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Underlying Suspicious Activity

The FATF non-cooperative countries and territories exercise encompasses some of the essential tenets of PDD-42. It has brought together the 29 FATF member nations in a multilateral effort to not only define what makes a country vulnerable to money laundering but to then clearly identify those nations whose substandard anti-money laundering regimes attract illegal proceeds that underwrite international criminal activity. The United States, in making its contribution to FATF, draws upon the collective expertise of the federal interagency community. That community has played a vital role by assessing the money laundering threat in various regions, analyzing the shortcomings in existing national laws, regulations and practices, crafting countermeasures and providing training and technical assistance to identified jurisdictions making a conscientious effort at improvement. During 2000, this integrated federal effort in support of the FATF initiative on non-cooperative jurisdictions has focused international attention and brought unprecedented progress in dealing with the global challenge of money laundering.

The Financial Action Task Force on Money Laundering (FATF), which was established at the G-7 Economic Summit in Paris in 1989, is an inter-governmental body whose purpose is the development and promotion of policies to combat money laundering. In 1990, the FATF issued Forty Recommendations to fight this phenomenon. The Recommendations were revised in 1996 to reflect changes in money laundering trends. These recommendations are designed to prevent proceeds of crime from being utilized in future criminal activities and from affecting legitimate economic activities.

The following is a draft text currently being considered: 

1. "Criminalized Drug Money Laundering": The jurisdiction has enacted laws criminalizing the offense of money laundering related to drug trafficking.

2. "Criminalized Beyond Drugs": The jurisdiction has extended anti-money laundering statutes and regulations to include non-drug-related money laundering.

3. "Record Large Transactions": By law or regulation, banks are required to maintain records of large transactions in currency or other monetary instruments.

4. "Maintain Records Over Time": By law or regulation, banks are required to keep records, especially of large or unusual transactions, for a specified period of time, e.g., five years.

5. "Report Suspicious Transactions": An "M" (for "mandatory") indicates that by law or regulation, banks are required to record and report suspicious or unusual transactions to designated authorities. A "P" indicates that by law or regulation, banks are permitted to record and report suspicious transactions. An effective know-your-customer policy is considered a prerequisite in this category.

6. "Financial Intelligence Unit": The jurisdiction has established a central, national agency responsible for receiving (and, as permitted, requesting), analyzing, and disseminating to the competent authorities disclosures of financial information concerning suspected proceeds of crime, or required by national legislation or regulation, in order to counter money laundering. These reflect those jurisdictions that are members of the Egmont Group.

7. "System for Identifying and Forfeiting Assets": The jurisdiction has enacted laws authorizing the tracing, freezing, seizure and forfeiture of assets identified as relating to or generated by money laundering activities.

8. "Arrangements for Asset Sharing": By law, regulation or bilateral agreement, the jurisdiction permits sharing of seized assets with third party jurisdictions which assisted in the conduct of the underlying investigation.

9. "Cooperates w/Domestic Law Enforcement": By law or regulation, banks are required to cooperate with authorized law enforcement investigations into money laundering or the predicate offense, including production of bank records, or otherwise lifting the veil of bank secrecy.

10. "Cooperates w/International Law Enforcement": By law or regulation, banks are permitted/required to cooperate with authorized investigations involving or initiated by third party jurisdictions, including sharing of records or other financial data.

11. "International Transportation of Currency": By law or regulation, the jurisdiction, in cooperation with banks, controls or monitors the flow of currency and monetary instruments crossing its borders. Of critical weight here are the presence or absence of wire transfer regulations and use of reports completed by each person transiting the jurisdiction and reports of monetary instrument transmitters.

12. "Mutual Legal Assistance": By law or through treaty, the jurisdiction has agreed to provide and receive mutual legal assistance, including the sharing of records and data.

13. "Non-Bank Financial Institutions": By law or regulation, the jurisdiction requires non-bank financial institutions to meet the same customer identification standards and adhere to the same reporting requirements that it imposes on banks.

14. "Disclosure Protection Safe Harbor": By law, the jurisdiction provides a "safe harbor" defense to banks or other financial institutions and their employees who provide otherwise confidential banking data to authorities in pursuit of authorized investigations.

15. "Offshore Financial Centers": By law or regulation, the jurisdiction authorizes the licensing of offshore banking and business facilities.

16. "States Parties to 1988 UN Drug Convention": As of December 31, 2000, a party to the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, or a territorial entity to which the application of the Convention has been extended by a party to the Convention.

Afghanistan (Other). Afghanistan has no formal credit institutions, and its financial institutions are rudimentary. Afghanistan is not considered a center for money laundering. However, Afghanistan does play a key role in the heroin trade. The proceeds of heroin trafficking generally are laundered in other countries, or through the hawala alternative remittance system. Reports indicate that the Taliban and other factions in Afghanistan are involved in narcotics trafficking. The private investment of drug profits reportedly has fueled a surge in construction and commercial activity in Kandahar City in recent years.

Afghanistan is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

Albania (Concern). Albania is at significant risk to money laundering because it is a transit country for trafficking in narcotics, arms, contraband, and illegal aliens. Organized crime groups use Albania as a base of operations for conducting criminal activities in other countries. The proceeds from these activities are easily laundered in Albania because of official corruption and weak government controls.

Albania criminalized all forms of money laundering through Article 287 of the Albanian Criminal Code of 1995. In 2000, the International Monetary Fund (IMF) assisted Albania in drafting anti-money laundering legislation that was subsequently approved by Albania's legislature. The law reportedly would establish an agency to coordinate the Government of Albania's (GOA) efforts to detect and prevent money laundering. This agency will fall under the control of the Ministry of Finance and will evaluate reports filed by financial institutions. If the agency suspects that a transaction involves the proceeds of criminal activity, it must forward the information to the prosecutor's office.

The legislation would also require financial institutions to report to the anti-money laundering agency all transactions that exceed approximately US $10,000. Financial institutions would be required to report transactions within 48 hours if the origin of the money cannot be determined. In addition, private and state entities would be required to report all financial transactions that exceed certain thresholds.

In December 2000, Albania signed the UN Convention against Transnational Organized Crime. Albania is a member of the Council of Europe (COE) Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (PC-R-EV).

The GOA should enact and fully implement the provisions of its anti-money laundering legislation. In particular, the GOA should provide adequate resources and support to the new anti-money laundering agency.

Algeria (Other). Algeria is not a financial center, and currently there is no available information suggesting that money laundering is a significant problem there. However, the Algerian government has not enacted anti-money laundering legislation nor does it have in place any procedures such as a suspicious transaction reporting system to detect money laundering. Individuals entering Algeria must declare all foreign currency, but it remains unclear how strictly this is enforced.

Algeria is a party to the 1988 UN Drug Convention, and in December 2000, signed the United Nations Convention against Transnational Organized Crime.

Angola (Other). Money laundering does not appear to be a significant problem in Angola because of its poorly developed financial sector. However, Angola does not have in place a set of comprehensive laws, regulations, and other procedures to detect money laundering and financial crime. Angola's counternarcotics laws criminalize money laundering related to drug trafficking.

In December 2000, Angola signed the UN Convention against Transnational Organized Crime.

Anguilla (Other). Anguilla has a small but growing offshore financial sector that renders it vulnerable to money laundering. As with the other United Kingdom Caribbean Overseas Territories, Anguilla underwent a thorough evaluation of its financial regulations in 2000, co-sponsored by the local and British governments.

Anguilla's domestic financial sector includes four domestic banks and 17 insurance companies. The Eastern Caribbean Central Bank (ECCB) supervises Anguilla's four domestic banks. The offshore sector includes two banks, one captive insurance company, and approximately 2000 international business companies (IBCs) and 43 trusts. IBCs may be registered using bearer shares that conceal the identity of the beneficial owner of these entities.

In 2000, Anguilla enacted several pieces of legislation to improve its anti-money laundering regime. The Proceeds of Criminal Conduct Act (PCCA) 2000 extends the predicate offenses for money laundering to all indictable offenses. It provides for suspicious activity reporting and a safe harbor for this reporting. The Money Laundering Reporting Authority Act (MLRA) 2000 requires persons involved in the provision of financial services to report any suspicious transactions derived from drugs or criminal conduct. It also details provisions for a Reporting Authority that will receive the suspicious transaction reports required and may forward information to the police for further investigation. The Criminal Justice (International Co-operation) (Anguilla) Act 2000 enables Anguilla to directly cooperate with other jurisdictions through mutual legal assistance.

Anguilla is subject to the US/UK MLAT and the US/UK extradition treaty. Anguilla is a member of the Caribbean Financial Action Task Force (CFATF), and through the UK, is subject to the 1988 UN Drug Convention.

Anguilla has developed important legal tools for detecting and investigating money laundering and other financial crimes. It should move quickly to implement provisions of the PCCA and the MLRA and establish a Reporting Authority that can easily cooperate with foreign authorities. Anguilla should also adopt consider measures to ensure complete identification of beneficial owners of IBCs so that international criminals do not use these entities to perpetuate financial crimes.

Antigua and Barbuda (Primary). Although Antigua and Barbuda remains vulnerable to money laundering because of its offshore financial sector and its internet gaming industry, it has made significant progress toward improving the regulation of the offshore financial sector since the US Treasury Department issued an advisory to US financial institutions in April 1999. In its advisory the Treasury Department recommended "enhanced scrutiny to all financial transactions routed into or out of Antigua and Barbuda" because of 1998 amendments that had seriously weakened Antigua and Barbuda's anti-money laundering regime. The United Kingdom (UK) also issued a bank advisory at that time and France publicly expressed it concerns.

In response to this international action, in 1999 the Government of Antigua and Barbuda (GOAB) repealed those amendments to the Money-Laundering (Prevention) Act (MLPA) of 1996 that had effectively strengthened bank secrecy, inhibited money laundering investigations and infringed on international cooperation. Additionally, in 2000 the GOAB amended the International Business Corporations Act (IBCA) of 1982 in order to excise the 1998 amendments that had given the International Financial Sector Regulatory Authority (IFSRA) responsibility to market and regulate the offshore sector, as well as to allow members of the IFSRA Board of Directors to maintain ties to the offshore industry.

In August 2000, the GOAB again amended the IBCA to require resident agents to ensure the accuracy of the records and registers that are kept at the Registrar's office, and to know the names of beneficial owners of IBC's and to disclose such information to authorities upon request. Furthermore, in December 2000 the GOAB issued a Statutory Instrument, which has the force of law, requiring banks to establish the true identities of account holders and to verify the nature of an account holder's business, source of funds and beneficiaries. The GOAB has also drafted an International Trusts Bill and a Mutual Funds Bill.

The GOAB has established and staffed the Supervisory Authority (SA) within the ONDCP as mandated by the MLPA, and has issued regulations that implement its suspicious transactions reporting system. According to an Antiguan official, by year's end Antiguan and Barbudian financial institutions had filed a total of between ten and twenty suspicious transaction reports (STRs).

During 1999 and 2000, the GOAB conducted an extensive review of the offshore banking sector. As a result, 21 offshore banks had their licenses revoked, were dissolved, were placed in receivership, or were otherwise put out of business. Currently, Antigua and Barbuda has 26 licensed offshore banks of which only 18 are currently in operation and in good standing.

Like most of the other countries in the Eastern Caribbean, GOAB does not have a unified regulatory structure or uniform supervisory practices for its financial services sector. This is due to the fact that the Eastern Caribbean Central Bank (ECCB) supervises Antigua and Barbuda's domestic banking sector, conducting both on-site and off-site reviews of the country's financial institutions. Examiners review information related to savings and demand deposits during on-site inspections. To date, the ECCB has not begun supervising offshore banks.

The IFSRA issues licenses for the offshore sector, including the issuance of licenses for offshore banks and international business corporations, of which there are approximately 12,000. The license application requires disclosure of the names and addresses of directors-who must be natural persons-the activities the corporation intends to engage in, and the names of shareholders and number of shares that they will hold. Additionally, the IFSRA is responsible for the supervision of the offshore banking sector. IFSRA is currently increasing its staff in order to effectively perform on-site and off-site examinations of licensed offshore banks. To date, IFSRA has not performed any on-site examinations.

In October 2000, a joint US and UK interagency team visited Antigua and Barbuda to review the GOAB's progress in enacting and implementing legislation that addresses the issues raised in the 1999 US and UK advisories. As a result the UK subsequently issued a statement announcing modification of its advisory which reads in part:

HM Treasury recognizes the considerable effort that the Government of Antigua and Barbuda has made since April 1999 to strengthen the system of supervision and control, with a particular view to strengthening anti-money laundering systems. Although it is too early to judge whether these new systems have been fully successful, it is clear that there has been a step-change in the culture of combating money laundering in the Government and supervisory structures. But as has been recognized by the Government of Antigua and Barbuda, there is still room for further improvement before the jurisdiction meets the highest standards of international anti-money laundering laws and practice.

While waiting for the new systems to bed down, and the final legislative changes to be made, the UK still believes that financial institutions should continue to undertake additional due diligence when accepting new business from the financial institutions in Antigua and Barbuda. In particular, UK financial institutions should be aware of concerns that there are serious risks associated with involvement in transactions linked to the offshore gaming industry.

The report of the US members of the assessment team and recommendations regarding the US advisory are pending.

During 2000, the GOAB continued its bilateral and multilateral cooperation in various criminal and civil investigations and prosecutions. The GOAB has provided substantial assistance to US law enforcement and prosecutors investigating and prosecuting fraud and money laundering cases involving Antiguan-licensed American International Bank, European Union Bank and European Federal Credit Bank. As a result of Operation Risky Business, an FBI and US Customs Service investigation in which 19 individuals were convicted for fraud and money laundering, a request for the extradition of Antiguan citizen William Cooper, who assisted in the establishment of Antiguan-licensed Caribbean American Bank, was made in 1999. The request is currently pending in the Antiguan courts. In 1999, the GOAB charged former Ukrainian Prime Minister Pavlo Lazarenko with money laundering and froze approximately $83 million in alleged fraud proceeds that had been deposited in European Federal Credit Bank. This money was ultimately forfeited by an Antiguan court in 2000, but the court's decision has been appealed. Lazarenko is currently in US custody awaiting trial on money laundering charges filed in the Northern District of California.

Casinos and sports book-wagering operations in the Free Trade Zone are regulated and supervised by the Directorate of Offshore Gaming (DOG) and are required to incorporate under the IBCA. The DOG has issued Internet Gaming Technical Standards and guidelines; however, it is not clear whether these standards and guidelines are mandatory. Moreover, it is not clear if casinos and other gaming-related entities are subject to provisions of the IBCA or the MLPB. The GOAB is considering legislation and has drafted "Regulations for the Licencing of Interactive Gaming And Interactive Wagering in Antigua and Barbuda" to address possible money laundering through client accounts of Internet gambling operations.

Antigua and Barbuda is a party to the 1988 UN Drug Convention. Antigua and Barbuda is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and the Caribbean Financial Action Task Force (CFATF). In 1999, Antigua and Barbuda became the first country in the eastern Caribbean to exchange the instruments of ratification to bring into force Mutual Legal Assistance and Extradition Treaties with the United States Government.

During the last two years, the GOAB has shown a clear commitment to the creation of a legal and regulatory anti-money laundering regime that will meet international standards. The GOAB is urged to fully implement and enforce all provisions of its anti-money laundering legislation. Moreover, the GOAB must ensure that its gambling sector is covered by anti-money laundering legislation and that it is adequately supervised.

Argentina (Concern). High-profile regional investigations have produced evidence that Mexican and Colombian drug cartels are infiltrating Argentina's banking sector, which is the sector most affected by money laundering activities. It is believed that contraband and bribery also contribute to the money laundering occurring in Argentina, and that the use of companies, shell companies, trusts, financial advisors, accountants and notaries facilitate money laundering.

New money laundering legislation, Law 25.246, was passed in May 2000. While the October 1989 law applied only to the proceeds of illicit drug trafficking activities, the new law extends the money laundering offenses to include all existing crimes in the Penal Code and makes it a crime to launder proceeds of crimes committed in other countries. The new law sets a stricter regulatory framework for banks and a wide range of other entities. Under previous central bank regulations, the requirements for record-keeping customer identification, recording of cash transactions over US $10,000, and reporting of suspicious transactions applied only to banks, financial companies, credit unions, savings institutions, credit card issuers and money exchange dealers. Law 25.246 expands the customer identification, record-keeping and suspicious transactions reporting to a wide range of entities including foreign exchange houses, money remitters, gambling outlets, exporters/importers of jewels and precious metals, property registration agents, stock brokers, insurance companies, art dealers, notaries, accountants, and travelers' checks companies. The law forbids these financial and commercial entities to notify their clients of the filing of suspicious financial transaction reports, and provides a safe harbor from liability for reporting the transactions.

To aid Argentina in its fight against money laundering, Law 25.246 creates a financial intelligence unit (FIU), an autonomous agency under the administration of the Ministry of Justice and Human Rights responsible for receiving, analyzing and disseminating to the Office of the Attorney General information to prevent and impede money laundering. The FIU is not yet operational.

One money laundering case is currently being prosecuted under the 1989 legislation.

Argentina is party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Argentina is an active participant in international anti-money laundering groups. Following their September 1999 admission as an observer member of the Financial Action Task Force (FATF), Argentina underwent an evaluation by the FATF in early 2000 and became a full member in June 2000. Argentina is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Argentina also played a leading role in the creation of the South American Financial Action Task Force in December 2000. Argentina and the United States have a Mutual Legal Assistance Treaty that entered into force in 1993.

The government of Argentina is encouraged to issue implementing regulations for Law 25.2456, and make its FIU operational as soon as possible to enable it to participate in the Egmont Group. This will enable it to cooperate more comprehensively in domestic and international efforts to combat money laundering.

Armenia (Other). Armenia is not a major financial center, however its status as a transit country for narcotics trafficking and smuggling, combined with lax border controls, creates a favorable money-laundering environment. High unemployment, low salaries, corruption, a large underground economy, and the presence of organized crime also increase Armenia's vulnerability to money laundering. Armenian authorities are generally not cognizant of the threat of money laundering and have devoted inadequate resources to the problem. Schemes used to launder funds include the under-invoicing of imports, double bookkeeping, and misuse of the banking system.

Armenia currently has no anti-money laundering statutes. However, the new draft Armenian criminal code includes a statute that for the first time would criminalize money laundering. The Government of Armenia expects the new draft criminal code to pass its third and final reading in parliament in early 2001.

Armenia is a party to the 1988 UN Drug Convention.

Aruba (Concern). Aruba has a growing offshore industry, casinos, and free zones that make it both attractive and vulnerable to money launderers. However, the Government of Aruba (GOA) is establishing a solid anti-money laundering program. Money laundering is a crime in Aruba, and money-laundering offenses extend to all predicate criminal offenses, including tax offenses.

The GOA has developed a comprehensive anti-money laundering program, and further strengthened its legislation this year. The GOA's new anti-money laundering initiatives include four State Decrees: a State Decree listing suspicious activity indicators for casinos, which will take effect in April 2001; a State Decree on the supervision of captive insurers, and one on the supervision of insurance underwriters, both of which will be introduced in February 2001; and a State Decree, which becomes effective January 1, 2001, that will permit the Central Bank of Aruba to supervise insurance companies. The Central Bank of Aruba is in charge of implementing this Decree, which provides the legal basis for supervision of onshore or offshore insurance companies operating in Aruba.

In March 2001, a State Ordinance is expected to be issued that will extend reporting and identification requirements to casinos.

In October 2000, a State Ordinance was enacted requiring life insurance agents to report unusual transactions, based on indicators. As of January 1, 2000, the Government of Aruba began working on the principles of the law, which will be implemented during the first half of the year 2001.

On July 4, 2000, the Aruban Parliament unanimously approved the State Ordinance Free Zones Aruba, which will implement standards for the sector. Aruba is also working with its counterparts in the Caribbean Financial Action Task Force (CFATF) to develop regional standards for free zones, since none currently exist. Once developed, CFATF members have agreed to implement these standards.

In June 2000, Aruba enacted a State Ordinance making it a legal requirement to report both the importation and exportation of currency in excess of 20,000 Aruban guilders (approximately US $11,235). The State decree to implement the law will be introduced in the early part of 2001.

The GOA has prepared a State Ordinance for the Supervision of Trust Companies. The draft ordinance provides for the oversight of thrift companies to ensure that they follow "Know Your Customer" procedures. The draft was submitted to an advisory committee. After the committee completes its review and provides comments, the draft will be returned to the government officials responsible for the law and then submitted to parliament for approval. Aruban officials are striving to enact the Ordinance early in 2001.

All financial institutions report unusual transactions to the Meldpunt Ongebruikelijke Transacties (MOT), Aruba's financial intelligence unit. The MOT is a member of the Egmont Group. A draft law, which would authorize the MOT to share information with foreign counterpart organizations with a Memorandum of Understanding (MOU), is now with the central committee.

Aruba has a small offshore sector compared to more established offshore jurisdictions. Services include finance companies, offshore banks, investment and holding companies and the Aruba Exempt Company (AEC). There are approximately 4700 AECs that are permitted to offer bearer shares. AECs pay an annual registration fee of approximately US $280, and must have a minimum authorized capital of US $6,000. AECs cannot participate in the economy of Aruba, and are exempt from several obligations-they are exempt from all taxes and currency restrictions, and need not file annual financial statements. Trust companies provide a wide range of corporate management and professional services to AECs, including looking after the interests of its shareholders, stockholders, or other creditors. In May 2000, the GOA issued Guidance Notes on sound corporate governance practices.

On August 31, 2000, the United States signed a multilateral agreement, with Aruba, Colombia, Panama and Venezuela, to establish an international task force to fight the money laundering that occurs through the "Black Market Peso Exchange"(BMPE). The BMPE is believed to be the largest money laundering system in the Western Hemisphere, and the primary money laundering method used by Colombian drug cartels. The task force will develop policy options and recommend enforcement actions to detect, prevent and prosecute money laundering by the BPME. The agreement also provides for enhanced information sharing among the signatories. The first task force meeting was held in Aruba on October 21, 2000 and was chaired by the director of the Aruba Free Zone. The next meeting will take place in March 2001.

Aruba, which has autonomous control over its internal affairs, is a part of the Kingdom of the Netherlands and, as such, is a member of the Financial Action Task Force (FATF).

Aruba has signed a Mutual Legal Assistance Treaty (MLAT) with the Unite States. Aruban judicial authorities have maintained an excellent record of cooperation under the MLAT.

Aruba's anti-money laundering legislation largely adheres to the recommendations of FATF and the CFATF. Furthermore, Aruba's efforts this year culminated in their first money laundering prosecution for drug trafficking. The Government of Aruba has shown a commitment to combating money laundering. With continued vigilance Aruba's vulnerability to money laundering should decrease.

Australia (Primary). The Government of Australia (GOA) has in place a balanced, comprehensive system to detect, prevent, and prosecute money laundering. In 1995, a comprehensive money laundering study commissioned by the GOA estimated that each year approximately US $2.8 billion is laundered in or through Australia, or offshore. The major sources of criminal proceeds laundered in Australia are narcotics trafficking and financial fraud.

The Government of Australia (GOA) has enacted comprehensive anti-money laundering legislation that criminalizes money laundering related to serious crimes, and mandates various forms of reporting. Moreover, the legislation provides for assistance to other governments with asset seizure and forfeiture. Three pieces of legislation form the basis of Australia's anti-money laundering regime: the Financial Transaction Reports Act (FTR) of 1988; the Mutual Assistance in Criminal Matters Act (MACMA) of 1987; and the Proceeds of Crime Act (POCA) of 1987.

The FTR was enacted in 1988 to combat tax evasion, money laundering and serious crime. The FTR requires that the following entities report suspicious transactions, cash transactions in excess of Australian $10,000, and international funds transfers to the Australian Transaction Reports and Analysis Center (AUSTRAC), Australia's financial intelligence unit: financial institutions; insurance businesses; securities dealers; trustees; sellers of monetary instruments; bullion dealers; gaming establishments and services; persons who collect, hold, or deliver currency on behalf of others; and persons who prepare payrolls for others in whole or in part from collected currency. AUSTRAC was established under section 35 of the FTR, and was given a regulatory role vis-a-vis Australia's financial services sector. The MACMA allows Australian authorities to assist other countries in identifying, freezing, seizing, and confiscating the proceeds of crime. The POCA criminalized money laundering for all serious crimes, and contains provisions to assist investigations and prosecutions in the form of production orders, search warrants, and monitoring orders.

Australia is a member of the Financial Action Task Force (FATF), the Asia Pacific Group on Money Laundering (APG), the South Pacific Forum, and the Commonwealth Secretariat. AUSTRAC is a member of the Egmont Group. Australia continues to promote the adoption of effective anti-money laundering measures by countries in the Asia/Pacific region, through its funding and hosting of the Secretariat of the Asia/Pacific Group on Money Laundering and by raising the issue of money laundering to a priority concern at the Asia/Pacific Economic Cooperation Forum. In September 1999, a Mutual Legal Assistance Treaty between Australia and the United States entered into force. AUSTRAC and FinCEN have signed a Memorandum of Understanding for the exchange of information. AUSTRAC also has bilateral agreements allowing the exchange of information with the United Kingdom, New Zealand, Belgium, France, Hungary, and Denmark.

Australia is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

Australia continues to have a comprehensive and effective anti-money laundering regime that adheres to the FATF Forty Recommendations. Australia's approach to combat money laundering and its demonstrated ability to adapt to change, serve as a model for other countries to emulate. The GOA should continue to support the APG and provide money laundering training and technical assistance for the Asia/Pacific region.

Austria (Primary). Austria is not a major financial center. Money laundering has been a criminal offense in Austria since 1993. A major risk for money laundering in Austria has been the existence of anonymous bank accounts known as Sparbuch (savings book) accounts. The Financial Action Task Force (FATF) threatened to suspend Austria's membership if Austria did not terminate these accounts by June 15, 2000.

In June 2000, the Government of Austria (GOA) approved legislation, the Banking Act Amendment, that addressed the FATF's concerns. Beginning November 2, 2000, applicants for new passbook accounts must be identified. In addition, if deposits are made to an existing passbook account, the holder must be identified-except for deposit transfers from anonymous securities accounts opened prior to August 1, 1996. After June 30, 2002, if a withdrawal is made from an existing passbook account-and the holder has not previously been identified-the holder must be identified. A June 15, 2000 press release indicates that the FATF will closely monitor Austria's implementation of these measures. The GOA in 1996 abolished anonymous securities accounts. Although new deposits are not allowed, customers can continue to make withdrawals and sales from these accounts without identification until June 2002.

In June 2000, the Ministry of Finance sent a circular to Austrian banks advising them to use special diligence in splitting passbook account balances-except among family members-exceeding one million Austrian schillings (approximately US $68,500). Austrian banks are required to continue exercising this enhanced diligence until anonymous accounts are completely phased out in June 2002.

The GOA imposes customer identification requirements for bank transactions exceeding Austrian shillings 200,000 (approximately US $13,700) for customers without a permanent business relationship with the bank. Bank records must be maintained for a minimum of five years after the business relationship has terminated. Banks, insurers, and foreign exchange bureaus are required to report suspicious transactions. Austria's financial intelligence unit, the Central Department for Combating Organized Crime, receives and analyzes financial disclosures, and is a member of the Egmont Group.

Austria has not enacted domestic legislation that provides for sharing narcotics-related assets with other governments. However, a Mutual Legal Assistance Treaty (MLAT) has been in force since August 1, 1998 between the GOA and the United States, which contains an asset-sharing provision. The GOA has been cooperative with US law enforcement investigations. Austria has a bilateral agreement with Hungary concerning the exchange of information related to money laundering. Austria is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Austria is a member of the FATF and the European Union.

The GOA should continue to develop a comprehensive anti-money laundering regime. By enacting legislation to eliminate anonymous passbook accounts, the GOA has taken an important step toward combating money laundering. The GOA should ensure full implementation of this new law. Continued diligence on the part of the GOA will be instrumental in helping to thwart money laundering in Austria.

Azerbaijan (Other). Azerbaijan's banking system is rudimentary; and its banking laws change frequently. Several banks have been closed as part of a government effort to consolidate the banking sector. Available information suggests that non-bank financial institutions probably are used to launder money related to tax evasion and avoidance of customs fees. The transportation of illegal source currency falls within the purview of the Organized Crime Division of the Ministry of Internal Affairs and the Ministry of National Security. However, these agencies probably are more concerned with stopping the transportation of funds used for anti-state activities such as anti-government propaganda and terrorism than funds generated from narcotics trafficking. Azerbaijan does not have anti-money laundering legislation.

Azerbaijan is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

Bahamas (Primary). The Commonwealth of The Bahamas is an important regional financial center; its well-developed offshore financial center, strong bank secrecy laws, weak regulation of international business companies (IBCs), and inadequate customer identification requirements have made it vulnerable to money laundering and other financial crimes. The offshore financial industry includes trust companies, 413 banks, 580 mutual funds, 30 insurance companies, and approximately 100,000 International Business Companies (IBCs).

In June 2000, the Financial Action Task Force (FATF) identified The Bahamas as "non-cooperative in the fight against money laundering." In its report, FATF stated cited the following concerns:

Although The Bahamas has comprehensive anti-money laundering legislation, there are serious deficiencies in its system. In particular, there is a lack of information about the beneficial ownership as to trusts and IBCs, which are allowed to issue bearer shares. There is also a serious breach in identification rules since certain intermediaries can invoke their professional code of conduct to avoid revealing the identity of their clients. International cooperation has been marked by long delays and restricted responses to requests for assistance and there is no room to cooperate outside of judicial channels.

In July 2000, the US Treasury Department issued an advisory to US financial institutions warning them to give enhanced scrutiny to financial transactions involving The Bahamas, particularly those transactions that do not involve established and adequately identified commercial or investment enterprises.

Under legislation in force prior to December 2000, The Government of the Commonwealth of The Bahamas (GOCB) supervisory officials had to seek a court order to obtain access to customer information held by Bahamian banks and trust companies. Moreover, the failure of Bahamian banks to obtain identifying information about customers limited their effectiveness in recognizing and avoiding money-laundering transactions. Banks were not required to verify the identity of customers whose accounts were opened by Bahamian lawyers and certain other intermediaries. It is unclear whether these entities' legal obligation to report suspicious transactions was preempted by their professional secrecy obligations.

The GCOB has taken significant steps to address the shortcomings in its anti-money laundering regime. In May 2000, the GCOB enacted legislation requiring that individuals declare currency in excess of US $10,000 when entering or leaving the country. Moreover, in December 2000, the GCOB enacted the following legislation and regulations: Proceeds of Crime Act No. 44 of 2000, Dangerous Drugs Act 2000, Criminal Justice (International Co-Operation) Act 2000, Financial Transactions Reporting Act 2000, the Central Bank of the Bahamas Act 2000, Banks and Trust Companies Regulation Act 2000, Financial and Corporate Service Providers Act 2000, International Business Companies (IBC) Act 2000, Financial Intelligence Unit (FIU) Act 2000, Criminal Justice (International Co-operation) Regulations Act of 2000, and Financial Transactions Reporting Regulations of 2000.

The Proceeds of Crime Act 2000, which supersedes the amended Money Laundering (Proceeds of Crime) Act, also expands the number of predicate crimes for money laundering to include drug trafficking, bribery, public corruption, and other serious crimes; expands the definition of the money laundering offence by introducing the concept of "reasonable suspicion," rather than requiring actual knowledge of the nature of the proceeds; and provides immunity from civil liability for disclosure of information to the Supervisory Authority or the Attorney General. In addition, for the first time, the new Proceeds of Crime Act 2000 provides for seizure, detention and forfeiture of the proceeds of crime, including money laundering; establishes penalties for failure to disclose knowledge or suspicion of money laundering; and, authorizes enforcement of domestic and external confiscation orders.

The International Business Companies Act (IBC), 2000, ends anonymous ownership of IBCs. The new legislation requires IBCs to have a registered office and agent in The Bahamas, to hold general meetings at least annually, to maintain a register of officers and directors that is available to the public, and to maintain a share register containing the names and addresses of the beneficial owners of shares, along with other information that is accessible by supervisory authorities. The Act also eliminates bearer shares and requires current owners of bearer shares to convert them to regular shares within a specified time frame. IBCs that fail to comply with these provisions will be struck from the register of companies.

The Financial and Corporate Service Providers Act 2000 regulates lawyers, accountants, and business managers engaged in the registration or management of IBCs.

The Financial Intelligence Unit Act 2000 establishes the GCOB's Financial Intelligence Unit (FIU). The Act gives the FIU authority to compel production-without a court order-of information and documents, and to exchange information with foreign FIUs. The Act also permits the lifting of financial secrecy provisions for inquiries concerning money laundering. Moreover, the FIU-in consultation with financial regulators-will issue specific guidelines to financial institutions for the mandatory reporting of suspicious transactions. The Act also establishes "safe harbor" protection from criminal, civil, and professional sanctions for individuals who provide information to the FIU. The GCOB has consulted with the Caribbean Anti-Money Laundering Programme for guidance in the establishment of an FIU. More recently, the GCOB requested that the United Nations Global Program Against Money Laundering provide it with a list of candidates from which to select a long-term mentor to assist with the development of its FIU. As currently envisioned, the FIU will have a staff of ten. Managerial positions have been filled, and the FIU is expected to become fully operational in 2001.

The Financial Transactions Reporting Act 2000 establishes "know your customer" requirements for banks, trust companies, securities broker-dealers, casinos, real estate brokers, insurance companies, co-operative societies, counsel/attorneys/accountants relative to certain transactions and others. These entities will be required to verify the identities of existing customers within 12 months, and report suspicious transactions to the FIU. The Act also creates a Compliance Commission to ensure the financial sector's compliance with the Act by institutions other than banks and trust companies. In accordance with the Act, in December 2000, the Ministry of Finance issued the Financial Transactions Reporting Regulations 2000. These regulations require institutions to verify the identity of persons conducting transactions of $10,000 or more.

The Banks and Trust Companies Regulation Act 2000 provides for cross-border supervision by banking regulators of foreign banks and trust companies with branches or subsidiaries operating in The Bahamas consistent with the principles established by the Basle Committee. The Central Bank of Bahamas Act 2000 expands the powers of the central bank to respond to requests for information from foreign regulatory authorities. The Act also grants the central bank governor the authority to deny licenses to banks or trusts that are deemed unfit to conduct business in The Bahamas.

The Bahamas is party to the 1988 UN Drug Convention, and is a member of the CFATF and the Offshore Group of Banking Supervisors. The Attorney General has established an International Affairs Unit to deal specifically with mutual legal assistance matters. The Bahamas has a Mutual Legal Assistance Treaty with the United States, which entered into force in 1990.

The GCOB continues to further its anti-money laundering efforts with enactment of new laws, establishment of an FIU, and its stated intention to join the Egmont Group. The GCOB has enacted substantial reforms that could reduce its financial sector's vulnerability to money laundering. The GCOB now needs to focus on fully implementing its new legislation.

Bahrain (Concern). Bahrain is vulnerable to money laundering because it is a regional financial and offshore center. The most common sources of illegal proceeds in Bahrain include narcotics trafficking, fraud, and evasion of international sanctions. Bahrain recently passed legislation that reportedly criminalizes money laundering.

Bahrain has 19 commercial banking institutions-seven locally incorporated and 12 subsidiaries of foreign banks-and has 48 offshore banking units (OBUs). The Bahrain Monetary Authority (BMA) licenses OBUs. The BMA requires that OBUs be audited yearly by outside firms that have been approved by the BMA. OBUs cannot do business with residents of Bahrain-except for agencies of the GOB-and must conduct all transactions in foreign currency. However, OBUs may participate in domestic development projects with the approval of the BMA. OBUs also must be fully staffed, and a majority of the staff must be Bahraini nationals. The books and records of OBUs must be available for examination by the BMA at all times. OBUs are required to submit statistical reports to the BMA twice yearly. OBUs are exempt from taxes and are not subject to restrictions regarding foreign exchange payments or receipts.

Bahrain also permits formation of two forms of international business companies (IBCs): offshore resident companies and offshore non-resident companies. Offshore resident companies must have a principal office in Bahrain and a minimum capitalization of US $54,000. The company must obtain a license from the BMA if it conducts financial activities. Offshore non-resident companies are exempt from the requirement of maintaining an office in Bahrain, and may instead appoint a law or auditing firm in Bahrain as their resident address. Non-resident companies must have a minimum capitalization of US $6,750, but cannot engage in insurance or other financial activities. Registration of an IBC can take as little as seven days, and there are no restrictions on remittances sent abroad.

In January 2001, new legislation went into effect by Amiri decree that reportedly criminalizes money laundering for a number of predicate offenses, requires the reporting of large transactions, provides specific guidelines for accepting transactions, and increases monitoring of banking activity.

Legislation in force prior to the enactment Bahrain's new anti-money laundering legislation obligates financial institutions to report suspicious transactions greater than Bahraini dinars (BD) 10,000 (approximately US $26,000) to the BMA. However, the BMA has not provided guidance to Bahraini banks on how to identify suspicious transactions.

Bahrain is a member of the Gulf Cooperation Council, which represents it before the Financial Action Task Force (FATF). In June 2000, Bahrain underwent a FATF mutual evaluation. Bahrain is a member of the Offshore Group of Banking Supervisors and has agreed to undergo a mutual evaluation by this body. Bahrain is a party to the 1988 UN Drug Convention.

Bahrain should ensure that its offshore sector is subject to adequate supervision.

Bangladesh (Other). Bangladesh is not an important financial center. Money laundering in Bangladesh is primarily related to income tax evasion and the illegal importation of consumer goods. There is no evidence that the proceeds of drug trafficking are laundered in Bangladesh. However, Bangladesh has not criminalized money laundering and banking regulation is weak and sporadic. Corruption among officials is believed to be high.

Bangladesh is a party to the 1988 UN Drug Convention, and is a member of the Asia/Pacific Group on Money Laundering.

Barbados (Concern). The Government of Barbados (GOB) has taken several steps in recent years to strengthen its anti-money laundering regime.

The Money Laundering (Prevention and Control) Act (MLPCA) 1998 criminalizes transactions that involve the proceeds of unlawful activities that are punishable by at least one-year imprisonment. The legislation also authorized creation of the Anti-Money Laundering Authority (AMLA) to supervise financial institutions' compliance with the Act. However, the AMLA was not established until 1 August 2000, and its financial intelligence unit (FIU) was not established until 1 September 2000. The FIU is now fully staffed and operating. The AMLA also may issue training requirements and regulations for financial institutions. Money laundering is punishable in Barbados by a maximum of 25 years in prison and a maximum fine of Barbadian (BB) $2 million, (approximately US $1 million). The law also contains asset seizure and forfeiture provisions.

The MLPCA applies to a wide range of institutions, including domestic and offshore banks, international business companies (IBCs), and insurance companies. These institutions are required to identify their customers, to cooperate with domestic law enforcement investigations, to maintain records of all transactions exceeding BB $10,000, and to report suspicious transactions to the AMLA. The AMLA forwards this information to the Commissioner of Police if it has reasonable grounds to suspect money laundering.

The GOB initially criminalized money laundering in 1990 through the Proceeds of Crime Act, No. 13. This law also authorizes asset confiscation and forfeiture and provides a disclosure protection safe harbor for individuals reporting suspicious activities. In 1997, the central bank issued Anti-Money Laundering Guidelines for Licensed Financial Institutions.

Barbados is an offshore center and offers offshore banking, international trusts, exempt insurance companies, IBCs, and foreign sales corporations (FSCs)-specialized companies that permit persons to engage in foreign trade transactions from within Barbados. Unofficial sources report Barbados has approximately 51 offshore banks, 376 exempt insurance companies, 3,855 IBCs and 2,975 foreign sales corporations.

The Offshore Banking Act (1980) gives the central bank authority to supervise and regulate offshore banks, in addition to Barbados's nine domestic commercial banks. Barbadian, Canadian-parent, and United Kingdom-parent banks operate on equal terms in Barbados. The Ministry of Finance issues licenses after the central bank receives and reviews applications, and recommends applicants for licensing. Offshore banks must submit quarterly statements of assets and liabilities and annual balance sheets to the central bank. Profits from offshore banks are subject to a 2.5 percent tax rate for profits of BB $10 million or less, and not less than 1 percent for profits exceeding BB $10 million.

The International Business Companies Act (1992) provides for general administration of IBCs. The Ministry of International Trade and Business vets and grants licenses to IBCs after applicants register with the Registrar of Corporate Affairs. Barbadian IBC's must pay a 2.5 percent tax on profits up to BB $20 million, with decreasing tax rates on additional profits. Bearer shares are not allowed, and financial statements of IBCs are audited if total assets exceed BB $1 million. Barbados has bilateral tax treaties that eliminate or reduce double taxation with the UK, Canada, Finland, Norway, Sweden, Switzerland, and the United States. Canada's treaty allows IBC and offshore banking profits to be repatriated to Canada tax-free after paying the 2.5 percent tax in Barbados.

In 1996, the United States and Barbados signed a Mutual Legal Assistance Treaty and an extradition treaty. Both treaties were brought into force in 2000 by an exchange of instruments of ratification. Barbados is a member of the Offshore Group of Banking Supervisors, the Caribbean Financial Action Task Force, and the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Barbados is a party to the 1988 UN Drug Convention.

The GOB needs to maintain strict control over vetting and licensing of offshore entities. The establishment of the AMLA should provide Barbados the necessary resources to enforce compliance by financial and commercial sectors, and enable it to fully cooperate with foreign authorities to investigate and prosecute money laundering and other financial crimes.

Belarus (Other). Money laundering does not seem to be a major problem in Belarus. However, Belarus has no anti-money laundering laws, and does not have in place significant laws, regulations, or other procedures to detect it. Banks are more inclined to focus on protecting the secrecy of their clients than on discovering and reporting irregular or unaccounted-for deposits. The growing number of casinos also could become venues for money laundering.

Belarus faces problems with organized crime that plague other countries of the former Soviet Union. The lack of anti-money laundering laws could lead organized crime to engage in more substantial money laundering in Belarus.

Belgium (Concern). Belgium's financial system is vulnerable to money laundering; approximately 60 percent of the suspicious transactions reports filed by Belgian financial institutions are related to drug trafficking. Illicit funds are laundered in Belgium through the diamond industry, real estate, front companies, gambling or amusement halls, currency exchange bureaus, international wire transfers, and banks. Belgium has a comprehensive anti-money laundering regime.

The Government of Belgium (GOB) in 1990 criminalized money laundering related to all crimes, and in 1993, passed additional legislation that mandated reporting of suspicious transactions by financial institutions and created a financial intelligence unit (FIU), Financial Information Processing Center (CTIF-CFI), to analyze them. As of June 2000, the CTIF-CFI had created 8,094 distinct case files since becoming operational in 1993, and 2,020 between July 1999 and June 2000. The CTIF-CFI is member of the Egmont Group.

Belgian financial institutions are required to maintain records on the identities of clients engaged in transactions that are considered suspicious, or that involve an amount equal to or greater than EUR 10,000 (approximately US $9,400). Financial institutions also are required to train their personnel in the detection and handling of suspicious transactions that could be linked to money laundering. No civil, penal, or disciplinary actions can be taken against institutions or individuals for reporting such transactions in good faith.

In 1998 and 1999, the GOB adopted legislation that mandates the reporting of suspicious transactions by notaries, accountants, bailiffs, real estate agents, casinos, cash transporters, external tax consultants, certified accountants, and certified accountant-tax experts. Casinos also are required to report certain other transactions.

The Judicial Police have primary responsibility for investigating money laundering in Belgium. However, the Gendarmerie also can investigate money laundering if the predicate offense is one over which the Gendarmerie has jurisdiction.

Belgium is a member of the Financial Action Task Force (FATF) and the European Union. Belgium is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Belgium has a Mutual Legal Assistance Treaty with the United States, which entered into force on January 1, 2000. The GOB exchanges information with other countries through international treaties and with foreign FIUs that have secrecy obligations similar to those of CTIF/CFI.

Belize (Concern). Belize is vulnerable to money laundering because of its growing offshore sector, which has two banks, an unknown number of international trusts, and over 16,000 international business companies (IBCs). Belize also has one Internet gaming site.

In 2000, the Financial Action Task Force (FATF) conducted a review of Belize's anti-money laundering regime against 25 specified criteria. Belize was not identified by the FATF as a noncooperative country in the international fight against money laundering. However, the FATF in its June report noted the following about Belize's anti-money laundering regime:

Since criminalizing money laundering in 1996, Belize has generally pursued policies in law and regulation aimed at fostering a sound anti-money laundering regime. Belize has, nonetheless, certain deficiencies with regard to IBCs, particularly in the identification of beneficial owners and in ascertaining other information that could prove useful in protecting against criminal abuse of its offshore sector.

The International Business Companies Act of 1990 (Amended 1995) established a licensing system and a regulatory body, the International Financial Services Commission (IFSC), for Belize's offshore sector. The IFSC is comprised primarily of individuals with ties to the offshore industry. IBCs can no longer issue bearer shares, and the Government of Belize (GOB) reportedly is considering ways to abolish or immobilize bearer shares that are already in existence. IBC records are maintained by the Belize International Services Limited, a subsidiary of CHI Corporation, a company traded on the NASDAQ and formerly known as BHI Corporation. Offshore trusts are prevalent in Belize because they do not have to be registered with any regulatory body.

Belize's Offshore Banking Act (OBA), which regulates offshore banks, and the Money Laundering Prevention Act (MLPA) have been in force since 1996. The MLPA criminalizes money laundering related to many serious crimes; mandates reporting of suspicious transactions by banks and non-bank financial institutions; specifies penalties for banks, non-bank financial institutions, and intermediaries who assist and collaborate in money laundering; and authorizes international cooperation in money laundering cases. The OBA and the Financial Institutions Act require financial institutions to report the identities of customers who engage in currency transactions of a large, complex, or unusual nature.

The Ministry of Finance has the authority to examine financial institutions' records. Financial institutions are required to retain records for a minimum of five years, and can lose their licenses and face a maximum fine of US $50,000 for failing to do so. Individual bankers can be held responsible if their institutions are caught laundering money. However, bankers can be protected from prosecution if they cooperate with law enforcement.

In 2000, the GOB reportedly issued the International Financial Services Commission (Licensing) Regulations 2000, which specifies licensing requirements for Belize's offshore financial services providers. Under the regulations, only lawyers, accountants, and companies registered under the Company Act as financial institutions would be eligible for such a license. The GOB has proposed draft legislation, the Customs Regulation Act, which would require individuals to declare cross-border movements of currency that exceed US $5,000.

The GOB has not prosecuted a single money laundering case under the MLPA, and in 2000, made no money laundering arrests. The GOB has an investigative unit within the National Criminal Investigation Branch that works with the central bank on financial cases.

Belize is a party to the 1988 UN Drug Convention. Belize is a member of the Caribbean Financial Action Task Force (CFATF), and the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. In August 2000, the GOB made a ministerial-level commitment to adhere to the minimum performance standards agreed to at the March 2000 UN Global Program Against Money Laundering. The United States and Belize have signed a Mutual Legal Assistance Treaty (MLAT), but it is not yet in force.

The GOB should pass legislation that requires offshore trusts to be registered with a central authority. Moreover, the GOB should take appropriate steps to ensure that its oversight of IBCs is conducted free of undue influence from the industry.

Benin (Other). Benin is not a major financial center. However, Beninese officials believe their country is being used by narcotics traffickers to launder profits. Although the exact nature of money laundering is unknown, Beninese officials suspect that the primary method is through the purchase of assets such as real estate, the wholesale shipment of vehicles or items for resale, and front companies. In addition, some laundering seems to occur through the banking system.

A 1997 anti-narcotics law criminalizes narcotics-related money laundering, and provides penalties of up to 20 years in prison as well as substantial fines. The law requires that all financial institutions report transactions they believe may be narcotics-related; they enjoy safe harbor protection if they do so. Financial institutions that fail to comply are subject to prison terms for their officials and fines. However, the government has not taken any significant steps to address the problem of money laundering not related to narcotics trafficking.

Benin is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

Bermuda (Other). Bermuda has a large offshore financial services sector that may be attractive to money laundering. However, the Government of Bermuda has taken a number of measures to aid in the detection, investigation, and prosecution of financial crimes. As with the other British Caribbean Overseas Territories, Bermuda underwent a thorough evaluation of its financial regulation in 2000, co-sponsored by the local and British governments.

Bermuda's offshore financial sector is dominated by its nearly 1,300 insurance (mainly captive and reinsurance) companies. The sector also has approximately 11,000 "exempt companies" (international business companies). The Bermuda Monetary Authority (BMA) is the main regulator and requires disclosure and vetting of proposed beneficial owners before registering exempt companies.

The Proceeds of Crime Act 1997 criminalizes money laundering related to all "relevant offenses," including drug trafficking, corruption, counterfeiting, and fraud. The Proceeds of Crime (Money Laundering) Regulations 1998 contain a number of obligations for regulated institutions, including customer identification, record keeping, and reporting of suspicious transactions. The government also issued guidance notes in 1998 to assist financial institutions to recognize suspicious transactions and comply with their obligations.

The Financial Investigation Unit (FIU), within the Bermuda Police Service, serves as Bermuda's financial intelligence unit. It receives, analyzes, and investigates suspicious activity report (SARs). Through the end of 1999, the unit had received approximately 2,400 SARs. The FIU is a member of the Egmont Group.

Bermuda is subject to the US/UK MLAT and the US/UK extradition treaty. Bermuda is a member of the Caribbean Financial Action Task Force (CFATF), and through the UK, is also a party to the 1988 UN Drug Convention. Bermuda is also a member of the Offshore Group of Banking Supervisors (OGBS).

Continued supervision and enforcement of regulations in the financial sector are necessary to discourage infiltration by organized crime and money launderers. Bermuda should also consider devoting additional resources toward investigative efforts to combat money laundering to more thoroughly deter international criminals.

Bolivia (Concern). Bolivia is not major financial center, and does not have an offshore sector. However, Bolivia has had a long tradition of banking secrecy that has facilitated money laundering, particularly the profits of contraband smuggling, organized crime, and drug trafficking.

The Government of Bolivia (GOB) criminalized money laundering related to organized criminal activities and public corruption through the 1988 Controlled Substances Law (No. 1008) and Law 1768 of March 1997, which amended Bolivia's Penal Code. Law 1768 also authorized creation of the Financial Investigations Unit (FIU) within the Office of the Superintendent of Banks and Financial Institutions to be responsible for implementing anti-money laundering controls. Decree 24771 of July 1997 requires banks, brokerages, and insurance companies to identify their customers, retain records of transactions for a minimum of 10 years, and report unusual and suspicious financial transactions to the FIU. The FIU has established mechanisms for sharing information with Bolivia's Public Ministry and the Special Counter-Narcotics Force (FELCN). However, personnel shortages within the Public Ministry, law enforcement, and the FIU, as well as the FIU's inability to monitor the activities of certain financial institutions, have hindered full implementation and enforcement of Bolivia's anti-money laundering controls.

The FIU is a member of the Egmont Group. Bolivia is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Bolivia is a member of the Organization of American States Inter-American Commission on Drug Abuse Control (OAS/CICAD) Experts Group to Control Money Laundering, and is a member of the South America Financial Action Task Force (GAFISUD). The GOB and the United States in 1995 signed an extradition treaty, which entered into force in 1996.

The GOB is urged to extend provisions of its anti-money laundering legislation to cover all financial institutions and to ensure that anti-money laundering bodies are sufficiently staffed.

Bosnia and Herzegovina (Other). Bosnia and Herzegovina is neither a financial center nor a money-laundering center. Laundering the proceeds of criminal activity through financial institutions is widespread, although narcotics proceeds tend to be diverted outside Bosnia. Neither US currency nor proceeds of drug sales in the US are significantly involved. Bosnia is a significant consumer of and transit point for a variety of illegal goods traded on the black market and has experienced an alarming increase in alien smuggling, which is conservatively estimated to amount to US $50 million per year. Money laundering has not been criminalized, but is now prohibited in the civil code.

Regulatory supervision of the banking sector is largely vested at the local rather than the federal level through two separate but roughly parallel banking agencies. Although legislation generally reflects the Basle Committee's core principles, including suspicious transaction reporting and due diligence requirements, in practice banking standards do not conform to international norms, as recent bank failures have demonstrated. Some safe harbor protection has now been afforded to banking officials for actions taken in the course of their professional duties. However, Bosnia's laws remain an unwieldy combination of communist-era statutes and internationally imposed reforms. Enforcement is tenuous at best in this cash-based, largely unregulated economy, thereby creating widespread potential for financial crime.

In addition, ambiguous lines of responsibility among investigative and regulatory agencies have aggravated already rampant political interference in investigations and direct intimidation of officials.

Bosnia is a party to the 1988 UN Drug Convention and in December 2000 it signed the UN Convention against Transnational Organized Crime.

Botswana (Other). Botswana is neither a major financial center nor a money-laundering center; it is, however, an offshore financial center. The Government of Botswana has enacted strict legislation against drug production and trafficking, as well as narcotics-related money laundering. The Bank of Botswana has the discretion to provide information on large currency transactions to law enforcement agencies.

Because of concerns that Botswana's status as an offshore financial center could increase its vulnerability to money laundering, regulations reportedly have been drafted that would regulate Botswana's International Financial Services Center (IFSC).

Botswanan officials have expressed interest in obtaining training to combat bank fraud and money laundering.

Botswana is a party to the 1988 UN Drug Convention and is expected to sign the Eastern and Southern Africa Anti-Money Laundering Group's Memorandum of Understanding in 2001.

Brazil (Primary). Money laundering that is related to drug trafficking and white-collar crime continues to occur in Brazil despite the Government of Brazil's (GOB) efforts to introduce regulatory and investigative measures to address the problem. A highly developed financial sector and an increasing problem with local drug consumption and trafficking have made Brazil a money-laundering center. In December 2000, a Brazilian Congressional Investigative Committee (CPI) probing narcotics trafficking released a 1,200-page report that detailed a vast network of drug-related organized crime, corruption, and money laundering. The report implicated over 800 people, including two federal congressmen, former state governors and other officials. The CPI estimates that approximately $50 billion is laundered in Brazil annually.

The GOB has a comprehensive anti-money laundering regulatory regime in place. Law 9613 of March 3, 1998 criminalized money laundering related to drug trafficking and other offenses, and penalizes offenders with a maximum of 16 years in prison. The law expanded the GOB's asset seizure and forfeiture provisions and exempts "good faith" compliance from criminal or civil prosecution.

The law also created the GOB's financial intelligence unit (FIU), the Council for the Control of Financial Activities (COAF), which is housed within the Ministry of Finance. The COAF includes representatives from regulatory and law enforcement agencies-including the central bank and Federal Police-and has a staff of 16 people with plans to expand to 22 in 2001. The COAF regulates those financial sectors not already under the jurisdiction of another supervising entity. In 1999, the COAF issued regulations that addressed real estate, factoring companies, gaming and lotteries, dealers in jewelry and precious metals, bingo, credit cards, commodities trading, and dealers in art and antiques. The regulations require customer identification, record keeping, and reporting of suspicious transactions directly to the COAF. In 2000 the COAF issued regulations slightly amending the bingo, lotteries, and gaming regulations.

As of October 2000, the COAF indicated that it had received, since its inception, 5,208 suspicious transactions reports (STRs), involving approximately 5 million reais (approximately US $2.5 million). Nearly 1000 of these reports were generated from bingo, leading the COAF to speculate that this sector may be experiencing the largest expansion in money-laundering activity. By the end of 2000, the COAF reported that it had received 6,673 STRs, leading to over 130 ongoing investigations and 100 prosecutions.

In 1999, the GOB's other regulatory bodies, the central bank, the Securities Commission (CVM), the Examiner of Private Insurance Companies (SUSEP), and the Office of Supplemental Pension Plans (PC), issued parallel regulations to covered institutions that spell out requirements for customer identification and reporting of suspicious transactions. All of these regulations include a list of guidelines that help institutions identify suspicious transactions. The central bank also established the DECIF (Departamento de Combate a Il?citos Cambiais e Financeiros) to implement anti-money laundering policy, receive suspicious activity reports from financial institutions, and forward information to the COAF. Current bank secrecy provisions, however, protect specific account information, and thus the COAF receives only partial information from the central bank. All other government agencies-except for congressional investigative committees-must get a court order to access detailed bank account and subject information. International requestors may only obtain this information through a letter rogatory. In early January 2001, however, President Fernando Henrique Cardoso signed into law a measure that will give all regulatory bodies direct access to complete banking information without court approval. However, some Brazilian legal scholars and legislators predict that the legislation will face judicial review that is likely to render it unconstitutional.

Regulations issued in 1998 require that individuals transporting more than 10,000 reais (approximately US $5,000) in cash, checks or traveler's checks across the Brazilian border must fill out a customs declaration that is sent to the central bank. Financial institutions remitting more than 10,000 reais (approximately US $5,000) also must make a declaration to the central bank.

In August 2000, Brazil hosted a summit of South American presidents; the agenda of which included signing a memorandum of understanding creating the South American Financial Action Task Force (GAFISUD). In December 2000, Brazil and the other member countries of MERCOSUR signed an agreement outlining cooperation among central banks in money laundering investigations.

The GOB continues to investigate and prosecute large money laundering operations. A joint investigation by the Federal Police, the central bank, the Federal Revenue Office, and the COAF uncovered a network that allegedly laundered 30 billion reais (approximately US $15 billion) between 1998 and 1999. Most of the laundered funds were the proceeds of drug trafficking, and trafficking in weapons and goods. Illicit funds from several Brazilian states were sent primarily to Foz de Igua?u, a city near the border with Paraguay, where the launderers used exchange houses, more than 100 large companies, 300 "laranjas," (individuals who allow their names to be used for a fee), and special non-resident "CC-5" accounts to transfer the money abroad. The Federal Police-who are cooperating with international authorities to track down the funds-have made several arrests and secured over 300 indictments in the case.

The Brazilian press has reported extensively on the investigation of Judge Nicolau dos Santos Neto, who is accused of embezzling 169 million reais (approximately $85 million) in funds earmarked for construction of a city courthouse. Nicolau allegedly used a system of front companies in offshore havens to transfer money and buy property abroad, including the United States. Brazilian authorities have been working with foreign authorities to track down these assets, and thus far, have identified bank accounts in the United States and Switzerland-the latter totaling approximately $4 million-and an apartment in Miami worth approximately $1 million. In December, Judge Nicolau turned himself in to authorities and now awaits trial on charges of embezzlement, corruption, tax evasion, and money laundering.

The COAF has been a member of the Egmont Group since May 1999. In June 2000, Brazil became a full member of FATF. The GOB and the United States signed a bilateral Mutual Legal Assistance Treaty in October 1997. The Brazilian Congress approved this treaty in December 2000, and the treaty will enter into force upon the exchange of instruments of ratification. Brazil is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Brazil is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. The GOB has bilateral information exchange agreements with Belgium, France, Paraguay, Portugal, Paraguay, and Spain.

Although the laundering of proceeds from drug trafficking and other crimes remains a major problem in Brazil, the GOB has taken important regulatory and investigative steps to address the problem. However, the GOB should ensure that all regulatory bodies have appropriate access to financial disclosure information. This would facilitate analysis, coordination, and cooperation among domestic and international authorities in their efforts to investigate and prosecute money laundering and other financial crimes.

British Virgin Islands (Concern). The British Virgin Islands (BVI) is a Caribbean Overseas Territory (COT) of the United Kingdom (UK). The BVI is vulnerable to money laundering because of an offshore sector that is one of the largest in the Caribbean. Financial services and tourism account for approximately 50 percent of the BVI's economy. The BVI's offshore sector offers incorporation and management of offshore companies, and provision of offshore financial and corporate services. The BVI has 13 banks (four of which are commercial), and approximately 1800 mutual funds, 140 captive insurance companies, 900 registered vessels, 90 licensed trust companies, and 360,000 international business companies (IBCs). Approximately 40 percent of the IBCs are resident in Hong Kong.

According to the International Business Companies Act of 1984, BVI-registered IBCs cannot engage in business with BVI residents, provide registered offices or agent facilities for BVI-incorporated companies, or own an interest in real property located in BVI, except for office leases. BVI's 90 registered agents are licensed by the Financial Services Unit (FSU), and are required to complete certification programs. Registered agents must verify the identities of their clients. The process for registering banks, trust companies, and insurers is governed by legislation that requires more detailed documentation such as a business plan and approval of the appropriate supervisor within the Financial Services Inspectorate.

The BVI criminalized drug money laundering through the Drug Trafficking Offences Act, 1987, amended 1990, and the Criminal Justice (International Co-operation) Act, 1993. The Proceeds of Criminal Conduct Act, 1997 expanded predicate offenses for money laundering to all criminal conduct, and created a financial intelligence unit, the Reporting Authority-BVI (RA-BVI), which is a member of the Egmont Group. The Financial Investigations Unit (FIU) is responsible for investigating fraud and money laundering cases, and is comprised of three police officers. Most of its investigations have involved IBCs and other offshore entities.

The Anti-Money Laundering Code of Practice (AMLCP), 1999 establishes procedures to identify and report suspicious transactions. The AMLCP requires covered entities to create a clearly defined reporting chain for employees to follow when reporting suspicious transactions, and to appoint a reporting officer to receive these reports. The reporting officer must conduct an initial inquiry into the suspicious transaction and report it to the authorities if sufficient suspicion remains. Failure to report could result in criminal liability. The FIU reportedly reviews approximately 30 suspicious transaction report (STRs) annually. In 1999, the FIU conducted 278 company inquiries, and in 2000, conducted approximately 1200. None of these queries has resulted in prosecutions. To date, the BVI has prosecuted only one money laundering case.

The Joint Anti-Money Laundering Coordinating Committee (JAMLCC) was established in 1999 to coordinate all the BVI's anti-money laundering initiatives. It is a broad-based, multi-disciplinary body comprised of private and public sector representatives. The JAMLCC has drafted Guidance Notes based on those of the UK and Guernsey.

In 2000, the Financial Action Task Force (FATF) reviewed BVI's anti-money laundering regime against 25 criteria. The FATF did not identify the BVI as a noncooperative jurisdiction in the international fight against money laundering. However, the FATF raised certain issues in its June 2000 report:

The BVI allows certain intermediaries, and individuals, which are subject to the same anti-money laundering standards and supervision as financial institutions, to introduce business to banks and financial institutions on the basis that the introducers themselves verify the identify of the customer. In addition, the BVI allows certain institutions based in certain overseas countries, subject to equivalent anti-money laundering systems, to introduce business, without separately verifying the identity of the customer. The banks and the financial institutions are only required to know the name of the client but not to verify the identity separately. There is concern as to whether such a system is consistent with FATF Recommendations and provides sufficiently rigorous checks on the identity of clients of banks and financial institutions, especially in cases where the introducer is not a financial institution.

The BVI also has a large number of IBCs, the formation of which by intermediaries is subject to fewer identification requirements than applied to the company sector as a whole.

In 2000, the BVI passed the Criminal Justice (International Cooperation) (Amendment) Act, 2000, criminalizing the act of acquiring, using, or possessing drug proceeds, and "tipping off" individuals under investigation. The BVI also has proposed the Code of Conduct (Service Providers) Act (CCSPA) and the Information Assistance (Financial Services) Act (IAFSA). The CCSPA would encourage professionalism, enhance measures to deter criminal activity, promote ethical conduct, and encourage greater self-regulation in the financial sector. The CCSPA also would establish the Council of Service Providers, a body that would regulate the conduct of individuals within the financial services industry. The Council also would formulate policy, procedures, and other measures to regulate the industry, advise the government on legislation and policy matters, and monitor compliance within the industry. The IAFSA would increase the scope of cooperation between BVI's regulators and regulators from other countries.

The BVI is a member of Caribbean Financial Action Task Force (CFATF) and, through the UK, is a party to the 1988 UN Drug Convention. The BVI is subject to the US/UK Mutual Legal Assistance Treaty.

The BVI should fully implement and enforce all provisions of its recently passed legislation. The BVI also is urged to eliminate any legal and regulatory impediments to international cooperation and exchange of information.

Brunei (Other). Brunei is not known to be a money-laundering center. It is however, an offshore financial center. The Government of Brunei has drafted anti-money laundering legislation and has evinced a strong interest in learning about methods to combat money laundering. Although Brunei has asset forfeiture laws they have not yet been applied to narcotics-related cases. Brunei's Narcotics Control Board has taken part in courses offered by ILEA in Bangkok, and recently attended a money-laundering seminar hosted by DEA in Singapore.

Earlier this year, the Sultanate of Brunei brought into effect a series of laws that established the International Financial Center: the International Business Companies Order 2000; the International Banking Order 2000; the Registered Agents and Trustees Licensing Order 2000; the International Trusts Order 2000; and the International Limited Partnerships Order.

This new offshore financial services center will offer banking services, provide for the formation of IBCs, trusts and limited partnerships. Supervisory authority is reportedly vested in a separate unit of the Ministry of Finance-referred to simply as the "Authority." Reports indicate that this entity, however, will combine both regulatory and marketing responsibilities.

Brunei is a party to the 1988 UN Drug Convention. Brunei is an observer jurisdiction to the Asia/Pacific Group on Money Laundering.

Bulgaria (Concern). Bulgaria, particularly its financial system, is vulnerable to money laundering related to narcotics trafficking and financial crimes such as bank and corporate fraud, embezzlement, tax evasion, tax fraud, and the illegal conversion of state-owned property. The proceeds of drug trafficking, contraband smuggling, vehicle theft, alien smuggling, prostitution, and extortion also are laundered in Bulgaria. The source and destination for much of the illicit funds include Eastern Europe, the former Soviet Union, Turkey, and the Middle East. The presence of organized criminal groups and official corruption contribute to Bulgaria's money laundering problem. Small-scale change bureaus also may play a role. The Government of Bulgaria (GOB) has declared the eradication of organized crime, corruption, and money laundering a national priority.

Bulgaria's anti-money laundering legislation, the Law on Measures Against Money Laundering, entered into force in July 1998. Money laundering is criminalized by Articles 253 and 253a of the Bulgarian Criminal Code; the law applies to the proceeds of all serious crimes. Anti-money laundering measures include customer identification and record keeping requirements, suspicious transaction reporting, and internal rules for financial institutions on implementation of an anti-money laundering program. Banks, securities brokers, auditors, accountants, insurance companies, investment companies, and other businesses are subject to these reporting requirements. Bank information can be obtained by law enforcement through a court order and an instruction from the prosecutor general. The money laundering legislation does not apply to casinos, which are an increasingly important mechanism for laundering money in Bulgaria.

The Ministry of Finance's Bureau of Financial Intelligence (BFI) is Bulgaria's financial intelligence unit. Since its establishment, the BFI has suspended 21 suspicious funds transfers to foreign banks, and has opened seven money-laundering investigations.

The GOB is considering legislation that would address forfeiture and seizure of criminal assets, allow indictment of legal persons on money laundering charges, and prohibit funds of dubious or criminal origin from being used in the acquisition of banks and businesses through the privatization process.

Bulgaria is a member of the Council of Europe (COE) and participates in the COE's Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (PC-R-EV). In November 1999, Bulgaria underwent a mutual evaluation by the PC-R-EV, and has been implementing changes to its anti-money laundering regime based on recommendations in the group's report. Bulgaria is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Bulgaria has no bilateral agreements on money laundering.

The GOB is urged to further strengthen its anti-money laundering regime through approval and full implementation of proposed measures that would address seizure and forfeiture of criminal assets; allow indictment of legal persons on money laundering charges; and prohibit funds of dubious or criminal origin from being used in the acquisition of banks and businesses through the privatization process.

Burma (Primary). Burma's economy continues to be vulnerable to drug money laundering because of its under-regulated financial system, weak anti-money laundering regime, and policies that facilitate the funneling of drug money into commercial enterprises and infrastructure investment.

Political and economic constraints on the flow of legitimate capital into Burma have increased the importance of narcotics-derived funds to the Burmese economy. As a result of cease-fire agreements, the Government of Burma (GOB) has encouraged former insurgent groups to invest money into legitimate commercial ventures. This policy has the effect of facilitating the laundering of illegal drug proceeds by some of the former insurgent groups through investments in banks, hotels, and construction companies. Businesses owned by family members of former or present drug traffickers also have invested heavily in infrastructure projects such as roads and port facilities, banks, hotels, casinos, and other real estate development projects.

In 1993, the GOB adopted the Narcotics Drugs and Psychotropic Substances Law. This law criminalizes narcotics-related money laundering and allows for seizure of assets that are derived from the drug trade. The GOB has been slow to implement provisions of this law, and has targeted few, if any, traffickers or their assets. GOB officials admit to having difficulty in implementing provisions related to money laundering because of their lack of expertise in money laundering and financial crimes investigations. The GOB reportedly is drafting new anti-money laundering legislation that would address deficiencies in its present legislation.

Burma does not have a financial intelligence unit, and is not active in international or regional anti-money laundering fora. Burma is an observer jurisdiction to the Asia/Pacific Group on Money Laundering. Burma is a party to the 1988 UN Drug Convention. The GOB has bilateral drug control agreements with India, Bangladesh, Vietnam, Russia, Laos, and the Philippines. It is not known whether these agreements cover cooperation on money laundering issues.

Burma must increase the regulation and oversight of its banking system, and end policies that facilitate the investment of drug money into the legitimate economy. Burma also should step up efforts to enforce existing money laundering legislation by investigating and prosecuting money launderers. Moreover, Burma is urged to pass new legislation that would expand predicate crimes for money laundering and provide additional tools to authorities for the detection and prosecution of money laundering.

Cambodia (Concern). Cambodia is not a major financial center, and does not have an offshore sector. Cambodia is vulnerable to money laundering because it is a transit country for heroin trafficking from the Golden Triangle. Crime, corruption, and money laundering reportedly are on the increase in Cambodia.

Cambodia in 1996 criminalized money laundering related to narcotics trafficking through the Law on Drug Control. The law includes provisions for customer identification, suspicious transaction reporting, and the creation of the Anti-Money Laundering Commission (AMLC) under the Prime Minister's Office. The composition and functions of the AMLC were to be promulgated through a separate decree. The provisions of this law have yet to be fully implemented and enforced.

In December 1999, Cambodia passed legislation, "The Law on Banking and Financial Institutions," that imposed capital and prudential requirements on financial institutions. Capital requirements for commercial banks will increase from US $5 million to US $13.5 million. Commercial banks also must maintain 20 percent of their capital on deposit with the National Bank of Cambodia (NBC) as reserves. The law required the NBC to review all banking licenses within one year. Only four banks-all foreign-owned-have received licenses under the new law. An additional 15 banks will have a one-year grace period to meet licensing requirements.

Money laundering offenses are investigated by the same entities that have jurisdiction over the underlying predicate crimes. However, these entities are not trained to detect, investigate, and prosecute money laundering cases.

Cambodia has assisted neighboring countries with money laundering investigations. Cambodia is not a party to the 1988 UN Drug Convention.

The Government of Cambodia (GOC) should fully implement and enforce its anti-money laundering legislation. Moreover, the GOC should better educate officials and financial institutions about anti-money laundering methods.

Cameroon (Other). Cameroon is not a regional financial center. Although illicit drugs transit Cameroon, there is no information indicating significant money-laundering activity. Cameroon's banking system is supervised by the Bank of Central African States (BEAC), a regional central bank that serves six countries of Central Africa.

In November 2000, Cameroon and the BEAC hosted a conference for BEAC member countries to devise joint structures and legal strategies for fighting money laundering.

Cameroon has not criminalized money laundering.

Cameroon is a party to the 1988 UN Drug Convention, and in December 2000 signed the UN Convention against Transnational Organized Crime.

Canada (Primary). Canada is neither a regional nor an offshore financial center. However, Canada remains vulnerable to money laundering because of its advanced financial services sector and heavy cross-border flow of currency and monetary instruments. Canada has financial institutions that engage in currency transactions involving international narcotics proceeds that include significant amounts of US dollars. Canada's financial institutions have been used to launder the proceeds of Latin American and Asian drug trafficking, and Asian organized crime. As a result of the common border between our two countries, strong and effective anti-money laundering enforcement is essential. The US Government is particularly concerned about the cross-border movements of currency.

The Government of Canada (GOC) continues to strengthen its anti-money laundering regime. In July 2000, the GOC passed the Proceeds of Money Laundering Control Act (PMLCA), which adopted enhancements recommended by the Financial Action Task Force (FATF) in 1999. The full effectiveness of this new legislation will not be known, however, until strong implementing regulations are put into place and enforced.

The PMLCA established the Financial Transaction and Reports Analysis Center (FinTRAC) on July 5, 2000. Under implementing regulations, FinTRAC will collect and analyze suspicious activities reports (SARs) from financial institutions and financial intermediaries, and determine which suspicious transactions merit further investigation. In addition, money service businesses, casinos, lawyers, and accountants handling third-party transactions are required to file SARs. The GOC expects that FinTRAC will be fully operational by mid-2001. The GOC presently is identifying managers and other staff for FinTRAC, and purchasing computer hardware and software. The GOC intends to have FinTRAC recognized by the Egmont Group as a Financial Intelligence Unit (FIU). FinTRAC will have the authority to negotiate and set guidelines for sharing information with foreign counterparts. US law enforcement has expressed concerns that there may be legal impediments restricting FinTRAC's ability to share information. The PMLCA also mandates reporting of cross-border movements of currency or monetary instruments as will be defined in implementing regulations.

Canada is a member of the FATF, and underwent a second FATF mutual evaluation in May 1997. Canada is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Canada also participates in the CFATF as a Cooperating and Supporting Nation. Canada is an observer jurisdiction to the Asia/Pacific Group on Money Laundering (APG). Canada has long-standing agreements with the United States on law enforcement cooperation, including treaties on extradition and mutual legal assistance. Canada is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

The GOC should ensure that the FinTRAC meets Egmont standards for FIUs, especially with regard to sharing information with other FIUs. The GOC also is urged to adopt and fully implement regulations that define cross-border currency reporting requirements.

Cayman Islands (Primary). The Cayman Islands, a United Kingdom (UK) Caribbean Overseas Territory (COT), remains vulnerable to money laundering because of its significant offshore sector that provides a wide range of services such as private banking, brokerage services, mutual funds, various types of trusts as well as company formation and company management. In March 2000, Cayman Islands authorities reported that approximately 570 banks and trust companies, 2,238 mutual funds, and 499 captive insurance companies were licensed in the Cayman Islands.

In addition, approximately 45,000 offshore companies are registered in the Cayman Islands.

In June 2000, the Financial Action Task Force (FATF) identified the Cayman Islands as non-cooperative in international efforts to fight money laundering. The FATF in its report cited several concerns:

The Cayman Islands does not have any legal requirements for customer identification and record keeping. Even if in the absence of a mandatory requirement, financial institutions were to identify their customers, supervisory authorities cannot, as a matter of law, readily access information regarding the identity of customers. Moreover, the supervisory authority places too much reliance on home country supervisors' assessment of management of bank branches.

Although the Cayman Islands has criminalized the laundering of the proceeds of all serious crimes and its system encourages reporting of suspicious transactions (by providing a safe harbor from criminal liability for those who report), it lacks a mandatory regime for the reporting of suspicious transactions. Moreover, a large class of management companies-including those providing nominee shareholders for the purpose of formation of a company or holding the issued capital of a company-is unregulated.

At the same time, the Cayman Islands has been a leader in developing anti-money laundering programs throughout the Caribbean region. It has served as president of CFATF, and it has provided substantial assistance to neighboring states in the region. It has demonstrated co-operation on criminal law enforcement matters, and uncovered several serious cases of fraud and money laundering otherwise unknown to authorities in FATF member states. In addition, it has closed several financial institutions on the basis of concerns about money laundering.

In July 2000, the US Treasury Department issued an advisory to US financial institutions warning them to pay special attention to give "enhanced scrutiny for certain transactions or banking relationships" involving the Cayman Islands.

In 1999, the Cayman Islands and the other UK COTs agreed to undergo a comprehensive review of their financial regulation, and implement recommended changes. The results of this review were published in October 2000 and indicate that although the Cayman Islands has made progress, its current regulatory structure was still not fully in accordance with international standards. The primary recommendations of the report were:

* Full operational independence for the Cayman Islands Monetary Authority.

* Improved supervision of the Cayman Islands Stock Exchange.

* Increased on-site visits by banking regulators.

* Improved supervisory process of company service and trust service providers.

* Strengthened regulation of partnerships.

* Improved international cooperation.

* Enhancements to the Misuse of Drugs Law.

* A review of the Code of Practice to ensure that it takes account of the Money Laundering Regulations 2000.

The report also stressed the importance of addressing bearer shares, and noted that the Cayman Islands in 2001 plans to introduce legislation that would immobilize bearer shares. The report lauded the Cayman Islands' efforts to date in strengthening its anti-money laundering regime.

In 2000, the Cayman Islands approved regulations and legislation that were intended to address deficiencies in it anti-money laundering regime. Regulations that entered into force in September 2000 specified record keeping and customer identification requirements for financial institutions. The regulations specifically cover individuals who establish a new business relationship, engage in a one-time transaction over Cayman Islands (CI) $15,000, or may be engaging in money laundering. The customer identification requirements do not apply to existing accounts with financial intermediaries.

Amendments to the Proceeds of Criminal Conduct Law (PCCL) make failure to report a suspicious transaction a criminal offense that could result in fines or imprisonment. The law does not specify a time frame in which suspicious transaction reports must be made, but instead, states that the transaction should be reported within a "reasonably practicable" timeframe once it comes to the person's attention.

Amendments to the Monetary Authority Law (MAL) grant the Cayman Islands Monetary Authority (CIMA) the power to obtain information from a person regulated under the laws of the Cayman Islands, a connected person, or a person reasonably believed to have information relevant to an inquiry by CIMA. The amendment includes provisions for identification of account holders and beneficial owners. However, CIMA can only obtain information about the identity of a client through a court order, which hinders CIMA's ability to detect, investigate, and take action against money laundering and the underlying offense. Further amendments to the MAL grant CIMA the authority to assist certain overseas regulators by sharing information in its files and obtaining client and other information from regulated and unregulated persons. CIMA's assistance is limited to overseas regulatory authorities that have the same functions as CIMA or those authorities "as may be specified in regulations" that have yet to be promulgated.

Also in 2000, the Cayman Islands passed the Banks and Trust Companies (Amendment) (Access to Information) Law, 2000, and the Companies Management (Amendment) (Access to Information) Law, 2000.

The Cayman Islands published a non-binding money laundering Code of Practice pursuant to Section 20 of the Proceeds of Criminal Conduct Law (1999 Revision) to coincide with its hosting of the UN Offshore Plenary Forum of International Money Laundering. The Code of Practice is intended to give Cayman Islands financial service providers guidance about preventing and detecting money laundering. The code outlines procedures for identifying clients, training staff, documenting evidence, and maintaining records consistent with international standards. However, the Code does not create a legal obligation; therefore, failure to comply with its provisions does not constitute a legal offense.

The Cayman Islands cooperates with US law enforcement in money laundering cases. In 1999, the Cayman Islands did not prosecute anyone for money laundering; however, it did arrest several individuals on suspicion of money laundering.

The Cayman Islands, through the UK, is a party to the 1988 UN Drug Convention. The Cayman Islands is a member of the Caribbean Financial Action Task Force (CFATF) and the Offshore Group of Banking Supervisors (OGBS). In addition, there is a 1986 US-UK Mutual Legal Assistance Treaty (MLAT) covering the Cayman Islands.

The Cayman Islands has made progress toward strengthening its anti-money laundering regime, and is urged to fully address all deficiencies that have been identified in its anti-money laundering regime. In particular, the Cayman Islands should follow through on its stated plans to immobilize bearer shares.

Chile (Concern). Chile has a well-developed financial sector, but is not considered a major regional financial center. Chile does not have an offshore sector. Chile continues to be vulnerable to money laundering because it lacks key legal provisions that aid in the prevention and detection of money laundering. According to press reports in April 2000, a Chilean Senate Finance Committee estimated that approximately US $10 billion is laundered annually through Chile. Money launderers reportedly exploit Chilean banks, commodities brokerages, and currency exchange businesses. Moreover, large real estate projects and casinos also are vulnerable to money laundering.

In 1995, Chile criminalized money laundering related to narcotics trafficking through the Counternarcotics Law. The law allows banks to voluntarily report suspicious or unusual financial transactions. However, the legislation has no "safe harbor" provisions that protect banks from potential civil or criminal liability. As a result, reporting of such transactions has been extremely low. Moreover, the legislation does not require reporting of large currency transactions. In December 1999, the Government of Chile (GOC) proposed legislation that would amend the Counternarcotics Law by mandating reporting of suspicious financial transactions, and creating a new financial intelligence unit to replace the existing FIU. However, the proposed legislation would not expand predicate crimes for money laundering. The Chilean Congress has not approved the legislation.

Chile's Judicial Reform Law of 1997 gives both the Council for the Defence of the State (CDE) and the Public Ministry responsibility for investigating money laundering cases. This joint arrangement will continue for at least two years. The pending amendments to the Counternarcotics Law would give the Public Ministry sole responsibility for implementing the new law when it is promulgated.

Chile is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Chile is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and the newly created South American Financial Action Task Force (GAFISUD). Chile's current financial intelligence unit, the Departmento de Control de Trafico Ilicito de Estupefacientes, is a member of the Egmont Group.

In August 2000, Chile and the United States signed an agreement for cooperation and mutual assistance in narcotics-related matters. Chile has similar agreements in force with the United Kingdom, Spain, and the Czech Republic. Bilateral agreement negotiations are underway with France, Germany, Russia, Poland, Romania, Ukraine, Turkey, Tunisia, Guatemala, and Honduras.

The GOC is urged to pass anti-money laundering legislation that would mandate reporting of both suspicious and large currency transactions by financial institutions, provide "safe harbor" protections to entities that report such transactions, and expand predicate offenses for money laundering to include all serious crimes. Moreover, the COG should ensure that its FIU has the authority and resources necessary to make it an effective force against money laundering, and that it can readily share information with international counterparts.

China, People's Republic of (Primary). In response to the growing threat of money laundering, the People's Republic of China (PRC) has begun to focus greater attention on improving the country's anti-money laundering regime. The State Council (Cabinet) has directed various government agencies to examine their current anti-money laundering measures and to draft new regulations for the commercial banking, regulatory, and enforcement sectors. The government views an enhanced anti-money laundering regime as a means to stem the rise in financial crime and corruption. Narcotics trafficking, smuggling, extortion, alien smuggling, and the counterfeiting of currency and goods remain major sources of illegal proceeds in the PRC. Foreign and domestic organized criminal activity, endemic corruption at the provincial and local levels, and the continued presence of anonymous bank accounts contribute to the PRC's money-laundering problem.

The PRC's efforts to address money laundering began in 1990, when the National People's Congress (NPC) adopted the country's first law criminalizing narcotics-related money laundering and allowed the confiscation of narcotics proceeds. In 1997, the NPC adopted the PRC's current Criminal Code, Article 191, which makes it a crime to launder the proceeds of narcotics trafficking, organized criminal activity, and smuggling. Efforts are underway to draft amendments to the Code that would expand the definition of predicate offenses for money laundering to include the proceeds of all criminal activity. In addition to Article 191, Article 312 of the Criminal Code criminalizes complicity in concealing the proceeds of criminal activity.

As in many civil law-based countries, the PRC charges each offense separately, and defendants who have laundered the proceeds of a predicate crime usually are prosecuted for the predicate offense rather than money laundering because the predicate offense generally carries a heavier penalty and is easier to prove. The sentences handed down by tribunals in 2000 illustrate the severity of punishment. Several dozen senior officials at both the national and provincial levels were sentenced to death for corruption and smuggling.

The PRC took additional steps in 2000 to combat money laundering. In April 2000, the PRC passed a statute that requires anyone opening a new bank account to do so in his or her true name. When opening or depositing money into a new account, the customer must produce an identification card to verify his or her identity. Existing anonymous accounts may remain open for five years from the time of the account's establishment. After five years, the account holder must re-register the account in his or her true name only. Anonymous accounts will be phased out in 2005.

The People's Bank of China (PBOC)--China's central bank--has issued internal regulations that require currency transaction reports for all transactions involving Renminbi (RMB) 50,000 (US $6,000) or more. The PBOC also has issued rules concerning the recording and reporting of currency transactions at the county level, as well as a circular to Chinese banks regarding the reporting of suspicious transactions. Withdrawals of RMB 200,000 (US $24,000), deposits of RMB one million (US $120,000), or a series of aggregate transactions totaling RMB one million must be reported to the PBOC. At the county level, withdrawals of RMB 50,000 (US $6,000) require picture identification. However, central bank supervisors do not verify compliance with these rules.

In addition, the PRC has foreign currency exchange controls. Commercial banks require PRC citizens to justify the exchange of RMB into a foreign currency. The maximum amount of foreign currency that a PRC citizen may take out of the PRC is US $2,000. For foreigners, the threshold is US $5,000. Requests for exchanges of currency above these thresholds require advance certification through documentation of the need for the foreign currency, such as for foreign travel or commerce.

The United States and the PRC continue to discuss cooperation on money laundering and other law enforcement topics under the auspices of the US-PRC Joint Liaison Group (JLG) on law enforcement cooperation. The last JLG meeting took place in June 2000 in Beijing. In 2000, US enforcement and regulatory agencies hosted several law enforcement delegations from China to discuss money laundering and financial crimes. In addition, the US Departments of Treasury and Justice conducted various training seminars in the PRC featuring the enforcement and prosecutorial aspects of money laundering.

In October 2000, an interagency US Government team visited the PRC to assess the need for training to help PRC authorities combat money laundering. The team will make recommendations on future training.

The United States and the PRC in June 2000 signed a Mutual Legal Assistance Agreement (MLAA), which contains general obligations to cooperate in criminal matters. The agreement is not yet in force. The PRC is a party to the 1988 UN Drug Convention, and in December 2000, signed the United Nations Convention against Transnational Organized Crime. The PRC is a member of the Asia/Pacific Group on Money Laundering.

As the PRC examines ways to enhance its anti-money laundering regime, consideration should be given to criminalizing money laundering for all serious crimes, and abolishing anonymous accounts prior to 2005. The PRC also should adopt comprehensive anti-money laundering legislation that establishes appropriate mechanisms for prevention, detection, and enforcement.

Colombia (Primary). Colombia has financial institutions that engage in currency transactions involving international narcotics proceeds that include significant amounts of US dollars. As the world's largest production and distribution source for cocaine and a significant supplier of heroin to the United States, Colombia has a natural vulnerability to drug money laundering. Pervasive commercial smuggling for tax and import duty avoidance, arms trafficking related to violent paramilitary groups and guerrilla organizations, along with continued capital flight from Colombia's fragile economy, are among additional factors that exacerbate the money laundering threat in Colombia. Trade-based money laundering, such as the Black Market Peso Exchange (BMPE), through which money launderers furnish narcotics-generated dollars in the United States to commercial smugglers, travel agents, investors and others in exchange for Colombian Pesos in Colombia, is a prominent method for laundering narcotics proceeds. Colombia also appears to be a significant destination and transit location for bulk shipment of narcotics-related United States currency, while the use of wire remitters and transactions involving precious metals and stones are believed to play significant roles in drug money laundering through Colombia. Smart cards and other financial sector technology represent growing challenges to money laundering enforcement in Colombia.

Although important reforms are needed to enhance law enforcement efforts, Colombia has significant legal authority to combat money laundering. Colombia has criminalized the laundering of the proceeds of extortion, illicit enrichment, rebellion, and drug trafficking. Colombia's 1996 extinction of domain forfeiture legislation provides for criminal forfeiture of drug money laundering proceeds, in rem forfeiture when assets are held in the name of a nominee or have been transferred, and forfeiture of substitute assets. Originally created by executive decree in 1998, Colombia formally adopted legislation in 1999 to establish a unified central Financial Information and Analysis Unit (UIAF) within the Ministry of Finance and Public Credit with broad authority to access and analyze financial information from public and private entities in Colombia. Additional forfeiture authority in criminal prosecutions is more generally available elsewhere in the Colombian criminal code.

In addition, the Superintendency of Banks has instituted "know your customer" regulations for the entities it regulates, including banks, insurance companies, trust companies, insurance agents and brokers, and leasing companies. Among other things, the Superintendency of Banks also has authority to rescind licenses for wire remitters. As a result of regulations issued in 2000, the Superintendency of Securities, which oversees Colombia's three stock exchanges, also will soon begin instituting anti-money laundering compliance procedures. However, the Colombian central bank's new External Resolution No. 8 issued in May 2000 relaxed certain requirements on individuals conducting currency exchange services, enabling them simply to identify this service when registering their business but eliminating the need for them to become fully licensed. Financial institutions and wire remitters are required to file suspicious activity reports, while currency transactions and cross-border movements of currency in excess of US $10,000 must also be reported. In addition, casas de cambio must file currency reports for transactions involving US $700 or more, while wire remitters must pay withdrawals over US $3000 by check.

The Prosecutor General's office established a specialized task force unit of agents and prosecutors to investigate and prosecute money laundering cases and forfeiture actions under the 1996 Extinction of Domain statute. Recent reductions in the rate of turnover among members of the unit may bring some stability to the office and increase its effectiveness. Including convictions under prior offenses of criminal reception and illicit enrichment, this unit has obtained criminal sentences in 33 money laundering related cases and has more than 200 active cases pending. Colombian authorities have seized more than 10,000 properties in more than 250 forfeiture actions, although Colombia has obtained forfeiture judgments in just twelve cases.

The UIAF receives an average of 500 suspicious activity reports (SARs) per month, totaling nearly 15,000 received since December of 1998. However, only thirteen of these SARs have been forwarded to the Prosecutor General's office for enforcement and only a handful of those forwarded have been accepted for further investigation or prosecution.

Colombia played a significant role in multilateral efforts to combat money laundering in 2000. In December, Colombia was the host of the inaugural meeting of GAFISUD, a South American regional anti-money laundering organization modeled after the Financial Action Task Force. Colombia also participated in a multilateral initiative with the Governments of the United States, Venezuela, Panama, and Aruba designed to address the problem of trade-based money laundering through the BMPE among the participating countries. In addition, in 2000 Colombia's UIAF became a new member of the Egmont Group.

During 2000, the United States and Colombia have continued to expand bilateral cooperation against money laundering. Among the eleven Colombian citizens extradited to the United States in 2000 were two wanted on money laundering charges. An additional seven persons indicted on money laundering charges were provisionally arrested in Colombia pursuant to United States requests for extradition. Colombia has also provided important continuing assistance to United States civil forfeiture actions against accounts in Colombia restrained in 1998 and 1999 in response to United States formal requests for assistance in Operations Juno and Casablanca. Colombia's Tax and Customs Directorate (DIAN) also provided valuable case-related assistance and training to United States prosecutors and agents in 2000.

In 2000, Colombia adopted a new criminal and criminal procedure code. These measures expand money laundering predicates to include conspiracy and corruption. However, this legislation, which does not come into effect until June of 2001, is under constitutional challenge. Additional legislation still pending would permit the disclosure of tax information to law enforcement for criminal investigation purposes.

The United States' July, 2000 appropriations in support of Plan Colombia are anticipated to provide meaningful assistance for money laundering and forfeiture prosecutions in 2001. These funds are expected to provide significant training and equipment investments for the Office of the Prosecutor General, the UIAF, the asset management program of the National Drug Directorate (DNE), and DIAN, among other things.

Colombia is a party to the 1988 UN Drug Convention and in December 2000 signed the UN Convention against Transnational Organized Crime. Colombia is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. The United States and Colombia have signed a Mutual Legal Assistance Treaty but it is not yet in force.

Colombia has established a comprehensive legal and regulatory program and has demonstrated an international commitment to combat money laundering. The Government of Colombia (GOC) should ensure that judges and prosecutors are adequately trained in order to fully enforce Colombia's anti-money laundering laws. The GOC also is urged to improve coordination among its law enforcement agencies by clarifying ambiguous lines of authority with respect to the sharing of information. The GOC should also undertake measures to improve its ability to successfully prosecute the predicate offenses for money laundering.

Cook Islands (Concern). The Cook Islands is a self-governing group of islands in the South Pacific that maintains a free association with New Zealand. Cook Islanders are citizens of New Zealand and are part of the British Commonwealth. The Cook Islands is vulnerable to money laundering because of an offshore sector that offers banking, insurance, international trusts, and formation of international companies, (the equivalent of international business companies, IBCs ). Marketers of offshore services on the Internet promote the Cook Islands as a favored jurisdiction for establishing asset protection trusts.

The International Companies Act of 1981 (amended 1982) allows formation of IBCs. It permits issuance of bearer shares, marketing of shelf companies, and prohibits public access to registers of corporate directors or managers or the disclosure of beneficial owners. This legislation is substantially similar to legislation that was enacted by Samoa and is based on a British Commonwealth and South Pacific Forum model. A corporation must grant prior approval before its records in the Companies Office Registry can be examined. Corporate entities may be listed as officers and shareholders of companies-except for companies engaged in banking and insurance, unless specifically licensed to do so-because corporations have the legal powers of a natural person. Corporate directors are not required to be residents. However, companies must maintain in the Cook Islands a registered office and company secretary. Companies must file annual returns, but are not required to have their accounts audited.

In June 2000, the Financial Action Task Force (FATF) listed the Cook Islands as a non-cooperative jurisdiction in the international fight against money laundering. FATF in its report noted:

In particular, the government has no relevant information on approximately 1,200 international companies that it has registered. The country has also licensed seven offshore banks that can take deposits from the public but are not required to identify customers and keep their records. Its excessive secrecy provisions guard against the disclosure of relevant information on those international companies as well as bank records.

During the FATF review process, the government expressed its intention to propose to the Parliament, before October 2000, two bills which would criminalize money laundering and establish a suspicious transaction reporting system with a financial intelligence unit (FIU). However, the authorities indicated that those bills would not likely introduce a customer identification requirement, nor would they relax the excessive secrecy provisions.

Following the FATF non-cooperative countries and territories exercise, the US Treasury Department issued an advisory to US financial institutions advising them to "give enhanced scrutiny" to all financial transactions involving the Cook Islands.

In August 2000, the Government of the Cook Islands (GOCI) passed legislation, the Money Laundering Prevention Act 2000 (MLPA), that criminalizes all money laundering; creates an FIU; mandates the reporting of suspicious transactions by financial institutions; and defines records retention and customer identification requirements for financial institutions. Money laundering is defined by the Act as engaging directly or indirectly in a transaction that involves the proceeds of crime; or receiving proceeds of a crime, including property that may be co-mingled with the proceeds of crime. Penalties for money laundering include a maximum fine of New Zealand $20,000 (approximately US $8,600) and maximum prison sentence of five years.

The MLPA imposes certain reporting obligations on financial institutions such as banks, offshore banking businesses, offshore insurance businesses, casinos, and gambling services. Financial institutions are required to report transactions if there is reasonable cause to suspect that the transaction involves the proceeds of a crime. Financial institutions are required to maintain for a minimum of five years all records that are related to the opening of accounts, and business transactions that exceed NZ $30,000 (approximately US $12,900). The records must include sufficient documentary evidence to prove the identity of the customer. Financial institutions are required to develop procedures to audit their compliance with these provisions.

The MLPA establishes a Money Laundering Authority (MLA) that is comprised of the financial secretary, the commissioner for offshore financial services, and the commissioner of the police. The MLA currently constitutes the financial intelligence unit. The MLA receives suspicious transactions reports; sends reports to the solicitor general when money laundering is suspected; instructs financial institutions to cooperate with investigations; compiles statistics and records for use by domestic and international regulatory and law enforcement; issues guidelines to financial institutions; and creates and provides to financial institutions training on record keeping and reporting requirements. The MLPA also requires that individuals declare cross-border movements of currency or negotiable securities greater than the equivalent of NZ $10,000 (approximately US $4,300) to a police, customs, or immigration officer. Failure to declare cross-border movements of currency or negotiable instruments can result in a maximum fine of NZ $1,000 (approximately US $430) and a maximum prison sentence of one year.

The Cooks Islands has also drafted regulations (The Money Laundering Prevention Regulations 2000) which specify the documentation required for satisfactory customer identification, details to be included in suspicious transaction reports (STRs) and time lines for filing STRs. These had yet to come into legal effect by year's end.

The Offshore Industry (Criminal Provisions) Act 1995-96 requires officers and employees of the Cook Islands' six trustee companies to report to the Cook Islands Commissioner for Offshore Financial Services (COFS) suspicious activities related to narcotics trafficking or transactions where there is actual knowledge that a serious crime has been committed. Trustee companies must provide information to the COFS to substantiate their suspicions. The COFS can petition the High Court to rescind the license of or strike from the corporate register offshore entities found to be involved in such crimes. Moreover, the High Court also may dispose of the assets of the business entity.

The MLPA authorizes the MLA to cooperate with foreign governments that have entered into bilateral or multilateral mutual assistance arrangements with the GOCI. However, Section 21 of the MLPA makes provision for ad hoc requests, granting the Minister of Finance the power to approve cooperation with a foreign government without an agreement in place. Money laundering is an extraditable offense.

The Cook Islands is an observer jurisdiction to the Asia/Pacific Group on Money Laundering. The Cook Islands is not a party to the 1988 UN Drug Convention.

The GOCI should fully implement and enforce the provisions of the recently passed MLPA. Moreover, the GOCI should eliminate excessive bank and corporate secrecy provisions, and expand oversight of the offshore sector.

Costa Rica (Concern). Costa Rica is vulnerable to money laundering because of increased drug trafficking in the region and a lack of stringent regulatory and supervisory controls for its offshore sector. Anecdotal information suggests that Costa Rica's financial institutions, currency-exchange businesses, casinos, and real estate market have been used to launder money.

Costa Rica's domestic banking sector is comprised of approximately 25 banks, 15 finance companies, and 27 savings and loan institutions, and is supervised by the General Superintendent of Financial Entities (SUGEF). Low taxes and strong secrecy laws have created in recent years a growing offshore sector that offers banking services, and corporate and trust formation. The central bank must approve applications for offshore banks. Costa Rica has approximately 20 foreign financial institutions and 24 offshore branches of domestic financial institutions. Foreign banks must adhere to regulations established by their parent banks, but are not subject to effective local supervision. Foreign offshore banks are required only to provide monthly balance statements and year-end audited statements to the SUGEF. Nonresidents can hold US dollar bank accounts. Although Costa Rica does not allow bearer shares, secrecy provisions can prevent access to ownership information of corporations. Trusts also can be shareholders of corporations. This arrangement provides tax advantages and additional secrecy.

Costa Rica's telecommunications system, lax regulatory regime, and an abundance of English speakers have made it a haven for Internet gaming companies. The number of Internet gaming licenses issued by Costa Rica has increased from three to 70 in the span of three years.

Law No. 7786 on Narcotics and Psychotropic Substances of May 1998 reformed a previous drug law and criminalized money laundering related to drug trafficking. Drug money laundering is punishable by eight to 20 years in prison. However, Costa Rica has not successfully prosecuted anyone under its current anti-money laundering laws.

Costa Rican law also obligates all financial institutions to identify their clients, record and report currency transactions that exceed US $10,000 to regulators, report suspicious transactions, and maintain records for a minimum of five years. Covered financial institutions include those supervised by SUGEF, the General Superintendent of Securities, and the Superintendent of Pensions, money exchangers and remitters, and dealers in traveler's checks and money orders. Other businesses such as dealers in jewelry and consumer goods, casinos, and credit card companies must report cash transactions that exceed US $10,000 to the Joint Counternarcotics Intelligence Center (CICAD). These businesses also must report suspicious transactions. Individuals are required to report cross-border movements of currency that exceed US $10,000. The law exempts good faith compliance from criminal, civil, or administrative liability.

The law also created the Unidad de Analisis Financiero (UAF), Costa Rica's financial intelligence unit, to receive and analyze suspicious financial transaction reports and investigate cases of money laundering. Financial institutions are required to report suspicious financial transactions to SUGEF, which forwards disclosures to the UAF. In June 1999, the UAF joined the Egmont Group. The UAF exchanges information with its counterparts.

Costa Rica's Legislative Assembly is considering legislation that would extend the predicate offenses for money laundering beyond drug trafficking.

Costa Rica is a member of the Caribbean Financial Action Task Force (CFATF), and the Organization of American States Inter-American Drug Abuste Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Costa Rica is a party to the 1988 UN Drug Convention. An extradition treaty is in force between the United States and Costa Rica. US law enforcement agencies work effectively with Costa Rican public security forces in counternarcotics and money laundering investigations.

The growth of Costa Rica's offshore sector-especially the rapid expansion of Internet gaming operations-and the absence of an effective regulatory and supervisory regime for it are causes for concern. The Government of Costa Rica (GOCR) should increase the resources necessary to implement its current anti-money laundering legislation. The GOCR also should increase its oversight of non-bank financial institutions. Moreover, the GOCR is urged to pass comprehensive anti-money laundering legislation that would expand the predicate offenses for money laundering to include all serious crimes. These measures would help Costa Rica protect its financial and offshore sectors from being abused by money launderers and other international criminals.

C?te d'Ivoire (Other). C?te d'Ivoire is an important regional financial center in West Africa. To the extent money laundering occurs, a significant portion relates to the proceeds of trafficking in narcotics, particularly heroin and cocaine. Money laundering is concentrated in the banking system and is controlled by organizations other than local traffickers.

Financial fraud is mostly limited to Nigerian-operated scams aimed at foreigners. Endemic smuggling of contraband does not generate funds sufficiently large enough to require laundering. C?te d'Ivoire is not an offshore financial center.

Laundering of money related to any criminal activity is a criminal offense. Banks are required to maintain records of large currency transactions and to report this data to the government. Banks are required to maintain the records necessary to reconstruct significant transactions through financial institutions. The government requires financial institutions to report suspicious transactions. Bankers' protection under the law is contingent on their cooperation with law enforcement entities. Money laundering controls are not applied to non-banking institutions.

C?te d'Ivoire has not addressed the problem of international transportation of illegal-source currency and monetary instruments although there are controls on the amount of currency that can be brought in and taken out. There were no arrests or prosecutions reported for money laundering in 2000.

Cote d'Ivoire's asset seizure and forfeiture law applies to both mobile and immobile property, including bank accounts and businesses used as conduits for money laundering. The Ivoirian Government is the designated recipient of any narcotics-related asset seizures and forfeitures. It is not known whether legal loopholes exist to permit traffickers and others to shield assets. The law does not allow for civil forfeiture or for the sharing of assets with other governments. No recent changes have been made to the law and no new legislation is being considered.

C?te d'Ivoire does not take part in any international anti-money laundering fora. It is a party to the 1988 UN Drug Convention.

Croatia (Other). Croatia is not a regional financial or money laundering center. Much of the money laundering that does occur is related to financial crimes such as tax evasion and business-related fraud. The proceeds of narcotics trafficking tend to be laundered through the purchase of real estate, luxury goods, and automobiles.

In 1997, Croatia criminalized money laundering related to serious crimes. The legislation established reporting requirements for banks and non-bank financial institutions for transactions that exceed US $17,500. It also authorized establishment of a financial intelligence unit (FIU) within the Ministry of Finance. Croatia's FIU is a member of the Egmont Group. In 2000, Croatia's Parliament strengthened the country's penal code to ensure that all those indicted can be charged with the money laundering offense where applicable. Prior to this change, a person could not be charged with money laundering if the predicate offense carried a maximum penalty of fewer than five years in prison. The Government of Croatia (GOC) plans to introduce legislation in 2001 that will require banks to transmit data to supervising agencies electronically instead of by mail. The GOC also plans to establish a National Center for the Prevention of Corruption and Organized Crime within the State Prosecutor's Office.

Croatia does not have limitations on providing and exchanging information with international law enforcement on money laundering investigations. Croatia's anti-money laundering efforts are hindered by weak enforcement and a lack of adherence to the law.

Croatia is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

Cuba (Other). Cuba is not an important regional financial center. The Government of Cuba (GOC) controls all financial institutions, and the Cuban peso is not a freely convertible currency. The GOC has not prosecuted any money-laundering cases since the National Assembly passed legislation in 1999 that criminalized money laundering related to trafficking in drugs, arms, or persons. The Cuban central bank has issued regulations that encourage banks to identify their customers, investigate unusual transactions, and identify the source of funds for large transactions. Cuba also has cross-border currency reporting requirements. Cuba has solicited anti-money laundering training assistance from the United Kingdom, Canada, France, and Spain.

Cuba is a party to the 1988 UN Drug Convention, and in December 2000 signed the UN Convention against Transnational Organized Crime.

Cyprus (Primary). Cyprus is a major regional financial center, and as such remains vulnerable to international money laundering activities. Russian organized crime, fraud, burglary and theft, are the major sources of illicit proceeds that are laundered in Cyprus. Credit card and bank card fraud also pose major problems for Cyprus. In 2000, the Financial Action Task Force (FATF) conducted a review of Cyprus's anti-money laundering regime against 25 specified criteria. Cyprus was not identified by the FATF as a non-cooperative country in the international fight against money laundering. However, the FATF in its June report raised a concern regarding customer identification in respect to all forms of trusts.

In 1996, the Government of Cyprus (GOC) passed the Prevention and Suppression of Money Laundering Activities Law. This law criminalized non-drug related money laundering; provided for the confiscation of proceeds from serious crimes; codified actions that banks and non-bank financial institutions must take, including customer identification; and mandated the establishment of a financial intelligence unit (FIU). Previously enacted legislation criminalized drug-related money laundering. A 1998 amendment to the 1996 anti-money laundering legislation extended the list of predicate offenses to include trafficking in women, terrorism, trafficking in human organs, attempted murder, and nuclear proliferation. The amendment also addressed government corruption, and facilitated the exchange of financial information with other FIUs, as well as the sharing of assets with other governments.

A law passed in 1999 criminalized the counterfeiting of bank instruments such as certificates of deposit and notes. In November 2000, the GOC further amended its 1996 money laundering law by eliminating the separate list of predicate offenses. This amendment, coupled with the central bank's guidance note to commercial banks reminding them of the importance of reporting any suspicious transaction to the FIU, may enable the Attorney General's office to increase the number of successful prosecutions for money laundering.

The GOC in January 1997 established its FIU, the Unit for Combating Money Laundering (UCML). The 14-member UCML is comprised of representatives from the Attorney General's Office, Customs, law enforcement, and support staff. The UCML's statutory authority directs it to evaluate evidence generated by its member organizations and other sources to determine if an investigation is necessary. The UCML also conducts anti-money laundering training for Cypriot police officers, bankers, accountants, and other financial professionals. In 2000, the UCML opened 123 cases and closed 142. The Unit issued 90 Information Disclosure Orders and froze $3 million in assets. During 2000, recorded two convictions under the 1996 Anti-Money Laundering law, while five cases were pending at the end of the year.

The GOC places restrictions on foreign ownership of property and transportation of currency and bullion. Cypriot law requires that all cash entering or leaving Cyprus in the amount of US $1,000 or greater must be declared. Declarations over US $10,000 are sent directly to the Investigations Section of Cypriot Customs. All banks and non-bank financial institutions-insurance companies, stock exchange, cooperative banks, lawyers, accountants and other financial intermediaries-must report suspicious transactions to UCML. Banks are required to report cash deposits in excess of US $10,000 to the central bank. A declaration form must accompany all foreign currency deposits. In 1998, the central bank instructed banks and financial institutions to pay special attention to complex, unusually large transactions, and to report cumulative electronic funds transfers that exceed of US $500,000 per month for a single customer. There are no statistics available on compliance with these regulations.

Cyprus's offshore sector includes 29 banks, 116 financial services companies, 20 companies that manage collective investment schemes, and 15 offshore trustee companies. The central bank has in place a strict regulatory framework aimed at preventing abuses within the offshore sector. Offshore banks are required to adhere to the same legal, administrative, and reporting requirements as domestic banks. The central bank requires that prospective offshore banks face a detailed vetting procedure to ensure that only banks from jurisdictions with proper supervision are allowed to operate in Cyprus. Offshore banks must have a physical presence in Cyprus and can not be brass plate operations. Once an offshore bank has registered in Cyprus, it is subject to a yearly on-site inspection by the central bank. Offshore banks in Cyprus may accept deposits and make foreign-currency denominated loans to residents of Cyprus if the resident has obtained an exchange control permit from the central bank.

There are approximately 47,000 international business companies (IBCs) registered in Cyprus; however, the central bank reported in June 1999 that only 12,000-14,000 of these companies filed mandatory annual reports. Only 1,057 have a physical presence in Cyprus. According to post reporting, Russian IBCs constitute a "significant" share of the total number of IBCs. The names of beneficial owners of IBCs can be released to law enforcement by court order and Cyprus does not permit bearer shares. The popularity of the offshore sector can be explained in part by the GOC's dual-tax treaties with 26 nations, including Russia. Profits of Cypriot offshore companies are taxed at a rate of only 4.25 percent. Moreover, there is no tax on dividends and foreign employees are required to pay only half the normal Cypriot income tax rate. IBCs may keep freely transferable currency accounts both abroad and in Cyprus. If an IBC is registered as an offshore partnership, profits are not taxed.

Cyprus is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Cyprus is a member of the Council of Europe's PC-R-EV, and is a member of the Offshore Group of Banking Supervisors. The UCML is a member of the Egmont Group. Cyprus and the United States have signed a Mutual Legal Assistance Treaty, but it is not yet in force. In 1997, the GOC entered into a bilateral agreement with Belgium for the exchange of information on money laundering.

In light of the GOC's stated commitment to combat money laundering, the central bank needs to continue to focus on meeting the increasing supervisory challenges of the offshore sector and on increasing the offshore sector's transparency. In particular, it should ensure that the identities of beneficial owners are easily accessible by law enforcement. In addition, the central bank should change its guidance note, which allows banks to open accounts for all forms of trusts without identifying the beneficial owner of the trust. The GOC should also take steps to ensure that all financial and non-financial institutions and entities report all suspicious transactions to the FIU, and thereby overcome commercial banks' reluctance to share information with the central bank.

(Cyprus has been divided since the Turkish military intervention of 1974, following a coup d'etat directed from Greece. Since then, the southern part of the country has been under the control of the Government of the Republic of Cyprus. The northern part is controlled by a Turkish Cypriot administration that in 1983 proclaimed itself the "Turkish Republic of Northern Cyprus" The US government recognizes only the Government of the Republic of Cyprus.)

It is more difficult to evaluate anti-money laundering efforts in the "Turkish Republic of Northern Cyprus" ("TRNC") but there continues to be strong evidence of a growing trade in narcotics between the "TRNC" and Turkey and Britain, as well as significant money laundering activities.

"TRNC" authorities have enacted a money laundering law for northern Cyprus, which went into effect in November 1999. The main thrust of the law was to reduce the amount of cash transactions in the "TRNC" as well as to improve the tracking of any transactions above US $10,000. The law also provides for the creation of an experts committee to advise "TRNC" authorities on combating money laundering as well as for the seizure of assets.

The law is an adjunct to the "TRNC's" existing Exchange Control Law of 1997, which requires banks to report to the "Central Bank" any movement of funds in excess of $100,000. Such reports must include information identifying the person transferring the money, the source of the money, and its destination. The law also proscribes individuals entering or leaving the "TRNC" from transporting more than US $10,000 in currency. Under the new law, banks, non-bank financial institutions, and foreign exchange dealers must report all currency transactions over $20,000 and suspicious transactions in any amount. Banks must follow a know-your-customer policy and require customer identification. Banks must also submit suspicious transactions to a central multi-agency committee that will function as an FIU and have investigative powers.

"TRNC" officials believe that its 24 essentially unregulated casinos are the primary vehicles through which money laundering occurs. There is also an offshore sector, consisting of 40 banks and 12 IBCs. The offshore banks may not conduct business with "TRNC" residents and may not deal in cash. However, these banks are not audited and their records are not publicly available. Reportedly, a new law will restrict the granting of new bank licensees only to those banks already having licensees in an OECD country.

In spite of a growing awareness in the "TRNC" of the danger represented by money laundering, it is clear that "TRNC" regulations are far less stringent than those in the Republic of Cyprus are. The new law of the "TRNC" provides better banking regulations than were previously in force. The major weakness continues to be the "TRNC's" many casinos, where a lack of resources and expertise leave that area, for all intended purposes, unregulated, and therefore, especially vulnerable to money laundering abuse.

Czech Republic (Concern). The Czech Republic is vulnerable to money laundering because of geographic and economic factors. Narcotics trafficking, smuggling, auto theft, arms trafficking, tax fraud, embezzlement, racketeering, prostitution, and trafficking in illegal aliens are the major sources of funds that are laundered in the Czech Republic. Domestic and foreign organized crime groups target Czech financial institutions for laundering activity; banks, currency exchanges, casinos and other gaming establishments, investment companies, and real estate agencies have all been used to launder criminal proceeds.

Money laundering was criminalized in September 1995 through the addition of Articles 251 and 251a to the Czech Criminal Code. Although the Criminal Code does not explicitly mention money laundering, the criminal provisions apply to financial transactions involving the proceeds of all serious crimes. The Czech Republic's anti-money laundering legislation, Act N?61/1996 Concerning Some Measures Against Legalization of Proceeds of Criminal Activity and Amending Legislation Thereto, became effective on July 1996.

Ministry of Finance Decree N?183 formally established the Czech Republic's financial intelligence unit, the Financial Analysis Unit (FAU), and outlines how financial institutions are to comply with the reporting of unusual transactions. The FAU is a member of the Egmont Group.

The Czech Parliament has failed to pass legislation that completely eliminates anonymous passbook accounts. However, establishment of new anonymous accounts was prohibited beginning in mid-2000. Czech officials argue that the existing accounts are of limited use for money laundering because customer identification is required for deposits and withdrawals that exceed 100,000 Czech crowns (approximately US $2,700).

The Czech Republic participates in the Council of Europe's Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (PC-R-EV), and in 1998, underwent a mutual evaluation by the Committee. The Czech Republic plans to implement changes to its anti-money laundering regime based on the results of the mutual evaluation. The United States and the Czech Republic have a Mutual Legal Assistance Treaty, which entered into force in May 2000. The Czech Republic is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

The Czech Republic is encouraged to pass legislation to adopt the suggestions of the PC-R-EV mutual evaluation report and to eliminate all anonymous passbook accounts.

Denmark (Other). Banking procedures in Denmark are transparent and are subject to government review, which discourages prospective money launderers and minimizes the likelihood of improper use of the banking system. Despite this, in response to a growing concern surrounding economic crimes in general, Denmark created the Serious Economic Crime Unit in 2000. The unit reports to the National Police Commissioner and consists of public prosecutors and police officers specifically trained in fighting economic crimes.

Money laundering is a criminal offense in Denmark. This applies to any type of money laundering, not just narcotics-related. Banks and other financial institutions are required to know, record and report the identity of customers engaging in significant transactions and maintain those records for an adequate amount of time. There are no secrecy laws in Denmark that prevent disclosure of financial information to competent authorities, and there are laws that protect bankers and others who cooperate with law enforcement authorities. Denmark has cooperated fully with US authorities with regards to money laundering investigations.

Denmark has regulations in place that ensure the availability of adequate records in connection with narcotics investigations. Denmark is a party to the 1988 UN Drug Convention and in December 2000 it signed the United Nations Convention against Transnational Organized Crime. It participates in European Union anti-money laundering efforts, and its financial intelligence unit (FIU) takes part in the Egmont Group of FIUs. Denmark has endorsed the 1997 Basle Committee Core Principles for Effective Banking Supervision. Denmark is also a member of the Financial Action Task Force (FATF).

Dominica (Primary). Like many Caribbean jurisdictions, Dominica has sought to attract offshore dollars by offering a wide range of financial services and promises of confidentiality, low fees, and minimal government oversight. A rapid expansion of this sector without proper supervision has made Dominica attractive to international criminals, and has prompted public criticism from international organizations.

Dominica has greatly expanded its offshore services in the past several years, and offers offshore banks, international business companies (IBCs), exempt insurance, and exempt trusts. The International Exempt Trust Act 1997 allows establishment of Asset Protection Trusts that greatly restrict seizure, expropriation, or confiscation of assets by foreign authorities. Dominica also offers Internet gaming and rapid processing of Internet gaming license applications. IBCs can be registered on-line within 24 hours and using bearer shares, providing complete anonymity for the beneficial owners. In 1999, Dominica's Ministry of Finance (MOF) reported that since the establishment of its offshore sector, Dominica had incorporated 5,800 IBCs, six offshore banks, six exempt trusts, and 20 Internet gaming companies. By December 2000, Dominica's successful marketing of IBCs had increased the number to approximately 6,600. In addition to its marketing duties, the MOF's International Business Unit grants licenses and supervises the offshore sector, thereby violating the Basle Core Principles for Effective Banking Supervision.

For the past several years, as part of its offshore services, Dominica has offered economic citizenship, a program that enables individuals to acquire Dominican citizenship, a passport, and possibly a new name in exchange for a direct payment of US $50,000 or government bonds worth US $75,000. This process has been loosely regulated, and Government of Dominica (GOD) officials appear not to have maintained adequate control of the program. Between 1996 and 2000, the GOD issued approximately 500 economic citizenships. The program has come under fire as a means for individuals from the Peoples' Republic of China (PRC) and other foreign countries to become Dominican citizens and enter the United States via Canada without visas. One widely reported case involved a group of 11 PRC nationals who tried to enter Canada on Dominican passports after spending only one month in Dominica. Upon taking office in January 2000, Prime Minister (PM) Roosevelt Douglas suspended passport sales, but in April 2000, reversed his decision. In August 2000, the GOD claimed to have suspended the program in the face of international pressure-in particular, the Government of Canada threatened to impose visa requirements on Dominican passport holders. The GOD indicated that in the first quarter of 2000 it had earned approximately US $1.9 million from sales of passports. The future of this program remains in question following the recent death of PM Douglas.

The Eastern Caribbean Central Bank (ECCB) supervises Dominica's five domestic banks, and has issued guidance notes against money laundering. However, these guidance notes do not have the force of law. In February 2000, the GOD announced that supervision of the offshore sector also would be transferred to the ECCB. However, it is unclear how this supervisory arrangement will function.

In June 2000, the Financial Action Task Force (FATF) identified Dominica as noncooperative in international efforts to combat money laundering. The FATF in its report noted:

Dominica has outdated proceeds of crime legislation, which lacks many features now expected, and very mixed financial services legislation currently on the books. In addition, company law provisions create additional obstacles to the identification of ownership. The offshore sector in Dominica appears to be largely unregulated although it is understood that responsibility for its regulation is to be transferred to the Eastern Caribbean Central Bank.

The US Department of Treasury has also issued an advisory to US financial institutions warning them to "give enhanced scrutiny" to financial transactions involving Dominica.

In response to the FATF report, the GOD has taken a number of steps to improve its anti-money laundering regime. In July 2000, the Finance Minister announced a comprehensive review of all offshore banks and the establishment of an Offshore Financial Services Council (OFSC). In December 2000, the OFSC issued guidelines for processing offshore banking licenses and administrative procedures for supervising offshore bank and trust companies.

In January 2001, the Dominican Government brought into force new legislation to strengthen its anti-money laundering regime: The Money Laundering (Prevention) Act of 2000, The International Business Corporation (Amendment) Act of 2000, The International Exempt Trust (Amendment) Act of 2000, The Exempt Insurance (Amendment) Act of 2000, and The Offshore Banking (Amendment) Act of 2000.

The Money Laundering (Prevention) Act (MLPA) of 2000 expands the predicate offenses for money laundering beyond drug trafficking and allows regulators to inspect the financial transactions of offshore entities. The MLPA establishes a Money Laundering Supervisory Authority (MLSA) that will issue guidelines to financial institutions and scheduled activities under the Act. The MLPA also requires a wide range of financial institutions-including offshore institutions-to report suspicious transactions to the MLSA, which will then send the reports to the Financial Intelligence Unit (FIU). Moreover, the MLPA requires persons to report and cross-border movements of currency that exceed US $10,000 to the FIU. The FIU will analyze these reports, forward appropriate information to the Director of Public Prosecutions, and liaison with other jurisdictions on financial crimes cases.

In addition, the other legislative changes should strengthen the GOD's regulation of its offshore sector. The International Business Corporation (Amendment) Act of 2000 reportedly requires accountants and financial institutions to maintain the names and addresses of the owners of bearer shares and track subsequent transfers of ownership. The Offshore Banking (Amendment) Act of 2000 reportedly requires banks to know the beneficial owners of all accounts.

Dominica criminalized money laundering related to drug trafficking through the Proceeds of Crime Act (POCA) of 1993. The POCA required financial institutions to maintain records related to the opening and closing of accounts, and of all transactions equal to or greater than Eastern Caribbean (EC) $5,000 (approximately US $1,900) for a minimum of seven years. The POCA also authorized banks to report transactions to the police or the Director of Public Prosecutions if the bank had reasonable grounds to suspect that the transaction was related to an offense. The POCA, however, did not mandate suspicious transactions reporting, and its provisions applied only to domestic institutions. The GOD has not prosecuted anyone for money laundering.

Dominica is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Dominica is also a member of the Caribbean Financial Action Task Force (CFATF). In May 2000, a Mutual Legal Assistance Treaty with the United States entered into force. Dominica is a party to the 1988 UN Drug Convention.

The GOD should fully implement and enforce the provisions of the MLPA and other recently enacted legislation; provide additional resources for regulating offshore entities; and establish the FIU in order to coordinate its own anti-money laundering efforts, as well as cooperate with foreign authorities. Such measures will help protect Dominica's financial system from further abuse by international criminals, and help avoid possible additional sanctions by the international community.

Dominican Republic (Primary). The Dominican Republic has financial institutions that engage in currency transactions involving international narcotics proceeds that include significant amounts of US dollars. The Dominican Republic is a burgeoning commercial exporter, and in 2000, remittances to the Dominican Republic from abroad were approximately US $1.7 billion. The Dominican Republic is a transshipment point for narcotics destined for the United States and Europe, and is vulnerable to narcotics-related money laundering. The primary methods for moving illicit funds from the United States to the Dominican Republic include smuggling bulk cash by couriers and wire transfer remittances. Dominican banks and casinos also are used to launder funds. However, currency exchange houses and money remitters remain the primary mechanisms for laundering money.

The Government of the Dominican Republic (GODR) has taken steps to address money laundering. The GODR has enacted laws that criminalize money laundering related to narcotics trafficking, and allows preventative seizures and criminal forfeiture of drug-related assets. The legislation also authorizes international cooperation in forfeiture cases.

In 1996, the GODR issued Decree No. 288-96, which requires financial institutions such as banks, currency exchange houses, casinos, and stock brokers to record currency transactions equal to or greater than the equivalent of US $10,000 in either domestic or foreign currency. Financial institutions are required to make this information available to law enforcement upon request. The Decree also obligates financial institutions to identify customers and report suspicious financial transactions (STRs), and designates the Superintendency of Banks as the recipient of STRs.

In 1997, the GODR established the Financial Analysis Unit (FAU) within the Superintendency of Banks. The FAU analyzes and disseminates STRs to the Financial Investigative Unit (FIU) within the National Drug Control Directorate (DNCD). The FAU has supervisory and information gathering authority over all financial institutions. The FIU investigates narcotics-related money laundering, and has authority to compel cooperation from other GODR agencies. In 1998, the GODR passed legislation that allows extradition of Dominican nationals on money laundering charges.

During 2000, the GODR authorities confiscated $82,749 in US currency, $88,632 in Dominican currency, ninety-six vehicles, and twenty residential and business properties linked to narcotics trafficking. However, there has never been a successful money laundering prosecution. In 2000, the GODR proposed legislation that would expand the predicate offenses for money laundering beyond drug trafficking to other serious crimes such as arms trafficking; trafficking in humans or human organs; kidnapping; extortion; car theft; forgery of currency, bills, or securities; illicit enrichment; embezzlement; and bribery. The legislation also would require financial institutions to report to the FAU cash transactions that are greater than or equal to the equivalent of US $10,000 in domestic or foreign currency. Moreover, the legislation will require individuals to declare cross-border movements of currency that are greater than or equal to the equivalent of US $10,000 in domestic or foreign currency. The Dominican Republic's legislature is expected to pass this legislation in early 2001.

The FAU is a member of the Egmont Group, and is authorized to exchange information with other financial intelligence units. The GODR is an active member of the Caribbean Financial Action Task Force (CFATF), and the Organization of American States Inter-American Commission on Drug Abuse Control (OAS/CICAD) Experts Group to Control Money Laundering. The Dominican Republic is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. The GODR cooperates with the US Government on counternarcotics and fugitive matters.

The GODR should quickly enact its proposed anti-money laundering legislation, and continue to develop a financial regulatory system that is consistent with international standards. Moreover, the Superintendency of Banks and the DNCD are encouraged to improve the flow of information between their organizations.

Ecuador (Concern). Ecuador is vulnerable to money laundering because of its proximity to drug-producing countries, its adoption of the US dollar as legal tender, and its ineffective oversight of the banking system. The GOE has no controls on cross-border movements of currency, and regulation of currency exchange businesses is weak. These factors most likely will make Ecuador an increasingly attractive venue for placing illicit currency into the international financial system. Several Ecuadorian banks also maintain offshore offices. Although these institutions have come under tighter control as a result of banking legislation passed in 1994, they continue to be used to channel funds through Ecuador.

Narcotics-related money laundering was criminalized through the 1990 Narcotics and Psychotropic Substance Act (No. 108). The Act requires financial institutions to report to the National Drug Council (CONSEP) large transactions in cash or stocks. The Government of Ecuador (GOE) in 1999 implemented electronic reporting of this information. However, a contradictory legal framework continues to place severe constraints on the information that financial institutions can release to law enforcement. The Banking Procedures Law limits the release of information on private bank accounts to the Superintendency of Banks, and the Criminal Defamation Law imposes sanctions on banks and other financial institutions that provide account information to law enforcement or advise law enforcement of suspicious transactions.

As a result of these conflicting laws, the Ecuadorian National Police (ENP) must obtain a court order to search for and obtain financial information from banks. However, banks, as a matter of practice, do not honor such orders, and claim that banking regulations make them answerable only to the Superintendency of Banks (SOB). Furthermore, the SOB will not accept requests for information directly from the ENP, but instead requires the request be handled through the CONSEP. Similarly, the ENP is not able to obtain information on private corporations from the Superintendency of Companies or information on stock market transactions from the Ministry of Finance. The GOE has not yet taken forceful efforts to remedy such limitations on the sharing of information, and as a consequence, has not conducted a serious money laundering investigation in the past five years.

The ENP has a financial investigation unit that recently received additional personnel and US-sponsored financial investigation training. The CONSEP also has a financial unit, and the SOB is considering establishment of one.

Ecuador is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Ecuador is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and the South American Financial Action Task Force (GAFISUD).

The GOE must revise its financial secrecy laws to encourage reporting by financial institutions, and eliminate any conflicts that prevent the sharing of information between financial institutions and law enforcement. Moreover, the GOE should take immediate steps to improve bank oversight in the wake of dollarization, and pass legislation establishing cross-border currency reporting requirements. The GOE also is encouraged to establish a joint financial-investigative task force in order to foster better interagency working relationships.

Egypt (Concern). Egypt is not considered a major financial center, and does not have an offshore sector. Moreover, Egypt does not have a significant black market. Most of the illicit funds that are laundered in Egypt are the proceeds of drug trafficking, organized crime, and terrorism. Narcotics-related money laundering usually involves investment in real estate or business ventures. In a typical scheme, a money launderer will invest through an intermediary, usually a relative or a trusted friend. Egyptian money launderers rarely use the banking system because of their cultural mistrust of banks and fears that banking records-despite Egypt's secrecy laws-could provide authorities with incriminating information.

Egypt does not have customer identification requirements or reporting requirements for financial institutions. Presidential Decree Law No. 205 of 1990, concerning the secrecy of bank accounts, states that "all accounts, deposits, trusts, and safes" in banks are to be "maintained secret." No access is to be allowed, or any information to be divulged, except with the written permission of the account's owner or agent. This prohibition remains in force after the banking relationship is terminated. The identities of account owners are known only to bank officials; the only exception is that the Egyptian Attorney General may seek from the Cairo Court of Appeal access to account information when there is "serious" proof that a felony or misdemeanor has been committed. The Egyptian Anti-Narcotics General Authority (ANGA), which maintains a unit that investigates financial crimes related to narcotics trafficking, states that bank authorities cooperate fully with law enforcement when such a court order is obtained, and that the records are adequate for a thorough investigation.

The Egyptian Parliament continues to consider passage of anti-money laundering legislation. However, the specifics of this legislation are not known at this time. Absent anti-money laundering laws, prosecutors have made use of a 1971 law, the Law of the Socialist Prosecutor, that targets individuals who have made money through any illegal activity. The law enables prosecutors to impound for a maximum of five years cash and property that belongs to the accused and the accused's immediate family. The highest Egyptian criminal court, the Court of Ethics, determines whether the impounded property was obtained as a result of illegal activity and should be forfeited. Forfeited assets go directly to the Egyptian treasury.

The United States and Egypt signed a Mutual Legal Assistance Treaty in May 1998, which is expected to enter into force in 2001. Egypt is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Crime.

Egypt should move swiftly to pass, implement, and enforce comprehensive new anti-money laundering legislation that is consistent with international standards in order to protect its growing economy from abuse by criminals.

El Salvador (Concern). El Salvador has one of the largest banking systems in Central America; its banks maintain important financial contacts with those of neighboring countries, Mexico, the Caribbean, and the United States. El Salvador does not have an offshore sector. The growth of El Salvador's financial sector and the increase in narcotics trafficking in the region continue to make it vulnerable to money laundering. In addition, the Government of El Salvador's (GOES) decision in November 2000 to dollarize its economy-dollars will be permitted to freely circulate beginning in January 2001-increases the risk of money laundering.

The GOES in 2000 made considerable progress in implementing its 1998 "Law Against Laundering of Money and Assets." The Unidad de Investigaci?n Financiera (UIF), the financial investigation unit within the Attorney General's Office, and separate anti-money laundering units within the Polic?a Nacional Civil (PNC) and the central bank enforce the law's provisions. The legislation criminalizes money laundering related to drug trafficking and any other criminal activity. Financial institutions such as banks, exchange companies, stock exchanges, insurance companies, credit card companies, casinos, and real estate companies must identify their customers, maintain records for a minimum of five years, train personnel in money and asset laundering, and establish internal auditing procedures. Covered institutions also must report suspicious transactions and transactions that exceed 500,000 colones (approximately US $57,000) to the UIF. Although a provision of this law provides for asset identification and seizure, asset sharing with non-Salvadoran agencies has not yet been approved.

In 2000, the GOES-in particular, the office of the Attorney General-worked closely with US Government agencies such as the Department of Treasury to develop and implement the UIF. The UIF has been operational since January 2000, and officially opened its new, modernized facilities in December 2000. The UIF currently is comprised of six individuals-three prosecutors (fiscales), one analyst, one computer technician and one secretary. The UIF has received approximately 100 reports of suspicious activities; opened 48 investigations that have resulted in two asset seizure actions; and begun judicial proceedings in three cases. The GOES has arrested several persons on charges of money laundering and counterfeiting.

The UIF has prepared draft regulations that would lower the threshold for filing currency transactions reports to US $20,000, and is seeking ways to tighten regulation of casinos and exchange houses. The US Government is working with the GOES to establish a Money Laundering Working Group that will improve information sharing, and in light of the GOES' decision to dollarize, will seek to provide specialized money laundering training to a broader spectrum of Salvadoran law enforcement and banking officials.

The UIF has applied for membership in the Egmont Group, and in January 2001, will participate in the Egmont Group's first training course. El Salvador is party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. El Salvador is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering.

The GOES is encouraged to continue building upon the progress that it has made in implementing its anti-money laundering measures, and demonstrate that it is a regional leader in the fight against money laundering and financial crime. In particular, the GOES is urged to implement draft regulations that would lower the threshold for reporting currency transactions.

Eritrea (Other). Eritrea has a poorly developed financial system; there are no reports of money laundering. Eritrea is not a party to the 1988 UN Drug Convention.

Estonia (Other). Estonia has one of the most developed banking systems of the former Soviet Union. Estonia permits credit institutions to participate in a variety of activities such as leasing, insurance, and securities. Russian organized crime groups are suspected of using financial institutions in the Baltic countries to launder money.

In 1999, Estonia implemented anti-money laundering legislation, and established the Information Bureau (IB) and a separate police unit to fight money laundering. Estonia's legislation requires financial institutions to report suspicious or unusual transactions to the IB. The reporting thresholds are: the equivalent of approximately US $11,000 for non-currency transactions; and the equivalent of approximately US $5,500 for currency transactions. However, Estonia has no formal system for ensuring that financial institutions comply with the reporting requirements. Moreover, the IB lacks authority to compel banks to disclose additional information.

More than 50 investigations have been opened based on reports of suspicious or unusual transactions. The anti-money laundering police unit recently initiated its first criminal anti-money laundering case against an employee of a credit institution who did not comply with reporting requirements. In November 2000, Estonia, along with other Baltic countries, signed a protocol that places special emphasis on the exchange of information related to organized crime, drug trafficking, and smuggling.

Estonia is a member of the Council of Europe (COE) Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (PC-R-EV). A COE delegation in 2000 visited Estonia to review its anti-money laundering regime. The IB is a member of the Egmont Group. Estonia became a party to the 1988 UN Drug Convention in July 2000, and in December 2000, signed the UN Convention against Transnational Organized Crime. A Mutual Legal Assistance Treaty between the United States and Estonia entered into force in October 2000.

Ethiopia (Other). Money laundering is not considered to be a problem in Ethiopia. Its underdeveloped financial infrastructure and lack of economic development make it unlikely that it will become a financial center of any type in the foreseeable future. The banking sector is small and has no links to the international financial community.

Ethiopia has no anti-money laundering legislation in place. It is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized crime.

Fiji (Other). There are no reports of money laundering in Fiji. Money laundering is criminalized under the Proceeds of Crime Act, 1997. In addition, the Reserve Bank of Fiji has issued anti-money laundering guidelines to licensed financial institutions that require them to develop programs and procedures for customer identification, record-keeping, and the monitoring and reporting of suspicious financial transactions. These guidelines are to come into effect 1 January 2001.

There is no formal agreement between Fiji and the United States for cooperation on law enforcement matters or mutual legal assistance; however, Fiji has responded positively to all such requests from the United States.

Fiji is a party to the 1988 UN Drug Convention. Fiji is a member of the Asia/Pacific Group on Money Laundering, a regional FATF-style anti-money laundering body.

Finland (Other). Finland is not a regional financial or money laundering center. However, Finnish authorities are concerned about possible money laundering by Russian organized crime, and money laundering arising from fraud and other economic crimes.

In 1994, Finland enacted legislation criminalizing money laundering related to narcotics trafficking and other serious crimes. Legislation enacted in 1998 compels financial institutions and most non-bank financial institutions-excluding accountants and lawyers-to report suspicious transactions. The number of suspicious transactions reports (STRs) appear to be on the rise: the Finnish police in 1999 investigated 348 STRs, but reported 255 investigations in the first six months of 2000 alone. (Final statistics for 2000 were unavailable for inclusion in this report.) In 1999, narcotics-trafficking was the predicate offense for 13 percent of money laundering convictions.

Finland in 1998 established a financial intelligence unit, the Money Laundering Clearing House (MLCH), to receive STRs from financial institutions. The MLCH is a member of the Egmont Group.

Finland is a member of the Financial Action Task Force and the Council of Europe. Finland is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

France (Primary). France remains an attractive venue for money laundering because of its large economy, strong currency, political stability, central location, and sophisticated financial system. Common methods of laundering money in France include the use of bank deposits, foreign currency and gold bullion transactions, corporate transactions, and purchases of real estate, hotels, and works of art. France has enacted legislation that codifies the FATF Forty Recommendations concerning customer identification, record keeping requirements, suspicious transaction reporting, internal anti-money laundering procedures, and training for financial institutions.

France criminalized money laundering related to all crimes with the adoption of Act N? 93-392 of 13 May 1996, "On the Fight against Money Laundering, Drug Trafficking and International Cooperation in Respect of Seizure and Confiscation of the Proceeds of Crime." Prior to passage of this Act, the French Penal Code and the French Customs Code only criminalized money laundering related to narcotics trafficking and other serious crimes. Even though Act No. 93-392 made money laundering in itself a general offense, some French courts do not allow joint prosecution of individuals on both money laundering charges and the underlying predicate offense because judges in those courts consider money laundering and the predicate crime to be the same offense.

France's financial intelligence unit, the Treatment of Information and Action Against Clandestine Financial Circuits (TRACFIN), is responsible for analyzing suspicious transaction reports (STRs) that are filed by French financial institutions. TRACFIN is a member of the Egmont Group, and may exchange information with foreign counterparts that observe similar rules regarding confidentiality of information. TRACFIN is establishing and leading France's Liaison Committee against the Laundering of the Proceeds of Crime. This committee will be comprised of representatives from reporting professions and institutions, regulators, and law enforcement authorities. In September 2000, TRACFIN hosted a regional workshop on Money Laundering and the Euro Changeover.

In 2000, the Government of France (GOF) proposed additional anti-money laundering measures:

* Casino directors and managers, high-value goods dealers, and eventually, gatekeepers such as accountants and independent legal professions would have to report suspicious transactions directly to TRACFIN.

* Financial institutions would automatically report to TRACFIN certain financial transactions such as those involving jurisdictions identified as noncooperative in the international fight against money laundering by the Financial Action Task Force (FATF).

* Public authorities at the state and local level would be able to send money laundering related information directly to TRACFIN.

France is a member of the FATF and the European Union, and a Cooperating and Supporting Nation to the Caribbean Financial Action Task Force. France is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. France and the United States in December 1998 signed a Mutual Legal Assistance Treaty, which is expected to enter into force in 2001. TRACFIN has information-sharing agreements with Austria, Italy, the United States, Belgium, Monaco, Spain, the United Kingdom, Argentina, Mexico, the Czech Republic, and Portugal.

France has established a comprehensive anti-money laundering regime. The GOF should further enhance it by adopting pending legislation that would expand suspicious transaction reporting requirements.

Georgia (Other). Georgia is not an important regional financial center, and its economy is too small to cover large flows of illicit foreign funds. Commercial banks are small but capable of clearing and transferring funds electronically. Small-scale money laundering schemes involve funds generated domestically through illegal activities, most of which are not connected with narcotics. Reportedly, some commercial banks have become involved in laundering funds generated by the smuggling of alcohol and cigarettes, but these proceeds are generally held in dollars outside the banking system. Although corruption is an issue in Georgia, no government official has been publicly linked to money laundering. The National Bank of Georgia (the central bank) plays a growing role in regulating the banking industry.

Georgia's new criminal code became effective in June 2000. Although it does not criminalize money laundering, it does make it a crime to "transform illegal money into legal income" or to conceal the source, location or owner of property acquired illegally. Violators are subject to imprisonment. No requirement exists to report suspicious transactions, and there are no legal safeguards to protect banks and other financial institutions that cooperate with law enforcement agencies. Georgian law enforcement agencies have not investigated commercial banks or other businesses for possible involvement in money laundering. There are no controls on the amount of money that may be brought into the country. The money-laundering controls that do exist are not applied to non-bank financial institutions. Most financial transactions in Georgia are conducted in cash.

USAID provides both technical assistance and training to the Georgian tax inspectorate in support of improvements in tax policy and regulation, such as the ability to identify underreporting of income, including questionable gains from illegal sources. The Constitutional Court, however, has declared asset forfeiture and seizure legislation to be unconstitutional.

Georgia is a party to the UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

Germany (Primary). Germany has the largest economy in Europe and a well-developed financial services industry. Russian organized crime groups, the Italian Mafia, and Albanian and Kurdish drug trafficking groups continue to launder money through German banks, currency exchange houses, business investments, and real estate.

The Government of Germany (GOG) in 1992 criminalized money laundering related to drug trafficking, fraud, forgery, and embezzlement. In November 1993, the GOG enacted the Money Laundering Act. This legislation imposes due diligence and reporting requirements on financial institutions, such as obtaining customer identification for transactions exceeding deutsche marks (DM) 30,000 (approximately US $14,500) that are conducted in cash or precious metals, and maintaining records necessary to reconstruct transactions of DM 30,000 or more. In addition, German banks are legally obligated to report suspicious transactions to state authorities. To assist in this process, the GOG established a central database to record these suspicious transactions. The database became operational in June 2000. Each state is responsible for ensuring that suspicious transactions reports (STRs) are entered into the database.

Since 1998, money transmitters have been required to be licensed and supervised by the Federal Banking Supervisory Office, which has issued anti-money laundering guidelines to the industry. Germany also has a law, which entered into force in 1998, that gives border officials the authority to compel individuals to declare imported currency of DM 30,000 or more.

The GOG has 12 Joint Financial Investigations Groups (JFIGs), comprised of customs and police officials, that are located in 11 cities throughout Germany. The JFIGs analyze and investigate STRs that have been filed by German banks. The US Customs Service maintains a liaison relationship with several of these units, and initiates joint investigations when suspicious financial transactions involving the United States are identified. These investigations often are related to fraud rather than narcotics trafficking. Although one of the JFIGs has participated in Egmont Group activities, the JFIGs are not considered FIUs and are not members of the Egmont Group.

The GOG has established procedures to effectively enforce its asset seizure and forfeiture law. The number of asset seizures and forfeitures remains low because of the high burden of proof that prosecutors must overcome in such cases. German law requires a direct link to drug trafficking before seizures are allowed. German authorities cooperate with US efforts to trace and seize assets to the extent that German law allows, and the GOG investigates leads from other nations. However, German law does not allow for sharing forfeited assets with other countries.

The GOG cooperates fully with the United States on anti-money laundering initiatives, even though it does not have a Mutual Legal Assistance Treaty with the United States. The GOG exchanges information through bilateral law enforcement agreements such as the Customs Mutual Assistance Agreement.

Germany is a member of the Financial Action Task Force, the European Union, and the Council of Europe. Germany is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

The GOG has taken an important step in developing a centralized database for recording suspicious transactions. However, Germany is encouraged to develop a centralized reporting unit that would further enhance the effectiveness of this system.

Ghana (Other). Ghana is not a regional financial center. However, non-bank financial institutions such as foreign exchange bureaus are suspected of being used to launder the proceeds of drug trafficking, and the illegal trade in diamonds and gold. In addition, donations to religious institutions allegedly have been used as a vehicle to launder money.

Ghana has criminalized money laundering related to drug trafficking and other serious crimes. However, financial institutions are not required to report large cash transactions. Law enforcement can compel disclosure of bank records for drug-related offenses, and bank officials are given protection from liability when they cooperate with law enforcement investigations. Ghana has cross-border currency reporting requirements. Moreover, the attorney general may require disclosure of assets sent out of the country.

The Government of Ghana in 2000 made no arrests or prosecutions related to money laundering. In April 2000, the US Government organized and financed a two-week anti-money laundering seminar in Accra. The seminar was organized in cooperation with the West African Institute for Financial and Economic Management (WAIFEM), and bankers from Ghana and four other West African countries were in attendance.

Ghana took part in the formation of the Inter-Governmental Action Group Against Money Laundering (GIABA) at the November 2000 meeting of the Economic Community of West African States (ECOWAS) in Dakar. Ghana is a party to the 1988 UN Drug Convention. Ghana has bilateral agreements for the exchange of money laundering-related information with the United Kingdom, Germany, Brazil, and Italy.

Gibraltar (Concern). Gibraltar is a largely self-governing, dependent territory of the United Kingdom, which assumes responsibility for Gibraltar's defence and international affairs. Gibraltar's offshore sector remains vulnerable to money laundering.

The Financial Services Commission (FSC) is responsible for regulating and supervising Gibraltar's financial services industry. It is obliged statutorily under its founding ordinance to match UK supervisory standards. Both onshore and offshore banks have the same legal and supervisory requirements. Gibraltar has 21 banks-11 of which are incorporated in Gibraltar-and all except for one are subsidiaries of major international financial institutions. The FSC also is responsible for overseeing the activities of the GOG offshore sector in the areas of trust and company management companies, insurance companies, collective investment schemes, and the formation of IBCs (of which there were 8300 registered by June 2000). Internet gaming is permitted by the GOG.

The Drug Offences Ordinance (DOO) of 1995 and Criminal Justice Ordinance of 1995 criminalize money laundering related to all crimes and mandate reporting of suspicious transactions by entities such as banks, mutual savings companies, insurance companies, financial consultants, postal services, exchange bureaus, attorneys, accountants, financial regulatory agencies, unions, casinos, charities, lotteries, car dealerships, yacht brokers, company formation agents, dealers in gold bullion, charities, and political parties.

In 1996, Gibraltar established its financial intelligence unit (FIU), the Gibraltar Coordinating Centre for Criminal Intelligence and Drugs (GCID). The GCID is comprised primarily of police and customs officers, but is independent of law enforcement. The GCID receives, analyzes, and disseminates information on financial disclosures filed by institutions covered by the provisions of Gibraltar's anti-money laundering legislation. The GCID has applied to join the Egmont Group.

In 2000, the Financial Action Task Force (FATF) conducted a review of Gibraltar's anti-money laundering regime against 25 specified criteria. Gibraltar was not identified by the FATF as a noncooperative country in the international fight against money laundering. However, the FATF in its June report raised certain concerns about Gibraltar's anti-money laundering regime:

Gibraltar...[has] in place a system for reporting suspicious transactions. Where the underlying criminal conduct is drug trafficking or terrorism, the obligation to report is a direct one. Where the underlying criminal conduct is another predicate offence, the reporting is an "indirect obligation"-failure to make a report potentially leaves one open to a charge of money laundering; making a report is a defence against such a charge...

Gibraltar...[allows] certain intermediaries, and individuals, which are subject to the same anti-money laundering standards and supervision as financial institutions, to introduce business to banks and financial institutions on the basis that the introducers themselves verify the identity of the customer. In addition, the jurisdiction allows certain institutions based in certain overseas countries, subject to equivalent anti-money laundering systems, to introduce business, without separately verifying the identity of the client. Banks and other financial institutions in Gibraltar...are only required to know the name of the client but not to verify the identity separately. There is concern as to whether such a system is consistent with FATF Recommendations and provides sufficiently rigorous checks on the identity of clients of banks and financial institutions, especially in cases where the introducer is not a financial institution...

The lack of a stringent scheme to apply the new rules of customer identification for accounts opened prior to their entry into force is also a source of concern. The new rules for customer identification verification were introduced in Gibraltar in 1995...

In response to the issues raised by the FATF in its June 2000 report, the GOG issued revised Guidance Notes pertaining to eligible introducers and anti-money laundering.

The Mutual Legal Assistance Treaty between the United States and the United Kingdom has not been extended to Gibraltar. However, the DOO of 1995 provides for mutual legal assistance with foreign jurisdictions on matters related to drug trafficking and related proceeds. Gibraltar has indicated its commitment, as part of the EU decision on its participation in certain parts of the Schengen acquis, to update mutual legal assistance arrangements with the EU and Council of Europe partners. Gibraltar has adopted EU Money Laundering Directive 91/308. The United Kingdom has not extended the application of the 1988 UN Drug Convention. Gibraltar is a member of the Offshore Group of Banking Supervisors.

The GOG took an important step in developing a centralized database for recording STRs. However, the GOG should develop a centralized reporting unit to further enhance the efficiency and effectiveness of their system. The GOG is urged to fully address the issues raised by the FATF in the June 2000 report.

Greece (Primary). The economy of Greece is vulnerable to money laundering related to drug trafficking, prostitution, arms smuggling, blackmail, and illicit gambling activities that are conducted by Russian and Albanian criminal groups. There have been reports in the Greek press of substantial money-laundering activity in Greece. Casinos are particularly susceptible to money laundering because of weak requirements for disclosing sources of foreign capital. Greece has five private and two state-owned casinos. Moreover, Greek authorities report that the cross-border movement of illicit currency and monetary instruments remains a problem.

In 1995, the Government of Greece (GOG) enacted anti-money laundering legislation, Prevention and Combating the Legalization of Income Derived from Criminal Activities, which criminalizes money laundering related to all crimes. The Bank of Greece is authorized to cooperate fully with EU central banks in matters relating to money laundering. The legislation also requires that banks and non-bank financial institutions file suspicious transaction reports (STRs) with Greece's financial intelligence unit, the Competent Committee (CC). The CC is a member of the Egmont Group, and is chaired by a senior judge with representatives from various government ministries, the central bank, and the stock exchange. STRs that merit further investigation are forwarded to the Financial Crimes Enforcement Unit (SDOE), a multi-agency group that functions as the CC's investigative arm. The CC is responsible for preparing money-laundering cases on behalf of the public prosecutor's office. The CC works with Interpol on investigations outside Greece. Greek law enforcement reportedly is investigating several money laundering cases. However, few of the cases have reached the public prosecutor's office.

Banks and brokerage firms must require identification from customers-internal identification documents or passports-when opening accounts or conducting transactions that exceed EUR 15,000 (approximately US $16,000). Greek citizens must provide a tax registration number in order to conduct exchanges of foreign currency that are equal to or greater than EUR 1,000 (approximately US $950), and proof of compliance with tax laws in order to conduct exchanges of foreign currency that are equal to or greater than EUR 10,000 (US $9,400).

Greece is a member of the Financial Action Task Force (FATF), the European Union, and the Council of Europe. Greece is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime.

The GOG should extend and implement suspicious transaction reporting requirements for gaming and stock market transactions, and is urged to adopt more rigorous standards for casino ownership or investments.

Grenada (Primary). Money laundering and other financial crimes are concerns in Grenada because of the Government of Grenada's (GOG's) rapid and relatively unsupervised venture into providing offshore services. Although the GOG has taken some legislative steps toward building a comprehensive anti-money laundering regime, the measures thus far have proved inadequate as evidenced by the scandal surrounding the collapse in 2000 of the First International Bank of Grenada, a licensed offshore bank.

Like many other Caribbean jurisdictions, the GOG has tried to raise revenue by luring offshore dollars through promises of low fees, banking and corporate secrecy, and minimal supervision. Since 1996, the GOG has raised approximately US $6 million through its offshore sector. In 1996, the GOG enacted the Offshore Banking Act, the Offshore Insurance Act, and the Company Management Act. The Minister of Finance reviews applications and issues licenses for offshore banks. Grenada amended its International Companies Act in 1996 to permit issuance of bearer shares. Through the International Trust Act 1996, Grenada allows formation of asset protection trusts, which hinder seizure of assets by foreign authorities. Grenada's International Betting Act 1998 provides for licensing of international gaming companies. As of 1999, the GOG had granted licenses for 16 offshore banks and six Internet gaming companies. Press reports indicate that approximately 2,200 International Business Companies (IBCs) have been formed in Grenada.

The Grenada Citizenship Amendment Act of 1997 enables foreign nationals to purchase citizenship for a family of five for approximately US $40,000. The Act does not impose a residency requirement. Moreover, new citizens can legally change their names, which increases the possibility that international criminals will take advantage of the program. Grenada has issued approximately 300 economic citizenships, and claims that proper background checks are made.

The GOG has enacted some anti-money laundering legislation and regulations for its offshore sector. The Proceeds of Crime Act 1992 criminalizes drug-related money laundering and establishes asset forfeiture provisions. However, no prosecutions have taken place under this Act. The Money Laundering Prevention Act (MLPA) of 1999, which came into force in 2000, additionally criminalizes money laundering related to any other crime that, had it been committed in Grenada, would have been punishable by at least five years in prison. Violators face maximum fines of US $1 million and prison sentences not to exceed 27 years. Individuals who "tip off" or aid and abet money launderers may be punished by a maximum fine of US $500,000 and five years in prison.

The MLPA imposes reporting responsibilities on financial institutions such as onshore and offshore banks, money transmitters and exchanges, issuers of credit cards and traveler's checks, insurance businesses and trust businesses. The MLPA established the Supervisory Authority (SA) to supervise financial institutions' compliance with the Act. Covered institutions must identify customers; maintain transaction records for a minimum of seven years; permit on-site inspections; report transactions to the SA if money laundering is suspected; and comply with regulations issued by the SA. The SA may forward information received from financial institutions to the Director of Public Prosecutions if there are reasonable grounds to suspect money laundering. Individuals leaving Grenada with more that EC $100,000 (approximately US $37,000) in currency must file a declaration form with the SA. The SA has the authority to establish training requirements and guidelines for financial institutions, and disseminate information internationally. The Ministry of Finance has the authority to issue a code of practice that would help covered institutions comply with provisions of the MLPA. Other provisions of the MLPA exempt good faith compliance with the Act from criminal or civil liability, and override bank secrecy in money laundering investigations. The GOG has not yet implemented certain provisions of the MLPA, including establishment of the SA and issuance of guidelines and a code of practice.

The GOG in 2000 restructured the Offshore Services Registry to create a semi-autonomous Financial Services Authority (FSA) with a staff of 13 personnel, including clerical and administrative personnel, to monitor and regulate the offshore sector. The FSA also is responsible for "promoting" Grenada's sector.

The GOG's anti-money laundering measures have thus far proven inadequate, as evidenced by the apparent fraudulent operation and ultimate collapse of the offshore First International Bank of Grenada (FIBG). The FIBG was founded in 1998 by US citizen Van A. Brink, who had declared bankruptcy in the United States, changed his name, and purchased a Grenadian passport. The FIBG lured investors with promises of 250 percent returns. Investigators allege Brink used new depositors' money to pay previous investors the impossibly high rate of return. In its first year, the bank claimed to have acquired assets of approximately US $26 billion.

In March 1999, an independent auditor of the FIBG warned the GOG of serious irregularities such as a lack of real assets and Brink's obstruction of the audit. Brink subsequently moved to Uganda and began to conduct business with rebel leaders in Congo. In January 2000, the FIBG hosted a conference of 60 Congolese rebel leaders and signed a deal promising them millions in aid.

In August 2000, the GOG stepped in to take control of the bank. Auditors claim that millions of dollars were transferred to international accounts belonging to officers of the bank, including Van Brink in Uganda. Later that month, local police arrested and charged two bank officers with fraud, attempting to defraud, and aiding and abetting. In October, the GOG reinstated FIBG as the First International Bank of Grenada 2000 on the condition that it would be properly supervised and reimburse depositors. The bank reportedly owes its approximately 6,000 depositors nearly US $150 million.

In the wake of international criticism surrounding the failure of FIBG, and at the time several other eastern Caribbean nations were determined by the FATF to be non-cooperative in international efforts to combat money laundering, the GOG initiated efforts to overhaul offshore legislation and regulations. In September 2000, the GOG named a new chairman for the FSA, sought international assistance, and announced plans to create a new financial crimes unit (FCU) within its police force. The FCU has not yet been established.

Since 2000, the GOG has had in force mutual legal assistance and extradition treaties with the United States. Grenada is a member of the Caribbean Financial Action Task Force (CFATF), and in November 1999, underwent a CFATF mutual evaluation. Grenada is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and is a party to the 1988 UN Drug Convention.

The GOG is urged to implement more stringent oversight of the offshore sector, in particular the economic citizenship program, and bring all provisions of the MLPA into full force. The GOG also should establish, fully staff, train, and fund the SA to operate as a financial intelligence unit. In addition, supervision should be strengthened by removing the marketing function from the FSA. Such measures will enable the GOG to better detect and investigate financial crime locally and cooperate with international law enforcement to prevent additional abuse of its financial sector by international criminals and fraud schemes.

Guatemala (Concern). Guatemala's geographic location and absence of comprehensive anti-money laundering legislation continues to make it vulnerable drug money laundering. Moreover, money laundering related to kidnapping, tax evasion, vehicle theft, and corruption is believed to be on the rise. Real estate transactions and the financing of large commercial development projects are particularly vulnerable to money laundering. Guatemala does not have an offshore sector. Ineffectiveness, intimidation, and corruption within Guatemala's judiciary and law enforcement agencies continue to be serious problems and hinder the government of Guatemala's (GOG) ability to control money laundering.

In January 2001, the GOG published legislation, the Law for the Free Use of Currency, which allows foreign currency such as the US dollar to become legal tender in Guatemala. Free circulation of the dollar will make Guatemala's financial institutions even more vulnerable to the placement of drug-derived currency.

The GOG in November 2000 ratified the Central American Convention for the Prevention of Money Laundering and Related Crimes. However, the GOG needs to strengthen its anti-money laundering legislation in order to implement its obligations under the Convention. Article 45 of Guatemala's 1992 Narcotics Law makes it illegal to participate in any transaction known to involve the proceeds of drug trafficking. The GOG also has issued regulations that require banks to record certain information regarding the origin of currency transactions that exceed US $5,000. The GOG has not made serious efforts to enact more stringent anti-money laundering controls because of the banking sector's resistance. Guatemala has strict bank secrecy laws, and its corporate code also offers considerable secrecy to the owners of corporations.

In 1999, the Secretariat for the Commission Against Addictions and Illicit Drug Trafficking (SECCATID) drafted legislation that would require reporting of suspicious or unusual financial transactions and declaration of cross-border currency movements; prohibit the use of anonymous bank accounts; and create a Financial Investigative Department (FID) that would investigate money laundering cases. The legislation has not yet been passed.

In April 2000, the GOG's Public Ministry, with US Government assistance, opened a new anti-corruption prosecutor's office. The office to date has initiated approximately 1,000 cases against government officials.

Guatemala is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Guatemala is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering.

The GOG must adopt comprehensive anti-money laundering legislation that meets international standards, implement such legislation, and develop effective enforcement mechanisms so that it can protect its economy and financial system from financial crimes.

Guernsey (Primary). The Bailiwick of Guernsey (BOG) covers a number of the Channel Islands (Guernsey, Herm, Alderney, and Sark being the largest). Guernsey is a Crown Dependency of the United Kingdom. Its sophisticated offshore center continues to be vulnerable to money laundering, particularly at the layering and integration stages.

The Financial Services Commission (FSC) is responsible for regulating the BOG's offshore industry. The FSC conducts on-site visits and analyzes assessments by auditors. There are approximately 79 offshore banks that offer deposit taking and custodial, trust, company, and fiduciary services. The BOG also has 413 registered offshore insurance companies, approximately 15,450 IBCs, and 15 bureaux de change.

In January 2000, the Proceeds of Crime Law and Regulations 1999 (All-Crimes Legislation) came into force, along with the corresponding regulations, the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Regulations 1999. The legislation extends predicate offenses for money laundering to all serious crimes and creates a system for reporting suspicious transactions. Suspicious transactions reports are filed with the Joint Police and Customs Financial Investigation Unit (JPCFIU). The JPCFIU is a member of the Egmont Group.

In 2000, the Financial Action Task Force (FATF) conducted a review of Guernsey's anti-money laundering regime against 25 specified criteria. Guernsey was not identified by the FATF as a noncooperative country in the international fight against money laundering. However, the FATF in its June report noted the following about Guernsey's anti-money laundering regime:

...Guernsey...[has] in place a system for reporting suspicious transactions. Where the underlying criminal conduct is drug trafficking or terrorism, the obligation to report is a direct one. Where the underlying criminal conduct is another predicate offence, the reporting is an "indirect obligation"-failure to make a report potentially leaves one open to a charge of money laundering; making a report is a defence against such a charge....

...Guernsey...[allows] certain intermediaries, and individuals, which are subject to the same anti-money laundering standards and supervision as financial institutions, to introduce business to banks and financial institutions on the basis that the introducers themselves verify the identity of the customer. In addition, the jurisdiction allows certain institutions based in certain overseas countries, subject to equivalent anti-money laundering systems, to introduce business, without separately verifying the identity of the client. Banks and other financial institutions in ...Guernsey...are only required to know the name of the client but not to verify the identity separately. There is concern as to whether such a system is consistent with FATF Recommendations and provides sufficiently rigorous checks on the identity of clients of banks and financial institutions, especially in cases where the introducer is not a financial institution.

The lack of a stringent scheme to apply the new rules of customer identification for accounts opened prior to their entry into force is also a source of concern. The new rules for customer identification verification were introduced in...Guernsey in 1999....

Proposed drug trafficking legislation would consolidate legislation passed in 1988 and 1992, and also would include a new offense of acquiring, possessing, or using the proceeds of drug trafficking. Moreover, this legislation would introduce an offense of failing to disclose the knowledge or suspicion of drug money laundering. Passage of this legislation reportedly would be an important step towards putting the UK in a position to extend the application of the 1988 UN Drug Convention to the BOG.

The BOG also is considering legislation that would regulate bureaux de change and cheque cashers to ensure that these entities are formally identified and comply with BOG Guidance Notes.

The BOG cooperates with international law enforcement on money laundering cases. The BOG is a member of the Offshore Group of Bank Supervisors.

The BOG has made strides toward developing a comprehensive anti-money laundering regime. The BOG should further strengthen its anti-money laundering program by approving and implementing pending legislation that would consolidate the drug trafficking law, regulate bureaux de change and cheque cashers, and expand regulation of trust companies.

Guyana (other). Guyana is not an important regional financial and offshore banking is not permitted. Nevertheless, there is concern that both narcotics and non-narcotics related money laundering takes place. A largely unregulated banking sector, several independent currency exchanges and growing illicit trade in licit goods (particularly gold and diamonds) facilitate money laundering activities.

Guyanese law requires that funds over US $10,000 imported into or exported out of Guyana be reported, but mechanisms have not yet been put into place to facilitate such reporting. The Financial Institutions Act of March 1995 designated the Bank of Guyana, the central bank, as the sole financial regulator and extended the coverage of legislation, regulations and penalties to all deposit-taking institutions. However, there are no laws in force at this time that require financial institutions to know, record, or report the identities of customers engaging in large currency transactions, suspicious transactions or to maintain transaction records.

Although a money laundering prevention bill was passed by the Guyanese National Assembly in February 2000, the legislation is not yet in force. The new law will criminalize money laundering related to narcotics and other serious crimes and will allow for the expansion of predicate offenses. The legislation also will establish requirements for reporting suspicious transactions by banks and non-bank financial institutions, and cross-border currency transactions. Moreover, other provisions of the legislation will require confidentiality in the reporting process, provide for good faith reporting, and contain provisions for asset forfeiture, international cooperation, and extradition for money laundering. The legislation authorizes creation of a supervisory authority to receive financial disclosure information and supervise financial institutions' activities to prevent and detect money laundering. However, the legislation appears to fall short of Financial Action Task Force (FATF) Forty Recommendations and the revised Organization of American States (OAS) Model Regulations on Money Laundering.

Guyana is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Guyana has not joined the Caribbean Financial Action Task Force (CFATF) by signing the CFATF Memorandum of Understanding. It would benefit by doing so and by actively participating in CFATF activities, including undergoing a mutual evaluation.

Guyana is a party to the 1988 UN Drug Convention

Haiti (Concern). Haiti is vulnerable to money laundering because of a dramatic rise in drug trafficking, official corruption, and ineffective bank supervision. Drug traffickers use Haiti as a transit country for moving bulk currency. Moreover, criminals launder funds through Haiti's exchange houses, and via wire transfers through banks and money remitters.

In August 2000, the Central Bank of Haiti (BRH) issued Circular 95, which requires banks, exchange brokers, and transfer bureaus to obtain declarations identifying the source of funds for transactions exceeding 200,000 gourdes (approximately US $ 9,600) or the equivalent in foreign currency. Covered entities must report to the competent authorities such transactions on a quarterly basis. Failure to comply can result in fines of 100,000 gourdes (approximately US $4,800). The BRH also can revoke the license of banks that fail to comply. The Ministry of Justice reported in August 2000 that it had created a body to receive and analyze financial disclosures. However, no additional details were provided. Several Haitian banks have organized anti-money laundering seminars to increase awareness.

In January 2001, Haiti reportedly passed anti-money laundering legislation. However, at this time, the specifics of the legislation have not been provided.

Haiti is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Haiti is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. The GOH in September 2000 began the process of applying for membership in the Caribbean Financial Action Task Force (CFATF). In December 2000, a CFATF team traveled to Haiti for a preliminary visit and evaluation.

The new GOH, which will be seated in February 2001, should build upon previous efforts and ensure that it enacts and fully enforces anti-money laundering legislation that meets international standards such as criminalizing the laundering of proceeds related to all serious crimes, including corruption, and requiring suspicious transactions and cross-border currency reporting. The GOH also is urged to establish, train, and adequately fund and staff a financial intelligence unit that would coordinate the GOH's anti-money laundering efforts and work with foreign governments to help protect the Haitian economy from criminal abuse. Moreover, the GOH is urged to continue its efforts to join and work more closely with the CFATF, which will help provide additional regional guidance, support, and coordination in the fight against money laundering.

Honduras (Concern). Honduras is not a major regional financial center, and does not offer offshore financial services. However, Honduras is vulnerable to drug money laundering because of increased drug-trafficking activity throughout the region. The illicit proceeds of auto theft, kidnappings, bank fraud, alien smuggling, and corruption also are believed to be laundered in Honduras. Money launderers use Honduran banks, casinos, exchange firms, and front companies.

Honduras's anti-money laundering regime is inadequate, and there have been no successful money laundering prosecutions under its present legislation. Law No. 27-98 of December 1997 criminalized narcotics-related money laundering, and requires banks and non-bank financial institutions to report suspicious financial transactions (STRs) to the National Banking and Insurance Commission (NBIC). The NBIC analyzes STRs and forwards those that it suspects are linked to narcotics trafficking to the Public Ministry. Even though financial institutions and their employees are protected from civil and criminal liability when filing STRs, compliance remains low. In 2000, a joint commission of the Public Ministry, NBIC, and other Government of Honduras (GOH) institutions drafted new legislation that would expand predicate crimes for money laundering to include all criminal activity, and promote more effective investigation of STRs. The National Congress has not yet approved this legislation.

Corruption is a serious impediment to implementing more effective anti-money laundering controls in Honduras. The Ministry of Security has proposed a series of measures that would target corruption in the judiciary and law enforcement, but the National Congress has yet to enact these measures.

Honduras is a party to the 1988 UN Drug Convention, and in December 2000, signed the UN Convention against Transnational Organized Crime. Honduras is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Honduras cooperates with the US Government in narcotics-related investigations.

Honduras is urged to pass comprehensive anti-money legislation that would expand the predicate crimes for money laundering to include all serious crimes.

Hong Kong (Primary). Hong Kong is an important international financial center and is vulnerable to money laundering through its traditional banking, remittance, and money transfer networks, as well as through the offshore financial services it offers and its extensive underground banking system. Narcotics trafficking, fraud, illegal gambling and bookmaking, alien smuggling, and tax evasion generate much of the illicit proceeds that are laundered in Hong Kong. Hong Kong has developed a strong anti-money laundering regime and is a regional leader in the area of financial regulation and supervision.

Hong Kong's banking system is a three-tier system of deposit-taking institutions: licensed banks, restricted license banks, and deposit-taking companies. As of October 2000, the Hong Kong Monetary Authority (HKMA) regulated 267 financial institutions. The Insurance Authority and the Securities and Futures Commission regulate the insurance and securities industries, respectively. All three groups impose licensing requirements and conduct background checks on applicants.

Hong Kong's offshore services include exempt companies in the form of registered, private, limited companies (PLCs). These companies can be formed using nominee shareholders and directors, but cannot issue bearer shares. Hong Kong allows public access to registers of corporate directors, managers, and members, but does not require disclosure of beneficial owners of the more than 470,000 such companies. PLCs generally are not taxed or required to file tax returns because Hong Kong taxes only income earned in Hong Kong. The HKMA requires authorized financial institutions to obtain written statements from company formation agents certifying that they have recorded and retained information that identifies the source of funds.

In 1989, Hong Kong criminalized money laundering related to drug trafficking through the Drug Trafficking (Recovery of Proceeds) Ordinance (DTROP), and in 1994, criminalized money laundering related to indictable offenses through the Organized and Serious Crime Ordinance (OSCO). In 1995, the GOHK passed amendments to the OSCO and the DTRPO that require banks, non-bank financial institutions, and financial intermediaries, such as lawyers and accountants, to file suspicious transactions reports (STRs). New legislation came into force in 2000 that requires remittance and money transfers agents to maintain records and identify customers for cash transactions equal to or greater than US $2,500.

Hong Kong also has implemented regulations that require financial institutions to record the identities of customers, or the identities of the customers' legal nominee, and to release this information to authorities upon request. Financial institutions are required to maintain these records for a minimum of five to seven years and to report suspicious transactions to the Joint Financial Intelligence Unit (JFIU) for review and possible investigation. The JFIU is a member of the Egmont Group and is able to share information with its international counterparts. Hong Kong law provides that the filing of an STR shall not be regarded as a breach of restrictions imposed by contract or law on the disclosure of information. The JFIU provides periodic feedback to financial institutions on STRs that they have filed and also makes available to financial institutions trend reports and sanitized case histories.

In the first ten months of 2000, the banking sector filed 4,969 suspicious transactions reports, the securities sector filed 24, and the insurance sector filed 11. Through November 2000, Hong Kong had prosecuted 13 money-laundering cases. Hong Kong reports that it has not detected an increase in financial crimes over the past year and has found no indications of narcotics proceeds funding smuggling activities.

In November 2000, Hong Kong reintroduced to the