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2013 INCSR: Countries/Jurisdictions of Primary Concern - Afghanistan through Greece


Bureau of International Narcotics and Law Enforcement Affairs
Report
March 5, 2013

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Afghanistan

The Islamic Republic of Afghanistan is not a regional or offshore center. Terrorist and insurgent financing, money laundering, cash smuggling, abuse of informal value transfer systems, and other illicit activities designed to finance organized criminal activity continue to pose serious threats to the security and development of Afghanistan. Afghanistan remains a major narcotics trafficking and producing country, and is the world’s largest opium producer and exporter. The narcotics trade, corruption and contract fraud are major sources of illicit revenue and laundered funds. Corruption permeates all levels of Afghan government and society and the country rates very poorly on various indices.

The growth in Afghanistan’s banking sector has slowed considerably in recent years; and traditional payment systems, particularly hawala networks, remain significant in their reach and scale. Official corruption and weaknesses in the banking sector incentivize the use of informal mechanisms and exacerbate the difficulty of developing a transparent formal financial sector in Afghanistan. The unlicensed and unregulated hawaladars in major drug areas such as Helmand likely account for a substantial portion of the illicit proceeds being moved in the financial system. Afghan business consortiums that control both hawaladars and banks allow criminal elements within these consortiums to manipulate domestic and international financial networks to send, receive, and launder illicitly-derived monies or funds intended for criminal, insurgent, or terrorist activities. The rapid depreciation of the Iranian rial in October 2012 led to increased demand for U.S. dollars in Iran and a reported increase in cash smuggling from Afghanistan to Iran.

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: NO

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Central Bank of Afghanistan (DAB), banks, registered money service businesses (MSBs), insurance companies, dealers in precious metals and stones, lawyers, accountants, securities dealers, and real estate agents

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 684 in 2012

Number of CTRs received and time frame: 1,921,129 in 2012

STR covered entities: Banks, MSBs, hawaladars, insurance companies and securities dealers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 22 in 2012

Convictions: 0

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Afghanistan 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 at: http://www.apgml.org/documents/docs/17/Afghanistan%20-%20published%20DAR.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Afghanistan (GOA) has no formal extradition or mutual legal assistance arrangements with the United States. Requests for extradition and mutual legal assistance are processed on an ad hoc basis, with assistance from the Afghan Attorney General’s Office. The government should adopt the drafted extradition-related legislation, which is pending in Afghan parliament.

Using Presidential executive orders the GOA has frozen bank accounts owned by hawala networks listed under UNSCR 1988. There are no instances of seized bank accounts, and there is no mechanism for asset sharing. The GOA should work with the international community to train enforcement officers, prosecutors, and judges to provide them a better understanding of the basis for seizing and forfeiting assets. Afghanistan should provide regulators and enforcement officers with the resources to carry out their oversight and investigative duties.

Afghanistan’s ability to enforce relevant laws and regulate institutions is hampered by corruption. Limited resources and lack of technical expertise and infrastructure also hamper effective regulatory oversight. Insurance companies and securities dealers are technically under the regulatory regime and are required to file STRs, but the GOA does not enforce this requirement. Dealers in precious metals and stones, lawyers, accountants, and real estate agents are not supervised in Afghanistan. The GOA should pass and enforce legislation to regulate financial institutions and designated non-financial businesses and professions and comply with anti-money laundering/combating the financing of terrorism (AML/CFT) regulations.

Less than five percent of the Afghan population uses banks, depending instead on the traditional hawala system, which provides a range of financial and non-financial business services in local, regional, and international markets. Approximately 90 percent of financial transactions run through the hawala system, including foreign exchange transactions, funds transfers, micro and trade finance, as well as some deposit-taking activities. There is not a clear division between the hawala system and formal financial sector. Hawaladars often keep accounts at banks and use wire transfer services to settle their balances with other hawaladars abroad. Due to limited bank branch networks, banks occasionally use hawaladars to transmit funds to hard-to-reach areas within Afghanistan. Afghanistan’s financial intelligence unit (FIU) reports that no MSBs or hawaladars have ever submitted STRs.

The GOA should issue the necessary regulatory instruments to increase the number of MSB/hawaladar inspections, and expand implementation of the MSB/hawala licensing program. The GOA also should create an outreach program to notify and educate hawaladars about the licensing and STR filing processes.

Border security continues to be a major challenge throughout Afghanistan, with the country’s 14 official border crossings under central government control. Cargo is often exempted from any screening or inspection due to corruption at the border crossings and customs depots. Outside of official border crossings, most border areas are under-policed or not policed at all, and are particularly susceptible to cross-border trafficking, trade-based money laundering, and bulk cash smuggling. Kabul International Airport lacks stringent inspection controls for all passengers, and includes a VIP lane that does not require subjects to undergo any inspections or controls. The GOA should strengthen inspection controls for airport passengers.

Afghanistan’s Central Bank reported that approximately $4.6 billion in cash left Afghanistan via Kabul International Airport in 2011. Tracking cash movements across borders or through airports has become increasingly difficult with implementation of an executive order that makes it illegal to take more than $20,000 out of the country, but eliminates the need to report outbound currency.

Afghanistan’s laws related to terrorist financing are not in line with international standards and do not criminalize all elements of the terrorist financing offense. Afghanistan has taken steps towards improving its AML/CFT regime, including by establishing high-level AML/CFT coordination mechanisms. However, certain strategic AML/CFT deficiencies remain. Afghanistan should continue to work to adequately criminalize money laundering and terrorist financing; establish and implement an adequate legal framework for identifying, tracing and freezing terrorist assets; implement an adequate AML/CFT supervisory and oversight program for all financial sectors; establish and implement adequate procedures for the confiscation of assets related to money laundering; establish a fully operational and effectively functioning FIU; and establish and implement effective controls for cross-border cash transactions.

Antigua and Barbuda

Antigua and Barbuda is a significant offshore center that, despite recent improvements, remains susceptible to money laundering due to its offshore financial sector and Internet gaming industry. Illicit proceeds from the transhipment of narcotics and from financial crimes occurring in the United States are laundered in Antigua and Barbuda. During the past year, the Government of Antigua and Barbuda’s Office of National Drug Control and Money Laundering Policy (ONDCP) compiled evidence that money laundering related to drug trafficking takes place through local financial institutions. The ONDCP’s analysis shows both that criminals abuse the system and financial institutions, in some instances, fail to apply sufficiently rigorous due diligence in relation to transactions that should be seen as questionable. The funds involved include Eastern Caribbean dollars traced to the sale of local property by at least one person U.S authorities identified as trafficking drugs through Antigua and Barbuda to U.S. territory. Funds also include significant quantities of U.S. currency found in bank safety deposit boxes.

Domestic casinos are required to incorporate as domestic corporations. Internet gaming companies are required to incorporate as international business corporations (IBCs), and as such are required to have a physical presence. Internet gaming sites are considered to have a physical presence when the primary servers and the key person are resident in Antigua and Barbuda. The Government of Antigua and Barbuda (GOAB) receives approximately $2,800,000 per year from license fees and other charges related to the Internet gaming industry. A nominal free trade zone in the country seeks to attract investment in areas the GOAB deems priority. Casinos and sports book-wagering operations in Antigua and Barbuda’s free trade zone are supervised by the ONDCP and the Directorate of Offshore Gaming.

Bearer shares are permitted for international companies. However, the license application requires disclosure of the names and addresses of directors (who must be natural persons), the activities the corporation intends to conduct, the names of shareholders and number of shares they will hold. Registered agents or service providers are required by law to know the names of beneficial owners. Failure to provide information or giving false information is punishable by a fine of $50,000. Offshore financial institutions are exempt from corporate income tax. All licensed institutions are required to have a physical presence, which means presence of at least a full-time senior officer and availability of all files and records. Shell companies are not permitted.

Currently, the Eastern Caribbean Central Bank (ECCB) supervises Antigua and Barbuda’s domestic banking sector, along with the domestic sectors of seven other Caribbean jurisdictions.

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, agricultural credit institutions, money exchangers, accountants, notaries, gaming centers, auto dealers and securities dealers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 102: January 1 – November 7, 2012

Number of CTRs received and time frame: 591: January 1 – November 7, 2012

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 3 in 2012

Convictions: 3 in 2012

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Antigua and Barbuda is a member of Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: https://www.cfatf-gafic.org/index.php?option=com_docman&task=cat_view&gid=355&Itemid=418&lang=en

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS

The Money Laundering Prevention Act of 1996 (MLPA), as amended, covers banks, offshore banks, IBCs, money transmitters, credit unions, building societies, trust businesses, casinos, Internet gaming companies, and sports betting companies. Intermediaries such as lawyers and accountants are not included in the MLPA.

The Banking (Amendment) Act 2012 requires the ECCB to approve the appointment of bank directors, senior management and significant shareholders. The Financial Services Regulatory Commission is responsible for the regulation and supervision of all institutions licensed under the International Business Corporations Act of 1982, including offshore banks and all aspects of offshore gaming. This includes issuing licenses for IBCs, maintaining the register of all corporations, and conducting examinations and reviews of offshore financial institutions as well as some domestic financial entities, such as insurance companies and trusts.

The GOAB adopted regulations for the licensing of interactive gaming and wagering entities to address possible money laundering through client accounts of Internet gaming operations. Internet gaming companies are required by the Interactive Gaming and Interactive Wagering Regulations to report to the ONDCP all payouts over $25,000. The Interactive Gaming and Interactive Wagering (Amendment) Regulations 2012 removes the provision that previously allowed the duplicate reporting of STRs to authorities other than the ONDCP. Internet gaming companies are required to submit quarterly and annual audited financial statements, enforce KYC verification procedures, and maintain records relating to all gaming and financial transactions of each customer for six years.

The GOAB should continue to work on strengthening all provisions of its AML/CFT legislation and enforcement.

Argentina

Argentine and international observers express concern that money laundering related to narcotics trafficking, corruption, contraband, and tax evasion occurs throughout the financial system. Observers also believe most money laundering operations in Argentina are conducted through transactions involving specific offshore centers. The most common money laundering operations in the non-financial sector involve transactions made through attorneys, accountants, corporate structures, and in the real estate sector. The widespread use of cash (including U.S. dollars) in the economy also leaves Argentina vulnerable to money laundering. Tax evasion is the predicate crime in the majority of Argentine money laundering investigations.

Argentina has a long history of capital flight and tax evasion. Traditionally, Argentina is an economy with strong links to U.S. currency. Many Argentines prefer to hold their savings in U.S. dollars and/or dollar-denominated assets as a hedge against the high levels of inflation and peso devaluation that commonly occur in the Argentine economy. Approximately 30 percent of the labor market is informal, and it is estimated that Argentines hold billions of U.S. dollars outside the formal financial system, both offshore and in country, much of it legitimately earned money that was not taxed. The general vulnerabilities in the system also expose Argentina to a risk of terrorist financing.

Argentina is a source country for precursor chemicals and a transit country for cocaine produced in Bolivia, Peru, and Colombia, and for marijuana produced in Paraguay. While most of the cocaine transiting Argentina is bound for the European market, virtually all of the marijuana is for domestic or regional consumption; there has been an increase in domestic drug consumption and production. Argentine officials also identified smuggling, corruption and different types of fraud as major sources of illegal proceeds. A substantial portion of illicit revenue also comes from black market peso exchanges or informal value transfers. Informal value transfers occur when unregistered importers, for example, use entities that move U.S. currency in bulk to neighboring countries where it is deposited and wired to U.S. accounts or to offshore destinations. Products from the United States are often smuggled into Argentina, or the shipping manifests are changed to disguise the importer and merchandise. U.S. law enforcement agencies consider the tri-border area (Argentina, Paraguay and Brazil) to be a major source of smuggling, especially of pirated products.

The Financial Action Task Force’s (FATF) third-round mutual evaluation report of Argentina found the country partially compliant or non-compliant with 46 of the then 49 FATF Recommendations. The Government of Argentina (GOA) developed an action plan to address the deficiencies, and has made substantial progress carrying out this action plan by passing, and at least partially, implementing several new laws. However, the effectiveness of these laws has not yet been demonstrated in terms of enforcement and increased convictions.

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, financial companies, credit unions, tax authority, customs, currency exchange houses, casinos, securities dealers, insurance companies, accountants, notaries public, dealers in art and antiques, jewelers, real estate registries, money remitters, charitable organizations, auto dealers, and postal services

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 13,308 in 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks, financial companies, credit unions, tax authority, customs, currency exchange houses, casinos, securities dealers, insurance companies, accountants, notaries public, dealers in art and antiques, jewelers, real estate registries, money remitters, charitable organizations, auto dealers, and postal services

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 31: Unknown time frame

Convictions: 2: June - December 2011

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Argentina is a member of the FATF and the Financial Action Task Force against Money Laundering in South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/3/60/46695047.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

On December 27, 2011, Argentina passed Law 26.734, which broadens the definition of terrorism, and increases monetary fines and prison sentences for crimes linked to terrorist financing. The law closes several loopholes in previous legislation, empowers the Argentine financial intelligence unit (UIF) to freeze assets, and criminalizes the financing of terrorist organizations, individuals, and acts. To date, this law has been used in human rights cases related to individuals wanted for criminal actions taken during Argentina’s military dictatorships thirty-plus years ago. The law was used to freeze funds related to both the wanted persons and to family members and associates who allegedly provided the fugitives recent financial assistance. The UIF brought 44 such cases in the past year, and froze funds related to four individuals. While this does demonstrate that the law can be used to quickly freeze the assets, the investigation and prosecution of long-standing cases does not demonstrate an ability to detect and prevent ongoing or more current terrorist activities.

Argentine exchange houses are significantly more regulated than similar operations in other Latin American countries. However, in 2012 Argentina sharply limited access to foreign exchange in the formal market for most purposes, which drove most foreign exchange activities away from formal actors and into the informal sector. The market shift away from formal methods of exchange makes it difficult to evaluate the effectiveness of new regulations.

The UIF claims it made significant progress in formalizing transactions in the real estate sector, a significant area for money laundering operations. Its efforts were directed toward triangulating the reports of notaries, real estate agents, and real estate registrars to insure consistency. Consequently, there was a significant decrease in real estate sales in Argentina in the past year as these policies were implemented. However, it is difficult to determine if this change is due to increased difficulties in acquiring foreign currency (traditionally real estate in Argentina has been priced in U.S. dollars), an economic slowdown, or efforts to make money laundering through real estate more difficult. There was a significant increase in the number of STRs filed in 2011 when compared to 2010.

Notwithstanding these improvements, technical deficiencies and challenges still remain in closing legal and regulatory loopholes and improving interagency cooperation. Argentina demonstrated a commitment to expand the knowledge of personnel involved in fighting financial crime and a willingness to act on the results of those trainings. For example, after officials attended a sponsored training on money laundering using pre-paid credit cards, Argentina implemented new regulations to try to prevent this practice. The GOA is open to advice on structuring new legal frameworks from international organizations. Most of the challenges Argentina now faces are in implementing these new laws and regulations in a proper, non-politicized manner. There have been two convictions from 31 money laundering cases opened after the 2011 revision of the law criminalizing money laundering.

Argentina continues to update its legal structures with an eye toward meeting international standards. Going forward, Argentina should continue to address the implementation of these laws to demonstrate the effectiveness of its anti-money laundering/counter-financing of terrorism (AML/CFT) infrastructure. Argentina should also take steps to foster the principals of transparency and good governance, criminalize tipping off, foster a culture of AML/CFT compliance, combat corruption, insure the court system is efficient, and build high ethical standards for police officers, prosecutors and judges, as well as professionals such as lawyers, accountants and auditors. Structural elements such as these are critical to establishing a functional legal and institutional AML/CFT framework.

Australia

Australia has deep, liquid financial markets and is recognized as a leader in investment management, as well as areas such as infrastructure financing and structured products. Australia is a financial services hub within the Asia-Pacific region, supported by a number of government initiatives such as the implementation of an investment manager regime and measures to provide taxation exemption or tax relief for foreign managers. Finance and insurance are the largest sectors in the Australian economy. Australia has one of the largest pools of consolidated assets under management globally, valued at about A$1.8 trillion (approximately $1.9 trillion). It is also a significant destination for foreign direct investment, with total inflows growing by over 16 percent in the first half of 2012 compared with the same period of 2011.

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

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 48,155: July 2011 - June 2012

Number of CTRs received and time frame: 16,332: July 2011 - June 2012

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 65: July 2011 - June 2012

Convictions: 53: July 2011 - June 2012

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Australia maintains a comprehensive system to detect, prevent, and prosecute money laundering. The Attorney-General’s Department is the policy agency responsible for the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) in collaboration with the Australian Transaction and Reports Analysis Center (AUSTRAC) who administers the Act and is also the country’s anti-money laundering regulator and financial intelligence unit. Australia’s financial system benefits from its global best practices regulatory regime. AUSTRAC works collaboratively with Australian industries and businesses in their compliance with anti-money laundering/counter-terrorism financing (AML/CFT) legislation. Australia has active interagency task forces, and consultations with the private sector are frequent. Australian law enforcement agencies investigate an increasing number of cases that directly involve offenses committed overseas.

Third-party deposits, which can be used as vehicles to facilitate money laundering, are legal in Australia. However, authorities are working to limit the associated risks in Australia’s financial system. In 2011, additional AML/CFT provisions came into effect, which require banking institutions to identify third parties undertaking transactions of $10,000 or more. This obligation is in addition to reporting the details of the account holder involved in the transaction, and builds on existing customer due diligence and STR obligations.

The Australian government recently established a new Criminal Assets Confiscation Taskforce, which brings together agencies with key roles in the investigation and litigation of proceeds of crime matters. The Taskforce should enhance the identification of potential asset confiscation matters and strengthen their pursuit.

Austria

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

Casinos and gambling are legal in Austria. The laws regulating casinos include anti-money laundering/countering the financing of terrorism (AML/CFT) provisions. There are migrant workers in Austria who send money home via all available channels, regular bank transfers and money transmitters (e.g., Western Union), but also informal and illegal remittance systems. No information is available to what extent such informal systems are used.

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: YES Domestic: NO

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

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 2,075 in 2011

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 537 in 2011

Convictions: 6 in 2011

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

A bilateral forfeited asset sharing agreement with the United States that entered into force in March 2011 still has not taken effect in Austria. The agreement applies retroactively to a June 2004 request from the United States that asked the Austrian authorities to recognize a final U.S. forfeiture judgment against drug proceeds in a bank account in Austria belonging to a convicted drug trafficker. Subsequent court decisions, including both an Austrian interim appeals court decision and a Supreme Court decision – ordered the Vienna bank holding the assets to turn them over to the Government of Austria. However, the Austrian courts are now considering a series of appeals to that decision and the latest action has been pending before the Austrian Supreme Court since April 2012. Under the 2011 asset sharing agreement, the United States is seeking the recovery of 50 percent of the forfeited proceeds, with the remainder going to the Government of Austria.

Austria has a combination of both an “all serious crimes” approach plus a list of predicate offenses which do not fall under the domestic definition of serious crimes, but which Austria includes to comply with international legal obligations and standards. Asset freezing authority applies to all economic resources including financial funds, real estate, companies, and vehicles.

Austrian banks have strict legal requirements regarding secrecy. Banks and other financial institutions must not divulge or exploit secrets which are revealed or made accessible to them exclusively on the basis of business relations with customers. However, the law stipulates that secrecy regulations do not apply with respect to banks’ obligation to report suspicious transactions in connection with money laundering or terrorist financing, or with respect to ongoing criminal court proceedings. Any amendment of these secrecy regulations requires a two-thirds majority approval in Parliament.

The Austrian Financial Market Authority (FMA) regularly updates a regulation issued January 1, 2012, which mandates banks and insurance companies apply additional special due diligence in doing business with designated countries. The FMA regulation currently includes 21 jurisdictions. This regulation implements Austria’s new AML/CFT regime requiring banks to exercise enhanced customer due diligence, and is based on the Austrian Banking Act, the Insurance Supervision Act, and FATF statements on jurisdictions with AML/CFT deficiencies.

As of May 1, 2012, administrative fines in Austria have been doubled. This measure also affects the administrative fines in the Banking Act. The fine for violating due diligence or STR filing requirements rose to €150,000 (approximately $197,400).

While there is no enhanced customer due diligence for Austrian PEPs, procedures are being established. Austria should ensure that domestic PEPs are subject to increased due diligence.

A January 2012 report criticized Austria’s anti-money laundering controls, stating that Austria should implement stronger measures to fight cross-border corruption and money laundering. The report also singled out the Austrian Banker’s Association by citing the group as an obstacle to law enforcement investigations and also noted that Austria’s gambling sector needs stricter monitoring.

Bahamas

The Commonwealth of the Bahamas is an important regional and offshore financial center. The economy of the country is heavily reliant upon tourism, tourist-driven construction and the offshore financial sector. The Bahamas is a transshipment point for cocaine bound for the United States and Europe. The major sources of laundered proceeds stem from drug trafficking, human smuggling, and illegal gambling. There is a significant black market for smuggled cigarettes and guns. Money laundering trends include the purchase of real estate, large vehicles, boats, and jewelry, as well as the processing of money through a complex web of legitimate businesses and international business companies (IBCs) registered in the offshore financial sector. Drug traffickers and other criminal organizations take advantage of the large number of IBCs and offshore banks registered in The Bahamas to launder significant sums of money, despite strict know-your-customer and transaction reporting requirements.

The archipelagic nature of The Bahamas and its proximity to the United States make the entire country accessible by medium-sized boats; smuggling and moving bulk cash is relatively easy. The country has one large free trade zone (FTZ), Freeport Harbor. The FTZ is managed by a private entity, the Freeport Harbor Company, owned and operated through a joint venture between Hutchison Port Holdings, and The Port Group (The Grand Bahama Port Authority, the Bahamian parastatal regulatory agency). Businesses at the harbor include private boats, ferry and cruise ship visits, roll-on/roll-off facilities for containerized cargo, and car transshipments. Freeport Harbor has the closest offshore port to the United States.

Gaming is legal for tourists. The Bahamas has three large casinos and a fourth is scheduled to open in March 2013 in Bimini. Ferry service between Florida and Bimini, located just 50 miles off the Florida coast, also is scheduled to begin in March 2013. The $2.6 billion Chinese Export-Import Bank-funded Baha Mar Casino and Resort will open in 2014 in New Providence as the largest casino in the Caribbean. Current law excludes Bahamian citizens, permanent residents, and temporary workers from gambling in the Bahamas. Illicit gaming operations based on U.S.-based lottery results and the internet, locally known as “web shops,” flourish in The Bahamas. The Government of the Commonwealth of The Bahamas (GOB) has scheduled a referendum for January 2013, to consider the legalization of web shop gaming.

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

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 183 in 2011

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0 in 2011

Convictions: 0 in 2011

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

The Bahamas is a member of the Caribbean Financial Action Task Force, (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: https://www.cfatf-gafic.org/index.php?option=com_content&view=category&layout=blog&id=376&Itemid=561&lang=en

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In 2011, the Financial Intelligence Unit (FIU) of the Ministry of Finance signed a Memorandum of Understanding with the Financial Monitoring Service of the Russian Federation.

The GOB should provide adequate resources to its law enforcement, judicial, and prosecutorial bodies in order to enforce existing legislation and to safeguard the financial system from possible abuses. Gaming will expand in 2013, from the growth of casino gaming and possibly from the legalization of web shop gaming. With this expansion, the government should ensure proper safeguards are in place, and provide additional suspicious transaction report (STR) training. The FIU should continue its outreach, training and coordination with the Royal Bahamas Police Force financial investigators. The GOB should further enhance its anti-money laundering/counter-terrorist financing regime by criminalizing bulk cash and human smuggling; implementing the National Strategy on the Prevention of Money Laundering; ensuring full compliance with UNSCRs 1267 and 1373; criminalizing participation in an organized criminal group; establishing a currency transaction reporting system; and implementing a system to collect and analyze information on the cross-border transportation of currency. It also should ensure there is a public registry of the beneficial owners of all entities licensed in its offshore financial center.

Belize

While Belize is not a major regional financial center, it is an offshore financial center. In an attempt to diversify Belize’s economic activities, the Government of Belize (GOB) encouraged the growth of offshore financial activities that are vulnerable to money laundering, including offshore banks, insurance companies, trust service providers, mutual fund companies, and international business companies. The Belizean dollar is pegged to the U.S. dollar, and Belizean banks continue to offer financial and corporate services to nonresidents in its offshore financial sector. Additionally, some money laundering is believed to be related to proceeds from U.S. residents participating in unlawful Internet gaming.

Belizean officials suspect there is money laundering activity in their two free trade zones known as Commercial Free Zones or CFZs. The largest, the Corozal Commercial Free Zone, is located on the border with Mexico, and the smaller one, the Benque Viejo Free Zone, recently started operating on the western border with Guatemala. The Corozal Free Zone was designed to attract Mexicans for duty free shopping, and Belizean authorities believe it is heavily involved in trade-based money laundering and the illicit importation of duty free products.

As Belize is a transshipment point for marijuana and cocaine, there are strong indications that money laundering proceeds are increasingly related to local drug trafficking organizations and organized criminal groups involved in the trafficking of illegal narcotics, psychotropic substances, and chemical precursors.

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

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: Domestic and offshore banks; venture risk capital; money brokers, exchanges, and transmission services; moneylenders and pawnshops; insurance; real estate; credit unions; building societies; trust and safekeeping services; casinos; motor vehicle dealers; jewelers; international financial service providers; attorneys; notaries public; accountants and auditors

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 82: January 1 - November 8, 2012

Number of CTRs received and time frame: Not applicable

STR covered entities: Domestic and offshore banks; venture risk capital; money brokers, exchanges, and transmission services; moneylenders and pawnshops; insurance; real estate; credit unions; building societies; trust and safekeeping services; casinos; motor vehicle dealers; jewelers; international financial service providers; attorneys; notaries public; accountants and auditors

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 14: January 2009 - September 2012

Convictions: 11: January 2009 - September 2012

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Belize is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: https://www.cfatf-gafic.org/index.php?option=com_docman&task=cat_view&gid=352&Itemid=418&lang=en

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The August 2012 “Domestic Banks and Financial Institution Act” strengthens internal anti-money laundering (AML) controls. The Act improves provisions to govern domestic banks and financial institutions by strengthening the supervisory powers and regulatory independence of the Central Bank, addressing deficiencies and vulnerabilities in the domestic banking sector, and providing for the appointment of a statutory license administrator, where appropriate, to protect the interests of depositors, creditors and shareholders. While the Act enhances the Central Bank’s control of domestic banks and financial institutions, the GOB should determine how the act can be used to strengthen money laundering investigations and prosecutions.

The GOB should provide additional resources to effectively enforce AML regulations. The responsibility for enforcement and implementation of all financially-related regulations as well as international sanctions lists, domestic tax evasion, and all money laundering investigations lies with the financial intelligence unit (FIU). There is limited assistance from other law enforcement agencies, governmental departments, and regulatory bodies. The FIU has a broad mandate and a small staff, and does not have sufficient training or experience in identifying, investigating, reviewing, and analyzing evidence in money laundering cases. Prosecutors and judges should receive additional training on financial crimes, including money laundering, to increase prosecutions. The FIU currently contracts outside attorneys for prosecutions.

The Prime Minister and other government officials have made public statements supportive of the U.S. Department of the Treasury’s Office of Foreign Assets Control’s 2012 designations of Belizeans, and all local banks comply and prohibit business with the designated entities.

In August 2012, Belize successfully convicted three people in a case involving Moneygram’s local owners and employees laundering money gained through an Internet gaming website. Three individuals were convicted on money laundering charges in November 2012. This is Belize’s first significant money laundering conviction.

The GOB should increase monitoring and control of the offshore financial sector and CFZs. It is widely believed there is illicit financial activity in both sectors, although no one has been charged with a financial crime. Belize should require the CFZs to be reporting entities.

Belize also should become a party to the UN Convention against Corruption.

Bolivia

Bolivia is not a regional financial center but remains vulnerable to money laundering. Illicit financial activities are related primarily to cocaine trafficking, but include corruption, tax evasion, smuggling, and trafficking in persons. Criminal proceeds laundered in Bolivia are derived from smuggling contraband and from the foreign and domestic drug trade.

There is a significant market for smuggled goods in Bolivia. Chile is the primary entry point for illicit products, which are then sold domestically or informally exported to Brazil and Argentina. An estimated 70 percent of Bolivia’s economy is informal, with proceeds entering the formal market through the financial system. There is no indication the illicit financial activity is linked to terrorist financing, though lack of proper safeguards creates a vulnerability to such activity.

Much of the informal economy occurs in non-regulated commercial markets where many products can be bought and sold outside of the formalized tax system. Public corruption is common in these commercial markets and money laundering activity is likely.

The Bolivian financial system is moderately dollarized, with some 31 percent of deposits and 24 percent of loans distributed in U.S. dollars rather than Bolivianos, the national currency. Bolivia has 13 free trade zones for commercial and industrial use located in El Alto, Cochabamba, Santa Cruz, Oruro, Puerto Aguirre, Desaguadero and Cobija. Casinos (hard gaming) are illegal in Bolivia. Soft gaming (e.g., bingo) is regulated; however, many operations have questionable licenses.

Bolivia 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 inadequacies in its criminalization of both money laundering and 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, micro-financial institutions, insurance companies, exchange houses, remittance companies, securities brokers, money transporter companies and financial intermediaries

REPORTING REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

STR covered entities: Banks, micro-financial institutions, insurance companies, exchange houses, remittance companies, securities brokers, money transporter companies and financial intermediaries

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 70: January through October 2012

Convictions: Not available

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: Not available

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In December 2008, the Egmont Group of Financial Intelligence Units (FIU) expelled Bolivia’s Financial Investigation Unit (UIF), Bolivia’s FIU, and continues to bar the UIF from participating in Egmont Group meetings or using the Egmont Secure Web, the primary means of information exchange among Egmont Group member FIUs. To regain Egmont membership, Bolivia must reapply and provide written evidence of compliance with Egmont definitions and requirements. A continued lack of personnel in the UIF, combined with inadequate resources and weaknesses in Bolivia’s basic legal and regulatory framework, limits the UIF’s reach and effectiveness. Given the UIF’s limited resources relative to the size of Bolivia’s financial sector, compliance with reporting requirements is extremely low. The exchange of information between the UIF and appropriate police investigative entities is also limited, although the UIF does maintain a database of suspect persons that financial entities must check before conducting business with clients.

Cash transporters, informal exchange houses, and wire transfer businesses are not subject to anti-money laundering controls. Non-registered currency exchanges are illegal.

The September 2011 legislation criminalizing terrorist financing is not sufficiently broad to meet international standards. According to the law, all terrorist activity must be connected to a group, and “terrorism” is narrowly defined. The financing of an individual terrorist would be covered only if he/she also takes part in such a group. Additionally, the Government of Bolivia (GOB) should demonstrate that procedures for freezing assets can be completed in a timely manner, and the freeze can be maintained indefinitely.

While Bolivia does not have a mutual legal assistance treaty with the United States, various multilateral conventions to which both countries are signatories are used for requesting mutual legal assistance.

The GOB should address AML/CFT legislative deficiencies and extend its laws to broaden the list of predicate offenses. Additionally, the GOB should strengthen the current legal and regulatory framework of the UIF and fulfill the requirements for reinstatement into the Egmont Group.

Brazil

Brazil was the world’s sixth largest economy by nominal gross domestic product (GDP) in 2011, and is considered a regional financial center for Latin America. It is also a major drug transit country, as well as one of the world’s largest consumer countries. Money laundering in Brazil is primarily related to domestic crimes, especially drug trafficking, corruption, organized crime, illegal gambling, and trade in various types of contraband. Laundering channels include the use of banks, real estate investment, financial asset markets, luxury goods, remittance networks, informal financial networks, and trade-based money laundering.

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

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: NO

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

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

REPORTING REQUIREMENTS:

Number of STRs received and time frame:

Number of CTRs received and time frame:

1,289,087 STRs/CTRs in 2011 (only combined figures are available)

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

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

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The GOB achieved visible results over the last few years from the increased anti-smuggling and law enforcement efforts by state and federal agencies. Brazilian Customs and the Brazilian Tax Authority continue to take effective action to suppress the smuggling of drugs, weapons, and contraband goods along the border with Paraguay. Because of the effective crackdown on the Friendship Bridge connecting Foz do Iguaçu, Brazil, and Ciudad del Este, Paraguay, most smuggling migrated to other sections of the border. The Federal Police Special Maritime Police Units aggressively patrol the maritime border areas.

In June 2012, the GOB passed a new anti-money laundering law. The new legislation provides Brazilian legal authorities with greater latitude in defining and prosecuting money laundering offenses and significantly increases the maximum fine for money laundering crimes. The law also allows assets held by third parties to be seized more easily; however, the 2012 legislation does not criminalize terrorism financing in a manner consistent with international standards and does not provide the GOB with the ability to quickly freeze terrorists’ assets. The GOB should take steps to correct these deficiencies by passing draft legislation that addresses these issues.

Legal persons are not subject to direct civil or administrative liability for committing money laundering offenses. Corporate criminal liability is not possible due to fundamental principles of domestic law. The GOB should enact legislation that imposes criminal and/or civil/administrative penalties for legal persons involved in money laundering/terrorist financing activity.

Some high-priced goods in the TBA are paid for in U.S. dollars, and cross-border bulk cash smuggling is a concern. Large sums of U.S. dollars generated from licit and suspected illicit commercial activity are transported physically from Paraguay into Brazil. From there, the money may make its way to banking centers in the United States. However, the GOB maintains some controls over capital flows and requires disclosure of the ownership of corporations.

Brazil’s Trade Transparency Unit (TTU), operating in partnership with the U.S. Department of involved in trade-based money laundering activities between Brazil and the United States. As a result of the TTU, the GOB has identified millions of dollars of lost revenue. The GOB has generally responded to U.S. efforts to identify and block terrorist-related funds, including U.S. designations related to terrorist financing activity within the country. Homeland Security, aggressively analyzes, identifies, and investigates companies and individuals

British Virgin Islands

The British Virgin Islands (BVI) is a United Kingdom (UK) overseas territory with a population of approximately 22,000. The economy is heavily dependent on tourism and its offshore operations. BVI is a well-established financial center offering accounting, banking and legal services, captive insurance, company incorporations, mutual funds administration, trust formations, and shipping registration. The Financial Services Commission (FSC) is the sole supervisory authority responsible for the licensing and supervision of financial institutions under the relevant statutes. BVI’s unique share structure does not require a statement of authorized capital and the lack of mandatory filing of ownership information poses significant money laundering risks.

Tourism accounts for 45 percent of the economy and employs the majority of the workforce; however, over one-half of government revenues derive from the financial sector. BVI’s proximity to the U.S. Virgin Islands and the use of the U.S. dollar for its currency pose additional risk factors for money laundering. The BVI is a major target for drug traffickers, who use the jurisdiction as a gateway to the United States. Drug trafficking, in general, is a serious problem.

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; currency exchanges and money remitters; trusts and company service providers; mutual and public fund managers; non-governmental organizations; insurance companies, agents and brokers; dealers in autos, yachts and heavy machinery; dealers in precious metals and stones; lawyers and accountants; real estate agents; casinos; and leasing companies

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 152 in 2011

Number of CTRs received and time frame: 59: January - June 2012

STR covered entities: Banks; currency exchanges and money remitters; trusts and company service providers; mutual and public fund managers; insurance companies, agents and brokers; non-governmental organizations; dealers in autos, yachts, and heavy machinery; dealers in precious metals and stones; leasing companies; money service businesses; lawyers and accountants; real estate agents; casinos

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 7 in 2011

Convictions: 0

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

BVI is a member of the Caribbean Financial Action Task Force, (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: https://www.cfatf-gafic.org/index.php?option=com_docman&task=cat_view&gid=327&Itemid=418&lang=en

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In July 2012, The Proceeds of Criminal Conduct (Amended) Act (PCCA), 2012 significantly increased penalties for most money laundering criminal acts. Additionally, the Anti-Money Laundering and Terrorist Financing (AML/TF) Code of Conduct (Amended, 2012) supplements the PCCA and provides risk-based approach guidance to businesses while allowing for stiff administrative penalties for violations. The FSC has increased its staffing in order to meet the recommended inspection and reporting requirements.

While real estate agents, lawyers, other independent legal advisers, accountants, dealers in precious metals and stones, and non-governmental organizations are covered by the AML/CFT regulations, there appears to be no effective mechanism to ensure compliance with AML/CFT requirements. Furthermore, although casinos also are covered, there are no casinos in the BVI at the present time.

As a United Kingdom (UK) Caribbean overseas territory, the BVI cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the BVI’s international affairs and may arrange for the ratification of any convention to be extended to the BVI. The 1988 Drug Convention was extended to the BVI in 1995. The UN Convention against Corruption was extended to the BVI in 2006. The International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime were extended to the BVI on May 17, 2012.

Burma

Burma is not a regional or offshore financial center. Its economy is underdeveloped and its historically isolated banking sector has just started taking tentative steps to connect to the international financial system. However, Burma’s prolific drug production, relationship with the North Korean government, the growing use of credit/debit cards connected to international financial institutions and lack of transparency make it attractive for domestic and possibly international money laundering. While its underdeveloped economy remains unattractive as a destination to harbor funds, the low risk of enforcement and prosecution makes it appealing to the criminal underground. Trafficking in persons and public corruption are also major sources of illicit proceeds. Additionally money launderers exploit the illegal trade in wildlife, gems, and timber; and trade-based money laundering is of increasing concern.

Burma continues to be a major source of opium and exporter of heroin, second only to Afghanistan. However, Burma’s level of poppy cultivation is considerably lower than in the peak during the 1980s and 1990s. Burma’s long, porous borders are poorly patrolled. In some remote regions where smuggling is active, ongoing ethnic tensions, and in some cases armed conflict, impede government territorial control. In other areas, political arrangements between traffickers and Burma’s government allow organized crime groups to function with minimal risk of interdiction. The Government of Burma (GOB) considers drug enforcement secondary to security and is willing to allow narcotics trafficking in border areas in exchange for cooperation from ethnic armed groups.

Corruption is endemic in both business and government. State-owned enterprises and military holding companies control a substantial portion of Burma’s resources, although there is a continued push for the privatization of more government assets. China, Japan and the United Arab Emirates have recently provided large amounts of investment which increase corruption and illicit activities. The privatization process provides potential opportunities for graft and money laundering, including by business associates of the former regime and politicians in the current civilian government, some of whom are allegedly connected to drug trafficking. Over the past several years, the GOB has enacted several reforms intended to reduce vulnerability to drug money laundering in the banking sector. However, connections to powerful patrons still outweigh rule of law, and Burma continues to face significant risk of drug money being funneled into commercial ventures. There are at least five casinos that operate, including one in the Kokang special region near China; however, little information is available about the regulation or scale of these institutions.

In July 2012, the United States eased economic sanctions related to new U.S. investments in Burma and the exportation of financial services to Burma. In November 2012, the ban on Burmese imports imposed in 2003 under the Burmese Freedom and Democracy Act and Executive Order 13310 was also eased to a large extent. However, U.S. legislation and Executive Orders that block the assets of members of the former military government and three designated Burmese foreign trade financial institutions, freeze the assets of additional designated individuals responsible for human rights abuses and public corruption, and impose travel restrictions on certain categories of individuals and entities remain in force.

In 2003, the United States also designated Burma as a jurisdiction of primary money laundering concern and imposed countermeasures, pursuant to Section 311 of the USA PATRIOT Act, because of its extremely weak anti-money laundering /counter-terrorist financing (AML/CFT) regime.

In its October 2012 Public Statement, the Financial Action Task Force (FATF) notes that Burma has taken steps to improve its AML/CFT regime, including by removing its reservations to the extradition articles of several international conventions. However, FATF expressed concern that Burma has not made sufficient progress in implementing its action plan and continues to have certain strategic AML/CFT deficiencies. The United States continues to issue advisories to financial institutions, alerting them of the risk posed by Burma’s AML/CFT deficiencies and of the need to conduct enhanced due diligence with respect to financial transactions involving Burma.

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: YES

KYC covered entities: Banks

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 97: January 1 to October 31, 2012

Number of CTRs received and time frame: 172,559: January 1 to October 31, 2012

STR covered entities: Banks (including bank-operated money changing counters); GOB bodies such as the Customs Department, Internal Revenue Department, Trade Administration Department, Marine Administration Department and Ministry of Mines; state-owned insurance company and small loans enterprise; securities exchange; accountants, auditors, the legal and real estate sectors; and dealers of precious metals and stones

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

Burma 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/Myanmar%202008.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Burma’s financial sector is extremely underdeveloped and most currency is held outside the formal banking system. The informal economy generates few reliable records, and the GOB makes no meaningful efforts to ascertain the amount or source of income or value transfers. Regulation of financial institutions is likewise extremely weak. While some Burmese financial institutions may engage in currency transactions related to international narcotics trafficking that include significant amounts of U.S. currency, the absence of publicly available GOB information precludes confirmation of such conduct. Burmese law does not contain any customer due diligence (CDD) requirements, although the Central Bank (CB) issues guidelines for banks to follow and some entities implement CDD procedures under other, non-AML related legal provisions. The government should draft new KYC/CDD rules and expand the number of organizations required to have such rules.

Burma does not specifically criminalize terrorist financing or designate it as a predicate offense for money laundering, nor is terrorist financing an extraditable offense. Burma should continue implementing its action plan in order to address these and other deficiencies, including by passing the draft Counter Terrorism Law (finalized in October 2012) that will criminalize terrorist financing, establish procedures to identify and freeze terrorist assets, and further strengthen the extradition framework for terrorist financing.

Government workers do not receive a living wage and routinely seek bribes as additional “compensation.” Efforts to address the rampant corruption are impeded by the military’s influence over civilian authorities, including the police, especially at the local level. The GOB should end all policies that facilitate corrupt practices and money laundering, including strengthening regulatory oversight of the formal financial sector and strengthening CDD measures in the 2002 Control of Money Laundering Law. The financial intelligence unit should become a fully funded independent agency that functions without interference, and the GOB should supply adequate resources to administrative and judicial authorities for their enforcement of government regulations. The GOB also should move the CB from under the operational control of the Ministry of Finance and make it an operationally independent entity.

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

Cambodia

Cambodia is neither a regional nor an offshore financial center. Several factors, however, contribute to Cambodia’s significant money laundering vulnerability. These include Cambodia’s weak and ineffective anti-money laundering regime; cash-based, dollarized economy; fast-growing formal banking sector and active informal banking system; porous borders; loose oversight of casinos; and limited capacity to oversee the fast growing financial and banking industries through the National Bank of Cambodia. A weak judicial system and endemic corruption are additional factors negatively impacting enforcement.

Cambodia has a significant black market for smuggled goods, including drugs and imported substances for local production of methamphetamine. Both licit and illicit transactions, regardless of size, are frequently done outside of formal financial institutions and are difficult to monitor. Cash proceeds from crime are readily channeled into land, housing, luxury goods, and other forms of property without passing through the formal banking sector. Casinos along the borders with Thailand and Vietnam also are another potential avenue to convert ill-gotten cash.

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, microfinance institutions, and credit cooperatives; securities brokerage firms and insurance companies; leasing companies; exchange offices/money exchangers; real estate agents; money remittance services; dealers in precious metals and stones; post offices offering payment transactions; lawyers, notaries, accountants, auditors, investment advisors and asset managers; casinos and gambling institutions; NGOs and foundations

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 58: January - October 2012

Number of CTRs received and time frame: 778,408: January - October 2012

STR covered entities: Banks, microfinance institutions, and credit cooperatives; securities brokerage firms and insurance companies; leasing companies; exchange offices/money exchangers; real estate agents; money remittance services; dealers in precious metals, stones and gems; post offices offering payment transactions; lawyers, notaries, accountants, auditors, investment advisors and asset managers; casinos and gambling institutions; NGOs and foundations

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0: January - October 2012

Convictions: 0: January - October 2012

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdiction: YES

Cambodia 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 July, the Government of Cambodia (GOC) signed a memorandum of understanding with the Japan Financial Intelligence Center, formalizing a mechanism for anti-money laundering/counter-terrorist financing (AML/CFT) information sharing.

Cambodia’s AML/CFT law allows authorities to freeze assets relating to money laundering or terrorist financing until courts have decided the case, but the AML/CFT regime lacks a clear system for identifying, seizing, and sharing assets with foreign governments. Furthermore, although Cambodia has the legal ability to identify and freeze terrorist assets, the GOC should establish and implement adequate procedures to perform this function. The GOC should adequately criminalize money laundering and terrorist financing; establish and implement adequate procedures for the confiscation of funds related to money laundering; ensure a fully operational and effectively functioning financial intelligence unit (FIU); and establish and implement effective controls for cross-border cash transactions. Given the high level of corruption, the GOC also should require enhanced due diligence for domestic politically exposed persons (PEPs).

The primary enforcement and implementation issues involve the willingness and ability of commercial bankers to comply with, and law enforcement to enforce, money laundering laws and regulations. The GOC should work to increase the reporting of STRs and increase the capability of the nascent and understaffed FIU. The FIU’s effectiveness is severely limited by the inability of the FIU to receive reports in an electronic format, to store received reports in an electronic database, and to perform systematic analyses on the electronic database. This is compounded by the paucity of reports received from reporting entities, probably due to the lack of credible regulatory enforcement. Effectiveness is further limited by the practice of sending analyses exclusively to Cambodia’s Interpol National Central Bureau rather than directly to relevant law enforcement bodies.

The law on AML/CFT excludes pawn shops from its explicit list of covered entities but does allow the FIU to designate any other profession or institution to be included within the scope of the law. In April 2012, the GOC issued a sub-decree to establish a National Coordination Committee on Anti-Money Laundering and Combating the Financing of Terrorism (NCC), as a permanent and senior-level coordination mechanism for preventing and controlling money laundering and terrorist financing in Cambodia. The NCC has the authority to coordinate with all stakeholders and to make decisions on the prevention and control of money laundering and terrorism financing in Cambodia. The key role of the NCC is to ensure the effective implementation of the AML/CFT law, including the development of national policy and a monitoring system to measure AML/CFT efforts. It is too early to tell what effect this committee will have on the country’s AML deficiencies.

The GOC should work to strengthen control over its porous borders. Cambodia should design and implement effective operational procedures both within affected agencies as well as among agencies, and measure the effectiveness of these procedures on an ongoing basis. It must also provide training to increase the capacity of commercial banks, law enforcement agencies, and regulatory bodies, as well as empower law enforcement and regulators to strictly enforce AML/CFT laws and regulations.

Canada

Money laundering activities in Canada are primarily a product of illegal drug trafficking and financial crimes, such as credit card and securities fraud. The criminal proceeds laundered in Canada derive primarily from domestic activity which is controlled by drug trafficking organizations and organized crime.

Canada does not have a significant black market for illicit or smuggled goods. Cigarettes are the most commonly smuggled good in the country. There are indications that trade-based money laundering occurs in the jurisdiction. There is no certainty that this activity is tied to terrorist financing activity.

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 and credit unions; life insurance companies, brokers, and agents; securities dealers; casinos; real estate brokers/agents; agents of the Crown; money services businesses; accountants and accounting firms; lawyers; dealers in precious metals and stones; and notaries in Quebec and British Columbia

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 70,392 in 2012

Number of CTRs received and time frame: 35,026 in 2012

STR covered entities: Banks and credit unions; life insurance companies, brokers, and agents; securities dealers; casinos; real estate brokers and agents; agents of the Crown; money services businesses; accountants and accounting firms; dealers in precious metals and stones; and notaries in British Columbia and Quebec

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 180 in 2011

Convictions: 18 in 2011

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

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

http://www.fatf-gafi.org/countries/a-c/canada/documents/mutualevaluationofcanada.html.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Canada has a rigorous detection and monitoring process in place to identify money laundering and terrorist financing activities, but a weak enforcement and conviction capability. A report released in June 2012 by the Canadian Centre for Justice Statistics found that actual suspects were identified in only 20 percent of reported money laundering cases and convictions were obtained in only one third of those cases. Industry experts cite several reasons for the problem: privacy rules that prevent Canada’s financial intelligence unit, the Financial Transaction Reports Analysis Centre of Canada (FINTRAC), from freely sharing information with law enforcement; complex investigations that can take understaffed police agencies years to finish; and overworked Crown Prosecutors who often plea bargain away difficult money laundering cases, instead prioritizing drug trafficking charges since they are viewed as having a stronger likelihood of conviction.

In Canada, the possession of proceeds of crime is a criminal offense under the Criminal Code which would be considered money laundering. A maximum term of imprisonment of 10 years applies to both money laundering convictions and possession of crime proceeds convictions involving more than $5,000. As such, possession of proceeds of crime is not considered to be a lesser offense and is equally effective in pursuing criminals and forfeiting their illicit assets.

Deficiencies were identified in Canada’s anti-money laundering/counter-terrorist financing (AML/CFT) regime relating to its customer due diligence obligations. The Government of Canada published proposed regulations amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations in October 2012, in order to address those deficiencies. The proposed changes would require reporting entities to better identify customers and understand their business, consequently enabling the reporting entities to identify transactions and activities that are at greater risk for money laundering or terrorist financing. The final regulations will go into effect one year after publication.

Canada should continue its work to strengthen its AML/CFT measures within the casino industry and reduce the length of time needed for FINTRAC to prepare reports used by law enforcement authorities. Canada also should continue to ensure its privacy laws do not excessively prohibit providing information to domestic and foreign law enforcement that might lead to prosecutions and convictions.

Cayman Islands

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

The Cayman Islands is home to a well-developed offshore financial center that provides a wide range of services, including banking, structured finance, investment funds, various types of trusts, and company formation and management. As of September 2011, the banking sector had $1.60 trillion in assets. There are more than 92,000 companies licensed or registered in the Cayman Islands. According to the Cayman Islands Monetary Authority, at the end of December 2012, there were 226 banks, 143 active trust licenses, 741 captive insurance companies, six money service businesses, and 10,841 registered mutual funds, of which 408 were administered and 121 were licensed. Shell banks are prohibited, as are anonymous accounts. Bearer shares can only be issued by exempt companies and must be immobilized.

Gambling is illegal; nor does the Cayman Islands permit the registration of offshore gaming entities. There are no free trade zones, and the authorities do not see risks from bulk cash smuggling related to the large number of cruise ships that dock in the jurisdiction.

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

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 406: July 1, 2011 - June 30, 2012

Number of CTRs received and time frame: Not applicable

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 6: Time frame unknown

Convictions: 0

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

The Cayman Islands is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/Cayman_Islands_3rd_Round_MER_(Final)_English.pdf.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

While the Cayman Islands has increased both its regulatory and law enforcement staffing, the number of prosecutions and convictions is extremely low given the vast scale of the country’s financial sector.

Registered agents of private trust companies are obligated to maintain ownership and identity information for all express trusts under their control. International reporting suggests agents for private trust companies and individuals carrying on trust businesses may not consistently maintain identity and ownership information for all express trusts for which they act as trustees. In addition, there remains a lack of penalties for failing to report ownership and identity information, which undermines the effectiveness of identification obligations. There also is a need to pay greater attention to the risks and proper supervision of non-profit organizations.

The regulation of Master Funds (numbering 1,849 as of September 2012) under the Mutual Funds Law (2012 Revision) reduced the estimated number of unregulated funds. There is a fine for not maintaining identity information.

The Cayman Islands continues to develop its network of exchange of information mechanisms. The Cayman Islands has signed additional tax information exchange agreements with Argentina, China, and Guernsey. The Cayman Islands now has a network of 27 information exchange agreements, with 24 of those already in force.

The Cayman Islands is a United Kingdom (UK) Caribbean overseas territory and cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the Cayman Islands’ international affairs and may arrange for the ratification of any Convention to be extended to the Cayman Islands. The 1988 Drug Convention was extended to the Cayman Islands in 1995, and is implemented through several laws. The UN Convention against Transnational Organized Crime was extended to the Cayman Islands on May 17, 2012. The UN Convention against Corruption has not yet been extended to the Cayman Islands; however, the full implementation platform for the anti-corruption convention exists under current Cayman law. A 2002 request for extension of the International Convention for the Suppression of the Financing of Terrorism to the Cayman Islands has not been finalized by the UK, although the provisions of the Convention also are implemented by domestic laws.

China

The development of China’s financial sector has required increased enforcement efforts to keep pace with the sophistication and reach of criminal and terrorist networks. The primary sources of criminal proceeds are corruption, narcotics and human trafficking, smuggling, economic crimes, intellectual property theft, counterfeit goods, crimes against property, and tax evasion. Criminal proceeds are generally laundered via methods that include: bulk cash smuggling; trade-based money laundering; manipulating the invoices for services and the shipment of goods; the purchase of valuable assets such as real estate; the investment of illicit funds in lawful sectors; gambling; and the exploitation of the formal and underground financial systems, in addition to third-party payment systems.

Most money laundering cases currently under investigation involve funds obtained from corruption, fraud, drug smuggling, and bribery. Chinese officials have noted that corruption in China often involves state-owned enterprises, including those in the financial sector.

While Chinese authorities continue to investigate cases involving traditional money laundering schemes, they have also identified the adoption of new money laundering methods, including illegal fund raising activity, cross-border telecommunications fraud, and corruption in the banking, securities, and transportation sectors. Chinese authorities have also observed that money laundering crimes are spreading from the developed coastal areas such as Guangdong and Fujian provinces to underdeveloped, inland regions.

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

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 and credit unions, securities dealers, insurance and trust companies; financial leasing and auto finance companies; and currency brokers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 61,852,018 in 2010

Number of CTRs received and time frame: Not available

STR covered entities: Banks, securities and futures institutions, and insurance companies

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: 11,380 in 2011

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

China is a member of the Financial Action Task Force (FATF), as well as the Asia/Pacific Group on Money Laundering (APG) and the Eurasian Group on Combating Money Laundering and Terrorist Financing (EAG), both of which are FATF-style regional bodies. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/33/11/39148196.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

While China’s October 2011 legislation has addressed some deficiencies in the implementation of the requirements of UNSCRs 1267 and 1373, some deficiencies remain to be addressed. These include guidance for designated non-financial businesses and professions; delisting and unfreezing procedures; and the rights of bona fide third parties in seizure/confiscation actions.

The Government of China (GOC) has strengthened its preventative measures, with an emphasis on requiring financial institutions to collect and maintain beneficial ownership information, and to make the STR reporting regime more comprehensive. China should enhance coordination among its financial regulators and law enforcement bodies to better investigate and prosecute offenders. China’s Ministry of Public Security should continue ongoing efforts to develop a better understanding of how anti-money laundering/counter-terrorist financing (AML/CFT) tools can be used to support the investigation and prosecution of a wide range of criminal activity.

The GOC should ensure all courts are aware of and uniformly implement the mandatory confiscation laws. In domestic cases, once an investigation is opened, all law enforcement entities and the Public Prosecutors are authorized to take provisional measures to seize or freeze property in question in order to preserve the availability of the same for later confiscation upon conviction. At present, although China’s courts are required by law to systematically confiscate criminal proceeds, enforcement is inconsistent and no legislation authorizes seizure/confiscation of assets of equivalent value. Confiscation is conviction based, while civil forfeiture is unavailable.

The United States and China are parties to the Agreement on Mutual Legal Assistance in Criminal Matters. U.S. law enforcement agencies note the GOC has not cooperated sufficiently on financial investigations and does not provide adequate responses to requests for financial investigation information. In addition to the lack of law enforcement-based cooperation, the GOC’s inability to enforce U.S. court orders or judgments obtained as a result of non-conviction based forfeiture actions against China-based assets remains a significant barrier to enhanced U.S. - China cooperation in asset freezing and confiscation. Such unwillingness and failure to provide seizure and forfeiture assistance increases the likelihood of the U.S. resorting to unilateral measures in cases where criminal forfeiture has been unavailable as no known defendants can be identified or returned to the U.S. for prosecution, thereby making civil forfeiture the only viable means to recover the criminal proceeds located in China.

The GOC should expand cooperation with counterparts in the United States and other countries, and pursue international AML/CFT linkages more aggressively. U.S. agencies consistently seek to expand cooperation with Chinese counterparts on AML/CFT matters and to strengthen both policy and operational level cooperation in this critical area. While China continues to make significant improvements to its AML/CFT legal and regulatory framework and is gradually making progress toward meeting international standards, implementation remains lacking, particularly in the context of international cooperation.

Colombia

The Government of Colombia (GOC) has a forceful anti-money laundering/counter-terrorist financing (AML/CFT) regime. However, the laundering of money from Colombia’s illicit cocaine and heroin trade continues to penetrate its economy and affect its financial institutions. Laundered funds are derived from commercial smuggling for tax and import duty evasion; kidnapping; arms trafficking; and terrorism connected to violent, illegally-armed groups (known as bandas criminales or BACRIM) and U.S. government-designated terrorist organizations, like the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN), operating locally and regionally. Official corruption and the growth of illegal mining have also aided money laundering and terrorist financing in geographic areas controlled by both the FARC and the BACRIM. It is reported that drug and money laundering groups have influenced high-level bank officials, especially in the stock brokerage market, in order to circumvent both established AML controls and government regulations. Colombian money brokers, primarily concentrated in Bogota, but also in Medellin and Cali, are additional actors that facilitate money laundering activities.

Smuggled merchandise remains a source for money laundered through the financial system. It occurs via trade and the non-bank financial system and is visible through Colombian criminal organizations with connections to financial institutions in Mexico, China, Ecuador, Peru, Panama, and Venezuela. This trend grew exponentially in recent years. In the black market peso exchange (BMPE), goods are bought with drug dollars from abroad, often Mexico. Many of the goods are either smuggled into Colombia via Panama or brought directly into Colombia’s customs warehouses, thus avoiding various taxes, tariffs, and customs duties. In other trade-based money laundering schemes, goods are over- or under-invoiced to transfer value. According to experienced BMPE industry workers, evasion of the normal customs charges is frequently facilitated through corruption of Colombian oversight authorities.

Casinos, the postal money order market, bulk cash smuggling, wire transfers, remittances, the securities markets in the U.S. and Colombia, electronic currency, prepaid debit cards, and illegal mining all are being utilized to repatriate illicit proceeds to Colombia. The trade of counterfeit items in violation of intellectual property rights is an ever increasing method to launder illicit proceeds.

Free trade zones (FTZs) in Colombia present opportunities for criminals to take advantage of inadequate regulation and transparency. Colombia’s FTZ law opens investment to international companies, allows one-company or stand-alone FTZs, and permits the designation of pre-existing plants as FTZs. As of October 2012, there are 104 FTZs in Colombia. Companies within FTZs enjoy a series of benefits such as a preferential corporate income tax rate and exemption from customs duties and value-added taxes on imported materials. The Ministry of Commerce administers requests for establishing FTZs, but the government does not participate in their operation.

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

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

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, stock exchanges and brokers, mutual funds, investment funds, export and import intermediaries (customs brokers), credit unions, wire remitters, money exchange houses, public agencies, notaries, casinos, lottery operators, car dealers, gold dealers, foreign currency traders, sports clubs, cargo transport operators, and postal order remitters

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 4,842: January through August 2012

Number of CTRs received and time frame: 7,943,732: January through August 2012

STR covered entities: Banks, securities broker/dealers, trust companies, pension funds, savings and credit cooperatives, depository and lending institutions, lotteries and casinos, vehicle dealers, currency dealers, importers/exporters and international gold traders

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 97 in 2012

Convictions: 80 in 2012

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Colombia is a member of the Financial Action Task Force 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/InformedeEvaluacinMutuaRepblicadeColombia_1.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The President takes a hard line on corruption and demonstrates a serious intent to punish corrupt officials at all levels. The President also has directed the Colombian National Police to assign more resources to illegal mining activities throughout Colombia.

The Government of Colombia (GOC) continues to make progress in the development of its financial intelligence unit (FIU), regulatory framework, and interagency cooperation within the government. Placing greater focus and priority on money laundering and terrorist financing investigations, including increasing resources and training, is necessary to ensure continued and improved progress. Congestion in the court system, procedural impediments in the asset forfeiture prosecutions, and corruption remain problems that should be addressed. While the GOC still should take steps to foster better interagency cooperation, including improved case coordination between the Unidad Aministrativa Especial de Información Análisis Financiero (UIAF), Colombia’s FIU, and the Colombian National Police’s specialized judicial police units, Colombia stands out as a regional leader in the fight against money laundering and terrorist financing and is a key part of a Regional FIU Initiative.

The DIAN, Colombia’s Tax and Customs Authority, regulates activities and materials in FTZs, and there are identification requirements for companies and individuals who enter or work in the FTZs. The current administration is revising the FTZ and tax exemption scheme.

The Government of Colombia tried to pass a law in 2012 that would allow money to be transferred electronically through cell phones. After over two months in Congress, and due in part to a procedural misstep in April 2012, the e-money law did not pass to a vote. In general, banks were concerned with the proposal, which lacked sufficient controls and an enhanced regulatory framework to avoid potential problems.

In September 2012, the Ministry of Foreign Affairs, the Fiscalia General, and the Treasury Ministry’s Financial Superintendency and UIAF signed an interagency memorandum of understanding (MOU) to allow for coordination and implementation of the Colombian government’s authority to block assets of individuals and entities on the UN 1267 and UN 1373 Sanctions Committees’ consolidated lists and to freeze the funds of designated terrorists, terrorist financiers, and terrorist groups. The MOU gives legal authority to the Fiscalia to implement the necessary seizure orders against the assets of individuals and entities on the UN 1267 Sanctions Committee’s consolidated list and provides administrative authorities to the Ministry of Foreign Affairs, the Financial Superintendency, and UIAF to provide the relevant UN orders and supporting information to the Fiscalia to assist it to locate and freeze any identified assets in Colombia.

The GOC should put in place streamlined procedures for the liquidation and sale of seized assets under state management and should revise procedures to permit expedited forfeiture of seized assets. An average seven- to ten-year time frame for forfeiture opens opportunities for waste, fraud, and abuse while limiting the deterrent effect that could result from rapid forfeiture. Colombian prosecutors should take steps to not only seize the physical assets (real property) of narcotics traffickers but also seize their Colombian bank accounts. This element is frequently not a part of regular Colombian asset seizure operations. In addition, the GOC should increase the number of judges and related administrative support resources that oversee asset forfeiture and money laundering cases to expedite the judicial process. The GOC is currently working on a revision of its asset forfeiture law. Key steps to the new streamlined approach include one expedited personal notification about forfeiture (at present, notifications can take up to six months or two years), the ability to notify and seize at the same time, and elimination of the appellate hierarchy that currently allows three opportunities to appeal. An important component will be a provision to allow Colombian courts to enforce asset forfeiture judgments of foreign courts without needing to resort to the current lengthy process. This law is slated to reach Congress during its next session in February 2013.

The GOC works extensively with U.S. law enforcement agencies to identify, target and prosecute groups and individuals engaged in drug and other financial crimes. In November 2012, a GOC money laundering unit took steps to seize the property of former retired General Mauricio Santoyo, head of security for former President Uribe, due to his ties to the United Self-Defense Forces of Colombia (AUC), named a foreign terrorist organization by the United States in September 2001. The Attorney General’s Office seized property including nine farms, five vehicles, a commercial establishment, and a factory. The goods will go to the National Drugs Directorate for further action. In September 2012, the GOC worked closely with the U.S. on a case involving Juliana Rubio Isaza, a Colombian woman who was extradited to the U.S. on money laundering charges. A U.S. investigation revealed she worked as a stock broker for Stanford, S.A. and belonged to the organization of Manuel Madero Luzardo alias “El Pato”. Rubio is said to have laundered money totalling more than $1.5 million from drug related activities in Mexico and the U.S. Colombia’s technical investigations body captured Rubio in January 2012, along with seven other key members of the El Pato organization.

Costa Rica

Proceeds from international cocaine trafficking represent the most significant source of assets laundered in Costa Rica. The Costa Rican-based internet gaming industry also launders millions of dollars in illicit proceeds through Costa Rica and offshore centers annually. Proceeds from domestic criminal activities, including narcotics trafficking, financial frauds, human trafficking, corruption and contraband smuggling, are also laundered in Costa Rica. The Government of Costa Rica (GOCR) reports that Costa Rica is primarily used by foreign organizations as a bridge to send funds to and from other jurisdictions using bulk cash shipments and companies or financial institutions located offshore.

Criminal organizations utilize financial institutions, licensed and unlicensed money remitters, and the free trade zones (FTZs) to launder the proceeds of their illicit activities. The money services businesses are a significant risk for money laundering and a potential mechanism for terrorist financing. The smuggling of bulk currency across borders with Panama and Nicaragua is also prevalent. Trade-based money laundering, while used, is not detected with the same frequency as the above typologies. There is no recent investigation related to terrorism 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.: 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: YES

KYC covered entities: Banks, savings and loan cooperatives, pension funds, insurance companies and intermediaries, money exchangers, and money remitters; securities broker/dealers, credit issuers, sellers or redeemers of travelers checks and postal money orders; trust administrators and financial intermediaries; asset managers, real estate developers and agents; manufacturers, sellers and distributors of weapons; art, jewelry and precious metals dealers; sellers of new and used vehicles; casinos, virtual casinos, and electronic or other gaming entities; lawyers and accountants

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 186: January 1 – November 19, 2012

Number of CTRs received and time frame: Not available

STR covered entities: Banks, savings and loan cooperatives, pension funds, insurance companies and intermediaries, money exchangers, and money remitters; securities broker/dealers, credit issuers, sellers or redeemers of travelers checks and postal money orders; trust administrators and financial intermediaries; asset managers, real estate developers and agents; manufacturers, sellers and distributors of weapons; art, jewelry and precious metals dealers; sellers of new and used vehicles; casinos, virtual casinos, and electronic or other gaming entities; lawyers and accountants

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: Not available

Convictions: 3: January 1 – November 19, 2012

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Costa Rica 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/eng-evaluaciones.php

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The GOCR made substantial progress enhancing its anti-money laundering (AML) regime through modifications to the legal and regulatory frameworks. Additional AML regulations for financial institutions and designated non-financial businesses and professions (DNFBPs) were implemented in 2012. Moreover, Costa Rica enacted a law to facilitate greater fiscal transparency through the international exchange of tax information.

However, various obstacles still exist that prevent the GOCR from effectively investigating and prosecuting money laundering crimes. Underutilized investigative tools, such as cooperating witnesses, confidential informants, electronic surveillance, and undercover operations reduce the ability of investigators to pursue these investigations. Costa Rica enacted a non-conviction based asset forfeiture law in 2009. However, the GOCR has not successfully pursued a case under this law, and it will likely need to be reformed. Costa Rican law does not contemplate the sharing of forfeited assets with other countries.

Pursuant to an interpretation of Costa Rican law, money laundering cannot be charged as an additional offense to the predicate crime (e.g., a drug dealer who is convicted on drug charges cannot also be prosecuted for laundering the drug proceeds). This practice diminishes the independent nature of the offense and greatly reduces the amount of potential money laundering prosecutions. In addition, criminal liability does not extend to legal persons.

The unregulated online gaming and casino industries pose significant risks for money laundering. The legislature rejected proposed provisions to create a regulatory body when it passed a recent gaming bill. It is difficult for the GOCR to verify the source of funds used for local real estate purchases on behalf of foreign buyers.

Despite these limitations, the attorney general’s office successfully prosecuted an individual for laundering millions of dollars generated from contraband cigarette sales in the United States. The case represented the first sophisticated money laundering prosecution in Costa Rica. Costa Rica fully cooperates with appropriate United States government law enforcement agencies investigating financial crimes related to narcotics and other crimes. Additionally, Costa Rica has a tax information exchange agreement with the United States.

Curacao

Curacao is an autonomous entity within the Kingdom of the Netherlands (KON). Curacao enjoys a high degree of autonomy on most internal matters, but defers to the KON on matters of defense, foreign policy, final judicial review, human rights, and good governance. Curacao is a regional financial center and a transshipment point for drugs from South America bound for the United States and Europe. Money laundering is primarily related to proceeds from illegal narcotics. Money laundering organizations can take advantage of banking secrecy and use offshore banking and incorporation systems, economic free zone areas, and resort/casino complexes to place, layer and launder drug proceeds. Another possible area of money laundering activity may be through wire transfers between the island and the Netherlands. Bulk cash smuggling is a continuing problem due to the close proximity of Curacao to South America.

Curacao has two economic free zones. It is not known to what extent “contrabanding” (using bulk cash to buy actual products which are shipped to South America and sold, thus legitimizing the profits) occurs. The worldwide financial recession continues to slow the economic activities of the zones, although local merchants are confident this will change soon. Curacao has an active “e-zone” which provides e-commerce investors a variety of tax saving opportunities and could be vulnerable to illegal activities.

Curacao’s offshore financial sector consists of trust service companies providing financial and administrative services to an international clientele, including offshore companies, mutual funds, and international finance companies. The extent of this sector is not clear, but it has declined in scale due to the worldwide financial crisis. Also, several international financial services companies have relocated their businesses elsewhere because the island suffers from a negative international perception as a tax haven. Banking regulations require international banks to have a physical presence and maintain records on the island. Owning bearer shares is prohibited for onshore companies, and international companies must maintain bearer shares in custody. Several casinos and Internet gaming companies operate on the island, although the number of Internet gaming companies is declining.

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: Onshore and offshore banks, saving banks, money remitters, credit card companies, credit unions, life insurance companies and brokers, trust companies and other service providers, casinos, Customs, lawyers, notaries, accountants, tax advisors, jewelers, car dealers, real estate agents, and administration offices

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 13,005: January – early November 2012

Number of CTRs received and time frame: 4,557: January – early November 2012

STR covered entities: Local and international banks, saving banks, money remitters, credit card companies, credit unions, life insurance companies, insurance brokers, company and other service providers , casinos, Customs, lawyers, notaries, accountants, tax advisors, jewelers, car dealers, real estate agents, and administration offices

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0

Convictions: 0

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Curacao 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=cat_view&gid=349&Itemid=418&lang=en

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

During the past year, the Public Prosecutor’s Office initiated an ongoing money laundering investigation into Robbie Dos Santos, a member of the board of the Curacao Lottery Foundation and a major lottery operator. The Government of Curacao’s (GOC) cooperation with the U.S. government led to the freezing of over $30 million of Dos Santos’ assets in the United States. Dos Santos is the half-brother of former Finance Minister George Jamaloodin, and reportedly a major donor to the Movementu Futuro Kòrsou political party in Curacao. Dos Santos reportedly has business ties to the owner of Atlantis World Group (owner of several casinos in Curacao and St. Maarten), Francesco Corallo. Italy has an outstanding arrest warrant for Corallo on charges related to money laundering.

The GOC should continue its regulation and supervision of the offshore sector and free trade zones, as well as its pursuit of money laundering investigations and prosecutions. Curacao should work to fully develop its capacity to investigate and prosecute money laundering and terrorist financing cases.

The Mutual Legal Assistance Treaty between the KON and the United States applies to Curacao; however, the treaty is not applicable to requests for assistance relating to fiscal offenses addressed to the Netherlands Antilles.

Curacao is part of the Kingdom of the Netherlands and cannot sign or ratify international conventions in its own right. Rather, the Netherlands may arrange for the ratification of any convention to be extended to Curacao. The 1988 Drug Convention was extended to Curacao in March 1999. The International Convention for the Suppression of the Financing of Terrorism was extended to the Netherlands Antilles, and as successor, to Curacao in March 2010. The United Nations Convention against Transnational Organized Crime and the UN Convention against Corruption have not been extended to Curacao.

Cyprus

Since 1974, Cyprus has been divided de facto into the Republic of Cyprus (ROC)-controlled two-thirds of the island and the remaining one-third, administered by Turkish Cypriots. The ROC government is the only internationally recognized authority; in practice, it does not exercise effective control over the area administered by Turkish Cypriots, a part of the island Turkish Cypriots declared independent in 1983. The United States does not recognize the area administered by Turkish Cypriots, nor does any country other than Turkey. This section of the report discusses the area controlled by the ROC. A separate section on the area administered by Turkish Cypriots follows.

The ROC is a regional financial center with a robust financial services industry and a significant number of nonresident businesses. A number of factors have contributed to the development of Cyprus as a financial center: a preferential tax regime; double tax treaties with 45 countries (including the United States, several European Union (EU) nations, and former Soviet Union nations); well developed and modern legal, accounting and banking systems; a sophisticated telecommunications infrastructure; and EU membership. Companies formerly classified as offshore are now free to engage in business locally. There are over 240,000 international business companies (IBCs) registered in Cyprus, many of which belong to non-residents. The same disclosure, reporting, tax and other laws and regulations apply equally to all registered companies. The ultimate beneficial owners of IBCs registered in Cyprus must be disclosed to the authorities.

The biggest threats for money laundering in the ROC are primarily from domestic and international financial crime. There is no significant black market for smuggled goods in the ROC. What little black market trade exists is usually related to small-scale transactions, typically involving fake clothing, pirated CDs/DVDs and cigarettes moved across the UN-patrolled buffer zone dividing the island.

The ROC has two free trade zones (FTZs) located in the main seaports of Limassol and Larnaca, which are used for transit trade. These areas are treated as being outside normal EU customs territory. Consequently, non-EU goods placed in FTZs are not subject to any import duties, value added tax, or excise tax. FTZs are governed under the provisions of relevant EU and ROC legislation. The Department of Customs has jurisdiction over both areas and can impose restrictions or prohibitions on certain activities, depending on the nature of the goods. Additionally, the Ministry of Commerce, Industry and Tourism has management oversight over the Larnaca FTZ.

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, cooperative credit institutions, securities and insurance firms, payment institutions including money transfer businesses, electronic money institutions, trust and company service providers, auditors, tax advisors, accountants, real estate agents, dealers in precious stones and gems, and attorneys

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 525 in 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks, cooperative credit institutions, securities and insurance firms, payment institutions including money transfer businesses, trust and company service providers, auditors, tax advisors, accountants, real estate agents, dealers in precious stones and gems, attorneys, plus any person who in the course of his profession, business or employment knows or reasonably suspects that another person is engaged in money laundering or terrorist financing activities

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 76 in 2011

Convictions: 18 in 2011

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

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

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

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

In December 2012, Cyprus passed several new laws upgrading its existing anti-money laundering (AML) legal framework within the context of its request for bailout assistance from the EU. The changes clarify the nature of information subject to exchange with foreign tax authorities; enhance the ability of the FIU to cooperate with foreign authorities; provide increased jail sentences for persons convicted of offenses pertaining to stalling or avoiding paying taxes; address certain deficiencies in Cyprus’ existing framework for regulating and supervising lawyers, accountants, and trustees; and call for a comprehensive review of the ROC’s existing bank AML supervisory framework.

Area Administered by Turkish Cypriots

The Turkish Cypriot community lacks the legal and institutional framework necessary to provide effective protection against the risks of money laundering, although significant progress has been made in recent years with the passage of “laws” better regulating the onshore and offshore banking sectors and casinos. There are currently 22 banks (seven of which are branches) in the area administered by Turkish Cypriots, and Internet banking is available.

The offshore banking sector remains a concern. The offshore sector consists of nine banks and 90 companies. The offshore banks may not conduct business with residents of the area administered by Turkish Cypriots and may not deal in cash. The “Central Bank” provides the regulation and licensing of offshore banks and audits the offshore entities, which must submit an annual report on their activities. The “law” permits only banks previously licensed by Organization for Economic Co-operation and Development (OECD)-member nations or Turkey to operate an offshore branch in northern Cyprus.

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

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 105: January 1 - October 30, 2011

Number of CTRs received and time frame: Not available

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 0

Convictions: 0

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

The area administered by Turkish Cypriots is not part of any FSRB and thus is not subject to normal peer evaluations.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Despite the 2009 promulgation of stricter “laws,” the 24 operating casinos (four in Nicosia, five in Famagusta and 15 in Kyrenia) remain essentially unregulated due to the lack of an enforcement or investigative mechanism by the casino regulatory body and efforts to de-criminalize any failure by casinos to follow KYC regulations.

Banks and other designated entities must submit STRs to the “FIU”. The “FIU” then forwards STRs to the five-member “Anti-Money Laundering Committee” which decides whether to further refer suspicious cases to the “attorney general’s office,” and then if necessary, to the “police” for further investigation. The five-member committee is composed of representatives of the “Ministry of Economy,” “Money and Exchange Bureau,” “Central Bank,” “police” and “customs.”

The EU continues to provide technical assistance to the Turkish Cypriots to combat money laundering more effectively. The EU is evaluating the continuance of its assistance in light of the area’s continuing AML/CFT risks.

The Turkish Cypriot “AML Law” provides better banking regulations than were in force previously, but without ongoing enforcement its objectives cannot be met. A major weakness remains the many casinos, where a lack of resources and expertise leave the area essentially unregulated, and therefore, especially vulnerable to money laundering abuse. Amendments to a “law” to regulate potential AML activity in casinos that would essentially decriminalize failure to implement KYC rules have been pending for over one year. The largely unregulated consumer finance institutions and currency exchange houses are also of concern.

Turkish Cypriots are currently drafting new AML “legislation” that will take into account UNSCRs 1267 and 1373 as well as address other sectors that face money laundering risks, such as casinos and exchange bureaus.

The Turkish Cypriot authorities should continue efforts to enhance the “FIU,” and adopt and implement a strong licensing and regulatory environment for all obligated institutions, in particular casinos and money exchange houses. Turkish Cypriot authorities should stringently enforce the cross-border currency declaration requirements. Turkish Cypriot authorities should continue steps to enhance the expertise of members of the enforcement, regulatory, and financial communities with an objective of better regulatory guidance, more efficient STR reporting, better analysis of reports, and enhanced use of legal tools available for prosecutions.

Dominican Republic

The Dominican Republic (DR) is not a major regional financial center, despite having one of the largest economies in the Caribbean. The DR continues to be a major transit point for the transshipment of illicit narcotics destined for the United States and Europe. The six international airports, 16 seaports and a large porous frontier with Haiti present Dominican authorities with serious challenges.

Corruption within the government and the private sector, the presence of international illicit trafficking cartels, a large informal economy, and a fragile formal economy make the DR vulnerable to money laundering and terrorist financing threats. The large informal economy is a significant market for illicit or smuggled goods. The under-invoicing of imports and exports by Dominican businesses is a relatively common practice for those seeking to avoid taxes and customs fees. U.S. law enforcement has identified networks smuggling weapons into the DR from the United States. The increase in drug-related violence throughout the DR is partially attributable to arms trafficking as evidenced by the seizures of illicit weapons at ports of entry over the past year. The major sources of laundered proceeds stem from illicit trafficking activities, tax evasion and fraudulent financial activities, particularly transactions with forged credit cards.

There are no reported hawala or other money or value transfer services operating in the DR. A significant number of remittances are transferred through banks. Casinos are legal in DR and unsupervised gaming activity represents a significant money laundering risk. While the country has a law creating an international financial zone, implementing regulations will not be issued until the law is reformed to avoid perceptions that the zone will be left out of the DR’s anti-money laundering (AML) regulatory regime.

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

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

CRIMINALIZATION OF MONEY LAUNDERING:

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

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, currency exchange houses, securities brokers, cashers of checks or other types of negotiable instruments, issuers/sellers/cashers of travelers checks or money orders, credit and debit card companies, remittance companies, offshore financial service providers, casinos, real estate agents, automobile dealerships, insurance companies, and dealers in firearms and precious metals

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 13,130: January 1 through December 1, 2012

Number of CTRs received and time frame: 1,286,870: January 1 through December 1, 2012

STR covered entities: Banks, agricultural credit institutions, money exchangers, notaries, gaming centers, securities dealers, art or antiquity dealers, jewelers and precious metals vendors, attorneys, financial management firms and travel agencies

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 12 in 2012

Convictions: 1 in 2012

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

The Dominican Republic 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=cat_view&gid=347&Itemid=418&lang=en

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Egmont Group of Financial Intelligence Units (FIUs) expelled the DR’s FIU in 2006 due to a lack of compliance with the definition of an FIU. The Egmont Group specified the formal steps the DR needs to take to re-apply for Egmont membership, thereby allowing the FIU to efficiently and securely share and exchange sensitive financial information with international FIUs. The function of the FIU improved, but problems remain. Specifically, the creation of an additional FIU-like organization to regulate international financial zones, as stipulated under Law 480/08, is in contravention of Egmont Group rules. The DR should modify Law 480/08 to eliminate the possibility of a second FIU, and re-apply for membership in the Egmont Group.

The DR strengthened its laws on politically exposed persons (PEPs) and correspondent relationships, but international experts have outlined key weaknesses. In addition, the DR needs to pass legislation to provide safe harbor protection for STR filers and criminalize tipping off. The government should better regulate casinos and non-bank businesses and professions, specifically real estate companies, and strengthen regulations for financial cooperatives and insurance companies.

The DR’s weak asset forfeiture regime is improving, but does not cover confiscation of instrumentalities intended for use in the commission of a money laundering offense, property of corresponding value, and income, profits, or other benefits from the proceeds of crime. The DR should implement legislation to align its asset forfeiture regime with international standards.

The DR’s weak asset forfeiture regime is improving, but does not cover confiscation of instrumentalities intended for use in the commission of a money laundering offense, property of corresponding value, and income, profits, or other benefits from the proceeds of crime. The DR should implement legislation to align its asset forfeiture regime with international standards.

France

France’s banking, financial and commercial relations, especially with Francophone countries, make it an attractive venue for money laundering because of its sizeable economy, political stability and sophisticated financial system. Public corruption, narcotics trafficking, human trafficking, smuggling, and other crimes associated with organized crime generate illicit proceeds.

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

France has a large informal sector, and informal value transfer systems such as hawalas may be used by immigrant populations used to such systems in their home countries, but there is little information on the scale of such activity.

Since 2011, France has considerably expanded its financial intelligence unit (FIU), TracFin. TracFin is looking into the ways in which new anonymous electronic payment instruments are offering an alternative to cash. The use of virtual money is growing in France through online gaming social networks.

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

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

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: 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 and money-issuing institutions, investment firms, money exchangers, investment management companies, mutual insurers and benefit institutions, insurance intermediaries, insurance dealers, notaries, receivers and trustees in bankruptcy, financial investment advisors, real estate brokers, chartered accountants, auditors, dealers in high value goods, auctioneers and auction houses, bailiffs, lawyers, participants in stock exchange settlement and delivery, commercial registered office providers, gaming centers, companies involved in sports betting and horse racing tips, and casinos

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 22,856 in 2011

Number of CTRs received and time frame: Not available

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

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 297 in 2011

Convictions: 28 in 2011

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

France is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/3/18/47221568.pdf

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of France (GOF) applies the 2006/70/CE European Union (EU) directive by which politically exposed persons from the EU states may benefit from simplified vigilance procedures, but only in a limited number of cases. France should review its procedures to ensure all PEPs undergo enhanced due diligence.

TracFin has hired new officers, updated its investigative methods, modernized its information system, and made more data available to the public online. In April 2012, France’s bank supervisor improved its bank questionnaires on prevention of money laundering and terrorism financing, provided guidelines to financial institutions for their dealings with occasional clients versus regular business clients, and updated its guidance on vigilance measures concerning fund transfers. These efforts should be continued to ensure effective implementation.

The GOF should examine the compliance with AML reporting requirements of company registration agents, real estate agents, jewelers, casinos and lawyers to ensure they are complying with their obligations under the law.

France does not have the capacity to share forfeited assets with other jurisdictions. The country should reform its laws to allow forfeited assets to be shared.

Germany

While not an offshore financial center, Germany is one of the largest financial centers in Europe. Germany is a member of the eurozone, using a currency widely available in Europe, thus making it attractive to organized criminals and tax evaders. Many indicators suggest Germany is susceptible to money laundering and terrorist financing because of its large economy, advanced financial institutions and strong international linkages. Although not a major drug producing country, Germany continues to be a consumer and a major transit hub for narcotics.

Organized criminal groups involved in drug trafficking and other illegal activities are sources of laundered funds in Germany. There is little current data on the volume of these proceeds. Terrorists have carried out terrorist acts in Germany and in other nations after being based in Germany. Germany is estimated to have a large informal sector, and informal value transfer systems such as hawalas may be used by immigrant populations accustomed to such systems in their home countries, but there is little idea of the scale of this activity.

Trends in money laundering include electronic payment systems; financial agents, i.e., persons who are solicited to make their private accounts available for money laundering transactions; and trade in rare metals, electronics, and energy. Free zones of control type I, i.e., freeports, exist in Bremerhaven, Cuxhaven, and Hamburg. Deggendorf and Duisburg are control type II Free zones, i.e., unfenced inland ports.

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: NO civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Credit, financial services, payment and e-money institutions as well as their agents; financial enterprises; insurance companies and intermediaries; investment companies; lawyers, legal advisers, auditors, chartered accountants, tax advisers and tax agents; trust or company service providers; real estate agents; casinos; and persons trading in goods

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 12,868 in 2011

Number of CTRs received and time frame: Not applicable

STR covered entities: Credit, financial services, payment and e-money institutions as well as their agents; financial enterprises; insurance companies and intermediaries; investment companies; lawyers, legal advisers, auditors, chartered accountants, tax advisers and tax agents; trust or company service providers; real estate agents; casinos; and persons trading in goods

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 1,070 in 2011

Convictions: 903 in 2011

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Germany is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/countries/d-i/germany/documents/mutualevaluationofgermany.html

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In December 2012, German prosecutors opened investigations against 25 employees of the Deutsche Bank. Five of them were arrested on charges of serious tax evasion, money laundering and attempted obstruction of justice in connection with emissions certificate trading.

On December 29, 2011, a law on Optimizing the Prevention of Money Laundering entered into force, tightening existing regulations. The law provides for the expansion of due diligence and reporting obligations in the non-financial sector. It also increases punishments for money laundering violations. The law also incorporates new provisions for e-money, enacting stricter reporting requirements for all e-money transactions greater than €100 (approximately $129). Finally, the new law expands the number and type of obliged entities required to appoint a money laundering officer. On November 8, 2012, the German Parliament passed an amendment to Germany’s Law Against Money Laundering to tighten control over the increasing number of casinos and slot machines and to regulate online gaming, which previously had been prohibited in Germany. The new law bans gift cards, subjects online gaming companies to KYC rules, requires online gaming operators to have better risk management, and strengthens the power of regulators.

Tipping off is a criminal offense only if it is committed with the intent to support money laundering or obstruct justice, and applies only to previously-filed STRs. Otherwise, it is an administrative offense that carries a fine of up to €100,000 (approximately $129,000) under the Money Laundering Act. Legal persons are only covered by the Administrative Offenses Act, and are not criminally liable under the Criminal Code. While Germany has no automatic CTR requirement, large currency transactions frequently trigger a STR. Germany should consider strengthening the above provisions and also tightening the regulations on domestic PEPs.

The numbers of prosecutions and convictions included in this report only reflect cases in which the money laundering violation carried the highest penalty of all the crimes of which the offender was convicted. Germany has no federal statistics on the amount of assets forfeited in criminal money laundering cases. Assets can be forfeited as part of a criminal trial or through administrative procedures such as claiming back taxes.

Germany should become a party to the UN Convention against Corruption.

Greece

Greece is a regional financial center for the Balkans, as well as a bridge between Europe and the Middle East. Official corruption, the presence of organized crime, and a large informal economy make the country vulnerable to money laundering and terrorist financing. Greek law enforcement proceedings indicate Greece is vulnerable to narcotics trafficking, trafficking in persons and illegal immigration, prostitution, smuggling of cigarettes and other contraband, serious fraud or theft, illicit gaming activities, and large scale tax evasion.

Evidence suggests financial crimes have increased in recent years and criminal organizations (some with links to terrorist groups) increasingly are trying to use the Greek banking system to launder illicit proceeds. Criminally-derived proceeds historically are most commonly invested in real estate, the lottery, and the stock market. Criminal organizations from southeastern Europe, the Balkans, Georgia, and Russia are responsible for a large percentage of the crime that generates illicit funds. The widespread use of cash facilitates a gray economy as well as tax evasion, although the government is trying to crack down on both trends. Due to the large informal economy it is difficult to determine the value of goods smuggled into the country, including whether any of the smuggled goods are funded by narcotic or other illicit proceeds. There is increasing evidence that domestic terrorist groups are involved with drug trafficking.

Greece has three free trade zones (FTZs), located at the Piraeus, Thessaloniki, and Heraklion port areas. Goods of foreign origin may be brought into the FTZs without payment of customs duties or other taxes and remain free of all duties and taxes if subsequently transshipped or re-exported. Similarly, documents pertaining to the receipt, storage, or transfer of goods within the FTZs are free from stamp taxes. The FTZs also may be used for repacking, sorting, and re-labeling operations. Assembly and manufacture of goods are carried out on a small scale in the Thessaloniki Free Zone. These FTZs may pose vulnerabilities for trade-based and other money laundering operations.

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: NO civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:

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

KYC covered entities: Banks, savings banks, and cooperative banks; credit companies, money remitters, financial leasing and factoring companies, money exchanges, and postal companies; stock brokers, investment services firms, and collective and mutual funds; life insurance companies and insurance intermediaries; accountants, auditors, and audit firms; tax consultants, tax experts, and related firms; real estate agents and companies; casinos (including internet casinos) and entities engaging in gaming activities; auctioneers, dealers in high value goods, and pawnbrokers; notaries, lawyers, and trust and company service providers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 3,586: January 1 - November 30, 2012

Number of CTRs received and time frame: 47: January 1 - November 30, 2012

STR covered entities: Banks, savings banks, and cooperative banks; credit companies, money remitters, financial leasing and factoring companies, money exchanges, and postal companies; stock brokers, investment services firms, and collective and mutual funds; life insurance companies and insurance intermediaries; accountants, auditors and audit firms; tax consultants, tax experts and related firms; real estate agents and companies; casinos (including internet casinos) and entities engaging in gaming activities; auctioneers, dealers in high value goods, and pawnbrokers; notaries, lawyers, and trust and company service providers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 279 in 2012

Convictions: Not available

RECORDS EXCHANGE MECHANISM:

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

With other governments/jurisdictions: YES

Greece is a member of the Financial Action Task Force. Its most recent mutual evaluation report can be found here: http://www.fatf-gafi.org/documents/documents/mutualevaluationofgreece.html

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Greece (GOG) has been working to improve the effectiveness of the Greek financial intelligence unit (FIU). Although the FIU has technical and data management systems and capacities to support its functions, the GOG, due mainly to austerity measures, has not provided adequate financial resources to ensure the FIU will be able to fulfill its responsibilities and ensure its powers are in line with international standards. It also remains unclear whether the Ministry of Justice has enough resources available to deal with money laundering or terrorism financing cases.

Greece should take steps to ensure a more effective confiscation regime. While the anti-money laundering/countering the financing of terrorism (AML/CFT) law contains provisions allowing civil asset forfeiture under special circumstances, Greek authorities advise it is not practical to initiate civil procedures and currently do not do so, except in cases involving the death of a suspect. The GOG also should develop procedures for the sharing of seized assets with third party jurisdictions that assist in the conduct of investigations.

The GOG requires transactions above €3,000 (approximately $3,965) be executed with credit cards, checks or cashiers’ checks and all business-to-business transactions in excess of €3,000 (approximately $3,965) be carried out through checks or bank account transfers. All credit and financial institutions, including payment institutions, also must report on a monthly basis all transfers of funds abroad executed by credit card, check or wire transfer. Transfers in excess of €100,000 (approximately $132,150) are subject to examination. Nevertheless, the GOG should ensure its system for reporting large currency transactions is applied equally across all regulated sectors and explicitly abolish company-issued bearer shares. It also should continue to deter the smuggling of currency across its borders. Greece also should ensure companies operating within its FTZs are subject to the same level of enforcement of AML/CFT controls as other sectors. The GOG should ensure domestic PEPs are also subject to enhanced due diligence, ensure that designated non-financial businesses and professions are adequately supervised and subject to the same reporting requirements as financial institutions, and work to bring charitable and nonprofit organizations under the AML/CFT regime.



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