Countries G through M

Gabon

Gabon is not a regional financial center. The Bank of Central African States (BEAC) supervises Gabon’s banking system. BEAC is a regional Central Bank that serves six countries of Central Africa. According to a 2003 letter from the Government of Gabon (GOG) to the UN Counter Terrorism Committee, in matters concerning suspicious financial transactions, banks are bound by the instructions of the Ministry of Economic and Financial Affairs. The actual monitoring of financial transactions is conducted by the Economic Intervention Service that harmonizes the regulation of currency exchanges in the member States of the Central African Economic and Monetary Community (CEMAC).

On November 20, 2002, the BEAC Board of Directors approved draft anti-money laundering and counterterrorist financing regulations that would apply to banks, exchange houses, stock brokerages, casinos, insurance companies, and intermediaries such as lawyers and accountants in all six member countries. The BEAC regulations treat money laundering and terrorist financing as criminal offenses. The regulations would also require banks to record and report the identity of customers engaging in large transactions. The threshold for reporting large transactions would be set at a later date by the CEMAC Ministerial Committee at levels appropriate to each country’s economic situation. Financial institutions would have to maintain records of large transactions for five years.

The regulations would require financial institutions to report suspicious transactions. Under the regulations, each country would establish a National Agency for Financial Investigation (NAFI) responsible for collecting suspicious transaction reports. Bankers and other individuals responsible for submitting suspicious transaction reports will be protected by law with respect to their cooperation with law enforcement entities. If a NAFI investigation were to confirm suspicions of terrorist financing, the Gabonese government could freeze and seize the related assets. The NAFI could cooperate with counterpart agencies in other countries.

Gabon has signed, but not yet ratified, both the 1988 UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism.

Gabon should work with the BEAC to establish a viable anti-money laundering and counterterrorist financing regime. Gabon should become a party to the UN International Convention for the Suppression of the Financing of Terrorism.

The Gambia

The Gambia is not a regional financial center, although it is a regional re-export center. Goods and capital are freely and legally traded in the Gambia, and, as is the case in other re-export centers, smuggling of goods occurs.

The ECOWAS community of states, of which The Gambia is a member, in 2000 created the GIABA, an intergovernmental action group against money laundering, designed to improve cooperation in the fight against money laundering between member states. The GIABA is working on a law to create financial intelligence units in each of the eight West African Economic Monetary Union (WAEMU) countries so that they will be able to share information.

Banks in the Gambia are supervised by the Central Bank. The Central Bank receives weekly activity reports from all in-country financial institutions, and these reports must include information on any suspicious transactions. Banks and other financial institutions are required to know, record, and report the identities of customers engaging in transactions over the equivalent of $10,000. Central Bank officials perform on-site examinations of all banks and trust companies operating in the Gambia on a yearly basis. If necessary, Central Bank officials can examine a bank or trust company more than once a year.

The Government of Gambia (GOG) recently passed the Money Laundering Act of 2003. The Act states that money laundering is a criminal offense and establishes narcotics trafficking as well as blackmail, counterfeiting, extortion, false accounting, forgery, fraud, illegal deposit taking, robbery, terrorism, theft and insider trading as predicate offenses. Furthermore, the law requires banks and other financial institutions to know, record, and report the identity of clients engaging in significant and/or suspicious transactions. Even though individual banks may have their own requirements to keep documents longer, the law requires them to maintain records for at least six years. Under the Money Laundering Act of 2003, terrorism is an offense consistent with UNSCR 1373. The Act also empowers the GOG to identify and freeze assets of a person suspected of committing a money laundering offense.

The Central Bank has circulated the U.S. Government list of terrorists designated under E.O. 13224 among banks and other financial institutions in the Gambia. There have been no arrests and/or prosecutions for money laundering or terrorist financing since January 2003. Gambia is a party to the 1988 UN Drug Convention and has signed and ratified the UN Convention against Transnational Organized Crime. The Gambia is also a party to the UN International Convention for the Suppression of the Financing of Terrorism.

The Gambia should examine its re-export sector to determine whether or not it is being used to launder criminal proceeds. The GOG should also expand its anti-money laundering legislation to include a comprehensive range of predicate offenses and should take steps to develop a financial intelligence unit.

Georgia

Although Georgia is not considered an important regional financial center, in past years the international community has raised concerns regarding the Government of Georgia’s (GOG) lack of an anti-money laundering regime. In Georgia, the sources of laundered money are primarily corruption, financial crimes and smuggling, rather than narcotics-related proceeds. Smuggling of goods across international borders is one of the country’s most serious problems, given the existence of thriving black markets in Ergneti (near the uncontrolled territory of South Ossetia), Red Bridge (on the border with Azerbaijan), and Abkhazia (breakaway region bordering Russia on the Black Sea coast). Law enforcement officials provide protection to smugglers, instead of prosecuting them, helping maintain the shadow economy which makes up 90 percent of Georgia’s economic activity (based on an estimate by the Transnational Crime and Corruption Center). A new government came into power in November 2003. The new Administration has launched several investigations relating to financial misdeeds undertaken by former members of the Georgian government.

At the urging of the international community the GOG has taken some steps. The lead was taken by the National Bank of Georgia, which was tasked by former President Shevardnadze to draft the Anti-Money Laundering Law. On June 6, 2003, President Shevardnadze signed the Anti-Money Laundering Law (AML Law) passed by the Georgian Parliament. As mandated by the newly enacted law (which also included an article concerning anti terrorist financing), Georgia created a Financial Monitoring Service (FMS) within the National Bank of Georgia on July 16, 2003. The FMS is tasked with creating a system for Suspicious Transaction Reporting (STR). The FMS is to begin receiving reports from monitored entities in January 2004. Also beginning in January 2004, the FMS is embarking on the construction of an IT system to collect and analyze data on suspicious financial transactions.

Although the AML Law in Georgia was enacted in June 2003 and entered into force on January 1, 2004 (the date selected to coincide with the start-up of the FMS), it still requires some serious revisions as noted by the Council of Europe’s recommendations to the Georgian Government. Amendments to the law proposed in 2003 would enhance suspicious transaction reporting, customs declarations, customer identification, record keeping, the development of compliance programs and asset freezing. These amendments will be presented to parliament for enactment early in 2004.

The GOG also created the National Money Laundering Prosecution Unit within the Prosecutor General’s Office of Georgia. The National Money Laundering Prosecution Unit, which is currently hiring and vetting members, will form a special task force of investigators and prosecutors to: collect, investigate and, where appropriate, prosecute matters arising from receipt of suspicious transaction reports from the FMS; and investigate and, where appropriate, prosecute violations of the AML Law which may come to their attention by referral from law enforcement or other agencies of the government and/or based on their in-house assessment of information suggesting violations of the AML Law or its predicate offenses. The Unit will begin work in early spring 2004.

Until the recent changes in the Georgian leadership, asset forfeiture was perceived by GOG officials as unconstitutional, therefore, legislators did not include asset forfeiture provisions in their Penal and Criminal Procedure Codes. This interpretation was based on a landmark ruling of the Constitutional Court of Georgia to remove the confiscation clause as a form of punishment from the Criminal Code of Georgia. Instead of strictly adhering to the Court’s decision and removing only confiscation as a punitive measure, legislators removed all forms of confiscation from the law. Confiscation as a punitive measure was deemed unconstitutional because it also applied to proceeds that may derive from an individual’s legal activity, and was used in Soviet times (according to a 1961 law) to leverage punishment for any type of crime. Soviet legislation also included “special confiscation”, which was used to seize assets obtained from illegal proceeds. This provision was also eliminated from the Criminal Code when the Constitutional Court made its ruling in July 1997. From 1997 through 2003, the Government made no serious attempts to amend the legislation or to correctly interpret the constitutionality of the confiscation clause. Many anticipate the new leadership in the Georgian government will resolve this issue. Members of the new government have repeatedly emphasized that they will use the asset forfeiture mechanism against corrupt officials.

The GOG has taken important first steps toward the development of an anti-money laundering regime. The GOG should enact the pending amendments to its anti-money laundering legislation. The GOG should also take whatever additional action is necessary to bring its anti-money laundering/antiterrorist financing regime into accordance with international standards. If it has not already done so, the GOG should specifically criminalize the financing and support of terrorism and terrorists. Georgia should provide sufficient training and resources to its new FMS and National Money Laundering Prosecution Unit to enable them to efficiently perform their new duties. The GOG should adequately supervise and regulate nonbank financial institutions, alternative remittance systems and nongovernmental organizations, including charitable organizations, to ensure they are not used for terrorist or other criminal ends. Until it does so, Georgia’s financial institutions will remain vulnerable to abuse by organized crime as well as terrorist organizations and their supporters.

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 narcotics-trafficking groups launder money through German banks, currency exchange houses, business investments, and real estate.

The Money Laundering Act, which was amended by the Act on the Improvement of the Suppression of Money Laundering and Combating the Financing of Terrorism of August 8, 2002, criminalizes money laundering related to narcotics trafficking, fraud, forgery, embezzlement, and membership in a terrorist organization, and imposes due diligence and reporting requirements on financial institutions. Under the current law, financial institutions are required to obtain customer identification for transactions exceeding 15,000 euros that are conducted in cash or precious metals. Germany has had this requirement for some time (in DM), but the information was only used for statistical purposes; only recently has the information been used in money laundering investigations. Germany also has fully incorporated the FATF Forty Recommendations for combating money laundering and its Eight Special Recommendations regarding the financing of terrorism. This includes questionable actions carried out via the Internet.

The amendments described above also brought German laws into line with the first and second European Union money laundering directives (Directive 91/308/EEC on the prevention of the use of the financial system for the purpose of money laundering, as revised by Directive 2001/97/EC). These include the mandate that member states standardize and expand suspicious activity reporting requirements to include information from notaries, accountants, tax consultants, casinos, luxury item retailers, and attorneys. Since 1998, the Federal Banking Supervisory Office has licensed and supervised money transmitters, and has issued anti-money laundering guidelines to the industry. Germany also has a law, entered into force in 1998, that gives border officials the authority to compel individuals to declare imported currency above a certain threshold (currently 15,000 euros).

The new 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. As a result, on April 1, 2003, a central database at the federal financial supervisory authority was established, which collects basic data on the bank and security accounts held in Germany. Banks use computers to analyze their customers and their financial dealings to identify suspicious activity. The legislation also calls for stiffer checks on the background of owners of financial institutions and tighter rules for credit card companies. Banks that have suspicions of money laundering must report their suspicions to the FIU as well as to the Staatsanwaltschaft (State Attorney), and then they may freeze the account in question.

In May 2002, the German banking, securities, and insurance industry regulators were merged into a single financial sector regulator known as BaFIN. Also in 2002, Germany established a single, central, federal financial intelligence unit (FIU) within the Bundeskriminalamt (National Police Office). The FIU functions as an administrative unit and is staffed with financial market supervision, customs, and legal experts. The FIU is responsible for developing money laundering cases before they go to prosecutors for formal investigation. It also exchanges information with its counterparts in other countries. Actual enforcement is carried out by the states, as is traditional in German federalism. Each state has a joint customs/police/financial investigations unit (“GFG”), which works closely with the federal FIU. U.S. Customs has conducted joint investigations with GFGs on a number of transnational cases. A new system is being implemented that will allow federal authorities access to certain information in all bank accounts in Germany, potentially a very effective tool against money laundering.

Regulations for freezing assets are in place, and the Ministry of Finance is considering amending the Banking Act further to increase the ability to freeze accounts. The Government of Germany (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 meet in such cases. German law requires a direct link to narcotics 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.

The GOG moved quickly after September 11, 2001 to identify weaknesses in Germany’s laws that permitted at least some of the terrorists to live and study in Germany, unobserved and unnoticed, prior to September 11. 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. Germany’s cabinet has submitted, and the Bundestag 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, e.g., through supposedly charitable organizations, and that have allowed extremists to advocate violence in the name of religion under “religious privilege” protections. Germany has undertaken legislative and law enforcement efforts to thwart the misuse of charitable entities. Germany has used its Law on Associations (Vereinsgesetz) to ban administratively extremist associations that threaten the constitutional order. The second package went into effect January 1, 2002. It enhances the capabilities 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. Germany’s internal intelligence service is provided access to information from banks and financial institutions, postal service providers, airlines, and telecommunication and Internet service providers.

After Germany and other EU member states adopted UNSC Resolution 1373 on December 27, 2001, the EU developed a list of persons and organizations against whom antiterrorist financing measures were to be taken. Germany adheres to this list, which is updated periodically by EU representatives. The Wirtschaftsministerium (Ministry of Economics) receives the international lists of suspected terrorists and distributes the lists as separately issued regulations to the industries. Banks are directed to freeze the accounts of individuals and groups on the list and report them to the FIU, independent of the standard regulations. On the basis of relevant UN Security Council resolutions, Germany participated in international efforts to freeze terrorism-related financial assets. The GOG responded quickly to freeze over 30 accounts of entities associated with terrorists. The bulk of assets initially frozen have since been released. At the end of 2003, approximately 13 accounts containing 3532 euros remained frozen in Germany under these resolutions. This does not include accounts frozen under the administrative banning of extremist organizations under the law on associations. In 2002, the Bundestag added terrorism and terrorism financing to the predicate offenses for money laundering as defined by Penal Code 161.

Germany continues to be an active partner in the fight against money laundering, and participates actively in a number of international fora. The GOG has always cooperated fully with the United States on anti-money laundering initiatives, even before it signed a Mutual Legal Assistance Treaty (MLAT) with the United States in October 2003. The GOG exchanges information with the United States through bilateral law enforcement agreements and other informal mechanisms. Germany has MLATs with numerous countries, and German law enforcement authorities cooperate closely at the EU level, such as through Europol.

Germany is a member of the Financial Action Task Force (FATF), the European Union, the Council of Europe, and in 2003 became a member of the Egmont Group. The head of BaFIN, Jochen Sanio, is the outgoing President of FATF. Germany 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. In December 2000, Germany signed, but has not yet ratified, the UN Convention against Transnational Organized Crime. Germany signed the UN International Convention for the Suppression of the Financing of Terrorism in 2000, and is expected to ratify it in early 2004.

Since 2001, the GOG has put forward a number of important proposals to strengthen its anti-money laundering and counterterrorist financing regime. 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 is likely to be strengthened as a result of the implementation of its financial intelligence unit. The GOG should continue to enhance its anti-money laundering regime and its active participation in international fora. The GOG should become a party to the UN International Convention for the Suppression of the Financing of Terrorism.

Ghana

Ghana is not a regional financial center. However, nonbank financial institutions such as foreign exchange bureaus are suspected of being used to launder the proceeds of narcotics trafficking. In addition, donations to religious institutions allegedly have been used as a vehicle to launder money. There has also been an increase in the number of “advanced fee” scam letters that originate in Ghana.

Ghana has criminalized money laundering related to narcotics trafficking and other serious crimes. 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. In December 2001, the Bank of Ghana began drafting money laundering legislation designed to increase the government’s financial oversight capabilities. As of December 2003, the bill has not been submitted to Parliament.

The Narcotic Drug Law of 1990 provides for the forfeiture of assets upon conviction of a money laundering offense. The Government of Ghana made no arrests or prosecutions related to money laundering in 2003.

In August and September 2002, the Narcotics Control Board in collaboration with the Ghana Police Service, Ghana Immigration Service, Bureau of National Investigations, Aviation Security, and Customs, Excise and Preventive Service conducted an interdiction exercise at Ghanaian airports. Through this exercise, currency worth approximately $200,000 was seized on suspicion of 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. In July 2002, Ghana also hosted the 2002 West African Joint Operation Conference (WAJO) that promotes regional law enforcement cooperation against narcotics trafficking, terrorism, and money laundering. In May 2003, more than 40 representatives from financial institutions and law enforcement agencies participated in and Economic and Financial Anti-Fraud and Computer Crime Training Course.

Ghana is a party to the 1988 UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism. Ghana has endorsed the Basel Committee’s “Core Principles for Effective Banking Supervision”. Ghana has bilateral agreements for the exchange of money laundering-related information with the United Kingdom, Germany, Brazil, and Italy.

Ghana should take steps to develop an anti-money laundering regime in accordance with international standards. Ghana should also become a party to the UN Convention against Transnational Organized Crime.

Gibraltar

Gibraltar is a largely self-governing overseas territory of the United Kingdom, which assumes responsibility for Gibraltar’s defense and international affairs. As part of the European Union, Gibraltar is required to transpose all relevant EU directives, including those relating to anti-money laundering.

The Financial Services Commission (FSC) is responsible for regulating and supervising Gibraltar’s financial services industry. It is required by statute to match UK supervisory standards. Both onshore and offshore banks are subject to the same legal and supervisory requirements. Gibraltar has 18 banks, ten of which are incorporated in Gibraltar, and all except one are subsidiaries of major international financial institutions. The FSC also licenses and regulates the activities of trust and company management activities insurance companies, and collective investment schemes. There were 8464 international business companies (IBCs) registered in Gibraltar as at 31 December 2003. Bearer-shares are permitted but the Government is committed to abolishing them. In addition, banks dealing with such warrants require their immobilization. The Government of Gibraltar also requires the immobilization of such warrants in respect of IBCs. Internet gaming is permitted by the Government of Gibraltar (GOG) and is subject to a licensing regime.

The Drug Offenses Ordinance (DOO) of 1995 and Criminal Justice Ordinance of 1995 criminalize money laundering related to all crimes and mandate reporting of suspicious transactions by any person whose suspicions of money laundering are aroused and includes such entities 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 money laundering legislation that covered all crimes. The Gibraltar Criminal Justice Ordinance to combat money laundering, which related to all crimes, entered into effect in January 1996. Comprehensive anti-money laundering Guidance Notes (which have the force of law) 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) 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 incorporates 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 but this application was blocked by Spain. The Egmont application process has recently been revived.

In 2000, the Financial Action Task Force (FATF) conducted a review of Gibraltar’s anti-money laundering program against the 25 Criteria employed in the Non-Cooperative Countries and Territories (NCCT) exercise. While Gibraltar was not placed on the NCCT list, 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 trusts services providers.

The FSC redrafted the anti-money laundering guidance notes (in July 2002) 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 they are in compliance with the new “know your customer” (KYC) procedures. The FSC also took this opportunity to introduce new guidelines related to correspondent banking, politically exposed persons, and bearer securities as well as clearer and more defined KYC procedures. Gibraltar has adopted and implemented the European Union (EU) Money Laundering Directive 91/308/EEC on the prevention of the use of the financial system for the purpose of money laundering. Gibraltar has implemented the 1988 UN Drug Convention pursuant to its Schengen obligations. However, the Convention has not yet been extended to Gibraltar by the United Kingdom. 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 narcotics trafficking and related proceeds. Gibraltar has passed legislation 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 FATF (under the aegis of the OGBS) conducted an on-site evaluation of Gibraltar in April 2001 against the FATF Forty Recommendations on Money Laundering. The report on Gibraltar found that “Gibraltar has in place a robust arsenal of legislation, regulations and administrative practices to counter money laundering,” adding: “The authorities clearly demonstrate the political will to ensure that their financial institutions and associated professionals maximize their defenses against money laundering, and cooperate effectively in international investigations into criminal funds. Gibraltar is close to complete adherence with the FATF Forty Recommendations”.

The Government of Gibraltar also invited the International Monetary Fund (IMF) to perform an assessment in May 2001 of the extent to which Gibraltar’s 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 evaluation found that “…supervision is generally effective and thorough and that Gibraltar ranks as a well-developed supervisor.” Gibraltar was found to be fully compliant or partially compliant with all but one of the 67 international standards of supervision in the areas of banking, insurance and securities. The standard that was found not to be met was in relation to on-site visits to insurance companies. This has been fully addressed by the FSC.

Gibraltar has also implemented the FATF Eight Special Recommendations on Terrorist Financing and giving effect to the relevant UN resolutions on the same issue. Arrangements are presently being made to introduce a licensing and supervisory regime in relation to money transmission services.

Gibraltar should take steps to ensure that Internet marketers of financial services do not engage in false advertising that can harm Gibraltar’s reputation as a well-regulated offshore financial center.

Greece

While not a major financial center, Greece is vulnerable to money laundering related to narcotics trafficking, prostitution, contraband cigarette smuggling, and illicit gambling activities conducted by criminal organizations originating in CIS countries, as well as Albania, Bulgaria, and other Balkan countries. Money laundering in Greece is controlled by organized local criminal elements associated with narcotics trafficking, and narcotics are the primary source of laundered funds. Most of the funds are not laundered through the banking system. Rather, they are most commonly invested in real estate, hotels, and consumer goods such as automobiles. Capital disclosure requirements for prospective foreign investors are weak. As a result, Greece’s five private and two state-owned casinos are susceptible to money laundering. The cross-border movement of illicit currency and monetary instruments is a continuing problem. Greece is not considered an offshore financial center, and there are no offshore financial institutions or international business companies operating within Greece. Senior Government of Greece (GOG) officials are not known to engage in or facilitate money laundering. Currency transactions involving international narcotics-trafficking proceeds are not believed to include significant amounts of U.S. currency.

The GOG criminalizes money laundering derived from all crimes in the 1995 Law 2331/1995. That law, “Prevention of and Combating the Legalization of Income Derived from Criminal Activities,” imposes a penalty for money laundering of up to ten years in prison and confiscation of the criminally derived assets. The law also requires that banks and nonbank financial institutions file suspicious transaction reports (STRs). Legislation passed in March 2001 targets organized crime by making money laundering a criminal offense when the property holdings being laundered are obtained through criminal activity or cooperation in criminal activity.

The 1995 law also establishes the Competent Committee (CC) to receive and analyze STRs 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.

In 2003 Greece enacted legislation (Law 3148) that incorporates European Union (EU) provisions in directives dealing with the operation of credit institutions and the operation and supervision of electronic money transfers. Under the new legislation, the Bank of Greece has direct scrutiny and control over transactions by credit institutions and entities involved in providing services for funds transfer. The Bank of Greece will issue operating licenses after a thorough check of the institutions, their management, and their capacity to ensure the transparency of transactions.

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 and closely monitor 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 a description of the internal control and communications procedures they have implemented to prevent money laundering. In addition, banks must undergo internal audits. Bureaux de change are required to send to the Bank of Greece a monthly report on their daily purchases and sales of foreign currency.

Banks in Greece must demand customer identification information when opening an account or conducting transactions that exceed 15,000 euros. In case of suspicion of illegal activities, banks can take reasonable measures to gather more information on the identification of the person. Greek citizens must provide a tax registration number if they conduct foreign currency exchanges of 1,000 euros or more, and proof of compliance with tax laws in order to conduct exchanges of 10,000 euros 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. Reporting individuals are protected by law.

Every bank and credit institution is required by law to appoint an officer to whom all other bank officers and employees must report any transaction they consider suspicious. Reporting obligations also apply to government employees involved in auditing, including employees of the Bank of Greece, the Ministry of Economy and Finance, and the Capital Markets Commission. Reporting individuals are required to furnish all relevant information to the prosecuting authorities.

Greece has adopted banker negligence laws under which individual bankers may be held liable if their institutions launder money. Banks and credit institutions are subject to heavy fines if they breach their obligations to report instances of money laundering; bank officers are subject to fines and a prison term of up to two years. There have been no objections from banking and political groups to the Greek government’s policies and laws on money laundering.

All persons entering or leaving Greece must declare to the authorities any amount they are carrying over 2,000 euros. Reportedly, however, cross-border currency reporting requirements are not uniformly enforced at all border checkpoints.

There have been several arrests for money laundering since January 2002. These involved the Greek owners (and their spouses) of vessels transporting cocaine from Colombia and other Western Hemisphere countries. The guilty parties received five-year sentences.

With regard to the freezing of accounts and assets, the GOG is preparing draft legislation to harmonize its laws with relevant legislation of the EU and other international organizations. The basic law on money laundering, Law 2331/1995, will be amended and supplemented accordingly. SDOE has established a mechanism for identifying, tracing, freezing, seizing, and forfeiting narcotics-related and other assets of serious crimes; the proceeds are turned over to the GOG. According to the 1995 law, all property and assets used in connection with criminal activities is seized and confiscated by the GOG following a guilty verdict. Legitimate businesses can be seized if used to launder drug money. Approximately $10 million was seized over the past year for drug-related crimes The GOG has not enacted laws for sharing seized narcotics-related assets with other governments.

The Ministry of Justice unveiled legislation on combating terrorism, organized crime, money laundering, and corruption in March 2001; Parliament passed the legislation in July 2002. The Ministry of National Economy and Finance is preparing new legislation on money laundering and terrorist financing that it hopes to introduce in Parliament in the first quarter of 2004. Under this new bill, individuals convicted of financing terrorist groups could face imprisonment of up to ten years. The bill will also incorporate the FATF recommendations on terrorist financing.

The Bank of Greece and the Ministry of National Economy and Finance have the authority to identify, freeze, and seize terrorist assets. The Bank of Greece has circulated to all financial institutions the list of individuals and entities that have been included on the UN 1267 Sanctions Committee’s consolidated list as being linked to the al-Qaida organization or the Taliban, or that the EU has designated under relevant authorities. Suspect accounts (of small amounts) have been identified and frozen.

There are no known plans on the part of the Greek government to introduce legislative initiatives aimed at regulating alternative remittance systems. Illegal immigrants or individuals without valid residence permits are known to send remittances to Albania and other destinations in the form of gold and precious metals, which are often smuggled across the border in trucks and buses. Charitable and nongovernment organizations are closely monitored by the financial and economic crimes police as well as tax authorities; there is no evidence that such organizations are being used as conduits for the financing of terrorism.

Greece is a member of the Financial Action Task Force (FATF), the European Union, and the Council of Europe. The CC is a member of the Egmont Group. The GOG is a party to the 1988 UN Drug Convention, and in December 2000 became a signatory to the UN Convention against Transnational Organized Crime. On June 8, 2000, Greece signed, but has not yet ratified, the UN International Convention for the Suppression of the Financing of Terrorism. Greece has signed bilateral police cooperation agreements with Egypt, Albania, Armenia, France, the United States, Iran, Israel, Italy, China, Croatia, Cyprus, Lithuania, Hungary, the Former Yugoslav Republic of Macedonia, Poland, Romania, Russia, Tunisia, Turkey, and Ukraine. It also has a trilateral police cooperation agreement with Bulgaria and Romania.

Greece exchanges information on money laundering through its Multilateral Assistance Treaty (MLAT) with the United States, which entered into force November 20, 2001. The Bilateral Police Cooperation Protocol provides a mechanism for exchanging records with U.S. authorities in connection with investigations and proceedings related to narcotics trafficking, terrorism, and terrorist financing. Cooperation between DEA and SDOE has been extensive, and the GOG has never refused to cooperate. The Competent Committee can exchange information with other FIUs, although it prefers to work with a memorandum of understanding in such exchanges.

The GOG should extend and implement suspicious transaction reporting requirements for gaming and stock market transactions, and should to adopt more rigorous standards for casino ownership or investments. Additionally, Greece should ensure uniform enforcement of its cross-border currency reporting requirements. The GOG should also take legislative action to specifically criminalize the financing and support of terrorists and terrorism and should become a party to the UN International Convention for the Suppression of the Financing of Terrorism.

Grenada

There has been improvement in Grenada’s anti-money laundering regime and the supervision of its financial sector. Grenada also has demonstrated consistently good cooperation with the U.S. Government by responding rapidly to requests for information involving money laundering cases. Like those of many other Caribbean jurisdictions, the Government of Grenada (GOG) raises revenue from the offshore sector by imposing licensing and annual fees upon offshore entities. As of December 2003, Grenada has two offshore banks, both of which are under GOG regulatory control, one trust company, one management company, and one international insurance company. Grenada is reported to have over 20 Internet gaming sites. There are 2,293 international business companies (IBCs), and the domestic financial sector includes 6 commercial banks, 26 registered domestic insurance companies, 20 credit unions, and 4 money remitters. The GOG has repealed its economic citizenship legislation, but there are indications that some individuals subsequently were able to purchase citizenship.

In September 2001, the Financial Action Task Force (FATF) placed Grenada on the list of noncooperative countries and territories in the fight against money laundering (NCCT). The FATF in its report cited several concerns: inadequate access by Grenadian supervisory authorities to customer account information, inadequate authority by Grenadian supervisory authorities to cooperate with foreign counterparts, and inadequate qualification requirements for owners of financial institutions. In April 2002, the U.S. Department of Treasury issued an advisory to banks and other financial institutions operating in the United States, to give enhanced scrutiny to all financial transactions originating in or routed to or through Grenada, or involving entities organized or domiciled, or persons maintaining accounts, in Grenada. Grenada’s efforts to put into place the legislation and regulations necessary for adequate supervision of Grenada’s offshore sector prompted the FATF to remove Grenada from the NCCT list in February 2003. The Department of Treasury also lifted its advisory on Grenada in April 2003.

Grenada’s Money Laundering Prevention Act (MLPA) of 1999, which came into force in 2000, criminalizes money laundering related to offenses under the Drug Abuse (Prevention and Control) Act, whether occurring within or outside of Grenada, or other offenses occurring within or outside of Grenada, punishable by death or at least five years’ imprisonment in Grenada. The MLPA also establishes a Supervisory Authority to receive, review, and forward to local authorities suspicious activity reports (SARs) from covered institutions and imposes customer identification requirements on banking and other financial institutions.

Financial sector legislation was strengthened, and the Grenada International Financial Services Authority (GIFSA), which monitors and regulates offshore banking, was brought under stricter management. An amendment to the GIFSA Act (No. 13 of 2001) eliminates the regulator’s role in marketing the offshore sector. GIFSA makes written recommendations to the Minister of Finance in regards to the revocation of offshore entities’ licenses and also issues certificates of incorporation to international business companies. In the future, GIFSA is expected to assume authority for regulating both onshore and offshore institutions, in some areas sharing supervision with the Eastern Caribbean Central Bank (ECCB). GIFSA will be renamed the Grenada Authority for the regulation of Financial Institutions.

The International Companies Act regulates IBCs and requires registered agents to maintain records of the names and addresses of directors and beneficial owners of all shares, as well as the date the person’s name was entered or deleted on the share register. Currently, there are 15 registered agents licensed by the GIFSA. There is an ECD$30,000 ($11,500) penalty, and possible revocation of the registered agent’s license, for failure to maintain records. The International Companies Act also gives GIFSA the authority to conduct on-site inspections to ensure that the records are being maintained on IBCs and bearer shares. GIFSA began conducting inspections in August 2002.

The International Financial Services (Miscellaneous Amendments) Act 2002 required all offshore financial institutions to recall and cancel any issued bearer shares and to replace them with registered shares. The holders of bearer shares in nonfinancial institutions must lodge their bearer share certificates with a licensed registered agent. These agents are required by Grenada law to verify the identity of the beneficial owners of all shares and to maintain this information for seven years. GIFSA was given the authority to access the records and information maintained by the registered agents and can share this information with regulatory, supervisory, and administrative agencies.

The Minister of Finance has signed a memorandum of understanding (MOU) with the ECCB that grants the ECCB oversight of the offshore banking sector in Grenada. Legislation that would incorporate the ECCB’s new role into existing offshore banking legislation was adopted in 2003 and is expected to go into effect in 2004. The ECCB will have the authority to share bank and customer information with foreign authorities. The ECCB already provides similar regulation and supervision to Grenada’s domestic banking sector.

During 2003, the GOG passed the Exchange of Information Act No. 2 of 2003, which will strengthen the GOG’s ability to share information with foreign regulators. The Proceeds of Crime (Amendment) Act of 2003 extends anti-money laundering responsibilities to a number of nonbank financial institutions.

Grenada’s legal framework now effectively enables GIFSA to obtain customer account records from an offshore financial institution upon request, and to share the customer account information (regulated financial institutions are required to conduct due diligence checks on account holders) with other regulatory, supervisory, and administrative bodies. GIFSA also has the ability to access auditors’ working papers, and can share this information as well as examination reports with relevant authorities.

The Supervisory Authority issues 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. The Supervisory Authority is authorized to conduct anti-money laundering inspections and investigations. The Supervisory Authority can also conduct investigations and inquiries on behalf of foreign counterpart authorities and provide them with the results. Financial institutions could be fined for not granting access to Supervisory Authority personnel.

Financial institutions must report SARs to the Supervisory Authority within 14 days of the date that the transaction was determined to be suspicious. A financial institution or an employee who willfully fails to file a SAR or makes a false report is liable to criminal penalties that include imprisonment or fines up to ECD$250,000, and possibly revocation of the financial institution’s license to operate.

In June 2001, the GOG established a financial intelligence unit (FIU) that is headed by a prosecutor from the Attorney General’s office; the staff includes an assistant superintendent of police, four additional police officers, and two support personnel. In 2003, Grenada enacted an FIU Act (No. 1 of 2003). The FIU, which operates within the police force but is assigned to the Supervisory Authority, is charged with receiving SARs from the Supervisory Authority and with investigating alleged money laundering offenses. By November 2003, the FIU had received 66 SARs. The GOG has obtained two drug-related money laundering convictions and has confiscated $19,000. Three other drug-related money laundering cases are pending before the courts, and $56,000 has been frozen in connection with those cases.

In 2003, Grenada enacted antiterrorist financing legislation, which provides authority to identify, freeze, and seize terrorist assets. The GOG circulates lists of terrorists and terrorist entities to all financial institutions in Grenada. There has been no known identified evidence of terrorist financing in Grenada. The GOG has not taken any specific initiatives focused on alternative remittance systems or the misuse of charitable and nonprofit entities.

A Mutual Legal Assistance Treaty and an Extradition Treaty have been in force between Grenada and the United States since 1999. Grenada also has a Tax Information Exchange Agreement with the United States. Grenada’s cooperation under the Mutual Legal Assistance Treaty has recently been excellent. Grenada is an active member of the Caribbean Financial Action Task Force (CFATF), and underwent a second CFATF mutual evaluation in September 2003. Grenada is a member of the OAS Inter-American Drug Abuse Control Commission Experts Group to Control Money Laundering. Grenada is a party to the 1988 UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism.

Although Grenada has significantly strengthened the regulation and oversight of its financial sector, it must remain alert to potential abuses and must steadfastly implement the laws and regulations it has adopted. The GOG should continue to expose GIFSA, Supervisory Authority, and FIU staff to available training opportunities. The GOG should also continue to enhance its information sharing, particularly with other Caribbean jurisdictions.

Guatemala

Guatemala is a major transshipment country for illegal narcotics from Colombia and precursor chemicals from Europe. Those factors, combined with a historically weak anti-money laundering regime, corruption and increasing organized crime activity, lead authorities to suspect that significant money laundering occurs in Guatemala. According to law enforcement sources, narcotics trafficking is the primary source of money laundered in Guatemala; however, the laundering of proceeds from other illicit sources, such as kidnapping, tax evasion, vehicle theft, and corruption, is on the rise. Officials of the Government of Guatemala (GOG) believe that couriers, offshore accounts, and wire transfers are used to launder funds, which are subsequently invested in real estate, capital goods, or large commercial projects. The large sums of money seized in airports—totaling nearly $6 million in 2003—suggest that proceeds from illicit activity are regularly hand-carried over Guatemalan borders.

Guatemala is not considered a regional financial center, but it is an offshore center, and some larger banks conduct significant business through their offshore subsidiaries. The Guatemalan financial services industry is comprised of 25 commercial banks, approximately 13 offshore banks, seven licensed money exchangers (hundreds exist informally), 18 insurance companies, 21 financial societies (bank institutions that act as financial intermediaries specializing in investment operations), 32 bonded warehouses, five wire remitters, 160 cooperatives (similar to credit unions), and 13 fianzas (financial guarantors). The Superintendence of Banks (SIB), which operates under the general direction of the Monetary Board, has oversight and inspection authority over the Bank of Guatemala, as well as over 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.

All offshore institutions are subject to the same requirements as onshore institutions. In June 2002, Guatemala enacted the Banks and Financial Groups Law (No. 19-2002), which places offshore banks under the oversight of the Superintendent of Banks. The law requires offshore banks to be authorized by the Monetary Board and to maintain an affiliation with an onshore institution. It also prohibits an offshore bank that is authorized in Guatemala from doing business in another jurisdiction; however, banks authorized by other jurisdictions may do business in Guatemala under certain limited conditions. Guatemala has recently completed the process of reviewing and licensing its offshore banks, which included performing background checks of directors and shareholders. In order to authorize an offshore bank, the financial group to which it belongs must first be authorized, under a 2003 resolution of the Monetary Board. As of January 2004, thirteen banks have requested Monetary Board authorization through the SIB. Of those, one has withdrawn its petition, one was denied authorization for failure to meet requirements and eleven have been authorized. By law, no offshore financial services businesses other than banks are allowed, but there is evidence that they exist in spite of that prohibition. No offshore trusts have been authorized. Offshore casinos and Internet gaming sites are not regulated.

In June 2001, the Financial Action Task Force (FATF) placed Guatemala on the list of noncooperative countries and territories in the fight against money laundering (NCCT). In its report, the FATF noted that: (1) secrecy provisions in Guatemalan law constitute 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. 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 Superintendence of Banks. The RPDLA, effective May 1, 2001, requires all financial institutions under the oversight and inspection of the SIB to establish anti-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 in detecting suspicious transactions.

In November 2001, Guatemala enacted Decree 67-2001, “Law Against Money and Asset Laundering”, to address several of the deficiencies identified by the FATF. Article 2 of the law 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 noncommutable 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. Conspiracy and attempt to commit money laundering are also penalized. Guatemalan authorities have had some success using these conspiracy provisions to target narcotics-traffickers.

Decree 67-2001 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 SIB, 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 exchangers. The law establishes that owners, managers, and other employees are expressly freed from criminal, civil, or administrative liability when they provide information in compliance with the law. However, it holds institutions and businesses responsible, regardless of the responsibility of owners, directors, or other employees, and they may face cancellation of their banking licenses and/or criminal charges for laundering money or allowing laundering to occur.

The requirements also apply to offshore entities that are described by the law as “foreign domiciled entities” that operate in Guatemala but are registered under the laws of another jurisdiction. Obligated institutions are prohibited from maintaining anonymous accounts or accounts that appear under fictitious or inexact names; bearer shares, however, are permitted by nonbanks, and there is banking secrecy. Obligated entities are required to keep a registry of their customers as well as of 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 approximately $10,000. Under the law, obligated entities must maintain records of these registries and transactions for five years.

Decree 67-2001 also obligates individuals and legal entities to report cross-border movements of currency in excess of approximately $10,000 with the competent authorities. At Guatemala City airport, a new special unit was formed in 2003 to enforce the use of customs forms. Compliance is not regularly monitored at land borders.

Decree 67-2001 establishes a financial intelligence unit (FIU), the Intendencia de Verificación Especial (IVE), within the Superintendence of Banks, to supervise obligated financial institutions and ensure their compliance with the law. The IVE began operations in 2001 and has a staff of 23. The IVE has the authority to obtain all information related to financial, commercial, or business transactions that may be connected to money laundering. Obligated entities are required to report to the IVE any suspicious transactions within twenty-five days of detection and to submit a comprehensive report every trimester, even if no suspicious transactions have been detected. Entities also must maintain a registry of all cash transactions exceeding approximately $10,000 or more per day, and report these transactions to the IVE. The IVE may impose sanctions on financial institutions for noncompliance with reporting requirements.

After receiving the suspicious activity reports (SARs) and currency transaction reports (CTRs), the IVE evaluates the information to determine if its contents are highly suspicious. If so, the IVE gathers further information from public records and databases, other obligated entities, and foreign FIUs, and assembles a case. Bank secrecy can be lifted for the investigation of money laundering crimes. The case must receive the approval of the SIB before being sent to the Anti-Money or Other Assets Laundering Unit within the Public Ministry for investigation. Under current regulations, the IVE cannot directly share the information it provides to the Anti-Money or Other Assets Laundering Unit with any other special prosecutors (principally the anti-corruption or antinarcotics units) in the Public Ministry. From January 2003 to October 31, 2003, the IVE received 439 SARs and forwarded two cases to the Public Ministry for further investigation and prosecution.

Within the Public Ministry, the Anti-Money or Other Assets Laundering Unit processes cases involving money laundering. Since January 1, 2003, there have been three arrests and 50 prosecutions connected to money laundering. The first public trial for money laundering is scheduled for early 2004.

In 2002, failure to comply with money laundering commitments was cited in the U.S. decision to decertify Guatemala as a cooperating country in the fight against narcotics trafficking. However, Guatemala was re-certified in 2003, and its efforts to comply with anti-money laundering commitments were identified as a factor in the decision. Still, the following impediments remain in the implementation of effective anti-money laundering measures: the applicable law does not permit undercover investigations; Guatemala lacks both the legislation and technology to permit police and prosecutors immediate access to public registries; corruption hampers enforcement; and authorities are not permitted to use seized assets to fund anti-money laundering initiatives.

During the FATF’s most recent review of noncooperative countries and territories, the FATF inspectors found Guatemala generally to be in compliance in the fight against money laundering. Three specific weaknesses were identified, however. These weaknesses are: (1) bearer shares are still allowed for nonbank entities, preventing true owners or beneficiaries from being traced; (2) authorities have insufficient resources to carry out anti-money laundering investigations; and (3) supervision of offshore banks remains weak. Guatemala remains on the FATF NCCT list.

Under current legislation, any assets linked to money laundering can be seized. Within the GOG, the IVE, the National Civil Police, and the Public Ministry have the authority to trace assets; the Public Ministry can seize assets temporarily or in urgent cases; and the Courts of Justice have the authority to permanently seize assets. The GOG passed reforms in 1998 to allow the police to use narcotics traffickers’ seized assets. These provisions also allow for 50 percent of the money to be used by the IVE and others involved in combating money laundering. In 2003, the Guatemalan Congress approved reforms to enable seized money to be shared among several GOG agencies, but the Constitutional Court (CC) temporarily suspended those provisions. This impasse will have to be addressed by the new government that will take office in mid-January 2004.

An additional problem is that the courts do not allow seized currency to be deposited into accounts. For money laundering and narcotics cases, any seized money is deposited in a bank safe and all material evidence is sent to the warehouse of the Public Ministry. There is no central tracking system for seized assets, and it is currently impossible for the GOG to provide an accurate listing of the seized assets in custody. In 2003, Guatemalan authorities seized more that $20 million in bulk currency, including the largest bulk seizure in Guatemalan history: $14.5 million.

Guatemala has taken a number of initiatives with regard to terrorist financing. According to the GOG, Article 391 of the Penal Code already sanctions all preparatory acts leading up to a crime, and financing would likely be considered a preparatory act. Technically, both judges and prosecutors could issue a freeze order on terrorist assets, but no test case has validated these procedures. There is no known credible evidence of terrorist financing in Guatemala, and the GOG has been very cooperative in looking for such funds. Recently, in accordance with international obligations, a comprehensive counterterrorism law that includes provisions against terrorist financing was introduced in Congress. However, it was not passed during the 2003 election season and will have to be re-introduced in the new Congress in 2004.

Guatemala is a party to the 1988 UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism. In November 2000, the GOG ratified the Central American Convention for the Prevention of Money Laundering and Related Crimes. The GOG ratified the UN Convention against Transnational Organized Crime on September 25, 2003, and signed the UN Convention Against Corruption on December 9, 2003. Guatemala is a member of OAS Inter-American Drug Abuse Control Commission Experts Group to Control Money Laundering (OAS/CICAD), and the Caribbean Financial Action Task Force (CFATF). In 2003, Guatemala’s FIU became a member of the Egmont Group. The SIB, through the IVE, has signed Memorandums of Understanding (MOUs) with 16 jurisdictions, including Bolivia, Brazil, Colombia, El Salvador, Spain, Honduras, Mexico, Montserrat, Panama, and the Dominican Republic. During 2003, Guatemala signed MOUs with Venezuela, Argentina, Barbados, Costa Rica, Bahamas and Peru. The SIB has also begun negotiations to sign an MOU with Puerto Rico. On November 5, 2003, the GOG signed an agreement with the USG Office of the Currency Comptroller to cooperate on supervision issues.

Guatemala has made efforts to comply with international standards and improve its anti-money laundering regime. In 2003, Guatemalan authorities applied new procedures to license and monitor offshore banks and demonstrated they could use anti-money laundering laws to successfully target criminals. However, the GOG should pass legislation on the financing of terrorists and terrorism, and continue efforts to implement the needed reforms. Guatemala should also focus its efforts on boosting its ability to successfully investigate and prosecute money launderers, and on distributing seized assets to law enforcement agencies to assist in the fight against money laundering and other financial crime. Corruption and organized crime remain strong forces in Guatemala and may prove to be the biggest hurdles facing Guatemala in the long term.

Guernsey

The Bailiwick of Guernsey (the Bailiwick) covers a number of the Channel Islands (Guernsey, Alderney, Sark, and Herm in order of size and population). The Islands are a Crown Dependency because the United Kingdom (UK) is responsible for their defense and international relations. However, the Bailiwick is not part of the UK. Alderney and Sark have their own separate parliaments and civil law systems. Guernsey’s parliament legislates criminal law for all of the islands in the Bailiwick. The Bailiwick alone has competence to legislate in and for domestic taxation. The Bailiwick is a sophisticated financial center and, as such, it continues to be vulnerable to money laundering at the layering and integration stages.

There are 16,340 companies registered in the Bailiwick. Nonresidents own approximately half of the companies, and they have an exempt tax status. These companies do not fall within the standard definition of an international business company (IBC). The remainder of the companies are owned by local residents and include trading and private investment companies. Exempt companies are not prohibited from conducting business in the Bailiwick, but must pay taxes on profits of any business conducted in the islands. Companies can be incorporated in Guernsey and Alderney, but not in Sark, which has no company legislation. Companies in Guernsey may not be formed or acquired without disclosure of beneficial ownership to the Guernsey Financial Services Commission (the Commission).

Guernsey has 65 banks, all of which have offices, records, and a substantial presence in the Bailiwick. The banks are licensed to conduct business with residents and nonresidents alike. There are 578 international insurance companies, and 507 collective investment funds. There are also 19 bureaux de change, which file accounts with the tax authorities. Many are part of a licensed bank, and it is the bank that publishes and files accounts.

Guernsey has put in place a comprehensive legal framework with which to counter money laundering and the financing of terrorism. The Proceeds of Crime (Bailiwick of Guernsey) Law 1999 (as amended) is supplemented by the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Regulations, 2002. The legislation criminalizes money laundering for all crimes, except for drug trafficking, which is covered by the Drug Trafficking (Bailiwick of Guernsey) Law, 2000. The Proceeds of Crime Law and the Regulations are supplemented by Guidance Notes on the Prevention of Money Laundering and Countering the Financing of Terrorism, issued by the Commission. There is no exemption for fiscal offenses. The 1999 law creates a system of suspicious transaction reporting (including about tax evasion) to the Guernsey Financial Intelligence Service (FIS). The Bailiwick narcotics trafficking, anti-money laundering, and terrorism laws designate the same foreign countries as the UK to enforce foreign restraint and confiscation orders.

The Drug Trafficking (Bailiwick of Guernsey) Law 2000 consolidates and extends money laundering legislation related to narcotics trafficking. It introduces the 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 check cashers.

In addition, the Bailiwick authorities have recently approved the enactment of the Prevention of Corruption (Bailiwick of Guernsey) Law of 2003 and have resolved to merge existing drug trafficking, money laundering and other crimes into one statute, and to introduce a civil forfeiture law.

On April 1, 2001, the Regulation of Fiduciaries, Administration Businesses, and Company Directors, etc. (Bailiwick of Guernsey) Law of 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 Commission creates Codes of Practice for corporate service providers, trust service providers, and company directors. Under the law, all fiduciaries, corporate service providers, and persons acting as company directors of any business must be licensed by the Commission. In order to be licensed, these agencies must pass strict tests. These include “Know Your Customer” requirements and the identification of clients. These organizations are subject to regular inspection, and failure to comply could result in the fiduciary being prosecuted and/or its license being revoked. The Bailiwick is fully compliant with the Offshore Group of Banking Supervisors Statement of Best Practice for Company and Trust Service Providers.

Since 1988, the Commission has regulated the Bailiwick’s financial services businesses. The Commission regulates banks, insurance companies, mutual funds and other collective investment schemes, investment firms, fiduciaries, company administrators, and company directors. The Bailiwick does not permit bank accounts to be opened unless there has been a “Know Your Customer” inquiry and verification details are provided. Company incorporation is by act of the Royal Court, which maintains the registry. All first-time applications to form a Bailiwick company have to be made to the Commission, which then evaluates each application. The court will not permit incorporation unless the Commission and the Attorney General or Solicitor General have given their prior approval. The Commission conducts regular on-site inspections and analyzes the accounts of all regulated institutions.

The Guernsey authorities have established a forum, the Crown Dependencies Anti-Money Laundering Group, where the Attorneys General from the Crown Dependencies, Directors General and other representatives of the regulatory bodies, and representatives of police, Customs, and the FIS, the Bailiwick’s financial intelligence unit, meet to coordinate the anti-money laundering and antiterrorism policies and strategy in the Dependencies.

The FIS, a joint Police and Customs/Excise Service, is mandated to place specific focus and priority on money laundering and terrorism financing issues. Suspicious transaction reports are filed with the FIS, which is the central point within the Bailiwick for the receipt, collation, evaluation, and dissemination of all financial crime intelligence.

The Criminal Justice (International Cooperation) (Bailiwick of Guernsey) Law, 2000, 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. In cases of serious or complex fraud, Guernsey’s Attorney General can provide assistance under the Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law 1991. The Commission also cooperates with regulatory/supervisory and law enforcement bodies.

On September 19, 2002, the United States and Guernsey signed a Tax Information Exchange Agreement. The agreement provides for the exchange of information on a variety of tax investigations, paving the way for audits that could uncover tax evasion or money laundering activities. Currently, similar agreements are being negotiated with other countries, among them members of the European Union.

There has been antiterrorism legislation covering the Bailiwick since 1974. The Terrorism and Crime (Bailiwick of Guernsey) Law, 2002, replicates equivalent UK legislation. The provisions of UN Security Council Resolutions 1373 and 1390 were enacted in domestic law at the same time as they were enacted in the UK. The Bailiwick has requested that the UK Government seek the extension to the Bailiwick of the UN International Convention on the Suppression of the Financing of Terrorism and the UN International Convention for the Suppression of Terrorist Bombing.

In November 2002, the International Monetary Fund (IMF) undertook an assessment of Guernsey’s compliance with internationally accepted standards and measures of good practice relative to its regulatory and supervisory arrangements for the financial sector. The IMF report states that Guernsey has a comprehensive system of financial sector regulation with a high level of compliance with international standards. As for anti-money laundering and combating terrorist financing (AML/CFT), the IMF report highlights that Guernsey has a developed legal and institutional framework for AML/CFT and a high level of compliance with the Financial Action Task Force Recommendations.

The Attorney General’s Office is represented in the European Judicial Network and has been participating in the European Union’s PHARE anti-money laundering project. The Commission cooperates with regulatory/supervisory and law enforcement bodies. It is a member of the International Association of Insurance Supervisors, the Offshore Group of Insurance Supervisors, the International Association of International Fraud Agencies, the International Organization of Securities Commissions, the Enlarged Contact Group for the Supervision of Collective Investment Funds, and the Offshore Group of Bank Supervisors. The FIS is a member of the Egmont Group.

After extension to the Bailiwick, Guernsey enacted the necessary legislation to implement 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 Drug Convention. The 1988 Agreement Concerning the Investigation of Drug Trafficking Offenses and the Seizure and Forfeiture of Proceeds and Instrumentalities of Drug Trafficking, as amended in 1994, was extended to the Bailiwick in 1996.

Guernsey has put in place a comprehensive anti-money laundering regime, and has demonstrated its ongoing commitment to fighting financial crime. Bailiwick officials should continue both to carefully monitor its anti-money laundering program to assure its effectiveness, and to cooperate with international anti-money laundering authorities.

Guinea

Guinea has an unsophisticated banking system and is not a regional financial center. Banking leaders in Guinea estimate that 70 to 80 percent of business transactions take place in cash. Several expatriate communities in Guinea maintain strong ties to their countries of origin and are sources of international currency transfers. Both formal and informal money transfer services have expanded greatly in Guinea in recent years. Guinea has an active black market for foreign currency—especially euros, U.S. dollars, and CFA francs. Contraband is common. Merchants dealing in small quantities comprise most of the business transactions in Guinea. Guinea’s mining industry leads to an influx of foreign currency. In addition to large mining operations, Guinea has an industry of small-scale, traditional mining. This industry, which deals primarily with diamonds and gold, lends itself to money laundering, as few records are kept and sales are made in cash. In 2002, Guinean police seized over $1.5 million high-quality counterfeit U.S. currency tied to gold and diamond trade. Some narcotics trafficking occurs in Guinea.

Instability in the region surrounding Guinea also contributes to a permissive environment. Given Guinea’s status as a relatively stable country in a troubled region, rebels and/ or refugees from neighboring nations may bring substantial amounts of cash, counterfeit currency and precious stones into Guinea.

Section 4 of the Guinean Penal Code criminalizes money laundering related to narcotics trafficking. Violations are punishable by 10 to 20 years in prison and a fine of $2,500 to $50,000. While some commercial banks in Guinea are voluntarily using software or other methods to detect suspicious transactions, no anti-money laundering regime is in place. The Ministry of Finance has approached an international accounting and consulting firm to assist the Government of Guinea in writing an anti-money laundering law.

No money laundering arrest or prosecutions for money laundering have been prosecuted since January 1, 2003.

Guinea is a party to the 1988 UN Drug Convention. Guinea is also a party to the UN International Convention for the Suppression of the Financing of Terrorism. A lack of resources makes full implementation of these international standards difficult for the Government of Guinea.

Guinea should enact comprehensive anti-money laundering legislation that criminalizes money laundering and terrorist financing.

Guinea-Bissau

Guinea-Bissau is not considered an important regional financial center. It is a Central Bank of West African States (BCEAO) member country. While anecdotal evidence of money laundering exists, Bissau-Guinean officials are not aware of its extent. Guinea-Bissau has an unofficial money transfer system, similar to the hawala alternative remittance system, but authorities are unaware of the scope of this system. However, there are numerous cases of corruption, narcotics trafficking, arms dealing and other crimes that could engender money laundering. Contraband smuggling exists at border points with neighboring countries, but it is not known whether the resulting funds are being laundered through the banking system. Guinea-Bissau’s courts did not function during most of 2003. Public servants are owed months of salary by a government in arrears and corruption is rampant. Money laundering could occur in all these areas and would be extremely difficult to detect.

Guinea-Bissau is a member of the Intergovernmental Group Against Money Laundering (GIABA), a regional body established by the Economic Union of West African States (ECOWAS) to facilitate regional coordination and harmonization of anti-money laundering programs in the region. GIABA recently hosted a self-evaluation exercise on anti-money laundering capabilities in conjunction with the International Monetary Fund and ECOWAS member states.

Guinea-Bissau is reportedly going to adopt a Uniform Act on Money Laundering that implements standards drafted by the West African Economic and Monetary Union (WAEMU) member states in conjunction with GIABA and the BCEAO. Under the harmonized WAEMU standards, Guinea-Bissau will join the other seven WAEMU countries and ultimately the 15 members of ECOWAS in updating the judicial and penal code concerning money laundering and crimes of corruption, establishing a Financial Intelligence Unit (FIU), and strengthening law enforcement and detection capability of money laundering and corruption.

A regulation at the regional level was approved by the council of ministers of the WAEMU on September 19, 2002; this regulation permits the freezing of accounts and other assets related to the financing of terrorism.

No arrests or prosecutions for money laundering or terrorist financing were made in 2003.

Guinea-Bissau is a party to the 1988 UN Drug Convention and has signed, but has not yet ratified, both the UN International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime. It has not signed the UN Convention Against Corruption.

Guinea-Bissau should criminalize terrorist financing and should take steps to develop an anti-money laundering regime in accordance with international standards. Guinea-Bissau should become a party to the UN International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime. It should avail itself of the opportunity to work closely with BCEAO and GIABA, as well as other international organizations, toward these ends.

Guyana

Guyana is neither an important regional financial center nor an offshore financial center, nor does it have any notable offshore business sector. The scale of money laundering, though, is thought to be large given the size of the informal economy, which is estimated to be at least 30 percent of the size of the formal sector. Money laundering has been linked to trafficking in drugs, firearms and persons, as well as corruption and fraud. Political instability, government inefficiency, an internal security crisis, and a lack of resources have significantly impaired Guyana’s efforts to bolster its anti-money laundering regime. Investigating and trying money laundering cases is not a priority for law enforcement. The Government of Guyana (GOG) made no arrests or prosecutions for money laundering in 2003.

The Money Laundering Prevention Act passed in 2000 is not yet fully in force, due to inadequate implementing legislation, difficulties associated with finding suitable personnel to staff the Financial Investigations Unit (FIU) and the Bank of Guyana’s lack of capacity to fully execute its mandate. Crimes covered by the Money Laundering Prevention Act include illicit narcotics trafficking, illicit trafficking of firearms, extortion, corruption, bribery, fraud, counterfeiting, and forgery. The law also requires that incoming or outgoing funds over $10,000 be reported. Licensed financial institutions are required to report suspicious transactions, although banks are left to determine thresholds individually according to banking best practices. Suspicious activity reports must be kept for seven years. The legislation also includes provisions regarding confidentiality in the reporting process, good faith reporting, penalties for destroying records related to an investigation, asset forfeiture, international cooperation, and extradition for money laundering offenses.

The GOG established a financial intelligence unit in 2003, although by the end of the year it was not yet fully staffed or equipped.

Asset forfeiture is provided for under the Money Laundering Act, although the guidelines for implementing seizures/forfeitures have not yet been finalized.

The Ministry of Foreign Affairs and the Bank of Guyana (the country’s Central Bank), continue to assist U.S. efforts to combat terrorist financing by working towards coming into compliance with UNSCRs 1333, 1368, and 1373. In 2001 the Central Bank, the sole financial regulator as designated by the Financial Institutions Act of March 1995, issued orders to all licensed financial institutions expressly instructing the freezing of all financial assets of terrorists, terrorist organizations, individuals and entities associated with terrorists and their organizations. Guyana has no domestic laws authorizing the freezing of terrorist assets, but the government created a special committee on the implementation of UNSCRs, co-chaired by the Head of the Presidential Secretariat and the Director General of the Ministry of Foreign Affairs. To date the procedures have not been tested, due to an absence of identified terrorist assets located in Guyana.

Guyana is a member of the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. A 2002 CICAD review of Guyana’s efforts against money laundering noted numerous deficiencies in implementation, resources, and political will. Guyana is now also a member of the Caribbean Financial Action Task Force (CFATF), but has not yet participated in that organization’s mutual evaluation process. Guyana is a party to the 1988 UN Drug Convention. Guyana has not signed the UN Convention against Transnational Organized Crime nor the UN International Convention for the Suppression of the Financing of Terrorism, although Guyana was debating the Convention in late 2003 and may sign it in early 2004.

Guyana should enact legislation and/or regulations to implement its Money Laundering law. Guyana should provide appropriate resources and awareness training to its regulatory, law enforcement and prosecutorial personnel. Guyana should criminalize terrorist financing and adopt measures that would allow it to block terrorist assets.

Haiti

Haiti is not a major regional financial center, and given Haiti’s dire economic condition and unstable political situation, it is doubtful it is a major player in the region’s formal financial sector. Most money laundering activity appears to be related to narcotics proceeds (primarily cocaine), although there is a significant amount of contraband passing through Haiti. While the informal economy in Haiti is significant and partly funded by narcotics proceeds, smuggling is historically prevalent and pre-dates narcotics trafficking. Money laundering occurs in the banking system and the nonbank financial system, including in casino, foreign currency, and real estate transactions. Further complicating the picture is the cash that is routinely transported to Haiti from Haitians and their relatives in the United States in the form of remittances. While there is no indication of terrorist financing, Haiti is often a stopover for illegal migrants from several countries.

In recent years, Haiti has taken steps to address its money laundering problems. Since August 2000, Haiti, through Central Bank Circular 95, has required banks, exchange brokers, and transfer bureaus to obtain declarations identifying the source of funds exceeding 200,000 gourdes (approximately $4,550) or its equivalent in foreign currency. Covered entities must report these declarations to the competent authorities on a quarterly basis. Failure to comply can result in fines up to 100,000 gourdes (approximately $2,275) or forfeiture of the bank’s license. Unfortunately, because of widespread official laxity and rampant corruption, and the fact that nearly two thirds of Haiti’s economy is informal, large amounts of money do not flow through the legitimate financial system that is governed by these regulations.

Since 2001, Haiti has used the “Law on Money Laundering from Illicit Drug Trafficking and other Crimes and Punishable Offenses” (AML Law) as its primary anti-money laundering tool. All financial institutions and natural persons are subject to the money laundering controls of the AML Law. The AML Law criminalizes money laundering, which it defines as “the conversion or transfer of assets for the purpose of disguising or concealing the illicit origin of those assets or for aiding any person who is involved in the commission of the offense from which the assets are derived to avoid the legal consequences of his acts; the concealment or disguising of the true nature, origin, location, disposition, movement, or ownership of property; and the acquisition, possession or use of property by a person who knows or should know that this property constitutes proceeds of a crime under the terms of this law.”

The AML Law provides for relatively long prison sentences and large fines totaling millions in gourdes, and applies to a wide range of financial institutions, including banks, money changers, casinos, and real estate agents. Insurance companies are not covered, but they represent only a minimal factor in the Haitian economy. The AML Law requires natural persons and legal entities to verify the identity of all clients, record all transactions, including their nature and amount, and submit the information to the Ministry of Economy and Finance.

Specifically, the AML Law requires financial institutions to establish money laundering prevention programs and to verify the identity of customers who open accounts or conduct transactions that exceed 200,000 gourdes (approximately $4,550). Banks are required to maintain records for at least five years and are required to present this information to judicial authorities and financial information service officials upon request. When stock or currency transactions exceed 200,000 gourdes and are of a suspicious nature, financial institutions are required to investigate the origin of those funds and prepare an internal report. These reports are available (upon request) to the Unite Centrale de Renseignements Financiers (UCREF), Haiti’s financial intelligence unit (FIU). Bank secrecy or professional secrecy cannot be invoked as grounds for refusing information requests from these authorities.

In 2002, Haiti formed a National Committee to Fight Money Laundering, the Comite National de Lutte Contre le Blanchiment des Avoirs (CNLBA). The CNLBA is in charge of promoting, coordinating, and recommending policies to prevent, detect, and suppress the laundering of assets obtained from the illicit trafficking of drugs and other serious offenses. The CNLBA, through UCREF, is responsible for receiving and analyzing reports submitted in accordance with the AML Law. The UCREF was created through an August 2000 circular by the Ministries of Justice and Public Security and is referenced in the AML Law. The FIU officially opened in December 2003, and by law, has the authority to exchange information with foreign countries. Entities or persons are required to report to the UCREF any transaction involving funds that appear to be derived from a crime. Failure to report such transactions is punishable by more than three years’ imprisonment. Although established in 2002, the CNLBA is still not fully functional or funded. Additionally, the UCREF does not meet the international standards established by the Egmont Group of FIUs.

The AML Law has provisions for the forfeit and seizure of assets; however, the government cannot declare the asset or business forfeited until there is a conviction, which does not happen often in Haiti. The judicial branch is the deciding organization, but seizures and use of seized assets is on an ad hoc basis. Haiti is considering modifications to the law to strengthen the judicial procedure and asset seizure and forfeit provisions.

Corruption and the large informal economy continue to prevent the full implementation and enforcement of Haiti’s 2001 anti-money laundering law. This is evidenced by the fact that in 2003 there were no arrests or prosecutions for money laundering or terrorism.

Haiti has made little progress regarding terrorist financing in the past year. The government still has not passed legislation criminalizing the financing of terrorists and terrorism, nor has it signed the UN International Convention for the Suppression of the Financing of Terrorism. The AML Law provides for investigation and prosecution in all cases of illegally derived money. Under this law, terrorist finance assets may be frozen and seized. The commission printed and circulated to all banks the list of individuals and entities on the UN 1267 Sanctions Committee’s consolidated list. The Central Bank chaired meetings with all bank presidents and requested their cooperation.

Although Haiti has signed the UN Convention against Transnational Organized Crime, the government has not yet ratified the treaty. Haiti is a party to the 1988 UN Drug Convention. Haiti is a member of the OAS/CICAD Experts Group to Control Money Laundering and the Caribbean Financial Action Task Force (CFATF).

In the coming year, the Government of Haiti should make every effort to fully implement the AML Law. Haiti should criminalize terrorist financing and work toward becoming a party to the UN International Convention for the Suppression of the Financing of Terrorism. It should also bring the UCREF into compliance with the Egmont Group standards and seek greater assistance and training for personnel involved in the fight against money laundering.

Honduras

Honduras is not an important regional or offshore financial center and is not considered to have a significant black market for smuggled goods. The vulnerabilities of Honduras to money laundering stem primarily from significant narcotics trafficking throughout the region. In Honduras, money laundering takes place through the banking sector, and most likely in currency exchange houses, casinos, and front companies as well. Corruption remains a serious problem, particularly within the judiciary and law enforcement sectors. The operation of offshore financial institutions is prohibited; casinos, however, remain unregulated.

In 2002, there were major developments in the fight against money laundering in Honduras. On February 28, 2002, the National Congress passed long-awaited legislation to widen the definition of money laundering and strengthen enforcement. Prior to the new law, the Honduran anti-money laundering program was based on Law No. 27-98 of December 1997. Law No. 27-98 criminalized the laundering of narcotics-related proceeds, and introduced customer identification (no anonymous bank accounts were permitted), record keeping (five years), and transaction reporting requirements for financial institutions, including banks, currency exchange houses, money transmitters, and check sellers/cashiers. Under the new legislation, Decree No. 45-2002, the Law No. 27-98 was expanded to define the crime of money laundering to include any non-economically justified sale or movement of assets, as well as asset transfers connected with trafficking of drugs, arms, and people; auto theft; kidnapping; bank and other forms of financial fraud; and terrorism. The penalty for money laundering is a prison sentence of 15-20 years. The law includes banker negligence provisions that make individual bankers subject to two- to five-year prison terms for allowing money laundering activities.

Decree No. 45-2002 also creates a financial intelligence unit, the Unidad de Información Financiera (UIF), within the Honduras National Banking and Securities Commission. Banks and other financial institutions are required to report to the UIF currency transactions over $10,000 in dollar denominated accounts or 200,000 lempiras (approximately $11,200) in local currency accounts. The law requires the UIF and reporting institutions to keep a registry of reported transactions for five years. The UIF receives over 2,000 reports per month of transactions over the designated threshold. Banks and other financial institutions are also required to report all unusual or suspicious financial transactions to the UIF. In 2003, the UIF initiated investigations into 74 unusual or suspicious transactions, up from the 24 investigated in 2002. The UIF also responded to 156 requests for investigation made by the Public Ministry, compared to 48 in 2002.

Decree No. 45-2002 requires that a public prosecutor be assigned to the UIF. In 2002, a prosecutor from the Public Ministry was assigned to the unit full-time. In 2003, however, the Public Ministry changed this arrangement so that there are now four prosecutors assigned to the UIF, each on a part-time basis, with responsibility for specific cases divided among them depending on their expertise. The prosecutors, under urgent conditions and with special authorization, may subpoena data and information directly from financial institutions. Public prosecutors and police investigators are permitted to use electronic surveillance techniques to investigate money laundering.

Early in 2003, there was ambiguity as to which of two units within the police forces would have responsibility for the investigation of financial crimes. This issue was resolved by mid-year, with primary responsibility for the investigations assigned to the Office of Special Investigative Services (DGSEI). By the end of 2003, it appeared the various government entities involved in the fight against money laundering—the DGSEI, the UIF and the Public Ministry—were beginning to work well together and communicate more effectively among themselves. In 2003, there were ten cases brought to court under the new law, which were still pending at the year’s end.

The National Congress enacted an asset seizure law in 1993 that subsequent Honduran Supreme Court rulings had substantially weakened. Decree No. 45-2002 strengthens the asset seizure provisions of the law, establishing an Office of Seized Assets under the Public Ministry. The law authorizes the Office of Seized Assets to guard and administer “all goods, products or instruments” of a crime. However, the actual process of establishing and equipping this office to carry out its functions has been slow. The implementing regulations governing the Office of Seized Assets were finalized and published in March 2003, and a director of the office was named at the same time. Plans to build separate offices and a warehouse for this entity, however, are still incomplete, resulting in seized assets currently being kept in various locations under dispersed authority. Moreover, in September another government entity made an unsuccessful attempt to take over the function of controlling seized assets from the nascent Office. Consequently, the Office of Seized Assets cannot be said to have established firm control over the asset seizure and forfeiture process. The physical transportation of large sums of cash is a growing phenomenon in Honduras, and since the beginning of 2003, there have been seizures of cash and assets totaling over two million dollars.

The Government of Honduras (GOH) has been supportive of counterterrorism efforts. Decree No. 45-2002 states that an asset transfer related to terrorism is a crime; however, terrorist financing has not been identified as a crime itself. This law does not explicitly grant the GOH the authority to freeze or seize terrorist assets; on separate authority; however, the National Banking and Insurance Commission has issued freeze orders promptly for the organizations and individuals named by the UN 1267 Sanctions Committee and those organizations and individuals on the list of Specially Designated Global Terrorists designated by the United States pursuant to Executive Order 13224 (on terrorist financing). The Ministry of Foreign Affairs is responsible for instructing the Commission to issue freeze orders. The Commission directs Honduran financial institutions to search for, hold, and report on terrorist-linked accounts and transactions, which, if found, would be frozen. The Commission reported that, to date, no accounts linked to the entities or individuals on the lists have been found in the Honduran financial system.

While Honduras is a major recipient of flows of remittances (estimated at $800 million in 2003), there has been no evidence to date linking these remittances to the financing of terrorism. Remittances primarily flow from Hondurans living in the United States to their relatives in Honduras. The great majority of these remittances is sent through wire transfer or bank services.

The GOH cooperates with U.S. investigations and requests for information pursuant to the 1988 UN Drug Convention. Honduras has signed memoranda of understanding to exchange information on money laundering investigations with Panama, El Salvador, Guatemala, and Colombia. The GOH also adheres to the Basel Committee’s “Core Principles for Effective Banking Supervision.” At the regional level, Honduras is a member of the Central American Council of Bank Superintendents, which meets periodically to exchange information.

Honduras is a party to the 1988 UN Drug Convention. The GOH is also a party to both the UN International Convention against Transnational Organized Crime and the UN International Convention for the Suppression of the Financing of Terrorism. The GOH has signed, but not yet become a party to, the OAS Inter-American Convention on Terrorism, and has not yet signed the UN Convention Against Corruption. Honduras is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. In 2002, Honduras became a member of the Caribbean Financial Action Task Force (CFATF). The UIF has been nominated by Spain for inclusion in the Egmont Group of Financial Intelligence Units. Its entry nomination will be voted upon in October of 2004.

In 2003, the GOH took positive steps to implement Decree No. 45-2002 by establishing and equipping the various government entities responsible for combating money laundering. However, there are only limited resources available for training officials, most of whom lack experience in dealing with money laundering issues. Due to a lack of available technology, most analysis of suspicious transactions reports and cash transaction reports is done manually, which increases the risk of human error and corruption. Further progress in implementing the new money laundering legislation will depend on the training and retention of personnel familiar with money laundering and financial crimes, clearer delineation of responsibility between different government entities, and improved ability and willingness of the Public Ministry to aggressively investigate and prosecute financial crimes. The GOH should continue to support the developing government entities responsible for combating money laundering and other financial crime, and ensure that resources are available to strengthen its anti-money laundering regime. The GOH should ensure full implementation and proper oversight of its asset forfeiture program. The GOH should also criminalize terrorist financing. The GOH should adequately supervise and regulate casinos, nongovernmental organizations, including charities, and alternative remittance systems to lessen their vulnerability to abuse by criminal and terrorist organizations and their supporters.

Hong Kong

Hong Kong is a major international financial center. Its low taxes and simplified tax system, sophisticated banking system, the availability of secretarial services and shell company formation agents, and absence of currency and exchange controls facilitate financial activity but also make it vulnerable to money laundering. The primary sources of laundered funds are narcotics trafficking (particularly heroin, methamphetamine, and ecstasy), tax evasion, fraud, illegal gambling and bookmaking, and illegal alien smuggling. Laundering channels include Hong Kong’s banking system, and its legitimate and underground remittance and money transfer networks. Hong Kong is substantially in compliance with the Financial Action Task Force’s (FATF) Forty Recommendations on Money Laundering, and has pledged to adhere to the Revised 40 FATF Recommendations. Overall, Hong Kong has developed a strong anti-money laundering regime, though improvements should be made. It is a regional leader in anti-money laundering efforts. Hong Kong has been a member of the FATF since 1990. It served as President of the FATF for the 2001/2002 term and served on the FATF’s Steering Group from 2001 to 2003.

Money laundering is a criminal offense in Hong Kong under the Drug Trafficking (Recovery of Proceeds) Ordinance (DTRoP) and Organized and Serious Crimes Ordinance (OSCO). The money laundering offense extends to the proceeds of drug-related and other indictable crimes. Money laundering is punishable by up to 14 years’ imprisonment and a fine of HK$5,000,000 ($643,000).

Money laundering reporting requirements apply to all persons, including banks and nonbank financial institutions, as well as to intermediaries such as lawyers and accountants. All persons must report suspicious transactions of any amount to the Joint Financial Intelligence Unit (JFIU). The JFIU does not investigate suspicious transactions itself, but receives, stores and disseminates suspicious transactions reports (STRs) to the appropriate investigative unit. Typically, STRs are passed to either the Narcotics Bureau or the Organized Crime and Triad Bureau of the Hong Kong Police Force, or to the Customs Drug Investigation Bureau of the Hong Kong Customs and Excise Department.

Financial regulatory authorities issue anti-money laundering guidelines to institutions under their purview and monitor compliance through on-site inspections and other means. Hong Kong law enforcement agencies provide training and feedback on suspicious transaction reporting.

Financial institutions are required to know and record the identities of their customers and maintain records for five to seven years. Hong Kong law provides that the filing of a suspicious transaction report shall not be regarded as a breach of any restrictions on the disclosure of information imposed by contract or law. Remittance agents and money changers must register their businesses with the police and keep customer identification and transaction records for cash transactions equal to or over $2,564 (HK$20,000). Hong Kong does not require reporting of the movement of currency above a threshold level across its borders or reporting of large currency transactions above a threshold level.

There is no distinction made in Hong Kong between onshore and offshore entities, including banks, and no differential treatment is provided for nonresidents, including on taxes, exchange controls, or disclosure of information regarding the beneficial owner of accounts or other legal entities. Hong Kong’s financial regulatory regimes are applicable to residents and nonresidents alike. The Hong Kong Monetary Authority (HKMA) regulates banks. The Insurance Authority and the Securities and Futures Commission regulate insurance and securities firms, respectively. All three impose licensing requirements and screen business applicants. There are no legal casinos or Internet gambling sites in Hong Kong.

In Hong Kong, it is not uncommon to use solicitors and accountants, acting as company formation agents, to set up shell or nominee entities to conceal ownership of accounts and assets. Hong Kong is a global leader in registering international business companies (IBCs), with nearly 500,000 registered in 2002. Many of the IBCs created in Hong Kong are owned by other IBCs registered in the British Virgin Islands. Many of the IBCs are established with nominee directors. The concealment of the ownership of accounts and assets is ideal for the laundering of funds. Additionally, some banks permit the shell companies to open bank accounts based only on the vouching of the company formation agent. However, solicitors and accountants have filed a low number of suspicious transaction reports in recent years, and have become a focus of attention to improve reporting, as a result.

The open nature of Hong Kong’s financial system has long made it the primary conduit for funds being transferred out of China, which maintains a closed capital account. Hong Kong’s role has been evolving as China’s financial system gradually opens. In November 2003, for instance, China’s State Council allowed China’s Central Bank, the People’s Bank of China, to provide clearing arrangements for banks in Hong Kong to take deposits in the mainland Chinese currency, the yuan, and offer personal banking business in yuan on a trial basis for the first time. This could bring some financial transactions related to China out of the money-transfer industry and into the more highly regulated banking industry. However, this new yuan-denominated banking also carries the risks associated with money laundering.

Under the Drug Trafficking (Recovery of Proceeds) Ordinance (DTRoP) and the Organized and Serious Crimes Ordinance (OSCO), a court may issue a restraining order against a defendant’s property at or near the time criminal proceedings are instituted. Both ordinances were strengthened in January 2003, through a legislative amendment lowering the evidentiary threshold for initiating confiscation and restraint orders against persons or properties suspected of drug trafficking. Property includes money, goods, real property, and instruments of crime. A court may issue confiscation orders at the value of a defendant’s proceeds from illicit activities. Cash imported into or exported from Hong Kong that is connected to narcotics trafficking may be seized, and a court may order its forfeiture. As of December 1, 2003, the value of assets under restraint was $164 million, and the value of assets under confiscation order, but not yet paid to the government was $12.98 million, according to figures from the Hong Kong Joint Financial Intelligence Unit. It also reported that as of December 1, 2003, the amount confiscated and paid to the government since the enactment of DTRoP and OSCO was $49.1 million, and a total of 96 persons had been convic