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Diplomacy in Action

2010 INCSR: Countries/Jurisdictions of Primary Concern - Afghanistan through Greece


Bureau of International Narcotics and Law Enforcement Affairs
Report
March 1, 2010

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Afghanistan

Afghanistan’s formal financial system is expanding rapidly while its traditional informal financial system remains significant in reach and scale. Afghanistan currently is experiencing massive outflows of currency to foreign countries---capital flight---which threatens its long-term financial stability and security. Hundreds of millions of dollars are transported out of the country through a variety means on an annual basis. At the same time, terrorist and insurgent financing, money laundering, cash smuggling, and other activities designed to finance organized criminal activity continue to pose a serious threat to the security and development of Afghanistan. Afghanistan remains a major drug trafficking and drug producing country and the illicit narcotics trade is the primary source of laundered funds. Despite ongoing efforts by the international community to build the capacity of Afghan police and customs forces, Afghanistan does not have the capacity at this time to consistently uncover and disrupt sophisticated financial crimes, in part because of few resources, limited capacity, little expertise and insufficient political will to seriously combat financial crimes. The most fundamental obstacles continue to be legal, cultural and historical factors that conflict with more Western-style proposed reforms to the financial sector. Public corruption is also a significant problem. Afghanistan ranks 179 out of 180 countries in Transparency International’s 2009 Corruption Perception Index.

Offshore Center: No

Free Trade Zones:

No information available.

Criminalizes narcotics money laundering: Yes

Narcotics-related money laundering constitutes an offense under Article 3 of the Anti-Money Laundering and Proceeds of Crime Law No. 840 (AML Law). Afghanistan does not have explicit legislation criminalizing narcotics money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

Afghanistan has criminalized money laundering under the AML Law, which is broadly-written, encompassing the laundering of proceeds of virtually any criminal offense. A predicate money laundering offense, as defined by the AML Law, means “any criminal offence, even if committed abroad, enabling its perpetrator to obtain proceeds.” Article 3 of the AML Law criminalizes money laundering according to a list of actions which constitute an offense whether they are committed within Afghanistan or in another jurisdiction.

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 has been criminalized under the Law on the Combating the Financing of Terrorism No. 839 (CFT Law).

Know-your-customer rules: Yes

Articles 9-13 of the AML Law deal with rules regarding KYC policies. These articles cover responsibilities for covered institutions on acquiring and verifying customer identification (both natural and legal persons), due diligence measures for politically exposed persons, occasional customers, the identification of customers in a series of related transactions, special monitoring of transactions, and consequences for failure to identify customers.

Bank records retention: Yes

Article 14 of the AML Law covers record keeping requirements for all covered institutions, including the maintenance of both domestic and international transactions for at least five years. Additionally, reporting entities are required to keep customer identification data for at least five years after the business relationship has ended.

Suspicious transaction reporting: Yes

Article 16 of the AML Law sets forth the legal requirements for covered institutions to report suspicious transactions. A reporting entity must submit a report when it suspects that any transaction (including an attempted transaction) is derived from the commission of an offense, or funds are to be used or linked to terrorism, terrorist groups or terrorist acts. Suspicious transaction reports (STRs) are submitted to the Financial Transactions and Reports Analysis Center of Afghanistan (FinTRACA), the financial intelligence unit (FIU) of Afghanistan.

Large currency transaction reporting: Yes

Under Article 15 of the AML Law reporting entities forward large cash transaction reports to FinTRACA. In 2008, approximately 22,000-25,000 large cash transaction reports were received. The FIU currently has approximately 500,000 large currency transaction reports in a secure database that can be searched using a number of criteria.

Narcotics asset seizure and forfeiture: Yes

The AML Law contains provisions authorizing the temporary freezing of accounts and transactions; the seizure of funds and property associated with a predicate offense of money laundering; and, the confiscation of such assets upon conviction of an offense of actual or attempted money laundering. In addition, the Afghan Counter Narcotics (CN) Law No. 875 (CN Law) provides for the forfeiture of assets acquired directly or indirectly from the commission of a narcotics offense under the CN Law. Assets directly or indirectly used, or intended to be used, in the commission of a CN offense also are subject to forfeiture. If assets subject to an order of forfeiture are unavailable, other assets of an equivalent value may be forfeited.

Narcotics asset sharing authority: Yes

Article 56 of the AML law provides for the disposal of confiscated funds and property per the request of foreign authorities. Afghanistan may conclude agreements with foreign countries to institutionalize the process or execute asset sharing on a case-by-case basis. Requests for confiscation apply to funds and proceeds—including corresponding value-- or instrumentalities of an offense under AML Law.

Cross-border currency transportation requirements: Yes

Customs and FinTRACA require incoming and outgoing passengers to fill out declaration forms when carrying cash or negotiable bearer instruments in an amount more than 1 million Afghanis (approximately $20,900) under Article 6 of the AML Law. There is no restriction on transporting any amount of declared currency. Customs is required to submit to FinTRACA all declaration forms once per month and notify FinTRACA five days after a seizure. If a passenger is found carrying undeclared cash or bearer instruments above the threshold, the money is seized and will be forfeited to the state pending conviction.

Cooperation with foreign governments:

The AML Law’s chapters on “International Cooperation,” “Extradition,” and “Provisions common to requests for mutual assistance and requests for extradition” may be used in money laundering and terrorist financing cases. These chapters, and more specifically, Articles 51-73, outline the requirements and procedures for making requests for mutual assistance and extradition in connection with offenses under both the AML Law and the CFT Law.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Money laundering and terrorist finance investigations in Afghanistan have been hampered by a lack of capacity, awareness, and political commitment. Corruption permeates all levels of Afghan government and society and directly impacts the lack of financial crimes enforcement.

Border security continues to be a major issue throughout Afghanistan. In 2008 there were 14 official border crossings that came under central government control, utilizing international assistance as well as local and international forces. However, many of the border areas are under policed or not policed at all. These areas are therefore susceptible to illicit cross-border trafficking, trade-based money laundering, and bulk cash smuggling. Furthermore, officials estimate there are over 1,000 unofficial border crossings along Afghanistan’s porous border. Customs authorities, with the help of outside assistance, have made important improvements, but much work remains to be done.

Currently, only 3% of the Afghan community is banked. Afghanistan is widely served by the traditional and deeply entrenched hawala system, which provides a range of financial and non-financial business services in local, regional, and international markets. It is estimated that between 80 percent and 90 percent of all financial transfers in Afghanistan are made through hawala. Financial activities include foreign exchange transactions, funds transfers (particularly to and from neighboring countries with weak regulatory regimes for informal remittance systems), micro and trade finance, as well as some deposit-taking activities. Although the hawala system and formal financial sector are distinct, the two systems have links. Hawala dealers often keep accounts at banks and use wire transfer services, while banks will occasionally use hawaladars to transmit funds to hard-to-reach areas within Afghanistan. There are some 300 known hawala dealers in Kabul, with branches or additional dealers in each of the 34 provinces. There are approximately 1,500 dealers spread throughout Afghanistan that vary in size and reach. Given how widely used the hawala system is in Afghanistan, financial crimes – including terrorist financing - undoubtedly occur through these entities. However, no STRs have been submitted by money service provider (MSPs), including licensed hawaladars. This needs to be addressed immediately, while continuing to license the remaining 50%-60% of MSPs still operating outside the formal sector.

U.S.-related currency transactions:

There is a significant amount of U.S. currency in Afghanistan that is used in both the licit and illicit economies. Each week, the Afghan Central Bank auctions millions of U.S. dollars to influence the Afghan money supply. In 2008 alone, the Central Bank auctioned more than $1.2 billion to banks, money service providers, and individuals.

Records exchange mechanism with U.S.: Yes

The Afghan government has no formal extradition or mutual legal assistance arrangements with the United States. In the absence of a formal bilateral agreement between Afghanistan and the United States, requests for extradition and mutual legal assistance have been processed on an ad hoc basis, largely with the assistance of the Afghan Attorney General’s Office. The 2005 Afghan Counter Narcotics law, however, allows the extradition of drug offenders under the 1988 UN Drug Convention.

FinTRACA and the Financial Crimes Enforcement Network (FinCEN), the FIU of the United States, have an exchange of letters outlining the procedure for information sharing between their respective units.

International agreements:

FinTRACA is a signatory to a number of information exchange agreements with other FIUs. FinTRACA is not a member of the Egmont Group.

Afghanistan 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

Afghanistan is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force (FATF)-style regional body. The APG plans to conduct its first mutual evaluation of Afghanistan in the first quarter of 2010. Afghanistan is also an observer of the Eurasian Group on combating money laundering and financing of terrorism (EAG), a FATF-style regional body.

Recommendations:

The Government of the Islamic Republic of Afghanistan (GOA) has made progress over the past year in developing its overall anti-money laundering/counter-terrorist financing (AML/CFT) regime. Recent improvement includes encouraging steps at the FIU, an increase in the reporting of large cash transactions, active participation in international AML bodies, continued work to improve AML compliance awareness among Afghan banks, and development and integration of information technology systems. However, Afghanistan must commit additional resources and find the political will to aggressively combat financial crimes, including corruption. Increasing the capacity of the authorities to conduct onsite AML/CFT supervision of both the formal and informal banking sectors must be a priority. Specifically, the GOA must develop, staff, and fund a concerted effort to bring hawaladars into compliance in Kabul and other major areas of commerce. Afghanistan should also continue efforts to develop the investigative capabilities of law enforcement authorities in various areas of financial crimes, particularly money laundering and terrorist financing. Judicial authorities must also become proficient in understanding the various elements required for money laundering prosecutions. The FIU should become autonomous and increase its staff and resources. Afghan customs authorities should learn to recognize forms of trade-based money laundering. Border enforcement should be a priority, both to enhance scarce revenue and to disrupt narcotics trafficking and illicit value transfer.

Antigua and Barbuda

Antigua and Barbuda has comprehensive legislation in place to regulate its financial sector, but remains susceptible to money laundering due to its offshore financial sector and Internet gaming industry. As of 2008, Antigua and Barbuda had eight domestic banks, seven credit unions, seven money transmitters, 18 offshore banks, two trusts, three offshore insurance companies, 2,967 international business corporations (IBCs), and 20 licensed Internet gaming companies. Noted money laundering problems in Antigua and Barbuda appear to be generated by schemes involving investment fraud and advance fee fraud. Drug related matters have concerned not only narcotics but other controlled pharmaceutical substances being illicitly distributed over the Internet.

Offshore Center: Yes

The International Business Corporations Act of 1982 (IBCA), as amended, is the governing legal framework for offshore businesses in Antigua and Barbuda. Offshore financial institutions are exempt from corporate income tax. All licensed institutions are required to have a physical presence, which means presence of at least a full-time senior officer and availability of all files and records. Shell companies are not permitted.

Free Trade Zones: Yes

The Antigua and Barbuda Free Trade and Processing Zone was established by an Act of Parliament in 1994, based on the legal foundation enacted twelve years earlier, which set guidelines for the establishment of IBCs in Antigua and Barbuda. The Zone is administered by a Commission, empowered by the Free Trade and Processing Zone Act No. 12 of 1994, to function as a private enterprise.

Criminalizes narcotics money laundering: Yes

The Money Laundering Prevention Act of 1996 (MLPA), as amended, is the cornerstone of Antigua and Barbuda’s anti-money laundering legislation. The MLPA makes it an offense for any person to obtain, conceal, retain, manage, or invest illicit proceeds or bring such proceeds into Antigua and Barbuda if that person knows or has reason to suspect that they are derived directly or indirectly from any unlawful activity.

Criminalizes other money laundering, including terrorism-related: Yes

The Proceeds of Crime Act (Amendment) (POCA) entered into force on December 30, 2009. This regulation mandates that all serious offenses (defined as all offenses which carry a penalty of one year or more imprisonment) are specified activities for money laundering.

Criminalizes terrorist financing: Yes

The Government of Antigua and Barbuda (GOAB) enacted the Prevention of Terrorism Act 2001 (PTA), amended in 2005, to implement the UN conventions on terrorism. The GOAB amended the PTA in 2008 to provide the Supervisory Authority and the Office of National Drug and Money Laundering Control Policy (ONDCP) the power to direct a financial institution to freeze property for up to seven days while the authority seeks a freeze order from the court.

Know-your-customer rules: Yes

Financial institutions must undertake full customer identification procedures under the following circumstances: a) formation of a business relationship; b) carrying out a one-time transaction of EC $25,000 (approximately $9,900) or more; c) carrying out one-time wire transfers; d) if there is any suspicion that a onetime transaction involves money laundering or terrorist financing. Internet gaming companies also are required to enforce know-your-customer verification procedures.

Bank records retention: Yes

Financial institutions are required to maintain records for six years after an account is closed. Internet gaming companies also are required to maintain records relating to all gaming and financial transactions of each customer for six years.

Suspicious transaction reporting: Yes

Reporting institutions include banks, offshore banks, IBCs, money transmitters, credit unions, building societies, trust businesses, casinos, Internet gaming companies, and sports betting companies. The MLPA requires reporting entities to report suspicious activity whether a transaction was completed or not. The Office of National Drug and Money Laundering Control Policy Act, 2003 (ONDCP Act) establishes the ONDCP as the financial intelligence unit (FIU) which receives and analyzes suspicious transaction reports.

Large currency transaction reporting:

There is no reporting threshold imposed on banks and financial institutions. Internet gaming companies, however, are required by the Interactive Gaming and Interactive Wagering Regulations to report to the ONDCP all payouts over $25,000.

Narcotics asset seizure and forfeiture:

Both the MLPA and the POCA provide for the forfeiture, freezing and seizing of the proceeds of crime. Legislative provisions in relation to the freezing of funds used for terrorist financing are to be found mainly in the PTA. The MLPA also provides specifically for civil forfeiture procedures. The definition of property in the MLPA does not expressly include income, profits or other benefits from the proceeds of crime. In the POCA, the definition of property is limited. However, the definition of ‘proceeds of crime’ includes benefits derived from unlawful activity and in this context the term can be said to cover income, profits and benefits. The term property is even more narrowly defined in the PTA. The Misuse of Drugs Act empowers the court to forfeit assets related to drug offenses. The ONDCP is responsible for tracing, seizing and freezing assets related to money laundering, and has the ability to direct a financial institution to freeze property for up to seven days, while it makes an application for a freeze order.

Narcotics asset sharing authority: Yes

The GOAB has entered into an asset sharing agreement with Canada and is currently working on asset sharing agreements with other jurisdictions, including the U.S. The director of ONDCP, with Cabinet approval, may enter into agreements and arrangements that cover matters relating to asset sharing with authorities of a foreign State. There are asset sharing agreements in place with some countries, while with others arrangements are negotiated on an ad hoc basis.

Cross-border currency transportation requirements: Yes

Under the MLPA, a person entering or leaving the country is required to report to the ONDCP whether he or she is carrying $10,000 or more. In addition, all travelers are required to fill out a customs declaration form indicating if they are carrying in excess of $10,000. If so, they may be subject to further questioning and possible search of their belongings by Customs officers.

Cooperation with foreign governments: Yes

The GOAB continues its bilateral and multilateral cooperation in various criminal and civil investigations and prosecutions.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The ONDCP is the agency responsible for money laundering, terrorist financing and illegal drugs intelligence and investigations. The biggest challenge faced by the FIU is that the subjects of its money laundering investigations reside outside the jurisdiction, and therefore, conducting interviews may be difficult. There have been no investigations involving terrorist financing.

While a conviction for a predicate offense is not necessary for the initiation of money laundering proceedings, the majority of prosecutions are for predicate offenses only, and relatively few prosecutions have been brought under the MLPA. The reason for the latter may lie in the tripartite prosecutorial regime which permits prosecutions to be brought by the Director of Public Prosecutions (DPP), the Police Prosecuting Unit and the Supervisory Authority.

Because of Antigua and Barbuda’s increased efforts to implement stricter standards to restrict the movement of value through the financial system, as well as to curb the physical, cross-border movement of illicit money, the use of trade-based money laundering methods has become a greater threat. The vulnerabilities of the international trade system to things such as over- and- under-invoicing of goods and services, over- and under-shipment of goods and services, and multiple invoicing of goods and services are a growing concern.

U.S.-related currency transactions:

Illicit proceeds from the transshipment of narcotics and from financial crimes occurring in the U.S. also are laundered in Antigua and Barbuda.

Records exchange mechanism with U.S.: Yes

In 1999, a Mutual Legal Assistance Treaty and an extradition treaty with the United States entered into force. The GOAB signed a Tax Information Exchange Agreement with the United States in December 2001.

International agreements:

The ONDCP has signed memoranda of understanding (MOUs) with its counterparts in Canada and Panama.

Antigua and Barbuda 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

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

Recommendations:

The Government of Antigua and Barbuda (GOAB) should take steps to amend its legislation to cover intermediaries, enhanced due diligence for politically exposed persons (PEPs) and other high-risk customers, and to provide for enforceable provisions on the prohibition of correspondent accounts for or with shell banks. The GOAB also should implement and enforce all provisions of its anti-money laundering/counter-terrorist financing (AML/CFT) legislation, including the comprehensive supervision of its offshore sector and gaming industry. The ONDCP should be given direct access to financial institution records in order to effectively assess their AML/CFT compliance. Continued efforts should be made to enhance the capacity of law enforcement and customs authorities to recognize money laundering typologies that fall outside the formal financial sector, particularly trade-based money laundering. Continued international cooperation, particularly with regard to the timely sharing of statistics and information related to offshore institutions, and enforcement of foreign civil asset forfeiture orders will likewise enhance Antigua and Barbuda’s ability to combat money laundering.

Australia

Australia is one of the major capital markets in the Asia-Pacific region. In 2007-08, Australia had the fastest growing foreign exchange market in the Asia-Pacific and seventh largest market in terms of global turnover. The Australian dollar (A$) was the sixth most traded currency. The Australian Stock Exchange is the 12th largest stock exchange in the world and, as of December 2008, the market capitalization of shares of domestic companies on the Australian Stock Exchange (ASX) was approximately $700 billion, the fourth largest in the Asia-Pacific region. In terms of share capital freely available to investors, the ASX is the eighth largest in the world. Australia has the third highest number of listed domestic companies in the Asia-Pacific.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Australia criminalized money laundering related to serious crimes with the enactment of the Proceeds of Crime Act (POCA) 1987.

Criminalizes other money laundering, including terrorism-related: Yes

The POCA 2002 repealed existing money laundering offenses and replaced them with updated offenses that have been inserted into the Criminal Code.

Criminalizes terrorist financing: Yes

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

In June 2002, Australia passed the Suppression of the Financing of Terrorism Act 2002 (SFT Act). It criminalizes terrorist financing and substantially increases the penalties that apply when a person uses or deals with suspected terrorist assets that are subject to freezing. The Anti-Terrorism Act (No.2) 2005 (AT Act), which took effect on December 14, 2006, amends offenses related to the funding of a terrorist organization in the Criminal Code so that they also cover the collection of funds for or on behalf of a terrorist organization. The AT Act also inserts a new offense of financing a terrorist.

Know-your-customer rules: Yes

The Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CFT Act), as amended in April 2007, covers the financial sector, gaming sector, bullion dealers and any other professionals or businesses that provide particular “designated services.” The Act imposes a number of obligations on entities, including customer due diligence, reporting obligations, and record keeping obligations. The AML/CFT Act will gradually replace the Financial Transaction Reports Act 1988 (FTR Act) which currently operates concurrently to the AML/CFT Act.

Bank records retention: Yes

Under provisions of the FTR Act, transaction records must be kept for at least seven years after the day the account is closed or the transaction takes place.

Suspicious transaction reporting: Yes

The FTR Act also establishes suspicious transaction reporting requirements for Australia’s cash dealers. The SFT Act requires cash dealers to report suspected terrorist financing transactions to the Australian Transaction Reports and Analysis Centre (AUSTRAC), the Australian financial intelligence unit. During the 2008-09 Australian financial year, AUSTRAC received 43,565 suspicious transaction reports (STRs).

Large currency transaction reporting: Yes

The FTR Act establishes reporting requirements for Australia’s cash dealers. Reporting requirements include cash transactions equal to or in excess of A$10,000 (approximately $9,200), and all international funds transfers into or out of Australia, regardless of value. The FTR Act reporting also applies to nonbank financial institutions, such as money exchangers, money remitters, stockbrokers, casinos and other gaming institutions, bookmakers, insurance companies, insurance intermediaries, finance companies, finance intermediaries, trustees or managers of unit trusts, issuers, sellers, and redeemers of travelers’ checks, bullion sellers, and other financial services licensees. The FTR Act will continue to apply to entities who are not reporting entities under the AML/CFT Act. Solicitors (lawyers) are also required to report significant cash transactions. During the 2008-09 Australian financial year, AUSTRAC received 19,771,903 financial transaction reports.

Narcotics asset seizure and forfeiture:

The POCA 2002 enables the prosecutor to apply for the restraint and forfeiture of property from the proceeds of crime. The law further creates a national confiscated assets account from which, among other things, various law enforcement and crime prevention programs may be funded. The POCA 2002 (Consequential Amendments and Transitional Provisions) also provides for civil forfeiture of the proceeds of crime. The Australian Federal Police restrained A$37,831,143 (approximately $24,630,000) of which A$341,923 (approximately $6,082,000) was forfeited.

The POCA 2002 also enables freezing and confiscation of property used in, intended to be used in, or derived from, terrorism offenses. It is intended to implement obligations under the UN Convention for the Suppression of the Financing of Terrorism and resolutions of the UN Security Council relevant to the seizure of terrorism-related property.

Narcotics asset sharing authority: Yes

Under POCA 2002, recovered proceeds can be transferred to other governments through equitable sharing arrangements.

Cross-border currency transportation requirements: Yes

Australia has a system for reporting cross-border movements of currency above A$10,000. Cross-border movements of physical currency (CBM-PC) reports are primarily declared to the Australian Customs Service (ACS) by individuals when they enter or depart from Australia. This information is forwarded to AUSTRAC.

Cooperation with foreign governments (including refusals): Yes

No known impediments to cooperation with foreign governments.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues/comments:

Designated services provided by real estate agents, dealers in precious stones and metals, and specified legal, accounting, trust, and company services are not yet covered by reporting and record keeping requirements.

From July 2007 through mid-May 2008, the Commonwealth Director of Public Prosecutions reported that 68 indictments for money laundering were issued. The seven principles behind Australia’s largest ever money laundering investigation were sentenced on December 17, 2009 to serve periods of imprisonment up to 12.5 years. They were charged with conspiring to launder up to A$68 million (approximately $62.5 million) of narcotics-related proceeds of crime. In all, 73 persons were charged and in excess of 50 convicted with money laundering and serious drug offenses.

U.S.-related currency transactions:

The US$-A$ is the fourth most traded currency pair.

Records exchange mechanism with U.S.:

In September 1999, a Mutual Legal Assistance Treaty between Australia and the United States entered into force. In January 1996, AUSTRAC and FinCEN signed a memorandum of understanding (MOU) to exchange information.

International agreements:

Australia is a party to various information exchange agreements with countries in addition to the United States. AUSTRAC has signed Exchange Instruments, mostly in the form of MOUs, allowing the exchange of financial intelligence the FIUs of 55 other countries.

Australia 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

Australia is a member of the Financial Action Task Force (FATF). It also serves as permanent co-chair, and hosts and funds the Secretariat of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Australia’s most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Australia%20ME2.pdf.

Recommendations:

The GOA continues to pursue a comprehensive anti-money laundering/counterterrorist financing regime. The GOA should continue to work toward a second tranche of AML/CFT reforms, which will extend regulatory obligations to designated services provided by real estate agents, dealers in precious stones and metals, and specified legal, accounting, trust and company services. The GOA should continue its exemplary leadership role in emphasizing money laundering/terrorist finance issues and trends within the Asia/Pacific region (now expanding into Africa), and its commitment to providing training and technical assistance to the jurisdictions in that region. Having significantly enhanced its focus on AML/CFT deterrence, the GOA should increase its efforts to prosecute and convict money launderers.

Austria

Austria is a major regional financial center; and Austrian banking groups control significant shares of the banking markets in Central, Eastern and Southeastern Europe. According to the Austrian National Bank, Austria ranks among those countries with the highest numbers of banks and bank branches per capita in the world, with 867 banks total and one bank branch for every 1,630 people. Money laundering occurs within the Austrian banking system as well as in non-bank financial institutions and businesses. The volume of undetected organized crime may be enormous, with much of it reportedly coming from the former Soviet Union. Money laundered by organized crime groups derives primarily from serious fraud, smuggling, corruption, narcotics trafficking, and trafficking in persons. Theft, drug trafficking and fraud are the main predicate crimes in Austria according to the statistics of convictions and investigations. Austria is considered by EUROPOL as one of the four main destination countries for human beings trafficking in the European Union (EU). Criminal groups use various instruments to launder money, including remittance services, informal money transfer systems such as hawala, and the Internet.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

In Austria, Article 165 of the StGB sets forth the offense of money laundering, which includes narcotics trafficking as a predicate offense for money laundering. The offense was established in 1993 and amended several times.

Criminalizes other money laundering, including terrorism-related: Yes

With the notable exception of counterfeiting and piracy of products, predicate offenses include terrorist financing, all serious crimes carrying a minimum sentence of three years imprisonment as well as listed misdemeanors. The law is stricter for money laundering by criminal organizations and terrorist “groupings”. Self-laundering is not criminalized in Austria as Article 165 limits the scope of the ML offenses to assets derived from the crime of another person. Effective September 1, 2009, the Government of Austria (GOA) amended and defined more precisely the strict new criminal regulations against corruption, also a predicate offense for money laundering.

Criminalizes terrorist financing: Yes

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

Austria criminalized terrorist “grouping,” terrorist criminal activities, and financing of terrorism in 2002. The Criminal Code defines financing of terrorism as a separate criminal offense category, punishable in its own right. Terrorist financing is also included in the list of criminal offenses subject to domestic jurisdiction and punishment, regardless of the laws where the act occurred.

Know-your-customer rules: Yes

The Banking Act establishes customer identification and record keeping obligations for the financial sector. Entities subject to the Banking Act include banks, leasing and exchange businesses, safekeeping services, and portfolio advisers. The law requires financial institutions to identify all customers when beginning an ongoing business relationship. In addition, the Banking Act requires customer identification for all transactions of at least 15,000 Euros (approximately $21,150) for non-customers. Moreover, all transactions on passbook savings accounts of at least 15,000 Euros (approximately $21,150) require identification of all customers. Trustees of accounts must appear personally and disclose the identity of the account beneficiary. Banking Act regulations require institutions to determine the identity of beneficial owners and introduce risk-based customer analysis for all customers. Financial institutions require customer identification for all fund transfers of 1,000 Euros (approximately $1,400) or more.

Bank records retention: Yes

Austrian law requires financial institutions to retain identification documents for at least five years after the termination of the business relationship and documentation and records of all transactions for a period of at least five years after their execution.

Suspicious transaction reporting: Yes

All obligated entities must file a suspicious transaction report (STR) in all cases of “suspicion or probable reason to assume” that a transaction serves the purpose of money laundering or terrorist financing, or that a customer has violated his duty to disclose trustee relationships. STRs are filed with Austria’s financial intelligence unit (FIU). By mid-November 2009, the FIU had received approximately 1,100 STRs.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture:

Since 1996, legislation has provided for asset seizure and the confiscation and forfeiture of illegal proceeds, however, in practice this does not seem to work effectively, given the low amounts thus far seized or forfeited/confiscated. Austria has regulations in the Code of Criminal Procedure that are similar to civil forfeiture in the U.S. In connection with money laundering, organized crime and terrorist financing, all assets are subject to seizure and forfeiture, including bank assets, other financial assets, cars, legitimate businesses, and real estate. Courts may freeze assets in the early stages of an investigation. In 2008, Austrian courts froze assets worth more than 12 million Euros (approximately $16,900,000) on interim injunctions.

Narcotics asset sharing authority:

Austria has not enacted legislation that provides for sharing forfeited narcotics-related assets with other governments. A bilateral U.S. - GOA agreement on sharing of forfeited assets is pending signature in both the U.S. and Austria.

Cross-border currency transportation requirements: Yes

The Customs Procedures Act and the Tax Crimes Act address cash couriers and international transportation of currency and monetary instruments from illicit sources. Austrian customs authorities do not automatically screen all persons entering Austria for cash or monetary instruments. However, to implement the EU regulation on controls of cash entering or leaving the EU, the GOA requires an oral or written declaration for cash amounts of 10,000 Euros (approximately $14,100) or more. This declaration, which includes information on source and use, must be provided when crossing an external EU border. Spot checks for currency at border crossings and on Austrian territory do occur. Customs officials have the authority to seize suspect cash, and will file a report with the FIU in cases of suspected money laundering.

Cooperation with foreign governments:

Austria may provide a range of measures of mutual assistance in AML/CFT investigations initiated by other countries. These measures may be granted on the basis of multilateral or bilateral agreements as well as, where no such agreement exists, on the basis of reciprocity.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Reportedly, the most significant money laundering problems faced by Austria are money remittance systems, offshore business and hawala. Austrian authorities should try to improve enforcement to tackle these various and complex methods used by criminals to launder their funds.

Bearer shares are permitted in Austria for banks and for non-banks.

All customs declaration forms are stored in hard copy at separate customs offices throughout Austria and there is currently no central database where these reports can be stored and analyzed for potential criminal activity.

The number of convictions for drug trafficking, theft, smuggling, corruption and bribery decreased sharply since 2004. There were 18 money laundering convictions in 2007 and seven in 2008.

Austrian authorities distribute to all financial institutions the names of suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee’s consolidated list, as well as the list of Specially Designated Global Terrorists that the United States has designated pursuant to Executive Order 13224, and those distributed by the EU to members. According to the Ministry of Justice and the FIU, no accounts found in Austria have shown any links to terrorist financing.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

Austria exchanges information on criminal matters through its mutual legal assistance treaty (MLAT) with the United States, which entered into force August 1, 1998. Through the MLAT, the two countries are able to exchange financial intelligence and cooperate on a variety of money laundering and financial crimes matters. The Austrian FIU exchanges information regularly with the FIU of the United States, FinCEN.

International agreements:

Austria 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

Austria is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/22/50/44146250.pdf.

Recommendations:

The Government of Austria (GOA) should criminalize self-laundering. It should also ease legal restrictions to allow authorities to have access to information held by financial institutions and legal professionals. Similarly, it should extend the FIU’s functions, allowing it access to appropriate records of other governmental bodies. Austria should also take steps to be sure customs declaration forms are available to the FIU and appropriate law enforcement agencies. The GOA should strengthen licensing requirements and sanctions for financial institutions. The GOA should widen the scope of customer diligence obligations and ensure adequate transparency of beneficial ownership of legal persons and legal arrangements, including the elimination of bearer shares.

Bahamas

The Commonwealth of The Bahamas is an important regional and offshore financial center. The gross domestic product (GDP) of The Bahamas is heavily reliant upon tourism and tourist driven construction. Eighty percent of tourists who visit The Bahamas are from the United States. The Bahamas is a transshipment point for cocaine bound for the United States and Europe. Money laundering trends include the purchase of real estate, large vehicles and jewelry, as well as the processing of money through a complex web of legitimate businesses, and international business companies registered in the offshore financial sector. Strict know your customer (KYC) laws make it difficult for money launderers to penetrate the Bahamian financial sector.

Offshore Center: Yes

The Bahamas is considered an offshore financial center. Offshore financial institutions include banks and trust companies, insurance companies, securities firms and investment fund administrators, financial and corporate service providers, cooperatives, and societies. There are approximately 160,000 registered international business companies, only 44,000 of which are active.

Free Trade Zone: Yes

The Bahamas has one free trade zone located in Freeport.

Criminalizes narcotics money laundering: Yes

The Proceeds of Crime Act, 2000 criminalizes three main money laundering offenses: the transfer or conversion of property with the intent to conceal or disguise the property; assisting another to conceal the proceeds of criminal conduct; and the acquisition, possession or use of the proceeds of crime.

Criminalizes other money laundering, including terrorism-related: Yes

See above. Additionally, the Anti-Terrorism Act of 2004 (ATA), as amended in 2008, addresses terrorism-related activity.

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 2004 as amended in 2008.

Know-your-customer rules: Yes

The Financial Transaction Reporting Act, 2000 (FTRA), as amended in 2008, establishes KYC requirements. The FTRA requires the verification of the identity of any customer before establishing a business relationship; executing transactions exceeding $15,000; executing structured transactions in the amount exceeding $15,000; when it is known or suspected a customer’s transaction is the proceeds of crime; when there is doubt of a customer’s identity; and when transactions are conducted on behalf of a third party.

Bank records retention: Yes

Financial institutions must retain records for a minimum of five years.

Suspicious transaction reporting: Yes

Reporting was established by the FTRA. The 2004 ATA provides for the reporting of suspicious transactions related to terrorist financing. Covered entities include banks and trust companies, insurance companies, securities firms and investment fund administrators, financial and corporate service providers, cooperatives, and societies. Regulated designated non-financial businesses and professions include casinos; lawyers; accountants; real estate agents; and company service providers. Dealers in precious metals and stones are not included. The Bahamian financial intelligence unit (FIU) received approximately 129 STRs in 2008.

Large currency transaction reporting: Yes

Transactions of $10,000 or greater are reported to the Central Bank.

Narcotics asset seizure and forfeiture:

The Bahamas is able to trace, freeze and seize assets. During 2009, nearly $4 million in cash and assets were seized or frozen.

 

The ATA, as amended in 2008, implements the provisions of UN Security Council Resolution 1373 and provides for the seizure and confiscation of terrorist assets. The 2008 amendments clarify aspects of the legislation and further comply with UN Conventions related to terrorist financing.

Narcotics asset sharing authority: Yes

Seized assets may be shared with other jurisdictions on a case by case basis. Several recent successful cases involving asset sharing have occurred between the United States and The Bahamas resulting in large amounts being shared by each government.

Cross-border currency transportation requirements: No

Persons entering The Bahamas are not required to provide a written declaration.

Cooperation with foreign governments (including refusals): Yes

There are no legal issues which would hamper the Bahamian 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:

No implementation issues were noted.

U.S.-related currency transactions:

The Bahamian dollar is pegged to the U.S. dollar at an exchange rate of one. The U.S. dollar and the Bahamian dollar are universally accepted in The Bahamas. The Bahamas receives a large influx of U.S. dollars from the tourism industry.

Records exchange mechanism with U.S.:

The Bahamas and the United States are parties to a bilateral mutual legal assistance treaty which entered into force in 1990 and provides for exchange of information. The Financial Crimes Enforcement Network (FinCEN) and the Bahamian FIU share information on a routine basis. The Bahamas has an information exchange agreement with the U.S. Securities and Exchange Commission to ensure that requests can be completed in an efficient and timely manner.

International agreements:

The Bahamas is a party to various information exchange agreements with countries in addition to the United States; authorities can share information or provide assistance to foreign jurisdictions in matters relating to money laundering or other financial crimes without need for a treaty.

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

Recommendations:

The Government of the Commonwealth of the Bahamas should provide adequate resources to its law enforcement, judicial, and prosecutorial bodies in order to enforce existing legislation and safeguard the financial system from possible abuses. The Bahamas should continue to enhance its anti-money laundering/counter-terrorist financing regime by implementing the National Strategy on the Prevention of Money Laundering. It should also ensure there is a public registry of the beneficial owners of all entities licensed in its offshore financial center.

Belize

Belize is not a major regional financial center. In an attempt to diversify Belize’s economic activities, authorities have encouraged the growth of offshore financial activities that are vulnerable to money laundering, and continue to offer financial and corporate services to non-residents in the offshore financial sector. Belizean officials suspect that money laundering occurs primarily within that sector. Belize has pegged the Belizean dollar to the U.S. dollar. There is a significant black market for smuggled goods in Belize.

Offshore Center: Yes

Belize is considered an offshore financial center. Offshore banks, international business companies, and trusts are authorized to operate from within Belize, although shell banks are prohibited within the jurisdiction. The Offshore Banking Act, 1996 governs activities of Belize’s offshore banks. By law, offshore banks cannot serve customers who are citizens or legal residents of Belize. To legally operate, all offshore banks must be licensed by the Central Bank of Belize and be registered with the International Business Companies (IBCs) registry. Before the Central Bank issues the license, the Central Bank must verify shareholders’ and directors’ backgrounds, ensure the adequacy of capital, and review the bank’s business plan. Presently, there are six licensed offshore banks, approximately 40,000 active registered IBCs, 15 licensed offshore insurance companies, five mutual fund companies, and 26 trust companies and agents operating in Belize. Belize does not have offshore casinos.

Free Trade Zones: Yes

There are two free trade zones (called Commercial Free Zones or CFZs) operating in Belize. There is a large one at the border with Mexico, the Corozal Commercial Free Zone, and a small one at the western border with Guatemala, the Benque Viejo Free Zone. There are also designated free trade zones in Punta Gorda and Belize City, but they are not operational. Commercial free zone (CFZ) businesses are allowed to conduct business within the confines of the CFZ, provided they have been approved by the Commercial Free Zone Management Agency (CFZMA) to engage in business activities. All merchandise, articles, or other goods entering the CFZ for commercial purposes are exempted from the national customs regime. However, any trade with the national customs territory of Belize is subject to the national Customs and Excise law. The CFZMA, in collaboration with the Customs Department and the Central Bank of Belize, monitors the operations of CFZ business activities.

The CFZs generate a significant volume of cash transactions, much of which is not subject to auditing. This vulnerability could allow for the entrance of illicit cash into the formal financial system if not monitored closely. There have been incidents involving the import of counterfeit goods, and, more recently, pharmaceuticals, such as ephedrine and pseudoephedrine, within the CFZs.

Criminalizes narcotics money laundering: Yes

The Money Laundering (Prevention) Act (MLPA), as amended in 2002, criminalizes money laundering related to many serious crimes, including drug trafficking, forgery, terrorism, blackmail, arms trafficking, kidnapping, fraud, illegal deposit taking, false accounting, counterfeiting, extortion, robbery, and theft. Other legislation to combat money laundering includes the Money Laundering Prevention Guidance Notes; the Financial Intelligence Unit Act, 2002; the Misuse of Drugs Act; The International Financial Services Practitioners Regulations (Code of Conduct), 2001 (IFSPR); Money Laundering Prevention Regulations 1998 (MLPR); and the Offshore Banking Act, 2000, renamed the International Banking Act, 2002 (IBA).

Criminalizes other money laundering, including terrorism-related: Yes

See above.

Criminalizes terrorist financing: Yes

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

Belize criminalizes terrorist financing via amendments to its anti-money laundering legislation, The Money Laundering (Prevention) (Amendment) Act, 2002.

Know-your-customer rules: Yes

Licensed banks and financial institutions are required to establish due diligence provisions and monitor their customers’ activities.

Bank records retention: Yes

Belizean law obligates banks and other financial institutions to maintain business transaction records for at least five years.

Suspicious transaction reporting: Yes

Suspicious transactions are reported, primarily by banks and credit unions. Reports from the other obligated entities are almost non-existent. Financial institutions are required to pay special attention to all complex, unusual, or large transactions or patterns of transactions, whether completed or not, and to insignificant but periodic transactions, which have no apparent economic or lawful purpose. If there is reasonable suspicion that the transactions described above could constitute or be related to money laundering, a financial institution is required to report the suspicious transactions to the FIU. There were 78 suspicious transaction reports (STRs) filed during 2009. Six became the subject of investigations.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Belize law provides for the tracing, freezing, and seizure of assets and makes no distinctions between civil and criminal forfeitures. The Money Laundering (Prevention) (Amendment) Act 5 of 2002 provides for the freezing of funds and other financial assets of terrorists and money launderers. All forfeitures resulting from money laundering or terrorist financing are treated as criminal forfeitures. The banking community cooperates fully with enforcement efforts to trace funds and seize assets. The FIU and the Belize Police Department are the entities responsible for tracing, seizing, and freezing assets related to money laundering or terrorist financing, and may do so with prior court approval, though the Ministry of Finance can also confiscate frozen assets.

Narcotics asset sharing authority:

Belizean law states that it is up to the discretion of the Minister of Finance to decide what to do with seized assets; there is nothing in the law prohibiting the GOB from sharing seized assets with foreign governments. Currently, the GOB is not engaged in any bilateral or multilateral negotiations with other governments to enhance asset tracking and seizure. However, the GOB cooperates with the efforts of foreign governments to trace or seize assets related to financial crimes.

Cross-border currency transportation requirements: Yes

The reporting of all cross-border currency movement is mandatory. All individuals entering or departing Belize with more than $5,000 in cash or negotiable instruments are required to file a declaration with the authorities at Customs, the Central Bank, and the FIU.

Cooperation with foreign governments: Yes

The Money Laundering (Prevention) (Amendment) Act of 2002 requires the GOB to cooperate with the appropriate authority of another jurisdiction to provide assistance in matters concerning money laundering offenses within the limits of their respective legal systems. This includes requests related to asset identification and forfeiture.

On several occasions, the FIU has cooperated with the United States on investigations of financial crimes.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2009, Belize arrested nine persons in connection with money laundering and seized over $750,000. Two major cases are currently before the courts, but there have been no convictions to date. Approximately $8,500,000 has been frozen pending the outcome of the cases.

Alternative remittance systems are illegal in Belize. However, Belizean authorities acknowledge the existence and use of indigenous alternative remittance systems that bypass, in whole or part, financial institutions, and these systems have not yet been deterred through fines or criminal prosecution.

Internet gaming is regulated by a Gaming Control Board, which is guided by the Gaming Control Act. There is one licensed internet gaming site, but there are an undisclosed number of Internet gaming sites illegally operating from within the country. In addition, many cases of money laundering in the country are related to the proceeds from U.S. residents participating in unlawful Internet gaming.

GOB authorities have circulated the names of suspected terrorists and terrorist organizations listed on the United Nations (UN) 1267 Sanctions Committee’s consolidated list and the list of Specially Designated Global Terrorists designated by the United States, pursuant to Executive Order (E.O.) 13224 to all financial institutions in Belize. The GOB did not identify, freeze, seize, and/or forfeit any assets related to terrorist organizations/financiers in 2009.

U.S.-related currency transactions:

GOB officials have reported an increase in financial crimes, such as bank fraud, cashing of forged checks, suspicious transactions, and counterfeit Belizean and United States currency.

These financial crimes are often conducted in U.S. currency or monetary instruments (i.e., U.S. denominated checks or other instruments).

Records exchange mechanism with U.S.:

Belize has signed and ratified a Mutual Legal Assistance Treaty with the United States. It entered into force in 2003. The FIU is empowered to share information with FIUs in other countries.

International agreements:

Belize is a party to various information exchange agreements with countries, and authorities can share information or provide assistance to foreign jurisdictions in matters relating to money laundering or other financial crimes without an agreement or a treaty.

Belize 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

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

Recommendations:

The Government of Belize (GOB) should take steps to address the vulnerabilities in its supervision of alternative remittance systems that bypass financial institutions and of the gaming sector, including Internet gaming facilities. It should do the same regarding its offshore sector. Belize should immobilize bearer shares and ensure the offshore sector complies with anti-money laundering and counter-terrorist financing reporting requirements. The GOB should also become a party to the UN Convention against Corruption.

Bolivia

Although Bolivia is not a regional financial center, money laundering activities continue to take place. These illicit financial activities are related primarily to narcotics trafficking, public corruption, smuggling and trafficking of persons, as well as Bolivia’s long tradition of bank secrecy and the lack of effective government oversight of non-bank financial activities. Most entities that move money in Bolivia continue to be unregulated. Hotels, currency exchange houses, illicit casinos, cash transporters, informal exchange houses, and wire transfer businesses are known to transfer money freely into and out of Bolivia without being subject to anti-money laundering controls. The ultimate result is the easy laundering of the profits of organized crime and narcotics trafficking, the evasion of taxes, and the laundering of other illegally obtained earnings.

Offshore Center: No

Free Trade Zones: Yes

Bolivia has 13 free trade zones for commercial and industrial use. Free trade zones are located in EI Alto, Cochabamba, Santa Cruz, Oruro, Puerto Aguirre, and Desaguadero.

Criminalizes narcotics money laundering: Yes

The current anti-money laundering law is based on Article 185 of Law 1768 of 1997. Law 1768 modifies the penal code and criminalizes money laundering related only to narcotics trafficking offenses, organized criminal activities, and public corruption. Article 185, however, cannot be applied unless the prosecution demonstrates in court that the accused participated in and was convicted of the predicate crime.

Criminalizes other money laundering, including terrorism-related: Yes

As indicated above, the law addresses other offenses, but it is limited and does not include terrorism-related crimes.

Criminalizes terrorist financing: No

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

Although terrorist acts are criminalized under the Bolivian Penal Code, the Government of Bolivia (GOB) lacks actual statutes that specifically criminalize the financing of terrorism or that grant the GOB authority to identify, seize, or freeze terrorist assets.

Know-your-customer rules: Yes

Under Supreme Decree 24771, obligated entities such as banks, insurance companies and securities brokers are required to identify their customers.

Bank records retention: Yes

Under Supreme Decree 24771, obligated entities are required to retain records of transactions for a minimum of ten years.

Suspicious transaction reporting: Yes

Supreme Decree 24771 obligates entities to report to the financial intelligence unit (FIU), the Unidad de Investigaciones Financieras (UIF), all transactions considered unusual (without apparent economic justification or licit purpose) or suspicious (customer refuses to provide information or the explanation and/or documents presented are clearly inconsistent or incorrect).

Large currency transaction reporting: Yes

The GOB’s Superintendent of Banks recently mandated that national banks report any cash transactions in excess of $10,000 to the UIF.

Narcotics asset seizure and forfeiture: Yes

Law 1768 defines the application of asset seizure beyond drug-related offenses. While traditional asset seizure is employed by counter-narcotics authorities, the ultimate forfeiture of assets continues to be problematic. The Directorate General for Seized Assets (DIRCABI) is responsible for confiscating, maintaining, and disposing of the property of persons either accused or convicted of violating Bolivia’s narcotics laws. In October 2008 draft asset seizure and forfeiture legislation was submitted to congress and is still being considered.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

As of August 2008, Supreme Decree No. 29681 obligates every natural or corporate person, public or private, domestic or foreign, to declare any incoming or outgoing currency and register the declaration with customs on a provided form. No threshold amount is provided. The same decree states that physical transportation of currency from Bolivia, as well as importation of currency into Bolivia, between $50,000 and $500,000 must be authorized by the Central Bank of Bolivia. Additionally, the decree states all transactions reported to customs in excess of $10,000 must be reported to the UIF on a monthly basis.

Cooperation with foreign governments:

Bolivia cooperates with foreign jurisdictions on financial crimes investigations on a case-by-case basis.

U.S. or international sanctions or penalties: Yes

In July 2007, as a result of Bolivia's lack of terrorist financing legislation, the UIF received a “Letter of Suspension” from the Egmont Group of FIUs. The GOB’s continued lack of terrorist financing legislation resulted in Bolivia’s expulsion from the Egmont Group in December 2008 – an unprecedented move by the Egmont Group. The expulsion bars the UIF from participating in Egmont meetings or using the Egmont Secure Web (the primary means of information exchange among Egmont member FIUs). To regain Egmont membership, Bolivia must criminalize terrorist financing, reapply to Egmont and provide written evidence of the UIF’s compliance with Egmont requirements.

The Financial Action Task Force of South America (GAFISUD), a Financial Action Task Force (FATF)-style regional body, placed sanctions on Bolivia in July 2007 as a result of the GOB’s failure to pay three years of its membership dues. The GOB has since paid its arrears to GAFISUD and the sanctions were lifted in November 2009.

Enforcement and implementation issues and comments:

The expulsion of U.S. Drug Enforcement Agency (DEA) agents from the country in November 2008 has seriously diminished the effectiveness of several financial investigative groups operating in the country, including Bolivia’s Financial Investigative Team (EIF), the Bolivian Special Counternarcotics Police (FELCN), and the Bolivian Special Operations Force (FOE). Most money laundering investigations continue to be in the Department of Santa Cruz and are associated with narcotics trafficking organizations. During the period January – October 2009, the EIF reported ten new money-laundering cases and a total of approximately $18.245 million in related assets seized.

Corruption remains a serious issue in Bolivia. In the past, allegations against high-ranking law enforcement and other GOB officials were routinely dismissed without further investigation. While some improvement in the effectiveness of investigations is apparent, few cases are fully prosecuted. As of October 2009, the Bolivian National Police’s Office of Professional Responsibility (OPR) reports it investigated a total of 2,753 cases in 2009 involving allegations of misconduct and/or impropriety by Bolivian National Police officers.

The UIF has endured substantial turmoil since 2006, when the GOB issued Supreme Decree 28695 proposing the replacement of Bolivia’s UIF with a new “Financial and Property Intelligence Unit” focused on combating corruption rather than money laundering. Although the new unit was never created, the decree resulted in the UIF losing a significant amount of its staff. The continued lack of personnel, combined with inadequate resources and weaknesses in Bolivia’s basic legal and regulatory framework limits the UIF’s reach and effectiveness. Given the UIF’s limited resources relative to the size of Bolivia’s financial sector, compliance with reporting requirements is extremely low. The exchange of information between the UIF and appropriate police investigative entities is also limited or, in most cases, non-existent. In December 2009, the Bolivians indicated the UIF had hired more analysts, received training from the international community, increased the number of obligated entities, and received 280 suspicious transaction reports.

U.S.-related currency transactions:

The Bolivian financial system is highly dollarized, with approximately 66 percent of deposits and loans distributed in U.S. dollars rather than Bolivians, the local currency.

Records exchange mechanism with U.S.:

Bolivia does not have a mutual legal assistance treaty with the United States.

International agreements:

Bolivia is a party to the Inter-American Convention on Mutual Assistance in Criminal Matters.

Bolivia 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

Bolivia is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group on Money Laundering. Bolivia is also a member of the GAFISUD.

Recommendations:

The Government of Bolivia (GOB) should take all necessary steps to ensure that draft anti-money laundering legislation is enacted and conforms to international standards. Among the most important legislative adjustments, it is imperative the GOB criminalize terrorist financing and allow for the blocking of terrorist assets. Doing so is not only mandated by Bolivia’s commitments as a member of the United Nations and GAFISUD, but could improve the likelihood that the UIF may successfully re-apply for Egmont Group membership.

In addition, money laundering should be an autonomous offense without requiring prosecution for the underlying predicate offense, and unregulated sectors, particularly designated non-financial businesses and persons, should be subject to anti-money laundering and counterterrorist financing controls.

Brazil

Brazil is the world’s fifth largest country in size and population, and as of 2009 its economy is the tenth largest in the world. Brazil is considered a regional financial center for Latin America. It is also a major drug-transit country. Brazil maintains some controls of capital flows and requires disclosure of the ownership of corporations. Money laundering in Brazil is primarily related to domestic crime, especially drug trafficking, corruption, organized crime, gambling, trade in various types of contraband, and also to proceeds coming from the Tri-Border Area (TBA) of Brazil, Argentina, and Paraguay. Laundering channels include the use of banks, real estate investment, financial asset markets, luxury goods, remittance networks, informal financial networks, and trade-based money laundering. An Inter-American Development Bank study of money laundering in the region found that Brazil’s incidence of money laundering is below average for the region.

The TBA is a widely recognized source of money laundering and terrorist financing. In addition to weapons and narcotics, a wide variety of counterfeit goods, including CDs, DVDs, and computer software (much of it of Asian origin), are routinely smuggled across the border from Paraguay into Brazil. In addition to the TBA, other areas of the country are also of growing concern. The Government of Brazil (GOB) and local officials in the states of Mato Grosso do Sul and Parana, for example, have reported increased involvement by Rio de Janeiro and Sao Paulo gangs in the already significant trafficking in weapons and drugs that plagues the states in the TBA

Offshore Center: No

Free Trade Zones: Yes

The GOB has granted tax benefits for certain free trade zones. The most prominent of these is the Manaus Free Trade Zone, in Amazonas State, which has attracted significant foreign investment, including from U.S. companies. Most of these free trade zones aim to attract investment to the North and Northeast of Brazil.

Criminalizes narcotics money laundering: Yes

Brazil’s first anti-money laundering legislation was enacted in 1998 and has since been amended by subsequent legislation, decree and regulation.

Criminalizes other money laundering, including terrorism-related: Yes

Law 9.613 criminalizes money laundering related to drug trafficking, terrorism, arms trafficking, extortion by kidnapping, public administration, the national financial system and organized crime. Subsequent modifications to the law and associated regulations criminalize the corruption or attempted corruption of foreign public officials involving international commercial transactions, and establish terrorist financing as a predicate offense for money laundering. The current legal regime also establishes crimes against foreign governments as predicate offenses.

Criminalizes terrorist financing: Yes

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

Law 10.701 of 2003 amends Law 9.613 of 1998 to include the financing of terrorism as a predicate offense for money laundering. Terrorist financing is not an autonomous offense in Brazil, although a bill awaiting legislative action contains language effecting that change.

Know-your-customer rules: Yes

Entities under the authority of the Central Bank, the Securities Commission (CVM), the Private Insurance Superintendence (SUSEP), and the Office of Supplemental Pension Plans (PC), are required to know and record the identity of customers. Brazil’s financial intelligence unit (FIU), the Council for the Control of Financial Activities (COAF) directly regulates and receives information from those financial sectors not already supervised by another entity, such as commodities traders, real estate brokers, credit card companies, money remittance businesses, factoring companies, gaming and lottery operators, bingo parlors, dealers in jewelry and precious metals, and dealers in art and antiques.

Bank records retention: Yes

Entities supervised by the authorities named directly above are required to maintain identifying information obtained during account opening. The current legal regime also requires the Central Bank to create and maintain a registry of information on all bank account holders.

Suspicious transaction reporting: Yes

Supervised entities are required to file suspicious transaction reports (STRs) with their respective regulator, which passes them to COAF. The FIU also receives STRs from the entities it directly regulates.

Large currency transaction reporting: Yes

In addition to filing STRs, banks are required to inform the Central Bank of institutional transactions exceeding 100,000 Reais (approximately $55,000) and “unusual” amounts transacted by individuals. Lottery operators must notify COAF of the names and identifying information of winners of three or more prizes equal to or higher than 10,000 Reais (approximately $5,500) within a 12-month period. Insurance companies and brokers are required to report large policy purchases, settlements or otherwise suspicious transactions. In addition, on January 8, 2008, the CVM extended monitoring/reporting requirements to include dealers in luxury goods, and persons or companies that engage in activities involving a high volume of cash transactions. During the first 10 months of 2008, COAF received information regarding 226,413 cash and 296,070 non-cash transactions. During the same period, the Central Bank received 830,257 reports of transactions exceeding 100,000 Reais; and 367,566 reports were submitted to SUSEP regarding activities in the insurance sector.

Narcotics asset seizure and forfeiture: Yes

Brazil has established systems for identifying, tracing, freezing, seizing, and forfeiting narcotics related assets. The COAF and the Ministry of Justice manage these systems jointly. Police and the customs and revenue services are responsible for tracing and seizing assets, and have adequate law enforcement powers and resources to perform such activities.

Narcotics asset sharing authority: Yes

The judicial system has the authority to forfeit seized assets, and Brazilian law permits the sharing of forfeited assets with other countries. The Justice Ministry’s Department of Asset Recovery, among other duties, is responsible for international cooperation on money laundering cases and is empowered to share seized forfeited assets with other countries.

Cross-border currency transportation requirements: Yes

The 1998 money laundering statute requires that individuals bringing more than 10,000 Reais (approximately $5,500) in cash, checks, or traveler’s checks into Brazil must fill out a customs declaration, but there is no currency limit to move money in or out of Brazil.

Cooperation with foreign governments (including refusals): Yes

The GOB regularly cooperates with other jurisdictions to combat international money laundering and financial crimes. Operationally, elements of the GOB responsible for combating terrorism, such as the Federal Police, Customs, and the Brazilian Intelligence Agency (ABIN), work effectively with their U.S. counterparts, investigating potential terrorist financing, document forgery networks, and other illicit activity. However, Brazil’s judicial system, which permits multiple appeals by both defendants and the prosecutors’ offices, delays the finality of sentences and forfeiture judgments for many, many years. Thus, often Brazil does not submit a final order for registration for nearly ten years, after which many assets which could be forfeited have disappeared.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues:

The GOB achieved visible results from recent investments in border and law enforcement infrastructure that were executed with a view to gradually control the flow of goods, both legal and illegal, through the TBA. Anti smuggling and law enforcement efforts by state and federal agencies have increased. Brazilian Customs and the Brazilian Tax Authority (Receita Federal) continue to take effective action to suppress the smuggling of drugs, weapons, and contraband goods along the border with Paraguay. According to the Receita Federal, in 2009 the agency interdicted a large volume of smuggled goods, including drugs, weapons, and munitions. Because of the effective crackdown on the Friendship Bridge connecting Foz do Iguaçu, Brazil, and Ciudad del Este, Paraguay, most smuggling has migrated to other sections of the border. The Federal Police have Special Maritime Police Units that aggressively patrol the maritime border areas.

The GOB has generally responded to U.S. efforts to identify and block terrorist-related funds. None of the individuals and entities on the UNSCR 1267 Sanctions Committee’s consolidated list has been found to be operating or executing financial transactions in Brazil, and the GOB insists there is no evidence of terrorist financing in Brazil.

In 2009, based on information provided by the F.B.I., a man was arrested in Sao Paulo on suspicion that he was connected to the Jihad Media Battalion, a known terrorist organization with possible ties to Al Qaeda. However, a Brazilian judge ordered his release after several weeks, and the GOB has taken the position he had no demonstrable ties to any terrorist activity. As Brazil continues to emerge as a global economic and political player, its efforts to render assistance in such cases will likely increase. However, its failure to enact terrorist financing laws is a huge gap.

U.S.-related currency transactions:

Most high-priced goods in the TBA are paid for in US dollars, and cross-border bulk cash smuggling is a major concern. Large sums of US dollars generated from licit and suspected illicit commercial activity are transported physically from Paraguay through Uruguay and Brazil to banking centers in the United States.

Records exchange mechanism with U.S.:

The Mutual Legal Assistance Treaty between Brazil and the United States entered into force in 2001, and a bilateral Customs Mutual Assistance Agreement became effective in 2005. Using the Customs-to-Customs Agreement framework, the GOB and U.S. Immigration and Customs Enforcement (ICE) in 2006 established a Trade Transparency Unit (TTU) in Brazil to detect money laundering via trade transactions. The GOB also participates in the “3 Plus 1” Security Group with the United States and the other TBA countries.

International agreements:

Brazil 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

Brazil is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Brazil also is a member of the Financial Action Task Force (FATF) and the Financial Action Task Force against Money Laundering in South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here: www.gafisud.org.

Recommendations:

The Government of Brazil (GOB) should criminalize terrorist financing as an autonomous offense. In order to successfully combat money laundering and other financial crimes, Brazil should ensure the passage of legislation to regulate the sectors in which money laundering is an emerging issue. Brazil should enact and implement legislation to provide for the effective use of advanced law enforcement techniques in order to provide its investigators and prosecutors with more advanced tools to tackle sophisticated organizations that engage in money laundering, financial crimes, and terrorist financing. Brazil should also enforce currency controls and cross-border reporting requirements, particularly in the Tri-Border Area and among designated non-banking financial businesses and professions. The GOB should initiate mandatory outbound cross-border reporting requirements. Additionally, the GOB must continue to fight against corruption and ensure the enforcement of existing anti-money laundering laws, including the obligation for all financial institutions to report transactions suspected of being related to terrorist financing.

Burma

Burma is a major drug-producing country and its economy remains dominated by state-owned entities, including those affiliated with the military. Drug trafficking is a major source of money laundering in Burma. Wildlife, gems, timber, human trafficking victims, and other contraband originate in or flow through Burma and are additional sources of money laundering, as is public corruption. The steps Burma has taken over the past several years have reduced vulnerability to drug money laundering in the banking sector. However, with an underdeveloped financial sector and a large volume of informal trade, Burma remains a country where there is significant risk of drug money being funneled into commercial enterprises and infrastructure investment. Regionally, value transfer via trade is of concern and hawala/hundi networks frequently use trade goods to provide counter-valuation. Burma’s border regions are difficult to control and poorly patrolled. In some remote regions where smuggling is active, ongoing ethnic tensions and, in some cases armed conflict, impede government territorial control. In other areas, collusion between traffickers and Burma’s ruling military government, the State Peace and Development Council (SPDC), allows organized crime groups to function with minimal risk of interdiction. Although progress was made in 2009, the criminal underground faces little risk of enforcement and prosecution. Corruption in business and government is a major problem. Burma is ranked 178 out of 180 countries in Transparency International’s 2009 Corruption Perception Index.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

The Government of Burma’s (GOB) 2004 anti-money laundering (AML) measures amended regulations instituted in 2003 that set out 11 predicate offenses, including narcotics trafficking. In 2007, the GOB further expanded the list of predicate offences to all serious crimes.

Criminalizes other money laundering, including terrorism-related: Yes

See above.

Criminalizes terrorist financing: No

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

It appears that Burma’s AML measures do not account for funds derived from legitimate sources which may be used to finance acts of terrorism. Burma has not enacted a law specifically criminalizing terrorist financing and designating it as one of the predicate offenses to money laundering as well as making it an extraditable offense.

Know-your-customer rules:

Information is not available.

Bank records retention: Yes

Reporting entities are obligated to maintain records for seven years.

Suspicious transaction reporting: Yes

Regulations require banks, customs officials and the legal and real estate sectors to file suspicious transaction reports (STRs). In July 2007, the Central Control Board issued five directives to bring more non-bank financial institutions under the AML compliance regime. As of August 2008, a total of 1,495 STRs had been received, of which seven cases were identified as potential money laundering investigations. The Burmese financial intelligence unit (FIU) has investigated eight cases to date, three of which were sent to the courts for prosecution.

Large currency transaction reporting: Yes

Regulations set a threshold amount for reporting cash transactions by banks and real estate firms at 100 million kyat (approximately $100,000 at the prevailing unofficial exchange rate in December 2009).

Narcotics asset seizure and forfeiture:

GOB case law for seizing assets falls under the Narcotic Drugs and Psychotropic Substance Law as well as the 2002 Control of Money Laundering Law. Under these laws, the GOB can seize instruments of crime such as conveyances used to transport narcotics, property on which illicit crops are grown or are used to support terrorist activity, or intangible property such as bank accounts.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Foreign currency importation over $2000 must be reported at the port of entry. Mandatory declaration forms are used. There are no known outbound currency requirements. Burmese citizens are not permitted to possess foreign currency.

Cooperation with foreign governments: Yes

There is cooperation on a case-by-case basis.

U.S. or international sanctions or penalties: Yes.

The United States maintains sanctions on Burma, which include restrictions on trade, new investment, and financial transactions, as well as a visa ban on selected individuals and a targeted asset freeze. Under the Tom Lantos Block Burmese JADE (Junta’s Anti-Democratic Efforts) Act of 2008, the Burmese Freedom and Democracy Act, and several Executive Orders, the United States bans the exportation of financial services to Burma from the United States or by any U.S. person, freezes assets of the SPDC and other designated individuals and entities, including banks, parastatals and regime cronies, and prohibits the importation of Burmese-origin goods into the United States, as well as jadeite, rubies, and articles of jewelry containing them (even if the jadeite or rubies have been substantially transformed in third countries). Additionally, other U.S. legislation, such as the Narcotics Control Trade Act, the Foreign Assistance Act, the International Financial Institutions Act, the Export-Import Bank Act, the Export Administration Act, and the Customs and Trade Act, the Tariff Act (19 USC 1307), place further restrictions on financial transactions and assistance to Burma.

In September 2008, the United States Government identified Burma as one of three countries in the world that had “failed demonstrably” to meet its international counter-narcotics obligations. On November 13, 2008, the Office of Foreign Assets Control in the Department of the Treasury named 26 individuals and 17 companies tied to Burma’s Wei Hsueh Kang and the United Wa State Army (UWSA) as Specially Designated Narcotics Traffickers pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act). Wei Hsueh Kang and the UWSA were designated by the President as Foreign Narcotics Kingpins on June 1, 2000 and May 29, 2003, respectively.

Enforcement and implementation issues and comments:

The GOB established a Department against Transnational Crime in 2004. Its mandate includes anti-money laundering activities. It is staffed by police officers and support personnel from banks, customs, budget, and other relevant government departments. There has been only one conviction for money laundering since 2004 out of 23 money laundering investigations.

U.S.-related currency transactions:

The prevalent informal use of the U.S. dollar in Burma makes cash courier/currency smuggling of U.S. dollars a common and attractive method of laundering illicit proceeds. The criminal underground faces little risk of enforcement and prosecution.

Records exchange mechanism with U.S.: None

International agreements:

Burma’s Mutual Assistance in Criminal Matters Law (MACML) 2004 Act provides that Burma can provide legal assistance according to stipulated conditions. Over the past several years, the GOB has expanded its counter narcotics cooperation with other states. The GOB has bilateral drug control agreements with India, Bangladesh, Vietnam, Russia, Laos, the Philippines, China, and Thailand. These agreements include cooperation on drug-related money laundering issues. Burma is not a member of the Egmont Group of Financial Intelligence Units.

Burma 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

Burma 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: http://www.apgml.org/documents/docs/17/Myanmar%202008.pdf.

Recommendations:

The Government of Burma (GOB) has in place a framework to allow mutual legal assistance and cooperation with overseas jurisdictions in the investigation and prosecution of serious crimes. To fully implement a strong anti-money laundering/counter-terrorist financing regime, Burma must provide the necessary resources to administrative and judicial authorities who supervise the financial sector so they can successfully apply and enforce the government’s regulations to fight money laundering. Burma also must continue to improve its enforcement of the new regulations and oversight of its financial sector. The GOB should end all government policies that facilitate the investment of drug money and proceeds from other crimes in the legitimate economy. The FIU should become a fully funded independent agency that is allowed to function without interference. Customs should be strengthened and authorities should monitor more carefully trade-based money laundering and how trade is used to sometimes provide counter-valuation for hawala/hundi networks. Burma should become a party to the UN Convention against Corruption. The GOB should take serious steps to combat smuggling of contraband and its link to the pervasive corruption that permeates all levels of business and government. The GOB should respond adequately to any foreign requests for cooperation. The GOB should criminalize the financing of terrorism. Finally, the GOB should adhere to all laws and regulations that govern anti-money laundering and counter-terrorist financing to which it is committed by virtue of its membership in the UN and the APG.

Cambodia

The major sources of money laundering in Cambodia are drug-trafficking, widespread human trafficking and corruption. Cambodia serves as a transit route for drug-trafficking from the Golden Triangle to international drug markets such as Vietnam, mainland China, and Taiwan. Cambodia’s fledgling anti-money laundering regime, a cash-based economy with an active informal banking system, porous borders with attendant smuggling, limited capacity of the National Bank of Cambodia (NBC) to supervise the rapidly expanding financial and banking sectors, and widespread corruption contribute to a significant money laundering risk.

Offshore Center:

No information provided.

Free Trade Zones:

No information provided.

Criminalizes narcotics money laundering: Yes

In 1996, Cambodia criminalized money laundering related to narcotics-trafficking through the Law on Drug Control.

Criminalizes other money laundering, including terrorism-related: Yes

With the 2007 enactment of the “Law on Anti-Money Laundering and Combating the Financing of Terrorism” (AML/CFT Law) and the subsequent May 2008 implementing regulations, Cambodia has created a foundation to combat acts of money laundering and terrorist financing within the banking sector. The 2009 Penal Code criminalizes money laundering in relation to proceeds from all serious crime, and makes the crime of money laundering a punishable offense.

Criminalizes terrorist financing: Yes

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

The AML/CFT Law criminalizes terrorist financing.

Know-your-customer rules: Yes

Financial institutions are required to conduct customer due diligence when carrying out transactions that involve a sum in excess of 40 million riel (approximately $9,630) or foreign currency equivalent or a wire transfer that involves a sum in excess of 4 million riel (approximately $963) or other equivalent foreign currency.

Bank records retention: Yes

Article 11 of the AML/CFT Law requires reporting entities to keep records of customer identification and of transactions for at least five years after the account has been closed or the business relationship with the customer has ended.

Suspicious transaction reporting: Yes

The AML/CFT Law provides the framework for banks, casinos, realtors, and designated money service businesses to report suspicious transaction reports (STRs) to the Cambodian Financial Intelligence Unit (CAFIU). CAFIU analyzes received information and, when appropriate, may refer its analyses to law enforcement bodies. In 2009, CAFIU received 64 STRs.

Large currency transaction reporting: Yes

The AML/CFT Law requires banks and other financial institutions to report transactions over 40,000,000 Riel (approximately $9,630). However, large cash reporting is not yet consistently implemented due to lack of a unified reporting mechanism and a CAFIU database. In 2009, CAFIU received 162,126 currency transaction reports.

Narcotics asset seizure and forfeiture:

Article 30 of the AML/CFT Law provides for confiscation of property in cases where someone is found guilty of money laundering as stipulated in the penal code.

Under the 2007 Law on Counter Terrorism, the Minister of Justice may order the prosecutor to freeze property of a legal or natural person if that person is listed on the list of persons and entities belonging or associated with the Taliban and Al Qaeda issued by the UNSCR 1267 Sanction Committee’s consolidated list. There have been no reports of designated terrorist financiers using the Cambodian banking sector.

Narcotics asset sharing authority:

No information provided.

Cross-border currency transportation requirements: Yes

Although there is a legal requirement to declare to Cambodian Customs the movement of more than $10,000 into or out of the country, in practice there is no effective oversight of cash movement across the border or reporting to the CAFIU.

Cooperation with foreign governments:

There is no clear legal basis for such cooperation but Cambodian authorities have cooperated with foreign authorities in conducting investigations.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There is a large black market in Cambodia for smuggled goods, including drugs and imported substances for local production of amphetamine-type stimulants such as methamphetamine. However, most smuggling is intended to circumvent official duties and evade tax obligations and involves items such as fuel, alcohol, optical disks, and cigarettes. Corruption influences some government officials and private sector associates that have control over the smuggling trade and its proceeds. Such proceeds are rarely transferred through the banking system or other financial institutions. Instead, they are readily channeled into land, housing, luxury goods or other forms of property.

Although the Ministry of Interior has a legal responsibility for general oversight of casino operations, in practice it exerts little supervision. Additionally, regulations necessary to establish reporting procedures and formats for designated nonfinancial businesses and professions (DNFBPs) to fully implement the AML/CFT Law are still in draft form.

U.S.-related currency transactions:

Bank operations are widely conducted on a cash basis and predominantly in U.S. dollars. The smuggling trade is usually conducted in U.S. dollars.

Records exchange mechanism with U.S.:

No information provided.

International agreements:

The AML/CFT Law authorizes the CAFIU to exchange information with its foreign FIU counterparts, and to conclude reciprocal cooperation agreements. Three MOUs have been signed with the FIUs in Malaysia, Sri Lanka, and Bangladesh, which allow the CAFIU to cooperate and exchange information on criminal activities connected with money laundering, financial crime, and terrorist financing.

Cambodia 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

In June 2004, Cambodia joined the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://apgml.org/documents/default.aspx?DocumentCategoryID=17.

Recommendations:

Cambodia has yet to strengthen controls over its porous borders as well as significantly increase the capability of the CAFIU. The Government of Cambodia should issue additional decrees necessary to fully implement the AML/CFT Law - particularly implementing provisions relating to designated non-financial businesses and professions mandating compliance with reporting requirements. Cambodia should develop the capability of its law enforcement and judicial authorities to investigate, prosecute, and adjudicate financial crimes. Establishing a national coordination group, including all relevant agencies involved in AML/CFT issues should be considered a high priority. Cambodia should take specific steps to combat corruption.

Canada

Money laundering in Canada is primarily associated with drug trafficking and financial crimes, particularly those related to fraud. According to the Canadian Security Intelligence Service (CSIS), criminals launder an estimated $5 to $17 billion each year. With roughly $1.5 billion in trade crossing the United States and Canadian borders each day, both governments share concerns about illicit cross-border movements of currency, particularly the proceeds of drug trafficking. Organized criminal groups involved in drug trafficking also remain a challenge. The Criminal Intelligence Service Canada estimates that approximately 750 organized crime groups operate in Canada, with approximately 80 percent involved in the illicit drug trade.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Section 462.31 of the Canadian Criminal Code criminalizes money laundering. Illicit trafficking in narcotic drugs and psychotropic substances are criminalized in Sections 5 to 7 of the Controlled Drugs and Substances Act.

Criminalizes other money laundering, including terrorism-related: Yes

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), enacted in 2001, expands the list of predicate money laundering offenses to cover all indictable offenses, including terrorism and trafficking in persons. Following subsequent amendments, this legislation applies to banks; credit unions; life insurance companies; trust and loan companies; brokers/dealers of securities; foreign exchange dealers; money services businesses; sellers and redeemers of money orders; accountants; real estate brokers; casinos; lawyers; notaries (in Québec and British Columbia only) and dealers in precious metals and stones. However, lawyers in several provinces have successfully filed legal challenges to the applicability of the PCMLTFA to them based upon common law attorney-client privileges, so lawyers are not completely covered by the AML provisions.

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-Terrorist Act (ATA) of 2001 criminalizes terrorist financing. Section 83 of the Criminal Code includes the corresponding relevant provisions.

The Government of Canada designates suspected terrorists and terrorist organizations on the UN 1267 Sanctions Committee’s consolidated list.

Know-your-customer rules: Yes

Section 53 of the PCMLTF Regulations requires financial institutions to ascertain the identity of any individual for whom they have to keep a large cash transaction record (cash transactions of CAD 10,000 or more). MSBs are required to keep client information records if they have an on-going business relationship with a client, or for occasional transactions over CAD 3,000, including remittances, wire transfers, and the issuance or redemption of money orders, traveler’s checks or other similar negotiable instruments. However, there is no requirement to identify customers where there is a suspicion of money laundering or terrorist financing.

Bank records retention: Yes

Canadian financial institutions are required to maintain business transaction records for a minimum of five years.

Suspicious transaction reporting: Yes

Under Section 7 of the PCMLTFA, all financial institutions covered by the PCMLTFA are required to report suspicious; alternative remittance systems, such as hawala, hundi, and chitti; and Canada Post for money orders are also subject to the report. There is no requirement for financial institutions to submit suspicious transaction reports on attempted transactions. Between April 2008 and the end of March 2009, FINTRAC, Canada’s financial intelligence unit (FIU), received 67,740 STRs (which now includes attempted suspicious transactions, not just completed transactions.

Large currency transaction reporting: Yes

The PCMLTFA creates a mandatory reporting system for cash transactions and international electronic funds transfers over CAD 10,000. FINTRAC received more than 6.2 million large cash transaction reports and nearly 18 million electronic funds transfer reports (which includes funds that enter and exit the country) between April 2008 and the end of March 2009.

Narcotics asset seizure and forfeiture: Yes

The Canadian government has asset seizure and forfeiture ability. Additionally, individual provinces have enacted forfeiture laws.

Narcotics asset sharing authority: Yes

The Canadian Sharing Regulations allow Canada to share with a foreign government that provided information relevant to or participated in an investigation or prosecution that resulted in the forfeiture. There also must be a reciprocal forfeiture agreement with Canada for such sharing to be authorized. Canada has entered into many asset sharing arrangements with foreign states and is negotiating a number of additional agreements. The United States has an asset forfeiture sharing agreement with Canada.

Cross-border currency transportation requirements: Yes

The PCMLTFA requires reporting of all cross-border movement, including through the mail system, of currency and monetary instruments totaling or exceeding CAD $10,000 (approximately $9533), to the Canadian Border Services Agency (CBSA). FINTRAC received 42,768 cross-border reports (which includes seizures), between April 2008 and the end of March 2009.

Cooperation with foreign governments (including refusals): Yes

There are no impediments to cooperation. The Canadian financial intelligence unit (FIU) is able to share intelligence with its foreign counterparts.

Canada has longstanding agreements with the U.S. on law enforcement cooperation. Recent cooperation concerns focus on the inability of U.S. and Canadian law enforcement officers to exchange information promptly concerning suspicious sums of money found in the possession of individuals attempting to cross the United States-Canadian border. A 2005 MOU between the CBSA and the U.S. Department of Homeland Security’s Immigration and Customs Enforcement (ICE) on exchange of cross-border currency declarations expanded the extremely narrow disclosure policy. However, the scope of the exchange remains restrictive. To remedy this, the CBSA is developing an information-sharing MOU with the United States related to its Cross-Border Currency Reporting Program.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

To bolster monitoring of the MSB sector, in June 2008 a national registry for Money Services Business was also implemented. By March 31, 2009, 803 MSBs registered representing roughly 21,000 branches and agents.

U.S.-related currency transactions:

Canada and the United States are neighbors and major trading partners. Most border commerce between these two nations is legitimate.

Records exchange mechanism with U.S.:

There are numerous treaties and agreements between Canada and the United States. The Mutual Legal Assistance Treaty (MLAT) enables U.S. and Canadian authorities to cooperate on judicial assistance and extradition. The bilateral asset-sharing agreement enables U.S. and Canadian authorities to share assets.

International agreements:

Canada is a party to various information exchange agreements.

Canada 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

Canada belongs to the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Canada is a member of the Financial Action Task Force (FATF) as well as the Asia/Pacific Group on Money Laundering (APG), and is a supporting nation of the Caribbean Financial Action Task Force (CFATF); both APG and CFATF are FATF-style regional bodies. Canada’s most recent mutual evaluation can be found here: http://www.fatfgafi.org/document/32/0,3343,en_32250379_32236982_35128416_1_1_1_1,00.html.

Recommendations:

The Government of Canada (GOC) has demonstrated a strong commitment to combating money laundering and terrorist financing both domestically and internationally. In 2009, the GOC continued enhancing its AML/CFT regime and reducing its vulnerability to money laundering and terrorist financing. However increased efforts are needed in preventing the production and exportation of drugs; oversight and enforcement of AML/CFT measures within the casino industry; improved communication between FINTRAC and law enforcement authorities; maintenance and monitoring of the money services business registry; and enhancements to existing cross-border reporting with increased efforts to share information with U.S. counterparts. The GOC also should continue to ensure its privacy laws do not excessively prohibit provision of information that might lead to prosecutions and convictions to domestic and foreign law enforcement.

Cayman Islands

The Cayman Islands, a United Kingdom (UK) Caribbean overseas territory, continues to make strides in strengthening its anti-money laundering/counter-terrorist financing (AML/CFT) regime. However, the islands remain vulnerable to money laundering due to the existence of a significant offshore sector. Most money laundering that occurs in the Cayman Islands is primarily related to fraud and drug trafficking. Due to its status as a zero-tax regime, the Cayman Islands are also considered attractive to those seeking to evade taxes in their home jurisdiction.

Offshore Center: Yes

The Cayman Islands is home to a well-developed offshore financial center that provides a wide range of services, including banking, structured finance, investment funds, various types of trusts, and company formation and management. As of December 2009, there are approximately 278 banks, 159 active trust licenses, 773 captive insurance companies, seven money service businesses, and more than 62,572 exempt companies licensed or registered in the Cayman Islands. According to the Cayman Islands Monetary Authority (CIMA), at year end 2009, there were more than 10,000 registered hedge funds. Shell banks are prohibited, as are anonymous accounts. Bearer shares can only be issued by exempt companies and must be immobilized. Gambling is illegal; and the Cayman Islands do not permit the registration of offshore gaming entities. As an offshore financial center with no direct taxes and a strong reputation for having a stable legal and financial services infrastructure, the Cayman Islands is attractive to businesses based in the United States and elsewhere for legal purposes but also equally attractive to criminal organizations seeking to disguise the proceeds of illicit activity.

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

The Misuse of Drugs Law and the Proceeds of Crime Law (POCL) criminalize money laundering related to narcotics trafficking and all other serious crimes.

Criminalizes other money laundering, including terrorism-related: Yes

The POCL came into effect in September 2008. The law repeals and replaces the Proceeds of Criminal Conduct Law (2007 revision). The POCL introduces the concept of criminal property (includes terrorist property) that constitutes a person’s direct or indirect benefit from criminal conduct; tax offenses are not included. The term criminal conduct is also amended to cover any offense. Extraterritorial and appropriate ancillary offenses are covered in domestic legislation and criminal liability extends to legal persons. The POCL also consolidates the law relating to the confiscation of the proceeds of crime and the law relating to mutual legal assistance in criminal matters.

Banks, trust companies, investment funds, fund administrators, insurance companies, insurance managers, money service businesses, and corporate service providers as well as most designated non-financial businesses and professions, are subject to the AML/CFT regulations set forth in the Money Laundering (Amendment) Regulations 2008, which came into force on October 24, 2008. Dealers of precious metals and stones and the real estate industry are also subject to AML/CFT regulations.

Criminalizes terrorist financing: Yes

The Cayman Islands is subject to the United Kingdom Terrorism (United Nations Measure) (Overseas Territories) Order 2001. The Cayman Islands criminalizes terrorist financing through the passage of the Terrorism Bill 2003, which extends criminal liability to the use of money or property for the purposes of terrorism. It also contains a specific provision on money laundering related to terrorist financing. While lists promulgated by the UN Sanctions Committee and other competent authorities are legally recognized, there is no legislative basis for independent domestic listing and delisting. There have been no terrorist financing investigations or prosecutions to date in the Cayman Islands.

Know-your-customer rules: Yes

CIMA’s Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing (Guidance Notes), as last amended in December 2008, require know your customer (KYC) identification requirements for financial institutions and certain financial services providers. The regulations require due diligence measures for individuals who establish a new business relationship, engage in one-time transactions over KYD $15,000 (approximately $18,293), or who may be engaging in money laundering. The Guidance Notes also address correspondent banking and enhanced due diligence procedures. Financial institutions are prohibited from correspondent relationships with shell banks. In addition, financial institutions must satisfy that respondent financial institutions in a foreign country do not permit their accounts to be used by shell banks.

Bank records retention: Yes

CIMA’s Guidance Notes require institutions to keep appropriate evidence of client identification, account opening or new business documentation. Adequate records identifying relevant financial transactions should be kept for a period of five years following the closing of an account, the completion of the transaction or the termination of the business relationship.

Suspicious transaction reporting: Yes

The POCL requires mandatory reporting of suspicious transactions and makes failure to report a suspicious transaction a criminal offense. A suspicious activity report (SAR) must be filed once it is known or suspected that a transaction may be related to money laundering or terrorist financing. There is no threshold amount for the reporting of suspicious activity. Obligated entities currently report suspicious activities to the Financial Reporting Authority (FRA), the Cayman Islands’ financial intelligence unit. From 2007 to date the FRA has reviewed over 300 reports.

Large currency transaction reporting: No

There is no system in place in the Cayman Islands requiring the reporting of large currency transactions above a certain threshold.

Narcotics asset seizure and forfeiture: Yes

The Cayman Islands has a comprehensive system in place for the confiscation, freezing, and seizure of criminal assets. In addition to criminal forfeiture, civil forfeiture is allowed in limited circumstances. The POCL provides the Attorney-General with the ability to issue restraint orders once an investigation has begun without the need to bring charges within 21 days. Additionally, the FRA can request a court order to freeze bank accounts if it suspects the account is linked to money laundering or terrorist financing. Confiscation orders also may now be issued by the Attorney General upon conviction in either Summary or Grand Courts. The legislation also permits the Attorney General to bring civil proceedings for the recovery of the proceeds of crime. Over $120 million in assets has been frozen or confiscated since 2003. The confiscation, freezing, and seizure of assets related to terrorist financing are permitted by law.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements: Yes

On August 10, 2007, the Cayman Islands enacted the Customs (Money Declarations and Disclosures) Regulations, 2007. These regulations establish a mandatory declaration system for the inbound cross-border movement of cash and a disclosure system for money that is outbound. All persons transporting money totaling KYD $15,000 (approximately $18,293) or more into the Cayman Islands are required to declare such amount in writing to a Customs officer at the time of entry. Persons carrying money out of the Cayman Islands are required to make a declaration upon verbal or written inquiry by a Customs officer.

Cooperation with foreign governments: Yes

No known impediments to cooperation exist.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In March 2008, the United Kingdom published The Foreign and Commonwealth Office: Managing Risk in the Overseas Territories. The report noted that, of the British Territories, only the Cayman Islands have achieved successful prosecutions of local participants for offshore money laundering offenses. There have been only five money laundering convictions in the Cayman Islands since 2003, which is not a large amount considering the size of its financial sector and the volume of offshore entities holding assets there.

In July 2008, the Financial Crime Unit (FCU) of the Royal Cayman Islands Police Service arrested an individual in connection with the collapse of the Grand Island Fund following serious irregularities in the fund’s trading activities. The collapse of the fund is believed to involve millions of dollars. The FCU investigation is ongoing.

Nonprofit organizations must be licensed and registered, although there is no competent authority responsible for their supervision.

U.S.-related currency transactions:

In July 2008, the U.S. Government Accountability Office (GAO) issued a report entitled: “Cayman Islands: Business and Tax Advantages Attract U.S. Persons and Enforcement Challenges Exist.” The report was prepared in response to a Congressional inquiry. The report found that U.S. persons who conduct financial activity in the Cayman Islands commonly do so to gain business advantages, such as facilitating U.S.-foreign transactions or to minimize or obtain tax advantages; while much of this activity is legal, some is not. In June 2008, two former Bear Stearns hedge fund managers were arrested and indicted in the U.S. on conspiracy and fraud charges related to the collapse of two Cayman Islands funds they oversaw. A companion civil suit to recover over $1.5 billion in losses was filed against four individuals and companies in the Cayman Islands

Records exchange mechanism with U.S.:

In 1986, the United States and the United Kingdom signed a Mutual Legal Assistance in Criminal Matters Treaty (MLAT) concerning the Cayman Islands. By a 1994 exchange of notes, Article 16 of that treaty has been deemed to authorize asset sharing between the United States and the Cayman Islands. The GAO report highlights the cooperation between U.S. agencies and their Cayman counterparts in investigating money laundering, financial crimes, and tax evasion. However, the Cayman Islands does not engage readily in informal mutual legal assistance with U.S. law enforcement agencies, insisting that requests be submitted through formal MLAT channels, which decreases the often necessary expediency of obtaining evidence and restraint of criminal assets. Also, although generally helpful when receiving formal MLAT assistance requests from the U.S., the Cayman Islands has not been proactive with regard to money laundering prosecutions based on its own investigations. The FRA and the Financial Crimes Enforcement Network (FinCEN) have a memorandum of understanding in place.

International agreements:

The FRA has MOUs in place with the FIUs of Australia, Canada, Chile, Guatemala, Indonesia, Mauritius, Nigeria, and Thailand.

Cayman Islands are 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 Cayman Islands is a member of the Caribbean Financial Action Task Force (CFATF), a FATF-style regional body. It’s most recent mutual evaluation can be found here:

http://www.cfatf-gafic.org//mutual-evaluation-reports.html

Recommendations:

The Government of the Cayman Islands bolstered its AML/CFT regime to be in accordance with international standards. However, for a jurisdiction with one of the largest and most developed offshore sectors, the Cayman Islands record of investigations and prosecutions is poor. The Cayman Islands should do more to strengthen its AML/CFT regime, to include ensuring the full implementation of provisions related to dealers in precious metals and stones as well as the disclosure/declaration system for the cross-border movement of currency. The Cayman Islands also should provide for the adequate supervision of nonprofit organizations. In addition, the Cayman Islands should work to fully develop its capacity to proactively investigate money laundering and terrorist financing cases.

China, People’s Republic of

The Government of the People’s Republic of China has continued to take steps to strengthen its anti-money laundering/counter-terrorist financing (AML/CFT) framework during the period of 2008-2009. Money laundering remains a serious concern as China restructures its economy and develops its financial system. Narcotics trafficking, smuggling, trafficking in persons, counterfeiting of trade goods, trade based money laundering, corruption, fraud, tax evasion, and other financial crimes are major sources of laundered funds. Most money laundering cases currently under investigation involve funds obtained from corruption and bribery. Proceeds of tax evasion, recycled through offshore companies, often return to China disguised as foreign investment and, as such, receive tax benefits. Chinese officials have noted that most acts of corruption in China are closely related to economic activities that accompany illegal money transfers. Observers register increasing concern regarding underground banking and trade-based money laundering. Value transfer via trade goods, including barter exchange, is a common component in Chinese underground finance. Many Chinese underground trading networks in Africa, Asia, the Middle East, and the Americas participate in the trade of Chinese-manufactured counterfeit goods. This trade-based mechanism could also present terrorist financing risks. Reportedly, the proceeds of narcotics produced in Latin America are laundered via trade by purchasing Chinese manufactured goods (both licit and counterfeit) in an Asian version of the Black Market Peso Exchange.

Offshore Center:

No information was available on the status of any offshore centers.

Free Trade Zones: Yes

China offers a broad range of investment incentives at the national, regional, and local levels. Foreign investors stand to benefit from reduced fees related to national and local income taxes, land use fees, and import/export duties with the country’s Special Economic Zones (SEZ’s) of Shenzhen, Shantou, Zhuhai, Xiamen, and Hainan, 14 coastal cities, designated development zones (100+) and inland cities.

Criminalizes narcotics money laundering: Yes

China introduced Article 349 of the Penal Code in December 1990 to criminalize the laundering of proceeds generated from drug-related offenses.

Criminalizes other money laundering, including terrorism-related: Yes

Article 191 of the Penal Code, most recently amended in June 2006, criminalizes the laundering of proceeds generated from seven broad categories of offences (drugs, smuggling, organized crime, terrorism, corruption or bribery, disrupting the financial management order and financial fraud). Article 312 criminalizes money laundering on the basis of an all-crimes approach, and criminalizes complicity in concealing the proceeds of criminal activity; an amendment to this article in February 2009 imposes criminal liability for money laundering on corporations.

On November 10, 2009, the Supreme People’s Court released a judicial interpretation on money laundering that further expands the application of the law to non-banking institutions. The judicial announcement, entitled “The Interpretation of Issues Concerning Concrete Applicability of Laws in handling Money Laundering Cases,” addresses money laundering typologies using non-banking/financial activities, including pawning, leasing, lottery, gambling, awards, and cash-intensive commercial operations. The Judicial Interpretation has not yet been codified in law or regulation.

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 Supreme People’s Court Judicial Interpretation issued on November 10, 2009 expands the provisions of Articles 191, 312 and 349 of the Penal Code by defining the sponsorship of terrorism as raising and providing funds or material support for terrorism. The notice addresses two particular Penal Code deficiencies related to the criminalization of terrorist financing. The language “financially support” was previously deemed to be narrow in scope but is now clearly defined as encompassing not only funds, but also property, premises and any other kinds of support. Additionally the sole collection of funds in the context of a terrorist financing scheme is deemed a violation of the Penal Code.

China’s implementation of UNSCRs 1267 and 1373 is deficient and does not include all the elements necessary to satisfactorily fulfill their provisions. China has not established an effective mechanism for dealing with the freezing of assets of UNSCRs 1267 and 1373-designated terrorists. China relies on a normal criminal procedure regime for seizure and confiscation of terrorist assets. There is no preventative mechanism in place for freezing terrorist assets without delay and no monitoring of compliance by financial regulators.

Know-your-customer rules: Yes

In 2007, China adopted a series of regulations to both refine customer due diligence (CDD) requirements and expand the provisions to apply to both the insurance and securities sectors. The current legislative framework for CDD measures in the financial sector consists of the following: “Rules for Anti-Money Laundering by Financial Institutions” (AML Rules); and “Administrative Rules for Financial Institutions on Customer Identification and Record Keeping of Customer Identity and Transaction Information” (CDD Rules). The AML Rules obligate financial institutions to perform CDD, regardless of the type of customer (business or individual), type of transaction, or level of risk. The law explicitly prohibits anonymous accounts or accounts in fictitious names. Banks must identify and verify customers when carrying out occasional transactions over RMB 10,000, or $1,000 equivalent, or when providing cash deposit or withdrawal services over RMB 50,000, or $10,000 equivalent. Similar provisions cover a range of cash and other transactions for the insurance sector.

The CDD Rules extend requirements relating to the identification of legal persons to all covered financial institutions and require all financial institutions to identify and verify their customers, including the beneficial owner. On December 30, 2008, the People’s Bank of China (PBC) issued a Notice further interpreting “beneficial owner” as persons including but not limited to: 1) entities controlling the account; and 2) entities not identified by the customer but who are authorized to handle transactions or eventually enjoy financial benefit. The Notice requires financial institutions to strengthen identification of foreign PEPs.

Bank records retention: Yes

Each financial institution must establish a program to keep required customer identity records and transaction records for at least five years following the termination of the business relationship or the completion of a transaction.

Suspicious transaction reporting: Yes

The Administrative Rules for the Reporting of Large-Value and Suspicious Transactions by Financial Institutions (LVT/STR Rules) as amended on June 21, 2007 require financial institutions and the insurance and securities sector to report transactions that meet specified criteria and/or are deemed suspicious in nature or related to terrorist financing. The LVT/STR Rules were amended on June 21, 2007, to require financial institutions to report suspicious transactions. In 2009, the PBC issued AML/CFT guidance for bankcard, money clearing, and payment and clearing organizations, subjecting each to the above noted STR requirements. In May 2009, the Legislative Affairs Office of the State Council extended similar requirements to the lottery industry.

Large currency transaction reporting: Yes

The current AML and LVT/STR Rules require reporting of cash deposits or withdrawals of over RMB 200,000 (approximately $29,000) or foreign-currency withdrawals of over $10,000 to the financial intelligence unit (FIU) at the PBC. Additionally money transfers between companies exceeding RMB 2 million (approximately $294,000) or between an individual and a company greater than RMB 500,000 (approximately $73,500) in one day must be reported. Financial institutions that fail to meet reporting requirements in a timely manner are subject to a range of administrative penalties and.

Narcotics asset seizure and forfeiture: Yes

China legislatively provides for the tracing, freezing and seizure of criminal assets within the penal code, criminal procedure code and AML law. The penal code imposes mandatory confiscation of (1) illegal proceeds; (2) property or interest derived from the illegal proceeds, (3) laundered assets; and (4) “intended” instrumentalities. The criminal procedure code authorizes law enforcement authorities (including the judiciary) to identify and trace criminal proceeds and instrumentalities and outline the process to use to seize and freeze assets. The AML Rules grant to the AML Bureau of the PBC the use of “temporary freezing measures” when a client under investigation initiates a payment to a foreign country.

Narcotics asset sharing authority: No

Chinese law neither authorizes nor prohibits the sharing of confiscated funds. Because the law is silent on the matter, in some instances, China has chosen to share assets. Reportedly, China has shared funds with the United States; and the Department of Justice is pursuing a bilateral arrangement to lead to future cooperation.

Cross-border currency transportation requirements: Yes

China’s current system of cross-border currency declaration focuses solely on the movement of cash, with no coverage of bearer negotiable instruments. Travelers are required to declare cross-border transportation of cash exceeding RMB 20,000 for local currency or the foreign equivalent (approximately $2,940). In 2008 the PBC, General Administration of Customs and State Administration of Foreign Exchange drafted a new administrative rule to include both cash and negotiable instruments, and to raise the threshold reporting amount. While the document has been circulated for comment, as of December 2009, it had not been approved, and the PBC and the customs authority were still in discussions.

Cooperation with foreign governments (including refusals): Yes

Limitations in China’s ability to enforce foreign forfeiture orders impede its ability to cooperate with foreign governments.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Although the CDD Rules require all financial institutions to identify beneficial owners, in practice, this requirement may be limited to the natural person who ultimately controls—as opposed to owns—a customer. The December 30, 2008 PBC Notice further interpreting beneficial ownership may constitute “other enforceable means” but is not equivalent to a regulation.

China has implemented several criteria related to the identification of politically exposed persons (PEPs); however, it is unclear whether current legislation requires senior management approval for account opening or sufficient measures to establish the source of funds.

Although China has had some success at combating illegal underground banking, the country’s cash-based economy, combined with robust cross-border trade, contributes to a high volume of difficult-to-track large cash transactions. While China is adept at tracing formal financial transactions, the large size of the informal economy—estimated by the Chinese Government at approximately ten percent of the formal economy, but quite possibly much larger—means that tracing informal financial transactions presents a major obstacle to law enforcement. The prevalence of counterfeit identity documents and underground banks, which in some regions reportedly account for over one-third of lending activities, further hamper AML/CFT efforts.

According to the PBC, in 2007 authorities discovered 89 cases of money laundering involving RMB 28.8 billion (approximately $4.24 billion). In the first half of 2008, the PBC sanctioned 12 financial institutions involved in money laundering, with fines totaling RMB 2.25 million (approximately $331,000). China reports convictions for money laundering offenses in 2008 as follows: under Penal Code Art. 191 - 12 cases finalized, 15 individuals convicted; under Penal Code Art. 312 – 10,318 cases finalized, 17,650 individuals convicted; and under Penal Code Art. 349 – 59 cases finalized, 69 individuals convicted.

Law enforcement agencies have authority to use a wide range of powers, including special investigative techniques, when conducting investigations of money laundering, terrorist financing and predicate offenses. Reportedly, however, law enforcement and prosecutorial authorities focus on pursuing predicate offenses, to the exclusion of AML/CFT.

Authorities do not appear to effectively use captured data on cross-border currency movements for money laundering or terrorist financing investigations.

U.S.-related currency transactions:

The extent of the linkages between underground banking and the large expatriate Chinese community remains unknown but is of potential concern.

Records exchange mechanism with U.S.:

A mutual legal assistance agreement (MLAA) between the United States and China entered into force in March 2001. The MLAA provides a basis for exchanging records in connection with narcotics and other criminal investigations and proceedings. China is not a member of the Egmont Group of cooperating Financial Intelligence Units. Since Egmont membership is the primary basis upon which FinCEN exchanges information with foreign jurisdictions, China’s non-membership impedes information exchange with the U.S. FIU. However, the Chinese FIU reportedly has in place certain infrastructure to securely exchange and safeguard information between units.

The United States and China cooperate and discuss money laundering and enforcement issues under the auspices of the U.S./China Joint Liaison Group’s (JLG) subgroup on law enforcement cooperation. In addition, the United States and China have established a Working Group on Counterterrorism that meets on a regular basis. In July 2009, during the US-China Strategic and Economic Dialogue (S&ED), the United States and China agreed to strengthen their cooperation on AML/CFT, as well as counterfeiting. The U.S. and China are in the process of establishing an AML/CFT working group under the S&ED framework. It is expected the S&ED Illicit Finance Working Group will hold its first meetings in early 2010. Proposed agenda items include anti-corruption/asset recovery, trade based money laundering, and counterfeit currency issues.

International agreements:

China has signed mutual legal assistance treaties with over 24 countries and has entered into some 70 MOUs and cooperation agreements with over 40 countries. China has signed extradition agreements with 30 countries. China also has established working groups with other countries to cooperate and discuss money laundering and enforcement issues as well as counter-terrorism matters.

China 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*

*China has registered Reservations that preclude it from being bound to certain articles of the above conventions.

China is currently a member of the Financial Action Task Force (FATF) and two FATF-style regional bodies. China became a member in the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) in 2004. China is a founding member of the Asia/Pacific Group on Money Laundering (1997), and reactivated its membership in 2009. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/33/11/39148196.pdf.

Recommendations:

The Chinese Government should continue to take steps to develop a viable AML/CFT regime consistent with international standards. China should continue to develop a regulatory and law enforcement environment designed to prevent and deter money laundering, and it should raise awareness within law enforcement and the judiciary of money laundering as a criminal offense. Specifically, China should ensure that law enforcement and prosecutorial authorities pursue money laundering and terrorist financing offenses, and not simply treat them as a subsequent byproduct of investigations into predicate offenses. China’s Anti-Money Laundering Law and related regulations should apply to a broader range of non-financial businesses and professions. Authorities should assess the application of sanctions for noncompliance with identification, due diligence and record-keeping requirements to ensure they have a genuinely dissuasive effect. China should ensure its judicial interpretations that clarify and strengthen its AML/CFT regime—including clarifications of the money laundering and terrorist financing offenses-- become codified in law. China should continue to increase its ability to honor foreign law enforcement forfeiture requests in areas other than narcotics and should ensure that it can enforce both criminal and in rem forfeiture requests. In addition, China should take immediate steps to effectively implement the UNSCRs and strengthen its mechanisms for freezing terrorist assets.

Colombia

The Government of Colombia (GOC) is a regional leader in the fight against money laundering. The GOC has a forceful anti-money laundering/counter-terrorist financing (AML/CFT) regime. However, the laundering of money from Colombia’s illicit cocaine and heroin trade continues to penetrate its economy and affect its financial institutions. Both drug and money laundering organizations use a variety of methods to repatriate their illicit proceeds to Colombia. These methods include the Black Market Peso Exchange (BMPE), bulk cash smuggling, reintegro (wire transfers), and more recent methods, such as using electronic currency and prepaid debit cards. In addition to drug-related money laundering, laundered funds are also derived from commercial smuggling for tax and import duty evasion, kidnapping, arms trafficking, and terrorism connected to violent, illegally-armed groups and guerrilla organizations. Further, money laundering is carried out to a large extent by U.S. Government-designated terrorist organizations. Criminal elements have used the banking sector, including exchange houses, to launder money. Money laundering also has occurred via trade and the non-bank financial system, especially related to transactions that support the informal or underground economy. The trade of counterfeit items in violation of intellectual property rights is an ever increasing method to launder illicit proceeds. Casinos and free trade zones in Colombia present opportunities for criminals to take advantage of inadequate regulation and transparency. Although corruption of government officials remains a problem, its scope has decreased significantly in recent years.

Offshore Center: No

Free Trade Zones: Yes

Currently there are 46 free trade zones and the GOC is planning to authorize more to attract greater investment and create more jobs. In 2005, Colombia’s Congress passed a comprehensive free trade zone (FTZ) modernization law that opens investment to international companies, allows one-company or stand-alone FTZs, and permits the designation of pre-existing plants as FTZs. The Ministry of Commerce administers requests for establishing FTZs, but the government does not participate in their operation. The DIAN (Colombia’s Tax and Customs Authority), regulates activities and materials in FTZs. There are identification requirements for companies and individuals who enter or work in the FTZs.

Companies within FTZs enjoy a series of benefits such as a preferential corporate income tax rate and exemption from customs duties and value-added taxes on imported materials. In return for these and other incentives, every FTZ project must meet specific investment and job creation commitments within three years for new projects and five years for pre-existing investments.

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

Colombia has criminalized money laundering broadly. Under legislation passed in 1995, 1997, and 2001, the GOC has established the “legalization and concealment” of criminal assets as a separate criminal offense, and criminalized the laundering of the proceeds of extortion, illicit enrichment, rebellion, narcotics trafficking, arms trafficking, crimes against the financial system or public administration, and criminal conspiracy.

Criminalizes terrorist financing: Yes

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

Terrorist financing is an autonomous crime in Colombia. Law 1121 of 2006, which entered into effect in 2007, amends the penal code to define and criminalize direct and indirect financing of terrorism of both national and international terrorist groups.

Know-your-customer rules: Yes

Financial institutions are required by law to know and record the identity of customers. Obligated entities include banks, stock exchanges and brokers, mutual funds, investment funds, export and import intermediaries, credit unions, wire remitters, money exchange houses, public agencies, notaries, casinos, lottery operators, car dealers, and foreign currency traders. Most of these obligated entities are required to establish “know-your-customer” provisions.

Bank records retention: Yes

Financial institutions are required by law to maintain records of account holders and financial transactions for five years.

Suspicious transaction reporting: Yes

Colombian financial institutions are required to report suspicious transactions to the Colombia Financial Intelligence Unit (FIU), or UIAF. Obligated entities include banks, stock exchanges and brokers, mutual funds, investment funds, export and import intermediaries, credit unions, wire remitters, money exchange houses, public agencies, notaries, casinos, lottery operators, car dealers, and foreign currency traders. Colombian financial institutions regularly report suspicious transactions over certain defined limits but also are obligated to report additional transactions which may fall outside defined regulations. The UIAF receives approximately 800 suspicious transaction reports (STRs) monthly and about 80 per month get referred to the Colombian prosecutor’s office for possible criminal investigation.

Large currency transaction reporting: Yes

With the exception of money exchange houses, obligated entities must report to the UIAF cash transactions over 10,000,000 Colombian pesos (approximately $5000). The UIAF requires money exchange houses to provide data on all transactions above $200.

Narcotics asset seizure and forfeiture:

Under Colombian Asset Forfeiture laws, virtually all instruments of crime can be seized. This includes transportation conveyances, properties used for illicit crop cultivation or terrorist activity, and intangibles such as bank and securities accounts. Licit assets can be substituted for illicit assets that cannot be located. Where licit and illicit assets are co-mingled through legitimate businesses, those businesses can be seized and forfeited.

Colombian law provides for both conviction-based and non-conviction based in rem forfeiture. Law 793 of 2002 eliminates interlocutory appeals that prolonged and impeded forfeiture proceedings in the past, imposes strict time limits on proceedings, places obligations on claimants to demonstrate their legitimate interest in property, requires expedited consideration of forfeiture actions by judicial authorities, and establishes a fund for the administration of seized and forfeited assets.

The Colombian government regularly carries out asset seizure operations against a myriad of drug trafficking and other criminal organizations throughout Colombia, to include properties, companies, and other assets such as residences, vehicles, aircraft, etc. Freezing assets is very quick and efficient under Colombian law, while forfeiture can take between 1-3 years. According to the Prosecutor General’s Office, approximately $107,537,932 worth of currency and goods have been seized in 2009 and approximately $1.3 million of physical assets has been permanently forfeited to the GOC. The administration of seized assets has not been effective.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements: Yes

Bulk Cash Smuggling has become a prominent method to repatriate narcotics proceeds. The GOC has criminalized cross-border cash smuggling and defined it as money laundering. It is illegal to transport more than the equivalent of $10,000 in cash across Colombian borders.

Cooperation with foreign governments: Yes

There are no known impediments to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In the Black Market Peso Exchange (BMPE), goods from abroad (particularly the United States) are bought with drug dollars. Many of the goods are either smuggled into Colombia or brought directly into Colombia’s customs warehouses, thus avoiding various taxes, tariffs and legal customs duties. In other trade-based money laundering schemes, goods are over-or-under invoiced to transfer value. According to cooperating informants who have worked for years in the BMPE industry, evasion of the normal customs charges is frequently facilitated by the drug and money laundering groups corrupting Colombian oversight authorities.

While the Colombian financial system has banking controls and governmental regulatory processes in place, statements from cooperating sources have revealed that drug and money laundering groups have influenced high level bank officials in order to circumvent both established anti-money laundering controls and governmental regulations. Official corruption has also aided money laundering and terrorist financing in geographic areas controlled by the Revolutionary Armed Forces of Colombia (FARC).

According to the Prosecutor General’s Office, 236 people were arrested in 2009 for money laundering crimes connected to drug trafficking, terrorism, and other felonies. The Colombian Prosecutor General’s office investigated and/or prosecuted 408 money laundering cases in 2009, attaining a total of 54 money laundering convictions and 84 forfeiture judgments.

Colombian law is unclear on the government’s authority to block assets of individuals and entities on the UN 1267 Sanctions Committee consolidated list. The government circulates the list widely among financial sector participants, and banks are able to close accounts, but not to seize assets. Banks also monitor other lists, such as OFAC’s publication of Specially Designated Narcotics Traffickers, pursuant to E.O. 12978, and Specially Designated Global Terrorists, pursuant to E.O. 13224.

U.S.-related currency transactions:

The massive Colombian/U.S. drug trade revolves around the U.S. dollar. The BMPE, designated by the Department of Treasury as the largest money laundering methodology in the Western Hemisphere, launders drug dollars in the United States through their exchange for Colombian pesos in the black market. Purchased goods rather than U.S. dollars cross over to Colombia in the BMPE system. The GOC and U.S. law enforcement agencies closely monitor transactions that could disguise terrorist financing activities.

Records exchange mechanism with U.S.:

The United States and Colombia exchange information and cooperate based on Colombia’s 1994 ratification of the 1988 UN Drug Convention. This convention applies to most money laundering activities resulting from Colombia’s drug trade. The GOC cooperates extensively with U.S. law enforcement agencies to identify, target and prosecute groups and individuals engaged in financial and drug crimes.

International agreements:

UIAF has signed memoranda of understanding with 27 FIUs.

Colombia 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

Colombia is a member of the Financial Action Task Force-style regional body GAFISUD. Its most recent mutual evaluation can be found here: www.gafisud.org.

Recommendations:

The Government of Colombia continues to make progress in the development of its financial intelligence unit, regulatory framework and interagency cooperation within the government. However, application of this new system is still being learned. Placing greater focus, and priority on money laundering investigations, including increasing resources, is necessary to ensure continued and improved progress. The GOC should take steps to foster better interagency cooperation, including coordination between the UIAF Colombia’s Trade Transparency Unit, and the tax and customs authority in order to combat the growth in contraband trade to launder illicit drug proceeds. Congestion in the court system, procedural impediments and corruption remain problems and must be addressed. The GOC should put in place streamlined procedures for the liquidation and sale of seized assets under state management. Colombian law should be clarified to spell out the government’s authority to block assets of individuals and entities on the UN 1267 Sanctions Committee consolidated list. In addition, the GOC should enact the necessary legislation to allow it to pay its GAFISUD dues and become active in GAFISUD once again.

Costa Rica

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

Offshore Center: No

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

Free Trade Zones: Yes

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

Criminalizes narcotics money laundering: Yes

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

Criminalizes other money laundering, including terrorism-related: Yes

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

Criminalizes terrorist financing: Yes

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

Know-your-customer rules: Yes

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

Bank records retention: Yes

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

Suspicious transaction reporting: Yes

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

Large currency transaction reporting: Yes

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

Narcotics asset seizure and forfeiture:

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

Narcotics asset sharing: No

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

Cross-border currency transportation requirements: Yes

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

Cooperation with foreign governments (including refusals): Yes

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

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

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

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

U.S.-related currency transactions:

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

Records exchange mechanism with U.S.:

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

International agreements:

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

Costa Rica is a party to:

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

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

Recommendations:

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

Cyprus

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

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

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

Offshore Center: Yes

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

Free Trade Zones: Yes

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

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

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

Criminalizes terrorist financing: Yes

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

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

Know-your-customer rules: Yes

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

Bank records retention: Yes

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

Suspicious transaction reporting: Yes

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

Large currency transaction reporting: Yes

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

Narcotics asset seizure and forfeiture:

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

Narcotics asset sharing authority: Yes

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

Cross-border currency transportation requirements: Yes

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

Cooperation with foreign governments (including refusals): Yes

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

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

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

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

U.S.-related currency transactions:

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

Records exchange mechanism with U.S.:

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

International agreements:

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

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

Cyprus is a party to:

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

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

Area Administered by Turkish Cypriots

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

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

Adoption of essential laws and regulations:

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

Cross border currency transportation requirements:

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

Recommendations:

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

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

Dominican Republic

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

Offshore Center: Legally authorized

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

Free Trade Zones: Yes

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

Criminalizes narcotics money laundering: Yes

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

Criminalizes other money laundering, including terrorism-related: Yes

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

Criminalizes terrorist financing: Yes

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

Know-your-customer rules: Yes

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

Bank records retention: Yes

Records must be maintained for a minimum of five years.

Suspicious transaction reporting: Yes

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

Large currency transaction reporting: Yes

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

Narcotics asset seizure and forfeiture:

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

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

Narcotics asset sharing authority: Yes

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

Cross-border currency transportation requirements: Yes

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

Cooperation with foreign governments: Yes

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

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

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

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

U.S.-related currency transactions:

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

Records exchange mechanism with U.S.: No

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

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

International agreements:

The Dominican Republic is a party to:

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

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

Recommendations:

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

France

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

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

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

Criminalizes other money laundering, including terrorism-related: Yes

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

Criminalizes terrorist financing: Yes

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

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

Know-your-customer rules: Yes

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

Bank records retention: Yes

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

Suspicious transaction reporting: Yes

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

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

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

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

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

Cooperation with foreign governments: Yes

There are no known impediments to international cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

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

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

U.S.-related currency transactions:

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

Records exchange mechanism with U.S.:

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

International agreements:

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

France is a party to:

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

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

Recommendations:

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

Germany

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

Offshore Center: No

Free Trade Zones: Yes

Free Trade Zones of Hamburg, Bremerhaven, and Cuxhaven

Criminalizes narcotics money laundering: Yes

The German Criminal Code Section 261.

Criminalizes other money laundering, including terrorism-related: Yes

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

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

Criminalizes terrorist financing: Yes

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

See previous section.

Know-your-customer rules: Yes

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

Bank records retention: Yes

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

Suspicious transaction reporting: Yes

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

Large currency transaction reporting: No

No requirement exists for systematic reporting of large cash transactions.

Narcotics asset seizure and forfeiture:

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

Narcotics asset sharing authority:

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

Cross-border currency transportation requirements: Yes

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

Cooperation with foreign governments (including refusals):

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

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There are no known implementation issues.

U.S.-related currency transactions:

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

Records exchange mechanism with U.S.:

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

International agreements:

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

Germany is a party to:

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

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

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

Greece

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

Offshore Center:

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

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

Free Trade Zones: Yes

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

Criminalizes narcotics money laundering: Yes

See below.

Criminalizes other money laundering, including terrorism-related: Yes

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

Criminalizes terrorist financing: Yes

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

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

Know-your-customer rules: Yes

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

Bank records retention: Yes

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

Suspicious transaction reporting: Yes

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

Large currency transaction reporting:

No information provided.

Narcotics asset seizure and forfeiture:

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

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

Narcotics asset sharing:

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

Cross-border currency transportation requirements: Yes

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

Cooperation with foreign governments (including refusals): Yes

No known impediments exist.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues/comments:

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

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

U.S.-related currency transactions:

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

Records exchange mechanism with U.S.:

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

International agreements:

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

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

Greece is a party to:

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

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

Recommendations:

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

Countries/Jurisdictions of Primary Concern - Guatemala through Mexico



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