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2013 International Narcotics Control Strategy Report (INCSR)--Volume II: Money Laundering and Financial Crimes Country Database-- Swaziland through Zimbabwe


Report
Bureau of International Narcotics and Law Enforcement Affairs
July 1, 2013

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Swaziland

The Kingdom of Swaziland is not considered a regional financial center. The financial sector in the Kingdom is small and dominated by subsidiaries of South African financial institutions. The small size of the country as well its proximity to major cities in Mozambique and South Africa make it a transit country for illegal operations in those countries and, to some extent, in the rest of the Southern African region. Proceeds from the sale or trade in marijuana may be laundered in Swaziland. Cash gained from the sale of marijuana and other illegal activities may be used to buy goods for retail outlets and to build houses on non-titled land. A large amount of proceeds involve cross-border transactions through banks, casinos, investment companies, and savings and credit cooperatives.

The Common Monetary Area provides a free flow of funds among South Africa, Swaziland, Lesotho, and Namibia with no exchange controls. Cash smuggling reports are shared on the basis of reciprocity between host government agencies on an informal basis.

There is a significant black market for smuggled goods such as cigarettes, liquor, pirated radio cassettes, videocassettes, and DVDs transited among Mozambique, South Africa and Swaziland. There is a general belief that trade-based money laundering exists in Swaziland. Proceeds generated through corruption are a major concern, as is human trafficking. Swazi officials believe the Kingdom to be at little risk of terrorist financing.

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

Are 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 firms, real estate brokers, cooperatives, provident fund managers, insurance brokers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 30 in 2012

Number of CTRs received and time frame: 0 in 2012

STR covered entities: Banks, insurance companies, fund managers, and pension funds

money laundering criminal Prosecutions/convictions:

Prosecutions: 3 in 2012

Convictions: 0 in 2012

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Swaziland is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.esaamlg.org/userfiles/Detailed-MER-for-the-Kingdom-of-Swaziland(1).pdf

Enforcement and implementation issues and comments:

During the last few years Swaziland has taken several steps to establish an anti-money laundering/counter-terrorist financing (AML/CFT) regime. The Money Laundering and Financing of Terrorism (Prevention) Act which, among other things, provides for the establishment of a financial intelligence unit (FIU) and seeks to forge closer national cooperation and coordination among government institutions involved with AML/CFT activities, came into force in early 2012. The new law also provides for the establishment of an anti-money laundering task force. The FIU is not yet fully operational.

Swaziland has successfully prosecuted one money laundering case. The Royal Swaziland Police Service (RSPS) and the Kingdom’s Anti-Corruption Commission (ACC) are the two main law enforcement agencies mandated to investigate money laundering offenses. In 2012, the Swaziland Revenue Authority (SRA) was officially made a law enforcement agency and will henceforth be involved in the investigation and reporting of financial crime. The RSPS is charged with investigating terrorist financing offenses. According to officials, RSPS officers require additional training and capacity to be adequately prepared to investigate both money laundering and terrorist financing offenses. The Government of the Kingdom of Swaziland should take steps to improve the capacity of, and coordination among, the RSPS, the ACC, the FIU, and the SRA.

Sweden

While Sweden is not a regional financial center, suspicious proceeds increased from 2010 to 2011. According to statistics from the Swedish Financial Police, suspected money laundering transactions totaled $2.3 billion in 2011 compared to $1.2 billion in 2010.

Money laundering in Sweden occurs either through individuals who use the financial system to turn over illicit funds, or with the help of corporations that use financial system services. Money laundering is further facilitated by criminals having contacts or acquaintances within, or influence over, corporations and actors within the financial system. Laundered money emanates from sales of narcotics, tax fraud, economic crimes, robbery, and organized crime. Money laundering is concentrated primarily in large urban regions, such as Stockholm, and is frequently conducted over the internet, utilizing international money transfer services, gaming sites, and narcotics and illicit chemical vending sites. Suspicious transaction reports (STRs) generally do not reference organized crime, although it is a growing concern. Public corruption is not an issue in Sweden.

Sweden does not have an offshore financial center. Sweden provides no offshore banking, and does not readily attract foreign criminal proceeds as it does not have especially favorable banking regulations. There is not a significant market for smuggled goods in Sweden; however, the Swedish police consider the smuggling of bulk cash to be a problem. Sweden is a member of the European Union (EU), and money moves freely within the EU. Sweden has foreign trade zones (FTZs) with bonded warehouses in the ports of Stockholm, Göteborg, Malmö, and Jönköping. Goods may be stored for an unlimited time in these zones without customs clearance, but they may not be consumed or sold on a retail basis. Permission may be granted to use these goods as materials for industrial operations within a FTZ. The same tax and labor laws apply to FTZs as to other workplaces in Sweden.

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

Are 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 firms; currency exchange houses, providers of electronic money, and money transfer companies; accounting firms; law firms and tax counselors; casinos, gaming entities, and lottery ticket sales outlets; dealers of vehicles, art, antiques and jewelry; and real estate brokers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 11,461 in 2011

Number of CTRs received and time frame: Not applicable

STR covered entities: Accountants; tax advisors; lawyers; real estate agents; casinos; banks; life insurance companies and insurance brokers; securities and fund companies; issuers of electronic money; and high value goods dealers

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

Sweden is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/infobycountry/0,3380,en_32250379_32236963_1_70765_43383847_1_1,00.html

Enforcement and implementation issues and comments:

Swedish legislation dealing with money laundering exists in the Penal Code and the Money Laundering Act (MLA). In practice, predicate crimes are prosecuted, but not money laundering itself. Most often, money laundering is prosecuted as tax evasion if no other direct connection to crime is found. Many money laundering incidents involve self laundering, wherein a person tries to launder his own ill-gotten gains. Self laundering is not criminalized in the Penal Code, even though it is defined as money laundering within the MLA. Rather than establishing criminal regulations, the MLA defines what is considered suspicious and should be reported to the financial intelligence unit.

The Swedish financial authority, Finansinspektionen, oversees compliance with current reporting regulations. It has the power to fine institutions and issue warnings, as well as to revoke licenses. Swedish authorities believe the most popular destinations for money leaving Sweden are Ghana, Nigeria, the UK, and Iran; however, the largest transfers have gone to the United Arab Emirates. Money has most frequently entered Sweden from Ghana, Iran, the UK, and Nigeria.

Switzerland

Switzerland is a major international financial center. The country’s central geographic location, relative political, social, and monetary stability, the range and sophistication of financial services it provides, and its long tradition of bank secrecy not only contribute to Switzerland’s success as a major international financial center, but also continue to expose Switzerland to potential money laundering abuse.

Media reports indicate criminals attempt to launder illegal proceeds in Switzerland from a wide range of criminal activities conducted worldwide. These illegal activities include, but are not limited to, financial crimes, narcotics trafficking, arms trafficking, organized crime, terrorist financing and corruption. Although both Swiss and foreign individuals or entities launder money in Switzerland, foreign narcotics trafficking organizations, often based in Russia, the Balkans, Eastern Europe, South America and West Africa, dominate the narcotics-related money laundering operations in Switzerland.

There are currently 21 casinos in Switzerland. Every casino must obtain a concession from the Federal Council (highest authority of the executive branch) that needs to be renewed every 20 years. While generally well regulated, there are concerns bout the use of casinos to launder money. One possible method involves the structuring of cash purchases of casino chips or tokens to avoid reporting requirements and subsequently redeeming the chips for checks drawn on, or wire transfers from, casino bank accounts. Corrupt casino employees also have facilitated drug money laundering activities.

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

Are 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; insurance companies; casinos; financial intermediaries; wealth managers and investment advisors

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 1,625 in 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks; securities and insurance brokers; money exchangers or remitters; financial management firms; casinos; financial intermediaries; wealth managers and investment advisors

money laundering criminal Prosecutions/convictions:

Prosecutions: 290 in 2011

Convictions: 219 in 2010

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Switzerland is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/53/52/43959966.pdf

Enforcement and implementation issues and comments:

From 2010 to 2011, the number of suspicious activity reports increased by 40 percent to 1,625, encompassing a total of CHF 3.3 billion (approximately $3.4 billion), compared to CHF 850 million (approximately $962 million) in 2010. In 2011, ten reports were related to terrorism finance, amounting to CHF 152,000 (approximately $160,000).

There is a lack of adequate regulation of some designated non-financial business sectors, such as real estate, jewelry, luxury cars, works of art, and commodities like oil and gas. The authorities should work to regulate these sectors.

Sports associations like the International Federation of Association Football or the International Olympic Committee are not businesses but associations. They do not pay taxes, and as associations, are exempted from the Swiss anti-corruption legal framework. The exception provided to these entities makes them more vulnerable to money laundering activity. The government should consider efforts to change these laws.

Since 2009, persons physically transferring money worth more than $10,600 into or out of Switzerland need to declare this cash and have to be able to specify to the authorities its origins, its destination, and its owner.

Syria

Syria is not an important regional or offshore financial center. Prior to widespread civil unrest beginning in 2011, only 20% of Syria’s population used formal banking services, although private-sector banks’ market penetration was growing rapidly. However, following the imposition of robust sanctions on individuals, entities, and banks by several jurisdictions, banking services were used considerably less in 2012. While large commercial transactions rely on banks, the majority of business transactions are still conducted in cash. The most obvious indigenous money laundering threat involves some members of Syria’s political and business elite, whose corruption and extra-legal activities continue unabated.

A lack of necessary legislation and poor enforcement of existing laws contribute to significant money laundering and terrorist financing vulnerabilities in Syria’s banking and non-bank financial sectors. Estimates of the volume of business Syrian money changers conduct in the black market range between $15 and $70 million per day. Syria’s borders are porous, and regional hawala networks, intertwined with smuggling and trade-based money laundering, raise significant concerns, including involvement in the financing of terrorism.

The United States has designated Syria as a State Sponsor of Terrorism. In addition, in March 2011, the Syrian regime began a violent crackdown against protestors, which included widespread human rights violations. As a result, the United States, the European Union, Arab League and individual nations imposed sanctions against individuals, entities, and corporations assisting the regime’s crackdown. Since April 29, 2011, the United States has undertaken sanctions on individuals enacted through Executive Orders 13572, 13573, 13582, 13606, and 13608. Several subsequent rounds of sanctions have continued and have targeted the Commercial Bank of Syria, the Real Estate Bank, Syrian-Lebanese Commercial Bank, Central Bank of Syria, Syrian International Islamic Bank, and U.S. dealings with the Syrian petroleum industry.

In May 2004, the U.S. Department of Treasury found the Commercial Bank of Syria (CBS), along with its subsidiary, the Syrian Lebanese Commercial Bank, to be a financial institution of “primary money laundering concern,” pursuant to Section 311 of the USA PATRIOT Act. This finding resulted from information that CBS had been used by terrorists or persons associated with terrorist organizations as a conduit for the laundering of proceeds generated from the illicit sale of Iraqi oil, and because of continued concerns that CBS was vulnerable to exploitation by criminal and/or terrorist enterprises. In April 2006, Treasury promulgated a final rule, based on the 2004 finding and proposed rulemaking, prohibiting U.S. financial institutions from maintaining or opening correspondent or payable-through accounts with CBS or its Syrian Lebanese Commercial Bank subsidiary.

After suspending Syria’s membership on November 12, 2011, the Arab League approved sanctions on Syria on November 28, 2011. These sanctions include cutting off transactions with the Syrian central bank; halting funding by Arab governments for projects in Syria; a ban on senior Syrian officials traveling to other Arab countries; and a freeze on assets related to President Bashar al-Assad’s government. The declaration also calls on Arab central banks to monitor transfers to Syria, with the exception of remittances from Syrians abroad.

The Financial Action Task Force (FATF) included Syria in its October 19, 2012 Public Statement for its failure to adequately implement its action plan to address noted anti-money laundering/counter-terrorist financing (AML/CFT) deficiencies. Syria needs to implement procedures for identifying and freezing terrorist assets and ensure appropriate laws and procedures are in place to provide mutual legal assistance.

There are eight public free trade zones (FTZs) in Syria. Iran had announced plans to build FTZs in Syria; however, it later dropped this idea in favor of pursuing a free trade agreement. China’s free zone in Adra was officially inaugurated in July 2008; 13 businesses have been established in Adra to date. The volume of goods entering the FTZs is estimated to be in the billions of dollars and is growing, especially with increasing demand for automobiles and automotive parts, which enter the zones free of customs tariffs before being imported into Syria. While all industries and financial institutions in the FTZs must be registered with the General Organization for Free Zones, part of the Ministry of Economy and Trade, the Syrian General Directorate of Customs continues to lack strong procedures to check country of origin certification, or the resources to adequately monitor goods that enter Syria through the zones. There also are continuing reports of Syrians using the FTZs to import arms and other goods into Syria in violation of U.S. sanctions under the Syrian Accountability Act and a number of United Nations Security Council Resolutions.

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

Are 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; money exchanges and remitters; issuers of payment instruments such as credit cards, payment cards, travelers checks, and ATM cards; investment funds and their managers; financial brokerages and financial leasing corporations; insurance companies; real estate brokers and agents; dealers of high value goods, jewelry, precious stones, gold, and antiquities; lawyers; and accountants

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 144: January 1 – November 30, 2010

Number of CTRs received and time frame: Not available

STR covered entities: Banks; money exchanges and remitters; issuers of payment instruments such as credit cards, payment cards, travelers checks, and ATM cards; investment funds and their managers; financial brokerages and financial leasing corporations; insurance companies; real estate brokers and agents; dealers of high value goods, jewelry, precious stones, gold, and antiquities; lawyers; and accountants

money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: 0

Records exchange mechanism:

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

With other governments/jurisdictions: NO

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

Enforcement and implementation issues and comments:

Money changers remain largely unregulated. In addition to cash smuggling, there is also a high rate of commodity smuggling in and out of Syria. It has been reported that some smuggling is occurring with the knowledge of, or perhaps even under the authority of, the Syrian security services, while other smuggling attempts to evade the regime’s crackdown on protesters. The General Directorate of Customs lacks the necessary staff and financial resources to effectively handle the problem of smuggling. While customs has started to enact some limited reforms, including the computerization of border outposts to interface with other government agencies, problems of information sharing remain.

Most Syrian judges are not yet familiar with the evidentiary requirements of the anti-money laundering law. Furthermore, the slow pace of the Syrian legal system and political sensitivities delay quick adjudication of these issues. The lack of expertise, further undermined by a lack of political will, continues to impede effective implementation of existing AML/CFT regulations.

While the Government of Syria (GOS) has made modest progress in implementing AML/CFT regulations that govern the formal financial sector, the continuing lack of transparency of the state-owned banks and their vulnerability to political influence reveal the absence of political will to address AML/CFT in the largest part of the banking sector. In addition, non-bank financial institutions and the underground economy will continue to be vulnerable to money launderers and terrorist financiers. Syria is ranked 144 of 176 countries on Transparency International’s 2012 Corruption Perception Index. To build confidence in Syria’s intentions, the Central Bank should be granted independence and supervisory authority over the entire financial sector. Additionally, the GOS should enact its draft AML/CFT law to address many of the remaining deficiencies. Upon enactment of the law, the GOS will need to work actively to effectively implement its provisions through appropriate regulation and other related action. The GOS should become a party to the UN Convention against Corruption.

Taiwan

Taiwan is a regional financial center. Its modern financial sector, strategic location on international shipping lanes, expertise in high-tech sectors, and role as an international trade hub make it vulnerable to transnational crimes, including money laundering, drug trafficking, telecom fraud, and trade fraud.

Domestic money laundering is generally related to tax evasion, drug trafficking, public corruption, and a range of economic crimes. Jewelry stores increasingly are being used as a type of underground remittance system. Jewelers convert illicit proceeds into precious metals, stones, and foreign currency, and generally move them using cross-border couriers. The tradition of secrecy in the precious metals and stones trade makes it difficult for law enforcement to detect and deter money laundering in this sector. Gambling is only allowed in limited parts of Taiwan’s territory but the extent of either online or other illegal gaming is unknown.

Official channels exist to remit funds, which greatly reduces the demand for unofficial remittance systems. However, although illegal in Taiwan, a large volume of informal financial activity takes place through unregulated and possibly organized crime-linked non-bank channels. Taiwan has five free trade zones and a growing offshore banking sector which are regulated by Taiwan’s Central Bank and the Financial Supervisory Commission. There is no significant black market for smuggled goods in Taiwan.

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: Combined approach

Are 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, trust and investment corporations, credit co-operative associations, credit departments of Farmers’ Associations and the Fishermen’s Association, Department of Savings & Remittances of Chunghwa Post Co., securities firms, life insurance companies, and retail jewelry businesses

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 5,257: January to October 2012

Number of CTRs received and time frame: 3,098,660: January to October 2012

STR covered entities: Banks, trust and investment corporations, credit co-operative associations, credit departments of Farmers’ Associations and the Fishermen’s Association, Department of Savings & Remittances of Chunghwa Post Co., securities firms, life insurance companies, and retail jewelry businesses

money laundering criminal Prosecutions/convictions:

Prosecutions: 13: January to October 2012

Convictions: 10: January to October 2012

Records exchange mechanism:

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

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

Taiwan continues to strengthen its anti-money laundering/counter-terrorist financing (AML/CFT) regime, but is not in full compliance with international standards on combating terrorist financing. While Taiwan criminalized the financing of terrorist activities, it is not an autonomous offense and does not specifically cover the financing and support of terrorist activities overseas. Taiwan should pass legislation to criminalize terrorism and terrorist financing as an autonomous crime, and clarify that the law covers such activities overseas. The government should abolish all shell companies and prohibit the establishment of new shell companies of any type.

New regulations regarding the reporting of transactions by jewelry stores came into force in January 2012, with stricter reporting requirements and a lower reporting threshold for transactions. Violations of these reporting requirements will be subject to penalties under Taiwan’s money laundering law. The responsible agency governing jewelry stores is the Department of Commerce within the Ministry of Economic Affairs, and it is unclear if this department has the capacity to audit jewelry stores. It is too early to evaluate the effectiveness of the new rules in discouraging illegal remittance via jewelry shops.

Taiwan’s AML/CFT requirements do not apply to several types of designated non-financial businesses and professions (DNFBPs), which remain vulnerable to money laundering/terrorist financing activity. Taiwan should raise awareness of the vulnerabilities of non-profit organizations to terrorist financing and should exert more authority over this sector. Taiwan should take steps to amend its legislation and regulations to bring all DNFBPs, as listed in the international standards, and the non-profit sector within the scope of its AML/CFT coverage. Given the increasing threat of alternative remittance centers such as the precious metals and stones sector, Taiwan’s law enforcement should enhance investigations of underground financial systems.

The United States and Taiwan, through their respective legal representatives, are parties to the Agreement on Mutual Legal Assistance in Criminal Matters Between the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States. Taiwan is unable to ratify UN conventions because of long-standing political issues. However, it has enacted domestic legislation to implement the standards in the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, and the UN Convention for the Suppression of the Financing of Terrorism.

Tajikistan

Criminal proceeds laundered in Tajikistan derive from both foreign and domestic criminal activities and are believed to be related to the large amounts of opium and heroin trafficked from Afghanistan to Russia via Tajikistan. Money laundering proceeds are primarily controlled by high level drug trafficking networks, with some smaller actors involved. While there is a market for smuggled goods, there is little evidence most items are financed with narcotics money, with the exception of imported cars and other luxury items.

It is believed corruption in some government bodies facilitates the drug trade and associated money laundering. Some money laundering takes place in the formal financial sector, according to the National Bank of Tajikistan, the Central Bank. However, the absence of any significant money laundering investigations or prosecutions, with subsequent confiscation of criminally derived assets, makes it nearly impossible to accurately measure or gauge the precise degree to which the formal banking sector is being used or exploited to launder such criminally derived assets.

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

Are legal persons covered: criminally: NO civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, money remitters, foreign exchange dealers, microfinance institutions, insurance companies, and securities dealers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 11: January 1 – November 30, 2012

Number of CTRs received and time frame: Not available

STR covered entities: Banks, money remitters, foreign exchange dealers, and microfinance institutions

money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: Not available

Records exchange mechanism:

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

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Government of Tajikistan (GOT) is a signatory to several international agreements pertaining to money laundering and financial crime. A number of the provisions in these agreements have not yet been codified into Tajik criminal law. In 2012, the GOT amended portions of its legislation pertaining to money laundering and financial crimes. The amendments bring the law more in line with international standards regarding conversion, transfer, and use of property. However, anti-money laundering legislation is still deficient in several areas. While the amended Article 78 of the money laundering law seems to allow for the confiscation of some of the instrumentalities of specific crimes, nowhere does it contain any language or reference to the confiscation and subsequent forfeiture of the proceeds of criminally derived assets that have been or were in the process of being criminally laundered. Fundamental principles and protections in the Constitution do not allow for the criminal liability of legal entities. The GOT should criminalize tipping off.

The continued absence of legally mandated comprehensive customer due diligence requirements makes it difficult for authorities to detect financial crimes or money laundering through financial institutions. In addition, staffing and training in Tajik agencies that deal with money laundering is severely lacking, impeding the ability to conduct effective money laundering investigations. While jurisdiction for investigating money laundering and related financial crimes is divided among the Ministry of Internal Affairs, the State Committee of National Security, the Prosecutor General’s Office, and the Anti-Corruption Agency, the level and quality of cooperation and coordination among these agencies could be significantly improved through training, protocols, and the establishment of multi-agency task forces.

While Tajikistan has ratified the UN Convention for the Suppression of the Financing of Terrorism, it has not fully implemented its provisions in domestic law. UNSCR 1373 has been partially implemented, but the freezing of terrorist assets still is not codified in the laws of Tajikistan. Similarly, the obligations of UNSCR 1267 have not been fully met.

The Financial Intelligence Unit (FIU) is responsible for coordinating Tajikistan’s efforts to implement its anti-money laundering/counter-terrorist financing program and providing training seminars on money laundering prosecutions. In July, 2012, the Tajik FIU became a member of the Egmont Group of FIUs.

Tanzania

While Tanzania is not a major regional financial center, its location at the crossroads of southern, central and eastern Africa leaves it vulnerable to activities, such as smuggling and the trafficking of narcotics, arms, and humans, that generate illicit revenue. The major profit generating crimes in Tanzania include theft, robbery, corruption, smuggling of precious metals and stones, and drug trafficking. With only 12 percent of the population engaged in the formal financial sector, money laundering is more likely to occur in the informal non-bank sectors. Mobile banking services, such as Mpesa and AirtelMoney, are growing rapidly in Tanzania, opening up formerly underserved rural areas to formal banking, but also creating new vulnerabilities in the financial sector. Criminals have been known to use front companies, hawaladars and bureaux de change to launder funds, though these are not currently significant areas of concern for Tanzanian anti-money laundering officials, who are not aware of any issues with or abuse of non-profit organizations, alternative remittance systems, offshore sectors, free trade zones, or bearer shares. Real estate and used car businesses also appear to be sources of money laundering. The use of front companies to launder money appears to be more common on the island of Zanzibar. Officials indicate money laundering schemes in Zanzibar generally take the form of foreign investment in the tourist industry. Bulk cash smuggling is also a problem.

The Financial Action Task Force (FATF) included Tanzania in its October 19, 2012 Public Statement for its failure to adequately implement its action plan to address noted anti-money laundering/counter-terrorist financing (AML/CFT) deficiencies. Tanzania needs to implement procedures for identifying and freezing terrorist assets.

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

Are legal persons covered: criminally: YES civilly: NO

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks and financial institutions, cash dealers, accountants, dealers in art and precious metals and stones, customs officials, and legal professionals

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 30: January 1 – November 30, 2012

Number of CTRs received and time frame: Not available

STR covered entities: Banks and financial institutions, cash dealers, accountants, realtors, dealers in art and precious metals and stones, casinos and gaming operators, regulators, customs officials, and legal professionals

money laundering criminal Prosecutions/convictions:

Prosecutions: 14 in 2012

Convictions: None

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Tanzania is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a 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:

In 2012, the Government of Tanzania (GOT) took positive steps to strengthen its response to money laundering. In February 2012, the Tanzanian parliament passed new AML legislation, amending the 2006 Anti-Money Laundering Act (AMLA) to expand the list of predicate offenses to include fraud, pyramid and other similar schemes, piracy of goods, and counterfeiting of currency. The amendments also expand KYC requirements. Weaknesses remain, however, in supervision of the financial sector and the lack of designated competent authorities responsible for ensuring compliance by financial institutions.

Coordination with Zanzibar on AML regulations and procedures has typically been complicated by the broader question of where Zanzibar’s authority ends and the Union’s authority begins. In October 2011, mainland and Zanzibari authorities came to an agreement to share a single financial intelligence unit (FIU), and established a national AML/CFT Center to serve as this authority. The AMLA grants operational and budgetary independence to the FIU. In addition, as established by law, the Commissioner of the FIU is the Chief Executive and Accounting Officer of the FIU. The Commissioner can only be removed from office by the President following a recommendation by a Committee of Inquiry.

The FIU has 16 staffers and reportedly plans to hire another six. Its budget increased in 2012, and it has conducted two training sessions with law enforcement authorities tasked with investigating financial crimes and two with reporting entities. In addition, the Tanzanian FIU signed memorandums of understanding with the United Kingdom, South Africa and Malawi. However, there continue to be weaknesses in the FIU’s operations. The FIU should continue its efforts to train new staff, to inform institutions of their reporting and record keeping responsibilities, and to train the financial sector to identify suspicious transactions.

The GOT continues to note that training and attention has focused on mainland authorities, and authorities in Zanzibar reportedly continue to lag behind their mainland counterparts. Additional training for the judiciary, as well as for the law enforcement authorities charged with investigating financial crimes is critical.

There is limited capacity to effectively implement all the requirements and adequately supervise the banking sector. A lack of enforceable requirements to ensure customer due diligence; a focus mainly on the formal banking sector rather than full coverage of designated non-financial businesses and professions; and ineffective provisions pertaining to recordkeeping, including a threshold approach to recordkeeping requirements, continue to be issues. Bankers are supportive of the new AML law and regulations, but indicate that implementation remains a significant challenge, particularly with regard to the new KYC regulations.

Currency transaction reporting was introduced in Tanzanian law in 2012, but authorities have not yet begun implementation and are making preparations to do so. At the close of 2012, Tanzanian authorities have not yet determined a threshold amount for reporting.

Tanzania does not have formal records exchange mechanisms. The Ministry of Foreign Affairs and Central Bank of Tanzania do cooperate with other governments via memoranda of understanding, but this happens infrequently.

A new Prevention of Terrorism Act was passed in 2012 that includes mechanisms to identity and freeze assets of suspected international terrorists. The new law addresses previous deficiencies in the implementation of UNSCRs 1267 and 1373.

Tanzania should work to increase the level of awareness and understanding of money laundering issues in the financial, law enforcement and judicial areas and should allocate the necessary human, technical, and financial resources to implement its AML/CFT regime, especially in Zanzibar. The GOT should focus its efforts on practical implementation of the AMLA. The GOT also should improve its cross-border cash declaration regime. Tanzanian police and customs officials also would benefit from training on identifying and preventing money laundering through exploitation of the money/value transfer services used in the region.

Thailand

Thailand is a centrally located Southeast Asian country with an extremely porous border. Thailand is vulnerable to money laundering within its own underground economy as well as to many categories of cross-border crime, including illicit narcotics and other contraband smuggling. Thailand is a source, transit, and destination country for international migrant smuggling and trafficking in persons, a production and distribution center for counterfeit consumer goods and a center for the production and sale of fraudulent travel documents. The proceeds of illegal gaming, corruption, underground lotteries, and prostitution are laundered through the country’s financial system. The Thai black market includes a wide range of pirated and smuggled goods, from counterfeit medicines to luxury automobiles.

Money launderers and traffickers use banks, as well as non-bank financial institutions and businesses, to move the profits of narcotics trafficking and other criminal enterprises. In the informal money changing sector, there is an increasing presence of hawalas via money shops that service Middle Eastern travelers in Thailand.

Thailand was publicly identified by the Financial Action Task Force (FATF) in February 2010 for its strategic anti-money laundering/counter-terrorist financing (AML/CFT) deficiencies, for which it has developed an action plan. In October 2012, the FATF determined that Thailand’s progress against the agreed action plan’s timeline continues to be insufficient and the Government of Thailand (GOT) needs to take adequate action to address its main deficiencies.

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: List approach

Are 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 (including state banks), finance companies, mortgage finance companies, securities dealers, insurance companies, money exchangers and remitters, asset management companies, jewelry and gold shops, automotive hire-purchase businesses or car dealers, real estate agents/brokers, antique shops, personal loan businesses, electronic card businesses, credit card businesses, and electronic payment businesses, as well as deposit/lending cooperatives with total operating capital exceeding $67,000

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 92,392: January 1 - September 30, 2012

Number of CTRs received and time frame: 824,082: January 1 – September 30, 2012

STR covered entities: Private and state-owned banks, finance companies, insurance companies, savings cooperatives, securities firms, asset management companies, and mortgage finance companies; land registration offices, moneychangers, remittance agents, jewelry and gold shops, automotive hire-purchase businesses and car dealerships, real estate agents and brokers, antique shops, personal loan companies, electronic and credit card companies, and electronic payment companies

money laundering criminal Prosecutions/convictions:

Prosecutions: 44 in 2012

Convictions: 31 in 2012

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Thailand is a member of the Asia/Pacific Group on Money Laundering, a FATF-style regional body. Its most recent mutual evaluation can be found here:

http://www.apgml.org/documents/docs/17/Thailand%20DAR.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Political and civil unrest, natural disasters and elections have impeded Thailand’s implementation of its AML/CFT action plan. Thailand’s legislative framework still does not adequately criminalize terrorist financing and does not establish adequate procedures for identifying and freezing terrorist assets. The GOT should pass the necessary laws in its end-of-year Parliamentary session to address the Thai financial system’s vulnerabilities to money laundering and terrorist financing.

Thai banking regulations cover financial institutions adequately but are ineffective against less formal operations.

The GOT has made some progress in improving its financial intelligence unit and its regulatory framework. The government has increased salaries of Anti-Money Laundering Office (AMLO) investigators to counter historically high turnover. The AMLO is responsible for monitoring compliance with AML/CFT requirements, coordinating information sharing and ensuring that financial supervisors carry out their responsibilities effectively. Thailand also has made progress in the training and supervision of reporting entities, particularly money changers and transfer businesses.

Thai law does not adequately prohibit tipping off, leaving financial institutions and their employees subject to potential liability for filing STRs. The GOT should amend its legislation as necessary to ensure this deficiency is corrected.

Timor-Leste

Timor-Leste is not a regional or offshore financial center, and has no free trade zones. The economy is cash based, and the Ministry of Finance estimates only 1.3 percent of Timorese regularly use banking facilities. The national economy heavily depends on government spending financed by petroleum and natural gas revenues, supplemented by assistance from international donors. The private sector is small, concentrated in the service and retail sectors.

All three major banks in Timor-Leste are branches of foreign banks, chartered in Australia, Portugal, and Indonesia, and are subject to the reporting requirements of their home jurisdictions. In 2011, the Timorese government created a commercial bank, and it is in the process of creating a development and investment bank, expected to have partial foreign ownership.

Weak controls at the land border with Indonesia and even weaker maritime border controls make Timor-Leste vulnerable to smuggling, organized crime, and terrorist activities. Drugs, including methamphetamines and cocaine, have been seized in the country but narcotics trafficking is not considered a significant source of illegal proceeds. However, the inadequacy of reporting and data systems makes it difficult to track cross-border activities.

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

Are 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, microfinance institutions, money exchanges and remitters, insurance companies and brokers, casinos, financial and real estate service providers, accountants, auditors, and financial consultants

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 8 in 2012

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, microfinance institutions, money exchanges and remitters, insurance companies and brokers, casinos, financial and real estate service providers, accountants, auditors, and financial consultants

money laundering criminal Prosecutions/convictions:

Prosecutions: 0

Convictions: 0

Records exchange mechanism:

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

With other governments/jurisdictions: NO

Timor-Leste is a member of the Asia/Pacific Group on Money Laundering, a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Timor-Leste%20ME1.pdf

Enforcement and implementation issues and comments:

In December 2011, the National Parliament approved Law no. 17/2011, new anti-money laundering/counter-terrorist financing (AML/CFT) legislation. The law contains important changes, including KYC rules that cover financial institutions and non-financial businesses and professions; suspicious transaction reporting requirements; a tipping off provision; record keeping requirements; and, criminal liability for legal persons. Customer due diligence and reporting procedures have been implemented only in banks and microfinance institutions. The law also establishes a financial intelligence unit, currently located at the Central Bank of Timor-Leste. However, there are weaknesses in the law. The law excludes nearly half of the categories of crimes listed as predicate offenses for money laundering in the international standards. Also, the law provides for immediately freezing terrorist assets and allows asset forfeiture, but only with prior notice to the suspect account holder. In addition, the law mandates the fullest judicial cooperation between relevant Timorese authorities and competent foreign authorities. The details of that cooperation are not specified, however. Many of the details with respect to implementation of the law are contained in a Decree Law and instructions which have not yet been implemented.

The Government of Timor-Leste (GOT-L) lacks critical AML/CFT controls, and its low technical, financial, and human capacity makes it difficult to enforce adequately the laws that are in place.

Parliament should remedy the deficiencies in the 2011 law and implement the necessary measures to make it more effective. The GOT-L should criminalize money laundering in line with international standards. The GOT-L should provide a safe harbor provision in the law to protect institution directors, officers, and employees who report suspicious transactions in good faith. Timor-Leste should become a party to the 1988 UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism.

Togo

Togo’s porous borders, susceptibility to corruption, and large informal sector make it vulnerable to drug transshipments and small-scale money laundering. Most narcotics passing through Togo are destined for European markets. Trafficking in persons, corruption, misappropriation of funds, tax evasion, and smuggling are major crimes in Togo. The country’s small financial infrastructure, dominated by regional banks, makes it a less attractive venue for money laundering through financial institutions.

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

Are 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, lending and savings institutions, microfinance entities, insurance and securities brokers and companies, mutual funds, the regional stock exchange, attorneys, notaries, auditors, dealers of high value goods, money exchangers and remitters, casinos and gaming establishments, non-governmental organizations, travel and real estate agents, and the post office

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 26: January 1 – November 30, 2012

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, lending and savings institutions, microfinance entities, insurance and securities brokers and companies, mutual funds, the regional stock exchange, attorneys, notaries, auditors, dealers of high value goods, money exchangers and remitters, casinos and gaming establishments, non-governmental organizations, travel and real estate agents, and the post office

money laundering criminal Prosecutions/convictions:

Prosecutions: 3: January 1 – November 30, 2012

Convictions: 0 in 2012

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Togo 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/about-giaba/25_mutual-evaluation.html

Enforcement and implementation issues and comments:

The Government of Togo (GOT) is slowly implementing a national plan to fight drugs and money laundering, and has been receiving increasing support from foreign donors. Togo’s anti-money laundering/counter-terrorism financing (AML/CFT) laws are primarily administered by its financial intelligence unit (FIU), the National Financial Information Processing Center (CENTIF). CENTIF analyzes STRs as well as reports of attempts to transport money across borders in excess of the amounts allowed by law. CENTIF lacks full operational autonomy and is inadequately resourced.

Investigating magistrates, police, and customs have little expertise in AML/CFT matters. In addition to a lack of capacity on the investigative side, the GOT has difficulty pursuing prosecutions due to an inefficient and overburdened court system. Corruption in government and all levels of society presents further obstacles.

Togo’s terrorism financing law does not comport with international standards. Additionally, although Togo’s AML/CFT laws include know-your-customer provisions, most covered entities are not aware of the requirements and compliance is negligible. Also, some designated non-financial businesses and professions are not subject to supervisory oversight for AML/CFT purposes.

Tonga

Tonga is an archipelago located in the South Pacific. With only three commercial banks Tonga is neither a financial center nor an offshore jurisdiction. Remittances from Tongans living and working abroad are the largest source of hard currency earnings, followed by tourism.

Tonga has not been seen as a major narcotics transit point, but during 2012, a substantial amount of cocaine was recovered, apparently en route to Australia. There were allegations that citizens of Tonga may have links to transnational drug cartels but the scale of this is unknown. Tonga is deemed by local police authorities to be vulnerable to smuggling and money laundering due to inadequate border controls.

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

Are 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, foreign exchange dealers, money lenders, Tonga Development Bank, credit unions, insurance companies and intermediaries, Retirement Fund Board, accountants, lawyers, real estate agents, securities dealers, casinos, sellers of payment instruments, and trustees

REPORTING REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, foreign exchange dealers, money lenders, Tonga Development Bank, credit unions, insurance companies and intermediaries, Retirement Fund Board, accountants, lawyers, real estate agents, securities dealers, casinos, sellers of payment instruments, and trustees

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

Tonga 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/default.aspx?DocumentCategoryID=17

Enforcement and implementation issues and comments:

The Tongan Transaction Reporting Authority (TRA) is generally vested with the authorities of a financial intelligence unit, although there are some serious limitations in its powers. The TRA’s functions under the Money Laundering and Proceeds of Crime Act (MLPCA) do not explicitly include analysis of STRs. Additionally, the lack of timely access to financial, administrative, and law enforcement information severely limits the TRA’s ability to effectively analyze STRs.

Although many types of entities are covered under the MLPCA, know-your-customer procedures and STR requirements are only applied to banks and foreign exchange dealers actively supervised by the National Reserve Bank of Tonga or the TRA. The government should work to ensure these requirements are applied more broadly and that politically exposed persons (PEPs) are covered under the relevant due diligence procedures. In addition, the country should consider better tracking of international cash transactions.

Relevant legislation regarding money laundering and terrorist financing does not expressly provide for national cooperation and coordination, which is therefore based on policy and practice. In practice, information sharing with some parts of the international community has been good.

The primary limitation to detecting money laundering in Tonga is the lack of technical and experienced staff and staffing restraints at key anti-money laundering/counter-terrorist financing agencies, including the TRA and the Tonga Police Transnational Crimes Unit. The lack of resources results in a lack of monitoring and depth of investigation of suspicious transactions, and an absence of prosecutions. A related issue is that the investigators may not be aware of new money laundering methodologies.

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

Trinidad and Tobago

Drug trafficking, illegal arms sales, fraud, and public corruption continue to be the most likely sources of laundered funds in Trinidad and Tobago (TT). Criminal assets laundered in TT are derived from domestic criminal activity as well as from criminal activities committed abroad. Some money laundering proceeds are controlled by drug trafficking organizations and organized crime entities operating locally and internationally. Money laundered by transnational criminal organizations in TT most commonly derives from the local sale of marijuana, cocaine, and firearms. There is information to suggest laundered proceeds also are controlled by certain local religious organizations.

TT’s relatively new and untested anti-money laundering/combating the financing of terrorism (AML/CFT) regime is not able to quantify the extent to which fraud and public corruption contribute to money laundering. Embezzlement and malfeasance in government acquisitions are commonly suspected, but rarely proven. Funds embezzled from unemployment relief programs are believed to be used by local narco-traffickers to purchase stocks of illegal substances or weapons for resale in local markets, the profits from which are laundered in local banks. According to information from financial institutions and legal analysts, financial crimes in general are increasing, particularly those involving the use of fraudulent checks, wire transfers, and financial instruments in the banking sector; and currency trades below the suspicious activity reporting threshold. The perception of impunity on the part of government contractors, financiers, and politicians encourages corrupt practices on the part of private individuals.

There is no significant black market for goods smuggled into TT. Reports of illegal diesel bunkering, the sale of heavily subsided diesel fuel originating from TT, occurring in or near TT territorial waters are on the rise. The estimated value of this trade is placed at over $100 million. Furthermore, the incidence of drug money supporting illegal arms imports is thought to be growing. Trinidad and Tobago Customs and Excise Division (TTCED) officials confirm trade-based money laundering occurs in TT, reporting cases of over- and under-invoicing of shipped goods and falsely described goods. There are no indications such activity is tied to terrorist financing.

TT does not have a significant traditional offshore business sector. While the banking system is generally regarded as the strongest and most efficient in the region, it is still considered high-cost and inefficient relative to competitors in the offshore market. The volume of money laundering in the offshore banking sector in TT is unknown. The extent to which alternative remittance services are a problem in TT is unclear.

There are six free trade zones (FTZs) in TT where exporting of manufactured products takes place. Companies must present proof of legitimacy and are subject to background checks prior to being allowed to operate in the FTZs, and while operating are required to submit tax returns quarterly and audited financial statements yearly. There is no evidence the FTZs are involved in money laundering schemes.

Casinos are legal in TT; however, online gaming is not allowed. The extent to which casinos are used to launder funds is unknown.

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

Are 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, trust and company service providers, building societies, postal services, cash remitters, real estate developers, motor vehicle vendors, money or value transfer services, gaming houses, pool betting services, national lotteries, online betting games, jewelers, private members’ clubs, accountants, lawyers, independent legal professionals, and art dealers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 127: January 1 – July 31, 2012

Number of CTRs received and time frame: Not available

STR covered entities: Banks, credit unions, trust and company service providers, building societies, postal services, cash remitters, real estate developers, motor vehicle vendors, money or value transfer services, gaming houses, pool betting services, national lotteries, online betting games, jewelers, private members’ clubs, accountants, lawyers, independent legal professionals, and art dealers

money laundering criminal Prosecutions/convictions:

Prosecutions: 1 in 2012

Convictions: 0 in 2012

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Trinidad and Tobago is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: https://www.cfatf-gafic.org/index.php?option=com_docman&task=doc_download&gid=664&Itemid=417&lang=en

Enforcement and implementation issues and comments:

As outlined in its AML/CFT Action Plan, the Government of TT (GOTT) established the necessary legal and regulatory framework to address strategic deficiencies, although progress of the proposed Credit Union and Securities bills to effect proper sector supervision and AML/CFT compliance has slowed. Ambiguity surrounding the confiscation/forfeiture regime and the freezing without delay mechanism was removed; its implementation demonstrated in an ongoing AML/CFT case before the courts. Further legislative amendments in 2012 enhance the ability of the financial intelligence unit (FIU) to request information from public authorities and to obtain a court order where the requested information is not provided within a reasonable time. The GOTT continues to work to address the full range of AML/CFT issues, particularly implementation of the new legislative and regulatory reforms.

Two-thirds of suspicious transaction reports in 2012 were received from the formal financial sector, and one quarter from money transfer services, with a total value of $90 million. AML/CFT implementation measures in 2012 focused on the FIU’s continuing efforts to achieve effective operations and apply a supervisory regime for designated non-financial businesses and professions through identifying and registering listed business activities and commencing on-site inspections. The impact of this action resulted in 239 instances where sanctions were initiated against non-compliant businesses. However, the system remains exposed until criminal elements are prevented from owning or managing private members’ clubs, which conduct casino operations. The FIU needs additional personnel to effect proper oversight of the hundreds of listed businesses subject to enforcement.

Interagency agreements were signed in 2012 to facilitate the exchange and sharing of information between the FIU, police, TTCED, Board of Inland Revenue, and the Registrar General. These agreements coincide with the commencement of several major investigations using a task force approach. In 2012, law enforcement agencies collectively detained, confiscated and forfeited motor vehicles, real estate, and a boat with a total asset value of over $1 million. The commencement of the country’s first money laundering prosecution in 2012 is encouraging and noteworthy.

Tunisia

Tunisia is not considered a regional financial center. Tunisia has strict currency exchange controls which authorities believe mitigate the risk of international money laundering. There is a low level of organized crime in Tunisia. The primary domestic criminal activities that generate laundered funds are clandestine immigration, trafficking in stolen vehicles, and narcotics.

Use of the financial sector for money laundering occurs, especially through informal economic activity involving smuggled goods. Since Tunisia has strict currency controls, it is likely that underground remittance systems such as hawala are prevalent. Trade-based money laundering is also a concern. Throughout the region, invoice manipulation and customs fraud are often involved in hawala counter-valuation.

Tunisia has two free trade zones, in Bizerte and Zarzis. Tunisia has eight offshore banks and 1,879 offshore industry companies, 1,158 with foreign participation.

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/s/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

Are 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, microfinance institutions, financial intermediaries; company and asset managers; real estate brokers and agents; dealers of precious metal, jewels, precious stones, or high value goods; and managers of casinos

REPORTING REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

STR covered entities: Banks, microfinance institutions, financial intermediaries; company and asset managers; real estate brokers and agents; dealers of precious metal, jewels, precious stones, or high value goods; and managers of casinos

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: YES

Tunisia 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 can be found here: http://www.menafatf.org/images/UploadFiles/MENAFATF.7.07.E.P5R2%20_with%20response_.pdf

Enforcement and implementation issues and comments:

The Governor of the Central Bank heads Tunisia’s interagency financial intelligence steering committee, the Tunisian Financial Analysis Commission (CTAF). Other members include a magistrate and representatives from the Ministry of Finance, Customs General Directorate, National Post Office, Council of Financial Markets, Insurance General Committee, Ministry of Interior, and “an expert specialized in the fight against financial infringements.” The General Secretary is in charge of the supervision of the financial intelligence unit. CTAF lacks analytical capacity due to a lack of analytical staff as well as lack of training for the staff already in place.

Under Tunisian law, all offshore financial institutions are held to the same regulatory standards as onshore financial institutions and undergo the same due diligence process. Offshore financial institutions are licensed only after the Central Bank investigates their references and the Ministry of Finance approves their applications. Anonymous directors are not allowed. Offshore international business companies are subject to all regulatory requirements, except for tax requirements and currency convertibility restrictions. Tunisia prohibits bearer financial instruments or shares, as well as anonymous and numbered accounts. The Tunisian penal code provides for the seizure of assets and property tied to narcotics trafficking and terrorist activities.

The Government of Tunisia (GOT) should continue to implement and enhance its anti-money laundering/counter-terrorist financing regime. GOT officials should collect and disseminate statistics such as prosecutions and convictions to assist in measuring progress. Tunisian authorities should examine, regulate where needed, and enforce existing regulations on hawala, mobile phone banking, and other money and value transfer systems operating in Tunisia. Authorities should build their capacity to recognize and investigate trade-based money laundering and value transfer and should examine underground finance and its possible link to money laundering and extremist finance.

Turkey

Turkey is an important regional financial center, particularly for Central Asia and the Caucasus, as well as for the Middle East and Eastern Europe. It continues to be a major transit route for Southwest Asian opiates moving to Europe. However, narcotics trafficking is only one source of the funds laundered in Turkey. Other significant sources include smuggling, invoice fraud and tax evasion, and to a lesser extent, counterfeit goods, and forgery. Terrorist financing and terrorist organizations with suspected involvement in narcotics trafficking and other illicit activities are also present in Turkey.

Money laundering takes place in banks, non-bank financial institutions, and the underground economy. Informed observers estimate as much as half of the economic activity is derived from unregistered businesses. Money laundering methods in Turkey include: the large scale cross-border smuggling of currency; bank transfers into and out of the country; trade fraud; and the purchase of high-value items such as real estate, gold, and luxury automobiles. Turkish-based traffickers transfer money and sometimes gold via couriers, the underground banking system, and bank transfers to pay narcotics suppliers in Pakistan or Afghanistan. Funds are often transferred to accounts in the United Arab Emirates, Pakistan, and other Middle Eastern countries.

In October 2012, the Financial Action Task Force (FATF) included Turkey in its Public Statement for Turkey’s continuing lack of adequate terrorist financing legislation and a legal framework within which to freeze terrorist assets. The FATF also announced it would take the countermeasure of suspending Turkey’s FATF membership if appropriate actions to address its concerns are not taken by its February 22, 2013 plenary.

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

Are 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, the Central Bank, post office banks, and money exchanges; issuers of payment and credit cards; lending, financial leasing, custody, settlement, and factoring companies; securities brokers, investment partnerships, and fund and asset managers; insurance, reinsurance and pension companies, and insurance and reinsurance brokers; Islamic financial houses; Directorate General of the Turkish Mint and precious metals exchange intermediaries; auctioneers, and dealers of precious metals, stones, jewelry, all types of transportation vehicles, art and antiquities; lawyers, accountants, auditors, and notaries; sports clubs; lottery and betting operators; and post and cargo companies

REPORTING REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, the Central Bank, post office banks, and money exchanges; issuers of payment and credit cards; lending, financial leasing, custody, settlement, and factoring companies; securities brokers, investment partnerships, and fund and asset managers; insurance, reinsurance and pension companies, and insurance and reinsurance brokers; Islamic financial houses; Directorate General of the Turkish Mint and precious metals exchange intermediaries; auctioneers, and dealers of precious metals, stones, jewelry, all types of transportation vehicles, art and antiquities; lawyers, accountants, auditors, and notaries; sports clubs; lottery and betting operators; and post and cargo 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

Turkey is a member of the FATF. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/14/7/38341173.pdf

Enforcement and implementation issues and comments:

For the past two years, various draft terrorism finance laws, which were supposed to address international concerns, were circulated and submitted to Parliament, the most recent in October 2011. However, the FATF, upon review of the legislation, informed the Government of Turkey (GOT) that the draft law currently before Parliament is insufficient to address the vulnerabilities identified. At the end of 2012, Turkey’s draft law still remained insufficient.

The GOT’s nonprofit sector is vulnerable to terrorist financing. Turkey’s investigative powers, law enforcement capability, oversight and outreach are weak and lacking in all the necessary tools and expertise to effectively counter this threat through a comprehensive approach; all these areas need to be strengthened. The nonprofit sector is not audited on a regular basis for terrorist financing activity and does not receive adequate anti-money laundering/counter-terrorist financing (AML/CFT) outreach or guidance from the GOT. The General Director of Foundations issues licenses for charitable foundations and oversees them. However, there are a limited number of auditors to cover more than 70,000 institutions.

Other significant weaknesses exist in the effectiveness of Turkey’s AML regime that should be addressed. These include: improving customer due diligence; making politically exposed persons (PEPs) subject to enhanced due diligence; ensuring cross-border wire transfers and cash transfers are recorded properly and consistently; ensuring designated non-financial businesses and professions are scrutinized and are subject to reporting requirements; and providing for the publication of current statistics on STRs, prosecutions, and convictions. The GOT should ensure adequate resources are made available to improve the deficiencies in its AML/CFT framework and to allow effective implementation to address noted issues.

Turkmenistan

Turkmenistan is not an important regional financial center. There are only five international banks and a small, underdeveloped domestic financial sector. The country’s significant mineral wealth is paid for through offshore accounts with little public scrutiny or accounting.

Given Turkmenistan’s shared borders with Afghanistan and Iran, money laundering in the country could involve proceeds from the trafficking and trade of illicit narcotics (primarily opium and heroin) as well as those derived from domestic criminal activities. Although there is no information on cash smuggling, gasoline and other commodities are routinely smuggled across the national borders. The two casinos operating in Turkmenistan, managed by Turkish companies, could be vulnerable to financial fraud and money laundering activity.

There are no offshore centers in the country. In 2007, Turkmenistan introduced the Awaza (or Avaza) Tourist Zone (ATZ) to promote the development of its Caspian Sea coast. Amendments to the tax code exempt construction and installation of tourist facilities in the ATZ from value added tax (VAT). Various services offered at tourist facilities, including catering and accommodations, are also VAT-exempt.

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

Are 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, money exchangers, and money remitters; postal service operators; leasing companies; securities brokers and intermediaries; insurance institutions; portfolio and asset managers; precious metals and stones dealers; accountants, lawyers, notaries, and other legal professionals; real estate agents; lottery or gaming entities; charitable foundations; State registrars; and, pawnshops

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 2: January 1 - May 20, 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks, credit institutions, money remitters, foreign currency dealers, and money exchangers; professional participants in the securities market, commodity exchanges, and firms taking cash payments for investments; leasing organizations; insurance organizations; precious metals and stones dealers; accountants, lawyers, notaries, and other legal professionals; real estate agents; lottery prizes or gaming entities; charitable foundations; and, pawnshops

money laundering criminal Prosecutions/convictions:

Prosecutions: 9: January 1 - May 20, 2011

Convictions: Not available

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Turkmenistan is a member of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), a Financial Action Task Force-style regional body. Its most recent mutual evaluation report can be found here:

http://www.eurasiangroup.org/mers.php

Enforcement and implementation issues and comments:

The Inter-Agency Coordination Working Committee for combating money laundering and financing of terrorism operates under the Ministry of Finance. Turkmenistan’s financial intelligence unit (FIU) has begun to function, and the Government of Turkmenistan (GOT) has increased its efforts to equip FIU officials with computer software designed to perform link analysis. International experts have seen positive movement in the country’s anti-money laundering/counter-terrorist financing (AML/CFT) actions.

Foreign embassies provide terrorist financing information regarding UN- and U.S.-designated individuals and organizations subject to asset freezing to the Ministry of Foreign Affairs, which reportedly distributes it to other relevant agencies. It is not clear, however, if financial institutions receive the information. While laws exist, the government does not have an independent system or mechanism for freezing terrorist assets. There are no reports that authorities identified, froze, seized, or forfeited assets related to terrorist financing in 2012.

The GOT should continue to work with international advisors to put in place an AML/CFT regime that comports with international standards. The GOT should enact a safe harbor provision to protect filers of STRs from being subject to civil or criminal liability. Turkmenistan’s law enforcement, customs, and border authorities need continuing assistance to recognize and combat money laundering and terrorist finance.

Turks and Caicos

The Turks and Caicos Islands (TCI) is a British Overseas Territory with a population of approximately 46,000. The economy depends greatly on tourism and the offshore financial sector. Financial services contributed almost 30 percent of GDP. The TCI is vulnerable to money laundering due to its significant offshore financial services sector and notable deficiencies in its anti-money laundering/counter-terrorist financing (AML/CFT) regime. In addition, corruption is a problem. The country’s geographic location has made it a transshipment point for narcotics traffickers.

As of November 2011, the TCI’s well-developed financial sector is comprised of eight banks, seven money remitters, 18 professional trustees, six securities firms, and 5,291 insurance companies. At the end of 2011, 9,871 “exempt companies,” or international business companies (IBCs), were included in the Companies Registry. Trust legislation allows the establishment of asset protection trusts that insulate assets from civil adjudication by foreign governments; therefore, TCI remains a tax haven for foreigners seeking to evade domestic tax reporting requirements. The country also has two casinos.

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

Are 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 card services, company managers, domestic insurance companies, insurance brokers/agents, investment dealers, money transmitters, mutual funds, professional trustees, dealers in high value goods, dealers in precious metals and stones, estate agents, casinos, accountants, auditors, and lawyers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 44 in 2011

Number of CTRs received and time frame: None

STR covered entities: Banks, credit card services, company managers, domestic insurance companies, insurance brokers/agents, investment dealers, money transmitters, mutual funds, professional trustees, dealers in high value goods, dealers in precious metals and stones, estate agents, casinos, accountants, auditors, and lawyers

money laundering criminal Prosecutions/convictions:

Prosecutions: 1 in 2011

Convictions: None

Records exchange mechanism:

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

With other governments/jurisdictions: YES

TCI is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation report can be found here: https://www.cfatf-gafic.org/index.php?option=com_docman&task=cat_view&gid=329&Itemid=418&lang=en

Enforcement and implementation issues and comments:

Even though trust legislation allows the establishment of asset protection trusts, the Superintendent of Trustees has investigative powers and may assist overseas regulators. The Financial Services Commission licenses and supervises banks, money transmitters, mutual funds and funds administrators, investment dealers, trust companies, insurance companies and agents, company service providers and designated non-financial businesses. It also licenses IBCs and acts as the Company Registry for the TCI.

Deficiencies remain, including weaknesses in cross-border currency controls and effective dissemination of designated terrorists lists. TCI does not produce or regularly release reports containing statistics on STRs, trends and typologies. It is also unclear whether 2011 legislative changes have increased the speed by which STRs are reported to the authorities.

The AML/CFT reporting and compliance responsibilities of designated non-financial businesses and professions should be more clearly articulated, in particular for casinos. TCI should consider implementing domestic provisions which allow for the enforcement of foreign restraint and confiscation orders, and the sharing of assets confiscated as a result of such cooperation. While this occurs in practice, having a formal system in place would facilitate such actions.

The TCI is a British Overseas Territory and cannot sign or ratify international conventions in its own right. Rather, the United Kingdom (UK) is responsible for the TCI’s international affairs and may arrange for the ratification of any convention to be extended to the TCI. The 1988 Drug Convention was extended to the TCI in 1995. The UN Convention against Corruption, the International Convention for the Suppression of the Financing of Terrorism, and the UN Convention against Transnational Organized Crime (UNTOC) have not yet been extended to the TCI. The UNTOC is implemented in the TCI by various Orders in Council which were made in the UK and have legislative effect in the TCI.

Uganda

A 2012 report by the Center on Global Counterterrorism Cooperation concludes that Uganda is “deeply vulnerable to money laundering and terrorist financing” and that “money laundering is rampant in the country.” Officials in the Ministry of Finance and Bank of Uganda (BOU) agree with this assessment and are lobbying hard for passage of Uganda’s long-stalled comprehensive anti-money laundering (AML) legislation. Money laundering in Uganda derives largely from government corruption, misappropriation of public funds and foreign assistance, and abuse of the public procurement process. Other widespread offenses for money laundering in Uganda include arms and natural resource smuggling, exchange control violations, and human trafficking.

Uganda’s enormous cash-based informal economy provides a fertile environment for money laundering, as does its lack of anti-counterfeiting legislation which feeds a large black market for smuggled and/or counterfeit goods. Currently, most laundered money comes from domestic proceeds. However, Uganda’s inability to monitor formal and informal financial transactions, particularly along porous borders with Sudan, Kenya, Tanzania, and the Democratic Republic of Congo, render Uganda vulnerable to more advanced money laundering activities and potential terrorist financing. Uganda’s black market takes advantage of these borders and the lack of customs and tax collection enforcement capacity. Annual remittances are Uganda’s largest single source of foreign currency.

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 applicable

Are 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, microfinance institutions, foreign exchange bureaus, insurance companies, and the securities sector

REPORTING REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

STR covered entities: Banks, finance companies, microfinance institutions, foreign exchange bureaus, insurance companies, and the securities sector

money laundering criminal Prosecutions/convictions:

Prosecutions: 0

Convictions: 0

Records exchange mechanism:

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

With other governments/jurisdictions: NO

Uganda is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.esaamlg.org/userfiles/UGANDA_MER1.pdf

Enforcement and implementation issues and comments:

Ugandan efforts to combat money laundering are limited by the lack of comprehensive AML legislation, severe resource constraints, and internal government corruption. Uganda has not criminalized money laundering. Uganda’s Anti-Money Laundering Committee, which comprises multiple Government of Uganda (GOU) ministries and is chaired by the BOU, drafted a comprehensive AML bill approved by the Cabinet in January 2005. However, it remains stalled in Parliament, where there is little political will to pass it. The Ministry of Finance and BOU co-hosted a two-day sensitization workshop for Parliamentarians in December 2012 to try to create the political will to pass the bill. Uganda is ranked 130 out of 176 countries surveyed in Transparency International’s 2012 Corruption Perception Index.

Current efforts to combat money laundering are piecemeal and based on other legislation such as the Anti-Terrorist Act of 2002 and the Financial Institutions Act of 2004. The Anti-Terrorist Act makes terrorist financing illegal, but does not place it in the overarching framework of money laundering. There is no evidence it has been used to effectively prosecute financiers of terrorism. There is no suspicious transaction reporting (STR) requirement for suspected terrorist financing under this act.

The BOU has statutory authority to set KYC and STR requirements for financial institutions, foreign exchange bureaus, and deposit-taking microfinance institutions. The BOU mandates KYC programs and receives STR reports from financial institutions and foreign exchange bureaus, but does not closely monitor remittances or foreign exchange bureaus. The BOU does not keep data on filed reports, and no other government entity receives them. The Financial Institutions Act provides the BOU with the ability to freeze accounts which are believed to be the proceeds of crime. However, the Act does not provide procedures for either asset forfeiture or releasing funds. The Insurance Commission and Capital Markets Authority also have KYC and STR guidelines for their regulated entities, but no firm regulations.

The Criminal Investigations Department (CID) of the Ugandan Police Force is understaffed and lacks adequate training in financial investigation techniques related to money laundering and terrorist financing. Internal corruption within the CID also hampers police investigative capacity. According to GOU officials, criminals often have access to technology that is more sophisticated than that available to police investigators.

In 2011, the Uganda Revenue Authority (URA) decided to implement a new policy requiring anyone involved in real estate purchases valued at more than $20,000 to declare their source of income. However, the policy is controversial and it is unclear when or if the URA will begin enforcing it.

The GOU should pass the long delayed AML legislation and work with the international community to put in place an anti-money laundering/counter-terrorist financing regime that comports with international standards.

Ukraine

Although Ukraine does not have a regional banking or financial industry, it has had close ties with other European banks. Recently, however, several international banks have pulled out of the country. In Ukraine, high risks of money laundering have been identified in foreign economic activities, credit and finance, the fuel and energy industry, and the metal and mineral resources market. Illicit proceeds are primarily generated through corruption; fictitious entrepreneurship and fraud; trafficking in drugs, arms or persons; organized crime; prostitution; cybercrime; and tax evasion.

The large shadow economy represents a significant vulnerability. An additional vulnerability is the level of corruption throughout society – both in the private and public sectors. The high level of corruption in the financial sector allows banking regulations to be bypassed or ignored. Transnational organized crime is also present and both transits the country as well as conducts business in Ukraine. It is involved in drug trafficking, economic crimes, cigarette trafficking, trafficking in persons, public corruption, real estate and other frauds, violent crimes and extortions. It is able to operate in Ukraine due to the corruption of the justice system.

Various laundering methodologies are used, including the use of real estate, insurance, bulk cash smuggling, and through shell companies and financial institutions. There is a significant market for smuggled goods and a large informal financial sector in the country. These activities are linked to evasion of taxes and customs duties. As many Ukrainians work abroad, worker remittances using banking transfers or via international payment systems are reported at $1.9 billion in 2011. However, not all worker remittances come through banking channels. The State Financial Monitoring Service acknowledges the existence and use of alternative remittance systems in Ukraine.

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

Are legal persons covered: criminally: NO civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, non-banking institutions, insurance companies, gambling institutions, credit unions, depositories, securities traders, registers, pawn shops, mail service operators and other operators conducting money transfers, real estate traders, certain traders of precious metals and stones, notaries, auditors, independent lawyers, leasing providers, and private entrepreneurs

REPORTING REQUIREMENTS:

Number of STRs received and time frame: Not available – combined with CTRs

Number of CTRs received and time frame: 716,821 from January – September 2012

STR covered entities: Banks, non-banking institutions, insurance companies, gambling institutions, credit unions, depositories, securities traders, registers, pawn shops, mail service operators and other operators conducting money transfers, real estate traders, certain traders of precious metals and stones, notaries, auditors, independent lawyers, leasing providers, and private entrepreneurs

money laundering criminal Prosecutions/convictions:

Prosecutions: 42: January - June 2012

Convictions: 34: January - June 2012

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Ukraine 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-style regional body. Its most recent mutual evaluation can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Ukraine_en.asp

Enforcement and implementation issues and comments:

Ukraine should address the rise of cybercrime and related transnational organized criminal activities by examining the significant amounts of U.S. currency which appear to be diverted into this region using financial institutions. Ukraine should increase its attention to investigating large-scale corruption and money laundering schemes. Ukraine also should adopt and implement a system to provide for asset freezing, confiscation and forfeiture.

While Ukraine has the necessary treaties signed and ratified, in many instances they are not applied or are applied poorly. This is particularly true in the area of international law enforcement cooperation, mutual legal assistance and asset forfeiture. Furthermore, while Ukraine is a party to the UN Convention against Corruption and the UN Convention against Transnational Organized Crime, the provisions of these conventions are not implemented or are not working properly in Ukraine. Ukraine should work to implement its treaty obligations.

United Arab Emirates

The United Arab Emirates (UAE) is the primary transportation and trading hub for the Persian Gulf States, East Africa, and South Asia. Its robust economic development, political stability, and liberal business environment have attracted a massive influx of people, goods, and capital, which may leave the country vulnerable to money laundering activity. Dubai, especially, is a major international banking and trading center. The potential for money laundering is exacerbated by the large number of resident expatriates, roughly 80 to 85 percent of the total population, who send remittances to their homelands.

A significant portion of the money laundering/terrorist financing (ML/TF) activity in the UAE is likely related to proceeds from illegal narcotics produced in South West Asia. Narcotics traffickers from Afghanistan, where most of the world’s opium is produced, are increasingly reported to be attracted to the UAE’s financial and trade centers. Groups operating primarily outside the country almost certainly control the funds. Domestic public corruption contributes little to money laundering or terrorist financing.

Regional hawalas and associated trading companies in various expatriate communities, most notably the Somalis, have established clearinghouses, the vast majority of which are not registered with the UAE government. Likewise, the UAE’s proximity to Somalia has generated anecdotal reports suggesting some influx and/or transit of funds derived from piracy. There is no significant black market for smuggled goods in the UAE, but contraband smuggling (including alcohol) probably generates some funds that are laundered through the system. There are some indications that trade based money laundering occurs in the UAE and that such activity might support terrorist groups in Afghanistan, Pakistan and Somalia.

Other money laundering vulnerabilities in the UAE include exploitation of cash couriers, the real estate sector, and the misuse of the international gold and diamond trade. The country also has an extensive offshore financial center and 38 free trade zones (FTZs). There are over 5,000 multinational companies located in the FTZs, and thousands more individual trading companies. Companies located in the free trade zones are considered offshore or foreign entities for legal purposes. However, UAE law prohibits the establishment of shell companies and trusts.

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

Are 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, exchange houses, and securities traders

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 479: January 1 – March 31, 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks, insurance companies, exchange houses, and securities traders

money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: Not available

Records exchange mechanism:

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

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Government of the UAE (GOUAE) continues to work on enhancing its anti-money laundering/countering the financing of terrorism (AML/CFT) program; however, several areas require ongoing action by the GOUAE. The GOUAE should increase the capacity and resources it devotes to investigation of ML/TF both federally at the Anti-Money Laundering/Suspicious Cases Unit (AMLSCU) and at emirate-level law enforcement. AMLSCU needs to improve its timely financial information sharing capability to conform to international standards. The AMLSCU also needs additional resources to be able to execute its mandate of hawala supervision – currently it is not capable of supervising the vast number of hawalas in the country or enforcing hawala compliance.

On August 13, 2012, the GOUAE issued Federal Legal Decree No. 5 for 2012 on combating cyber crimes. Article 37 of the law stipulates seven years’ imprisonment and a fine of not less than 500,000 Dirhams (approximately $136,128) and not exceeding 2 million Dirhams (approximately $544,514) against any person using electronic sites or any information technology means to transfer or deposit illegal funds with the intention to hide or camouflage their source, or to hide or camouflage the facts about illegal funds, their source, movement and ownership.

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

While firms operating in the Dubai International Financial Center (DIFC) are subject to the UAE AML law, the Dubai Financial Services Authority (DFSA), regulator of the DIFC, has its own AML regulations and supervisory regime which it has based on regulatory regimes and standards found in the United States and Europe. This has caused some ambiguity about the Central Bank’s and the FIU’s respective authorities within the DIFC; however, the overlapping authorities can result in financial institutions holding to a more rigorous standard in compliance matters.

Enforcement of cash declaration regulations is weak. Law enforcement and customs officials should conduct more thorough inquiries into large declared and undeclared cash imports into the country, as well as enforce outbound declarations of cash and gold utilizing existing smuggling laws.

Law enforcement and customs officials should proactively develop cases based on investigations, rather than wait for STR-based case referrals from the AMLSCU. All facets of trade-based money laundering should be given greater scrutiny by UAE customs and law enforcement officials, including customs fraud, the trade in gold and precious gems, commodities used as counter-valuation in hawala transactions, and the abuse of trade to launder narcotics proceeds. The GOUAE should expand follow-up with financial institutions and the Ministry of Social Affairs regarding regulations on charities to ensure their registration at the federal level. The UAE also should continue its regional efforts to promote sound charitable oversight. The GOUAE has been looking at moving forward with formulating a policy on all aspects of asset forfeiture, including asset sharing; it should continue to act upon this interest. The cooperation between the Central Bank and the DFSA can be improved, with lines of authority clarified. Moreover, the absence of meaningful statistics across all sectors is a significant hindrance to the assessment of the effectiveness of the AML/CFT program.

United Kingdom

The United Kingdom (UK) plays a leading role in European and world finance and remains attractive to money launderers because of the size, sophistication, and reputation of its financial markets. Although narcotics are still a major source of illegal proceeds for money laundering, the proceeds of other offenses, such as financial fraud and the smuggling of people and goods, have become increasingly important. The past few years have seen an increase in the movement of cash via the non-bank financial system as banks and mainstream financial institutions have tightened their controls and increased their vigilance. Bureau de change, cash smugglers (into and out of the UK), and traditional gatekeepers (including lawyers and accountants) are used to move and launder criminal proceeds. Also on the rise are credit/debit card fraud, internet fraud, and the purchase of high value assets to disguise illegally obtained money.

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

Are 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, building societies, emoney issuers, and credit institutions; insurance companies; securities and investment service providers and firms; independent legal professionals, auditors, accountants, tax advisors, and insolvency practitioners; estate agents; casinos; high value goods dealers; and trust or company service providers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 285,000: January 1, 2012 – November 29, 2012

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, credit unions, building societies, emoney issuers, and credit institutions; insurance companies; securities and investment service providers and firms; independent legal professionals, auditors, accountants, tax advisors, and insolvency practitioners; estate agents; casinos; high value goods dealers; and trust or company service providers

money laundering criminal Prosecutions/convictions:

Prosecutions: 2,721 in 2010

Convictions: 1,587 in 2010

Records exchange mechanism:

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

With other governments/jurisdictions: YES

The United Kingdom is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/media/fatf/documents/reports/mer/FoR%20UK.pdf

Enforcement and implementation issues and comments:

The United Kingdom has a comprehensive range of anti-money laundering/countering the financing of terrorism (AML/CFT) laws. It is an active participant in multilateral efforts to meet AML/CFT threats. The UK continuously reviews and assesses the effectiveness and proportionality of its AML/CFT regime – including through the approval of updated and more accessible industry guidance.

Late in 2012, in cooperation with U.S. authorities, the British Financial Services Authority (FSA) put in place a 25-point regulatory plan with which a large British-based bank must comply. The bank also agreed to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used for several years to launder drug money flowing out of Mexico, and for other banking lapses, including transferring funds from countries under international sanctions. In a deferred prosecution agreement with the U.S. Department of Justice, the bank acknowledged it failed to maintain an effective program against money laundering and failed to conduct adequate due diligence on some account holders.

There is no enhanced customer due diligence for British PEPs. The UK should consider changing its rules to ensure domestic PEPs are identified and, if appropriate, subject to increased due diligence requirements in accordance with international recommendations.

In April 2013, the FSA is due to be reorganized. The new Prudential Regulation Authority will be the prudential supervisor and the Financial Conduct Authority will monitor the conduct of business across markets and services. The reorganization is dependent on the Financial Services Bill being approved by Parliament. Also, the Serious Organized Crime Agency, which includes the UK financial intelligence unit, is due to transition to the National Crime Agency in 2013. It is important these changes not impede the UK’s AML/CFT efforts.

Uruguay

Although the Government of Uruguay (GOU) took affirmative steps to counter money laundering (ML) and terrorism financing (TF) activities and continues to make progress in enforcement, Uruguay remains vulnerable to these threats. Uruguay has a highly dollarized economy, with the U.S. dollar often used as a business currency; about 75 percent of deposits and 50 percent of credits are denominated in U.S. dollars. Officials from the Uruguayan police and judiciary assess that Colombian criminal organizations are operating in Uruguay and Mexican criminal organizations are also likely present. There is additional concern about organized crime moving south from Brazil.

To the extent known, laundered criminal proceeds derive primarily from foreign activities related to drug trafficking organizations. Drug dealers are increasingly participating in other illicit activities like car theft and trafficking in persons, and violent crime is rising. Publicized ML cases are primarily related to narcotics and/or involve the real estate sector. Public corruption does not seem to be a significant factor behind money laundering or terrorist financing. Uruguay has porous borders with Argentina and Brazil and, despite its small size, there is a market for smuggled goods, determined by price differentials between Uruguay and its neighbors. Bulk cash smuggling and trade-based money laundering are likely to occur; however, there is no indication they are tied to terrorist financing.

Given the longstanding free mobility of capital in Uruguay, the informal financial sector is practically non-existent. Money is likely to be laundered via the formal financial sector (onshore or offshore). Six offshore banks operate in Uruguay, three of which cannot initiate new operations since they are in the process of being liquidated. Offshore banks are subject to the same laws, regulations, and controls as local banks, with the GOU requiring they be licensed through a formal process that includes a background investigation of the principals. Offshore trusts are not allowed. Bearer shares may not be used in banks and institutions under the authority of the Central Bank, and any share transactions must be authorized by the Central Bank.

There are 13 free trade zones (FTZs) located throughout the country. Three accommodate a variety of tenants offering a wide range of services, including financial services. Two were created exclusively for the development of the pulp industry, one is dedicated to science and technology, and the rest are devoted mainly to warehousing. Some of the warehouse-style FTZs and Montevideo’s free port and airports are used as transit points for containers of counterfeit goods or raw materials bound for Brazil and Paraguay. A decree passed in November 2010 discourages shell companies from establishing a presence in FTZs.

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

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

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 199: January 1 – November 30, 2012

Number of CTRs received and time frame: 6.1 million: January 1 – October 31, 2012

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

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

Uruguay is a member of the Financial Action Task Force on Money Laundering in South America (GAFISUD), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.gafisud.info/pdf/InformeEMUruguay09.pdf

Enforcement and implementation issues and comments:

Uruguay continued making progress on AML/CFT in 2012. Main developments include: the approval of the new National Strategy against money laundering for 2012-2015; the passage of a law banning bearer shares corporations; the signature of several tax information exchange agreements; the compilation of all AML/CFT-related legislation in a single body (with a view to harmonization and improvement); and, the launching of a Strategic Information Unit within the AML Secretariat (AMLS) (Decree 334/12). Additionally, the GOU created a working group to analyze the inclusion of tax evasion as a predicate crime for ML. The financial intelligence unit (UIAF) released a “Guide to Risky Operations and Alerts Related to Terrorism Finance” (Communication 2012/191), and the AMLS launched its web page.

The AML/CFT Strategy, approved in August 2012 via Decree 289/12, is expected to be a major improvement from the previous 2007 strategy. It was developed in two stages with donor support: identification of the most vulnerable areas (2010) and design of a strategy to address them (2011). The new Strategy seeks to strengthen Uruguay’s overall AML/CFT system by improving three areas: prevention; detection/financial intelligence; and criminal justice. UIAF personnel are hopeful the Strategy will help the GOU address several weak points on prevention and control. The Strategy’s work plan includes a precise set of goals, lays out responsibilities for different agencies, and sets a timeline for each goal.

Law No 18,914, passed in June 2012, mandates all government offices supply information to two judges and two prosecutors specialized in organized crime. The law expedites the procedures for judges and enables prosecutors to require reporting. In 2012, the GOU continued strengthening its AMLS, which organized several training events to create awareness about the importance of seizing assets and imprisoning criminals. In December 2011 and May 2012, the UIAF extended the obligation to report CTRs to securities intermediaries and wire transferors/remitters (Communications 2011/228 and 2012/036). In 2012, the UIAF designed a set of early warning indicators to leverage its comprehensive database. Over 96 percent of STRs were made by the financial sector.

The GOU does not have precise public records on prosecutions, convictions or amount of seized assets related exclusively to AML/CFT cases. Reportedly, 11 individuals were prosecuted in January - late November 2012, in two money laundering cases that had trafficking in persons and corruption as predicate crimes. The National Drug Council, which administers Uruguay’s Seized Assets Fund, indicates that between January and late November 2012, the GOU seized 47 vehicles and $1.2 million in cash, and confiscated one house. In 2012, the UIAF did not freeze any assets.

The GOU should amend its legislation to provide for criminal liability for legal persons. It also should continue improving its statistics related to money laundering, and should work with non-financial obligated entities, such as notaries or real estate brokers, to improve suspicious operations reporting.

Uzbekistan

Uzbekistan borders Afghanistan, and porous borders allow for narcotics, money and other goods to enter and exit the country to and from neighboring countries. Uzbekistan is not a major regional financial center and does not have a well-developed financial system. Uzbekistan operates largely on a cash economy and with decentralized accounting systems, which makes money laundering difficult to detect.

Corruption, narcotics trafficking, and smuggling generate the majority of illicit proceeds. Local and regional drug trafficking and other organized criminal organizations control narcotics markets and proceeds from other criminal activities, such as smuggling of cash, high-value transferable assets (e.g., gold), property, or automobiles. Uzbekistan is home to a significant black market for smuggled goods. This black market does not appear to be significantly funded by narcotics proceeds but can be used to launder drug-related money.

The large percentage of the migrant workers sending money to Uzbekistan may pose risks with regard to informal or alternative value systems; however, there is little publicly available information on these entities.

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

Are 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, credit unions, micro-credit institutions, securities brokers, members of the stock exchange, insurance brokers, leasing companies, money transfer companies, postal operators, dealers in precious metals and stones, real estate agents, notaries, lawyers, auditors, pawn shops, and lotteries

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 5,000 in 2011

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, credit unions, micro-credit institutions, securities brokers, members of the stock exchange, insurance agents and brokers, leasing companies, money transfer companies, dealers in precious metals and stones, real estate agents, notaries, lawyers, audit organizations, pawn shops, and lotteries

money laundering criminal Prosecutions/convictions:

Prosecutions: 1 in 2012

Convictions: Not available

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Uzbekistan is a member of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://eurasiangroup.org/ru/restricted/EAG_ME_2010_1_eng_amended.doc

Enforcement and implementation issues and comments:

Uzbekistan’s legal system is generally susceptible to corruption and political influence. Since 2009, legislation to reestablish anti-money laundering/counter-terrorist financing (AML/CFT) measures has been adopted piecemeal, leading to confusion from vague requirements, incomplete procedures, and occasional conflicts with banking regulations. Government secrecy surrounding cases and statistics inhibits evaluation. The Prosecutor General’s Office attempts to maintain secrecy by not releasing the criteria for identifying suspicious transactions, even to banks. Fearing the consequences of not reporting criminal activity, banks adopted excessively cautious policies that have led to massive over-reporting since 2010.

Ambiguities in the law make it difficult to determine the division of authority among the Prosecutor General’s Office and other law enforcement bodies in money laundering cases. Aside from the Financial Intelligence Unit (FIU), the Ministry of Internal Affairs and the National Security Service also investigate money laundering and terrorist finance, respectively, and both are making efforts to build financial crime departments.

The ability to freeze assets is limited; financial institutions can hold suspicious transactions for three business days, and the FIU can extend that by two days. After five business days the transaction must be resumed unless the assets can be seized as the result of a criminal case, leaving a very narrow window for investigation.

The Uzbek government currently is working with international donors to improve the AML/CFT legal framework and build national enforcement capacity.

Vanuatu

Vanuatu, closely tied to the economies of Australia and New Zealand, has a developing economy primarily based on agriculture and tourism.

The Government of Vanuatu (GOV) is trying to maintain its tax haven reputation while adopting regulations to keep it in line with international anti-money laundering/counter-terrorist financing (AML/CFT) standards. Vanuatu has historically maintained strict bank secrecy provisions that have prevented law enforcement agencies from identifying the beneficial owners of registered offshore entities. International experts have raised concerns about the offshore banking facilities and the vulnerability of the offshore sector to money laundering. The GOV has responded by introducing greater regulatory control of the offshore banking sector and strengthening domestic and offshore financial regulation, which has led to a reduction in the number of offshore banks operating in Vanuatu from over 63 in the early 2000s to just seven.

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

Are 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, casinos, lawyers, notaries, accountants, trust and company service providers, car dealers, real estate agencies, insurance and securities companies

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 50 in 2012

Number of CTRs received and time frame: 6,712 in 2012

STR covered entities: Banks, casinos, lawyers, notaries, accountants, trust and company service providers, car dealers, real estate agencies, and cash dealers

money laundering criminal Prosecutions/convictions:

Prosecutions: 0

Convictions: 0

Records exchange mechanism:

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

With other governments/jurisdictions: YES

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

http://www.apgml.org/documents/default.aspx?DocumentCategoryID=17

Enforcement and implementation issues and comments:

In 2012 Vanuatu amended its Proceeds of Crime Act and Mutual Assistance in Criminal Matters Act to eliminate noted duplication and inconsistency.

The Reserve Bank of Vanuatu and the Vanuatu Financial Services Commission have responsibility for regulating the offshore banking sector. They are supported by the Financial Intelligence Unit (FIU). The FIU does not have the requisite number of staff or the financial and technical resources to effectively perform its duties, particularly in light of Vanuatu’s recently enhanced AML/CFT legislation.

The Vanuatu Police Department operates a small Transnational Crime Unit, which is responsible for conducting investigations involving money laundering and terrorist financing offenses, the identification and seizure of criminal proceeds, and conducting investigations in cooperation with foreign jurisdictions. In 2012 Vanuatu put in place two important memorandums of understanding (MOUs). In March, Vanuatu’s State Law Office, which houses the FIU, signed a MOU with the Vanuatu Police Force to formalize information sharing on money laundering and fraud cases. While the two entities had a historically good relationship, there had been no formal legal mechanism in place to allow for the sharing of information, which slowed investigations. In August, the FIU signed a MOU with the Vanuatu Department of Customs and Inland Revenue, to put in place a similar formal information sharing arrangement.

The GOV should continue to implement all the provisions of its Proceeds of Crime Act and enact all additional legislation necessary to bring both its onshore and offshore financial sectors into compliance with international standards. The GOV should establish a viable asset forfeiture regime and circulate the UNSCR 1267 Sanctions Committee updated list of designated terrorist entities. Appropriate authorities should continue to initiate outreach to all reporting institutions regarding their legal obligations and should ensure enforcement agencies have sufficient resources and training. The GOV also should develop and implement a comprehensive system for the declaration or disclosure of cross-border transportation of cash and negotiable monetary instruments.

Venezuela

Venezuela is a major cocaine transit country. The country’s proximity to drug producing countries, weaknesses in its anti-money laundering regime, limited bilateral cooperation, and substantial corruption in law enforcement and other relevant sectors continue to make Venezuela vulnerable to money laundering. The main sources of money laundering are proceeds generated by drug trafficking organizations.

Money laundering occurs through commercial banks, exchange houses, gambling sites, fraudulently invoiced foreign trade transactions, smuggling, real estate, agriculture and livestock businesses, securities transactions, and trade in precious metals. Trade-based money laundering remains a prominent method for laundering regional narcotics proceeds. One such trade-based system is the black market peso exchange, through which money launderers furnish narcotics-generated dollars in the United States to commercial smugglers, travel agents, investors, and others in exchange for Colombian pesos. It is reported many black market traders ship their goods through Margarita Island’s free port, one of three free trade zones/ports in Venezuela. The free trade zones provide exemptions from most import and export duties and offer foreign-owned firms the same investment opportunities as Venezuelan firms. Venezuela has two free ports that also enjoy exemptions from most tariff duties: Margarita Island (Nueva Esparta) and Santa Elena de Uairen in the state of Bolivar.

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

Are 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, leasing companies, money market and risk capital funds, savings and loans, foreign exchange operators, regulated financial groups, and credit card operators; hotels and tourist institutions that provide foreign exchange; general warehouses or storage companies; regulated securities and insurance entities; casinos, bingo halls, and slot machine operators; and regulated notaries and public registration offices

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 1,427 in 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks, leasing companies, money market funds, savings and loans, foreign exchange operators, regulated financial groups, and credit card operators; hotels and tourist institutions that provide foreign exchange; general warehouses or storage companies; regulated securities and insurance entities; casinos, bingo halls, and slot machine operators; and regulated notaries and public registration offices

money laundering criminal Prosecutions/convictions:

Prosecutions: 14: January 1 - November 29, 2012

Convictions: 8: January 1 - November 29, 2012

Records exchange mechanism:

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

With other governments/jurisdictions: YES

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

http://www.cfatfgafic.org/downloadables/mer/Venezuela_3rd_Round_MER_(Final)_English.pdf

Enforcement and implementation issues and comments:

The Government of Venezuela (GOV) has implemented its 2010 action plan and improved anti-money laundering/counter-terrorism financing (AML/CFT) deficiencies. Venezuela’s executive branch approved new regulations to strengthen the supervision of banks and securities intermediaries through the Superintendent of Banking Sector Institutions and National Superintendent of Securities, respectively. In the banking sector, the new regulations require enhanced due diligence for higher-risk activities, customer profiles, and categories of customers – distinctions that did not exist prior to these regulations. In the securities sector, the new regulations require securities intermediaries to determine the origin and destination of the funds being used, conduct comprehensive customer due diligence, appoint compliance officers, maintain internal committees for prevention and control of money laundering, and have a code of ethics. In January 2012, the national assembly passed a law that defines and sanctions both organized crime and terrorist financing. However, the politicized judicial system compromises the law’s effectiveness. The GOV should increase institutional infrastructure and technical capacity to effectively implement the new AML/CFT legislation and legal mechanisms.

The U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN) continues to suspend the exchange of information with Venezuela’s National Financial Intelligence Unit, after the unauthorized disclosure of information provided by FinCEN in January 2007.

Vietnam

Vietnam, although not considered a major regional financial center, is a site of significant money laundering activity. Vietnam’s economy is largely cash-based, with both U.S. dollars and gold widely used as a means of exchange and storing value. Sources of illicit funds in Vietnam include public corruption, fraud, gambling, prostitution, counterfeiting of goods and trading in counterfeit merchandise, illegal wildlife trade, and trafficking in persons. Remittances from the proceeds of narcotics trafficking in Canada, the United Kingdom, and the United States are a significant source of money laundering, as are narcotics proceeds from traffickers using Vietnam as a transit country.

Vietnam’s banking sector is partially privatized. However, the state maintains controlling interests in five individual banks that collectively represent at least 50 percent of total assets in the banking system. Because of widespread cross-ownership between state-owned enterprises and individual banks, the true level of state control of banking system assets is indeterminable but undoubtedly much higher than 50 percent. There are no signs the state intends to relinquish this level of control. State-controlled banks are employed as tools for carrying out state policies, which includes favorable treatment of state-owned enterprises, many of which are related through interlocking directorates. Almost all trade and investment receipts and expenditures are processed by the banking system, but transactions are not monitored effectively. As a result, the banking system is at relatively higher risk of being used for money laundering through false declarations, including fictitious investment transactions. Customs fraud and the over- or under-invoicing of exports and imports are common and could be indicators of trade-based money laundering. Real property is also believed to play a significant role in the money laundering process.

On October 19, 2012, the Financial Action Task Force (FATF) included Vietnam in its Public Statement, acknowledging that, although Vietnam has taken steps toward improving its anti-money laundering/counter-terrorist financing (AML/CFT) regime, Vietnam has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain.

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

Are legal persons covered: criminally: NO civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks; insurers; foreign exchange houses; fund, investment, and business management services; games of chance, casinos or lotteries; real estate trading service companies; traders in gold, silver and precious stones; lawyers and legal service providers; financial and accounting advisors; and corporate secretarial services

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 352: January 1 through September 30, 2012

Number of CTRs received and time frame: 0

STRcovered entities: Banks; insurers; foreign exchange houses; fund, investment, and business management services; games of chance, casinos or lotteries; real estate trading service companies; traders in gold, silver and precious stones; lawyers and legal service providers; financial and accounting advisors; and corporate secretarial services

money laundering criminal Prosecutions/convictions:

Prosecutions: 0

Convictions: 0

Records exchange mechanism:

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

With other governments/jurisdiction: YES

Vietnam is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Vietnam%20ME1.pdf

Enforcement and implementation issues and comments:

The Government of Vietnam (GOV) has issued various decrees to criminalize money laundering and terrorist financing, establish procedures to identify and freeze terrorist assets, improve the AML/CFT supervisory framework, enhance customer due diligence and reporting, and strengthen international cooperation. A new law was enacted in June 2012 and took effect on January 1, 2013. The AML law includes only preventative measures. Enforceable obligations with penalties for criminal offenses related to money laundering are included in the Penal Code. Legal persons are not subject to criminal liability under the Penal Code. Vietnam currently has no plans to impose criminal liability on legal persons because of perceived conflicts with fundamental principles of domestic law. Vietnam should remedy this gap to be in full conformance with international standards.

While the GOV has criminalized terrorist financing, identified gaps remain, in particular related to collection and provision of funds for specific terrorist acts and the ability to freeze funds used for terrorist financing. Vietnam does not have a comprehensive system for implementing UNSCRs 1267 or 1373 and lacks a system for freezing terrorist assets in accordance with these resolutions.

While currency transaction reports appear to be required, there are no implementing regulations and no large transaction reports are filed. In practice, the Anti-Money Laundering Department (AMLD) of the State Bank of Vietnam appears to receive little of the financial and suspicious transaction report (STR) information required by decree. Given the size of Vietnam’s economy, the number of reports received is low and suggests a correspondingly low level of STR compliance. All STRs are received in paper form. The AMLD claims to have an electronic database and electronic analysis system, but international officials have not seen evidence of an electronic system for sharing information with domestic law enforcement authorities to help investigate and prosecute money laundering, trade fraud, and financial crimes. Moreover, while the GOV claims that information exchanges have occurred with several foreign financial intelligence units (FIUs), these appear to involve receipt rather than provision of information. While the GOV regulates customer identification and the collection of customer details and documents, it does not explicitly require verification of a customer’s identity, unless the financial institution becomes “suspicious.” There are implementing circulars promulgated by regulatory bodies which include provisions for enhanced due diligence, including verification of identity in situations where such verification is required. A State Bank of Vietnam Circular addresses politically exposed persons (PEPs); however, this circular applies only to entities regulated by the State Bank of Vietnam.

Vietnam should implement the AML law and criminalize money laundering according to international standards. The GOV also should complete drafting its anti-terrorism law and comprehensively criminalize terrorist financing. Vietnam should continue to work to implement its action plan to address recognized deficiencies.

On June 8, 2012, the GOV became a party to the UN Convention against Transnational Organized Crime.

Yemen

Yemen is not considered a regional financial center. The financial system in Yemen is not well developed and the extent of money laundering is not known. Government corruption, substantial politicization of government institutions, a largely cash-based economy, and lax government enforcement of existing laws and regulations render Yemen vulnerable to money laundering and other financial abuses—including possible terrorist financing. Yemen has a large underground economy due, in part, to the profitability of the smuggling of trade goods and contraband. Criminal proceeds in Yemen tend to emanate from foreign criminal activity, including smuggling by criminal networks, and, possibly, terrorist groups, operating locally, although the extent is unknown. There have been a number of U.S. investigations of khat being smuggled from Yemen and East Africa into the United States with profits laundered and repatriated via hawala networks.

Yemen has a free trade zone (FTZ) in the port city of Aden. Identification requirements within the FTZ are enforced. Truckers must file the necessary paperwork in relevant trucking company offices and must wear ID badges. FTZ employees must undergo background checks by police, the Customs Authority and employers. There is no evidence the FTZ is being used for trade-based money laundering or terrorist financing schemes. Transparency International lists Yemen as 156 out of 174 on its 2012 Corruption Perception Index.

Yemen is included in the October 2012 Financial Action Task Force (FATF) Public Statement because it has not made sufficient progress in implementing its action plan and continues to have certain strategic anti-money laundering/counter-terrorist financing (AML/CFT) deficiencies, including the inadequate criminalization of money laundering and terrorist financing, the inability to freeze terrorist assets, and the lack of capacity of supervisory entities and the financial intelligence unit (FIU).

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

Are 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, exchange companies, insurance companies, fund transfer companies, General Post and Postal Savings Authority, real estate agents, gold or precious metal dealers, public notaries, lawyers, accountants, financial and investment services companies, various government ministries such as the Central Organization for Control and Audit, Central Bank of Yemen, and Ministry of Industry and Trade

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 89 in 2012

Number of CTRs received and time frame: 0 in 2012

STR covered entities: Banks, exchange companies, insurance companies, fund transfer companies, General Post and Postal Savings Authority, real estate agents, gold or precious metal dealers, public notaries, lawyers, accountants, financial and investment services companies, various government ministries such as the Central Organization for Control and Audit, Central Bank of Yemen, and Ministry of Industry and Trade

money laundering criminal Prosecutions/convictions:

Prosecutions: 0 in 2012

Convictions: 0 in 2012

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Yemen 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 can be found here: http://www.menafatf.org/images/UploadFiles/MER_Republic_of_Yemen.pdf

Enforcement and implementation issues and comments:

Yemen’s law 1/2010, “On Combating Money Laundering and Financing of Terrorism,” requires a number of businesses to file STRs with the FIU. The FIU has promulgated regulations pursuant to this law; however, in practice, compliance is limited. Financial institutions are subject to regulations and limited monitoring by the Central Bank of Yemen (CBY). There are approximately 532 registered money exchange businesses in Yemen, which serve primarily as currency exchangers in addition to performing funds transfer services. Money transfer businesses are required to register with the CBY and can open offices at multiple locations.

The FIU has 11 employees. It has no computerized database and is not networked to other government or regional financial data systems. The FIU needs substantial improvement of its operational capacity to effectively fulfill its responsibilities. In 2012, the FIU pursued and participated in training to enhance its operational capacity. Additional training is planned.

Law enforcement as well as border control agencies are not proactive or prevention oriented with regard to money laundering issues. Yemen has a cross-border cash declaration or disclosure requirement for cash amounts over $15,000. Compliance is lax and customs inspectors do not routinely file currency declaration forms if funds are discovered.

Zambia

Zambia is not a major financial center. The proceeds of narcotics transactions and money derived from public corruption are the major sources of laundered funds. Human trafficking is also a problem. Banks, real estate agents, insurance companies, casinos, and law firms are the institutions most commonly used to launder money. Money launderers in Zambia have used structuring, currency exchanges, monetary instruments, gambling, under-valuing assets, and front businesses to launder their proceeds. Other means include securities, debit/credit cards, bulk cash smuggling, wire transfers, and false currency reporting. Further, some criminals use their proceeds to purchase luxury goods such as vehicles and real estate.

Zambia is not considered an offshore center. The government of Zambia (GOZ) is currently developing a number of multi-facility economic zones that are similar to free trade zones.

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

Are 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: Commercial and development banks, building societies and microfinance entities, savings and credit institutions, money exchanges and remitters, securities firms, and casinos

REPORTING REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not applicable

STR covered entities: Commercial and development banks, building societies and micro-finance entities, savings and credit institutions, money exchanges and remitters, securities firms, insurance companies, venture capital and pension funds, leasing companies and casinos

money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: Not available

Records exchange mechanism:

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

With other governments/jurisdictions: YES

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

Enforcement and implementation issues and comments:

The Prevention and Prohibition of Money Laundering Act (PPMLA) does not expressly set out any direct customer identification obligation, but it does indirectly require identification of customers as part of its requirement to document transactions. The PPMLA applies to all regulated entities, to include any institution regulated by any supervisory institution of the Zambian Government, including, but not limited to, the Bank of Zambia, the Registrar of Banks and Financial Institutions, the Registrar of Insurance, the Securities and Exchange Commissioner, the Commissioner of Lands, and the Registrar of Companies. The Bank of Zambia Anti-Money Laundering Directives of 2004 provide a direct customer identification obligation, which is applied flexibly to avoid financial exclusion in rural areas. Zambian banks also have voluntarily adopted KYC rules.

The financial intelligence unit (FIU), created in 2010, has received little government funding and has just begun operations. The FIU board was constituted in November 2012 and is now housed at the Bank of Zambia headquarters. The FIU has received some assistance from international donors and continues to look for capacity building and financial support. Most money laundering crimes are prosecuted through the Drug Enforcement Commission. Like much of the Zambian government, authorities tasked with investigating and prosecuting financial crimes are hampered by a lack of resources and capacity.

In May 2012, the GOZ enacted Statutory Instrument (SI) 33, prohibiting the use of foreign currencies in domestic transactions. While not targeted at money laundering, SI 33 is expected to aid enforcement by making international money laundering easier to identify. In addition, effective January 1, 2013, Zambia will begin the transition to a rebased local currency, the kwacha, including additional security features. This is expected to aid anti-money laundering enforcement by making concealed funds worthless after the new currency phase-in period.

The GOZ should become a party to the UN International Convention for the Suppression of the Financing of Terrorism.

Zimbabwe

Zimbabwe is not a regional financial center, but it faces problems related to money laundering and official corruption. Regulation and enforcement in the financial sector is weak, mainly due to a lack of trained regulators and investigators and limited asset-seizure authority. These deficiencies expose the country to money laundering abuses, but there are no data on the extent of money laundering in Zimbabwe. The exposure is greatest within the financial sector, which includes both formal and informal institutions. Commercial banks, building societies, moneylenders, insurance brokers, realtors, and lawyers in Zimbabwe are all vulnerable to exploitation by money launderers. Financial crime may also be magnified by efforts by the Government of Zimbabwe (GOZ) to sell diamonds through sanctions-skirting approaches including high-value cash transactions and obfuscating actual entities involved in electronic financial transactions.

Nearly all transactions in Zimbabwe are now carried out with either the U.S. dollar or the South African rand. The GOZ’s switch to this “multi-currency regime” dramatically reduced opportunities for money laundering and financial crime arising from the multiple exchange rates and opaque foreign exchange controls that were in place until 2009. Legislators from all parties in the coalition government have increased scrutiny of government activities, and ministers from former opposition parties have pushed for further reforms. For example, the parliamentary committee on mining has held officials to account for GOZ actions in the Marange diamond fields. As a result, the Ministry of Finance promised to tighten controls by introducing a Diamond Act and to enhance the revenue authority’s oversight on production and sale of diamonds. Ultimate responsibility for the Diamond Act lies with the Ministry of Mines and Mining Development, and a draft Act has not yet been produced. In addition, the minister of finance implemented a new law to improve accountability at the Reserve Bank of Zimbabwe.

The United States, Canada, Australia, and the European Union have imposed targeted financial sanctions and travel restrictions on political leaders and a limited number of companies and state-owned enterprises believed to have been complicit in human rights abuses and undermining institutions and processes in Zimbabwe.

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

Are 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: Commercial banks, acceptance houses, discount houses, money transfer agencies, bureaux de change, legal practitioners, accounting firms, pension funds, real estate agents, cash dealers, and finance houses

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 187: January 1 - November 5, 2012

Number of CTRs received and time frame: Not available

STR covered entities: Commercial banks, acceptance houses, discount houses, money transfer agencies, bureaux de change, legal practitioners, accounting firms, pension funds, real estate agents, cash dealers, and finance houses

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/jurisdiction: YES

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

Enforcement and implementation issues and comments:

AML legislation is sometimes abused for political purposes. More broadly, corruption sometimes impedes application of Zimbabwe’s anti-money laundering mechanisms.

Zimbabwe has developed an action plan to address its strategic anti-money laundering/counter-terrorist financing deficiencies. Zimbabwe now has a fully operational and functioning financial intelligence unit. The GOZ, however, still needs to adequately criminalize money laundering and terrorist financing, and establish and implement procedures to adequately identify and freeze terrorist assets to effectively implement UNSCRs 1267 and 1373.

Law enforcement and regulatory agencies lack the resources to effectively combat money laundering. Zimbabwe has criminalized money laundering and put in place mechanisms for freezing and forfeiting assets; however, deficiencies remain in being able to do so in a timely manner. The banking system can quickly freeze accounts, but financial institutions typically receive information related to designations from private sources and not government agencies. Zimbabwe has broad legislation on mutual legal assistance in both civil and criminal cases. In general, there are no legal or practical impediments to rendering assistance, providing both Zimbabwe and the requesting country criminalize the conduct underlying the offense. However, mutual legal assistance is only available for the investigation and prosecution of money laundering offenses but not for terrorist financing. There were a number of prosecutions and convictions between January and November 2012, although exact figures are not available because of the lack of a centralized system for compiling and collating the information.

The GOZ should adequately criminalize money laundering and terrorist financing; ensure obliged entities comply with STR filing requirements; establish and implement adequate procedures to identify and freeze terrorist assets, which includes implementing its obligations under UNSCRs 1267 and 1373; become a party to the International Convention for the Suppression of the Financing of Terrorism; ensure a fully operational and effectively functioning financial intelligence unit; and enact and implement appropriate mutual legal assistance legislation.



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