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2011 International Narcotics Control Strategy Report (INCSR)--Volume II: Money Laundering and Financial Crimes Country Database--Indonesia through Mongolia


Report
Bureau of International Narcotics and Law Enforcement Affairs
May 20, 2011


Indonesia

Although neither a regional financial center nor an offshore financial haven, Indonesia is vulnerable to money laundering and terrorist financing due to gaps in financial system regulation, extensive use of cash in the economy, a lack of effective law enforcement, and the wide-ranging tactics of major indigenous terrorist groups, such as Jemaah Islamiyah, and their financiers from abroad. Most money laundering in the country is connected to non-drug criminal activity such as corruption, illegal logging, theft, bank fraud, credit card fraud, maritime piracy, sale of counterfeit goods, gambling and prostitution. Indonesia has a long history of smuggling, a practice facilitated by thousands of miles of unpatrolled coastline, weak law enforcement, and poor customs infrastructure. The proceeds of illicit activities are easily moved offshore and repatriated as needed for commercial and personal needs. Although Indonesia’s corruption indicators are improving, corruption remains a major issue for all aspects of Indonesian society and a challenge for anti-money laundering/counter-terrorist financing (AML/CFT) implementation.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: Combination approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, finance companies, insurance companies and insurance brokerage companies, pension fund financial institutions, securities companies, investment managers, money remitters and foreign currency traders

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, financing companies, insurance companies and insurance brokerage companies; pension fund financial institutions, securities companies, and investment managers; custodians, trustees, postal services as providers of fund transfer services, and foreign currency changers (money traders); providers of instruments of payment using cards, e-money or e-wallet; cooperatives doing business as savings and loans; pawnshops, commodity futures traders, and money remitters. Property companies, property agents, car dealers, dealers of precious stones and jewelry/precious metals, art and antique dealers, and auction houses became subject to STR reporting in 2010.

Number of STRs received and time frame: 17,348 in 2010

Number of CTRs received and time frame: 1,461,883 in 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: 36 - January through November 2010

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdiction: YES

Indonesia is a member of 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://www.apgml.org/documents/docs/17/Indonesia%20MER2_FINAL.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

On October 22, President Yudhoyono signed Law No. 8 of 2010 on the Prevention and Eradication of the Crime of Money Laundering. This law expands the list of agencies permitted to conduct money laundering investigations; increases the ability of the independent Financial Intelligence Unit (PPATK) to examine suspicious financial transactions; expands institutions authorized to obtain results of PPATK analysis or examination of transactions; creates a streamlined mechanism to seize and freeze criminal assets; expands the entities which must file reports with PPATK and increases some criminal penalties for money laundering offenses. The law designates non-financial businesses, in addition to Indonesian banks and providers of financial services, which are required to report suspicious transactions to PPATK.

The Central Bank issued new regulations, effective December 1, 2010, applying to rural banks and rural Shariah banks, which contain more extensive requirements for customer due diligence, enhanced due diligence for high-risk customers and politically exposed persons, and checks against the Central Bank’s Terrorist List, as part of Indonesia’s AML/CFT program.

Indonesia continues to lack an effective mechanism to implement UNSCR 1267 and 1373, though it recently passed AML legislation that will provide for the freezing of terrorist assets linked to the UN List of designated terrorists and terrorist organizations. The government also appointed a drafting team to prepare draft terrorist financing legislation that would expand criminal liability, create a better mechanism to freeze and seize terrorist assets and subject non-governmental organizations (NGOs) to PPATK regulation. This draft legislation is expected to be submitted to the legislature in 2011.

In 2010, Indonesian prosecutors brought their first terrorism case based solely on terrorist financing grounds. The Saudi national defendant charged with financing the July 17, 2009 twin Jakarta hotel bombings was acquitted of the terrorist finance charge on June 28, 2010, but found guilty of immigration violations and sentenced to 18 months’ imprisonment. In addition, as of mid-December 2010, there are three indictments under Article 11 of the 2003 Anti-Terrorism law, which proscribes intentionally providing or collecting funds to be used partly or wholly for acts of terrorism.

On July 7, 2010, the Government of Indonesia completed a domestic review of its non-profit sector and the Coordinating Ministry of Politics, Law and Security Affairs is expected to submit to the President recommendations regarding NGO section supervision.

Indonesia has mutual legal assistance treaties with several countries but not the U.S. It shares law enforcement information with the U.S. through memoranda of understanding.

Iran

Iran is not a regional financial center. Its economy is marked by a bloated and inefficient state sector and over-reliance on the petroleum industry. A combination of price controls and subsidies continue to weigh down the economy, although the Iranian government began a broad subsidy reform in 2010. Widespread corruption has also undermined the potential for private sector-led growth. The United States lists Iran as a state-sponsor of terrorism and the Financial Action Task Force (FATF) has repeatedly warned of Iran’s failure to address the risks of terrorist financing, urging jurisdictions around the world to impose effective countermeasures to protect their financial sectors from the dangers of illicit finance emanating from Iran. Iran has a large underground economy, spurred by restrictive taxation, widespread smuggling, currency exchange controls, capital flight, and a large Iranian expatriate community.

Iran has established an international banking network, with many large state-owned banks that have foreign branches and subsidiaries in Europe, the Middle East, Asia, and the Western Hemisphere. In 1994, Iran authorized the creation of private credit institutions; licenses for these banks were first granted in 2001. In a number of cases, Iran has used its state-owned banks to channel funds to terrorist organizations and finance its nuclear and ballistic missile programs. The United States has designated a total of 20 Iranian-linked banks and subsidiaries under its counter-proliferation and terrorism authorities.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF U.S. CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: Unknown

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All crimes approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions:

Not available

KNOW-YOUR-CUSTOMER RULES:

Covered entities: The Central Bank, banks, financial and credit institutions, insurance companies (including the state regulator and reinsurance provider), interest-free funds, charity organizations and institutions, municipalities, notaries, lawyers, accountants, auditors, authorized specialists of the Justice Ministry, and official inspectors

Enhanced due diligence procedures for PEPs: Foreign: Unknown Domestic: Unknown

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: The Central Bank, banks, financial and credit institutions, insurance companies (including the state regulator and reinsurance provider), interest-free funds, charity organizations and institutions, municipalities, notaries, lawyers, accountants, auditors, authorized specialists of the Justice Ministry, and official inspectors

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: None

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: Unknown

Iran is not a member of any Financial Action Task Force (FATF)-style regional body.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In 1984, the Department of State designated Iran as a state sponsor of terrorism. Iran continues to provide material support, including resources and guidance, to multiple terrorist organizations and other groups that undermine the stability of the Middle East and Central Asia. Hamas, Hizballah, and the Palestinian Islamic Jihad (PIJ) maintain representative offices in Tehran in part to help coordinate Iranian financing and training. In November 2008, Treasury revoked the license authorizing “U-turn” transfers involving Iran, thus terminating Iran’s ability to access the U.S. financial system indirectly via non-Iranian foreign banks.

Since 2006, the U.S. has taken a number of targeted financial actions against key Iranian financial institutions, entities, and individuals under non-proliferation, counter-terrorism, human rights, and Iraq-related authorities, i.e., Executive Order 13382, Executive Order 13224, Executive Order 13553, and Executive Order 13438, respectively. To date, the Departments of the Treasury and State have designated over 240 Iranian entities and individuals for proliferation-related activity under Executive Order 13382.

The following are some examples of notable designations under Executive Orders: Twenty Iranian-linked banks (including Bank Sepah, Bank Melli, Bank Mellat, and Export Development Bank of Iran, plus Post Bank, Ansar Bank, Mehr Bank, and Europaisch-Iranische Handelsbank in 2010), located in Iran and overseas, have been designated in connection with Iran’s proliferation activities. One state-owned Iranian bank (Bank Saderat and its foreign operations) was designated for funneling money to terrorist organizations. The Qods Force, a branch of the Iranian Revolutionary Guard Corps (IRGC), was designated for providing material support to the Taliban, Lebanese Hizballah, and Palestinian Islamic Jihad. The Martyrs Foundation (also known as Bonyad Shahid), an Iranian parastatal organization that channels financial support from Iran to several terrorist organizations in the Levant, including Hizballah, Hamas, and the Palestinian Islamic Jihad (PIJ), has been designated along with Lebanon- and U.S.-based affiliates. Another Iranian parastatal, Bonyad Taavon Sepah, was designated in 2010 for its ties to the IRGC. The United States also designated the Islamic Republic of Iran Shipping Lines (IRISL) as a proliferator in 2008 and Iran’s Moallem Insurance Company in 2010 for providing marine insurance to vessels owned by IRISL.

Since July 2006, the United Nations Security Council (UNSC) has passed six related resolutions (UNSCRs), four of which imposed financial sanctions on Iran. The most recent of these, UNSCR 1929, was adopted by the UNSC in June 2010.

In October 2007, the Financial Action Task Force (FATF) issued its first public statement expressing concern that Iran’s lack of a comprehensive framework to counter money laundering and terrorist financing represents a significant vulnerability to the international financial system. In February 2009, the FATF urged all jurisdictions to apply effective countermeasures to protect their financial sectors from the money laundering/terrorist financing risks emanating from Iran and also stated that jurisdictions should protect against correspondent relationships being used to bypass or evade countermeasures or risk mitigation practices. The FATF reiterated its call for countermeasures most recently in October 2010. The FATF urges Iran to immediately and meaningfully address its anti-money laundering/counter the financing of terrorism (AML/CFT) deficiencies, in particular by criminalizing terrorist financing and effectively implementing suspicious transaction reporting requirements.

Since February 2007, the European Union (EU) has also adopted numerous measures to implement the UNSCRs on Iran and further protect the EU from Iranian risks. For example, in 2010, the EU adopted significant new measures against Iran, including new sanctions on several Iranian banks, the IRGC, and IRISL; enhanced vigilance by way of additional reporting and prior authorization for any funds transfers to and from an Iranian person, entity, or body above a certain threshold amount; a prohibition on the establishment of new Iranian bank branches, subsidiaries, joint ventures, and correspondent accounts; and other restrictions on insurance, bonds, energy, and trade.

Numerous countries around the world have also restricted their financial and business dealings with Iran in response to both the UNSC measures on Iran as well as the FATF statements on Iran’s lack of adequate AML/CFT controls. A growing number of governments have moved to designate Iranian banks, and many of the world’s leading financial institutions have voluntarily chosen to reduce or cut ties with Iranian banks. South Korea, Japan, Australia, Canada, Norway, India and others undertook extensive additional listings of Iranian entities and individuals and implemented new systemic measures in 2010.

Iran is ranked 146 out of 178 countries listed in Transparency International’s 2010 Corruption Perception Index. There is pervasive corruption within the ruling and religious elite, government ministries, and government-controlled business enterprises.

In Iran and elsewhere in the region, proceeds from narcotics sales are sometimes exchanged for trade goods via value transfer. Illicit proceeds from narcotics trafficking are used to purchase goods in the domestic Iranian market; those goods are often exported and sold in Dubai. Iran’s merchant community makes active use of hawala and moneylenders. Counter-valuation in hawala transactions is often accomplished via trade, thus trade-based money laundering is likely a prevalent form of money laundering. Many hawaladars and traditional bazaari are linked directly to the regional hawala hub in Dubai. Over 300,000 Iranians reside in Dubai, with approximately 8,200 Iranian-owned companies based there.

Iran’s real estate market is also often used to launder money. Frequently, real estate settlements and payments are made overseas. In addition, there are reports that billions of dollars in Iranian capital has been invested in the United Arab Emirates, particularly in Dubai real estate.

In 2010, the Government of the Islamic Republic of Iran teamed with United Nations Office on Drugs and Crime to establish a financial intelligence unit (FIU) that will analyze suspicious financial transactions, particularly those dealing with illicit narcotics proceeds. However, no independent assessment has been conducted to assess if the FIU meets international standards.

Iraq

Iraq’s economy is primarily cash-based, and there is little data available on the extent of money laundering in the country. Smuggling is endemic, involving consumer goods, cigarettes, and petroleum products. There is a large market in Iraq for stolen automobiles from Europe and the United States. Bulk cash smuggling, counterfeit currency, trafficking in persons, and intellectual property rights violations are also major problems. Ransoms from kidnappings and extortion are often used to finance terrorist networks. There are credible reports of counterfeiting. Trade-based money laundering, customs fraud, and value transfer are found in the underground economy. Hawala networks, both licensed and unlicensed, are widely used for legitimate and illicit purposes. Regulation and supervision of the formal and informal financial sectors is still quite limited and enforcement is subject to political constraints, resulting in weak private sector controls. Corruption is a major challenge and is exacerbated by weak financial controls in the banking sector and weak links to the international law enforcement community. Transparency International’s 2010 International Corruption Perception index ranked Iraq as 175 out of 178 countries, demonstrating a slight decline from the previous year.

Iraq has four free trade zones: the Basra/Khor al-Zubair seaport; Ninewa/Falafel area; Sulaymaniyah; and al-Qaim, located in western Al Anbar province. Under the Free Trade Zone (FTZ) Authority Law, goods imported or exported from the FTZ are generally exempt from all taxes and duties, unless the goods are to be imported for use in Iraq. Additionally, capital, profits, and investment income from projects in the FTZ are exempt from taxes and fees throughout the life of the project, including the foundation and construction phases. Value transfer via trade goods is a significant problem in Iraq and the surrounding region. Iraq is investigating the application of a new customs tariff regime.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: YES

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: NO

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

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

KNOW-YOUR-CUSTOMER RULES:

 

Covered entities: Banks; investment funds managers; life insurance companies and those which offer or distribute shares in investment funds; securities dealers; money transmitters, hawaladars, and issuers or managers of credit cards and travelers checks; foreign currency exchange houses; asset managers, transfer agents, investment advisers, securities dealers; and, dealers in precious metals and stones

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks; investment funds managers; life insurance companies and those which offer or distribute shares in investment funds; securities dealers; money transmitters, hawaladars, and issuers or managers of credit cards and travelers checks; foreign currency exchange houses; asset managers, transfer agents, investment advisers, securities dealers; and, dealers in precious metals and stones

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

Assets forfeited: criminally: None civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Iraq is a member of MENAFATF, a Financial Action Task Force (FATF)-style regional body. Iraq has not yet undergone a mutual evaluation.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

CPA Law 93, AML Act of 2004, the only anti-money laundering statute in Iraq, takes an “all serious crimes” approach although the statute itself references “proceeds of some form of unlawful activity….” Although the statute seems to broaden itself even beyond serious crime, the criminalization under CPA Law 93 is that of a misdemeanor. Thus, Iraq will not prosecute cases under this law because the law does not effectively criminalize money laundering. Iraq should become a party to the UN Convention for the Suppression of the Financing of Terrorism.

Iraq’s legal framework needs to be strengthened, either by amendment or redrafting of new AML/CFT legislation. Until the parliamentarians change the law and adequately criminalize money laundering, there will be a lack of political will in enforcing it. In addition, Iraqi ministries need to support a viable AML/CFT regime with cooperation across ministries. The lack of implementation of legislation and weak enforcement by the Money Laundering Reporting Office (MLRO) housed in the Central Bank of Iraq undermine its ability to be a stalwart counterforce to terrorist financing and money-laundering. The MLRO does not appear to take action to gather financial intelligence on suspected criminal activity to shore up law enforcement efforts or assist in obtaining relevant information to support ongoing investigations from foreign jurisdictions. The Government of Iraq should ensure the MLRO has the capacity, resources and authorities to serve as the central point for collection, analysis and dissemination of financial intelligence to law enforcement and to provide international assistance.

Investigators, prosecutors and judges all need support from their principals to move farther with pursuing AML/CFT cases. Prosecutors and investigators are frustrated because their cases are not pursued by judges; similarly, judges claim the cases they receive are of poor quality and not prosecutable. Senior level support and increased capacity for all parties are necessary to ensure AML/CFT cases can be successfully prosecuted in Iraq.

In practice, despite customer due diligence requirements, most banks open accounts based on the referral of existing customers and/or verification of a person’s employment. Actual application of the rules varies widely across Iraq’s 39 state-owned and private banks. Also, rather than file STRs in accordance with the law, most banks either do internal investigations or contact the FIU, which does an account review to resolve any questionable transactions. In practice, very few STRs are filed. US dollars are widely accepted and are used for many payments made by the US military, and assistance agencies and their contractors.

Banks do receive the UNSCR 1267 Committee list of designated terrorists and terrorist organizations, although the current process for distribution is very inefficient and inconsistent.

Ireland

Ireland is an increasingly significant European and international financial services hub, with a number of multinational banks having set up offices in Dublin.

The primary sources of funds laundered in Ireland are prostitution, cigarette smuggling, drug trafficking, fuel laundering, domestic tax violations and welfare fraud. Customs authorities have also intercepted cash from drug dealing which was being smuggled out of Ireland. The largest such interception was in 2010 when a suitcase belonging to an Irish drug trafficker containing €676,000 (approximately $878,800) in used bank notes was seized at Dublin International Airport.

Irish authorities estimate that up to 80 percent of the reports of suspicious transactions filed with them involve funds derived from domestic tax violations and social welfare fraud. While money laundering occurs via credit institutions such as banks, money has also been laundered through schemes involving remittance companies, solicitors, accountants, and second-hand car dealerships. According to law enforcement, money is most commonly laundered through the purchase of high-value goods for cash; the transfer of funds from overseas through Irish credit institutions; the filtering of funds via complex company structures; and the purchase in Ireland of Irish and foreign real property.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All crimes approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, building societies, the post office, stock brokers, credit unions, currency exchanges, life insurance companies, and insurance brokers

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, building societies, the post office, stock brokers, credit unions, currency exchanges, life insurance companies, and insurance brokers

Number of STRs received and time frame: 14,500 in 2009

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 11 in 2009

Convictions: Two in 2009

Assets forfeited: criminally: €1.35 million (approximately $1.9 million) in 2009 civilly: Not available

RECORDS EXCHANGE MECHANISM:

With the United States: YES

With other governments/jurisdictions: Exchange intelligence only

Ireland is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/63/29/36336845.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Criminal Justice (Money Laundering and Terrorist Financing) Bill 2010 consolidates Ireland’s existing anti-money laundering and counter-terrorist financing laws, which previously were contained mainly in the Criminal Justice Act 1994. It also increases the obligations on a wide range of individuals and organizations to disclose information related to suspected money-laundering and terrorist financing.

On June 17, 2010, Ireland became a party to the UN Convention against Transnational Organized Crime. The Government of Ireland should establish mechanisms for sharing information with other jurisdictions and providing assistance in transnational criminal investigations. Ireland also should become a party to the UN Convention against Corruption.

Isle of Man

Isle of Man (IOM) is a British crown dependency, and while it has its own parliament, government, and laws, the United Kingdom (UK) remains constitutionally responsible for its defense and international representation. Offshore banking, manufacturing, and tourism are key sectors of the economy. The government offers incentives to high-technology companies and financial institutions to locate on the island. Its large and sophisticated financial center is potentially vulnerable to money laundering. Most of the illicit funds in the IOM are from fraud schemes and narcotics trafficking in other jurisdictions, including the UK. Identity theft and Internet abuse are growing segments of financial crime activity.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks; building societies; credit issuers; financial leasing companies; money exchanges and remitters; issuers of checks, traveler’s checks, money orders, electronic money, or payment cards; guarantors; securities and commodities futures brokers; safekeeping, portfolio and asset managers; estate agents; auditors, accountants, lawyers and notaries; insurance companies and intermediaries; casinos and bookmakers; high-value goods dealers and auctioneers

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks; building societies; credit issuers; financial leasing companies; money exchanges and remitters; issuers of checks, traveler’s checks, money orders, electronic money, or payment cards; guarantors; securities and commodities futures brokers; safekeeping, portfolio and asset managers; estate agents; auditors, accountants, lawyers and notaries; insurance brokers and companies and intermediaries; casinos and bookmakers; high-value goods dealers and auctioneers

Number of STRs received and time frame: 1,435

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 15 in 2010

Convictions: 13 in 2010

Assets forfeited: criminally: $510,381 civilly: $94,903

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Compliance with international standards 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/pubs/ft/scr/2009/cr09275.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

IOM legislation provides powers to constables, including customs officers, to investigate whether a person has benefited from any criminal conduct. These powers allow information to be obtained about that person’s financial affairs. These powers can be used to assist in criminal investigations abroad as well as in the IOM. In 2003, the U.S. and the UK agreed to extend to the IOM the U.S.-UK Treaty on Mutual Legal Assistance in Criminal Matters.

The Terrorism (Finance) Act 2009 allows the IOM authorities to compile their own list of suspects subject to sanctions when appropriate.

IOM is a Crown Dependency and cannot sign or ratify international conventions in its own right unless entrusted to do so. Rather, the UK is responsible for IOM’s international affairs and, at IOM’s request, may arrange for the ratification of any Convention to be extended to the Isle of Man. The UK’s ratification of the 1988 UN Drug Convention was extended to include IOM on December 2, 1993; its ratification of the UN Convention against Corruption was extended to include the IOM on November 9, 2009; and its ratification of the International Convention for the Suppression of the Financing of Terrorism was extended to IOM on September 25, 2008. The UK has not extended the UN Convention against Transnational Organized Crime to the IOM.

Israel

Israel is not regarded as a regional financial center. It primarily conducts financial activity with the markets of the United States and Europe, and to a lesser extent with the Far East. Criminal groups in Israel, either home-grown or with ties to the former Soviet Union, United States, and European Union often utilize a maze of offshore shell companies and bearer shares to obscure beneficial owners. The Minister of Public Security recently announced that domestic revenue from the drug trade is in the billions of dollars. Seizures by the police have increased dramatically over 2009, with increased manpower and cooperation at key border points. Human trafficking is considered the crime-for-profit with the greatest human toll in Israel, and public corruption the crime with the greatest social toll.

Black market penetration in Israel remains low and is comparable in scale to that of Western, industrialized nations. With the exception of a few isolated incidents involving the sales of drugs in the United States by Israeli organized crime, Israel’s illicit drug trade is regionally-focused, with Israel as more of a transit country than a stand-alone significant market. Concern from the authorities is growing relative to illegal pharmaceuticals sales, some retail businesses which are suspected money-laundering enterprises, and corruption accusations against some public officials which may or may not be politically-motivated. Bilateral cooperation between United States and Israeli law-enforcement authorities is very high, including joint repatriations, training exercises and sharing of information where relevant.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, members of the Tel Aviv Stock Exchange, portfolio managers, insurers and insurance agents, provident funds and the companies who manage them, providers of currency services, money services businesses and the Postal Bank

Number of STRs received and time frame: 27,332 (January – November 2010)

Number of CTRs received and time frame: 960,316 (January – November 2010)

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 19 (January – August 2009)

Convictions: 13 (January – August 2009)

Assets forfeited: criminally: civilly: Combined total assets forfeited (criminally and civilly): 1,927,000 NIS (approximately $550,571) January – August 2010

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Israel has observer status with MONEYVAL (the Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism). Its most recent mutual evaluation can be found here: www.coe.int/moneyval.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

A scathing report by the State Comptroller to the Knesset in May 2009 cited Israel’s failure to effectively organize and fight organized crime. While the police did get credit for pursuing and arresting many leading mafia figures despite lack of resources, the report pointed out that the State would have to do a better job of targeting and weakening the financial foundation of organized crime; there was considerable lack of cooperation, coordination of activity, and sharing of information among relevant agencies; and ineffective leveraging of current legislation, including anti-money laundering laws. With an established director of the Israeli Money Laundering Authority in September 2010, the hope is that a key source of internal lack of coordination which has plagued some sensitive operations will be reduced.

In July 2009, the Ministry of Finance announced that a special unit would be established alongside the Tax Authority to coordinate the economic side of the fight against organized crime, including better tracking of money laundering. As of November 2010, this unit still has not been established. The Israeli National Police established the Lahav 433 special unit to target organized crime, which had many notable successes in arresting senior members of crime families. While significant resources and attention exist within the GOI to fight terrorist-related money laundering, the lack of resource allocation and follow-through on non-terror related financial crimes still lags significantly versus the scope of the problem. Organized crime has existed in Israel for many years, although it is only within the last couple of years that there has been formal acknowledgement by the authorities of the scope of the problem, or existence of crime families. The State of Israel convicted a businessman and former mayoral candidate in Jerusalem for laundering over 650 million shekels (approximately $183.8 million).

Israel’s “right of return” laws for citizenship have meant that crime figures can and have continued to operate in their home countries while having easy access into and out of the country. Israeli citizenship for those “making aliyah” does not require strong ties to Israel such as proof of continuous residency. Therefore it is not uncommon for some crime figures suspected of money laundering to hold passports in a home country, a third country for business, and Israel without necessarily having established ties here.

U.S. law enforcement has a robust relationship with the Israel Tax Authority’s (ITA’s) Anti Drug and Money Laundering Unit. A customs mutual assistance agreement between the U.S. and Israel allows for the exchange of information between Customs services in support of joint financial investigations, and the U.S. and ITA routinely coordinate to target illicit finance and bulk cash smuggling between the two countries. In addition, U.S. and Israeli law enforcement officials cooperate on extradition requests for individuals accused of crimes such as money laundering. For example, Itzhak Abergil, a U.S.-designated Consolidated Priority Organization Target (CPOT), and several other Israeli nationals recently lost their appeal fighting extradition to the United States, where they now face a host of charges including money laundering, and drug trafficking.

Italy

Italy is fully integrated into the European Union (EU) single market for financial services. Money laundering is a concern because of the prevalence of homegrown organized crime groups as well as criminal organizations from abroad, especially from Albania, Bulgaria, China, Israel, Romania and Russia. Italy is both a consumer country and a major transit point for heroin coming from South Asia through the Balkans en route to Western/Central Europe and, to a lesser extent, the United States. The heavy involvement of organized crime groups in narcotics trafficking complicates narcotics-related anti-money laundering (AML) activities because of the sophistication of the laundering methods used by these groups. Italian and ethnic Albanian criminal organizations work together to funnel drugs to Italy and, in many cases, on to third countries. Additional important trafficking groups include Balkan organized crime entities, as well as Nigerian, Colombian, and other South American trafficking groups. In addition to the narcotics trade, laundered money originates from myriad criminal activities, such as alien smuggling, contraband cigarette smuggling, counterfeit goods, extortion, human trafficking, and usury. Financial crimes not directly linked to money laundering, such as credit card fraud, Internet fraud, and phishing have increased over the past year. Phishing more than tripled from 2008 to 2009 (from 791 to 2,687 instances) for an overall amount increase from 3 to 8 million euros (approximately $3.9 to $10.4 million). Italy’s financial intelligence unit (FIU) also reported a reduction among suspicious cash transactions, but an increase in wire transactions and money transfers.

Money laundering occurs to some extent in both the regular banking sector and the nonbank financial system, including casinos, money transfer houses, and the gold market. There is a substantial black market for smuggled goods in the country, but it is not believed to be funded significantly by narcotics proceeds. Italy’s underground economy is an estimated 15-17 percent of Italian GDP, totaling about 233 to 264 billion euros (approximately $304 billion to $344 billion), though a substantial fraction of this total is related to tax evasion of otherwise legitimate commerce.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, Italian postal services, electronic money institutions, investment firms, asset management companies, insurance companies, agencies providing tax collection services, stock brokers, financial intermediaries, trust companies, lawyers, accountants, auditors, and casinos

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, Italian postal services, electronic money institutions, investment firms, asset management companies, insurance companies, agencies providing tax collection services, stock brokers, financial intermediaries, trust companies, lawyers, accountants, auditors, and casinos

Number of STRs received and time frame: 37,114 in 2010

Number of CTRs received and time frame: 37,231 in 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 23

Convictions: 16

Assets forfeited: criminally: $317,063,640 confiscated in 2010 civilly: Not applicable

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Italy is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/infobycountry/0,3380,en_32250379_32236963_1_70522_43383847_1_1,00.html

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Given the relatively low number of STRs being filed by non-bank financial institutions, Italy should improve its training efforts and supervision in this sector and should clarify attorney/client privilege. Italy should take steps to allow for civil forfeiture of criminal proceeds. Italian law enforcement agencies should take additional steps to understand and identify underground finance and value transfer methodologies employed by Italy’s burgeoning immigrant communities. Italy also should ensure its new regulations on PEPs are enforced. Finally, Italy should continue its active participation in multilateral fora dedicated to the global fight against money laundering and terrorist financing and its assistance to jurisdictions with nascent or developing AML/CFT regimes.

Jamaica

Money laundering in Jamaica is primarily related to proceeds from illegal narcotics and to a lesser extent psychotropic substances. Criminal proceeds laundered in Jamaica are derived from both domestic and foreign criminal activities, but primarily from foreign criminal activities. Money laundering is largely controlled by organized criminal groups whose primary activity is drug trafficking. Public corruption also contributes to money laundering and most often occurs when a public contract is awarded that gives an organized criminal group the opportunity to benefit. Jamaica has experienced a slight increase in financial crimes, primarily emanating from the Lotto Scam and electronic frauds/cybercrimes.

There is a significant black market for smuggled goods in Jamaica, but there is no data or intelligence to suggest that smuggling is funded by proceeds from narcotics or other illicit means. However, evidence suggests that funds generated from contraband smuggling are laundered through the financial system.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, credit unions, merchant banks, wire-transfer companies, exchange bureaus, remittance companies, mortgage companies, insurance companies, securities brokers and other intermediaries, securities dealers, and investment advisors

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, credit unions, merchant banks, exchange bureaus, remittance companies, mortgage companies, insurance companies, securities brokers and other intermediaries, securities dealers, and investment advisors

Number of STRs received and time frame: 249,130 in 2010

Number of CTRs received and time frame: 113,435 in 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None in 2010

Convictions: Three in 2010

Assets forfeited: criminally: None civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Financial Investigations Division Act became law on April 17, 2010. This Act establishes the Financial Investigations Division (FID) by statute and empowers it to undertake financial crime investigations, including money laundering, with a greater level of effectiveness and authority. Before the Act, the division was established by action of the Minister of Finance with limited enforcement authority. However, the FID’s capacity to enforce AML/CFT laws is restricted by resource issues and the limited amount of time within the law to process consent to processing of a transaction subject to a suspicious transaction report after it is reported by a financial organization. Additionally, designated non-financial businesses and professions are not covered under Jamaica’s AML law. On June 7, 2010, the Cabinet accepted and approved recommendations on a proposed supervisory regime for these entities and the categories of persons to be designated as gatekeepers.

Effectiveness is also hindered by lengthy delays in the court system in the processing of judicial orders. There is a need to amend the Jamaica’s Evidence Act to allow witnesses overseas to give evidence by way of video conferencing. This would assist in the investigation and prosecutions of financial crimes, particularly cases where the victims are overseas. Consideration should also be given to the establishment of a special court to deal with financial crimes in order to fast track those cases.

A total of sixty-four money laundering cases are being investigated, and the government has seized $2.3 million in cash derived from the international drug trade. These cases are pending before the courts, which will decide whether the seized funds will be forfeited.

Through the Caribbean Regional Drug Law Enforcement Training Centre (REDTRAC) located in Jamaica, the government and its bilateral partners provide specialized training for regional law enforcement officers in areas such as narcotics investigations, intelligence gathering and analysis, kidnapping and extortion, money laundering, financial fraud and assets tracing. The institution serves law enforcement officials from Jamaica and across the Caribbean region.

Japan

Although the Japanese government continues to strengthen legal institutions to permit more effective enforcement of anti-money laundering/counter-terrorist financing (AML/CFT) laws, Japan still faces substantial risk of money laundering by organized crime (including Boryokudan, Japan’s organized crime groups, and Iranian drug trafficking organizations), extremist religious groups, and other domestic and international criminal elements. The major sources of money laundering proceeds include drug trafficking, fraud, loan-sharking (illegal money lending), remittance frauds, the black market economy, prostitution, and illicit gambling. In the past year, there has been an increase in financial crimes by citizens of West African countries, such as Nigeria and Ghana, who are resident in Japan. There is not a significant black market for smuggled goods, and the existence of alternative remittance systems is believed to be very limited in Japan.

Japan is not an offshore financial center. It has one free-trade zone, the Okinawa Special Free Trade Zone, established in 1999 in Naha, to promote industry and trade in Okinawa. The zone is regulated by the Department of Okinawa Affairs in the Cabinet Office. Japan also has two free ports, Nagasaki and Niigata. Customs authorities allow the bonding of warehousing and processing facilities adjacent to these ports on a case-by-case basis.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Financial institutions, real estate agents and professionals, precious metals and stones dealers, antique dealers, postal service providers, lawyers, judicial scriveners, certified administrative procedures specialists, certified public accountants, certified public tax accountants, trust companies

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Financial institutions, real estate agents and professionals, precious metals and stones dealers

Number of STRs received and time frame: 268,582 for January-November 2010

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

Assets forfeited: criminally: approximately ¥2.7 billion (approximately $33 million)

January 1 - December 31, 2009 civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Japan’s compliance with international standards is notably deficient on recommendations specific to financial institutions. While Japan has legal requirements for customer due diligence (CDD) programs in its institutions, the CDD provisions are severely lacking, and there is no requirement for financial institutions to gather information on the purpose and intended nature of the business relationship or to conduct ongoing due diligence on these relationships. Japan should strengthen its CDD provisions to include specific requirements for due diligence by financial institutions and to require financial institutions to collect information about business accounts and transactions.

The Government of Japan (GOJ) has not implemented a risk-based approach to AML/CFT, and there is no mandate for enhanced due diligence for higher-risk customers, business relationships, and transactions. The current regulations do not authorize simplified due diligence, though there are exemptions to the identification obligation on the grounds that the customer or transaction poses no or little risk of money laundering or terrorist financing. Japan should implement a risk-based approach to its AML/CFT regime.

The GOJ’s number of investigations, prosecutions, and convictions for money laundering in relation to the number of drug and other predicate offenses is low, despite the GOJ’s many legal tools and programs to combat these crimes. The National Police Agency (NPA) provides very limited cooperation with other GOJ agencies, and most foreign governments, on nearly all criminal, terrorism, or counter-intelligence-related matters. The NPA’s minimal level of cooperation has caused the law enforcement offices of nearly all other industrialized countries to either leave Japan or significantly reduce their presence. The GOJ should develop a robust program to investigate and prosecute money laundering offenses, and require enhanced cooperation by the NPA with its counterparts in the GOJ and foreign missions.

The GOJ’s system does not allow the freezing of terrorist assets without delay, and in practice the Ministry of Finance has never actually frozen or confiscated any terrorist assets. Japan’s system does not cover assets raised by a non-terrorist for use by a terrorist or terrorist organization, and reaches only funds, not other kinds of assets. The GOJ should enact legislation to allow terrorist assets to be frozen without delay, and to expand the scope of assets to include non-financial holdings.

Japan should provide more training and investigatory resources for AML/CFT law enforcement authorities, establish an effective CDD regime, and consider implementing a system to report large currency transactions. As Japan is a major trading power, the GOJ should take steps to identify and combat trade-based money laundering. Japan should also become a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption, and should fully implement the freezing obligations for terrorist funds, according to the UN Convention for the Suppression of the Financing of Terrorism.

Jersey

The Island of Jersey, the largest of the Channel Islands, is an international financial center offering a sophisticated array of offshore services. Jersey is a British crown dependency but has its own parliament, government, and laws. The United Kingdom (UK) remains constitutionally responsible for its defense and international representation but has entrusted Jersey to negotiate and sign tax information exchange agreements directly with other jurisdictions and regulate its own financial service sector. The financial services industry is a key sector, with banking, investment services, and trust and company services accounting for approximately half of Jersey’s total economic activity. As a substantial proportion of customer relationships are established with nonresidents, most of the illicit money in Jersey is derived from foreign criminal activity. In particular, the Island’s financial services industry continues to be vulnerable to the laundering of the proceeds of foreign political corruption in industries such as oil, gas and transportation.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: NO

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks; money exchanges and foreign exchange dealers; financial leasing companies; issuers of credit and debit cards, travelers’ checks, money orders and electronic money; securities brokers and dealers; safekeeping, trust, and portfolio managers; insurance companies and brokers; fund products and fund operators; casinos; company service providers; real estate agents; dealers in precious metals and stones and other high-value goods; notaries, accountants, lawyers and legal professionals

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks; money exchanges and foreign exchange dealers; financial leasing companies; issuers of credit and debit cards, travelers’ checks, money orders and electronic money; securities brokers and dealers; safekeeping, trust, and portfolio managers; insurance companies and brokers; fund products and fund operators; casinos; company service providers; real estate agents; dealers in precious metals and stones and other high-value goods; notaries, accountants, lawyers and legal professionals

Number of STRs received and time frame: 1,854 in 2009

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: One prosecuted to judgment in 2010

Convictions: One in 2010

Assets forfeited: criminally: £7,454,250 (approximately $11,299,600) in 2010 civilly: Not applicable

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

In lieu of a mutual evaluation, a report was prepared by the International Monetary Fund’s Financial Sector Assessment Program. The report can be found here: http://www.imf.org/external/pubs/ft/scr/2009/cr09280.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Although not yet used in practice, Jersey has an ability to designate persons and freeze their assets in conformity with UNSCR 1373. No formal procedure is in place to receive and assess requirements based on a foreign request, as required by UNSCR 1373. Additionally, the definition of “funds” subject to freezing does not expressly refer to assets “jointly” or “indirectly” owned or controlled by designated or listed persons.

The Jersey Financial Services Commission (JFSC) website contains a link to the United Kingdom Consolidated List of asset freeze targets, as designated by the United Nations, European Union and United Kingdom. It does not use other means to distribute UN lists of designated terrorists or terrorist entities.

Jersey does not enter into bilateral mutual legal assistance treaties. Instead it is able to provide mutual legal assistance to any jurisdiction, including the US, in accordance with the Criminal Justice (International Co-operation) (Jersey) Law 2001 and the Civil Asset Recovery (International Co-operation (Jersey) Law 2007. Jersey has granted U.S. requests for assistance in criminal matters. Jersey signed a Tax Information Exchange Agreement with the United States in 2002. In 2009, the JFSC signed a statement of cooperation with the Board of Governors of the Federal Reserve System, Office of the Comptroller of Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision. This statement is in addition to existing memoranda of understanding with the Securities and Exchange Commission and Commodity Futures Trading Commission.

Jersey is a Crown Dependency and cannot sign or ratify international conventions in its own right unless entrusted to do so, as is the case with tax information exchange agreements. Rather, the UK is responsible for Jersey’s international affairs and, at Jersey’s request, may arrange for the ratification of any Convention to be extended to Jersey. The UK’s ratification of the 1988 UN Drug Convention was extended to include Jersey in July 1998; its ratification of the UN Convention against Corruption was extended to include Jersey in November 2009; and its ratification of the International Convention for the Suppression of the Financing of Terrorism was extended to Jersey on September 25, 2008. The UK has not extended the UN Convention against Transnational Organized Crime to Jersey.

Jersey authorities have a continuing concern regarding the increasing incidence of domestic drug related crimes. The customs and law enforcement authorities devote considerable resources to countering drug-related crime. Jersey should continue to maintain and enhance its level of compliance with international standards to assist those efforts. The Financial Services Commission should ensure its AML Unit has enough resources to continue to function effectively, and to provide outreach and guidance to the sectors it regulates, especially the newest entities required to file reports. The Commission also should distribute the UN lists of designated terrorists and terrorist organizations to the obligated entities and not expect the entities to stay current through their own Internet research.

Jordan

Although Jordan is not a regional or offshore financial center, it has a well-developed financial sector with significant banking relationships in the Middle East. Jordan’s long and remote desert borders and nexus to Iraq, Syria, Saudi Arabia and the West Bank make it susceptible to the smuggling of bulk cash, fuel, narcotics, cigarettes, counterfeit goods and contraband. Jordan boasts a thriving “import-export” community of brokers, traders, and entrepreneurs who regionally are involved with value transfer via trade and customs fraud. There are anecdotal indications of the use of Jordan for money laundering of illicit funds derived from narcotics and other criminal activity in the U.S., and possibly Europe, via bulk cash smuggling for criminal elements involving Jordanians in those areas. However, it is thought the major sources of illicit funds in Jordan are most likely to be related to commercial fraud, customs fraud, tax fraud and intellectual property rights (IPR) violations. In 2010, Jordan made significant strides to bring its anti-money laundering/counter-terrorist financing (AML/CFT) regime into fuller compliance with international standards and to raise the profile of AML/CFT stakeholders.

There are six public free trade zones (FTZ) in Jordan: the Zarqa Free Zone, the Sahab Free Zone, the Queen Alia International Airport Free Zone, the Al-Karak Free Zone, the Al-Karama Free Zone, and the Aqaba Special Economic Zone (ASEZ). With the exception of Aqaba, these FTZs list their activities merely as trade. There are 36 private free trade zones, a number of which are related to the aviation industry, with five more being established. Some of these FTZs list their activities as industrial, agricultural, pharmaceutical, training of human capital, and multi-purpose. With the exception of ASEZ, all free trade zones are regulated by the Jordan Free Zones Corporation in the Ministry of Finance. The Aqaba Special Economic Zone Authority (ASEZA), a ministerial level authority, controls all of the port city of Aqaba. ASEZA has its own customs authority, which operates separately from Jordan Customs and processes all merchandise and commodities destined for businesses in the zone and all passengers entering the zone. Jordan Customs processes all shipments of goods in transit to areas outside the zone.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, exchange companies and money transfer companies; securities brokers and investment and asset managers; credit and financial leasing companies; insurance companies, brokers and intermediaries; entities providing credit, leasing services, financial management companies, postal services, real estate and development, and traders of precious metals and stones

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, exchange and money transfer companies, securities brokers and investment and asset managers; credit and financial leasing companies; insurance companies, brokers and intermediaries; entities providing credit, leasing services, financial management companies, postal services, real estate and development, and traders of precious metals and stones

Number of STRs received and time frame: 510 -- July 2007 - December 14, 2010

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Two in 2010

Convictions: One in 2010

Assets forfeited: criminally: $2.05 million -- July 2007 - December 14, 2010 civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In February 2010, the Financial Action Task Force (FATF) identified Jordan as a jurisdiction with significant AML/CFT vulnerabilities. The Government of Jordan has been actively engaged to alleviate the noted deficiencies. By late 2010, Jordan had addressed successfully all noted areas of non-compliance with key international standards.

During 2010, the Government of Jordan (GOJ) remedied several deficiencies in its AML/CFT legal framework. Those changes include: (a) extension of the range of predicate offenses to include all offenses (both misdemeanors and felonies) which are crimes in Jordan, whether committed in Jordan or abroad; (b) clarification that a conviction of an underlying predicate offense is not a prerequisite for criminal indictment for money laundering; (c) extension of the scope of the terrorist financing offense to include provision to, or collection of funds by terrorist organizations or individual terrorists, including in situations where there is no proof that the funds were going to be directed to the commission of a terrorist act; (d) inclusion of an adequate definition of what constitutes “funds” under terrorist financing provisions; (e) inclusion of general measures to provide for the freezing, seizing and confiscation of funds related to money laundering and terrorist financing; (f) extension of the mandate of the FIU to receive STRs related to terrorist financing; and, (g) establishment of effective procedures for implementing terrorist financing-related obligations under UNSCRs 1267 and 1373.

In addition to changes in the legal framework, other operational developments in 2010 impacting the AML/CFT regime in Jordan include expansion of the FIU staff and preparations to move to an independent office space. In addition, the Prime Minister issued a directive confirming the primacy of the role of the FIU in the AML/CFT regime. Lastly, a cross-border customs declaration form was issued to implement existing declaration requirements related to currency transport in excess of 15,000 Jordanian dinars (approximately $21,150).

The first two indictments for money laundering in Jordan occurred in 2010. In both cases, the predicates were committed outside of Jordan. One conviction has been achieved to date, involving two defendants and resulting in a sentence of three years’ hard labor, a fine of 10,000 Jordanian dinars (approximately $14,100), and confiscation of the proceeds.

Kazahkstan

While Kazakhstan is not a regional financial center, it has the best developed financial system in the Central Asia region. The primary sources of laundered money are proceeds from tax evasion committed through the use of shell companies; corruption, particularly in the areas of state procurement, natural resource extraction, illegal production and distribution of oil and alcoholic products; and financial fraud. Authorities reported a 6.8 percent decrease in the number of financial crimes in the first eight months of 2010 compared to the same period in 2009, including a decrease in counterfeiting and banking crimes.

Authorities report that the under-invoicing of imports and exports in order to avoid taxes and customs duties remains a relatively common practice. Under-invoicing and attempts to conceal shipments in order to avoid required payments accounted for 68 percent of the 580 cases initiated by the Customs Committee during the first nine months of 2010.

According to the Committee for National Security, there is no evidence that proceeds from smuggling of drugs or other commodities are used to fund terrorist activity, though the Committee continues its efforts to detect connections between drug trafficking and terrorist organizations.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF U.S. CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: NO civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks and organizations that conduct banking transactions; stock exchanges; insurance (re-insurance) companies; insurance brokers; pension funds; professional participants of the securities market; central depositories; exchange offices and post operators that deal with fund transfers; lawyers; independent experts on legal issues; commodity stock exchanges; audit organizations and organizers of gambling businesses

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks and organizations that conduct banking transactions; stock exchanges; insurance (re-insurance) companies; insurance brokers; pension funds; professional participants of the securities market; central depositories; exchange offices and post operators that deal with fund transfers; lawyers; independent experts on legal issues; commodity stock exchanges; audit organizations and organizers of gambling businesses

Number of STRs received and time frame: 5,701 from March 9 through September 30, 2010

Number of CTRs received and time frame: 146,550 from March 9 through September 30, 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 90 from January to August 2010

Convictions: 93 from January to August 2010

Assets forfeited: criminally: $8.16 million from January-August 2010 civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Kazakhstan is a member of the Eurasian Group on Combating Money Laundering and Terrorist Financing Crimes (EAG), a Financial Action Task Force (FATF)-style regional body. The first draft mutual evaluation report will be discussed at the June 2011 EAG plenary meeting.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

A new AML/CFT law took effect in March 2010. However, this law excludes from the list of covered entities pawn shops; micro-credit organizations; leasing organizations; entities dealing with jewelry and precious metals; financial management firms; dealers of arts, antiques, and other high-valued consumer goods; and travel agencies. These entities are not required to maintain customer information or report suspicious activity. Effective implementation and enforcement will depend on further resources and the development of institutional expertise.

The strict segregation of duties between law enforcement agencies hampers the government's ability to detect, investigate and prosecute money laundering crimes related to serious criminal offenses like drug trafficking and trafficking in persons. The Financial Police, as the only agency empowered to investigate money-laundering cases, deals only with economic and corruption crimes. The Ministry of Interior is authorized only to investigate predicate crimes (which generate the proceeds), but not to initiate money laundering cases. So far only the Committee for National Security has been able to prosecute money laundering cases related to trafficking in persons (one, in 2008) and narcotics trafficking (three in 2009, and one initiated in 2010). During the first eight months of 2010, the Financial Police seized $20.41 million related to anti-money laundering operations.

Kenya

Kenya is a major money laundering country. Kenya’s use as a transit point for international drug traffickers continues to increase. The laundering of funds related to Somali piracy, corruption, smuggling, the misuse of casinos and other assorted crimes is a substantial problem. Reportedly, Kenya’s financial system may be laundering over $100 million each year, including an undetermined amount of narcotics proceeds and Somali piracy-related funds. As a regional financial and trade center for Eastern, Central, and Southern Africa, Kenya’s economy has large formal and informal sectors. Although banks, wire services, and other formal channels execute funds transfers, there are also thriving, unregulated informal networks of hawala and other alternative remittance systems using cash-based, unreported transfers that the Government of Kenya (GOK) cannot track. Expatriates, in particular the large Somali refugee population, primarily use hawala to send and receive remittances internationally.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: YES

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Financial and non-bank financial institutions engaging in one or more of the following: accepting deposits; lending; financial leasing; transferring funds or value; issuing and managing means of payment; financial guarantees and commitments; trading in money market instruments, foreign exchange, exchange, interest rate and index funds, transferable securities, and commodity futures; participation in securities issues; individual and collective portfolio or fund management; safekeeping and asset administration; underwriting and sales of life insurance and other investment related insurance; and/or money and currency changing; also, casinos; real estate agencies; accountants; and dealers in precious metals or stones

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Financial and non-bank financial institutions engaging in one or more of the following: accepting deposits; lending; financial leasing; transferring funds or value; issuing and managing means of payment; financial guarantees and commitments; trading in money market instruments, foreign exchange, exchange, interest rate and index funds, transferable securities, and commodity futures trading; participation in securities issues; individual and collective portfolio management; safekeeping and administering cash or liquid assets on behalf of other persons; investing, administering, or managing funds on behalf of other persons; underwriting and placement of life insurance and other investment related insurance; and/or money and currency changing; also, casinos; real estate agencies; accountants; and dealers in precious metals or stones

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0

Convictions: 0

Assets forfeited: criminally: 0 civilly: 0

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Kenya is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force-style regional body. No mutual evaluation report is available at this time.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Proceeds of Crime and Anti-Money Laundering Act (PCAMLA), which came into force in June 2010, has a number of deficiencies. While the PCAMLA does take an “all crimes” approach to money laundering predicate offenses, the Act has never been used to prosecute any crimes. Kenya’s criminal justice system remains open to interference and corruption and combating money laundering has not been given priority. The PCAMLA contains sanctions that are proportionate and meet the international standard but have not yet been operationalized with implementing regulations. The PCAMLA does not mention or criminalize terrorism or terrorist financing. The legislation does not explicitly authorize the seizure of legitimate businesses used to launder money. A number of amendments to the law appear to have made the PCAMLA less powerful than earlier drafts. The Central Bank of Kenya (CBK) is relying on the future Financial Intelligence Centre (FIC), the financial intelligence unit, for implementation, as the police lack institutional capacity to handle complex financial crimes analysis and investigation. Although authorized under the PCAMLA, the FIC has not yet been established.

The GOK did not report any money laundering or terrorist financing arrests, prosecutions, or convictions from 2007 through 2010. Kenya lacks the institutional capacity, investigative skill, and equipment to conduct complex investigations independently. There is also insufficient political will to address these crimes. Kenya ranks 154 out of 178 countries on the 2010 Transparency International Corruption Perceptions Index.

There is a black market for smuggled goods in Kenya, which serves as the major transit country for Uganda, Tanzania, Rwanda, Burundi, northern Democratic Republic of Congo (DRC), and Southern Sudan. While goods marked for transit avoid Kenyan customs duties, authorities acknowledge these goods are often sold in Kenya. Many entities in Kenya are involved in exporting and importing goods, including nonprofit entities. Trade-based money laundering is a serious problem in Kenya. Trade goods are often used to provide counter-valuation in regional hawala networks.

Kenya has no straightforward legal mechanism to freeze or seize criminal or terrorist accounts. To demand bank account records or to seize an account, the police must present evidence linking the deposits to a criminal violation and obtain a court warrant. Because of corruption and leaks, the confidentiality of this process is difficult to maintain. The Central Bank does not distribute UN lists to financial institutions. Instead, it refers all banks to the public lists posted on the Internet. Two times per year, each bank is required to confirm to the Central Bank that they have ensures none of their clients are on any of the lists.

Korea, Democratic Republic of

In recent years, Democratic People’s Republic of Korea (DPRK) citizens have been apprehended or implicated in international investigations for narcotics trafficking and other criminal behavior, such as producing and distributing counterfeit U.S. currency (including $100 “supernotes”), and trading in counterfeit products such as cigarettes. There is also evidence that North Korean governmental entities and officials have been involved in laundering the proceeds of illicit activities, including those related to counterfeiting, through front companies. The illegal revenue garnered from these sources provides desperately needed foreign hard currency for the DPRK. The UN Security Council passed additional multilateral sanctions against the DPRK in June 2009 (UNSCR 1874) making it even more difficult for the DPRK to gain access to foreign hard currency.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: Not available

Legal persons covered: criminally: Not available civilly: Not available

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: Not available

UN lists of designated terrorists or terrorist entities distributed to financial institutions: Not available

(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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Not available

Enhanced due diligence procedures for PEPs: Foreign: Not available Domestic: Not available

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Not available

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: NO

The DPRK is not a participant in any Financial Action Task Force-style regional body (FSRB).

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

On October 11, 2008, the United States Government formally removed North Korea from the U.S. list of state sponsors of terrorism.

In response to concerns that North Korea had conducted nuclear testing, the UN Security Council adopted UNSCR 1718 on October 14, 2006, which aimed to prevent a range of nuclear, ballistic missile, and other weapons of mass destruction-related equipment and technology from entering or leaving the Democratic People’s Republic of Korea. The Resolution imposes an asset freeze and travel ban on persons related to the nuclear weapons program. Similar concerns gave rise to the adoption of UNSCR 1874 on June 12, 2009, calling for member states to prevent the provision of financial services or any financial or other assets or resources that could contribute to North Korea’s nuclear, ballistic missile, or other weapons of mass destruction-related programs or activities. UNSCR 1874 also demands that North Korea immediately comply with UNSCR 1718, which includes a ban on the transfer of luxury goods to North Korea.

In addition, FinCEN issued an initial advisory on June 18, 2009 (amended December 18, 2009) on North Korea Government Agencies’ and Front Companies’ Involvement in Illicit Financial Activities. In light of the financial measures in UNSCRs 1718 and 1874, and the use of deceptive financial practices by North Korea and North Korean entities, as well as individuals acting on their behalf to hide illicit conduct, FinCEN advised all U.S. financial institutions to take commensurate risk mitigation measures.

On August 30, 2010 the Department of Treasury announced additional sanctions against North Korea aimed at freezing the assets of individuals and entities engaging in or facilitating North Korean trafficking in and manufacturing of arms and related materiel; procurement of luxury goods; and illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling, and narcotics trafficking. The August 30, 2010 action supplements sanctions that target North Korean proliferators of weapons of mass destruction and their supporters thereby isolating them from the US financial and commercial systems.

The DPRK should develop a viable anti-money laundering/counter-terrorist financing regime that comports with international standards and participate in a FSRB. The DPRK also should become a party to the UN Convention for the Suppression of the Financing of Terrorism, the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Korea, Republic of

The Republic of Korea (ROK) has strengthened its AML/CFT regime in recent years. While most money laundering in South Korea is associated with domestic criminal activity and official corruption, locally-based criminal groups associate with international crime syndicates involved in human trafficking, contraband smuggling, and related organized crime. Korean money launderers use illegal game rooms, customs and trade fraud, intellectual property theft, and counterfeit goods to conceal proceeds. They also exploit the zero value added tax (VAT) rates on gold bars. Launderers frequently use cash transactions or fraudulent bank accounts to conceal proceeds from illicit activities.

South Korea is not an offshore banking center. It has six free economic zones (FEZs), with Incheon International Airport wholly incorporated into one of the zones. While companies operating in FEZs enjoy certain tax privileges, they are subject to the same general laws on financial transactions as companies operating elsewhere. Korea mandates extensive entrance screening to determine companies’ eligibility to participate in FEZ areas, and firms are subject to standard disclosure rules and criminal laws.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, exchange houses, stock brokerages, casinos, insurance companies, merchant banks, mutual savings banks, finance companies, credit unions, credit cooperatives, trust companies, and securities companies

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, exchange houses, stock brokerages, casinos, insurance companies, merchant banks, mutual savings banks, finance companies, credit unions, credit cooperatives, trust companies, and securities companies

Number of STRs received and time frame: 104,200 (January 1 to June 30, 2010)

Number of CTRs received and time frame: 5,705,000 (January 1 to June 30, 2010)

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

Assets forfeited: criminally: $3.6 million in 2009 civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

The ROK is a member of the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Korea%20MER%202009.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of the Republic of Korea (ROK) should expand its active participation in international AML/CFT efforts by becoming a party to the UN Convention against Transnational Organized Crime. Also, while the Prohibition of Financing for Offenses of Public Intimidation is intended to implement the UN International Convention for the Suppression of the Financing of Terrorism, it does not clearly criminalize provision or collection of funds or assets used by a terrorist organisation or terrorist for purposes other than for terrorist acts. The ROK should create language that clearly criminalizes terrorist financing as an autonomous offense. In October 2009 the ROK initiated a three-year action plan that puts emphasis on creating a system to effectively prevent terrorism and terrorist financing.

Korea’s AML/CFT regime requires all obligated entities to report STRs to the Korea Financial Intelligence Unit (KFIU). The ROK strengthened the STR system in June 2010, lowering the mandatory STR filing threshold from 20 to 10 million won (approximately $8,700). It also reduced the threshold for cash transaction reports (CTR) from 30 million won (approximately $25,800) to 20 million won (approximately $17,200) in January 2010. The KFIU plans to abolish the STR threshold in the long term, and instead require covered entities to report all suspicious transactions. The ROK should make elimination of the STR reporting threshold a short-term goal.

Officials charged with investigating money laundering and financial crimes are widening their scope to include crimes related to commodities trading and industrial smuggling, and continue to search for possible links between domestic illegal activities and international terrorist activity. ROK authorities are investigating the underground alternative remittance systems used to send illegal remittances abroad by South Korea’s approximately 495,886 documented and 51,068 undocumented foreign workers. According to the Korea Customs Service, there were 601 underground remittance (hawala) cases worth 1.99 trillion won (approximately $1.7 billion) in 2009, and 167 cases totaling 1.23 trillion won (approximately $1.07 billion) in the first eleven months of 2010.

Kosovo

Kosovo is not considered a regional financial or offshore center. The country does, however, have an active black market for smuggled consumer goods and pirated products. Kosovo’s borders are porous and facilitate drug trafficking. According to the Customs Service, significant amounts of cigarettes and fuel are smuggled into the country. There is no indication that these smuggled items are funded by narcotic or other illicit proceeds. Illegal proceeds from domestic and foreign criminal activity are generated from official corruption, tax evasion, customs fraud, organized crime, contraband and other types of financial crimes. Most of the proceeds from smuggling activity are believed to be laundered directly into the economy in areas such as construction and real estate, retail and commercial stores, banks, financial services, casinos and trading companies. Smaller amounts are thought to be laundered through the financial system.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: Not available

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks; money exchangers and remitters; securities brokers and service providers, portfolio and fund managers; insurance companies; issuers of traveler’s checks, money orders, emoney, and payment cards; political parties; casinos; attorneys, accountants, notaries, and auditors; real estate agents; and high-value goods dealers

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks; money exchangers and remitters; securities brokers and service providers, portfolio and fund managers; insurance companies; issuers of traveler’s checks, money orders, emoney, and payment cards; non-governmental organizations; political parties; casinos; attorneys, accountants, notaries, and auditors; real estate agents; and high-value goods dealers

Number of STRs received and time frame: 164 - 2010

Number of CTRs received and time frame: 420,000 - 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Kosovo is not a member of a Financial Action Task Force (FATF)-style regional body.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Kosovo Police Economic Crimes and Corruption Directorate, the Organized Crime Directorate, and the Special Prosecutors Anti-Corruption Task Force (established in April 2010) are weak in all aspects of economic crimes investigations. The Kosovo Police (KP) needs to enhance its ability to investigate economic crimes by developing: the necessary investigative skills; interagency cooperation with other law enforcement and regulatory agencies; a cadre of KP instructors who will be able to train investigators in all aspects of economic crimes investigations; and, institutionalized communication and cooperation between economic crimes investigators and Kosovo’s prosecutors. Prosecutors also require enhanced skills to prosecute economic crimes.

In October 2010 the new Law on the Prevention of Money Laundering and Terrorist Financing came into effect, replacing UNMIK Regulation 2004/2. Among other provisions, this law establishes a new FIU within the Ministry of Finance and Economy, customer due diligence and record keeping requirements, and cross-border monetary instrument transportation reporting requirements; sets administrative sanctions for non-compliance; identifies money laundering as an autonomous offense; prohibits tipping off; and provides safe harbor protection for reporting persons.

The Kosovo draft Law on Games of Chance remains at the Ministry of Economy and Finance awaiting passage into law and implementation of a regulatory framework. The recently established Tax Administration of Kosovo Criminal Tax Investigation Unit needs to improve its capacity to investigate criminal tax cases.

The Government of Kosovo (GOK) should continue its efforts to have the FIU become fully operational, compliant with international standards, and accepted by the international community. The GOK’s newly created Agency for Asset Forfeiture will manage and dispose of seized and forfeited assets, at least a portion of which will be provided to law enforcement agencies to provide the resources necessary to combat money laundering, terrorist financing, and other financial crimes. The Agency for Asset Forfeiture will require substantial training to enhance its ability to effectively manage and dispose of seized assets. In addition, the GOK should enhance its pursuit of confiscation and forfeiture of the proceeds of smuggling, human trafficking, corruption, and other organized criminal activities, and should enact domestic laws permitting international sharing of confiscated assets.

Kuwait

Financial crimes such as money laundering and terrorist financing are a concern in Kuwait. The Government of Kuwait (GOK) holds financial crimes public awareness campaigns, including through annual money laundering training conferences. The Central Bank of Kuwait (CBK) reported total banking sector assets of $142 billion as of December 2010. Kuwait has 21 banks: six conventional (commercial) banks, six Islamic banks, eight branches of foreign banks, and one government-owned bank.

The current AML law does not specifically cite terrorist financing as a crime, therefore, terrorist financing criminal cases are handled under ‘crimes against the state’ statutes.

On September 16, 2010, the Minister of Interior decided to transfer the responsibility for money laundering crimes from the CID at the Ministry of Interior to Kuwait State Security.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, other financial institutions, insurance agents, insurance brokers and companies; investment companies; exchange bureaus; jewelry establishments including gold, metal and other precious commodity traders; real estate establishments and agents; and auditing firms

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, other financial institutions, insurance agents, insurance brokers and companies; investment companies; exchange bureaus; jewelry establishments including gold, metal and other precious commodity traders; real estate establishments and agents; and auditing firms

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0

Convictions: 0

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Kuwait is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a FATF-style regional body. Kuwait’s on-site mutual evaluation took place in October 2010, and is expected to be adopted in mid-2011. Once available, the report will be found here: http://www.menafatf.org/

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Kuwait has had difficulty implementing the current anti-money laundering law due in part to structural inconsistencies within the law itself. Law No. 35 does not mandate that the FIU act as the central or sole unit for the receipt, analysis, and dissemination of STRs. The FIU that is in place operates under the CBK and is not an independent, autonomous competent authority. Law No. 35 requires banks to file STRs with the Office of Public Prosecution (OPP), who, in accordance with an MOU with the Central Bank, will in turn refer the STRs to the CBK’s FIU for analysis. The FIU conducts analysis and reports any findings to the OPP for the initiation of a criminal case. There is no clear criteria for a suspicious transaction thus STRs are interpreted widely. The FIU analysis is limited due to its inability to effectively analyze STRs and its inability to share information without prior approval from the OPP. The vague delineations of the roles and responsibilities of the FIU, CBK, and OPP continue to hinder the overall effectiveness of Kuwait’s anti-money laundering regime.

Kuwait’s FIU should be made the national authority for the receipt, analysis and dissemination of STRs and other reports, and given true operational independence. Kuwait customs, police and prosecutors should be made aware of money laundering methodologies and should initiate inquiries and investigations without waiting for the filing and dissemination of a STR.

The Ministry of Social Affairs and Labor (MoSAL) monitors and audits charitable giving in Kuwait. The Ministry of Foreign Affairs and MoSAL monitor and regulate funds transfers by authorized charities abroad. MoSAL uses a coupon tracking system as well as electronic bank transfers which creates a formal paper trail for all donations. Despite increased regulations, MoSAL reports the amount of donations continues to rise in Kuwait.

Kuwait’s financial crimes enforcement and investigative capacity is weak. Provisions of Law No. 35 require travelers to disclose to customs authorities upon entry if they are carrying any national or foreign currency, gold bullion, or other precious materials. The law does not require individuals to file declaration forms when carrying cash or precious metals when exiting Kuwait. Currency smuggling into Kuwait is criminalized; however cash reporting requirements are not uniformly enforced at ports of entry (except at Kuwait International Airport and the Al-Abdali Border point). There were no court cases of currency smuggling in 2010. The last case on record was reportedly in 2008 which has yet to be prosecuted. Kuwait should take steps to implement and enforce a uniform cash declaration policy for both inbound and outbound travelers at all its ports.

In December 2009 the Kuwaiti Government passed a draft amended anti-money laundering law to parliament intended to bring Kuwait into compliance with international standards, including the restructuring of the FIU and inclusion of definitions of roles and responsibilities. In November 2010, the Kuwaiti parliament passed the law back to the government with a request to consider placing provisions for the criminalization of terrorist financing into a separate law.

Kuwait does not have legislation outlawing the funding of terrorism, and financial support to terrorist groups, both by charities and by individuals continues to be a major concern. Kuwait should criminalize terrorist financing and ratify and implement fully the United Nations International Convention for the Suppression of the Financing of Terrorism.

Kyrgyz Republic

The Kyrgyz Republic is not a regional financial center. A significant percentage of the country’s GDP comes from remittances from abroad, posing a money laundering vulnerability. Corruption, organized crime and a large shadow economy also make the country vulnerable to money laundering and terrorist financing. Narcotics trafficking, tax and tariff evasion, and corruption related to the performance of official duties or government contracts are the major sources of laundered proceeds. Money laundering primarily occurs through trade-based fraud and bulk cash carriers.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: NO civilly: NO

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, credit institutions, stock brokerages, foreign exchange offices, casinos, insurance companies, notaries, tax consultants/auditors, realtors, the state’s property agency, trustees, jewelry stores and dealers

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, credit institutions, stock brokerages, foreign exchange offices, casinos, insurance companies, notaries, tax consultants/auditors, realtors, the state’s property agency, trustees, jewelry stores and dealers

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None -- 2008 - 2010

Convictions: None -- 2008 - 2010

Assets forfeited: criminally: None - 2008 - 2010 civilly: None - 2008 - 2010

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

The Kyrgyz Republic is a member of the Eurasian Group on Combating Money Laundering and Financing of Terrorism, a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.eurasiangroup.org/mers.php

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The government has adopted anti-money laundering/counter-terrorist financing legislation and established a Financial Intelligence Service. However, the lack of political will and inter-agency cooperation, resource constraints, inefficient financial systems and corruption hamper efforts to effectively combat money laundering and terrorist financing.

Key reporting issues that need to be resolved: auto dealers and real estate developers are not included in the list of entities required to report large dollar transactions. Additionally, the statutory threshold amount that triggers mandatory reporting remains high: $25,000.

The Government of the Kyrgyz Republic should continue to strengthen legislation as it relates to money laundering and financial crimes that support terrorist organizations, both within financial institutions and within those activities that circumvent financial institutions. In addition, the Kyrgyz Republic must increase and enhance training in money laundering and terrorist financing investigative techniques.

The banking system is at risk for money laundering, as oversight of the banking sector is generally weak. Two serious deficiencies include the lack of a ‘tipping off’ law to prohibit the disclosure of the reporting of suspicious or unusual activity to an individual who is the subject of such a report, or to a third party; and the lack of a “safe harbor” defense to banks and/or other covered entities and their employees who provide otherwise confidential banking data to authorities in pursuit of authorized investigations.

Laos

Laos is not a regional or offshore financial center. However, its lack of a comprehensive legal and regulatory framework and ineffective implementation of existing laws increases Laos’ vulnerability to money laundering and related financial crimes. Illegal timber harvesting, official corruption, cross-border smuggling of goods and currency, high value used cars, illicit proceeds from the sale of methamphetamine and opiates, including heroin, and domestic crime may all be sources of illicit funds. In 2009, the Lao Government endorsed an estimate of the value of the illicit drug economy of about ten percent of GDP or up to $750 million. There are continued reports of illicit funds being diverted into hotel construction, gaming operations, resort development, mining ventures, golf courses, luxury real and personal property, and industrial tree cropping projects.

Laos receives a large amount of development assistance from overseas donors and there are concerns that a substantial portion of these monies may be stolen or otherwise diverted. In recent years a number of private sector-financed projects and/or parastatal enterprises in the hydropower, mining, and construction sectors have started to generate revenues to the government, but reliable public reporting of these revenues is often lacking and the possibility exists of theft and/or diversion. Anecdotal evidence indicates that bulk cash generated from illicit activities is often smuggled across borders and deposited in accounts in Thailand, China, and Vietnam. During 2010, there were several significant narcotics seizures by Lao law enforcement authorities which involved bulk cash smuggling. Invariably, part of the evidence seized by police or customs agents in such cases includes large amounts of cash (usually in US dollars or Thai Baht). In the largest case, nearly $175,000 equivalent in Thai Baht was part of the evidence.

The gaming industry represents a particularly large and growing vulnerability. The Ministry of Information and Culture (MOIC) is responsible for the regulation of casinos in Laos. However, its regulatory regime has no known AML controls for casinos in place. In 2010, the Lao Government approved two new special economic zones (SEZs) in Luang Namtha, and Bokeo provinces. Private Chinese companies fully own and manage these SEZs. The Savan-Seno SEZ, established in 2003 in Savannakhet Province, remains under the government’s management. The SEZs present an additional complication for the AML regime, as it is not clear that MOIC regulatory authority applies to casinos located inside the SEZs. Other smaller gaming operations apparently operate in Laos--often near immigration checkpoints along the Mekong and across from Thailand.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: Not available civilly: Not available

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, finance companies, loan institutions and cash transfer companies

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, finance companies, loan institutions and cash transfer companies

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

Assets forfeited: criminally: None civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: Not available

With other governments/jurisdictions: Not available

Laos is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its first mutual evaluation was conducted in October 2010. Once finalized, the evaluation report will be available here: http://www.apgml.org/about/eventDetail.aspx?EventID=65

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Laos (GOL) should place priority upon full implementation of its existing anti-money laundering/counter-terrorist financing (AML/CFT) decrees. The GOL should prioritize capacity building, including training and awareness programs for appropriate supervisory, law enforcement, FIU and prosecutorial personnel as well as the judiciary. The GOL should also reach out to entities subject to the reporting requirements to make them aware of their compliance responsibilities.

The GOL should ensure all entities not supervised by the Bank of Laos, especially the casinos, are adequately supervised and monitored for AML/CFT compliance. Laos began to address the vulnerabilities in the gaming industry through the issuance of a new Prime Ministerial Decree in 2010 on the establishment of SEZs. The legislation prohibits the establishment of casinos in any new SEZ; however, this rule does not apply to the three SEZs currently in operation. At least one “gambling gaming” operation opened at a hotel in Boulikhamxai Province in 2010, apparently financed and/or operated by Vietnamese business interests. During 2010, there was also a public announcement that “internet online gambling” operations would be opened during 2011 under a joint investment agreement with a well known gaming corporation based in Manila.

Reporting entities designated in the anti-money laundering (AML) decree, other than financial institutions, are not believed to be supervised at all for AML purposes. The Bank of Laos issued a guideline for suspicious transaction reporting, but to date the Anti-Money Laundering Intelligence Unit (AMLIU) has received only a small number of reports and none are known to have resulted in referrals to law enforcement. AMLIU does not currently have the data, analytic capacity, or technical and procedural means to detect and refer such cases.

The GOL requires enhanced due diligence for “high risk persons.” However, the AMLIU defines a “high risk person” as any individual who is or has been listed in the “black lists” of the United Nations, and does not clearly state that other individuals who meet a set of high-risk criteria can also be included. The GOL should clearly define high-risk persons to include PEPs and others meeting the high risk profile, beyond those who are or have been on the U.N. designation lists.

The GOL should require reporting entities to submit cases of suspected terrorist financing. The GOL should offer disclosure protection for individuals reporting ML/TF activity, and should criminalize “tipping off” suspect individuals and entities that they are under investigation.

Laos lacks a clear legal and procedural framework for the seizure of assets. The Lao criminal code and drug laws refer to the right of the state to seize assets of convicted drug traffickers, but the legal and procedural processes are not specified, and thus neither the prosecutors nor the court system have taken any legal action regarding asset seizures. The lack of an asset forfeiture regime could hinder Lao assistance in money laundering or terrorist financing investigations and assistance requests. The GOL should implement an asset forfeiture regime that includes a system to account for forfeited assets and ensure they are disposed of in accordance with the laws.

Latvia

Latvia is a regional financial center that has a large number of commercial banks with a sizeable nonresident deposit base. Latvia is among the European economies most affected by the global financial turmoil. To ease the situation, the Government of Latvia (GOL) sought external financial support and agreed to an international stabilization program. Despite the on-going economic crisis in Latvia, total bank deposits have increased in the past year.

Authorities report that the largest sources of money laundered in Latvia are tax evasion and other forms of financial fraud. Lesser sources include smuggling (primarily cigarettes) and public corruption. Local officials do not consider proceeds from illegal narcotics to be a major source of laundered funds in Latvia. According to regulators and law enforcement officials, most of the laundered funds derived from financial fraud - and a sizeable portion of the funds derived from tax evasion - originate outside of Latvia. Reportedly, Russian and Latvian organized crime groups are active in Latvia, and authorities believe that a significant portion of all criminal proceeds originating domestically is generated by these groups. Although Latvian regulatory agencies closely monitor financial transactions to identify instances of terrorist financing, no prosecutions or penalties have been initiated based on this monitoring in recent memory.

Four special economic zones provide a variety of significant tax incentives for manufacturing, outsourcing, logistics centers, and the transshipment of goods to other free trade zones. These zones are located at the free ports of Ventspils, Riga, and Liepaja, and in the inland city of Rezekne near the Russian and Belarusian borders. Though there have been reports of cigarette smuggling through the free trade zones, there have been no confirmed cases of the zones being used for money laundering schemes or by terrorist financiers. The zones are covered by the same regulatory oversight and enterprise registration regulations that exist for other areas.

Latvian officials maintain that the country is experiencing an overall decrease in financial crimes. While acknowledging that the total amount of assets seized and frozen declined in 2010 (compared to prior years), they observe that transactions tend to be smaller, which they claim is largely attributable to the economic crisis. Meanwhile, statistics for investigations initiated, transactions reports received, and convictions all trended upward in 2010, despite resource limitations which affected all regulatory and law enforcement agencies. GOL officials note that Latvia’s updated “Law on the Prevention of Laundering the Proceeds from Criminal Activity (Money Laundering) and of Terrorist Financing” (amended December 2009) provides a more robust statute for those investigating, interdicting and prosecuting financial crimes.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF U.S. CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: "all crimes" approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Financial institutions, including credit institutions, life insurance companies and brokers, private pension fund administrators, investment brokerage firms and management companies, currency exchange offices, money transmission or remittance offices; tax advisors, external accountants, sworn auditors, sworn notaries, advocates, and other independent legal professionals; real estate agents or intermediaries; organizers of lotteries or other gaming activities; money collection services; and traders of real estate, transport vehicles, items of culture, precious metals, precious stones and articles thereof, or intermediaries in such transactions

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Financial institutions, including credit institutions, life insurance companies and brokers, private pension fund administrators, investment brokerage firms and management companies, currency exchange offices, money transmission or remittance offices; tax advisors, external accountants, sworn auditors, sworn notaries, advocates, and other independent legal professionals; real estate agents or intermediaries; organizers of lotteries or other gaming activities; money collection services; and traders of real estate, transport vehicles, items of culture, precious metals, and precious stones

Number of STRs received and time frame: 19,907 from January through November 2010

Number of CTRs received and time frame: 8,354 from January through November 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 26 persons (involving 62 separate charges) from January through November 2010

Convictions: Seven (involving 14 individuals) from January through November 2010

Assets forfeited: criminally: Approximately $2.46 million from January 1 through November 30, 2010 civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

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

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Current laws do not require enhanced due diligence procedures for domestic PEPs, however, they allow discretion to any institution or professional covered by KYC rules to apply enhanced due diligence, based on its risk assessment for a particular customer.

Approximately $2.1 million was frozen by the FIU through November 30, 2010. Additionally, approximately $472,000 in assets was seized by law enforcement officials during the same time period.

In April 2005, the United States outlined concerns in a Notice of Proposed Rulemaking against VEF Banka, under Section 311 of the USA PATRIOT Act. The bank was found to lack adequate AML/CFT controls and was used by criminal elements to facilitate money laundering, particularly through shell companies. In August 2006, the United States issued a final rule imposing a special measure against the VEF Banka, as a financial institution of primary money laundering concern. This measure is still in effect. Following the Latvian authorities revocation of the bank’s license in May 2010, a lawsuit was filed asserting this action was not legal; that suit was resolved in the Government of Latvia’s favor on November 15, 2010. According to Latvian authorities, this resolution means the bank’s license cannot be reactivated.

In January 2010, legislative amendments establishing mechanisms for sharing assets with non-EU countries and regarding the application of the EU Framework Decision on the application of mutual recognition of confiscation orders took effect. Latvian officials have cooperated with USG law enforcement agencies to investigate numerous financial narcotics-related crimes. The Latvian Financial and Capital Market Commission regularly exchanges information with the U.S. Securities and Exchange Commission. More broadly, officials in Latvia are also able to provide assistance outside of the formal mutual legal assistance process in accordance with current AML/CFT laws.

Law enforcement and regulatory agencies have a heavy workload and their budgets, salaries, and in some cases, personnel have been reduced due to the severe economic crisis. Despite these constraints, the Latvian FIU referred a total of 256 cases to other investigative agencies in 2010 (through November 30), roughly 80% more than in all of 2009. Of this total, approximately half were related to cases involving tax evasion. In one notable recent case, the Latvian Financial Police - a subordinate agency of the State Revenue Service - performed more than 60 searches in one day in investigating a series of real estate deals allegedly involving Latvian and Russian criminal groups and officials at Latvian credit institutions. This investigation is reportedly tied to approximately $3.76 million in unpaid taxes and led to the freezing of 60 separate bank accounts. Authorities note increased activity by regulators and law enforcement officials over the past year. They observe that questionable transactions tend to be smaller and conclude that the overall monetary value of money laundering may be decreasing due to the economic crisis.

Lebanon

Lebanon is a financial hub for banking activities in the Middle East and eastern Mediterranean and has one of the more sophisticated banking sectors in the region. Lebanon faces significant money laundering and terrorist financing challenges. For example, Lebanon has a substantial influx of remittances from expatriate workers and family members, estimated by the World Bank at $8.2 billion per year. It has been reported that a number of Lebanese abroad are involved in underground finance and trade-based money laundering (TBML) activities.

Laundered criminal proceeds come primarily from foreign criminal activity and organized crime. There is some smuggling of cigarettes and pirated software, but the sale of these goods does not generate large amounts of funds that are then laundered through the formal banking system. There is a black market for stolen cars, counterfeit goods and pirated software, CDs, and DVDs. The domestic illicit narcotics trade is not a principal source of money laundering proceeds.

Although offshore banking, trust and insurance companies are not permitted in Lebanon, the government has provisions regarding activities of offshore companies and transactions conducted outside Lebanon or in the Lebanese Customs Free Zone. Offshore companies can issue bearer shares. There are also two free trade zones (FTZ) operating in Lebanon: the Port of Beirut and the Port of Tripoli. FTZs fall under the supervision of the Customs Authority.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF U.S. CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Bank; money exchanges; private couriers who transfer currency for money service businesses such as Western Union and Money Gram; and charitable and nonprofit organizations

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: financial institutions, exchange offices, financial intermediation companies, leasing companies, mutual funds, insurance companies, companies promoting and selling real estate and construction, and dealers and companies engaged in transactions for high-value items

Number of STRs received and time frame: 179 from January through November 2010

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: As of November 2010, eleven cases were transmitted to the penal judge

Convictions: One between January and November 2010

Assets forfeited: criminally: 0 civilly: 0

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Lebanon is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Its most recent evaluation is posted at www.menafatf.org

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Lebanon’s financial intelligence unit (FIU), the Special Investigations Commission (SIC) is seeking to finalize amendments to Central Bank Circular 83. One amendment would enhance due diligence procedures for foreign PEPs. In the first 11 months of 2010, the SIC investigated 179 allegations of money laundering and terrorist financing activities, a sharp rise from 116 cases during all of 2010. Although the number of filed STRs and subsequent money laundering investigations coordinated by the SIC have steadily increased, prosecutions and convictions are still lacking.

Customs is required to inform the FIU of suspected TBML or terrorist financing; however, high levels of corruption within Customs create vulnerabilities for TBML and other threats.

In addition to the names of suspected terrorist individuals and terrorist organizations on the UNSCR 1267 Sanctions Committee’s consolidated list, the SIC circulates to all financial institutions the the list of Specially Designated Global Terrorists designated by the U.S. pursuant to Executive Order 13224, and entities designated by the European Union under its relevant authorities.

The Government of Lebanon (GOL) should encourage more efficient cooperation between financial investigators and other relevant agencies such as Customs and the Internal Security Force. Lebanon should increase efforts to disrupt and dismantle terrorist financing efforts, including those carried out by Hizballah, which the GOL does not consider a terrorist group. The GOL should consider amending its legislation to allow a greater ability to provide forfeiture cooperation internationally and also provide authority for the return of fraudulent proceeds. The GOL should pass legislation to mandate and enforce cross-border currency reporting. The trading of bearer shares of unlisted companies remains a vulnerability, and the GOL should take action to immobilize those shares as well as to criminalize “tipping off’.

In addition, there should be more emphasis on linking predicate offenses to money laundering and not an over-reliance on suspicious transaction reports (STRs) filed by financial institutions to initiate investigations. Existing safeguards do not address the issue of the laundering of diamonds and value transfer through Lebanon directly or by Lebanese buying agents in Africa. Lebanese law enforcement authorities should examine domestic ties to the international network of Lebanese brokers and traders who are commonly found in underground finance, trade fraud, and TBML.

Finally, the GOL should become a party to the UN International Convention for the Suppression of the Financing of Terrorism.

Lesotho

The Government of Lesotho (GOL) is steadily increasing its control over and ability to monitor the flow of money in Lesotho. The development of the new financial intelligence unit is a prime example of recent GOL efforts. Lesotho is not a regional financial center, and any money laundering present is not believed to be related to international terrorism, illegal drugs, or organized crime.

While there is no significant black market for smuggled goods in the country, undeclared and under-declared items pass between Lesotho and South Africa daily. The vast majority of smuggling is low level and committed by individuals. They commonly bring undeclared consumer goods like staple foods and small electronics, or occasionally larger items like automobiles, purchased in South Africa, into Lesotho. Smaller items are smuggled to avoid paperwork and hassle, while larger items are smuggled to avoid paying import fees and taxes. There is some evidence of more illicit activity as small arms are smuggled across Lesotho’s porous border, often in exchange for Lesotho-grown marijuana. The funding source is unclear as is the destination of the proceeds.

There is no offshore center in Lesotho. Lesotho is a member of the Southern African Development Community (SADC) and the Southern African Customs Union (SACU). SACU provides a common external tariff and the duty-free flow of goods between its five member states. Eleven SADC member states launched a free trade zone in 2008, with three additional members to join at a later stage. The SADC free trade agreement (FTA) aimed to eliminate import tariffs, form a Customs Union in 2010, and adopt a common currency by 2018. However, the Customs Union has not been adopted and the FTA is well behind schedule.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or list approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, money lenders, money exchangers, brokers, insurance companies, securities dealers, real estate agents, gambling houses, casinos, the lottery, precious metals or stones dealers, and service providers

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, money lenders, money exchangers, brokers, insurance companies, securities dealers, real estate agents, gambling houses, casinos, the lottery, precious metals or stones dealers, and service providers

Number of STRs received and time frame: Six from January to October 2010

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None in 2010

Convictions: None in 2010

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Lesotho is a member of Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force (FATF)-style regional body. The first mutual evaluation took place late in 2010. Once adopted, the report will be available here: http://www.esaamlg.org/

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Inadequate resources, capacity, and expertise, as well as lack of awareness and training pose serious challenges to the adequate implementation of AML/CFT procedures. Lesotho, however, is making progress. The Directorate on Economic Offenses is now forming its anti-money laundering unit. While, it needs to be strengthened and capacitated, the Ministry of Finance very recently created the financial intelligence unit (FIU) to address the deficiencies in its current AML/CFT regime. The director of the FIU took office in November 2010.

No important cases have emerged during the reporting period. No cases of abuse of nonprofit organizations (NPOs) have been reported, and efforts are underway to develop a legal framework to address NPOs.

Liberia

Liberia is not a regional financial center. Financial controls are weak, and both Liberian and U.S. dollars are legal tender in Liberia, making it easier to launder U.S. currency. There is a significant market for smuggled goods and borders are porous. Document fraud, lax immigration controls, and widespread corruption are significant issues. There is little information on whether money laundering is linked to the sale of narcotics, but few hard drugs are interdicted in Liberia. Civil war and government mismanagement destroyed much of Liberia's economy, especially the infrastructure in and around the capital, Monrovia. Many businesses fled the country, taking capital and expertise with them, but with the conclusion of fighting and the installation of a democratically-elected government the situation is improving. There are no confirmed cases of money laundering or terrorist financing in the Liberian banking sector, which is dominated by Nigerian banks (four of eight banking licenses are operated by Nigerian banks or families). Money laundering enforcement suffers from limited resources, inadequately trained personnel, and a weak judicial system – products of 14 years of civil war.

On December 22, 2003, the UN Security Council adopted Resolution 1521 imposing sanctions against Liberia and designated individuals. The sanctions covered an arms embargo, travel bans and export/import restrictions. Additionally, on March 12, 2004, UNSCR 1532 was adopted, imposing financial sanctions against then-president Charles Taylor and his wife and son. Furthermore, UNSCR 1638 of 2005 gave the UN mission in Liberia the task of apprehending then-president Taylor to facilitate his transport to the Sierra Leone Special Court for prosecution. UNSCRs 1647 (2005), 1836 (2008) and 1854 (2008) reinforced and extended the Resolutions. Subsequently, the export/import restrictions were lifted, and under UNSCR 1903 of December 17, 2009, the arms embargo and travel ban were allowed to expire on December 17, 2010; however, the asset freezing provisions remain in place.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: Not available

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Central Bank of Liberia, financial institutions

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Financial institutions

Number of STRs received and time frame: 0 in 2010

Number of CTRs received and time frame: 0 in 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0

Convictions: 0

Assets forfeited: criminally: 0 civilly: 0

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Liberia is a member of the West African Intergovernmental Action Group Against Money Laundering (GIABA), a Financial Action Task Force (FATF)-style regional body. Liberia was scheduled for a mutual evaluation in late 2010. Once adopted, the resulting report can be found here: http://www.giaba.org/index.php?type=c&id=46&mod=2&men=2

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Draft anti-money laundering legislation calls for the creation of a financial intelligence unit (FIU), which would be housed in the Central Bank of Liberia (CBL). Banks are currently supposed to report suspicious transaction reports to the CBL but few comply with reporting guidelines. The CBL has begun outlining how the new FIU would operate. The CBL has begun drafting a new anti-money laundering/counter-terrorist financing (AML/CFT) law based on international standards.

The Liberia National Police (LNP) investigates financial crimes through the Criminal Investigation Division’s Technical Investigation Unit and the National Bureau of Investigation (NBI) investigates crimes through the Economic Crimes and Transnational Crimes Divisions. The Ministry of National Security and the National Security Agency (NSA) are marginally responsible for investigating financial crimes. Intelligence related to money laundering and other financial crimes is handled by various government security organizations in an uncoordinated fashion.

There have been no arrests, prosecutions or convictions for money laundering or terrorist financing. The AML law provides for seizure of laundered assets including property, land, securities, and cash. The police and other security officials have the power to seize drug-related assets, but need permission from the courts. Generally, implementation of laws is hampered by political interference, corruption and weak capacity within the judiciary, and a lack of adequate resources. The Liberian government has not frozen the assets of any of the Liberians (including four Liberian legislators) on the UN asset-freeze list.

In 2010, the Government of Liberia deported seven people to the U.S. after arresting them for allegedly trying to smuggle 4,000 kilograms of cocaine (worth an estimated $100 million) through Liberia.

Libya

The Libyan oil and gas sectors constitute over 70 percent of GDP. Libya’s economy remains primarily cash-based, and hawala and informal value transfer networks are present. Libya is a destination and transit point for smuggled goods, particularly black market and counterfeit goods from sub-Saharan Africa, Egypt and China. Contraband smuggling reportedly includes narcotics, particularly hashish/cannabis and heroin. Libya is not considered to be a production location for illegal drugs, although its geographic position, porous borders and limited law enforcement capacity make it an attractive transit point for illegal drugs. Libya is also a transit and destination country for large numbers of migrants from sub-Saharan Africa, whose movement across borders is primarily facilitated by smugglers. In general, training and resources are lacking to conduct anti-money laundering awareness and for countermeasure implementation. Libya has been going through a slow opening of its financial sector and modernization of its banking system.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: Not available civilly: Not available

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks and financial institutions authorized by the Libyan Central Bank

Enhanced due diligence procedures for PEPs: Foreign: Unknown Domestic: Unknown

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Financial institutions authorized by the Libyan Central Bank

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: NO

Libya is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. It has not yet had a mutual evaluation.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

There is little information or reliable data on the scope of Libya’s anti-money laundering/counter-terrorist financing countermeasures including investigations, asset forfeiture, prosecutions, and convictions. Libya has not criminalized terrorist financing.

It is illegal to transfer funds outside of Libya without the approval of the Libyan Central Bank. Cash courier operations are in violation of Libyan law. It is estimated that up to ten percent of foreign transfers are made through illegal means (i.e., not through the Central Bank). Between 1.5 and 2 million foreigners are thought to live and work in Libya. Funds transfers by migrant workers (mainly from sub-Saharan Africa and Asia) are difficult for the Libyan government to monitor, particularly transfers by criminal organizations.

Informal hawala money dealers (muhawaleen) exist in Libya, and are often used to facilitate trade and small project finance. Trade is often used to provide counter-valuation or a means of balancing the books between hawaladars. Given the poor quality and limited reach of Libya’s banking system, Libya’s socialist practices, and commercial rivalries among regime insiders that discourage disclosure of income and business transactions, many Libyans and foreigners rely on informal mechanisms for cash payments and transactions. Until the recent revision of the tax code, tax rates of up to 80-90 percent also encouraged off-the-book transactions.

Liechtenstein

The Principality of Liechtenstein has a well-developed offshore financial services sector, liberal incorporation and corporate governance rules, relatively low tax rates, and a tradition of strict bank secrecy. All of these conditions significantly contribute to the ability of financial intermediaries in Liechtenstein to attract both licit and illicit funds from abroad. Liechtenstein’s financial services sector includes 16 banks, 102 asset management companies, 41 insurance companies and 70 insurance intermediaries, 33 pension schemes and five pension funds, 395 trust companies and 27 fund management companies with approximately 411 investment undertakings (funds), and 1,448 other financial intermediaries. The three largest banks control 85 percent of the market.

In recent years the Principality has made continued progress in its efforts against money laundering. In 2009, the Liechtenstein Government recognized the OECD standard as the global standard in tax cooperation and as a result renegotiated a series of Double Taxation Agreements to include administrative assistance on tax evasion cases.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, securities and insurance brokers; money exchangers or remitters; financial management firms and investment and real estate companies; dealers in high value goods; insurance companies; lawyers; money exchangers or remitters; casinos; the Liechtenstein Post Ltd.; or individuals acting as intermediaries in bank lending, money transactions, trading of currencies or dealing in matters of wealth management and investment advice

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, securities and insurance brokers, money exchangers or remitters, financial management firms, investment companies, real estate companies, dealers in high valued goods, insurance companies, lawyers, money exchangers or remitters, casinos, the Liechtenstein Post Ltd.; or individuals acting as intermediaries in bank lending, money transactions, trading of currencies or dealing in matters of wealth management and investment advice

Number of STRs received and time frame: 235 in 2009

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Seven between September 1, 2008 and October 18, 2010

Convictions: Two between September 1, 2008 and October 18, 2010

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Liechtenstein is a member of Moneyval, a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here:

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Liechtenstein has shown an important effort to improve deficiencies in money laundering. The 2009 reporting year saw a new record high number of suspicious activity reports (SARs) at 235, an increase of 24.3% compared to 189 SARs in 2008: 57.9% of the SARs were based on fraud; 11.5% on money laundering; and 30.6% on the other enumerated offense categories. No SARs were submitted for suspected terrorist financing. In 2009, 74% of Liechtenstein’s SARs were forwarded to the Office of the Public Prosecutor (in 2010, so far 82% have found their way to the Office of the Public Prosecutor).

In practice, many of the customer characteristics considered high-risk in the international standards, including non-resident and trust or asset management accounts, are considered routine, subject only to normal customer due diligence procedures. Liechtenstein also decided not to include entities with bearer shares, trusts and foundations, or entities registered in privately-held databases in the high-risk category. The present SAR reporting requirements do not clearly indicate whether “attempted transactions” relating to funds used in connection with terrorism are covered.

There are reportedly no abuses of non-profit organizations, alternative remittance systems, offshore sectors, free trade zones, bearer shares, or other specific sectors.

Lithuania

Lithuania is not a regional financial center. Lithuania has adequate legal safeguards against money laundering; however, its geographic location makes it a target for smuggled goods and tax evasion. The sale of narcotics does not generate a significant portion of money laundering activity in Lithuania. Value added tax (VAT) fraud is one of the biggest sources of illicit income, through underreporting of goods’ value. Most financial crimes, including VAT embezzlement, smuggling, illegal production and sale of alcohol, capital flight, and profit concealment, are tied to tax evasion by Lithuanians. There are no reports of public corruption contributing to money laundering or terrorist financing.

Lithuania has Free Economic Zones (FEZ) in the cities of Klaipeda and Kaunas. As of yearend 2010, there are 20 businesses operating in the Klaipeda FEZ, and nine in the Kaunas FEZ. The companies operating in the zones have the same accounting and identification responsibilities as those operating outside the zones. Lithuania’s EU accession agreement permits the indefinite operation of existing free trade zones, but precludes the establishment of new ones.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All crimes approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, credit unions, and financial leasing firms; insurance companies and brokers; lawyers, notaries, tax advisors, auditors, and accountants; investment and management companies; real estate brokers and agents; gaming enterprises; postal services; and dealers in art, antiquities, precious metals and stones and high-value goods

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, credit unions, and financial leasing firms; insurance companies and brokers; lawyers, notaries, tax advisors, auditors, and accountants; investment and management companies; real estate brokers and agents; gaming enterprises; postal services; and dealers in art, antiquities, precious metals and stones and high-value goods

Number of STRs received and time frame: 213 in 2009; about 200 -- January through November 2010

Number of CTRs received and time frame: Approximately 700 by December 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 16 from January 2010 to December 15, 2010

Convictions: One

Assets forfeited: criminally: Approximately 73 million litas (approximately $30 million) in 2009; approximately $93 million litas (approximately $37 million) in 2010 civilly: Not applicable

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Lithuania is a member of MONEYVAL, a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Lithuania_en.asp

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Lithuania has a comprehensive anti-money laundering/counter-terrorist financing regime and is continually enhancing its laws and regulations as necessary to adhere to international standards.

In 2008, an Irishman was arrested in Vilnius and charged with, among other charges, seeking to aid a terrorist organization. The Irishman was apprehended while meeting a Lithuanian agent posing as an arms dealer. His trial is ongoing.

Luxembourg

Despite its standing as the second-smallest member of the European Union (EU), Luxembourg is one of the largest financial centers in the world. It also operates as an offshore financial center. Although there are a handful of domestic banks operating in the country, the majority of banks registered in Luxembourg are foreign subsidiaries of banks in Germany, Belgium, France, Italy, and Switzerland. While Luxembourg is not a major hub for illicit narcotics distribution, the size and sophistication of its financial sector create opportunities for money laundering, tax evasion, and other financial crimes.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: Combination of listed crimes and a penalty threshold

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, pension funds, insurance brokers, undertakings for collective investment (UCIs), management companies, external auditors, accountants, notaries, lawyers, casinos, gaming establishments, real estate agents, tax and economic advisors, domiciliary agents, and insurance providers

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, pension funds, insurance brokers, UCIs, management companies, external auditors, accountants, notaries, lawyers, casinos, gaming establishments, real estate agents, tax and economic advisors, domiciliary agents, and insurance providers

Number of STRs received and time frame: 4,866

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 107

Convictions: 51

Assets forfeited: criminally: 26.8 million EUR (approximately $36 million) civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: Not available

Luxembourg is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/40/7/44655591.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Law of 3 March 2010 introduces the criminal liability of legal persons into the Penal Code and into the Code of Criminal Procedure,

A Grand-Ducal Decree from February 2010 sets out several provisions concerning inter alia a) prohibition of accounts opened in fictitious names and specifications on numbered accounts; b) the verification of the powers of the natural person purporting to act on behalf of the customer; c) the identification of the beneficial owner; d) the determination of whether the customer is acting on behalf of another person; e) the scope of simplified due diligence; f) the regime of enhanced due diligence by specifying the measures and the risk management applicable to non face-to-face clients and transactions, correspondent banking and politically exposed persons; and, g) the specification of the obligation to report suspicious transactions.

The horizontal Law of 27 October 2010 entered into force on November 7, 2010. The Law introduces a considerable number of changes to the existing AML/CFT provisions and proposes to bring changes to as many as 20 existing Laws. The Law strengthens the existing AML/CFT provisions by extending the coverage of the money laundering and terrorist financing offenses and the asset forfeiture regime; clarifying and enhancing know-your-customer procedures; increasing sanctions and penalties; providing a supervisory regime for real estate agents, dealers in high-value goods, and trust and company service provider; establishing a cross-border currency declaration system; and strengthening the authority and access to information of the FIU.

Macau

Macau, a Special Administrative Region (SAR) of the People’s Republic of China (PRC), is not a significant regional financial center. Banks and insurance companies mainly offer traditional products and services to the local population. However, as the world’s biggest gambling market by revenue, benefiting from millions of visitors - mostly from nearby mainland China - Macau is vulnerable to becoming a hub for the laundering of criminal proceeds. Reported annual gaming revenues for 2010 were over $23.5 billion, although observers note that the amount of unreported illegal side-betting could be as much as ten times reported revenues. In addition to the existence of casinos, close proximity border with PRC and Macau’s open economy, including lack of controls on cross border physical movement of cash, are factors that create a risk of money laundering and terrorist financing activities. The primary sources of criminal proceeds in Macau are drug-related crimes, organized crime, and illegal gambling. Networks spanning across Macau’s boundary with mainland China account for much of the criminal activity.

Loosely-regulated gaming promoters, known as junket operators, profit from sourcing the majority of Macau’s VIP players who contribute to over 80 percent of gaming revenues. They finance gamblers while in Macau, assuming credit risk and mingling customer funds in a consolidated junket account, and supply them to the casinos on commission. Junkets are increasingly popular among gamblers seeking anonymity and among casinos aiming to reduce credit default risk. This inherent conflict of interest, together with anonymity provided through use of the junket operator to transfer funds, presents significant challenges to anti-money laundering measures in the gaming sector.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF U.S. CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: NO

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, credit and insurance entities, casinos, gaming intermediaries, remittance agents and money changers, cash couriers, trust and company service providers, realty services, pawn shops, traders in high-value goods (e.g., jewels, precious metals, vehicles, etc.), notaries, registrars, commercial offshore service institutions, lawyers, auditors, accountants, and tax consultants

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: All persons, irrespective of entity or amount of transaction involved, are required to file STRs

Number of STRs received and time frame: 1,220 in2010

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Two (January to September 2010)

Convictions: 0

Assets forfeited: criminally: $806,000* (January to November 2010) civilly: Not applicable

* Forfeited assets credited to Macau Government in 2010 from a 2008 conviction.

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Macau 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/Macao%20ME2%20-%20FINAL.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Although Macau has no formal law enforcement cooperation agreements with the United States, informal cooperation between the two routinely takes place. U.S. government agencies work closely with Macau counterparts in capacity building measures, information exchange, and investigations. Macau’s Financial Intelligence Unit (FIU) has been an essential component in coordinating AML/CFT efforts. The Government of Macau (GOM) established the FIU in 2006 as a non-permanent government entity in order to avoid having to seek legislative approval. The FIU’s current term expires in August 2012. The GOM should permanently institutionalize it without term limits, given the FIU’s crucial role in sustaining a long-term AML/CFT infrastructure.

The AML law does not require currency transaction reporting (CTR). However, gaming entities are subject to threshold reporting under the supplementary guidelines of the Gaming Inspection and Coordination Bureau (GICB). Currently, the GICB only shares statistical data on CTR filings with the Financial Intelligence Unit (FIU). To enhance the FIU’s ability to detect and deter illicit activity, the FIU should have full access to CTR reports collected by GICB.

Under current regulatory guidelines, financial institutions are obligated and do identify and freeze suspect bank accounts or transactions. However, the GOM cannot provide mutual legal assistance on AML/CFT under existing legislation. Macau should enhance its ability to support international efforts by developing its legal framework to facilitate the freezing and seizure of assets. The GOM can provide mutual legal assistance on criminal matters, even without a formal agreement, and cooperation between the GOM and the United States routinely takes place.

Macau continues making considerable efforts to develop an AML/CFT framework that meets international standards. It should continue to strengthen interagency coordination to prevent money laundering in the gaming industry, especially by introducing robust oversight of junket operators. It also should implement mandatory cross-border currency reporting requirements.

Macedonia

Macedonia is not a regional financial center. Most financial transactions are done through the banking system, which is regulated and supervised. However, cash transactions and settlements of considerable amounts sometimes take place outside the banking system. Money laundering in Macedonia is mostly connected to financial crimes such as tax evasion, smuggling, financial and privatization fraud, insurance fraud, bribery, and corruption. Most of the laundered proceeds come from domestic criminal activities. A small portion of money laundering activity may be connected to narcotics trafficking. There is no evidence that narcotics trafficking organizations or terrorist groups control money laundering. Also, there is no evidence that weapons or human traffickers have been involved in money laundering activities using bank or non-bank financial institutions. However, since organized crime groups are involved in both weapons and human trafficking in Macedonia, it is possible that proceeds from these activities have been laundered by investing in businesses.

Macedonia is not an offshore financial center, and the Law on Banks does not allow the existence of shell banks in Macedonia. Banks do not allow the opening of anonymous bank accounts, and bearer shares are not permitted. There is no evidence that alternative remittance systems exist in Macedonia. There are a few operational free trade zones in Macedonia, which all function as industrial zones within which some industrial production has the legal right to receive the benefits of a free trade zone. The production facilities enjoying these benefits are owned by foreign investors. The GOM is trying to attract more foreign investment by leasing out several large free trade zones throughout the country.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, savings houses, exchange offices, stock exchanges, central registry, central securities depositary, credit bureaus, brokerages, insurance companies, auditing companies, accountants, notaries, attorneys at law, real estate agents, consultants, NGOs, casinos and gaming centers

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, savings houses, exchange offices, stock exchanges, central registry, central securities depositary, credit bureaus, brokerages, insurance companies, auditing companies, accountants, notaries, attorneys at law, real estate agents, consultants, NGOs, casinos and gaming centers

Number of STRs received and time frame: 279 from January through November 2010

Number of CTRs received and time frame: 75,482 from January through November 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Two from January to November 2010

Convictions: One from January to November 2010

Assets forfeited: criminally: $104,000 from January to November 2010 civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Macedonia is a member of MONEYVAL, a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: www.coe.int/moneyval

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Dealers of arts, antiques, and other high-value consumer goods, entities dealing with jewelry and precious metals, and travel agencies are excluded from the list of entities obliged to report suspicious and cash transactions to the Macedonian FIU. So far, there is no evidence that any of these entities engage in money laundering or terrorist financing activities.

Non-bank financial institutions, including exchange offices and non-bank money transfer agents, as well as all other reporting entities, are poorly supervised and audited in regard to anti-money laundering/counter terrorist financing programs and practices. These institutions are to be supervised by the Public Revenue Office; in practice such inspections rarely occur as the Public Revenue Office is focused on investigating tax evasion. There is a need for improving supervision of the non-bank financial sector and providing necessary resources and training to ensure full implementation of laws. Although mandatory, reporting by lawyers, accountants, brokers, real estate agents, consultants, NGOs, casinos, and notaries is irregular, but improving.

The FIU’s competencies overlap in many areas with the Public Revenue Office, the Customs Administration, the Financial Police, and the regular police. Although in the past two or more of these institutions would be working independently on the same cases, coordination between them has been effective, resulting in several coordinated large-scale investigations of cases concerning money laundering, tax evasion, fraud, corruption, and misuse of official position, involving numerous companies and individuals.

Terrorist financing is a crime under Macedonian laws, but to date, there have been no convictions for terrorist financing. There are no indications that financiers of terrorism use trade-based money laundering schemes or the free trade zones for their operations. A few smaller banks and all savings houses lack the ability to electronically identify account holders and transactions by named individuals and usually will cross-check their customer lists with distributed lists manually.

According to the Macedonian Law on Preventing Money Laundering and Other Proceeds of Crime and Terrorism Financing (LPMLTF), financial institutions can temporarily freeze assets of suspected money launderers and terrorist financiers prior to receiving a court order. Frozen assets are confiscated only by a court’s final verdict. Although there is existing legislation for management of seized and forfeited assets, more work is needed to bring it in line with good international practices.

Macedonia has passed complex legislation pertaining to judicial reforms, including amendments to the Constitution and the Criminal Procedure Code that allow the use of specialized investigative methods in investigating money laundering cases. In 2010, the Parliament adopted a new Criminal Procedure Code, which after becoming effective in the second half of 2011 will strengthen prosecutors’ ability to more effectively prosecute serious and organized crime. Reforms in the judiciary should further enhance efforts to combat organized crime, corruption, terrorism, trafficking in human beings, money laundering, and narcotics, by increasing penalties, tightening definitions, and defining authorities responsible for taking the lead in combating these various crimes. However, real reforms are almost non-existent, the judiciary is highly politicized, and the rule of law is backsliding.

Madagascar

Madagascar is not a regional financial center. Illicit activities, public corruption, and associated money laundering appear to have increased in 2010. Tax and customs fraud, violation of the foreign exchange code, and illegal rosewood logging are the major sources of proceeds. Smuggling of gemstones, protected flora and fauna, and illegal drugs, to a lesser extent, also contributes to money laundering. Madagascar’s inadequately monitored 3,000 mile coastline facilitates smuggling and money laundering. Criminal proceeds laundered in the country derive mostly from domestic criminal activity, but are often linked to international trade. It is suspected that most money laundering occurs through informal channels and is not tracked by the government.

Offshore banks and international business companies are permitted in Madagascar. Along with domestic banks and credit institutions, offshore banks are required to request authorization from the Financial and Banking Supervision Committee (CSBF) which is affiliated with the central Bank.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: NO civilly: NO

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks and other financial institutions

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks and moneychangers

Number of STRs received and time frame: 76 in 2010

Number of CTRs received and time frame: None

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0

Convictions: 0

Assets forfeited: criminally: None civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: NO

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Madagascar (GOM) should continue to implement the requirements of Law 2004-020 and internationally recognized anti-money laundering/counter-terrorist financing standards. The GOM should pass the stalled legislation on terrorist financing. Additional effort should be made to combat smuggling. Money laundering related to underground finance and informal value transfer systems should be recognized and enforced. The GOM should train police and customs authorities to proactively recognize money laundering at the street level and at the ports of entry. Additionally, prosecutors should receive training so they are more able to successfully prosecute complex financial crime and money laundering cases.

Contacts have been established with the East and Southern Africa Anti-Money Laundering Group (ESAMLAG) secretariat to start the membership process.

Malawi

Malawi is not a regional financial center. One of the primary sources of illicit funds is the production and trade of Cannabis Sativa (Indian hemp) which is extensively cultivated in remote areas of the country. Anecdotal evidence indicates that Malawi is a transshipment point for other forms of narcotics trafficking. Human trafficking, vehicle hijacking, fraud, and corruption are also areas of concern. Smuggling and the laundering of funds are exacerbated by porous borders and weak enforcement. The Government of Malawi (GOM) has adopted anti-money laundering and counter-terrorist financing legislation; however, the development of institutional capacity and enforcement mechanisms is still lacking.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: NO

CRIMININALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, microfinance institutions, discount houses, foreign exchange bureaus, estate agencies, casinos, accountants, lawyers, dealers in precious metals and stones, and capital markets

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, microfinance institutions, discount houses, foreign exchange bureaus, estate agencies, casinos, accountants, lawyers, dealers in precious metals and stones, and capital markets

Number of STRs received and time frame: 15 – January through October 2010

Number of CTRs received and time frame: 509,765 – January through October 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0

Convictions: 0

Assets forfeited: criminally: NONE civilly: NONE

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Malawi is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force (FATF) regional body. Malawi’s most recent mutual evaluation can be found here: http://www.esaamlg.org/reports/me.php

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Malawi’s financial intelligence unit (FIU) is set up within the Reserve Bank of Malawi. However, despite numerous suspicious transaction reports (STRs) there have been no successful prosecutions or convictions for money laundering in Malawi.

Now that the Government of Malawi (GOM) has adopted its anti-money laundering and counter-terrorist financing legislation, it should work toward full implementation of its laws. A number of challenges remain. To date, a permanent director has not been appointed to the FIU; there is no provision in the ML Act for administrative penalties; investigative agencies do not have adequate financial and human resource capacity to carry out effective investigation and successful prosecution of money laundering cases; and, investigative agencies have also shown reluctance to seriously tackle the often complex financial cases referred to them by the FIU. Porous borders and uncharted routes make it easier for criminals to smuggle goods, people and currency across to/from Mozambique, Zambia and Tanzania; Malawi has a cash-based economy and there are usually little or no paper trails to follow-up during investigations of financial crimes when transactions have to be reconstructed; and, there is no regulatory or administrative framework for implementing UN Security Council Resolutions 1267 and 1373.

A lack of a national identification system makes it difficult for financial institutions to apply a standard form of identification under the ML Act. Some financial institutions allow their customers to be identified using the Malawi Electoral Commission voter identification certificate. This ID is not reliable, cannot be easily verified and is not fraud proof. Insurance providers are not designated as reporting institutions under the money laundering law.

Malaysia

Malaysia is a growing regional financial center and has a well-developed anti-money laundering/counter-terrorist financing (AML/CFT) framework. Malaysia’s long porous land and sea borders and its strategic geographic position increase its vulnerability to transnational criminal activity, including money laundering and terrorist financing in the region. Drug trafficking is the main source of illegal proceeds in Malaysia.

Malaysia’s offshore financial center on the island of Labuan is subject to the same AML/CFT laws as those governing onshore financial service providers. The financial institutions operating in Labuan are generally among the largest international banks and insurers. Offshore companies must be established through a trust company, which is required by law to establish true beneficial owners and submit suspicious transaction reports (STRs).

Free trade zones in Malaysia are divided into Free Industrial Zones (FIZ), where manufacturing and assembly takes place, and Free Commercial Zones (FCZ), generally for warehousing commercial stock. The FIZs are designed mainly to promote manufacturing industries producing goods mostly for export and are dominated by large international manufacturers attracted to the zones because they offer preferential tax and tariff treatment. Currently there are 17 FIZs and 17 FCZs in Malaysia. Companies wishing to operate in an FIZ or FCZ must be licensed.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF U.S. CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Financial institutions from the conventional, Islamic, and offshore sectors; offshore listing sponsors and trading agents; stock and futures brokers; unit trust, investment fund, and futures fund managers; money lenders and pawnbrokers; money remitters; charge account and credit card issuers; insurance financial advisers; e-money issuers; leasing and factoring businesses; lawyers, public notaries, accountants, and company secretaries; licensed casinos and gaming outlets; registered estate agents; trust companies, and dealers in precious metals and stones

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Financial institutions from the conventional, Islamic, and offshore sectors; offshore listing sponsors and trading agents; stock and futures brokers; wholesale money changers; unit trust, investment fund, and futures fund managers; money lenders and pawnbrokers; money remitters; charge account and credit card issuers; insurance financial advisers; e-money issuers; leasing and factoring businesses; lawyers, public notaries, accountants, and company secretaries; licensed casinos and gaming outlets; registered estate agents; trust companies, and dealers in precious metals and stones

Number of STRs received and time frame: 12,489 (2009) and 4,260 (January to April 2010)

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 106 money laundering cases (from 2004-December 2010)

Convictions: 15 convictions (from 2004-December 2010)

Assets forfeited: criminally: $178,000 (from 2004-December 2010) civilly: $16.2 million (from 2004-December 2010)

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Malaysia is a member of 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://www.apgml.org/documents/docs/17/Malaysian%20MER%20-%20FINAL%20August%202007.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Reporting institutions are subject to strict customer due diligence (CDD) rules, and the Government of Malaysia (GOM) has adopted banker negligence laws that extend criminal liability to bank directors if their institution launders money or finances terrorism.

As of December 2010, the Attorney General’s Chambers was prosecuting 86 money laundering cases involving a total of 4,576 charges with a cumulative total value of RM2 billion (approximately $645 million) which also includes self-laundering cases.

The use of informal remittances, which are not subject to AML/CFT controls, creates vulnerability for abuse by money launderers and terrorist financiers. Malaysia’s competent authority for implementing its AML/CFT laws, Bank Negara Malaysia (BNM), should continue its efforts to encourage the use of formal remittances. Additionally, law enforcement and customs authorities should examine trade based money laundering and invoice manipulation and their relationship to underground finance and informal remittance systems.

A number of terrorist organizations have been active on Malaysian territory, and authorities have taken action against Jemaah Islamiyah and other terrorist networks. Terrorist financing in Malaysia is predominantly carried out using cash and relies on trusted networks. In 2010, Malaysia initiated five new terror finance investigations, its first under the AML/CFT legal framework. Malaysia should take further steps to increase law enforcement capacity to identify, investigate, and prosecute terrorist and proliferation financing.

Malaysia’s Labuan Financial Services Authority (LFSA) is responsible for ensuring AML/CFT compliance on Labuan. Malaysia passed the Labuan Financial Services and Securities Act of 2010 (LFSSA) in February to address the remaining regulatory issues that led the OECD in April 2009 to briefly designate Labuan as an uncooperative tax haven. The LFSSA gives LFSA more regulatory, investigative and enforcement authorities over offshore financial services companies licensed in Labuan and removes privacy restrictions on its access to Labuan-based account activities.

In February 2009, LFSA issued an operating license to First East Export Bank (FEEB), a wholly owned subsidiary of Iran-based Bank Mellat, which in 2007 was designated by the United States under E.O. 13382 for its proliferation finance activities. FEEB opened its Labuan operation in August 2009. The United States designated FEEB under E.O. 13382 on November 5, 2009, based on its relationship to Bank Mellat. On June 9, 2010, UNSCR 1929 listed FEEB as an entity subject to UN sanctions. The GOM ordered FEEB’s assets frozen and prohibited Malaysian banks from transacting business with FEEB on July 14, 2010, in full compliance with UNSCR 1929. LFSA should remain vigilant to any attempts to use Labuan for proliferation and terrorism finance activities.

Mali

Mali is a member of the West African Economic and Monetary Union (WAEMU), which also includes Benin, Burkina Faso, Cote D’Ivoire, Guinea-Bissau, Niger, Senegal, and Togo. All of the WAEMU members share a common currency, the franc CFA. The currency is pegged to the euro and guaranteed by France.

Mali is not a regional financial center, and presently, there are no free trade zones or offshore sectors in Mali. The danger of laundering of illegal proceeds arises from well-travelled trafficking routes moving drugs, small arms, people, and everyday commodities across the Algerian and Mauritanian borders in the sparsely-populated north of the country. Terrorist cells from Al-Qaeda in the Islamic Maghreb (AQIM), known to operate in the north, are suspected of involvement in these smuggling routes. On the 2010 Corruption Index sponsored by Transparency International, Mali placed 116th out of 178 (with 178 being the most corrupt), dropping from 111th in 2009.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: UNKNOWN

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, the Public Treasury, microfinance entities, the post office, currency exchanges, insurance companies and brokers, securities and asset brokers and managers, the regional stock exchange, mutual funds, casinos

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Financial organizations, Banks, the Public Treasury, microfinance entities, the post office, currency exchanges, insurance companies and brokers, securities and asset brokers and managers, the regional stock exchange, mutual funds, attorneys, notaries, auditors, real estate and travel agents, non-governmental organizations, casinos and gaming establishments, and dealers of high-value goods and precious metals and stones

Number of STRs received and time frame: 25 in 2010

Number of CTRs received and time frame: None in 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Five in 2010

Convictions: None in 2010

Assets forfeited: criminally: None in 2010 civilly: None in 2010

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Mali is a member of the Inter Governmental Action Group Against Money Laundering in West Africa (GIABA), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation report can be found here: http://www.giaba.org/media/M_evalu/MALI_word_MER_english[1].pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Mali’s financial intelligence unit, the Cellule Nationale de Traitement des Informations Financières (CENTIF) is confident that closer relations with foreign financial intelligence units will improve the number of prosecutions for financial crimes, and will also elucidate the sources and possible destinations of laundered funds. CENTIF enjoys a transparent and mutually beneficial relationship with liaison officers from the customs service, police, and gendarme forces. Significant challenges to CENTIF’s efficiency remain lack of funds to mount comprehensive awareness training for bank and public sector employees as well as adequate publicity for the organization itself.

Although many types of entities are listed as covered under Mali’s anti-money laundering law, very few are actually conforming to requirements and, with the exception of casinos, designated non-financial businesses and professions are not subject to customer due diligence requirements.

CENTIF suspects that proceeds from cocaine trafficking into Europe from South America may be passed through Malian banks, but CENTIF lacks the necessary cooperation with external banks to make this determination.

Malta

Malta is not a regional financial center. Malta’s location between North Africa and Italy makes it a potential transit point for drug and human trafficking to Europe.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, currency exchange offices, stockbrokers, insurance companies, money remittance/transfer services, real-estate agencies, auditors, accountants, notaries, tax advisors, trust or asset managers, company formation agents, nominee shareholders, casinos, auctioneers, and dealers in art, precious metals and stones

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, currency exchange offices, stockbrokers, insurance companies, money remittance/transfer services, real-estate agencies, auditors, accountants, notaries, tax advisors, trust or asset managers, company formation agents, nominee shareholders, casinos, auctioneers, and dealers in art, precious metals and stones

Number of STRs received and time frame: 63 in 2009

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Nine in 2009

Convictions: Five in 2009

Assets forfeited: criminally: 2,670,811 EUR (approximately $3,690,000) in 2009 civilly: 0 in 2009

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Malta is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Malta_en.asp

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Malta should continue to enhance its anti-money laundering and counter-terrorist financing legislation and procedures, as appropriate.

Marshall Islands

The Republic of the Marshall Islands (RMI) consists of 29 atolls and five islands, covering 70 square miles of land, spread across 750,000 square miles of ocean. The country is not economically developed and has limited resources for development. The RMI signed a compact of free association with the United States in 1986, and relies on the United States for the majority of its economic support. There are no known terrorist or narcotics money laundering activities in the Marshall Islands.

The RMI offshore corporate sector is vulnerable to money laundering. The Marshall Islands Trust Company and the Marshall Islands Maritime & Corporate Administrators, Inc., provide for a robust registration of corporations and ships. The RMI fleet is the third largest flagged fleet in the world, although almost none of the vessels come to the Marshall Islands. The port of Majuro is visited only by tuna fishing boats, with a few cargo ships per month delivering food and fuel to the nation. Available information indicates nonresident corporations (NRCs), the equivalent of international business companies, can be formed online. NRCs are allowed to offer bearer shares. Corporate officers, directors, and shareholders may be of any nationality and live anywhere. NRCs are not required to disclose the names of officers, directors, and shareholders or beneficial owners, and corporate entities may be listed as officers and shareholders. The corporate registry program, however, does not allow the registering of offshore banks, offshore insurance firms, online gaming institutions, and other companies which are financial in nature. Although NRCs must maintain registered offices in the Marshall Islands, corporations can transfer domicile into and out of the RMI with relative ease. Marketers of offshore services via the Internet promote the Marshall Islands as a favored jurisdiction for establishing NRCs. In addition to NRCs, the Marshall Islands offer nonresident trusts, partnerships, unincorporated associations, and domestic and foreign limited liability companies. No current information is available on the extent of offshore corporate operations.

There are two banks in the country, the Bank of the Marshall Islands, and a branch office of the Bank of Guam. There are no brokerage houses or other types of financial firms in the country. Land cannot be sold, so there are no realtors, and there are no casinos or other places typically used to launder money.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

All serious crimes approach or list approach to predicate crimes: Not defined

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: NO

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Financial institutions, insurers, insurance brokers and intermediaries, securities dealers, futures brokers, bullion dealers, businesses issuing, selling or redeeming travelers' checks, money orders, or similar instruments, payroll service businesses involved in collecting, holding and delivering cash, gambling houses, casinos, lotteries, currency dealers and exchangers, money transmission services, financial futures and options, exchange and interest rate instruments, transferable securities, and broker/dealers

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Financial institutions, insurers, insurance brokers and intermediaries, securities dealers, futures brokers, bullion dealers, businesses issuing, selling or redeeming travelers' checks, money orders, or similar instruments, payroll service businesses involved in collecting, holding and delivering cash, gambling houses, casinos, lotteries, currency dealers and exchangers, money transmission services, financial futures and options, exchange and interest rate instruments, transferable securities, and broker/dealers

Number of STRs received and time frame: 41 in 2010

Number of CTRs received and time frame: 2,406 in 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

Assets forfeited: criminally: None civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

The Marshall Islands is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body. The report from the APG’s 2004 evaluation is not available online. The APG conducted a new evaluation in September 2010. Once finalized, it may be found at: http://www.apgml.org/documents/default.aspx?DocumentCategoryID=17

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Marshall Islands has passed national laws that can be used to prosecute money laundering crimes; however these have not yet been used. The laws were passed with the assistance and drafting of both U.S. and EU donors to meet international standards. These laws cover both individuals and corporations. Fines and other punishments (not including incarceration) are included in the statutes. While money laundering is a crime, predicate crimes are not defined, whether by list or a generalized serious crimes approach.

The government does not have an independent national system and mechanism for freezing terrorist assets in a timely manner. The government does not distribute any information on international terrorism to the Bank of Guam or to the Bank of the Marshall Islands.

The RMI should ensure its offshore sector is adequately supervised and that information on company ownership and management is available to law enforcement and supervisory authorities. The Marshall Islands is in the process of signing tax and other types of treaties with other nations. It has signed a tax treaty with Australia.

The RMI became a party to the 1988 UN Drug Convention on November 5, 2010. It also should become a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Mauritania

The Islamic Republic of Mauritania has a largely informal and under-developed economy. Its economic system suffers from a combination of weak government oversight, lax financial auditing standards, a large informal trade sector, porous borders, lack of enforcement, and corruption in government and the private sector. In recent years, Mauritania has become a transshipment point for cocaine from South America intended for the European market. General smuggling, trafficking in vehicles stolen mostly in Europe, parallel networks, and the provision of logistical support for organized international drug traffickers are all serious problems. The instability that followed the August 6, 2008 coup d’état made the country more vulnerable to informal and illegal economic activity. However, following the 2009 election, the Government of Mauritania embarked upon an aggressive campaign against corruption and the terrorist network of Al-Qaeda in the Islamic Maghreb. The Office of the Inspector General of the State and the Financial Analysis Committee (CANIF) have been empowered to lead efforts to identify, prevent and reduce corrupt practices and financial crimes, including financial crimes linked to narcotics and terrorist finance networks.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, formal money exchanges, remittance offices

Number of STRs received and time frame: Five from 2005-2010

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Five – timeframe is not available

Convictions: Not available

Assets forfeited: criminally: Approximately $2.2 million - 2005 and 2010 civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

While Mauritania has been successful in creating a legal and institutional framework to fight financial crimes, there remain many challenges to successfully implement these initiatives in an informal economy. Monitoring informal financial markets also remains a challenge. Only seven percent of Mauritanian adults have bank accounts, and informal banking and financial systems remain vulnerable to exploitation. Mauritanian authorities are aware of these issues and are working to formalize financial transactions to the extent possible and to devise mechanisms to prevent the exploitation of the informal financial system.

Mauritania’s financial intelligence unit (CANIF) is the office with direct responsibility for oversight of criminal activity in the financial sector. Although CANIF has existed since 2005, due to political instability, it was not truly functional until 2009. Given that CANIF is such a young organization, and has only recently become operational, there is still a great deal of work to be done to formalize its operating procedures.

Mauritius

Mauritius has developed a reputation as a well-regulated and credible international financial center. According to the Mauritius’ Independent Commission Against Corruption (ICAC), laundered funds are primarily the proceeds from drug trafficking – mainly heroin, and increasingly, Subutex. Other important predicate crimes for money laundering offenses include aggravated larceny, conspiracy, forgery, swindling, and corruption. Criminal proceeds laundered in Mauritius are not controlled by drug trafficking organizations or organized criminal groups. There is no significant black market for smuggled goods in Mauritius, although there is occasional smuggling of stolen automobiles and cigarettes. According to ICAC, money laundering occurs in the banking system, the offshore financial center, and the non-bank financial system. Criminal proceeds are derived from both domestic and foreign criminal activities.

The Mauritius Global Business Sector is a major route for foreign investments into the Asian sub-continent and is by far the largest source of foreign direct investment and portfolio investment in India. As of December 2010, there were 28,000 Global Business Companies (GBCs) in Mauritius, including 700 licensed global funds. The offshore sector also includes management companies licensed by the Financial Service Commission (FSC) to provide professional services to GBCs. Shell companies and bearer shares are not allowed in Mauritius nor are nominee or anonymous directors or trustees.

The Mauritius Freeport, a free-trade zone (FTZ), was established to promote the country as a regional FTZ center for Eastern and Southern Africa and the Indian Ocean rim. As of December 2010, there were about 350 registered Freeport companies, with a total turnover of $667 million.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, insurance companies, securities dealers, money changers, foreign exchange dealers, accountants, attorneys, barristers, notaries, chartered secretaries, gaming centers, jewelry dealers, land promoters, property developers, estate agents

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, insurance companies, securities dealers, money changers, foreign exchange dealers, accountants, attorneys, barristers, notaries, chartered secretaries, gaming centers, jewelry dealers, land promoters, property developers, estate agents

Number of STRs received and time frame: 173 in 2009

Number of CTRs received and time frame: Not applicable

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 34 in 2010

Convictions: 19 in 2010

Assets forfeited: criminally: None civilly: Not applicable

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Mauritius is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.esaamlg.org/reports/view_me.php?id=173

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Limited capacity and training of the judiciary and the ICAC compromises Mauritius’ ability to successfully implement its AML regime. Stronger support of judges to carry cases through successful prosecution is needed.

Legislation to correct deficiencies and amend the AML framework has been pending with authorities since 2006, but most of the amendments have not been tabled to the National Assembly.

Although coordination is possible via the 2003 Mutual Assistance in Criminal and Related Matters Act, international cooperation, particularly on sharing of information, is a lengthy and uncertain process. Timely access to financial documents domestically is also a problem. While Mauritius has a legal framework enabling it to freeze terrorist-related assets without delay, its ability to do so is subject to compliance with judicial proceedings.

Authorities have recently completed the drafting of the Asset Forfeiture Bill, which, when enacted, will consolidate all asset forfeiture functions into a single unit and should bring about major improvements. The new legislation will also provide for civil asset forfeiture and non-conviction based asset forfeiture.

Mexico

Mexico is a major drug-producing and drug-transit country. Proceeds from the illicit drug trade leaving the United States are the principal source of funds laundered through the Mexican financial system. Other significant sources of illegal proceeds being laundered include corruption, kidnapping, and trafficking in firearms and persons. Sophisticated and well-organized drug trafficking organizations based in Mexico take advantage of the extensive U.S.-Mexico border and the large flow of legitimate remittances to Mexico. The smuggling of bulk shipments of U.S. currency into Mexico and the repatriation of the funds into the United States via couriers, armored vehicles, and wire transfers remain favored methods for laundering drug proceeds. The combination of a sophisticated financial sector, a large cash-based informal sector, and insufficiently implemented regulatory controls further complicates the problem. According to US authorities, drug trafficking organizations send between $19 and $29 billion annually to Mexico from the United States. Mexico has seized over $457.5 million in bulk currency shipments since 2002. In 2010, bulk-cash seizures amounted to $32.4 million in U.S. dollars and 87.3 million (approximately $7 million) in pesos.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: YES

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All crimes

Legal persons covered: criminally: NO civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: NO

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks and other financial institutions, including mutual savings companies, insurance companies, securities brokers, retirement and investment funds, financial leasing and factoring funds, casas de cambio, and centros cambiarios (unlicensed foreign exchange centers)

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks and other financial institutions, including mutual savings companies, insurance companies, securities brokers, retirement and investment funds, financial leasing and factoring funds, casas de cambio, and centros cambiarios

Number of STRs received and time frame: 34,511 January through September 2010

Number of CTRs received and time frame: 3.2 million January through September 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 162 from September 2009 to July 2010

Convictions: 17 (37 individuals) from September 2009 to July 2010

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Mexico is a member of the Financial Action Task Force (FATF), of which Mexico currently holds the presidency (until July 2011), and the Financial Action Task Force for South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here:

http://www.fatf-gafi.org/document/20/0,3343,en_32250379_32236963_41911956_1_1_1_1,00.html

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The number of casas de cambio has declined due to actions the Mexican authorities have taken against those with serious AML/CFT violations and the closure of correspondent accounts in the United States. Unlike regulated casas de cambio – of which there are only nine – there are over 4000 centros cambiarios, which are largely unregulated, and approximately 1200 registered money transmitters. Commercial banks, foreign exchange companies, and general commercial establishments also may offer money exchange services. The Government Secretariat issues temporary licenses for national lotteries, casinos, horse races, and sport pools, but these operations as well as lawyers, accountants, real estate agents, dealers of precious metals and stones, and couriers are currently not subject to AML reporting requirements. Legislation to regulate these non-financial entities has been proposed and remains pending in Congress.

The Government of Mexico (GOM) has made fighting money laundering and drug trafficking one of its top priorities, and has made progress in combating these crimes over the course of 2010. Mexico has adopted a national anti-money laundering strategy, increased the capacity of law enforcement and supervisors, and established a vetted police unit. The Mexican government works very closely with U.S. law enforcement on transnational cases. From September 2009 to July 2010, Mexican judges convicted 37 individuals on money laundering charges. Given that from 2004 to 2007, only 17 criminals were convicted of money laundering, this is a notable improvement.

However, Mexico continues to face challenges with respect to its AML/CFT regime, particularly with its ability to prosecute and convict money launderers. The GOM should amend its legislation to ensure that legal persons can be held criminally liable for money laundering and terrorist financing. Mexico should also amend its terrorist financing legislation to fully comport with the UN Convention for the Suppression of the Financing of Terrorism; and enact legislation and procedures to freeze without delay terrorist assets of those designated by the UN 1267Sanctions Committee. To create a more effective AML/CFT regime, Mexico should fully implement and improve its mechanisms for asset forfeiture, control the bulk smuggling of currency across its borders, monitor remittance systems for possible exploitation, improve the regulation and supervision of money transmitters, unlicensed currency exchange centers, centros cambiarios and gambling centers, and extend AML/CFT requirements to designated non-financial businesses and professions. While some of these issues are addressed in pending AML legislation, the fate of some of the proposals is uncertain as they must pass an opposition-dominated Congress.

On June 15, 2010 the Finance Ministry announced new regulations imposing limits on U.S. dollar (USD) transactions in Mexico. The caps, which were eased on December 3 for border areas, are applicable to cash transactions from dollars to pesos, including deposits, credit payments, and service fees. In addition to limiting transaction amounts for individuals, all USD transactions are prohibited by the regulation for corporate entities and trusts (including account and non-account holding entities), except for those which are account-holders located in border or tourist areas, for which transactions are limited.

On August 26, 2010 the GOM stepped up its AML efforts and announced the National Strategy for the Prevention and Elimination of Money Laundering and Financing for Terrorism along with a package of bills currently pending in Congress. The package includes nine reforms and three modifications to federal codes, as well as the creation of the Law to Prevent and Identify Operations with Illegal Origins and Terrorism Financing.

Micronesia, Federated States of

The Federated States of Micronesia (FSM) is not a regional or offshore financial center, and has no free trade zones. Its geographic isolation, small and relatively poor population, and limited infrastructure make it a low risk for money laundering and terrorist financing. Money laundering activity primarily originates in public corruption, including bribery and misuse of public funds. The extent of such corruption is unknown and prosecutions are rare. Corruption extends to directing public contracts and employment to unqualified companies or persons; there are no estimates on the amount of money involved.

Both the legislative and executive branches of the government have declined to allocate funds for FSM to join any information sharing organization, which has stymied prosecution of cases with international links. Should legislation authorizing the building of a casino in Pohnpei, currently in committee in the state legislature, be authorized and implemented, concerns for money laundering would rise.

Local law enforcement suspect some smuggled goods are making their way onshore, mostly cigarettes. The FSM’s isolation, small and relatively poor population, and limited transportation links make it an unlikely destination for large amounts of smuggled goods.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: NO

(Please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/inl/rls/nrcrpt/2009/index.htm

KNOW-YOUR-CUSTOMER RULES:

 

Covered entities: Financial institutions and “cash dealers,” including insurers, operators of bingo parlors, trustees, and money transaction services

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: All banks and financial institutions

Number of STRs received and time frame: 13 (January 1 – September 30, 2010)

Number of CTRs received and time frame: Not applicable.

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

Assets forfeited: criminally: Zero civilly: Zero

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: NO

FSM is not a member of any Financial Action Task Force (FATF)-style regional body.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Financial Intelligence Unit (FIU) of the National Police receives suspicious transaction reports through the Department of Justice (DOJ). The FIU consists of a single police officer. It has no operational or budgetary independence, and relies entirely on the DOJ for funding and the National Police for staff. The officer has both criminal investigative and regulatory responsibilities. Inadequate police training and lack of resources significantly diminish the investigative abilities of both police and FIU staff. There have been no arrests, prosecutions or convictions for money laundering since the FSM criminalized the offense in 2001. The FSM should give the FIU operational and budgetary independence, and build its overall capacity.

The FSM ratified the UN Convention for the Suppression of the Financing of Terrorism in 2001. However, the country has yet to make terrorist financing, or even the commission of terrorist acts, a specific crime. The FSM should make the criminalization of terrorist acts and terrorist financing a priority, and establish an effective implementation mechanism.

Money laundering statutes provide for the seizure of “tainted” property, as well as any benefits derived from the commission of a money laundering offense. However, no property has ever been seized or confiscated under the money laundering statute. There is no civil forfeiture. The FSM should support the investigation of money laundering cases and the seizure and confiscation of assets where appropriate.

Local institutions and personnel lack the training and capacity to fully enforce the law and its attendant regulations. Although legally obligated, only one of the two banks in FSM currently reports STRs.

The FSM should become a party to the UN Convention against Corruption.

Moldova

Moldova is not considered a regional financial center based on either volume or structure. The Government of Moldova (GOM) monitors money flows through Moldova, but does not exercise control over its breakaway region of Transnistria. Transnistrian authorities do not adhere to GOM financial controls, and maintain a banking system independent of and not licensed by the National Bank of Moldova. Criminal proceeds laundered in Moldova derive substantially from tax evasion, contraband smuggling, and corruption. Money laundering has occurred in the banking system and in exchange houses, along with offshore financial centers in Transnistria. Fifteen banks constitute the Moldovan financial system. Neither offshore banks nor shell companies are permitted to operate in Moldova. Internet gaming sites do exist, although no statistics are currently available on the number of sites in operation. Internet gaming comes under the same set of regulations as domestic casinos.

Moldova contains six free-trade zones (FTZs). Some of these free-trade zones are infrequently used. Reportedly, goods from abroad are frequently imported into the FTZ and then resold without payment of customs duties to the country of origin or to Moldova. The goods are then exported to other countries with documentation indicating Moldovan origin. Companies operating in FTZs are subject to inspections, controls, and investigations by inspectors from the Customs Service and the Center for Combating Economic Crime and Corruption.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, currency exchange offices, investment funds, investment management companies, deposit companies, fiduciary companies, security dealers, stock exchange companies, brokers, insurance and reinsurance companies, company formation agents and ownership registries, gaming and lottery organizers and institutions (including internet-casinos), real estate agents, dealers of precious metals or gems, auditors, accountants and financial consultants, investment or fiduciary service providers, lawyers, notaries, and organizations that provide postal and telephone mandate exchange or transfer of resource services

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, currency exchange offices, investment funds, investment management companies, deposit companies, fiduciary companies, security dealers, stock exchange companies, brokers, insurance and reinsurance companies, company formation agents and ownership registries, gaming and lottery organizers and institutions (including internet-casinos), real estate agents, dealers of precious metals or gems, auditors, accountants and financial consultants, investment or fiduciary service providers, lawyers, notaries, and organizations that provide postal and telephone mandate exchange or transfer of resource services

Number of STRs received and time frame: 303,671 from January to October 2010

Number of CTRs received and time frame: 8,973,795 from January to October 2010

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 16 from January to November 2010

Convictions: One from January to November 2010

Assets forfeited: criminally: $85,750 from January to October 2010 civilly: Not applicable

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

Moldova is a member of MONEYVAL, a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Moldova_en.asp

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Moldova has made some progress in instituting a legal framework for combating money laundering that is consistent with international standards, and has made significant efforts to raise its stature in this area. Despite these encouraging developments, the GOM still faces serious challenges in the enforcement and implementation of anti-money laundering laws, as evidenced by the low level of prosecutions and convictions for money laundering. These challenges may be magnified even further if a November 2010 decision of the Constitutional Court goes into effect. This decision invalidates some provisions of the law regulating the ability of the FIU to collect suspicious transactions reports as well as the ability of authorities to temporarily restrain accounts suspected of involvement with illegal activity. The GOM has issued a decree reinstating the provisions; the enforceability of this document is questionable. As underscored by this recent development, there is a pressing need to review and amend the laws regulating enforcement and implementation of the anti-money laundering framework. This should also include changes to the criminal procedure code to institute non-conviction based confiscation, and to permit special investigative techniques to be applied to a wider range of offenses associated with money laundering and terrorist financing.

Monaco

The Principality of Monaco is the second-smallest country in Europe. It is linked closely to France, and is closely tied to the economic apparatus of the European Union (EU) through its customs union with France and its use of the euro as its official currency. Monaco is known for its security and political stability. Historically, Monaco’s casinos, run by a majority state-owned company, were major sources of income. Now, however, the casino revenues constitute less than 3% of the state budget. Monaco’s state budget is now based primarily on taxes, duties, and excises which account for 75% of the total income. Monaco’s 39 banks and two financial institutions hold more than 300,000 accounts and manage total assets of about 750 billion euros (approximately $102.8 billion). Non-residents total 46 percent of the financial institutions’ total number of clients, representing 60% of the total assets and deposits, respectively almost 84,000 clients and 45 billion euros (approximately $57.6 billion). Money laundering offenses relate mainly to offenses committed abroad. Reportedly, the Principality does not face ordinary forms of organized crime. There is no significant market for smuggled goods.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: YES

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks; insurance companies; stockbrokers; corporate service providers; portfolio managers; some trustees; institutions within the offshore sector; casinos; money remitters; real estate brokers; consultants or advisors in business, legal or tax matters; dealers in precious stones, precious materials, antiquities, fine art and other valuable assets; lawyers; notaries; accountants

Number of STRs received and time frame: 478 in 2008

Number of CTRs received and time frame: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

Assets forfeited: criminally: Not available civilly: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: YES

With other governments/jurisdictions: YES

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Monaco (GOM) should enhance the authority of its financial intelligence unit (FIU) to forward reports and share financial intelligence with law enforcement and foreign FIUs even when the report or information obtained does not relate specifically to drug trafficking, organized crime, or terrorist financing. The GOM should become a party to the UN Convention against Corruption.

Mongolia

Mongolia is not a financial center. There are few financial and economic crimes, although numbers have increased in the last five years. Mongolia is vulnerable to a low grade of transnational crime due to the growth in tourism, investment, and remittances from abroad in recent years, but thus far this vulnerability has not translated into a greater incidence of such crime. The increase in reports of suspicious transactions is more likely a product of the increasing effectiveness and experience of the financial intelligence unit (FIU). Mongolia’s limited capacity to monitor its extensive borders with Russia and China is a liability in the fight against smuggling and narcotics, but drug use and trafficking remain limited and unsophisticated. There is a black market for smuggled goods, but this is largely tied to tax avoidance rather than drug trafficking. There are no indications that international narcotics traffickers exploit the banking system, and no instances of terrorist financing have been reported.

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: NO civilly: YES

CRIMINALIZATION OF TERRORIST FINANCING:

Ability to freeze terrorist assets without delay: YES

UN lists of designated terrorists or terrorist entities distributed to financial institutions: 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/)

KNOW-YOUR-CUSTOMER RULES:

Covered entities: Banks, non-bank financial institutions, savings and credit cooperatives, insurance companies, securities dealers, foreign exchange units, pawnshops, and casinos (though casinos are currently prohibited in Mongolia)

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Covered entities: Banks, non-bank financial institutions, savings and credit cooperatives, insurance companies, securities dealers, foreign exchange units pawnshops, and casinos (though casinos are currently prohibited in Mongolia)

Number of STRs received and time frame: 25 (January 1 – December 15, 2010)

Number of CTRs received and time frame: 319,000 (January 1 – Dec 15, 2010)

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Two (January 1 – December 15, 2010)

Convictions: None (January 1 – December 15, 2010)

Assets forfeited: criminally: None civilly: None

RECORDS EXCHANGE MECHANISM:

With U.S.: NO

With other governments/jurisdictions: YES

Mongolia is a member 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://www.apgml.org/documents/docs/17/Mongolia%20Mutual%20Evaluation%202007%20-%20Final%20.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Mongolian FIU expanded international cooperation, signing MOUs with the FIUs of Malaysia, Korea, Nepal, and Afghanistan in 2010. The FIU shared 20 reports (ten incoming and ten outgoing) with foreign FIUs in 2010.

The increasing financial flows in advance of an expected mining-driven boom create a distinct challenge to the Mongolian FIU. Although the Parliament passed a law on December 24, 2009, bringing AML/CFT efforts into harmony with international guidelines, it is not clear that the Government of Mongolia has the capacity fully to enforce this law. While highly professional, the FIU appears under-staffed, and coordination with other law enforcement organizations reportedly remains deficient. Although two cases were opened during the year, the lack of a single successful prosecution to date illustrates the enforcement problem.



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