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Diplomacy in Action

2011 INCSR: Countries/Jurisdictions of Primary Concern - Netherlands through Zimbabwe


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

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Netherlands

The Netherlands is a major financial center and consequently an attractive venue for laundering funds generated from illicit activities. These activities are often related to the sale of cocaine, cannabis, or synthetic and designer drugs (such as ecstasy). Financial fraud, especially tax-evasion, is believed to generate a considerable portion of domestic money laundering, and there is increasingly less evidence of trade-based money laundering. There are no indications of syndicate-type structures in organized crime or money laundering, and there is virtually no black market for smuggled goods in the Netherlands. In 2009, the number of suspicious transfers was at the lowest level in seven years. Although under the Schengen Accord there are no formal controls on national borders within the European Union (EU), the Dutch authorities run special operations in the border areas with Germany and Belgium to keep smuggling to a minimum.

Six islands in the Caribbean fall under the jurisdiction of the Netherlands. Bonaire, St. Eustasius, and Saba are special municipalities of the country the Netherlands. Aruba, Curacao, and St. Maarten are countries within the Kingdom of the Netherlands.

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: 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, exchange offices, casinos, money service businesses, lawyers, notaries, tax specialists, accountants, life insurers, trust and company service providers, credit card companies

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

Suspicious transaction reporting requirements:

Covered entities: Banks, credit institutions, securities institutions, investment institutions, money transaction offices, providers of money transaction services, life insurers and insurance brokers, credit card companies, casinos, traders in high-value goods, other traders, accountants, lawyers, business economic consultants, tax consultants, real estate brokers, estate agents, civil-law notaries, independent legal consultants, trust and asset administrative companies

Number of STRs received and time frame: 164,000 in 2009

Number of CTRs received and time frame: 32,100 in 2009

Money laundering criminal prosecutions/convictions:

Prosecutions: 770 January through June 2009

Convictions: 328 January through June 2009

Assets forfeited: criminally: 50 million euro (approximately $64.9 million) in 2009 civilly: Not applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

The Netherlands is a member of the Financial Action Task Force (FATF). In lieu of an evaluation by the FATF, the International Monetary Fund (IMF) prepared a Report on the Observance of Standards and Codes (ROSC). The ROSC can be found here: http://www.imf.org/external/pubs/ft/scr/2004/cr04312.pdf The Netherlands underwent a new FATF evaluation 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:

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

The Netherlands has established an “unusual transaction” reporting system. Designated entities are required to file unusual transaction reports (UTRs) with the Netherlands’ financial intelligence unit (FIU) on any transaction that appears unusual (applying a broader standard than “suspicious”) or when there is reason to believe that a transaction is connected with money laundering or terrorist financing. The FIU investigates UTRs and forwards them to law enforcement for criminal investigation; once the FIU forwards the report, the report is then classified as a suspicious transaction report (STR).

The United States enjoys strong cooperation with the Netherlands in fighting international crime, including money laundering. The Netherlands has ratified the bilateral implementing instruments for the U.S.-EU mutual legal assistance agreement (MLAT) and extradition treaties. The U.S.-EU MLAT came into force in February 2010. One provision included in the U.S.-EU MLAT will facilitate the exchange of information on bank accounts. The Dutch Ministry of Justice and the National Police work together with U.S. law enforcement authorities in the Netherlands on operational money laundering initiatives.

While historically Dutch public prosecutors have moved to seize assets in only a small proportion of money laundering cases, the recent assignment of two dedicated money laundering prosecutors is slowly bringing change. The limited asset seizure is due to a shortage of trained financial investigators and a compartmentalized approach where the financial analysts and operational drug investigation teams often do not act in unison. In order to further increase the confiscation of criminal assets, the Dutch Minister of Justice has introduced a new law, currently before Parliament, that introduces confiscation as a standard procedure of any money driven criminal case, increasing the capacity within law enforcement agencies to take such actions.

Financial institutions do not receive the UN list of designated terrorists directly from the Dutch government, but the Dutch Central Bank holds them responsible for implementing the EU ‘Freeze list’ (the Combined Targeted Financial Sanctions List).

In 2009, the Public Prosecution Office served a summons to suspects of money laundering offenses in 779 cases. The Netherlands Court of Audit reported in June 2009 that 87 percent of money laundering cases referred to the Office of Public Prosecution resulted in a conviction.

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


Nigeria

Nigeria is a major drug trans-shipment point and a significant center for criminal financial activity. Individuals and criminal organizations take advantage of the country's location, porous borders, weak laws, corruption, lack of enforcement, and poor socio-economic conditions to launder the proceeds of crime. The proceeds of illicit drugs in Nigeria derive largely from foreign criminal activity rather than domestic activities. One of the schemes used by drug traffickers to repatriate and launder their proceeds involves the importation of various commodities, predominantly luxury cars and other items such as textiles, computers, and mobile telephone units.

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

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: NO

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, community banks, mortgage institutions, development finance banks, financial service companies, bureaux de change; the insurance, and securities and investment industries; discount houses; finance companies; money brokerages; factoring, project and export financing, and equipment leasing; debt and pension fund administration; fund and investment management; private ledger services; project consultancy; estate agents; lawyers; accountants; and, casinos

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

Suspicious transaction reporting requirements:

Covered entities: Banks, community banks, mortgage institutions, development finance banks, financial service companies, bureaux de change; the insurance, and securities and investment industries; discount houses; finance companies; money brokerages; factoring, project and export financing, and equipment leasing; debt and pension fund administration; fund and investment management; private ledger services; project consultancy; estate agents; lawyers; accountants; and, casinos

Number of STRs received and time frame: 2,084 in 2010

Number of CTRs received and time frame: 13,575,712 in 2010

Money laundering criminal prosecutions/convictions:

Prosecutions: Ten in 2010

Convictions: 0

Assets forfeited: criminally: 0 civilly: 0

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Nigeria is a member of the Intergovernmental Action Group Against Money Laundering in West Africa (GIABA), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.giaba.org/index.php?type=c&id=49&mod=2&men=2

Enforcement and implementation issues and comments:

Corruption continues to be a significant problem. Weak law enforcement and long delays within the justice sector have hindered the progress of many prosecutions and investigations. Additionally, Nigerian legislation does not provide safe harbor for financial institutions, or their employees, who file STRs in good faith. The GON should amend its legislation to include safe harbor provisions. In 2010, there were no money laundering convictions. The National Assembly should adopt the proposed Special Courts Bill that will establish a special court with specific jurisdiction and trained judges to handle financial crimes, and should consider passing amendments to the Money Laundering Prohibition Act, 2004.

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

Nigeria’s failure to criminalize terrorist financing limits its ability to inhibit terrorism-related activity. Additionally, Nigeria is not able to freeze terrorist assets in accordance with UNSCR 1267. The GON should enact appropriate laws, such as the Prevention of Terrorism Bill, to correct these deficiencies.


Pakistan

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

Money laundering and terrorist financing often occur in Pakistan via an overlap of the hundi/hawala alternative remittance system and the formal banking system. The State Bank of Pakistan (SBP) requires all hawaladars to obtain licenses and meet minimum capital requirements. Despite this requirement, few hawalas have been registered by the authorities, and unlicensed hawaladars continue to operate illegally throughout Pakistan (particularly Peshawar and Karachi). Fraudulent invoicing is typical in hawala/hundi counter-valuation schemes. Legitimate remittances from Pakistani expatriates residing abroad now flow mostly through the formal banking sector and through licensed money transmitting businesses. According to authorities, in calendar 2010, remittances through formal channels totaled $9.7 billion, out of an estimated total of $14 billion.

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: 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 (conventional and Islamic, micro-finance banks, development finance institutions), exchange companies, securities markets, non-bank financial companies, and insurance companies

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

Suspicious transaction reporting requirements:

Covered entities: Any institution accepting deposits; lending; financial leasing; issuing and managing of means of payment, including credit and debit cards and electronic money; transferring money or value; changing money or currency; participating in share issues and providing services in relation to share issues; engaging in portfolio management; conducting insurance transactions; or carrying out business as an intermediary

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

Money laundering criminal prosecutions/convictions:

Prosecutions: 0 in 2010

Convictions: 0 in 2010

Assets forfeited: criminally: None civilly: None

Records exchange mechanism:

With U.S.: NO

With other governments/jurisdictions: NO

Pakistan 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://apgml.org/documents/docs/17/Pakistan%20MER%20-%20final%20version.pdf

Enforcement and implementation issues and comments:

Pervasive corruption and a lack of political will continue to be the two primary obstacles to an effective anti-money laundering and counter-terrorist financing regime in Pakistan. Pakistan ranks 143 out of 178 countries surveyed in Transparency International’s 2010 International Corruption Perception Index. Considering the extent of the financial crime and terrorist financing challenges facing Pakistan, the absence of prosecutions and convictions is telling.

During 2010, the FATF identified Pakistan as a jurisdiction with significant AML/CFT vulnerabilities. In response, the Pakistani government expressed high-level political commitment to address deficiencies in its AML/CFT regime. Despite the passage of the Anti-Money Laundering Act of 2010, legislative shortcomings are pervasive and should be addressed accordingly. Additionally, Pakistan’s lack of police and judicial capacity contributes to its lack of prosecutions and convictions. Pakistan’s financial intelligence unit (FIU) must be strengthened and should be given operational autonomy. The FIU also needs a strong information technology infrastructure to aid in the core functions of collection, analysis and dissemination of financial intelligence. Suspicious and currency transaction reporting should be fully implemented, comprehensive and actionable. Pakistani law enforcement should not, however, become dependent on these reports to initiate investigations; rather, law enforcement authorities should be proactive in pursuing money laundering and terrorist financing in their field investigations. Restrictive information-sharing rules both within the interagency and with foreign counterparts hinder international cooperation.

The Anti-Terrorist Act (ATA) allows the Pakistani government to ban a fund, entity or individual on the grounds of involvement with terrorist activity and permits freezing of accounts. Although legally allowed, there have been deficiencies concerning the timeliness and thoroughness of the asset freezing regime and no formal system is in place to implement an asset forfeiture regime. Section 11B of the ATA specifies that an organization is proscribed or listed if and when the GOP has reason to believe it is involved with terrorism. In light of the role private charities have played in terrorist financing, Pakistan must work quickly to conduct outreach, supervise, and monitor charitable organizations and their activities. Meaningful action should be taken to shut down internationally designated charities and prevent their reopening.

At present there is no requirement to declare inbound currency. Pakistan’s relatively strict currency exportation requirements may lead hawaladars to export foreign currency out of the country by other means, including smuggling it across the porous border with Afghanistan. Pakistan should implement and enforce inbound and outbound cross-border currency reporting requirements and focus greater efforts on identifying and targeting illicit cash couriers.


Panama

Panama’s strategic geographic location and its economic openness make it a natural location for laundering money derived from drug sales. However, location is only one reason for Panama’s attractiveness for money launderers. Panama is promoting itself as the new hub for Central America because it is a leader in developing the physical and financial infrastructure that go with that role. The Colon Free Trade Zone is the second largest free trade zone in the world and the major airline, Copa, is expanding international and local flights. The financial sector is increasing direct marketing efforts to attract regional financial institutions. This current and future access to infrastructure and global connections attracts international clients who know how to use financial and commercial accounts for money laundering.

During 2010, Panama made progress on the policy front in improving the transparency of its financial system. The Government of Panama (GOP) is working diligently to ensure its removal from the OECD’s grey list by signing a Tax Information Exchange Agreement (TIEA) with the United States in November and signing Double Taxation Treaties (DTTs), which include similar information exchange provisions, with 13 other OECD members. It is drafting new anti-money laundering legislation and strengthening its financial intelligence unit’s authority. Panama still has unregulated parallel market exchanges like hawalas.

Unfortunately, the lack of enforcement of Panamanian banking and anti-money laundering laws undercuts the policy progress the GOP has made. The very factors that contribute to Panama’s economic growth and financial sector sophistication – the dollar-based economy, the large number of offshore banks and shell companies, loosely regulated free trade zones, and sustained growth in the ports and maritime industries – are also mechanisms that are vulnerable to abuse for money laundering and other illicit financial activities. Legislation that allows bearer share corporations remains in effect and provides a near impenetrable corporate veil for shareholders. In addition, corruption and weak regulatory bodies impede Panama’s progress toward a more transparent economy.

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: 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, savings cooperatives, savings and mortgage banks, and money exchanges; investment houses and brokerage firms; insurance and reinsurance companies; fiduciaries; casinos; free trade zones; finance companies; and real estate brokers

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

Suspicious transaction reporting requirements:

Covered entities: Banks, cooperatives, and money exchanges, casinos, fiduciaries; insurance companies, government entities focused on the lottery, and investment houses

Number of STRs received and time frame: 944 in 2009

Number of CTRs received and time frame: Not available

Money laundering criminal prosecutions/convictions:

Prosecutions: Not available

Convictions: 0

Assets forfeited (seized): criminally: $41 million in 2010 civilly: Not applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

In July 2010 Panama became a member of the Financial Action Task Force on money laundering in South America GAFISUD, a Financial Action Task Force (FATF)-style regional body. It moved from the Caribbean Financial Action Task Force to the GAFISUD because the authorities felt it shared more goals and problems with the GAFISUD members. Its most recent mutual evaluation report can be found here: http://www.cfatf-gafic.org/downloadables/mer/Panama_3rd_Round_MER_(Final)_English.pdf

Enforcement and implementation issues and comments:

Panama allows the use of bearer shares and shell company structures based on bearer shares to provide privacy for share holders. These structures are very vulnerable to abuse by criminal groups to launder funds. Panama took steps in 2010 to enhance the transparency of its financial system. In addition to the signature of the TIEA with the U.S. and DTTs with other OECD members, the GOP enacted legislation (Law 33 of July 2010) which requires banks and law firms to share transaction and ownership information with the GOP and authorizes the sharing of such information with foreign tax authorities pursuant to TIEA requests. Law 33 complements existing “know your customer” requirements.

Panama allows the transfer of seized assets to other countries when the seizure occurs in the course of an investigation conducted pursuant to a mutual legal assistance request. One asset transfer example occurred in April 2010 in a New York investigation led by the United States Department of Justice which led to the seizure of approximately $40 million worth of gold, jewelry and assorted gemstones. The assets were seized by the GOP at the request of the U.S. Government, and eventually repatriated to the U.S. Government in recognition of forfeiture orders entered by the United States Attorney’s Office for the Southern District of New York.

Panama’s judicial system has not sentenced anyone under the current money laundering laws. In October, 2010, a former municipal employee and accomplices were brought up on charges of laundering approximately $2 million using a corporate entity. Other recent cases were either dismissed or are still under investigation.

The Colon Free Trade Zone (CFZ) continues to be vulnerable to illicit financial activities in part because of the following practices: the ease of third party payments made by an intermediary apparently unrelated to the seller or purchaser; use of amended internal credit documents without reasonable justification; customers not required to produce appropriate documentation (e.g., invoice) to support a requested transaction; significant discrepancies exist between transport document information and the invoice; the long-awaited electronic transaction recording information system is operational but not widely used – a total of 5,000 keys to the electronic system were provided to CFZ companies, but most continue to submit transaction information in hard-copy format ; and, the ease with which bulk cash can be brought into Panama through the main international airport by declaring it is for use in the CFZ.

The several anti-money laundering regulatory bodies do not communicate well. Panama’s FIU (the UAF), Superintendencia, Banker’s Association, Customs, Consejo and the Judiciary branches do not know each other’s roles and responsibilities.

The UAF is overworked and lacks adequate resources to process, let alone enforce the required reporting. UAF is developing new software that will allow covered entities to submit their STRs electronically. Submissions currently must be made in hard copy with supporting electronic documentation included in CD format.

Money laundering, in and of itself, is still not a priority with the Panamanian Customs Authority. As long as money is properly declared, it flows easily across Panama’s borders. U.S. law enforcement agencies believe millions of dollars in cash and monetary instruments are declared openly upon entry at Panama’s airport without prompting further investigation by Panama’s Customs Authority. There were numerous press reports on corrupt customs/immigration officials during 2010. In October, Panama passed Law 67 which, among other actions, now requires the declaration of cash valued at $10,000 or over when leaving the country.

Panama cooperates with U.S. law enforcement agencies. There is increasing bilateral cooperation such as maritime operations and the partnership of the Panamanian and US Trade Transparency Units (TTU). Established in 2010 by U.S. Immigration and Customs Enforcement, the Panamanian TTU is a vetted unit whose data mining efforts have provided investigative assistance and insights for many GOP agencies, like the UAF and Panama’s tax authority. Some examples of the TTU’s successes include: the discovery of a network of banks and exchange houses that moved euros from Colombia, using Panamanian banks, to the U.S. and Europe; the use of harmonized tariff codes for perfumes, video gaming and precious metals to identify several companies in the CFZ involved in commercial fraud and possible trade-based money laundering; and, information that reveals possible export tax incentive fraud.

Panama’s regulated financial institutions are generally not believed to be willingly involved in transactions related to the proceeds from serious crime. If the GOP continues its efforts to improve its anti-money laundering legal framework, particularly eliminating bearer shares, criminalizing “tipping off,” initiating efforts to increase prosecutions and convictions, and creating a more transparent financial network, money laundering will become more difficult within Panama’s borders.


Paraguay

Paraguay is a major drug transit country and money laundering center. A multi-billion dollar contraband trade, fed in part by endemic, institutional corruption, occurs in the border region shared with Argentina and Brazil (the Tri-Border Area) and facilitates much of the money laundering in Paraguay. While the Government of Paraguay (GOP) suspects proceeds from narcotics trafficking are often laundered in the country, it is difficult to determine what percentage of the total amount of laundered funds is generated from narcotics sales or is controlled by drug trafficking organizations, organized crime, or terrorist groups operating locally. Trade-based money laundering and the trafficking in counterfeit goods are widespread. Weak controls in the financial sector, open borders, bearer shares, casinos, a surfeit of unregulated exchange houses, lax or non-enforcement of cross-border transportation of currency and negotiable instruments, ineffective and/or corrupt customs inspectors and police, and minimal enforcement activity for financial crimes allows money launderers, transnational criminal syndicates, and possible terrorist financiers to take advantage of Paraguay’s financial system.

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

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

As a land-locked nation, Paraguay does not have an offshore sector. However, Paraguay’s port authority manages free trade ports and warehouses in neighboring countries' seaports, which are used for the reception, storage, handling, and transshipment of merchandise transported to and from Paraguay. Such free trade ports are located in Argentina (Buenos Aires and Rosario); Brazil (Paranagua, Santos, and Rio Grande do Sul); Chile (Antofagasta and Mejillones); and Uruguay (Montevideo and Nueva Palmira). About three-fourths of all goods entering and exiting Paraguay are transported by barge on the large river system that connects Paraguay with Buenos Aires (Argentina) and Montevideo (Uruguay).

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES

Criminalization of money laundering:

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

Legal persons covered: criminally: YES civilly: YES

Criminalization of terrorist financing:

Ability to freeze terrorist assets without delay: NO

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

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

Know-your-customer rules:

Covered entities: Banks, finance companies, insurance companies, exchange houses, stock exchanges and securities dealers, investment companies, trust companies, mutual and pension fund administrators, credit and consumer cooperatives, gaming entities, real estate brokers, nongovernmental organizations, pawn shops, and dealers in precious stones, metals, art, and antiques.

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

Suspicious transaction reporting requirements:

Covered entities: Banks, finance companies, insurance companies, exchange houses, stock exchanges and securities dealers, investment companies, trust companies, mutual and pension fund administrators, credit and consumer cooperatives, gaming entities, real estate brokers, nongovernmental organizations, pawn shops, and dealers in precious stones, metals, art, and antiques

Number of STRs received and time frame: 781 in 2010

Number of CTRs received and time frame: Not available

Money laundering criminal prosecutions/convictions:

Prosecutions: 9 in 2010

Convictions: 0

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: NO

With other governments/jurisdictions: YES

Paraguay is a member of the Financial Action Task Force against Money Laundering in South America (GAFISUD), a Financial Action Task Force-style regional body, of which Paraguay assumed the pro tempore Presidency in December 2010. Its most recent mutual evaluation can be found here: http://www.imf.org/external/pubs/ft/scr/2009/cr09235.pdf

Enforcement and implementation issues and comments:

The GOP took a huge step forward in regard to money laundering in June 2010 when it passed an anti-terrorism law making terrorism financing an illegal act punishable by five to fifteen years in prison.

Paraguay has shown a great deal of cooperation with U.S. law enforcement agencies. In March 2007, U.S. Immigration and Customs Enforcement created a Paraguay-based Trade Transparency Unit (TTU) to aggressively analyze, identify and investigate companies and individuals involved in trade-based money laundering activities between Paraguay and the United States. As a result of the TTU, Paraguay has identified millions of dollars of lost revenue and has helped target a criminal organization accused of supporting a terrorist entity.

Paraguay is a member of the “3 + 1” Security Group with the United States and the Tri-Border Area countries. Paraguayan and U.S. law enforcement agencies cooperate on a case-by-case basis. To date, the Paraguayan financial intelligence unit (FIU) has signed 29 MOUs with other FIUs and is in the process of signing eight more.

Prosecutors handling financial crimes have limited resources to investigate and prosecute. In addition, the selection of judges, prosecutors and public defenders is largely based on politics, nepotism, and influence peddling. The lack of interagency cooperation throughout Paraguay, and particularly within law enforcement, is an impediment to effective enforcement, prosecution, and reporting efforts.

Asset forfeiture legislation is desperately needed in Paraguay. Paraguayan law does not provide for freezing or seizure of many criminally derived assets. Law enforcement can only freeze assets of persons under investigation for a crime in which the state risks loss of revenue from furtherance of a criminal act, such as tax evasion. Enforcement agencies have limited authority to seize or forfeit assets of suspected money launderers. Assets seized or forfeited are limited to transport vehicles, such as planes and cars, and normally do not include bank accounts. When a seizure does occur, law enforcement authorities cannot dispose of these assets until a defendant is convicted. A draft bill requesting power be granted to the Secretariat for the Prevention of Money or Property Laundering (SEPRELAD) to administratively freeze assets without judicial approval is currently being reviewed by the Paraguayan Presidency. However, the administrative freeze would only be temporary unless either extended by a court order, or finalized through a conviction.

The non-bank financial sector operates in a weak regulatory environment with limited supervision. The organization responsible for regulating and supervising credit unions, the National Institute of Cooperatives, lacks the capacity to enforce compliance. Exchange houses are another non-bank sector where enforcement of compliance requirements remains limited.

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


Philippines

The Republic of the Philippines is not a regional financial center. Despite its developed financial system, the Philippines is still a heavily cash-based economy, with substantial remittances from its large expatriate community. Nonetheless, money launderers generally use formal financial institutions to conceal proceeds of crime, and the weak national ID system makes implementing a robust “know your customer” system difficult.

The principle sources of criminal proceeds are human and drug trafficking, official corruption, and investment scams. The Philippines’ geographic position makes it attractive to human and narcotics traffickers; and relatively open sea borders complicate enforcement of currency controls. The Philippines continues to experience an increase in foreign organized criminal activity from China, Hong Kong, and Taiwan. Insurgency groups operating in the Philippines partially fund their activities through local crime and the trafficking of narcotics and arms, and engage in money laundering through ties to organized crime. Smuggling, including bulk cash smuggling, continues to be a problem.

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

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/)

Know-your-customer rules:

Covered entities: Banks, quasi banks, trust entities, and all other institutions and their subsidiaries/affiliates supervised/regulated by the Philippine Central Bank; insurance and pre-need companies; securities dealers, brokers/sales representatives, investment houses, mutual funds, and other entities managing securities as agents/consultants; foreign exchange dealers, money changers, remittance/transfer agents; and, entities dealing in valuable objects, currency, financial derivatives, cash substitutes, and similar monetary instruments.

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

Suspicious transaction reporting requirements:

Covered entities: Banks, quasi banks, trust entities, and all other institutions and their subsidiaries/affiliates supervised/regulated by the Philippine Central Bank; insurance and pre-need companies; securities dealers, brokers/sales representatives, investment houses, mutual funds, and other entities managing securities as agents/consultants; foreign exchange dealers, money changers, remittance/transfer agents; and, entities dealing in valuable objects, currency, financial derivatives, cash substitutes, and similar monetary instruments.

Number of STRs received and time frame: 6,298 (January 1-November 30, 2010)

Number of CTRs received and time frame: 35,924,241 (January 1-November 30, 2010)

Money laundering criminal prosecutions/convictions:

Prosecutions: 33 as of November 30, 2010

Convictions: One as of November 30, 2010

Assets forfeited: criminally: None civilly: approximately $20,592,909 as of November 30, 2010

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

The Philippines is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force (FATF)-style regional body. Its most recent evaluation can be found here: http://www.apgml.org/documents/docs/17/The%20Philippines%20DAR%20-%20Final%20%20210809.pdf

Enforcement and implementation issues and comments:

The Philippines’ financial intelligence unit (FIU) investigations are severely constrained by limited authority to access bank information. Except in instances of serious offenses such as kidnapping for ransom, drugs and terrorism-related activities, the FIU is required to secure a court order to examine bank deposit accounts related to unlawful activities enumerated in the Anti-Money Laundering Act. In addition, a Supreme Court ruling prevents ex parte inquiry into bank accounts. The FIU can, however, seek an ex parte freeze order from the Court of Appeals before seeking authorization to inquire into bank deposits. The FIU also must obtain a court order to freeze assets, including those of terrorists and terrorist organizations placed on the UN 1267 Sanctions Committee’s consolidated list and the lists of foreign governments. This requirement is inconsistent with the international standard, which calls for the preventative freezing of terrorist assets “without delay” from the time of designation. The Government of the Philippines (GOP) should enhance the FIU’s access to financial records, and ensure it can rapidly freeze terrorist assets.

Terrorist financing is not a stand-alone offense under Philippine law and therefore not a predicate crime under the Anti-Money Laundering Act. A person who finances the commission of terrorism may be prosecuted as a terrorist either as a principal by inducement pursuant to Article 17 of the Revised Penal Code or as an accomplice pursuant to Section 5 of the Human Security Act. However, this approach requires a terrorist act to have occurred and does not encompass general financial support to terrorist entities for other purposes (recruiting, training, social welfare projects, etc.). The GOP should criminalize terrorist financing as a stand-alone offense, and enhance training on its connection to money laundering.

The GOP has cooperated with the USG to share assets. However, the GOP should formalize asset sharing arrangements, and clearly designate which agencies have authority over this process.


Russia

The current administration aspires to establish the capital, Moscow, as an international financial center. However, money laundering (ML) and terrorist financing (TF) are prevalent in Russia, where there is a high level of organized crime and corruption. Domestic sources of laundered funds include organized crime, evasion of tax and customs duties, fraud, public corruption, and smuggling operations. Criminal elements from Russia and neighboring countries continue to use Russia’s financial system and foreign legal entities to launder money. Criminals invest and launder their proceeds in real estate and security instruments, or use them to buy luxury consumer goods. Russia has been a repeated victim of terrorism, and some TF schemes involve the misuse of alternative remittance networks by foreign and North Caucasian terrorist groups. Despite making progress in combating financial crimes, Russia remains vulnerable to such activities. Russia’s risk factors, such as the many large-scale financial transactions associated with its vast natural resources; the state’s major role in the economy; the country’s porous borders and its role as a geographic gateway between Europe and Asia; and chronic under-funding and lack of capacity of regulatory and law enforcement agencies, create an environment in which corruption and financial crimes flourish.

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES

Criminalization of money laundering:

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

Legal persons covered: criminally: NO civilly: 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 and credit institutions; Russia Post; payment acceptance and money transfer services; securities, insurance and leasing companies; investment and non-state pension funds; casinos and gambling outlets, dealers in precious metals and stones, real estate agents, and pawnshops

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

Suspicious transaction reporting requirements:

Covered entities: Banks and credit institutions, securities markets, investment and pension funds, Russian Post, insurance sector, leasing companies, dealers in precious metals and stones, casinos, real estate agents, lawyers, notaries, and persons providing legal or accounting services

Number of STRs received and time frame: 3,147,937 - January 1 to October 1, 2010

Number of CTRs received and time frame: 5,030,727 - January 1 to October 1, 2010

Money laundering criminal prosecutions/convictions:

Prosecutions: 50 - January 1, 2010 to October 1, 2010; 208 in 2009

Convictions: 110 in 2009

Assets forfeited: criminally: $9.6 million - 2009 civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Russia is a member of the Financial Action Task Force (FATF). It also is a member of two FATF-style regional bodies: the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) and the Eurasian Group on Combating Money Laundering and the Financing of Terrorism (EAG). Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Russia_en.asp

Enforcement and implementation issues and comments:

Through aggressive enactment and implementation of comprehensive anti-money laundering/combating the financing of terrorism (AML/CFT) legislation, Russia has established much of the legal and enforcement framework to deal with money laundering and terrorist financing. On July 23, 2010, Russia adopted amendments that improve legislation on AML/CFT. These amendments focus on three main areas: expanding AML/CFT coverage, clarifying legal definitions, and improving administrative oversight for enforcement of AML/CFT legislation. AML/CFT coverage has been expanded to subsidiary branches, representative offices, and affiliates of financial institutions located outside the Russian Federation. Furthermore, microfinance and short-term loans, which have grown significantly in Russia, are now subject to AML/CFT laws. In addition to expanding AML/CFT coverage, the new amendments clarify definitions critical to enforcement, such as “beneficiary,” “organization of internal control,” “conduct of internal control,” “customer,” “identification,” and “data recording.”

Amendments to the Code of Administrative Infringements improve regulatory oversight for violation of AML/CFT legislation. These amendments broaden the authority of the FIU (Rosfinmonitoring) and the Central Bank of Russia to conduct investigations of ML violations. Order 203, issued August 3 by Rosfinmonitoring, replaces Order 256 regarding the obligation to conduct staff training on AML issues. Directive 967-R sets forth requirements for all non-banking organizations concerning the development of ML internal control rules. The Code of Administrative Offenses now specifies five types of “ML safety” violations, instead of grouping all violations under one general offense.

It is too early to assess the impact of the 2010 amendments to the AML/CFT Law. Implementing regulations have not been issued for critical components of the new law, such as monitoring of affiliates’ operations outside the Russian Federation. Furthermore, it will take time for private sector entities to incorporate the clarified definitions into their AML/CFT practices. Reforms to the Code of Administrative Infringements do not address the full array of regulatory oversight challenges for enforcement of AML/CFT liability.

Russia takes an “all crimes” approach to money laundering predicate offenses, with the exception of six financial crimes, such as insider trading and stock market manipulation. To address these exceptions, Law 241-FZ was passed on October 30, 2009 to criminalize insider trading, stock market manipulation, and other similar crimes, but it does not take effect until 2014. Under Russian law, corporations cannot be held criminally liable; only a natural person is subject to criminal liability. Additionally, “tipping off” by bank directors and employees is not explicitly prohibited; the relevant section of the legislation only criminalizes revealing “measures taken against money laundering and terrorist financing”. Some new payment mechanisms, such as certain internet-based payment systems, are not covered by Russia’s AML/CFT controls.

Although Russia continues to establish and develop anti-corruption measures, corruption continues to be a problem. The Government of Russia should continue to aggressively pursue corruption; similarly, it should continue to pursue increased transparency in the financial sector and ensure that domestic PEPs are monitored with the same scrutiny as foreign PEPs.

Russia has successfully spread awareness of AML/CFT in its financial sector and has weeded out noncompliant financial institutions; however, significant discrepancies still remain between the standards of international and local domestic banks. Further attempts should be made to bring the AML efforts of all Russian banks to a more sophisticated level, including continued enhancement of the compliance training and certification process.

Russia hosts and funds the Secretariat of the EAG, and through this effort has contributed to improving the region’s AML/CFT capacity. Russia should continue to play a leadership role through sustained involvement in the regional and international bodies focusing on AML/CFT regime implementation.


Singapore

Singapore is a significant international financial and investment center as well as a major offshore financial center. The structural gaps in Singapore’s financial regulations make it vulnerable to money launderers, and its financial crimes enforcement should be strengthened. Stringent bank secrecy laws and the lack of routine currency reporting requirements make Singapore a potentially attractive destination for drug traffickers, transnational criminals, foreign corrupt officials, terrorist organizations and their supporters seeking to launder money or fund terrorist activities. Authorities have taken action against Jemaah Islamiyah and its members and have identified and frozen terrorist assets held in Singapore. Terrorist financing in general remains a risk.

As of December 2009, there were 38 offshore banks in operation, all foreign-owned. Singapore has increasingly become a center for offshore private banking and asset management. Total assets under management in Singapore increased 40 percent in 2009 to S$1.2 trillion (approximately $861 billion). Singapore does not permit shell banks.

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

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: No

Criminalization of money laundering:

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

Legal persons covered: criminally: YES civilly: YES

Criminalization of terrorist financing:

Ability to freeze terrorist assets without delay: YES

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

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

Know-your-customer rules:

Covered entities: Banks, financial institutions, finance companies, merchant banks, life insurers, brokers, securities dealers, investment advisors, futures brokers and advisors, trust companies, approved trustees, and money changers and remitters

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

Suspicious transaction reporting requirements:

Covered entities: Banks, auditors, financial advisors, capital market service licensees and exempt persons, finance companies, lawyers, notaries, merchant banks, life insurers, trust companies, approved trustees, real estate agents and money changers and remitters

Number of STRs received and time frame: 11,004 in 2009

Number of CTRs received and time frame: Not available. Reporting began in 2010.

Money laundering criminal prosecutions/convictions:

Prosecutions: 23 in 2008

Convictions: 24 in 2008

Assets forfeited: criminally: $10,962,377 civilly: Not applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Singapore is a member of the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering, a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/36/42/40453164.pdf

Enforcement and implementation issues and comments:

Singapore’s rigid bank secrecy is sometimes an impediment to effective international cooperation in financial crimes enforcement. Less rigid bank secrecy restrictions would enhance Singapore’s law enforcement cooperation in areas such as information sharing and conformance to international standards and best practices.

Singapore’s legal system generally provides for the investigation and prosecution of money laundering offenses. However, the implementation of these laws is uneven, particularly in prosecuting money laundering as a stand-alone offense, and investigating foreign-sourced cases. Singaporean police are fairly successful at identifying domestic predicate offenses, and include ancillary money laundering charges as appropriate. Singapore should more aggressively pursue domestic stand-alone money laundering offenses as well.

Singapore’s large, stable, and sophisticated financial center may be attractive as a conduit for laundering proceeds generated by foreign criminal activities, including official corruption. The Suspicious Transaction Reporting Office (STRO) and criminal investigators are encouraged to identify money laundering that originates from foreign predicate offenses, and use stand-alone money laundering charges to prosecute third-party offenders in Singapore.


Somalia

There is no recognized central government of Somalia. The Transitional Federal Government (TFG) controls only portions of the country's capital and remote pockets of some regions. The TFG is besieged by an insurgency that is led by international terrorist organization al-Shabaab. Many ministries exist in name only, or have non-functioning, mostly unpaid staff. There is no court system to speak of, and policing is rudimentary. The laws that exist - anti-money laundering (AML), counter-terror financing (CFT), or otherwise - are effectively unenforced given the security threats in Somalia and lack of capacity. Corruption is rampant. The financial system in Somalia operates almost completely outside of any system of oversight, either on the black market or via international money transfer companies/hawalas.

Due to its lack of a public regulatory system and its inaccessibility to international diplomats and law enforcement, little is known about money laundering in Somalia. No information is available on drug-related currency transactions channeling through Somali financial institutions. Because Somalia's narcotics trade is centered on khat, a controlled substance in much of the world but legal in Somalia, the proceeds are not illegal. Thus, it is not likely that khat money is laundered in Somalia. Most khat proceeds go back to khat transporters based outside Somalia in cash or via money transfer companies.

Pirates mostly launder their ransoms in northern Somalia, as well as perhaps in neighboring countries, the Middle East, or Europe. The ransoms are delivered through cash drops to pirates holding ships off Somalia's coast and divided among the pirates and those in their support networks. Officials in Somalia's northern region of Puntland reportedly benefit from pirate ransoms. They may facilitate ransom laundering or the transfer of ransom money to neighboring countries or globally. In this manner, public corruption significantly facilitates money laundering. Much of the ransom reportedly remains in cash. Anecdotal reports indicate that ransom money finances real estate, luxury goods and businesses.

Smuggling is rampant. Somalia has one of the longest land borders and the longest coastline in Africa. The TFG and local officials control almost none of its borders, and goods flow into and out of Somalia with no TFG knowledge. There are occasional but unverified reports of U.S. dollar counterfeiting in al-Shabaab-controlled areas.

Somalia is a center for terrorism financing. Al-Shabaab is headquartered here and financed by contributions from terrorist financiers outside the region, including from the global Somali diaspora and business community. Some of the funds enter Somalia as cash, but a significant portion likely passes through hawalas. Al-Shabaab operations are also financed through extortion of private citizens and local businesses, revenue from seaports under their control, and to an unknown extent by diversion of humanitarian and development assistance.

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of money laundering:

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

Legal persons covered: criminally: NO civilly: NO

Criminalization of terrorist financing:

Ability to freeze terrorist assets without delay: NO

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

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

Know-your-customer rules:

Covered entities: None

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

Suspicious transaction reporting requirements:

Covered entities: None

Number of STRs received and time frame: Not Applicable

Number of CTRs received and time frame: Not Applicable

Money laundering criminal prosecutions/convictions:

Prosecutions: 0

Convictions: 0

Assets forfeited: criminally: 0 civilly: 0

Records exchange mechanism:

With U.S.: NO

With other governments/jurisdictions: NO

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

Enforcement and implementation issues and comments:

Somalia has been without a functioning central government since 1991. There are no AML/CFT laws, and the financial regulations that do exist go unenforced given the lack of policing and investigative capacity and Somalia's insecurity. International standards, to the extent they are recognized, are self imposed in Somalia by hawalas and other financial entities that must meet international rules and regulations to do business elsewhere in the world. The lack of laws, regulatory bodies, and enforcement mechanisms to counter money laundering and financial crimes is likely due to a lack of capacity, and not a lack of political will. Obstacles to enacting AML/CFT laws include the TFG's lack of territorial control, threats to the government by the al-Shabaab insurgency, and lack of capacity and resources at all levels of government.

There were no arrests for money laundering in 2010. There was one interdiction of a suspected terrorist financier's couriering cash illegally into Somalia. However, interdictions such as this often result in an arrest, followed by indefinite detentions or releases given Somalia's inadequate judicial system. In one case, incoming counterfeit U.S. dollars were seized at Mogadishu International Airport. It is not clear what happened to the perpetrator.

There are no government entities charged with, or capable of tracking, seizing, or freezing illegal assets or terrorist funds. Somalia has no laws requiring forfeiture of laundered assets or of terrorist finances, and laws that could lend themselves to AML/CFT are not enforced.

The TFG has called on regional governments to help stem the flow of terrorist financing, including requesting that local governments trace, freeze, and seize funds and finances related to and supporting al-Shabaab. Somalia has cooperated with USG law enforcement on numerous occasions, most recently investigations concerning suspected terrorists and kidnapping, piracy and acts of terror committed inside and outside Somalia, but there has been no known assistance with regard to investigations involving financial crimes.


Spain

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

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

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

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

Know-your-customer rules:

Covered entities: Banks; mutual savings associations; credit companies; insurance companies; financial advisers; brokerage and securities firms; pension fund managers; collective investment schemes; postal services; currency exchange outlets; individuals and unofficial financial institutions exchanging or transmitting money; realty agents; dealers in precious metals, stones, antiques and art; legal advisors and lawyers; accountants; auditors; notaries; and casinos

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

Suspicious transaction reporting requirements:

Covered entities: Banks; mutual savings associations; credit companies; insurance companies; financial advisers; brokerage and securities firms; pension fund managers; collective investment schemes; postal services; currency exchange outlets; individuals and unofficial financial institutions exchanging or transmitting money; realty agents; dealers in precious metals, stones, antiques and art; legal advisors and lawyers; accountants; auditors; notaries; and casinos

Number of STRs received and time frame: 2,904 in 2008 (most recent available figures)

Number of CTRs received and time frame: Not available

Money laundering criminal prosecutions/convictions:

Prosecutions: Not available

Convictions: Not available

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

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

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

On April 29, 2010, Spain enacted Law 10/2010, on preventing money laundering and terrorist financing. The new law incorporates and enhances Law 19/1993 on preventing money laundering, and supersedes Law 12/2003, on preventing terrorist financing, which was never fully implemented. Law 10/2010 introduces a risk-based approach to preventing money laundering and terrorist financing and imposes stringent requirements on financial institutions as well as designated non-financial businesses and professionals (DNFBP). Additionally, implementation of Law 10/2010 will greatly enhance authorities’ capacity to combat terrorist financing by placing greater requirements, with stiffer penalties for non-compliance, on financial institutions and other businesses, and by strengthening monitoring and oversight. The new law entered into force immediately; however, implementing regulations will not be approved until 2011; until then, many of its provisions are not being implemented.

The Government of Spain should clarify whether its laws allow civil forfeiture. Spain should maintain and disseminate statistics on investigations, prosecutions, and civil asset forfeiture. More generally, the government needs to review the resources available for industry supervision and ensure that the FIU has the independence and resources it needs to effectively discharge its responsibilities.


Switzerland

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

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, securities and insurance brokers, money exchangers or remitters, financial management firms, investment companies, insurance companies, casinos, or individuals acting as intermediaries in bank lending, money transactions, trading of currencies or dealing in matters of wealth management and investment advice

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

Suspicious transaction reporting requirements:

Covered entities: Banks, securities and insurance brokers, money exchangers or remitters, financial management firms, casinos, or individuals acting as intermediaries in bank lending, money transactions, trading of currencies or dealing in matters of wealth management and investment advice

Number of STRs received and time frame: 896 in 2009

Number of CTRs received and time frame: Not applicable

Money laundering criminal prosecutions/convictions:

Prosecutions: 269 individuals in 2009

Convictions: 172 individuals in 2009

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Switzerland 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/53/52/43959966.pdf

Enforcement and implementation issues and comments:

The Swiss money laundering regime is generally perceived to conform to international standards and Swiss authorities are regularly updating their legislation. For instance, on October 1, 2010, a new law on PEPs was issued and will reportedly be put into force on January 20, 2011. Additionally, on January 1, 2011, the 26 cantonal codes of criminal procedure were replaced with regulations in the Swiss Penal Code (“Strafgesetzbuch”), designed to unify procedural rules and facilitate international cooperation.

The anti-money laundering (AML) law does not explicitly cover real estate brokers and dealers of arts, antiquities and other high-value goods. Also, for terrorist financing reporting, Swiss authorities distinguish the obligation to communicate (reasonable suspicion) and the right to communicate (simple suspicion) given the degree of suspicion that prevails.

Under the law, measures for insurance companies and other financial intermediaries (excluding banks) are not sufficiently elaborated. Additionally, several measures have been implemented for anonymous companies, but some deficiencies remain as the competent authorities do not have access to the register of the shareholders. Furthermore, a lack of transparency exists in relation to foundations run by non professionals. The Swiss Financial Market Supervisory Authority (FINMA) is not authorized to impose pecuniary sanctions; it can only issue administrative ones. Furthermore, the breadth of the sanctions may not always take into account the gravity of the crime.

In 2009, approximately 65% of filed suspicious activity reports (SARs) came from the banking sector and seven SARs were linked to suspected terrorist financing. The number of SARs hit an all-time high in 2009. Fraud (37%), embezzlement (10%), organized crime (9%), and money laundering (9%) were the most common predicate/suspected criminal offenses, and nearly two-thirds of all SARs were generated by media reports, third-party information and information from prosecuting authorities. No particular money laundering issues about non-profit organizations, alternative remittance systems, offshore sectors, free trade zones or bearer shares have occurred.

Switzerland has returned more money to the countries of origin than any other financial centre, amounting to a total of $1.8 billion. Furthermore, Switzerland is involved in many multilateral fora related to asset recovery, corruption and development.


Taiwan

Taiwan’s modern financial sector, strategic location on international shipping lanes, and role as an international trade hub make it vulnerable to transnational crimes, including money laundering, drug trafficking, trade fraud, and smuggling. Though illegal in Taiwan, a significant volume of informal financial activity takes place through unregulated non-bank channels. In recent years Taiwan has taken steps to shift much of this activity into official, regulated financial channels. Taiwan has five free trade zones and a growing offshore banking sector. There is no significant black market for smuggled goods in Taiwan.

Domestic money laundering is generally related to tax evasion, drug trafficking, public corruption, and a range of economic crimes. An emerging trend in money laundering is the use of jewelry stores as a type of underground remittance system. Jewelers convert illicit proceeds into precious metals, stones, and foreign currency, and generally move them using cross-border couriers. The tradition of secrecy in the precious metals and stones trade make it difficult for law enforcement to detect and deter money laundering in this 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: List approach

Legal persons covered: criminally: YES civilly: YES

Criminalization of terrorist financing:

Ability to freeze terrorist assets without delay: YES

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

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

Know-your-customer rules:

Covered entities: Banks, credit co-operative associations, credit departments of Farmers’ Associations and Fishermen’s Associations, Department of Savings & Remittances of Chunghwa Post Co., securities firms, life insurance companies, and dealers in precious metals and stones

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

Suspicious transaction reporting requirements:

Covered entities: Banks, credit co-operative associations, credit departments of Farmers’ Associations and Fishermen’s Associations, Department of Savings & Remittances of Chunghwa Post Co., securities firms, life insurance companies, jewelry stores, and members of the National Real Estate Broking Agencies Association

Number of STRs received and time frame: 1,845 (January - December 2009)

Number of CTRs received and time frame: 2,963, 282 (January - December 2009)

Money laundering criminal prosecutions/convictions:

Prosecutions: 39 persons (January - December 2010)

Convictions: 11 persons (January - December 2010)

Assets forfeited: criminally: NT$593.8 million (approximately $20.1 million) (January - December 2010) civilly: Not applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Taiwan 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/Chinese%20Taipei%20MER2_FINAL.pdf

Enforcement and implementation issues and comments:

Taiwan continues to strengthen its AML/CFT regime. However, the government has not passed legislation that would address weaknesses in terrorist financing prevention measures, despite numerous draft laws over the past several years. While the financing of terrorist activities in Taiwan is a criminal offense, it is not an autonomous offense, and does not specifically cover the financing and support of terrorist activities overseas. Taiwan should pass legislation to criminalize terrorism and terrorist financing as an autonomous crime, and clarify that the law covers such activities overseas.

Many types of designated non-financial businesses and professions are not subject to AML/CFT requirements. The lack of reporting, customer due diligence and recordkeeping requirements makes these entities particularly vulnerable to money laundering/terrorist financing activity. Taiwan should take steps to amend its legislation and regulations, as necessary, to bring all DNFBPs, as listed in the international standards, within the scope of its AML/CFT coverage.

Foreign politically exposed persons (PEPs) are not subject to enhanced due diligence. Taiwan's Financial Supervisory Commission, the top financial regulator in Taiwan, is establishing a databank for "high profile politicians" in an effort to prevent money laundering. Once established, financial institutions will be required to identify, record, and report the identities of high-profile customers engaging in significant or suspicious transactions.

Taiwan is unable to ratify UN conventions because of long-standing political issues. However, it has enacted domestic legislation to implement the standards in the key AML/CFT UN Conventions. Amendment of the money laundering legislation incorporated related laws to fully implement the provisions of the Vienna, Palermo and terrorist financing conventions and resolutions.

Taiwan should raise awareness of the vulnerabilities of non-profit organizations to terrorist financing, and should exert more authority over this sector. The government should abolish all shell companies and prohibit the establishment of new shell companies of any type. Given the increasing threat of alternative remittance centers such as the precious metals and stones sector, Taiwan's law enforcement should enhance investigations of underground financial systems.

Taiwan began to draft new legislation of the Mutual Assistance Act for Criminal Justice in January of 2010. In the draft legislation, mutual legal assistance request doesn’t need to initiate judicial proceedings as precondition in requesting jurisdiction.


Thailand

Thailand is a centrally located, middle-income Southeast Asian country surrounded by economically less vibrant neighbors along an extremely porous border. Thailand is vulnerable to money laundering from its own underground economy as well as many categories of cross-border crime, including illicit narcotics and other contraband smuggling. The Thai black market includes a wide range of pirated and smuggled goods, from counterfeit medicines to luxury automobiles. Money launderers and traffickers use banks, as well as non-bank financial institutions and businesses to move the profits of narcotics trafficking and other criminal enterprises. In the informal money changing sector there is an increasing hawala-type money shop presence servicing Middle Eastern travelers in Thailand, most of them arriving to avail themselves of the country’s comparatively inexpensive medical services. The Thai banking regulations cover these institutions adequately, but effective oversight of the least formal operations is difficult to achieve.

Thailand is a source, transit, and destination country for international migrant smuggling and trafficking in persons, a production and distribution center for counterfeit consumer goods and, increasingly, a center for the production and sale of fraudulent travel documents. Illegal gaming, corruption, underground lotteries, and prostitution are all problems. Thailand’s criminal justice system has low capacity to deal with these challenges but is improving.

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.?: no

Criminalization of money laundering:

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

Legal persons covered: criminally: YES civilly: YES

Criminalization of terrorist financing:

Ability to freeze terrorist assets without delay: YES

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

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

Know-your-customer rules:

Covered entities: Banks (including state banks), finance companies, securities dealers, insurance companies, money exchanges and remitters, asset management companies, jewelry and gold shops, automotive hire-purchase businesses or car dealers, real-estate agents/brokers, antique shops, personal loan businesses, electronic card and credit-card businesses, electronic payment businesses, and deposit/lending cooperatives

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

Suspicious transaction reporting requirements:

Covered entities: Banks (including state banks); finance and factoring companies; securities dealers; insurance companies; money exchanges and remitters; asset management companies; financial management firms; jewelry and gold shops; automotive hire-purchase businesses or car dealers; real-estate agents/brokers; antique shops; personal loan businesses; electronic payment, card and credit-card businesses; deposit/lending cooperatives; and the Ministry of Interior’s Department of Lands

Number of STRs received and time frame: 616,148 from January 1 – October 31, 2010

Number of CTRs received and time frame: 522,318 from January 1 – October 31, 2010

Money laundering criminal prosecutions/convictions:

Prosecutions: 15 from October 2007 – March 2008

Convictions: Not available

Assets forfeited: criminal: None civil: $529,000 from October 2007 – March 2008

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Thailand is a member of Asia/Pacific Group against Money Laundering (APG), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: www.apgml.org/documents/docs/17/thailand

Enforcement and implementation issues and comments:

Thai law does not provide for enhanced due diligence for politically exposed persons nor does it adequately prohibit “tipping off,” leaving financial institutions and their employees subject to potential liability for filing STRs. Furthermore, there is no comprehensive cross-border currency reporting or seizure system. The Government of Thailand should amend its legislation as necessary to ensure these deficiencies are corrected.

There have been no prosecutions since 2008. Both the AML Board and Transaction Committee were dissolved several years ago. The Transaction Committee approves seizures for civil forfeiture. Thailand has had no seizures for forfeiture since the Transaction Committee was disbanded. A new AML Board was appointed in November, 2010.

Thailand should become a party to the UN Convention against Corruption and the UN Convention against Transnational Organized Crime.

During 2010, the FATF identified Thailand as a jurisdiction with significant AML/CFT vulnerabilities. In response, the Thai government expressed high-level political commitment to address deficiencies in its AML/CFT regime, and reported taking steps to address these deficiencies. For example, the Thai government drafted a proposed Counter-Terrorism Financing Act which, in part, would criminalize the collection or provision of funds for the purpose of supporting terrorist acts or organizations. However, important actions are still pending, including passage of key amendments and regulations which will augment the current AML/CFT regime. The Thai FIU lacks clear leadership, with a new Secretary General yet to be appointed. For AMLO to become a sophisticated agency able to take substantial casework, it will need to build extensive institutional capacity and political will.


Turkey

Turkey is an important regional financial center, particularly for Central Asia and the Caucasus, as well as for the Middle East and Eastern Europe. While the vast majority of Turkey’s economy is legitimate, money laundering is a problem. Turkey continues to be a major transit route for Southwest Asian opiates moving to Europe. However, narcotics trafficking is only one source of the funds laundered in Turkey. Other significant sources of laundered funds include invoice fraud and tax evasion, and to a lesser extent, smuggling, counterfeit goods, and forgery. Terrorist financing and terrorist organizations with suspected involvement in narcotics trafficking and other illicit activities are also present in Turkey. Money laundering takes place in banks, non-bank financial institutions, and the underground economy. The World Bank estimates as much as 30 percent of the economic activity is derived from unregistered businesses. Money laundering methods in Turkey include: the large-scale cross-border smuggling of currency; bank transfers into and out of the country; trade fraud; and the purchase of high-value items such as real estate, gold, and luxury automobiles. Turkish-based traffickers transfer money and sometimes gold via couriers, the underground banking system, and bank transfers to pay narcotics suppliers in Pakistan or Afghanistan. Funds are transferred to accounts in the United Arab Emirates, Pakistan, and other Middle Eastern countries.

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 and regulated financial institutions, including the Central Bank; securities companies; post office banks; Islamic financial houses; and exchange offices

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

Suspicious transaction reporting requirements:

Covered entities: Banks; card issuers; consumer finance, financial leasing and factoring companies; insurance companies, lotteries, vehicle sales outlets, antique dealers, pension and mutual funds, exchange houses, dealers in art, high-value goods, precious stones and precious metals, and precious metals exchange intermediaries, notaries, sports clubs, real estate companies, capital and portfolio management companies, postal service and cargo companies

Number of STRs received and time frame: 9,823 in 2009; 6,718 through August 24, 2010

Number of CTRs received and time frame: Not applicable

Money laundering criminal prosecutions/convictions:

Prosecutions: 279 from 1997-2009; 15 in 2009

Convictions: 22 from 1997-2009; three in 2009

Assets forfeited: criminally: Not available civilly: Not applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

Turkey 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/14/7/38341173.pdf

Enforcement and implementation issues and comments:

Turkish Criminal Court records are closed to the public. According to statistics from Turkey’s financial intelligence unit, Financial Crimes Investigation Board (MASAK), between 2005 and 2009, 342 money laundering cases were referred for further investigation, but only 22 cases resulted in convictions. In 2009, the 15 prosecutions resulted in three convictions. There are still 188 cases pending in the courts. Moreover, all of the convictions are reportedly under appeal. There is a lack of specialization and understanding of anti-money laundering/counter-terrorist financing (AML/CFT) provisions among relevant authorities, which has contributed to the high number of acquittals in money laundering cases.

Turkey and the United States cooperate closely on narcotics and money laundering investigations.

Although legal persons are subject to criminal liability, the sanctions against such entities are limited. There is no mandated enhanced due diligence for PEPs; banks are simply encouraged to give closer scrutiny to such customers.

The Government of Turkey’s (GOT) non-profit sector is likely vulnerable to abuse by terrorist financing. The Turkish government is still developing the investigative skills, law enforcement expertise, financial oversight and outreach necessary to effectively counter this threat. The nonprofit sector is not audited on a regular basis for counter-terrorist finance vulnerabilities and does not receive adequate AML/CFT outreach or guidance from the GOT. The General Director of Foundations issues licenses for charitable foundations and oversees them. However, there are a limited number of auditors to cover more than 70,000 institutions.

Laws related to terrorist financing are limited to acts committed by members of organizations operating against the Turkish Republic, so the collection, donation and movement of funds by terrorist organizations would not be prohibited if the funds could not be linked to a specific domestic terrorist threat. While the GOT has implemented UNSCR 1267, it has not yet established punishment or sanctions for institutions that fail to observe a freezing order, and it has not yet established procedures for delisting entities or unfreezing funds. Additionally, the GOT has not taken steps that would allow it to freeze the assets of entities designated by other jurisdictions, as required under UNSCR 1373.

In February 2010, the FATF identified Turkey as a jurisdiction with significant AML/CFT vulnerabilities, chief among them Turkey’s lack of adequate criminalization of terrorist financing and national asset freezing mechanisms. The GOT adopted an action plan designed to commit to a timeline for implementing new legislation. A draft law on the “Prevention of Terrorism Financing” intended to address the CFT deficiencies is currently within the Prime Ministry where it is being reviewed by experts.


Ukraine

In Ukraine, high risks of money laundering have been identified in foreign economic activities, credit and finance, the fuel and energy industry, and the metal and mineral resources market.  Illicit proceeds are primarily generated through corruption; fictitious entrepreneurship; fraud; trafficking in drugs, arms, and persons; organized crime; prostitution; and tax evasion.  Various laundering methodologies are used, including real estate, insurance, bulk cash smuggling, and through financial institutions.  There is a significant market for smuggled goods and a large informal financial sector.  These activities are linked to the evasion of taxes and customs duties.

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

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

Know-your-customer rules:

Covered entities: Banks, non-bank financial institutions, insurance companies, gambling institutions, credit unions, depositories, securities traders, registers, pawnshops, mail service operators and other money transfer services, real estate traders, certain traders of precious metals and stones, notaries, auditors, lawyers and leasing providers

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

Suspicious transaction reporting requirements:

Covered entities: Banks, non-bank financial institutions, insurance companies, gambling institutions, credit unions, depositories, securities traders, registers, pawnshops, mail service operators and other money transfer services, real estate traders, certain traders of precious metals and stones, notaries, auditors, lawyers , and leasing providers.

Number of STRs received and time frame: See below

Number of CTRs received and time frame: 728,799 in 2010

Money laundering criminal prosecutions/convictions:

Prosecutions: Not available

Convictions: 48 from January 1 to April 1, 2010

Assets forfeited: criminally: $94 million in 2009 civilly: Not applicable

Records exchange mechanism:

With U.S.: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

On May 18, 2010, Ukraine's Parliament passed amendments to Ukraine’s anti-money laundering/ counter-terrorist financing (AML/CFT) legislation.  The amendments are a significant step forward.  The new legislation replaces and significantly improves Ukraine’s basic AML/CFT Law, and amends relevant portions of the criminal code to bring them into greater compliance with international standards.  Among other improvements, the May 18, 2010 amendments require enhanced due diligence procedures for PEPs.  However, the procedure of informing primary financial monitoring agencies about the list of foreign PEPs is yet to be developed. 

While it does not appear that significant narcotic proceeds are laundered through Ukraine’s financial institutions, the rise of cybercrime and related transnational organized crime would suggest that significant amounts of U.S. currency are diverted to this region.

Through their regulatory agencies, banks and non-bank financial services receive the U.S. designations of suspected terrorists and terrorist organizations under Executive Order 13224 and other U.S. authorities and are instructed to report any transactions involving designated individuals or entities. According to the new anti-money laundering law, the financial institution or FIU has the power to suspend suspicious transactions for a limited amount of time (up to 14 days). Afterwards, assets may only continue to be held if law enforcement bodies initiate a criminal case or if it can be established that the assets are related to terrorist activity, in which case they can be held indefinitely. The need to initiate criminal cases might provoke serious delays that would allow the assets to be transferred before action could be taken to freeze the accounts. Draft legislation will address additional details of terrorist assets freezing, such as an enhanced definition of terrorist assets, procedures for seizing assets of individuals designated on international terrorist lists; and the procedural prerequisites to seizing terrorist assets.

While Ukraine has signed and ratified the necessary treaties, in many instances they are not applied or are applied poorly. Furthermore, while Ukraine is a party to UNCAC and UNTOC, the provisions of these conventions are not implemented or are not working properly in Ukraine.

Ukraine has remained on the FATF list of countries with “strategic deficiencies” since February 2010. The remaining deficiencies include poor terrorist asset freezing provisions, inadequate criminalization of market manipulation and insider trading, and the absence of corporate criminal liability for terrorist financing. Ukraine also lacks any functional regime for locating or seizing forfeitable assets.

Although, the current legislation does not provide for autonomous prosecution of money laundering, Ukraine continues to take measures to improve it. There were two cases of autonomous investigations and prosecutions of money laundering. Ukraine should place additional emphasis on developing these capabilities.

Most importantly, while Ukraine's legislation has been significantly modernized, Ukraine lacks examples of successful prosecutions of money laundering. This is due to the lack of specialized expertise among prosecutors in handling complex financial cases, corruption within law enforcement and the courts, and poor coordination among prosecutors, investigators, and the FIU. Ukraine has taken steps to improve the technical expertise of the Prosecutor General’s Office through training of its law enforcement and prosecutors. This training should be continually developed, placing an emphasis on the systematic use of financial investigations, the use of existing tools and investigative techniques, analysis and use of computer techniques, and by providing relevant guidance.


United Arab Emirates

The United Arab Emirates (UAE) is an important financial center in the Middle East region. Dubai, in particular, is a major international banking and trading center. The country also has a growing offshore financial center and 38 free trade zones. The UAE’s robust economic development, political stability, and liberal business environment have attracted a massive influx of people, goods, and capital, which may leave the country susceptible to money laundering activities. The UAE also is vulnerable to money laundering due to its geographic location as the primary transportation and trading hub for the Persian Gulf States, East Africa, and South Asia; longstanding trade relations with Iran; its expanding trade ties with the countries of the former Soviet Union; and lagging relative transparency in its corporate environment.

The potential for money laundering is exacerbated by the large number of resident expatriates (roughly 80 - 85 percent of total population) who send remittances to their homelands. Given the country’s proximity to Afghanistan, where most of the world’s opium is produced, narcotics traffickers are increasingly reported to be attracted to the UAE’s financial and trade centers. Other money laundering vulnerabilities in the UAE include cash couriers, hawala, trade based money laundering, smuggling, the real estate sector, and the misuse of the international gold and diamond trade.

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, money exchange houses, finance companies, and any other financial institutions operating in the UAE

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

Suspicious transaction reporting requirements:

Covered entities: Banks, money exchange houses, finance companies, and any other financial institutions operating in the UAE

Number of STRs received and time frame: 2,711

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 applicable

Records exchange mechanism:

With U.S.: NO

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Government of the UAE has shown some progress in enhancing its AML/CFT program. In August 2009, the Central Bank issued a circular instructing local banks not to handle accounts belonging to politically exposed persons (PEPs). Information sharing between the UAE’s financial intelligence unit (FIU), the Anti-Money Laundering and Suspicious Cases Unit (AMLSCU), and some foreign FIUs has substantially improved.

Several areas requiring further action by the UAE Government (UAEG) remain. The UAE should increase the capacity and resources it devotes to investigation of AML/CFT both federally at the AMLSCU and at emirate-level law enforcement. AMLSCU needs to improve its timely financial information sharing capability to conform to international standards. Law enforcement and customs officials should proactively develop cases based on investigations, rather than wait for STR-based case referrals from the AMLSCU. Law enforcement and customs officials should conduct more thorough inquiries into large declared and undeclared cash imports into the country, as well as require - and enforce - outbound declarations of cash and gold utilizing existing smuggling laws. Currently the law only requires the disclosure of inbound cash above the delineated threshold.

Although UAE legislation includes a provision prohibiting “tipping off,” the provision is very narrow and does not appear to address the disclosure of STR filings to third parties. Additionally, the Central Bank regulations appear to require institutions to notify customers of suspicions regarding their accounts. This would appear to contradict any “tipping off” prohibitions.

All facets of trade-based money laundering should be given greater scrutiny by UAE customs and law enforcement officials, including customs fraud, the trade in gold and precious gems, commodities used as counter-valuation in hawala transactions, and the misuse of trade to launder narcotics proceeds. The UAEG should expand follow-up with financial institutions and the Ministry of Social Affairs regarding regulations on charities to ensure their registration at the federal level. The UAE should also continue its regional efforts to promote sound charitable oversight. The cooperation between the Central Bank and the offshore Dubai Financial Services Authority (DFSA) needs improvement, with lines of authority clarified. Moreover, the absence of meaningful statistics across all sectors is a significant hindrance to the assessment of the effectiveness of the AML/CFT program.


United Kingdom

The United Kingdom (UK) plays a leading role in European and world finance and remains attractive to money launderers because of the size, sophistication, and reputation of its financial markets. Although narcotics are still a major source of illegal proceeds for money laundering, the proceeds of other offenses, such as financial fraud and the smuggling of people and goods, have become increasingly important. The past few years have seen an increase in the movement of cash via the non-bank financial system, as banks and mainstream financial institutions have tightened their controls and increased their vigilance. The use of bureau de change, cash smugglers (into and out of the UK), and traditional gatekeepers (including solicitors and accountants) to move and launder criminal proceeds has been increasing. Also on the rise are credit/debit card fraud, use of the internet for fraud, and the purchasing of high-value assets to disguise illegally obtained money. A July 2009 Home Office report estimates that the total cost of the economic and social harm caused to the UK by serious organized crime is around GPB 68.4 billion (approximately $107.75 billion) per year.

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: no

Criminalization of money laundering:

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

Legal persons covered: criminally: YES civilly: YES

Criminalization of terrorist financing:

Ability to freeze terrorist assets without delay: YES

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

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

Know-your-customer rules:

Covered entities: Financial and credit institutions, independent legal professionals, auditors, accountants, tax advisors, auditors, insolvency practitioners, estate agents, casinos, high value goods dealers, and trust or company service providers

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

Suspicious transaction reporting requirements:

Covered entities: Financial and credit institutions, independent legal professionals, auditors, accountants, tax advisors, auditors, insolvency practitioners, estate agents, casinos, high value goods dealers, and trust or company service providers

Number of STRs received and time frame: 240,582 (October 1, 2009 – September 30, 2010)

Number of CTRs received and time frame: Not applicable

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

The United Kingdom is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here: www.fatf-gafi.org/dataoecd/44/8/44048060.pdf

Enforcement and implementation issues and comments:

The United Kingdom has a comprehensive range of anti-money laundering/countering the financing of terrorism (AML/CFT) laws. It is an active participant in multilateral efforts to meet AML/CFT threats. The UK engages in efforts to freeze the assets of persons who commit terrorist acts, as required by the United Nations. In January 2010, the United Kingdom Supreme Court held that the government had earlier exceeded its authority by imposing asset freezing orders that went beyond the requirements of Security Council Resolution 1373. The Supreme Court reinstated temporary asset freezing regulations as an interim measure following the judgment. In December 2010, the United Kingdom replaced the temporary provisions with a new legislative framework that raises the burden of proof for freezing assets from “reasonable suspicion” to “reasonable belief”.


Uruguay

Uruguay remains vulnerable to the threats of money laundering (ML) and terrorist financing (TF). Uruguay has a highly dollarized economy with about 80 percent of deposits and 70 percent of credits denominated in U.S. dollars. The U.S. dollar is often used as a business currency and many goods and services, including real estate and vehicles, are quoted and sold in dollars. Officials from the Uruguayan police and judiciary assess that there is a growing presence of Mexican and Colombian criminal organizations in the Southern Cone and are concerned they could begin operating in Uruguay. Drug dealers are slowly starting to participate in other illicit activities like car theft and trafficking in persons. The Government of Uruguay (GOU) acknowledges there is a growing risk of money laundering in the real estate sector, in free zones and in bureaus that administer corporations, and in late 2010, passed a decree to improve controls in those areas.

The vast majority of money laundering cases that have become public have been related to drugs. Uruguay has porous borders with Argentina and Brazil, and there is a market for smuggled goods that is greatly determined by price differentials between Uruguay and its neighbors. Trade-based money laundering is likely to occur but specialists do not identify it as a major source of risk.

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

There are 13 free trade zones (FTZs) located throughout the country. While most are dedicated solely to warehousing, two were created exclusively for the development of the paper and pulp industry, and three accommodate a wide variety of tenants offering a wide range of services, including financial services. Some of the warehouse-style FTZs have been used as transit points for containers of counterfeit goods bound for Brazil and Paraguay. A decree passed in November 2010 discourages shell companies from establishing a presence in FTZs.

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of U.S. currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of money laundering:

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

Legal persons covered: criminally: 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: 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, currency exchange houses, stockbrokers, pension funds, insurance companies, casinos, art dealers, real estate and fiduciary companies, lawyers, accountants, and other non-banking professionals that carry out financial transactions or manage commercial companies on behalf of third parties

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

Suspicious transaction reporting requirements:

Covered entities: Banks; currency exchange houses; stockbrokers and pension funds; insurance companies; businesses that perform safekeeping, courier or asset transfer services; professional trust managers; investment advisory services; casinos; real estate brokers and intermediaries; notaries; auctioneers; dealers in antiques, fine art and precious metals or stones; FTZ operators; and natural or judicial persons who carry out transactions or administer corporations on behalf of third parties

Number of STRs received and time frame: 195 - January 1–December 16, 2010

Number of CTRs received and time frame: One - January 1–December 16, 2010

Money laundering criminal prosecutions/convictions:

Prosecutions: Four 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

The GOU is a member of the Organization of American States Inter-American Drug Abuse Control Commission (CICAD) Experts Group to Control Money Laundering. Uruguay is a member of the Financial Action Task Force on Money Laundering in 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/InformeEMUruguay09.pdf

Enforcement and implementation issues and comments:

Uruguay has significantly upgraded its anti-money laundering legislation in recent years and improved its enforcement actions. Law 18.494, passed in 2009, gives national authorities more flexibility to fight money laundering and terrorist financing, and Decree 226/10, passed in December 2010, includes detailed provisions for non-financial sector entities obliged to report suspicious transactions. Decree 226/10 stipulates risk-based customer due diligence (CDD) procedures, sets de minimis procedures, and establishes CDD thresholds in specific activities: casinos (over $3,000), and art dealers and auctioneers (over $15,000). The decree also provides for enhanced due diligence (EDD) for high risk customers, such as those involving non-residents from countries that fail to apply international standards. Real estate brokers must apply EDD procedures in transactions over $15,000 and notaries and auctioneers must apply them in transactions over $200,000 (or over $100,000 in cash). While Decree 226/10 does not distinguish between local and foreign PEPs, it appears to be focused on locals. A list of about 5,000 local PEPs is available on the Central Banks´ website.

Decree 226/010 mandates obligated entities to establish internal procedures that would enable them to detect goods or transactions related to individuals or terrorist organizations included in the UN list. The financial intelligence unit publishes the UN 1267 Sanctions Committee list on its website but does not distribute it to financial institutions. It does not send the USG lists of terrorists to financial institutions but includes them in its database and runs name checks against it. There have been no reported cases or investigations related to terrorist financing.

In 2010 Uruguay joined the Egmont Group of Financial Intelligence Units. Tax evasion is not an offense in Uruguay, which limits cooperation possibilities because the financial intelligence unit cannot share tax-related information with its regional counterparts.

In an ongoing high-profile case, 14 people were indicted in September 2006 for a money laundering charge tied to the largest cocaine seizure in Uruguay at that time; in June 2008 the kingpin was convicted and in November 2009 five individuals, including a well known attorney, were prosecuted. Through 2009 the GOU had frozen assets totaling $20 million, of which $17 million were frozen in 2009 alone. The Anti-Money Laundering Secretariat seeks to create awareness about the importance of seizing assets as well as imprisoning criminals.

The GOU should enhance its regulation and monitoring of the real estate sector and sports industries.


Venezuela

Venezuela is one of the principal drug-transit countries in the Western Hemisphere. Cocaine produced in Colombia is trafficked through Venezuela to the Eastern Caribbean, Central America, the United States, Europe, and western Africa. In 2010, Mexican drug trafficking organizations gained an increased presence in Venezuela. Venezuela’s proximity to drug producing countries, weaknesses in its anti-money laundering regime, limited bilateral cooperation, and alleged substantial corruption in law enforcement and other relevant sectors continue to make Venezuela vulnerable to money laundering. The main sources of money laundering are proceeds generated by drug trafficking organizations and illegal transactions that exploit Venezuela’s currency controls and its various exchange rates.

Money laundering occurs through commercial banks, exchange houses, gambling sites, fraudulently invoiced foreign trade transactions, smuggling, real estate (in the tourist industry), agriculture and livestock businesses, securities transactions, and trade in precious metals. Venezuela is not a regional financial center and does not have an offshore financial sector, although many local banks have offshore affiliates in the Caribbean. Trade-based money laundering, such as the black market peso exchange, through which money launderers furnish narcotics-generated dollars in the United States to commercial smugglers, travel agents, investors, and others in exchange for Colombian pesos, remains a prominent method for laundering regional narcotics proceeds. It is reported that many black market traders ship their goods through Margarita Island’s free port.

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: Yes

Criminalization of money laundering:

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

Legal persons covered: criminally: YES civilly: YES

Criminalization of terrorist financing:

Ability to freeze terrorist assets without delay: NO

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

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

Know-your-customer rules:

Covered entities: The Fund of Deposit Guaranty and Bank Protection; universal, commercial, mortgage, investment, and development banks; representative offices of foreign banks; leasing financers; money market funds; savings and loan entities; exchange houses; foreign exchange operators; credit card issuers; societies and funds of reciprocal guaranties; municipal institutes or credit businesses; insurance companies; casinos; real estate agents; construction companies; car dealerships; hotels, travel agents, and the tourism industry; and dealers in precious metals and stones

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

Suspicious transaction reporting requirements:

Covered entities: The Fund of Deposit Guaranty and Bank Protection, banks, leasing financers, money market funds, savings and loan entities, exchange houses, financial groups, frontier exchange operators, credit card issuers, societies and funds of reciprocal guaranties, municipal institutes or businesses of credit, funds and societies of capital risk, representative offices of foreign banks, insurance and reinsurance companies, casinos, real estate agents, construction companies, car dealerships, hotels and the tourism industry, travel agents, and dealers in precious metals and stones

Number of STRs received and time frame: 1,086 through October 31, 2010

Number of CTRs received and time frame: Not available

Money laundering criminal prosecutions/convictions:

Prosecutions: Ten 2006-2010

Convictions: Seven 2006-2010

Assets forfeited: criminally: Not available civilly: Not available

Records exchange mechanism:

With U.S.: NO

With other governments/jurisdictions: YES

Venezuela 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://cfatfgafic.org/downloadables/mer/Venezuela_3rd_Round_MER_%28Final%29_English.pdf

Enforcement and implementation issues and comments:

There is little evidence the Government of Venezuela (GOV) has made enforcement of anti-money laundering laws and regulations a priority. Reportedly, many, if not most, judicial and law enforcement officials remain ignorant of anti-money laundering countermeasures. Additionally, although the law includes many financial institutions and designated non-financial businesses and professions as covered entities, no implementing regulations have been developed and, in practice, the majority of entities are not subject to mandatory reporting and customer due diligence requirements. The insurance and securities sectors and the Venezuelan Association of Currency Exchange Houses, which counts all but one of the country’s money exchange companies among its membership, voluntarily comply with the STR reporting requirements.

In 2010, the FATF identified Venezuela as a country with strategic anti-money laundering and counter-terrorist financing (AML/CFT) deficiencies. The resulting action plan includes adequately criminalizing terrorist financing; establishing and implementing adequate procedures to identify and freeze terrorist assets; ensuring a fully operational and effectively functioning financial intelligence unit; implementing adequate customer due diligence guidelines for all sectors, including the securities sector; and establishing adequate STR reporting obligations for money laundering and terrorist financing.

Corruption is a very serious problem in Venezuela and appears to be worsening. Transparency International’s Corruption Perception Index for 2010 ranks Venezuela at 164 of 178 countries on the index. Venezuela has laws to prevent and prosecute corruption, and accepting a bribe is a criminal act. However, the judicial system has been ineffective historically and is accused of being overtly politicized. The current regime of price and foreign exchange controls also has provided opportunities for corruption. Trade-based money laundering and value transfer is a significant problem in Venezuela. In March 2010, 16 individuals were indicted in Miami on charges of conspiracy to launder narcotics proceeds. The case involved trade-based money laundering focused on Venezuela.

Venezuela and the United States signed a Mutual Legal Assistance Treaty (MLAT) in 1997. The Financial Crimes Enforcement Network (FinCEN) suspended the exchange of information with Venezuela’s National Financial Intelligence Unit (UNIF) in January 2007 due to the unauthorized disclosure of information provided by FinCEN, and the relationship has not resumed to date. In 2009 and 2010, there was no money laundering information exchange between Venezuela and the United States.


Zimbabwe

Zimbabwe is not a regional financial center, but it faces problems related to money laundering and official corruption. Regulation and enforcement in the financial sector are weak, mainly due to a lack of trained regulators and investigators and limited asset seizure authority. These deficiencies expose the country to money laundering abuses, but there are no data on the extent of money laundering in Zimbabwe. The exposure is greatest within the financial sector, which includes both formal and informal institutions. Commercial banks, building societies, moneylenders, insurance brokers, realtors, and lawyers in Zimbabwe are all vulnerable to exploitation by money launderers. Financial crime may also be magnified by opportunities to smuggle diamonds.

Anti-money laundering laws are sometimes abused for political purposes. More broadly, corruption sometimes impedes application of Zimbabwe's anti-money laundering mechanisms.

Nearly all transactions in Zimbabwe are now carried out with either the U.S. dollar or the South African rand. The Government of Zimbabwe's (GOZ) switch to this "multi-currency regime" dramatically reduced opportunities for money laundering and financial crime, thereby eliminating multiple exchange rates and opaque foreign-exchange controls. Of late, the parliamentary committee on mining has held officials to account for GOZ actions in the Marange diamond fields, and the minister of finance has implemented a new law to improve accountability at the Reserve Bank of Zimbabwe (RBZ).

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: No

Criminalization of money laundering:

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

Legal persons covered: criminally: YES civilly: YES

Criminalization of terrorist financing:

Ability to freeze terrorist assets without delay: NO

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

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

Know-your-customer rules:

Covered entities: Commercial banks, acceptance houses, discount houses, money transfer agencies, bureaux de change, insurance companies, and finance houses

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

Suspicious transaction reporting requirements:

Covered entities: Banks, acceptance houses, discount houses, money transfer agencies, bureaux de change and cash dealers, insurance companies, finance houses, lawyers, accountants, pension funds, casinos, moneylenders, estate agents, import/export businesses, and trust management and service providers

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

Money laundering criminal prosecutions/convictions:

Prosecutions: None in 2010

Convictions: None in 2010

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

Records exchange mechanism:

With U.S.: NO

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Zimbabwe’s law provides for freezing and forfeiture of assets, and the banking system can quickly freeze deposits. Law enforcement and regulatory agencies lack the resources to combat money laundering vigorously. For example, financial institutions typically receive information related to designations from private sources, not from government agencies. The capacity for broader freezing or forfeiture of terrorist assets is untested.

Zimbabwe does have broad legislation on mutual legal assistance in both civil and criminal cases, and there are no legal or practical impediments to rendering assistance, provided both Zimbabwe and the requesting country criminalize the activity.

The United States, Canada, Australia, and the European Union have imposed targeted financial sanctions and travel restrictions on political leaders and others believed to have been complicit in human rights abuses.



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