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2011 INCSR: Countries/Jurisdictions of Primary Concern - Afghanistan through Greece


Bureau of International Narcotics and Law Enforcement Affairs
Report
March 3, 2011

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Afghanistan

Afghanistan’s formal financial system is no longer rapidly expanding while traditional informal financial systems, particularly regional hawala networks, remain significant in reach and scale. Afghanistan currently is experiencing large gross outflows of currency. Annually, hundreds of millions of dollars are transported out of the country through a variety of means. Terrorist and insurgent financing, money laundering, cash smuggling, informal value transfer systems and other activities designed to finance organized criminal activity continue to pose a serious threat to the security and development of Afghanistan. Afghanistan remains a major drug trafficking and drug producing country. The illicit narcotics trade, corruption and contract fraud are major sources of laundered funds. Despite ongoing efforts by the international community to build the capacity of Afghan police and customs forces, Afghanistan is unable to consistently uncover and disrupt financial crimes because of limited resources, little expertise, and corruption and insufficient political will. Proposed reforms often conflict with legal, historical, and cultural factors.

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: 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: 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 Afghanistan (DAB), banks, money service providers, insurance companies, dealers in precious metals and stones, lawyers, accountants, securities dealers, and real estate agents

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

Suspicious transaction reporting requirements:

Covered entities: Financial institutions and money service businesses including informal funds transfer providers such as hawaladars.

Number of STRs received and time frame: 598 from June 2006 to October 2010

Number of CTRs received and time frame: 1,744,169, from June 2006 to October 2010

Money laundering criminal Prosecutions/convictions:

Prosecutions: None

Convictions: None

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Afghanistan is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force (FATF)-style regional body. It is scheduled to undergo its first mutual evaluation late in 2010.

Enforcement and implementation issues and comments:

In 2010 Afghanistan became a member of the Egmont Group of Financial Intelligence Units.

Money laundering and terrorist financing investigations in Afghanistan have been hampered by a lack of capacity, awareness, and political commitment, particularly involving prosecutors and the courts. Corruption permeates all levels of Afghan government and society and has a direct impact on the lack of financial crimes enforcement. Afghanistan ranked 176 out of 178 countries surveyed in Transparency International’s 2010 Corruption Perception Index.

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

It is estimated that five percent or less of the Afghan population uses banks. Afghanistan is widely served by the traditional and deeply entrenched hawala system, which provides a range of financial and non-financial business services in local, regional, and international markets. It is estimated between 80 percent and 90 percent of all financial transfers in Afghanistan are made through hawala. Financial activities include foreign exchange transactions, funds transfers (particularly to and from neighboring countries such as the UAE, Iran and Pakistan with weak regulatory regimes for informal remittance systems), micro and trade finance, as well as some deposit-taking activities. Although the hawala system and formal financial sector are distinct, the two systems have links. Hawala dealers often keep accounts at banks and use wire transfer services to settle their balances with other hawaladars abroad, while banks will occasionally use hawaladars to transmit funds to hard-to-reach areas within Afghanistan. There are approximately 250 known hawala dealers in Kabul, and approximately 1,500 dealers that vary in size and reach spread throughout Afghanistan’s 34 provinces. Given how widely used the hawala system is in Afghanistan, it undoubtedly is involved, intentionally or inadvertently, in financial crimes; however, only a few STRs have been submitted by money service providers (MSPs), including licensed hawaladars. This needs to be addressed immediately, while continuing to license the remaining 50 percent - 60 percent of MSPs still operating outside the formal sector.

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


Antigua and Barbuda

Antigua and Barbuda is a significant offshore center that despite recent improvements remains susceptible to money laundering due to its offshore financial sector and Internet gaming industry. Illicit proceeds from the transshipment of narcotics and from financial crimes occurring in the U.S. also are laundered in Antigua and Barbuda.

Antigua and Barbuda uses the East Caribbean (EC) dollar and its monetary authority is the Eastern Caribbean Central Bank (ECCB). Seven other island economies are also members of the ECCB: Anguilla, Dominica, Grenada, Montserrat, St Kitts and Nevis, St. Lucia, and St Vincent and the Grenadines. The existence of this common currency may raise the risk of money laundering, but there is little evidence that the EC dollar is a primary vehicle for money laundering.

As of 2010, Antigua and Barbuda has 15 international banks, one international trust, three offshore insurance companies, 3,497 international business corporations (IBCs), ten interactive gaming companies, six interactive wagering companies, eight money services businesses, and 25 corporate management and trust services providers. In addition, there are five casinos. Bearer shares are permitted for international companies but the names and addresses of directors (who must be naturalized persons), the activities the corporation intends to conduct, the names of shareholders, and number of shares they will hold are required to be disclosed. Registered agents or service providers are required by law to know the names of beneficial owners. All licensed institutions are required to have a physical presence, which means presence of at least a full-time senior officer and availability of all files and records. Shell companies are not permitted. Internet gaming companies are required to incorporate as IBCs, to report all payouts over $25,000 to Antigua and Barbuda’s Office of National Drug and Money Laundering Control Policy (ONDCP), and to have a physical presence, meaning the primary servers and the key person are resident in Antigua and Barbuda.

A nominal free trade zone in the country seeks to attract investment in areas deemed as priority by the government. Casinos and sports book-wagering operations in Antigua and Barbuda’s free trade zone are supervised by the ONDCP, and the Directorate of Offshore Gaming. Internet gaming companies are required to submit quarterly and annual audited financial statements and maintain records relating to all gaming and financial transactions of each customer for six years.

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, agricultural credit institutions, and money exchangers; notaries; domestic and Internet gaming centers; real estate and travel agents; company service providers; lawyers; accountants; dealers in autos, precious metals and stones, and other high-value goods; insurance brokers; and securities dealers

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

Suspicious transaction reporting requirements:

Covered entities: Banks, agricultural credit institutions, and money exchangers; notaries; domestic and Internet gaming centers; real estate and travel agents; company service providers; lawyers; accountants; dealers in autos, precious metals and stones, and other high-value goods; insurance brokers; and securities dealers

Number of STRs received and time frame: 145, January to December 2010

Number of CTRs received and time frame: No information available

Money laundering criminal Prosecutions/convictions:

Prosecutions: One in 2009

Convictions: None

Assets forfeited: criminally: $23,000 (In addition, $1, 379,120 was confiscated on behalf of US authorities.) civilly: None

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Antigua and Barbuda 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/downloadables/mer/Antigua_and_Barbuda_3rd_Round_MER_Final(Eng).pdf

Enforcement and implementation issues and comments:

During the year, the Prevention of Terrorism (Amendment) Act was passed, making further explicit provisions for the de-listing of specified entities; however, deficiencies remain.

The Government of Antigua and Barbuda (GOAB) does not have a unified regulatory structure or uniform supervisory practices for its domestic and offshore banking sectors. Currently, the ECCB supervises Antigua and Barbuda’s domestic banking sector. The Registrar of Insurance supervises and examines domestic insurance agencies. The Financial Services Regulatory Commission is responsible for the regulation and supervision of all IBCs, including offshore banks and all aspects of offshore gaming; this includes conducting examinations and reviews of offshore financial institutions as well as some domestic financial entities, such as insurance companies and trusts. The director of the ONDCP supervises all financial institutions for compliance with suspicious transaction reporting requirements. Only gaming institutions are required to file large currency transaction reports.

The GOAB has taken steps to combat money laundering by passing relevant legislation that applies to both domestic and offshore financial institutions, and establishing a thorough regulatory regime. The GOAB should implement and enforce all provisions of its AML/CFT legislation. The ONDCP should be given direct access to financial institution records in order to effectively assess their AML/CFT compliance. Antigua and Barbuda has yet to prosecute a money laundering case and there are few arrests or prosecutions. More comprehensive investigations could lead to higher numbers of arrests, prosecutions, and convictions. Continued efforts should be made to enhance the capacity of law enforcement and customs authorities to recognize money laundering typologies that fall outside the formal financial sector. Continued international cooperation, particularly with regard to the timely sharing of statistics and information related to offshore institutions, and enforcement of foreign civil asset forfeiture orders will likewise enhance Antigua and Barbuda’s ability to combat money laundering.


Australia

Australia is one of the major centers for capital markets in the Asia-Pacific region. While narcotics offenses provide a substantial source of proceeds of crime, the majority of illegal proceeds are derived from fraud-related offenses. The Government of Australia (GOA) maintains a comprehensive system to detect, prevent, and prosecute money laundering. The last few years have seen a noticeable increase in activities investigated by Australian law enforcement agencies that relate directly to offenses committed overseas. Australia’s system has evolved over time to address new money laundering and terrorist financing risks identified through continuous consultation between government agencies and the private sector.

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

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; gaming and bookmaking establishments and casinos; bullion and cash dealers and money exchanges and remitters, including electronic funds transferors; insurers and insurance intermediaries; securities or derivatives dealers; registrars and trustees; issuers, sellers or redeemers of travelers checks, money orders or similar instruments; preparers of payroll in whole or in part from currency on behalf of other persons; currency couriers

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

Suspicious transaction reporting requirements:

Covered entities: Banks, gaming and bookmaking establishments and casinos; bullion and cash dealers and money exchanges and remitters, including electronic funds transferors; insurers and insurance intermediaries; securities or derivatives dealers; registrars and trustees; issuers, sellers or redeemers of travelers checks, money orders or similar instruments; preparers of payroll in whole or in part from currency on behalf of other persons; currency couriers

Number of STRs received and time frame: 47,386 - 2009-2010

Number of CTRs received and time frame: 3,375,447 - 2009-2010

Money laundering criminal Prosecutions/convictions:

Prosecutions: 88 indictments - July 2009 - June 2010

Convictions: 50 in 2009 - 2010

Assets forfeited: criminally: $7,691,800 civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Australia is a member of the Financial Action Task Force (FATF). It also serves as permanent co-chair, and hosts and funds the Secretariat of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/60/33/35528955.pdf

Enforcement and implementation issues and comments:

The formal and informal money remittance sector is vulnerable to the risk of being exploited for criminal purposes. Additionally, the majority of designated non-financial businesses and professions (DNFBPs), such as real estate agents, dealers in precious stones and metals, and specified legal, accounting, trust, and company service providers are not yet covered by reporting and record keeping requirements of Australia’s AML/CFT laws, nor are politically exposed persons subject to enhanced due diligence procedures. This lack of coverage leads to increased vulnerabilities in these entities. Australia should amend its legislation, as necessary, to cover all DNFBPs.

In comparison to the size of the Australian economy and the comprehensive anti-money laundering countermeasures in place, the number of convictions for money laundering remains very low.


Austria

Austria is a major regional financial center and Austrian banking groups control significant shares of the banking markets in Central, Eastern, and Southeastern Europe. Money laundering occurs within the Austrian banking system as well as in non-bank financial institutions and businesses. Money laundered by organized crime groups derives primarily from serious fraud, smuggling, corruption, narcotics-trafficking, and trafficking in persons. Theft, drug trafficking and fraud are the main predicate crimes in Austria according to the statistics of convictions and investigations. Austria is not an offshore jurisdiction and has no free trade zones.

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

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

Know-your-customer rules:

Covered entities: Banks and credit institutions, financial institutions, leasing and exchange businesses, safe custody services, portfolio advisers, brokers, securities firms, money transmitters, insurance companies and intermediaries, casinos, all dealers including those in high value goods, auctioneers, real estate agents, lawyers, notaries, certified public accountants, and auditors.

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

Suspicious transaction reporting requirements:

Covered entities: Banks and credit institutions, financial institutions, leasing and exchange businesses, safe custody services, portfolio advisers, brokers, securities firms, money transmitters, insurance companies and intermediaries, casinos, all dealers including those in high value goods, auctioneers, real estate agents, lawyers, notaries, certified public accountants, auditors, and customs officials.

Number of STRs received and time frame: 1,385 in 2009

Number of CTRs received and time frame: Not applicable

Money laundering criminal Prosecutions/convictions:

Prosecutions: 289 in 2009

Convictions: Five in 2009

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Numerous legal amendments to bring Austria's AML/CFT regime more in line with FATF standards were adopted by Parliament on May 20, 2010, and entered into force July 1, 2010. Those amendments strengthen regulatory standards, give more power and responsibility to bank compliance officers and regulators (in particular Austria's FIU), and make asset seizure easier in AML/CFT cases. New paragraph 165 of the Austrian Penal Code extends the scope of money laundering offenses to "self-laundering" of illicit proceeds. Austria has a combination of both an “all serious crimes” approach plus a list of predicate offenses which do not fall under the domestic definition of serious crimes, but which Austria includes to comply with international legal obligations and FATF standards.

Since July 1, 2010, asset freezes pursuant to UN and European Union (EU) sanctions are based on Austria’s new Sanctions Law (previously, the Foreign Exchange Act). The new Sanctions Law significantly expands and improves implementation of UNSCR and European financial sanctions on terrorists, including measures set forth in directly applicable EU Regulations. Asset freezes now apply not just to financial funds but to all economic resources including real estate, companies, and vehicles. The law provides for bans on travel and bans on rendering services to designated entities; it also establishes administrative and criminal penalties.

The Government of Austria has committed to sharply restrict the issuance and use of bearer shares. Draft legislation eliminating bearer shares for all companies except those listed on the stock exchange has been circulated for comment.

Even absent a specific suspicion, new regulations require tax authorities to inform the FIU of all cases where private foundations do not disclose the founding deed including all appendices and supplementary documentation, as well as beneficial owners of hidden trusteeships.

In June 2010, the United States and Austria signed a bilateral asset sharing agreement to share assets seized from convicted criminals.


Bahamas

The Commonwealth of The Bahamas is an important regional and offshore financial center. The economy of the country is heavily reliant upon tourism, tourist-driven construction and the offshore sector. The Bahamas is a transshipment point for cocaine bound for the United States and Europe. Money laundering trends include the purchase of real estate, large vehicles and jewelry, as well as the processing of money through a complex web of legitimate businesses, and international business companies registered in the offshore financial sector. Drug traffickers and other criminal organizations take advantage of the large number of international business companies and offshore banks registered in The Bahamas to launder significant sums of money despite strict KYC and transaction reporting requirements.

The country has one large free trade zone, Freeport Harbor. This zone is managed by a private entity called the Freeport Harbor Company, which is owned and operated through a joint venture between Hutchison Port Holdings (HPH) and The Port Group (The Grand Bahama Port Authority). Businesses at the harbor include private boat, ferry and cruise ship visits, roll-on/roll-off facilities for containerized and LTL cargo, and car transshipment. Freeport Harbor has the closest offshore port to the United States and the entire country is relatively accessible by medium sized boats. This makes smuggling and bulk cash money laundering relatively easy. While it is illegal for citizens of the Bahamas to gamble, gambling is legal for tourists and there are three main casinos.

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: 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 and trust companies, insurance companies, securities firms and investment fund administrators, financial and corporate service providers, cooperatives, societies, casinos, lawyers, accountants, real estate agents, and company service providers

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

Suspicious transaction reporting requirements:

Covered entities: Banks and trust companies, insurance companies, securities firms and investment fund administrators, financial and corporate service providers, cooperatives, societies, casinos, lawyers, accountants, real estate agents, and company service providers

Number of STRs received and time frame: 138 STRs in 2009

Number of CTRs received and time frame: Not applicable

Money laundering criminal Prosecutions/convictions:

Prosecutions: 0 in 2010

Convictions: 0 in 2010

Assets forfeited: criminally: $0 in 2010 civilly: $0 in 2010

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

The Bahamas is a member of the Caribbean Financial Action Task Force, (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/The_Bahamas_3rd_Round_MER_(Final)_English.pdf

Enforcement and implementation issues and comments:

The Government of the Commonwealth of the Bahamas should provide adequate resources to its law enforcement, judicial, and prosecutorial bodies in order to enforce existing legislation and safeguard the financial system from possible abuses. The Bahamas should continue to enhance its anti-money laundering/counter-terrorist financing regime by implementing the National Strategy on the Prevention of Money Laundering; by ensuring full compliance with UNSCRs 1267 and 1373; and by implementing a system to collect and analyze information on the cross border transportation of currency. It should also ensure there is a public registry of the beneficial owners of all entities licensed in its offshore financial center.

Additional gaps in the country’s legislation include a failure to criminalize participation in an organized criminal group and to tighten the currency transaction reporting system to track people arriving and leaving to all destinations.


Belize

Belize is not a major regional financial center but is an offshore financial center. In an attempt to diversify Belize’s economic activities, authorities have encouraged the growth of offshore financial activities that are vulnerable to money laundering, including offshore banks, insurance companies, trust service providers, mutual fund companies, and international business companies. Belize has pegged the Belizean dollar to the U.S. dollar and continues to offer financial and corporate services to nonresidents in its offshore financial sector, which represents a potential vulnerability for money laundering.

Most money laundering is largely thought to be related to proceeds from U.S. residents participating in unlawful internet gaming. Belize is a transshipment point for marijuana and cocaine. There is a growing indication that money laundering proceeds are related to proceeds from the trafficking of illegal narcotics, psychotropic substances, and chemical precursors, and that they are controlled by local drug trafficking organizations and organized criminals.

Belizean officials suspect that money laundering occurs primarily within the free trade zones. Belizean officials believe the large Corozal Commercial Free Zone (CFZ) that operates at the border with Mexico is involved in trade-based money laundering.

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: Both

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: Domestic and offshore banks; venture risk capital; money broker, exchange and transmission services; moneylenders and pawnshops; insurance; real estate; credit unions and building societies; trust and safekeeping services

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

Suspicious transaction reporting requirements:

Covered entities: Domestic and offshore banks; venture risk capital; money broker, exchange and transmission services; moneylenders and pawnshops; insurance; real estate; credit unions and building societies; trust and safekeeping services

Number of STRs received and time frame: 67, January 1 through December 13, 2010

Number of CTRs received and time frame: Not applicable

Money laundering criminal Prosecutions/convictions:

Prosecutions: Six, January 1 through December 13, 2010

Convictions: Five, January 1 through December 13, 2010

Assets forfeited: criminally: None civilly: $510,000

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Belize 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 cannot be found on the CFATF website. A Report on the Observance of Standards and Codes prepared by the IMF can be found at: http://www.imf.org/external/pubs/ft/scr/2004/cr04373.pdf

Enforcement and implementation issues and comments:

Belize lacks the resources to effectively enforce anti-money laundering rules. Belize’s Financial Intelligence Unit (FIU) has a broad mandate and is severely understaffed. The FIU staff does not have sufficient training or experience in identifying, investigating, reviewing, and analyzing evidence in money laundering cases. Prosecutors and judges also need additional training on financial crimes, including money laundering. Prosecutors assigned to the FIU could also assist with cases going to court, as the FIU is currently forced to contract outside attorneys to prosecute its cases. If implemented, an arrangement for asset sharing may provide additional resources to the FIU.

While it is widely believed that abuse occurs within the offshore sector and in the free trade zones, no one from these organizations has been charged with a financial crime. Belize should require the Commercial Free Zones (CFZ) to be reporting entities. The GOB should become a party to the UN Convention against Corruption.


Bolivia

Bolivia is not a regional financial center, but money laundering activities continue to take place. These illicit financial activities are related primarily to narcotics trafficking, corruption, tax evasion, and smuggling and trafficking of persons. Hotels, currency exchange houses, casinos, cash transporters, informal exchange houses, and wire transfer businesses are not subject to anti-money laundering controls. The Bolivian financial system is highly dollarized, with approximately 50% of deposits and loans distributed in U.S. dollars rather than Bolivianos, the local currency (down from 90% in 2004). Bolivia has 13 free trade zones, located in El Alto, Cochabamba, Santa Cruz, Oruro, Puerto Aguirre, and Desaguadero, for commercial and industrial use.

Bolivia was suspended from the Egmont Group of Financial Intelligence Units (the Egmont Group) in July 2007 because Bolivia has not criminalized terrorist financing. In December of 2008, the Egmont Group expelled Bolivia’s FIU from its membership, due to a lack of terrorism financing legislation in Bolivian law. To regain Egmont membership, Bolivia must reapply and provide written evidence of its FIU’s compliance with Egmont FIU definitions and requirements.

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: 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/2009/140888.htm

Know-your-customer rules:

Covered entities: Banks, insurance companies, securities brokers and financial intermediaries

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

Suspicious transaction reporting requirements:

Covered entities: Banks, insurance companies, securities brokers and financial intermediaries

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: Not available

Bolivia is a member of the Financial Action Task Force of South America (GAFISUD), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.gafisud.info/pdf/InformeBolivia.pdf

Enforcement and implementation issues and comments:

The expulsion of the U.S. Drug Enforcement Administration from Bolivia in November 2008 has diminished the effectiveness of several financial investigative groups operating in the country, including Bolivia’s Financial Investigative Team, the Bolivian Special Counternarcotics Police, and the Bolivian Special Operations Force. Most money laundering investigations continue to be in the Department of Santa Cruz and are associated with narcotics trafficking organizations.

Bolivia’s expulsion from the Egmont Group bars the UIF from participating in Egmont Group meetings or using the Egmont Secure Web (the primary means of information exchange among Egmont Group member FIUs).

New legislation introduced in March of 2010 provides for money laundering to be treated as an autonomous offense. The law also expands the list of predicate offenses for money laundering but still does not include all offenses recommended in the international standards. The predicate offenses for money laundering should cover all serious offenses, and Bolivia should seek to extend its laws to the widest range of predicate offenses.

In September 2010, a draft law to criminalize terrorist financing was provided to the Council of Ministers for approval. This draft law also includes provisions addressing the freezing, seizure and confiscation of terrorist-related assets; and gives authority to the FIU to freeze for 48 hours the execution of a transaction suspected of being related terrorist financing. It appears the proposed criminalization of TF requires “intent”. This may pose difficulties in the application and interpretation of the provision. The provision seems to require that the funds are actually used to carry out or attempt a terrorist act. Separately, obligated entities should be required by law or regulation to report to the FIU information related to terrorist financing.

The continued lack of personnel, combined with inadequate resources and weaknesses in Bolivia’s basic legal and regulatory framework, limits the UIF’s reach and effectiveness. Given the UIF’s limited resources relative to the size of Bolivia’s financial sector, compliance with reporting requirements is extremely low. The exchange of information between the UIF and appropriate police investigative entities is also limited, although the UIF does maintain a database of suspect persons that financial entities must check before conducting business with clients.


Brazil

Brazil is the world’s fifth largest country in size and population, and as of 2010, the eighth largest economy in the world. Brazil is considered a regional financial center for Latin America. It is a major drug-transit country, as well as one of the world’s largest consumer countries. Brazil maintains some controls of capital flows and requires disclosure of the ownership of corporations. Money laundering in Brazil is primarily related to domestic crime, especially drug trafficking, corruption, organized crime, gambling, and trade in various types of contraband. Laundering channels include the use of banks, real estate investment, financial asset markets, luxury goods, remittance networks, informal financial networks, and trade-based money laundering.

Sao Paulo and the Tri-Border Area (TBA) of Brazil, Argentina, and Paraguay are particular areas that possess high risk factors for money laundering. In addition to weapons and narcotics, a wide variety of counterfeit goods, including CDs, DVDs, and computer software (much of it of Asian origin), are routinely smuggled across the border from Paraguay into Brazil. In addition to Sao Paulo and the TBA, other areas of the country are also of growing concern. The Government of Brazil (GOB) and local officials in the states of Mato Grosso do Sul, and Parana, for example, have reported increased involvement by Rio de Janeiro and Sao Paulo gangs in the already significant trafficking in weapons and drugs that plagues Brazil’s western border states.

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: List approach

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: Commercial and savings banks and credit unions; insurance companies and brokers; securities, foreign exchange, and commodities brokers/traders; real estate brokers; credit card companies; money remittance businesses; factoring companies; gaming and lottery operators and bingo parlors; dealers in jewelry, precious metals, art and antiques

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

Suspicious transaction reporting requirements:

Covered entities: Commercial and savings banks and credit unions; insurance companies and brokers; securities, foreign exchange, and commodities brokers/traders; real estate brokers; credit card companies; money remittance businesses; factoring companies; gaming and lottery operators and bingo parlors; dealers in jewelry, precious metals, art and antiques

Number of STRs received and time frame: 56,371 in 2009

Number of CTRs received and time frame: 1,746, 494 in 2009

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

Brazil is a member of the Financial Action Task Force (FATF) and the FATF of South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here: www.fatf-gafi.org

Enforcement and implementation issues and comments:

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

Legal persons are not subject to direct civil or administrative liability for committing money laundering (ML) offenses. Corporate criminal liability is not possible due to fundamental principles of domestic law. Natural and legal persons are not subject to effective sanctions for ML because systemic problems in the court system seriously hamper the ability to obtain final convictions and sentences, and legal persons are not subject to direct civil/administrative sanctions for committing a ML offense. Very few final convictions for ML and convictions in the first instance are low given the level of ML risk and size of the financial sector. The GOB should take legislative action to establish direct civil or administrative corporate liability for ML and ensure that effective, proportionate and dissuasive sanctions may be applied to legal persons. Brazil also should continue to support the Specialized Federal Courts and other measures to ameliorate the negative impact of some of the systemic problems in the court system which are undermining the ability to effectively apply final sanctions for ML. The GOB should continue taking measures to ensure that the overlapping jurisdiction among federal and state law enforcement authorities does not impede the effectiveness of their ability to investigate ML. Brazil should also continue the PNLD training program and extend it as widely as possible to ensure that police, prosecutors and judges at both the state and federal levels have sufficient training in the investigation and prosecution of ML cases.

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

In February 2006, U.S. Immigration and Customs Enforcement established a Brazil-based partner Trade Transparency Unit (TTU) to aggressively analyze, identify, and investigate companies and individuals involved in trade-based money laundering activities between Brazil and the United States. As a result of the TTU, Brazil has identified millions of dollars of lost revenue.

The GOB has generally responded to U.S. efforts to identify and block terrorist-related funds. None of the individuals and entities on the UNSCR 1267 Sanctions Committee’s consolidated list has been found to be operating or executing financial transactions in Brazil, and the GOB has frequently insisted that there is no evidence of terrorist financing within Brazil. However, in December 2010, the U.S. Treasury Department designated Bilal Mohsen Wehbe, Hizballah’s chief representative in South America, as a Specially Designated Global Terrorist (SDGT) under Executive Order 13224. Wehbe has been involved in transferring funds collected in Brazil to Hizballah in Lebanon. In 2009, based on information provided by the F.B.I., a man was arrested in Sao Paulo on suspicion that he was connected to the Jihad Media Battalion, a known terrorist organization with possible ties to Al Qaeda. However, a Brazilian judge ordered his release after several weeks, and the GOB has taken the position he had no demonstrable ties to any terrorist activity.

Although Brazil is a party to the United Nations International Convention for the Suppression of the Financing of Terrorism, it has not criminalized terrorist financing in a manner that is consistent with international standards. Terrorist financing is a predicate offense for money laundering but is not an autonomous offense in Brazil; however, a bill awaiting legislative action contains language that could resolve this gap.


British Virgin Islands

The British Virgin Islands (BVI) is a United Kingdom (UK) overseas territory with a population of approximately 22,000. The economy depends greatly on tourism and its offshore financial sector. As of September 2010, there were 456,547 active companies, 237 licensed banks and 2,951 mutual funds registered with the BVI Financial Services Commission (FSC). BVI’s unique share structure that does not require a statement of authorized capital as well as the lack of mandatory filing of ownership, pose significant money laundering risks. Tourism accounts for 45 percent of the economy and employs the majority of the workforce. Financial services are very important, however, contributing over half of government revenues. BVI remains vulnerable to money laundering practices through its drug trafficking trade and the exploitation of its offshore financial services. BVI’s proximity to the U.S. Virgin Islands and the use of the U.S. dollar for its currency pose risk factors for money laundering. The BVI are a major target for drug traffickers, who use the area as a gateway to the United States. Drug trafficking in general is a serious problem.

BVI is a well established center offering accounting, banking and legal services; captive insurance; company incorporations; mutual funds administration; trust formation; and shipping registration. The FSC is the sole supervisory authority responsible for the licensing and supervision of financial institutions under the relevant statutes.

While gaming is prohibited in the Virgin Islands, casinos have been incorporated in the definition of relevant business under the AML/CFT 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.: 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: NO

Know-your-customer rules:

Covered entities: Banks; currency exchanges; charities and nonprofit associations; dealers in autos, yachts, and heavy machinery; dealers in precious metals and stones; and leasing companies

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

Suspicious transaction reporting requirements:

Covered entities: Banks; currency exchanges; charities and nonprofit associations; dealers in autos, yachts, and heavy machinery; dealers in precious metals and stones; and leasing companies

Number of STRs received and time frame: 191 in 2010

Number of CTRs received and time frame: Not available

Money laundering criminal Prosecutions/convictions:

Prosecutions: 0 in 2010

Convictions: 0 in 2010

Assets forfeited: criminally: 0 civilly: 0

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

BVI is a member of the Caribbean Financial Action Task Force, (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/Virgin_Islands_3rd_Round_MER_(Final)_English.pdf

Enforcement and implementation issues and comments:

Reporting institutions are advised to monitor relevant websites for names of suspected terrorists and related organizations. No specific guidance has been issued to outline reporting institutions’ obligations to freeze funds of designated terrorists and terrorist organizations.

The U.S. and the British Virgin Islands established a Tax Information Exchange Agreement (TIEA) in 2006. Application of the US - UK mutual legal assistance treaty (MLAT) concerning the Cayman Islands was extended to the BVI in 1990. The FSC cooperates with foreign counterparts and law enforcement agencies. In 2000, the Information Assistance (Financial Services) Act (IAFSA) was enacted to increase the scope of cooperation between the BVI’s regulators and regulators from other countries.

While BVI legislation has strengthened due diligence requirements where a representative is acting on another person’s behalf or when the customer is resident in another country which does not fully comply with FATF rules, and has extended regulation to money value transfer service operators these laws are too new to be evaluated. The FSC should increase its staffing in order to meet the recommended inspection and reporting requirements, especially in light of the new entities covered under the law. The lack of prosecutions for money laundering and a reported decline in number of inspections suggests that the FSC should work closely with law enforcement and other authorities. In addition, while real estate agents, lawyers, other independent legal advisers, accountants, dealers in precious metals and stones are covered by the AML/CFT regulations, there appears to be no effective mechanism to ensure compliance with AML/CFT requirements.

The British Virgin Islands is a United Kingdom (UK) Caribbean overseas territory and cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the BVI’s international affairs and may arrange for the ratification of any convention to be extended to the BVI. The 1988 Drug Convention was extended to the BVI in 1995. The UN Convention against Corruption was extended to the BVI in 2006. The International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime have not yet been extended to the BVI.


Burma

Burma is not a regional or offshore financial center. Its strategic geographic location, prolific drug production, and lack of transparency make it an attractive transit country for money laundering. While its underdeveloped economy is not adequate as a destination to harbor funds, the low risk of enforcement and prosecution make it appealing to the criminal underground. Drug trafficking, human trafficking, and public corruption are major sources of illicit proceeds. Money launderers also exploit the illegal trade in wildlife, gems, and timber, and trade-based money laundering is of increasing concern.

Burma is second only to Afghanistan in opium production, and is increasingly a source of methamphetamine and amphetamine type substances. Its long, porous borders are poorly patrolled. In some remote regions where smuggling is active, ongoing ethnic tensions, and in some cases armed conflict, impede government territorial control. In other areas, political arrangements between traffickers and Burma’s ruling military government allow organized crime groups to function with minimal risk of interdiction.

The Government of Burma (GOB) dominates the economy. State-owned enterprises and military holding companies control a substantial portion of Burma’s resources. A move toward privatization in 2010 transferred significant assets to private parties; however, most new owners appear to be business associates of the ruling generals, and some are allegedly connected to drug trafficking.

Corruption is endemic in both business and government. Transparency International’s 2010 Corruption Perception Index ranked Burma 176 out of 178 countries. This extensive corruption and overall lack of governmental transparency has stymied the GOB’s gestures toward financial reforms. The GOB enacted several reforms in the past several years to reduce vulnerability to drug money laundering in the banking sector. However, connections to powerful patrons still outweigh rule of law, and Burma continues to face significant risk of drug money being funneled into commercial ventures.

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: 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: None

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

Suspicious transaction reporting requirements:

Covered entities: Banks, customs officials, state-owned insurance company and small loans enterprise, securities exchange, the Andaman Club Resort Hotel (the only licensed money changer) accountants, the legal and real estate sectors and dealers of 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: 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

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

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

Enforcement and implementation issues and comments:

Burma's financial sector is extremely underdeveloped and most currency is held outside the formal banking system. The informal economy generates few reliable records, and the GOB makes no meaningful efforts to ascertain the amount or source of income or value transfers. The GOB’s lack of engagement extends to its financial institutions. Some Burmese financial institutions may engage in currency transactions related to international narcotics trafficking that include significant amounts of U.S. currency. However, the absence of publicly available GOB information on this issue precludes confirmation of such conduct. Burmese law does not contain any customer due diligence requirements, although some entities follow such procedures under other, non-AML related legal provisions.

Corruption is pervasive in every level of government. Senior military officials are essentially above the law and free to engage in a range of activities designed to enrich themselves and maintain their hold on power. Government workers do not receive a living wage and may seek bribes as additional “compensation.” Officials who resist the rampant corruption are impeded by the military’s control over all civilian authority, including the police. The GOB should end all policies that facilitate corrupt practices, including strengthening its oversight of the formal financial sector and implementing a transparent transaction reporting regime. The FIU should become a fully funded independent agency that functions without interference, and the GOB should supply adequate resources to administrative and judicial authorities for their enforcement of government regulations. The GOB should become a party to the UN Convention against Corruption.


Cambodia

Cambodia is neither a regional nor an offshore financial center. Cambodia’s fledgling anti-money laundering regime; cash-based, dollarized economy with an active informal banking system; porous borders; loose oversight of casinos; and limited capacity of the National Bank of Cambodia to oversee the fast growing financial and banking industries contribute to a significant money laundering risk.

Cambodia has a significant black market for smuggled goods, including drugs and imported substances for local production of the methamphetamine ATS. Both licit and illicit transactions, regardless of size, are frequently done outside of formal financial institutions, and are difficult to monitor. Proceeds from crime are readily channeled into land, housing, luxury goods or other forms of property. The majority of real estate transactions are done without a registered real estate agent, and buyers and sellers determine the price of the property without reference to an independent valuation 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 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/ct/rls/crt/)

Know-your-customer rules:

Covered entities: Banks; micro-finance institutions; credit cooperatives; security brokerage firms and insurance companies; leasing companies; exchange offices/money exchangers; real estate agents; money remittance services; dealers in precious metals, stones and gems; post office operating payment transactions; lawyers, notaries, accountants, auditors, investment advisors and asset managers; casinos and gambling institutions; non-governmental organizations (NGOs) and foundations doing business and raising funds; and any other institutions or professions designated by the Financial Intelligence Unit to fall within the scope of the present law

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

Suspicious transaction reporting requirements:

Covered entities: Banks; micro-finance institutions; credit cooperatives; security brokerage firms and insurance companies; leasing companies; exchange offices/money exchangers; real estate agents; money remittance services; dealers in precious metals, stones and gems; post office operating payment transactions; lawyers, notaries, accountants, auditors, investment advisors and asset managers; casinos and gambling institutions; NGOs and foundations doing business and raising funds; and any other institutions or professions designated by the Financial Intelligence Unit to fall within the scope of the present law

Number of STRs received and time frame: 96 (January through October 2010)

Number of CTRs received and time frame: 359,599 (January through October 2010)

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

Cambodia 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/Cambodia%20World%20Bank%20DAR%20July%2007.pdf

Enforcement and implementation issues and comments:

The Government of Cambodia (GOC) has not fully implemented its current AML/CFT legislation, and its list of covered entities is incomplete. The GOC should issue additional decrees, mandating compliance of designated non-financial businesses and professions with the reporting requirements established by the AML/CFT law, and provide training to commercial bankers. Given the high level of corruption in Cambodia, the GOC should also require special due diligence for domestic politically exposed persons (PEPs). Cambodia does not have, and has not offered, a safe harbor provision. The government should propose such a provision in the short term.

By regulation, banks are individually responsible for maintaining and monitoring the list of designated terrorists or terrorist entities; however, the GOC does not distribute the UN lists.

The GOC should also expand the authorities of the Cambodian Financial Intelligence Unit (CAFIU). At present, the CAFIU lacks the power to enforce AML/CFT laws. As a result, few covered entities follow STR reporting guidelines.

While Article 30 of the AML/CFT law provides for the confiscation of property in cases where someone is found guilty of money laundering as stipulated in the penal code, the law is vague, and does not describe a system of asset forfeiture. Cambodia should clearly define the system of asset forfeiture, and establish a regulation to implement the system.

Law enforcement capacity remains quite limited, and is hindered by corruption and a weak investigative and prosecutorial infrastructure. There have been no money laundering prosecutions or convictions since 2007, when two suspects were arrested but not convicted. Elements of the Ministry of Finance, the new Anti-Corruption unit, and the Cambodian National Police are receiving training on complex financial crimes. While the law enforcement training plan is long term and progressive, until the GOC fully implements AML/CFT legislation and addresses corruption, Cambodia will remain a high-risk environment for money laundering operations.


Canada

Money laundering in Canada is primarily associated with drug trafficking and financial crimes, particularly those related to fraud. With roughly $1.4 billion in trade crossing the United States and Canadian borders each day, both governments share concerns about illicit cross-border movements of currency, particularly the proceeds of drug trafficking. Organized criminal groups are involved in drug trafficking, contraband smuggling, illegal arms sales, migrant smuggling and white-collar crimes. The Criminal Intelligence Service Canada estimates that over 900 organized crime groups operate in Canada, with the vast majority involved in the illicit drug trade.

Money laundering generally occurs through the following methods: smuggling; money service businesses and currency exchanges; casinos; purchase of real estate; wire transfers; establishment of offshore corporations; credit cards, stored value cards and new payment methods. Criminals have also used internet payments or gold bullion to move funds.

Casinos now are required to report large disbursements and suspicious transactions. In 2010, the first year of reporting, 43,752 casino disbursement reports were filed. Alternative remittance systems, such as hawala, hundi, and chitti are also required to report.

There are no free trade zones or offshore financial institutions.

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: 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; credit unions; life insurance companies; trust and loan companies; brokers/dealers of securities; foreign exchange dealers; money services businesses; sellers and redeemers of money orders; accountants; real estate brokers; casinos; lawyers; notaries (in Québec and British Columbia only) and dealers in precious metals and stones

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

Suspicious transaction reporting requirements:

Covered entities: banks; credit unions; life insurance companies; trust and loan companies; brokers/dealers of securities; foreign exchange dealers; money services businesses; sellers and redeemers of money orders; accountants; real estate brokers; casinos; lawyers; notaries (in Québec and British Columbia only) and dealers in precious metals and stones

Number of STRs received and time frame: 64,240 April 2009 through March 2010

Number of CTRs received and time frame: 6,868,506 April 2009 through March 2010

Money laundering criminal Prosecutions/convictions:

Prosecutions: 211 April 2005 through March 2006

Convictions: Ten April 2005 through March 2006

Assets forfeited: criminally: $17.5 million civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Canada is a member of the Financial Action Task Force (FATF) as well as the Asia/Pacific Group on Money Laundering (APG), and is a supporting nation of the Caribbean Financial Action Task Force (CFATF). Both APG and CFATF are FATF-style regional bodies. Canada’s most recent published mutual evaluation can be found here:

http://www.fatf-gafi.org/document/58/0,3343,en_32250379_32236963_40199098_1_1_1_1,00.html

Enforcement and implementation issues and comments:

Lawyers in several provinces have successfully challenged the applicability of the AML law to them based upon common law attorney-client privileges, therefore, lawyers are not completely covered by the AML provisions.

The United States and Canada signed a memorandum of understanding (MOU) in November 2010 to track the movement of illicit currency by sharing data on currency seized at the border. The MOU will significantly enhance the ability of law enforcement officers in both countries to investigate and track illicit cash movements and disrupt the flow of funds that support the activities of criminals and terrorists.

Money laundering offenses have a higher threshold for prosecution and conviction than the offense of benefiting from the proceeds of crime. Criminals appear willing to forfeit assets and plead guilty to lesser charges to avoid prosecution under AML and proceeds of crime statutes.

While the law provides sufficient powers to Canadian law enforcement to pursue money launderers, the budget for relevant law enforcement authorities has not increased; additional resources could increase the effectiveness of existing laws. Provincial and federal statistics should be tracked jointly. Appropriately tracking these cases could reveal a more robust rate of money laundering related convictions.

Canada should continue oversight and increase follow-up of the relatively new AML/CFT measures within the casino industry; reduce the length of time needed for FINTRAC to prepare reports used by law enforcement authorities (average number of days for a report dropped from 82 to 68 from 2009-2010); and maintain the monitoring of the money services business registry. Canada also should continue to ensure its privacy laws do not excessively prohibit provision of information to domestic and foreign law enforcement that might lead to prosecutions and convictions.


Cayman Islands

The Cayman Islands, a United Kingdom (UK) Caribbean overseas territory is an offshore financial center. Most money laundering that occurs in the Cayman Islands is primarily related to fraud and drug trafficking. Due to its status as a zero-tax regime, the Cayman Islands is also considered attractive to those seeking to evade taxes in their home jurisdiction.

The Cayman Islands is home to a well-developed offshore financial center that provides a wide range of services, including banking, structured finance, investment funds, various types of trusts, and company formation and management. As of December 2010, the banking sector had $1.73 trillion in assets. There were approximately 245 banks, 150 active trust licenses, 738 captive insurance companies, eight money service businesses, and more than 85,000 companies licensed or registered in the Cayman Islands. According to the Cayman Islands Monetary Authority (CIMA), at year end 2010, there were approximately 9,400 mutual funds. Shell banks are prohibited, as are anonymous accounts. Bearer shares can only be issued by exempt companies and must be immobilized.

Gambling is illegal; and the Cayman Islands do not permit the registration of offshore gaming entities. There are no free trade zones and the authorities do not see risks from bulk cash smuggling related to the large number of cruise ships that dock at the island.

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, trust companies, investment funds, fund administrators, insurance Companies and managers, money service businesses, corporate and trust service providers, money transmitters, dealers of precious metals and stones, and the real estate industry

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

Suspicious transaction reporting requirements:

Covered entities: Banks, trust companies, investment funds, fund administrators, insurance Companies and managers, money service businesses, corporate and trust service providers, money transmitters, dealers of precious metals and stones, and the real estate industry

Number of STRs received and time frame: 308 in 2010

Number of CTRs received and time frame: Not applicable

Money laundering criminal Prosecutions/convictions:

Prosecutions: Eight 2003 - 2010

Convictions: Six 2003 - 2010; only one since 2006

Assets forfeited: criminally: Approximately $6 million civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

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

http://www.cfatf-gafic.org/downloadables/mer/Cayman_Islands_3rd_Round_MER_(Final)_English.pdf

Enforcement and implementation issues and comments:

While the country has increased both its regulatory and law enforcement staffing, the number of prosecutions and convictions is extremely low given the vast scale of the country’s financial sector; only six successful prosecutions for money laundering, and only one in the last four years.

Private trust companies and individuals who carry on trust businesses or act as trustees are exempt from licensing requirements and the AML requirements. In addition, the lack of penalties for failing to report ownership and identity information undermines the effectiveness of these obligations. This is a problem in particular for an estimated 3,000 unregulated mutual funds resident in the Cayman Islands. In addition, there appear to be no requirements for companies, trusts and partnerships to retain records for at least five years.

The Cayman Islands should continue to computerize various registrations, such as those for mutual funds. There is a need to pay greater attention to the risks and proper supervision of non-profit organizations.

In January 2010, an anti-corruption law took effect which criminalizes bribery and formalizes international cooperation. Amendments to the Criminal Justice (International Co-operation) Act were passed in February 2010. These laws provided measures for investigation, prosecution and confiscation of the proceeds of all serious crimes and broadened international assistance to include not only drug trafficking but all serious crimes, including official corruption and other types of transnational crime.

In 1986, the United States and the United Kingdom signed a Mutual Legal Assistance in Criminal Matters Treaty (MLAT) concerning the Cayman Islands. By a 1994 exchange of notes, Article 16 of that treaty has been deemed to authorize asset sharing between the United States and the Cayman Islands.

The Cayman Islands is a United Kingdom (UK) Caribbean overseas territory and cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the Cayman Islands’ international affairs and may arrange for the ratification of any Convention to be extended to the Cayman Islands. The 1988 Drug Convention was extended to the Cayman Islands in 1995 and is implemented through several laws. The UN Convention against Corruption and the UN Convention against Transnational Organized Crime have not yet been extended to the Cayman Islands. However, the full implementation platform for the anti-corruption convention exists under current Cayman law. A 2002 request for extension of the International Convention for the Suppression of the Financing of Terrorism to the Cayman Islands has not yet been finalized by the UK, although the provisions of the Convention also are implemented by domestic laws.


China, People’s Republic of

China is a major global financial center, with a rapidly growing economy and increased integration in the international market. The primary sources of criminal proceeds are corruption, narcotics and human trafficking, smuggling, economic crimes, intellectual property theft, counterfeit goods, crimes against property, and tax evasion. Money is generally laundered through bulk cash smuggling, trade-based fraud (over/under pricing of goods, falsified bills of lading and customs declarations, counterfeit import/export contracts), and both the formal and underground banking systems. The use of cash-intensive, non-financial sectors such as real estate has increased, as has the use of e-currency, online exchanges, and the exploitation of investment vehicles such as forward exchange rate contracts and financial derivatives.

Most money laundering cases currently under investigation involve funds obtained from corruption and bribery. Proceeds of tax evasion, recycled through offshore companies, often return to China disguised as foreign investment and, as such, receive tax benefits. Chinese officials have noted that most acts of corruption in China are closely related to economic activities that accompany illegal money transfers.

Chinese authorities have observed that the increase in AML efforts by banks has been accompanied by increased laundering through the underground banking system and trade fraud. Value transfer via trade goods, including barter exchange, is a common component in Chinese underground finance. Many Chinese underground trading networks in Africa, Asia, the Middle East, and the Americas participate in the trade of Chinese-manufactured counterfeit goods.

China has multiple Special Economic Zones (SEZs) and other designated development zones at the national, regional, and local levels. SEZs include Shenzhen, Shantou, Zhuhai, Xiamen, and Hainan, along with 14 coastal cities and over 100 designated development zones. It is not a major offshore financial center.

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: List 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

Know-your-customer rules:

Covered entities: Banks, securities dealers, insurance companies

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

Suspicious transaction reporting requirements:

Covered entities: Banks, securities dealers, and insurance companies

Number of STRs received and time frame: 42,933,226 in 2009

Number of CTRs received and time frame: China does not separate STRs and CTRs

Money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: 10,674 in 2009

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

China is a member of the Financial Action Task Force (FATF), as well as the Asia/Pacific Group on Money Laundering (APG) and the Eurasian Group on Combating Money Laundering and Terrorist Financing (EAG), both of which are FATF-style regional bodies (FSRB). Its most recent mutual evaluation can be found here:

http://www.fatf-gafi.org/dataoecd/33/11/39148196.pdf

Enforcement and implementation issues and comments:

The Government of China (GOC) has strengthened the legal framework for its overall AML/CFT regime, notably by clarifying the suspicious transaction reporting obligations of Chinese banks and by increasing the number of money laundering investigations, prosecutions, and convictions. However, even though it is mandatory, the courts do not systematically pursue the confiscation of criminal proceeds, which undermines any disincentive to commit the crime. The GOC should ensure that all courts are aware of the mandatory confiscation laws, and ensure uniform implementation.

China’s terrorist financing legislation has significant gaps, including the inability to freeze terrorist assets without delay. China should enact comprehensive terrorism and terrorist financing legislation and create a mechanism to freeze terrorist assets without delay. China should also enhance coordination between its financial regulators and law enforcement bodies to better investigate and prosecute offenders.

Chinese financial regulators have made progress in recent years in applying AML/CFT controls to China’s developing financial system; however, enforcement efforts need strengthening to keep pace with the sophistication and reach of criminal and terrorist networks.

The GOC has become more open to working across borders on money laundering and terrorist financing investigations. However, U.S. law enforcement agencies note that the GOC has not cooperated sufficiently on financial investigations and does not provide adequate responses to requests for financial investigation information. The GOC should expand cooperation with counterparts in the United States and other countries and pursue international linkages in AML/CFT efforts more aggressively. U.S. agencies have continued to seek to expand cooperation with Chinese counterparts on AML/CFT matters and to strengthen both policy- and operational-level cooperation in this critical area.


Colombia

The Government of Colombia (GOC) is a regional leader in the fight against money laundering. The GOC has a forceful anti-money laundering/counter-terrorist financing (AML/CFT) regime. However, the laundering of money from Colombia’s illicit cocaine and heroin trade continues to penetrate its economy and affect its financial institutions. Both drug and money laundering organizations use a variety of methods to repatriate their illicit proceeds to Colombia. These methods include the Black Market Peso Exchange, trade based value transfer, bulk cash smuggling, reintegro (wire transfers), remittances, smuggled merchandize (contraband) and more recently, electronic currency and prepaid debit cards.

In addition to drug-related money laundering, laundered funds are also derived from commercial smuggling for tax and import duty evasion, kidnapping, arms trafficking, and terrorism connected to violent, illegally-armed groups and guerrilla organizations. Further, money laundering is carried out to a large extent by U.S. Government-designated terrorist organizations. Criminal elements have used the banking sector, including exchange houses, to launder money. Money laundering also has occurred via trade and the non-bank financial system, especially related to transactions that support the informal or underground economy. The trade of counterfeit items in violation of intellectual property rights is an ever increasing method to launder illicit proceeds. Casinos, free trade zones and the postal money order market in Colombia present opportunities for criminals to take advantage of inadequate regulation and transparency. Although corruption of government officials remains a problem, its scope has decreased significantly in recent years.

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: List 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, stock exchanges and brokers, mutual funds, investment funds, export and import intermediaries, credit unions, wire remitters, money exchange houses, public agencies, notaries, casinos, lottery operators, car dealers, and foreign currency traders

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

Suspicious transaction reporting requirements:

Covered entities: Banks, stock exchanges and brokers, mutual funds, investment funds, export and import intermediaries, credit unions, wire remitters, money exchange houses, public agencies, notaries, casinos, lottery operators, car dealers, and foreign currency traders

Number of STRs received and time frame: 9,600 in 2010

Number of CTRs received and time frame: Not available

Money laundering criminal Prosecutions/convictions:

Prosecutions: 408 investigations and/or prosecutions in 2009

Convictions: 54 in 2009

Assets forfeited: criminally: Approximately $1.3 million in 2009 civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Colombia is a member of the Financial Action Task Force (FATF) of South America (GAFISUD) a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.gafisud.info/home.htm

Enforcement and implementation issues and comments:

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

To help combat BMPE and other financial crimes, in 2005, a Colombian-based trade transparency unit (TTU) was created by U.S. Immigration and Customs Enforcement to analyze, identify and investigate companies and individuals involved in trade-based money laundering activities between Colombia and the United States. In the past year, the Colombian TTU has worked to enhance the quality and quantity of trade data shared, expanding its investigative capacity.

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

According to the Prosecutor General’s Office, 236 people were arrested in 2009 for money laundering crimes connected to drug trafficking, terrorism, and other felonies. The GOC cooperates extensively with U.S. law enforcement agencies to identify, target and prosecute groups and individuals engaged in financial and drug crimes. Colombia is working with other member countries of GAFISUD to develop a common PEP standard and to share its PEP list with other financial intelligence units.

The Colombian government regularly carries out asset seizure operations against a myriad of drug trafficking and other criminal organizations throughout Colombia. Freezing assets is very quick and efficient under Colombian law, while forfeiture can take between 1-3 years. The biggest difficulty in Colombia is administering seized assets. The National Drug Directorate (DNE) – as a legal institution – lacks the technical expertise to administer seized assets. The proceeds from asset seizures or forfeitures are by law used to fund various projects, such as the construction of new high-security prisons, low-income government housing, or specific educational initiatives. However, many assets have lost their value over time due to poor administration, and the National Drug Directorate (DNE) has been unable to conduct studies to evaluate and monitor the impact of its efforts.

Colombian law is unclear on the government’s authority to block assets of individuals and entities on the UN 1267 Sanctions Committee consolidated list. In addition to the UN lists, banks also monitor the Office of Foreign Assets Control’s publication of Specially Designated Narcotics Traffickers, pursuant to Executive Order (EO) 12978, and the Foreign Narcotics Kingpin Designation Act, and Specially Designated Global Terrorists, pursuant to E.O. 13224.


Costa Rica

While Costa Rica is not a major regional financial center, it remains vulnerable to money laundering and other financial crimes. Illicit proceeds from fraud, trafficking in persons, arms, narcotics trafficking (mainly cocaine), and corruption are laundered in Costa Rica. To a limited extent, money laundering/terrorist financing occurs across the formal financial sector, within the free trade zones (FTZs), and in the non-bank financial system. Costa Rica has 33 FTZs, used by approximately 270 companies. In addition, Costa Rica has a sizeable internet gaming industry which in practice is almost unregulated. While local criminals are active, the majority of laundered criminal proceeds derive from foreign criminal activity. Costa Rica does not have a significant market for smuggled goods, however, criminal organizations involved in fraud, trafficking in persons, arms, narcotics trafficking, and corruption are known to utilize the international trade system to move and launder their criminal proceeds.

The Government of Costa Rica (GOCR) reports that Costa Rica is primarily used as a bridge to send funds to and from other jurisdictions using, in many cases, companies or banks established in offshore financial centers. Nicaraguans residing in Costa Rica send approximately $200 million in remittances annually to family members in their home country, much of which is sent via unlicensed money remitters. These unregulated businesses are a significant risk for money laundering and a potential mechanism for terrorist financing.

Costa Rica has demonstrated a genuine commitment to strengthening its anti-money laundering/counter-terrorist financing (AML/CFT) regime. As a result of a law passed in 2009, in 2010 Costa Rica continued implementing new regulations directed at combating money laundering, terrorist financing, and organized crime. Costa Rica also created a new National Anti-Drug Commissioner position that is responsible for monitoring and evaluating the GOCR’s policies and plans to combat money laundering.

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: NO

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

Know-your-customer rules:

Covered entities: Banks and savings and loan cooperatives; pension funds; money exchangers or remitters; investment fund and safekeeping companies; credit institutions; issuers, sellers or redeemers of travelers checks and postal money orders; and securities dealers

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

Suspicious transaction reporting requirements:

Covered entities: Banks and savings and loan cooperatives; pension funds; money exchangers or remitters; fiduciary trust, investment fund and safekeeping companies, and asset managers; credit institutions; issuers, sellers or redeemers of travelers checks and postal money orders; securities dealers; and real estate agents

Number of STRs received and time frame: 304 from January to December 2010

Number of CTRs received and time frame: Not available

Money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: Ten - January through October 2010

Assets forfeited: criminally: $9,693,214.00 in FY2010 civilly: Not applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

In December 2010, the Financial Action Task Force of South America (GAFISUD) admitted Costa Rica as a member, formally marking its departure from the Caribbean Financial Action Task Force (CFATF). Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Enforcement and implementation issues and comments:

Money laundering cannot be charged as an additional offense to the predicate crime (e.g., a drug dealer who is convicted on drug charges cannot also be prosecuted for laundering the drug proceeds). In addition, criminal liability does not extend to legal persons.

There are over 250 Internet sports book companies registered to operate in Costa Rica. The industry transacts approximately $12 billion annually and employs 10,000 people. This industry in practice is almost unregulated. The FIU reports that Costa Rican attorneys oftentimes conduct cash purchases of real estate on behalf of persons located in the U.S. The FIU has had significant difficulties verifying the identity and source of funds for those purchases.

The FIU does not directly receive cash transaction reports (CTRs). Each supervisory entity that receives CTRs holds them unless it determines that further analysis is required or the FIU requests the reports.

Costa Rica fully cooperates with appropriate United States government law enforcement agencies investigating financial crimes related to narcotics and other crimes. Additionally, Costa Rica has a tax information exchange agreement with the U.S.

Law 8719 authorizes the FIU to administratively freeze assets or accounts that are subject to an ongoing money laundering or narcotics investigation by the host government authority without a prior Court order (a judicial order must be obtained within 5 days after the seizure). This provision was used in several money laundering cases involving bulk cash smuggling during 2010. Although the GOCR enacted a provision to allow for civil forfeitures in 2009, no case has been pursued by prosecutors. The prosecutors state they have been reluctant to try cases under this law, because they fear these cases will not hold up in court. Based on the non-use of this provision, it is unclear whether the GOCR will assist other countries in obtaining non-conviction-based forfeiture.

Several pieces of real property were identified and frozen by the U.S. Office of Foreign Asset Control (OFAC) owned by a Colombian National that resides in Costa Rica and uses his farms to launder funds for the FARC. This subject and his property were named as a second tier in the King-Pin Act with money laundering ties to the FARC. Shortly after the OFAC report was publicized in Costa Rica the subject fled Costa Rica and returned to Colombia.


Cyprus

Cyprus has been divided since 1974. Since then, the Republic of Cyprus (ROC) has controlled the southern two-thirds of the country, while a Turkish Cypriot administration calling itself the “Turkish Republic of Northern Cyprus (TRNC)” controls the northern part. Only Turkey recognizes the “TRNC.” The U.S. Government recognizes only the Republic of Cyprus. This section of the report discusses the area controlled by the ROC. A separate section on the area administered by Turkish Cypriots follows at the end.

Cyprus is a major regional financial center with a robust financial services industry and a significant amount of nonresident businesses. A number of factors have contributed to the development of Cyprus as a financial center: a preferential tax regime; double tax treaties with 44 countries (including the United States, several European Union (EU) nations, and former Soviet Union nations); a sophisticated telecommunications infrastructure; and EU membership. In 2003, Cyprus introduced tax and legislative changes effectively abolishing all legal and substantive distinctions between domestic and offshore companies. Cyprus has also lifted the prohibition from doing business domestically and companies formerly classified as offshore are now free to engage in business locally. International business companies are allowed to be registered in Cyprus but their ultimate beneficial ownership must be disclosed to the authorities. There are over 220,000 companies registered in Cyprus, many of which are non-resident. The same disclosure, reporting, tax and other laws and regulations apply equally to all registered companies.

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

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

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, credit institutions, securities and insurance firms, money transfer services, international financial services and trust companies, auditors, tax advisors, accountants, real estate agents, dealers in precious stones and gems, and in certain cases, attorneys

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

Suspicious transaction reporting requirements:

Covered entities: Banks; credit institutions; issuers or servicers of credit or payment cards, and traveler’s checks; financial leasing companies; securities and insurance brokers and firms; money transfer or brokerage services; financial advisors, international financial service providers, and trust and safekeeping companies; auditors, tax advisors, and accountants; real estate agents; dealers in precious stones and gems; and in certain cases, attorneys

Number of STRs received and time frame: 428 in2009

Number of CTRs received and time frame: Not available

Money laundering criminal Prosecutions/convictions:

Prosecutions: 30 in 2009

Convictions: Five in 2009

Assets forfeited: criminally: Euros 5.5 million (approximately $7.1 million in 2009 civilly: Not applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Cyprus is a member of the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a 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/Cyprus_en.asp

Enforcement and implementation issues and comments:

There are no legal issues hampering Cyprus’ ability to assist foreign governments in mutual legal assistance requests. Cypriot law allows MOKAS, the Cypriot financial intelligence unit (FIU) to share information with other FIUs without benefit of a memorandum of understanding (MOU).

Cyprus has enacted comprehensive legislation and established systems for identifying, tracing, freezing, seizing, and forfeiting narcotics-related assets and assets derived from other serious crimes. Like most EU countries, though, Cyprus has no provisions allowing civil forfeiture of assets without a criminal case. The police and the FIU are responsible for tracing, seizing and freezing assets and they fully enforce existing legislation. Cyprus has an independent national system and mechanism for freezing terrorist assets, and has also engaged in bilateral and multilateral negotiations with other governments to enhance its asset tracking and seizure system.

Amending legislation that came into force in June 2010 strengthened the 2007 Law for the Prevention and Suppression of Money Laundering Activities (LPSMLA), e.g., by requiring a timely response to FIU enquiries, and criminalizing the provision of false or misleading information.

Area Administered by Turkish Cypriots

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

The Turkish Cypriot community is not part of any FSRB and thus is not subject to normal peer evaluations. Turkish Cypriot authorities have taken steps to address the risk of financial crime, including enacting an "anti-money laundering law (AMLL)" for the area and formally establishing an FIU equivalent. The “law” aims to reduce the number of cash transactions in the area administered by Turkish Cypriots as well as improve the tracking of any transactions above 10,000 Euros (approximately $13,000). Under the "AMLL," banks must report to the “Central Bank” and the “Money and Exchange Bureau” any electronic transfers of funds in excess of $100,000. Such reports must include information identifying the person transferring the money, the source of the money, and its destination. Under the “law,” banks, nonbank financial institutions, and foreign exchange dealers must report all currency transactions over 10,000 Euros (approximately $13,000) and suspicious transactions in any amount to the “Money and Exchange Bureau”. Banks must follow a KYC policy and require customer identification. Banks and other designated entities also must submit STRs to a five-member “Anti-Money Laundering Committee” which decides whether to refer suspicious cases to the "police" and the “attorney general’s office” for further investigation. The five-member committee is composed of representatives of the “police,” “customs,” the “Central Bank,” and the “Ministry of Economy”. According to the Turkish Cypriot authorities, 102 STRs were received by the “FIU” in 2009.

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/ct/rls/crt/)

Know-your-customer rules:

Covered entities: Banks, cooperative credit societies, finance companies, leasing/factoring companies, portfolio management firms, investment firms, jewelers, foreign exchange bureaus, real estate agents, retailers of games of chance, lottery authority, accountants, insurance firms, cargo firms, antique dealers, auto dealers, lawyers

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

Suspicious transaction reporting requirements:

Covered entities: Banks, cooperative credit societies, finance companies, leasing/factoring companies, portfolio management firms, investment firms, jewelers, foreign exchange bureaus, real estate agents, retailers of games of chance, lottery authority, accountants, insurance firms, cargo firms, antique dealers, auto dealers, lawyers

Number of STRs received and time frame: 106 in 2010

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, with Turkey

The area administered by Turkish Cypriots is not a member of any Financial Action Task Force (FATF)-style regional body.

Enforcement and implementation issues and comments:

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


Dominican Republic

In spite of having the largest economy in the Caribbean, the Dominican Republic (DR) is not a major regional financial center. The DR continues to be a major transit point for the transshipment of illicit narcotics destined for the United States and Europe. The existence of six international airports, six major seaports, and a poorly controlled frontier with Haiti present the authorities with serious challenges. The existence of corruption within the government and the private sector, an organized crime presence (primarily illicit trafficking in narcotics and persons), a fragile economy and a large informal economy make the DR vulnerable to money laundering and terrorist financing threats. The major sources of laundered proceeds stem from illicit trafficking activities, tax evasion and fraudulent financial activity, particularly transactions with forged credit cards.

The DR is a major bulk cash smuggling hub. The smuggling of bulk cash by couriers and the use of wire transfer remittances are the primary methods for moving illicit funds from the United States into the DR. Once in the DR, currency exchange houses, money remittance companies, real estate and construction companies, and casinos are commonly used to facilitate the laundering of illicit funds. The lack of a single recognized financial intelligence unit exacerbates the problem, and the proposed creation of an offshore financial center may worsen the DR’s vulnerability to money laundering.

There is a significant market for illicit or smuggled goods in the Dominican Republic; the funding sources are unclear, as is the destination of the proceeds. Authorities say the under-invoicing of imports and exports by Dominican Republic businessmen is still a relatively common practice. The primary goal for businessmen who engage in such activity is reportedly to avoid taxes and customs fees. Customs fraud and invoice manipulation are also found in regional value transfer schemes.

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: YES

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

Know-your-customer rules:

Covered entities: Banks, currency exchange houses, stockbrokers, securities brokers, cashers of checks or other types of negotiable instruments, issuers/sellers/cashers of travelers checks or money orders, credit and debit card companies, remittance companies, offshore financial service providers, casinos, real estate agents, automobile dealerships, insurance companies, and certain commercial entities such as those dealing in firearms and precious metals

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

Suspicious transaction reporting requirements:

Covered entities: Banks, agricultural credit institutions, money exchangers, notaries, gaming centers, and securities dealers

Number of STRs received and time frame: 45 from January to August 2010

Number of CTRs received and time frame: 138 in 2009

Money laundering criminal Prosecutions/convictions:

Prosecutions: 4 from January 2009 to October 2010

Convictions: 0

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Dominican Republic 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/

Enforcement and implementation issues and comments:

Limited resources hamper the Government of the Dominican Republic’s (GODR) ability to enforce the anti-money laundering (AML) regulations. Institutions and personnel lack the training and capacity to fully enforce the law and its attendant regulations. Earlier resistance in the judiciary and among prosecutors to applying AML has evaporated, and authorities effectively apply the AML and regulations when able to gather proper evidence. The lack of data and systematic study make it difficult for the Federal Police to identify trends in money laundering. The system of asset forfeiture is largely ineffective.

The AML law excludes from the list of covered entities dealers of art, antiques, and other high-valued consumer goods; entities dealing with jewelry and precious metals; and attorneys, financial management firms and travel agencies. These entities are not required to maintain customer information or report suspicious activity. Additionally, accountants and auto dealers are excluded from the STR requirement. PEPs are addressed in a circular issued by the Superintendency of Banks and in force since September 7, 2010; while this is a step forward, the circular does not address all elements in the international standards and does not apply to all pertinent entities. Covered non-bank businesses and professions are to be inspected by the Tax Authority. However, in practice, such inspections rarely occur.

The decision to replace the UIF financial intelligence unit (FIU), which became a member of the Egmont Group in 2000, with the Financial Analysis Unit (UAF) caused the Dominican Republic to lose its Egmont membership. Although the UAF is now recognized as the GODR’s financial intelligence unit, it appears there is still confusion among obligated entities regarding their reporting requirements. Further confounding the duality of FIU functions in the Dominican Republic is the proposed creation of an offshore financial center with its own agency equivalent to an FIU.

In December 2008, the GODR passed law 480/08 allowing the creation of “International Financial Zones” (IFZs) where the full range of financial services can be conducted separately from traditional monetary, banking and financial regulatory oversight. Sections of Law 480/08 would allow the IFZs to have their own regulatory and supervisory authority, independent from that of the domestic financial system. This Law creates a new entity called the Financial Investigations Department (DIF) created within the NCIFZ. The creation of the DIF within the NCIFZ, with specified roles, gives such a unit the same functions as the UAF. This situation is unacceptable, because two FIUs cannot coexist within a jurisdiction. Law 480/08 has not been implemented nor have any IFZs been established. Members of the Dominican Congress are trying to amend Law 480/08 to correct this risk. The Dominican Republic has approximately 50 free trade zone parks, focused on textiles, tobacco, small electric devices, and medical and pharmaceutical products.

The GODR should bolster the operational capacity of the UAF, which is the single, unified FIU. The UAF should have budgetary independence. There should be enhanced supervision of money service businesses. Authorities should identify, investigate and prosecute organized criminal groups involved with bulk cash smuggling and trade-based money laundering. The GODR should not establish International Financial Zones, which will greatly increase the risk of all-source money laundering. Specific steps should be taken to combat corruption within both government and industry.


France

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

France can designate portions of its customs territory as free trade zones and free warehouses in return for commitments in favor of employment. France has taken advantage of these regulations in several specific instances. The French Customs Service administers these zones.

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, credit institutions, money-issuing institutions, investment firms, money exchangers, investment management companies, mutual insurers and benefit institutions, insurance intermediaries, insurance dealers, notaries, receivers and trustees in bankruptcy, financial investment advisors, real estate brokers, chartered accountants, auditors, dealers in high-value goods, auctioneers and auction houses, bailiffs, lawyers, participants in stock exchange settlement and delivery, commercial registered office providers, gaming centers, companies involved in sports bets and horse-racing tips, and casinos

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

Suspicious transaction reporting requirements:

Covered entities: Banks, credit institutions, money-issuing institutions, investment firms, money exchangers, investment management companies, mutual insurers and benefit institutions, insurance brokers and intermediaries, notaries, receivers and trustees in bankruptcy, financial investment advisors, real estate brokers, chartered accountants, auditors, dealers in high-value goods, auctioneers and auction houses, bailiffs, lawyers, participants to stock exchange settlement and delivery and commercial registered office providers, gaming centers, companies involved in sports bets and horse-racing tips, and casinos

Number of STRs received and time frame: 17,310 in 2009

Number of CTRs received and time frame: Not available

Money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: 225 in 2009

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

France is a member of the Financial Action Task Force (FATF), and is a Cooperating and Supporting Nation to the Caribbean Financial Action Task Force (CFATF) and an Observer to the Financial Action Task Force of South America (GAFISUD), two FATF-style regional bodies. The International Monetary Fund (IMF) prepared a Report on the Observance of Standards and Codes. This report can be found here: http://www.imf.org/external/np/fsap/fsap.asp# . France was evaluated by the FATF in 2010; once finalized the evaluation report may be found here: http://www.fatf-gafi.org/infobycountry/0,3380,en_32250379_32236963_1_1_1_1_1,00.html

Enforcement and implementation issues and comments:

France applies the 2006/70/CE European Union (EU) directive by which politically exposed persons from the EU states may benefit from simplified vigilance procedures, but only in a limited number of cases.

France and the United States have exchanged large amounts of data in connection with money laundering and terrorist financing.

France does not have the capacity to share forfeited assets with other jurisdictions.

The Government of France (GOF) has established a comprehensive anti-money laundering/counter-terrorist financing (AML/CFT) regime and is an active partner in international efforts to control money laundering and the financing of terrorism. France should continue its active participation in international organizations and its outreach to lower-capacity recipient countries to combat the domestic and global threats of money laundering and terrorist financing.


Germany

Germany is one of the largest financial centers in Europe. Although not a major drug producing country, Germany continues to be a consumer and a major transit hub for narcotics. Organized criminal groups involved in drug trafficking and other illegal activities are a significant source of money laundering in Germany. Trends in money laundering in Germany cited in 2009 include trade in CO2 emission certificates, cash and gold transactions, and commercial websites that did not ship goods after receiving payment. Germany is not an offshore financial center. Free Trade Zones of control type I exist in Bremerhaven, Cuxhaven, and Hamburg. Deggendorf and Duisburg are control type II Free Trade Zones (unfenced inland ports).

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: Both

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: Credit institutions, financial services institutions, financial enterprises, insurance companies, insurance intermediaries, investment companies, lawyers, legal advisers, auditors, chartered accountants, tax advisers and tax agents, trust or company service providers, real estate agents, casinos, persons trading in goods

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

Suspicious transaction reporting requirements:

Covered entities: Credit institutions, financial services institutions, financial enterprises, insurance companies, insurance intermediaries, investment companies, lawyers, legal advisers, auditors, chartered accountants, tax advisers and tax agents, trust or company service providers, real estate agents, casinos, persons trading in goods

Number of STRs received and time frame: 9,046 in 2009

Number of CTRs received and time frame: Not applicable

Money laundering criminal Prosecutions/convictions:

Prosecutions: 518 in 2009

Convictions: 416 in 2009

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Germany is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/44/19/44886008.pdf

Enforcement and implementation issues and comments:

In 2009, suspicious transaction reports increased 23% compared to 2008. The increase mostly comes from an increased number of "financial agents," i.e., persons who are solicited to make their private accounts available for money laundering transactions. Authorities confirmed the suspicion of a criminal act in about half of the reports (46%). While Germany has no automatic CTR requirement, large currency transactions frequently trigger a report.

Tipping off is a criminal offense only if it is committed with the intent to support money laundering or obstruct justice and applies only to previously-filed reports. Otherwise, it is an administrative offense that carries a fine of up to € 50,000 (approximately $64,900) under the Money Laundering Act. Legal persons are only covered by the Administrative Offenses Act, and are not criminally liable under the Criminal Code.

In July 2010, Germany banned the Frankfurt-based Foundation for Human Rights and Freedoms and Humanitarian Relief (IHH) because it “knowingly and deliberately supports organizations that either are under Hamas control or support Hamas themselves”. According to the German Interior Ministry, the German-based IHH, which ostensibly split from the Turkish IHH, funneled money to Hamas.

The numbers of prosecutions and convictions included in this report only reflect cases in which the money laundering violation carried the highest penalty of all the crimes of which the offender was convicted. A trial continued in 2010 against seven persons accused of laundering money from cocaine sales throughout Europe by transporting it to Lebanon. According to the press, in May 2008 customs officers found € 8.7 million (approximately $11.3 million) hidden in luggage at Frankfurt Airport. A police search of the subject men's apartment unearthed an additional €500,000 (approximately $649,300). Additional arrests were made in October 2009.

Germany has no statistics on assets forfeited in criminal money laundering cases, as money laundering is usually only one of the charges leading to conviction. Assets can be forfeited as part of a criminal trial or through administrative procedures such as claiming back taxes.

Germany has signed, but not yet ratified, the UN Convention against Corruption.


Greece

Greece is considered to be a regional financial center in the developing Balkans, as well as a bridge between Europe and the Middle East. Official corruption, the presence of organized crime, and a large shadow economy make the country vulnerable to money laundering and terrorist financing. Greek law enforcement proceedings indicate that Greece is vulnerable to narcotics trafficking, trafficking in persons and illegal immigration, prostitution, smuggling of cigarettes and other contraband, serious fraud or theft, illicit gaming activities, and large scale tax evasion. Anecdotal evidence of illicit transactions suggests an increase in financial crimes in the past few years and that criminal organizations (some with links to terrorist groups) increasingly are trying to use the Greek banking system to launder illicit proceeds. Criminally-derived proceeds historically are most commonly invested in real estate, the lottery, and the stock market. Criminal organizations from southeastern Europe and the Balkan region are responsible for a large percentage of the crime that generates illicit funds. The widespread use of cash facilitates a gray economy as well as tax evasion, though as part of Greece’s three-year €110 billion (approximately $143 billion) European Union (EU)-IMF program, the government is trying to crack down on both trends. Due to the large informal economy – estimated by the Organization for Economic Co-operation and Development and others to be between 25 and 37 percent of GDP – it is difficult to determine the value of goods smuggled into the country, including whether any of the smuggled goods are funded by narcotic or other illicit proceeds. There is increasing evidence that domestic terrorist groups are involved with drug trafficking.

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: A combination of a “list” of predicate offenses and a threshold approach

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; savings banks, and cooperative banks; credit companies, money remitters, financial leasing and factoring companies, bureaux de change, and postal companies; stock brokers, investment services firms, and collective and mutual funds; life insurance companies and insurance intermediaries; accountants, auditors, and audit firms; tax consultants, tax experts and related firms; real estate agents and companies; casinos (including internet casinos) and entities engaging in gaming activities; auction houses; and dealers in high value goods and auctioneers; notaries and lawyers

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

Suspicious transaction reporting requirements:

Covered entities: Banks; savings banks, and cooperative banks; credit companies, money remitters, financial leasing and factoring companies, bureaux de change, and postal companies; stock brokers, investment services firms, and collective and mutual funds; life insurance companies and insurance intermediaries; accountants, auditors, and audit firms; tax consultants, tax experts and related firms; real estate agents and companies; casinos (including internet casinos) and entities engaging in gaming activities; auction houses; and dealers in high value goods and auctioneers; notaries and lawyers

Number of STRs received and time frame: 2,392 through December 28, 2010

Number of CTRs received and time frame: Not applicable

Money laundering criminal Prosecutions/convictions:

Prosecutions: 42 in 2008; more recent data not available

Convictions: 34 in 2008; 20 through June 2009

Assets forfeited: criminally: Not available civilly: Not Applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Greece is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/document/23/0,3343,en_32250379_32236963_38916695_1_1_1_1,00.html

Enforcement and implementation issues and comments:

Greece ratified the United Nations Convention against Transnational Organized Crime in August 2010, and amended its anti-money laundering/countering the financing of terrorism (AML/CFT) law to adequately criminalize and widen the scope of the terrorist financing offense. The Government of Greece (GOG) also improved the supervisory capacity of its key supervisors.

Despite continued improvements in Greece’s AML/CFT regime, a number of deficiencies remain, and Greece continues to be subject to enhanced follow-up by the FATF.

The GOG has been working to improve the effectiveness of the Greek financial intelligence unit; however, deficiencies pertaining to staffing and information technology remain. While the Greek authorities have hired more staff and ensured that STR analysis is carried out only by full-time FIU staff, the total number of employees still appears insufficient to carry out the extensive functions with which the FIU is tasked. The GOG should make available adequate human and financial resources to ensure the FIU is able to fulfill its responsibilities, ensure its powers are in-line with the international standards related to a financial intelligence unit, and ensure its technical and data management systems and capacities support its functions.

Greece should ensure that its confiscation regime is more effectively implemented and used. While the 2008 AML/CFT law contains provisions allowing civil asset forfeiture, Greek authorities advise it is not practical to launch civil procedures and currently do not do so. The government also should develop an arrangement for the sharing of seized assets with third party jurisdictions that assist in the conduct of investigations.

Although the law provides for the freezing, seizure and confiscation of terrorist assets, Greece has a limited ability to freeze funds in accordance with UNSCR listings of designated terrorists outside of the EU listing system. In the absence of a comprehensive listing and freezing regime, Greece uses an administrative procedure for freezing assets of suspected terrorists designated as such domestically or upon request from a foreign authority. While the GOG advises it is not necessary to open a criminal investigation to use this procedure, it is not clear how quickly it works, and whether all supervised entities are complying. The GOG does not provide guidance to financial institutions and designated non-financial businesses and professions on freezing assets without delay, and does not monitor for compliance. In July 2010 the Bank of Greece introduced sanctions for credit and financial institutions for failure to promptly apply freezing requests or respond without delay to such requests. The GOG advises it is in the process of drafting legislation that would introduce a comprehensive system for suspected terrorists’ designation and listing, and asset freezing in accordance with UNSCRs 1267 and 1373.

While Greece has made positive strides in the supervision area, particularly with its recent move to transfer supervisory powers over the insurance sector to the Bank of Greece, a shortage of personnel at the Hellenic Capital Markets Commission (which supervises securities firms, brokers, other financial intermediaries, and clearing houses) remains and continues to challenge its effectiveness. In addition, it is not clear whether the Ministry of Justice has enough resources available to deal with ML or TF related cases.

The GOG should adopt regulations to report large currency transactions and explicitly abolish company-issued bearer shares. It should also ensure uniform enforcement of its cross-border currency reporting requirements and take further steps to deter the smuggling of currency across its borders. Greece also should ensure that companies operating within its free trade zones are subject to the same AML/CFT requirements and customer due diligence provisions as other sectors and work steadfastly to bring charitable and nonprofit organizations under the AML/CFT regime.

 

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