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


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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: Swaziland through Zimbabwe

Swaziland

Swaziland is not considered an important regional financial center. An in-country crime syndicate controls the sale or trade in dagga (marijuana), the proceeds of which may be laundered in Swaziland. There is a general belief that trade-based money laundering exists in Swaziland. There is suspicion that some retail shops are used for laundering money because there is no cash declaration between Swaziland and South Africa. There is also suspicion that cash gained from the sale of marijuana or hard drugs is used to buy goods for retail outlets and to build houses on non-titled land. The country is experiencing an increase in financial crimes related to fraud, as well as pyramid schemes. There is a significant black market for smuggled goods such as cigarettes, liquor, and pirated radio cassettes, videocassettes, and DVDs between Mozambique, South Africa and Swaziland. The smuggling of illegal goods is not funded by narcotics proceeds or other illicit proceeds.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Money laundering is a criminal offense in Swaziland and is punishable by law under the Money-Laundering Act of 2001 (MLA).

Criminalizes other money laundering, including terrorism-related: Partially

The MLA lists as predicate offenses blackmail, counterfeiting, drug trafficking and related crimes, extortion, false accounting, forgery, fraud, illegal deposit taking, terrorism, arms trafficking, kidnapping, and robbery and theft above a threshold of the equivalent of $1538. The law does not include the financing of terrorist activities as a predicate offense.

Criminalizes terrorist financing:

The Suppression of Terrorism Act of 2008 criminalizes the financing of terrorists and their activities.

Know-your-customer rules:

All new clients of financial institutions are required to present their national Personal Identification Number (PIN) to establish their identity and to furnish the bank with utility bills indicating their physical place of residence.

Bank records retention:

According to the Financial Institutions Act of 2006, financial institutions are required to keep financial records for a period of at least five years.

Suspicious transaction reporting:

All banks and non-bank financial institutions are required to pay special attention to all complex and unusual or large transactions and to promptly report such suspicious transactions to the Central Bank of Swaziland (CBS). Financial institutions did submit STRs in 2009, which resulted in two pyramid schemes companies being liquidated and one still under investigation.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture:

The Serious Offenses (Confiscation of Proceeds) Act of 2001 allows for the confiscation of assets procured by commission of a serious offense. Money laundering is not listed as a serious offense, but the act does include a number of predicate offenses for money laundering. The government can seize any property acquired directly or indirectly from the commission of money laundering. A legitimate business entity can be seized if it is established and proved that it is involved in money laundering deals. The law does not allow for civil forfeiture. The Government of the Kingdom of Swaziland (GKOS) does not have an independent national mechanism in place for freezing terrorist-related assets. In 2009, the GKOS did not freeze any narcotics or other criminal-related assets.

Narcotics asset sharing authority:

Swaziland has not enacted laws for the sharing of seized narcotics assets, nor assets from other serious crimes, with other governments. The GKOS is engaged in multilateral negotiations with other governments to enhance asset tracing, freezing and seizure.

Cross-border currency transportation requirements:

According to the MLA, a person who leaves Swaziland for a destination outside the Common Money Area (CMA), composed of South Africa, Swaziland, Lesotho, and Namibia, with more than $1538 is required to obtain permission from the CBS. The CMA provides free flow of funds among the four countries with no exchange controls. The MLA requires persons leaving Swaziland for a destination outside of the CMA to report funds in excess of E10, 000. Cash declaration forms are not used at the country’s border posts.

Cooperation with foreign governments:

The MLA allows for international cooperation. Swaziland has cooperated with appropriate USG law enforcement personnel when requested.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

GKOS’s biggest challenge is the implementation of its current laws. Swaziland has not successfully prosecuted money laundering or terrorist financing cases.

There is a need for clearer coordination between the Anti-Corruption Commission and the Police’s Fraud Department to ensure investigations and prosecutions of white-collar crimes can be done comprehensively and efficiently. The police are not adequately trained or staffed.

A 2009 draft Money Laundering and Financing of Terrorism (Prevention) Bill proposes the establishment of a financial intelligence unit (FIU).

The CBS circulates lists of individuals and entities included on the UN 1267 sanctions committee’s consolidated list to all financial institutions. The government did not freeze, seize, and/or forfeit any assets related to terrorist financing in 2009.

U.S.-related currency transactions:

There are no known or reported cases of financial institutions engaging in currency transactions involving international narcotic trafficking proceeds that include significant amounts of United States currency or currency derived from illegal drug sales in the United States.

Records exchange mechanism with U.S.:

Swaziland has not adopted laws or regulations that allow for the exchange of records with the United States on narcotics-related money laundering crimes, terrorism, or terrorist financing investigations. Currently, there are no negotiations to arrange an exchange mechanism.

International agreements:

Swaziland 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

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

Recommendations:

Swaziland has taken several important steps to establish an anti-money laundering/counter-terrorist financing (AML/CFT) regime. The Government of the Kingdom of Swaziland should adopt its pending AML/CFT legislation and work to fully implement its existing legislation. The GOKS should take steps to improve the capacity and coordination between the police and the Anti-Corruption Commission. The GOKS should establish a FIU.

Sweden

While money laundering in Sweden is a growing concern, Sweden is not a significant problem country. According to statistics from the Swedish Finance Police, the amount of suspicious money laundering transactions totaled $1.4 billion in 2009 compared with $570 million in 2007.

Money laundering in Sweden occurs by criminal proceeds being integrated and turned over in the financial system or with the help of corporations that use financial system services. Money laundering is further facilitated by criminals having contacts, influence or control over corporations within the financial system. Laundered money primarily emanates from narcotics, tax fraud, economic crimes, robbery, and organized crime. Money laundering is concentrated primarily in the large urban regions, such as Stockholm.

Offshore Center: No

Free Trade Zones: Yes

Sweden has foreign trade zones with bonded warehouses in the ports of Stockholm, Goteborg, Malmo, and Jonkoping. Goods may be stored for an unlimited time in these zones without customs clearance, but they may not be consumed or sold on a retail basis. Permission may be granted to use these goods as materials for industrial operations within a free trade zone. The same tax and labor laws apply to foreign trade zones as to other workplaces in Sweden.

Criminalizes narcotics money laundering: Yes

Conviction for a predicate offense also covers the activity of self-laundering, which is not prosecuted separately.

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering is criminalized through sections 6, 6a, 7 and 7a of Chapter 9 of the Swedish Penal Code on receiving and money receiving. The basic money receiving offense covers the mandatory physical elements required by the Vienna and Palermo Conventions. Sweden has adopted an “all crimes” approach. However, in practice, the predicate crimes are prosecuted, not 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 July 2002, the Government of Sweden (GOS) implemented the UN Convention on the Suppression of Terrorist Financing. According to the legislation, it is punishable to collect, provide, or receive money or other funds with the intention of using them or in the knowledge that they are to be used to commit crimes which are classified as terrorism under international conventions. Attempts to commit such crimes are also punishable. Banks and financial institutions are obliged to report suspected terrorist financing transactions to the police. The prosecutor has to be able to prove intent to fund not only a particular organization, but also the intent to fund terrorist activity.

Know-your-customer rules:

In 1994, the GOS implemented regulations requiring financial institutions, insurance companies, security firms, currency exchange houses, providers of electronic money, and money transfer companies to verify background and identities for each transaction. Amendments in 2005 and 2008 extend the requirements to accounting firms, law firms, tax counselors, casinos, firms dealing with gambling and the sale of lottery tickets, companies buying and selling new and used vehicles, art dealers, dealers in antiques and jewelry, and real estate brokers.

In February 2009, the Swedish Parliament adopted the New AML Act which introduces customer due diligence (CDD) provisions for situations that require CDD, basic CDD measures, and measures to perform enhanced CDD.

Bank records retention:

The AML/CFT Regulations/Guidelines contain guidance on record keeping measures which require legal persons as well as natural persons conducting business operations to maintain comprehensive accounts and accounting records for ten years. The New AML Act introduces record keeping requirements in line with provisions in the 3rd European Union (EU) AML Directive.

Suspicious transaction reporting: Yes

The 1994 regulations require financial parties and other institutions to report suspicious transactions to the FIU. The obligations to file suspicious transaction reports (STRs) in the New AML Act include both STRs related to money laundering and terrorist financing. In 2008, there were 13,048 STRs filed with the FIU. The FIU handed over information to the Office of the Public Prosecutor based on 685 of the reports. There are no statistics on how many of these resulted in convictions.

Large currency transaction reporting: No

The GOS considered the establishment of such a system but decided against it.

Narcotics asset seizure and forfeiture:

Although Swedish law provides for the seizure of assets derived from drug-related activity, it is not possible to stop a transaction based solely on suspicions of unlawful activity. Law enforcement officials may only seize the assets of an organization or individual that is the subject of an ongoing criminal investigation. Freezing of assets based on UN Security Council Resolutions is carried out by implementation of European Commission law. UN and international sanctions can be imposed through the 1995 Sanctions Act, but the Swedish government does not have the authority to identify potential sources of terrorist financing and to disrupt them on its own without a decision by the EU or UN. Commencing in 2008, the rules on forfeiture were broadened to make it possible to forfeit assets which have been clearly proven to be more likely acquired through illegal activity than through legal means. The provisions only apply to crimes which are punishable by six years of prison (including certain narcotics-related crimes and all human trafficking).

Narcotics asset sharing authority: No

Sweden cooperates internationally on asset tracing, freezing and seizure. There is no asset sharing of forfeited assets between the Swedish state and other governments. Forfeited assets go to the Swedish state.

Cross-border currency transportation requirements:

There is free movement of financial instruments within the EU (including cash). The EU Regulation (EC) No. 1889/2005 on controls of cash entering or leaving the community entered into force in July 2007. According to the regulation, any natural person entering or leaving the European Community and carrying cash and/or bearer negotiable instruments of a value of 10,000 euros or more must make a declaration to customs. This regulation is directly applicable in Sweden, with cash declarations made to Swedish Customs. The Swedish FIU believes the number of individuals who declare these transfers falls short of the real number carrying reportable amounts.

Cooperation with foreign governments:

The GOS regularly cooperates with other jurisdictions in combating money laundering and terrorist financing.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There are a total of 250 payment transfer agents operating in the Swedish market. Approximately 100 entities are considered to be underground banking operations and hawala systems. The majority of these lack supervision since they do not register with the Swedish Financial Supervisory Authority. These systems transfer close to $100 million abroad each year, which is nearly as much as legal agents transfer.

There are currently no statistics available on convictions or prosecution for money laundering or terrorist financing for 2009. (Note that money laundering is not an independent crime in Sweden). Generally, individuals suspected of laundering money or financing terrorism are convicted for another crime. One example is the 2009 conviction of a Somali man operating a hawala system from a Stockholm suburb, who was sentenced to 18 months in prison after transferring a total of close to SEK 38 million (approximately $5.4 million) to Somali citizens in the period 2005-2007 through what he called a non-profit organization. The operation did not maintain any required accounting records.

The GOS circulates the UN 1267 consolidated list and the EU list of designated terrorists and terrorist organizations.

U.S.-related currency transactions:

There is no available information.

Records exchange mechanism with U.S.:

There is good cooperation with U.S. law enforcement agencies. In 2010, a Mutual Legal Assistance Treaty will enter into force between the U.S. and the EU.

International agreements:

Sweden 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

Sweden is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/26/35/36461995.pdf

Recommendations:

The Government of Sweden should continue to enhance its anti-money laundering/counter-terrorist financing regime by amending its terrorist financing legislation to cover all types of terrorist financing activity, registering or licensing and supervising payment transfer and remittance operators, and adopting comprehensive customer due diligence procedures.

Switzerland

Switzerland is a major international financial center. Reporting indicates that criminals attempt to launder illegal proceeds in Switzerland from a wide range of criminal activities conducted worldwide. These illegal activities include, but are not limited to, financial crimes, narcotics trafficking, arms trafficking, organized crime, terrorist financing and corruption. Although both Swiss and foreign individuals or entities launder money in Switzerland, foreign narcotics trafficking organizations, often based in the Balkans, Eastern Europe, or South America, dominate the narcotics-related money laundering operations in Switzerland. The country’s central geographic location, relative political, social, and monetary stability, the range and sophistication of financial services it provides, and its long tradition of bank secrecy not only contribute to Switzerland’s success as a major international financial center, but also expose Switzerland to potential money laundering abuse.

Offshore Center: Yes

Switzerland is one of the world’s largest offshore centers, with estimates that the country manages as much as one-third of an estimated $7 trillion of offshore money worldwide. While Switzerland’s banking industry offers the same account services for both residents and nonresidents, many Swiss banks offer additional offshore services, including permitting non-residents to form offshore companies to conduct business. However, Swiss commercial law does not recognize any offshore mechanism per se and its provisions apply equally to residents and nonresidents. In April 2009, the Organization for Economic Co-operation and Development (OECD) placed Switzerland on it grey list of tax havens. The country was subsequently removed from the list in September 2009 after having renegotiated a series of Double Tax Agreements (DTAs). The agreements include provisions for extended administrative assistance in tax matters.

Free Trade Zones: Yes

Switzerland has approximately 17 duty free zones located mainly in border cantons like Geneva and Basel. Customs authorities supervise the admission into and the removal of goods from customs warehouses. Warehoused goods may only undergo manipulations necessary for their maintenance, such as repacking, splitting, sorting, mixing, sampling and removal of the external packaging; any further manipulation is subject to authorization. Goods may not be manufactured in these zones. Swiss law has full force in the duty free zones, and export laws on strategic goods, war material, and medicinal products, as well as laws relating to anti-money laundering prohibitions, all apply.

Criminalizes narcotics money laundering: Yes

Money laundering related to all crimes (including narcotics trafficking) is criminalized in Article 305 bis of the Swiss Penal Code, which provides that anyone who commits an act intended to obstruct the identification of the origin, discovery or confiscation of property that he knew or should have presumed was derived from a crime, shall be liable to imprisonment or a fine.

Criminalizes other money laundering, including terrorism-related: Yes

Article 305 bis of the PC and The Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector of October 1997 (AML/CFT Act) form the legal basis of Switzerland’s anti-money laundering (AML) regime. Switzerland revised its AML regulations effective February 1, 2009. The regulations, aimed at the banking and securities industries, codify a risk-based approach to suspicious transactions and client identification and install a global know-your-customer risk management program for all banks, including those with branches and subsidiaries abroad. Under the revised AMLA, Swiss law recognizes certain criminal offenses as predicate offenses for money laundering, including illegal trafficking in migrants, counterfeiting and pirating of products, smuggling, insider trading, and market manipulation.

Criminalizes terrorist financing: Yes

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

Terrorism-related money laundering is criminalized in the AML/CFT Act. Revisions to the Swiss Penal Code regarding terrorist financing entered into force on October 1, 2003. Article 100 of the Penal Code extends criminal liability for terrorist financing to include companies. However, the Swiss Penal Code currently criminalizes the financing of an act of criminal violence, not the financing of an individual, independent of a particular act.

Swiss authorities regularly request that banks and nonbank financial intermediaries check their records and accounts against the U.S. and UN lists and those generated by the Swiss Economic and Finance Ministries.

Know-your-customer rules: Yes

Swiss money laundering laws and regulations apply to both banks and nonbank financial institutions. The Swiss Bankers Association Due Diligence Agreement was drafted by the Swiss banking industry. The guidelines were most recently revised on January 17, 2003. The regulations contain obligations to keep records of all clients’ dates of birth and nationality. Customers have to prove their identity with an official document, even if they are known by a bank employee. In the case of accounts held for legal entities, the individual opening the account has to reveal his identity, while clients opening Internet banking accounts have to provide a copy of their passport or identity card. Financial intermediaries must conduct additional due diligence in the case of higher-risk business relationships. The regulations require increased due diligence for politically exposed persons (PEPs), ensuring that decisions to commence relationships with such persons be undertaken by at least one member of the senior executive body of a financial institution.

Bank records retention: Yes

The AML/CFT Act requires financial intermediaries to keep records of transactions for a minimum of ten years after the termination of the business relationship, or after completion of the transaction.

Suspicious transaction reporting: Yes

Switzerland’s AMLA requires financial institutions to report suspicious transactions to Switzerland’s financial intelligence unit (FIU), the Money Laundering Reporting Office (MROS). In addition to financial institutions, designated nonfinancial businesses and professions (DNFBPs) such as attorneys, commodities and precious metals traders, asset managers and investment advisers, distributors of investment funds, securities traders, and credit card companies are also required to report. There is no currency reporting threshold for suspicious transaction report (STR) filing. MROS received 851 STRs in 2008, and forwarded 81 percent of these to Swiss law enforcement. As was the case in the previous years, “fraud” was by far the most frequently suspected predicate offense (38.5 percent). An amendment to Article 9-1 of the AMLA provided for reporting of suspected terrorist financing.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Switzerland has implemented legislation for identifying, tracing, freezing, seizing, and forfeiting assets. If financial institutions believe that assets derive from criminal activity, they must freeze the assets immediately until a prosecutor decides on further action. Under Swiss law, suspect assets may be frozen for up to five days while a prosecutor investigates the suspicious activity.

Narcotics asset sharing authority: Yes

Switzerland has shared large amounts of seized narcotics assets with the United States and other countries. In addition, Switzerland has returned a total of $1.6 billion in illegal PEP assets to home countries. Most prominently, Switzerland returned $684 million in assets deposited by Ferdinand Marcos to the Philippines and $700 million in assets deposited by Sani Abacha to Nigeria. Historically, Switzerland has required court rulings in both Switzerland and the PEP’s home country before returning the assets.

Cross-border currency transportation requirements: No

Cooperation with foreign governments: Yes

Swiss authorities cooperate with counterpart bodies from other countries and no legal issues hamper the government's ability to assist foreign governments in mutual legal assistance requests

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Because there are no laws for declaration of currency and monetary instruments, Swiss authorities cannot effectively initiate bulk cash investigations.

Switzerland ranks third in the highly profitable global artwork trading market, exporting $1.5 billion of artwork in 2008. Because of the size of the Swiss art market, organized crime groups have attempted in the past to transfer stolen art or to use art to launder criminal funds via Switzerland. The United States is by far Switzerland’s most important trading partner in this area, having purchased $476 million worth of works of art in 2008. This sum represents 29% percent of total Swiss artwork exports.

The Swiss Attorney General froze 21 accounts representing about SFr. 21 million (approximately $20.5 million) on the grounds that they were related to terrorism financing. As of November 2009, the State Secretariat for Economic Affairs (SECO) advised that 25 bank accounts totaling Sfr. 17 million (approximately $16.3 million) relating to al-Qaida and the Taliban remained frozen.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

Switzerland has a mutual legal assistance treaty (MLAT) in place with the United States, and Swiss law allows authorities to furnish information to U.S. regulatory agencies, provided it is kept confidential and used for law enforcement purposes. Switzerland has worked closely with the U.S. on numerous money laundering cases and cooperates with U.S. on efforts to trace and seize assets. Swiss legislation permits “spontaneous transmittal,” a process allowing the Swiss investigating magistrate to signal to foreign law enforcement authorities the existence of evidence regarding suspicious bank accounts in Switzerland. However, Swiss privacy laws make it extremely difficult for bank officials and Swiss police to divulge financial crime information to U.S. authorities absent a MLAT request or Letters Rogatory. The Swiss FIU exchanges information regularly with the FIU of the United States without a memorandum of understanding in place.

International agreements:

Switzerland 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.

Switzerland 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

Switzerland is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/29/11/35670903.pdf

Recommendations:

The Government of Switzerland (GOS) has been trying to change the country’s image as a haven for illicit banking services for many years. The Swiss believe their system of self-regulation, which incorporates a “culture of cooperation” between regulators and banks, equals or exceeds that of other countries. The GOS should address deficiencies with regard to correspondent banking regulations and beneficial owner identification requirements. Switzerland should enact and implement cross-border currency reporting requirements and consider the implementation of a reporting system for large currency transactions. The GOS should outlaw bearer shares completely, and implement effective AML legislation and rules that monitor and regulate money service businesses and the DNFBP sectors, including ensuring that the competent authorities have the resources to conduct outreach and complete their regulatory missions.

Syria

Syria is not an important regional or offshore financial center, due primarily to its still underdeveloped private banking sector and the fact the Syrian pound is not a fully convertible currency. Despite rapid growth in the banking sector since 2004, industry experts estimate only ten percent of Syria’s population of nearly 21 million people actually uses banking services. Consequently, some 70 percent of all business transactions are still conducted in cash. Additionally, there continue to be significant money laundering and terrorist financing vulnerabilities in Syria’s banking and non-bank financial sectors that have not been addressed by necessary legislation or other government action. Syria’s black market moneychangers are not adequately regulated, and the country’s borders remain porous. Regional hawala networks are intertwined with smuggling and trade-based money laundering and raise significant concerns, including involvement in the financing of terrorism. The most obvious indigenous money laundering threat involves Syria’s political and business elite, whose corruption and extra-legal activities continue unabated. The U.S. Department of State has designated Syria as a State Sponsor of Terrorism.

Offshore Center: No

Free Trade Zones: Yes

There are eight public free trade zones in Syria and five additional free zones are planned in Damascus, Homs, Dayr al-Zawr, Idleb, and the port of Tartous. The Al-Ya’rubiyeh free trade zone in al-Hasakeh province, near the northeastern Syrian - Iraqi border, was officially inaugurated in December 2007.

In recent years, both China and Iran announced plans to build free zones in Syria, although Iran later dropped this idea in favor of pursuing a Preferential Trade Agreement with Syria. China’s free zone in Adra was officially inaugurated in July 2008 and is expected to provide roughly 200 Chinese companies with a regional gateway for their goods. The volume of goods entering the free zones is estimated to be in the billions of dollars and is growing, especially with increasing demand for automobiles and automotive parts, which enter the zones free of customs tariffs before being imported into Syria. While all industries and financial institutions in the free zones must be registered with the General Organization for Free Zones, which is part of the Ministry of Economy and Trade, the Syrian General Directorate of Customs continues to lack strong procedures to check country of origin certification or the resources to adequately monitor goods that enter Syria through the zones. There are also continuing reports of Syrians using the free zones to import arms and other goods into Syria in violation of USG sanctions under the Syrian Accountability and Lebanese Sovereignty Act, and a number of United Nations Security Council Resolutions (UNSCR).

Criminalizes narcotics money laundering: Yes

In September 2003, the Syrian Arab Republic Government (SARG) passed Decree 59, criminalizing money laundering and creating the Anti-Money Laundering Commission.

Criminalizes other money laundering, including terrorism-related: Partially

In response to international pressure to improve its anti-money laundering/counter-terrorist financing (AML/CFT) regulations, the SARG passed Decree 33 in May 2005, which strengthens the Commission and empowers it to act as a financial intelligence unit (FIU). Decree 33 provides a relatively broad definition of money laundering, but one that does not fully meet international standards. The definition includes attempts to conceal the proceeds of criminal activities, knowingly helping a criminal launder funds, and the possession of money or property that resulted from the laundering of criminal proceeds. In addition, the law specifically lists thirteen crimes that are covered under the AML legislation, including narcotics offenses, fraud, and the theft of material for weapons of mass destruction. Terrorist financing is not considered a predicate offense for money laundering. A new draft AML/CFT law had been anticipated by the end of 2009 but was not passed as of yearend.

Criminalizes terrorist financing: Partially

(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 text of Decree 33 limits the definition of terrorist financing to funds to be used for a terrorist act. There are currently no efficient laws or procedures to timely freeze terrorists’ funds or the assets of persons designated in accordance with UNSCRs1267 and 1373.

Know-your-customer rules: Yes

Under Decree 33, all banks and non-bank financial institutions are required to use Know Your Customer (KYC) procedures and to follow up on their customers every three years. The chairmen of Syria’s private banks continue to report that they are employing internationally recognized KYC procedures to screen transactions and also employ their own investigators to check suspicious accounts.

Bank records retention: Yes

All banks and non-bank financial institutions must maintain records on closed accounts for five years.

Suspicious transaction reporting: Yes

Under Decree 33, all banks and non-bank financial institutions are required to file suspicious transaction reports (STRs) regardless of the amount. There is no obligation requiring financial institutions to report attempted transactions or those related to terrorist financing. Many non-bank financial institutions continue to be unfamiliar with the requirements of the law.

Large currency transaction reporting: Yes

Under Decree 33, all banks and non-bank financial institutions are required to file reports with the Commission for transactions over $10,000.

Narcotics asset seizure and forfeiture:

Syrian law allows the confiscation of money and assets of a convicted money launderer. There have not been any money laundering convictions.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

While the SARG maintains strict controls on the amount of money that individuals can take with them out of the country, there is a high incidence of cash smuggling across the Lebanese, Iraqi, and Jordanian borders. Most of the smuggling involves the Syrian pound, as a market for Syrian currency exists among expatriate workers and tourists in Lebanon, Jordan, and the Gulf countries. The Commission and the Customs Directorate have reportedly implemented a form asking individuals to voluntarily declare currency when entering or exiting the country, although consistency of implementation and any action resulting from enforcement remain unknown.

Cooperation with foreign governments:

The Arab committee of experts from the Ministries of Justice and Interior has concluded the draft of the Arab agreement for combating money laundering and terrorist financing, which was submitted for final approval to the meeting of the Arab Ministers of Justice in November 2008 and then to the meetings of the Arab Ministers of Interior in March 2009. The Agreement is expected to be signed late 2009/early 2010. The purpose of this draft indicative law is to guide Arab states on implementing AML/CFT controls within their jurisdictions.

U.S. or international sanctions or penalties: Yes

In May 2004, the U.S. Department of Treasury found the Commercial Bank of Syria (CBS), along with its subsidiary, the Syrian Lebanese Commercial Bank, to be a financial institution of “primary money laundering concern,” pursuant to Section 311 of the USA PATRIOT Act. This finding resulted from information that CBS had been used by terrorists or persons associated with terrorist organizations, as a conduit for the laundering of proceeds generated from the illicit sale of Iraqi oil, and because of continued concerns that CBS was vulnerable to exploitation by criminal and/or terrorist enterprises. In April 2006, Treasury promulgated a final rule, based on the 2004 finding and proposed rule-making, prohibiting U.S. financial institutions from maintaining or opening correspondent or payable-through accounts with CBS or its Syrian Lebanese Commercial Bank subsidiary.

The U.S. Department of State has designated Syria as a State Sponsor of Terrorism.

Enforcement and implementation issues and comments:

In 2008, the Commission investigated 78 suspicious transaction cases. Of these 78 cases, 26 were referred to the criminal court system for prosecution. Through September 30, 2009, the Commission investigated 57 transaction cases of which 13 were forwarded by foreign countries. Three of the cases were referred to the criminal court system for prosecution. To date, all criminal cases are pending, and there have been no convictions.

Most Syrian judges are not yet familiar with the evidentiary requirements of the anti-money laundering law. Furthermore, the slow pace of the Syrian legal system and political sensitivities delay quick adjudication of these issues. The Commission itself continues to be seriously hampered by human resource constraints. The lack of expertise, further undermined by a lack of political will, continues to impede effective implementations of existing AML/CFT regulations.

Although Decree 33 provides the Central Bank with the legal basis to combat money laundering, most Syrians still do not maintain bank accounts or use checks, credit cards, or ATM machines. The Syrian economy remains primarily cash-based, and Syrians use moneychangers, some of whom also act as hawaladars, for many financial transactions. Estimates of the volume of business conducted in the black market by Syrian moneychangers range between $15 and $70 million per day. As a step to enhancing oversight of moneychangers, the SARG passed a Moneychangers law in 2006, however they remain largely unregulated.

In addition to cash smuggling, there also is a high rate of commodity smuggling out of Syria, and it has been reported that some smuggling is occurring with the knowledge of or perhaps even under the authority of the Syrian security services.

The General Directorate of Customs lacks the necessary staff and financial resources to effectively handle the problem of smuggling. While it has started to enact some limited reforms, including the computerization of border outposts and government agencies, problems of information-sharing remain.

U.S.-related currency transactions:

U.S. dollars also are commonly smuggled in the region. Some of the smuggling may involve the proceeds of narcotics and other criminal activity.

Records exchange mechanism with U.S.: None

International agreements:

Since its establishment, the Commission has signed cooperation agreements and memorandums of understanding with Turkey, Ukraine, Lebanon and Cyprus in the area of combating money laundering and terrorist financing.

Syria 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

Syria is one of the founding members of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Syria’s most recent mutual evaluation can be found here: http://www.menafatf.org/images/UploadFiles/MutualEvaluationReportofSyria.pdf

Recommendations:

While the Syrian Arab Republic Government (SARG) has made modest progress in implementing AML/CFT regulations that govern its formal financial sector, the continuing lack of transparency of the state-owned banks and their vulnerability to political influence reveals the absence of political will to address AML/CFT in the largest part of the banking sector. In addition, non-bank financial institutions and the black market will continue to be vulnerable to money laundering and terrorist financiers. To build confidence in Syria’s intentions, the Central Bank should be granted independence and supervisory authority over the entire sector. Additionally, the SARG should enact the draft AML/CFT law to correct many of the remaining deficiencies. Upon enactment of the new law, Syria will need to actively work to effectively implement its provisions through appropriate regulation and other related action. The SARG should become a party to the UN Convention against Corruption. The General Directorate of Customs, the Central Bank, and the judicial system in particular continue to lack the resources and the political will to effectively implement AML/CFT measures. Although the SARG has stated its intention to create the technical foundation through which different government agencies could share information about financial crimes, this system has not been created. In addition, it remains doubtful whether the SARG has the political will to combat terrorist financing by classifying what it deems as legitimate resistance groups as terrorist organizations, or to address the corruption that exists at the highest levels of government and business. All of these issues remain obstacles to developing a comprehensive and effective AML/CFT regime in Syria.

Taiwan

Taiwan’s modern financial sector and its role as a hub for international trade make it susceptible to money laundering. Taiwan’s location astride international shipping lanes makes it vulnerable to transnational crimes, such as narcotics trafficking, trade fraud, and smuggling. There has traditionally been a significant volume of informal financial activity through unregulated non-bank channels, but in recent years Taiwan has taken steps to shift much of this activity into official, regulated financial channels. Most illegal or unregulated financial activities are related to tax evasion, corruption, racketeering, fraud, or intellectual property violations. An emerging trend in money laundering is underground alternative remittance systems operated by jewelry stores which usually use couriers to move gold and currency cross-border.

Offshore Center: Yes

Legislation ratified in 2006 allows the expansion of offshore banking unit (OBU) operations to the same scope as Domestic Business Units (DBU). This was done to assist China-based Taiwan businesspeople in financing their business operations. DBUs engaging in cross-strait financial business must follow the regulations of the “Act Governing Relations between Peoples of the Taiwan Area and the Mainland Area” and “Regulations Governing Approval of Banks to Engage in Financial Activities between the Taiwan Area and the Mainland Area.” According to the Central Bank, as of September 2009, Taiwan hosted 63 offshore banking units. Offshore banks, international businesses, and shell companies must comply with the disclosure regulations from the Central Bank, the Banking Bureau of the Financial Supervisory Commission, and the Anti-Money Laundering Division (AMLD). Supervisory agencies conduct background checks on applicants for banking and business licenses. Offshore casinos and Internet gambling sites are illegal.

Free Trade Zones: Yes

Taiwan has five Free Trade Zones (FTZ)--in Keelung and the areas of Taipei, Taichung, Kaohsiung, and Taoyuan. Each zone is associated with a particular function/industry, categorized as international logistics, high value-added industries, warehousing, transshipment, processing of cargo, and/or mature industrial clusters. The values of shipments through these FTZs in the first nine months of 2009 was NT$145.5 billion (approximately $4.5 billion), up from NT$86.6 billion (approximately $2.57 billion) for the same period in 2008. In 2009, an amendment to Article 3 of Taiwan’s Act for the Establishment and Management of Free Trade Zones was passed, providing for the establishment of a Free Trade Zone Coordination Committee. The Committee will be the designated authority charged with reviewing and examining the development policy of the FTZ, the demarcation and designation of FTZs, and inter-FTZ coordination.

Criminalizes narcotics money laundering: Yes

The offense of money laundering is criminalized under the Money Laundering Control Act 1996 (the MLCA), most recently amended in 2009. Provisions found within the Organized Crime Prevention Act, the Narcotics Hazards Control Act, and Article 38 of the Criminal Code further support the criminalization and subsequent prosecution of drug related money laundering offenses.

Criminalizes other money laundering, including terrorism-related: Yes

The predicate offenses for money laundering are defined in Article 3 of the MLCA and combine both a threshold and list approach, including “serious crimes” which have a minimum punishment of imprisonment of five years or more. July 2007 amendments to the MLCA expand its coverage to include a new agricultural bank, trust companies, and newly licensed currency exchanges as well as hotels, jewelry stores, postal offices, temples, and bus/railway stations, essentially all entities that may be involved in currency exchange.

Criminalizes terrorist financing: Yes

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

Terrorist financing was established as a separate criminal offense in May 2009 with revisions to Article 11 of the amended MLCA. The amended law subjects individuals to criminal liability when they collect funds or use them for themselves or others to commit one or more of 26 designated crimes aimed to blackmail people, coerce the government, or coerce an international organization. Additionally, Article 3 establishes terrorist financing as a predicate to money laundering and enables the government to exercise broader power in punishing nationals who commit terrorist offenses outside of their jurisdiction.

Know-your-customer rules: Yes

The “Regulations Governing Bank Handling of Accounts with Suspicious or Unusual Transactions” requires banks to establish clear know-your-customer (KYC) policies and procedures that include standards for monitoring of deposit accounts and transactions. The directions issued by the Financial Supervisory Commission for banks, securities firms, and life insurance companies engaged in wealth management business require such financial institutions to tailor their KYC rules according to the risk characteristics of each type of business. The directions also require financial institutions to apply stricter customer due diligence (CDD) and approval procedures to individuals of certain background or professions identified as high risk and their family members. Current legislation does not have explicit requirements calling for enhanced CDD measures for Politically Exposed Persons (PEPs).

The threshold for occasional cash transactions that triggers a CDD obligation was lowered from NT$1 million (approximately $31,200) to NT$ 500,000 (approximately $ 15,600). Those who transfer funds over NT$30,000 (approximately $930) at any bank in Taiwan must produce a photo ID, and the bank must record the name, ID number and telephone number of the client.

Bank records retention: Yes

Record keeping requirements are broadly provided under Article 7 of the MLCA that requires financial institutions to keep transaction and customer identification records for five years only for cash transactions exceeding NT$1,000,000 (approximately $31,200). Article 8 of the MLCA also requires financial institutions to keep transaction and customer identification records for suspicious transactions.

Suspicious transaction reporting: Yes

Financial institutions are required to identify, record, and report the identities of customers engaging in significant or suspicious transactions. Revisions to the MLCA extend suspicious transaction reporting to suspected terrorist financing activity. There is no threshold amount specified for filing suspicious transaction reports (STRs). Certain designated nonfinancial businesses and professions (DNFBPs) are also subject to anti-money laundering/counter-terrorist financing (AML/CFT) reporting requirements. The Ministry of Economic Affairs revised the STR reporting forms for jewelry stores in May 2009 to facilitate timelier reporting. Ethics Rules adopted by the Ministry of Interior in December 2008 obligate members of the National Real Estate Broking Agencies Association to report suspicious transactions to the association when they occur.

The Anti-Money Laundering Division (AMLD) of the Ministry of Justice’s Investigation Bureau (IBMJ) is Taiwan's financial intelligence unit (FIU). The AMLD receives, analyzes, and disseminates STRs, currency transaction reports and cross-border currency movement declaration reports. In 2008, the AMLD received 1,643 STRs, 23 of which resulted in prosecutions based on the MLCA.

Large currency transaction reporting: Yes

The “Regulations Governing Cash Transactions Reports and Suspicious Transaction Reports by Financial Institutions” issued took effect in March 2009. Per the regulation, the threshold amount triggering cash transaction reporting was lowered from NT$1 million (approximately $31,200) to NT$500,000 (approximately $15,600). The order imposes similar due diligence obligations and currency transaction reporting on agricultural financial institutions for transactions exceeding NT$500,000. In 2008, the AMLD received 1,133,014 Cash Transaction Reports (CTRs).

When foreign currency in excess of NT$500,000 (approximately $15,600) is transferred into or out of Taiwan via the Taiwan banking system, the transfer must be reported to the Central Bank. Prior approval is required for exchanges between New Taiwan dollars and foreign currency when the amount exceeds $5 million for an individual resident or $50 million for a corporate entity.

Narcotics asset seizure and forfeiture: Yes

The MLCA, Article 9, provides that whenever the prosecutor obtains sufficient evidence to prove the offender has committed a crime prescribed in Article 11 (stipulating money laundering and terrorist financing offenses) by transporting or transferring a monetary instrument or funds, the prosecutor may request the court to order the financial institution to freeze that specific transaction to prevent withdrawal, transfer, or other disposition of the involved funds for a period not more than six months. Assets of drug traffickers, including instruments of crime and intangible property, can be seized along with legitimate businesses used to launder money. The law does not allow for civil forfeiture.

To support these efforts the Ministry of Justice organized a “laws and decrees amendment researching” task force in March 2009. The group of multi-disciplinary stakeholders is charged with developing a comprehensive seizure and confiscation regime.

Narcotics asset sharing authority: Yes

Taiwan has promulgated drug-related asset seizure and forfeiture regulations that stipulate that—in accordance with treaties or international agreements—Taiwan’s Ministry of Justice shall share seized assets with foreign official agencies, private institutions, or international parties that provide Taiwan with assistance in investigations or enforcement.

Cross-border currency transportation requirements: Yes

According to legislation passed in July 2007, individuals are required to report currency transported into or out of Taiwan in excess of NT$60,000 (approximately $1,900), $10,000 or equivalent in foreign currency, 20,000 Chinese Yuan (approximately $2,930), or gold worth more than $20,000.

Cooperation with foreign governments: Yes

Taiwan provides information to international counterparts upon request, based on the principles of mutual benefits and reciprocity. With regard to mutual legal assistance requests made by foreign jurisdictions (where there is no agreement or memorandum of understanding (MOU) with Taiwan), the Ministry of Justice in accordance with established procedure, forwards the requests to the relevant prosecutors’ office to provide the assistance requested. The Act of Handling Foreign Court-Commissioned Cases and the Taiwan-American Agreement on Mutual Legal Assistance in Criminal Matters establish a basis through which Taiwan can respond to requests of foreign nations that do not relate to a case under prosecution.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Taiwan prosecuted 33 cases involving money laundering in 2008. Among the 33 cases, 19 involved financial crimes, such as unregistered stock trading, credit card theft, currency counterfeiting or fraud; four were corruption-related.

Amendments to the Foreign Exchange Control Act and the Offshore Banking Act on April 29, 2009 implement the requirements of UNSCRs 1267 and 1373 on combating the financing of terrorism.

U.S.-related currency transactions:

Direct two-way remittance of funds between Taiwan and the Peoples Republic of China (PRC) started on February 26, 2009. In Taiwan, the transfer of funds to the PRC is handled at branches designated by Chunghwa Post. Since no mechanism is in place for the cross-Strait settlement of the Renminbi (RMB) and New Taiwan Dollar (NT$) currencies, cross-Strait remittances currently have to be denominated in U.S. dollars.

The possession, distribution and use of counterfeit US Federal Reserve Notes and fraudulent US Bonds continues to occur in Taiwan, often in concert with other illicit activity. During 2009, the United States Secret Service (USSS) continued on-going investigations, involving over $4 million in counterfeit currency. In 2009, there was a new case involving the seizure of $75.5 billion in fraudulent US Bonds.

Records exchange mechanism with U.S.:

A mutual legal assistance agreement (MLAA) between the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office in the United States (TECRO) entered into force in March 2002. It provides a basis for Taiwan and U.S. law enforcement agencies to cooperate in investigations and prosecutions for narcotics trafficking, money laundering (including the financing of terrorism), and other financial crimes.

The AMLD is able to exchange information with the Financial Crimes Enforcement Network (FinCEN).

International agreements:

Revisions to the MLCA in 2007 reduced restrictions on mutual legal assistance where previously mutual legal assistance treaties or MLAA were required. Taiwan is now able to exchange information based on the principles of reciprocity and mutual benefits. Since June 2008, Taiwan has signed MOUs to establish mechanisms for cooperation with countries and jurisdictions including the United States, Macedonia, the Netherlands Antilles and Aruba. Customs became a member of the Customs Asia Pacific Enforcement Reporting System and has signed MOUs with counterparts in the U.S., Australia, and the Philippines for sharing customs information.

Taiwan is unable to ratify UN Conventions because of long standing political issues. However, it has enacted domestic legislation to implement the standards in the key AML/CFT UN Conventions. The new amendment of the MLCA has incorporated related laws to fully implement the provisions of the Vienna, Palermo and Terrorist Financing conventions and resolutions.

Taiwan is a member of the Financial Action Task Force-style regional body Asia/Pacific Group on Money Laundering (APG). Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Chinese%20Taipei%20MER2_FINAL.pdf

Recommendations:

Taiwan continues to improve and implement an anti-money laundering regime that largely comports with international standards. Taiwan should pass legislation to criminalize terrorism and terrorist financing as an autonomous crime. It should exert more authority over its nonprofit organizations. The authorities on Taiwan should continue to strengthen the existing anti-money laundering regime as they implement new measures included in the 2009 MLCA amendments. Taiwan should abolish all shell companies and prohibit new shell companies of any type from being established. Taiwan should enhance implementation of legislation regarding alternate remittance systems and Taiwan law enforcement should enhance investigations of underground finance and its links to trade fraud and trade-based money laundering.

Tajikistan

Tajikistan operates largely on a cash economy. The criminal proceeds laundered in Tajikistan derive primarily from foreign criminal activity related to the large portion of opiates cultivated and refined in Afghanistan traveling to Russia and the other former Soviet countries via Tajikistan. According to the Drug Enforcement Administration, in barter exchange agreements Afghan-based narcotics trafficking organizations are seeking weapons in Tajikistan in exchange for heroin. These weapons then are provided to the Taliban and Taliban-related organizations to support their efforts against the U.S.-led coalition. Domestic goods smuggling occurs in Tajikistan. Consumer goods, mostly apparel and low-cost household appliances, are smuggled to avoid customs duties and local taxes. There are several schemes for smuggling goods into the country. In most cases, goods such as tobacco, alcohol, and fuel are not “officially” imported to Tajikistan. For example, a shipment nominally intended for Afghanistan or Kazakhstan transiting Tajikistan never reaches those countries. While there is certainly a market for smuggled goods, there is little evidence that most items are financed with narcotics money, with the exception of imported cars and other luxury items. Tajikistan has few meaningful money laundering controls and little enforcement.

Offshore Center: No

Free Trade Zones: Yes

In 2008, the Government of Tajikistan (GOT) created the free economic zones Panji Poen FEZ and Sugd FEZ. The GOT also announced the establishment in the near future of an additional FEZ in Ishkashim, and another in Khatlon to improve agricultural trade.

Criminalizes narcotics money laundering: Yes

Tajik law prohibits money laundering and it is a criminal offense. However, the money laundering offense does not fully comport with international standards.

Criminalizes other money laundering, including terrorism-related: Yes

Criminal Code Article 262, Legalization (Laundering) of Illegally Obtained Incomes lists designated offenses for money laundering. The Law on amnesty of citizens and legal entities of the Republic of Tajikistan serves as the current anti-money laundering law. This law, however, prohibits the prosecution of Tajik natural and legal persons for property related money laundering 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/)

Article 179.1 of the Criminal Code criminalizes terrorist financing. Tajik authorities consider terrorist financing a “serious crime”.

Know-your-customer rules: No

Banks and other institutions subject to regulation by the National Bank of Tajikistan (NBT) are required to identify their customers when opening accounts. There are no other customer due diligence (CDD) requirements.

Bank records retention: No

Suspicious transaction reporting: No

Financial institutions make no regular reports of transactions or other activity. In January 2009, the GOT formed a working group tasked with drafting an anti-money laundering/counter-terrorist financing (AML/CFT) bill and elaborating proposals for creating a financial intelligence unit. As a result of the working group activities, on October 20, 2009 the President of the Republic of Tajikistan signed Order No. 724 on creating a Financial Intelligence Unit under the National Bank of Tajikistan the Financial Monitoring Department.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Article 57 of the Criminal Code states that asset forfeiture is possible but the article also specifies exceptions. On March 20, 2008, the Tajik Parliament adopted the Law on Executive Proceedings that enables asset-seizure mechanisms.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements:

In accordance with the Joint Order of the National Bank and the Ministry of State Revenues and Duties, travelers may depart with a maximum amount of $3,000 without registering it in the customs declaration. Tajik citizens can depart with amounts up to $10,000 with a customs declaration. When the amount exceeds $3,000, a foreigner must present documents of origin, customs declaration, source of money, provide reasons why he has the funds, justify where he is going to take it, and prove which bank gave him the funds. Travelers may enter Tajikistan with unlimited quantities of cash.

Cooperation with foreign governments:

The GOT has not adopted laws or regulations that ensure the availability of adequate records in connection with narcotics, terrorism, terrorist financing or other investigations. Tajikistan signed the Commonwealth of Independent States (CIS) Agreement on the Legal Assistance and Cooperation on Civil, Family and Criminal Cases of January 22, 1993, and is a member of the CIS Antiterrorism Center.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Jurisdiction in investigating financial crimes in Tajikistan is split between the Ministry of Interior Affairs, State Committee of National Security, and the Anti-Corruption Agency. These agencies are not adequately staffed and trained. In 2009, there were no arrests or prosecutions for money laundering or terrorist financing.

The “Law on Banking Activity” prevents disclosure of client and ownership information to bank supervisors and law enforcement authorities for domestic and offshore financial services companies.

There are severe obstacles in place to enforcing any laws in regards to financial crimes in Tajikistan because the country’s financial institutions still rely on a paper-based record keeping system. This severely inhibits timely investigations on all matters related to financial crimes.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

Tajikistan and the U.S. have agreed to exchange records in connection with investigations and proceedings relating to narcotics, terrorism, terrorist financing and other serious criminal investigations, and negotiations are currently underway regarding specific law enforcement cooperation.

International agreements:

The GOT 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

Tajikistan is a member of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), a Financial Action Task Force-style regional body. Its most recent 2008 mutual evaluation report can be found here:

http://www.eurasiangroup.org/files/MERs%20-%20ENG/tajikistan.pdf

Recommendations:

The Government of Tajikistan (GOT) does not appear to be taking significant steps to seriously address money laundering and financial crime. The GOT should work closely with the EAG and enact and implement a new AML/CFT program that adheres to international standards. This will include enacting the necessary legislation to provide for effective supervision and preventative measures for financial institutions and designated non-financial businesses and professions.

Tanzania

Tanzania is not an important regional financial center. Tanzania’s location at the crossroads of southern, central and eastern Africa leaves it vulnerable to activities that generate illicit revenue, such as smuggling, and the trafficking of narcotics, arms, and humans. The major profit generating crimes in Tanzania include theft, robbery, corruption, smuggling of precious metals and stones, and drug trafficking. With only six percent of the population engaged in the formal financial sector, money laundering is more likely to occur in the informal non-bank sectors. Criminals have been known to use front companies, including hawaladars and bureaux de change, to launder funds. Real estate and used car businesses also appear to be particularly vulnerable. The use of front companies to launder money is especially common on the island of Zanzibar, where few federal regulations apply. Officials indicate that money laundering schemes in Zanzibar generally take the form of foreign investment in the tourist industry and bulk cash smuggling.

Offshore Center: No

Free Trade Zones: Yes

There are three free economic zones in Zanzibar and two free port zones. On the mainland there are four export processing zone industrial parks; three in Dar Es Salaam and one in Arusha. Tanzania intends to establish additional free trade zones at Tanga and Kigoma ports. There is no known evidence Tanzania’s free trade zones (FTZs) are being used in trade-based money laundering schemes or by terrorist financiers. Companies and individuals who use the zones are registered with the Zanzibar Free Economic Zones Authority (ZAFREZA) or the mainland Export Processing Zone Authority.

Criminalizes narcotics money laundering: Yes

Money laundering is criminalized under section 71 of the Proceeds of Crime Act. However, Tanzanian authorities have indicated this provision has never been used in practice.

Criminalizes other money laundering, including terrorism-related:

Money laundering is also criminalized under the Anti-Money Laundering Act, 2006 (AMLA). The AMLA does not apply to the semi-autonomous archipelago of Zanzibar. Section 3 of the AMLA lists specific crimes as predicate offenses, to include trafficking in drugs, persons and arms; terrorism; racketeering; smuggling; counterfeiting; robbery; piracy; insider trading; hijacking; tax evasion; poaching, illegal fishing and mining, and environmental crimes. The AMLA does not cover all financial institutions and designated non-financial businesses and professions (DNFBPs) nor does it apply to financial institutions and DNFBPs operating in Zanzibar.

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/)

Tanzania has criminalized terrorist financing. The main legislation pertaining to the financing of terrorism is as follows: The Prevention of Terrorism Act, 2002 (POTA); The AMLA; and, the Written Laws (Miscellaneous Amendments Act), 2007. However, neither the POTA nor the AMLA are in force in Zanzibar.

Know-your-customer rules:

Banks and other financial institutions are required to know, record, and report the identity of customers engaging in suspicious transactions, including the recording of large currency transactions.

Bank records retention:

Banks and other financial institutions are required to maintain records necessary to reconstruct significant transactions for a period of between five and ten years.

Suspicious transaction reporting:

Financial institutions are required to file suspicious transaction reports (STRs) with the central bank (BOT) and the financial intelligence unit (FIU). The following categories of DNFBPs are designated as reporting persons under the AMLA: accountants, real estate agents, dealers in precious stones, work of arts or metals; attorneys, notaries and other independent legal professionals and operators of gaming activities (including casinos). Generally, DNFBPs have not implemented anti-money laundering/counter-terrorist financing (AML/CFT) measures as required under the Act, and there have been no STRs filed by DNFBPs thus far. The FIU has disseminated five STRs to the Directorate of Criminal Investigations.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Tanzania has enacted laws to enable asset seizure and forfeiture under judicial authority related to money laundering, drug trafficking, organized crime and terrorist financing. Proceeds must be derived from or used in connection with a serious offense, including money laundering and any predicate offense. Proceeds from sales of forfeited goods are added to a Consolidated Fund. Tanzanian law does not cover freezing of assets, only confiscation. The banking community cooperates with enforcement efforts to trace funds and seize bank accounts. The current legislation allows for both civil and criminal forfeiture. However, a comprehensive legal framework for freezing, seizing and confiscating the proceeds of crime is not enforceable in Zanzibar.

Narcotics asset sharing authority: No

The government is not currently engaged in bilateral or multilateral negotiations to enhance asset tracing, freezing and seizure.

Cross-border currency transportation requirements: No

The AMLA criminalizes cash smuggling and provides for reporting of inbound or outbound cash or negotiable instruments in an amount prescribed by the Minister in Regulations; however, no regulations or monetary threshold have yet been prescribed by the Minister, and at present there is no declaration/disclosure system in place. Money transfer companies such as Western Union require passports and vaguely defined “written documentation” justifying cross-border cash transfers.

Cooperation with foreign governments:

The FIU, police and banking supervisors are able to provide international cooperation to foreign counterparts. Under the AMLA, the FIU may exchange information with overseas FIUs and comparable bodies.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The Tanzanian Police has a special unit that deals with financial crime and money laundering. Other enforcement entities engaged in financial crimes enforcement are the Prevention and Combating of Corruption Bureau and the Department of Public Prosecutions. Both staffing and training are inadequate for effective investigation and prosecution of financial crimes. During 2009, there have been no arrests, prosecutions or convictions for money laundering or terrorist financing.

Since neither the POTA nor the AMLA are in force in Zanzibar, STR reporting, know-your-customer procedures and record keeping requirements are not required of any institution operating in Zanzibar.

Tanzania's capacity and resources to trace and seize assets without undue delay are inadequate.

U.S.-related currency transactions:

The likely sources of illicit funds are Asia and the Middle East and, to a lesser extent, Europe. Such transactions rarely include significant amounts of U.S. currency.

Records exchange mechanism with U.S.:

Tanzania has no formal agreement with the United States government or a mechanism for exchange of records in connection with investigations and proceedings related to narcotics, all-source money laundering, terrorism and terrorist financing. Tanzania has cooperated with the United States in investigating and combating terrorism in the past, but not on specific financial crimes.

International agreements:

Tanzania 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 Convention against Corruption - Yes

Tanzania is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force-style regional body, and hosts the Secretariat in Dar-Es-Salaam. Its most recent mutual evaluation can be found here: http://www.esaamlg.org/userfiles/Tanzania_Mutual_Evaluation_Detail_Report.pdf

Recommendations:

The Government of Tanzania (GOT) has made improvements in its compliance with international AML/CFT standards. However, the GOT needs to take steps to ensure that it has a national AML/CFT legal framework, by bringing its legislation into force in Zanzibar. The GOT should focus its efforts on practical implementation of the AMLA, including dedicating the resources necessary to build an effective FIU. The FIU should continue its efforts to hire additional staff to ensure financial institutions are adequately supervised, to inform them of their reporting and record keeping responsibilities, and to train the financial sector to identify suspicious transactions. Tanzania should work to increase the level of awareness and understanding of money laundering issues in the financial, law enforcement and judicial areas and should allocate the necessary human, technical, and financial resources to implement its AML/CFT regime. Authorities should ensure the Prevention of Terrorism Act comports with international standards and the GOT implements all provisions in the law. The GOT should also improve its cross-border cash declaration regime. Tanzania should examine vulnerabilities it has not yet addressed, in particular the inherent vulnerabilities of alternative remittance systems and trade. The capacity of Tanzanian police and customs officials to recognize money laundering and value transfer methodologies used in the region should be raised.

Thailand

Thailand is a centrally located, developed Southeast Asian country surrounded by economically less vibrant neighbors along an extremely porous border. Thailand is vulnerable to money laundering from its own underground economy as well as many categories of cross-border crime, including illicit narcotics and other contraband smuggling. The Thai black market includes a wide range of pirated and smuggled goods, from counterfeit medicines to luxury automobiles. Money launderers and traffickers use banks, as well as non-bank financial institutions and businesses to move the profits of narcotics trafficking and other criminal enterprises. Thailand is a significant destination and source country for international migrant smuggling and trafficking in persons, a production and distribution center for counterfeit consumer goods and, increasingly, a center for the production and sale of fraudulent travel documents. Illegal gambling, underground lotteries, and prostitution are all problems. Underground finance and remittance systems are used to launder illicit proceeds. In addition to its home-grown and regional criminal problems, some parts of Thailand are becoming havens for criminal elements from other regions, particularly West Africa and the former Soviet Union. The capacity of Thailand’s criminal justice system to deal with these daunting challenges is low.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Thailand’s anti-money laundering legislation, the 1999 Anti-Money Laundering Act (AMLA) and subsequent amendments, criminalize money laundering for narcotics trafficking.

Criminalizes other money laundering, including terrorism-related: Yes

The AMLA and subsequent amendments criminalize money laundering for the following nine offenses: narcotics trafficking, trafficking in women or children for sexual purposes, public fraud, financial institution fraud, public corruption, customs evasion and blackmail, terrorist activity, and illegal gambling.

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 2003, the Royal Thai Government (RTG) issued two Emergency Decrees to enact measures related to terrorist financing. The first Decree amended Section 135 of the Thai Penal Code. The second Decree amended Section 3 of the AMLA to add the offenses related to terrorism under the Thai Penal Code, including the financing of terrorism, as predicate offenses for money laundering. Parliament endorsed the status of such decrees as legal acts in April 2004. However, terrorist financing has not been criminalized consistent with international standards, as the terrorist financing offense does not conform to the UN Convention for the Suppression of the Financing of Terrorism. Further, Thai legislation does not criminalize all situations for the provision or collection of funds for an individual terrorist or a terrorist organization, nor does the terrorist financing offense extend to the unlisted individual terrorist or terrorist organization.

Know-your-customer rules: Yes

In 2009, a new amendment to the AMLA was passed broadening the range of non-bank businesses required to follow reporting and identification requirements. Unlike the requirements for financial institutions, only suspicious transactions or those exceeding certain amounts are subject to the identification requirement. Apart from investment advisors, the amended AMLA also covers eight additional non-bank businesses, including jewelry and gold shops, automotive hire-purchase businesses or car dealers, real-estate agents/brokers, antiques shops, personal loan businesses, electronic card businesses, credit card businesses, and electronic payment businesses. However, the minimum monetary thresholds for reporting business transactions have not yet been finalized.

Bank records retention: Yes

Under AMLA requirements, financial institutions are required to keep customer identification and specific transaction records for a period of five years from the date an account was closed, or from the date a final transaction occurred, whichever is longer.

Suspicious transaction reporting: Yes

The AMLA requires financial institutions (private banks, state owned-banks, finance companies, insurance companies, savings cooperatives, etc.), and land registration offices to report suspicious transactions to the Thai Anti-Money Laundering Office (AMLO) which serves as the financial intelligence unit (FIU). During the 2009 fiscal year (October 08 – September 09), AMLO received 11,951 suspicious transaction reports and disseminated 23 reports within AMLO and to other agencies.

Large currency transaction reporting: Yes

The AMLA also requires that obligated entities report most financial transactions exceeding Bt 2 million (approximately $60,500), including purchases of securities and insurance, and property transactions exceeding Bt 5 million (approximately $151,300).

Narcotics asset seizure and forfeiture: Yes

The Act for the Suppression of Drugs Offenders of 1991 provides for the tracing, freezing, and seizure of assets. In addition, the AMLA provides for civil forfeiture of property involved in a money laundering offense. Money and property derived from commission of a predicate offense, from aiding or abetting the commission of a predicate offense, or derived from the sale, distribution, transfer, or returns of such money or assets may be seized under section 3 of the AMLA. AMLO, through the Transaction Committee, is responsible for tracing, freezing, and seizing assets. The AMLA makes no provision for substitute seizures if authorities cannot prove a relationship between the asset and the predicate offense.

Narcotics asset sharing authority: Yes

Under the Suppression of Drugs Offenders Law Thai law enforcement entities may share assets as a function of a bilateral agreement, though in practice this has rarely happened.

Cross-border currency transportation requirements: No

There are no restrictions or reporting obligations on the importation or exportation of foreign currency (or bearer-negotiable instruments). Export of domestic currency is subject to authorization when the amount exceeds 50,000 baht ($1,500), or 500,000 baht ($15,100) when traveling to adjacent countries.

Cooperation with foreign governments: Yes

The RTG routinely cooperates with other jurisdictions in financial crimes investigations.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

AMLO, the Bank of Thailand, the Securities and Exchange Commission and the Department of Special Investigation are all responsible for investigating financial crimes, with overlapping jurisdictions and quite varied levels of competence.

Thailand does not have mechanisms in place for freezing funds or other assets of persons designated under UNSCRs 1267 and 1373.

The AMLO prosecuted 15 cases and seized Bt 18.4 million (approximately $529,000) during the first six months of FY 2008 fiscal year. However, the prosecution process ceased in April 2008 because an amendment to the AMLA in early 2008 required that both the Anti-Money Laundering Board and the Transaction Committee be dissolved (in March 2008) and replaced by new bodies in line with the amended AMLA. Without these two bodies, asset forfeiture and financial asset seizure cannot be processed, as the AMLA does not have any provision to allow existing bodies to continue their work while the selection process of new members takes place. The selection process also was delayed due to three changes of government in 2008, and a later disagreement between the Cabinet and the Parliament on the proposed list of experts for the AML Board. Although asset forfeiture and financial asset seizure operations are on hold, the AMLO retains the power to investigate cases, and pursued 184 of them during FY 2009.

U.S.-related currency transactions:

Currency transactions between the US and Thailand are voluminous, mostly related to trade matters. It is likely that currency transactions resulting from the illicit narcotics trade do transit the Thai banking system.

Records exchange mechanism with U.S.:

Thailand and the United States are parties to a bilateral mutual legal assistance treaty (MLAT). AMLO is able to exchange information with the Financial Crimes Enforcement Network (FinCEN).

International agreements:

Thailand has MLATS with ten additional countries and is party to the regional Association of Southeast Asian Nations (ASEAN) Mutual Legal Assistance Agreement. Thailand is also a party to various information exchange agreements. Thai 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. AMLO has memoranda of understanding (MOUs) on money laundering cooperation with 36 other FIUs. It also actively exchanges information with nations with which it has not entered into an MOU, including the United States, Singapore, and Canada.

Thailand is a party to:

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

Thailand 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:

During the past several years, the Royal Thai Government (RTG) has demonstrated more of a commitment to the adoption of anti-money laundering/counter-terrorist financing (AML/CFT) international best practices. While many improvements have already been identified and adopted by Thai agencies, there are important actions still pending, including the passage of key bills, regulations, or measures which will help augment the current AML/CFT regime in Thailand. The RTG must take steps to amend the process by which the Anti-Money Laundering Board and Transaction Committee members are replaced to preclude lengthy interruption of the prosecution process. Until the RTG provides a viable mechanism for all of its financial institutions to be examined for compliance with the AMLA, Thailand’s AML/CFT regime will not fully comport with international standards. Thailand should institute mandatory cross-border currency reporting requirements. The RTG should take steps to eliminate overlapping jurisdictions or to clarify investigative responsibilities. Additionally, the RTG should ensure its investigative agencies receive the appropriate training to enable them to competently perform their duties. The RTG should take additional measures to address the vulnerabilities presented by alternative remittance systems. The RTG should become a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Timor-Leste

Timor-Leste is not a regional financial center. The Ministry of Finance estimates only 1.3 percent of Timorese regularly use banking facilities. Some smuggling occurs across the land border with Indonesia, mainly to avoid taxes or regulations. Narcotic proceeds are likely not a significant source of funding.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: No

A draft anti-money laundering (AML) bill has been temporarily withdrawn.

Criminalizes other money laundering, including terrorism-related: No

Criminalizes terrorist financing: No

Know-your-customer rules: No

Bank records retention: No

Suspicious transaction reporting: No

The draft AML law would create a financial intelligence unit.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: No

The proposed law would allow for criminal and civil forfeiture.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements: No

Cooperation with foreign governments:

No information available.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Timor-Leste does not have a well-developed formal financial sector.

The ability to monitor cross-border cash transportation is limited.

Timor-Leste has not circulated to its financial institutions the names of individuals and entities included on the UN 1267 sanctions committee’s consolidated list.

U.S.-related currency transactions:

Financial institutions engage in currency transactions involving the U.S. dollar because Timor-Leste utilizes the U.S. dollar as its national currency. Narcotics trafficking proceeds, in dollars or otherwise, do not play a major role.

Records exchange mechanism with U.S.: None

International agreements:

Timor-Leste 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 - No
  • the UN Convention against Corruption - Yes

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

Recommendations:

The Government of Timor-Leste should adopt the proposed anti-money laundering-counter-terrorist financing bill. Once adopted, sufficient resources should be devoted to ensure its implementation. The GOTL should become a party to the 1988 UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism.

Togo

Togo’s poor financial infrastructure makes it an unlikely venue for money laundering through its financial institutions. Its porous borders, however, make it a transshipment point in the regional and sub-regional trade in narcotics.

Offshore Center:

No information available.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering: Yes

Togo’s 1998 drug law criminalizes narcotics-related money laundering.

Criminalizes other money laundering, including terrorism-related:

No information available.

Criminalizes terrorist financing: Yes

On August 28, 2009, the Government of Togo (GOT) ratified the Uniform Law against Terrorism Financing, which makes terrorist financing a criminal offense in Togo.

Know-your-customer rules:

Financial institutions are required to monitor and report monetary transactions above a threshold appropriate to the local economic situation, maintain records of such transactions, and supply them to government authorities on request. Due diligence legislation applies to bankers and other professionals.

Bank records retention:

See above.

Suspicious transaction reporting:

No information available.

Large currency transaction reporting:

All bank deposits over the equivalent of $11,000, along with customer identification information, must be reported to the Central Bank of West African States, which serves as Togo’s central bank.

Narcotics asset seizure and forfeiture:

The GOT has the legal authority to seize assets associated with narcotics-trafficking.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements:

No information available.

Cooperation with foreign governments:

No information available.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There have never been any arrests for money laundering.

On January 14, 2009, the GOT created a new national agency called Cellule Nationale de Traitement des Informations Financières (CENTIF). The mandate of the CENTIF, which falls under the Ministry of Security, is to specifically fight money laundering; however, as a new agency, it has yet to establish a track record.

The GOT has circulated to Togolese financial institutions the names of suspected terrorists and terrorist organizations listed on the UNSCR 1267 Sanctions Committee consolidated list and the list of Specially Designated Global Terrorists designated by the United States pursuant to Executive Order 13224.

U.S.-related currency transactions:

There are no indications that currency transactions in Mauritania 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.:

No information available.

International agreements:

Togo 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

Togo is a member of the Intergovernmental Action Group against Money Laundering in West Africa, a Financial Action Task Force-style regional body. A mutual evaluation has been scheduled for early 2010. Once completed, it will be found here: http://www.giaba.org/index.php?type=c&id=24&mod=2&men=2

Recommendations:

If it has not already done so, the Government of Togo should criminalize money laundering for all serious crimes. The GOT should ensure the new CENTIF has adequate resources and authority to fulfill its responsibilities.

Tonga

Tonga is an archipelago located in the South Pacific, about two-thirds of the way from Hawaii to New Zealand. Tonga is neither a financial center nor an offshore jurisdiction. It has only three commercial banks. Remittances from Tongans living and working abroad are the largest source of hard currency earnings, followed by tourism. Tonga is not a major narcotics transit point, but in September 2009, Police seized a large amount of crystallized methamphetamine. The case is still under investigation. Tonga is deemed by local police authorities to be vulnerable to smuggling and money laundering due to inadequate border controls.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Tonga’s Money Laundering and Proceeds of Crime Act of 2000 (MLPCA) criminalizes money laundering. The amended Criminal Offenses (Amendment) Act 2002 criminalizes acts of terrorism; and the amendments to the Money Laundering and Proceeds of Crime (Amendment) Act 2005 and the Transnational Crime Act 2005 both define “acts of terrorism.” Tonga takes an “all serious crimes” approach to predicate offenses for money laundering.

Criminalizes terrorist financing: Yes

The MLPCA and the Transnational Crimes Act 2005 criminalize acts of terrorism and terrorist financing.  Terrorist financing also is designated as a serious crime. 

Know-your-customer rules:

Part II section 12 of the MLPCA requires a financial institution or cash dealer to take reasonable measures to satisfy itself as to the true identity of any applicant seeking to enter into a business relationship with it or to carry out a transaction or series of transactions.

Bank records retention: Yes

The MLPCA requires financial institutions and currency dealers to maintain records of all transactions of 10,000 Pa’anga (approximately $5,500) or more for at least five years.

Suspicious transaction reporting: Yes

Commercial banks and cash dealers are required to submit Financial Transaction Reports (FTRs) on suspicious transactions to the Transaction Reporting Unit (TRA), the financial intelligence unit (FIU) for Tonga.  In 2009, no FTRs were submitted to the TRA.  Since the reporting requirement was instituted in 2002, less than 20 FTRs have been filed.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Tongan law permits the police to seize assets suspected to be tainted property. After assets are seized, the Attorney General applies to the Supreme Court for a restraining order to prevent a defendant from disposing of the assets. The restraining order remains in force for six months or until it is discharged, revoked or varied; or a confiscation order or a pecuniary penalty order, as the case may be, is made in respect of property which is the subject of the order. However, there have been no asset seizures or forfeitures in Tonga.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements:

Tonga has mandatory inbound and outbound cross-border currency declaration requirements for TOP 10,000 (approximately $5,200). However, the reporting requirements are not adequately enforced.

Cooperation with foreign governments:

Tonga has legislation that authorizes the Attorney General to enter into agreements with foreign governments for purposes of sharing information.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The TRA has no operational or budgetary independence.

Many Tongans send remittances by setting up a bank account in the country where they are working and providing withdrawal privileges to relatives or friends in Tonga, such as by providing an ATM card. The National Reserve Bank (NRB) is reportedly attempting to monitor this practice.

Tonga’s high level of remittances has resulted in a relatively high number of money transfer businesses. These are licensed by the Ministry of Labor, Commerce and Industries. The NRB is working on a licensing framework that will enable the licensing of the money transfer businesses as foreign exchange dealers under the Foreign Exchange Control Act, bringing them under the supervision of the NRB.

U.S.-related currency transactions:

There are no indications that currency transactions in Tonga 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.:

There has not been occasion to exchange financial records; however, the working relationship with the United States is excellent.

International agreements:

Tonga 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

Tonga is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body. A mutual evaluation was conducted by the APG in late 2009. Once completed, the report will be available here: http://www.apgml.org/documents/default.aspx?DocumentCategoryID=17

Recommendations:

The Government of Tonga (GOT) should implement anti-money and counter-terrorist financing countermeasures that adhere to international standards. The TRA should be given operational and budgetary independence. The GOT should sign and ratify the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Tunisia

Tunisia is not considered an important regional financial center. Tunisia has strict currency exchange controls which authorities believe mitigate the risk of international money laundering. There is a low level of crime in Tunisia. The primary domestic criminal activities that generate laundered funds are clandestine immigration, trafficking in stolen vehicles and narcotics.

Offshore Center: Yes

All offshore financial institutions are held to the same regulatory standards as onshore financial institutions.  Offshore financial institutions undergo the same due diligence process as onshore banks and are licensed only after the Central Bank investigates their references and the Ministry of Finance approves their applications.  Anonymous directors are not allowed.  Tunisia currently has eight offshore banks and a considerable number of offshore international business companies.  Offshore international business companies are subject to all regulatory requirements, except for tax requirements and currency convertibility restrictions.  Bearer financial instruments or shares are strictly prohibited (Act No. 35 of 2000).

Free Trade Zones: Yes

Tunisia has two free trade zones, in Bizerte and Zarzis, with a limited number of companies manufacturing products for export. There are no offshore financial institutions located in either free trade zone.

Criminalizes narcotics money laundering: Yes

Tunisia's 1992 law (Law No. 1992-52) against narcotics trafficking includes provisions that contribute to combating money laundering. Under Articles 2 and 30 of Law No. 1992-52, anyone aiding in narcotics operations or the transfer of proceeds in connection with these operations, including financial institutions, can be prosecuted.

Criminalizes other money laundering, including terrorism-related: Yes

In December 2003, the Tunisian Parliament passed Law No. 2003-75, a comprehensive anti-money laundering/counter-terrorist financing (AML/CFT) law making it a crime to provide financial assistance or any other type of support to terrorist activities. Money laundering is punishable where false information is proffered relating to the illicit origin of property or income arising directly or indirectly from an offense. Money laundering is also defined as investing, depositing, transferring or safekeeping of property or income resulting from an offense. The law does not delineate specific crimes; rather it broadly states that money laundering related to “a crime or infraction” is illegal.

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 2009, the Tunisian legislature passed Law No. 2009-65 as an amendment to law 2003-75. The new law is intended to harmonize national legislation with UN AML/CFT resolutions.

Know-your-customer rules: Yes

Law 2003-75, as amended, imposes obligations on all financial institutions to gather full identifying information for personal and business accounts.  There are no anonymous or numbered accounts allowed in Tunisia. 

Bank records retention: Yes

All financial records and supporting documentation, in both paper and electronic form, must be maintained for ten years.

Suspicious transaction reporting: Yes

Under Law 2003-75, as amended, all institutions or intermediaries must report any suspicious transactions to the Tunisian Financial Analysis Commission, the Tunisian financial intelligence unit (FIU) which is located within the Central Bank. Law No. 2009-65 no longer mandates the automatic freezing of accounts subject to an STR, but rather instructs banks to allow the transaction so that authorities can trace the destination of the funds.

Large currency transaction reporting: Yes

Financial institutions are also required to report all transactions above 5,000 dinars (approximately $3,900).

Narcotics asset seizure and forfeiture:

The Tunisian penal code also allows for the sequestering, confiscation, or seizure of assets and property in certain situations, including narcotics trafficking and terrorist activities. The definition of assets is broad and covers financial or physical assets. Financial assets are traced by the Central Bank and Financial Analysis Commission, each of which has broad powers for investigating and seizing financial assets.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements: No

There are no AML/CFT cross-border currency reporting requirements.  The Tunisian dinar is not fully convertible and it is illegal to export dinars.  Residents are generally prohibited from holding or exporting foreign currency except for certain purposes, such as travel or business, and are limited in the value of foreign currency that can be used for these purposes.  The import and export of foreign exchange is regulated by Article 76 of Law No. 2003-75.  Non-residents entering Tunisia with foreign currency or other instruments worth less than 25,000 dinars are required to declare the total amount if they wish to re-export or deposit more than 5,000 dinars (approximately $3,900).  Non-residents do not need to declare currency exports under 5,000 dinars.  

Cooperation with foreign governments:

There are no known impediments to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Since the passage of Tunisia’s 2003 Terrorism Law, approximately 1,000 Tunisians have been detained, charged, and/or convicted on terrorism-related charges. However, Tunisia has not had any money-laundering or terrorist financing prosecutions.

Banks report regularly receiving the US Government and United Nations 1267 Sanctions Committee freeze lists from the Central Bank. The Financial Analysis Commission reports that it has never discovered any accounts or assets belonging to a listed individual or entity.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

No information available.

International agreements:

Tunisia has bilateral agreements on criminal matters with 29 countries and is party to 12 international agreements on counter-terrorism. Tunisia has submitted its candidacy for membership to the Egmont group.

Tunisia 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

Tunisia is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation report can be found here: http://www.menafatf.org/images/UploadFiles/MENAFATF.7.07.E.P5R2%20_with%20response_.pdf

Recommendations:

The Government of Tunisia should continue to implement and enhance its AML/CFT regime. Since Tunisia has strict currency controls, in all likelihood informal remittance systems such as hawala are prevalent. Authorities should examine underground finance and its possible link to money laundering and extremist finance. Tunisia should become a party to the UN Convention against Corruption.

Turkey

Turkey is an important regional financial center, particularly for Central Asia and the Caucasus, as well as for the Middle East and Eastern Europe. It continues to be a major transit route for Southwest Asian opiates moving to Europe. However, narcotics-trafficking is only one source of the funds laundered in Turkey. Other significant sources include invoice fraud and tax evasion, and to a lesser extent, smuggling, counterfeit goods, and forgery. Terrorist financing and terrorist organizations with suspected involvement in narcotics-trafficking and other illicit activities are also present in Turkey. Money laundering takes place in banks, non-bank financial institutions, and the underground economy. Informed observers estimate as much as 40 to 50 percent of the economic activity is derived from unregistered businesses. Money laundering methods in Turkey include: the large-scale cross-border smuggling of currency; bank transfers into and out of the country; trade fraud; and the purchase of high-value items such as real estate, gold, and luxury automobiles. Turkish-based traffickers transfer money and sometimes gold via couriers, the underground banking system, and bank transfers to pay narcotics suppliers in Pakistan or Afghanistan. Funds are often transferred to accounts in the United Arab Emirates, Pakistan, and other Middle Eastern countries.

Offshore Center: No

Free Trade Zones: Yes

There are 19 free trade zones (FTZ) in Turkey: Mersin, Antalya, Adana-Yumurtalik, Izmir, Denizli, Izmir Menemen, Istanbul Thrace, Istanbul Ataturk Airport, Istanbul Leather and Industry, Europe FTZ, Kocaeli, TUBITAK MAM Technology, Bursa, Trabzon, Rize, Samsun, Mardin, Gaziantep and Kayseri. These FTZs have a wide range of activities, including manufacturing, trading, storing, packing, banking and finance, software, and research and development. All the companies wishing to operate in FTZs must apply to the FTZ’s General Directorate in the Foreign Trade Undersecretariat. Full identification of all applicants is required. The companies are also required to report on their activities to the zone directorate, which regularly sends reports to the Undersecretariat. The General Directorate of FTZs has the authority to cancel operating licenses if the companies are involved in activities not included in the initial description of their field of activity, or if they fail to pay taxes. The companies are also required to submit identification information on any personnel they employ or dismiss during their time of activity in the zone.

Criminalizes narcotics money laundering: Yes

Turkey’s Law on Prevention of Money Laundering, most recently amended in September 2009 and numbered 5918, criminalizes money laundering. It provides for penalties of three to seven years in prison for money launderers, a fine of 20,000 TL (approximately $13,700) plus asset forfeiture provisions.

Criminalizes other money laundering, including terrorism-related: Yes

The present code defines money laundering predicate offenses as all offenses for which the punishment is imprisonment for one year or more.

Criminalizes terrorist financing: Yes

Existing Turkish law criminalizing terrorist financing include: Articles 2, 7, and 8 of the Law to Fight Terrorism numbered 3713; and various articles of the penal code which can be used to punish the financing of terrorism. A separate law, Number 5549 (October 2006), includes significant provisions to prevent money laundering and terrorist financing. The laws are limited to acts committed by members of organizations operating against the Turkish Republic, so the collection, donation and movement of funds by terrorist organizations would not be prohibited if the funds could not be linked to a specific domestic terrorist act. Turkey issued additional regulations to combat terrorist financing in January 2008.

Know-your-customer rules: Yes

Under a 2007 Ministry of Finance (MOF) banking regulation circular, all banks and regulated financial institutions, including the Central Bank, securities companies, post office banks, and Islamic financial houses are required to record tax identity information for all customers opening new accounts, applying for checking accounts, or cashing checks. The circular also requires exchange offices to sign contracts with their clients. The MOF also mandates that a tax identity number be used for all financial transactions.

Bank records retention: Yes

The Council of Ministers passed a set of regulations that requiring know-your-customer provisions and bank maintenance of transaction records for five years.

Suspicious transaction reporting: Yes

Turkish law provides safe harbor protection to the filers of suspicious transaction reports (STRs). The law also covers a range of entities subject to reporting requirements, to include several designated non-financial businesses and professions (DNFBPs), such as art dealers, insurance companies, lotteries, vehicle sales outlets, antique dealers, pension funds, exchange houses, jewelry stores, notaries, sports clubs, and real estate companies. In November 2007, the Government of Turkey (GOT) issued a General Communiqué of Suspicious Transaction Reporting Regarding Terrorist Financing to require the reporting of suspicious transactions related to terrorist financing.

MASAK, the Financial Crimes Investigation Board, is Turkey’s financial intelligence unit (FIU). MASAK receives, analyzes, and refers STRs for investigation. In 2008, 4,924 STRs were filed, of which 228 were linked to terrorist financing activities. Nine were from brokerage houses, 15 were from factoring entities, and 10 were from insurance companies. As of October 2009, there have been 7,797 STRs filed.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Turkey has a system for identifying, tracing, freezing, and seizing assets that are not related to terrorism, although the law allows only for their criminal, not administrative, forfeiture. Applicable law provides for the confiscation after conviction of all property and assets (including derived income or returns) that are the proceeds of a money-laundering predicate offense. The law allows for the confiscation of the instrumentalities of money laundering and the equivalent value of direct proceeds that could not be seized. The defendant must own the property subject to forfeiture. Legitimate businesses can be seized if used to launder drug money or support terrorist activity, or are related to other criminal proceeds.

Narcotics asset sharing authority:

There is no specific provision in Turkish law for the sharing of seized assets with other countries; however the United States and Turkey shared seized assets in one narcotics case.

Cross-border currency transportation requirements: Yes

Travelers may take up to $5,000 (approximately 7,750 Turkish Lira) or its equivalent in foreign currency notes out of the country. Turkey does have cross-border currency reporting requirements, and the law gives Customs officials the authority to sequester valuables of travelers who make false or misleading declarations and impose fines for such declarations. The currency reporting thresholds and whether the requirements are both in and outbound are not known.

Cooperation with foreign governments:

There are no known impediments to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

According to MASAK statistics, as of December 31, 2008 it had pursued 1532 money laundering investigations since 2003. Of these, 459 were referred for further investigation, but only 19 cases resulted in convictions. There are still 188 cases pending in the courts. Moreover, all of the convictions are reportedly under appeal. There is a lack of specialization and understanding of AML/CFT provisions among relevant authorities, which has contributed to the high number of acquittals in money laundering cases. In 2008, the GOT opened 34 money laundering cases, of which seven resulted in a conviction. It should be noted there is no way to corroborate the accuracy of these statistics, as Turkish Criminal Court records are closed to the public.

The GOT’s non-profit sector is vulnerable to terrorist financing. Turkey's investigative powers, law enforcement capability, oversight and outreach are weak and lacking in all the necessary tools and expertise to effectively counter this threat through a comprehensive approach; all these areas need to be strengthened. The nonprofit sector is not audited on a regular basis for counter-terrorist finance vulnerabilities and does not receive adequate anti-money laundering/counter-terrorist financing (AML/CFT) outreach or guidance from the GOT. The General Director of Foundations (GDF) issues licenses for charitable foundations and oversees them. However, there are a limited number of auditors to cover more than 70,000 institutions

Turkey has not taken sufficient steps to implement an effective regime to combat terrorist financing, especially as it relates to UNSCRs 1267 and 1373. For example, while the GOT has implemented UNSCR 1267, it has failed to establish punishment or sanctions for institutions that fail to observe a freezing order, and it has not established procedures for delisting entities or unfreezing funds. Additionally, the GOT has not taken steps that would allow it to freeze the assets of entities designated by other jurisdictions, as required under UNSCR 1373.

U.S.-related currency transactions:

No information provided.

Records exchange mechanism with U.S.:

Turkey and the United States have a Mutual Legal Assistance Treaty (MLAT) and cooperate closely on narcotics and money laundering investigations. Turkey and the United States are both members of the Egmont Group and occasionally exchange financial intelligence.

International agreements:

The GOT cooperates closely with its neighbors in the Southeast Europe Cooperation Initiative (SECI).

Turkey 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

Turkey is a member of the FATF. It’s most recent 2007 mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/14/7/38341173.pdf

Recommendations:

The Government of Turkey (GOT) should regulate and investigate remittance networks to thwart their potential misuse by terrorist organizations or their supporters. The GOT should expand its narrow legal definition of terrorism and take steps to fully implement UNSCRs 1267 and 1373. The GOT must also strengthen its oversight of foundations and charities, which currently receive only cursory overview and auditing. AML and CFT prosecutions, convictions, and penalties remain low and many have been overturned on appeal. In order to better investigate and prosecute cases, law enforcement and judicial authorities should enhance their knowledge of AML/CFT issues and what constitutes an offense.

Turkmenistan

Turkmenistan is not an important regional financial center. There are only five international banks and a small, underdeveloped financial sector. Foreign companies operate, but do not own, three hotels and two casinos in Turkmenistan, which under certain conditions could become vulnerable to financial fraud and used for money laundering. Turkmenistan exports billions of dollars worth of natural gas, relying heavily on a complex network of opaque Russian and Ukrainian energy firms, raising money laundering concerns. In addition, given Turkmenistan’s shared border with Afghanistan, money laundering in the country also involves proceeds from illegal narcotics trafficking and trade, derived primarily from domestic criminal activities. Although there is no information on cash smuggling, gasoline and other commodities are smuggled routinely across the national borders. Since January 2009, the Government of Turkmenistan (GOT) redenominated its national currency, the Turkmen manat. One redenominated manat is equivalent to 5,000 old manats.

Offshore Center: No

Free Trade Zones: Yes

The current Law on Free Economic Zones (FEZs) in Turkmenistan, as amended in 1994, determines the legal regime for conducting business in these zones. There are ten FEZs in Turkmenistan: Mary-Bayramali, Okarem-Hazar (Cheleken), Turkmenabat-Seyidi, Baharly-Serdar, Dashoguz Airport, Ashgabat-Anau, Ashgabat-Abadan, Ashgabat International Airport, Serakhs, and Guneshli Turkmenistan near Anau. The zones were all created prior to 1998. All related enterprises are exempt from taxes on profits for the first three years of profitable operation. All goods and properties must be declared when imported into or exported from FEZs.

In May 2007, Turkmenistan introduced a National Tourism Zone (NTZ) “Awaza,” heavily promoted by the President to encourage tourism development at a site on the Caspian Sea. Tax and other incentives are provided in legislation passed in October 2007, including amendments to the Tax Code to exempt construction and installation of tourist facilities in the NTZ from the Value Added Tax (VAT). Various services of tourist facilities, including catering and accommodation, are also VAT exempt. Income tax on accommodation and catering of tourist facilities will not be levied for the first 15 years.

Criminalizes narcotics money laundering: Yes

The Turkmen Criminal Code of June 12, 1997, Article 242 (Legalization of illegally obtained funds or other property) prohibits money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

In May 2009, the GOT adopted a new law, “On Combating the Legalization of Criminal Proceeds and the Financing of Terrorism” (AML/CFT Law), which went into effect in September 2009. The new law further defines such terms as “criminal proceeds” and “legalization of criminal proceeds,” gives the definition of a “property” and a “suspicion operation or transaction,” and defines the reporting entities.

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 Criminal Code of Turkmenistan determines criminal liability for crimes of a terrorist nature, such as article 130, 170, part 1 article 176, 271-273. The new AML/CFT Law clearly defines the financing of terrorism and measures directed at combating it.

Know-your-customer rules:

Presidential Resolution No. 0210/02-2 of October 17, 1995 requires any entity making an electronic transfer of funds to an account abroad to provide documentation establishing the source of the money. The AML/CFT Law includes customer identification requirements and specifies instances when they should be applied, but implementation efforts are at the beginning stages.

Bank records retention: Yes

The new AML/CFT Law requires all reporting entities to store information and records relating to transactions, the identification of a client and business relationships for at least five years from the time a transaction is completed or following the closure of an account or termination of a business relationship.

Suspicious transaction reporting:

The AML/CFT Law establishes an “authorized government body” as the entity empowered to collect, analyze and disseminate information about suspicious transactions and operations. In January 2010 the President of Turkmenistan signed a Decree to establish the Office of Financial Monitoring, the financial intelligence unit (FIU), under the Ministry of Finance. Under the AML/CFT Law, transactions and operations are subject to mandatory disclosure if their amounts in foreign and national currency are equal to or exceed $5,000, whenever such a transaction arouses suspicion. The AML/CFT Law requires the following entities to report any suspicious transactions: banks and other financial institutions; insurance and leasing companies; pawnshops; securities dealers and commodity exchanges; currency exchanges; gambling organizers; real estate intermediaries and property agents; mail and telegraphy organizations providing money transfer services and other settlements and/or payments; sellers of gems and precious metals when performing cash operations with their clients; auctioneers; attorneys, notary officers, legal advisers and accountants; and financial consultant services. The STR reporting regime has not been implemented. The FIU is not operational, and to date no entities have filed suspicious transaction reports.

Large currency transaction reporting:

Transactions above the equivalent of $5,000 must be reported if they involve the purchase or sale of foreign currency; exchange of bank notes of one denomination to another denomination; cash payments for investments, leases, insurance premiums, real estate, lottery prizes, or gaming; cash flows of charitable foundations; the placing of securities or valuable items at a pawnshop; and finally, money transfer(s) effected at the client’s instruction.

Narcotics asset seizure and forfeiture:

Presidential Decree No. 6097 of January 24, 2003, authorizes asset seizure and confiscation. Turkmenistan’s Antiterrorism Law of August 15, 2003, as well as the AML/CFT Law, authorizes the GOT to freeze the assets of individuals who commit or attempt to commit terrorist acts; who contribute to such acts; or are under the ownership or control of, or acting on behalf of terrorists or terrorist organizations. The GOT does not have an independent national system or mechanism for freezing terrorist assets. There are no reports that authorities identified, froze, seized, and forfeited assets related to the terrorist financing in 2009.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

The statutory requirements for limiting or monitoring the cross-border transportation of currency and monetary instruments are stipulated in the Turkmenistan Customs Code. Customs declaration forms are used at border crossings for cross-border currency reporting requirements for both inbound and outbound currency.

Cooperation with foreign governments:

Article 7 of the AML/CFT Law states the GOT shall cooperate with foreign states on money laundering and terrorist financing investigations and prosecutions. The second paragraph of the article states the GOT shall furnish the competent bodies of foreign states with appropriate information based on their requests, or at their own initiative, based on the international treaties of Turkmenistan, upon the consent of the President of Turkmenistan. Turkmen counter-terrorism laws require Turkmenistan to cooperate with foreign states and international organizations in terrorism matters and to render assistance to other states in criminal investigations and prosecutions of individuals involved in financing or supporting terrorist activities. The absence of an FIU limits Turkmenistan’s ability to share financial information related to money laundering through the Egmont Group of FIUs.

U.S. or international sanctions or penalties:

While Turkmenistan is not subject to U.S. or international targeted financial measures, it was the subject of a Financial Action Task Force (FATF) Statement in February 2009, expressing concern that the serious deficiencies in its AML/CFT regime constitute a money laundering/terrorist financing vulnerability in the international financial system and alerting all countries to take appropriate measures to address this risk.

The U.S. Financial Crimes Enforcement Network (FinCEN) issued advisories in July and October 2009 to alert financial institutions to statements by the FATF citing deficiencies in the AML/CFT system of Turkmenistan.

Enforcement and implementation issues and comments:

The U.S. Embassy regularly provides terrorist financing information regarding UN and U.S.-designated individuals and organizations subject to asset forfeiture to the Ministry of Foreign Affairs (MFA). The Ministry of Foreign Affairs reports it distributes such information to the Ministry of Finance, the Ministry of National Security, the Ministry of Internal Affairs, and other concerned agencies. It is not clear whether financial institutions receive the information.

There have been no reports of arrests, prosecutions or convictions for money laundering or terrorist financing since January 1, 2009.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

FinCEN does not exchange information with Turkmenistan.

International agreements:

The Prosecutor General’s Office has concluded interagency agreements on legal issues and legal assistance with the Prosecutor General’s Offices of other Commonwealth of Independent States (CIS) countries.

Turkmenistan 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

Turkmenistan is not a member of any FATF-style regional body. It is an observer of the Eurasian Group on Combating Money Laundering and Financing of Terrorism but has not pursued full membership.

Recommendations:

While Turkmenistan has made recent progress in adopting AML/CFT legislation and secondary legislation that aims to implement the AML/CFT Law, deficiencies remain in Turkmenistan’s AML/CFT regime. The Government of Turkmenistan should take the necessary actions to fully implement its new AML/CFT Law. It should provide sufficient autonomy, resources and capacity to its new FIU to allow it to function effectively and ensure that all covered entities are aware of their responsibilities under the law, including the requirement to report suspicious transactions. Likewise, it should provide the necessary training and capacity building to government entities with supervisory, investigative and prosecutorial responsibilities. If it does not already do so, the GOT also should ensure all relevant financial institutions receive the lists of designated terrorists and terrorist organizations. Turkmenistan should become a member of a FATF-style regional body.

Uganda

Uganda is not a major hub for narcotics trafficking and terrorist financing, but it is a growing site for money laundering. Ugandan efforts to combat money laundering are hampered by the continued absence of comprehensive anti-money laundering legislation, severe resource constraints, and internal government corruption. Counterfeit US currency is a recurring problem. Uganda’s inability to monitor formal and informal financial transactions, particularly along porous borders with Sudan, Kenya, Tanzania, and the Democratic Republic of Congo, render Uganda vulnerable to more advanced money laundering activities and potential terrorist financing. Money laundering in Uganda derives from a wide range of activities, including government corruption, misappropriation of public funds and foreign assistance, abuse of the public procurement process, as well as from abuse of religious charities, land speculation, car theft, arms and natural resource smuggling, and exchange control violations. Uganda’s active informal economy also provides a fertile environment for money laundering. Uganda’s thriving black market for smuggled and/or counterfeit goods takes advantage of porous borders and lack of customs and tax collection enforcement capacity.

Offshore Center: No

Free Trade Zones:

The Special Economic Zones Bill of 2002 authorized the creation of export processing zones (EPZs) and free trade areas (FTAs) within Uganda. However, Uganda has not created any EPZs or FTAs despite a $24 million credit from the World Bank to do so. The Uganda Investment Authority (UIA) is in the process of establishing an industrial business park at Namanve, east of Kampala, and hopes to create EPZs and FTAs within this area. However, it lacks a legal framework to manage them. This framework is articulated in the draft Free Trade Zones Bill currently undergoing Cabinet review. The UIA will regulate operators in the zones until a Uganda Free Zones Authority is established.

Criminalizes narcotics money laundering: Yes

In 2001, the Government of Uganda (GOU) criminalized narcotics-related money laundering.

Criminalizes other money laundering, including terrorism-related: No

Uganda’s Financial Action Task Force (FATF), comprised of multiple Ugandan government ministries and chaired by the Bank of Uganda (BOU), drafted a comprehensive anti-money laundering (AML) bill in 2003, and Cabinet approved the bill in January 2005. In 2009, the bill was submitted to Parliament. Citing “procedural concerns,” the Finance Ministry drafted several amendments to the bill in consultation with other ministries and the BOU. Some attribute the delay in passing the AML bill to corrupt government officials who may be exploiting loopholes the AML bill is designed to close.

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 2002 Anti-Terrorism Act (ATA) criminalizes contributing, soliciting, controlling, or managing funds used to support terrorism or terrorist organizations. The BOU has the power to freeze the assets of any entity designated as a terrorist organization, and also may require a commercial bank to freeze its customer’s assets in response to an outside request pursuant to a legally binding international convention that Uganda has signed. The BOU has yet to freeze any assets under the ATA.

Know-your-customer rules: Yes

From 2002 to 2004, the BOU issued guidelines to financial institutions, foreign exchange bureaus, and local insurance companies stipulating that they comply with know-your-customer principles such as instituting internal control measures and reporting suspicious activities to the BOU for further investigation.

Bank records retention:

No information available.

Suspicious transaction reporting: No

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: No

There are some legislative provisions for seizure and confiscation powers for corruption cases, domestic terrorism and drug crimes. The Financial Institutions Act of 2004 (S.8) provides for freezing of proceeds of crime but does not deal with forfeiture.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements: No

The BOU attempts to monitor cross-border financial transactions in conjunction with customs officials at some border posts but is limited by severe resource constraints.

Cooperation with foreign governments:

Uganda is an active member of the International Criminal Police Organization (INTERPOL), and hosts the headquarters of the United National African Institute for the Prevention of Crime and Treatment of Offenders (UNAFRI).

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Without AML laws, Uganda cannot create an operational financial intelligence unit (FIU) or pursue other anti-money laundering measures.

The Criminal Investigations Department (CID) of the Ugandan Police Force is responsible for investigating financial crimes. However, until Parliament approves the AML legislation, the CID maintains only limited authority to investigate and prosecute money laundering violations. The CID is understaffed and lacks adequate training in financial investigation techniques related to AML and terrorist financing. Internal corruption within the CID also hampers police investigative capacity. According to GOU officials, criminals have access to technology that is more sophisticated than what is available to police investigators. The Inspectorate General of Government has the power to investigate cases brought to it by the public, but in practice has not investigated AML and terrorist financing cases.

Many Ugandans working abroad use an informal cash-based remittance system to send money to their families. Annual remittances are Uganda’s largest single source of foreign currency and totaled $414 million in 2008/2009, down sharply from $645 million in 2006/2007. Remittances are used primarily for consumption purchases.

Counterfeit US currency is a consistent problem in Uganda. Counterfeit US currency arrives from, and transits through, Uganda to the Democratic Republic of Congo, Kenya, and Dubai. In one common counterfeit scheme, counterfeiters sell fake US currency marked or “masked” by black ink or a special stamp. The seller offers this currency at a discount because of the markings, and claims the bills can be exchanged or “unmasked” at a U.S. embassy or bank. In mid-2008 in eastern Uganda, police arrested an individual in possession of more than $1 million in counterfeit US dollars. Highlighting Uganda’s unwillingness to crack down on counterfeiters in cases involving well-connected individuals, police subsequently released the individual from custody, and he later disappeared.

In 2004, the BOU circulated to financial institutions the list of individuals and entities included on the UNSCR 1267 Sanctions Committee’s consolidated list.

U.S.-related currency transactions:

The extensive use of cash - US dollars and Ugandan shillings - instead of other financial instruments hinders the monitoring of financial transactions. The US dollar is widely used in both the licit and underground economies.

Records exchange mechanism with U.S.:

Uganda and the United States do not have formal agreements to facilitate the exchange of records in connection with narcotics and money laundering crimes. Nevertheless, Ugandan authorities have cooperated with U.S. law enforcement efforts in the past.

International agreements:

Uganda is a party to:

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

Uganda is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a FATF-style regional body. Its most recent mutual evaluation report can be found here: http://www.esaamlg.org/userfiles/UGANDA_MER1.pdf

Recommendations:

The Government of Uganda (GOU) should pass the anti-money laundering bill now pending in Parliament to provide Uganda with comprehensive anti-money laundering legislation that meets international standards and to allow it to establish a financial intelligence unit. Uganda also should pass pending whistleblower legislation. Other challenges include informing the public about money laundering, creating infrastructure to implement anti-money laundering guidelines, and seeking the cooperation of financial institutions and other stakeholders. The GOU should also continue to seek out training opportunities for its bankers, police investigators, and prosecutors to improve awareness of money laundering schemes. Uganda should become a party to the UN Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime.

Ukraine

In the Ukraine, high risks of money laundering have been identified in foreign economic activities, credit and finance, the fuel and energy industry, and the metal and mineral resources market. Illicit proceeds are primarily generated through corruption, fictitious entrepreneurship, fraud, drug trafficking, arms trafficking, organized crime, prostitution, tax evasion, and trafficking in persons. Various laundering methodologies are used including the use of real estate, insurance, bulk cash smuggling, and financial institutions

Offshore Center: No

Free Trade Zones: Yes

In 2005, the Government of Ukraine (GOU) eliminated the tax and customs duty privileges available in 11 Special Economic Zones (SEZs) and nine Priority Development Territories (PDTs) operating within Ukraine, which have been associated with rampant evasion of customs duties and taxes.

Criminalizes narcotics money laundering: Yes

In November 2002, Ukraine enacted an anti-money laundering (AML) package entitled “On Prevention and Counteraction of the Legalization (Laundering) of the Proceeds of Crime” (the Basic AML Law), which serves as the legal basis for a national anti-money laundering/counter-terrorist financing (AML/CFT) regime. Specific elements of the money laundering offense are also contained in Article 306 of the Criminal Code, which addresses laundering of proceeds generated from drug trafficking.

Criminalizes other money laundering, including terrorism-related: Yes

With the exception of market manipulation and financing of terrorism (in all its forms) the range of offenses set out in the Criminal Code which are predicate offenses to money laundering include all categories of offenses included in the international standards. However, certain offenses and acts are not sufficiently covered.

On November 6, 2009, Parliament passed significant amendments to the Basic AML law, designed to address many of the identified deficiencies and to take significant steps to bring the regime into compliance with international standards. However, the President vetoed the bill on December 8 in response to pressure from the financial community, which complained of onerous additional reporting requirements.

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 Ukrainian legal framework does not criminalize terrorist financing as an autonomous offense. The terrorism offense is criminalized in article 258 of the Criminal Code. However, the Criminal Code only provides for the criminalization of terrorist financing based on funding linked to a specific terrorist act and does not cover sole funding for an individual terrorist or a terrorist organization.

Know-your-customer rules: Yes

The legal framework for customer due diligence is set out in a variety of documents. All types of financial institutions are covered by AML/CFT obligations for customer due diligence through a combination of the Basic AML Law, the Law on Financial Services and State Regulation of Financial Markets, and the Law of Ukraine on Securities and Stock Market. The measures apply to legal persons, authorized representatives, and beneficial owners. Additional requirements stipulate the procedures for conducting customer identification that apply to non-banking institutions, insurance companies, gambling institutions, credit unions, depositories, securities traders, registers, pawn shops, and leasing providers.

Bank records retention: Yes

Article 5 of the Basic AML Law requires financial institutions to keep documents on financial transactions for five years following the completion of the transaction. The Law on Banks and Banking repeats this requirement. However, non-bank financial institutions are not required to maintain such records. There is also no requirement that transaction records should be sufficient to permit reconstruction of individual transactions.

Suspicious transaction reporting: Yes

The Basic AML Law requires reporting to the financial intelligence unit (FIU) of all transactions that appear to be suspicious and certain forms of attempted transactions. However, there is no explicit legal requirement to report all types of attempted transactions, not just those that have been refused by the obligated entities. There are few STRs regarding terrorist financing. According to the Basic AML Law, there is no reporting threshold for suspicious transactions.

Large currency transaction reporting: Partially

Any transaction of 80,000 UAH (approximately $9,300), or foreign currency equivalent, must be reported if the transaction meets one of several suspicious activity criteria set out in article 11 of the Basic AML Law. In 2008, the FIU received 1,083,461 transaction reports, which include STRs and large currency transaction reports, and sent 641 separate cases to law enforcement agencies.

Narcotics asset seizure and forfeiture:

Ukraine has a general asset forfeiture regime that is largely an inappropriate and ineffective relic of Soviet-era legislation. Article 59 of the Ukrainian Criminal Code provides for the mandatory seizure of all or a part of the property of any person convicted for “grave or particularly grave offenses,” as defined in the code, regardless of whether this property bore any relation to the crime of conviction. With respect to money laundering, Article 209 allows for the forfeiture of criminally obtained money and other property. However, confiscation of instrumentalities intended for use in the commission of a money laundering offense; property of corresponding value; and income, profits or other benefits from the proceeds of crime do not appear to be captured by the Ukrainian legislation.

Narcotics asset sharing authority:

Ukrainian authorities have indicated that sharing of confiscated assets with other countries might be resolved by bilateral agreements on coordination of seizure and confiscation actions. Mechanisms for international cooperation on confiscation measures have not yet been tested. Civil confiscation orders are not recognized in the Ukrainian criminal legislation.

Cross-border currency transportation requirements: Yes

Cash smuggling is substantial in Ukraine, although it is reportedly more related to unauthorized capital flight than to criminal proceeds or terrorist funding. Beginning in May 2008, as a result of amendments to the “Resolution on the Adoption of Instructions Regarding Movement of Currency, Precious Metals, Payment Documents, and Other Banking Documents over the Customs Border of Ukraine,” travelers must declare both inbound and outbound cross-border transportation of cash exceeding euro 10,000 (approximately $14,100) and name the origin of such funds. Precious metals also subject to reporting are defined as gold, silver, and platinum. Persons may not import or export precious metals exceeding 500g in weight without a written declaration submitted to customs.

Cooperation with foreign governments:

Ukraine provides mutual legal assistance (MLA) on the basis of multilateral international treaties and bilateral agreements, and in the absence of an agreement, requests for legal assistance are considered on the basis of the reciprocity principle via diplomatic channels. The Basic AML Law provides that the FIU shall cooperate internationally to exchange experience and information with relevant foreign agencies on the basis of international agreements in force or on a reciprocity basis.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Ukraine’s AML/CFT legal framework is significantly deficient in that the laws do not provide for autonomous prosecution of money laundering - a money laundering conviction requires prior or simultaneous conviction for a predicate offense linked to the laundered proceeds; cover all predicate crime categories; cover conversion or transfer of property; or cover terrorist financing in all its aspects or as a separate offense. In addition, Ukraine appears to have serious difficulties implementing the law.

Ukraine’s customer due diligence (CDD) regime does not adequately cover all institutions and types of transactions. For example, the definition of beneficial owner does not cover natural persons, and there is no requirement that financial institutions determine the identity of the natural persons who ultimately own or control the customer; securities institutions are only required to identify the control structure and beneficial owners of the customer and to obtain information on the purpose and nature of the business relationship in higher risk situations; there is no specific requirement for any institution to conduct ongoing due diligence; and, there is no general requirement to perform enhanced due diligence for higher risk categories of customers, business relationships or transactions.

Suspicious transaction reporting requirements are not well understood outside of the banking sector. Additionally, there is a pronounced lack of guidance to reporting institutions on how to detect suspicious transactions related to terrorism.

Ukraine lacks any functional regime for locating or seizing forfeitable assets. In particular, Ukraine lacks legislation allowing in rem forfeiture or the seizure of corporate assets, has no specialized asset forfeiture prosecutors or officials, and lacks any entity to administer forfeited assets.

In 2008, law enforcement agencies initiated 354 formal criminal investigations and submitted indictments in 117 of those cases; there were 76 convictions.

Through their regulatory agencies, banks and non-bank financial services receive the U.S. designations of suspected terrorists and terrorist organizations under Executive Order 13224 and other U.S. authorities and are instructed to report any transactions involving designated individuals or entities.

U.S.-related currency transactions:

The local currency (hryvnia) is tied to the dollar. Dollars and, increasingly, Euros are ubiquitous. It is the common view that dollars are for savings kept at home and for big purchases, while hryvnias are for day-to-day expenses. Ukrainians are still mistrustful of their monetary system so many people still prefer to secrete dollars in hiding places rather than deposit them in a bank.

Records exchange mechanism with U.S.:

The U.S.-Ukraine Treaty on Mutual Legal Assistance in Criminal Matters entered into force in February 2001. A bilateral Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, which provides for the exchange of information in administrative, civil, and criminal matters, is also in force.

International agreements:

As of December 2009, the FIU has signed memoranda of understanding (MOUs) with the FIUs of 46 countries. In July, 2009, Ukraine amended the law on Banks and Banking to permit international exchange of information between the National Bank and respective regulators of other countries for purposes of combating money laundering.

Ukraine 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

Ukraine is a member of MONEYVAL and an observer to the Eurasian Group on Combating Money Laundering and the Financing of Terrorism (EAG), both Financial Action Task Force-style regional bodies. Ukraine’s 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 Ukraine (GOU) has strengthened and clarified its legislation and established a comprehensive anti-money laundering regime. However, Ukraine’s ability to implement this regime through consistent successful criminal prosecutions has yet to be proven. The GOU should adopt draft legislation to bring its AML/CFT regime into closer accordance with both the language and the intent of international standards. The recent veto of amendments that would do just this is unfortunate. The GOU also should consider carefully the consequences of reestablishing tax and customs privileges that have been abused in the past. Ukraine should provide guidance to all reporting institutions, bank and non-bank, on the reporting requirements for suspicious transactions related to both money laundering and terrorist financing. Law enforcement officers, customs, and the judiciary need a better understanding of the theoretical and practical aspects of identifying, investigating and prosecuting money laundering cases, especially in the regions where implementation is poor. The GOU also should more aggressively address public corruption by investigating, prosecuting and convicting corrupt public officials.

United Arab Emirates

The United Arab Emirates (UAE) is an important financial center in the Gulf region. Dubai, in particular, is a major international banking and trading center. The country also has a growing offshore financial free zone. The UAE’s robust economic development, political stability, and liberal business environment have attracted a massive influx of people, goods, and capital, which makes the country susceptible to possible money laundering activities. The UAE also is susceptible to money laundering due to its geographic location as the primary transportation and trading hub for the Gulf States, East Africa, and South Asia; longstanding trade relations with Iran; its expanding trade ties with the countries of the former Soviet Union; and lagging relative transparency in its corporate environment.

The potential for money laundering is exacerbated by the large number of resident expatriates (roughly 80—85 percent of total population) who send remittances to their homelands. However, in 2009 the Ministry of Labor introduced a new electronic wage protection system, designed to replace cash salary payments with direct deposits into a personal bank account. Given the country’s proximity to Afghanistan, narcotics traffickers are increasingly reported to be attracted to the UAE’s financial and trade centers. Other money laundering vulnerabilities in the UAE include hawala, trade fraud, smuggling, the real estate sector, the misuse of the international gold and diamond trade, the misuse of shell companies and the use of UAE-based companies to assist in transactions that violate U.S. and/or U.N sanctions. Reportedly, the UAE is used as a financial center by pirate networks operating off the coast of Somalia and for corrupt officials in Afghanistan and Pakistan.

Offshore Center: Yes

In March 2004, the Government of the UAE (GUAE) passed Federal Law No. 8, regarding the Financial Free Zones (FFZs) (Law No. 8/2004). Although the new law exempts FFZs and their activities from UAE civil and commercial laws, FFZs and their operations are still subject to federal criminal laws including the Anti-Money Laundering Law (Law No. 4/2002) and the Anti-Terror Law (Law No. 1/2004). As a result of Law 8/2004 and a subsequent federal decree, the UAE’s first financial free zone (FFZ), known as the Dubai International Financial Center (DIFC), was established in September 2004, supervised by the Dubai Financial Services Authority (DFSA). By September 2005, the DIFC had opened its securities market, the Dubai International Financial Exchange (DIFX). The law prohibits companies licensed in the FFZ from dealing in UAE currency (i.e., dirham), or taking domestic deposits. Further, the law stipulates that the licensing standards of companies shall be comparable to those for domestic companies. Insurance activities conducted in the FFZ are limited by law to reinsurance contracts only.

Free Trade Zones: Yes

The number of FTZs is growing, with 38 currently operating in the UAE. Every emirate has at least one functioning FTZ. There are over 5,000 multinational companies located in the FTZs, and thousands more individual trading companies. The FTZs permit 100 percent foreign ownership, no import duties, full repatriation of capital and profits, no taxation, and easily obtainable licenses. Companies located in the free trade zones are considered offshore or foreign entities for legal purposes. However, UAE law prohibits the establishment of shell companies and trusts, and does not permit nonresidents to open bank accounts in the UAE. The larger FTZs in Dubai are well-regulated.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The UAE has enacted the Anti-Money Laundering Law No. 4/2002, and the Anti-Terrorism Law No. 1/2004. Both pieces of legislation, in addition to the Cyber Crimes Law No. 2/2006, serve as the foundation for the country’s anti-money laundering/counter-terrorist financing (AML/CFT) efforts. Law No. 4/2002 criminalizes all forms of money laundering activities.

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 July 2004, the UAE government strengthened its legal authority to combat terrorism and terrorist financing by passing Federal Law Number No. 1/2004. The law specifically criminalizes the funding of terrorist activities and terrorist organizations.

Know-your-customer rules: Yes

Administrative Regulation No. 24/2000 requires banks, money exchange houses, finance companies, and any other financial institutions to follow customer due diligence procedures for accountholders and to verify a customer’s identity and maintain transaction details (i.e., name and address of originator and beneficiary) for all exchange house transactions over the equivalent of $545 and for all non-accountholder bank transactions over $10,900. The regulation delineates the procedures to be followed for the identification of natural and juridical persons. Amendments to the Regulations in July 2006 add enhanced due diligence requirements for charities; and, in August 2009, the Central Bank issued a circular instructing local banks not to handle accounts belonging to politically exposed persons (PEPs).

Bank records retention: Yes

Regulation 24/2000 calls for customer records to be maintained for a minimum of five years and further requires they be periodically updated as long as the account is open.

Suspicious transaction reporting: Yes

In the first five months of 2009, 6,198 suspicious transaction reports (STRs) were filed. In 2008, 13,101 STRs were filed. Of the total STRs filed in the UAE from 2002 to date, 285 have been referred to the UAE Public Prosecutor’s office, of which 20 have reached the courts.

Large currency transaction reporting:

Law No. 4/2002 calls for stringent reporting requirements for wire transfers exceeding 2000 dirhams (approximately $545) and currency imports above 40,000 dirhams (approximately $10,900).

Narcotics asset seizure and forfeiture:

Law No. 1/2004, addressing terrorism and terrorist financing, also provides for asset seizure and confiscation. Article 31 gives the Attorney General the authority to seize or freeze assets until the investigation is completed. Article 32 confirms the Central Bank’s authority to freeze accounts for up to seven days if it suspects the funds will be used to fund or commit any of the crimes listed in the law. Amendments to the Central Bank Regulations 24/2000 in July 2006 require financial institutions to freeze transactions they believe may be destined for funding terrorism, terrorist organizations, or for terrorist purposes.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements:

The Central Bank requires any cash imports over the equivalent of $10,900 to be declared to Customs; otherwise undeclared cash may be seized upon attempted entry into the country. However, enforcement mechanisms are ineffectual and failure to declare is not specifically penalized. Because movements of bulk cash across borders is often used to support trade for countries in the region with underdeveloped banking systems, customs officials, police, and judicial authorities tend to not regard large cash imports as potentially suspicious or criminal activities, and it is not unusual for people to carry significant sums of cash. The UAE has not set any limits on the amount of cash that can be imported into or exported from the country. No reporting requirements currently exist for cash exports, constituting a significant vulnerability in the UAE’s enforcement regime.

Cooperation with foreign governments (including refusals):

There is a reference in UAE law that enables the UAE to provide international "judicial" cooperation, but this provision has been interpreted narrowly. However, there have been recent examples of UAE cooperation in pending US criminal cases, including the production of financial records and the identification of criminal assets.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The free trade zones are monitored by the local emirate rather than federal authorities. Although some trade-based money laundering undoubtedly occurs in the large FTZs, a higher potential for financial crime exists in some of the smaller FTZs located in the northern emirates. The UAE is also a hub for re-export activity that permits Iran to evade internationally imposed sanctions.

Although firms operating in the DIFC are subject to Law No. 4/2002, the DFSA has issued its own anti-money laundering regulations and supervisory regime, which has caused some ambiguity about the Central Bank’s and the FIU’s respective authorities within the DIFC.

No cross-border currency transportation reporting requirements currently exist for cash exports.

In 2003, the Central Bank issued regulations to help improve the oversight of hawala, including registration of hawala brokers. The regulations require hawaladars to submit the names and addresses of all originators and beneficiaries of funds and to file STRs on a monthly or quarterly basis. However, since the inception of the program, there reportedly have not been any STRs filed by hawaladars.

The Central Bank states it circulates an updated UNSCR 1267 Sanctions Committee’s consolidated list of suspected terrorists and terrorist organizations to all the financial institutions under its supervision.

In June 2009, a Dutch suspect was arrested in Dubai for suspected involvement in international money laundering, reportedly based on an Interpol request. The accused, who was looking to open a commercial company in a UAE free trade zone, was suspected of being part of a European gang involved in drug trafficking and of supplying South American narcotics to European countries and South Africa. Dubai Police also reported the disruption of a narcotics-related international money laundering operation worth $28 billion.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

There is no mutual legal assistance treaty (MLAT) between the U.S. and the UAE, which has historically prevented timely UAE compliance with US investigative requests in financial crimes cases. However, the UAE Attorney General has expressed an interest in removing certain preconditions that have historically prevented the signing of an MLAT with the U.S., and discussions between the U.S. and the UAE on this issue are anticipated to be ongoing. The UAE FIU exchanges and shares information with FinCEN, the FIU of the United States. The DFSA has a memorandum of understanding (MOU) with the U.S. Commodity Futures Trading Commission. On October 23, 2007, the DFSA entered into a MOU with the five U.S. banking supervisors.

International agreements:

The DFSA has undertaken a campaign to reach out to other international regulatory authorities to facilitate information sharing. The DFSA has MOUs with more than 41 other regulatory bodies, including the UK’s Financial Services Authority and the Securities and Exchange Board of India. The UAE Central Bank has signed a number of MOUs with Egmont member countries, including Nigeria, the Philippines, Canada and Holland, and continues this effort. In May 2008, the UAE and Russia signed an executive plan for enforcement of the Anti-Crime Cooperation Agreement.

The UAE 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 UAE is a member of The Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. It’s most recent mutual evaluation can be found here: www.MENAFATF.org

Recommendations:

The Government of the UAE (GUAE) has shown some progress in enhancing its AML/CFT program. However, several areas continue to need further action by the GUAE. Most importantly, the UAE should adopt outbound cash and gold declaration requirements, a key vulnerability in the UAE’s AML/CFT regime. Additionally, law enforcement and customs officials should be more proactive in developing cases based on investigations, rather than on STRs, and should step up inquiries into large and undeclared cash imports into the country. The GUAE should continue to strengthen its regulatory and enforcement regime to interdict potential illicit cash couriers transiting major airports. All forms of trade-based money laundering must be given greater scrutiny by UAE customs and law enforcement officials, including customs fraud, the trade in gold and precious gems, commodities used as counter-valuation in hawala transactions, and the misuse of trade to launder narcotics proceeds. The UAE FIU remains under-resourced and lacks investigative capacity. The GUAE should increase the resources it devotes to supervision and investigation of AML/CFT both federally and at the emirate level, including ensuring all free trade zones are adequately supervised. Moreover, the absence of meaningful statistics across all sectors is a significant hindrance to the assessment of the effectiveness of the AML/CFT program. The Central Bank should review the effectiveness of its hawaladar registration and dramatically step up its enforcement and oversight of this sector. The UAE should also continue its regional efforts to promote sound charitable oversight. Action also should be taken to clamp down on Iranian activity in the UAE that evades international sanctions regimes.

United Kingdom

The United Kingdom (UK) plays a leading role in European and world finance and remains attractive to money launderers because of the size, sophistication, and reputation of its financial markets. Although narcotics are still a major source of illegal proceeds for money laundering, the proceeds of other offenses, such as financial fraud and the smuggling of people and goods, have become increasingly important. The past few years have witnessed the movement of cash placement away from banks and mainstream financial institutions as these entities have tightened their controls and increased their vigilance. The use of bureaux de change, cash smugglers (into and out of the UK), and traditional gatekeepers (including solicitors and accountants) to move and launder criminal proceeds has been increasing. Also on the rise are credit/debit card fraud and the purchasing of high-value assets to disguise illegally obtained money. Additionally, the Internet increasingly provides criminals with a variety of money making opportunities and methods to launder funds.

The UK Threat Assessment conducted by the Serious Organized Crime Agency (SOCA) estimated the annual proceeds from crime were between £19 billion (approximately $32 billion) and £48 billion (approximately $80 billion) with £25 billion (approximately $42 billion) representing a realistic figure for the amount laundered each year.

Offshore center: No

Free trade zones: Yes

The UK has five designated Free Zones in which non-European Union (EU) goods are treated as outside the customs territory of the EU for the purposes of import duties until the goods are released for free circulation. Import VAT and excise duty are also suspended until the goods are removed to the UK market or used or consumed within the Free Zone. The Free Zones are located in Liverpool, Prestwick, Port of Sheerness, Southampton, and Port of Tilbury.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Proceeds of Crime Act (POCA) of 2002 consolidates and expands pre-existing legislation criminalizing money laundering. POCA covers all crimes as predicate offenses. It also creates a new criminal offense, applicable to all regulated sectors, of failing to disclose suspicious transactions.

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 Act of 2000 criminalizes terrorist financing. Additionally, the Terrorism (United Nations Measures) Order 2006 and the Al-Qaida and the Taliban (United Nations Measures) Order 2006 provide the Treasury with designation authority. The Counter-Terrorism Act of 2008 (CTA) came into effect on November 27, 2008. Schedule 7 of the CTA gives the Treasury additional powers to act against terrorist financing and money laundering.

Know-your-customer rules: Yes

The Money Laundering Regulations of 2007 implement in part the EU’s Third Money Laundering Directive and include an obligation to establish and maintain appropriate and risk-sensitive policies and procedures relating to customer due diligence measures and ongoing monitoring, reporting, record keeping, and risk assessment. Covered entities include credit and financial institutions, auditors, accountants, tax advisers and insolvency practitioners, independent legal professionals, trust or company service providers, estate agents, high value dealers, and casinos.

Bank records retention: Yes

Pursuant to the Money Laundering Regulations of 2007, relevant persons must retain transaction records and identity verification documents for at least five years.

Suspicious transaction reporting: Yes

Business sectors subject to formal suspicious transaction reporting (STR) requirements include attorneys, solicitors, accountants, real estate agents, and dealers in high-value goods, such as cars and jewelry. Sectors of the betting and gaming industry that are not currently regulated are being encouraged to establish their own codes of practice, including a requirement to disclose suspicious transactions. In fiscal year 2008, 210,524 STRs were filed with the UK Financial Intelligence Unit (UK FIU).

Large currency transaction reporting:

The UK government considered the feasibility of a fixed threshold currency transaction reporting system, but made a policy decision not to introduce such a system.

Narcotics asset seizure and forfeiture:

UK legislation, most notably the Serious Crime Act of 2007 which consolidates existing laws on forfeiture and money laundering, provides for the confiscation of laundered property which represents proceeds from, instrumentalities used in, and instrumentalities intended for use in the commission of money laundering, terrorist financing, or other predicate offenses, and property of corresponding value. The UK has in place four different schemes for confiscation and recovery with regard to proceeds of crime: confiscation following a criminal conviction, civil recovery, taxation, and seizure-forfeiture of cash.

Narcotics asset sharing authority:

The UK is able to share confiscated and forfeited assets with other countries that have assisted operations to bring the confiscation to fruition. The UK has authority to share up to 50% of the proceeds of confiscation, net of costs. The UK can share with other countries on an ad hoc case-by-case basis.

Cross-border currency transportation requirements: Yes

The Control of Cash (Penalties) Regulations of 2007 provides for penalties for failing to declare movement of cash amounting to €10,000 (approximately $14,500) or more into and out of the European Community.

Cooperation with foreign governments: Yes

The UK cooperates with international anti-money laundering authorities on regulatory and criminal matters.

U.S. or international sanctions or penalties: No.

Enforcement and implementation issues and comments:

Businesses in the UK that are particularly attractive to money launderers are those with high cash turnovers and those involved in overseas trading. Illicit cash is consolidated in the UK, and then moved overseas where it can enter the legitimate financial system, either directly or by other means such as purchasing property or trade goods. Because cash is the mainstay of the illicit narcotics trade, traffickers make extensive use of money transmission agents (MTA), cash smuggling, and alternative remittance systems such as hawala to transfer money and value from the UK.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

A Mutual Legal Assistance Treaty (MLAT) between the US and the UK has been in force since 1996, and the two countries signed a reciprocal asset sharing agreement in 2003. There is a memorandum of understanding (MOU) in force between the U.S. Immigration and Customs Enforcement and HM Revenue and Customs. The U.S. Department of Treasury’s Financial Crimes Enforcement Network also signed a MOU with the UK in 1995 and regularly exchanges information with the UK FIU.

International agreements:

The UK 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. While the UK legislative framework does not require MLATS, the UK has signed treaties with over 30 countries in order to execute requests.

The UK 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 UK is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here:

http://www.fatf-gafi.org/dataoecd/55/29/39064399.pdf

Recommendations:

The United Kingdom has a comprehensive AML/CFT regime. The UK should continue its active participation in international fora and its efforts to provide assistance to jurisdictions with nascent or developing anti-money laundering/counter-terrorist financing regimes.

Uruguay

Uruguay’s financial system remains vulnerable to the threats of money laundering and terrorist financing. Officials from the Uruguayan police and judiciary assess that there is a growing presence of Mexican and Colombian cartels in the Southern Cone and fear they will begin operating in earnest in Uruguay. Drug dealers are slowly starting to participate in other illicit activities like car theft and trafficking in persons. The Government of Uruguay (GOU) acknowledges that there is a growing risk of money laundering in the real estate sector, in free zones and in bureaus that administer corporations.

Offshore Center: Yes

The six offshore banks are subject to the same laws, regulations, and controls as local banks, with the GOU requiring them to be licensed through a formal process that includes a background investigation of the principals. Offshore trusts are not allowed. Bearer shares may not be used in banks and institutions under the authority of the Central Bank, and any share transactions must be authorized by the Central Bank.

Free Trade Zones: Yes

There are 12 free trade zones located throughout the country. While most are dedicated almost exclusively to warehousing, two were created exclusively for the development of the paper and pulp industry, and three accommodate a wide variety of tenants offering a wide range of services, including financial services. Some of the warehouse-style free trade zones have been used as transit points for containers of counterfeit goods bound for Brazil and Paraguay.

Criminalizes narcotics money laundering: Yes

Money laundering is criminalized under Law 17.343 of 2001, Law 17.835 of 2004, and Law 18.494 of 2009. Decrees 296/09 and 305/09 (from June 22, 2009 and October 26, 2009, respectively) create the first “Comprehensive Permanent National Plan against Drug Trafficking and Money Laundering.”

Criminalizes other money laundering, including terrorism-related: Yes

Law 17.343 identifies money laundering predicate offenses to include narcotics-trafficking; corruption; terrorism; smuggling (of items valued at more than $20,000); illegal trafficking in weapons, explosives and ammunition; trafficking in human organs, tissues, and medications; trafficking in human beings; extortion; kidnapping; bribery; trafficking in nuclear and toxic substances; and illegal trafficking in animals or antiques. Law 18.494 incorporates seven new predicate offenses: fraud; embezzlement; fraudulent bankruptcy; fraudulent insolvency; offenses against trademarks and intellectual property rights; offenses related to trafficking in persons and sexual exploitation; and counterfeiting or alteration of currency.

Criminalizes terrorist financing: Yes

Law 17.835 and Law 18.494 significantly strengthen the GOU’s anti-money laundering/counter-terrorist financing (AML/CFT) regime by including specific provisions related to terrorist financing and the freezing of assets linked to terrorist organizations. Under Law 17.835, terrorist financing is a separate, autonomous offense. Under Law 18.494 a direct relationship between the funds provided and a terrorist act is no longer required as the following have been included as elements of the offense: a) that the purpose is to finance a terrorist organization, a member of a terrorist organization, or an individual terrorist, and b) that it is an offense regardless of whether a terrorist act is committed.

Know-your-customer rules: Yes

Obligated entities are mandated to know their customers. Under Law 17.835, all obligated entities must implement AML policies, such as thoroughly identifying customers, recording transactions of more than $10,000 in internal databases, and reporting suspicious transactions to the financial intelligence unit (FIU). This obligation extends to all financial intermediaries, including banks, currency exchange houses, stockbrokers, insurance companies, casinos, art dealers, and real estate and fiduciary companies. Lawyers, accountants, and other non-banking professionals that habitually carry out financial transactions or manage commercial companies on behalf of third parties are also required to identify customers whose transactions exceed $15,000 and report suspicious activities of any amount.

Bank records retention:

Obligated entities are mandated to know their customers on a permanent basis, keep adequate records and report suspicious activities to the FIU.

Suspicious transaction reporting: Yes

Law 18.494 obliges ten new types of individuals or enterprises to report unusual or suspicious transactions: businesses that perform safekeeping, courier or asset transfer services; professional trust managers, investment advisory services; casinos; real estate brokers and intermediaries; notaries, when carrying out certain operations; auctioneers; dealers in antiques, fine art and precious metals or stones; free trade zones operators; and natural or judicial persons who carry out transactions or administer corporations on behalf of third parties. The law also requires reporting of suspected terrorist financing activity. Fines can be levied for failure to report.

The FIU received 174 suspicious transaction reports (STRs) in 2009. Banks and exchange houses accounted for 60 percent and 19 percent of total reports, respectively. In 2009, eight cases stemming from STRs were sent to prosecutors. Four cases stemming from STRs have ended in prosecutions in recent years.

Large currency transaction reporting: Yes

Central Bank Circular 1.978 mandates financial intermediaries to report the conversion of foreign exchange or precious metals over $10,000 into cash, bank checks, deposits or other liquid instruments; cash withdrawals over $10,000; and wire transfers over $1,000.

Narcotics asset seizure and forfeiture:

The courts have the power to seize and confiscate property, products or financial instruments linked to money laundering activities. Law 18.494 improves the seizure regime by listing the kind of property that can be seized while establishing the possibility of seizing assets of similar worth or imposing a fine when listed property cannot be seized. Based on a prosecutor’s request, courts can seize: prohibited narcotics and psychotropic substances confiscated in the investigation; property or instruments used in committing the criminal offense; property and products considered proceeds of the criminal offense. In 2009, the FIU froze $17 million in assets.

Narcotics asset sharing authority:

No information was available on the legal provisions addressing asset sharing authority. Both Uruguay and the U.S. have expressed their willingness to sign an agreement to share the value of assets seized in joint operations, but no progress has been made as of December 2009.

Cross-border currency transportation requirements: Yes

Law 17.835 and Law 18.494 extend reporting requirements to all persons entering or exiting Uruguay with more than $10,000 in cash or monetary instruments. New legislation and enforcement efforts resulted in the detection of $2.5 million in undeclared cross-border cash and other financial instrument movements.

Cooperation with foreign governments: Yes

Tax evasion is not an offense in Uruguay, which in practice limits cooperation possibilities because the FIU cannot share tax-related information with its counterparts.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Law 18.494, passed in June 2009, significantly upgrades Uruguay’s AML efforts by giving national authorities more flexibility to fight money laundering and terrorist financing. The GOU applied the set of new investigative techniques (the use of collaborators and the improved electronic surveillance) provided by Law 18.494 for the first time. These recent developments have led to the prosecution of 39 individuals. The use of new techniques has triggered a moderate public debate over the need to keep a balance between investigative requirements, respect for the privacy of individuals, and potential uncertainty in the practice of law. There have been no reported cases or investigations related to terrorist financing.

The way real estate is registered complicates efforts to track money laundering in this sector, especially in the partially foreign-owned tourist sector. Authorities must obtain a judicial order to gain access to the names of titleholders.

The FIU has circulated to financial institutions the list of individuals and entities included in UN 1267 Sanctions Committee and published it on its web page.

U.S.-related currency transactions: No

Records exchange mechanism with U.S.:

Uruguay and the United States are parties to a mutual legal assistance treaty that entered into force in 1994.

International agreements:

The FIU may exchange information relevant to AML/CFT investigations and is becoming increasingly active in cooperation with counterpart FIUs and judiciaries from other countries. The FIU is not currently a member of the Egmont Group of Financial Intelligence Units.

Uruguay 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 GOU is a member of the Organization of American States Inter-American Drug Abuse Control Commission (CICAD) Experts Group to Control Money Laundering. Uruguay is a founding member of the Financial Action Task Force of South America (GAFISUD), a Financial Action Task Force-style regional body. Its most recent evaluation can be found here: http://www.gafisud.info/pdf/InformedeAvanceUruguay_1.pdf

Recommendations:

The Government of Uruguay (GOU) has taken significant steps over the past few years to strengthen its AML/CFT regime. To continue its recent progress, Uruguay should continue its implementation and enforcement of recently enacted legislation. The FIU should prioritize efforts to gain membership in the Egmont Group; such a step would enable it to share financial information with other FIUs globally. The GOU should exert greater vigilance in detecting undeclared and cross-border movements of cash and other monetary instruments. The GOU should enhance its regulation and monitoring of the real estate sector and sports industries.

Vanuatu

The Pacific island nation of Vanuatu is a developing economy closely tied to the economies of Australia and New Zealand. Vanuatu has historically maintained strict bank secrecy provisions that have prevented law enforcement agencies from identifying the beneficial owners of offshore entities registered in the sector, making its offshore sector vulnerable to money laundering. Due to allegations of money laundering and in response to international pressure, the Government of Vanuatu (GOV) strengthened domestic and offshore financial regulation.

Offshore Center: Yes

The Reserve Bank of Vanuatu (RBV) regulates the offshore banking sector that includes approximately eight international banks and 3,600 international business companies (IBCs), as well as offshore trusts and captive insurance companies. Under the International Banking Act No. 4 of 2002, regulatory agencies in Vanuatu instituted stricter procedures for issuance of offshore banking licenses and continue to review the status of previously issued licenses. All offshore banks registered in Vanuatu must have a physical presence in Vanuatu, and management, directors, and employees must be in residence.

IBCs are registered with the Vanuatu Financial Services Commission (VFSC). IBCs traditionally could be registered using bearer shares, shielding the identity and assets of beneficial owners of these entities. Section 125 of the International Companies Act No. 31 of 1992 (ICA) provided a strict secrecy provision for information disclosure related to shareholders, beneficial ownership, and the management and affairs of IBCs registered in Vanuatu. This provision had been used by the industry to decline information requests made by the Vanuatu Financial Intelligence Unit (VFIU). However, section 17(3) of the amended Financial Transaction Reporting Act (FTRA) provides for an override of section 125 of the ICA. Moreover, the International Companies (Amendment) Act No. 45 of 2006 revises the regime governing IBC operations. Ministerial Order No. 15 of 2007 creates a Guideline of Custody of Bearer Shares, which immobilizes bearer shares and requires the identification of their custodians.

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Serious Offenses (Confiscation of Proceeds) Act 1989 criminalizes the laundering of proceeds from all serious crimes and provides for seizure of criminal assets and confiscation after a conviction. The Proceeds of Crime Act 2002 (POCA) retains the criminalization of the laundering of proceeds from all serious crimes and criminalizes the financing of terrorism.

Criminalizes terrorist financing: Yes

The Counter-Terrorism and Transnational Organized Crime Act (CTTOCA) No. 29 of 2005 came into force in February 2006. The aim of the Act is to implement UN Security Council Resolutions and Conventions dealing with terrorism and transnational organized crime, to prevent terrorists from operating or receiving assistance through financial resources in Vanuatu, and to criminalize human trafficking and smuggling. Terrorist financing is criminalized under section 6 of the CTTOCA. Section 7 of the CTTOCA makes it an offense to knowingly provide support or services, directly or indirectly, to, or for the benefit of, a terrorist group.

Know-your-customer rules: Yes

The financial institutions listed under Section 2 of the FTRA must identify and verify the identity of customers opening an account or entering into a business relationship with the financial institution, or when conducting an an electronic funds transfer of any amount or an occasional transaction exceeding VT 1 million (approximately $8,000).

Bank records retention: Yes

FTRA amendments mandate that the nature of the transaction, the amount of the transaction, the currency in which it was denominated, the date the transaction was conducted, and the parties to the transaction be maintained by covered entities for a period of six years after the completion of the transaction.

Suspicious transaction reporting: Yes

All financial institutions, both domestic and offshore, are required to report suspicious transactions. The amended FTRA defines financial institutions to include casinos licensed under the Casino Control Act No.6 of 1993, lawyers, notaries, accountants, trust and company service providers, car dealers, and real estate agencies. The VFIU receives suspicious transaction reports (STRs) and distributes them to the Public Prosecutor’s Office, the Reserve Bank of Vanuatu, the Vanuatu Police Force, and the Vanuatu Financial Services Commission.

Large currency transaction reporting: Yes

Financial institutions are required to file currency transaction reports (CTRs) for any single transaction in excess of VT 1,000,000, or its equivalent in a foreign currency, and wire transfers into and out of Vanuatu in excess of VT 1,000,000 (approximately $10,200).

Narcotics asset seizure and forfeiture:

Vanuatu has a comprehensive legal framework for confiscating, freezing and seizing the proceeds of crime. Section 15 of the POCA provides for forfeiture orders to be made against instrumentalities or proceeds of crime, upon a person being convicted of a serious offense. This covers predicate offenses including money laundering and terrorist financing. However, the structural framework for implementing this legislative power is seriously compromised by a lack of coordination among responsible agencies as well as general unfamiliarity with the powers provided under the legislation. Vanuatu has no records or statistics of any proceeds having been seized or confiscated.

Narcotics asset sharing authority:

Section 42(3) of the Mutual Assistance in Criminal Matters Act 2002 (MACMA) authorizes the Attorney-General to enter into an arrangement with a foreign country to share with that country the amount forfeited in respect of a registered foreign forfeiture order or amount paid under a registered foreign pecuniary penalty order.

Cross-border currency transportation requirements: Yes

The Proceeds of Crime Act No. 30 of 2005 through its new Section 74A requires all incoming and outgoing passengers to declare to the Department of Customs cash in their possession exceeding VT 1,000,000 (approximately $10,200).

Cooperation with foreign governments:

The MACMA facilitates the provision of international assistance in criminal matters, including the taking of evidence, search and seizure proceedings, forfeiture or confiscation of property, and restraints on property that may be subject to forfeiture or seizure. Vanuatu does not recognize or enforce foreign non-criminal confiscation orders. The Attorney General possesses the authority to grant requests for assistance, and may require government agencies to assist in the collection of information pursuant to the request. The Extradition Act of 2002 includes money laundering within the scope of extraditable offenses.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

A financial institution must immediately freeze the account of a terrorist entity; however, there is a lack of coordination and communication between the relevant government agencies in terms of identifying terrorist entities as designated in the UNSCRs and distributing such information.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

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

International agreements:

Vanuatu 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

Vanuatu is a member of the Commonwealth Secretariat and the Pacific Island Forum. Vanuatu also is a member of the Asia/Pacific Group on Money Laundering, 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/Vanuatu%20ME2%20_Final_.pdf

Recommendations:

The Government of Vanuatu (GOV) should implement all the provisions of its Proceeds of Crime Act and enact all additional legislation that is necessary to bring both its onshore and offshore financial sectors into compliance with international standards. The GOV should also establish a viable asset forfeiture regime and circulate the updated UNSCR 1267 Sanctions Committee updated list of designated terrorist entities. The GOV should continue to initiate outreach to all reporting institutions regarding CDD obligations, as well as establish legislative requirements for financial institutions to have policies and procedures to address risks arising from new or developing technologies and non-face-to-face businesses in particular internet accounts. Vanuatu should become a party to the UN Convention against Corruption.

Venezuela

According to the UNODC 2009 World Drug Report, Venezuela is one of the principal drug-transit countries in the Western Hemisphere. Venezuela’s proximity to drug producing countries, weaknesses in its anti-money laundering regime, refusal to cooperate regularly with the United States in mutual legal assistance matters, including on counter-narcotics activities, and alleged substantial corruption in law enforcement and other relevant sectors continue to make Venezuela vulnerable to money laundering. The main sources of money laundering are proceeds generated by drug trafficking organizations, the embezzlement of funds from the petroleum industry, and illegal transactions that exploit Venezuela’s currency controls. Trade-based money laundering, such as the Black Market Peso Exchange, through which money launderers furnish narcotics-generated dollars in the United States to commercial smugglers, travel agents, investors, and others in exchange for Colombian pesos, remains a prominent method for laundering regional narcotics proceeds. Venezuela is not a regional financial center and does not have an offshore financial sector, although many local banks have offshore affiliates in the Caribbean.

Offshore Center: No

Free Trade Zones: Yes

The Free-Trade Zone Law of Venezuela (1991) provides for free trade zones/free ports. The three existing free trade zones (FTZs) are located in the Paraguana Peninsula on Venezuela's northwest coast, Atuja in the State of Zulia, and Merida. These zones provide exemptions from most import and export duties and offer foreign-owned firms the same investment opportunities as host country firms. The Paraguana and Atuja zones provide additional exemption of local services such as water and electricity. Venezuela also has two free ports that also enjoy exemptions from most tariff duties: Margarita Island (Nueva Esparta) and Santa Elena de Uairen in the state of Bolivar. The FTZ law designates the customs authority of each jurisdiction as responsible for its respective FTZ. The Ministry of Economy and Finance is responsible for the oversight of the customs authority with regard to FTZs. It is reported that many black market traders ship their wares through Margarita Island’s free port.

Criminalizes narcotics money laundering: Yes

The 2005 Organic Law against Organized Crime (OLOC) criminalizes money laundering as an autonomous offense.

Criminalizes other money laundering, including terrorism-related: Yes

Those who cannot establish the legitimacy of possessed or transferred funds, or are aware of the illegitimate origins of those funds, can be charged with money laundering. Predicate offenses for money laundering under the OLOC include: trafficking, trade, retailing, manufacture and other illicit activities connected with, inter alia, narcotics and psychotropic substances, child pornography, corruption, extortion, trafficking in persons and migrants, smuggling and other customs offenses. The most common predicate offenses for money laundering are illicit drug trafficking and trading.

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/)

Under the OLOC, terrorist financing is a crime against public order in Venezuela and is criminalized to the extent that an individual finances, belongs to, acts or collaborates with armed bands or criminal groups with the purpose to commit violent acts or to subvert the constitutional order or gravely alter the public peace. Terrorist financing, however, is not adequately criminalized in accordance with international standards. The law does not establish terrorist financing as a separate crime, nor does it provide adequate mechanisms for freezing or confiscating assets.

Know-your-customer rules: Yes

Under the OLOC and Resolution 185.01 of the Superintendencia de Bancos y Otras Instituciones Financieras (SUDEBAN), anti-money laundering controls have been implemented that include strict customer identification requirements. These know-your-customer (KYC) controls apply to all banks (commercial, investment, mortgage, and private), insurance and reinsurance companies, savings and loan institutions, financial rental agencies, currency exchange houses, money remitters, money market funds, capitalization companies, frontier foreign currency dealers, casinos, real estate agents, construction companies, car dealerships, hotels and the tourism industry, travel agents, and dealers in precious metals and stones. In practice the institutions often have difficulty obtaining all the data or information for every customer.

Bank records retention: Yes

Banks and other financial institutions supervised by SUDEBAN are required to retain documents or records of customer transactions and business relationships for five years, including customer identification documentation.

Suspicious transaction reporting: Yes

The entities that must comply with KYC rules also are required to file suspicious and cash transaction reports with Venezuela’s financial intelligence unit (FIU), the Unidad Nacional de Inteligencia Financiera (UNIF). However, insurance and reinsurance companies, tax collection entities and public service payroll agencies are not required to file suspicious transaction reports (STRs). The Venezuelan Association of Currency Exchange Houses (AVCC), which counts all but one of the country’s money exchange companies among its membership, voluntarily complies with the same reporting standards as those required of banks. SUDEBAN Circular 3759 of 2003 requires its supervised financial institutions to report suspicious activities related to terrorist financing. The UNIF analyzes STRs and other reports, and refers those deemed appropriate for further investigation to the Public Ministry (the Office of the Attorney General). In 2009¸ 1,234 STRs were received by UNIF and 529 were forwarded to the Public Ministry.

Large cash transaction reports: Yes

The UNIF receives reports on currency transactions exceeding approximately $10,000. UNIF also receives reports on the sale and purchase, and the domestic transfer of foreign currency exceeding $10,000. An exemption process is available for customers who frequently conduct otherwise reportable currency transactions in the course of their businesses.

Narcotics asset seizure and forfeiture: Yes

The OLOC also expands Venezuela’s mechanisms for freezing assets tied to illicit activities. A prosecutor may now solicit judicial permission to freeze or block accounts in the investigation of any crime included under the law. However, to date, there have been no significant seizures of assets and few if any successful money laundering prosecutions as a result of the law’s passage.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements:

Article 4 of the Law against Exchange Offenses stipulates that natural or legal persons who import or export foreign currency in an amount in excess of $10,000, or the equivalent in other currencies, are required to declare to the competent authority the amount and type of funds. However, the law also states that all foreign currency acquired by non-resident natural persons in transit or tourists whose stay in the country less than 180 continuous days are exempt from this obligation, thereby negating the overall effectiveness of the requirement.

Cooperation with foreign governments:

Venezuela has regularly refused to cooperate with the United States in mutual legal assistance matters, including on counter-narcotics activities.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Corruption is a very serious problem in Venezuela and appears to be worsening. Transparency International’s Corruption Perception Index for 2009 ranks Venezuela at 162 of 180 countries on the index. Venezuela has laws to prevent and prosecute corruption, and accepting a bribe is a criminal act. However, the judicial system has been ineffective historically and is accused of being overtly politicized. The current regime of price and foreign exchange controls also has provided opportunity for corruption.

There is little evidence the Government of Venezuela (GOV) has made enforcement of anti-money laundering laws and regulations a priority. Reportedly, many, if not most, judicial and law enforcement officials remain ignorant of the OLOC and its specific provisions, and the UNIF does not have the necessary autonomy to operate effectively. According to reported statistics, from 2006-2008 there were 335 money laundering investigations resulting in one conviction.

The SUDEBAN has distributed to its supervised financial entities the list of individuals and entities included on the UNSCR 1267 sanctions committee’s consolidated list. No statistics are available on the amount of assets frozen, if any.

U.S.-related currency transactions:

U.S.-Venezuelan commercial ties are deep. The United States is Venezuela's most important trading partner, with U.S. goods accounting for about 26% of imports, and approximately 60% of Venezuelan exports going to the United States. In turn, Venezuela is the United States’ third-largest export market in Latin America. Venezuela is one of the top four suppliers of foreign oil to the United States. There is also a large movement of currency between both countries (in the billions). However, Venezuela has strict currency exchange controls and limits the access of its citizens to the US dollar. Despite these controls, dollars are illegally offered for sale on the black market at almost twice the official rate. The US dollar is the currency of choice in Venezuela and the surrounding region for narcotics-trafficking organizations.

Records exchange mechanism with U.S.:

Venezuela and the United States signed a Mutual Legal Assistance Treaty (MLAT) in 1997. In 2009, there was no money laundering information exchange between Venezuela and the United States. The Financial Crimes Enforcement Network (FinCEN) suspended the exchange of information with the UNIF in January 2007 due to the unauthorized disclosure of information provided by FinCEN, and the relationship has not resumed to date.

International agreements:

UNIF has signed bilateral information exchange agreements with counterparts worldwide.

Venezuela 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

Venezuela participates in the Organization of American States Inter-American Commission on Drug Abuse Control (OAS/CICAD) Money Laundering Experts Working Group. Venezuela 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/downloadables/mer/Venezuela_3rd_Round_MER_%28Final%29_English.pdf

Recommendations:

The Government of Venezuela (GOV) took no significant steps to expand its anti-money laundering regime in 2009. The 2005 passage of the Organic Law against Organized Crime was a step toward strengthening the GOV’s abilities to fight money laundering; however, Venezuela needs to enforce the law by implementing the draft procedures to expedite asset freezing, establishing an autonomous financial investigative unit, and ensuring that law enforcement and prosecutors have the necessary expertise and resources to successfully investigate and prosecute money laundering cases. The GOV should also adequately criminalize the financing of terrorism and establish procedures for freezing terrorist assets in order to conform to international standards. SUDEBAN should supervise currency exchange operators, particularly those situated close to the frontiers. Cross-border currency declarations should be established that adhere to international standards. Venezuelan customs and law enforcement officials should investigate trade-based money laundering and value exchange. The UNIF should take the necessary steps to ensure that information exchanged with other FIUs is subject to the appropriate safeguards mandated by the Egmont Group.

Vietnam

Vietnam is not an important regional financial center, but is the site of significant money laundering activities. Vietnam remains a largely cash-based economy and both US dollars and gold are widely used as a means of exchange and of stored value. The main sources of illicit funds in Vietnam are fraud, gambling, prostitution, trafficking and counterfeiting of fake goods, corruption and trafficking in narcotics, weapons, and women and children. Remittances from the proceeds of narcotics trafficking in Canada and the United States are also a significant source of money laundering as are narcotics proceeds attributed to Vietnam’s role as a transit country.

The Vietnamese banking sector is in transition from a state-owned to a partially privatized industry. At present, approximately 50 percent of the assets of the banking system are held by state-owned commercial banks that allocate much of the available credit to state-owned enterprises. Almost all trade and investment receipts and expenditures are processed by the banking system, but neither trade nor investment transactions are monitored effectively. As a result, the banking system could be used for money laundering either through over- or under-invoicing exports or imports or through phony investment transactions.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Article 251 of the Penal Code defines the money laundering offense. Article 250 defines the offense of harboring (acquiring, concealing, etc.) or consuming property obtained from the commission of crime by others. Covered acts under the article include some forms of money-laundering. While there have been many convictions under Article 250, such convictions have not involved money laundering, but instead relate to harboring property from crimes of others. Article 251 does not meet current international standards; among other weaknesses, the law requires a very high burden of proof (essentially, a confession) to pursue money laundering allegations, so prosecutions are non-existent and international cooperation is extremely difficult. The 2001 Law on Drug Prevention prohibits the “legalizing” of monies and/or property acquired by committing drug offenses; and, it gives the Ministry of Public Security’s specialized counter-narcotics agency the authority to require disclosure of financial and banking records when there is a suspected violation of the law.

Criminalizes other money laundering, including terrorism-related: Yes

Revisions to anti-money laundering (AML) provisions of the Penal Code were approved by the National Assembly in June 2009, and the amended provisions will take effect January 1, 2010. Article 251 was revised, specifically defining “money laundering crime” as an independent offense.

Criminalizes terrorist financing: Yes

In June 2009 Article 230(b) was added to the Penal Code, for the first time defining and criminalizing terrorist finance. However, Vietnam has not criminalized terrorist financing as an autonomous offense.

Know-your-customer rules: Yes

AML Decree 74 on Preventing and Combating of Money Laundering (AML Decree 74) covers banks and non-bank financial institutions and prescribes the contents of customer identification and the collection of certain customer details and documents. It does not explicitly require that financial institutions verify a customer’s identity. Clause 4 requires financial institutions to undertake some verification measures but only if the financial institution becomes “suspicious.”

Bank records retention: Yes

Banks are required to maintain records for seven years or more.

Suspicious transaction reporting: Yes

Suspicious transaction reporting (STR) obligations are specified in AML Decree 74 and were introduced in 2006. However, at present only credit institutions are subject to STR reporting requirements. Other non-bank financial institutions such as money changers, remittance agents, insurance, and securities dealers are not subject to STR reporting obligations. The Anti-Money Laundering Information Center (AMLIC) served as Vietnam’s financial intelligence unit (FIU). In July 2009, the State Bank of Vietnam (SBV) changed its organizational structure and the AMLIC became the Anti-Money Laundering Department (AMLD) of the SBV. The AMLD receives and processes financial information required by the Decree. The AMLD received 58 STRs from 2006-2008 and referred 19 STRs to law enforcement for investigation, a very low reporting ratio given the number of reporting institutions. Figures for 2009 are not available.

Large currency transaction reporting: Yes

Vietnam is primarily a cash economy. Large cash transactions are still common. In November 2009, the SBV signed Circular No. 22/2009/TT-NHNN to implement AML Decree 74, providing for mandatory filing of large currency transaction reports (CTRs). According to the circular, credit institutions will have to report to the Financial Supervision Agency all transactions in cash, gold, and foreign currencies of individuals and organizations valued above VND 200 million per day, or any cash deposits or withdrawals of individuals above VND 500 million per day.

Narcotics asset seizure and forfeiture:

Under existing legislation, there are provisions for seizing assets linked to drug trafficking. In the course of its drug investigations, the Ministry of Public Security (MPS) has seized vehicles, property and cash. Final confiscation requires a court finding. Reportedly, MPS can notify a bank that an account is “seized” and that is sufficient to have the account frozen.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Foreign currency (including traveler’s checks) in excess of $7,000 and gold of more than 300 grams must be declared at customs upon arrival and departure. There is no limitation on either the export or import of foreign currency provided that all currency in excess of $7,000 (or its equivalent in other foreign currencies) is declared upon arrival and departure, and supported by appropriate documentation. If excess cash is not declared, it is confiscated at the port of entry/exit.

Cooperation with foreign governments:

Vietnam’s laws, and in particular the Law on Mutual Legal Assistance, allow for cooperation with foreign jurisdictions based on the principal of mutual reciprocity. However, Vietnam’s lack of laws for identifying, tracing, freezing, seizing, and confiscating the proceeds of crime hinder its full cooperation in many instances. The Ministry of Public Security (MPS) is responsible for negotiating and concluding international treaties on judicial assistance, cooperation and extradition in the prevention and combat of money laundering related offenses.

From 2008 - 2009, DEA referred five money laundering investigations to MPS involving drug trafficking organizations which were laundering hundreds of thousands in US currency derived from drug proceeds. In all five investigations, illegal drug proceeds were being remitted from the US to Vietnam. While DEA has proposed various investigative techniques and offered support to MPS to further develop these investigations in order to help identify and prosecute individuals in both the US and Vietnam, to date MPS has not provided DEA with any information in the referred investigations.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Official inbound remittances are estimated at approximately $2.8 billion for the first six months of 2009, and approximately $6.8 billion for the year. Financial industry experts believe that actual remittances may be as much as double the official figures. These amounts are generally transmitted by wire and while officially recorded, there is no reliable information on either the source or the recipients of these funds. Additionally, there is evidence that large amounts of cash are hand carried into Vietnam. The Government of Vietnam (GOV) does not require any explanation of the source or intended use of funds brought into the country in this way.

A form of informal value transfer service widely used to transfer funds within Vietnam often operates through domestic jewelry and gold shops. Although covered by AML Decree 74, these informal transmitters have not been brought under regulation or supervision.

The DEA is engaged in a number of investigations targeting significant ecstasy and marijuana trafficking organizations, composed primarily of Vietnamese residents and naturalized citizens in the United States and Canada. These drug trafficking networks are capable of laundering tens of millions of dollars per month back to Vietnam, either through wire transfers to Vietnamese bank and remittance accounts or through the smuggling of bulk amounts of US currency and gold into Vietnam. It is suspected that the majority of the money is derived from criminal activity. Law enforcement agencies in Australia and the United Kingdom have also tracked large transfers of drug profits back to Vietnam.

The MPS is responsible for investigating money laundering related offenses. There is no information available from MPS on investigations, arrests, and prosecutions for money laundering or terrorist financing.

U.S.-related currency transactions:

US dollars are widely used as a means of exchange. There is a thriving black market for US currency.

Records exchange mechanism with U.S.:

MPS signed a nonbinding Memorandum of Understanding (MOU) with U.S. Drug Enforcement Administration (DEA) in 2006 to strengthen law enforcement cooperation in combating transnational drug-related crimes, including money laundering, but claims it is unable to provide such information due to constraints within the Vietnamese legal system.

International agreements:

Vietnam 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

Vietnam is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body. The results of its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Vietnam%20ME1.pdf

Recommendations:

The Government of Vietnam should promulgate all necessary regulations to fully implement its 2005 Decree on the Prevention and Combating of Money Laundering. Vietnam should ratify the UN Conventions against Transnational Organized Crime and Corruption. Vietnamese law enforcement authorities should be provided with the necessary resources and capacity to investigate money laundering, trade fraud, alternative remittance systems, and other financial crimes in Vietnam’s shadow economy. The reorganized AMLD should be equipped with an electronic information reporting system to enable it to effectively collect, store and analyze financial transactions. Vietnam should continue to take those additional steps necessary to ensure its anti-money laundering/counter-terrorist financing regime comports with international standards.

Yemen

The financial system in Yemen is not well developed, and the extent of money laundering is not known. Yemen remains relatively isolated from the global financial community. Alternative remittance systems, such as hawala, are not subject to scrutiny and are vulnerable to money laundering and other financial abuses--including possible terrorist financing. Yemen has a large underground economy due, in part, to the profitability of the smuggling of trade goods and contraband. The use of qat, a recreational drug produced from a bush grown in parts of East Africa and Arabia, is common in Yemen, and there have been a number of investigations of qat being smuggled from Yemen and East Africa into the United States with profits laundered and repatriated via hawala networks. Smuggling and piracy are rampant along Yemen’s sea border with Oman, across the Red Sea from the Horn of Africa, and along the land border with Saudi Arabia in the North.

Offshore Center: No

Free Trade Zones: Yes

Yemen has one free trade zone (FTZ) in the port city of Aden. Identification requirements within the FTZs are enforced. For example, truckers must file the necessary paperwork in relevant trucking company offices and must wear ID badges. FTZ employees must undergo background checks by police, the Customs Authority and employers. There is no evidence that the FTZ is being used for trade-based money laundering or terrorist financing schemes.

Criminalizes narcotics money laundering: Yes

On December 29, 2009, Yemen’s Parliament passed a law regarding Anti-Money Laundering (AML) and Terrorism Funding. On January 17, 2010, the law acquired presidential approval, becoming Law No. 1 of 2010. Pending in parliamentary committee since November 2007, the law represents a major step forward in criminalizing money laundering and terrorist financing, and institutionalizing the ability of the Yemeni government to combat these crimes. Law 1 of 2010 represents more comprehensive anti-money laundering and counter-terrorist financing legislation to accommodate international standards.

Criminalizes other money laundering, including terrorism-related: Yes

Law No. 1 of 2010 replaces previous AML legislation, Law No. 35 of 2003, which criminalized money laundering for a wide range of crimes, including narcotics offenses, kidnapping, embezzlement, bribery, fraud, tax evasion, illegal arms trading, and monetary theft. Law 1 of 2010 expands the types of financial institutions that the Yemeni government will monitor to include hawaladars, jewelry shops, lawyers’ associations, and real estate firms.

Criminalizes terrorist financing: Yes

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

Law 1 of 2010 criminalizes terrorist funding for acts of violence or threatening violence, spreading terror, inflicting harm, risking lives, inflicting damage, and jeopardizing natural resources. It also characterizes terrorist funding as any act that represents a crime under conventions that the Yemeni government has ratified and any act that represents a crime in the anti-brigandage and kidnapping law.

Know-your-customer rules: Yes

The Central Bank of Yemen (CBY) issued Circular 22008 in April 2002, instructing financial institutions to positively identify the place of residence of all persons and businesses that establish relationships with them. The circular also requires a bank to verify the identity of non-accountholders that wish to transfer more than the equivalent of $10,000. The same provision applies to beneficiaries of such transfers. The circular also prohibits inbound and out-bound money transfers of more than the equivalent of $10,000 without prior permission from the CBY, although this requirement is not strictly enforced. The due diligence process, however, is limited in most financial institutions, particularly non-banking entities, to customer identification. Little attention is paid to account activities or the size of the account.

Bank records retention: Yes

Banks, financial institutions, and precious metals and gem dealers are obligated to keep records of transactions for up to five years.

Suspicious transaction reporting: Yes

Obligated entities must submit suspicious transaction reports (STRs) to the Anti-Money Laundering Information Unit (AMLIU), which acts as the country’s financial intelligence unit (FIU). The AMLIU reports to the National Anti-Money Laundering Committee (NAMLC). Since 2004, only 25 STRs have been filed with the AMLIU, with a few forwarded to the Office of the Public Prosecutor for suspected money laundering. Of the 25 STRs, only three have been transferred to the courts for prosecution – all in 2009.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture: Yes

The Public Prosecutor may ask the competent court to take provisional measures and procedures, including the seizure of funds and freezing of accounts related to the predicate offense. A judge must order the forfeiture of items involved in or proceeds from the crime for which the defendant was convicted. Forfeiture is available for all crimes and extends to funds and property. In some instances, the courts can order real property, such as a dwelling, to be closed for one year before the owner may use it again. The courts have yet to order the forfeiture of any property.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

Yemen has no cross-border cash declarations or disclosure requirements. Customs inspectors do file currency declaration forms if funds are discovered.

Cooperation with foreign governments:

There are no known legal impediments for Yemeni cooperation with foreign jurisdictions in financial crimes and terrorist financing enforcement; however, in practice such cooperation is minimal. There is not a clear and efficient mechanism to implement in a timely manner requests seeking mutual legal assistance.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There are approximately 448 registered money exchange businesses in Yemen, which serve primarily as currency exchangers in addition to performing funds transfer services. Money transfer businesses are required to register with the CBY and can open offices at multiple locations. CBY has not performed examinations of the money exchange businesses for anti-money laundering/counter-terrorist financing (AML/CFT) compliance.

The AMLIU has only a few employees and uses the services of field inspectors from the CBY’s Banking Supervision Department for some of the FIU duties. The AMLIU has no database and is not networked to other government data systems.

In 2006, the CBY began issuing a circular every three months containing an updated list of persons and entities belonging to al-Qaida and the Taliban. Since the February 2004 addition of Yemeni Sheikh Abdul Majid Zindani to the UNSCR 1267 Sanctions Committee’s consolidated list, however, the Yemeni government has made no known attempt to enforce the sanctions and freeze his assets. There is no information on whether Yemeni authorities have identified, frozen, seized, or forfeited other assets related to terrorist financing.

Yemen is ranked as the 154th most corrupt country out of 180 countries in Transparency International’s 2009 Corruption Perception Index.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

There is no mutual legal assistance treaty (MLAT) or extradition treaty between Yemen and the United States. The U.S. Embassy in Sana’a routinely passes requests for information and assistance to the Government of Yemen concerning terrorist financing and other issues, but seldom receives responses.

International agreements:

Yemen is not a member of the Egmont group of FIUs.

Yemen 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

Yemen is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Its most recent evaluation can be found here: http://www.menafatf.org/images/UploadFiles/YEMEN_EN.pdf

Recommendations:

While Law 1 of 2010 is a necessary first step in criminalizing money laundering and terrorist financing, the Yemeni government is now challenged with the implementation and enforcement of the law. The government should continue to develop an anti-money laundering regime that adheres to international standards. Banks and non-bank financial institutions should enhance their capacity to detect and report suspicious financial transactions to the FIU, including those related to terrorist financing. Even with the new law, the AMLIU needs substantial improvement of its operational capacity to effectively fulfill its responsibilities. The Government of Yemen (GOY) should investigate the abuse of alternative remittance systems such as hawala networks with regard to money laundering and terrorist financing. Law enforcement and customs authorities should also examine trade-based money laundering and customs fraud. The GOY should enact specific legislation with respect to forfeiture of the assets of those suspected of terrorism. Yemen should enforce sanctions and freeze the assets of Sheikh Abdul Majid Zindani, who was added to the UN 1267 Sanctions Committee’s consolidated list in February 2004, as well as assets of any other designated individuals or entities. Yemen should ratify the UN Convention against Transnational Organized Crime. The GOY has no institutionalized coordination for terrorism matters among the different ministries and has yet to implement steps listed under the UN international terrorism protocols, to which Yemen is a party.

Zambia

Zambia is not a major financial center. The proceeds of narcotics transactions and money derived from public corruption are the major sources of laundered money. Human trafficking is also a problem. Money laundering takes place in both the formal financial sector and the non-bank financial sector. Money launderers in Zambia have used structuring, currency exchanges, money instruments, gambling, under-valuing assets, front businesses, and non-financial institutions to launder their proceeds. Other means include securities, debit/credit cards, physical transportation of cash, wire transfers, and false currency reporting. Further, some criminals use their proceeds to purchase luxury goods such as vehicles and real estate.

Offshore Center: No

Free Trade Zones: Yes

The Government of Zambia (GOZ) is developing four multi-facility economic zones (MFEZ) similar to free trade zones. A zone developed by the Chinese in the Copperbelt is currently operating, and includes primarily mining service companies. The Zambia Development Agency (ZDA), an agency under the Ministry of Commerce, Trade & Industry, regulates and monitors the MFEZ together with the Zambia Revenue Authority and the Ministry of Finance.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Prohibition and Prevention of Money Laundering Act of 2001 (PPMLA) makes money laundering a criminal offense in Zambia.

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 Anti-Terrorism Act of 2007 criminalizes terrorist financing. Under the act, fundraising for terrorism, using or possessing terrorist property or funds, assisting in the retention or control of terrorist funds, and providing any support or service, including financial service, in support of terrorism is punishable by a prison term.

Know-your-customer rules: No

The PPMLA, which is the primary legislation that requires financial institutions to have in place anti­-money laundering preventive measures, does not expressly set out any direct customer identification obligation.

Bank records retention: Yes

Under the PPMLA, regulated institutions are required to keep a “business transaction record” for all transactions for ten years. The record must include identities of the parties involved and the amount of the transaction. There is no statutory minimum. Regulated institutions must also report when the institution has reasonable grounds to suspect that a money laundering offense is being, has been, or is about to be committed. Covered institutions include any institution regulated by any supervisory authority including, the Bank of Zambia, the Registrar of Banks and Financial Institutions, the Registrar of Insurance, the Securities and Exchange Commissioner, the Commissioner of Lands, and the Registrar of Companies.

Suspicious transaction reporting: Yes

The PPMLA requires obligated entities to report suspicious transactions to regulators. Zambia does not currently have an operational financial intelligence unit (FIU). The GOZ hopes to have an operational FIU sometime in 2010. The FIU is slated to be housed in the Bank of Zambia.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Under the PPMLA, any property acquired through the “proceeds of crime” can be seized and forfeited to the state. In the act, property is defined as money and all other property, real or personal, movable or immovable including other intangible or incorporated property. Any asset or property seized under the PPMLA can be forfeited to the state if the accused is found guilty; or if the accused is found not guilty, or does not stand trial, and does not request the property be returned within six months. Through December 2, 2009, the Drug Enforcement Commission (DEC) seized six vehicles and two computers as a result of its financial crime investigations and forfeited the property to the state.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Zambia requires that any cash carried in or out of the country in excess of $5,000 be declared. Declaration forms are used at land and air ports of entry. However, the Customs Department does not have adequate resources to detect currency at official border crossings or along porous borders.

Cooperation with foreign governments:

The Government of Zambia routinely honors information sharing requests.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In the first 11 months of 2009, the Anti-Money Laundering Investigations Unit, housed within the DEC, received 123 cases of money laundering or other financial crime and made 40 arrests. During the same period, 11 people were convicted, although ten of those were from the 2008 case load. DEC reports that financial crime cases take longer to conclude in the Zambian judicial system as most defendants are represented by counsel. None of the cases were related to terrorist financing, and most appear to be instances of petty corruption or theft rather than incidences of complex financial crime. In 2008, the DEC recovered $10 million in laundered money from commercial bank accounts.

U.S.-related currency transactions: No

Records exchange mechanism with U.S.:

There is a good record exchange mechanism with the U.S.

International agreements:

Zambia 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

Zambia 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/Zambia_Mutual_Evalution_Report.pdf

Recommendations:

The Government of Zambia should adopt explicit customer due diligence requirements for its covered financial institutions and designated non-financial businesses and professions. The GOZ should ensure its prosecutive, investigative and customs services have sufficient resources and training to be able to successfully investigate and prosecute financial crimes, including money laundering and terrorist financing. Similarly, its supervisory authorities should be provided with adequate resources and training. Zambia should establish a FIU and ensure it has sufficient resources and autonomy to function effectively. The GOZ should become a party to the UN Convention for the Suppression of the Financing of Terrorism.

Zimbabwe

Though Zimbabwe is not a regional financial center, it faces problems related to money laundering and official corruption. In addition to regulatory weaknesses in the financial sector, deficiencies include a lack of trained regulators and investigators and limited asset seizure authority. These deficiencies in the Government of Zimbabwe's regulatory and enforcement framework contribute to Zimbabwe’s attractiveness as a money laundering destination. Money is most often laundered through the financial sector, encompassing both the formal and the informal financial sector. Building societies, moneylenders, insurance brokers, realtors and lawyers are also vulnerable to exploitation by money launderers. Financial crime is fueled by smuggling of precious minerals.

In 2009 the Government of Zimbabwe (GOZ) abolished the Zimbabwe dollar and switched to a multi-currency system based predominantly on the U.S. dollar and South African rand. This has reduced opportunities for money laundering and financial crime committed by government elites and well-connected insiders. The elimination of the Reserve Bank of Zimbabwe’s (RBZ) capacity to print money and the withdrawal of the Zimbabwe dollar has shut down a parallel foreign-exchange market that rewarded officials loyal to President Robert Mugabe and sustained the Zimbabwe African National Union – Patriotic Front (ZANU-PF) party. Additionally, in February 2009, the formation of an inclusive government representing ZANU-PF and two factions of the rival Movement for Democratic Change party (MDC-T and MDC-M) has increased scrutiny of government activities and expenditures. For instance, the Ministry of Finance -- led by the MDC-T -- has sought to further curtail the RBZ’s capacity to fund unbudgeted expenditures by promoting legislation that improves oversight of RBZ activities. As of yearend 2009, the amendment to the RBZ statute was awaiting passage by Parliament.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes,

Zimbabwe criminalizes money laundering under Sections 63 and 64 of The Serious Offenses (Confiscation of Profits) Act. Money Laundering is a specified offense under Section 2, in which money laundering is referred to in relation to the proceeds of a serious narcotics offense.

Criminalizes other money laundering, including terrorism-related: Yes

The GOZ’s Anti-Money Laundering and Proceeds of Crime Act, enacted in December 2003, criminalizes money laundering. In 2004 ,the GOZ adopted the Bank Use Promotion and Suppression of Money Laundering Act (the 2004 Act), which extends the anti-money laundering law to all serious offenses, criminalizes terrorist financing, and authorizes the tracking and seizure of assets. In 2008 the government amended the schedule of fines applicable to those convicted of financial crimes. The new guidelines established minimum penalties, allowing judges to apply whatever maximum fine they determine appropriate to the offense.

Criminalizes terrorist financing: Partially

(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/)

Zimbabwe has criminalized terrorist financing, but the law does not comport with international standards, as it has not criminalized (i) conspiracy to commit money laundering or terrorist financing outside of the context of an organized criminal group; and (ii) obtaining or collecting funds/assets to be used by a terrorist organization/individual terrorist where their use/intended use cannot be connected with a specific terrorist act.

Know-your-customer rules: Yes

The Bank Use Promotion and Suppression of Money Laundering Act 2002 (BUPSMLA) requires designated institutions to identify customers. Although Zimbabwe has implemented basic customer identification obligations, it has not implemented full customer due diligence (CDD) requirements for all financial institutions and designated nonfinancial businesses and professions (DNFBPs). In May 2006, the RBZ issued new Anti-Money Laundering Guidelines that reinforce requirements for financial institutions and DNFBPs. These binding requirements address politically exposed persons, mandating obligated entities to gather more personal data on these high-profile clients.

Bank records retention: Yes.

Financial institutions must keep records of accounts and transactions for at least ten years.

Suspicious transaction reporting: Yes.

The law requires financial institutions, money transfer businesses and DNFBPs, including trustee companies, casinos, real estate agencies, precious metals and stones dealers, and accountants, to file suspicious transaction reports (STRs) with the Financial Intelligence Inspectorate and Evaluation Unit (FIIE), Zimbabwe’s financial intelligence unit (FIU). The BUPSMLA Guidelines provide in detail how the BUPSMLA should be implemented by all obligated institutions. However, compliance from the DNFBP sector is lacking.

Large currency transaction reporting: Yes

In June 2007, the RBZ installed an electronic surveillance system to track all financial transactions in the banking system.

Narcotics asset seizure and forfeiture:

The 2001 Serious Offenses (Confiscation of Profits) Act establishes a protocol for asset forfeiture. The BUPSMLA also provides for confiscation, seizure and forfeiture of proceeds of crime and incorporates money laundering among the bases for the GOZ to confiscate assets. The Attorney General may request confiscation of illicit assets within six months of the conviction date. The court can then issue a forfeiture order against any property. However, the system has not yet been tested in relation to money laundering offenses. The legislation is unclear as to whether instrumentalities used in, or intended for use in, money laundering are subject to freeze or forfeiture provisions.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

The Exchange Control Act provides for a reporting system that requires all persons to make a declaration of goods and currency they are carrying when exiting the country. This includes the reporting of suspicious cross-border transportation of currency. Under the Act, cross-border monitoring of cash is enforced by the Zimbabwe Revenue Authority (ZIMRA). Currency crossing the Zimbabwe borders under suspicious circumstances is investigated by ZIMRA, which will pass the investigation on to the Zimbabwe Republic Police. However, ZIMRA does not report declarations, seizures or suspicious persons or activities to the FIU.

Cooperation with foreign governments (including refusals):

Mutual legal assistance is regulated by the Attorney General’s Department of Zimbabwe. In general, there are no legal or practical impediments to rendering assistance, providing both Zimbabwe and the requesting country criminalize the conduct underlying the offense. Since terrorist financing has not yet been criminalized there is no scope for mutual legal assistance or extradition. Zimbabwe can only respond to both mutual legal assistance and extradition requests regarding other serious offenses.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Zimbabwe’s laws and regulations are ineffective in combating money laundering. The RBZ is the lead agency for prosecuting money laundering offenses. The BUPSML Guidelines came into force in April 2006 and as yet no sanctions have been taken against institutions for non-compliance. Burdensome GOZ regulations and difficult business climate encourage circumvention of the law by otherwise legitimate businesses. Furthermore, the government’s anti-money laundering efforts throughout the year appeared to be directed less to ensuring compliance than to targeting opponents.

Despite having the legal framework in place to combat money laundering, the sharp contraction of the economy over the past decade, vulnerability of the population, and decline of judicial independence raise concerns about the capacity and integrity of Zimbabwean law enforcement. The 2004 Act has reportedly raised human rights concerns due to the GOZ’s history of selective use of the legal system against its political opponents. But to date the 2004 Act has not been associated with any reported due process abuses.

Charitable organizations are obligated to register with the Ministry of Public Service, Labor and Social Welfare; but Zimbabwe has not implemented regulations or enforcement to combat the exploitation of charities by money launderers or terrorist financiers.

U.S.-related currency transactions:

In March 2009, the Minister of Finance introduced a revised GOZ budget that legalized the replacement of the Zimbabwe dollar with several foreign currencies, including the U.S. dollar. The Minister has maintained his commitment to exclusive use of foreign currencies in the 2010 budget delivered in December 2009.

Records exchange mechanism with U.S.:

Zimbabwe and the United States are not parties to a bilateral mutual legal assistance treaty that provides for exchange of information, but the banking community and the RBZ have cooperated with the United States in global efforts to identify individuals and organizations associated with terrorist financing.

International agreements:

Mutual legal assistance and extradition measures apply to money laundering since money laundering is a criminal offense, and both the Criminal Matters (Mutual Assistance) Act and the Extradition Act provide that measures must be taken against “any” criminal offense and in the absence of an applicable treaty.

Zimbabwe 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

Zimbabwe is a member of the Financial Action Task Force-style regional body, the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). Its most recent mutual evaluation can be found here: www.esaamlg.org

Recommendations:

The Government of Zimbabwe (GOZ) leadership should work to develop and maintain transparency, prevent corruption, and subscribe to practices ensuring the rule of law. The GOZ can illustrate its commitment to combating money laundering and terrorist financing by using its legislation for the purposes for which it was designed, instead of using it to persecute opponents of ZANU-PF and nongovernmental organizations which disagree with GOZ policies. Once these basic prerequisites are met, the GOZ should endeavor to develop and implement an anti-money laundering/counter-terrorist financing regime that comports with international standards. The GOZ also should become a party to the UN International Convention for the Suppression of the Financing of Terrorism and revise its counter-terrorist financing legislation to bring it in line with international standards.

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