U.S. Department of State

Introduction

The terrorist attacks of September 11 vividly illuminated the importance of anti-money laundering laws and controls. The attacks fostered an even greater recognition of the importance of anti-money laundering cooperation around the world. This recognition galvanized international cooperation and led to significant modifications to anti-money laundering laws. The framework of laws and regulations enacted during the last decade to address money laundering paid prompt dividends in the world community?s ability to trace the funds of those who finance international terrorism. The developments that have taken place since September 11 will further enhance global efforts against terrorist financing and the full range of money laundering challenges.

2001 was a year of domestic and international advances in the fight against money laundering. The terrorist attacks of September 11 added urgency and intensity to a robust process already underway. In 2001, the United States continued its vigorous inter-agency international anti-money laundering training program, totaling more than $3.5 million, to improve worldwide efforts to combat money laundering and financial crime. Other governments and international organizations also strengthened anti-money laundering programs in 2001. The European Union broadened its anti-money laundering directive and imposed anti-money laundering obligations on "gatekeepers"?professionals such as lawyers and accountants who help place dirty money into the financial system. Regional anti-money laundering bodies in Europe, Asia and the Caribbean continued working effectively, and nascent anti-money laundering regional organizations in South America and Africa became operational.

A major money laundering focus of the year was the work of the Financial Action Task Force (FATF), the world?s preeminent multilateral anti-money laundering body, which continued its non-cooperative countries and territories exercise. By year?s end, all fifteen jurisdictions on the original list had passed anti-money laundering legislation and four jurisdictions were removed from the list, while eight additional jurisdictions were identified as being non-cooperative.

Thanks largely to the anti-money laundering experience and expertise accumulated by FATF over the past dozen years, many jurisdictions were well-positioned to react quickly to the threat of terrorist financing. FATF moved quickly after September 11 to convene an extraordinary Plenary on the Financing of Terrorism. At this October Plenary in Washington, the FATF decided to expand its mission beyond money laundering, and to focus its energy and expertise on the worldwide effort to combat terrorist financing. The FATF adopted eight special recommendations regarding terrorist financing and prepared an extensive questionnaire that requested members to describe what legislation they have in place, or intend to pass, to thwart terrorist financing. FATF agreed to distribute the questionnaire to all countries worldwide and analyze their responses in 2002.

Anti-money laundering measures played a critical role in efforts by law enforcement officials immediately after the September 11 attacks to help identify the perpetrators and determine who organized and financed them. The FBI, recognizing the important role of financial records, established an interagency review group to focus on the financial aspects of the terrorist network. The regulatory and investigative systems established over the past ten years were key to unraveling this network. As the terrorists were identified, various records, including credit card transactions, provided immediate information in retracing the terrorists? movements prior to the attacks, as well as the links between them. Banks in the United States worked with law enforcement to provide swift access to information about bank accounts that were linked to the credit card accounts.

Simultaneous with the establishment of the FBI Financial Review Group and a Treasury task force, the Department of State convened an interagency task force to determine which countries? financial systems were most heavily involved with funding these terrorists. Diplomatic outreach to those countries ensued. Teams comprised of U.S. Government technical experts were formed to assess the capabilities and technical assistance needs of those countries that exhibited the political will to block terrorist financing and to develop viable anti-money laundering regimes.

The September 11 attacks led the world?s international organizations to take prompt action against terrorist financing. On September 28, 2001, the United Nations Security Council (UNSC) adopted Resolution 1373 which reaffirmed earlier UN counterterrorism resolutions 1269 and 1368 and requires states to take prescribed actions to combat terrorism and the financing of terrorism.

The Egmont Group of Financial Intelligence Units (FIUs) provides a network for sending out leads and requests for information to FIUs around the world. Cooperation among the Egmont Group?s 58 members and their prompt responses to these requests were unprecedented.

The terrorist attacks gave strong impetus to many countries to amend and strengthen their money laundering laws. In the United States, Congress passed the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism ("USA PATRIOT") Act of 2001 on October 26, 2001. This landmark piece of legislation made major changes to the U.S. anti-money laundering regime. The broad new authorities provided in the USA PATRIOT Act will have significant influence on the relationships between U.S. financial institutions and their individual and institutional customers.

While the investigations of the financial links underlying the September 11 attacks demonstrate the value of measures that have been taken to identify, prevent and attack money laundering, they also reveal shortcomings. For example, after years of discussion, far too many countries still do not require identifying information about originators of international funds transfers. While most developed countries of the world now require banks to file suspicious activity reports, many still do not require non-bank financial institutions to do so. Some countries have yet to criminalize money laundering beyond drug-related offenses and many more do not have laws that address terrorist financing. September 11 demonstrated the need to do both. And many new initiatives that will be featured in anti-money laundering efforts in 2002 are now underway to try to overcome all of these deficiencies.

Why We Must Combat Money Laundering

Money laundering is organized crime?s way of trying to disprove the adage that "crime doesn?t pay." It is an attempt to assure drug dealers, illegal arms dealers, corrupt public officials and other criminals that they can hide their profits and to provide them the fuel to operate and expand their criminal enterprises. Fighting money launderers and strengthening anti-money laundering regimes globally will reduce financial crime by depriving criminals of the means to commit other serious crimes. To a lesser but real extent, strengthening anti-money laundering regimes, particularly in the areas of identifying the originators of international wire transfers, will impact terrorist financing as well. At a minimum, strong anti-money laundering measures help to create a body of evidence that exposes criminal behavior and help law enforcement identify perpetrators and build cases against them that lead to their arrests and convictions.

As the tragic events of September 11 graphically demonstrated, crime has become global, and the financial aspects of crime have become more complex, due to rapid advances in technology and the globalization of the financial services industry. Modern financial systems, in addition to facilitating legitimate commerce, permit criminals to transfer millions of dollars instantly, using personal computers and satellite dishes. Only his or her creativity limits the criminal?s choice of money laundering vehicles. Money is laundered through currency exchange houses, stock brokerage houses, gold dealers, casinos, automobile dealerships, insurance companies, and trading companies. Private banking facilities, offshore banking, shell corporations, free trade zones, wire systems, and trade financing all have the ability to mask illegal activities. In so doing, criminals manipulate financial systems throughout the world.

Money laundering generally involves a series of multiple transactions used to disguise the source of financial assets so that those assets may be used without compromising the criminals who seek to use the funds. These transactions typically fall into three stages: (1) Placement, the process of placing, through deposits, wire transfers, or other means, unlawful proceeds into financial institutions; (2) Layering, the process of separating the proceeds of criminal activity from their origin through the use of layers of complex financial transactions; and (3) Integration, the process of using an apparently legitimate transaction to disguise the illicit proceeds. Through this process the criminal tries to transform the monetary proceeds derived from illicit activities into funds with an apparently legal source.

The United States and other nations are also victims of tax evasion schemes that use various financial centers around the world and their bank secrecy laws to hide money from tax authorities, undermining legitimate tax collection. Financial centers that have strong bank secrecy laws and weak corporate formation regulations, and that do not cooperate in tax inquiries from foreign governments, are found worldwide. These financial centers, known as "tax havens," thrive in providing sanctuary for the deposit of monies from individuals and businesses that evade the payment of taxes in their home jurisdictions and allow them to keep the money they have deposited from the knowledge of tax authorities.

Unchecked, money laundering can erode the integrity of a nation?s financial institutions. Due to the high integration of capital markets, money laundering adversely affects currencies and interest rates as launderers reinvest funds where their schemes are less likely to be detected, rather than where rates of return are higher. Money launderers also negatively impact jurisdictions by reducing tax revenues through underground economies, competing unfairly with legitimate businesses, damaging financial systems, and disrupting economic development. Ultimately, laundered money flows into global financial systems where it can work to undermine national economies and currencies.

There is now worldwide recognition that we must deal firmly and effectively with increasingly elusive, well-financed and technologically adept criminals and terrorists who are determined to use every means available to subvert the financial systems that are the cornerstone of legitimate international commerce. The continued abuse of some offshore financial centers, the proliferation of on-line Internet banking and the widespread use of underground banks and money-changers highlight the importance of using new technologies and strong strategies to combat money laundering schemes and terrorist financing schemes.

International Terrorism Financing

Terrorist groups differ from other criminal networks in the motive behind their crimes. While drug traffickers and organized crime groups primarily seek monetary gain, terrorist groups usually seek non-financial goals, such as publicity and political influence. Terrorism is a means to these ends. Terrorist financing also differs from money laundering in other respects. Ordinarily, criminal activity produces the funds and other proceeds that money launderers disguise so that the funds can be used for legitimate or criminal purposes. Funds that support terrorist activity are generated primarily through fundraising?often through legal non-profit entities, although terrorist groups often obtain some funds from criminal activities as well. Because terrorist activity requires very little money (the attacks on the World Trade Center and the Pentagon are estimated to have cost a little more than half a million dollars), the amounts of money that individual terrorist cells or their members seek to disguise is substantially less compared to that laundered by organized crime and drug kingpins. And it is the latter for which anti-money laundering tools were initially created. For example, the U.S. reporting requirement of cash transactions above $10,000 may not be useful in detecting terrorist financing. This may require modification of existing laws and regulations. The investigation of terrorist financing is requiring law enforcement and regulatory officials to use existing anti-money laundering laws in altogether new ways. And it will require stronger international anti-money laundering enforcement regimes.

While they do not seek financial gain as a sole end, international terrorist groups need money to attract adherents and to support their activities. Some terrorist organizations also need funds for media campaigns, to buy political influence, and to undertake social projects aimed at maintaining membership and attracting sympathetic supporters. Often, terrorists also rely in part on funds gained from traditional crime such as robbery, kidnapping for ransom, drug trafficking, extortion, document forgery, currency and merchandise counterfeiting, and smuggling. Terrorists can then divert some of the proceeds of these criminal activities to their terrorist efforts.

Terrorists typically derive only relatively small sums from the proceeds of traditional illegal activities. A substantial portion of the terrorists? funding comes from contributors, some of whom know the intended purpose of their contribution and some of whom do not. In this key respect, terrorism financing contrasts with the financing of a drug trafficking network, which obtains virtually all of its funding from illegal activities.

Terrorist groups commingle illicit revenues with legitimate funds drawn from profits from commercial enterprises and donations from witting and unwitting sympathizers. They tap a range of sources for their financial support including:

• Otherwise Legitimate Commercial Enterprises. Terrorist groups earn profits from businesses they own. They also secure donations from sympathetic entrepreneurs.
• Social and Religious Organizations. Since the early 1990s, terrorist groups have relied increasingly on donations from social and religious organizations for financial support.
• State Sponsors. Several rogue nations?Cuba, Iran, Iraq, Libya, North Korea, Sudan, and Syria?have provided material assistance, financial support or other resources to terrorists.

Tracking terrorist financial transactions is more difficult than following the money trails of mainstream criminal groups. While many organized crime groups are adept at concealing their wealth and cash flows for long periods of time, their involvement in the physical trade of illicit drugs, arms, and other commodities often exposes the revenues and expenditures connected to these illegal dealings. In contrast, terrorist actions generally are comparatively inexpensive and their financing is often overshadowed by the larger financial resources allocated for the group?s political and social activities, making it more difficult to uncover the illicit nexus.

Terrorist groups use a variety of means to move their funds, including:

• Currency Transport. Cash couriered by operatives is difficult to track because there is no paper trail.
• Traditional Financial Institutions. The international nature of most foreign terrorist groups forces them to rely on banks and other financial institutions.
• Islamic Banks. Banks that operate in line with Islamic law, which prohibits the payment of interest and certain other activities, have proliferated throughout Africa, Asia and the Middle East since the mid-1970s. In most instances, these banks simply are not required to adhere to a wide range of regulations normally imposed on commercial banks. Islamic banks are often not subject to any regulatory and supervisory scrutiny by bank regulators, and thus, do not undergo periodic bank examinations or inspections. While these banks may voluntarily comply with banking regulations and in particular, anti-money laundering guidelines, there is often no control mechanism to ensure such compliance. Some of the largest Islamic financial institutions now operate investment houses in Europe and elsewhere.
• Money Changers. Money changers play a major role in transferring funds in Asia, the Americas, the Middle East, and other regions. Their presence is largest in countries where cash is an accepted means to finalize business deals and where large numbers of expatriates work to remit funds to family abroad.
• Underground Bankers. Commonly referred to as alternative remittance systems, such as the Hawala or Hundi, underground bankers are prevalent throughout Asia and the Middle East.

Legislation: The U.S. enacted legislation specifically to address the problem of terrorist financing. Title 18 U.S.C. ? 2339A, enacted in 1994, amended in 1996, and strengthened again most recently in 2001 by the USA PATRIOT Act, makes it a crime for persons within the U.S. to provide, conceal or disguise the nature, location, source, or ownership of "material support or resources" to be used in a violation of any of the predicate enumerated crimes. There are further statutes directly related to the fight against terrorist financing such as the Antiterrorism and Effective Death Penalty Act (AEDPA) and the International Emergency Economic Powers Act (IEEPA) that give the President broad authority to regulate international transactions under certain specified circumstances.

Prosecution: Funds involved in traditional money laundering are usually the proceeds of a specific prior crime. Funds used to finance terrorism generally are not related to the proceeds of a specific prior crime. Terrorist funds acquire their criminal "taint" from the intent to assist in an act of terrorism or to fund a designated foreign terrorist organization. Despite this difference, the money laundering statutes provide numerous opportunities for United States prosecutors in terrorist financing cases. For example, where a violation of the money laundering statutes can be charged, the prosecution can seek criminal and civil asset forfeiture.

There are several, terrorism-related, alternative crimes that can serve as predicate crimes to money laundering, including the charges of laundering of monetary instruments and engaging in monetary transactions in property derived from specified unlawful activity. Providing material support to terrorists and other such terrorist-related offenses are also crimes that can involve money laundering. The money laundering charge most commonly applied to financiers of terrorism is available where funds are transmitted internationally with the intent to promote a specified unlawful activity such as providing material support to terrorists, an offense against a foreign nation involving murder, kidnapping, robbery, extortion, or destruction of property by means of explosive or fire, or other terrorism-related specified crimes. In addition, the International Emergency Economic Powers Act authorizes the imposition of criminal and civil penalties against any person who engages in transactions prohibited by executive orders and implementing regulations issued under that Act.

The international consensus to fight terrorist financing has never been stronger. The international community is equipping itself with increasingly more effective tools to prevent and respond to terrorist financing. The Group of Eight (G-8) nations, the United Nations, the European Union, the Financial Action Task Force on Money Laundering (FATF), and the Organization of American States have all sponsored conferences and crafted recommendations designed to produce enhanced cooperation and strengthened measures to combat terrorist financing. As further evidence of international resolve, on September 28, 2001, the United Nations Security Council (UNSC) adopted Resolution 1373 which reaffirms earlier UN counter-terrorism resolutions and requires states to combat terrorism and the financing of terrorism.

Offshore Financial Centers

Although there is little consensus regarding the exact definition of an offshore financial center (OFC), certain characteristics distinguish traditional onshore financial centers from those termed "offshore". Offshore financial centers are, in the vast majority of cases, segregated from the traditional banking structure of the jurisdiction. At least 90 percent of all jurisdictions offering offshore financial services restrict access to the offshore sector to non-residents, thereby creating a highly confidential and parallel financial system within their own borders. Many jurisdictions with OFCs conduct financial transactions only in currencies other than the local currency. OFCs also differ from onshore jurisdictions in their regulatory regimes and legal frameworks. Many OFCs lack the stringent regulatory and supervisory regimes found in developed onshore jurisdictions. In the majority of OFCs, banks are not required to adhere to a wide range of regulations normally imposed on onshore banks. In most OFCs, non-bank financial industries, such as the insurance and securities industries, are subject to even less, if any, regulation than is the banking industry.

OFCs maintain that their carefully crafted laws and regulations provide beneficial business and financial planning options for their clients. These include, but are not limited to: sophisticated trade financing; estate planning for high net worth individuals; tax mitigation for individuals and corporations; avoidance of exchange controls; liability containment for ships and airplanes; sophisticated insurance management options; investment opportunities that transcend home country marketing regulations; preservation of assets; investment of overnight funds; and freedom from certain home country regulatory requirements.

Freedom from certain home country regulatory requirements provides opportunities to those with criminal intent. In many OFCs, a bank can be formed, registered and its ownership placed in the hands of nominee directors via the Internet. However formed, there are few, if any, disclosure requirements, bank transactions are free of exchange and interest rate restrictions, minimal or no capital reserve requirements are required and transactions are mostly tax-free. Some OFCs permit the licensing and registration of "shell banks"?generally understood as banks that exist on paper only and do not have a physical presence in any jurisdiction. Of the more than 4000 offshore banks thought to exist, the number of shell banks remains unknown.

A principal attraction of the OFCs is often the existence of legal frameworks designed to obscure the identity of the beneficial owner, to promote regulatory and supervisory arbitrage, and to provide mitigation or evasion of home-country tax regimes. Some of these OFCs offer the ability to form and manage confidentiality of a variety of international business companies (IBCs) and exempt companies, trusts, investment funds and insurance companies, many with nominee directors, nominee officeholders and nominee shareholders.¹ When combined with the use of bearer shares (shares that do not name the owner) and "mini-trusts" (the latter are instruments used to further insulate the beneficial owner while bridging the ownership and management of the corporate entity), IBCs can present impenetrable barriers to law enforcement.

 ¹"IBC" is the term used to describe a variety of offshore corporate entities, which are almost always restricted to transacting business outside the jurisdiction in which they are formed. IBCs are characterized by rapid formation, at low cost, with broad powers, low to no taxation, minimal or non-existent reporting requirements and secrecy. Many OFCs permit IBCs to issue bearer shares. The Enron Corporation, for example, reportedly registered IBCs in the Cayman Islands and the Turks and Caicos OFCs.

This lack of transparency and the ability to engage in regulatory arbitrage, coupled with a concomitant reluctance or refusal of many OFCs to cooperate with regulators and law enforcement officials from other jurisdictions, attract those with both legitimate and illegitimate purposes. Drug traffickers, terrorists, money launderers, tax evaders and other criminals have found the OFCs a particularly inviting venue in which to conduct and conceal their activities. With the advent of the Internet and other technological advances, funds can be transferred around the globe instantaneously, providing further opportunities to engage in the placement and layering of illicitly gained funds. There is also a growing concern that terrorists and other criminals are increasingly enlisting the services of unethical lawyers, accountants and other professionals to help them discover and manipulate new money laundering and terrorist financing opportunities afforded by the new technologies. The attraction for small states in the offshore financial services market is a dependable source of income that in some instances exceeds 50 percent of a jurisdiction?s GDP.

Although IBCs have served as the predominant instruments for committing financial crimes in OFCs, a variety of types of trusts play important roles as well. One form of trust, the Asset Protection Trust (APT), protects the assets of individuals from civil judgments in their home countries. A common provision of APTs is that challenges or claims against the assets of the trust must be brought before the courts of the jurisdiction of the APT domicile within a relatively short period of time (usually two years). Many APTs contain "flee clauses" providing for funds to be immediately transferred to another OFC if the APT is threatened by inquiry. Used in combination, IBCs, mini-trusts, bearer shares and APTs make it nearly impossible for competent authorities to generate paper trails or to identify beneficial owners of companies, while they simultaneously protect those engaging in serious financial crime from civil or criminal prosecution.

Other practices found in some OFCs cause problems for law enforcement. One such practice, well advertised on the Internet, is the selling of "economic citizenship"?a practice that, if improperly controlled, can enable individuals suspected of committing crimes to purchase citizenship in an OFC jurisdiction that may not have an extradition agreement with the purchaser?s original home country. Purchasers of economic citizenships can change their names to go along with their new passports, creating yet another impediment to law enforcement. During 2001, three Caribbean Basin OFCs sold inadequately controlled economic citizenships: Belize, Dominica and St. Kitts & Nevis. Grenada suspended selling improperly controlled economic citizenships in 2001. In the Pacific region, Nauru sells improperly controlled economic citizenships.

Not only criminals purchase economic citizenships. Terrorists do as well. In December, two individuals purchased economic citizenships from Belize for $25,000 apiece. They then attempted to obtain visas to enter the United States as citizens of Belize. They were denied entry visas by the consular staff of the American embassy in Belize because the two applicants were members of a proscribed Middle Eastern terrorist group. The government of Belize subsequently announced that it would cease selling economic citizenships in January 2002.

Internet gaming executed via the use of credit cards and offshore banks represents yet another powerful vehicle for criminals to launder funds from illicit sources as well as to evade taxes. Advertised on the Internet as being located primarily in the Caribbean Basin, virtual casinos can be extremely profitable for governments that sell the licenses and likely share in the operators profits. At the beginning of 2001, Antigua and Barbuda, for example, reportedly had licensed more than 80 Internet gaming websites at a cost of $75,000?$85,000 per license for a sports betting shop and $100,000 for virtual casinos. As the Offshore Financial Services chart at the end of this section illustrates, St. Kitts/Nevis is the only Caribbean OFC to sell "economic citizenships" and license virtual casinos. In the Pacific region, only the Palau and Vanuatu OFCs are reported to sell gaming licenses, although neither sells economic citizenships.

In recent years, various bodies have examined the threats presented by a lack of transparency and oversight posed to an increasingly interdependent global financial system. Two 2000 initiatives, described in detail in the 2001 International Narcotics Control Strategy Report, have had a direct impact on the offshore financial services industry: The Financial Stability Forum (FSF) and the Financial Action Task Force Non-Cooperative Countries and Territories exercise (FATF NCCT).

The FSF concluded that a number of the OFCs were perceived as having weaknesses in financial supervision, cross-border cooperation and transparency. Divided into three groups, eight OFCs (Group I) were described as "largely of a good quality"; nine Group II OFCs were found to be of lower quality than Group I OFCs but apparently somewhat more cooperative, more transparent and somewhat better supervised than the twenty-six OFCs in Group III. All thirty-five OFCs in Group II and III were found to have regulatory deficiencies that could allow financial market participants to engage in regulatory arbitrage of several forms, thereby undermining efforts to strengthen the global financial system.¹

¹Financial Stability Forum press release, May 26, 2000. The Report of the Working Group on Offshore Financial Centers is located at the FSF?s website: http://www.fsforum.org. Group I OFCs: Hong Kong, Luxembourg, Singapore and Switzerland, Guernsey, Ireland, the Isle of Man and Jersey. Group II OFCs: Andorra, Bahrain, Barbados, Bermuda, Gibraltar, Labuan (Malaysia), Macao, Malta and Monaco; Group III OFCs: Anguilla, Antigua and Barbuda, Aruba, Belize, British Virgin Islands, Cayman Islands, Cook Islands, Costa Rica, Cyprus, Lebanon, Liechtenstein, Marshall Islands, Mauritius, Nauru, Netherlands Antilles, Niue, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Samoa, Seychelles, the Bahamas, Turks and Caicos, and Vanuatu.

The FSF requested the International Monetary Fund (IMF) to develop, organize and conduct assessments of OFC adherence to international financial standards, including several of the FATF 40 Recommendations that involved supervision and regulatory matters. The FSF recommended giving "highest priority to those in Group II" and "high priority to those OFCs in Group III whose scale of financial activity has the greatest potential impact on global financial stability."

The IMF agreed to conduct assessments only of those OFCs that volunteered and first completed a self-assessment of their supervisory regimes, focused principally on the supervisory and regulatory arrangements in place for banking, securities and insurance activities. The self-assessment would be followed by an IMF-led assessment (Module II Assessment). A third broader and more complex IMF-led assessment (Module III) of those OFCs previously assessed by the IMF would follow. The IMF will make no assessments public unless the assessed jurisdiction voluntarily consents. During 2001, the IMF had completed Module II assessments of Cyprus, Gibraltar, Panama, Macau, Belize and Aruba.

The FATF Non-Cooperative Countries and Territories exercise measured jurisdictions? anti-money laundering regimes against twenty-five criteria for the purpose of determining which jurisdictions weakened the global effort to combat money laundering. These criteria encompass four broad areas: loopholes in financial regulations; obstacles raised by other regulatory requirements; obstacles to international cooperation; and, inadequate resources for preventing and detecting money laundering activities.

At its June 2000 Plenary, the FATF identified fifteen jurisdictions as non-cooperative in the international fight against money laundering. All but four were OFCs.¹ At the June 2001 Plenary, the FATF determined that four OFC jurisdictions?the Bahamas, the Cayman Islands, Panama and Liechtenstein?had made sufficient progress in remedying the noted deficiencies in their anti-money laundering regimes to be removed from the non-cooperative list. In 2001, the FATF added the OFCs of Grenada and Guatemala to the list of Non-Cooperative Countries and Territories (NCCT), as well as the non-OFC jurisdictions of Burma, Egypt, Hungary, Indonesia, Nigeria and Ukraine.

 ¹ FATF identified the following OFCs as "non-cooperative" in June 2000: the Bahamas, the Cayman Islands, Cook Islands, Dominica, Liechtenstein, Marshall Islands, Nauru, Niue, Panama, St. Kitts and Nevis and St. Vincents and the Grenadines. Other jurisdictions identified as non-cooperative were Israel, Lebanon, the Philippines and Russia.

By year?s end, seven of the eight remaining OFCs on the original NCCT list had passed adequate anti-money laundering legislation to avoid the imposition of countermeasures by FATF. Nauru was the only delinquent OFC. FATF reviewed Nauru?s legislation, deemed it insufficient, and warned Nauru that the law would have to be amended by the end of November or it would have to face countermeasures by the 29 member state FATF. Nauru did not comply and FATF members agreed to invoke countermeasures against it. The United States issued its countermeasures in January 2002.

As effective as the FATF NCCT exercise has proven to be in convincing recalcitrant OFCs to pass anti-money laundering legislation and regulations, legislation passed by the United States Congress may prove to have a more fundamental impact on criminals and terrorists who have used poorly regulated OFCs to launder criminally derived money or to disguise assets derived from allegedly legitimate sources. On October 26, 2001, President George W. Bush signed a new anti-terrorism bill, the Uniting and Strengthening America Act by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001. The new Act generally prohibits covered U.S. financial institutions from maintaining a correspondent account in the United States for a foreign shell bank. The Act also generally requires covered U.S. financial institutions to take reasonable steps to ensure that their correspondent account holders (foreign banks) do not use those accounts to indirectly provide banking services to a foreign shell bank.

The Act also requires that U.S. financial institutions that establish, maintain, administer or manage a private banking account or correspondent account for a non-U.S. person to apply due diligence policies, procedures and controls reasonably designed to detect and report instances of money laundering through those accounts. The Act imposes additional standards for such accounts held by foreign banks operating under offshore licenses or licenses from certain jurisdictions.

The USA PATRIOT Act also required U.S. financial institutions to take "reasonable steps" to ensure that their correspondent account holders (foreign banks) are not using those accounts to provide banking services to foreign shell banks indirectly in violation of the USA PATRIOT Act. U.S. Treasury Department regulations suggested that one "reasonable step" would be for U.S. financial institutions to obtain written notification from their corresponding banking clients certifying that none of their account holders are shell banks as defined by the Act.

In Nauru, for example, it is believed that nearly all, if not all, 400 banks registered in Nauru are shell banks?banks that exist on paper only for the purpose of "booking" monies through them. In many cases, the beneficial owners of the shell bank are anonymous and have established equally anonymous IBCs that are aggressively employed to move funds through their fictional shell banks.

While Nauru might be the extreme example, the number of banks currently registered in jurisdictions that offer offshore services (as noted on the Offshore Services chart that follows this section) may decrease dramatically in 2002 as shell banks come under closer scrutiny.

The USA PATRIOT Act also allows the U.S. Government to seize funds held by foreign banks in U.S. correspondent accounts to satisfy certain types of seizure orders against funds deposited in the foreign bank abroad. The first such seizure of this nature occurred December 2001 with respect to forfeitable funds deposited by two U.S. citizens in the OFC of Belize.

The continuation of the IMF assessments, the FATF NCCT exercise and the adherence to and enforcement of the USA PATRIOT Act will not only continue to distinguish well regulated offshore jurisdictions from those that are not, but will diminish the capacity of OFCs to cater to criminals attempting to launder money or finance terrorist activities through U.S. financial institutions.

See Offshore Financial Services Chart.

Chart 2 provides a rank ordering of the underlying suspicious activity identified in the SAR data between April 1996 and April 2001.

See Comparative Chart.

Country Reports

Afghanistan. Afghanistan is not a regional financial or banking center. Afghanistan has no formal credit institutions, and its financial institutions are rudimentary. In the last quarter of 2001, the Central Bank stopped functioning, as did the formal financial sector. The counterfeiting of the afghan currency remained a major problem.

The proceeds of drug trafficking are generally remitted abroad using hawala. Reports indicate that illegally obtained proceeds are moved from Afghanistan to Pakistan to be laundered.

Afghanistan is a party to the 1988 UN Drug Convention and has signed but not yet ratified the UN Convention against Transnational Organized Crime.

Albania. Albania remains at significant risk for 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 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. Law No. 8610 "On the Prevention of Money Laundering" (passed May 17, 2000) requires financial institutions to report to an anti-money laundering agency all transactions that exceed approximately U.S. $10,000. Financial institutions are required to report transactions within 48 hours if the origin of the money cannot be determined. In addition, private and state entities are required to report all financial transactions that exceed certain thresholds.

The legislation also mandates the establishment of the above referenced agency to coordinate the Government of Albania?s (GOA) efforts to detect and prevent money laundering. The Agency for Coordinating the Combat of Money Laundering (ACCML) is Albania?s financial intelligence unit. The ACCML falls under the control of the Ministry of Finance and is to 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 law has two unusual provisions with regard to the ACCML. First, the ACCML has the ability to enter into bilateral or multilateral information sharing agreements on its own authority. Second, it has the responsibility to assess and combat emerging technologies. The legislation, however, does not mandate staffing and funding of the ACCML.

In December 2000, Albania signed the UN Convention against Transnational Organized Crime. Albania is a member of the Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (PC-R-EV). As of December 2001, Albania had not ratified the European Money Laundering Convention. Albania participates in the Southeastern Europe Cooperative Initiative.

To date no money laundering cases have been prosecuted in Albanian courts and no illicit proceeds have been forfeited. The GOA should fully implement the provisions of its anti-money laundering legislation. In particular, the GOA should provide adequate legal and financial resources and support to the ACCML, its financial intelligence unit. It would also be beneficial for the ACCML to join the Egmont Group of financial intelligence units to increase its international cooperation.

Algeria. Algeria is not a financial center. Reportedly, there is little evidence that suggests that there are money laundering activities within the country. Currently, 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 to the proper customs authority.

Algeria is a party to the 1988 UN Drug Convention and has signed but not yet ratified the United Nations Convention against Transnational Organized Crime.

Angola. Money laundering does not appear to be a significant problem in Angola because of its poorly developed financial sector. Yet the illegal trade in diamonds and the usage of diamonds as a conduit for money laundering schemes is a concern. There is also plausible evidence that there are links between the illegal diamond trade and international terrorist, drug, and/or criminal organizations. Currently, Angola is participating in efforts to launch the "Kimberly Process," which involves establishing a global certification system for diamonds.

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.

Angola is a party to the 1988 UN Drug Convention and a signatory to the UN Convention against Transnational Organized Crime.

Anguilla. Anguilla?s offshore financial sector renders it vulnerable to money laundering. As with the other United Kingdom Caribbean Overseas Territories, Anguilla underwent an 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 2,792 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.

The Proceeds of Criminal Conduct Act (PCCA) 2000 extends the predicate offenses for money laundering to all indictable offenses and allows for the forfeiture of criminally derived proceeds. 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. The MLRA establishes requirements for customer identification, record keeping, reporting, and training procedures. 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.

The U.S./UK MLAT concerning the Cayman Islands was extended to Anguilla in November 1990. Anguilla is also subject to the U.S./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 should establish a Reporting Authority that can cooperate with foreign authorities. It should also adopt measures to ensure identification of beneficial owners of IBCs.

Antigua and Barbuda. While Antigua and Barbuda remains vulnerable to money laundering because of its offshore financial sector and its Internet gaming industry, the Government has enacted reforms to its anti-money laundering regime and taken concrete steps to effectively implement those reforms. In August 2001, as a result of the enactment of these new laws and their substantial implementation, both the U.S. and the United Kingdom lifted financial advisories that had been in effect since April 1999. These advisories had recommended that U.S. and UK financial institutions give "enhanced scrutiny to all financial transactions routed into or out of Antigua and Barbuda."

In response to these advisories, in 1999 the Government of Antigua and Barbuda (GOAB) repealed the 1998 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. Additional amendments were made to the MLPA in 2000 and 2001, which acted to enhance international cooperation and correct deficiencies in the asset forfeiture provisions. The GOAB plans to submit further amendments to Parliament in 2002 to create an in rem forfeiture system for money laundering. In addition, the GOAB introduced a terrorism act in October 2001 that, if enacted, will allow the GOAB to seize and freeze terrorist funds.

In 2001, the GOAB inaugurated new facilities for the Office of National Drug Control and Money Laundering Policy (ONDCMLP), an office that was established in 1996. The modern multi-purpose facility houses the National Joint Headquarters, the Financial Intelligence Unit, the Financial Investigations Unit, the Drugs Intelligence Unit, and the government?s Drug Control Policy Unit. During 2000 and 2001, eleven Antiguan law enforcement officials received anti-money laundering training from the Caribbean Anti-Money Laundering Program.

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 both 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 that resident agents ensure the accuracy of the records and registers that are kept at the Registrar?s office, as well as know the names of beneficial owners of IBC and 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.

During 1999, 2000, and 2001, the GOAB conducted an extensive review of the offshore banking sector. As a result, 26 offshore banks had their licenses revoked, were dissolved, placed in receivership, or otherwise put out of business. Currently, Antigua and Barbuda has 21 licensed offshore banks in operation.

Like most of the other countries in the Eastern Caribbean, the 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, and conducts 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.

The IFSRA issues licenses for the offshore sector, and also conducts bank examinations. The IFSRA revoked five bank licenses in 2001. The IFSRA is also responsible for issuing licenses for 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.

Casinos and sports book-wagering operations in Antigua and Barbuda?s 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. The 2000 and 2001 amendments to the MLPA expand its coverage to include all types of gambling entities and impose financial limit reporting on the gambling entities. These reports are to be sent to the ONDCMLP, but to date no such reports have been forwarded. It is not clear if casinos and other gaming-related entities are subject to provisions of the IBCA. The GOAB has drafted and is considering legislation and regulations for the licensing of interactive gaming and interactive wagering in order to address possible money laundering through client accounts of Internet gambling operations.

Antigua and Barbuda is a party to the 1998 UN Drug Convention, a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and a member of the Caribbean Financial Action Task Force (CFATF). In 1999, Antigua and Barbuda was the first country in the Eastern Caribbean to exchange the instruments of ratification in order to bring into force a Mutual Legal Assistance Treaty and an Extradition Treaty with the United States. In addition, Antigua and Barbuda signed a Tax Information Exchange Agreement with the United States in December 2001, which will allow the exchange of tax information between the two nations. Antigua and Barbuda signed the UN Convention against Transnational Organized Crime on September 26, 2001.

During 2001, the GOAB continued its bilateral and multilateral cooperation in various criminal and civil investigations and prosecutions. The GOAB has provided assistance to U.S. and other countries? law enforcement and prosecutors investigating and prosecuting fraud and money laundering cases. The U.S. has made one extradition request to Antigua and Barbuda since the bilateral extradition treaty entered into force. This request, which is related to a fraud and money laundering investigation, originally made in November 1999 and resubmitted in 2001, is currently awaiting the Magistrate?s decision after a length-contested hearing. Additionally, the GOAB has received substantial revenues through asset sharing as a result of its cooperation in the freezing and forfeiture of illegal assets at the request of other countries.

The GOAB should continue to fully implement and enforce all provisions of its anti-money laundering legislation, as well as to take the necessary legislative and regulatory steps to ensure that its gambling sector is covered by anti-money laundering legislation and is adequately supervised.

Argentina. Argentina is neither an important regional financial center nor an offshore banking center. Money laundering related to bribery, contraband, tax evasion and narcotics activities is believed to occur throughout the banking system and non-bank financial institutions.

Allegations made by an Argentine congressional committee that bankers and former government officials may have engaged in money laundering activities related to illegal arms trafficking, illicit enrichment and narcotics-trafficking shocked the Argentine public during 2001. The turmoil emphasized the critical need to move forward with implementation of a new anti-money laundering law passed in 2000 (Law 25.246). Law 25.246 expanded money laundering predicate offenses to all existing crimes included in the Penal Code, set a stricter regulatory framework for the financial sector; and created a Financial Intelligence Unit (FIU) within the Ministry of Justice and Human Rights.

Under this new law, requirements for customer identification, record keeping and reporting of suspicious transactions now apply to a wide variety of entities, including banks, currency exchange houses, casinos, securities dealers, registrars of real estate, auto dealerships, dealers in art, antiques, jewels, precious metals, and stones, stamps and coins, insurance companies, issuers of travelers checks, credit card companies, armored car companies, postal money transmitters, notaries, and certified public accountants. Law 25.246 forbids these financial institutions and businesses from notifying their clients when filing suspicious financial transactions reports, and provides a safe harbor from liability for reporting such transactions. The FIU is expected to establish reporting norms tailored to each type of business.

The FIU will receive and analyze the reports of suspicious transactions, and refer those deemed appropriate for investigation to the Public Ministry. On February 14, 2001, the GOA issued Decree 169/2001 to regulate Law 25.246 and further define the composition of the FIU that originally would have been composed of 11 members from the public and private sectors. However, on November 22, 2001, Decree 1547/2001 was issued reducing the FIU to five members. Of the five, three governmental officials have been appointed (Central Bank, National Securities Commission, and Secretariat for the Prevention of Drug Addiction?SEDRONAR); two non-governmental members are expected to be appointed by early 2002.

Prior to the passage of Law 25.246 of April 2000, the Central Bank of Argentina and the National Securities Commission had issued a series of regulations requiring certain financial institutions to know, record and report the identity of customers conducting transactions of U.S. $10,000 or more. The regulations required these institutions to report transactions considered suspicious. The regulation was based on a list of twenty types of transactions. The Central Bank has referred over 50 cases to the office of the public prosecutor for investigation.

Additional anti-money laundering measures went into effect in January 2001 with the passage of Law 25.345, Prevention of Tax Evasion. This tax law requires all transactions of U.S. $10,000 or more be conducted in instruments other than cash, i.e., bank draft, credit card or bank transfer. The Argentine Customs Service issued regulations to control the international transportation of currency and monetary instruments. Resolution 1172 of December 4, 2001 requires that individuals (foreign or national) entering Argentina with currency and/or monetary instruments over U.S. $10,000 make a declaration to the Customs authorities. Resolution 1176 of December 7, 2001, imposes similar requirements to individuals departing Argentina. The Customs authorities will then communicate the declarations to the tax authorities and the FIU.

The GOA remains active in the fight against financial crimes through its participation in diverse international fora. It is a party to the 1988 UN Drug Convention and has signed but not yet ratified the 2000 UN Convention Against Transnational Organized Crime. Argentina is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and in June 2000 became a full member of the FATF. It played a leading role in the creation of the South American FATF (GAFISUD) in December 2000, and it is the venue for the GAFISUD Executive Secretariat. Argentina and the United States have a Mutual Legal Assistance Treaty that entered into force in 1993. A new extradition treaty between Argentina and the USG entered into force on June 15, 2000. The GOA?s SEDRONAR and the U.S. Treasury FinCEN exchange information in support of money laundering investigations under the terms of a memorandum of understanding signed in December 1995.

The GOA should continue to focus its efforts at implementing anti-money laundering Law 25.246 of May 2000, and should make its FIU operational in the very near future.

Armenia. Armenia is not a major financial center; however, high unemployment, low salaries, corruption, a large underground economy, and the presence of organized crime also contribute to Armenia?s vulnerability to money laundering. Armenian authorities are generally not cognizant of the threat of money laundering and have devoted inadequate resources to combat money laundering. 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.

Armenia is a party to the 1988 UN Drug Convention. In November 2001, Armenia signed the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, the Convention on Cyber crime, and the European Convention on Mutual Assistance in Criminal Matters.

Aruba. As a transit country for cocaine and heroin, Aruba is both attractive and vulnerable to money laundering. The island has an offshore sector, with approximately 500 limited liability companies and 4,000 offshore tax-exempt companies referred to as Aruba Exempt Companies (AEC). Both types of companies can issue bearer shares. There are also 11 casinos, 6 local banks, and over 30 money transmitters and exchange offices. Money laundering is a crime in Aruba and money laundering offenses extend to all criminal offenses including tax offenses. Aruba?s offshore industry constitutes about one percent of GDP and is due to be phased out by the end of 2005 as part of the Government?s May 2001 commitment to the OECD in connection with the Harmful Tax Practices initiative.

Aruba offshore services include the offshore Naamloze Vennootschap (NV) or limited liability company, which is a low-tax entity, and the AEC. A local director, usually a trust company, must represent offshore NVs. A legal representative that must be a trust company represents AECs. AECs pay an annual registration fee of approximately U.S. $280, and must have a minimum authorized capital of U.S. $6,000. AECs cannot participate in the economy of Aruba, and are exempt from several obligations: all taxes and currency restrictions, and from filing annual financial statements. Trust companies provide a wide range of corporate management and professional services to AECs, including managing the interests of its shareholders, stockholders, or other creditors. In May 2000, the Government of Aruba (GOA) issued guidance notes on corporate governance practices.

All financial and non-financial institutions are obligated to report unusual transactions to Aruba?s financial intelligence unit (FIU), the Meldpunt Ongebruikelijke Transacties (MOT). The MOT has a staff of six that consists of one director, three investigators, and two administrative assistants. This small unit is required to inspect all casinos, banks, money remitters, and insurance companies. On July 1, 2001, a State Ordinance was issued that extended reporting and identification requirements to casinos and insurance companies. The MOT will begin on-site casino inspections in late 2002. The State Ordinance on the Supervision of Insurance Business (SOSIB) and the Implementation Ordinance on SOSIB require insurance companies established after July 1, 2001 to obtain a license from the Central Bank of Aruba.

In October 2000, a State Ordinance was enacted requiring life insurance agents to report unusual transactions based on indicators. A law that will require life insurance agents to report SARs has been presented to the Minister of Finance and Justice and is expected to be enacted in 2002. The MOT will also have the supervision of life insurance companies and the brokers. The MOT has drafted indicators for the life insurance companies and brokers and intends to require the reporting of unusual transactions in the first quarter of 2002.

In June 2000, Aruba enacted a State Ordinance making it a legal requirement to report the importation and exportation via harbor and airport of currency in excess of 20,000 Aruban guilders (approximately U.S. $11,000). The GOA is currently working on having the law implemented by April 2002.

The GOA has prepared a State Ordinance for the Supervision of Trust Companies. The draft ordinance, which was submitted to parliament on January 23, 2001, provides for the oversight of thrift companies to ensure that they follow "Know Your Customer" procedures. The International Monetary Fund (IMF) is also reviewing the draft ordinance. The draft ordinance is expected to become effective during 2002.

Working with the IMF, the GAO completed the first phase of a voluntary assessment of its offshore sector and is engaged in the second phase.

Following up on the July 4, 2000 Parliamentary approval of the State Ordinance Free Zones Aruba (FZA), in July 2001 the Parliament unanimously approved the designation of Free Zone Aruba NV entity to operate the free zones. One aspect of this designation requires free zone customers to reapply for authorization to operate within the zones. The Free Zone NV is preparing a "Best Practices" guide describing these standards for its companies. Aruba took the initiative in the Caribbean Financial Action Task Force (CFATF) to develop regional standards for free zones, where none existed, in an effort to control trade-based money laundering. The guidelines were adopted in April 2001 at the CFATF Plenary, and in October the CFATF Ministerial Council followed. As a result, the tougher standards resulted in a 65 percent drop in free zone business.

On August 31, 2000, the United States signed a multilateral directive with Aruba, Colombia, Panama, and Venezuela to establish an international working group to fight the money laundering that occurs through the Black Market Peso Exchange (BMPE). The BMPE is the largest money laundering system in the Western Hemisphere, and the primary money laundering method used by Colombian drug cartels. The working group has developed policy options and recommendations to enforcement actions that will prevent, detect, and prosecute money laundering through the BMPE. The first working group meeting was held in Aruba on October 21, 2000 and was chaired by the director of the Aruba Free Zone. Aruba has regularly attended working group meetings, which were held in April, October and December of 2001. It is expected that a final set of recommendations on the BMPE will be reached in 2002.

In 2001 several persons were convicted of money laundering offenses. Currently, two cases are pending.

Aruba, which has autonomous control over its internal affairs, is a part of the Kingdom of the Netherlands, and through the Netherlands, Aruba participates in the Financial Action Task Force (FATF) and therefore participates in the FATF mutual evaluation program. The GOA has a local FATF Committee that oversees the implementation of the FATF recommendations. As part of its commitment to combat the financing of terrorism, another committee has been formed to ensure cooperation within the Kingdom of the Netherlands. Aruba is a member of CFATF and served as its Chairman in 2001.

In 1999, the Netherlands extended application of the 1988 UN Drug Convention to Aruba. The Netherlands?s Mutual Legal Assistance Treaty with the United States applies to Aruba, though it is not applicable to requests for assistance relating to fiscal offenses addressed to Aruba.

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. In June 2001, the MOT signed an agreement with the FIUs of the Netherlands and the Netherlands Antilles to exchange information.

Aruba?s anti-money laundering legislation adheres to the recommendations of FATF and the CFATF. The GOA has shown a commitment to combating money laundering by establishing a solid anti-money laundering program. The GOA should provide adequate resources to the MOT to enable it to properly carry out its mission of analyzing unusual transactions and conducting on-site inspections of all financial and non-financial institutions.

Australia. The Government of Australia (GOA) has put in place a comprehensive system to detect, prevent and prosecute money laundering. The major sources of illegal proceeds are fraud and drug trafficking. It is likely that the volume of money currently laundered in Australia, or by Australians using offshore financial centers, has increased from the $2.8 billion dollar estimate provided by a government sponsored study in 1995.

Australia criminalized money laundering related to serious crimes with the enactment of the Proceeds of Crime Act of 1987. This legislation also contains provisions to assist investigations and prosecution in the form of production orders, search warrants and monitoring orders. The Mutual Assistance in Criminal Matters Act of 1987 allows Australian authorities to assist other countries in identifying, freezing, seizing, and confiscating the proceeds of crime. The Financial Transaction Reports Act (FTR) of 1988 was enacted to combat tax evasion, money laundering and serious crimes. The FTR established reporting requirements on Australia?s financial services sector. Required to be reported are: suspicious transactions; cash transactions in excess of Australian $10,000; and international funds transfers equivalent to or exceeding Australian $10,000. The Australian Transaction Reports and Analysis Center (AUSTRAC), Australia?s financial intelligence unit (FIU), was established under the FTR to oversee compliance with the reporting requirements imposed on the financial services sector. AUSTRAC also gathers and disseminates financial intelligence that supports revenue collection and law enforcement activities.

Australia is a member of the Financial Action Task Force (FATF), the Asia/Pacific Group on Money Laundering (APG), the Pacific Island Forum and the Commonwealth Secretariat. Through its funding and hosting of the Secretariat of the APG, Australia has elevated money laundering issues to a priority concern among countries in the Asia/Pacific region. AUSTRAC is a member of the Egmont Group, and has bilateral agreements allowing the exchange of financial intelligence with the United States, the United Kingdom, New Zealand, Belgium, France, Hungary, Denmark, The Netherlands, and Italy. In September 1999, a Mutual Legal Assistance Treaty between Australia and the United States entered into force.

Australia has signed and ratified the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and the 1988 UN Drug Convention. Australia signed but has not yet ratified the UN Convention against Transnational Organized Crime.

Australia continues to pursue a well-balanced, comprehensive and effective anti-money laundering regime that meets the objectives of the FATF Forty Recommendations. It gives high priority to dealing with money laundering and to international cooperation. AUSTRAC serves as a model for FIUs worldwide because of its demonstrated commitment and competence in using financial reports and related information to identify money trails. The GOA should continue in its efforts to emphasize money laundering issues and trends within the APG, and continue to provide training and technical assistance to the Asia/Pacific region.

Austria. Although Austria is not a major financial center, it does have a significant money laundering problem as illicit proceeds of economic crimes originating in the former Soviet Union and East European countries continue to flow into its banks. , Austria?s financial intelligence unit, the Central Department for Combating Organized Crime (EDOK), stated in December 2000 that the smuggling of bulk cash is a major method of laundering money in Austria and that Austrian Customs officials have uncovered several instances in which criminals were attempting to bring in major amounts of cash. Recent police investigations have also revealed that trusts, especially offshore trusts, were being used to conceal the proceeds of crime and that Russian organized criminal groups have reportedly established front and shell companies through Austrian fiduciaries to launder money.

The existence of anonymous passbook savings accounts spurred the Financial Action Task Force (FATF) to threaten Austria with suspension from FATF if the government did not take action to abolish the accounts. The threat of suspension followed FATF?s issuance of a public warning to financial institutions of the risks that are associated with Austrian anonymous passbook savings accounts. In response, the Government enacted legislation that will effectively eliminate anonymous passbook savings accounts by June 2002. No new accounts have been permitted since early November 2000. In response the FATF lifted its warning about the anonymous passbook savings accounts.

Other measures to prevent money laundering included the Ministry of Finance sending a circular to Austrian banks advising them to use special diligence in splitting passbook account balances?except among family members?exceeding AS one million (approximately U.S. $75,000). Austrian banks are required to continue exercising this enhanced diligence until anonymous accounts are completely phased out in June 2002. The Government of Austria (GOA) has emphasized that although funds may be withdrawn without identification during the phasing-out period, banks (as well as insurers and bureaux de change) must report suspicious transactions in any amount.

Money laundering was criminalized in 1993. Adoption of the Banking Act of 1994 created obligations for the financial sector such as customer identification, record keeping requirements, and training employees and staff. The Banking Act created EDOK within the police, which serves as the central repository of suspicious transaction reports. In 1996 Austria abolished anonymous securities accounts, in compliance with the FATF Forty Recommendations and European Union (EU) regulations (although customers can continue to make withdrawals and sales from these accounts without identification until June 2002.) In 1997, the GOA tightened restrictions on trustee accounts.

Legislation implemented in 1999 allows for asset seizure and the forfeiture of illegal proceeds, however there is little evidence of enforcement to date. The amended Extradition and Judicial Assistance Law provides for expedited extradition, expanded judicial assistance and acceptance of foreign investigative findings in the course of criminal investigations, as well as enforcement of foreign court decisions.

Austria has not enacted legislation that provides for sharing narcotics-related assets with other governments. However, mutual legal assistance treaties (MLATs) can be used as an alternative vehicle to achieve equitable distribution of forfeited assets. The MLAT that has been in force since August 1, 1998 between the GOA and the United States contains a provision relating to asset sharing. The GOA has been extremely cooperative with U.S. 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 the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime of 1990. In December 2000 Austria signed the UN Convention against Transnational Organized Crime. Austria is a member of the FATF and the EU. The EDOK is a member of the Egmont Group.

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.

Azerbaijan. Azerbaijan?s is not a money laundering concern, as the banking system is rudimentary. Recently, Azerbaijan?s parliament has made amendments to its banking laws in order to prevent money laundering activities. These new regulations stipulate that any person leaving or entering the country with up to $50,000 in foreign currency must report the amount to customs. If an individual wishes to take more than $50,000 into the country, the origin of the funds must be declared. Yet Azerbaijan does not have a set of laws that addresses directly money laundering. Available information also suggests that non-bank financial institutions probably are used to launder money related to tax evasion and avoidance of customs fees.

The National Bank of Azerbaijan (NBA) has officially accepted the directive of the Wolfsburg principles to combat money laundering and in 2001 Azerbaijan signed the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime.

Azerbaijan is a party to the 1988 UN Drug Convention and has signed but not yet ratified the UN Convention against Transnational Organized Crime.

Bahamas. The Commonwealth of The Bahamas (GCOB) is an important regional and offshore financial center. During 2001, the GCOB focused on implementing legislative reforms, enacted in December of the previous year, that strengthened its anti-money laundering regime and made it much less vulnerable to exploitation by money launderers and other financial criminals. In June, the Financial Action Task Force (FATF) removed The Bahamas from the FATF list of jurisdictions that were "non-cooperative in the fight against money laundering." The U.S. and Canada also withdrew financial advisories on The Bahamas.

Offshore banking and finance is the second most important industry in The Bahamas, ranking behind tourism. At the beginning of 2001, there were 410 licensed bank or trust companies. By July this number had declined to 366 as the Central Bank of The Bahamas required "managed banks" (those without a physical presence, but are run by an agent such as a lawyer or another bank) to either establish a physical presence in The Bahamas (an office, separate communications links and a resident director) or cease operations. Approximately, 233 of the 366 institutions were permitted to deal with the public and 133 had either restricted or non-active licenses. Of the public institutions, only 48 were Bahamian-based banks and trusts; 105 were subsidiaries of banks and trusts based in Switzerland (25), the UK (13), the USA (9), Canada (3), Latin America and the Caribbean (31), Europe (21), and Asia (3); 58 were Euro-currency branches of foreign banks and trusts based in the USA (19), the UK (6), Canada (3), Europe (13), South and Central America (10) and Asia (5); and 24 were clearing banks or trusts based outside The Bahamas and authorized to deal in Bahamian and foreign currency and gold.

During early 2001, the newly created Financial Intelligence Unit (FIU) began sharing financial information with its foreign counterparts. In June, the U.S. financial intelligence unit, the Financial Crimes Enforcement Network (FinCEN), sponsored the successful application of the Bahamian FIU for membership in the Egmont Group. In November, a Bahamian Supreme Court justice struck down as unconstitutional a provision of the FIU Act 2000 that gave the FIU the power to freeze a financial account without first obtaining a court order. The justice ruled that Parliament had violated the principal of separation of powers by giving an executive body a power that should be reserved to the judiciary. This case involved a British Virgin Islands firm, Financial Clearing Corporation. The Bahamian Attorney General announced that the GCOB would appeal the controversial decision. In the meantime, the functioning of the FIU is not expected to be weakened, since the FIU can seek ex-parte freeze orders from the courts whenever necessary.

Following the September 11 terrorist attack on the United States, the Attorney General directed the FIU to freeze three financial accounts, in The Bahamas, suspected of belonging to individuals on the UN and USG lists of terrorists, financial supporters of terrorist organizations, and officials of Afghanistan?s Taliban regime. The Attorney General?s Office, the FIU, and the Central Bank cooperated with FinCEN and other USG officials in investigating and clearing the suspect accounts.

The Financial Transaction Reporting Act 2000 required financial institutions (including banks and trusts, insurance companies, real estate brokers, casino operators, and others who hold or administer accounts for clients) to report suspicious transactions to the FIU and to the police. From January through November the FIU received 218 suspicious transaction reports (more than the number received by GCOB authorities in 1999 and 2000 combined), including 96 from domestic banks and 108 from the offshore sector.

That Act also established "Know Your Customer" (KYC) requirements for financial institutions and obliged them to verify by December 31, 2001 the identities of all their existing account holders and of customers without an account making transactions over $10,000. In mid-December 2001, the chief legal advisor to the Bahamas Financial Services Board estimated that The Bahamas had completed between 80 to 95 percent of the KYC requirement for old accounts. Funds in accounts that remain unidentified or whose owners fail to comply with documentation requirements will be transferred to the Central Bank after the deadline. Amendments to the Act passed in August allowed the Minister of Finance discretion to extend the deadline for six months to a year; in December he extended the deadline until the end of June 2002. All new accounts established in 2001 had to be in compliance with KYC rules before they were opened. The KYC requirements caused complaints by Bahamians who were unable to produce adequate documentation when attempting to open accounts in domestic banks. (The absence of house numbers on most Bahamian streets, the prevailing practice of utility companies issuing bills only in the name of landlords rather than tenants, and the scarcity of picture identification among Bahamians contributed to these documentation problems.)

The Central Bank of The Bahamas Act 2000 expanded the powers of the Central Bank to enable it to respond to requests for information from overseas regulatory authorities and gave the Bank?s Governor the right to deny licenses to banks or trust companies he deems unfit to transact business in The Bahamas. The primary impact on the offshore sector has been the weeding out of many of the "managed" or "shell" banks that had no actual physical presence in The Bahamas. During 2001, the Governor revoked the licenses of 55 of these banks, including the British Bank of Latin America and Federal Bank, both identified in a U.S. Senate Report as being at high risk of involvement in money laundering, and Al-Taqwa Bank, which was listed in October by the USG as financially linked to Osama Bin Laden?s Al-Qaeda terrorist organization. Of the 340 managed banks at the beginning of 2001, the Central Bank expects less than half to remain by March 2002.

At the beginning of 2001, there were some 100,000 incorporated international business companies (IBCs) in The Bahamas. The IBC Act 2000 eliminated anonymous ownership of IBCs by prohibiting bearer shares and imposing KYC requirements. As a result, The Bahamas became less attractive, both to potential and existing IBC owners. During the first nine months of 2001, the number of new IBCs registered in The Bahamas was down to 4,148, compared to 14,454 during the same period of 2000, a 71 percent decline. The Governor of the Central Bank estimated that 80 percent of existing IBCs failed to renew their registrations during 2001.

The Bahamas has two casinos in Nassau and one in Freeport/Lucaya. A fourth casino is scheduled to open in Lucaya in 2002, and a license for a fifth casino, on San Salvador, has been approved. Annual revenues for the three existing casinos are estimated at $196 million. Cruise ships that overnight in Nassau may operate casinos. Betting in casinos on sporting events is allowed, except on horse races. There are no Internet gambling sites based in The Bahamas. Law prohibits Bahamian residents from gambling.

As of March, there were 55 local insurers and 30 offshore insurance companies in The Bahamas. At the beginning of 2001 there were 757 Bahamas-based mutual funds (up 20 percent from 628 at the start of 2000) with a net asset value of $95 billion. The Bahamas International Securities Exchange (BISX) lists three of the aforementioned funds.

Money laundering in The Bahamas is probably related primarily to the proceeds of cocaine and marijuana trafficking, although a substantial portion is likely related to financial fraud. The Bahamas? first major money laundering conviction (against Latoya Cargill and Victor Wilkinson) was in December 2001 and involved a total of $241,000 in drug trafficking proceeds. In November, the GCOB obtained an ex-parte court order freezing some $973,000 in bank accounts held by notorious international drug trafficker, Samuel "Ninety" Knowles, Jr., whom the U.S. is seeking to extradite from The Bahamas. Another major money laundering case is that of prominent Bahamian attorney Leslie Vernon Rolle, who is charged with financial fraud of 1.7 million. Prosecution is awaiting information from the Cayman Islands and is scheduled for trial in the Supreme Court in 2002.

In June 2001, the Bahamas became a member of the Egmont Group. The Bahamas is party to the 1988 UN Drug Convention, a member of Caribbean Financial Action Task Force, 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, and also with the United Kingdom and Canada. In April 2001, the Bahamas signed the UN Convention against Transnational Organized Crime.

The GCOB has enacted substantial reforms that could reduce its financial sector?s vulnerability to money laundering. The GCOB should continue to further its anti-money laundering efforts with the enforcement of the new laws and international cooperation.

Bahrain. Bahrain is a regional financial and an offshore center that poses as an attractive potential target for money laundering activities. Some common sources of illegal proceeds in Bahrain are narcotics-trafficking, fraud, and evasion of international sanctions. However it is thought that the greatest risk of money laundering stems from the foreign criminal proceeds that transit Bahrain.

In January 2001, the Government of Bahrain (GOB) enacted a new anti-money laundering law that criminalized the laundering of proceeds derived from any predicate offense. A UK law firm in consultation with the Financial Action Task Force (FATF) drafted the law (Decree Law No. 4 of 2001). The law stipulates punishment of up to seven years in prison and a fine of up to one million dinars (U.S. $2.65 million) for convicted launderers and those aiding or abetting them. If organized criminal affiliation, corruption, or disguising the origin of proceeds is involved, the minimum penalty is a fine of at least 100,000 dinars (approximately U.S. $265,000) and a prison term of no less than one year. The law places the burden of proof on the accused to demonstrate the legality of the source of his funds.

Following enactment of the Law, the Bahrain Monetary Agency (BMA) as the principal regulator, issued regulations requiring financial institutions to report suspicious transactions, to maintain records for a period of five years, and to provide ready access to account information to law enforcement officials. Immunity from criminal or civil action is given to those who report suspicious transactions. Even prior to the enactment of the new anti-money laundering law, financial institutions were obligated to report suspicious transactions greater than 10,000 dinars (approximately U.S. $26,500) to the BMA.

The new law also provided for the formation of an interagency committee to oversee Bahrain?s anti-money laundering regime. Accordingly, in June 2001, the National Anti-Money Laundering Policy Committee was established and assigned the responsibility for developing anti-money laundering policies and guidelines. The committee includes members from the Bahrain Monetary Agency, the Bahrain Stock Exchange, and the Ministries of Finance, Interior, Justice, and Commerce. In addition, a new unit is to be created within the BMA to receive and analyze suspicious transaction reports, thus serving as Bahrain?s financial intelligence unit (FIU). The unit will then forward the reports to the appropriate enforcement and supervisory agencies for investigation, if appropriate. Finally, the new law provides further powers of confiscation and allows for better international cooperation.

Bahrain has 19 commercial banking institutions-seven locally incorporated and 12 subsidiaries of foreign banks and 33 investment banks. Bahrain is known for its offshore banking units (OBUs), which currently number 48. The BMA licenses offshore banking units, which are branches of international commercial banks exempted from foreign-exchange controls, cash reserve requirements, taxes on interest paid to depositors, and banking income taxes that are required of other banks in Bahrain. In exchange for these privileges, OBUs pay the government annual license fees, are prohibited from accepting deposits from citizens and residents of Bahrain, and must refrain from transactions involving Bahraini dinars. The OBUs are required by law to be audited yearly by outside firms, to be fully staffed with a majority of the staff being Bahrain nationals, to have books and records available for examination by the BMA at all times, and to submit statistical reports to the BMA twice yearly.

Bahrain law permits the formation of offshore resident companies and offshore non-resident companies, which are formed as international business companies (IBCs). Resident companies must have an office within Bahrain, a minimum capital of U.S. $54,000, and a license from the BMA in order to conduct financial activities. Offshore non-resident companies do not have to maintain an office in Bahrain. Instead, the company can maintain a resident address at an appointed auditing firm or a law firm within Bahrain. The minimum amount of capital for a non-resident company is U.S. $6,750. Non-resident IBCs cannot participate 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. Bearer shares are not permitted in resident or non-resident IBCs.

Bahrain is a member of the Gulf Cooperation Council, which is a member of the FATF. In June 2000, Bahrain underwent a FATF mutual evaluation. Bahrain is also 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 has undertaken a number of steps demonstrating a commitment to put in place an anti-money laundering regime. Now the Government of Bahrain needs to follow through by enforcing the law and developing and prosecuting anti-money laundering cases. Bahrain should also take steps to establish its FIU, and should continue to monitor its offshore sector. Implementation is crucial to making Bahrain more secure against international crime.

Bangladesh. Bangladesh is not a regional financial center. Money laundering in Bangladesh is primarily related to income tax evasion, the illegal importation of consumer goods, and illegal money transfers.

The government has the authority to confiscate assets in drug-related money laundering cases. In March 2001, the Bangladesh Bank finalized a draft money laundering law. The Bangladesh Bank also proposed that a Financial Intelligence Unit be formed. To date, this law has not been passed. Bangladesh?s banking regulations are weak and sporadic. Strict currency controls, coupled with the fact that the Bangladesh Taka has no value outside the country, discourage the removal of laundered money from the country. 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. The Government of Barbados (GOB) has taken a number of steps in recent years to strengthen its anti-money laundering regime.

The Money Laundering (Prevention and Control) Act (MLPCA) 1998 criminalized the laundering of proceeds from unlawful activities that are punishable by at least one-year imprisonment. The MLPCA made money laundering punishable by a maximum of 25 years in prison and a maximum fine of Barbadian (BB) $2 million (approximately U.S. $1 million). The law also provided for asset seizure and forfeiture.

In November 2001, the GOB amended its financial crimes legislation to shift the burden of proof to the accused to demonstrate that property in his/her possession or control is derived from a legitimate source. Absent such proof, the presumption is that such property was derived from the proceeds of crime. The law also enhances the GOB?s ability to freeze bank accounts and to prohibit transactions from suspect accounts.

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, cooperate with domestic law enforcement investigations, maintain records of all transactions exceeding BB $10,000 (approximately U.S. $5,000), and report suspicious transactions to the Anti-Money Laundering Authority (AMLA). The AMLA forwards this information to the Commissioner of Police if it has reasonable grounds to suspect money laundering. Financial institutions must also establish internal auditing and compliance procedures. The MLPCA also sets forth seizure and criminal forfeiture procedures.

The AMLA was established in August 2000 to supervise financial institutions? compliance with the Act and issue training requirements and regulations for financial institutions. The AMLA?s financial intelligence unit (FIU) was established in September 2000. The FIU is now fully staffed and operational.

The GOB initially criminalized drug money laundering in 1990 through the Proceeds of Crime Act, No. 13, which also authorized asset confiscation and forfeiture, permitted suspicious transaction disclosures to the Director of Public Prosecutions, and exempted such disclosures from civil or criminal liability. In 1997, the Central Bank issued Anti-Money Laundering Guidelines for Licensed Financial Institutions.

The Offshore Banking Act (1980) gives the Central Bank authority to supervise and regulate offshore banks, in addition to Barbados?s seven 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. Barbados? offshore sector includes approximately 55 offshore banks, 4,000 international business companies (IBCs), 370 exempt insurance companies, and 2,900 foreign sales corporations (FSCs)?specialized companies that permit persons to engage in foreign trade transactions from within Barbados. The Foreign Sales Corporation Act, which authorized establishment of FSCs, was repealed in 2000.

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. Bearer shares are not allowed, and financial statements of IBCs are audited if total assets exceed U.S. $500,000.

Barbados has bilateral tax treaties that eliminate or reduce double taxation with the UK, Canada, Finland, Norway, Sweden, Switzerland, and the U.S. The treaty with Canada allows IBCs and offshore banking profits to be repatriated to Canada tax-free after paying a much lower tax in Barbados. As a result, the Barbadian offshore financial services industry continues to expand, driven largely by Canadian-based companies.

A Mutual Legal Assistance Treaty and extradition treaty between the United States and Barbados entered into force in 2000. 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. Barbados signed the UN Convention Against Transnational Organized Crime in September 2001.

The GOB should maintain strict control over vetting and licensing of offshore entities. The establishment of the AMLA and continued development of the AMLA?s financial intelligence unit should provide Barbados with the necessary tools 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. The absence of anti-money laundering laws or regulations makes Belarus vulnerable to money laundering. 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.

Belarus is a party to the 1988 UN Drug Convention and has signed but not yet ratified the UN Convention against Transnational Organized Crime.

Belarus should enact comprehensive anti-money legislation.

Belgium. Belgium has a very comprehensive anti-money laundering regime. Despite this, Belgium?s financial system remains vulnerable to money laundering. Most of the money laundering cases detected in Belgium are related to narcotics-trafficking, particularly with neighboring countries the Netherlands, Luxembourg, Germany and France. The main money laundering venues are bureaux de changes, international fund transfers and payments, and payments into accounts. Funds are also laundered through the diamond industry, real estate, offshore companies, gambling or amusement halls, and banks. Belgian officials noted in mid-2001 that "dummy companies", or front companies, figured prominently in cases turned over to legal authorities for prosecution for money laundering. They also state that money launderers attempt to use notaries to found such companies or to buy property. They use such methods as selling property below its market value, making significant investments on behalf of foreign nationals with no connections to Belgium, making client property transactions whose value is disproportionate to the socio-economic status of the client, and founding a large number of companies in a short space of time.

According to the Belgian annual report, the Financial Information Processing Center (CTIF-CFI), Belgium?s financial intelligence unit (FIU), is currently investigating several cases of terrorist financing-related money laundering. These have involved both apparently legitimate sources (involving businesses acting as fronts or collected from associations with purported social, charitable or cultural purposes) and illegal ones (involving illegal drugs or arms trafficking).

The Government of Belgium (GOB) in 1990 criminalized money laundering related to all crimes. In 1993, it passed additional legislation that mandated reporting of suspicious transactions by financial institutions and created an FIU to receive, process, and analyze them. As of June 2001, the CTIF-CFI had created 10,160 distinct case files since becoming operational in 1993, including 2,066 between July 2000 and June 2001. Approximately half of the July 2000-June 2001 case files were turned over to the Crown Prosecutor.

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 U.S. $9,100). 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. Infractions against non-reporting and compliance with other requirements of the 1993 law are punishable by a fine of up to BF 50 million (about U.S. $1 million).

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. Under the new legislation, casinos include any establishments that conduct casino-like gambling activities. The CTIF-CFI noted in mid-2001 that it had observed a market increase in casino chip purchasing operations that it believed was linked to the third stage?integration?of the money laundering cycle.

The Federal 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 the CTIF/CFI. The CTIF-CFI is member of the Egmont Group.

Belize. Belize?s proximity to Mexico and Guatemala has made it a significant transshipment point for illicit drugs, notably cocaine and marijuana. Belize?s growing offshore sector has 2 banks, an unknown number of international trusts, over 15,000 international business companies (IBCs), and an Internet gaming site. The transshipment of drugs and the growing offshore sector, regulated by those who promote it, make Belize vulnerable to money laundering.

The Money Laundering Prevention Act (MLPA), in force since 1996,criminalizes money laundering related to many serious crimes including arms and drug trafficking, fraud, extortion, terrorism, blackmail, and certain theft involving more than $10,000. The Act also provides mechanisms for the freezing and forfeiture of assets; 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. Additionally, persons departing Belize must declare B$20,000 or more in cash or negotiable bearer instruments.

Financial institutions are required to report complex, unusual, or large business transactions to the Governor of the Central Bank. Supporting Regulations and Guidance Notes were issued in 1998. The Central Bank forwards any reports warranting further investigation to the Director of Public Prosecutions (DPP) Office. Financial institutions are required to retain records for a minimum of five years, and can lose their licenses and face a maximum fine of U.S. $50,000 for failing to do so. Individual bankers can be held responsible if their institutions are caught laundering money. However, bankers are protected from prosecution if they cooperate with law enforcement. Financial institutions must also comply with instructions from the Central Bank, and permit the Supervisory Authority to enter and inspect records.

The gaming industry is not regulated under the MLPA. Neither the Gaming Control Act, 1999 nor the Computer Wagering Licensing Act, 1995 require reporting of suspicious activity reports. The Government of Belize (GOB) has established legislation that facilitates computer and casino gaming; however, the legislation makes no provision for due diligence procedures, record keeping, or suspicious transactions reporting.

The International Financial Services Commission (IFSC) serves as the regulator for Belize?s offshore sector. Members of the IFSC consist of individuals from the private and public sector. The IFSC promotes, protects, and enhances Belize as an offshore center. It also regulates and supervises the provision of international financial services within Belize through formulation of appropriate policies and the provision of advice to government on regulatory matters. The IFSC does not regulate domestic and offshore banks that are supervised by the Central Bank.

IBCs are regulated under the International Business Companies Act of 1990 and amendments to the Act issued in 1995 and 1999. The 1999 amendment to the IBC Act allows properly licensed IBCs to operate as banks and insurance companies. Registered agents have primary responsibility for the registration and on-going operations of the IBCs registered in Belize. There is no legal requirement for identification of beneficial ownership or directors of IBCs to be disclosed to the registrar. IBCs can issue bearer shares. Currently, the International Financial Services Commission is in the process of formulating policies that will be legally binding to control the mobilization of bearer shares.

The Offshore Banking Act, 1996 (OBA) governs activities of Belize?s offshore banks. The Act generally prohibits offshore banks from transacting business with residents of Belize. There are minimum capital requirements under the OBA and the shares of offshore banks must be in registered form and not in bearer form. Offshore banking licenses are granted by the Minister of Finance on the recommendation of the Central Bank, which has supervisory powers over both domestic and offshore banks. With regard to the offshore banks, the supervisory role of the Central Bank is restricted to the licensee?s operations in Belize. The Central Bank has no access to information regarding a customer, depositor or transaction, except in case of large credit exposures.

Offshore trusts are also prevalent in Belize and registration with a regulatory body is not required. Although the Central Bank is the supervisory authority with regard to money laundering, there are no legal requirements to provide account information or activity regarding trusts to the Central Bank. As of December 2001, the GOB was selling economic citizenships.

Belize?s Police Department (BPD) has assigned five persons to investigate money laundering cases. This unit will serve as the financial intelligence unit. An office space, separate from the police department, has been designated for this unit.

Belize is a party to the 1988 UN Drug Convention. Belize is a member of 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. The United States and Belize have signed a Mutual Legal Assistance Treaty (MLAT) in September 2000, but it is not yet in force.

The GOB will remain vulnerable to money launderers as long as IBCs can issue bearer shares without disclosure of the beneficial owner. The GOB should monitor the Internet and casino gaming industry and require suspicious activity reporting to prevent potential money launderers. Additionally, the GOB should provide the financial intelligence unit sufficient resources and staff needed to receive, analyze, and disseminate suspicious transaction reports.

Benin. Benin is not a major financial center. However, Government of Benin officials believe narcotics traffickers use Benin to launder profits. Although the exact nature of money laundering is unknown, Beninese officials suspect that the primary methods are 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 counternarcotics 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 has signed but not yet ratified the UN Convention against Transnational Organized Crime. In 2001 Benin signed the International Convention for the Suppression of the Financing of Terrorism.

Bermuda. 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.

The nearly 1,300 insurance (mainly captive and reinsurance) companies in Bermuda dominate the territory?s offshore financial sector. The sector also has approximately 12,000 "exempt companies" (international business companies) and 34 licensed trust companies. The Bermuda Monetary Authority (BMA) is the main regulator and requires disclosure and vetting of proposed beneficial owners before registering exempt companies. The government passed The Regulation of Trust Business Act of 2001, which strengthened oversight of trust companies.

The Proceeds of Crime Act 1997 criminalizes money laundering related to all "relevant offenses," including drug trafficking, corruption, counterfeiting, fraud, theft, forgery, and tax evasion. 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 1,885 SARs, most of which relate to the conversion of local drug profits to U.S. dollars. The FIU is a member of the Egmont Group.

Bermuda is subject to the US/UK MLAT and to 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.

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. Most money laundering in Bolivia is related to contraband smuggling rather than to narcotics-trafficking. Bolivia?s long tradition of banking secrecy facilitates the laundering of illegally obtained earnings, evasion of taxes, and the profits of organized crime, and drug trafficking.

The Government of Bolivia (GOB) has criminalized money laundering related to narcotics-trafficking, organized criminal activities, and public corruption. Law 1768 also created a financial investigations unit, the Unidad de Investigaciones Financieras (UIF), within the Office of the Superintendent of Banks and Financial Institutions to be responsible for implementing anti-money laundering controls. Banks, insurance companies, and securities brokers are required to identify their customers, retain records of transactions for a minimum of 10 years; and report transactions considered unusual (without apparent economic justification or licit purpose) or suspicious (customer refuses to provide information or the explanation and/or documents presented are clearly inconsistent or incorrect) to the UIF.

The Superintendency of Banks UIF is in full operation against money laundering, but it lacks sufficient links to the Public Ministry, the office responsible for prosecuting money laundering. The Public Ministry does not have a specialized unit to prosecute money laundering cases. The UIF is also hampered by weak political support within the GOB and confusion over its legal role.

In 2001, the FIU investigated 16 potential money laundering cases, but the Public Ministry has prosecuted none. During 2001, the UIF was instrumental in uncovering what may be significant money laundering activities by a major Brazilian drug trafficking organization (da Costa). According to the UIF, the organization may have deposited over $250 million throughout several banks in Bolivia for further transfer to Lebanon. The UIF?s findings prompted an investigation by the Brazilian Federal Police, and the Central Bank of Lebanon has frozen accounts. The UIF is a member of the Egmont Group and has established mechanisms for sharing information with Bolivia?s Public Ministry and the Special Counternarcotics Force.

In June 2001, the GOB implemented a new criminal code that is intended to expedite criminal cases and help in the prosecution of money laundering cases. However, the current money laundering law is flawed, and the United States Government (USG) is assisting the GOB in drafting stronger legislation.

The recently implemented Code of Criminal Procedures (CCP) has attempted to remedy Constitutional challenges to the asset seizure and forfeiture sections of Law 1008 and subsequent decrees. The CCP now permits the GOB to sell certain kinds of property, with or without the consent of the accused, if the property might lose value or cost too much to maintain. However, challenges continue to the sale of property seized in drug arrests.

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 USG resumed support of the Directorate of Seized assets in 2001, after having suspended support in 1998 due to negligent accountability for property seized and the GOB?s inability to resolve the problem of judges who routinely returned seized property to narcotics defendants before trial.

Bosnia and Herzegovina. Bosnia and Herzegovina has not criminalized money laundering, although it is an offense in the civil code. The government intends to adopt and implement new statutes and procedures that would criminalize money laundering in 2002. Laundering the proceeds of criminal activity through financial institutions is widespread. However, narcotics proceeds tend to be diverted outside Bosnia. Neither U.S. currency nor proceeds of drug sales in the U.S. are significantly involved.

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. In 2001, the international community established a working group that plans to centralize banking supervision within the Central Bank in 2002. Although legislation generally reflects the Basel Committee?s core principles, including suspicious transaction reporting and due diligence requirements, in practice banking standards do not conform to international norms. Asset seizure and forfeiture statutes exist, but reportedly neither prosecutors nor judges implement them. 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 a signatory to the UN Convention against Transnational Organized Crime.

Botswana. Botswana is a developing regional financial center and therefore is vulnerable to money laundering. Botswana has a well-developed banking sector.

The Government of Botswana has enacted legislation against drug production and trafficking, as well as narcotics-related money laundering. Narcotics-related money laundering is a felony punishable by a fine of approximately U.S. $41,000 or three years in prison, or both. The Bank of Botswana requires financial institutions to report any transaction where Pula 100,000 (U.S. $15,800) or more is transferred, whether domestically or internationally. The Bank of Botswana has the discretion to provide information on large currency transactions to law enforcement agencies.

On August 19, 1994, the Corruption and Economic Crime Act was passed. Later that year the Directorate on Corruption and Economic Crime was established. The Corruption and Economic Crime Act states procedures for handling corruption and related economic crimes.

In September 2001, the Government of Botswana also passed the Proceeds of Serious Crimes (Amendment) Act. This legislation criminalized money laundering. The act also makes stipulations for identification of financial bodies and owners of corporations and accounts.

Because of concerns that Botswana?s status as an offshore financial center could increase its vulnerability to money laundering, the Government of Botswana drafted regulations which would require banks to file suspicious activity reports with the Bank of Botswana. The Bank of Botswana intends to implement these regulations in January 2002, and at the same time distribute guidance to banks on how to identify suspicious transactions.

In September 2001, the newest International Law Enforcement Academy (ILEA) opened in Gaborone. The ILEA will provide training in money laundering and other law enforcement areas to countries in the southern region of Africa.

Botswana is a party to the 1988 UN Drug Convention. Botswana has ratified the International Convention for the Suppression of the Financing of Terrorism adopted by the UN General Assembly in 1999. The Government of Botswana has also taken steps to block the assets of terrorist financing through blocking assets in accounts that are held by persons and organizations that appear in Executive Order 13224.

Botswana should join the Eastern and Southern African Anti-Money Laundering Group, and pass anti-money laundering legislation that covers all serious crimes.

Brazil. Despite the important regulatory and investigative steps the GOB has taken, the laundering of proceeds from drug trafficking white-collar crime, corruption and other crimes remains a problem in Brazil. 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 alleged the existence of a vast network of drug-related organized crime and corruption, including money laundering. The report implicated over 800 people, including two federal congressmen, former state governors and other officials, and estimated that criminals launder approximately $50 billion in Brazil annually. In 2001, the GOB continued to investigate and prosecute large money laundering operations.

The GOB has a comprehensive anti-money laundering regulatory regime in place. Law 9,613 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. Regulations issued in 1998 require that individuals transporting more than 10,000 reais (then approximately U.S. $10,000, now approximately U.S. $4,000) 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 also must make a declaration to the central bank.

The 1998 Law also created a financial intelligence unit, 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. The COAF has a staff of 16 people-8 intelligence analysts, 3 international analysts, 1 legal specialist, 2 technical specialists, and 2 administrators. The COAF regulates those financial sectors not already under the jurisdiction of another supervising entity. In 1999, the COAF issued eight 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 Regulation No. 9, slightly amending the bingo, lotteries, and gaming regulations. In November 2001 the COAF issued Regulation No. 10, which imposes additional requirements for money remittance businesses.

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 Departamento de Combate a Il?citos Cambiais e Financeiros (DECIF) to implement anti-money laundering policy, receive suspicious activity reports from financial institutions, and forward information on the suspect and nature of the transaction to the COAF. Until January 2001, bank secrecy protected the name of the bank and the account number, and transaction details. All government agencies-except for congressional investigative committees-required a court order to access detailed bank account information. The GOB addressed this problem by enacting Complementary Law No. 105 and its implementing Decree No. 3,724 in January 2001. These allow for complete bank transaction information to be provided to regulatory authorities, including the COAF, without a court order.

The COAF indicated that in 2001 (through Nov. 1) it has received approximately 4,300 suspicious activity reports (SARs), including approximately 2,700 from the banking sector, 870 from bingos and 500 from real estate companies. COAF?s analysis and investigation of approximately 200 of these reports led to 33 prosecutions. The COAF forwarded an additional 47 directly to the police for additional investigation. The federal police had initiated a total of 140 formal investigations as of November 2001. In addition, the GOB began two administrative proceedings against entities that failed to file SARs in 2001.

In October 2001, the Brazilian Congress approved a measure that would increase penalties for corruption and money laundering. The measure awaits action in the Brazilian Senate.

During 2001 the GOB continued to struggle against corruption. The investigation into Judge Nicolau dos Santos Neto, who was arrested in December 2000 for embezzling 169 million reais (then approximately $85 million) in funds earmarked for construction of a city courthouse, proceeded. Nicolau allegedly used a system of front companies in offshore havens to transfer money and buy property abroad, including the United States. Judge Nicolau still awaits trial on charges of embezzlement, corruption, tax evasion, and money laundering.

A December 2001 Brazilian Senate report accused 17 top soccer officials of corruption, fraud, embezzlement, mismanagement of funds, tax evasion, and money laundering. Among other allegations, soccer officials are accused of having bought and sold rights to players in exchange for large payoffs.

Money laundering also occurs around the region of Foz de Igua?u, near the tri-border area with Paraguay and Argentina, an area believed to be a haven for smuggling and arms trafficking. Launderers used exchange houses, "laranjas," (individuals who allow their names to be used for a fee), and special non-resident "CC-5" accounts to transfer the money abroad. Brazilian authorities continue to watch the area for possible connections to Middle Eastern terrorist organizations.

The COAF is a member of the Egmont Group. In June 2000, Brazil became a full member of the Financial Action Task Force (FATF). In its 2001 annual report, the FATF indicated Brazil to be fully compliant with the 28 FATF recommendations requiring specific action. In 2000 Brazil also became a founding member of the South American Financial Action Task Force (GAFISUD). Brazil is also a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. In February 2001, the Mutual Legal Assistance Treaty between Brazil and the United States entered into force. Brazil is a party to the 1988 UN Drug Convention and the UN Convention against Transnational Organized Crime. The GOB has bilateral information exchange agreements with Belgium, France, Paraguay, Portugal, Paraguay, and Spain.

Reportedly, Brazil and the Bahamas have reached an anti-money laundering agreement regarding offshore bank accounts of Brazilian citizens suspected of money laundering or tax evasion. The agreement, which still needs to be passed on by Brazil?s Congress, would allow the freezing of accounts for a limited period until further documentation is provided to authorities in the Bahamas. Reportedly similar initiatives with other offshore jurisdictions the Cayman Islands, Jersey, British Virgin Islands, Andorra, and Liechtenstein are under consideration.

The GOB needs to ensure proper funding and staffing for its law enforcement and regulatory bodies to fully enforce its laws and to cooperate even more effectively internationally in the global effort to combat money laundering and other financial crimes.

British Virgin Islands. The British Virgin Islands (BVI) is a Caribbean Overseas Territory of the United Kingdom (UK). The BVI is vulnerable to money laundering due to its financial services industry. Tourism and financial services account for approximately 50 percent of the economy. The 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 approximately 360,000 international business companies (IBCs). Approximately 40 percent of the IBCs originate in Hong Kong.

On December 7, 2001, legislation was passed which establishes an independent Financial Services Commission for BVI. The Law transfers responsibility for regulatory oversight of the financial services sector from a government body, the Financial Services Department, to a new autonomous regulatory body, the Financial Services Commission.

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 has approximately 90 registered agents that 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 narcotics-related money laundering in 1987. 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?Financial Services Inspectorate (referred to as the Reporting Authority). The Reporting Authority?Financial Services Inspectorate is responsible for investigating fraud and money laundering cases, and has extensive powers to obtain information. Most of its investigations have involved IBCs and other offshore entities. The 1997 Act also allows the BVI Court to grant confiscation orders against those convicted of an offense and who have benefited from criminal conduct.

On 29 December 2000 the Anti-Money Laundering Code of Practice (AMLCP), 1999 entered into force. The Code established 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 Reporting Authority reviews approximately 30 suspicious transaction reports (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 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, 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 subject to the 1988 UN Drug Convention. Application of the U.S./UK Mutual Legal Assistance Treaty concerning the Cayman Islands was extended to the BVI in 1990. The Reporting Authority?Financial Services Inspectorate is a member of the Egmont Group.

The BVI should eliminate any legal and regulatory impediments to international cooperation and exchange of information.

Brunei. The Government of Brunei has drafted anti-money laundering legislation. In 2001, Brunei implemented an asset seizure and forfeiture law. Brunei?s Narcotics Control Board has taken part in courses offered by ILEA in Bangkok, and has also attended a money laundering seminar hosted by DEA in Singapore.

In 2001, Brunei actuated its plans to become an offshore financial center. 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.

Supervisory authority will be 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 and an observer jurisdiction to the Asia/Pacific Group on Money Laundering.

Brunei should consider separating the marketing and regulatory functions of the Authority to avoid potential conflict of interest cases.

Bulgaria. Bulgaria?s financial system is vulnerable to money laundering related to narcotics-trafficking and financial crimes such as bank and corporate fraud, embezzlement, tax evasion, and tax fraud. The proceeds of smuggling, vehicle theft, alien smuggling, prostitution, and extortion also are laundered in Bulgaria. The sources and destinations 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. Combating corruption and organized crime have been policy priorities for the government.

Bulgarian anticrime legislation includes a 1998 money laundering law criminalizing money laundering related to all serious crimes. Other provisions include customer identification and record keeping requirements, suspicious transactions 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.

The Ministry of Finance?s Bureau of Financial Intelligence (BFI) is Bulgaria?s financial intelligence unit. Since its establishment in 1998, the BFI has received over 800 suspicious transaction reports, 81 percent of which were submitted by the banking system indicating its active cooperation in the fight against money laundering. The BFI has forwarded 111 cases to the Prosecutor?s Office and the Ministry of Interior. During 2001 $90 million in assets were frozen.

The Government of Bulgaria (GOB) is considering legislation addressing actual forfeiture and seizure of criminal assets, indictment of legal persons on money laundering charges, and prohibiting the use of funds of dubious or criminal origin in acquiring banks and businesses during privatization.

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). The BFI is a member of the Egmont Group, participates actively in information sharing with foreign counterparts, and was acknowledged by the 2000 mutual evaluation conducted by the PC-R-EV to be the driving force against money laundering in Bulgaria.

Bulgaria is a party to the 1988 UN Drug Convention and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime. Bulgaria has signed and ratified the UN Convention against Transnational Organized Crime, which is not yet in force internationally. Currently, the BFI has bilateral memoranda of understanding regarding information exchange relating to money laundering with Belgium, the Czech Republic, Latvia, the Russian Federation, and Slovenia.

In June 2001, Bulgaria was judged by the Technical Consult Group of the European Commission to be in full compliance with Chapter 4 of the pre-accession negotiations with respect to preventive legislation in the area of counteraction of money laundering.

The GOB should approve and implement proposed measures that will address forfeiture and seizure of criminal assets, the indictment of legal persons on money laundering charges, and prohibit the use of dubious or criminal-origin funds to acquire banks and businesses during privatization.

Burma. Burma, a developing, agrarian country ruled by a military regime, has a population of approximately 41 million people. Renamed the Union of Myanmar by the ruling junta, Burma has a mixed economy with private activity dominant in agriculture, light industry, and transport, and with substantial state-controlled activity, mainly in energy, heavy industry, and the rice trade. Burma?s economy continues to be vulnerable to drug money laundering due to 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. While Burma?s current law contains some legal tools for addressing money laundering such as the seizure of drug-related assets and prosecution of drug conspiracy cases, the GOB has been slow to implement provisions of this law and has targeted few, if any, traffickers or their assets. There have been no reported prosecutions for drug money laundering.

In June 2001, the Financial Action Task Force (FATF) identified Burma as non-cooperative in international efforts to fight money laundering. The FATF in its report cited that Burma lacks a basic set of anti-money laundering provisions, specifically in the Central Bank Regulations for financial institutions. The report noted serious deficiencies concerning the absence of a legal requirement to maintain records and to report suspicious or unusual transactions. In addition, Burma?s current system contains significant obstacles to international cooperation by judicial authorities. Further, the GOB has allocated inadequate resources for the prevention, detection, and repression of money laundering activities.

The GOB?s current anti-money laundering legislation is limited at best. The Narcotics and Psychotropic Substances Law of 1993 criminalizes money laundering in connection with narcotics crimes only. The 1986 Law for the Cognizance of Possession criminalizes the purchase, sale or transfer of any property that has been acquired by illegitimate means. The central bank?s regulations for financial institutions contain no anti-money laundering provisions or legal requirements to maintain records or report suspicious or unusual transactions.

Officials report that action is pending on a proposed Money Laundering Law that seeks to criminalize money laundering for a wide range of predicate offenses, including human trafficking and organized crime, provide for some international cooperation, impose record-keeping requirements and establish an agency to receive, analyze and act on suspicious or unusual transactions. This new anti-money laundering legislation would require banks to report extraordinary or suspicious transactions and high denomination transactions. Financial institutions would be required to maintain records for five years and to allow investigators full access to all financial records. Money laundering would be punishable by seven years in prison, bankers who fail to report suspicious transactions would face up to three years. This legislation would be enforced by the Central Control Board, chaired by the Home Minister and would include the Attorney General, Finance Minister, and the Governor of the central bank. This board would set policy, manage cooperation with other international money laundering groups, and organize investigation teams. The legislation proposes that this board decide whether money laundering prosecution is warranted based on the evidence collected by financial investigative teams. The legislation is expected to be enacted in 2002.

Burma is an observer jurisdiction to the Asia/Pacific Group on Money Laundering and 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. Currently, Burma does not provide significant mutual legal assistance or cooperation to overseas jurisdictions in the investigation and prosecution of serious crimes. The GOB is planning to couple the proposed anti-money laundering legislation with proposed mutual assistance legislation to facilitate judicial cooperation between Burma and other states.

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 pass and implement its proposed anti-money laundering legislation. Burma should add additional resources to improve the ability of the administrative and judicial authorities that supervise the financial sector and enforce the financial regulations to successfully fight money laundering. Lastly, the GOB should provide additional resources and training for combating money laundering to the police, banking officials and regulators.

Cambodia. 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. The Government is in the process of drafting additional amendments to their anti-money laundering legislation, which will expand predicate offenses beyond drug money laundering.

In December 1999, Cambodia passed legislation, "The Law on Banking and Financial Institutions," that imposes capital and prudential requirements on financial institutions. Capital requirements for commercial banks increased from U.S. $5 million to U.S. $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 requires the NBC to review all banking licenses within one year.

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 not yet established a financial intelligence unit but is developing a system for reporting suspicious transactions.

Cambodia has assisted neighboring countries with money laundering investigations. Cambodia is not a party to the 1988 UN Drug Convention. On November 11, 2001 Cambodia signed the UN Convention against Transnational Organized Crime.

The Government of Cambodia should fully implement and enforce its anti-money laundering legislation. Moreover, the Government should institute training so to educate officials and financial institutions about anti-money laundering methods.

Cameroon. Cameroon is not a regional financial center. Funds generated from the transit of illicit drugs through Cameroon, and the absence of any anti-money laundering legislation, make Cameroon vulnerable to money laundering. The Bank of Central African States (BEAC) supervises Cameroon?s banking system. The Bank of Central African States is a regional central bank that serves six countries of Central Africa.

Cameroon is a party to the 1988 UN Drug Convention and has signed but not yet ratified the UN Convention against Transnational Organized Crime.

Canada. Canada remains vulnerable to money laundering because of its advanced financial services sector and heavy cross-border flow of currency and monetary instruments. The U.S. Government, sharing its northern border with Canada, is particularly concerned about the cross-border movements of currency. Canada?s financial institutions engage in currency transactions involving international narcotics-trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States.

In 2000, the Government of Canada (GOC) passed the Proceeds of Crime (Money Laundering) Act, which adopted enhancements recommended by the Financial Action Task Force in 1999, to assist in the detection and deterrence of money laundering and facilitate the investigation and prosecution of money laundering offenses. The Act created a mandatory reporting system for suspicious financial transactions and cross-border movements of currency or monetary instruments. The Act also provided for the creation of a financial intelligence unit (FIU), the Financial Transaction and Reports Analysis Center (FinTRAC), which reports to the Department of Finance and will receive and analyze reports from financial institutions and other financial intermediaries.

In November 2001, FinTRAC became operational and regulations came into effect that require reporting agencies to report all suspicious transactions when there are reasonable grounds to suspect that the transaction is related to the commission of a money laundering offense. In addition to banks and other financial institutions, money service businesses, casinos, lawyers, accountants, and real estate agents handling third-party transactions are required to file suspicious activity reports (SARs). FinTRAC will collect and analyze the SARs and determine which suspicious transactions merit further investigation. A second set of regulations related to compliance regimes, large-cash transactions, record keeping and client identification are expected to be phased in starting in early 2002.

FinTRAC is expected to have the authority to negotiate and set guidelines for sharing information with foreign counterparts. Currently before the parliament is legislation that amends the Canadian rules on information exchange. Under proposed Anti-Terrorism legislation, the Proceeds of Crime (Money Laundering) Act would be amended in order to authorize FinTRAC to detect financial transactions that may constitute threats to the security of Canada and to disclose this information to the Canadian Security Intelligence Service.

Canada is a member of the FATF and the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Canada also participates with the Caribbean Financial Action Task Force (CFATF) as a Cooperating and Supporting Nation, and as an observer jurisdiction to the Asia/Pacific Group on Money Laundering (APG). Canada is a party to the Inter-American Convention on Mutual Assistance in Criminal Matters. Canada has long-standing agreements with the U.S. 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 fully implement regulations that define cross-border currency reporting requirements. FinTRAC should join the Egmont Group to allow for the exchange of information with foreign counterparts.

Cayman Islands. The Cayman Islands, a United Kingdom (UK) Caribbean Overseas Territory, has made significant strides in its counter-money laundering program, though it is still vulnerable to money laundering due to its significant offshore sector. With a population of 40,000, the Cayman Islands is home to a well-developed offshore financial center 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. Cayman Islands authorities report that approximately 580 banks and trust companies, 3,178 mutual funds, and 517 captive insurance companies are licensed in the Cayman Islands. In addition, approximately 45,000 offshore companies are registered in the Cayman Islands, including many formed by the Enron Corporation.

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, including (1) lack of customer identification and record-keeping requirements; (2) lack of access to customer identity records by supervisory authorities; (3) lack of mandatory reporting of suspicious transactions; and (4) lack of supervision of a large class of management companies.

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

Following the FATF designation and the U.S. Treasury Advisory, the Cayman Islands enacted and implemented comprehensive anti-money laundering laws and regulations to address the major identified deficiencies: (1) Money laundering regulations that entered into force in September 2000 specify record-keeping and customer identification requirements for financial institutions and certain financial services providers; the regulations specifically cover individuals who establish a new business relationship, engage in a one-time transaction over Cayman Islands (CI) $15,000, or who may be engaging in money laundering; (2) 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 ; (3) A provision of the Banks and Trust Companies Law (2001 Revisions) grants the Cayman Islands Monetary Authority (CIMA) the power to request "any information" from "any person" when there are "reasonable grounds to believe" that that person is carrying on a banking or trust business in contravention of the licensing provisions of the law and grants CIMA access to audited account information from licensees who are incorporated under the Companies Law (2001 Second Revision); (4) The Monetary Authority Law (2001 Revision) grants CIMA, consistent with its regulatory authority, the power to obtain information "as it may reasonably require" from a person regulated under the regulatory laws of the Cayman Islands, a connected person, or a person reasonably believed to have information relevant to an inquiry by CIMA; the 2001 revisions to the Monetary Authority Law, unlike prior versions of the law, contain no requirement that CIMA obtain a court order before accessing account ownership and identification information; and (5) Amendments to the Companies Management Law (2001 Revision) expand regulatory supervision and licensing to management companies that were previously exempted, while the Companies Law (2001 Second Revision) institutes a custodial system in order to immobilize bearer shares.

A 2001 amendment to the PCCL revises the legal definition of financial intelligence unit to adopt the Egmont Group definition, thereby making the Cayman Islands Financial Reporting Unit eligible to become a member of the Egmont Group and facilitating information exchange with its international counterparts. The Office of the Attorney General has also established an international division to respond to international requests for judicial cooperation.

Since the FATF issued its June 2000 report, the Cayman Islands has also passed and/or amended various other laws, including the Money Services Law (2000), Building Societies Law (2001 Revision), Cooperative Societies Law (2001 Revision), Insurance Law (2001 Revision), and the Mutual Funds Law (2001 Revision).

The FATF recognized in June 2001 that the Cayman Islands had remedied the serious deficiencies in its anti-money laundering regime and decided to remove the Cayman Islands from the FATF?s list of non-cooperative countries. Similarly, the U.S. Treasury Department withdrew its advisory against the Cayman Islands in June 2001.

The Cayman Islands has been cooperative with criminal law enforcement authorities in the U.S. Through the UK, the Cayman Islands is subject to the 1988 UN Drug Convention and a 1986 U.S.-U.K. Mutual Legal Assistance Treaty. Also, it is a member of the Caribbean Financial Action Task Force, the Offshore Group of Banking Supervisors, and most recently was accepted into the Egmont Group of Financial Intelligence Units in June 2001.

The Cayman Islands has made notable progress toward addressing the serious systemic problems that characterized its counter-money laundering regime less than two years ago. It has also made important gains in terms of implementation of its new counter-money laundering regime. The government should continue with its anti-money laundering implementation plans and international cooperation.

Chile. Chile has a well-developed financial sector but is not considered a major regional financial center. The financial sector, particularly the banks, commodities brokerages, and currency exchange houses, remains highly vulnerable to money laundering due to the absence of comprehensive and effective anti-money laundering laws.

Chile?s current anti-money laundering program is based on the 1995 Counter Narcotics Law No. 19.366, which criminalized narcotics-related money laundering activities. The law allows banks to voluntarily report suspicious or unusual financial transactions. However, the legislation has no "safe harbor" provisions protecting banks from potential civil or criminal liability, and as a result the reporting of such transactions continues to be extremely low. Chile?s Judicial Reform Law of 1997 gives both the Council for the Defense of the State (CDE) and the Office of the Chief Prosecutor (Ministerio Publico) responsibility for investigating narcotics-related money laundering cases.

In December 1999, the Government of Chile (GOC) proposed amendments to the Counter Narcotics Law in order to enhance Chile?s ability to prevent and combat money laundering. This proposed new law would add illicit enrichment and terrorism as predicate offenses for money laundering and mandate the reporting of suspicious financial transactions by banks and other financial institutions. Those institutions would include currency exchange houses, credit card companies, chambers of commerce, brokers in securities, investments, bonds, and stocks, mutual funds companies, casinos and horse racetracks, notaries, the Foreign Investments Committee, and the Central Bank.

The proposed law also creates a new financial intelligence unit (FIU) within the Ministry of Finance replacing the existing FIU currently operating with limited legal abilities within the Council for the Defense of the State. The new FIU would receive and analyze reports of suspicious financial activities and forward those deemed appropriate for further investigation to the Public Ministry. In addition, the law would grant sole responsibility for investigating money laundering activities to the Public Ministry.

Chile is a party to the 1988 UN Drug Convention, and has signed but not yet ratified 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 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 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 Government of Chile should pass the anti-money laundering bill and put in place the legal framework allowing authorities to require disclosure of suspicious transactions. Any new FIU should be granted the authority and resources necessary to make it an effective force against money laundering and to cooperate internationally in the fight against money laundering.

China, People?s Republic of. As the People?s Republic of China (PRC) has become more prosperous, money laundering, bank fraud, embezzlement, and other financial crimes have become more common. Other areas of increased criminal activity include narcotics-trafficking, illegal alien smuggling, and intellectual property violations. Corruption figures prominently into financial crimes such as smuggling, embezzlement of public funds, and tax evasion. The use of alternative remittance systems to move criminal proceeds and to evade foreign currency control measures is on the rise. The PRC?s legal, regulatory, and enforcement sectors require additional reforms to counter the growth in financial crimes and money laundering. Law enforcement agencies are ill prepared in training and equipment to prevent, investigate, and prosecute crime.

The PRC has taken modest steps in 2001 to improve its anti-money laundering regime. As a means of cracking down on illegal foreign exchange trading that facilitates money laundering, among other financial crimes, the State Administration for Foreign Exchange (SAFE) and the Ministry of Public Security (MPS) issued a joint circular in early September 2001 for local departments of both agencies to cooperate more closely in scrutinizing foreign exchange transactions.

The various agencies responsible for developing the PRC?s anti-money laundering regime are studying how best to incorporate anti-money laundering measures into the PRC?s legal and financial environments. An impediment to the PRC?s participation in international money laundering fora, such as the Asia/Pacific Group on Money Laundering (APG), is the question of what to call Taiwan in the APG. The PRC participated in the initial meeting of the APG and hosted the first round of working group meetings in Beijing in July 1997. The PRC has not attended subsequent meetings of the APG citing Taiwan nomenclature issues as an obstacle to the PRC?s participation.

While awaiting the adoption of comprehensive money laundering measures, the PRC?s primary legal tool to combat money laundering is Article 191 of the 1997 Criminal Code. It lists three offenses?narcotics-trafficking, organized crime, and smuggling?in connection with which money laundering is treated as a criminal offense. Additionally, Article 312 criminalizes complicity in concealing the proceeds of criminal activity. The PRC is currently investigating 70 money laundering cases tied to these predicate offenses.

The April 2000 statute that requires bank clients to use their real names and show identification cards to open bank accounts has been effective in preventing criminal proceeds from being easily deposited into bank accounts opened under pseudonyms and withdrawn freely. In response to the closure of this loophole, Chinese officials have noted a rise in cross-border money laundering, particularly of funds derived from bribery or embezzlement headed to Hong Kong and returning to the PRC disguised as foreign investments. Under provisions of this statute, anonymous accounts will be totally phased out by 2005.

The United States and the PRC continue to hold discussions on cooperation on money laundering and other enforcement topics through the auspices of the US-PRC Joint Liaison Group (JLG) on law enforcement cooperation. The next JLG meeting is scheduled to occur in early 2002 in Washington.

The United States and the PRC signed a Mutual Legal Assistance Agreement (MLAA) in June 2000, the first major bilateral law enforcement agreement between the countries and an interim step towards the conclusion of a Mutual Legal Assistance Treaty. The MLAA entered into force in March 2001. In February 2002 the PRC agreed to the establishment of a legal attache office in Beijing to be staffed by the FBI. The PRC is a party to the 1988 UN Drug Convention, and has signed but not yet ratified the UN Convention against Transnational Organized Crime.

Building upon Article 191 and the ancillary financial regulations adopted in the past few years, China should criminalize money laundering for all serious crimes and implement anti-money laundering measures in line with international standards. As China integrates itself into the global anti-money laundering effort, the adoption of laws and regulations compatible with partner nations will allow it to more effectively combat money laundering domestically as well as internationally.

Colombia. Drug money laundering continues to infect Colombian financial institutions and other economic sectors as a result of Colombia?s prominence as the world?s largest production and distribution source for cocaine and a significant supplier of heroin. Colombia?s financial institutions engage in currency transactions involving international narcotics-trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States.

However, the Government of Colombia (GOC) has endeavored to become a regional leader in the fight against money laundering, with broad legal authority to combat money laundering and established anti-money laundering programs in several governmental institutions. Despite these efforts and funding support from the United States, the money laundering threat in Colombia remains high due to procedural difficulties in Colombian legal proceedings, limited resources for anti-money laundering programs, and pervasive money laundering of funds related to narcotics-trafficking, commercial smuggling for tax and import duty avoidance, kidnapping for profit, and arms trafficking and terrorism connected to violent paramilitary groups and guerrilla organizations.

A variety of money laundering techniques are present 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, remains a prominent method for laundering narcotics proceeds. Colombia also appears to be a significant destination and transit location for bulk shipment of narcotics-related U.S. currency. In particular, there is growing concern about the use of local currency exchangers to convert narcotics dollars to Colombian pesos, with the U.S. currency later shipped to Central America for deposit as legitimate exchange house funds where it is converted back to pesos and repatriated by wire to Colombia. Other methods include the use of debit cards drawn upon financial institutions outside of Colombia and the transfer of funds out of and then back into Colombia by wire through different Casas of Cambio in order to give the appearance of a legal business or personal transaction. Colombian authorities have also noted increased body smuggling of U.S. and other foreign currency and an increase in the number of shell companies operating in Colombia. Smart cards, Internet banking, and the dollarization of the economy of neighboring Ecuador represent some of the growing challenges to money laundering enforcement in Colombia.

Colombia established the "legalization and concealment" of criminal assets as a separate criminal offense in 1995, and more generally criminalized the laundering of the proceeds of extortion, illicit enrichment, rebellion, and drug trafficking in 1997. Colombia?s new criminal code enacted in 2000 became effective in July of 2001. Among other things, this new code expanded the money laundering predicates to also include arms trafficking, crimes against the financial system or public administration and criminal conspiracy.

A general provision for criminal forfeiture for intentional crimes has existed in Colombian penal law since the 1930s. Since then, Colombia has adopted additional criminal forfeiture provisions for particular offenses, most notably those contained in Colombia?s principal counternarcotics statute, Law 30 of 1986. In 1996, Colombia added an in rem forfeiture statute, giving Colombia one of the most expansive legislative regimes for forfeiture in Latin America. Nevertheless, despite this broad criminal and in rem legislative framework, until recently, forfeiture appears to have been used sparingly and with limited success.

In 1993, Colombia established suspicious activity and currency transaction reporting for banking institutions, and barred the entities and their employees with such reporting obligations from informing their clients of their reports to Colombian law enforcement. In addition to financial institutions, wire remitters now are required to file suspicious transaction reports, while currency transactions and cross-border movements of currency in excess of U.S. $10,000 must also be reported. Casas de cambio must file currency reports for transactions involving U.S. $700 or more. More recently, Colombia has sought to extend anti-money laundering compliance procedures to such institutions as the Superintendency of Securities, which oversees Colombia?s stock exchanges.

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. 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 to simply identify this service when registering their business but eliminating the need for them to become fully licensed.

Despite Colombia?s comprehensive anti-money laundering laws and regulations, enforcement continues to be a challenge for Colombia. Limited resources for prosecutors and investigators have made financial investigations problematic. Continued difficulties in establishing the predicate offense further contribute to Colombia?s limited success in achieving money laundering convictions and successful forfeitures of criminal property. Congestion in the court system and procedural impediments similarly have contributed to limited results in forfeiture.

In 1996, 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. Including convictions under prior offenses of criminal reception and illicit enrichment, this unit has obtained criminal sentences in about 50 money laundering related cases, with approximately 17 occurring in 2001. While Colombian authorities have initiated forfeiture actions against more than 10,000 properties in more than 350 forfeiture actions, Colombia obtained in rem forfeiture judgments in only six cases in 2001, bringing the total judgments to eighteen since 1998, some of which remain on appeal.

Until recently, Colombia also did not have a financial intelligence unit capable of receiving suspicious transaction reports. 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. The UIAF is now widely viewed as a hemispheric leader in efforts to combat money laundering and supplies considerable expertise in organizational design and operations to other financial intelligence units in Central and South America. In 2001, the UIAF received an average of more than 1000 suspicious activity reports (SARs) per month, a significant increase from last year?s figures. Since December of 1998, the UIAF has forwarded more than 1100 SARs to the Prosecutor General?s office for further investigation or prosecution. Electronic submission of suspicious transaction reports scheduled to go into effect last spring was expected to improve suspicious transaction reporting. The UIAF became a member of the Egmont Group of Financial intelligence units in 2000.

As in 2000, Colombia played a significant role in multilateral efforts to combat money laundering in 2001. In 2001, Colombia held the presidency of the South American Financial Action Task Force (GAFISUD), a newly established regional anti-money laundering organization modeled after the G-8 Financial Action Task Force. Colombia has also agreed to undergo mutual evaluation by fellow GAFISUD members. Colombia has also has continued to participate 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.

The United States and Colombia have continued to expand bilateral and multilateral cooperation in money laundering and forfeiture investigations. Twenty-six fugitives were returned from Colombia to the United States in 2001, twelve on money laundering charges. The majority of those returned were Colombian nationals. At least two other Colombian nationals and an Italian citizen are currently pending extradition to the United States on money laundering charges following a 2001 Colombian Supreme Court resolution in favor of their extradition. In early 2001, close cooperation between the United States Drug Enforcement Administration (DEA), the Colombian Administrative Department of Security (DAS) and Panamanian authorities resulted in 24 arrests and important seizures of assets connected to an international money laundering operation. In addition, coordinated efforts in 2001 between a DAS-DEA special unit and the United States Customs Service resulted in 28 arrests in the U.S. and Colombia in January of 2002 and the seizure of more than $7 million in assets over the course of a critical undercover money laundering investigation involving the inner workings of the BMPE. 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) has also provided valuable case-related assistance and training to United States prosecutors and agents.

Among other things, the United States? July 2000 appropriations in support of Plan Colombia have enabled the United States to provide training to the prosecutors and agents of the Prosecutor General?s specialized money laundering and forfeiture unit in 2001. Expenditures from these funds are expected to provide further training, as well as an infusion of equipment and operational expense support for the unit. United States appropriations in support of Plan Colombia are also expected to provide significant assistance to such programs as the asset management program of the National Drug Directorate (DNE) and anti-money laundering initiatives of the DIAN.

2001 also brought the transition to a new Prosecutor General. Additional personnel changes are anticipated in executive branch agencies following the 2002 presidential elections in Colombia. The new Colombian authorities should continue the progress made in the establishment of anti-money laundering programs and further strengthen the law enforcement relationship between the United States and Colombia.

Cook Islands. 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 it has 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.

In June 2000, the Financial Action Task Force (FATF) identified the Cook Islands as non-cooperative in international efforts to fight money laundering. The FATF in its report cited several concerns. In particular, the Government of the Cook Islands (GOCI) had no relevant information on approximately 1,200 international companies it had registered. The country also licensed seven offshore banks that took deposits from the public, yet were not required to identify customers, nor keep records. Excessive secrecy provisions in place guarded against the disclosure of relevant information on those international companies as well as bank records.

In June 2000, the U.S. Treasury Department issued an advisory to U.S. financial institutions, warning them to give enhanced scrutiny to all financial transactions originating in or routed to or through the Cook Islands or involving entities organized or domiciled, or persons maintaining accounts, in the Cook Islands.

The GOCI?s regulatory scheme is susceptible to money laundering. The International Companies Act of 1981 and amended 1982 permits issuance of bearer shares and the marketing of shelf companies. The Act prohibits public access to registers of corporate directors or managers or the disclosure of beneficial owners. While corporate directors are not required to be residents, companies must maintain a registered office and company secretary in the Cook Islands. Companies must file annual returns, but are not required to have their accounts audited.

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 GOCI has enacted several legislative reforms to address the deficiencies identified by the FATF. In August 2000, GOCI passed the Money Laundering Prevention Act 2000 (MLPA), that criminalizes all money laundering, creates a financial intelligence unit (FIU), mandates the reporting of suspicious transactions by financial institutions, and defines records retention and customer identification requirements for financial institutions. The anti-money laundering measures in the financial area cover both the domestic and offshore sector.

The legislation established a Money Laundering Authority (MLA) that is comprised of the financial secretary, the commissioner for offshore financial services, and the commissioner of the police and currently constitutes the country?s financial intelligence unit. The GOCI is in the process of making this FIU fully operational. The Government of New Zealand has provided a technical advisor to assist 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 foreign regulators and law enforcement, issues guidelines to financial institutions, and creates record keeping and reporting requirements for financial institutions. The Money Laundering Authority issued Guidance Notes on Money Laundering Prevention in April 2001.

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 U.S. $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 also requires that individuals declare cross-border movements of currency or negotiable securities greater than the equivalent of NZ $10,000 (approximately U.S. $4,150) 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 U.S. $415) and a maximum prison sentence of one year.

The MLA is authorized to cooperate with foreign governments that have entered into bilateral or multilateral mutual assistance arrangements with the GOCI. In addition, 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 not a party to the 1988 UN Drug Convention. It is a member of the Asia/Pacific Group on Money Laundering and participated in a mutual evaluation conducted by that Group and the Offshore Group of Banking Supervisors in October 2001.

In June 2001, FATF determined that although the Cook Islands had taken steps to remedy deficiencies in its anti-money laundering regime, the Cook Islands will need to take further steps to warrant removing it from FATF?s list of non-cooperative countries. The GOCI still needs to finalize and promulgate the necessary regulations in order to bring its legislation into full force.

The GOCI has taken a number of steps toward address the deficiencies identified by the FATF. However, the GOCI should begin to aggressively implement and enforce the provisions of the recently passed MLPA. Moreover, the GOCI needs to eliminate confidentiality provisions relating to the incorporation and registration of companies and other entities and their transactions, and expand oversight of the offshore sector.

Costa Rica. Costa Rica is vulnerable to money laundering because of drug trafficking in the region, and despite a December 2001 law expanding the scope of anti-money laundering regulations, a lack of stringent supervisory controls over 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 includes approximately 20 private and 3 state-owned banks, 13 finance companies, and 25 savings and loan institutions. The General Superintendent of Financial Entities (SUGEF) supervises these entities. Private banks are often small parts of the 21 "financial groups" that also engage in other activities such as bond trading and stock brokerage.

Low taxes and strong secrecy laws have created in recent years a growing offshore sector that offers banking services, and corporate and trust formation. Costa Rica has approximately 10 banks domiciled in jurisdictions outside of Costa Rica?Bahamas, Cayman Islands, Montserrat, and Panama?operating as part of Costa Rican financial groups. These foreign-domiciled "offshore" banks may not engage in direct financial operations in Costa Rica. These banks may receive or transfer funds in foreign currency, generally using correspondent accounts in other countries. Foreign-domiciled banks may only conduct transactions in Costa Rica through a domestic bank under a services contract. According to one estimate, these banks hold assets of approximately U.S. $1.4 billion.

There are no formal licensing procedures for foreign-domiciled banks. The central bank approves applications for foreign-domiciled banks to operate in Costa Rica after relying on the foreign jurisdiction?s certificate of good standing of these institutions. However, regulations allow for incorporation of these entities only from jurisdictions with authority to enter into supervision agreements with Costa Rican authorities and only from what Costa Rican authorities deem adequately regulated jurisdictions.

Costa Rican authorities have supervisory authority over foreign-domiciled banks in Costa Rica and have direct access to their records only through service contracts and through joint on-site inspections in those jurisdictions that permit them. Foreign-domiciled banks are required only to provide monthly balance statements and year-end audited statements to the General Superintendent of the Financial System (SUGEF); they must otherwise adhere to regulations established by their home jurisdictions.

The SUGEF supervises the domestic banking activity of foreign domiciled banks since they may only conduct local business through a domestic bank, and domestic banks are subject to Costa Rican regulations and direct SUGEF supervision.

The Government of Costa Rica (GOCR) has signed a memorandum of understanding (MOU) with Panama that permits joint on-site inspections of their Costa Rican offshore institutions. Costa Rican authorities indicated that on-site inspections have been scheduled with banks from the other jurisdictions despite the lack of an MOU.

Costa Rica has also become a haven for Internet gaming companies, especially sports betting, with over 100 companies estimated to be active employing over 5,000 people.

Law No. 7786 on Narcotics and Psychotropic Substances of May 1998 reformed a previous drug law and criminalized money laundering related to drug trafficking. Under Law 7786, drug money laundering is punishable by 8 to 20 years in prison. Law 8204, approved in December 2001, expanded the scope of Law 7786 and criminalizes the laundering of proceeds from all serious crimes.

Law No. 7786 obligates domestic financial institutions to identify their clients, record and report currency transactions that exceed U.S. $10,000 to regulators, report suspicious transactions, and maintain records for a minimum of five years. Law 8204 additionally requires deification of beneficial owners of accounts and transacted funds.

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 U.S. $10,000 and suspicious transactions to the Joint Counternarcotics Intelligence Center (CICAD). Individuals are required to report cross-border movements of currency that exceed U.S. $10,000. The law exempts good faith compliance from criminal, civil, or administrative liability.

Law No. 7786 created the Unidad de Analisis Financiero (UAF), Costa Rica?s financial intelligence unit and part of the CICAD, to receive and analyze suspicious financial transaction reports and investigate cases of money laundering. Financial institutions are required to report suspicious financial transactions their corresponding supervisory authority, which forwards disclosures to the UAF. In June 1999, the UAF joined the Egmont Group. The UAF assists other Costa Rican agencies? investigations and exchanges information with its foreign counterparts.

Law 8204 expands the UAF authority in several respects. The law requires all covered institutions to respond to all information requests by the UAF. Law 8204 also grants the UAF explicitly authority to share any information it receives with a wide range of judicial and administrative authorities, including foreign FIUs.

Law 8204 also extends anti-money laundering regulations to foreign-domiciled banks. However, it is unclear how Costa Rican authorities could comprehensively supervise these entities since they only have direct access to domestic transaction information through the local bank.

In 2000 the UAF reported receiving 58,000 large currency transaction reports and investigated 30 subjects. The UAF forwarded these results to the Public Ministry; however, Costa Rica has not successfully prosecuted anyone under its current anti-money laundering laws.

Costa Rica 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. Costa Rica is a party to the 1988 UN Vienna Convention. An extradition treaty is in force between the United States and Costa Rica.

U.S. law enforcement agencies work effectively with Costa Rican public security forces in counternarcotics and money laundering investigations. In 2001, the GOCR assisted the U.S. Internal Revenue Service (IRS) in arrests and executing search warrants relating to a major tax evasion and money laundering ring in Costa Rica. Six people were charged in Costa Rica of conspiring to launder $470,000 through offshore trusts designed to conceal assets and evade millions of dollars in U.S. taxes.

The growth of Costa Rica?s offshore sector and the absence of an effective regulatory and supervisory regime are causes for concern. The GOCR should subject all offshore institutions to comprehensive anti-money laundering supervision to help Costa Rica protect its financial and offshore sectors from being abused by money launderers and other international criminals.

C?te d?Ivoire. 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.

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 never prosecuted a money laundering case.

C?te d?Ivoire has not addressed the problem of international transportation of illegal-source currency and monetary instruments, although there are reporting requirements on transporting cash in excess of 5 million West African Francs (approximately U.S. $6,850) into or out of the country.

C?te 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.

C?te d?Ivoire is a party to the 1988 UN Drug Convention.

Croatia. Croatia is neither a regional financial nor a 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 converted into real estate and luxury goods rather than laundered for re-integration in to the financial system.

In 1997, Croatia criminalized money laundering related to serious crimes. The legislation requires banks and non-bank financial institutions to report transactions that exceed U.S. $17,500, as well as any cash transactions that seem suspicious. 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 2001, the Government of Croatia (GOC) began centralizing anti-money laundering intelligence and investigation within the Ministry of the Interior. 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 GOC plans to introduce legislation in 2001 that will require banks to transmit data to supervising agencies electronically instead of by mail. In 2001, the GOC established a National Center for the Prevention of Corruption and Organized Crime within the State Prosecutor?s Office. This office has the authority to freeze assets, including securities and real estate, for up to a year. The office also has enhanced powers to seek financial transaction information and to coordinate the investigation of financial crimes.

Weak interagency cooperation, the insufficient technical skills of the police and prosecutors, and a judicial backlog of over one million cases hinder Croatia?s anti-money laundering efforts. Croatia does not have limitations on providing and exchanging information with international law enforcement on money laundering investigations.

Croatia is a party to the 1988 UN Drug Convention and a signatory to the UN Convention against Transnational Organized Crime.

Cuba. 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 a signatory to the UN Convention against Transnational Organized Crime.

Cyprus. The Republic of Cyprus is a major regional financial center with a robust offshore financial services industry, and as such, remains vulnerable to international money laundering activities. Organized crime, credit card fraud, burglary, and theft are the major sources of illicit proceeds laundered in Cyprus.

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 criminal offenses punishable by imprisonment exceeding one year from which proceeds were derived. 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 counterfeiting 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, has contributed to a nearly three-fold increase in the number of bank suspicious activity reports from 25 in 2000 to 67 in 2001.

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 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 2001, the UCML opened 202 cases and closed 98. The Unit issued 115 Information Disclosure Orders and 21 freezing orders, resulting in approximately U.S. $2.67 million in frozen assets. During 2001, there were three convictions recorded under the 1996 Anti-Money Laundering law, while twelve cases were pending at the end of the year.

On 22 November 2001, Cyprus Parliament ratified the UN Convention on the Suppression of the Financing of Terrorism. The GOC created a sub-unit within the UCML that will focus specifically on the financing of terrorism. The unit reinforces the UCML with additional staff. The UCML will coordinate with the new counter-terrorism unit under the authority of the Attorney General. The GOC has cooperated with the U.S. to investigate terrorist financing.

The GOC places restrictions on foreign ownership of property and transportation of currency and bullion. Cypriot law requires declaration of all cash entering or leaving Cyprus in the amount of U.S. $1,600 or greater. Declarations over U.S. $10,000 are sent directly to the Investigations Section of Cypriot Customs and the central bank. All banks and non-bank financial institutions?insurance companies, stock exchange, cooperative banks, lawyers, accountants and other financial intermediaries?must report suspicious transactions to the UCML. Bank employees currently report all suspicious transactions to the bank?s compliance officer, who determines whether to forward the report to the UCML for investigation. Reports not sent to the UCML are filed monthly with the central bank. Banks are also required to document cash deposits in excess of U.S. $10,000 and to file monthly aggregate reports with 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 U.S. $500,000 per month for a single customer. There are no statistics available on compliance with these regulations.

In 2000, the Financial Action Task Force (FATF) conducted a review of Cyprus?s anti-money laundering regime against 25 specified criteria. The report raised a concern regarding customer identification in respect to all forms of trusts. In 2001, the central bank issued rules addressing this concern, requiring banks to ascertain the identities of the natural persons who are the "principal/ultimate" beneficial owners of new corporate or trust accounts. This rule does not apply to existing accounts.

The central bank took several steps during 2001 to improve suspicious activity reporting and identification of beneficial owners of new accounts. The central bank amended its requirement that commercial banks report the opening and maintenance of accounts, by banks incorporated in 19 jurisdictions, to include the Former Yugoslav Republic of Montenegro. The amendment enhanced the requirement to obtain central bank approval for cash deposits exceeding $100,000 per year by requiring banks to apply the annual limit to the aggregate value of deposits from family members and business associates.

The central bank also issued a series of orders requiring banks to notify the central bank of accounts held by any individuals or organizations associated with the financing of terrorist organizations, and to freeze assets held in those accounts. The aforementioned requirements, apply equally to domestic and offshore banks. Banks and professional groups generally support the steps taken by the central bank. At the request of the Central Bank, the lawyers and accountant associations requested their members notify the associations of any work performed on behalf of certain terrorist organizations. Both associations are cooperating closely with the central bank.

A substantial amount of money was illegally transferred out of Yugoslavia while former President Slobodan Milosevic was in office. Estimates range as high as four billion dollars with some of these funds believed to have been transferred through Cyprus. By April 2001, the GOC had turned over documents to the international war crimes tribunal in The Hague concerning possible money laundering by Milosevic and his associates. Some 250 bank accounts have been identified as belonging to Serbian offshore companies based in Cyprus.

The development of the offshore financial sector in Cyprus has been facilitated by the island?s central location, a preferential tax regime, an extensive network of double tax treaties (particularly with Eastern European and former Soviet Union nations), a labor force particularly well trained in legal and accounting skills, a sophisticated telecommunications infrastructure, and relatively liberal immigration and visa requirements. Services provided are confined to banks (total 2001 assets: U.S. $10.8 billion), insurance services, company formation and relatively small fund management and advisory businesses.

Cyprus?s offshore sector includes 29 banks, 28 licensed foreign insurance companies, 116 financial services companies, 20 companies that manage collective investment schemes, and 12 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 prospective offshore banks to face a detailed vetting procedure to ensure only banks from jurisdictions with proper supervision are allowed to operate in Cyprus. Offshore banks must have a physical presence in Cyprus and cannot be brass plate operations (shell banks). 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.

As of mid-2001, there were approximately 52,000 international business companies (IBCs) registered in Cyprus. However, approximately 16,000 of these remain active and about 1,000 have a physical presence in Cyprus. Russian IBCs constitute a "significant" share of the total number of active IBCs. The central bank began an intensive program in 2001 to identify inactive offshore companies and to delete them from the registry. Exact figures are unavailable; however, the Central Bank is believed to have deleted approximately 18,000 companies from the registry during 2001. The names of beneficial owners of IBCs can be released to law enforcement by court order. The popularity of the offshore sector can be explained in part, as noted above, 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 does not permit bearer shares.

In March 2001, the IMF conducted an assessment of the offshore sector in Cyprus. In its final report, published in July 2001, the IMF concluded that although lack of resources meant that onsite supervision was less than optimal, Cyprus?s supervision of the offshore sector was generally "effective and thorough." The IMF characterized Cyprus? anti-money laundering legislative framework, as well as measures imposed by the central bank and other regulatory authorities, as being adequate. The report noted that, as in other offshore jurisdictions, there was still scope to improve the identification of beneficial owners and the reporting of suspicious transactions, particularly in the case of non-resident controlled companies.

The IMF report noted that Cyprus planned to abandon, by 2005, its existing framework of tax preferences for offshore businesses. Cypriot authorities are drafting a new Financial Services Bill that will extend supervision to cover all investment services in Cyprus, including some domestic businesses currently outside the scope of the current supervisory framework. These steps will eliminate the differentiation between onshore and offshore businesses in Cyprus. This will also assist in clearing the way for Cyprus?s accession to European Union (EU) membership.

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.

Cyprus has put in place a comprehensive anti-money laundering legal framework that meets international standards. Recent central bank rules requiring banks to identify the beneficial owners of new accounts should be extended to cover existing bank accounts whenever there is a significant change in the ownership or control of the corporate or trust account holder. The GOC could enhance enforcement of its anti-money laundering laws by authorizing UCML to conduct unannounced inspections of the bank compliance officers and to also examine suspicious activity reports filed with the Central Bank. In addition, as noted by the IMF, it should ensure that the identities of beneficial owners are easily accessible by law enforcement.

(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 U.S. 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 with 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 number of cash transactions in the "TRNC" as well as to improve the tracking of any transactions above U.S. $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" 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 U.S. $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 fail to provide effective protection against the risk of money laundering. 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. Both geographic and economic factors render the Czech Republic vulnerable to money laundering. The country straddles Europe, with Poland and Slovakia, which separated from the Czech Republic less than a decade ago, to the east, Germany to the west and Austria to the south. 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.

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 in July 1996. Money laundering was technically criminalized in September 1995 through the addition of Articles 251 and 251a to the Czech Criminal Code. The Criminal Code does not explicitly mention money laundering, but the criminal provisions do apply to financial transactions involving the proceeds of all serious crimes. The Financial Action Task Force (FATF) report of July 2001 on the Czech Republic suggests nevertheless that the current legislative configuration constitutes a major weakness in the country?s anti-money laundering regime.

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 suspicious transactions. The FAU is a member of the Egmont Group, and is authorized to cooperate with its foreign counterparts, even those not part of the Egmont Group.

The Czech Parliament has failed to pass legislation that completely eliminates anonymous passbook accounts. 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 U.S. $2,700). While the prohibition of new anonymous accounts beginning in mid-2000 is considered to be a major step forward, the continued existence of prior anonymous accounts remains, in the eyes of the FATF reviewers, a clear weakness in the effort to combat money laundering.

In addition to identifying these weaknesses, FATF has reported that insufficient requirements for the identification of beneficial owners that are legal persons severely hamper money laundering investigations in the Czech Republic.

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 continues 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 has signed Memoranda of Understanding (MOUs) on information exchange with Belgium, France, Italy and Bulgaria.

The Czech Republic has made progress. A revision in May 2001 of the Criminal Code has facilitated the seizure and forfeiture of bank accounts. There has been a significant increase in the number of suspicious transaction reports being transmitted to the FAU and, in turn, that are evaluated and forwarded to law enforcement, indicating an active participation of obliged entities in the anti-money laundering regime. After clarifications to the reporting requirements in 1996, reporting soared from 95 unusual transactions (1996) to 1,920 suspicious transactions in 2000. The number of reports forwarded to the police increased from none the first year to 103 in 2000. The Czech Republic is encouraged to continue adopting the suggestions of the PC-R-EV mutual evaluation report, to eliminate all anonymous passbook accounts, and to strengthen the requirements on identification of beneficial owners.

Denmark. 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, regardless of the predicate offense. 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 regulations in place that ensure the availability of adequate records in connection with narcotics investigations. Denmark has cooperated fully with U.S. authorities with regards to money laundering investigations.

Denmark is a party to the 1988 UN Drug Convention and has signed but not yet ratified the United Nations Convention against Transnational Organized Crime. It participates in European Union anti-money laundering efforts, and its financial intelligence unit belongs to the Egmont Group. Denmark has endorsed the 1997 Basel Committee Core Principles for Effective Banking Supervision. Denmark is also a member of the Financial Action Task Force.

Dominica. Dominica has enacted legislation to address many of the deficiencies in its anti-money laundering program but implementation of its reforms remains vital to the country?s ability to combat financial crime including money laundering.

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. Dominica?s financial sector includes 5 domestic banks and 3 offshore banks, 17 credit unions, 1,100 international business companies (IBCs) (a 5,000 reduction from last year), 4 Internet gaming companies, and 1 international exempt trust. Under Dominica?s economic citizenship program, individuals could purchase Dominican passports as well as official name changes for approximately U.S. $50,000 or U.S. $75,000 in government bonds. Dominica?s economic citizenship program was improperly controlled and came under fire as a way for individuals from the Peoples? Republic of China and other foreign countries to become Dominican citizens and enter the United States via Canada without visas. Between 1996 and 2000, the Government of Dominica (GOD) issued approximately 500 economic citizenships.

A rapid expansion of Dominica?s offshore sector without proper supervision has made Dominica attractive to international criminals, and has prompted public criticism from international organizations. A February 2001 U.S. Senate report on correspondent banking alleged that the British Trade and Commerce Bank Ltd. (BTCB), a Dominican offshore bank, was involved in suspicious transactions involving millions of dollars from financial fraud operations. The GOD revoked BTCB?s license two weeks later after an on-site bank inspection.

In June 2000, the Financial Action Task Force (FATF) identified Dominica as non-cooperative in international efforts to combat money laundering. The FATF in its report of June 2000 cited several concerns: outdated anti-money laundering legislation, inadequate identification of corporate owners and bank customers, and a largely unregulated offshore sector. The U.S. Department of Treasury also issued an advisory to U.S. financial institutions in July 2000 warning them to "give enhanced scrutiny" to financial transactions involving Dominica.

In response to pressure from the international community, the GOD enacted a number of reforms to address the deficiencies in its financial sector. In July 2000, the Finance Minister announced a comprehensive review of all offshore banks and the establishment of an Offshore Financial Services Council (OFSC). An agreement between the OFSC and the Eastern Caribbean Central Bank (ECCB) in December 2000 placed Dominica?s offshore banks under the direct supervision of the ECCB. The agreement specified licensing and ongoing supervision requirements. The ECCB already supervised Dominica?s domestic banks. Three joint offshore bank inspections by the ECCB and the Ministry of Finance?s International Business Unit (IBU) resulted in the revocation of at least three licenses in 2001.

Dominica has enacted anti-money laundering legislation since 2000. The Money Laundering (Prevention) Act (MLPA) No. 20 of December 2000 (effective January 2001) and its July 2001 amendments criminalize the laundering of proceeds from any indictable offense. The MLPA requires financial institutions to keep records of transactions for at least seven years. The MLPA authorizes the Money Laundering Supervisory Authority (MLSA) to inspect and supervise non-bank financial institutions and regulated businesses for compliance with the MLPA. The MLPA requires a wide range of financial institutions and businesses, including offshore institutions to report suspicious transactions to the MLSA, which will then send the reports to the Financial Intelligence Unit (FIU); the MLSA is also responsible for developing anti-money laundering policies, issuing guidance notes, and conducting training. The MLPA also requires persons to report cross-border movements of currency that exceed U.S. $10,000 to the FIU. The FIU will analyze these reports of suspicious transactions and cross-border currency transactions, forward appropriate information to the Director of Public Prosecutions, and liaison with other jurisdictions on financial crimes cases.

The MLPA also authorizes the FIU to exchange information with foreign counterparts. A new Exchange of Information Act provides for information exchange between regulators. Dominican authorities have indicated that the FIU has five trained staff and has been operational since August 2001.

The MLPA also provides for freezing of assets for seven days by the FIU after which time a suspect must be charged with money laundering or the assets released; assets may be forfeited after a conviction.

The May 2001 Money Laundering (Prevention) Regulations, apply to all onshore and offshore financial institutions (including banks, trusts, insurance companies, money transmitters, regulated businesses, and securities companies). The regulations specify customer identification, record keeping and suspicious transaction reporting procedures and require compliance officers and training programs for financial institutions. Anti-Money Laundering Guidance Notes, also issued in May 2001, provide further instructions for complying with the MLPA and provide examples of suspicious transactions to be reported to the MLSA.

The Offshore Banking (Amendment) Act No. 16 of 2000 prohibits the opening of anonymous accounts, prohibits IBCs from direct or indirect ownership of an offshore bank, requires all banks licensed in Dominica to have a physical presence in Dominica, and requires disclosure of beneficial owners and prior authorization to changes in beneficial ownership of banks.

The International Business Companies (Amendment) Act No. 13 of 2000 (effective January 2001) requires that newly issued bearer shares be kept with an "approved fiduciary," who is required to maintain a register with the beneficial owner name and address. It empowers the IBU to "perform regulatory, investigatory and enforcement functions" of IBCs. Additional amendments to the Act in September 2001 require previously issued bearer shares to be registered.

In June 2001, FATF determined that although Dominica had taken steps to remedy some of the deficiencies in its anti-money laundering regime, Dominica had made insufficient progress to warrant removing it from FATF?s list of non-cooperative countries in the international fight against money laundering. FATF noted that Dominica had not addressed fully several issues, including customer identification procedures, the retention of records and information sharing with administrative authorities.

On September 7, 2001, FATF recognized Dominica for its latest reform, a September 3 amendment to the Money Laundering (Prevention) Regulations that requires Dominican institutions to apply within one-year customer identification procedures for existing bank accounts. FATF also encouraged Dominica to address deficiencies identified in the area of trusts and invited Dominica to submit an implementation plan.

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 its recent legislation, provide additional resources for regulating offshore entities, and continue to develop the FIU in order to coordinate its own anti-money laundering efforts and cooperate with foreign authorities. Such measures will help protect Dominica?s financial system from further abuse by international criminals.

Dominican Republic. The Dominican Republic is a major transshipment point for narcotics moving from South America into Puerto Rico and the United States, and is vulnerable to narcotics-related money laundering. The Dominican Republic?s financial institutions engage in currency transactions involving international narcotics-trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States. The smuggling of bulk cash by couriers and wire transfer remittances are the primary methods for moving illicit funds from the United States into the Dominican Republic. Once in the Dominican Republic, the use of currency exchange houses and money remittance companies are the primary mechanisms for laundering the illicit funds. In September 2001, a year-long investigation, known as Operation Sanctuary, resulted in the arrest of numerous individuals who were part of an international organization engaged in the illicit trafficking of multi-ton quantities of cocaine and the laundering of millions of U.S. dollars. The investigation was initiated by the Dominican Republic?s National Drug Control Directorate (DNCD) and supported by law enforcement officials from the U.S., Puerto Rico and Venezuela.

The Government of the Dominican Republic (GODR) has taken steps to combat money laundering. Since December 1995, narcotics-related money laundering has been considered a criminal offense, and the law allows preventative seizures and criminal forfeiture of drug-related assets. It also authorizes international cooperation in forfeiture cases. Decree No. 288-1996 by the Superintendency of Banks requires banks, currency exchange houses, casinos, and stockbrokers to record currency transactions equal to or greater than the equivalent of U.S. $10,000 in either domestic or foreign currency, and make this information available to law enforcement upon request. The Decree also obligates these financial institutions to identify customers and report suspicious financial transactions (STRs). Numerous narcotics-related investigations have been initiated under this 1995 Narcotics Law and substantial currency and other assets confiscated but there has never been a prosecution.

In 1997, the GODR established the Financial Analysis Unit (FAU) within the Superintendency of Banks to analyze and disseminate STRs information to the Financial Investigative Unit within the DNCD. The Unit investigates narcotics-related money laundering, and has authority to compel cooperation from other GODR agencies. The FAU is a member of the Egmont Group, and is authorized to exchange information with other financial intelligence units. In 1998, the GODR passed legislation that allows extradition of Dominican nationals on money laundering charges.

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 U.S. $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 U.S. $10,000 in domestic or foreign currency. The Senate passed the legislation in December 2001 and it now awaits action in the Lower House of the Congress.

The GODR is the current president of the Caribbean Action Task Force (CFATF), and a member of 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 a signatory to the UN Convention against Transnational Organized Crime (December 2000). The GODR cooperates with the U.S. Government on counter narcotics and fugitive matters.

The GODR should enact pending anti-money laundering legislation and implement its provisions.

Ecuador. Drug trafficking organizations continue to exploit Ecuador?s borders while money launderers benefit from the absence of an effective anti-money laundering program. Ecuador?s adoption of the U.S. dollar as its national currency during 2000 could increase the attractiveness of Ecuador as a money laundering site. Several Ecuadorian banks maintain offshore offices, although these have come under tighter control as a result of banking legislation passed in 1994, could be used to channel illicit funds. There were no successful prosecutions specifically involving the financing of drug operations during 2001, although over 1.5 million of smuggled U.S. currency, believed to be related to drug sales, was seized.

The Narcotics and Psychotropic Substance Act of 1990 (Law 108) criminalizes illegal enrichment, conversion or transfer of assets, and prosecution of front men done in connection with drug trafficking. Regulations are in place (through Drug Law 108, 1994 Financial System Law, and 1996 Banking Superintendency Resolution) requiring financial institutions to report to the National Drug Council (CONSEP) any transaction in cash or stocks over U.S. $5,000; and suspicious financial transactions. The CONSEP does not share this information with the Central Bank or other financial regulatory agencies, therefore, the Banking Superintendency cannot verify if the financial institutions are complying with the reporting requirements. A contradictory legal framework remains in place severely limiting the information that can be made available to law enforcement. The Ecuadorian National Police (ENP) must obtain a court order to search for and obtain financial information from banks and other financial institutions. However, private financial institutions and banks generally refuse to honor the orders claiming that, according to banking regulations, they are only required to respond to the Superintendency of Banks. The Superintendency of Banks will not accept request for information directly from police but requires that the request be made by the CONSEP, and provides the information back to the CONSEP, which often does not share with other agencies. A bill revising the Drug Law has been drafted to correct some of these deficiencies.

Ecuador?s new Code of Criminal Procedures went into effect in July 2001 transforming the country?s traditional inquisitorial system into an accusatorial one. The prosecutors can now decide which cases can precede and the judiciary will now hear criminal cases in oral trials as compared with the slow moving and predominantly written inquisitorial system. The National Police will continue to work as investigators but under the direction of the prosecutors.

Ecuador is a party to the 1988 UN Drug Convention and has signed but not yet ratified 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. Ecuador is also a member of the South American Financial Action Task Force (GAFISUD). There is a 1992 Financial Information Exchange Agreement (FIEA) between the Government of Ecuador (GOE) and the U.S. to share information on currency transactions.

The GOE should enact reforms to criminalize money laundering from any illicit activity, provide law enforcement authorities with effective investigative techniques, and take the necessary steps to construct a viable anti-money laundering regime to combat money laundering.

The Arab Republic of Egypt. Egypt is not a major regional financial center. The majority of funds laundered in Egypt represent proceeds from drug trafficking, organized crime, and evasion of international sanctions. Narcotics-related money laundering usually involves investment in real estate or business ventures. In a typical scheme, a launderer will invest through a trusted intermediary, such as a relative or a close friend. Because of widespread mistrust of banks and fear that banking records?despite Egypt?s secrecy laws?could provide authorities with incriminating evidence, Egyptian money launderers rarely use the banking system.

Egypt has no law specifically criminalizing money laundering, does not have customer identification requirements for non-bank financial institutions, and contains no requirement that banks or other financial institutions report suspicious transactions to governmental authorities. Presidential Decree No. 205 of 1990, as amended by Law No. 97 of 1992, generally provides for banking anonymity, specifically that "all clients? accounts, deposits, trusts, and safes in banks, and all dealings related thereto shall be confidential." The law states in translation, however, that secrecy may be abridged through an order from the Cairo Court of Appeal "[i]f this is so necessitated unveiling a fact in a felony or misdemeanor of which the occurrence is established by substantiated evidences." The exact basis on which the Cairo Court of Appeal might grant such a court order is somewhat unclear.

The Egyptian government has shown some willingness to cooperate with foreign authorities in criminal investigations. For example, the United States and Egypt signed a Mutual Legal Assistance Treaty in May 1998, which will enter into force sometime in 2001. Egypt is a party to the 1988 UN Drug Convention, and has signed but not yet ratified the UN Convention Against Transnational Organized Crime. The Egyptian government has signed legal and judicial cooperation agreements with the United Arab Emirates, Bahrain, Morocco, Hungary, Jordan, France, Kuwait, Tunisia, Iraq, and Algeria. It has signed other international agreements, including extradition agreements and mutual judicial recognition agreements, with Italy, Turkey, and Arab League Countries.

There have been some improvements to Egypt?s anti-money laundering enforcement regime since the last reporting period. In June 2001, the Central Bank of Egypt (CBE) issued regulations containing customer identification and record-keeping provisions for banks under its control and requiring staff anti-money laundering training. The regulations, however, do not apply to non-bank financial institutions. In addition, while the regulations require banks to maintain information about "unusual transactions," there is no requirement to report these transactions to governmental authorities. Finally, while Egypt?s Parliament has periodically debated enacting a law that would clearly criminalize money laundering, many Egyptian officials do not see such a law as urgent, believing that existing laws and regulations are adequate to combat money laundering.

In June 2001, the Financial Action Task Force (FATF) identified Egypt as non-cooperative in international efforts to fight money laundering. The FATF in its report cited several concerns: (1) the failure to criminalize money laundering; (2) the failure to establish an adequate suspicious transaction reporting system and financial intelligence unit; and (3) the failure to establish adequate customer identification requirements that apply to all financial institutions. The FATF also sought clarification on the evidence required to abridge Egypt?s strict bank secrecy requirements.

Though the Egyptian government has made some attempt to improve the country?s domestic anti-money laundering program and to cooperate internationally with criminal investigations, serious deficiencies remain. As a crucial first step to address these deficiencies, Egypt needs to pass a law clearly criminalizing money laundering. Additional necessary improvements include requiring the reporting of suspicious transactions to appropriate authorities (i.e., a financial intelligence unit), instituting customer identification and record-keeping provisions for all financial institutions, and the easing of bank secrecy requirements to protect Egypt?s economy from infiltration by criminals.

El Salvador. Located on the southern coast of the Isthmus, El Salvador has one of the largest banking systems in Central America. Salvadoran banks? most significant financial contacts are those with its Central American neighbors, Mexico, the Caribbean, and the United States. The growth of El Salvador?s financial sector and the increase in narcotics-trafficking in the region continue to make El Salvador quite vulnerable to money laundering. Criminals also launder funds generated from kidnapping. In addition, the Government of El Salvador?s (GOES) dollarization of the economy in January 2001 increased the risk of money laundering. However, thus far the GOES aggressive anti-money laundering policies have resulted in the first money laundering prosecution and the entry of the GOES financial intelligence unit in 2001 into the Egmont Group.

The 1998 "Law Against Laundering of Money and Assets" criminalized money laundering related to drug trafficking and any other criminal activity. The Unidad de Investigaci?n Financiera (UIF), the financial intelligence unit (FIU) within the Attorney General?s Office, separate anti-money laundering units within the Polic?a Nacional Civil (PNC) and the central bank enforce the law?s provisions. 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 identification of money and asset laundering, and establish internal auditing procedures. Covered institutions also must report suspicious transactions and transactions that exceed 500,000 colones (approximately U.S. $57,000) to the UIF. The law also requires sworn declarations for those entering the country with more than 100,000 colones (approximately U.S. $11,400), or its foreign equivalent, in cash or securities.

Although a provision of this law provides for asset identification and seizure, asset sharing with non-Salvadoran agencies has not yet been approved. Draft legislation would lower the threshold reporting requirement to 100,000 colones (approximately U.S. $11,400), and additionally require the declaration of outbound currency movements of 100,000 colones or more.

The UIF has been operational since January 2000. The UIF currently is composed of six individuals?three prosecutors (fiscales), one analyst, one computer technician and one secretary. From January 1 to October 31 2001, the UIF received 54 reports from 17 financial institutions, opened approximately 100 investigations involving over 500 subjects, and prosecuted three cases. The UIF also reported freezing approximately $500,000 from various suspect bank accounts.

In June 2001 the UIF formally joined the Egmont Group. El Salvador is party to the 1988 UN Drug Convention, and has signed but not yet ratified the UN Convention against Transnational Organized Crime. El Salvador is also a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering.

The GOES should continue the aggressive anti-money laundering policies it has pursued over the last few years. It is urged to address the deficiencies in its anti-money laundering law and provide training for judges to ensure proper enforcement of its laws.

Eritrea. Eritrea is a small country that has a developing financial system. There are no reports of money laundering in Eritrea.

Eritrea is not a party to the 1988 UN Drug Convention.

Estonia. 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 Estonia and the other 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 U.S. $11,000 for non-currency transactions; and the equivalent of approximately U.S. $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. In 2001 Estonia established the Tax Police, which also has the authority to investigate money laundering and to seize assets and cash.

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). The IB is a member of the Egmont Group. Estonia is a party to the 1988 UN Drug Convention and has signed but not yet ratified the UN Convention against Transnational Organized Crime. A Mutual Legal Assistance Treaty is in force between the United States and Estonia.

The Government of Estonia should implement a system to ensure that banks actually comply with the reporting requirements and should take steps to develop a viable anti-money laundering regime that will enable it to fully participate in the global effort to thwart money laundering.

Ethiopia. Ethiopia is neither a regional financial center nor a haven for money laundering activities. Because inter-continental criminal, terrorist, and drug organizations operate within the region, Ethiopia is vulnerable to money laundering related activities. These can include illegal trade in narcotics, illegal gem and mineral trading, terrorist financing, human trafficking, and trafficking of animal products.

Money laundering is not a crime in Ethiopia. However, Ethiopia?s underdeveloped financial infrastructure and lack of economic development make it unlikely that it will become a financial center in the foreseeable future. The country contains around 5 local banks as well as a government bank. Currently, there are no foreign banks that operate within the country. Foreign exchange controls limit possession of foreign currency, and the government controls the exchange of foreign currency into local currency.

Banks are required to know and report the identity of their customers making significant (unspecified) transactions. Banks must also maintain account records.

Ethiopia is a party to the 1988 UN Drug Convention and has signed but not yet ratified the UN Convention against Transnational Organized Crime.

Fiji. No significant money laundering appears to be taking place 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 customer identification procedures, keep transaction and other account records for seven years, and report suspicious financial transactions to both the Fiji Police and the Reserve Bank of Fiji. These guidelines went into effect in January 2001. Approximately 50 suspicious transactions were reported in 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.

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

In 1994, Finland enacted legislation criminalizing money laundering related to narcotics-trafficking or 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) Finnish police have investigated has increased in the past three calendar years: 348 STRs in 1999, 1,109 in 2000, and 2,700 in 2001. Trafficking in narcotics was the predicate offense for 40 percent of money laundering convictions in 2001.

In 1998, Finland 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 has signed but not yet ratified the UN Convention against Transnational Organized Crime.

France. France remains an attractive venue for money laundering because of its sizable economy, strong currency, political stability, 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 Financial Action Task Force (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 in 1996 of Act N? 93-392, "On the Fight against Money Laundering, Drug Trafficking and International Cooperation in Respect of Seizure and Confiscation of the Proceeds of Crime." Even though this Act 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, on the grounds that they constitute the same offense.

In July 2001, the French Parliament proposed a law that would ease the responsibility of banks to report large cash deposits during the introduction of the Euro. The law would temporarily raise the amount of money an individual could deposit (from FF50, 000 to 60,000) without the bank having to report the transaction to France?s financial intelligence unit, TRACFIN (the Treatment of Information and Action Against Clandestine Financial Circuits). The law would also suspend, from 1 December 2001 to 17 February 2002, the sanctions imposed on banks that fail to notify TRACFIN of such deposits, provided the banks are confident that the money being deposited is money being "hoarded." The existing requirements that banks report all suspicious transactions will remain unchanged?banks currently face fines of FF2.5 to five million for failure to report such transactions, and bankers face up to ten years in prison.

Also in 2001, the Government of France (GOF) proposed additional anti-money laundering measures in order to bring the French regime into line with the newer, tougher European Union (EU) Directive on money laundering. These include requiring companies to disclose their nominee shareholders and giving the GOF the power to shut down shell companies being used in money laundering operations. However, the GOF will not address one aspect of the EU Directive: it will not require auditors and attorneys to report suspicious transactions, as called for in the Directive.

TRACFIN is responsible for analyzing suspicious transaction reports 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.

As a member of the European Union, France is subject to EC Directive 91/308/EEC. France is a member of the FATF and a Cooperating and Supporting Nation to the Caribbean Financial Action Task Force. France is a party to the 1988 UN Drug Convention and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime. France has signed but not yet ratified the 2000 UN Convention against Transnational Organized Crime. The U.S. and France have entered into a Mutual Legal Assistance Treaty, which was ratified by the French Parliament and came 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 build upon this regime by expanding suspicious transaction reporting requirements.

Georgia. Georgia has a small economy and is not a regional financial center. The scope of money laundering in Georgia involves small-scale schemes with proceeds from various illegal activities. 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. Corruption also remains an issue in Georgia. The National Bank of Georgia (the central bank) plays a growing role in regulating the banking industry.

Georgia?s criminal code of June 2000 does not criminalize money laundering, but makes it a crime to "transform illegal money into legal income" or to conceal the source, location or owner of property acquired illegally. Violators of this law are subject to imprisonment. The criminal code does not make any provisions for suspicious transaction reporting, and there are no legal safeguards to protect banks and other financial institutions that cooperate with law enforcement agencies. Currently, 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.

The Constitutional Court has declared asset forfeiture and seizure legislation to be unconstitutional.

Georgia is a party to the UN Drug Convention and has signed the UN Convention against Transnational Organized Crime but not yet deposited an instrument of ratification.

Germany. 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 launder money through German banks, currency exchange houses, business investments, and real estate.

The Money Laundering Act criminalized money laundering related to drug trafficking, fraud, forgery, and embezzlement, and imposed due diligence and reporting requirements on financial institutions. Under the current law, financial institutions are required to obtain customer identification for transactions exceeding deutsche marks (DM) 30,000 (approximately U.S. $14,500) that are conducted in cash or precious metals, and maintain records necessary to reconstruct transactions of DM 30,000 or more. In November 2001, the European Union money laundering directive mandated that member states, which include Germany, standardize and expand "suspicious activity" reporting requirements to include information from notaries, accountants, tax consultants, casinos, luxury item retailers, and attorneys. A draft law is currently before parliament that addresses the European Union money laundering directive and stronger due diligence requirements. Since 1998, the Federal Banking Supervisory Office license and supervise money transmitters, and 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 Government of Germany (GOG) moved quickly after the September 11, 2001 terrorist attacks in the United States, to identify weaknesses in their laws that permitted at least some of the terrorists to live and study in Germany, unobserved and unnoticed, prior to September 11. The Federal government has submitted, and the Federal Parliament has passed, two packages of legislation to modify existing laws. The first package closes large loopholes in German law that have permitted members of foreign terrorist organizations to live and raise money in Germany, and have allowed extremists to advocate violence in the name of religion under "religious privilege" protections. The second package went into effect January 1, 2002. It enhances the performance of Federal law enforcement agencies, and improves the ability of intelligence and law enforcement authorities to coordinate their efforts and share important information, as they attempt to identify terrorists residing and operating in Germany.

The GOG also announced new anti-money laundering measures in October 2001. Foremost among these measures, the GOG plans to form a unit within the Ministry of Interior to receive and analyze financial disclosures. The unit will be staffed with experts in financial market supervision, customs, and law. The unit will be responsible for building cases before they go to prosecutors for formal investigation. It will also exchange information with its counterparts in other countries. The newly proposed anti-money laundering package also requires the country?s banking supervisory authority to compile a central register of all bank accounts, including 300 million deposit accounts. Banks will use computers to analyze their customers and their financial dealings to identify suspicious activity. The proposed legislation also calls for stiffer checks on the background of owners of financial institutions and tighter rules for credit card companies.

Each of the 16 states in Germany has a joint, financial investigations unit ("Gemeinsame Finanzermittlungsgruppen" or GFG), comprised of customs and police officials. Responsibility for money laundering investigations rests at the state level in Germany. The GFGs analyze and investigate suspicious transaction reports (STRs) that have been filed by German banks. The U.S. 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 GFGs has participated in Egmont Group activities, the GFGs are not considered FIUs and are not members of the Egmont Group.

The GOG has established procedures to 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 U.S. 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.

Germany?s strict data privacy laws have made it difficult for authorities to monitor and take action against financial accounts and transfers used by terrorist networks. The situation is changing rapidly in the aftermath of the attacks on the U.S. The Germans have responded quickly to freeze the accounts of entities associated with terrorists. New measures introduced in the second security package require financial institutions to make more data on suspicious transactions available to authorities.

The GOG cooperates fully with the United States on anti-money laundering initiatives, 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.

Recently, the GOG has put forward a number of important proposals to further strengthen its anti-money laundering regime in 2002. The GOG?s new anti-money laundering package reflects Germany?s commitment to combat money laundering, and to cooperate with international governments. Germany?s cooperation will be strengthened with the creation of a financial intelligence unit.

Ghana. 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 automobiles, diamonds, and gold. In addition, donations to religious institutions allegedly have been used as a vehicle to launder money. There have also been increases in the amount of "advanced fee" scam letters intercepted that originated in Ghana.

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. In 2001 the Bank of Ghana began drafting money laundering legislation that will increase the government?s financial oversight capabilities.

The Narcotic Drug Law of 1990 provides for the forfeiture of assets upon conviction of a money laundering offense. The Government of Ghana in 2001 made no arrests or prosecutions related to money laundering.

Ghana participated in the formation of the Inter-Governmental Action Group Against Money Laundering (GIABA) at the December 2001 meeting of the Economic Community of West African States in Dakar. GIABA is not currently operational.

Ghana is a party to the 1988 UN Drug Convention. Ghana endorses the Basel committee "core principles" for banking supervision. Ghana has bilateral agreements for the exchange of money laundering-related information with the United Kingdom, Germany, Brazil, and Italy.

Gibraltar. Gibraltar is a largely self-governing, dependent territory of the United Kingdom, which assumes responsibility for Gibraltar?s defense 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 are subject to the same legal and supervisory requirements. Gibraltar has 21 banks, 11 of which are incorporated in Gibraltar, and all except one are subsidiaries of major international financial institutions. The FSC also is responsible for overseeing the activities of the Government of Gibraltar (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, and political parties.

Gibraltar was one of the first jurisdictions to introduce and implement all crimes money laundering legislation. The Gibraltar Criminal Justice Ordinance to combat money laundering related to all crimes entered into effect in January 1996. Comprehensive anti-money laundering Guidance Notes were also issued to clarify the obligations of Gibraltar?s financial service providers.

Also in 1996, Gibraltar established the Gibraltar Coordinating Centre for Criminal Intelligence and Drugs (GCID) in 1996, to receive, analyze, and disseminate information on financial disclosures filed by institutions covered by the provisions of Gibraltar?s anti-money laundering legislation. The GCID is now known as the Gibraltar Financial Intelligence Unit (GFIU), and is a sub-unit of the Gibraltar Criminal Intelligence Department. The GFIU consists mainly of police and customs officers, but is independent of law enforcement. The GFIU has applied to join the Egmont Group of FIUs.

In 2000, the Financial Action Task Force (FATF) conducted a review of Gibraltar?s anti-money laundering program against 25 specified criteria. Although Gibraltar was not identified by the FATF as non-cooperative in the international fight against money laundering, the FATF noted a number of concerns, particularly with regard to suspicious transaction reporting and customer identification and verification.

In response to the issues raised by the FATF, the GOG is currently drafting amendments to their anti-money laundering legislation. The amendments will provide direct reporting requirements of suspicious transactions, and extend the provisions of the anti-money laundering legislation to cover company formation agents and trust services providers. The FSC has been redrafting the anti-money laundering guidance notes to abolish the present system for introducer certificates, and to require institutions to review all accounts opened prior to April 1, 1995 to ensure that "know your customer" procedures are clear and up to the new standards. The FSC are also taking this opportunity to introduce new guidelines related to correspondent banking, politically exposed persons, and bearer securities. According to government officials all of these changes are expected to be ready and implemented by 2002.

Gibraltar has adopted the European Union (EU) Money Laundering Directive 91/308. The United Kingdom has not extended the application of the 1988 UN Drug Convention to Gibraltar. The Mutual Legal Assistance Treaty between the United States and the United Kingdom also has not been extended to Gibraltar. However, application of a 1988 U.S.-UK agreement concerning the investigation of drug trafficking offenses and the seizure and forfeiture of proceeds and instrumentalities of drug trafficking was extended to Gibraltar in 1992. Also, 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 arrangements, to update mutual legal assistance arrangements with the EU and Council of Europe partners. Gibraltar is a member of the Offshore Group of Banking Supervisors (OGBS). The OGBS conducted an on-site evaluation of Gibraltar in April 2001. The report on Gibraltar will be discussed and approved later this year at the annual OGBS meeting. The Government of Gibraltar also invited the IMF to carry out an assessment in May 2001 of the extent to which the Gibraltarian supervisory arrangements for the offshore financial sector complied with certain internationally accepted standards. The assessment was carried out on the basis of the "Module 2" assessment in accordance with the procedures agreed by the IMF?s Executive Board in July 2000.

The GOG has established a comprehensive anti-money laundering program in response to international concerns. The Government should enact and implement amendments to its anti-money laundering legislation to provide for direct reporting requirements of suspicious transactions and extend the provisions of the anti-money laundering legislation to cover company formation agents and trust services providers.

Greece. While not a major financial center, Greece is vulnerable to money laundering related to drug trafficking, trafficking in women and children, arms smuggling, blackmail, and illicit gambling activities that are conducted by Russian and Albanian criminal organizations. In the establishment of business in general in Greece, there are weak requirements for disclosing sources of foreign capital. As a result, Greece?s five private and two state-owned casinos are susceptible to money laundering. Greek authorities also consider the cross-border movement of illicit currency and monetary instruments to be a continuing problem.

The Government of Greece (GOG) criminalized money laundering derived from all crimes in 1995 with its seminal law, Prevention of and Combating the Legalization of Income Derived from Criminal Activities. The law imposes a penalty of up to ten years in prison and confiscation of the criminally derived assets. The law also requires that banks and non-bank financial institutions file suspicious transaction reports (STR). The new legislation passed in March 2001 makes money laundering a criminal offense when the property holdings being laundered are obtained through criminal activity or cooperation in criminal activity.

Banks must also demand customer identification when opening an account or conducting transactions that exceed EUR 15,000 (U.S. $16,000). Greek citizens must provide a tax registration number if they conduct foreign currency exchanges of EUR 1,000 (U.S. $950) or more, and proof of compliance with tax laws in order to conduct such exchanges of EUR 10,000 (U.S. $9,500) or more. Banks and financial institutions are required to maintain adequate records and supporting documents for at least five years after ending a relationship with a customer, or in the case of occasional transactions, for five years after the date of the transaction.

Money laundering became an offense in the Greek Legislation under Presidential decree 2181/93. With this decree the banks are required to identify persons making an economic transaction of more than ?15 000 and in case of doubts or suspicious of illegal activities, the bank can take reasonable measures to gather more information on the identification of the person. International transactions and foreign exchange dealings are especially under strict control. In 1995, new legislation (law n? 2331/95) was adopted to prevent and combat the legalization of income from criminal activities. The penalty for such criminal activity can be up to 10 years.

The Bank of Greece, through its Banking Supervision Department; the Ministry of National Economy and Finance, which supervises the Capital Market Commission; and the Ministry of Development through its Directorate of Insurance Companies supervise Greek credit and financial institutions. Supervision includes the issuance of guidelines and circulars, as well as on-site examinations aimed at checking compliance with anti-money laundering legislation. Supervised institutions must send to their competent authority internal control and communications procedures that they have implemented to prevent money laundering. In addition, banks must also undergo internal audits. Bureaux de changes are required to send to the Bank of Greece a monthly report on their daily purchases and sales of foreign currency. All persons entering or leaving Greece must declare to the authorities any amount they are carrying over EUR 2,000 (U.S. $1,900).

Greece?s central bank stepped up measures to counter money laundering as part of its effort to cooperate with an investigation by authorities in Belgrade into the illegal transfer of funds abroad during the rule of alleged war criminal and former Yugoslav President, Slobodan Milosevic.

The Law of 1995 established the Competent Committee (CC) to receive and analyze STR?s and to function as Greece?s financial intelligence unit (FIU). The CC is chaired by a senior judge and includes representatives from the central bank, various government ministries, and the stock exchange. If the CC believes that an STR warrants further investigation, it forwards the STR to the Financial Crimes Enforcement Unit (SDOE), a multi-agency group that functions as the CC?s investigative arm. The CC is also responsible for preparing money laundering cases on behalf of the Public Prosecutor?s office. The CC is a member of the Egmont Group of FIUs.

The Ministry of Justice unveiled legislation on combating terrorism, organized crime, money laundering and corruption in March 2001. The Parliament had not passed this legislation by December 2001.

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

The Government of Greece 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. Money laundering and other financial crimes are concerns in Grenada because of the rapid expansion of the offshore sector and the Government of Grenada?s (GOG?s) failure to adequately supervise offshore entities. Although the Government of Grenada (GOG) has taken a number of steps to improve financial sector regulation, serious deficiencies remain in Grenada?s anti-money laundering regime. The GOG also has failed to respond to U.S. requests for information involving money laundering offenses, further undermining Grenada?s apparent commitment to cooperate in the international fight against money laundering.

Like many other Caribbean jurisdictions, the GOG has raised revenue from the offshore sector by imposing licensing and annual fees upon offshore entities. In the past, the GOG has been able to attract banks and other financial institutions to set up offshore companies in Grenada through low licensing fees, banking and corporate secrecy, and minimal offshore service regulation. As of December 2001, Grenada had 22 offshore bank and trust companies, 2 Internet gaming companies, 6 offshore insurance companies, 2 company managers, and 4,000 International Business Companies. Grenada?s domestic financial sector includes 5 commercial banks, 15 registered domestic insurance companies, 22 credit unions and 2 money remitters. Until recently, the GOG allowed foreigners to buy economic citizenship and passports through an improperly regulated program that international criminals had abused. In light of the terrorist attacks upon the United States, the GOG reportedly suspended the practice of selling citizenship status and passports to foreigners in October 2001.

The collapse of the First International Bank of Grenada (FIBG) in 2000 highlighted serious deficiencies in Grenada?s existing counter-money laundering regime. A U.S. citizen founded FIBG, an offshore bank, by purchasing a Grenadan passport and using assets from a Nauruan bank as well as fictitious documents to establish his financial worth. Beginning in 1998, the FIBG attracted depositors with promises of 250 percent returns. A liquidator?s report issued in March 2001 estimated FIBG?s liabilities at $206 million and assets at $46 million, and indicated that FIBG had transferred funds to accounts in Grenada, St. Vincent, Jersey, and Uganda. The report described layers of international offshore entities and pyramid schemes to attract customers and raise funds. The liquidator found that FIBG?s deposit insurance program was a "sham" and concluded that since its inception, the business of FIBG had been carried on "with the intent to mislead depositors and creditors." In response, the Minister of Finance revoked 17 offshore bank and trust company licenses. The FIBG scandal prompted the GOG to accelerate the pace of legislative reforms concerning anti-money laundering and offshore sector regulation.

Grenada?s Money Laundering Prevention Act (MLPA) of 1999, which came into force in 2000, criminalizes money laundering related to offenses that are otherwise punishable in Grenada by at least five years in prison. The MLPA also establishes a Supervisory Authority (SA) to receive; review and forward to local authorities suspicious activity reports from obliged institutions and imposes customer identification requirements on banking institutions.

The Grenada International Financial Services Authority (GIFSA) Act of 1999 has undergone some important changes recently. The GIFSA monitors and regulates offshore banking. A recent amendment to the GIFSA Act (n. 13 of 2001) eliminates the regulator?s role in promoting the development of the offshore sector. Grenada?s legal infrastructure diminishes the effectiveness of the GIFSA, however. Although the GIFSA is authorized to obtain customer account records from an offshore institution upon request, it cannot compel an institution to produce these records without a court order. A recent amendment to the Offshore Banking (Amendment) Act n. 10 of 2001 seems to have made the process of obtaining a court order more difficult by requiring evidence of illegal activity "by" the licensee itself, as opposed to "in" the licensee. The GIFSA is further limited in its ability to combat financial crime because it has no authority to share customer information with foreign counterparts absent a court order. The GOG has proposed additional amendments to the GIFSA Act that would address these deficiencies.

In 2001, the GOG made some effort to regulate the issuance of bearer shares by international business companies (IBCs) and offshore banks. The International Companies (Amendment) Act n. 12 of 2001 requires beneficial ownership information for bearer shares to be registered with an agent and delivered to the SA. Prior to this amendment, individuals owning bearer shares in affected international companies could remain anonymous. The amendment, however, only applies to shares issued after the June 2001 commencement of the Act, and to companies conducting offshore banking, international insurance, company management, international trust business, or international betting businesses. Other international companies are not required to inform the SA of beneficial ownership.

The deficiencies in the International Companies Act also have diminished the effectiveness of the GOG?s recent amendments to the Offshore Banking Act. The Offshore Banking Act amendment of 2001 requires applicants for bank licenses to provide information relating to shareholders and beneficial owners. However, as banks may have issued bearer shares prior to June 2001, owners of these shares are not subject to registration requirements under the International Companies Act and, thus, cannot be identified and examined under the Offshore Banking Act.

In September 2001, the Financial Action Task Force (FATF) identified Grenada as non-cooperative in international efforts to fight money laundering. The FATF in its report cited several concerns: inadequate access by Grenadan supervisory authorities to customer account information; inadequate authority by Grenadan supervisory authorities to cooperate with foreign counterparts; and inadequate qualification requirements for owners of financial institutions.

Recently, the GOG established a financial intelligence unit (FIU) and appointed a staff of six to the unit. The FIU, which will operate within the police force, is charged with receiving suspicious activity reports from the SA and with investigating alleged money laundering offenses. The U.S. contributed computers, furniture, and equipment for the FIU new office. In 2001, the GOG appointed a staff of five to the SA, and in June, the SA issued anti-money laundering guidelines, pursuant to section 12(g) of the MLPA, that direct financial institutions to maintain records, train staff, identify suspicious activities, and designate reporting officers. The guidelines also provide examples to assist bankers to recognize and report suspicious transactions.

Mutual legal assistance and extradition treaties have been in force between Grenada and the United States since 2000 but the GOG has failed to respond to several mutual legal assistance requests from the United States. An extradition treaty entered into force between the U.S. and Grenada in 1999. Grenada is a member of the Caribbean Financial Action Task Force (CFATF), and underwent a CFATF mutual evaluation in November 1999. 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 Vienna Convention.

Despite the GOG?s attempts to strengthen financial sector regulation in 2001, continuing legal deficiencies render the sector vulnerable to abuse. The GOG should ensure that all appropriate authorities have access to financial and business documents, including beneficial ownership information. The GOG should also fully train and fund the GIFSA, the SA, and the newly formed FIU. The GOG should also amend its information sharing in order to protect Grenada?s financial sector from fraud schemes and other types of financial crime.

Guatemala. Guatemala?s geographic location near drug producing countries and lack of a broad-based anti-money laundering regime historically makes the country vulnerable to money laundering. Officials of the Government of Guatemala (GOG) believe that criminals deposit their illegal proceeds in bank accounts and subsequently invest the funds in real estate or large commercial projects. Some law enforcement sources believe that the laundering of proceeds from kidnapping, tax evasion, vehicle theft, and corruption is on the rise.

The Guatemalan financial services industry is comprised of 32 commercial banks with an estimated U.S. $6.5 billion in assets, 20 non-bank financial institutions, which primarily engage in investment banking and medium and long-term lending, 8 currency exchange houses, and 19 insurance companies. The Superintendency of Banks, which operates under the general direction of the Monetary Board, has oversight and inspection authority over the Bank of Guatemala, as well as banks, credit institutions, financial enterprises, securities entities, insurance companies, currency exchange houses, and other institutions as may be designated by the Bank of Guatemala Act.

On April 25, 2001, the Guatemalan Monetary Board issued Resolution JM-191 approving the "Regulation to Prevent and Detect the Laundering of Assets" (RPDLA) submitted by the Superintendency of Banks. The RPDLA, effective May 1, 2001, requires all financial institutions under the oversight and inspection of the Superintendency of Banks to establish counter-money laundering measures, and introduces requirements for transaction reporting and record keeping. Obligated institutions must establish money laundering detection units, designate compliance officers, and train personnel. They must identify all customers opening new accounts and report customers conducting transactions (cash or other types) of U.S. $5,000 or more (or national currency equivalent) a day to the bank?s manager. Accounts opened prior to May 1, 2001, are not subject to the customer identification requirements of the RPDLA. If, however, a customer performs a cash transaction for more than U.S. $5,000, the bank must fully identify the customer and the customer must submit the information regardless of when the account was opened. The regulation also requires obligated entities to monitor, record and report transactions considered "unusual" or "suspicious" to the Superintendency of Banks within ten days of detection.

The reforms instituted as a result of the RPDLA have yielded positive results to date. Following the issuance of the regulation, financial institutions began filing suspicious transaction reports and the process has led to an investigation by the Superintendency of Banks of a government official.

In June 2001, the Financial Action Task Force (FATF) listed Guatemala as a non-cooperative jurisdiction in the international fight against money laundering. In its report, the FATF noted: (1) Secrecy provisions in Guatemalan law constitute a considerable a significant obstacle to administrative authorities? anti-money laundering efforts; (2) Guatemalan law fails to provide for the sharing of information between Guatemalan administrative authorities and their foreign counterparts; (3) Guatemala?s laws criminalize money laundering only in relation to drug offenses and not for all serious crimes; and (4) Guatemala?s suspicious transaction reporting system does not prohibit "tipping off" the person involved in the transaction.

Since the FATF designation, the GOG has taken important steps to reform its anti-money laundering program in accordance with international standards. In November 2001, Guatemala enacted Decree 67-2001, "Law Against Money and Asset Laundering" (LAMAL), to address several of the deficiencies identified by the FATF. Article 2 of the LAMAL expands the range of predicate offenses for money laundering from drug offenses to any crime. Individuals convicted of money or asset laundering are subject to a non-commutable prison term ranging from six to 20 years, and fines equal to the value of the assets, instruments or products resulting from the crime. Convicted foreigners will be expelled from Guatemala.

The LAMAL also adds new record keeping and transaction reporting requirements to those already in place as a result of the RPDLA. These new requirements apply to all entities under the oversight of the Superintendency of Banks, as well as several other entities including credit card issuers and operators, check cashers, sellers or purchasers of travelers checks or postal money orders and currency exchange. The requirements also apply to "off-shore" entities, which are described by the LAMAL as "foreign domiciled entities" that operate in Guatemala but are registered under the laws of another jurisdiction.

Among other things, the LAMAL prohibits obligated institutions from maintaining anonymous accounts or accounts that appear under fictitious or inexact names. Covered institutions are required to keep a registry of their customers as well as the transactions undertaken by them, such as the opening of new accounts, the leasing of safety deposit boxes, or the execution of cash transactions exceeding U.S. $10,000 (or national currency equivalent). For cash transactions in excess of U.S. $10,000, the LAMAL requires obligated institutions to maintain a daily registry of the transactions. Obligated institutions also must adopt measures to obtain, update and store information regarding the beneficial owners of accounts where there is doubt as to their true identity. The LAMAL obligates individuals and legal entities to report cross-border movements of currency in excess of U.S. $10,000 (or national currency equivalent) with the competent authorities. Under the LAMAL, obligated entities must maintain records of these registries and transactions for five years.

The LAMAL also establishes the "Intendance for Verification" (IVE) within the Superintendency of Banks?the equivalent of a financial intelligence unit (FIU) to supervise obligated financial institutions to ensure compliance with the law. The IVE has the authority to obtain all information related to financial, commercial or business transactions that may be connected to money laundering. The IVE may impose sanctions on financial institutions for non-compliance. The LAMAL calls for the IVE to analyze the information it obtains, to offer domestic law enforcement support in connection with money laundering offenses and to exchange information with similar foreign entities pursuant to cooperative agreements. The IVE has 180 days from the effective date of the LAMAL to become operational.

The LAMAL obligates "off-shore" or foreign domiciled entities operating in Guatemala to comply with the same anti-money laundering measures (reporting and record keeping requirements) as other domestic institutions. The LAMAL, however does not subject these institutions to supervision for general legal compliance or inspection for safety and soundness by either the Superintendency of Banks or the IVE. A bill is pending before the Congress that would give the Superintendency of Banks regulatory and supervisory controls over offshore entities.

Corruption remains a significant problem in Guatemala.

Guatemala is a party to the 1988 UN Drug Convention. In November 2000, the GOG ratified the Central American Convention for the Prevention of Money Laundering and Related Crimes. In December 2000, the GOG signed the UN Convention against Transnational Organized Crime, but it has not yet deposited an instrument of ratification. Guatemala is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and plans to join the Caribbean Financial Action Task Force (CFATF).

The GOG should continue efforts to implement the reforms to its anti-money laundering regime, move forward with domestic regulation and supervision of the offshore entities, and invest the necessary resources to make its FIU operational.

Guernsey. The Bailiwick of Guernsey 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 as do the company and trust sectors.

In January 2000, the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999, and its associated regulations, came into force. The legislation extends predicate offenses for money laundering to all serious crimes, including tax offenses, and addresses reporting of suspicious transactions Under the provisions of the 1999 Law, all financial service businesses (including bureaux de change and cheque cashers) must abide by regulations concerning the identification of customers, record keeping, and international reporting procedures, etc. The Guernsey Financial Services Commission (FSC) has commenced on-site visits to bureaux de change to ensure that the businesses are in compliance with the regulations.

In December 2000, the FSC prepared a consultation paper, jointly with the Crown Dependencies of Jersey and the Isle of Man, called "Overriding Principles for a Revised Know Your Customer Framework", to develop a consistent approach on anti-money laundering. The consultation paper stated that each institution would have to conduct an exercise to check its way of doing business to determine that there is sufficient information available to prove identity.

Guernsey has 71 offshore banks that offer deposit taking and a range of other services, such as custodial, trust company, and fiduciary services. Guernsey also has 370 captive insurance companies, 25 life insurers, 62 insurance intermediaries, 40 domestic insurers, a comprehensive range of investment and fiduciary firms, approximately 7,500 international business companies, and 19 bureaux de change. The FSC is responsible for regulating Guernsey?s offshore industry. The FSC conducts on-site visits and analyzes assessments by auditors.

The Drug Trafficking (Bailiwick of Guernsey) Law 2000, which consolidated and amended legislation passed in 1998 and 1992, came into force in January 2001. The law establishes comprehensive money laundering offenses, including an offense of failing to disclose the knowledge or suspicion of drug money laundering. The duty to disclose extends outside of financial institutions to others, for example, bureaux de change and cheque cashers.

On April 1, 2001, the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 ("the Fiduciary Law") came into effect. The Fiduciary Law was enacted to license, regulate, and supervise company and trust service providers. Under section 35 of the Fiduciary Law, the FSC created Codes of Practice for Corporate Service Providers; Trust Service Providers; and Company Directors. Under the law, all fiduciaries and corporate service providers and persons acting as company director of any business must be licensed by the FSC. In order to be licensed, these agencies must pass strict tests. These include possession of "know your customer" requirements and the identification of clients. They are subject to regular inspection, and failure to comply could result in the fiduciary being prosecuted and/or their license being revoked. In cases of serious or complex fraud, assistance can be provided by Guernsey?s Attorney General under the Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law 1991.

The Criminal Justice (International Cooperation) (Bailiwick of Guernsey) Law, 2001, furthers cooperation between Guernsey and other jurisdictions by allowing certain investigative information concerning financial transactions to be exchanged. Guernsey cooperates with international law enforcement on money laundering cases. The FSC also cooperates with regulatory/supervisory and law enforcement bodies. Guernsey is a member of the Offshore Group of Bank Supervisors.

As of April 2, 2001, suspicious transaction reports are filed with Guernsey?s financial intelligence unit, the Financial Intelligence Service (FIS). The FIS is a new unit that took over responsibility from the Joint Police and Customs Financial Investigation Unit (JFIU). FIS is the central point within Guernsey for gathering, collating, evaluating, and disseminating of all financial crime intelligence. The FIS is comprised equally of Police and Customs officers, most of who previously worked at the JFIU. The new unit places special emphasis on money laundering, and is a member of the Egmont Group.

Guernsey has, in place, all legislation required by the 1959 Council of Europe Convention on Mutual Assistance in Criminal Matters, the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime, and the 1988 UN Convention against the Illicit Traffic of Narcotics and Psychotic Substances. The Guernsey authorities have asked that the United Kingdom Government seek extension of these Conventions to the Bailiwick of Guernsey.

Guernsey has put in place a comprehensive anti-money laundering regime and cooperates internationally. The Government should devote more resources to ensure effective implementation of its anti-money laundering regime.

Guyana. Guyana is not an important regional financial center. Nevertheless, there is concern that both narcotics-related 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.

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.

Although the Guyanese National Assembly passed The Money Laundering Prevention Act in February 2000, the legislation is not yet in force pending the creation of supervisory arrangements at the Bank of Guyana. The new law criminalizes money laundering related to narcotics and other serious crimes. The law requires that funds over U.S. $10,000 imported into or exported from Guyana be reported. The legislation also establishes requirements for reporting suspicious transactions by banks and non-bank financial institutions. Records of suspicious activity reports will have to be kept for six years. Moreover, other provisions of the legislation require confidentiality in the reporting process, provide for good faith reporting, establish penalties for destroying records related to an investigation, and provide for asset forfeiture, international cooperation, and extradition for money laundering offenses. In 2001, the Caribbean A