In 2002, the German Government (GOG) enacted a number of laws to improve authorities' ability to combat money laundering and terrorist financing. The 2002 measures brought German laws into line with the first and second European Union (EU) Money Laundering Directives, which mandate suspicious activity reporting by a variety of entities, including notaries, accountants, tax consultants, casinos, luxury item retailers, and attorneys.

Germany's Money Laundering Act, 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. It also increases due diligence and reporting requirements for banks and financial institutions and requires financial institutions to obtain customer identification for transactions conducted in cash or precious metals exceeding 15,000 euros (approximately $19,520). The legislation mandates more comprehensive background checks for owners of financial institutions and tighter rules for credit card companies. Banks must report suspected money laundering to the FIU located within the Federal Office of Criminal Investigation (Bundeskriminalamt or BKA), as well as to the State Attorney (Staatsanwaltschaft).

The GOG has directed the Interior Ministry to draft new legislation to implement the third EU Money Laundering Directive by December 2007. In addition to requiring that EU member states implement the Financial Action Task Force's (FATF) Forty Recommendations, the directive contains further provisions on customer due diligence and other internal risk-management measures to prevent money laundering. The directive calls for improved integrity and transparency to help prevent financial crime and improve information exchange between the public and private sectors. The EU requirement also expands reporting requirements to encompass transactions which support the financing of terrorism or would do so if actually effected.

In May 2002, the German banking, securities, and insurance industry regulators merged into a single financial sector regulator known as the Federal Financial Supervisory Authority (BaFIN). Germany's anti-money laundering (AML) legislation requires that BaFIN compile a centralized register of all bank accounts in Germany, including 300 million deposit accounts. As a result, in 2003 BaFIN established a central database with electronic access to all key account data held by banks in Germany. Banks cooperate with authorities and use computer-aided systems to analyze customers and their financial dealings to identify suspicious activity. Many of Germany's banks have independently developed risk assessment software to screen potential and existing clients and to monitor transactions for suspicious activity.

In 2002, Germany established a single, centralized, federal FIU within the BKA. Staffed with financial market supervision, customs, and legal experts, the FIU is responsible for developing a central database to use when analyzing cases and responding to reports of suspicious transactions. Another unit under the BKA, the Federal Financial Crimes Investigation Task Force, houses twenty BKA officers and customs agents.

In 2005, obligated entities submitted more than 8,000 STRs to the FIU. Approximately forty-five percent of the persons cited in German STRs are non-German nationals. Eighty-five percent of the reports resulted in investigative action. As with other crimes, actual enforcement under the German federal system is carried out at the state (sub-federal) level. Each state has a joint customs/police/financial investigations unit (GFG), which works closely with the federal FIU. In 2004, that the most recent year for which data is available, there were 109 money laundering convictions. The State Attorney can order a freeze of accounts when warranted.

As an EU member, Germany complies with a recent EU regulation requiring accurate originator information on funds transfers-but only for transfers into or out of the EU, not within the EU. FATF Special Recommendation Seven on Terrorist Financing, which governs wire transfers, however, requires such information on all cross-border transfers, including transfers between EU members.

Germany moved quickly after September 11, 2001, to identify and correct the weaknesses in its laws that had permitted terrorists to live and study in Germany. The first reform package closed loopholes that had permitted members of foreign terrorist organizations to engage in fundraising in Germany (e.g., through charitable organizations) that extremists had exploited to advocate violence. Subsequently, Germany increased its law enforcement efforts to prevent misuse of charitable entities. Germany has used its Law on Associations (Vereinsgesetz) to take administrative action to ban extremist associations that "threaten the democratic constitutional order."

The second reform package, which went into effect January 1, 2002, enhances the capabilities of federal law enforcement agencies and improves the ability of intelligence and law enforcement authorities to coordinate efforts and to share information on suspected terrorists. The law also provides Germany's internal intelligence service with access to information from banks and financial institutions, postal service providers, airlines, and telecommunication and internet service providers. Another proposed counterterrorism reform, will further streamline and simplify security agencies' access to German financial, travel, and telephone records. In 2002, the GOG also added terrorism and terrorist financing to its list predicate offenses for money laundering, as defined by Section 261 of the Federal Criminal Code. A 2002 amendment of the Criminal Code allows prosecution of members of terrorist organizations based outside Germany

An immigration law, effective January 2005, contains provisions designed to facilitate the deportation of foreigners who support terrorist organizations.

A November 2003 amendment to the Banking Act created a broad legal basis for BaFIN to order freezes of assets of suspected terrorists who are EU residents, although authorities concentrate on financial assets. While BaFIN's system allows for immediate identification of financial assets for potential freezes and German law enforcement authorities can freeze accounts for up to nine months, money cannot be seized until authorities prove in court that the funds were derived from criminal activity or intended for terrorist activity. Sanctions imposed by the United Nations Security Council (UNSC) are exempted from the rule.

Germany participates in United Nations and EU processes to monitor and freeze the assets of terrorists. The names of suspected terrorists and terrorist organizations listed on the UNSCR 1267 Sanctions Committee's consolidated list and those designated by EU or German authorities are regularly disseminated to German financial institutions. In 2005, authorities found and froze less than 20,000 euros (approximately $26,000) in connection with names appearing on the 1267 consolidated list. A court can order the freezing of nonfinancial assets, but Germany typically does not do so, even when the action is pursuant to EU or UNSCR 1267 listings. Germany and several other EU member states have taken the view that the EU Council Common Position requires, at a minimum, a criminal investigation to establish a sufficient legal basis for freezes under the EU Clearinghouse process.

Proceeds from asset seizures and forfeitures are paid into the federal government treasury. German authorities cooperate with U.S. authorities to trace and seize assets to the full extent allowed under German laws. German law does not allow for sharing forfeited assets with other countries.

Since 1998, the GOG has licensed and supervised money transmitters, shut down thousands of unlicensed money remitters, and issued anti-money laundering guidelines to the industry. A 1998 German law requires individuals to declare when they are entering, departing, or transiting the country with over 15,000 euros (approximately $19,400). A new European Union (EU) law, applicable to all EU members, is expected to take effect in June 2007 and will lower this amount to 10,000 euros (approximately $13,000)

Germany considers the activities of alternative remittance systems such as hawala to be banking activities. Accordingly, German authorities require bank licenses for money transfer services, thus allowing authorities to prosecute unlicensed operations and maintain close surveillance over authorized transfer agents. BaFIN has investigated more than 2,500 cases of unauthorized financial services since 2003. It closed down more than 200 informal financial networks in 2005. There are currently 52 legally licensed money transfer services in Germany.

Germany exchanges law enforcement information with the United States through bilateral law enforcement agreements and informal mechanisms. United States and German authorities have conducted joint investigations. German law enforcement authorities cooperate closely at the EU level, such as through Europol. Germany has Mutual Legal Assistance Treaties (MLATs) with numerous countries. The MLAT with the United States was signed in October 2003. On July 27, 2006, the U.S. Senate ratified the MLAT; once the German parliament ratifies it, the two sides will exchange letters to bring the MLAT into force. In addition, the U.S.-EU Agreements on Mutual Legal Assistance and Extradition are expected to further improve U.S.-German legal cooperation.

Germany is a member of the FATF, the EU and the Council of Europe. Its FIU is a member of the Egmont Group. Germany is party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime. Germany has signed, but not yet ratified, the UN Convention against Corruption.

The Government of Germany's anti-money laundering laws and its ratification of international instruments underline Germany's continued efforts to combat money laundering and terrorist finance. Germany should amend its wire transfer legislation to ensure that origination information applies to all cross-border transfers, including those within the EU. It should also amend legislation to waive the asset freezing restrictions in the EU Clearinghouse for financial crime and terrorism financing, so that the freezing process does not require a criminal investigation. German legislation should be amended to allow asset sharing with other countries. Germany should ratify the UN Convention against Corruption.

Gibraltar

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

The Drug Offenses Ordinance (DOO) of 1995 and Criminal Justice Ordinance to Combat Money Laundering criminalize money laundering related to all crimes. These ordinances also mandate suspicious transaction reporting for the financial sector and for designated nonfinancial businesses, which include 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. Obliged entities must submit suspicious transactions reports (STRs) to Gibraltar's financial intelligence unit (FIU).

The Financial Services Commission (FSC) regulates and supervises Gibraltar's financial services industry. Because of statutory requirements, the FSC must match the supervisory standards set by the UK. The FSC issues comprehensive AML Guidance Notes, which have the force of law, to clarify the obligations of Gibraltar's financial service providers. Financial institutions must retain records for at least five years from the date of the most recent transaction. If the obligated institution has submitted an STR to the FIU, or when a client or transaction is under investigation, it must maintain any relevant record even if the five year mandate has expired. Offshore banks are subject to the same legal and supervisory requirements as onshore.

The FSC also licenses and regulates the activities of trust and company management services, insurance companies, and collective investment schemes. The Government of Gibraltar (GOG) permits internet gaming, and maintains a licensing regime for that sector. Gibraltar has circulated guidelines for correspondent banking, politically exposed persons, bearer securities, and "know your customer" (KYC) procedures.

The 2001 "Terrorism (United Nations Measures) (Overseas Territories) Order" criminalizes terrorism financing. Under this Order, if a financial institution suspects or knows that a customer is a terrorist or is linked to terrorism, including terrorist financing, the institution must report that customer.

In 1996, Gibraltar established the Gibraltar Coordinating Center for Criminal Intelligence and Drugs (GCID) as a sub-unit of the Gibraltar Criminal Intelligence Department. The GCID serves as Gibraltar's FIU. As such, it serves as the central point for receiving both financial and terrorism-related disclosures and receives, analyzes, and disseminates STR information filed by obliged institutions, The GCID is staffed mainly with police and customs officers, but is independent of any law enforcement agency. The FIU received 108 STRs in 2005, and 118 in 2006. There is a confiscation regime in place, but in order to confiscate assets in a money laundering case, the law enforcement agency investigating the case must be able to link the funds passing through the financial system with the original illicit funds. If this link cannot be substantiated, the funds cannot be confiscated.

The United Kingdom has not extended the Mutual Legal Assistance Treaty between itself and the United States to Gibraltar. However, 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.

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 to update mutual legal assistance arrangements with the EU and Council of Europe partners. The GOG has implemented the 1988 UN Drug Convention pursuant to its Schengen obligations, but the UK has not extended the Convention to Gibraltar. Gibraltar is a member of the Offshore Group of Banking Supervisors (OGBS), and, in 2004, the GCID became a member of the Egmont Group.

The Government of Gibraltar should continue its efforts to implement a comprehensive anti-money laundering regime capable of thwarting terrorist financing. Gibraltar should put in place reporting requirements for cross-border currency movements. The GOG should pass legislation implementing the Financial Action Task Force's Nine Special Recommendations on Terrorist Financing. Gibraltar should also institute a regulatory scheme for its internet gaming sector in addition to its licensing regime. The GOG should work to implement the standards in the UN Convention against Corruption, the UN Convention against Transnational Organized Crime, and the UN Convention for the Suppression of the Financing of Terrorism.

Greece

While not a major financial center, Greece is fast becoming a regional financial center in the rapidly developing Balkans. Money laundering in Greece, due to the extensive use of currency in Greek society, is inherently difficult to detect. U.S. law enforcement agencies believe that criminally derived funds are typically not laundered through the banking system; rather they are most commonly invested in real estate, the lottery and a growing stock market. U.S. law enforcement agencies also believe Greece's location has led to a moderate increase in cross-border movements of illicit currency and monetary instruments due to the increasing interconnection of various financial services companies operating in Southeastern Europe and the Balkans. Reportedly, currency transactions involving international narcotics trafficking proceeds are not thought to include significant amounts of U.S. currency.

Greek authorities maintain that Greece is not an offshore financial center, and that there are no offshore financial institutions or international business companies (IBCs) per se operating within the country. However, Greek law (89/1967) provides for the establishment of companies which may be based in Greece but operate solely abroad. These firms are effectively excluded from supervision by Greece's tax authorities as they do not file taxes in Greece. "Law 89" companies, as they are known, mainly operate or claim to operate in the shipping industry and are known for their complex corporate and ownership structures. These firms fall under the authority of non-Greek jurisdictions and often operate through a large number of intermediaries. They could serve as a catalyst for money laundering. Although Greek law allows banking authorities to check these companies' transactions, such audits must be executed in conjunction with other Greek jurisdictions to be effective.

Greek law does not provide for nominee directors or trustees in Greek companies. Bearer shares have been abolished for banks and for a limited number of other companies, but most companies may issue bearer shares. Greece has three free trade zones, located at the ports of Piraeus, Thessalonica, and Heraklion, where foreign goods may be brought in without payment of customs duties or other taxes if they are subsequently transshipped or re-exported. Reportedly there is no indication that these zones are being used in trade-based money laundering or in the financing of terrorism.

The GOG criminalized money laundering derived from all crimes with the 1995 Law 2331/1995, entitled "Prevention of and Combating the Legalization of Income Derived from Criminal Activities." That law 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) with Greece's financial intelligence unit (FIU). Legislation passed in March 2001 targets organized crime by making money laundering a criminal offense when the property holdings laundered are obtained through criminal activity or cooperation in criminal activity.

In November 2005, the GOG enacted Law 3424/2005, which extends the list of predicate offenses for money laundering to include terrorist financing, trafficking in persons, electronic fraud, and stock market manipulation. It also extends the STR reporting requirements to obligate additional sectors such as auction dealers and accountants. It furthermore broadens the powers of the supervisory authorities and clarifies previous legislation by ending a conflict between confidentiality rules and anti-money laundering regulations imposed on banks and other financial institutions. The law also provides supervisory authorities with greater authority to block transactions where money laundering is suspected and authorizes the FIU director to issue a temporary freeze of assets without the issuance of a court order. Through its Act 2577 9/2006, the Bank of Greece has applied the main provisions of the Third European Union (EU) Directive to all financial institutions. The GOG anticipates that the Directive will be formally transposed into national law in early 2008.

In 2003, Greece enacted legislation (Law 3148) that incorporates EU provisions in directives dealing with the operation of credit institutions and the operation and supervision of electronic money transfers. Under this legislation, the Bank of Greece has direct scrutiny and control over transactions by credit institutions and entities involved in providing services for fund transfers. The Bank of Greece issues 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, through its Capital Market Commission; and the Ministry of Development, through its Directorate of Insurance Companies, supervise and monitor credit and financial institutions. Supervision includes the issuance of guidelines and circulars, as well as on-site audits that incorporate a component assessing 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 must send the Bank of Greece a monthly report on their daily purchases and sales of foreign currency and audits of such companies are also periodically carried out, albeit infrequently. However, implementation of regulatory requirements documenting the flow of large sums of cash through financial and other institutions is reportedly weak.

Under Decree 2181/93, banks in Greece must demand customer identification information when opening an account or conducting transactions that exceed 15,000 euros (approx. $19,400). If there is suspicion of illegal activities, banks may take measures to gather more information on the identification of the person involved in the transaction. If any question remains, officers must file an STR with the Bank's compliance officer, irrespective of the amount involved. Greek citizens must also provide a tax registration number if they conduct foreign currency exchanges of 1,000 euros (approx. $1300) or more. The law requires that banks and financial institutions 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.

Every financial institution is required by law to appoint a compliance officer to whom all other branches or other officers must report any suspicious transactions. 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 must furnish all relevant information to the prosecuting authorities. Safe harbor provisions in Greek law protect individuals reporting violations of anti-money laundering laws and statutes.

Greece has adopted banker negligence laws under which individual bankers may be held liable if their institutions launder money. Banks and credit institutions may be 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. In September 2006, the Bank of Greece announced that for the first three-quarters of 2006, it had imposed fines in excess of ten million euros against a number of unidentified institutions for violating anti-money laundering laws and regulations. However, most of the fines reportedly require the offending institution to give the Central Bank a sum of money that the Central Bank holds in a separate, interest free account. After a designated period of time, the Central Bank returns the money to the offending institution. The Bank has imposed fines and administrative sanctions, including prohibiting the opening of new branches, in previous years.

Although authorities have recently targeted the gaming industry to restrain money launderers from using Greece's nine casinos to launder illicit funds, reportedly there is no oversight committee. Casinos are not obligated to report suspicious transactions.

Law 2331/1995 established the Competent Committee (CC), which functions as Greece's FIU. The FIU has been empowered with substantial authority. The CC is chaired by a senior retired judge and includes eleven senior representatives from the Bank of Greece, various government ministries and law enforcement agencies, the Hellenic Bankers Association, and the securities commission. The CC is responsible for receiving and processing all STRs. The STRs are hand delivered to the FIU, where, upon receipt, the committee (which is comprised of senior officials, and not full-time analysts) reviews the STRs to determine whether further investigation is necessary. If the committee requests more information from the reporting institution, the FIU will mail those questions to the institution. Once it receives a reply, the committee reviews the file again to see if the report warrants further investigation.

When the CC considers an STR to warrant further investigation, it forwards the case to the Special Control Directorate (YPEE), a multi-agency group that, in addition to initiating its own investigations, currently functions as the CC's investigative arm. When fully staffed, the Greek FIU will carry out its own investigations without resorting to help by third agencies. The YPEE, which only has investigative authority over cases which, broadly defined, involve smuggling and high-worth tax evasion, is under the direct supervision of the Ministry of Economy and Finance. The YPEE has its own in-house prosecutor in order to facilitate confidentiality and speed of action. The FIU is responsible for preparing Money laundering cases on behalf of the Public Prosecutor's Office. The FIU is not operating at its envisaged capability because it lacks the parliamentary-approved level of full time staff, has no updated electronic database and inadequate technical capabilities for processing an ever-increasing number of STRs, which, based on unconfirmed numbers, have exceeded 1500 through late 2006.

Law 3424 passed in November 2005 upgraded the CC to an independent authority with access to public and private files, and without tax confidentiality restrictions. The law also broadens the FIU's authority with respect to the evaluation of information it receives from various organizations within Greece as well as from international organizations. However, the FIU requires a memorandum of understanding (MOU) before exchanging information with its international partners. The head of the FIU can temporarily freeze suspects' funds. The committee has the authority to impose heavy penalties on those who fail to report suspicious transactions. Reportedly, the staff limitations at the FIU have contributed to its difficulty in maintaining an effective two-way communication with Greece's broader financial community, as well as with its international counterparts.

Money laundering cases have seldom been prosecuted independently of another crime. Greek authorities do not have an effective information technology system in place to track money laundering prosecution statistics. There have been several prosecutions for money laundering in the past year. A senior judge was sentenced to 86 years in prison on charges of money laundering and receiving bribes. Additionally, the Ministry of Justice has either fired or suspended fourteen judges accused of being involved in bribery and money laundering cases. Recently, a high profile case involving over $125 million in laundered funds made headlines. It involved ten individuals and five companies spread over four countries. A court decision is still pending in the case.

If the FIU director freezes any assets, the FIU must prepare a report and forward it to an investigating magistrate and prosecutor, who conducts a further investigation and who, upon conclusion of the investigation, can issue a freezing order, pending the outcome of the criminal case. With regard to the freezing of accounts and assets, Law 3424/2005 incorporates elements of the EU Framework Decision on the freezing of funds and other financial assets, as well as the EU Council Regulation on the financing of terrorism. The GOG promulgated implementing regulations for Law 3424/2005 in June, 2006. The YPEE has established a mechanism for identifying, tracing, freezing, seizing, and forfeiting assets of narcotics-related and other serious crimes, the proceeds of which are turned over to the GOG. It is unclear what the GOG can seize once it obtains a conviction against a defendant, and whether the GOG can seize not only property as the proceeds of crime, but also property intended for use in a crime. Legitimate businesses can be seized if used to launder drug money. The GOG has not enacted laws for sharing seized narcotics-related assets with other governments.

In March 2001, the Ministry of Justice unveiled legislation on combating terrorism, organized crime, money laundering, and corruption. Parliament passed the legislation in July 2002. Under a recent counterterrorism law (Law 3251/July 2004), anyone who finances the joining or forming of a terrorist group faces imprisonment of up to ten years. If a private legal entity is implicated in terrorist financing, it faces fines of between 20,000 and 3 million euros (approximately $26,000 and $3,885,000), closure for a period of two months to two years, and ineligibility for state subsidies. Technically, it is not illegal in Greece to fund an already established terrorist group. It is only considered a terrorist financing crime if a person funds a specific attack executed by three or more people. The GOG plans to address the Financial Action Task Force's (FATF) Special Recommendation IX on cash couriers at a later date, following the issuance of a relevant EU directive.

The Bank of Greece has circulated to all financial institutions the list of individuals and entities that have been included on the UNSCR 1267 Sanctions Committee's consolidated list as being linked to Usama Bin Laden, the Al-Qaida organization, or the Taliban, as well as the EU's list of designees. However, in most instances, there must be an active investigation before the GOG can freeze any assets. The GOG has not found any accounts belonging to anyone on the circulated lists.

The Bank of Greece maintains that alternative remittance systems do not exist in Greece and has no plans to introduce initiatives for their regulation. Illegal immigrants or individuals without valid residence permits reportedly send remittances to Albania and other destinations in the form of currency, gold and precious metals, which are often smuggled across the border in trucks and buses. The financial and economic crimes police, as well as tax authorities, closely monitor charitable and nongovernmental organizations. There is no reported evidence that such organizations are used as conduits for the financing of terrorism.

Greece is a member of the FATF, the EU, 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, but has not yet ratified the law to enact the convention. On April 16, 2004, Greece became a party to the UN International Convention for the Suppression of the Financing of Terrorism. Greece has signed bilateral police cooperation agreements with twenty countries, including the United States. It also has a trilateral police cooperation agreement with Bulgaria and Romania, and a bilateral agreement with Ukraine to combat terrorism, drug trafficking, organized crime, and other criminal activities.

Greece exchanges information on money laundering through its Mutual Legal 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 the U.S. Drug Enforcement Administration and YPEE has been extensive.

The Government of Greece has made progress in expanding and adjusting its legislation to international standards by gradually incorporating all EU directives on money laundering and terrorist financing. However, these actions do not comprehensively address all of the FATF Forty plus Nine Recommendations. In order to meet its stated goal of effectively addressing money laundering, the Greek Government should:

 • Accelerate its efforts to realize the promise of new laws and regulations aimed at upgrading its financial intelligence unit. This includes staffing it fully with experienced analysts. The FIU should also improve its information technology (IT) capabilities so that analysts can develop an comprehensive database as well as use the Egmont Group's secure communications system. These IT upgrades will have the advantage of allowing Greek authorities to implement a system to track statistics on money laundering prosecutions and convictions, as well as asset freezes and forfeitures;

 • Improve its asset freezing capabilities and should develop a clear and effective system for identifying and freezing terrorist assets within its jurisdiction. Furthermore, the GOG must also make public its system for releasing any assets it may accidentally freeze in accordance with its UN obligations;

 • Take steps to require suspicious transaction reporting for its casinos and for the gaming sector, and institute a supervisory body to monitor its compliance;

 • Ensure uniform enforcement of its cross-border currency reporting requirements and take steps to deter the smuggling of currency and precious metals across its borders. The GOG should take steps to codify and implement legislation addressing FATF Special Recommendation IX relating to cash couriers, and not wait for an EU Directive;

 • Ensure that its "Law 89" companies, and companies operating within its free trade zones, are subject to the same AML requirements and gatekeeper and due diligence provisions, including know your customer (KYC) rules and the identification of the beneficial owner, as its other sectors;

 • Abolish company-issued bearer shares, so that all bearer shares are legally prohibited;

 • Ratify the UN Convention against Transnational Organized Crime.

Grenada

Grenada is not an important regional financial center. Most of the money laundering found in Grenada involves smuggling and narcotics. Proceeds of narcotics trafficking may be laundered through a wide variety of businesses, as well as through the purchase of land, boats, jewelry, cars, and houses and other real estate. Grenada's offshore financial sector is also vulnerable to money laundering.

After being placed on the Financial Action Task Force's (FATF) list of noncooperative countries and territories (NCCT) in the fight against money laundering in September 2001, the Government of Grenada (GOG) implemented and strengthened its legislation and regulations necessary for adequate supervision of Grenada's offshore sector, which prompted the FATF to remove Grenada's name from the NCCT list in February 2003.

As of December 2006, Grenada had one inactive offshore bank, one trust company, one management company, and one international insurance company. Grenada is reported to have over 20 internet gaming sites. There are also nearly 6000 international business companies (IBCs). The domestic financial sector includes six commercial banks, 26 registered domestic insurance companies, two credit unions, and four or five money remitters. The GOG has repealed its economic citizenship legislation.

The Grenada International Financial Services Authority (GIFSA) monitors and regulates offshore financial services. GIFSA is governed by seven directors, appointed by the Minister of Finance, who are qualified or experienced in accounting, banking, commerce, insurance, management or law. GIFSA issues certificates of incorporation for IBCs, and makes recommendations to the Minister of Finance in regard to the revocation of offshore licenses. Bearer shares are not permitted for offshore banks. Currently Grenada's only offshore bank is inactive. However, holders of bearer shares in nonfinancial institutions or IBCs are permitted to issue bearer shares but must lodge these shares with one of the 15 or so registered agents licensed by the GIFSA. Registered agents are required by law to verify the identity of the beneficial owners of all shares. In addition, the International Companies Act requires registered agents to maintain records of the names and addresses of directors and beneficial owners of all shares. There is an ECD 30,000 (approximately $11,500) penalty and possible revocation of the registered agent's license for failure to maintain records. The GIFSA has the ability to conduct on-site inspections; the authority to access the records and information maintained by registered agents; and the authority to obtain customer account records from an offshore institution upon request. The GIFSA is able to share this information with regulatory, supervisory and administrative agencies. The GIFSA also has access to auditors' examination reports and may also share this information with relevant authorities.

To strengthen the supervision of the nonbank financial sector, which includes the insurance sector, cooperatives, offshore financial services, and money remitters, the GOG enacted the Grenada Authority for the Regulation of Financial Institutions (GARFIN) Act in May 2006. The Act provides for the creation of a single regulatory agency responsible for regulating and supervising all nonbank financial institutions and services in Grenada. The Eastern Caribbean Central Bank has responsibility for the supervision of domestic banks, and will continue to do so. It is anticipated that GARFIN will be operational by spring 2007.

The Money Laundering Prevention Act (MLPA) enacted in 1999 and the Proceeds of Crime Act (POCA) No. 3 of 2003 criminalize money laundering in Grenada. Under the MLPA, the laundering of the proceeds of narcotics trafficking and all serious crimes is an offense. Under the POCA 2003, the predicate offenses for money laundering extend to all criminal conduct, which includes illicit drug trafficking, trafficking of firearms, kidnapping, extortion, corruption, terrorism and its financing, and fraud. According to the POCA 2003, a conviction on a predicate offense is not required in order to prove that certain goods are the proceeds of crime, and subsequently convict a person for laundering those proceeds. Grenada's anti-money laundering legislation applies to banks and nonbank financial institutions, as well as the offshore sector.

Established under the MLPA, the Supervisory Authority supervises the compliance of banks and nonbank financial institutions (including money remitters, stock exchange, insurance, casinos, precious gem dealers, real estate, lawyers, notaries, and accountants) with money laundering and terrorist financing laws and regulations. These institutions are required to know, record and report the identity of customers engaging in significant transactions. This applies to large currency transactions over the threshold of $3,700. Records must be maintained for seven years. In addition, a reporting entity must pay attention to all complex, unusual or large business transactions, or unusual patterns of transactions, whether completed or not. Once a transaction is determined to be suspicious or possibly indicative of money laundering, the reporting entity must forward a suspicious transaction report (STR) to the Supervisory Authority within 14 days.

The Supervisory Authority issued Anti-Money Laundering Guidelines in 2001. The guidelines direct financial institutions to maintain records, train staff, identify suspicious transactions, and designate reporting officers. The guidelines also provide examples to help institutions 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 counterparts and provide them with information. Financial institutions could be fined for not granting access to Supervisory Authority personnel.

In June 2001, the GOG established a Financial Intelligence Unit (FIU), headed by a prosecutor from the Attorney General's office. The FIU's staff includes an assistant superintendent of police, four police officers, and two support personnel. In 2003, Grenada enacted the Financial Intelligence Unit Act No. 1 of 2003. Though the FIU operates within the police force, it is technically assigned to the Supervisory Authority. The FIU is charged with receiving and analyzing suspicious transaction reports (STRs) from the Supervisory Authority, and with investigating alleged money laundering offenses. From January to November 2006, the FIU received 17 STRs. An investigation of one STR resulted in an arrest, which was a joint FIU-Drug Squad operation. The operation netted a quantity of a controlled substance and $3,700. The case is currently pending in court. The FIU has the ability to directly consult bank accounts and can request any documents from institutions that it considers necessary to fulfill its functions. In addition, the FIU also has access to other government agencies' databases. The FIU has the authority to exchange information with its foreign counterparts without a memorandum of understanding (MOU).

The FIU and the Director of Public Prosecution's Office are responsible for tracing, seizing and freezing assets. The time period for restraint of property is determined by the High Court. Presently, only criminal forfeiture is allowed by law. Approximately $42,132 of criminal-related assets was seized by November 2006. The management and disposition of seized and forfeited assets are in the charge of the Minister of Finance. The POCA provides for the establishment of a confiscated assets fund; the Minister of Finance is also responsible for the management of this fund. There is no independent system for freezing terrorist assets; it falls under the general authority of the Director of Public Prosecution. New legislation is currently under consideration, including the Civil Forfeiture Bill, Interception of Communication Act, Cash Forfeiture Act, and Confiscation of the Proceeds of Crime Bill. These bills are now being reviewed by the relevant ministries.

Grenada regulates the cross-border movement of currency. There is no threshold requirement for currency reporting. Law enforcement and Customs officers have the powers to seize and detain cash that is imported or exported from Grenada. Cash seizure reports are shared between government agencies, particularly between Customs and the FIU.

The GOG criminalized terrorism financing through the Terrorism Act No. 5 2003. The legislation provides the GOG with the authority to identify, freeze, and seize assets related to terrorism. The GOG circulates to the appropriate institutions the names of individuals and entities that have been included on the UN 1267 Sanctions Committee's consolidated list. There has been no known identified evidence of terrorist financing in Grenada. Grenada has not taken any specific initiatives focused on alternative remittance systems or the misuse of charitable and nonprofit entities. The GOG has not identified any indigenous alternative remittance systems, but suspects there are some in operation.

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 (TIEA) with the United States. Grenada has cooperated extensively with U.S. law enforcement in numerous money laundering and other financial crimes investigations, contributing to successful prosecutions. Grenada also works actively with other governments to ensure asset tracing, freezing and seizures take place, if and when necessary, regardless of the status of the agreements. In 2003, the GOG passed the Exchange of Information Act No. 2 to permit the ECCB to provide information to foreign regulators on Grenadian banks, both domestic and offshore.

Grenada is a member of the Caribbean Financial Action Task Force (CFATF). The FIU became a member of the Egmont Group in June 2004. Grenada is a member of the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. The GOG is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, and the UN Convention against Transnational Organized Crime. Grenada has not yet signed the UN Convention against Corruption. On May 8, 2006, Grenada ratified the Inter-American Convention against Terrorism.

Although the Government of Grenada has 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. Grenada should continue to update its Anti-Money Laundering Guidelines. The GOG should also move forward in adopting civil forfeiture legislation, and establish mechanisms to identify and regulate alternative remittance systems. Law enforcement and customs authorities should initiate money laundering investigations based on regional smuggling. Grenada should also continue to enhance its information sharing, particularly with other Caribbean jurisdictions. Grenada should also become a party to the UN Convention against Corruption.

Guatemala

Guatemala is a major transit country for illegal narcotics from Colombia and precursor chemicals from Europe. Those factors, combined with historically weak law enforcement and judicial regimes, 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 human trafficking, contraband, kidnapping, tax evasion, vehicle theft and corruption, is substantial. 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, large commercial projects and shell companies, or are otherwise transferred through the financial system.

Guatemala is not considered a regional financial center, but it is an offshore center. Exchange controls have largely disappeared and dollar accounts are common, but some larger banks conduct significant business through their offshore subsidiaries. The Guatemalan financial services industry is comprised of 25 commercial banks, four of which exist in a state of permanent suspension with no commercial offices; ten offshore banks, all of which are affiliated, as required by law, with a domestic financial group; five licensed money exchangers; 14 money remitters, including wire remitters and remittance-targeting courier services; 18 insurance companies; 17 financial societies; 16 bonded warehouses; 308 savings and loans cooperatives; eight credit card issuers; seven leasing entities; 11 financial guarantors; and one check-clearing entity run by the Central Bank. It is also estimated that there are hundreds of unlicensed money exchangers that exist informally.

The Superintendence of Banks (SIB), which operates under the general direction of the Monetary Board, has oversight and inspection authority over the Central Bank (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. Guatemala's relatively small free trade zones target regional maquila (assembly line industry) and logistic center operations, and are not considered by GOG officials to be a money laundering concern, although proceeds from tax-related contraband are probably laundered through them.

The offshore financial sector initially offered a way to circumvent currency controls and other costly financial regulations. However, financial sector liberalization has largely removed many incentives for legitimate businesses to conduct offshore operations. 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 SIB. The law requires offshore banks to be authorized by the Monetary Board and to maintain an affiliation with a domestic 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.

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. By law, no offshore financial services businesses other than banks are allowed, but there is evidence that they exist in spite of that prohibition. In 2004, the SIB and Guatemala's financial intelligence unit (FIU), the Intendencia de Verificación Especial (IVE), concluded a process of reviewing and licensing all offshore entities, a process which resulted in the closure of two operations. No offshore trusts have been authorized, and offshore casinos and internet gaming sites are not regulated.

There is continuing concern over the volume of money passing informally through Guatemala. Much of the more than $3.5 billion in remittance flows pass through informal channels, although sector reforms are leading to increasing use of banks and other formal means of transmission. Terrorist financing legislation passed in August 2005 requires remitters to maintain name and address information on senders (principally U. S. based) on transfers equal to or over an amount to be determined by implementing regulations. Increasing financial sector competition should continue to expand services and bring more people into the formal banking sector, isolating those who abuse informal channels.

The Financial Action Task Force (FATF) placed Guatemala on the list of Non-Cooperative Countries and Territories (NCCT) in the fight against money laundering in 2001. Guatemala was removed from the NCCT list at the FATF plenary in June 2004, after authorities implemented the necessary reforms to bring Guatemala into compliance with international standards.

One of the reforms is Decree 67-2001, or the "Law Against Money and Asset Laundering." 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. The law holds institutions and businesses responsible for failure to prevent money laundering or allowing money laundering to occur, regardless of the responsibility of owners, directors or other employees, and they may face cancellation of their banking licenses and/or criminal charges. The law also applies to the offshore entities that operate in Guatemala but are registered under the laws of another jurisdiction.

Decree 67-2001 also obligates individuals and legal entities to report to the competent authorities the cross-border movement of currency in excess of approximately $10,000. At Guatemala City airport, a new special unit was formed in 2003 to enforce the use of customs declarations upon entry to and exit from Guatemala. Money seized at the airports-approximately $167,400 in 2006-suggests that proceeds from illicit activity are regularly hand carried over Guatemalan borders. However, apart from a cursory check of a self-reporting customs form, there is little monitoring of compliance at the airport. Compliance is not regularly monitored at land borders.

In addition, the Guatemalan Monetary Board issued Resolution JM-191, approving the "Regulation to Prevent and Detect the Laundering of Assets" (RPDLA) submitted by the SIB. The RPDLA 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. The Guatemalan financial sector has largely complied with these requirements and has a generally cooperative relationship with the SIB.

Covered institutions are prohibited from maintaining anonymous accounts or accounts that appear under fictitious or inexact names. Nonbank financial institutions, however, may issue bearer shares, and there is limited 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 or the leasing of safety deposit boxes. Financial institutions must also keep records of the execution of cash transactions exceeding $10,000 or more per day, and report these transactions to Guatemala's FIU, the IVE. Under the law, obligated entities must maintain records of these registries and transactions for five years. Financial institutions are also required to report all suspicious transactions to the IVE.

Decree 67-2001 establishes the IVE within the Superintendence of Banks in order to supervise covered financial institutions and ensure their compliance with the law. The IVE began operations in 2002 and has a staff of 26. The IVE has the authority to obtain all information related to financial, commercial, or business transactions that may be connected to money laundering. The IVE conducts inspections on the covered entities' management, compliance officers, anti-money laundering training programs, "know-your-client" policies, and auditing programs. The IVE has imposed over $100,000 in civil penalties to date for institutional failure to comply with anti-money laundering regulation.

Since its inception, the IVE has received approximately 1,600 suspicious transaction reports (STRs) from the 400 obligated entities in Guatemala. All STRs are received electronically, and the IVE has developed a system of prioritizing them for analysis. After determining that an STR is highly suspicious, the IVE gathers further information from public records and databases, other covered entities and foreign FIUs, and assembles a case. Bank secrecy can be lifted for the investigation of money laundering crimes. Once the IVE has determined a case warrants further investigation, the case must receive the approval of the SIB before being sent to the Anti-Money or Other Assets Laundering Unit (AML Unit) within the Public Ministry. Under current regulations, the IVE cannot directly share the information it provides to the AML Unit with any other special prosecutors (principally the anticorruption or counternarcotics units) in the Public Ministry. The IVE also assists the Public Ministry by providing information upon request for other cases the prosecutors are investigating.

In 2006, Guatemala created a money laundering task force. The money laundering task force is a joint unit comprised of individuals from the Guatemalan Tax Authority (SAT), the IVE, Public Ministry, Prosecutor's Office, Government Ministry, National Police and Drug Police. Together they work on investigating financial crimes, building evidence and bringing the cases to prosecution. They are currently working on four cases of suspected money laundering.

Other government agencies have become involved in combating money laundering. In addition to the SIB, the SAT has been working to improve its processes and personnel to better collect taxes and combat tax evasion. This indirectly assists anti-money laundering efforts by making it easier to detect suspicious activity through nonpayment of tax.

Thirty-nine cases have been referred by the IVE to the AML Unit, four of which stem from public corruption. In several cases, assets have been frozen. Thirteen money laundering prosecutions have been concluded, twelve of which resulted in convictions. Eleven of those cases have been sentenced, with the remaining two cases awaiting the completion of appeals. Additional cases have been developed from cooperation between the Public Ministry and the IVE. The Public Ministry's AML Unit had initiated 46 cases as of January 2006. In addition, four cases have been transferred to other offices for investigation and prosecution (such as the anticorruption unit) due to the nature of their particular predicate offenses. The other 46 cases are either still under investigation or in initial trial stages. Several high profile cases of laundering proceeds from major corruption scandals involving officials of the previous government are currently under investigation and have resulted in arrests and substantial seizures of funds and assets. These seizures have been supported by the cooperating financial institutions along with the vast majority of public and political interests.

In 2006, Guatemala passed an organized crime control law. This new legislation permits the use of undercover operations, controlled deliveries and wire taps to investigate many forms of organized crime activity, including money laundering crimes.

Under current legislation, any assets linked to money laundering can be seized. 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. In 2003, the Guatemalan Congress approved reforms to enable seized money to be shared among several GOG agencies, including police and the IVE. Nevertheless, the Constitutional Court ruled that forfeited currency remains under the jurisdiction of the Supreme Court of Justice.

An additional problem is that the courts do not allow seized currency to benefit enforcement agencies while cases remain open. 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 2005, Guatemalan authorities seized more than U.S. $6.5 million in bulk currency, significantly less that the $20 million seized in 2003 (although one case alone in 2003 accounted for more than $14 million). The lack of access to the resources of seized assets outside of the judiciary has made sustaining seizure levels difficult for the resource-strapped enforcement agencies.

In June 2005, the Guatemalan Congress passed legislation criminalizing terrorist financing. Implementing regulations were submitted to the Monetary Board in December 2005. According to the GOG, Article 391 of the penal code already sanctioned all preparatory acts leading up to a crime, and financing would likely be considered a preparatory act. Technically, both judges and prosecutors could have issued a freeze order on terrorist assets, but no test case ever validated these procedures. The new counterterrorism financing legislation removed potential uncertainty regarding the legality of freezing assets when no predicate offense had been legally established but the assets have been determined destined to terrorists or to support terrorist acts. The GOG has been very cooperative in looking for terrorist financing funds. The new legislation brings Guatemala into greater compliance with FATF Special Recommendations on Terrorist Financing and the United Nations Security Council Resolution 1373 Against Terrorism.

Guatemala is a party to the UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, and the UN Convention against Transnational Organized Crime. On March 1, 2006, the GOG ratified the Inter-American Convention against Terrorism, and on November 3, 2006, the GOG ratified the UN Convention against Corruption. Guatemala is also a party to the Central American Convention for the Prevention of Money Laundering and Related Crimes. The GOG is a member of the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering and the Caribbean Financial Action Task Force (CFATF). In 2003, the IVE became a member of the Egmont Group.

Corruption and organized crime remain strong forces in Guatemala and may prove to be the biggest hurdles facing the Government of Guatemala in the long term. Guatemala has made efforts to comply with international standards and improve its anti-money laundering regime; however, Guatemala should take steps to immobilize bearer shares, and to identify and regulate offshore financial services and gaming establishments. The GOG should also continue efforts to improve enforcement and implementation of needed reforms. Cooperation between the IVE and the Public Ministry has improved since the new administration took office in January 2004, and several investigations have led to prosecutions. However, Guatemala should continue to focus its efforts on boosting its ability to successfully investigate and successfully prosecute money laundering cases, and distributing seized assets to law enforcement agencies to assist in the fight against money laundering and other financial crime.

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 dependents of the British Crown and 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 authority to legislate 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 approximately 17,800 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). Local residents own the remainder of the companies, including 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 on 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 51 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 626 international insurance companies and 684 collective investment funds. There are also 18 bureaux de change, which file accounts with the tax authorities. Ten of the bureaux de change are part of a licensed bank, and it is the bank that publishes and files those accounts. Bureaux de change and other money service providers are required to register information with the Commission.

Guernsey has put in place a comprehensive legal framework to counter money laundering and the financing of terrorism. The Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999, as amended, is supplemented by the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Regulations, 2002. The legislation criminalizes money laundering for all crimes except 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 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 beyond financial institutions to cover others as well, for example, bureaux de change and check cashers.

In addition, the Bailiwick authorities enacted the Prevention of Corruption (Bailiwick of Guernsey) Law of 2003. They have also 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, the Commission must license all fiduciaries, corporate service providers and persons acting as company directors on behalf of any business. 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. The AML/CFT Regulations contain penalties to be applied when financial services businesses do not follow the requirements of the Regulations. Company incorporation is by act of the Royal Court, which maintains the registry. All 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 has given prior approval. The Commission conducts regular on-site inspections and analyzes the accounts of all regulated institutions.

On July 1, 2005, the European Union Savings Tax Directive (ESD) came into force. The ESD is an agreement between the Member States of the European Union (EU) to automatically exchange information with other Member States about EU tax resident individuals who earn income in one EU Member State but reside in another. Although not part of the EU, the three UK Crown Dependencies (Guernsey, Jersey, and the Isle of Man), have voluntarily agreed to apply the same measures to those in the ESD and have elected to implement the withholding tax option (also known as the "retention tax option") within the Crown Dependencies.

Under the retention tax option, each financial services provider will automatically deduct tax from interest and other savings income paid to EU resident individuals. The tax will then be submitted to local and Member States tax authorities annually. The tax authorities receive a bulk payment but do not receive personal details of individual customers. If individuals elect the exchange of information option, then no tax is deducted from their interest payments but details of the customer's identity, residence, paying agent, level and time period of savings income received by the financial services provider will be reported to local tax authorities where the account is held and then forwarded to the country where the customer resides.

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 Financial Intelligence Service (FIS) meet to coordinate the anti-money laundering and counterterrorism policies and strategy in the Dependencies.

The FIS operates as the Bailiwick's financial intelligence unit (FIU). The FIS began operations in April 2001, and is currently staffed by Police and Customs/Excise Officers. The FIS is directed by the Service Authority, which is a small committee of senior Police and Customs Officers who co-ordinate with the Bailiwick's financial crime strategy and report to the Chief Officers of Police and Customs/Excise. The FIS is mandated to place specific focus and priority on money laundering and terrorism financing issues. Suspicious Transaction Reports (STRs) are filed with the FIS, which serves as the central point within the Bailiwick for the receipt, collation, analysis, and dissemination of all financial crime intelligence. In 2005, the FIS received 650 STRs. The FIS received 757 STRs in 2004 and 705 STRs in 2003.

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 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 FATF Recommendations.

There has been counterterrorism legislation covering the Bailiwick since 1974. The Terrorism and Crime (Bailiwick of Guernsey) Law, 2002, replicates equivalent UK legislation.

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, which is not yet in force. 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.

After its extension to the Bailiwick, Guernsey enacted the necessary legislation to implement the Council of Europe Convention on Mutual Assistance in Criminal Matters, the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime, and the 1988 UN Drug Convention. The 1988 U.S.-UK 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. The Bailiwick has requested that the UK Government seek the extension to the Bailiwick of the UN International Convention for the Suppression of the Financing of Terrorism.

The Attorney General's Office is represented in the European Judicial Network and has participated in the European Union's PHARE anti-money laundering developmental assistance 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 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 Banking Supervisors. The FIS is a member of the Egmont Group.

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 Guernsey's anti-money laundering program to assure its effectiveness, and to cooperate with international anti-money laundering authorities.

Guyana

Guyana is neither an important regional nor an offshore financial center, nor does it have any free trade zones. However, the scale of money laundering is thought to be large relative to the size of the economy, with some experts estimating that the informal economy is 40 to 60 percent of the size of the formal sector. Money laundering has been linked to trafficking in drugs, firearms and persons, as well as to corruption and fraud. Drug trafficking and money laundering appear to be benefiting the Guyanese economy, particularly the construction sector. Investigating and prosecuting money laundering cases is not a priority for law enforcement. The Government of Guyana (GOG) made no arrests or prosecutions for money laundering in 2006 due to a lack of adequate legislation and resources.

The Money Laundering Prevention Act of 2000 criminalizes money laundering related to narcotics trafficking, illicit trafficking of firearms, extortion, corruption, bribery, fraud, counterfeiting and forgery. The Act does not specifically cover the financing of terrorism or all serious crimes in its list of offenses. Licensed financial institutions-including banks, securities brokers, exchange houses, credit unions, building societies and trusts-are required to report suspicious transactions to Guyana's financial intelligence unit (FIU), although they are left to determine thresholds individually according to banking best practices. Financial institutions must keep records of suspicious transaction reports (STRs) for six years. The law also requires that the cross-border transportation of currency exceeding $10,000 be reported. The legislation includes provisions regarding confidentiality in the reporting process, good faith reporting, penalties for destroying records related to an investigation or disclosing investigations, and international cooperation. The Money Laundering Prevention Act establishes the Guyana Revenue Authority, the Customs Anti-Narcotics Unit, the Attorney General, the Director for Public Prosecutions and the FIU as the authorities responsible for investigating financial crime.

The GOG's anti-money laundering regime is ineffective, and the implementing regulations of the Money Laundering Prevention Act are inadequate. Guyana's central bank, the Bank of Guyana, lacks the capacity to fully execute its mandate to supervise financial institutions for compliance with anti-money laundering provisions. There have been no money laundering prosecutions to date, and it is unclear if a conviction for the predicate offense is necessary to obtain a money laundering conviction. The financial intelligence unit, established within the Ministry of Finance in 2003, is currently a one-person organization and is dependent upon the Ministry for its budget and office space. Although the FIU may request additional information from obligated entities, its analytical capabilities are severely limited by its inability to access to law enforcement data and its lack of authority to exchange information with foreign FIUs. The GOG does not release statistics on the number of suspicious transaction reports received by the FIU, although the requirement to make these statistics available to relevant authorities is mandated by the Financial Action Task Force (FATF).

In order to improve the GOG's anti-money laundering regime, the FIU has prepared drafts of legislation criminalizing the financing of terrorism and expanding the scope of the money laundering offense. The new legislation is also expected to provide for oversight of export industries, the insurance industry, real estate and alternative remittance systems. The draft money laundering act failed to make the legislative agenda before the dissolution of Parliament in May 2006.

In January 2007, the National Assembly passed the Gambling Prevention (Amendment) Bill, which legalizes casino gambling. The bill establishes a Gaming Authority authorized to issue casino licenses to new luxury hotel or resort complexes with a minimum of 150 rooms. Vocal opposition to the bill from religious groups, opposition parties, and the public included concerns that casino gambling would provide a front for money launderers.

The Money Laundering Prevention Act provides for seizure of assets derived as proceeds of crime, including money, investments, and real and personal property. However, guidelines for implementing seizures and forfeitures have not been finalized. Forfeiture and seizure mechanisms are conviction-based, and may be carried out by the Office of the Director of Public Prosecutions if a court order is obtained.

The Ministry of Foreign Affairs and the Bank of Guyana continue to assist U.S. efforts to combat terrorist financing by working towards compliance with relevant United Nations Security Council Resolutions (UNSCRs). In 2001 the Bank of Guyana, 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, and 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, as no terrorist assets have been identified in Guyana. The FIU director also disseminates the names of suspected terrorists and terrorist organizations listed on the UN 1267 Sanctions Committee's consolidated list to relevant financial institutions.

Guyana is a member of the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering and the Caribbean Financial Action Task Force (CFATF). Guyana underwent its second CFATF mutual evaluation in 2004, and the results of the evaluation were presented at the CFATF plenary in October 2006. The mutual evaluation team found the GOG to be noncompliant or materially noncompliant with approximately half of the FATF Recommendations.

Guyana is a party to the 1988 UN Drug Convention and the UN Convention against Transnational Organized Crime. Guyana has not signed the UN International Convention for the Suppression of the Financing of Terrorism or the UN Convention against Corruption. The GOG has signed, but not yet ratified, the Inter-American Convention against Terrorism. Guyana's FIU is one of the few in the region that is not a member of the Egmont Group.

The Government of Guyana should introduce the draft legislation on money laundering to Parliament early in the legislative session. The GOG should provide greater autonomy for the FIU by making it an independent unit with its own budget and office space, enable the FIU to access law enforcement data, and ensure that the FIU has the operational capacity to meet the membership requirements of the Egmont Group and other international standards. Guyana should also provide appropriate resources and awareness training to its regulatory, law enforcement and prosecutorial personnel, and establish procedures for asset seizure and forfeiture. Now that Guyana has legalized casino gambling, the GOG should ensure that the necessary anti-money laundering regulations are extended to the gaming sector. Guyana should criminalize terrorist financing and adopt measures that would allow it to block terrorist assets. In addition, Guyana should seize opportunities to sensitize the public to the harmful impact of money laundering on legitimate businesses and the national economy. The GOG should become a party to the UN International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Corruption.

Haiti

Haiti is not a major financial center. Given Haiti's dire economic condition and unstable political situation, it is doubtful that it will become a major player in the region's formal financial sector in the near future. Haiti is a major drug-transit country, and money laundering activity is linked to the drug trade. Money laundering and other financial crimes occur in the banking system and in casinos, foreign currency transactions and real estate transactions. While the informal economy in Haiti is significant and partly funded by illicit narcotics proceeds, smuggling is historically prevalent and predates narcotics trafficking. Flights to Panama City, Panama, remain the main identifiable mode of transportation for money couriers. Usually travelers, predominantly Haitian citizens, hide large sums, ranging from $30,000 to $100,000 on their persons. Haitian narcotics officers interdicting these outbound funds often collect a six to 12 percent fee and allow the couriers to continue without arrest. During interviews, couriers usually declare that they intend to use the large amounts of U.S. currency to purchase clothing and other items to be sold upon their return to Haiti, a common practice in the informal economic sector. 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, representing an estimated 30 percent of Haiti's gross domestic product.

In March 2004, an interim government was established in Haiti following former President Jean Bertrand Aristide's resignation and departure. The Interim Government of Haiti (IGOH) took initiatives to establish improvements in economic and monetary policies, as well as working to improve governance and transparency. In response to the corruption that continues to plague Haiti, the IGOH created an Anti-Corruption Unit and a commission to examine transactions conducted by the government from 2001 through February 2004. The commission published its report in July 2005. In early 2006 Presidential elections took place. Neither the IGOH nor the new government have prosecuted any cases based on the information provided in the report.

Despite political instability, Haiti has taken steps to address its money laundering and financial crimes problems. 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 legislation. All financial institutions and natural persons are subject to the money laundering controls of the AML Law. The AML Law criminalizes money laundering and applies to a wide range of financial institutions, including banks, money remitters, exchange houses, casinos, and real estate agents. Insurance companies are not covered; however, they are only nominally represented in Haiti. 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 $5,420). It also requires exchange brokers and money remitters to obtain declarations identifying the source of funds exceeding 200,000 gourdes or its equivalent in foreign currency. The nonfinancial sector, however, remains largely unregulated.

In 2002, Haiti formed a National Committee to Fight Money Laundering, the Comité 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. Created in 2003, the Unite Centrale de Renseignements Financiers (UCREF) is the financial intelligence unit (FIU) of Haiti. The UCREF is responsible for receiving and analyzing reports submitted in accordance with the law. The UCREF has approximately 42 employees, including 25 investigators. Institutions are required to report to the UCREF any transaction involving funds that appear to be derived from a crime, as well as those exceeding 200,000 gourdes. Failure to report such transactions is punishable by more than three years' imprisonment and a fine of 20 million gourdes (approximately $542,000). Banks are required to maintain records for at least five years and are required to present this information to judicial authorities and UCREF officials upon request. Bank secrecy or professional secrecy cannot be invoked as grounds for refusing information requests from these authorities.

The AML Law has provisions for the forfeiture and seizure of assets; however the government cannot declare the asset or business forfeited until there is a conviction. The inability to seize or freeze assets early in the judicial process reduces the government's authority and resources to pursue cases. The IGOH was supportive of a stronger, more proactive asset seizure law, yet its temporary governmental mandate did not allow for the passage of new laws. The IGOH set-up a Financial Crimes Task Force under the auspices of the Central Bank and the Ministries of Justice and Finance, charged with identifying and investigating major financial crimes and coordinating with the UCREF in recommending prosecutions. The recently elected Government of Haiti has not recognized the Task Force and the Task Force has become dormant.

In 2006, UCREF confiscated $801,000 and froze 157 million gourdes (approximately $4.3 million), in addition to $1.4 million related to money laundering offenses. It is unknown how many current investigations are active at this time. The director of UCREF was jailed for a short period of time by a magistrate on unknown charges. At the time of his incarceration over $1.4 million was unfrozen and released to the persons who claimed ownership.

In 2006 the UCREF assisted the U.S. in at least three major investigations. The UCREF also assisted the IGOH in filing the first-ever civil lawsuit in a U.S. court for reparation of Haitian government funds diverted through U.S. banks and businesses. However, the law suit was dropped shortly after the new government took office. Though the recent achievements of the UCREF are a marked improvement, it is still not fully functional or funded, and many of the UCREF's employees still lack experience and the ability to independently investigate cases, which translates into slow progress in moving cases into the judicial system.

Haiti still has not passed legislation specifically criminalizing the financing of terrorists and terrorism, nor has it signed the UN International Convention for the Suppression of the Financing of Terrorism. Reportedly, Haiti does circulate the UN 1267 list. 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. Currently, there is no indication of the financing of terrorism in Haiti.

Haiti is a party to the 1988 UN Drug Convention, and has signed, but not yet ratified, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption and the Inter-American Convention against Terrorism. Haiti is a member of the OAS/CICAD Experts Group to Control Money Laundering and the Caribbean Financial Action Task Force. The UCREF is not a member of the Egmont Group of financial intelligence units; however, it has three memoranda of understanding with the FIUs of the Dominican Republic, Panama and Honduras.

While improvements were made to Haiti's anti-money laundering regime under the IGOH, the new administration should implement and enforce the AML Law. The Government of Haiti should confront the rampant corruption present in almost all public institutions. The GOH should recognize the Financial Crimes Task Force and should strengthen the organizational structures and personal skills of employees both in the UCREF and the Financial Crimes Task Force. Steps should be taken so that the UCREF fully meets international standards and is eligible for membership in the Egmont Group. The GOH should enact legislation to criminalize the financing of terrorism and become a party to the UN International Convention for the Suppression of the Financing of Terrorism.

Honduras

Honduras is not an important regional or offshore financial center and is not considered to have a significant black market for smuggled goods, although there have been recent high-profile smuggling cases involving gasoline and other consumer goods. Money laundering, however, does take place, primarily through the banking sector but also through currency exchange houses and front companies. The vulnerabilities of Honduras to money laundering stem primarily from significant trafficking of narcotics, particularly cocaine, throughout the region. An estimated $2 billion in remittances and smuggling of contraband may also generate funds that are laundered through the banking system. Money laundering in Honduras derives both from domestic and foreign criminal activity, and the proceeds are controlled by local drug trafficking organizations and organized crime syndicates. Honduras is not experiencing an increase in financial crimes such as bank fraud. It is not a matter of government policy to encourage, facilitate or engage in laundering the proceeds from illegal drug transactions, terrorist financing or other serious crimes. However, corruption remains a serious problem, particularly within the judiciary and law enforcement sectors.

There is no indication Honduran free trade zone companies are being used in trade-based money laundering schemes or by financiers of terrorism. Under Honduran legislation, companies may register for "free trade zone" status, and benefit from the associated tax benefits, regardless of their location in the country. Companies that wish to receive free trade zone status must register within the Office of Productive Sectors within the Ministry of Industry and Commerce. The majority of companies with free trade zone status operate mostly in the textile and apparel industry.

Money laundering has been a criminal offense in Honduras since 1998, when the passage of Law No. 27-98 criminalized the laundering of narcotics-related proceeds and introduced various record keeping and reporting requirements for financial institutions. However, weaknesses in the law, including a narrow definition of money laundering, made it virtually impossible to successfully prosecute the crime.

In 2002, Honduras passed Decree No. 45-2002, which strengthened its legal framework and available investigative and prosecutorial tools to fight money laundering. Under the new legislation, the definition of money laundering was expanded to include the transfer of assets that proceed directly or indirectly from trafficking of drugs, arms, human organs or persons; auto theft; kidnapping; bank and other forms of financial fraud; and terrorism, as well as any sale or movement of assets that lacks economic justification. The penalty for money laundering is a prison sentence of 15-20 years. The law also requires all persons entering or leaving Honduras to declare-and, if asked, present-cash and convertible securities (títulos valores de convertibilidad inmediata) that they are carrying if the amount exceeds $10,000 or its equivalent.

Decree No. 45-2002 created the financial intelligence unit (FIU), the Unidad de Información Financiera (UIF), within the 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 the equivalent in local currency accounts, as well as all suspicious transactions. The law requires the UIF and reporting institutions to keep a registry of reported transactions for five years. Banks are required to know the identity of all their clients and depositors, regardless of the amount of a client's deposits, and to keep adequate records of the information. The law also includes banker negligence provisions that make individual bankers subject to two- to five-year prison terms if, by carelessness, negligence, inexperience or non-observance of the law, they permit money to be laundered through their institutions. Anti-money laundering requirements apply to all financial institutions that are regulated by the National Banking and Securities Commission, including state and private banks, savings and loan associations, bonded warehouses, stock markets, currency exchange houses, securities dealers, insurance companies, credit associations, and casinos.

Decree No. 45-2002 requires that a public prosecutor be assigned to the UIF. In practice, two prosecutors are assigned to the UIF, each on a part-time basis, with responsibility for specific cases divided among them depending upon 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.

Under the Criminal Procedure Code, officials responsible for filing reports on behalf of obligated entities are protected by law with respect to their cooperation with law enforcement authorities. However, some have alleged that their personal security is put at risk if the information they report leads to the prosecution of money launderers. This has not been an issue throughout 2006, however, as only cases originating from the police and prosecutors have been presented in court.

There had been some ambiguity in Honduran law concerning the responsibility of banks to report information to the supervisory authorities, and the duty of these institutions to keep customer information confidential. A new law passed in September 2004, the Financial Systems Law (Decree No. 129-2004), clarifies this ambiguity, explicitly stating that the provision of information requested by regulatory, judicial, or other legal authorities shall not be regarded as an improper divulgence of confidential information.

In December 2004, Decree No. 24-2004 created the Interagency Commission for the Prevention of Money Laundering and Financing of Terrorism (CIPLAFT). The group was tasked as the coordinating entity responsible for ensuring that all anti-money laundering and anti-financing of terrorism systems operate efficiently and consistently with all relevant laws, regulations, resolutions, and directives. However, the size of the group and overly political environment stifled effective discussions and marginalized any positive developments that came out of the meetings. In early 2006, the new head of the banking commission effectively terminated the CIPLAFT.

At roughly the same time as the termination of the CIPLAFT, a new agreement among the Public Ministry, the banking commission, and the UIF was drafted with the intent to more effectively prioritize money laundering cases and determine which cases to pursue. Previously, an average of 20 nonpriority cases were sent to prosecutors for review each month. This has been streamlined to a more manageable five cases, each of which has been determined to be promising for potential prosecution, and many older cases have been officially closed. The result is fewer active cases, allowing the overloaded prosecutors and under-funded police units to focus on the strongest and most important cases.

Prior to 2004, there had been no successful prosecutions of money laundering crimes in Honduras. In 2004, however, Honduran authorities arrested 16 persons for money laundering crimes, issued six additional outstanding arrest warrants, and secured five convictions. Through November of 2006, another six convictions have been obtained.

The Honduran Congress first enacted an asset seizure law in 1993. Decree No. 45-2002 strengthens the asset seizure provisions of the law, and established an Office of Seized Assets (OABI) under the Public Ministry. Decree 45-2002 authorizes the OABI to guard and administer all goods, products or instruments of a crime, and states that money seized or money raised from the auctioning of seized goods should be transferred to the public entities that participated in the investigation and prosecution of the crime. Under the Criminal Procedure Code, when goods or money are seized in any criminal investigation, a criminal charge must be submitted against the suspect within 60 days of the seizure; if one is not submitted, the suspect has the right to demand the release of the seized assets.

Decree No. 45-2002 is not entirely clear on the issue of whether a legitimate business can be seized if used to launder money derived from criminal activities. The chief prosecutor for organized crime maintains that the authorities do have this power, because once a "legitimate" business is used to launder criminal assets, it ceases to be "legitimate" and is subject to seizure proceedings. However, this authority is not explicitly granted in the law, and there has been no test case to date which would set an interpretation. There are currently no new laws being considered regarding seizure or forfeiture of assets of criminal activity.

As of December 2006, the total value of assets seized since the 2002 law came into effect is estimated at $5.7 million, including $4.6 million in tangible assets such as cars, houses and boats. To date in 2006, two new cases have added approximately $20,000 to the total assets seized. Most of these seized assets are alleged to have derived from crimes related to drug trafficking; none is suspected of being connected to terrorist activity. The law allows for both civil and criminal forfeiture, and there are no significant legal loopholes that allow criminals to shield their assets.

In addition to undergoing the financial audit verifying the bank accounts, OABI has moved to distribute funds to various law enforcement units and nongovernmental organizations (NGOs). The funds, which constituted the first systematic distribution under the new guidelines, went to the Supreme Court, federal prosecutors, OABI, and two civil society groups. Momentum is now gaining for OABI to more quickly liquidate all assets once confiscated, in an effort to avoid parking lots full of deteriorating assets or high protection and maintenance fees. With new management and guidelines in place, OABI is set to expand its role significantly when a witness protection law passes that will allow the unit to hold all seized assets, not just assets seized under the money laundering law.

The 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; however, under separate authority, the National Banking and Insurance Commission has issued freeze orders promptly for the organizations and individuals named by the United Nations 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. 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 has 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 $2 billion in 2006), 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. Most remittances are sent through wire transfer or bank services, with some cash probably being transported physically from the United States to Honduras. There is no significant indigenous alternative remittance system operating in Honduras, nor is there any evidence that charitable or nonprofit entities in Honduras have been used as conduits for the financing of terrorism.

Honduras cooperates with U.S. investigations and requests for information pursuant to the 1988 United Nations Drug Convention. No specific written agreement exists between the United States and Honduras to establish a mechanism for exchanging adequate records in connection with investigations and proceedings relating to narcotics, terrorism, terrorist financing, and other crime investigations. However, Honduras has cooperated, when requested, with appropriate law enforcement agencies of the U.S. Government and other governments investigating financial crimes. The UIF has signed memoranda of understanding to exchange information on money laundering investigations with Panama, El Salvador, Guatemala, Mexico, Peru, Colombia and the Dominican Republic.

Honduras is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, the UN International Convention for the Suppression of the Financing of Terrorism, the UN Convention against Corruption, and the Inter-American Convention against Terrorism. Honduras strives to comply with the Basel Committee's "Core Principles for Effective Banking Supervision," and the new Financial System Law, Decree No. 129-2004, is designed to improve compliance with these international standards. 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 member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Group of Experts to Control Money Laundering, and the Caribbean Financial Action Task Force (CFATF). In 2005, the UIF became a member of the Egmont Group.

Four years after passing a new law against money laundering, the Government of Honduras (GOH) continued to make considerable progress in implementing the law, establishing and training the entities responsible for the investigation of financial crimes, and improving cooperation among these entities. In 2006, the Government of Honduras continues its positive steps to implement Decree No. 45-2002. The number of good cases identified for investigation has helped focus the poorly funded prosecutors and police force, while the number of cases closed continues to climb. The asset seizure organization, OABI, continues to improve, and seized assets could soon become a significant funding source for the Public Ministry and police forces. The GOH should continue to support the developing law enforcement and regulatory entities responsible for combating money laundering and other financial crimes, and ensure that resources are available to strengthen its anti-money laundering regime. Sustained progress will depend upon increased commitment from the government to aggressively prosecute financial crimes. Honduras should draft and pass legislation specifically criminalizing the financing of terrorism to comport with international standards.

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 the absence of currency and exchange controls, facilitate financial activity but also make Hong Kong vulnerable to money laundering. The primary sources of laundered funds are tax evasion, fraud, illegal gambling and bookmaking, and intellectual property rights violations. Laundering channels include Hong Kong's banking system, and its legitimate and underground remittance and money transfer networks. The proceeds from narcotics trafficking are believed to be only a small percentage of illicit proceeds laundered. However, over the past two years, reportedly legitimate Hong Kong business entities and financial institutions have been playing an increasingly important role in the Black Market Peso Exchange (BMPE). The BMPE in Hong Kong is perpetuated by local Hong Kong business entities that either knowingly or unknowingly enter into business agreements with individuals directly associated with the BMPE process. The BMPE is a trade-based money laundering scheme used by Colombian drug cartels to launder illicit drug profits. 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 FATF Forty Recommendations. It is a regional leader in anti-money laundering efforts. Hong Kong has been a member of the FATF since 1990.

Money laundering is a criminal offense in Hong Kong under the Drug Trafficking (Recovery of Proceeds) Ordinance (DTRoP) and the 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 (approximately $641,000).

Money laundering ordinances apply to covered institutions 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 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 issued anti-money laundering guidelines reflecting the revised FATF Forty Recommendations on Money Laundering to institutions under their purview, and monitor compliance through on-site inspections and other means. The Hong Kong Monetary Authority is responsible for supervising and examining compliance of financial institutions that are authorized under Hong Kong's Banking Ordinance. The Hong Kong Securities and Futures Commission (SFC) is responsible for supervising and examining compliance of persons that are licensed by the SFC to conduct business in regulated activities as defined in Schedule 5 of the Securities and Futures Ordinance. The Office of the Commissioner of Insurance (OCI) is responsible for supervising and examining compliance of insurance institutions. 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. The filing of a suspicious transaction report cannot be considered 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 HK$20,000 (approximately $2,564), and must retain these records for at least six years. Under a directive from Hong Kong's Monetary Authority, Hong Kong would reduce this threshold amount to HK$8000 (approximately $1000) effective January 1, 2007.

Hong Kong does not require reporting of the movement of currency above any threshold level across its borders, or reporting of large currency transactions above any threshold level. Hong Kong is examining the effectiveness of its existing regime in interdicting illicit cross border cash couriering activities. Reportedly, Hong Kong is deliberating ways of complying with FATF Special Recommendation Nine but does not intend to put in place the recommended "declaration system." Law enforcement agents in Hong Kong are already empowered to seize criminal proceeds at any place, including at the border.

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 Office of Commissioner of Insurance (OCI) and the Securities and Futures Commission (SFC) 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 registered 7,279 new international business companies (IBCs) in 2005. Many of the more than 500,000 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. In such cases, the HKMA's anti-money laundering guidelines require banks to verify the identity of the owners of the company, including beneficial owners. The bank should also assess whether the intermediary is "fit and proper." However, solicitors and accountants have filed a low number of suspicious transaction reports in recent years, and consequently have become a focus of attention to improve reporting through regulatory requirements and oversight.

The open nature of Hong Kong's financial system has long made it the primary conduit for fun