminal liability in line with international standards. The GOS should consider amending its confiscation and forfeiture regime to provide for asset forfeiture from third-party beneficial owners.

Slovenia

Slovenia is not a regional financial center. According to Slovenian authorities, economic crimes against property and narcotics offenses are increasing. Other predicate offenses of concern include business and tax fraud.

Offshore Center: No

Free Trade Zones: Yes

Free economic zones (FEZ) exist in Koper and Maribor. The Maribor FEZ’s mandate expires on January 1, 2010. The Government of Slovenia (GOS) has the option to extend the life of the Maribor FTZ. The following activities may be performed within free economic zones: production and services; wholesale trade; banking and other financial services; and insurance and reinsurance regarding the above activities. FEZs are administered by the Customs Administration.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering and terrorist financing are criminalized under the Prevention of Money Laundering and Terrorist Financing Act of 2007.

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.

Know-your-customer rules: Yes

Bank records retention: Yes

Banks must maintain records for ten years.

Suspicious transaction reporting:

Banks, non-bank financial institutions, and other obligated professional entities are required to file suspicious transaction reports (STRs) with the Office for Money Laundering Prevention (OMLP), Slovenia’s financial intelligence unit (FIU). In 2007, 192 STRs were filed.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture: Yes

Instruments of crime such as conveyances used to transport narcotics, property on which illicit crops are grown or are used to support terrorist activity, or intangible property such as bank accounts can be seized. Legitimate businesses can be seized if used to launder drug money or support terrorist activity. Both criminal and civil forfeiture are allowed.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Slovenia is a member of the European Union (EU) and adheres to EU cross-border currency reporting requirements.

Cooperation with foreign governments:

There are no known impediments to international cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Bearer shares are allowed for companies.

There were no arrests, prosecutions, or convictions for money laundering or terrorist financing in 2009.

Slovenia has circulated to its financial institutions the list of individuals and entities that have been included on the UN 1267 sanctions committee’s consolidated list. No terrorist financing-related assets have been frozen or seized.

U.S.-related currency transactions:

There are no indications that currency transactions in Slovenia 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 Slovenian FIU is able to exchange information with the Financial Crimes Enforcement Network.

International agreements:

Slovenia 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

Slovenia is a member of the Council of Europe’s MONEYVAL, a Financial Action Task Force-style regional body. Its most recent mutual evaluation report can be found here:

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

Recommendations:

The Government of Slovenia should continue to enhance its anti-money laundering/counter-terrorist financing legislation and procedures as appropriate. The GOS should immobilize its company bearer shares.

Solomon Islands

Solomon Islands (SI) is not considered a major financial center. It has a relatively stable banking system closely integrated with the financial systems of Australia and New Zealand. Smuggling, environmental crimes, public corruption, and the proliferation of counterfeit goods are problems in SI. SI is developing its anti-money laundering/counter-terrorist financing countermeasures.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

See below.

Criminalizes other money laundering, including terrorism-related: Yes

Part II, section 17 of the Money Laundering and Proceeds of Crime Act 2002 (MLPCA), criminalizes other money laundering offenses, if a person possesses or uses property, directly or indirectly, which constitutes an offense against any law of the Solomon Islands that is punishable by imprisonment for not less than twelve months.

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/)

Part 2, section 6 of the Counter-Terrorism Act 2009 criminalizes terrorist financing.

Know-your-customer rules: Yes

Under Part II, section 12 of the MLPCA, financial institutions or cash dealers must take reasonable measures to determine to their satisfaction the true identity of any applicant seeking to enter into a business relationship.

Bank records retention: Yes

Under the MLPCA, transaction records must be kept for a period of at least five years from the date the relevant business or transaction was completed.

Suspicious transaction reporting: Yes

Part II, section 14 of the MLPCA requires a financial institution or cash dealer that has reasonable grounds to suspect a transaction may be relevant to an investigation or prosecution of a person for a serious offense to file a suspicious transaction report within three working days.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Asset forfeiture and seizure in SI are based primarily on Customs regulations.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements:

SI has customs regulations which limit the amount of currency and negotiable instruments that can be brought into and taken out of the country at any given time. Information regarding possession of currency and other liquid assets is explicitly requested on customs declaration cards.

Cooperation with foreign governments:

The Mutual Assistance in Criminal Matters Act of 2002 addresses mutual legal assistance. The SI works closely with Australian authorities.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There have been five arrests and/or deportations involving suspected money laundering. These cases have reportedly involved both SI and African suspects. There have been several reports of suspected money laundering in SI, but no successful prosecutions thus far.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.: No

International agreements:

SI 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 - No
  • the UN Convention against Corruption - No

SI became a party to the UN Convention for the Suppression of the Financing of Terrorism through accession on September 24, 2009.

SI is a member of the Asia/Pacific Group on Money Laundering, a Financial Action Task Force-style regional body. SI was scheduled to undergo a mutual evaluation in 2009. When available, the evaluation report will be found here: http://www.apgml.org/documents/default.aspx?DocumentCategoryID=8

Recommendations:

The Government of the Solomon Islands should continue its work to develop procedures to conform to international anti-money laundering and counter-terrorist finance standards. The SI should become a party to the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, and the 1988 UN Drug Convention.

South Africa

South Africa’s position as the major financial center in the region, its relatively sophisticated banking and financial sector, and its large, cash-based market, make it a vulnerable target for transnational and domestic crime syndicates. The largest source of laundered funds in the country is proceeds from the narcotics trade. Fraud, theft, racketeering, corruption, currency speculation, poaching, theft of precious metals and diamonds, small arms, human trafficking, stolen cars, and smuggling are also sources of laundered funds. Many criminal organizations are also involved in legitimate business operations. There is a significant black market for smuggled and stolen goods. In addition to South African criminal organizations, observers note criminal activities by Nigerian, Pakistani, Andean and Indian drug traffickers, Chinese triads, Taiwanese groups, Lebanese trading syndicates, and the Russian mafia. There are few successful investigations and prosecutions.

Offshore Center: No

Free Trade Zones: Yes

South Africa does operate Industrial Development Zones (IDZs). Imports and exports that are involved in manufacturing or processing in the zones are duty-free, provided that the finished product is exported. South Africa maintains IDZs in Port Elizabeth, East London, Richards Bay, and Johannesburg International Airport. The South African Revenue Service (SARS) monitors the customs control of these zones.

Criminalizes narcotics money laundering: Yes

South Africa replaced previous legislation with the Prevention of Organized Crime Act (No. 121 of 1998) (POCA), which criminalizes money laundering, mandates the reporting of suspicious transactions, and contains “safe harbor” provisions.

Criminalizes other money laundering, including terrorism-related: Yes

South Africa adopts an “all crimes” approach, so that predicate offenses for money laundering cover all offenses under South African law as well as applicable international conventions and standards.

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 2005, the Protection of Constitutional Democracy Against Terrorist and Related Activities Act came into effect. The Act criminalizes terrorist activity and terrorist financing and gives the government investigative and asset seizure powers in cases of suspected terrorist activity. The Act requires financial institutions to report suspected terrorist activity to the Financial Intelligence Center (FIC) – the financial intelligence unit (FIU). The Act also applies to charitable and nonprofit organizations operating in South Africa. The FIC distributes the list of individuals and entities included on the UN 1267 Sanctions Committee’s consolidated list. There have been no prosecutions under the Act.

Know-your-customer rules: Yes

Section 21 of the Financial Intelligence Center Act (FICA) requires obligated institutions to establish and verify the identity of a customer prior to establishing a business relationship or concluding a single transaction with that customer. This Section also prohibits obligated institutions from concluding transactions with existing customers without first taking certain steps to establish and verify the identity of the customer and to trace all accounts held by the institution that are involved in transactions concluded in the course of that business relationship.

Bank records retention: Yes

The FICA requires obligated entities to maintain records of transactions for at least five years.

Suspicious transaction reporting: Yes

The FICA requires obligated entities, including banks, life insurance companies, foreign exchange dealers, casinos, and real estate agents, to file suspicious transaction reports (STRs) with the FIC. The FIC analyzes STRs and forwards those needing further investigation to the investigative and prosecutorial authorities. When there is a suspicion of terrorist financing, the FIC will forward the relevant information to the National Intelligence Agency. From March 2008 through March 2009, the FIC received 22,762 STRs. The FIC referred 1,221 STRs, with transactions valued at more than 5.9 billion rand (approximately $800 million), to law enforcement and/or intelligence agencies for further investigation.

Large currency transaction reporting: Yes

Section 28 of the FICA calls for the reporting of cash transactions above a prescribed threshold. This provision was scheduled to come into operation in 2009 - after the FIC developed capacity to receive and process such transactions.

Narcotics asset seizure and forfeiture:

Both the POCA and the FICA contain criminal and civil forfeiture provisions. The Asset Forfeiture Unit (AFU) in the National Prosecuting Authority administers and implements the freezing and forfeiture provisions of the POCA.

Narcotics asset sharing authority:

The International Cooperation in Criminal Matters Act (ICCMA) enables South Africa to share confiscated assets with countries involved in coordinated law enforcement actions. The general rule is that the amount recovered in response to a foreign confiscation order, less all expenses incurred in connection with the execution of the order, is paid over to the requesting state (s.21, ICCMA). The sharing of assets can also be achieved in terms of mutual legal assistance treaties (MLATs) entered into with other countries.

Cross-border currency transportation requirements: Yes

SARS requires all visitors carrying cash to declare the amount upon arrival in South Africa. All South African citizens and residents leaving the country with cash must declare amounts in excess of 175,000 rand (approximately $17,500) for individuals, or 250,000 rand (approximately $25,000) for families. Although South Africa has not explicitly criminalized bulk cash smuggling, failing to declare currency carries a penalty. Smuggling and reportedly lax border enforcement represent major vulnerabilities for South Africa.

Cooperation with foreign governments:

No known impediments exist to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

From April 2003 to March 2008, 64 money laundering cases were filed in the court system, with 16 resulting in convictions. Considering the size of South Africa’s economy and the suspected volume of illicit proceeds flowing through the country, the number of convictions is extremely low. Many investigators and prosecutors appear to focus on predicate offenses.

In part due to the stricter banking requirements, but also because of the cash-driven nature of the South African economy, South Africans, particularly the Muslim and Indian communities, often use alternative remittance systems that bypass the formal financial sector. Hawala networks in South Africa have direct ties to both South Asia and the Middle East. Currently, South Africa does not require alternative remittance providers or participants to report cash transactions within the country.

Foreign workers and refugees in South Africa often use the public transportation network (e.g., taxi drivers, bus drivers) to physically move cash, mostly from wage earnings, across the border, rather than making remittances through the formal financial sector. The authorities advise that this form of remittance has long been used by migrant labor and has been integral to regional economic development for more than a century, while the cash component is indicative of the extent to which the regional economy remains cash-based.

U.S.-related currency transactions:

US currency is rarely used to transact business in South Africa. Post is unaware of any dollar-smuggling cases, and South Africa is not a major source of drug trafficking directly to the U.S.

Records exchange mechanism with U.S.:

South Africa cooperates with the United States in exchanging information related to money laundering and terrorist financing. The two nations have a MLAT and a bilateral extradition treaty (litigation regarding the status of the extradition treaty is now before the South African Constitutional Court). In 2009, the FIC signed a memorandum of understanding with FinCEN.

International agreements:

South Africa 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

South Africa is a member of the Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a FATF-style regional body. Its most recent mutual evaluation, adopted in 2009, can be found here: http://www.fatf-gafi.org/dataoecd/60/15/42432085.pdf

Recommendations:

The Government of South Africa (GOSA) should more proactively pursue money laundering offenses. South Africa should establish controls for cross-border currency movements, bolster border enforcement and examine trade-based money laundering. It should also regulate and investigate the country’s alternative remittance systems, and further examine their use and vulnerability to exploitation by money launderers and terrorist financiers. Authorities should ensure that designated non-financial businesses and professions report suspicious transactions and enforce anti-money laundering regulations within the casino industry. An assessment of terrorist financing risks within the non-profit organizations sector should be conducted. Law enforcement and customs officials should follow the money and value trails during the course of their investigations to determine if money laundering has occurred. The GOSA should fully implement the new law against terrorist activity and terrorist financing. South Africa should publish the annual number of money laundering and terrorist financing investigations, prosecutions, and convictions.

Spain

Spain is a major European center of money laundering activities as well as a major gateway for illicit narcotics. Drug proceeds from other regions enter Spain as well, particularly proceeds from Afghan hashish entering from Morocco, cocaine entering from Latin America, and heroin entering from Turkey and the Netherlands. Tax evasion in internal markets and the smuggling of goods along the coastline also continue to be sources of illicit funds in Spain. The smuggling of electronics and tobacco from Gibraltar remains an ongoing problem. Passengers traveling from Spain to Latin America reportedly smuggle sizeable sums of bulk cash. Colombian cartels reportedly use proceeds from drug sales in Spain to purchase goods in Asia. They subsequently sell these goods legally in Colombia or at stores run by drug cartels in Europe. Credit card balances are paid in Spanish banks for charges made in Latin America, and money deposited in Spanish banks is withdrawn in Colombia through ATM networks.

An unknown percentage of drug trafficking proceeds are invested in Spanish real estate, particularly in the once-booming coastal areas in the south and east of the country. Up to twenty percent of the 500 euro notes in use in Europe were reported to be in circulation in Spain during 2009, directly linked to the purchase of real estate to launder money. Efforts by Spain’s tax authority to deter fraudulent activity involving these large bank notes have kept the number of 500 euro notes at October 2008 levels (around 110 million notes).

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Money laundering is criminalized by Article 301 of the Penal Code, added in 1988 when laundering the proceeds from narcotics trafficking was made a criminal offense.

Criminalizes other money laundering, including terrorism-related: Yes

The law was expanded in 1995 to cover all serious crimes that require a prison sentence greater than three years. Amendments to the code, which took effect in 2004, make all forms of money laundering financial crimes. Any property, of any value, can form the basis for a money laundering offense, and a conviction or a prosecution for a predicate offense is not necessary to prosecute or obtain a conviction for money laundering. Spanish authorities can also prosecute money laundering based on a predicate offense in another country, if the predicate offense would be a crime in Spain.

In October 2009, the European Commission filed a complaint against Spain in the European Court of Justice for inadequate implementation of EU norms against money laundering. In December, the Council of Ministers submitted to Congress a draft of a new anti-money laundering/counter-terrorist financing (AML/CFT) law. The legislation aims to codify existing AML/CFT laws and will supersede Law 12/2003 on the Prevention and Blocking of the Financing of Terrorism, which was never fully implemented.

Criminalizes terrorist financing: Yes

See above. In addition, crimes of terrorism are defined in Article 571 of the Penal Code, and penalties are set forth in Articles 572 and 574. Terrorist financing issues are governed by a separate code of law.

Know-your-customer rules: Yes

Money laundering controls apply to most entities active in the financial system, including banks, mutual savings associations, credit companies, insurance companies, financial advisers, brokerage and securities firms, pension fund managers, collective investment schemes, postal services, currency exchange outlets, and individuals and unofficial financial institutions exchanging or transmitting money. Most categories of designated nonfinancial businesses and professions (DNFBPs) are subject to the same core obligations as the financial sector. The list of DNFBPs includes realty agents; dealers in precious metals, stones, antiques and art; legal advisors and lawyers; accountants; auditors; notaries; and casinos.

Bank records retention: Yes

Spanish financial institutions are required by law to maintain fiscal information for five years and mercantile records for six years.

Suspicious transaction reporting: Yes

The financial sector is required to report suspicious transactions. Reporting entities are required to report each suspicious transaction to the financial intelligence unit (FIU). In 2008, the FIU received 2,904 suspicious transaction reports (STRs). Of those received, 328 were submitted by non-bank financial entities.

Large currency transaction reporting: Yes

Law 19/2003 obliges financial institutions to make monthly reports on large transactions. Banks are required to report all international transfers greater than 50,000 Euros (approximately $71,300). The law also requires the declaration and reporting of internal transfers of funds greater than 100,000 Euros (approximately $143,000). Foreign exchange and money remittance entities must report transactions above 5,000 Euros (approximately $7,100).

Narcotics asset seizure and forfeiture:

Article 127 of the Penal Code allows for broad confiscation authority by applying it to all crimes or summary offenses under the Code. Instrumentalities used to commit the offense and the profits derived from the offense can all be confiscated. Article 127 also provides for the confiscation of property intended for use in the commission of any crime or offense. It also applies to property that is derived directly or indirectly from proceeds of crime, regardless of whether the property is held or owned by a criminal defendant or by a third party. Article 374 of the Penal Code calls for the confiscation of goods acquired through drug trafficking-related crimes and of any profit obtained. This allows for the confiscation of instrumentalities used for illegal drug dealing, as well as the goods or proceeds obtained from the illicit traffic.

Narcotics asset sharing authority: Yes

The Fund of Seized Goods of Narcotics Traffickers, established under the National Drug Plan, receives seized assets. The division of assets from seizures involving more than one country depends on the relationship with the country in question. European Union (EU) working groups determine how to divide the proceeds for member countries. Outside of the EU, bilateral commissions are formed with countries that are members of the Financial Action Task Force (FATF), FATF-style regional bodies (FSRBs), and the Egmont Group, to coordinate the division of seized assets. With other countries, negotiations are conducted on an ad hoc basis.

Cross-border currency transportation requirements: Yes

Individuals traveling internationally are required to report the importation or exportation of currency greater than 10,000 Euros (approximately $14,300). Confiscation provisions apply to persons smuggling cash or monetary instruments that are related to money laundering or terrorist financing. Gold, precious metals, and precious stones are considered to be merchandise and are subject to customs legislation. Failing to file a declaration for such goods may constitute a case of smuggling and would fall under the responsibility of the customs authorities.

Cooperation with foreign governments: Yes

Spain regularly cooperates with other countries investigating money laundering, terrorist financing, and other financial crimes.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Although Spanish authorities have taken steps to neutralize them since 1998, ensuring that mere possession cannot serve as proof of ownership, bearer shares still exist, and the requirements to determine the beneficial owner are inadequate.

Spain has long been dedicated to fighting terrorist organizations, including ETA, GRAPO, and more recently, al-Qaida. Spanish law enforcement entities have identified several methods of terrorist financing: donations to finance nonprofit organizations (including ETA and Islamic groups); establishment of publishing companies that print and distribute books or periodicals for the purposes of propaganda, which then serve as a means for depositing funds obtained through kidnapping or extortion; fraudulent tax and financial assistance collections; the establishment of “cultural associations” used to facilitate the opening of accounts and provide a cover for terrorist financing activity; and alternative remittance system transfers.

Spanish authorities recognize the presence of alternative remittance systems. Informal non-bank outlets such as “locutorios” (communication centers that often offer wire transfer services) are used to move money in and out of Spain by making small international transfers for members of the immigrant community. Spanish regulators also note the presence of hawala networks in the Islamic community.

Spain regularly circulates to its financial institutions the list of individuals and entities that have been included on the UNSCR 1267 Sanctions Committee consolidated list. No assets associated with entities listed by the UNSCR 1267 Sanctions Committee were reported to be in Spain in 2009.

A small percentage of the money laundered in Spain is believed to be used for terrorist financing. It is primarily money from the extortion of businesses in the Basque region that is moved through the financial system and used to finance the Basque terrorist group ETA. Throughout 2009, Spanish authorities conducted numerous AML/CFT operations that resulted in arrests and seizures. In July, the Civil Guard arrested 13 members of a trafficking network operating out of the Barcelona airport, including seven airport employees. Police seized cocaine, 12,000 Euros in cash (approximately $18,000) and 85,000 Euros in jewels (approximately $130,000). In September, police raided an area in Mallorca and seized unspecified amounts of drugs, along with 4.3 million Euros (approximately $6,400,000), 8,000 U.S. dollars, and 7.5 kilos of jewelry. In October, five high-ranking ex-officials from the Catalan regional government were arrested for their involvement in a corruption and money laundering case.

U.S.-related currency transactions:

There are no known currency transactions of significance involving large amounts of U.S. currency and/or direct narcotics proceeds from U.S. sales.

Records exchange mechanism with U.S.:

Spain’s mutual legal assistance treaty with the United States has been in effect since 1993. Spain has a robust information exchange with a variety of U.S. law enforcement agencies.

International agreements:

The Government of Spain has signed criminal mutual legal assistance agreements with a number of countries and has also entered into bilateral agreements for cooperation and information exchange on money laundering issues with 14 countries, as well as with the United States. The FIU has bilateral agreements for cooperation and information exchange on money laundering issues with more than 25 FIUs.

Spain 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

Spain is a member of the FATF and is an observer to the South American Financial Action Task Force and a cooperating and supporting nation to the Caribbean Financial Action Task Force, both FATF-style regional bodies. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/52/3/37172019.pdf

Recommendations:

The scale of money laundering and the sophisticated methods used by criminals represent a major threat to Spain. The Government of Spain (GOS) should review the resources available for industry supervision, and ensure that its FIU has the independence and resources it needs to effectively discharge the duties entrusted to it. The GOS should work to close the loopholes in the areas of customer due diligence, beneficial ownership of legal persons, and the continued use of bearer shares. Congressional approval and implementation of Spain’s new AML/CFT legislation will greatly enhance the authorities’ capacity to combat terrorist financing. The GOS should clarify whether its laws allow civil asset forfeiture. Spain should maintain and disseminate statistics on investigations, prosecutions and convictions, including the amounts and values of assets frozen or confiscated. Spain should continue its efforts to actively participate in international fora and to assist jurisdictions with nascent or developing AML/CFT regimes.

Sri Lanka

Sri Lanka is not a financial center. Sri Lanka has a cash intensive society. A significant amount of money is transferred through informal remittance systems. Hawala is officially illegal in Sri Lanka, however, many Sri Lankan migrant workers, mainly in the Middle East, use hawala to remit their earnings. Various payments out of Sri Lanka are also made using this system. Trafficking of drugs generates significant amounts of criminal proceeds, and those proceeds are also readily transported via hawala. Cash-intensive establishments such as restaurants, hotels, casinos, and construction companies have also been used as front companies to launder illicit funds. Illegal profits are co-mingled with legitimate income in the placement and layering stages of money laundering. The over- and under-invoicing of import/export transactions are used as a method of money laundering, to settle accounts between hawaladars, and in circumventing Sri Lanka’s foreign exchange law. From 1983 to May 2009, the Government of Sri Lanka (GOSL) engaged in an armed conflict with the Liberation Tigers of Tamil Eelam (LTTE), a terrorist organization seeking an independent homeland for Sri Lanka’s Tamil people.

Offshore Center:

Sri Lanka is not considered an offshore financial center. Offshore banking units are allowed to operate as a part of a commercial bank operating in an overseas country in order to facilitate trade finance. They are subject to Central Bank supervision. Bearer shares are not permitted for offshore banks and foreign-owned companies.

Free Trade Zones: Yes

Sri Lanka has 12 export-processing zones, administered by the state-owned Board of Investment (BOI). The zones house export-manufacturing operations. Only companies approved by the BOI are allowed to operate inside the zones.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Money-laundering is a criminal offense under the Prevention of Money Laundering Act No 5 of 2006 (Act No. 5). The definition of money-laundering covers many offenses already covered under existing laws on narcotics, terrorism prevention, bribery, firearms, exchange control, banking, transnational organized crime, cyber crimes, child protection, trafficking of persons and any other offense punishable by death or imprisonment of seven years or more.

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 Convention on the Suppression of Terrorist Financing Act No 25 of 2005 (Act No. 25) gives effect to the UN Convention for the Suppression of the Financing of Terrorism.

Know-your-customer rules: Yes

In June 2007, the financial intelligence unit (FIU) issued know your customer (KYC) and customer due diligence (CDD) policies applicable to banking institutions and finance companies. In December 2007, the FIU issued KYC and CDD policies for securities dealers, and in August 2008, for insurance companies. Regulatory instruments are being developed for the other reporting entities.

Bank records retention: Yes

Obligated entities must maintain required documents for a period of six years.

Suspicious transaction reporting: Yes

Financial institutions such as banks, finance companies, leasing companies, money transfer agents, credit card issuers, foreign exchange and money market dealers, and designated non-finance businesses such as portfolio managers, fund managers, insurance companies, casinos, and real estate agents are required to file suspicious transaction reports (STRs). Sri Lanka has a tradition of strict bank secrecy laws, under which the GOSL is required to have a court order to obtain banking information on bank customers. However, the 2006 money-laundering and terrorist financing laws override the bank secrecy provisions of other laws. In practice, banks have recognized a fairly liberal reading of the anti money-laundering/counter-terrorist financing (AML/CFT) laws and have generally been responsive in providing information under these laws. However, these reporting requirements only cover the formal financial sector and not informal money transfer organizations. The FIU received 91 STRs from January to November 2009 and referred 15 STRs to law enforcement.

Large currency transaction reporting: Yes

Obligated entities must record large cash transaction reports and forward them to the FIU. The reporting threshold for both cash and electronic transactions was increased from Rs 500,000 (approximately $4,350) to Rs 1 million (approximately $8,700).

Narcotics asset seizure and forfeiture:

Anti-money laundering legislation includes asset forfeiture and seizure provisions for narcotics-related money laundering.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

The Central Bank’s Exchange Control Department has imposed regulations for limiting and monitoring the cross border transportation of currency and monetary instruments. Declarations are required when leaving the country for currency notes over $5,000 and for currency plus travelers checks amounting to over $10,000 (or the equivalent in other foreign currencies). Declarations are required when arriving in Sri Lanka for amounts over $15,000 or for lower amounts of foreign currency notes brought in if the traveler intends to later take out foreign currency notes exceeding $5,000.

Cooperation with foreign governments:

The Mutual Assistance in Criminal Matters Act of 2002 provides for cooperation in criminal matters with Commonwealth countries and with non-Commonwealth countries with which Sri Lanka has entered into a bilateral agreement on mutual assistance in criminal matters. Under Acts No. 25 and No. 5, the government is required to cooperate and provide assistance with regard to investigations and prosecutions under the respective laws. In August 2008, Sri Lanka also became a signatory to the South Asian Association for Regional Cooperation (SAARC) Convention on Mutual Legal Assistance in Criminal Matters.

U.S. or international sanctions or penalties: No

In October 1997, the US Government designated the LTTE as a Foreign Terrorist Organization under provisions of the Anti-Terrorism and Effective Death Penalty Act of 1996. The Government of Sri Lanka lifted a proscription on the LTTE in 2001 but still designates the LTTE as a terrorist organization under “UN Regulation 1 of 2001” made under United Nations Act No 45 of 1968. This regulation was introduced by the Ministry of Foreign Affairs to give effect to binding obligations under UNSCR 1373. Under the regulation, funds cannot be remitted to the LTTE. The LTTE has used a number of nonprofit organizations for financing, including the Tamil Rehabilitation Organization, designated under U.S. Executive Order 13224 for providing material support to the LTTE. In December 2007, the GOSL proscribed the TRO in Sri Lanka. The FIU seized and later forfeited approximately Rs 72 million, or $720,000 from TRO bank accounts.

Enforcement and implementation issues and comments:

The FIU’s regulatory authority only covers the formal financial system and does not cover informal money transfers.

The Central Bank continues to allow the operation of bearer certificates of deposits, although banks are required to maintain a record of purchasers of these certificates.

There have been no successful money laundering prosecutions in Sri Lanka.

The FIU circulates the list of individuals designated under UNSCR 1267 to local financial institutions with instructions to identify, freeze, and seize terrorist assets. To date, no such assets have been identified.

U.S.-related currency transactions:

There are no indications that currency transactions in Sri Lanka 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.:

The Sri Lankan FIU has not entered into an information exchange agreement with the Financial Crimes Enforcement Network.

International agreements:

The Sri Lankan FIU joined the Egmont Group of FIUs in June 2009. The Sri Lankan FIU must enter into a written agreement with a counterpart FIU before it is able to exchange financial intelligence with that entity.

Sri Lanka 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

Sri Lanka 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/Sri%20Lanka%20MER%20-%20Final%2010August06.pdf

Recommendations:

The Government of Sri Lanka should continue its efforts to combat money laundering and terrorist financing. The GOSL should provide adequate supervision and monitoring of informal money remitters or else curtail their activity according to its outstanding legislation. Sri Lanka should immobilize its bearer certificates of deposit. The GOSL should ratify the UN Convention against Transnational Organized Crime.

St. Kitts and Nevis

St. Kitts and Nevis is a federation composed of two islands in the Eastern Caribbean. The federation is at major risk for corruption and money laundering due to the high volume of narcotics trafficking activity through and around the island, and the presence of known traffickers on the islands. The growth of its offshore sector and an inadequately regulated economic citizenship program further contribute to the federation’s money laundering vulnerabilities.

The Ministry of Finance oversees St. Kitts and Nevis’ Citizenship by Investment Program. An individual may qualify for citizenship with a $350,000 minimum investment in real estate. In addition, the Government of St. Kitts and Nevis (GOSKN) created the Sugar Industry Diversification Foundation as a special approved project for the purposes of citizenship by investment. To be eligible, an applicant must make a contribution ranging from $200,000 to $400,000 (based on the number of the applicant’s dependents). The GOSKN requires applicants to make a source of funds declaration and provide evidence supporting the declaration.

Offshore Center: Yes

With most of the offshore financial activity concentrated in Nevis, it has developed its own offshore legislation. As of November 2009, Nevis has one offshore bank, 106 licensed insurance companies, 11,809 international business companies (IBCs), 4,511 limited liability companies (LLCs), 1,026 international trusts, 83 multiform foundations (used for estate planning, charity financing, and special investment holding arrangements), and 58 registered agents. Figures from 2009 indicate St. Kitts has 1,780 exempt companies and foundations, 100 captive insurance companies, four trust service providers and 31 corporate service providers. Internet gaming entities must apply for a license as an IBC. The GOSKN states that extensive background checks on all proposed licensees are conducted by a third party on behalf of the GOSKN before a license is granted. By law, all offshore bank licensees are required to have a physical presence in the federation. Shell companies are not permitted.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering: Yes

The Proceeds of Crime Act No. 16 of 2000 (POCA) criminalizes money laundering for serious offenses (defined to include more than drug offenses).

Criminalizes other money laundering, including terrorism-related: Yes

The POCA, as amended in 2008, covers all financial institutions, including nonbank financial institutions and dealers in precious stones and metal for purposes of anti-money laundering/counter-terrorist financing (AML/CFT). The Money Services Business Act, implemented in January 2009, provides for the licensing and regulation of the business of the transmission of money or monetary value in any form.

Criminalizes terrorist financing: Yes

The Anti-Terrorism Act No. 21 of 2002 (ATA) criminalizes terrorist financing.

Know-your-customer rules: Yes

The Anti-Money Laundering Regulations 2001 require financial institutions to identify their customers. In July 2008, the GOSKN issued amended Anti-Money Laundering Regulations and Guidance Notes to update and apply a risk-based approach to regulation and to include CFT measures; identification procedures for one-off transactions; and enhanced due diligence.

Bank records retention: Yes

The Anti-Money Laundering Regulations 2001 require financial institutions to maintain a record of transactions for up to five years.

Suspicious transaction reporting: Yes

The Anti-Money Laundering Regulations 2001 also require financial institutions to report suspicious transactions to the financial intelligence unit (FIU). In 2009, the FIU received 281 suspicious activity reports and referred 129 to law enforcement for appropriate action.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture: Yes

Under the POCA, legitimate businesses can be seized by the FIU if proven to be connected to money laundering activities. The FIU and the Director of Public Prosecutions (DPP) are responsible for tracing, seizing, and freezing assets. The FIU can freeze an individual’s bank account for up to five days in the absence of a court order; freeze orders obtained via the court may have an expiration of six months or more. The ATA provides the FIU and Director of Public Prosecutions the authority to identify, freeze, and/or forfeit terrorist finance-related assets. However, the law only allows for criminal forfeiture, and only of criminal proceeds, not instrumentalities or intended instrumentalities of the underlying crime. Civil forfeiture is considered unconstitutional. In 2008, $154,000 was forfeited. No assets were forfeited in 2009. The confiscation system has not been used with respect to any money laundering or terrorist financing offenses.

Narcotics asset sharing authority: No

There is no legislation relating to the sharing of seized narcotics assets or assets from other serious crimes with other governments.

Cross-border currency transportation requirements: Yes

Under the POCA any person importing into or exporting from St. Kitts and Nevis a value exceeding $10,000 or its equivalent in Eastern Caribbean dollars, or other currency, needs to declare it through Customs. In addition, the Customs Control and Management Act criminalizes bulk cash smuggling.

Cooperation with foreign governments (including refusals):

As a result of a refusal by the GOSKN to remit over $1,000,000 in securities fraud proceeds arising out of a prosecution in the Southern District of California, the U.S. filed an action against the U.S. correspondent account of the Bank of Nevis under the USA PATRIOT Act. A judge in Nevis recognized the U.S. court-appointed SEC Receiver as an appropriate recipient of the funds from the Bank of Nevis, and as a result, the U.S. action is now settled. Since this case, the GOSKN has restrained funds at the request of the United States, and has repatriated approximately 2/3 of the amount restrained.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

GOSKN circulates to its financial institutions the names of individuals and entities included on the UN 1267 Sanctions Committee’s lists. To date, no terrorist related funds have been identified.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

A Mutual Legal Assistance Treaty (MLAT) between St. Kitts and Nevis and the United States entered into force in 2000. Past requests from the United States under the MLAT have not always been treated with appropriate responsiveness. More recently, relations have improved, and there are efforts by the DPP office to remedy the previous deficiencies in the system.

International agreements:

St. Kitts and Nevis 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

St. Kitts and Nevis is also a member of the Organization of American States Inter-American Drug Abuse Control Commission Experts Group to Control Money Laundering (OAS/CICAD). St. Kitts and Nevis also is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/St.Kitts_Nevis_3rd_Round_MER_%28Final%29_English.pdf

Recommendations:

Bank secrecy laws, bearer shares, and the lack of transparency of beneficial ownership of legal entities make Nevis, in particular, a haven for criminals to conceal their assets. To address remaining vulnerabilities, the Government of St. Kitts and Nevis (GOSKN) should devote sufficient resources to effectively implement its AML/CFT regime, giving particular attention to its offshore financial sector. It is also vital that St. Kitts and Nevis determine the exact number of Internet gaming companies present on the islands and provide the necessary oversight of these entities. As part of operating an offshore financial center, St. Kitts and Nevis needs to provide adequate resources and capacity to law enforcement agencies to effectively investigate money laundering cases. The GOSKN should ensure close supervision of its economic citizenship programs or else consider their discontinuance. Additionally, Nevis should expand its supervision program to credit unions, local insurance companies, and money transfer agencies. To strengthen its legal framework against money laundering, St. Kitts and Nevis should move expeditiously to become a party to the UN Convention against Corruption. The GOSKN should also more closely cooperate with foreign government partners, identifying criminally-derived property within its banking system, or property purchased in the country, with a view toward depriving criminal organizations of their ill-gotten gains, and reaching agreements with those partners to permit the sharing of such confiscated property.

St. Lucia

St. Lucia has developed an offshore financial service center that is vulnerable to money laundering. Additionally, the transshipment of narcotics (cocaine and marijuana), unregulated money remittance businesses, cash smuggling, and bank fraud, such as counterfeit U.S. checks and identity theft, are among the other primary sources for laundered funds in St. Lucia.

Offshore Center: Yes

As of yearend 2009, St. Lucia has six offshore banks - of the six, two are Class B Banks (totally private and may not have a physical presence in St. Lucia) and four are Class A Banks. There are 3,686 International Business Companies (IBCs), 82 offshore international businesses, 4,000 exempt companies, 19 shell companies, 38 trust companies and agents, and ten insurance companies. Shell banks are not permitted. St. Lucia licenses offshore banks and IBCs, and background checks are performed on all individuals connected to these companies. The Financial Sector Supervision Unit (FSSU) is responsible for the regulation of the onshore and offshore sector.

Free Trade Zones: Yes

The Government of St. Lucia (GOSL) also has established one free trade zone (FTZ) where investors may establish businesses and conduct trade and commerce within the FTZ or between the FTZ and foreign countries. St. Lucia authorities indicate there is a permanent Customs presence and monitoring by the Free Zone Management Authority. Identification of companies and individuals who use the zone is required.

Criminalizes narcotics money laundering: Yes

Money laundering in St. Lucia is a crime under the 1993 Proceeds of Crime Act and the Money Laundering (Prevention) Act (MLPA) of 2003.

Criminalizes other money laundering, including terrorism-related: Yes

The MLPA criminalizes the laundering of proceeds with respect to numerous predicate offenses, including narcotics and firearms trafficking, abduction, blackmail, counterfeiting, extortion, forgery, corruption, fraud, prostitution, trafficking in persons, tax evasion, terrorism, gambling, illegal deposit taking and robbery. However, certain crimes are not predicates for money laundering, such as smuggling, insider trading and market manipulation, counterfeiting, trafficking in stolen property, and organized crime.

Criminalizes terrorist financing: No

The GOSL has not criminalized terrorist financing. However, St. Lucia circulates to financial institutions lists of terrorists and terrorist organizations on the UN 1267 Sanctions Committee’s consolidated list and the list of Specially Designated Global Terrorists designated by the United States pursuant to Executive Order 13224. The GOSL has the legislative power to freeze, seize and forfeit terrorist finance-related assets. To date, no accounts associated with terrorists or terrorist entities have been found in St. Lucia.

Know-your-customer rules: Yes

The MLPA imposes a duty on financial institutions to take reasonable measures to establish the identity of customers, and requires accounts to be maintained in the true name of the holder. It also requires an institution to take reasonable measures to identify the underlying beneficial owner when an agent, trustee or nominee operates an account. These obligations apply to domestic and offshore financial institutions, including banks, building societies, financial services providers, credit unions, trust companies, and insurance companies. The FSSU has issued detailed guidance notes to implement the MLPA. Currently, steps are also being taken to implement legislation to regulate money remitters.

Bank records retention: Yes

The MLPA imposes record keeping requirements.

Suspicious transaction reporting: Yes

The MLPA mandates suspicious transaction reporting. St. Lucia’s financial intelligence unit (FIU), the Financial Intelligence Authority (FIA), is responsible for receiving, analyzing and disseminating suspicious transaction reports (STRs). In 2009, the FIA received 65 STRs, three of which were referred to law enforcement agencies for further investigation.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Under current legislation, instruments of crime, such as conveyances, farms, and bank accounts, can be seized by the FIA. Substitute assets also can be seized. The legislation also applies to legitimate businesses if used to launder drug money, support terrorist activity, or if otherwise used in a crime. There is no legislation for civil forfeiture. If the individual or business is not charged, then assets must be released within seven days. No assets or cash were seized or frozen in 2009.

Narcotics asset sharing authority: No

There is no legislation for sharing of narcotics assets.

Cross-border currency transportation requirements:

No information available.

Cooperation with foreign governments (including refusals):

The GOSL has been cooperative with the USG in financial crimes investigations.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There were no arrests or prosecutions for money laundering or terrorist financing in 2009. There was one extradition for money laundering and fraud in 2009.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

In February 2000, St. Lucia and the United States brought into force a Mutual Legal Assistance Treaty.

International agreements:

St. Lucia’s FIU became a member of the Egmont Group in May 2009.

St. Lucia 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

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

Recommendations:

The Government of St. Lucia should move expeditiously to criminalize terrorist financing. It also should enhance and implement its anti-money laundering legislation and programs by regulating money remitters and consider the adoption of civil forfeiture legislation. Efforts to increase transparency within the island’s offshore financial services sector should be continued. St. Lucia also should criminalize self-laundering and implement risk-based assessment procedures as well as consider requirements for reporting large monetary transactions to the FIA. The GOSL should intensify its efforts to investigate, prosecute, and sentence money launderers and those involved in other financial crimes, and should permit extradition in cases of money laundering and terrorist financing. St. Lucia should use its asset seizure and forfeiture regimes, and provide for asset sharing with other governments. St. Lucia should become a party to the UN Convention for the Suppression of the Financing of Terrorism, the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption.

St. Vincent and the Grenadines

St. Vincent and the Grenadines (SVG) remains vulnerable to money laundering and other financial crimes as a result of drug trafficking and its offshore financial sector. Money laundering is principally affiliated with the production and trafficking of marijuana in SVG, as well as the trafficking of other narcotics from South America. Drug trafficking is controlled by a small group of local criminals. There is no evidence to suggest there are organized crime syndicates in SVG and no known terrorist groups operate in the country. Money laundering occurs in various financial institutions such as domestic and offshore banks and money remitters. There has been a slight increase in fraud and the use of counterfeit instruments over the last year, such as tendering counterfeit checks or cash. The Government of St. Vincent and the Grenadines (GOSVG) eliminated its economic citizenship program.

Offshore Center: Yes

The offshore sector includes four offshore banks, 9,584 international business corporations (IBCs), 13 offshore insurance companies, 45 mutual funds, 19 registered agents, and 123 international trusts. There are no offshore casinos, and no Internet gaming licenses have been issued. No physical presence is required for offshore sector entities and businesses, with the exception of offshore banks. Nominee directors are not mandatory except when an IBC is formed to carry on banking business. Bearer shares are permitted for IBCs but not for banks. The International Business Companies (Amendment) Act No. 26 and 44 of 2002 was enacted to immobilize bearer shares and requires registration and custody of bearer share certificates by a registered agent who must also keep a record of each bearer certificate issued or deposited in its custody. The record must contain pertinent information relating to the company issuing the shares, the number of the share certificate, and identity of the beneficial owner. The Offshore Finance Inspector has the ability to access the name or title of a customer account and confidential information about a licensed customer.

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Proceeds of Crime and Money Laundering (Prevention) Act 2001 (PCMLPA) criminalizes money laundering. In 2005, the PCMLPA was amended to include an all offenses approach and to extend the scope of sections relating to the seizure, detention, and forfeiture of cash. In addition to banks, money laundering controls also apply to nonbanking financial institutions and intermediaries including exchange houses, stock brokerages, cash couriers, casinos, insurance companies, lawyers and accountants.

Criminalizes terrorist financing: Yes

All terrorist financing offenses are predicate offenses to money laundering, therefore the mechanisms available under the PCMLPA to identify, trace, freeze, forfeit, and confiscate properties related to money laundering can also be used for terrorist financing cases. In 2006, the GOSVG enacted the United Nations (Anti-Terrorism Measures) (Amendment) Act 2006, Act No. 13 (UNATMA). The UNATMA criminalizes terrorist financing and imposes a legal obligation on financial institutions and relevant businesses to report suspicious transactions relating to terrorism and terrorist financing to the Financial Intelligence Unit (FIU).

Know-your-customer rules: Yes

The Proceeds of Crime (Money Laundering) Regulations establish mandatory record keeping rules and customer identification requirements.

Bank records retention: Yes

Financial institutions are required to maintain all records relating to transactions for a minimum of seven years.

Suspicious transaction reporting: Yes

The PCMLPA obligates covered entities to report suspicious transactions regardless of the transaction amount if a transaction could constitute money laundering, the proceeds of criminal conduct, or terrorist financing. The Financial Intelligence Unit Act No. 38 of 2001 (FIU Act) establishes the GOSVG’s FIU. The FIU has the mandate to receive, analyze, and investigate financial intelligence, and prosecute money laundering cases. As of November 2009, the FIU received 1,184 suspicious activity reports for the year, almost triple that of 2008.

Large currency transaction reporting: Yes

Banks and other financial institutions are required to know and report the identity of customers engaging in significant transactions. Customers are required to complete a source of funds declaration for any cash transaction over 10,000 East Caribbean dollars (XCD) (approximately $3,700).

Narcotics asset seizure and forfeiture:

Existing anti-money laundering legislation allows for the criminal forfeiture of intangible as well as tangible property. Drug trafficking offenses also may be liable to the forfeiture provisions pursuant to the Drug (Prevention and Misuse) Act and the Criminal Code. There is no period of time during which the assets must be released. The FIU is responsible for tracing, seizing, and freezing assets. In 2009, approximately $293,822 in assets and cash was frozen or seized.

Narcotics asset sharing authority:

St. Vincent and the Grenadines has enacted legislation for the sharing of seized narcotics assets, as well as the assets from other serious crimes with other governments. Section 55 of the PCMLPA authorizes the Minister of Finance, after consultation with the National Anti-Money Laundering Committee and Cabinet, to access funds from the Confiscated Assets Fund to satisfy an obligation of the GOSVG to a foreign jurisdiction.

Cross-border currency transportation requirements: Partially

Incoming travelers are required to declare currency over 10,000 XCD (approximately $3,700) on a customs declaration form. Bulk cash smuggling and the use of cash couriers to move proceeds of criminal and terrorist activity is a primary concern of the GOSVG. There are laws which criminalize the smuggling of cash both in and out of SVG. Customs officials are aware of the existence of cash courier problems and are trained to handle them.

Cooperation with foreign governments:

No known impediments exist to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In December 2008, a suspect was arrested and charged under the PCMLPA. The charges related to $1,700,000 discovered within a harbor in St. Vincent on board a yacht owned by the suspect which, in whole or in part, directly represented criminal proceeds. Two other individuals, the operators of the vessel, were charged in April 2008, when the funds were discovered. The suspect’s arrest was a major milestone for law enforcement in St. Vincent, as the first arrest under the Act. There have been no arrests or prosecutions for money laundering or terrorist financing in 2009.

The UN 1267 Sanctions Committee’s consolidated list is circulated by the FIU to all financial institutions whether domestic or offshore. The institutions are also provided with a link to the website for review.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

An updated extradition treaty and a Mutual Legal Assistance Treaty between the United States and the GOSVG entered into force in 1999. SVG officials have regularly assisted the U.S. Internal Revenue Service on investigations.

International agreements:

The FIU is permitted to enter agreements or make arrangements to share information with foreign FIUs. For example, SVG signed a memorandum of understanding with Bermuda in November 2009 to assist both countries’ ability to trace, seize, and freeze assets related to money laundering and terrorist financing.

The GOSVG 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 GOSVG is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. SVG also is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force-style regional body. The International Monetary Fund conducted an evaluation in 2009. The report will be posted here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Recommendations:

The Government of St. Vincent and the Grenadines has strengthened its anti-money laundering/counter-terrorist financing (AML/CFT) regime through legislation and the establishment of an effective FIU. The GOSVG should continue to ensure this legislation is fully implemented, and the FIU has access to all necessary information. The GOSVG should properly supervise and regulate all aspects of its offshore sector, including continuing to insist the beneficial owners of IBCs are known and listed in a registry available to law enforcement, and immobilizing all bearer shares. The GOSVG should also continue to provide training and devote resources to increase the cooperation among its regulatory, law enforcement, and FIU personnel in AML/CFT operations and investigations. To ensure timely and effective information sharing, the GOSVG would be well served to computerize its record keeping systems. Passage of civil forfeiture legislation and broader use of special investigative techniques should continue to be pursued to strengthen the government’s AML/CFT efforts. St. Vincent and the Grenadines should also become a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Suriname

Money laundering in Suriname is closely linked to transnational criminal activity related to the transshipment of cocaine to the United States, Europe, and Africa. Domestic drug trafficking organizations and organized crime, with links to international groups, are thought to control much of the money-laundering proceeds, which are laundered and invested locally in casinos, real estate, and private sector businesses. Additionally, money laundering occurs as a result of poorly regulated private sector activities, such as casinos and car dealerships, the non-bank financial sector, construction, the sale of gold purchased with illicit money, the purchase and sale of real estate, and the manipulation of commercial bank accounts. There are indications some trade-based money laundering is occurring in Suriname, such as through the activities of local car dealerships and the sale of consumer goods. There is an informal gold economy in the interior mining region of the country; money launderers have taken advantage of this existing gold economy to launder their proceeds. Suriname’s porous borders and lack of corresponding enforcement facilitate smuggling.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The 2002 Act Penalizing Money Laundering criminalizes all types of money laundering for proceeds derived from criminal offenses.

Criminalizes terrorist financing: No

A draft law on terrorism is under review by the Council of Ministers.

Know-your-customer rules: Yes

Suriname’s legislation requires service providers to confirm the identities of individual or corporate clients before completing requested services. This practice is not implemented by cambios (exchange houses), many of which include drive-thru windows.

Bank records retention: Yes

Suriname’s legislation requires service providers to retain photocopies of identity documents and all other relevant documents pertaining to national and international transactions for a period of seven years.

Suspicious transaction reporting: Yes

Financial institutions are required to report unusual or suspicious transactions. Although the law requires financial institutions, non-bank financial institutions, and individuals who provide financial services to report unusual transactions to the financial intelligence unit (FIU), only 130 entities in Suriname are registered with the FIU and have received training regarding Suriname’s money laundering legislation. The FIU continues to have difficulty registering providers in certain sectors. As a result, not all of Suriname’s jewelers, notaries, credit unions, cambios, casinos, or car dealers are aware of, or in compliance with, the requirements of the money laundering legislation.

Large currency transaction reporting:

Reporting is mandatory if financial transactions are above a certain threshold; however, sanctions for noncompliance are not currently enforced. The thresholds for financial institutions range from $5,000 for money-transfer offices to $10,000 for banks, insurance companies, money exchange offices, and savings and credit unions. Thresholds for nonbanking financial institutions and individuals are $5,000 for casinos, $10,000 for dealers of precious metals and stones, and $25,000 for notaries, accountants, lawyers, and car dealerships.

Narcotics asset seizure and forfeiture:

An amendment to the criminal code enacted in 2003 allows authorities to confiscate proceeds and assets obtained partly or completely through criminal offenses, and to seize items that were used in the planning or the commission of a criminal act. The Ministry of Justice and Police as well as the court system are responsible for tracing, seizing, and freezing assets. Under current law, assets cannot be converted to cash or disposed of, but new asset forfeiture legislation which would make this possible has been drafted and is under review at the National Assembly. Suriname also has legislation that allows the authorities to freeze assets of those suspected of money laundering. Assets may be confiscated pending the outcome of the trial. There are no provisions for civil forfeiture.

Narcotics asset sharing authority: No

Suriname has not enacted laws for the sharing of seized assets with governments and is not engaged in negotiations with other governments to enhance asset tracing, freezing and seizure.

Cross-border currency transportation requirements: Yes

Amounts in excess of $10,000 must be reported to authorities before entering or leaving Suriname. In addition, any person who wishes to take money in excess of $10,000 out of the country must notify the Immigration Police.

Cooperation with foreign governments:

Mutual legal assistance activity is frequent, particularly with the neighboring countries and the Netherlands. As a general rule all requests are channeled through the Office of the Prosecutor General as central authority.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Upon making a determination that an unusual activity report is indeed suspicious and sufficient to initiate an investigation, the FIU refers the matter to the Attorney General’s Office. In 2009, two suspicious transactions forwarded by the FIU were reviewed for possible police investigation. If the Attorney General’s Office concurs with the FIU’s findings, it directs the Financial Investigation Team (FOT) to conduct an investigation. As of October 2009, the FOT had not received any cases from the Attorney General’s Office. However, the FOT investigated money laundering cases against suspects already arrested on narcotics charges, and had investigated nine such cases as of October 30, 2009.

U.S.-related currency transactions:

Narcotics traffickers in Suriname and the surrounding region frequently use US dollars.

Records exchange mechanism with U.S.:

Suriname has cooperation agreements with the United States on narcotics trafficking and has exchanged information with appropriate USG law enforcement agencies investigating financial crimes related to narcotics.

International agreements:

The Government of Suriname (GOS) is party to the Treaty of Chaguaramas which contains general principles on mutual assistance between Caribbean Community (CARICOM) countries. The GOS has signed and ratified the Organization of American States Convention on Mutual Legal Assistance in Criminal Matters. Suriname is not a member of the Egmont Group of FIUs.

The GOS 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 - Yes

Suriname is a member of the Caribbean Financial Action Task Force, a Financial Action Task Force-style regional body. Its most recent mutual evaluation report is found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Recommendations:

The Government of Suriname (GOS) should assure all nonfinancial businesses and professions are subject to and fully implement customer identification and unusual transaction reporting procedures. Additionally, Suriname should ensure that those same entities are subject to adequate supervision and enforcement programs. The GOS should enact its pending legislation to enhance its asset seizure and forfeiture regime. Suriname should implement reforms to permit the FIU to qualify as a member of the Egmont Group. The GOS should criminalize terrorist financing and become a party to the UN Convention for the Suppression of the Financing of Terrorism.

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