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2012 International Narcotics Control Strategy Report (INCSR)--Volume II: Money Laundering and Financial Crimes Country Database--Indonesia through Mongolia


Report
Bureau of International Narcotics and Law Enforcement Affairs
May 30, 2012

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Indonesia

While Indonesia is neither a regional financial center nor an offshore financial haven, the country remains vulnerable to money laundering and terrorist financing due to its weak anti-money laundering/counter-terrorist financing (AML/CFT) regime, cash-based economy, weak rule-of-law and ineffective law enforcement institutions, and the presence of major indigenous terrorist groups, such as Jemaah Islamiyah (JI), a loose network of JI spin-off groups, and Jemaah Anshorut Tauhid, which obtain financial support from both domestic and foreign sources. Most money laundering in the country is connected to non-drug criminal activity such as corruption, illegal logging, theft, bank fraud, credit card fraud, maritime piracy, sale of counterfeit goods, gambling and prostitution.

Indonesia has a long history of smuggling of illicit goods and bulk cash, facilitated by thousands of miles of unpatrolled coastline, sporadic law enforcement, and poor customs infrastructure. Proceeds from illicit activities are easily moved offshore and repatriated as needed for commercial and personal use. While Indonesia has made some progress in combating official corruption via a strong yet embattled Corruption Eradication Commission, endemic corruption remains a significant concern and poses a challenge for AML/CFT regime implementation.

In an October 2011 report, the Financial Action Task Force (FATF) noted that Indonesia continues to have certain strategic AML/CFT deficiencies, including a lack of progress on the implementation of its action plan. Of particular concern is Indonesia’s failure to pass terrorist financing and asset forfeiture legislation.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, finance companies, insurance companies and insurance brokerage companies, pension fund financial institutions, securities companies, investment managers, providers of money remittance, and foreign currency traders

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 16,054 from January through October 2011

Number of CTRs received and time frame: 1,412,769 from January through October 2011

STR covered entities: Banks, financing companies, insurance companies and insurance brokerage companies, pension fund financial institutions, securities companies, investment managers, custodians, trustees, postal services as providers of fund transfer services, foreign currency changers (money traders), providers of payment card services, providers of e-money or e-wallet services, cooperatives doing business as savings and loan institutions, pawnshops, commodity futures traders, money remitters, property companies and agents, car dealers, dealers of precious stones and jewelry/precious metals, art and antique dealers, and auction houses

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Four from January through October 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

In October 2010, the Government of Indonesia (GOI) enacted a new AML law that partially complies with international standards. Among other improvements, the law expands the list of agencies permitted to conduct money laundering investigations, gives the independent financial intelligence unit (FIU), PPATK, more authority to examine suspicious financial transactions, and increases some criminal penalties for money laundering offenses. Personnel in both the executive and judicial branches should receive more training to effectively implement and enforce the expanded provisions of the AML law.

Indonesia’s PPATK is a dynamic and effective FIU that works closely with the Central Bank to oversee and implement Indonesia’s anti-money laundering regime. PPATK is well-funded and has an experienced and effective leadership team in place. The October 2010 AML legislation, however, has taxed the institution’s capacity and PPATK will need a significant increase in staff to meet its responsibilities under the law. In an effort to place some of the legal burden on industry and bank partners, PPATK will open three anti-money laundering centers in different regions of Indonesia to serve as resource centers for organizations that must comply with the new regulations.

Despite a stated high-level commitment to the action plan developed to address some of the persistent gaps in its AML/CFT legislation, the GOI has not met its projected timeframes. Essential draft CFT legislation will not be submitted to parliament until at least early 2012, more than a year later than originally expected. Passage may be further delayed by disagreements over various provisions, including those addressing forfeiture of unexplained wealth and new reporting requirements for religious institutions.

Indonesia continues to lack an effective mechanism to implement UNSCRs 1267 and 1373. The October 2010 AML legislation only provides for the temporary suspension of terrorist assets linked to the UN list of designated terrorists and terrorist organizations and does not allow for an immediate and ongoing freeze. Corruption, particularly within the police ranks, impedes effective investigations and prosecutions. Prosecutors and judges should be given additional training on tracing and documenting financial flows and presenting this evidence convincingly in court.

Iran

Although not considered a financial hub, Iran has a large underground economy, spurred by restrictive taxation, widespread smuggling, currency exchange controls, capital flight, and a large Iranian expatriate community. Iran is a major transit route for opiates smuggled from Afghanistan through Pakistan to the Persian Gulf, Turkey, Russia, and Europe. At least 40% of opiates leaving Afghanistan enters or transits Iran for domestic consumption or for consumers in Russia and Europe. Illicit proceeds from narcotics trafficking are used to purchase goods in the domestic Iranian market; those goods are often exported and sold in Dubai. Iran’s merchant community makes active use of money and value transfer systems, including hawala and moneylenders. Counter-valuation in hawala transactions is often accomplished via trade, thus trade-based transactions are likely a prevalent form of money laundering. Many hawaladars and traditional bazaari are linked directly to the regional hawala hub in Dubai. Over 300,000 Iranians reside in Dubai, with approximately 8,200 Iranian-owned companies based there. Iran’s real estate market is also used to launder money. There also are reports that billions of dollars in Iranian capital have been invested in the United Arab Emirates, particularly in Dubai real estate.

On November 21, 2011, Iran was identified by the U.S. Government as a state of primary money laundering concern pursuant to section 311 of the USA PATRIOT Act. Widespread corruption and economic sanctions, as well as evasion of those sanctions, have undermined the potential for private sector growth and facilitated money laundering. The Financial Action Task Force (FATF) has repeatedly warned of Iran’s failure to address the risks of terrorist financing. The FATF urges jurisdictions around the world to impose countermeasures to protect their financial sectors from illicit finance emanating from Iran. In October 2011, the FATF urged all members and jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions.

In 1984, the Department of State designated Iran as a state sponsor of terrorism. Iran continues to provide material support, including resources and guidance, to multiple terrorist organizations and other groups that undermine the stability of the Middle East and Central Asia. Hamas, Hizballah, and the Palestinian Islamic Jihad (PIJ) maintain representative offices in Tehran in part to help coordinate Iranian financing and training.

Although Iran has established an international banking network, with many large state-owned banks that have foreign branches and subsidiaries in Europe, the Middle East, Asia, and the Western Hemisphere, Iranian banks have a diminishing international presence in these regions as a growing number of governments move to sanction Iranian financial institutions in response to UN, U.S., and autonomous sanctions regimes as well as the FATF statements on Iran’s lack of adequate anti-money laundering/counter-terrorist financing (AML/CFT) controls. Iran is known to use its state-owned banks to channel funds to terrorist organizations and finance its nuclear and ballistic missile programs. The United States has designated at least 20 banks and subsidiaries under counter-proliferation and terrorism authorities.

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.: Not available

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other: NO

With other governments/jurisdictions: Not available

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

Enforcement and implementation issues and comments:

Since 2006, the U.S. has taken a number of targeted financial actions against key Iranian financial institutions, entities, and individuals under non-proliferation, counter-terrorism, human rights, and Iraq-related authorities, i.e., Executive Order 13382, Executive Order 13224, Executive Order 13553, and Executive Order 13438, respectively. To date, the Departments of Treasury and State have designated over 300 Iranian entities and individuals for proliferation-related activity under Executive Order 13382. Additionally, the United Nations Security Council (UNSC) has passed numerous resolutions that impose sanctions on Iran. The most recent of these, UNSCR 1929, was adopted in June 2010.

UNSCR 1929 recognizes the potential connection between Iran’s revenues derived from its energy sector and the funding of its proliferation of sensitive nuclear activities. In 2010, in recognition of that connection, the United States adopted the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), which makes sanctionable certain activities in Iran’s energy sector, including the provision of refined petroleum products to Iran.

On December 31, 2011, the National Defense Authorization Act for Fiscal Year 2012 was signed into law. Under Section 1245 of the Act, foreign financial institutions that knowingly facilitate significant financial transactions with the Central Bank of Iran or with Iranian financial institutions designated by Treasury risk being cut off from direct access to the U.S. financial system. This legislation builds upon the sanctions from previous U.S. legislation and UNSC resolutions.

The following are some examples of notable designations under Executive Orders: 20 Iranian-linked banks (including Bank Refah in 2011), located in Iran and overseas, have been designated in connection with Iran’s proliferation activities; one state-owned Iranian bank (Bank Saderat and its foreign operations) was designated for funneling money to terrorist organizations; the Qods Force, a branch of the Iranian Revolutionary Guard Corps (IRGC), was designated for providing material support to the Taliban, Lebanese Hizballah, and Palestinian Islamic Jihad; and, the Martyrs Foundation (also known as Bonyad Shahid), an Iranian parastatal organization that channels financial support from Iran to several terrorist organizations in the Levant, including Hizballah, Hamas, and the PIJ, has been designated along with Lebanon- and U.S.-based affiliates.

In October 2007, the FATF issued its first public statement expressing concern over Iran’s lack of a comprehensive AML/CFT framework. In February 2009, the FATF urged all jurisdictions to apply effective countermeasures to protect their financial sectors from the money laundering/terrorist financing risks emanating from Iran and also stated that jurisdictions should protect against correspondent relationships being used to bypass or evade countermeasures or risk mitigation practices. In October 2011, the FATF reiterated its call for countermeasures. The FATF urges Iran to immediately and meaningfully address its AML/CFT deficiencies, in particular by criminalizing terrorist financing and effectively implementing suspicious transaction reporting requirements.

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

Numerous countries around the world also have restricted their financial and business dealings with Iran in response to both the UNSC measures on Iran as well as the FATF statements on Iran’s lack of adequate AML/CFT controls. A growing number of governments have moved to designate Iranian banks, and many of the world’s leading financial institutions have voluntarily chosen to reduce or cut ties with Iranian banks.

Iran is ranked 120 out of 183 countries listed in Transparency International’s 2011 Corruption Perception Index. There is pervasive corruption within the ruling and religious elite, government ministries, and government-controlled business enterprises.

In 2010, the Government of Iran teamed with United Nations Office on Drugs and Crime to establish a financial intelligence unit (FIU). The Iranian FIU reportedly will focus on suspicious financial transactions linked to illicit narcotics proceeds. No entity has been able to assess whether Iran’s FIU meets international standards.

Iraq

Iraq’s economy is primarily cash-based, and there is little data available on the extent of money laundering in the country. Smuggling is endemic, often involving consumer goods, cigarettes, and petroleum products. Bulk cash smuggling, counterfeit currency, trafficking in persons, and intellectual property rights violations are major problems. Ransoms from kidnappings and extortion are often used to finance terrorist networks. Credible reports of counterfeiting abound. Trade-based money laundering, customs fraud, and various means of value transfer are found in the underground economy. Hawala networks, both licensed and unlicensed, are widely used for legitimate and illicit purposes. Corruption is a major challenge and is exacerbated by weak financial controls in the banking sector and weak links to the international law enforcement community. U.S. dollars are widely accepted and are used for many payments made by the U.S. government, as well as foreign assistance agencies and their contractors.

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

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: NO

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 43 in 2011

Number of CTRs received and time frame: 1,320 in 2011

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

Iraq is a member of MENAFATF, a Financial Action Task Force (FATF)-style regional body. Iraq’s first mutual evaluation is scheduled for late 2012.

Enforcement and implementation issues and comments:

Although the only anti-money laundering statute in Iraq, CPA Law 93, AML Act of 2004, is broad enough to reach even beyond serious crime, the criminalization under CPA Law 93 is only that of a misdemeanor. Iraq does not prosecute cases under this law because the law does not effectively criminalize money laundering.

Iraq’s legal framework needs to be strengthened, either by amendment or by drafting of new AML/CFT legislation. Iraqi ministries need to support a viable AML/CFT regime with cooperation across ministries. Investigators, prosecutors, and judges all need support from their leadership to move more aggressively in pursuing AML/CFT cases. Prosecutors and investigators are frustrated when judges do not pursue their cases; similarly, judges claim the cases they receive are of poor quality and not prosecutable. Senior-level support and increased capacity for all parties are necessary to ensure AML/CFT cases can be successfully prosecuted in Iraq. In addition, the lack of implementing legislation, weak compliance enforcement by the Central Bank of Iraq (CBI), and the lack of support to the Money Laundering Reporting Office (MLRO), Iraq’s financial intelligence unit, undermine Iraq’s ability to counter terrorist financing and money laundering.

The CBI generally does not support the MLRO. The MLRO has adequate staffing but lacks training, computer equipment, and software to receive, store, retrieve, and analyze data from the reporting institutions. Without a database, the MLRO staff must process the data received manually. The MLRO is empowered to exchange information with other Iraqi and foreign government agencies. Historically the MLRO received little support from Iraqi law enforcement, but that changed in 2011 because the MLRO has added value to many of their investigations. The Government of Iraq should ensure the MLRO has the capacity, resources, and authorities to serve as the central point for collection, analysis, and dissemination of financial intelligence to law enforcement and to serve as a platform for international cooperation.

Regulation and supervision of the formal and informal financial sectors are still quite limited and enforcement is subject to political constraints, resulting in weak private sector controls. In practice, despite customer due diligence requirements, most banks open accounts based on the referral of existing customers and/or verification of a person’s employment. Actual application of the rules varies widely across Iraq’s 45 state-owned and private banks. Also, rather than file STRs in accordance with the law, most banks either conduct internal investigations or contact the MLRO, which executes an account review to resolve any questionable transactions. In practice, very few STRs are filed.

Iraq should become a party to the UN Convention for the Suppression of the Financing of Terrorism.

Ireland

Ireland is a significant European financial hub, with offices of a number of international banks established in Dublin. The primary sources of funds laundered in Ireland are prostitution, cigarette smuggling, drug trafficking, fuel laundering, domestic tax violations and welfare fraud. While money laundering occurs via credit institutions such as banks, money has also been laundered through schemes involving remittance companies, solicitors, accountants, and second-hand car dealerships. According to law enforcement officials, money is most commonly laundered through the purchase of high value goods for cash; the transfer of funds from overseas through Irish credit institutions; the filtering of funds via complex company structures; and the purchase in Ireland of Irish and foreign real property.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, building societies, the post office, stock brokers, credit unions, bureaux de change, life insurance companies, and insurance brokers

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 13,416 in 2010

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, building societies, the post office, stock brokers, credit unions, bureaux de change, life insurance companies, and insurance brokers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 11 in 2010

Convictions: Four in 2010

RECORDS EXCHANGE MECHANISM:

With the United States: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

Ireland 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/63/29/36336845.pdf

Enforcement and implementation issues and comments:

Irish authorities estimate that up to 80% of STRs involve funds derived from domestic tax violations and social welfare fraud.

In 2011, the largest known asset seizures, valued at approximately €500,000 (approximately $660,000), were seized in police raids on a suspected money laundering operation in Ireland. The case is believed to be related to money laundering by a European-based narcotics trafficking organization.

Customs authorities continue to intercept bulk cash from narcotics trafficking being smuggled out of Ireland. The largest interception was in 2010 when a suitcase belonging to an Irish drug trafficker containing 676,000 euros (approximately $895,000) in used bank notes was seized at Dublin International Airport.

On November 9, 2011, Ireland became a party to the UN Convention against Corruption.

The Government of Ireland should establish mechanisms for sharing information with other jurisdictions, outside of the Egmont procedures, and providing assistance in transnational criminal investigations.

Isle of Man

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

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 1,435 in 2010

Number of CTRs received and time frame: Not applicable

STR covered entities: All businesses

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 15 in 2010

Convictions: 13 in 2010

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Compliance with international standards was evaluated in a report prepared by the International Monetary Fund’s Financial Sector Assessment Program. The report can be found here: http://www.imf.org/external/pubs/ft/scr/2009/cr09275.pdf

Enforcement and implementation issues and comments:

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

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

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

Israel

Israel is not regarded as a regional financial center. It primarily conducts financial activity with the markets of the United States and Europe, and to a lesser extent with the Far East. Criminal groups in Israel, either home-grown or with ties to the former Soviet Union, United States, and European Union often utilize a maze of offshore shell companies and bearer shares to obscure beneficial owners. Law enforcement continues to focus on human trafficking and public corruption.

Israel’s illicit drug trade is regionally focused, with Israel as more of a transit country than a stand-alone significant market. The authorities continue to be concerned with illegal pharmaceutical sales, retail businesses which are suspected money-laundering enterprises, and corruption accusations against public officials. Bilateral cooperation between United States and Israeli law enforcement authorities is significant, including joint repatriations, training exercises and sharing of information where relevant.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banking corporations, credit card companies, trust companies, stock exchange members, portfolio managers, and the Postal Bank

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 27,922 (January 1 - October 12, 2011)

Number of CTRs received and time frame: 922,583 (January 1 - October 12, 2011)

STR covered entities: Banking corporations, credit card companies, trust companies, members of the Tel Aviv Stock Exchange, portfolio managers, insurers and insurance agents, provident funds and the companies who manage them, providers of currency services, money services businesses and the Postal Bank

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 52 from January - August 2011

Convictions: 12 from January - August 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

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

U.S. law enforcement has a robust relationship with the Israel Tax Authority’s (ITA) Anti Drug and Money Laundering Unit. U.S. customs authorities and the ITA routinely coordinate to target illicit finance and bulk cash smuggling between the two countries. In 2011, the Israel Money Laundering and Terror Financing Prohibition Authority signed an MOU with the U.S.’s Financial Crimes Enforcement Network to further cooperation on money laundering and terrorist financing issues. In addition, U.S. and Israeli law enforcement officials cooperate on extradition requests for individuals accused of crimes such as money laundering. For example, Itzhak Abergil, a U.S.-designated Consolidated Priority Organization Target (CPOT), and several other Israeli nationals were extradited to the United States in 2011 where they now face a host of charges including money laundering and drug trafficking.

Italy

The proceeds of domestic organized crime groups (especially the Mafia, Camorra, and ‘Ndrangheta) operating across numerous economic sectors in Italy and abroad compose the main source of laundered funds. A report from the Italian confederation of trade, tourism, and service-company operators declared domestic organized crime as Italy’s largest enterprise. Other major sources of laundered money are proceeds from tax crimes, smuggling and sale of counterfeit goods, extortion, and usury. Based on limited evidence, the major sources of money for financing terrorism seem to be petty crime, document counterfeiting, and smuggling and sale of various legal and contraband goods. Italy’s total black market is estimated to generate as much as 15% of GDP ($310 billion). A sizeable portion of this black market is for smuggled goods. The proceeds of these sales are often laundered, and some may be used to finance terrorism. However, the largest portion of this black market is for tax evasion by otherwise legitimate commerce. Money laundering and terrorist financing in Italy occurs in both the formal and the informal financial system, as well as offshore.

Italy continues to combat the sources of money laundering and terrorist financing. For example, in his first speech to Parliament, new Prime Minister Monti announced that fighting tax evasion, which he said deprives Italy of one-fifth of its GDP, and fighting organized crime will be high priorities for the new government.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, Italian post office, electronic money transfer institutions, payment institutions, agents, investment firms, asset management companies, insurance companies, agencies providing tax collection services, stock brokers, financial intermediaries, trust companies, lawyers, accountants, auditors, and casinos

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 23,816 for January through June 2011

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, Italian post office, electronic money transfer institutions, investment firms, asset management companies, insurance companies, agencies providing tax collection services, stock brokers, financial intermediaries, trust companies, lawyers, accountants, commercial assessors, notaries, auditors, real estate agents, casinos, and high-value goods dealers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 21 in 2011

Convictions: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

In 2011, Italy made the following key legal, regulatory, and policy changes related to money laundering and terrorist financing: Parliament passed a law reducing from 5,000 euros to 2,500 euros the threshold above which cash transactions, cash bank deposits, and cash payments for bearer bonds are illegal; the Ministry of Interior issued a regulation establishing anomaly indicators for financial transactions, to facilitate the reporting of suspicious transactions by several categories of non-financial businesses and professions; the Bank of Italy, the Italian central bank, strengthened the required procedures and internal controls for financial intermediaries, to prevent their involvement in money laundering and terrorist financing. The Bank of Italy also raised the standards for data required in STRs, to increase the likelihood of detecting money laundering and terrorist financing transactions.

Although several of the above actions were intended to increase the number of STRs filed by non-financial businesses and professions, since these entities now file less than 1% of the STRs, Italy must continue to implement measures that will significantly increase the quality of STRs from all these entities and the number of STRs from selected categories of these entities. Italy also must continue to implement measures to increase the quality and timeliness of the data reported by all types of entities. In 2010, 37,047 STRs were filed for money laundering and 274 for terrorist financing.

Although Italy requires that large transactions be reported, these transactions are reported only in the aggregate.

As in previous years, in 2011 the Guardia di Finanza cooperated on a number of occasions with various U.S. authorities in investigations of money laundering, bankruptcy crimes, and terrorist financing (the Guardia di Finanza is the primary Italian law enforcement agency responsible for combating financial crime and smuggling, and is Italy’s primary agency for interdicting drugs, along with the Carabinieri and the Italian National Police). The Direzione Centrale per i Servizi Antidroga, a task force comprised of the Guardia di Finanza, Carabinieri, and the Italian National Police, also plays a central role in these efforts.

Jamaica

Money laundering in Jamaica is primarily related to proceeds from illegal narcotics and to a lesser extent psychotropic substances and scams. This illicit activity is largely controlled by organized criminal groups whose primary motive is drug trafficking. Jamaica has experienced an increase in financial crimes, emanating from Lotto scams and cybercrimes.

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

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 320,146 in 2011

Number of CTRs received and time frame: 116,550 in 2011

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 11 in 2011

Convictions: Two in 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Terrorism Prevention Act was amended in 2011 to further clarify the requirement for suspicious transaction reporting in cases of suspected terrorism financing. The amendments also clarify the basis upon which the Director of Public Prosecutions can apply to the courts to have persons listed as terrorists or terrorist entities, facilitating the freezing of related assets.

During 2011, the Government of Jamaica (GOJ) passed into law the Protected Disclosures Act, which includes whistleblower protection in cases of perceived corruption. The Bank of Jamaica conducted public outreach focused on accountants and attorneys, to sensitize those professions about their obligations under Jamaica’s anti-money laundering laws.

The GOJ and its bilateral partners also provide specialized training for regional law enforcement officers in areas such as narcotics investigations, intelligence gathering and analysis, kidnapping and extortion, money laundering, financial fraud and asset tracing. This training is conducted by the Caribbean Regional Drug Law Enforcement Training Centre, located in Jamaica.

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

The Financial Investigations Division (FID) has applied for membership in the Egmont Group of Financial Intelligence Units. The process has been challenging for the FID since it did not meet the Egmont Group’s standards during its most recent attempt. The GOJ should ensure it responds to the requirements of the Egmont Group in order to allow the FID to join.

Japan

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

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

For additional information focusing on terrorism financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 337,341 in 2011

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 191 in 2010

Convictions: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

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

http://www.fatf-gafi.org/document/61/0,3746,en_32250379_32236963_41684733_1_1_1_1,00.html

Enforcement and implementation issues and comments:

Although the Japanese government continues to strengthen legal institutions to permit more effective enforcement of anti-money laundering/counter-terrorist financing (AML/CFT) laws,

Japan’s compliance with international standards specific to financial institutions is notably deficient. In April 2011, Japan amended its basic AML law, the Criminal Proceeds Act, to improve customer due diligence (CDD) requirements, including by requiring financial institutions to identify the customer’s name, address, and date of birth, and to verify the purpose of transaction, business activities and beneficial owners. However, while the government is in the process of formulating the subordinate decrees, these requirements do not come into effect until April 28, 2013.

The Government of Japan (GOJ) has not implemented a risk-based approach to AML/CFT, and there is currently no mandate for enhanced due diligence for higher-risk customers, business relationships, and transactions. While the April 2011 amendments to the Criminal Proceeds Act call for financial institutions to verify a customer’s assets and income in certain higher risk situations, they delineate those situations as those where it is suspected that false identity is being used, rather than by increased risks presented by such factors as business type, customer location, or type of transaction. The current regulations also do not authorize simplified due diligence, though there are exemptions to the identification obligation on the grounds that the customer or transaction poses no or little risk of money laundering or terrorist financing. Japan should implement a risk-based approach to its AML/CFT regime.

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

The GOJ’s system does not allow the freezing of terrorist assets without delay, and in practice the Ministry of Finance has frozen terrorist assets in only a few cases. Japan’s system does not cover assets raised by a non-terrorist for use by a terrorist or terrorist organization, and reaches only funds, not other kinds of assets. The GOJ should enact legislation to allow terrorist assets to be frozen without delay, and to expand the scope of assets to include non-financial holdings.

Japan should provide more training and investigatory resources for AML/CFT law enforcement authorities. As Japan is a major trading power, the GOJ should take steps to identify and combat trade-based money laundering.

Japan should become a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption, and should fully implement the freezing obligations for terrorist funds, according to the UN Convention for the Suppression of the Financing of Terrorism.

Jersey

The Island of Jersey, the largest of the Channel Islands, is an international financial center offering a sophisticated array of offshore services. Jersey is a British crown dependency but has its own parliament, government, and laws. The United Kingdom (UK) remains constitutionally responsible for its defense and international representation but has entrusted Jersey to regulate its own financial service sector and to negotiate and sign tax information exchange agreements directly with other jurisdictions. The financial services industry is a key sector, with banking, investment services, and trust and company services accounting for approximately half of Jersey’s total economic activity. As a substantial proportion of customer relationships are with nonresidents, adherence to know-your-customer rules is an area of focus for efforts to limit illicit money from foreign criminal activity. Jersey also requires that beneficial ownership information be obtained and held by its company registrar. Island authorities undertake efforts to protect the financial services industry against the laundering of the proceeds of foreign political corruption deriving from industries such as oil, gas, and transportation.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

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

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: One prosecuted to judgment in 2010

Convictions: One in 2010

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

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

Although not yet used in practice, Jersey has an ability to designate persons and freeze their assets in conformity with UNSCR 1373; however, no formal procedure is in place to receive and assess requirements based on a foreign request. Additionally, the definition of “funds” subject to freezing does not expressly refer to assets “jointly” or “indirectly” owned or controlled by designated or listed persons. The JFSC website contains a link to the United Kingdom Consolidated List of asset freeze targets, as designated by the United Nations, European Union and United Kingdom. It does not use other means to distribute UN lists of designated terrorists or terrorist entities.

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

Jersey authorities have a continuing concern regarding the increasing incidence of domestic drug related crimes. The customs and law enforcement authorities devote considerable resources to countering drug-related crime. Jersey should continue to maintain and enhance its level of compliance with international standards to assist those efforts. The JFSC should ensure its AML Unit has enough resources to continue to function effectively, and to provide outreach and guidance to the sectors it regulates.

Jersey authorities should explicitly require that a relevant obliged entity obtain all necessary customer due diligence (CDD) information from the intermediary or introducer immediately at the beginning of a relationship and should consider requiring relevant persons to perform spot-testing of an intermediary or introducer’s performance of CDD obligations.

Jordan

Although Jordan is not a regional or offshore financial center, it has a well-developed financial sector with significant banking relationships in the Middle East. Jordan’s long and remote desert borders and proximity to Iraq, Syria, Saudi Arabia, and Israel and the West Bank make it susceptible to the smuggling of bulk cash, fuel, narcotics, cigarettes, counterfeit goods, and other contraband. Jordan boasts a thriving “import-export” community of brokers, traders, and entrepreneurs who are involved with regional value transfer via trade and customs fraud. There are anecdotal indications of the use of Jordan for money laundering of illicit funds derived from narcotics and other criminal activity in the U.S., and possibly Europe, via bulk cash smuggling for criminal elements involving the Jordanian diaspora. However, it is thought the major sources of illicit funds in Jordan are most likely to be related to commercial fraud, customs fraud, tax fraud, and intellectual property rights (IPR) violations. Anecdotal reports also indicate that Jordan’s real estate sector has often been used to launder illicit funds.

There are six public free trade zones (FTZs) in Jordan: the Zarqa Free Zone, the Sahab Free Zone, the Queen Alia International Airport Free Zone, the Al-Karak Free Zone, the Al-Karama Free Zone, and the Aqaba Special Economic Zone (ASEZ). With the exception of Aqaba, these FTZs list their activities merely as trade. There are many designated private FTZs, a number of which are related to the aviation or chemical and mining industries. FTZ activities vary from industrial, agricultural, pharmaceutical, or vocational to multi-purpose. With the exception of ASEZ, all free trade zones are regulated by the Jordan Free Zones Corporation Law and are monitored by the Ministry of Finance. The Aqaba Special Economic Zone Authority (ASEZA), a ministerial level authority, controls the port city of Aqaba. Until late 2011 when Jordan Customs assumed authority, the ASEZA had its own customs authority, which operated separately from Jordan Customs, and processed all merchandise and commodities destined for businesses in the zone and all passengers entering the zone.

For additional information focusing on terrorist financing, please refer also to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 204from January 1 to November 1, 2011

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Two from 2010 through November 2011

Convictions: Two from 2010 through November 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: NO

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Operational developments in 2011 impacting Jordan’s AML/CFT regime include further increases in the number of FIU staff and additional preparations to move to an independent office space within the Central Bank of Jordan. Jordan is currently seeking membership in the Egmont Group of Financial Intelligence Units.

In September 2011, Jordan’s Anti Money Laundering Unit referred to prosecution a case with an order to freeze over $100 million in assets. The referral, Jordan’s largest to date, is significant both in the size of the case and because the predicate offenses were committed in Jordan. All previous money laundering prosecutions in Jordan relied on predicate offenses committed outside of Jordan.

Kazakhstan

Kazakhstan is not a regional financial center, but has the most developed financial system in the Central Asia region. Governmental corruption, an organized crime presence and a large shadow economy make the country vulnerable to money laundering and terrorist finance. The major sources of laundered proceeds stem from corruption, tax evasion and fraudulent financial activity, particularly transactions involving the use of shell companies. Smuggling of contraband goods and under-invoicing of imports and exports by Kazakhstani businessmen also remain relatively common practices.

The presence of hawalas and money or value transfer services poses risks in regard to money laundering. While there is little publicly available information on the scale, there are indications that these entities are used for trade-based money laundering and to move narcotics trafficking proceeds.

Casinos are legal in two geographic areas – Shuchinsk and Kapchagai, while online gambling is prohibited. Kazakhstan has several free trade zones (FTZ), including an FTZ agreement with CIS countries that will come into force in 2012. Both of these may pose money laundering risks.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: NO civilly: NO

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks and organizations that conduct banking transactions; stock exchanges and securities dealers/brokers; insurance (re-insurance) companies and insurance brokers; pension funds; central depositories; exchange offices and post operators; lawyers and independent legal experts; auditors, and organizers of gambling businesses

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 30,399 - January 1-November 30, 2011

Number of CTRs received and time frame: 575,739 - January 1-November 30, 2011

STR covered entities: Banks, insurance companies and brokers, pension funds, exchange offices, auditors, notaries and lawyers, gaming centers, securities brokers/dealers, post operators and funds remitters

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 70 - January - October 2011

Convictions: Eight - January - October, 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

Kazakhstan is a member of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.eurasiangroup.org/ru/restricted/MER_2011_1_KAZ_rev.1_eng.doc

Enforcement and implementation issues and comments:

Kazakhstan should expand the reporting requirements under its AML law to pawn shops, micro-credit organizations, leasing organizations, entities dealing with jewelry and precious metals, financial management firms, travel agencies and dealers of arts, antiques, and other high-value consumer goods. These entities are not required to maintain customer information or report suspicious activity.

Currently all reporting entities subject to the AML/CFT law are inspected by their respective regulatory agencies, rather than by the FIU. Most of those agencies, however, lack the resources and expertise to inspect reporting entities for AML/CFT compliance. The Government of Kazakhstan (GOK) should allocate more resources to ensure the proper enforcement of its AML regulations. It also needs to educate local institutions and personnel on further implementation of the AML/CFT law. The GOK should extend the tipping off prohibition to directors, officers and employees of financial institutions.

Strict segregation of duties among law enforcement agencies hampers the government’s ability to detect, investigate and prosecute money laundering crimes related to serious criminal offenses, including drug trafficking and trafficking in persons. The Financial Police is the only agency responsible for the investigation of money laundering crimes. The Ministry of Interior investigates a wide range of predicate offenses, but does not typically examine the financial aspects of crimes. Kazakhstani law enforcement agencies should develop a more integrated and coordinated approach to the investigation of money laundering related to serious criminal offenses, perhaps through interagency investigative groups.

The Criminal Code provides for the mandatory seizure, in part or in whole, of property of any person convicted for miscellaneous predicate offenses, as defined. In an effort to evade such forfeiture, criminals often register their assets in the names of straw owners or relatives. Since the burden of proof lies with law enforcement and can be difficult to meet, law enforcement agencies frequently do not attempt to determine the origin of assets during the initial stage of an investigation.

The legislation does not address the seizure of property of corresponding value or indirect benefits from the proceeds of a crime. Police seized almost $11.9 million during the first ten months of 2011 for money laundering crimes with defined losses of $15.2 million. Kazakhstan has no legal framework to allow the government to freeze terrorist assets in a timely manner; all asset freeze orders must have prior court approval. Kazakhstan also lacks a mechanism to share with other countries assets seized through joint or trans-boundary operations.

Kenya

Kenya is the largest financial center in East Africa, and its banking and financial sectors are growing in sophistication. As a regional financial and trade center for Eastern, Central, and the Horn of Africa, Kenya’s economy has large formal and informal sectors; and it remains vulnerable to money laundering and other financial fraud. Reportedly, Kenya’s financial system may be laundering over $100 million each year, although lack of regulation and limited records make quantifying the value difficult.

Money laundering/terrorist financing activity derives from both domestic and foreign criminal activity. Kenya is a transit point for international drug traffickers. The laundering of funds derived from corruption, smuggling, and other financial crimes is a substantial problem. Its proximity to Somalia makes Kenya an attractive and likely destination for the laundering of piracy-related proceeds and a conduit for terrorism-related funds. There is a black market for smuggled goods in Kenya, which serves as a major transit country for Uganda, Tanzania, Rwanda, Burundi, eastern Democratic Republic of Congo, Somalia, and South Sudan. Goods marked for transit to these northern corridor countries avoid Kenyan customs duties, but authorities acknowledge they are often sold in Kenya. Many entities in Kenya are involved in exporting and importing goods, including nonprofit entities. Trade-based money laundering is a problem in Kenya, and traded commodities are often used to provide counter-valuation in regional hawala networks.

In addition to banks, wire services, and other formal channels that act as depository institutions and execute funds transfers, Kenya also houses money/value transfer systems (MVTS) catering to those who conduct cash-based business. Kenyan Somalis and Somali expatriates, in particular the large Somali refugee population, primarily use hawalas to send and receive remittances internationally. Mobile money, using telecom networks for cash and value transfers, called M-Pesa, is an increasingly large component of the Kenyan financial sector.

There are questions concerning Kenya’s political will to address money laundering and terrorist financing. In June and October 2011, Kenya was included in the Financial Action Task Force (FATF) Public Statement for its lack of progress on adopting/implementing its action plan to improve its AML/CFT regime despite over a year of targeted engagement by the FATF.

For additional information focusing on terrorism financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks and institutions accepting repayable funds from the public; lending institutions, factors, and commercial financiers; financial leasing firms; transferors of funds or value, by any means, including both formal and informal channels; issuers and managers of credit and debit cards, checks, traveler’s checks, money orders and banker’s drafts, and electronic money; financial guarantors; traders of money market instruments, including derivatives, foreign exchange, currency exchange, interest rate and index funds, transferable securities, and commodity futures; participation in securities issues and the provision of financial services related to such issues; portfolio managers; safekeeping, management, and administration of cash or liquid securities; underwriting and placement of life insurance and other investment related insurance; casinos; real estate agencies; accountants; and dealers in precious metals and stones

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 37 – January through October 2011

Number of CTRs received and time frame: None

STR covered entities: Banks and institutions accepting repayable funds from the public; lending institutions, factors, and commercial financiers; financial leasing firms; transferors of funds or value, by any means, including both formal and informal channels; issuers and managers of credit and debit cards, checks, traveler’s checks, money orders and banker’s drafts, and electronic money; financial guarantors; traders of money market instruments, including derivatives, foreign exchange, currency exchange, interest rate and index funds, transferable securities, and commodity futures; participation in securities issues and the provision of financial services related to such issues; portfolio managers; safekeeping, management, and administration of cash or liquid securities; underwriting and placement of life insurance and other investment related insurance; casinos; real estate agencies; accountants; and dealers in precious metals and stones

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), which came into force in June 2010, provides a legal framework for regulation and enforcement as well as a framework for compliance among most of Kenya’s financial and some of its non-financial sectors; however, the law has not been implemented, and authorities such as the Financial Reporting Center (FRC), Kenya’s FIU, have yet to be established. Due to Kenya’s lack of implementation, POCAMLA has never been used to prosecute any crimes, nor have any charges been filed under the POCAMLA, so the law remains untested.

The future FRC will issue official implementing regulations. In the interim, the Central Bank of Kenya (CBK) has issued guidance notes to commercial banks, non-bank financial institutions, and mortgage finance companies about their responsibilities under POCAMLA. In July 2011, guidance was issued on suspicious transaction reporting. In September 2011, the CBK issued guidance on combating terrorist financing, but as neither terrorism nor terrorist financing is criminalized, this guidance is not binding. In 2011, the CBK closed several foreign exchange bureaus for failing to comply with new, more stringent standards.

The POCAMLA does not adequately address KYC measures related to PEPs. With Kenya’s new constitution, PEPs are now subject, for the first time, to financial disclosure requirements and enhanced vetting procedures. Kenya does not actively collect CTRs, though banks provide this data if asked.

The Government of Kenya cannot track transactions by MVTS entities. The lack of regulation/supervision of this sector, coupled with a lack of reporting from the obliged entities, contribute to the vulnerability posed by this sector. Tracking, reporting, and investigating suspicious transactions related to the MVTS are more difficult for the Kenyan authorities than those using the formal financial sector.

Kenyan law enforcement authorities lack the institutional capacity, investigative skill, and resources to conduct complex financial investigations, and a number of bureaucratic impediments present challenges. To demand bank account records or to seize an account, the police must present evidence linking the deposits to a criminal violation and obtain a court warrant. The confidentiality of this process is difficult to maintain, and because of leaks, account holders are tipped off about the investigations and then move their accounts or contest the warrants. However, the Kenya Revenue Authority has made recent strides in increasing its internal monitoring and collection procedures. With the implementation of Kenya’s constitution, there are significant judicial reforms underway. The Office of the Public Prosecutor is organizing a special unit to address financial crimes and is collaborating with the Ethics and Anti-Corruption Commission to investigate illicit financial flows.

The POCAMLA does not criminalize terrorist financing; the draft anti-terrorism bill addressing terrorist financing languishes in Parliament, where it has been for years. POCAMLA provides for legal mechanisms to freeze or seize criminal accounts; however, the law has not yet been used to do this. Kenya does not have a mechanism or legal authority to freeze or seize accounts used for terrorist financing. In November 2011, the President signed the Mutual Legal Assistance Act. This Act will allow increased cooperation with its international partners. Although it had languished for a number of years, the Act became operational on December 2 and was gazetted on December 9, 2011.

Korea, Democratic Republic of

The Democratic People’s Republic of Korea (DPRK or North Korea) is not a regional financial center. The regime has a history of involvement in currency counterfeiting, drug trafficking, and the laundering of related proceeds, as well as the use of deceptive financial practices in the international financial system. In the past, customs and police officials have apprehended DPRK diplomats or quasi-official representatives of state trading companies trying to smuggle narcotics, although such incidents have become less frequent in recent years. The DPRK regime continues to present a range of additional challenges for the international community, such as pursuit of nuclear weapons, weapons trafficking and proliferation, and human rights abuses. As a result, the DPRK is one of the most sanctioned countries in the world.

Access to current information on the financial and other dealings of the DPRK is hampered by the extremely closed nature of its society. The economic practice of juche, a constitutionally enshrined ideology in North Korea characterized by the goals of independence and self-reliance, has minimized international trade relations and discouraged foreign investment.

In February 2011, the Financial Action Task Force (FATF) called upon its members to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies and financial institutions. In addition to enhanced scrutiny, the FATF has called for its members to apply effective counter-measures to protect their financial sectors from money laundering and terrorism financing risks emanating from the DPRK.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Not available

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

STR covered entities: Not available

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other: NO

With other governments/jurisdictions: NO

The Democratic People’s Republic of Korea is not a member of a FATF-style regional body.

Enforcement and implementation issues and comments:

There is little available information on the DPRK’s financial system. The DPRK has never undertaken a review of its anti-money laundering/counter-terrorist financing (AML/CFT) regime based on the international standards, and calls for the DPRK government to be involved in the mutual evaluation process have been unsuccessful. Therefore, a serious deficiency lies in the lack of detailed information on the DPRK’s AML/CFT regime as well as mechanisms to verify the extent to which the DPRK’s AML/CFT regime meets international standards.

In 2006, the DPRK adopted the Law on the Prevention of Money Laundering which states that the DPRK has a “consistent policy to prohibit money laundering.” However, it is impossible to determine what standing this law has in the DPRK. The law is significantly deficient in most respects, and there is no evidence of an AML/CFT infrastructure in the DPRK capable of implementing the law. Lacking any type of sufficient AML/CFT regulatory authority, the DPRK cannot effectively supervise its financial institutions and enforce AML/CFT practices. Moreover, although the Law mentions effective monitoring and supervisory mechanisms, including powers to sanction financial institutions and other businesses and professions that do not comply with AML/CFT requirements, there is no explanation for how this is achieved or any framework established to implement sanctions.

The DPRK is party to a number of international conventions, including the 1988 UN Drug Convention. There is no evidence that the DPRK has taken sufficient steps to properly implement provisions contained in the conventions. The DPRK has signed, but not ratified, the UN Convention for the Suppression of the Financing of Terrorism, but there is no evidence of efforts to ratify the agreement or implement the UN resolutions relating to the prevention and suppression of the financing of terrorist acts, particularly UNSCR 1373.

Korea, Republic of

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

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

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 227,043 from January 1 to August 31, 2011

Number of CTRs received and time frame: 7,056,108 from January 1 to August 31, 2011

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Republic of Korea Government (ROKG) revised the Prohibition of Financing for Offenses of Public Intimidation Act in August 2011 to criminalize provision or collection of funds or assets used by a terrorist organization or terrorist for purposes other than for terrorist acts.

Korea’s AML/CFT regime requires all obligated entities to report STRs to the Korea Financial Intelligence Unit (KFIU). The ROK strengthened the STR system in June 2010, lowering the mandatory STR filing threshold from 20 to ten million won (approximately $8,700). The ROK should make elimination of the STR reporting threshold a short-term goal, and require all covered entities to report all suspicious transactions.

Officials charged with investigating money laundering and financial crimes are widening their scope to include crimes related to commodities trading and industrial smuggling, and continue to search for possible links between domestic illegal activities and international terrorist activity. ROK authorities are investigating the underground alternative remittance systems used to send illegal remittances abroad by South Korea’s approximately 545,369 documented and 54,769 undocumented foreign workers. According to the Korea Customs Service, there were 194 underground remittance (hawala) cases worth 1.36 trillion won (approximately $1.2 billion) in 2010, and 69 cases totaling 1.015 trillion won (approximately $898 million) in the first ten months of 2011.

The Government of the Republic of Korea (ROKG) should expand its active participation in international AML/CFT efforts by becoming a party to the UN Convention against Transnational Organized Crime. The ROKG also should become a party to the UN Convention against Corruption.

Kosovo

Kosovo is not considered a regional financial or offshore center. The country has porous borders which facilitates an active black market for smuggled consumer goods and pirated products. According to the Customs Service, significant amounts of cigarettes and fuel are smuggled into the country. Kosovo is a transit point for illicit drugs, not a destination point. Proceeds of drug trafficking do not fund the black market of smuggled and pirated items.

Illegal proceeds from domestic and foreign criminal activity are generated from official corruption, tax evasion, customs fraud, organized crime, contraband and other types of financial crimes. Most of the proceeds from smuggling activity are believed to be laundered directly into the economy in areas such as construction and real estate, retail and commercial stores, banks, financial services, casinos and trading companies. Smaller amounts are thought to be laundered through the financial system.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 224 from July 2010 – June 2011

Number of CTRs received and time frame: 109,098 from June 2011 – October 2011

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Three from January – June 2011

Convictions: Two from January – June 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Kosovo Police Economic Crimes and Corruption Directorate, the Organized Crime Directorate, the Special Prosecutors Anti-Corruption Task Force, the Financial Intelligence Unit (FIU), the Agency for the Management of Confiscated and Sequestered Assets, the Tax Investigations Unit, the Tax Administration of Kosovo (TAK) Gaming Department, and Customs Intelligence and Investigations are nascent entities which receive significant training and assistance. As each organization develops its capacity in enforcing laws, it must also learn how to coordinate with other agencies across the government. The weaknesses faced by these financial and law enforcement institutions do not represent a lack of commitment by Kosovo officials, rather the limitations are illustrative of a judicial and regulatory system that is in its infancy and still developing capacity.

The definition of PEP in Kosovo law is not comprehensive, largely covering only members of political parties.

The Kosovo draft Law on Games of Chance has been forwarded to Parliament for the first reading. Following passage into law, the TAK Gaming Department will be tasked with the development and implementation of a regulatory framework in accordance with the new law.

The Government of Kosovo (GOK) should continue its efforts to have the FIU become fully operational, compliant with international standards, and accepted by the international community. A review of Kosovo’s judicial and regulatory regime to assess Kosovo’s current state of compliance with international standards led to the development of an 89-item action plan to achieve compliance. The government now needs to develop a plan for achieving the suggested legal and/or regulatory changes.

Kosovo’s lack of UN membership, stemming from political disagreements with Serbia, is a limiting factor on the country’s participation in regional and international organizations, and makes Kosovo unable to become a party to any UN treaty or convention.

Kuwait

Financial crimes, such as money laundering and terrorist financing, remain concerns in Kuwait primarily due to lack of adequate legislation. As of December 2010, the Central Bank of Kuwait reported total banking sector assets of $142 billion. Currently 21 banks operate in Kuwait: five commercial banks, five Islamic banks, ten branches of foreign banks, and the Central Bank of Kuwait.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None in 2010 or 2011

Convictions: None in 2010 or 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: NO

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Kuwait’s anti-money laundering (AML) law has not been updated since its passage in 2002. Kuwait has had difficulty implementing its AML law (Law No. 35) due in part to structural inconsistencies within the law itself.

Kuwait does not have specific legislation to target terrorist financing. The current AML law does not specifically cite terrorist financing as a crime; terrorist financing criminal cases are treated as crimes against the state. In December 2009, the Kuwaiti Government presented to parliament a draft comprehensive anti-money laundering/counter-terrorist financing (AML/CFT) law intended to bring Kuwait into compliance with international standards, and including definitions of roles and responsibilities and the establishment of a financial intelligence unit (FIU). In November 2010, the Kuwaiti Parliament sent the law back to the government directing it to consider placing provisions for the criminalization of terrorist financing into a separate law.

The vague delineations of the roles and responsibilities of the FIU, Central Bank of Kuwait (CBK), and the Office of Public Prosecution (OPP) continue to hinder the overall effectiveness of Kuwait’s AML/CFT regime. Kuwait’s FIU fails to meet the minimum criteria for membership in the Egmont Group. The FIU currently operates under the authority of the CBK and is not an independent, autonomous authority. Law No. 35 requires banks to file STRs with the OPP, which, in accordance with a memorandum of understanding with the Central Bank, will in turn refer the STRs to the FIU for analysis. The FIU conducts analysis and reports any findings to the OPP for the initiation of a criminal case. The FIU is further limited by its inability to share information about STRs with relevant authorities without prior approval from the OPP. Kuwait’s FIU should be made the national authority for the receipt, analysis and dissemination of STRs and other reports, and given true operational independence.

Covered entities do not demonstrate an understanding of what comprises a suspicious transaction; and Kuwait’s financial crimes enforcement and investigative capacity are also weak. In early 2011, responsibility for investigating money laundering crimes transferred from the Ministry of Interior to Kuwait State Security. Kuwaiti customs, police and prosecutors should be made aware of money laundering methodologies and should initiate inquiries and investigations without waiting for the filing and dissemination of a STR. In order to build domestic enforcement and investigative capacity and to increase public awareness about financial crimes and regulations, the Government of Kuwait (GOK) hosts money laundering training conferences and other similar events, sometimes in coordination with regional bodies and international organizations.

Although the law requires travelers to disclose to customs authorities upon entry if they are carrying any national or foreign currency, gold bullion, or other precious materials, the law does not require a universal written declaration when carrying cash or precious metals upon exiting Kuwait. Despite the criminalization of currency smuggling into Kuwait, cash reporting requirements are not uniformly enforced at ports of entry other than at Kuwait International Airport and the Al-Abdali point of entry. The last court case of currency smuggling on record was reportedly in 2008 and has not been prosecuted. Kuwait should take steps to implement and enforce a uniform cash declaration policy for both inbound and outbound travelers at all its points of entry.

The GOK monitors and regulates funds transfers by authorized charities abroad, using a coupon tracking system as well as electronic bank transfers to create a formal paper trail for all donations. The GOK reports that, despite increased regulations, the amount of donations continues to rise in Kuwait. Financial support to terrorist groups, both by charities and by individuals continues to be a major concern. Kuwait should criminalize terrorist financing and ratify and implement fully the United Nations International Convention for the Suppression of the Financing of Terrorism.

Kyrgyz Republic

The Kyrgyz Republic operates largely on a cash economy and with decentralized accounting systems, which makes money laundering difficult to detect. The banking sector is small and the Kyrgyz Republic is not a regional financial center. A significant percentage of the country’s GDP comes from remittances from abroad, posing a money laundering vulnerability. Corruption, organized crime, and a significant shadow economy also make the country vulnerable to money laundering and terrorist financing. Narcotics trafficking, tax and tariff evasion, and corruption related to the performance of official duties or government contracts are generally regarded to be the major sources of laundered proceeds. Money laundering also allegedly occurs through trade-based fraud and bulk cash carriers.

The presence of hawalas, money or value transfer services, and free trade zones poses risks in regard to money laundering; however, there is little information available on these topics.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: NO civilly: NO

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None 2008 - 2011

Convictions: None 2008 - 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Government of the Kyrgyz Republic (GOKR) has adopted anti-money laundering/counter-terrorist financing (AML/CFT) legislation and established the Financial Intelligence Service (FIS). However, the lack of political will and interagency cooperation, resource constraints, inefficient financial systems, and corruption hamper efforts to effectively combat money laundering and terrorist financing. Also, the FIS is not recognized by other government entities as a “legitimate” investigative agency, which causes a lack of cooperation and information sharing across agency lines. As of December 2011, the Kyrgyz Republic’s Parliament and the GOKR were discussing the possibility of eliminating the FIS and transferring its functions to another government agency.

The banking system is at risk for money laundering, as oversight of the banking sector is generally weak, and key reporting issues need to be resolved: auto dealers and real estate developers are not included in the list of entities required to report large dollar transactions. Additionally, the statutory threshold amount that triggers mandatory reporting remains high at $25,000.

The GOKR should continue to strengthen legislation as it relates to money laundering and financial crimes that support terrorist organizations. In addition, the Kyrgyz Republic must increase and enhance training in AML/CFT investigative techniques. The GOKR developed an action plan to adequately criminalize money laundering and terrorist financing; establish and implement an adequate legal framework for identifying, tracing and freezing terrorist assets; establish and implement adequate measures for the confiscation of funds related to money laundering; establish effective customer due diligence measures for all financial institutions; and implement an adequate and effective AML/CFT supervisory program for all financial sectors.

As of January 1, 2012, casinos will be outlawed in the Kyrgyz Republic. This will provide one less opportunity for money launderers to hide and disperse assets under the cover of a legitimate business operation.

Laos

Laos is not a regional or offshore financial center. However, its position at the crossroads of mainland Southeast Asia’s drug trade, high rate of economic growth, and weak legal and regulatory framework make it vulnerable to money laundering activities. In 2011, the Government of Laos (GOL) reiterated an earlier estimate of the value of the illicit drug economy of 10% of GDP, or approximately $750 million.

Development assistance from overseas donors accounts for over 80% of the GOL operating budget; there are concerns that a substantial portion of this funding may be stolen and subsequently laundered. Reliable public reporting of revenues from government and private mining and hydropower assets is often lacking. Bulk cash smuggling to Thailand, China, and Vietnam is likely occurring. During 2011 Lao law enforcement authorities seized several large amounts of cash during counternarcotics operations.

The gaming industry, primarily driven by Chinese tourists visiting casinos in Special Economic Zones (SEZs) near the border, continues to present a money-laundering opportunity outside of the formal financial sector. The Ministry of Information and Culture (MOIC) is responsible for the regulation of casinos in Laos. However, its regulatory regime has no known AML controls for casinos in place. Inside the financial system, the legal regime is inadequate to cope with the rapid growth of the banking sector, which has grown by approximately one-quarter in the last two years. SEZs present an additional complication for the anti-money laundering (AML) regime, as it is not clear that MOIC regulatory authority applies to casinos located inside the SEZs.

Terrorist financing is not criminalized, and there has never been a money laundering investigation or prosecution in Laos.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: NO civilly: NO

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, finance companies, loan institutions and cash transfer companies

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 28 from October 2006 to December 2010

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, finance companies, loan institutions and cash transfer companies

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: NO

With other governments/jurisdictions: Not available

Laos 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/Lao%20PDR%20ME1.pdf

Enforcement and implementation issues and comments:

The GOL continues to struggle with the implementation of existing anti-money laundering laws and decrees. Financial institutions, law enforcement, the Anti-Money Laundering Intelligence Unit (AMLIU) in the Bank of Laos (BOL), and justice system personnel still lack a clear awareness of the threat of money laundering. The establishment of a banking industry trade association in November 2011 provides a possible avenue for raising awareness about money laundering and financial crimes. The GOL should pursue additional avenues to ensure that covered entities are aware of their compliance responsibilities.

Reporting entities designated in the AML decree, other than financial institutions, remain unsupervised for AML purposes. The BOL-issued guidelines for suspicious transaction reporting have resulted in only a small number of reports to date. None are known to have resulted in referrals to law enforcement. The AMLIU continues to lack the technical and procedural means to detect and refer such cases. The GOL should improve the monitoring of all entities not supervised by the Bank of Laos for AML/CFT compliance. Laos began to address the vulnerabilities in the gaming industry through the issuance of a new Prime Ministerial Decree in 2010.

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

Terrorist financing continues to be ignored. There is currently no defined protection against liability for individuals reporting ML/TF activity, nor is tipping off suspect individuals and entities that they are under investigation for a criminal offense criminalized. The GOL should develop and implement safe harbor protection rules and criminalize tipping off.

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

Latvia

Latvia is a regional financial center that has a large number of commercial banks with a sizeable non-resident deposit base. Total bank deposits have increased in the past year, with non-residential deposits increasing by 17% and comprising 41% of total bank deposits (as of August 2011).

In August 2006, the United States issued a Final Rule under Section 311 of the USA PATRIOT Act, imposing a special measure against the VEF Banka, as a financial institution of primary money laundering concern. The bank was found to lack adequate AML/CFT controls and was used by criminal elements to facilitate money laundering, particularly through shell companies. The Latvian authorities subsequently closed the bank, and on August 1, 2011, the Final Rule was rescinded.

Local officials do not consider proceeds from illegal narcotics to be a major source of laundered funds in Latvia, despite the interception of a record 80 kilograms of hashish at the Latvian-Russian border in early September. Authorities report that the primary sources of money laundered in Latvia are tax evasion; organized criminal activities, such as prostitution, tax evasion, and fraud, perpetrated by Russian and Latvian groups; as well as other forms of financial fraud. Officials report that questionable transactions and the overall value of money laundering have remained below pre-financial crisis levels. Latvian regulatory agencies closely monitor financial transactions to identify instances of terrorist financing.

Public corruption remains a problem in Latvia. This year, the Corruption Prevention and Combating Bureau (KNAB) initiated proceedings against several public officials for financial fraud, including money laundering. For example, an official of the Ministry of Finance was charged with bribing an official of the State Revenue Service (SRS) to allow illegal activities. In another instance, an assistant head of a Latvian-owned bank was arrested for allegedly demanding a 50,000 LVL (approximately $100,000) bribe in return for a favorable loan.

There is a black market for smuggled goods (primarily cigarettes, alcohol and gasoline); however, contraband smuggling does not generate significant funds that are laundered through the financial system. In the first nine months of 2011, confiscation of smuggled goods has increased several fold over 2010 figures (494% more fuel has been seized so far).

Four special economic zones provide a variety of significant tax incentives for manufacturing, outsourcing, logistics centers, and the transshipment of goods to other free trade zones. These zones are located at the free ports of Ventspils, Riga, and Liepaja, and in the inland city of Rezekne near the Russian and Belarusian borders. The zones are covered by the same regulatory oversight and enterprise registration regulations that exist for other areas. In 2011, the SRS uncovered the largest fraud case in the history of the Riga Free Port; the criminal investigation into tax evasion and smuggling is ongoing.

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, credit institutions, life insurance companies, intermediaries, private pension fund administrators, investment brokerage firms and management companies, currency exchange offices, and money transmission or remittance offices; tax advisors, external accountants, and sworn auditors; sworn notaries, advocates, and other independent legal professionals; trust and company service providers; real estate agents or intermediaries; organizers of lotteries or other gambling activities; persons providing money collection services; EU-owned entities; and any merchant, intermediary or service provider, where payment for goods or services is accepted in cash in an amount equivalent to or exceeding 15,000 EUR (approximately $20,000)

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 15,467 from January 1 through October 31

Number of CTRs received and time frame: 10,961 from January 1 through October 31

Note: Number of CTRs includes both cash transactions and other unusual transactions, as per the Latvian Law.

STR covered entities: Banks, credit institutions, life insurance companies, intermediaries, private pension fund administrators, investment brokerage firms and management companies, currency exchange offices, and money transmission or remittance offices; tax advisors, external accountants, and sworn auditors; sworn notaries, advocates, and other independent legal professionals; trust and company service providers; real estate agents or intermediaries; organizers of lotteries or other gambling activities; persons providing money collection services; any merchant, intermediary or service provider, where payment for goods or services is accepted in cash in an amount equivalent to or exceeding 15,000 EUR (approximately $20,000); and public institutions

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 39 persons prosecuted for 85 crimes from January 1 through October 31, 2011

Convictions: Six cases with final court judgments and eight convicted persons from January 1 through October 31, 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

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

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

Enforcement and implementation issues and comments:

In 2011, Latvia adopted beneficial ownership disclosure amendments which require shareholders owning 25% of shares or more to submit data identifying the natural person behind the shareholder. The latest amendments of the AML/CFT Law simplify customer due diligence, add payment services providers and electronic money institutions to the list of entities subject to the Law, and clarify the definition of “financial institutions.” Finally, the AML/CFT Law now extends to EU-owned entities and requires their compliance with the Latvian laws related to customer identification, due diligence, and record keeping.

Under Latvian law, foreign politically exposed persons (PEPs) are always subject to enhanced due diligence procedures. Current laws do not require enhanced due diligence procedures for domestic PEPs, however they allow discretion to any institution or professional covered by KYC rules to apply enhanced due diligence, based on its risk assessment for a particular customer.

Latvian officials have cooperated with USG law enforcement agencies to investigate numerous financial narcotics-related crimes. The Latvian Financial and Capital Market Commission (FCMC) regularly exchanges information with the U.S. Securities and Exchange Commission. More broadly, officials in Latvia are also able to provide assistance outside of the formal mutual legal assistance process in accordance with the current AML/CFT laws. Total assets seized by law enforcement officials in money laundering cases was approximately 177,000 LVL (approximately $347,000), a decrease from 2010.

“Internet phishing” crimes have increased from 67 in 2010 to 223 in the first ten months of 2011. The value of these transactions remains small and does not significantly contribute to money laundering. However, authorities are concerned that Latvian youth are allegedly used by the German and Dutch phishing hackers as “money mules,” allowing their bank accounts to serve as conduits for illicit money.

Latvia has comprehensive AML/CFT laws and regulations. The scope of the “shadow” (untaxed) economy (estimated at around 40% of the overall economy), geographic location, and public corruption make it challenging to combat money laundering. Despite these difficulties, Latvian law enforcement officials and regulators are making progress. FCMC reports that Latvian banks have substantially invested in their IT systems to design programs for identifying suspicious activities, especially with regard to high-risk clients. FCMC is committed to strengthen its capacity by increasing its human and financial resources, specifically for AML purposes. FCMC has also drafted a memorandum of understanding for cooperation with U.S. Commodity Futures Trading Commission and is awaiting the Commission’s reply.

Lebanon

Lebanon is a financial hub for banking activities in the Middle East and eastern Mediterranean and has one of the more sophisticated banking sectors in the region. Lebanon faces significant money laundering and terrorist financing challenges; for example, Lebanon has a substantial influx of remittances from expatriate workers and family members, estimated by the World Bank at $8.4 billion in 2010. It has been reported that a number of Lebanese abroad are involved in underground finance and trade-based money laundering (TBML) activities. In 2011, Lebanese Canadian Bank was designated as a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act.

Laundered proceeds come primarily from foreign criminal activity and organized crime, and Hizballah, which the United States has designated as a terrorist organization; though the Government of Lebanon (GOL) does not recognize this designation. Domestically, there is a black market for cigarettes, cars, counterfeit consumer goods, and pirated software, CDs and DVDs. However, the sale of these goods does not generate significant proceeds that are laundered through the formal banking system. In addition, the domestic illicit narcotics trade is not a principal source of laundered proceeds.

Lebanese expatriates in Africa and South America have established financial systems outside the formal financial sector, and some are reportedly involved in TBML schemes. Lebanese diamond brokers and purchasing agents are reportedly part of an international network of traders who participate in underground activities including the trafficking of conflict diamonds, diamond trade fraud (the circumvention of the Kimberly process) and TBML.

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

For additional information focusing on terrorism financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, lending institutions, money dealers, financial brokerage firms, leasing companies, mutual funds, insurance companies, real estate developers, promotion and sale companies, high-value goods merchants (jewelry, precious stones, gold, works of art, archeological artifacts)

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 151 from December 2010 until October 2011

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, lending institutions, money dealers, financial brokerage firms, leasing companies, mutual funds, insurance companies, real estate developers, promotion and sale companies, high-value goods merchants (jewelry, precious stones, gold, works of art, archeological artifacts)

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Seven - December 2010 through October 2011

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Lebanon is a member of 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/MER/MutualEvaluationReportoftheLebaneseRepublic-English.pdf

Enforcement and implementation issues and comments:

Lebanon is seeking to finalize a regulation which would add predicate offenses to the existing money laundering law 318/2001. The draft legislation would also impose financial penalties on obliged entities for reporting violations, and oblige lawyers and accountants to report suspicious transactions.

A December 2010 amendment to circular 83 provides for enhanced due diligence procedures for foreign PEPs. Lebanon’s financial intelligence unit, the Special Investigations Commission (SIC), has issued a number of circulars amending the regulations on the control of financial and banking operations for fighting money laundering and terrorism financing; all address exchange institutions and/or transactions with exchange institutions, or the cross-border transportation of cash, metal coins and bullion. The trading of bearer shares of unlisted companies remains a vulnerability, and the GOL should take action to immobilize those shares.

Although the number of filed STRs and subsequent money laundering investigations coordinated by the SIC has steadily increased over the years, prosecutions and convictions are still lacking. In addition, there should be more emphasis on proactive targeting and not simply a reliance on STRs filed by financial institutions to initiate investigations. This could be attributable to a lack of political will to effectively prosecute cases or a lack of resources and familiarity with AML/CFT standards. Corruption also touches all aspects of Lebanese society, which may impede prosecution efforts.

Lebanon’s Internal Security Forces (ISF) received 49 SIC referrals and 22 Interpol notices to investigate money laundering and terrorist financing activities but there were no subsequent arrests or prosecutions. The ISF Money Laundering Department staff lacks the training and skill set to conduct effective money laundering investigations, as well as equipment and software programs to effectively track cases. Additionally, there is lackluster coordination among law enforcement entities. Linking the efforts of all concerned authorities and monitoring the effectiveness and efficiency of the AML/CFT system in general might improve the system’s effectiveness. The GOL should encourage more efficient cooperation, including the development of task forces, between financial investigators and other relevant agencies such as Customs, the ISF, the SIC, and the judiciary. The GOL also should consider amending its legislation to allow a greater ability to provide forfeiture cooperation internationally and also provide authority for the return of fraudulent proceeds.

Customs is required to inform the FIU of suspected TBML or terrorist financing; however, high levels of corruption within Customs create the potential to compromise effectiveness on measures addressing vulnerabilities for TBML and other threats. The GOL should enforce cross-border currency reporting. Existing safeguards also do not address the issue of the laundering of diamonds. Law enforcement authorities should examine domestic ties to the international network of Lebanese brokers and traders.

Lebanon should increase efforts to disrupt and dismantle terrorist financing efforts, including those carried out by Hizballah. Finally, the GOL should become a party to the UN International Convention for the Suppression of the Financing of Terrorism.

Lesotho

The Kingdom of Lesotho has a small, concentrated financial sector offering limited financial services. The financial sector is closely linked to that of South Africa. The Government of Lesotho (GOL) is increasing its ability to control and monitor the flow of money in Lesotho.

While there is no significant black market for smuggled goods in the country, undeclared and under-declared items pass between Lesotho and South Africa daily. The vast majority of smuggling is low level and committed by individuals to avoid paperwork and hassle. Larger items are smuggled to avoid paying import fees and taxes.

Criminal activities have organized tendencies when involving cross-border crimes. Predicate offenses of concern include trafficking in drugs (mainly cannabis – locally known as dagga), fire arms and human beings; counterfeit and smuggling of tobacco/cigarettes and garments; smuggling of diamonds; robbery, including of cash in-transit; corruption (especially government procurement); fraud and forgery; and cattle theft.

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

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

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

Number of CTRs received and time frame: Not available

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None in 2010

Convictions: None in 2010

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

Lesotho 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/Deatiled-MER-for-the-Kingdom-of-Lesotho.pdf

Enforcement and implementation issues and comments:

Lesotho adopted its 2010 National Strategy; however, inadequate resources, capacity, and expertise, as well as lack of awareness and training pose serious challenges to the adequate implementation of AML/CFT procedures. Lesotho, however, is making progress. The Directorate on Economic Offenses is forming its anti-money laundering unit; and the Ministry of Finance created the financial intelligence unit, which needs to be strengthened. Border enforcement and value transfer are areas of particular concern.

Liberia

Liberia is not a significant regional financial center and financial controls are weak. The Liberian economy is essentially cash-based, with both Liberian and U.S. dollars being legal tender, facilitating the laundering of U.S. currency. Currently, nine commercial banks operate in Liberia, eight of which are foreign-owned. There are presently 76 bank branches operating in 11 of Liberia’s 15 counties. Approximately half of the banks provide money transfer services. Three offer credit cards, automated teller machines, internet banking and other modern bank products and services across the country. There also are over 700 licensed and non-licensed foreign currency exchange bureaux. Liberia has a significant market for smuggled goods, which are easily imported as a result of porous borders. There is little information on whether money laundering is linked to the sale of narcotics, but few hard drugs are interdicted in Liberia. The relative openness of Liberia’s economy coupled with its craving for foreign investment makes the country potentially prone to some degree of illegal business activities.

There are no confirmed cases of money laundering or terrorist financing in the Liberian banking sector. Money laundering as an offense does not feature prominently on police records.

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Central Bank of Liberia, banks, thrift and loan associations; broker/ dealers in securities and commodities; bureau de change, check cashers, issuers of credit cards, money orders and other similar instruments; insurance, loan or financing agencies and underwriters; and funds remitters

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: None in 2011

Number of CTRs received and time frame: None in 2011

STR covered entities: Central Bank of Liberia, banks, thrift and loan associations; broker/ dealers in securities and commodities; bureau de change, check cashers, issuers of credit cards, money orders and other similar instruments; insurance, loan or financing agencies and underwriters; and funds remitters

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Liberia is a member of the Inter Governmental Action Group Against Money Laundering in West Africa (GIABA), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here:

http://www.giaba.org/media/M_evalu/GIABA%20DETAILED%20MUTUAL%20EVALUATION%20%20%20%20REPORT%20%20ON%20THE%20REPUBLIC%20OF%20LIBERIA%20-2011.pdf

Enforcement and implementation issues and comments:

Liberia has not yet established a financial intelligence unit (FIU). The Central Bank of Liberia (CBL) receives STRs from licensed commercial banks which are analyzed for internal purposes only. Draft AML/CFT legislation, under review by the inter-ministerial committee comprising the CBL, Ministry of Finance and the Ministry of National Security, calls for setting up an FIU in the CBL. Intelligence related to money laundering and other financial crimes is handled by various government security organizations in an uncoordinated fashion.

In Liberia, a foreign exchange bureau may be established by any person, partnership or company upon receipt of a license from the CBL. Liberia has not implemented the regulation and supervision of bureau de change for AML/CFT purposes. In addition to the licensed forex bureaus, there are a number of unregulated money changers throughout the country whose activities have raised concerns among foreign exchange bureau operators and the general public. Throughout Liberia, forex is sold to anybody without identification or verification of the person’s identity or business profile. The Association of Foreign Exchange Bureaux has appealed to the CBL to strictly enforce the CBL Regulations for Licensing and Supervision of Foreign Exchange Bureaux.

Liberia presently lacks a supervisory entity for the gaming sector consisting of two casinos.

The Liberia National Police and the National Bureau of Investigation have jurisdiction over financial crime investigations. The Ministry of National Security and the National Security Agency also have some authority to investigate financial crimes.

The Ministry of Justice has unlimited authority over asset forfeiture and seizure, while the Liberian Anti-Corruption Commission can trace, seize and freeze assets for those charged with corruption and economic sabotage. The police and other security officials have the power to seize drug-related assets, but need permission from the courts. Although the AML law provides for seizure of laundered assets including property, land, securities, and cash, there have been no arrests, prosecutions or convictions for money laundering or terrorist financing. The Liberian government has not frozen the assets of any of the Liberians (including four Liberian legislators) on the UN asset-freeze list.

Generally, implementation of laws is hampered by political interference, corruption and a lack of capacity within the judiciary, and a lack of adequate resources. Under Liberia’s AML law, “serious crimes” covers only three of the 20 predicate offenses for ML listed in the international standards. The government of Liberia has not criminalized the financing of terrorism as required by the UN Security Council Resolution 1373.

In 2011, the CBL continued its transition to risk-based supervision of the financial sector.

Libya

2011 witnessed the collapse of the former Libyan government headed by Muammar Qaddafi. In response to the violent crackdown on the Libyan people, and in order to hasten the collapse of the Qaddafi regime, in February 2011 the United States imposed military and financial sanctions against the Libyan leader, his government, and his inner circle. The United Nations, United Kingdom, and European Union followed suit shortly thereafter. With Qaddafi’s death in October, and the subsequent formation of an interim government, financial sanctions on Libya’s Central Bank and foreign investment bank were lifted. As the Government of Libya (GOL) works to assert its authority, armed gangs, former members of fighting forces, tribes, and clans within Libya engage in criminal activity for profit, including theft, weapons trafficking, and extortion.

Despite high-level awareness of the need for diversification, for the foreseeable future the GOL will continue to be dependent on the oil and gas sectors of the economy to generate revenue. The markets remain primarily cash-based, and hawala and informal value transfer networks are present. Hawala money dealers (muhawaleen) are often used to facilitate trade and small project finance. Libya is a destination and transit point for smuggled goods, particularly black market and counterfeit goods from sub-Saharan Africa, Egypt, and China. Contraband smuggling reportedly includes narcotics, particularly hashish/cannabis and heroin. Libya is not considered to be a production location for illegal drugs, although its geographic position, porous borders and limited law enforcement capacity make it an attractive transit point for narcotics. Libya is also a transit and destination country for large numbers of migrants from sub-Saharan Africa and Egypt, whose movement across borders is primarily facilitated by bribery of border officials. Libya has been going through a slow opening of its financial sector and modernization of its banking system. Priorities for the new GOL remain to be seen.

Corruption remains a large problem. Libya is ranked 168 out of 183 countries in Transparency International’s 2011 International Corruption Perception Index.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: NO

With other governments/jurisdictions: NO

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

Enforcement and implementation issues and comments:

Particularly after the fall of the former Libyan regime, there is little information or reliable data on the scope of Libya’s anti-money laundering/counter-terrorist financing countermeasures, including investigations, asset forfeiture, prosecutions, and convictions. In general, training and resources are lacking to conduct anti-money laundering awareness and for countermeasure implementation. Libya’s financial intelligence unit (FIU) was set up under the Qaddafi regime and has retained its Qaddafi-era director.

It is illegal to transfer funds outside of Libya without the approval of the Central Bank of Libya (CBL). Cash courier operations are in violation of Libyan law. It is estimated up to 10% of foreign transfers are made through illegal means (i.e., not through the CBL). Prior to the revolution, between 1.5 and 2 million foreigners were thought to live and work in Libya. Although that number dropped dramatically during the revolution, foreign workers began to return to Libya in late 2011. Funds transfers by migrant workers (mainly from sub-Saharan Africa and Asia) are difficult for the Libyan government to monitor.

Trade is often used to provide counter-valuation or a means of balancing the books between hawaladars. Given the poor quality and limited reach of Libya’s banking system, Libya’s socialist practices, and commercial rivalries among regime insiders that discourage disclosure of income and business transactions, many Libyans and foreigners rely on informal mechanisms for cash payments and transactions. Until the recent revision of the tax code, tax rates of up to 80-90% also encouraged off-the-book transactions.

Liechtenstein

The Principality of Liechtenstein has a well-developed offshore financial services sector, liberal incorporation and corporate governance rules, relatively low tax rates, and a tradition of strict bank secrecy. All of these conditions significantly contribute to the ability of financial intermediaries in Liechtenstein to attract both licit and illicit funds from abroad. Liechtenstein’s financial services sector includes 17 banks, 107 asset management companies, 40 insurance companies and 71 insurance intermediaries, 33 pension schemes and six pension funds, 392 trust companies and 21 fund management companies with approximately 469 investment undertakings (funds), and 637 other financial intermediaries. The three largest banks control 85% of the market.

In recent years the Principality has made continued progress in its efforts against money laundering as banking secrecy has been softened to allow for greater cooperation with other countries to identify tax evasion. The Liechtenstein Government has recognized the OECD standard as the global standard in tax cooperation and has renegotiated a series of double taxation agreements to include administrative assistance on tax evasion cases.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 328 in 2010

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Seven from October 19, 2010 to October 31, 2011

Convictions: None from October 19, 2010 to October 31, 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanisms: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Because there are no laws for declaration of currency and monetary instruments, Liechtenstein’s authorities cannot effectively conduct bulk cash investigations.

Liechtenstein has shown an important effort to improve deficiencies in combating money laundering. The 2010 reporting year saw a new record high number of suspicious activity reports (SARs), an increase of 39.6% over 2009. Nearly half (47.6%) of the SARs were based on fraud concerns; 8.8% on money laundering; and 30.6% on the other enumerated offense categories. In 2010, 83.8% of Liechtenstein’s SARs were forwarded to the Office of the Public Prosecutor. No SARs were submitted for suspected terrorist financing. The present SAR reporting requirements do not clearly indicate whether attempted transactions relating to funds used in connection with terrorism are covered.

In practice, many of the customer characteristics often considered high-risk in other locales, including non-resident and trust or asset management accounts, are considered routine in Liechtenstein, subject only to normal customer due diligence procedures. Liechtenstein also decided not to include entities with bearer shares, trusts and foundations, or entities registered in privately-held databases in the high-risk category. Liechtenstein should consider reviewing whether this decision makes its financial system more vulnerable to illegal activities.

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

Lithuania

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

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

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 207 by November 2011

Number of CTRs received and time frame: 478,295 by November 2011

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 13

Convictions: Nine

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

In 2011, the Lithuanian Parliament adopted the draft law amending the Code of the Administrative Infringements that envisions higher penalties for non-compliance with preventive measures, differentiating violations subject to administrative penalties. Administrative proceedings will be brought against individuals and organizations’ management. Also in 2011, the Lithuanian Parliament amended the AML/CFT Law with a new Article under which customs controls will be applied to cash brought into or leaving Lithuania from or into other EU countries.

The Financial Crime Investigation Service cannot use civil law to forfeit assets, as there are no such laws in Lithuania.

According to the Baltic Anti-Money Laundering Survey 2011, a majority of Lithuanian banks have assessed the overall level of regulatory burden as acceptable, but at the same time reveal a need for better focused requirements in order to ensure a more effective AML system.

Luxembourg

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

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks and payment institutions; investment, tax, and economic advisers; brokers, custodians, and underwriters of financial instruments; commission agents, private portfolio managers, and market makers; managers and distributors of units/shares in undertakings for collective investments (UCIs); financial intermediation firms, registrar agents, management companies, trust and company service providers, and operators of a regulated market authorized in Luxembourg; foreign exchange cash operations; debt recovery and lending operations; pension funds and mutual savings fund administrators; corporate domiciliation agents, company formation and management services, client communication agents, and financial sector administrative agents; primary and secondary financial sector IT systems and communication networks operators; insurance brokers and providers; auditors, accountants, notaries, and lawyers; casinos and gaming establishments; real estate agents; and any other natural or legal persons trading in goods to the extent that payments are made in cash in an amount of €15,000 (approximately $20,250) or more

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 7,741 as of November 2011

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks and payment institutions; investment, tax, and economic advisers; brokers, custodians, and underwriters of financial instruments; commission agents, private portfolio managers, and market makers; managers and distributors of units/shares in undertakings for collective investments (UCIs); financial intermediation firms, registrar agents, management companies, trust and company service providers, and operators of a regulated market authorized in Luxembourg; foreign exchange cash operations; debt recovery and lending operations; pension funds and mutual savings fund administrators; corporate domiciliation agents, company formation and management services, client communication agents, and financial sector administrative agents; primary and secondary financial sector IT systems and communication networks operators; insurance brokers and providers; auditors, accountants, notaries, and lawyers; casinos and gaming establishments; real estate agents; and any other natural or legal persons trading in goods to the extent that payments are made in cash in an amount of €15,000 (approximately $20,250) or more

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 127 as of November 2011

Convictions: 77 as of November 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Luxembourg is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/infobycountry/0,3380,en_32250379_32236963_1_70591_43383847_1_1,00.html

Enforcement and implementation issues and comments:

During 2011, competent authorities were busy implementing the comprehensive package of legislative and administrative actions that were put in place in 2010, notably the Law of October 27, 2010. This law introduces important changes to AML/CFT provisions and prescribes changes to 20 existing pieces of legislation. Most visibly, the financial intelligence unit (FIU) expanded its capabilities through the hiring of additional analysts and continued preparations for an enlargement of the FIU premises. Nevertheless, state prosecution officials have called publicly for further resources, notably more analysts. In response to these requests, the Ministry of Justice has pledged to continue supporting the state prosecution, and the FIU in particular, with the level of resources needed to fulfill its responsibilities. In terms of quantitative data, the number of transaction reports, money laundering criminal prosecutions, and convictions has risen in comparison to 2010 following the systematic implementation of the new legislation.

Macau

Macau, a Special Administrative Region (SAR) of the People’s Republic of China, is not a significant regional financial center. However, with reported gaming revenues of $30.5 billion from January to November 2011, Macau is the world’s largest gaming market by revenue. Macau’s gaming industry relies heavily on loosely-regulated gaming promoters, known as junket operators, for the supply of gamblers mostly from nearby mainland China. Increasingly popular among gamblers seeking inscrutability and alternatives to China’s currency movement restrictions, junket operators are also popular among casinos aiming to reduce credit default risk and unable to legally collect gambling debts in China. This inherent conflict of interest, together with the anonymity gained through the use of the junket operator in the transfer and commingling of funds, as well as the absence of currency and exchange controls, present vulnerabilities for money laundering. Primary sources of criminal proceeds in Macau, attributed to criminal networks spanning across Macau’s boundary with mainland China, are: gaming-related crimes, robbery offenses, corruption, organized crime, and narcotics crimes.

For additional information focusing on terrorism financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, credit and insurance entities, casinos, gaming intermediaries, remittance agents and money changers, cash couriers, trust and company service providers, realty services, pawn shops, traders in high-value goods, notaries, registrars, commercial offshore service institutions, lawyers, auditors, accountants, and tax consultants

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 1,190 from January to September 2011

Number of CTRs received and time frame: Not applicable

STR covered entities: All persons, irrespective of entity or amount of transaction involved

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None from January to June 2011

Convictions: One from January to June 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

Macau is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Macao%20ME2%20-%20FINAL.pdf

Enforcement and implementation issues and comments:

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

The AML law does not require currency transaction reporting (CTR). However, gaming entities are subject to threshold reporting (over MOP 500,000, approximately $62,450) under the supplementary guidelines of the Gaming Inspection and Coordination Bureau (DICJ). Currently, the DICJ only shares statistical data on CTR filings with the FIU. To enhance the FIU’s ability to detect and deter illicit activity, the FIU should have full access to CTR reports collected by DICJ.

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

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

As a SAR of China, Macau cannot sign or ratify international conventions in its own right. Rather, China is responsible for Macau’s international affairs and may arrange for the ratification of any convention to be extended to Macau. The 1988 Drug Convention was extended to Macau in 1999. The UN Convention against Transnational Organized Crime was extended to Macau in 2003. The UN Convention against Corruption and the International Convention for the Suppression of the Financing of Terrorism were extended to Macau in 2006.

Macedonia

Macedonia is not a regional financial center. Money laundering in Macedonia is mostly connected to financial crimes such as tax evasion, smuggling, financial and privatization fraud, insurance fraud, bribery, misuse of official position, and corruption. Most of the laundered proceeds come from domestic criminal activities. A small portion of money laundering activity may be connected to narcotics trafficking, although there is no evidence narcotics trafficking organizations or terrorist groups control money laundering. Organized crime groups involved in trafficking weapons or humans in Macedonia may have laundered the proceeds from these activities by investing in businesses.

Macedonia is not an offshore financial center, and shell banks are not allowed. Most financial transactions are done through the banking system; however, cash transactions and settlements of considerable amounts sometimes take place outside the banking system. There is no evidence that alternative remittance systems exist. There are a few operational free trade zones in Macedonia, which all function as industrial zones within which some foreign-owned industrial production facilities have the legal right to receive the benefits of a free trade zone. The GOM is trying to attract more foreign investment by leasing out several large free trade zones throughout the country.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, savings houses, exchange offices, central securities depository, brokerages, life insurance companies, auditing companies, accountants, notaries, attorneys, real estate agents, consultants, NGOs, car dealerships, cadastre, company service providers, and casinos

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 123 - January – October 2011

Number of CTRs received and time frame: 69,347 - January – October 2011

STR covered entities: Banks, savings houses, exchange offices, central securities depository, brokerages, life insurance companies, auditing companies, accountants, notaries, attorneys at law, real estate agents, consultants, NGOs, car dealerships, cadastre, company service providers, and casinos

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Four - January – July 2011

Convictions: Four - January – July 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Dealers of art, antiques, and other high-value consumer goods, entities dealing with jewelry and precious metals, and travel agencies are excluded from the list of entities obliged to report suspicious and cash transactions to the Macedonian FIU. In 2011, the Law on Money Laundering Prevention and other Criminal Proceeds and Financing Terrorism (AML/CFT Law) was amended to exclude stock exchanges, credit registry, credit bureaus, gaming centers, and non-life insurance companies from the list of obliged reporting entities. At the same time, car dealerships, cadastre, and company service providers were added to the list. So far, there is no evidence any of these entities engage in money laundering or terrorist financing activities. The amendments also strengthen and more precisely define the anti-money laundering/counter terrorist financing (AML/CFT) activities related to reporting entities other than banks.

Anonymous bank accounts and bearer shares are not permitted. Non-bank financial institutions, including exchange offices and non-bank money transfer agents, are poorly supervised and audited in regard to AML/CFT programs and practices. There is a need to improve supervision of the non-bank financial sector and provide necessary resources and training to ensure full implementation of laws. Reporting by lawyers, accountants, brokers, real estate agents, consultants, NGOs, casinos, and notaries is irregular, but improving due to awareness raising efforts.

The AML/CFT Law amendments give the FIU the authority to order the reporting entities to monitor the business relationship when there is suspicion of money laundering or terrorism financing. The law also provides a more precise definition of supervisory authorities, fines and penalties for non-compliance, and provisions for more education and training for reporting entities.

The FIU‘s competencies overlap in many areas with the Public Revenue Office, the Customs Administration, the Financial Police, and the regular police. Coordination among them has been effective in the past few years, especially when working in joint working groups formed and led by a public prosecutor. This has resulted in several coordinated large-scale investigations of cases concerning money laundering, tax evasion, fraud, corruption, and misuse of official position, involving numerous companies and individuals.

To date, there have been no convictions for terrorist financing. A few smaller banks and all savings houses lack the ability to electronically identify account holders and transactions by named individuals.

In 2010, Macedonia passed amendments to the Criminal Procedure Code (CPC) that allow the use of specialized investigative methods in investigating money laundering cases. The effective date of the new CPC has been moved back from late 2011 to November 2012. Real reforms in the judiciary that should enable much stronger efforts against organized crime, terrorism, money laundering, and narcotics smuggling are largely lagging behind. The judicial system is highly politicized and inefficient. Rule of law is not well respected, and selective enforcement of justice is common.

Madagascar

Madagascar is neither a regional financial center nor a major drug trafficking country. Madagascar’s inadequately monitored 3,000 mile coastline facilitates smuggling and money laundering. Drugs transiting the country are mainly shipped to the neighboring islands. Public corruption, violations of the foreign exchange code, and illegal rosewood logging are the major sources of illicit proceeds. Smuggling of gemstones and protected flora and fauna also generate laundered funds. Criminal proceeds laundered in the country derive mostly from domestic criminal activity, but are often linked to international trade. It is suspected most money laundering occurs through informal channels and is not tracked by the government.

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

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Financial institutions

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 49 in 2010

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, money changers, gambling establishments, real estate entities

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 15 in 2010

Convictions: Not available

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: NO

With other governments/jurisdictions: NO

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

Enforcement and implementation issues and comments:

The Government of Madagascar (GOM) should continue to implement the requirements of Law 2004-020 and internationally recognized anti-money laundering/counter-terrorist financing standards. The GOM should pass the stalled legislation on terrorist financing.

In 2008, Madagascar created a financial intelligence unit, SAMIFIN, to carry out research and financial analysis related to money laundering. SAMIFIN is not yet a member of the Egmont Group. In 2010, SAMIFIN identified ariary 316,704 billion (approximately $158 million) of suspicious transactions in the construction, logging and mining sectors. In addition, SAMIFIN noticed several payments in foreign currency without counterparts in imports. A suspicious transfer involving a religious association was also received.

Money laundering related to underground finance and informal value transfer systems should be recognized and investigated. The GOM should train police and customs authorities to proactively recognize money laundering at the street level and at the ports of entry. Additionally, prosecutors should receive training so they are more able to successfully prosecute complex financial crime and money laundering cases.

Madagascar has established contact with the Eastern and Southern Africa Anti Money Laundering Group to discuss possible membership.

Malawi

Malawi is not a regional financial center. One of the primary sources of illicit funds is the production and trade of Cannabis Sativa (Indian hemp) which is extensively cultivated in remote areas of the country. Anecdotal evidence indicates that Malawi is a transshipment point for other forms of narcotics trafficking. Human trafficking, vehicle hijacking, fraud, and corruption are also areas of concern. Smuggling and the laundering of funds are exacerbated by porous borders with Mozambique, Zambia and Tanzania. Malawi has a cash based economy, and there are usually few paper trails to follow in financial investigations.

The Government of Malawi (GOM) has adopted anti-money laundering and counter-terrorist financing legislation; however, the development of institutional capacity and enforcement mechanisms is still lacking.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: NO

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, microfinance institutions, money transmitting firms, discount houses, foreign exchange bureaus, real estate agencies, casinos, accountants, lawyers, dealers in precious metals and stones, and capital markets

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 21 in 2011

Number of CTRs received and time frame: 509,765 from January to October 2010

STR covered entities: Banks, foreign exchange bureaus, microfinance institutions, money transmitting firms, discount houses, real estate agencies, casinos, accountants, lawyers, dealers in precious metals and stones, and capital markets

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Two

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: NO

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The GOM should work toward full implementation of its anti-money laundering/counter-terrorist financing (AML/CFT) legislation. Malawi’s financial intelligence unit (FIU) is set up within the Reserve Bank of Malawi. A permanent FIU Director has not been named.

Although all banks, non-bank financial institutions and designated non-financial businesses and professions covered under the Money Laundering Act must report STRs, to date only banks and foreign exchange bureaus forward reports to the FIU. During 2011, the STRs were disseminated to the Malawi Revenue Authority, Reserve Bank of Malawi, Immigration, Anti-Corruption Bureau, and Fiscal and Fraud Unit of the Malawi Police Service. There have been no successful prosecutions or convictions for money laundering in Malawi. Progress is hampered by a lack of capacity and investigative and prosecutorial expertise. Authorities believe that a deficient national identification system also makes it difficult for financial institutions to apply a standard form of identification.

In 2011, the FIU signed memorandums of understanding with the Immigration Department, Reserve Bank of Malawi, Malawi Revenue Authority and the Malawi Police Service to implement a process for the declaration of currency, precious stones or metals, and negotiable bearer instruments at borders or other ports of arrival or departure.

Malaysia

Malaysia is a growing regional financial center and has a well-developed anti-money laundering/counter-terrorist financing (AML/CFT) framework. Malaysia’s long porous land and sea borders and its strategic geographic position increase its vulnerability to transnational criminal activity, including money laundering and terrorist financing. Malaysia is primarily used as a transit country to transfer drugs originating from the Golden Triangle and Europe; and Iranian and Nigerian drug trafficking organizations are the main sources of illegal proceeds in Malaysia. Drug trafficking is the main source of illegal proceeds in Malaysia.

Malaysian authorities also highlight illegal proceeds from corruption as a significant money laundering risk. Other common predicate offenses generating significant proceeds in Malaysia include fraud, criminal breach of trust, illegal gambling, credit card fraud, counterfeiting, robbery, forgery, human trafficking, extortion and smuggling. Smuggling of goods subject to high tariffs is a major source of illicit funds. Customs’ efforts to investigate invoice manipulation identified risks from trade based money laundering.

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

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

A number of terrorist organizations have been active on Malaysian territory, and authorities have taken action against Jemaah Islamiah and other terrorist networks. Terrorist financing in Malaysia is predominantly carried out using cash and relies on trusted, clandestine networks.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING REQUIREMENTS:

Number of STRs received and time frame: 16,643 in 2010

Number of CTRs received and time frame: Not available

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 100 from 2004 to October, 2011

Convictions: 26 from 2004 to October, 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other: YES

With other governments/jurisdictions: YES

Malaysia is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Malaysian%20MER%20-%20FINAL%20August%202007.pdf

Enforcement and implementation issues and comments:

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

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

In the past 12 months, Malaysia initiated eight new terror finance investigations under its AML/CFT legal framework. Malaysia should take further steps to increase capacity to identify, investigate, and prosecute terrorist and proliferation financing.

Malaysia’s Labuan Financial Services Authority (LFSA) is responsible for ensuring AML/CFT compliance on Labuan, the country’s international offshore financial center. The Labuan Financial Services and Securities Act of 2010 gives LFSA more regulatory, investigative and enforcement authorities over offshore financial services companies licensed in Labuan and removes privacy restrictions on its access to Labuan-based account activities. In 2011, the Inland Revenue Board launched a wide-ranging investigation into money laundering and smuggling activities in Labuan.

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

Maldives

Maldives has a small financial market but is susceptible to money laundering and terrorist financing due to limited oversight capacity. No official figures are available, but anecdotal evidence suggests that illegal drug trafficking in psychotropic substances and corruption produce significant amounts of illegal funds. Drug trafficking is noted as one of the most frequent asset-generating crimes and is estimated to produce up to $57 million per year. There are indications funds are raised in the country to finance terrorist activities abroad. Other predicate offenses include human trafficking, piracy, and offenses committed by gangs. Even though the number of corruption cases is low, only a small percentage are prosecuted and reports indicate the sums involved can be significant.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, security sector licensees

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: None in 2010

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, security sector licensees

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

Maldives is a member of the Asia/Pacific Group on Money Laundering, 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/Maldives%20-%20published%20DAR.pdf

Enforcement and implementation issues and comments:

Money laundering is criminalized in Maldives only with respect to proceeds of offenses listed in the Drugs Act. Although all categories of offenses set out in the international standards have been criminalized, only drug-related offenses are predicate offenses for money laundering, constituting a major shortcoming of the current anti-money laundering/counter-terrorist financing (AML/CFT) framework.

No enforceable AML/CFT obligations are in place. A Banking Act was put in place in 2010 that requires banks to implement basic AML/CFT measures such as customer identification and reporting of suspicious transactions to the financial intelligence unit within the Central Bank’s Maldives Monetary Authority. Beginning in April 2011, intermediaries in the securities sector are required to implement limited AML/CFT measures. Oversight efforts are still in the initial stages.

Shortcomings in the overall criminal legislative framework, in particular with respect to criminal procedure, and the lack of resources of competent authorities make it challenging for the Maldives to fight effectively against money laundering and terrorist financing. Maldives Police Services, the Prosecutor General’s Office and the judiciary need capacity building and training to enforce the existing AML/CFT system.

The Government of the Maldives should become a party to the United Nations Convention against Transnational Organized Crime.

Mali

Mali is not a regional financial center, and presently has no free trade zones or offshore sectors. Like most West African countries, Mali relies on cash for virtually all daily transactions. Illegal proceeds derive from rampant trafficking of drugs, small arms, people, and everyday commodities across the Algerian and Mauritanian borders in the sparsely-populated north of the country. Authorities believe that terrorist cells from al-Qaida in the Islamic Maghreb, known to operate in the north, are involved in smuggling as well as kidnapping for ransom as funds-generating activities. Malian authorities believe that proceeds from cocaine trafficking into Europe from South America may be passed through Malian banks, but lack the resources to make such a determination.

Mali is a member of the West African Economic and Monetary Union (WAEMU), which also includes Benin, Burkina Faso, Cote D’Ivoire, Guinea-Bissau, Niger, Senegal, and Togo. All of the WAEMU members share a common currency, the (West African) CFA, and have developed a common anti-money laundering/combating the financing of terrorism (AML/CFT) framework, including legal and financial intelligence unit (FIU) structures.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

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.: Not available

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 15 in 2011

Number of CTRs received and time frame: 13 in 2011

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Six in 2011

Convictions: None in 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Although Mali’s anti-money laundering law covers a number of financial sectors, very few comply with their legal reporting obligations. While businesses are technically required to report cash transactions over approximately $10,000, most do not. With the exception of casinos, designated non-financial businesses and professions are not subject to customer due diligence requirements. While Mali criminalizes tipping off for terrorist financing-related STRs in its December 2010 legislation, it does not appear to have criminalized tipping off in relation to other types of STRs.

Mali’s financial intelligence unit, the Cellule Nationale de Traitement des Informations Financières (CENTIF), seeks closer relations with foreign financial intelligence units, which will likely come to pass since CENTIF became a member of the Egmont Group of FIUs in 2011. CENTIF’s staff includes secondments from the customs service, police, and gendarme forces; additional training is needed for new CENTIF staff members. Significant challenges to the effectiveness of Mali’s AML/CFT regime remain, including a lack of resources to perform outreach and mount sensitization and training for financial institutions as well as other financial sectors.

Mali also lacks capacity in investigation of money laundering and terrorist financing. For example, Mali lacks the capacity to trace informal networks and money/value transfer systems, including hawalas. There is also doubt as to whether the state prosecutor’s office understands complex financial crimes sufficiently to be able to pursue money laundering or terrorist financing crimes effectively and to a successful prosecution. In the three years since CENTIF was organized, there have been no successful prosecutions for AML/CFT violations.

Malta

Malta is not a regional financial center. Malta’s location between North Africa and Italy makes it a transit point for narcotics and human trafficking to Europe. Incidents of fraud, forgery, and embezzlement are also a concern.

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 73 in 2010

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Eight in 2010

Convictions: One in 2010

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Malta Police Economic Crimes Squad is responsible for the investigation of all financial related crimes. Its Money Laundering Unit investigates reports sent by the financial intelligence unit as well as reports from other sources.

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

Marshall Islands

The Republic of the Marshall Islands (RMI) is not a regional financial center. It consists of 29 atolls and five islands, covering 70 square miles of land, spread across 750,000 square miles of ocean. The country is not economically developed and has limited resources for development. The RMI signed a Compact of Free Association with the United States in 1986, and relies on the United States for the majority of its economic support. There are no known terrorist or narcotics money laundering activities in the Marshall Islands. There are two banks in the country and no brokerage houses or other types of financial firms. Land cannot be sold, and there are no realtors. There are no casinos in the Marshall Islands.

The RMI offshore corporate sector is vulnerable to money laundering. The Marshall Islands Trust Company and the Marshall Islands Maritime & Corporate Administrators, Inc., provide for a robust registration of corporations and ships. The RMI fleet is the third largest flagged fleet in the world, although few of the vessels come to the Marshall Islands. Available information indicates non-resident corporations (NRCs), the equivalent of international business companies, can be formed online. NRCs are allowed to offer bearer shares, and corporate officers, directors, and shareholders may be of any nationality and live anywhere. NRCs are not required to disclose the names of officers, directors, shareholders or beneficial owners, and corporate entities may be listed as officers and shareholders. The corporate registry program, however, does not allow the registering of offshore banks, offshore insurance firms, online gaming institutions, or other companies which are financial in nature. Although NRCs must maintain registered offices in the Marshall Islands, corporations can transfer domicile into and out of the RMI with relative ease. Marketers of offshore services via the Internet promote the Marshall Islands as a favored jurisdiction for establishing NRCs. In addition to NRCs, the Marshall Islands offer nonresident trusts, partnerships, unincorporated associations, and domestic and foreign limited liability companies. No current information is available on the extent of offshore corporate operations.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 14 from January 1 to December 7, 2011

Number of CTRs received and time frame: 2,971 from January 1 to December 7, 2011

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: NO

With other governments/jurisdictions: YES

The Marshall Islands is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/RMI%20ME%202.pdf

Enforcement and implementation issues and comments:

With the assistance of the United States and EU donors, the RMI passed national laws that can be used to prosecute money laundering crimes; however, these laws have not yet been used. The laws criminalizing money laundering cover both individuals and corporations, although predicate crimes are not defined either by list or an all serious crimes approach. The statutes do not include incarceration as a penalty.

Although there presently are no casinos in the RMI, they are covered under the AML laws. The RMI should establish disclosure protections and criminalize tipping off. The RMI should also strengthen KYC requirements, large currency transaction reporting, and records retention.

The RMI should establish an independent national system and mechanism for freezing terrorist assets in a timely manner.

The RMI should ensure its offshore sector is adequately supervised and that information on company ownership and management is available to law enforcement and supervisory authorities. The Marshall Islands signed a tax treaty with Australia, and is in the process of signing tax and other types of treaties with other nations. On September 29, 2011, it became a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Mauritania

The Islamic Republic of Mauritania has a largely informal and under-developed economy. Its economic system suffers from a combination of weak government oversight, lax financial auditing standards, a large informal trade sector, porous borders, lack of enforcement, and corruption in government and the private sector. In recent years, Mauritania has become a transshipment point for cocaine from South America intended for the European market. General smuggling, trafficking in vehicles stolen mostly in Europe, parallel networks, and the provision of logistical support for organized international drug traffickers are all serious problems. Following the election of President Mohamed Ould Abdel Aziz in July 2009, and in response to increasing terrorist and illicit trafficking activities along its long and porous borders with Algeria and Mali, the Government of Mauritania (GOM) began an aggressive campaign against both corruption and the terrorist network of al-Qaida in the Islamic Maghreb.

For additional information focusing on terrorism financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks and money exchangers and remitters

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: Five 2005 - 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks and money exchanges/remittance offices

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Four

Convictions: Two, and two awaiting judgment

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

Mauritania is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF). Its most recent mutual evaluation report can be found here: www.menafatf.org

Enforcement and implementation issues and comments:

While Mauritania has been successful in creating a legal and institutional framework to fight financial crimes, there remain many challenges to its successful implementation of that framework, especially given Mauritania’s cash-based and informal economy. All legal entities, corporations, partnerships, and individuals are covered under Mauritanian laws to prevent laundering and terrorist financing and are subject to both criminal and civil penalties, depending upon the crime committed.

The Financial Information Analysis Commission (CANIF), Mauritania’s financial intelligence unit, would like to expand the legal structure to include real estate holding companies and the complete money/value transfer sector. Monitoring the informal financial markets remains a challenge. Only 4% of Mauritanian adults have access to a bank account, and the money/value transfer sector remains vulnerable to exploitation. Mauritanian authorities are aware of these issues and are working to formalize financial transactions to the extent possible and to devise mechanisms to prevent the exploitation of the remittance sector and other non-bank financial sectors. In 2011, two orders were signed: Order N 640 promulgates an anti-money laundering/counter-terrorism financing ruling covering non-financial companies, real estate agents, and lawyers; and Order N 641 does the same for non-governmental organizations.

President Aziz empowered the Office of the Inspector General of the State and the CANIF to lead efforts to identify, prevent, and reduce corrupt practices and financial crimes, including financial crimes linked to narcotics and terrorist finance networks. CANIF falls under the jurisdiction of the Central Bank of Mauritania and includes representatives of the Mauritanian Ministries of Finance and Justice, as well as the customs authority, national police, and Gendarmerie working together to identify, investigate, prevent, and prosecute financial crimes. In January 2011, CANIF released its first-ever annual report on financial crime in Mauritania. Given that CANIF is a young organization, there is still a great deal of work to be done to formalize its operating procedures and build capacity.

Mauritius

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

The Mauritius Global Business Sector is a major route for foreign investments into the Asian sub-continent and is by far the largest source of foreign direct investment and portfolio investment in India. As of September 2011, there were 27,670 Global Business Companies (GBCs) in Mauritius, including 806 licensed global funds. The offshore sector also includes management companies licensed by the Financial Service Commission (FSC) to provide professional services to GBCs. Shell companies and bearer shares are not allowed in Mauritius nor are nominee or anonymous directors or trustees.

The Mauritius Freeport, a free-trade zone (FTZ), was established to promote the country as a regional FTZ center for Eastern and Southern Africa and the Indian Ocean rim. There are currently about 275 companies which are active in Mauritius Freeport, with a turnover estimated at $667 million.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 18 from January 2011 to October 2011

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 24 from January 2011 to October 2011

Convictions: 13 from January 2011 to October 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: NO

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

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

Legislation to correct deficiencies and amend the AML framework has been pending since 2006, but most of the amendments have not been tabled in the National Assembly. Although coordination is possible via the 2003 Mutual Assistance in Criminal and Related Matters Act, international cooperation, particularly sharing of information, is a lengthy and uncertain process. Timely access to financial documents domestically also is a problem. While Mauritius has a legal framework enabling it to freeze terrorist-related assets without delay, its ability to do so is subject to compliance with judicial proceedings.

The 2011 Asset Recovery Act, passed in the National Assembly in April 2011, will take effect on February 1, 2012. The new law is intended to enable the forfeiture of proceeds of crimes to compensate victims, whether the State or an individual. It contains provisions of both conviction-based and non-conviction based forfeiture. The Director of Public Prosecutions is designated to exercise enforcement powers included in the law. Additionally, the law provides for the Recovered Assets Fund, where forfeited assets would be placed.

Mexico

Mexico is a major drug-producing and drug-transit country. Proceeds from the illicit drug trade leaving the United States are the principal source of funds laundered through the Mexican financial system. Other significant sources of laundered proceeds include corruption, kidnapping, and trafficking in firearms and persons. Sophisticated and well-organized drug trafficking organizations based in Mexico take advantage of the extensive U.S.-Mexico border, the large flow of legitimate remittances, and the high volume of legal commerce to conceal transfers to Mexico. The smuggling of bulk shipments of U.S. currency into Mexico and the repatriation of the funds into the United States via couriers, armored vehicles, and wire transfers remain favored methods for laundering drug proceeds. The combination of a sophisticated financial sector and a large cash-based informal sector complicates the problem. According to U.S. authorities, drug trafficking organizations send between $19 and $39 billion annually to Mexico from the United States, although the Government of Mexico (GOM) disputes this figure. Mexico has seized over $500 million in bulk currency shipments since 2002.

For additional informationfocusing on terrorism financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here:  http://www.state.gov/j/ct/rls/crt/

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: NO civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, mutual savings companies, insurance companies, securities brokers, retirement and investment funds, financial leasing and factoring funds, casas de cambio, centros cambiarios (unlicensed foreign exchange centers), savings and loans institutions, money remitters, SOFOMES (multiple purpose corporate entity), SOFOLES (limited purpose corporate entity), and general deposit warehouses

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 36,040 - January through September 2011

Number of CTRs received and time frame: 4.1 million - January through September 2011

STR covered entities: Banks, mutual savings companies, insurance companies, securities brokers, retirement and investment funds, financial leasing and factoring funds, casas de cambio, centros cambiarios (unlicensed foreign exchange centers), savings and loans institutions, money remitters, SOFOMES (multiple purpose corporate entity), SOFOLES (limited purpose corporate entity), and general deposit warehouses

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 54 from January to October 2011

Convictions: 13 from January to July 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Mexico is a member of the Financial Action Task Force (FATF) and the Financial Action Task Force on Money Laundering in South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/document/20/0,3343,en_32250379_32236963_41911956_1_1_1_1,00.html

Enforcement and implementation issues and comments:

The GOM has taken some important steps to reduce the use of cash in the economy and prevent the laundering of illicit drugs proceeds in U.S. dollars (USD); however, the package of bills submitted in August 2010 to further enhance anti-money laundering regulations remains in limbo in the Mexican Congress. In June 2010, the Finance Ministry implemented regulations imposing limits on USD transactions in Mexico. The caps, which later were eased for border areas, are applicable to cash transactions from dollars to pesos, including deposits, credit payments, and service fees. In addition to limiting transaction amounts for individuals, all USD transactions are prohibited by the regulation for corporate entities and trusts (including account and non-account holding entities), except for those which are accountholders located in border or tourist areas, for which transactions are limited. The impact of the restrictions has been dramatic, with USD cash repatriation to the U.S. from the Mexican formal financial sector dropping by 50%, or $7 billion. The new destination for the USD cash no longer entering the Mexican financial system remains an open question. Recent data does not support the hypothesis that the flows would be redirected to Central America and/or the Caribbean. U.S. and Mexican authorities have agreed to continue studying the flow of U.S. currency.

In 2010, the GOM announced the National Strategy for the Prevention and Elimination of Money Laundering and Financing for Terrorism. On April 14, 2011, the Federal Executive sent to Congress a Bill of Decree by which the Federal Criminal Code and the Federal Criminal Procedures Code are to be amended. The bill includes a modification to the Federal Criminal Code in order to expressly establish that a legal person is liable for any money laundering/terrorist financing crimes, among others, committed by any of its legal representatives acting on its behalf. The bill is currently under review by the Senate. The government also submitted a federal law for the Prevention and Identification of Transactions with Criminal Proceeds, which was approved by the Senate on April 28, 2011, and is currently under review by the Congress. The bill includes, among other important aspects, restrictions on the use of cash in certain transactions (i.e., real estate, jewelry, precious stones and metals, games and lotteries, accounting and legal services).

On August 3, 2011, amendments were issued to the General Law of Auxiliary Credit Organizations and Activities to establish the National Banking and Securities Commission (CNBV) as the supervisory authority for AML/CFT with regard to centros cambiarios, money remitters and non-regulated SOFOMES. This authority will be transferred from the Tax Administration System (SAT) to CNBV. The change was made in recognition that the broad experience of CNBV on AML/CFT issues and its risk-based approach to supervision will allow for better oversight of these entities. The amendment provides for a transition period of 240 days. The existing centros cambiarios and money remitters that registered prior to August 4, 2011, or that requested their registration prior to November 1, 2011, may continue with their operations if SAT approves their registration. If the registration is denied, they must suspend their operations. Any new centros cambiarios or money remitters which did not request registration prior to November 1, 2011 are prohibited from initiating operations until receipt of confirmation of registration by SAT. After March 30, 2012, all requests for registration shall be reviewed by CNBV. The general rule establishes that centros cambiaros may only provide the services of buying, selling or exchanging currency, within certain company formation restrictions and with prior authorization from the Ministry of Finance and Public Credit. An exception to the need for prior authorization is established for centros cambiarios that provide the aforementioned services and do not exceed the threshold of $10,000 per client per day.

In 2011, the GOM also issued a number of AML/CFT regulations covering financial entities; specifically: General Provisions applicable to Auxiliary Credit Organizations (issued on 5/31/11); General Provisions applicable to SOFOLES (issued on 3/17/11); and General Provisions applicable to SOFOMES (issued on 3/17/11). These regulations strengthen reporting requirements and expand the range of entities covered under AML/CFT provisions. The regulations represent concrete steps forward, though until the final passage by the Senate of the 2010 package of anti-money laundering bills Mexico’s regulatory framework will remain incomplete.

Mexico should amend its terrorist financing legislation to fully comport with the UN Convention for the Suppression of the Financing of Terrorism; and enact legislation and procedures to freeze without delay terrorist assets of those designated by the UN 1267 Sanctions Committee.

Micronesia, Federated States of

The Federated States of Micronesia (FSM) is not a regional or offshore financial center. It has no free trade zones. Its geographic isolation, small and relatively poor population, and limited infrastructure make it a low risk for money laundering and terrorist financing as well as smuggled goods. Money laundering activity primarily originates from public corruption, including bribery and misuse of public funds. Corruption extends to directing public contracts and employment to unqualified companies or persons; there are no estimates on the amount of money involved. Since both the executive and legislative branches want to avoid scrutiny, they have not allocated funds for a more robust anti-money laundering/counter-terrorist finance program. Prosecutions are rare.

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

Local law enforcement suspect some smuggled items, mostly cigarettes, make their way onshore.

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

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Financial institutions, cash dealers, insurers, bingo parlors, trustees, and money transaction services

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not applicable

STR covered entities: All banks and financial institutions

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: NO

With other governments/jurisdictions: NO

The Federated States of Micronesia is not a member of a Financial Action Task Force (FATF)-style regional body.

Enforcement and implementation issues and comments:

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

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

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

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

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

Moldova

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

Moldova contains six free trade zones (FTZs), some of which are infrequently used. Reportedly, goods from abroad are sometimes imported into the FTZ and then resold and exported to other countries with documentation indicating Moldovan origin. Companies operating in FTZs are subject to inspections, controls, and investigations by inspectors from the Customs Service and the Center for Combating Economic Crime and Corruption.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 215,214 from January to October 2011

Number of CTRs received and time frame: 16,480 from January to October 2011

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Seven from January to October 2011

Convictions: Eight from January to October 2011

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Moldova has made some progress in instituting a legal framework for combating money laundering that is consistent with international standards. However, in November 2010, the Constitutional Court struck down some of the most relevant provisions of the anti-money laundering law. Specifically, the Court invalidated the provisions of the law enabling the Financial Intelligence Unit (FIU) to collect STRs and temporarily freeze accounts suspected of involvement in illegal activity. The GOM reacted by issuing a decision re-establishing the requirement for financial institutions to report STRs to the FIU. In addition, on April 7, 2011, Moldova’s parliament enacted amendments to the anti-money laundering law which defines the STR reporting obligations according to international standards, sets an equivalent $10,000 threshold for reporting cash transactions, provides additional autonomy for the FIU, and regulates the FIU’s ability to freeze accounts involved in suspicious transactions. The enactment of the anti-money laundering amendments has had a positive impact on the FIU’s institutional development. In addition, the FIU increased its operational capacity by securing electronic access to more governmental databases.

Moldova should continue to review and amend the criminal procedure code to institute non-conviction based confiscation and to permit special investigative techniques to be applied to a wider range of offenses associated with money laundering and terrorist financing. Additionally, the GOM should criminalize tipping off.

Monaco

The Principality of Monaco is the second-smallest country in Europe. It is linked closely to France and is tied to the economic apparatus of the European Union (EU) through its customs union with France and its use of the euro as its official currency. Monaco is known for its security and political stability. Monaco’s state budget is based primarily on taxes, duties, and excises which account for 75% of the total income; casino revenues constitute less than 3% of the state budget. Private banking and fund management dominate the financial sector. Monaco’s 36 banks and three financial institutions hold more than 300,000 accounts and manage total assets of about 750 billion euros (approximately $102.8 billion). Non-residents total 46% of the financial institutions’ total number of clients, representing 60% of the total assets and deposits, respectively almost 84,000 clients and 45 billion euros (approximately $57.6 billion). Money laundering charges relate mainly to offenses committed abroad. Reportedly, the Principality does not face ordinary forms of organized crime, nor is there a significant market for smuggled goods.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, financial institutions, casinos, trustees and company service providers

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 637 in 2010

Number of CTRs received and time frame: Not available

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 21 in 2010

Convictions: 14 in 2010

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

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

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

Mongolia

Mongolia is not a regional financial center. There are few financial and economic crimes, although numbers have increased in the last five years. Mongolia is vulnerable to low-grade transnational crime due to the growth in tourism, investment, and remittances from abroad, but the overall rate of these crimes has not increased. The increase in reports of suspicious transactions is more likely a product of the increasing effectiveness and experience of the Bank of Mongolia’s Financial Information Unit (FIU).

Mongolia’s limited capacity to monitor its extensive borders with Russia and China is a liability in the fight against smuggling and narcotics trafficking, but drug use and trafficking remain limited and unsophisticated. There is a black market for smuggled goods, which appears largely tied to tax avoidance rather than drug trafficking. There are no indications that international narcotics traffickers exploit the banking system, and no instances of terrorist financing have been reported.

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

Legal persons covered: criminally: NO civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

SUSPICIOUS TRANSACTION REPORTING (STR) REQUIREMENTS:

Number of STRs received and time frame: 56 from January 1 – November 1, 2011

Number of CTRs received and time frame: Over 300,000 from January 1 – November 1,

2011

STR covered entities: Banks

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: None

Convictions: None

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

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

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

Enforcement and implementation issues and comments:

The Bank of Mongolia’s FIU expanded international cooperation by signing MOUs with the FIUs of Taiwan, Slovenia and Moldova. The Government of Mongolia (GOM) should strengthen cooperation by implementing a system for the identification and forfeiture of assets, along with arrangements for asset sharing. The GOM should also provide safe harbor protection for individuals and entities filing STRs and cooperating with authorized investigations, while also criminalizing “tipping off” subjects of this reporting.

Although the Parliament passed a law on December 24, 2009, which improved AML/CFT efforts, it failed to bring Mongolia into compliance with international standards, and it is not clear that the GOM has the capacity fully to enforce this law. Deficiencies include inadequate criminalization of money laundering and terrorist financing, lack of adequate procedures to identify and freeze terrorist assets, and the absence of a fully operation and effectively functioning financial intelligence unit, among others.

The GOM should work to improve its legal framework by passing amendments to bring its system fully in line with international standards and dedicate the necessary resources to enforce the provisions. While highly professional, the FIU appears under-staffed, and coordination with other law enforcement organizations reportedly remains deficient. The increasing financial flows in advance of an expected mining-driven boom create a distinct challenge to the Mongolian FIU. Although five cases were opened during the year, the lack of a single successful prosecution to date illustrates the enforcement problem.



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