According to United Nations (UN) statistics, in 2005 and 2006, opium production increased and today Afghanistan accounts for over 90 percent of the world’s opium production. Opium gum is sometimes used as a currency—especially by rural farmers—and it is used as a store of value in prime production areas. It is estimated that at least one third of Afghanistan’s (licit plus illicit) gross domestic product (GDP) is derived directly from narcotics activities, and proceeds generated from the drug trade have reportedly fueled a growing real estate boom in Kabul, as well as a sharp increase in capital investment in rural poppy growing areas.

Much of the recent rise in opium production comes from Taliban strongholds in the southern part of the country. The Taliban impose taxes on narcotics dealers, which undoubtedly helps finance their terrorist activities. Additional revenue streams for the Taliban and regional warlords come from “protecting” opium shipments, running heroin labs, and from “toll booths” established on transport and smuggling routes.

Afghan opium is refined into heroin by production labs, more of which are being established within Afghanistan’s borders. The heroin is then often broken into small shipments and smuggled across porous borders for resale abroad. Payment for the narcotics outside the country is facilitated through a variety of means, including through conventional trade and the traditional hawala system that uses trade as the primary medium to balance accounts. In addition, the narcotics themselves are often used as tradable goods and as a means of exchange for automobiles, construction materials, foodstuffs, vegetable oils, electronics, and other goods between Afghanistan and neighboring Pakistan and Iran. Many of these goods are smuggled into Afghanistan from neighboring countries, particularly Iran and Pakistan, or enter via the Afghan Transit Trade Agreement (ATTA) without payment of customs duties or tariffs. Most of the trade goods imported into Afghanistan originate in Dubai. Invoice fraud, corruption, indigenous smuggling networks, underground finance, and legitimate commerce are all intertwined.

Afghanistan is widely served by the hawala system, which provides a range of financial and nonfinancial business services in local, regional, and international markets. Financial activities include foreign exchange transactions, funds transfers (particularly to and from neighboring countries with weak regulatory regimes for informal remittance systems), micro and trade finance, as well as some deposit-taking activities. While the hawala network may not provide financial intermediation of the same type as the formal banking system (i.e., deposit-taking for lending and investing purposes based on the assessment, underwriting, and pricing of risks), it is a traditional form of finance and deeply entrenched and widely used throughout Afghanistan and the neighboring region.

There are over 300 known hawala dealers in Kabul, with branches or additional dealers in each of the 34 provinces. These dealers are organized into informal provincial unions or guilds whose members maintain a number of agent-principal and partnership relationships with other dealers throughout the country and internationally. Their record keeping and accounting practices are robust, efficient, and take note of currencies traded, international pricing, deposit balances, debits and credits with other dealers, lending, cash on hand, etc. Hawaladars are supposed to be licensed; however the licensing regime that existed from April 2004 until September of 2006 was overly burdensome and resulted in issuance of few licenses. In September of 2006, Da Afghanistan Bank (DAB), Afghanistan’s Central Bank, issued a new money service provider regulation that streamlined the licensing process and substantially reduced the licensing and ongoing compliance burden for hawaladars. The focus of the regulation is on anti-money laundering and counter-terrorist financing (AML/CTF). The regulation requires and provides standard mechanisms for record keeping and reporting of large transactions. The DAB provided training sessions on the regulation and has developed a streamlined application process. In Kabul, approximately 100 licenses have been issued under the regulation, which is the result of the DAB outreach, law enforcement actions, and pressure from commercial banks where hawaladars hold accounts. Options for strengthening the hawaladar unions and promoting self-regulation are also being studied. The DAB has begun outreach efforts to money service providers in other large cities, specifically Mazar-e-Sharif and Herat, and hopes to expand the licensing to these cities in 2008. Given how widely used the hawala system is in Afghanistan, financial crimes undoubtedly occur through these entities.

In early 2004, the DAB worked in collaboration with international donors to establish the legislative framework for AML/CTF initiatives. Although Afghanistan was unable to meet its initial commitment to enact both pieces of legislation by September 30, 2004, they were both finalized and signed into law by late October 2004.

The Anti-Money Laundering and Proceeds of Crime and Combating the Financing of Terrorism laws incorporate provisions that are designed to meet the recommendations of the Financial Action Task Force (FATF). These laws address the criminalization of money laundering and the financing of terrorism, customer due diligence, the establishment of a financial intelligence unit (FIU), international cooperation, extradition, and the freezing and confiscation of funds. Under the law, money laundering and terrorist financing are criminal offences. The AML law also includes provisions to address cross-border currency reporting, and establishes authorities to seize and confiscate monies found to be undeclared or falsely declared, or determined to be transferred for illicit purposes.

Under the AML law, the Financial Transactions and Reports Analysis Center of Afghanistan (FinTRACA), Afghanistan’s FIU, has been established and is functioning as a semi-autonomous unit within the DAB. The FIU, originally to be established in January 2005, was actually initiated in October 2005—with the assignment of a General Director, office space, and other basic resources.

Banks and other financial and nonfinancial institutions are required to report to the FIU all suspicious transactions and large cash transactions above the equivalent of U.S. $10,000, as prescribed by the DAB. These financial institutions are also required to maintain their records for a minimum of 10 years. Approximately 10,000 large cash transaction reports are currently being received from financial institutions and processed each month. The FIU has over 140,000 large transaction reports currently stored in its database that can be searched using a number of criteria. The FIU has the legal authority to freeze financial assets for up to seven days. FinTRACA also has access to records and databases of other government entities.

The formal banking sector consists of sixteen licensed banks. AML examinations have been conducted for all these banks that have resulted in a growing awareness of AML requirements, deficiencies among the banks, and a need for building the AML capacity of the formal financial sector. Additionally, the Central Bank has worked with the banking community through the Afghan Bankers Association (ABA) to develop several ongoing topical working groups focused on AML issues. The ABA has recently designed a “know your customer” (KYC) form that has been accepted by the financial industry and has provided on-going education on identifying suspicious transactions. Seven suspicious transaction reports were received in 2007 by the FIU, one of which was referred to law enforcement for investigation.

The Afghanistan Central Bank has circulated a list of individuals and entities that have been included on the UN 1267 Sanctions Committee’s consolidated list of designated individuals and entities to financial institutions. There is no information currently available regarding the results of these lists being circulated.

The Supervision Department within the DAB was formed at the end of 2003, and is divided into four divisions: Licensing, General Supervision (which includes on-site and off-site supervision), Special Supervision (which deals with special cases of problem banks), and Regulation. The Department is charged with administering the AML/CTF legislation, conducting examinations, licensing new institutions, overseeing money service providers, and outreach to the commercial banking sector. The effectiveness of the Supervision Department in the AML area remains limited due to staffing, organization, and management issues. As a result, FinTRACA has taken on some supervisory responsibilities, yet resources are limited.

The Ministry of Interior (MOI) and the Attorney General’s Office are the primary financial enforcement and investigative authorities. They are responsible for tracing, seizing and freezing assets. While MOI generally has adequate police powers, it lacks the resources to trace, seize, and freeze assets. According to FinTRACA, it is not aware of Afghanistan freezing, seizing, or forfeiting related assets in 2007, or of any calls on the banking community for cooperation with enforcement efforts. FinTRACA has an MOU in place with the MOI for cooperation and currently shares information with the Sensitive Investigations Unit (SIU), a law enforcement group within the MOI.

Pursuant to the Central Bank law, a Financial Services Tribunal will be established to review certain decisions and orders of the DAB. Judges and administrative staff will need to significantly increase their technical knowledge before the Tribunal is effective. The Tribunal will review supervisory actions of the DAB, but will not prosecute cases of financial crime. At present, all financial crime cases are being forwarded to the Kabul Provincial Court, where there has been little to no activity in the last three years. The process to prosecute and adjudicate cases is long and cumbersome, significantly underdeveloped, and corruption can play a role at various levels. There was one arrest for alleged terrorist financing in 2007 but the individual was not prosecuted.

Border security continues to be a major issue throughout Afghanistan. At present there are 21 border crossings that have come under central government control, utilizing international donor assistance as well as local and international forces. However, many of the border areas are not policed and therefore susceptible to illicit cross-border trafficking and trade-based money laundering. Many regional warlords also continue to control the international borders in their provincial areas, causing major security risks. Customs authorities, with the help of outside assistance, have made significant strides, but much work remains to be done.

Customs collection has improved, but smuggling and corruption continue to be major concerns, as well as trade fraud, which includes false and over-and under-invoicing. Thorough cargo inspections are not conducted at any gateway. A pilot program for declaring large, cross-border currency transactions has been developed at the Kabul International Airport (KIA). This prototype will serve as the foundation for expansion to other land, air and sea crossings. Currently, KIA requires incoming and outgoing passengers to fill out declarations forms for carrying cash in an amount of 1 million Afghanis (approximately U.S. $20,000) or its equivalent. The DAB is working with Customs authorities to further improve enforcement of airport declarations. However there is very little international air travel outside of Kabul. Although Afghanistan has limited resources to enforce customs declarations outside of Kabul, the DAB has sent delegations to border crossings in Hairatan and Islam Qala to assess the capacity and describe the provisions of the law to the local authorities. There is no restriction on transporting any amount of declared currency. However, in the case of cash smuggling at the airport, reports are entered into a Customs database and this information is shared with the FIU.

Under the Law on Combating the Financing of Terrorism, any nonprofit organization that wishes to collect, receive, grant, or transfer funds and property must be entered in the registry with the Ministry of Auqaf (Islamic Affairs). All nonprofit organizations are subject to a due diligence process which includes an assessment of accounting, record keeping, and other activities. However, the capacity of the Ministry to conduct such examinations is nearly nonexistent, and the reality is that any organization applying for a registration is granted one. Furthermore, because no adequate enforcement authority exists, many organizations operating under a “tax-exempt” nonprofit status in Afghanistan go completely unregistered, and illicit activities are suspected on the part of a number of organizations.

The Government of Afghanistan (GOA) is a party to 12 of the United Nations (UN) conventions and protocols against terrorism and is a signatory to the International Convention for the Suppression of Acts of Nuclear Terrorism (which is pending ratification). Afghanistan 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. Afghanistan is also a signatory to the UN Convention against Corruption (UNCAC). Ratification of UNCAC, one of the benchmarks established under the London Compact, as well as amendment of domestic laws to conform to the UNCAC’s obligations, remain pending.

In July 2006, Afghanistan became a member in the Asia Pacific Group, a FATF-Style Regional Body (FSRB), and has also obtained observer status in the Eurasian Group, another FSRB. No mutual evaluation has been conducted on the AML/CTF regime of Afghanistan to date; however, the APG is scheduled to assess the financial system in the third quarter of 2009. FinTRACA, Afghanistan’s FIU, has active bilateral MOUs for cooperation with the FIU’s of the United Kingdom, Russia, the Kyrgyz Republic, and Belarus. Although FinTRACA is not yet a member of the Egmont Group of financial intelligence units, it has taken several steps to build its capacity in efforts to meet international standards.

The Government of Afghanistan has made progress over the past year in developing its overall AML/CTF regime. Improvement has been seen in development of its nascent FIU, the reporting of large cash transactions, participation in international AML bodies, improvement in bank AML compliance awareness, information technology systems, and in efforts to bring money service providers into a legal and regulatory framework. However, much work remains to be done. Afghanistan needs to commit additional resources and find the political will to seriously combat financial crimes, including corruption. Afghanistan should develop secure, reliable, and capable relationships among departments and agencies involved in law enforcement. Afghanistan should develop the investigative capabilities of law enforcement authorities in the various areas of financial crimes, particularly money laundering and terrorist finance. Judicial authorities need to become proficient in understanding the various elements required for money laundering prosecutions. The FIU should become autonomous and increase its staff and resources. Afghan customs authorities should implement cross-border currency reporting and learn to recognize forms of trade-based money laundering. Border enforcement should be a priority, both to enhance scarce revenue and to disrupt narcotics trafficking and illicit value transfer. Afghan authorities should also work to address the widespread corruption in commerce and government.

Albania

Albania is not considered an important regional financial or offshore center. As a transit country for trafficking in narcotics, arms, contraband, and humans, Albania remains at significant risk for money laundering. The major sources of criminal proceeds in the country are trafficking offenses, official corruption and fraud. Corruption and organized crime are likely the most significant sources of money laundering, but the exact extent to which these various illegal activities contribute to overall crime proceeds and money laundering is unknown.

Criminals frequently invest tainted money in real estate and business development projects. Albania has a significant black market for smuggled goods because of its high level of consumer imports and weak customs controls. Organized crime groups use Albania as a base of operations for conducting criminal activities in other countries and often return their illicit gains to Albania. The proceeds from these activities are easily laundered in Albania because of the cash economy and weak government controls on banking.

As a cash-based economy, the Albanian economy is also particularly vulnerable to money laundering activity. Few individuals have bank accounts and check writing is not common. Of the 17 banks in Albania, five of them are considered to have a significant national presence. According to the Bank of Albania (the Central Bank), 25 percent of the money in circulation is outside of the banking system, compared to an average of 10 percent in other Central and Eastern European transitioning economies. A significant portion of remittances enters the country through unofficial channels. It is estimated that only half of total remittances enter Albania through banks or money transfer companies. According to a 2007 United Nations Office on Drugs and Crime (UNODC) report, remittances comprise nearly 14 percent of Albania’s annual gross domestic product (GDP.) Black market exchange is still present in the country despite repeated efforts by the Government of Albania (GOA) institutions to impede such exchanges. The Bankers Association estimates that only 20-30 percent of transactions take place through formal banking channels. Similarly, the GOA estimates that proceeds from the informal sector account for approximately 30-60 percent of Albania’s GDP. Although current law permits the operation of free trade zones, none are currently in operation.

Electronic and automatic teller machine (ATM) transactions are relatively few in number but are growing as more banks introduce this technology. The number of ATMs expanded following the decision of the GOA to deliver salaries through electronic transfers. All central government institutions have now converted to electronic pay systems, and many private companies have also started to issue salaries electronically. Credit card usage has also increased, but only a small number of people possess them and usage is primarily limited to a few large vendors. Bank fraud still remains largely undetected.

Albania criminalized money laundering with Article 287, Albanian Criminal Code 1995, as amended. Albania’s original money laundering law was “On the Prevention of Money Laundering”, or Law No. 8610 of 17 May 2000. In June 2003, Parliament approved Law No. 9084, which strengthened the old Law No. 8610, and improved the Criminal Code and the Criminal Procedure Code. The new law redefined the legal concept of money laundering, harmonizing the Albanian definition with that of the European Union (EU) and international conventions. Under the revised Criminal Code, Albania expanded and upgraded many powers. The new law also revises the definition of money laundering, outlaws the establishment of anonymous accounts, and permits the confiscation of accounts. The law also mandates the identification of beneficial owners. Currently, no law criminalizes negligence by financial institutions in money laundering cases. The Bank of Albania has established a task force to confirm banks’ compliance with customer verification rules.

Albania’s law sets forth an “all crimes” definition for the offense of money laundering. However, the Albanian court system applies a difficult burden of proof. Albanian courts require a prior or simultaneous conviction for the predicate offense before issuing an indictment for money laundering.

Law 9084 places reporting requirements on both financial institutions and individuals. Obliged institutions must report to Albania’s financial intelligence unit (FIU) all transactions that exceed approximately U.S. $200,000 as well as those transactions that involve suspicious activity, regardless of the amount. A new draft law, when enacted, will lower the threshold for currency transaction reporting from the current U.S. $200,000 to U.S. $15,000, thereby ensuring compliance with EU standards. Subject transactions must be reported within 72 hours of their occurrence. Individuals and entities reporting transactions are protected by law if they cooperate with and provide financial information to the FIU and law enforcement agencies. Reportedly, however, leaks of financial disclosure information from other agencies compromise the entities’ client confidentiality.

Under current Albanian law, financial institutions have no legal obligation to identify customers prior to opening an account. Albania distinguishes between record keeping of client information and record keeping of transaction information, and, in an effort to reduce the record-keeping burden on obligated entities, has a different threshold for each. While most banks have internal rules mandating customer identification, Albania’s money laundering law only requires customer identification prior to conducting transactions that exceed approximately U.S. $20,000 or when there is a suspicion of money laundering. For all transactions in excess of U.S. $20,000, entities must maintain customer records. With regard to transactions, obliged entities are not required to maintain records on transactions under a U.S. $200,000 threshold. For every transaction in excess of U.S. $200,000 entities must maintain records that can be used to reconstruct the transaction if necessary. If there is no suspicion, entities must retain customer identification information for all transactions exceeding U.S. $20,000—but could destroy all records of financial transactions below U.S. $200,000. The new draft law, when enacted, will require client identification regardless of the size of the transaction.

It is the responsibility of the licensing authority to supervise intermediaries for compliance. For example, the Ministry of Justice is responsible for oversight of attorneys and notaries, and the Ministry of Finance for accountants. Although regulations also cover nonbank financial institutions, enforcement has been poor in practice. There is an increasing number of suspicious transaction reports (STRs) coming from banks as that sector matures, although the majority continues to come from tax and customs authorities and foreign counterparts.

Individuals must report to customs authorities all cross-border transactions that exceed approximately U.S. $10,000. Albania provides declaration forms at border crossing points, and the law does not distinguish between an Albanian and a foreign visitor. However, customs controls on cross-border transactions lack effectiveness due to a lack of resources, poor training and, reportedly, corruption of customs officials.

Law No. 8610 established an administrative FIU to coordinate the GOA’s efforts to detect and prevent money laundering. Under Law No. 9084, the FIU became a quasi-independent agency within the Ministry of Finance, formally known as the General Directorate for the Prevention of Money Laundering (DPPPP). Albania is in the process of preparing a new administrative law on FIU operations. Referred to as the “draft law,” it will clarify certain anti-money laundering measures and elaborate on reporting requirements for obliged entities.

As an administrative-type FIU, the DPPPP does not have law enforcement capabilities. The FIU receives reports from obliged entities, analyzes them, and then disseminates the results of its analysis to the prosecutor’s office. After nearly six years, the FIU cannot demonstrate any referral that has resulted in a money laundering prosecution. There were only three money laundering referrals to the Prosecutor’s Office during 2006 and all three were declined for prosecution. There were no money laundering referrals to the Prosecutor’s Office during 2007. In an effort to increase money laundering prosecutions, in May 2007, Albania established the Economic Crimes and Corruption Joint Investigative Unit (ECCJIU) within the Tirana District Prosecution Office. This unit focuses efforts and builds expertise in the investigation and prosecution of financial crimes and corruption cases by bringing together members of the General Prosecutors Office, the Albanian State Police’s Financial Crimes Sector, the Ministry of Finance’s Customs Service and Tax Police, and Albanian intelligence services. The ECCJIU will also receive cooperation from the FIU and the National Intelligence Service. The ECCJIU will have responsibility for the prosecution of money laundering cases within the District of Tirana.

To address the criminal aspects of its informal economy, Albania passed comprehensive legislation against organized crime in 2004. Law No. 9284, the “anti-mafia law,” enables civil asset sequestration and confiscation provisions in cases involving organized crime and trafficking. The law applies to the assets of suspected persons, their families, and close associates. In cases where the value of the defendant’s assets exceeds the income generated by known legal activity, the law places the burden on the defendant to prove a legitimate source of income for the assets. During 2006, the Serious Crimes Prosecution Office filed twenty forfeiture cases pursuant to the anti-mafia law. The properties sequestered include a sports center of 4000 square meters, hotels, apartments, land, vehicles, and approximately U.S. $35,000 in cash. Although the Agency for the Administration of the Sequestration and Confiscation of Assets (AASCA) is charged with the responsibility of administrating confiscated assets, the agency has failed to function in a meaningful fashion. As such, enforcement of the assets law remains reportedly inadequate due to a lack of financial or political support for the agency.

Article 230/a of the Penal Code criminalizes the financing of terrorism. Financing of terrorism or its support of any kind is punishable by a term of imprisonment of at least fifteen years, and carries a fine of U.S. $50,000 to U.S. $100,000. The Penal Code also contains additional provisions dealing with terrorist financing including sections dealing with giving information regarding the investigation or identification to identified persons, and conducting financial transactions with identified persons. There are no known prosecutions under these laws, but the Prosecutor’s Office is currently investigating one case with such implications.

In 2004, Albania enacted Law No. 9258, “On Measures against Terrorist Financing”. This law provides a mechanism for the sequestration and confiscation of assets belonging to terrorism financiers, particularly as to the United Nations (UN) updated lists of designees. While comprehensive, it lacks implementing regulations and thus is not fully in force. As of October 2007, the Ministry of Finance claimed to maintain asset freezes against six individuals and fourteen foundations and companies from the UN Security Council’s 1267 Consolidated lists of identified terrorist entities. In total, assets worth more than U.S. $10 million, belonging to six persons, five foundations and nine companies, remain sequestered. Reportedly, the full extent of sequestered assets and their exact whereabouts are unknown.

The Ministry of Finance is the main entity responsible for issuing freeze orders. After the Minister of Finance executes an order, the FIU circulates it to other government agencies, which then sequester any assets found belonging to the UNSCR 1267 named individual or entity. The sequestration orders remain in force as long as their names remain on the list.

Albania is a party to the UN International Convention for the Suppression of the Financing of Terrorism, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption and the 1988 UN Drug Convention. Albania is a member of the Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL) and was most recently evaluated by MONEYVAL in July 2006. Albania’s FIU is also a member of the Egmont Group, the international organization of financial intelligence units.

Although there are continuing initiatives to improve Albania’s capacity to deal with financial crimes and money laundering, the lack of positive results and apparent inability to adequately address the deficiencies in the programs continue to hamper progress. Despite Albania’s efforts, additional improvements are needed. Albania should increase support and training for the FIU, as a majority of its staff is new and lacks experience in the analysis of money laundering and terrorist financing cases. The FIU should create or obtain a database to allow effective analysis of the large volume of currency transaction reports and suspicious transaction reports received. Albania should ensure that those charged with pursuing financial crime increase their technical knowledge to include modern financial investigation techniques. Albania should provide its police force with a central database. Investigators and prosecutors should implement case management techniques, and prosecutors, and judges need to become more conversant with the nuances of money laundering. The FIU, prosecutors and ECCJIU should enhance their effectiveness through cooperation with one another and outreach to other entities. Albania should remove the requirement of a conviction for the predicate offense before a conviction for money laundering can be obtained. Albania should devise implementing regulations for Law 9258 regarding sequestration and confiscation of assets linked to the financing of terrorism so that it can be fully effective. The Government of Albania should also improve the enforcement and enlarge the scope of its asset seizure and forfeiture regime, including fully funding and supporting the Agency for the Administration of the Sequestration and Confiscation of Assets (AASCA). Albania should also incorporate into anti-money laundering legislation specific provisions regarding negligent money laundering, corporate criminal liability, comprehensive customer identification procedures, and the adequate oversight of money remitters and charities. Albania should enact its draft law and promulgate implementing regulations as soon as possible.

Algeria

Algeria is not a regional financial center or an offshore financial center. The extent of money laundering through formal financial institutions is thought to be minimal due to stringent exchange control regulations and an antiquated banking sector. The partial convertibility of the Algerian dinar enables the Bank of Algeria (Algeria’s Central Bank) to monitor all international financial operations carried out by public and private banking institutions. Embezzlement, fraud, and tax evasion are common financial crimes. Algeria has a large informal and cash-based economy. Algeria is a transit country for men and women trafficked from sub-Sahara Africa en route to Europe.

Algeria first criminalized terrorist financing through the adoption of Ordinance 95.11 on February 24, 1994, making the financing of terrorism punishable by five to ten years of imprisonment. On February 5, 2005, Algeria enacted public law 05.01, entitled “The Prevention and Fight against Money Laundering and Financing of Terrorism.” The law aims to strengthen the powers of the Cellule du Traitement du Renseignement Financier (CTRF), an independent financial intelligence unit (FIU) within the Ministry of Finance (MOF) created in 2002. This law seeks to bring Algerian law into conformity with international standards and conventions. It offers guidance for the prevention and detection of money laundering and terrorist financing, institutional and judicial cooperation, and penal provisions.

The 2005 legislation extends money laundering controls to specific, nonbank financial professions such as lawyers, accountants, stockbrokers, insurance agents, pension managers, and dealers of precious metals and antiquities. Provided that information is shared with CTRF in good faith, the law offers immunity from administrative or civil penalties for individuals who cooperate with money laundering and terrorist finance investigations. Under the law, assets may be frozen for up to 72 hours on the basis of suspicious activity; such freezes can only be extended with judicial authorization. Financial penalties for noncompliance range from 50,000 to 5 million Algerian dinars (approximately U.S. $760 to U.S. $76,000). In addition to its provisions pertaining to money laundered from illicit activities, the law allows the investigation of terrorist-associated funds derived from “clean” sources.

The law provides significant authority to the Algerian Banking Commission, the independent body established under the authority of the Bank of Algeria to supervise banks and financial institutions, to inform CTRF of suspicious or complex transactions. The law also gives the Algerian Banking Commission, CTRF, and the Algerian judiciary wide latitude to exchange information with their foreign government counterparts in the course of money laundering and terrorist finance investigations, provided confidentiality for suspected entities is insured. A clause excludes the sharing of information with foreign governments in the event legal proceedings are already underway in Algeria against the suspected entity, or if the information is deemed too sensitive for national security reasons.

On November 14, 2005, the Government of Algeria issued Executive Decree 05-442 establishing a deadline of September 1, 2006 after which all payments in excess of 50,000 Algerian dinars must be made by check, wire transfer, payment card, bill of exchange, promissory note, or other official bank payment. While nonresidents are exempt from this requirement, they must (like all travelers to and from the country) report foreign currency in their possession to the Algerian Customs Authority. The government suspended the deadline in September 2006, however, in response to the slow implementation of a nation-wide electronic check-clearing system that failed to gain the confidence of the Algerian business community.

In 1996 Algeria adopted ordinance 96-22 regarding exchange regulations and currency movements abroad. The law criminalized cash smuggling as well as the failure to respect reporting requirements for the transfer of cash into or out of Algeria. The maximum value of cash that may be carried by an individual at any given time is the equivalent of 7,600 euros (approximately U.S. $11,000). Higher sums may only be legally sent abroad by wire transfer. Given limits on convertibility of the Algerian dinar, even sums less than the 7,600 euros threshold must be accompanied by a bank statement declaring that the holder acquired the foreign currency with the authorization of the central bank. Holders of foreign currency without such a declaration, such as individuals who traded dinars for foreign currencies in one of Algiers’ many black markets, risk confiscation. In addition to foreign currency, the ordinance applies to other liquid financial instruments, precious metals and gemstones. Penalties for noncompliance range from three to five years of imprisonment or a fine valued of up to twice the value of the seized property.

Algerian financial institutions, as well as Algerian customs and tax administration agents, are required to report any activities they suspect of being linked to criminal activity, money laundering, or terrorist financing to CTRF and comply with subsequent CTRF inquiries. They are obligated to verify the identity of their customers or their registered agents before opening an account; they must furthermore record the origin and destination of funds they deem suspicious. In addition, these institutions must maintain confidential reports of suspicious transactions and customer records for at least five years after the date of the last transaction or the closing of an account.

In 2006, the Algerian customs service reported 373 cases of cash smuggling with a total value of U.S. $5.6 million. These cases occurred in 11 of the country’s 48 wilayas (regional departments). In 2005, customs reported 426 cases with a total value of U.S. $2.7 million. The total fines levied against smugglers were U.S. $41 million in 2006. In 2007, CTRF investigated 103 suspicious transaction reports.

The Ministry of Interior is charged with registering foreign and domestic nongovernmental organizations in Algeria. While the Ministry of Religious Affairs legally controls the collection of funds at mosques for charitable purposes, some of these funds escape the notice of government monitoring efforts.

Algerian customs and law enforcement authorities are increasingly concerned with cases of customs fraud and trade-based money laundering. In response, Algerian authorities are taking steps to coordinate information sharing between concerned agencies.

In November 2004, Algeria became a member of the Middle East and North Africa Financial Action Task Force (MENAFATF). Algeria is a party to 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 1988 UN Drug Convention. In addition, Algeria is a signatory to various UN, Arab, and African conventions against terrorism, trafficking in persons, and organized crime. The Ministry of Justice is expected to create a pool of judges trained in financial matters.

The Government of Algeria has taken significant steps to enhance its statutory regime against money laundering and terrorist financing. It needs to move forward now to implement those laws and eliminate bureaucratic barriers among various government agencies by empowering CTRF to be the focal point for the AML/CTF investigations. In addition, given the scope of Algeria’s informal economy, it should renew its initiative to limit the size of cash transactions. Algerian law enforcement and customs authorities need to enhance their ability to recognize and investigate trade-based money laundering, value transfer, and bulk cash smuggling used for financing terrorism and other illicit financial activities.

Angola

Angola is neither a regional nor an offshore financial center and has not prosecuted any known cases of money laundering. Angola does not produce significant quantities of drugs, although it continues to be a transit point for drug trafficking, particularly cocaine brought in from Brazil or South Africa destined for Europe. The laundering of funds derived from continuous and widespread high-level corruption is a concern, as is the use of diamonds as a vehicle for money laundering. The Government of the Republic of Angola (GRA) has implemented a diamond control system in accordance with the Kimberley Process. However, corruption and Angola’s long and porous borders further facilitate smuggling and the laundering of diamonds.

Angola currently has no comprehensive laws, regulations, or other procedures to detect money laundering and financial crimes. Other provisions of the criminal code do address some related crimes. The various ministries with responsibility for detection and enforcement are revising a draft anti-money laundering law drawn up with help from the World Bank. The Central Bank’s Supervision Division, which has responsibility for money laundering issues, exercises some authority to detect and suppress illicit banking activities under legislation governing foreign exchange controls. The Central Bank has the authority to freeze assets, but Angola does not presently have an effective system for identifying, tracing, or seizing assets. Instead, such crimes are addressed through other provisions of the criminal code. For example, Angola’s counternarcotics laws criminalize money laundering related to narcotics trafficking.

Angola’s high rate of cash flow makes its financial system an attractive site for money laundering. With no domestic interbank dollar clearing system, even dollar transfers between domestic Angolan banks are logged as “international” transfers, thus creating an incentive to settle transfers in cash. The local banking system imports approximately U.S. $200-300 million in currency per month, largely in dollars, without a corresponding cash outflow. Local bank representatives have reported that clients have walked into banks with up to U.S. $2 million in a briefcase to make a deposit. No currency transaction reports cover such large cash transactions. These massive cash flows occur in a banking system ill-equipped to detect and report suspicious activity. The Central Bank has no workable data management system and only rudimentary analytic capability. Corruption pervades Angolan society and commerce and extends across all levels of government. Angola is rated 147 out of 180 countries in Transparency International’s 2007 International Corruption Perception Index.

Angola is party to the 1988 UN Drug Convention and the UN Convention against Corruption. Angola has signed but has not yet ratified the UN Convention against Transnational Organized Crime. Angola has not signed the UN International Convention for the Suppression of the Financing of Terrorism.

The Government of Angola should pass its pending legislation to criminalize money laundering beyond drug offenses and terrorist financing. The GRA should establish a system of financial transparency reporting requirements and a corresponding Financial Intelligence Unit through legislation that adheres to world standards. The GRA should then move quickly to implement this legislation and bolster the capacity of law enforcement to investigate financial crimes. Angola’s judiciary, including its Audit Court (Tribunal de Contas) should give priority to prosecuting financial crimes, including corruption. The GRA should become a party to both the UN Convention against Transnational Organized Crime and the UN International Convention for the Suppression of the Financing of Terrorism. The GRA should increase efforts to combat official corruption, by establishing an effective system to identify, trace, seize, and forfeit assets and by empowering investigative magistrates to actively seek out and prosecute high profile cases of corruption.

Antigua and Barbuda

Antigua and Barbuda has comprehensive legislation in place to regulate its financial sector, but remains susceptible to money laundering because of its offshore financial sectors and Internet gaming industry. As with other countries in the region, illicit proceeds from the transshipment of narcotics are laundered in Antigua and Barbuda. Its offshore financial sector exacerbates Antigua and Barbuda’s vulnerability to money laundering.

In 2007, Antigua and Barbuda had 17 offshore banks, three offshore trusts, two offshore insurance companies, 3,255 international business corporations (IBCs), and 23 licensed Internet gaming companies. The International Business Corporations Act of 1982 (IBCA), as amended, is the governing legal framework for offshore businesses in Antigua and Barbuda. Bearer shares are permitted for international companies. However, the license application requires disclosure of the names and addresses of directors (who must be natural persons), the activities the corporation intends to conduct, the names of shareholders, and number of shares they will hold. Registered agents or service providers are required by law to know the names of beneficial owners. Failure to provide information or giving false information is punishable by a fine of U.S. $50,000. Offshore financial institutions are exempt from corporate income tax. All licensed institutions are required to have a physical presence, which means presence of at least a full-time senior officer and availability of all files and records. Shell companies are not permitted.

Antigua and Barbuda has five domestic casinos, which are required to incorporate as domestic corporations. Internet gaming companies are required to incorporate as IBCs, and as such are required to have a physical presence. Internet gaming sites are considered to have a physical presence when the primary servers and the key person are resident in Antigua and Barbuda. The Government of Antigua and Barbuda (GOAB) receives approximately U.S. $2.8 million per year from license fees and other charges related to the Internet gaming industry. A nominal free trade zone in the country seeks to attract investment in priority areas of the government. Casinos and sports book-wagering operations in Antigua and Barbuda’s free trade zone are supervised by the Office of National Drug Control and Money Laundering Policy (ONDCP), which serves as the GOAB’s financial intelligence unit (FIU), and the Directorate of Offshore Gaming (DOG), housed in the Financial Services Regulatory Commission (FSRC). The GOAB has adopted regulations for the licensing of interactive gaming and wagering, to address possible money laundering through client accounts of Internet gambling operations. The FSRC and DOG have also issued Internet gaming technical standards and guidelines. Internet gaming companies are required to submit quarterly and annual audited financial statements, enforce know-your-customer verification procedures, and maintain records relating to all gaming and financial transactions of each customer for six years. Suspicious activity reports from domestic and offshore gaming entities are sent to the ONDCP and FSRC.

The GOAB has not initiated a unified regulatory structure or uniform supervisory practices for its domestic and offshore banking sectors. Currently, the Eastern Caribbean Central Bank (ECCB) supervises Antigua and Barbuda’s domestic banking sector. The Registrar of Insurance supervises and examines domestic insurance agencies. The director of the ONDCP—who was designated in 2003 as the Supervisory Authority created under the Money Laundering Prevention Act of 1996 (MLPA)—supervises all financial institutions for compliance with suspicious transaction reporting requirements. The FSRC is responsible for the regulation and supervision of all institutions licensed under the IBCA, including offshore banking and all aspects of offshore gaming. This includes issuing licenses for IBCs, maintaining the register of all corporations, and conducting examinations and reviews of offshore financial institutions as well as some domestic financial entities, such as insurance companies and trusts.

In the offshore sector, the IBCA requires that a corporate entity submit all books, minutes, cash, securities, vouchers, customer identification, and customer account records. Financial institutions are required to maintain records for six years after an account is closed. The IBCA provides for disclosure of confidential information pursuant to a request by the director of the ONDCP, and pursuant to an order of a court of competent jurisdiction in Antigua and Barbuda. In addition, section 25 of the MLPA states that the provisions of this Act shall have effect notwithstanding any obligation as to secrecy or other restriction upon the disclosure of information imposed by any law or otherwise. The MLPA contains provisions for obtaining client and ownership information.

The MLPA, as amended, is the cornerstone of Antigua and Barbuda’s anti-money laundering legislation. The MLPA makes it an offense for any person to obtain, conceal, retain, manage, or invest illicit proceeds or bring such proceeds into Antigua and Barbuda if that person knows or has reason to suspect that they are derived directly or indirectly from any unlawful activity. The MLPA covers institutions defined under the Banking Act, IBCA, and the Financial Institutions (NonBanking) Act, which include offshore banks, IBCs, money service businesses, credit unions, building societies, trust businesses, casinos, Internet gaming companies, and sports betting companies. Intermediaries such as lawyers and accountants are not included in the MLPA. The MLPA requires reporting entities to report suspicious activity suspected to be related to money laundering, whether a transaction was completed or not. There is no reporting threshold imposed on banks and financial institutions. Internet gaming companies, however, are required by the Interactive Gaming and Interactive Wagering Regulations to report to the ONDCP all payouts over U.S. $25,000.

The Office of National Drug Control and Money Laundering Policy Act, 2003 establishes the ONDCP as the GOAB’s FIU. The ONDCP is an independent organization under the Ministry of National Security and is primarily responsible for the enforcement of the MLPA and for directing the GOAB’s anti-money laundering efforts in coordination with the FSRC. The ONDCP assumes the role and fulfills the responsibilities of the Supervisory Authority as described in the MLPA, which includes the supervision of all financial institutions with respect to filing suspicious transaction reports (STRs). Additionally, the ONDCP Act authorizes the director to appoint officers to investigate narcotics trafficking, fraud, money laundering, and terrorist financing offenses. Auditors of financial institutions review their compliance program and submit a report to the ONDCP for analysis and recommendations. The ONDCP has no direct access to databases of financial institutions. Domestically, the ONDCP has a memorandum of understanding with the FSRC and is expected to sign another with the ECCB. Other memoranda of understanding have been drafted to cover all aspects of the ONDCP’s relationship with the Royal Antigua and Barbuda Police Force, Customs, Immigration, and the Antigua and Barbuda Defense Force.

As of October 2007, the ONDCP had received 43 STRs (down from 52 in 2006), 11 of which were investigated. No arrests, prosecutions or convictions were reported by the GOAB in 2006 or 2007, although there were two arrests in 2005. Antigua and Barbuda has yet to prosecute a money laundering case.

Under the MLPA, a person entering or leaving the country is required to report to the ONDCP whether he or she is carrying U.S. $10,000 or more in cash or currency. In addition, all travelers are required to fill out a customs declaration form indicating if they are carrying in excess of U.S. $10,000 in cash or currency. If so, they may be subject to further questioning and possible search of their belongings by Customs officers. The GOAB Customs Department maintains statistics on cross-border cash reports and seizures for failure to report. This information is shared with the ONDCP and the police.

The Misuse of Drugs Act empowers the court to forfeit assets related to drug offenses. The ONDCP is responsible for tracing, seizing and freezing assets related to money laundering. The ONDCP has the ability to direct a financial institution to freeze property up to seven days, while it makes an application for a freeze order. If a charge is not filed or an application for civil forfeiture is not made within 30 days, the freeze order lapses. Convictions for a money laundering offense make it likely that an application for forfeiture will succeed unless the defendant can show that the property was acquired by legal means or the defendant’s business was legitimate. Forfeited assets are placed into the Forfeiture Fund and can be used by the ONDCP for any other purpose. Approximately 20 percent of forfeited assets go to the Consolidated Fund at the Treasury.

The GOAB is currently working on asset forfeiture agreements with other jurisdictions. The director of ONDCP, with Cabinet approval, may enter into agreements and arrangements with authorities of a foreign State, which covers matters relating to asset sharing. There are asset sharing agreements with certain countries, while others are negotiated on an ad hoc basis. The ONDCP is presently overseeing the drafting of MOUs with a number of countries in Central America to enhance asset tracing, freezing and seizure. An MOU has recently been concluded with Canada. Regardless of its own civil forfeiture laws, currently the GOAB can only provide forfeiture assistance in criminal forfeiture cases.

In the past few years, the GOAB has frozen approximately U.S. $6 million in Antigua and Barbuda financial institutions as a result of U.S. requests and has repatriated approximately U.S. $4 million. The GOAB has frozen, on its own initiative, over U.S. $90 million believed to be connected to money laundering cases still pending in the United States and other countries. The GOAB reported seizing U.S. $420,236 in 2006 and U.S. $14,753 in 2007.

The GOAB enacted the Prevention of Terrorism Act 2001, amended in 2005, to implement the UN conventions on terrorism. The Act empowers the ONDCP to nominate any entity as a “terrorist entity” and to seize and forfeit terrorist funds. The law covers any finances in any way related to terrorism. The Act also provides the authority for the seizure of property used in the commission of a terrorist act; seizure and restraint of property that has been, is being or may be used to commit a terrorism offence; forfeiture of property on conviction of a terrorism offence; and forfeiture of property owned or controlled by terrorists. The Act requires financial institutions to report every three months on whether or not they are in possession of any property owned or controlled by or on behalf of a terrorist group. In addition, financial institutions must report every transaction that is suspected to be related to the financing of terrorism to the ONDCP. The Attorney General may revoke or deny the registration of a charity or nonprofit organization if it is believed funds from the organization are being used for financing terrorism. The GOAB circulates lists of terrorists and terrorist entities to all financial institutions in Antigua and Barbuda. No known evidence of terrorist financing has been discovered in Antigua and Barbuda to date. The GOAB does not believe indigenous alternative remittance systems exist in country, and has not undertaken any specific initiatives focused on the misuse of charities and nonprofit entities

The GOAB continues its bilateral and multilateral cooperation in various criminal and civil investigations and prosecutions. As a result of such cooperation, both the United States and Canada have shared forfeited assets with the GOAB on several occasions. The amended Banking Act 2004 enables the ECCB to share information directly with foreign regulators if a memorandum of understanding is established. In 1999, a Mutual Legal Assistance Treaty (MLAT) and an extradition treaty with the United States entered into force. An extradition request related to a fraud and money laundering investigation remains pending under the treaty. The GOAB signed a Tax Information Exchange Agreement with the United States in December 2001 that allows the exchange of tax information between the two nations.

Antigua and Barbuda is a member of the Caribbean Financial Action Task Force (CFATF) and will undergo a mutual evaluation in early 2008. Antigua and Barbuda is also a member of the Organization of American States Inter-American Drug Abuse Control Commission Experts Group to Control Money Laundering (OAS/CICAD). The GOAB is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, the International Convention for the Suppression of the Financing of Terrorism, and the Inter-American Convention against Terrorism. The ONDCP is a member of the Egmont Group.

The Government of Antigua and Barbuda has taken steps to combat money laundering and terrorist financing by passing relevant legislation that applies to both domestic and offshore financial institutions, and establishing a thorough regulatory regime. However, the GOAB should implement and enforce all provisions of its anti-money laundering and counter-terrorist financing legislation, including the supervision of its offshore sector and gaming industry. Despite the comprehensive nature of the law, Antigua and Barbuda has yet to prosecute a money laundering case and there are few arrests or prosecutions. The GOAB should conduct more thorough investigations that could lead to higher numbers of arrests, prosecutions, and convictions. Law enforcement and customs authorities should be trained to recognize money laundering typologies that fall outside the formal financial sector. The GOAB should continue its international cooperation, particularly with regard to the timely sharing of statistics, information related to offshore institutions, and seized assets.

Argentina

Argentina is neither an important regional financial center nor an offshore financial center. Money laundering related to narcotics trafficking, corruption, contraband, and tax evasion is believed to occur throughout the financial system, in spite of the efforts of the Government of Argentina (GOA) to stop it. The financial sector’s continuing recovery from the 2001-02 financial crisis and post-crisis capital controls may have reduced the incidence of money laundering through the banking system. However, transactions conducted through nonbank sectors and professions, such as the insurance industry, financial advisors, accountants, notaries, trusts, and companies, real or shell, remain viable mechanisms to launder illicit funds. Tax evasion is the predicate crime in the majority of Argentine money laundering investigations. Argentina has a long history of capital flight and tax evasion, and Argentines hold billions of dollars offshore, much of it legitimately earned money that was never taxed.

In 2007, the Argentine Congress passed legislation criminalizing terrorism and terrorist financing. Law 26.268, “Illegal Terrorist Associations and Terrorism Financing”, entered into effect in mid-July. The law amends the Penal Code and Argentina’s anti-money laundering law, Law No. 25.246, to criminalize acts of terrorism and terrorist financing, and establish terrorist financing as a predicate offense for money laundering. Persons convicted of terrorism are subject to a prison sentence of five to 20 years, and those convicted of financing terrorism are subject to a five to 15 year sentence. The new law provides the legal foundation for Argentina’s financial intelligence unit (the Unidad de Información Financiera, or UIF), Central Bank, and other regulatory and law enforcement bodies to investigate and prosecute such crimes. The adoption of counter-terrorist financing legislation effectively removes Argentina from the Financial Action Task Force’s (FATF) follow-up process, which began in 2004 to address deficiencies in the GOA’s anti-money laundering and counter-terrorist financing (AML/CTF) regime. With the passage of Law 26.268, Argentina also joins Chile, Colombia, and Uruguay as the only countries in South America to have criminalized terrorist financing.

On September 11, 2007, President Nestor Kirchner signed into force the National Anti-Money Laundering and Counter-Terrorism Finance Agenda. The overall goal of the National Agenda is to serve as a roadmap for fine-tuning and implementing existing money laundering and terrorist financing laws and regulations. The Agenda’s 20 individual objectives focus on closing legal and regulatory loopholes and improving interagency cooperation. The next challenge is for Argentine law enforcement and regulatory institutions, including the Central Bank and UIF, to implement the National Agenda and aggressively enforce the newly strengthened and expanded legal, regulatory, and administrative measures available to them to combat financial crimes.

Argentina’s primary anti-money laundering legislation is Law 25.246 of May 2000. Law 25.246 expands the predicate offenses for money laundering to include all crimes listed in the Penal Code, sets a stricter regulatory framework for the financial sectors, and creates the UIF under the Ministry of Justice and Human Rights. The law requires customer identification, record keeping, and reporting of suspicious transactions by all financial entities and businesses supervised by the Central Bank, the Securities Exchange Commission (Comisión Nacional de Valores, or CNV), and the National Insurance Superintendence (Superintendencia de Seguros de la Nación, or SSN). The law forbids institutions to notify their clients when filing suspicious transaction reports (STRs), and provides a safe harbor from liability for reporting such transactions. Reports that are deemed by the UIF to warrant further investigation are forwarded to the Attorney General’s Office.

Law 26.087 of March 2006 amends and modifies Law 25.246 to address many previous deficiencies in Argentina’s anti-money laundering regime. It makes substantive improvements to existing law, including lifting bank, stock exchange, and professional secrecy restrictions on filing suspicious activity reports; partially lifting tax secrecy provisions; clarifying which courts can hear requests to lift tax secrecy requests; and requiring court decisions within 30 days. Law 26.087 also lowers the standard of proof required before the UIF can pass cases to prosecutors, and eliminates the so-called “friends and family” exemption contained in Article 277 of the Argentine Criminal Code for cases of money laundering, while narrowing the exemption in cases of concealment. Overall, the law clarifies the relationship, jurisdiction, and responsibilities of the UIF and the Attorney General’s Office, and improves information sharing and coordination. The law also reduces restrictions that have prevented the UIF from obtaining information needed for money laundering investigations by granting greater access to STRs filed by banks. However, the law does not lift financial secrecy provisions on records of large cash transactions, which are maintained by banks when customers conduct a cash transaction exceeding 10,000 pesos (approximately U.S. $3,200).

In September 2006, Congress passed Law 26.119, which amends Law 25.246 to modify the composition of the UIF. The law reorganized the UIF’s executive structure, changing it from a five-member directorship with rotating presidency to a structure that has a permanent, politically-appointed president and vice-president. Law 26.119 also established a UIF Board of Advisors, comprised of representatives of key government entities, including the Central Bank, AFIP, the Securities Exchange Commission, the national counternarcotics secretariat (SEDRONAR), and the Justice, Economy, and Interior Ministries. The Board of Advisors’ opinions on UIF decisions and actions are nonbinding.

The UIF has issued resolutions widening the range of institutions and businesses required to report suspicious or unusual transactions beyond those identified in Law 25.246. Obligated entities include the tax authority (Administración Federal de Ingresos Publicos, or AFIP), Customs, banks, currency exchange houses, casinos, securities dealers, insurance companies, postal money transmitters, accountants, notaries public, and dealers in art, antiques and precious metals. The resolutions issued by the UIF also provide guidelines for identifying suspicious or unusual transactions. All suspicious or unusual transactions, regardless of the amount, must be reported directly to the UIF. Obligated entities are required to maintain a database of information related to client transactions, including suspicious or unusual transaction reports, for at least five years and must respond to requests from the UIF for further information within 48 hours. As of September 30, 2007, the UIF had received 2851 reports of suspicious or unusual activities since its inception in 2002, forwarded 165 suspected cases of money laundering to prosecutors for review, and assisted prosecutors with 121 cases. There have been only two money laundering convictions in Argentina since money laundering was first criminalized in 1989, and none since the passage of Law 25.246 in 2000.

The Central Bank requires by resolution that all banks maintain a database of all transactions exceeding 10,000 pesos, and periodically submit the data to the Central Bank. Law 25.246 requires banks to make available to the UIF upon request records of transactions involving the transfer of funds (outgoing or incoming), cash deposits, or currency exchanges that are equal to or greater than 10,000 pesos (approximately U.S. $3200). The UIF further receives copies of the declarations to be made by all individuals (foreigners or Argentine citizens) entering or departing Argentina with over U.S. $10,000 in currency or monetary instruments. These declarations are required by Resolutions 1172/2001 and 1176/2001, which were issued by the Argentine Customs Service in December 2001. In 2003, the Argentine Congress passed Law 22.415/25.821, which would have provided for the immediate fine of 25 percent of the undeclared amount, and for the seizure and forfeiture of the remaining undeclared currency and/or monetary instruments. However, the President vetoed the law because it allegedly conflicted with Argentina’s commitments to MERCOSUR (Common Market of the Southern Cone).

Although the GOA has passed a number of new laws in recent years to improve its AML/CTF regime, Law 25.246 still limits the UIF’s role to investigating only money laundering arising from seven specific crimes. The law also defines money laundering as an aggravation after the fact of the underlying crime. A person who commits a crime cannot be independently prosecuted for laundering money obtained from the crime; only someone who aids the criminal after the fact in hiding the origins of the money can be guilty of money laundering. Another impediment to Argentina’s anti-money laundering regime is that only transactions (or a series of related transactions) exceeding 50,000 pesos (approximately U.S. $16,000) can constitute money laundering. Transactions below 50,000 pesos can constitute only concealment, a lesser offense.

In 2006 and 2007, the National Coordination Unit in the Ministry of Justice and Human Rights became fully functional, managing the government’s AML/CTF efforts and representing Argentina at the FATF and the Financial Action Task Force for South America (GAFISUD). The Attorney General’s special investigative unit set up to handle money laundering and terrorism finance cases began operations in 2007. The proposal by the Argentine Banking Superintendence to create a specialized anti-money laundering and counter-terrorism finance examination program is awaiting authorization and is not yet operational.

Argentina’s Narcotics Law of 1989 authorizes the seizure of assets and profits, and provides that these or the proceeds of sales will be used in the fight against illegal narcotics trafficking. Law 25.246 provided that proceeds of assets forfeited under this law can also be used to fund the UIF.

Prior to the passage of terrorist financing legislation in June 2007, the Central Bank was the lead Argentine entity responsible for issuing regulations on combating the financing of terrorism. The Central Bank issued Circular A 4273 in 2005 (titled “Norms on ‘Prevention of Terrorist Financing’”), requiring banks to report any detected instances of the financing of terrorism. The Central Bank regularly updates and modifies the original Circular. The Central Bank of Argentina also issued Circular B-6986 in 2004, instructing financial institutions to identify and freeze the funds and financial assets of the individuals and entities listed on the list of Specially Designated Global Terrorists designated by the United States pursuant to E.O. 13224. It modified this circular with Resolution 319 in October 2005, which expands Circular B-6986 to require financial institutions to check transactions against the terrorist lists of the United Nations, United States, European Union, Great Britain, and Canada. No assets have been identified or frozen to date. The GOA and Central Bank assert that they remain committed to freezing assets of terrorist groups identified by the United Nations if detected in Argentine financial institutions.

In December 2006, the U.S. Department of Treasury designated nine individuals and two entities that have provided financial or logistical support to Hizballah and operate in the territory of neighboring countries that border Argentina. This region is commonly referred to as the Tri-Border Area, between Argentina, Brazil, and Paraguay. According to the designation, the nine individuals have provided financial support and other services for Specially Designated Global Terrorist Assad Ahmad Barakat, who was previously designated by the U.S. Treasury in June 2004 for his support to Hizballah leadership. The two entities, Galeria Page and Casa Hamze, are located in Ciudad del Este, Paraguay, and have been used in generating or moving terrorist funds. The GOA joined the Brazilian and Paraguayan governments in publicly disagreeing with the designations, stating that the United States had not provided new information proving terrorist financing activity is occurring in the Tri-Border Area.

Working with the U.S. Department of Homeland Security’s Office of Immigration and Customs Enforcement (ICE), Argentina has established a Trade Transparency Unit (TTU). The TTU examines anomalies in trade data that could be indicative of customs fraud and international trade-based money laundering. The TTU has discovered a major discrepancy in import-export data and is supporting an on-going investigation. One key focus of the TTU, as well as of other TTUs in the region, will be financial crimes occurring in the Tri-Border Area. The creation of the TTU was a positive step towards complying with FATF Special Recommendation VI on terrorist financing via alternative remittance systems. Trade-based systems often use fraudulent trade documents and over and under invoicing schemes to provide counter valuation in value transfer (hawala) and settling accounts.

The GOA remains active in multilateral counternarcotics and international AML/CTF organizations. It is a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, the FATF and GAFISUD. The GOA is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, the Inter-American Convention against Terrorism, the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption. Argentina participates in the “3 Plus 1” Security Group (formerly the Counter-Terrorism Dialogue) between the United States and the Tri-Border Area countries. The UIF has been a member of the Egmont Group since July 2003, and has signed memoranda of understanding regarding the exchange of information with a number of other financial intelligence units. The GOA and the USG have a Mutual Legal Assistance Treaty that entered into force in 1993, and an extradition treaty that entered into force in 2000.

With passage of counter-terrorist financing legislation and strengthened mechanisms available under Laws 26.119, 26.087, and 25.246, Argentina has the legal and regulatory capability to combat and prevent money laundering and terrorist financing. Furthermore, the new national anti-money laundering and counter-terrorist financing agenda provides the structure for the Government of Argentina to improve existing legislation and regulation, and enhance inter-agency coordination. The challenge now is for Argentine law enforcement and regulatory agencies and institutions, including the Ministry of Justice, Central Bank, and UIF, to implement the National Agenda and aggressively enforce the newly strengthened and expanded legal, regulatory, and administrative measures available to them to combat financial crimes. The GOA could further improve its legal and regulatory structure by enacting legislation to expand the UIF’s role to enable it to investigate money laundering arising from all crimes, rather than just seven enumerated crimes; establishing money laundering as an autonomous offense; and eliminating the current monetary threshold of 50,000 pesos (approximately U.S. $16,000) required to establish a money laundering offense. To comply with the FATF recommendation on the regulation of bulk money transactions, Argentina should review the legislation vetoed in 2003 to find a way to regulate such transactions consistent with its MERCOSUR obligations. Other continuing priorities are the effective sanctioning of officials and institutions that fail to comply with the reporting requirements of the law, the pursuit of a training program for all levels of the criminal justice system, and the provision of the necessary resources to the UIF to carry out its mission. There is also a need for increased public awareness of the problem of money laundering and its connection to narcotics, corruption, and terrorism.

Aruba

Aruba is an autonomous and largely self-governing Caribbean island under the sovereignty of the Kingdom of the Netherlands; foreign, defense and some judicial functions are handled at the Kingdom level. Due to its geographic location, casinos, and free trade zones, Aruba is both attractive and vulnerable to narcotics trafficking and money laundering.

Aruba has four commercial and two offshore banks, one mortgage bank, one credit union, an investment bank, a finance company, and eleven casinos. The island also has four registered money transmitters, two exempted U.S. money transmitters (Money Gram and Western Union), eight life insurance companies, 13 general insurance companies, four captive insurance companies, and 11 company pension funds. There are approximately 5,343 limited liability companies (NVs), of which 372 are offshore limited liability companies or offshore NVs, which may operate until 2008. In addition, there are approximately 2,763 Aruba Exempt Companies (AECs), which mainly serve as vehicles for tax minimization, corporate revenue routing, and asset protection and management.

The offshore NVs and the AECs are the primary methods used for international tax planning in Aruba. The offshore NVs pay a small percentage tax and are subject to more regulation than the AECs. The AECs pay an annual U.S. $280 registration fee and must have a minimum of U.S. $6,000 in authorized capital. Both offshore NVs and AECs can issue bearer shares. A local managing director is required for offshore NVs. The AECs must have a local registered agent, which must be a trust company.

In 2001, the Government of Aruba (GOA) made a commitment to the Organization for Economic Cooperation and Development (OECD), in connection with the Harmful Tax Practices initiative, to modernize fiscal legislation in line with OECD standards. In 2003, the GOA introduced a New Fiscal Regime (NFR) containing a dividend tax and imputation payment. As of July 1, 2003, the incorporation of low tax offshore NVs was halted. The NFR contains a specific exemption for the AECs. Nevertheless, as a result of commitments to the OECD, the regime was brought in line with OECD standards as of January 2006. As a result of the NFR, Aruba’s offshore regime will cease operations by July 1, 2008.

Aruba currently has three designated free zones: Oranjestad Free Zone, Bushiri Free Zone, and the Barcadera Free Zone. The free zones are managed and operated by Free Zone Aruba (FZA) NV, a government limited liability company. Originally, only companies involved in trade or light industrial activities, including servicing, repairing and maintenance of goods with a foreign destination, could be licensed to operate within the free zones. However, State Ordinance Free Zones 2000 extended licensing to service-oriented companies (excluding financial services). Before being admitted to operate in the free zone, companies must submit a business plan along with personal data of managing directors, shareholders, and ultimate beneficiaries, and must establish a limited liability company founded under Aruban law intended exclusively for free zone operations. Aruba took the initiative in the Caribbean Financial Action Task Force (CFATF) to develop regional standards for free zones in an effort to control trade-based money laundering. The guidelines were adopted at the CFATF Ministerial Council in October 2001. Free Zone Aruba NV is continuing the process of implementing and auditing the standards that have been developed.

The Central Bank of Aruba is the supervisory and regulatory authority for credit institutions, insurance companies, company pension funds, and money transfer companies. The State Ordinance on the Supervision of Insurance Business (SOSIB) brought all insurance companies under the supervision of the Central Bank. The insurance companies already active before the introduction of this ordinance were also required to obtain a license from the Central Bank. The State Ordinance on the Supervision of Money-Transfer Companies, effective August 2003, places money transfer companies under the supervision of the Central Bank. Quarterly reporting requirements became effective in 2004. A State Ordinance on the supervision of trust companies, which will designate the Central Bank as the supervisory authority, is currently being drafted.

Aruba’s State Ordinance on the penalization money laundering of 1993 (AB 1993 no. 70) was repealed in 2006 through amendments to the Penal Code (AB 2006 no. 11). The GOA’s anti-money laundering legislation extends to all crimes, and the Penal Code allows for conviction-based forfeiture of assets. All financial and nonfinancial institutions, which include banks, money remitters, brokers, insurance companies, and casinos, are obligated to identify clients that conduct transactions over 20,000 Aruban guilders (approximately U.S. $11,300), and report suspicious transactions to Aruba’s financial intelligence unit (FIU), the Meldpunt Ongebruikelijke Transacties (MOT). Obligated entities are protected from liability for reporting suspicious transactions. The GOA’s anti-money laundering requirements do not extend to such nonfinancial businesses and professions as lawyers, accountants, the real estate sector, or dealers in precious metals and jewels.

The MOT was established in 1996. The MOT is authorized to inspect all obligated entities for compliance with reporting requirements for suspicious transactions and the identification requirements for all financial transactions. The MOT is currently staffed by 10 employees. In 2007, the MOT received approximately 5,715 suspicious transaction reports (STRs), resulting in 180 investigations conducted and 47 cases transferred to the appropriate authorities. The MOT reports that very few STRs are filed by the gaming and insurance sectors.

In June 2000, Aruba enacted a State Ordinance making it a legal requirement to report the cross-border transportation of currency in excess of 20,000 Aruban guilders to the customs department. The law also applies to express courier mail services. Reports generated are forwarded to the MOT to review, and in 2007, approximately 820 such reports were submitted.

The MOT shares information with other national government departments. In April 2003, the MOT signed an information exchange agreement with the Aruba Tax Office, which is in effect and being implemented. The MOT and the Central Bank have also signed an information exchange memorandum of understanding (MOU), effective January 2006. The MOT is not linked electronically to the police or prosecutor’s office. The MOT is a member of the Egmont Group and is authorized by law to share information with members of the Egmont Group through MOUs.

In 2004, the Penal Code of Aruba was modified to criminalize terrorism, the financing of terrorism, and related criminal acts. The GOA has a local committee comprised of officials from different departments of the Aruban Government, under the leadership of the MOT, to oversee the implementation of Financial Action Task Force (FATF) Forty Recommendations and Nine Special Recommendations on terrorist financing. The local committee, FATF Committee Aruba, reviewed the GOA anti-money laundering legislation and proposed, in accordance with the nine FATF Special Recommendations on Terrorist Financing, amendments to existing legislation and introduction of new laws. In 2007, the Parliament of Aruba approved the Ordinance on Sanctions 2006 (AB 2007 no. 24), to enhance the GOA’s compliance with the FATF Special Recommendations. The GOA and the Netherlands formed a separate committee in 2004 to ensure cooperation of agencies within the Kingdom of the Netherlands in the fight against cross-border organized crime and international terrorism.

The bilateral agreement between the Netherlands and the United States Government (USG) regarding mutual cooperation in the tracing, freezing, seizure, and forfeiture of proceeds and instrumentalities of crime and the sharing of forfeited assets, which entered into force in 1994, applies to Aruba. The Mutual Legal Assistance Treaty between the Netherlands and the USG also applies to Aruba, though it is not applicable to requests for assistance relating to fiscal offenses addressed to Aruba. The Tax Information Exchange Agreement with the United States, signed in November 2003, became effective in September 2004.

The Netherlands extended application of the 1988 UN Drug Convention to Aruba in 1999, the UN International Convention for the Suppression of the Financing of Terrorism in 2005, and the UN Convention against Transnational Organized Crime in 2007. The Netherlands has not yet extended application of the UN Convention against Corruption to Aruba. Aruba participates in the FATF and the FATF mutual evaluation program as part of the Kingdom of the Netherlands. The GOA is also a member of CFATF. The MOT became a member of the Egmont Group in 1997. Aruba is also a member of the Offshore Group of Banking Supervisors.

The Government of Aruba has shown a commitment to combating money laundering and terrorist financing by establishing an anti-money laundering and counter-terrorist financing regime that is generally consistent with the recommendations of the FATF and CFATF. Aruba should take additional steps to immobilize bearer shares under its fiscal framework and to enact its long-pending ordinance addressing the supervision of trust companies. The GOA should ensure that all obligated entities are fully complying with their anti-money laundering and counter-terrorist financing reporting requirements, and consider extending these reporting requirements to designated nonfinancial businesses and professions.

Australia

Australia is one of the major centers for capital markets in the Asia-Pacific region. In 2006-07, turnover across Australia’s over-the-counter and exchange-traded financial markets was AU $120 trillion (approximately U.S. $108 trillion). Australia’s total stock market capitalization is over AU $1.63 trillion (approximately U.S. $1.5 trillion), making it the eighth largest market in the world, and the third largest in the Asia-Pacific region behind Japan and Hong Kong. Australia’s foreign exchange market is ranked seventh in the world by turnover, with the U.S. dollar and the Australian dollar the fourth most actively traded currency pair globally. While narcotics offences provide a substantial source of proceeds of crime, the majority of illegal proceeds are derived from fraud-related offences. A 2004 Australian Government estimate suggests that the amount of money laundered in Australia is in the vicinity of AU $4.5 billion (approximately U.S. $4 billion) per year.

The Government of Australia (GOA) has maintained a comprehensive system to detect, prevent, and prosecute money laundering. The last five years have seen a noticeable increase in activities investigated by Australian law enforcement agencies that relate directly to offenses committed overseas. Australia’s system has evolved over time to address new money laundering and terrorist financing risks identified through continuous consultation between government agencies and the private sector.

In March 2005, the Financial Action Task Force (FATF) conducted its on-site Mutual Evaluation (FATFME) of Australia’s anti-money laundering/counter-terrorist financing (AML/CTF) system. Australia was one of the first member countries to be evaluated under FATF’s revised recommendations. The FATF’s findings from the mutual evaluation of Australia were published in October 2005; and Australia was found to be compliant or largely complaint with just over half of the FATF Recommendations. The FATFME noted that although Australia “has a comprehensive money laundering offense . . . the low number of prosecutions . . . indicates . . . that the regime is not being effectively implemented.”

In response, the GOA has committed to reforming Australia’s AML/CTF system to implement the revised FATF Forty plus Nine recommendations. The Attorney General’s Department (AGD) is coordinating this process, now underway, which is significantly reshaping Australia’s AML/CTF regime and bringing it into line with current international best practices.

Australia criminalized money laundering related to serious crimes with the enactment of the Proceeds of Crime Act 1987. This legislation also contained provisions to assist investigations and prosecution in the form of production orders, search warrants, and monitoring orders. It was superseded by two acts that came into force on January 1, 2003 (although proceedings that began prior to that date under the 1987 law will continue under that law). The Proceeds of Crime Act 2002 provides for civil forfeiture of proceeds of crime as well as for continuing and strengthening the existing conviction-based forfeiture scheme that was in the Proceeds of Crime Act 1987. The Proceeds of Crime Act 2002 also enables freezing and confiscation of property used in, intended to be used in, or derived from, terrorism offenses. It is intended to implement obligations under the UN International Convention for the Suppression of the Financing of Terrorism and resolutions of the UN Security Council relevant to the seizure of terrorism-related property. The Act also provides for forfeiture of literary proceeds where these have been derived from commercial exploitation of notoriety gained from committing a criminal offense.

The Proceeds of Crime (Consequential Amendments and Transitional Provisions) Act 2002 (POCA 2002), repealed the money laundering offenses that had previously been in the Proceeds of Crime Act 1987 and replaced them with updated offenses that have been inserted into the Criminal Code. The new offenses in Division 400 of the Criminal Code specifically relate to money laundering and are graded according both to the level of knowledge required of the offender and the value of the property involved in the activity constituting the laundering. As a matter of policy all very serious offenses are now gradually being placed in the Criminal Code. POCA 2002 also enables the prosecutor to apply for the restraint and forfeiture of property from proceeds of crime. POCA 2002 further creates a national confiscated assets account from which, among other things, various law enforcement and crime prevention programs may be funded. Recovered proceeds can be transferred to other governments through equitable sharing arrangements.

The Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act) received Royal Assent on December 12, 2006 and was subsequently amended on April 12, 2007. The Act forms part of a legislative package that implements the first tranche of reforms to Australia’s AML/CTF regulatory regime. The AML/CTF Act covers the financial sector, gambling sector, bullion dealers and any other professionals or businesses that provide particular ‘designated services’. The Act imposes a number of obligations on entities that provide designated services, including customer due diligence, reporting obligations, record keeping obligations, and the requirement to establish and maintain an AML/CTF program. The AML/CTF Act implements a risk-based approach to regulation and the various obligations under the Act will be implemented over a two-year period (the final components will commence in December 2008). The legislative framework authorizes operational details to be settled in AML/CTF Rules, which will be developed by the Australian Transaction Reports and Analysis Centre (AUSTRAC) in consultation with industry. During 2006-07, AUSTRAC published 16 Rules relating to the AML/CTF Act, all developed in consultation with industry. AUSTRAC has also published a number of guidance notes for entities, including guidance regarding correspondent banking and providers of designated remittance services.

In 2007, the Australian Government began work on a second tranche of AML/CTF reforms, which will extend regulatory obligations to designated services provided by real estate agents, dealers in precious stones and metals, and specified legal, accounting, trust and company services (lawyers and accountants were included in the first tranche, but only where they compete with the financial sector and not for general services). The AGD has actively engaged with a broad cross-section of entities and interest groups regarding the proposed reforms.

The AML/CTF Act will gradually replace the Financial Transaction Reports Act 1988 (FTR Act) which currently operates concurrently to the AML/CTF Act, providing certain AML/CTF obligations until the various provisions of the new act are fully implemented. The FTR Act was enacted to combat tax evasion, money laundering, and serious crimes and it requires banks and nonbanking financial entities (collectively referred to as cash dealers) to verify the identities of all account holders and signatories to accounts, and to retain the identification record, or a copy of it, for seven years after the day on which the relevant account is closed. A cash dealer, or an officer, employee, or agent of a cash dealer, is protected against any action, suit, or proceeding in relation to the reporting process. The FTR Act also establishes reporting requirements for Australia’s cash dealers. Required to be reported are: suspicious transactions, cash transactions equal to or in excess of AU $10,000 (approximately U.S. $9,000), and all international funds transfers into or out of Australia, regardless of value. The FTR Act also obliges any person causing an international movement of currency of Australian AU $10,000 (or a foreign currency equivalent) or more, into or out of Australia, either in person, as a passenger, by post or courier to make a report of that transfer. When the reporting obligations of the AML/CTF Act are implemented in December 2008, reporting entities will be required to report suspicious matters (which is broader than the current obligation to report suspect transactions), international funds transfers, and threshold transactions (more than AU $10,000), as well as being obliged to report details of their compliance with the AML/CTF legislation in the form of compliance reports.

FTR Act reporting also applies to nonbank financial institutions such as money exchangers, money remitters, stockbrokers, casinos and other gambling institutions, bookmakers, insurance companies, insurance intermediaries, finance companies, finance intermediaries, trustees or managers of unit trusts, issuers, sellers, and redeemers of travelers checks, bullion sellers, and other financial services licensees. Solicitors (lawyers) are also required to report significant cash transactions. Accountants do not have any FTR Act obligations. However, they do have an obligation under a self-regulatory industry standard not to be involved in money laundering transactions.

AUSTRAC was established under the FTR Act and is continued in existence by the AML/CTF Act. AUSTRAC is Australia’s AML/CTF regulator and specialist financial intelligence unit (FIU). AUSTRAC collects, retains, compiles, analyzes, and disseminates financial transaction report (FTR) information. AUSTRAC also provides advice and assistance to revenue collection, social justice, national security, and law enforcement agencies, and issues guidelines to regulated entities regarding their obligations under the FTR Act, AML/CTF Act and the Regulations and Rules. Under the AML/CTF Act, AUSTRAC now has an expanded role as the national AML/CTF regulator with supervisory, monitoring and enforcement functions over a diverse range of business sectors. As such, AUSTRAC plays a central role in Australia’s AML system both domestically and internationally. During the 2006-07 Australian financial year, AUSTRAC’s FTR information was used in 1,529 operational matters. Results from the Australian Taxation Office (ATO) shows that the FTR information contributed to more than AU $87 million (approximately U.S. $77 million) in ATO assessments during the year. In 2006-07, AUSTRAC received 15,740,744 financial transaction reports, with 99.7 percent of the reports submitted electronically through the EDDS Web reporting system. AUSTRAC received 24,440 suspect transaction reports (SUSTRs), a decline of 1.5 percent following a 44.1 percent increase in the previous year.

During 2006-07, there was a significant increase in the total number of financial transaction reports received by AUSTRAC. Significant cash transactions reports (SCTRs) account for 17 percent of the total number of FTRs reported to AUSTRAC in 2006-07 and are reported by cash dealers and solicitors. In 2006-07, AUSTRAC received 2,675,050 SCTRs, an increase of 10.7 percent from the previous year. Cash dealers are also required to report all international funds transfer instructions (IFTIs) to AUSTRAC. Cash dealers reported 13,017,467 IFTIs to AUSTRAC during the financial year—a 14.0 percent increase from 2005-06. International currency transfer reports (ICTR) are primarily declared to the Australian Customs Service (ACS) by individuals when they enter or depart from Australia. AUSTRAC received 23,351 ICTRs—a 15.9 percent decrease from the previous financial year. The Infringement Notice Scheme (INS) is a new penalty-based scheme introduced in 2007 under the AML/CTF Act to strengthen Australia’s cross border movement procedures. An ACS or Australian Federal Police (AFP) officer can issue infringements at the border, where there is a failure to report a cross border movement of physical currency (CBM-PC) or the cross border movement of a bearer negotiable instrument (CBM-BNI; for example, travelers checks). The issuing of infringements for a failure to report a CBM-BNI is based on disclosure upon request rather than a declaration.

In April 2005, the Minister for Justice and Customs launched AUSTRAC’s AML eLearning application. This application has been well received by cash dealers as a tool in providing basic education on the process of money laundering, the financing of terrorism, and the role of AUSTRAC in identifying and assisting investigations of these crimes. In December 2007, the new Minister for Home Affairs launched three new tools to assist industry comply with their AML/CTF obligations, in addition to updating the eLearning application. AUSTRAC Online is a secure Internet-based system which assists entities adhere to their reporting and regulatory obligations, and enables them to access their own information. The AUSTRAC Regulatory Guide is an instructional and ‘living’ document that assists industry to understand and meet their AML/CTF obligations, which will be updated as further AML/CTF Act provisions are implemented. Lastly, the AUSTRAC Typologies and Case Studies Report 2007 was published to raise industry awareness regarding potential AML/CTF risk factors, methods and typologies.

The Australian Prudential Regulation Authority (APRA) is the prudential supervisor of Australia’s financial services sector. AUSTRAC regulates anti-money laundering/counter-terrorist financing (AML/CTF) compliance. The FATFME noted that a comprehensive system for AML/CTF compliance for the entire financial sector needed to be established by the GOA, as does an administrative penalty regime for AML/CTF noncompliance. As a result, the AML/CTF Act has given AUSTRAC a wide range of enhanced enforcement powers to complement the criminal sanctions that were available under the FTR Act. The AML/CTF Act now provides AUSTRAC with a civil penalty framework and other intermediate sanctions, such as enforceable undertakings, remedial directions and external audits for noncompliance. AUSTRAC has conducted very few compliance audits in recent years and places a great deal of emphasis on educating and continuously engaging the private sector regarding the evolution of AML/CTF regime and the attendant reporting requirements. During 2006-07, AUSTRAC conducted 78 educational visits to regulated entities to raise awareness of their obligations under the AML/CTF Act.

In June 2002, Australia passed the Suppression of the Financing of Terrorism Act 2002 (SFT Act). The aim of the SFT Act is to restrict the financial resources available to support the activities of terrorist organizations. This legislation criminalizes terrorist financing and substantially increases the penalties that apply when a person uses or deals with suspected terrorist assets that are subject to freezing. The SFT Act enhances the collection and use of financial intelligence by requiring cash dealers to report suspected terrorist financing transactions to AUSTRAC, and relaxes restrictions on information sharing with relevant authorities regarding the aforementioned transactions. The SFT Act also addresses commitments Australia has made with regard to the UNSCR 1373 and is intended to implement the UN International Convention for the Suppression of the Financing of Terrorism. Under this Act three accounts related to an entity listed on the UNSCR 1267 Sanction Committee’s consolidated list, the International Sikh Youth Federation, were frozen in September 2002. While there have been some charges laid for acts in preparation of terrorism, there have been no terrorist financing charges or prosecutions under this legislation. The Security Legislation Amendment (Terrorism) Act 2002 also inserted new criminal offenses in the Criminal Code for receiving funds from, or making funds available to, a terrorist organization.

The Anti-Terrorism Act (No.2) 2005 (AT Act), which took effect on December 14, 2006, amends offenses related to the funding of a terrorist organization in the Criminal Code so that they also cover the collection of funds for or on behalf of a terrorist organization. The AT Act also inserts a new offense of financing a terrorist. The AML/CTF Act further addressed terrorist financing by placing an obligation on providers of designated remittance services to register with AUSTRAC.

Investigations of money laundering reside with the AFP and Australian Crime Commission (Australia’s only national multi-jurisdictional law enforcement agency). The AFP is the primary law enforcement agency for the investigation of money-laundering and terrorist-financing offences in Australia at the Commonwealth level and has both a dedicated Financial Crimes Unit and well staffed Financial Investigative Teams (FIT) with primary responsibility for asset identification/restraint and forfeiture under the POCA 2002. The Commonwealth Director of Public Prosecutions (CDPP) prosecutes offences against Commonwealth law and to recover proceeds of Commonwealth crime. The main cases prosecuted by the CDPP involve drug importation and money laundering offences. One individual plead guilty to charges of money laundering in 2007, and legal proceedings are underway against a group of individuals arrested in late 2006 for involvement in a multi-million dollar money laundering operation.

In April 2003, the AFP established a Counter Terrorism Division to undertake intelligence-led investigations to prevent and disrupt terrorist acts. A number of Joint Counter Terrorism Teams (JCTT), including investigators and analysts with financial investigation skills and experience, are conducting investigations specifically into suspected terrorist financing in Australia. The AFP also works closely with overseas counterparts in the investigation of terrorist financing, and has worked closely with the FBI on matters relating to terrorist financing structures in South East Asia. In 2006, AFP introduced mandatory consideration of potential money laundering and crime proceeds into its case management processes, thereby ensuring that case officers explore the possibility of money laundering and crime proceeds actions in all investigations conducted by the AFP.

The GOA participates in the Strategic Alliance Group, also known as “5 Eyes”. This group of five countries include representatives from the UK Serious Organized Crime Agency (SOCA), the Royal Canadian Mounted Police (RCMP), the Australian Federal Police (AFP), the New Zealand Police (NZP), the United States Immigration and Customs Enforcement (ICE), the Drug Enforcement Administration (DEA), and the Federal Bureau of Investigation (FBI), all of whom analyze various genres of criminal activity and exchange information and best practices.

Australia is a party to the 1988 UN Drug Convention, the UN Convention for the Suppression of the Financing of Terrorism, and the UN Convention against Transnational Organized Crime and its protocol on migrant smuggling. In September 1999, a Mutual Legal Assistance Treaty between Australia and the United States entered into force. Australia participates actively in a range of international fora, including the FATF, the Pacific Islands Forum, and the Commonwealth Secretariat. Through its funding and hosting of the Secretariat of the Asia/Pacific Group on Money Laundering (APG), of which it serves as permanent co-chair, the GOA has elevated money laundering and terrorist financing issues to a priority concern among countries in the Asia/Pacific region. AUSTRAC is an active member of the Egmont Group of Financial Intelligence Units (FIUs). AUSTRAC has signed Exchange Instruments, mostly in the form of Memoranda of Understanding (MOUs) allowing the exchange of financial intelligence, with FinCEN and the FIUs of 48 other countries.

Following the bombings in Bali in October 2002, the Australian Government announced an AU $10 million (approximately U.S. $9 million) initiative managed by the Australian Agency for International Development (AusAID), to assist in the development of counterterrorism capabilities in Indonesia. As part of this initiative, the AFP has established a number of training centers such as the Jakarta Centre for Law Enforcement Cooperation. As part of Australia’s broader regional assistance initiatives, AUSTRAC continued its South East Asia Counter Terrorism Program of providing capacity building assistance to 10 South East Asian nations, to develop capacity in detecting and dealing with terrorist financing and money laundering. AUSTRAC is also providing further assistance in terms of IT system enhancements to the Indonesian FIU, PPATK (Indonesian Financial Transaction Reports and Analysis Center). In the Pacific region, AUSTRAC has developed and provided unique software and training for personnel to six Pacific island FIUs (Cook Islands, Solomon Islands, Samoa, Tonga, Palau and Vanuatu) to fulfill their domestic obligations and share information with foreign analogs. AUSTRAC is also undertaking IT Needs Assessments in Papua New Guinea and Nauru as part of its engagement with Pacific FIUs. AUSTRAC has worked collaboratively with the Fiji FIU to develop a larger scale information management system solution and enable the collection and analysis of financial transaction reports. The AGD received a grant of AUD7.7 million (approximately U.S. $6.9 million) over four years to establish the Anti-Money Laundering Assistance Team (AMLAT). AMLAT works cooperatively with the U.S. Department of State-funded Pacific Islands Anti-Money Laundering Program (PALP) to enhance AML/CTF regimes for Pacific island jurisdictions. The PALP, a four-year program, is managed by the Pacific Islands Forum (PIF) and employs residential mentors to develop or enhance existing AML/CTF regimes in the nonFATF member states of the PIF.

The GOA continues to pursue a comprehensive anti-money laundering/counter-terrorist financing regime that meets the objectives of the revised FATF Forty Recommendations and Nine Special Recommendations on Terrorist Financing. To enhance its AML/CTF regime, as noted in the FATF mutual evaluation, AUSTRAC has been provided with substantially increased powers to ensure compliance. There will be more on-site compliance audits and AUSTRAC can require regular compliance reports from reporting entities; can initiate monitoring orders and statutory demands for information and documents; can seek civil penalty orders, remedial directions and injunctions; and, can require a reporting entity to subject itself to an external audit of its AML/CTF program. The AML/CTF Act also provides for greater coordination amongst the regulatory agencies of its financial, securities and insurance sectors.

The GOA is continuing its exemplary leadership role in emphasizing money laundering/terrorist finance issues and trends within the Asia/Pacific region and its commitment to providing training and technical assistance to the jurisdictions in that region. Having significantly enhanced its increased focus on AML/CTF deterrence, the Government of Australia should increase its efforts to prosecute and convict money launderers.

Austria

As a major financial center, Austrian banking groups control significant shares of the banking markets in Central, Eastern and Southeastern Europe. According to Austrian National Bank statistics, Austria has one of the highest numbers of banks and bank branches per capita in the world, with about 870 banks and one bank branch for every 1,605 people. Austria is not an offshore jurisdiction. Money laundering occurs within the Austrian banking system as well as in nonbank financial institutions and businesses. The percentage of undetected organized crime may be enormous, with much of it reportedly coming from the former Soviet Union. Money laundered by organized crime groups derives primarily from serious fraud, corruption, narcotics trafficking and trafficking in persons. Criminal groups use various instruments to launder money, including informal money transfer systems, the Internet, and offshore companies.

Austria criminalized money laundering in 1993. Predicate offenses include terrorist financing and other serious crimes. Regulations are stricter for money laundering by criminal organizations and terrorist “groupings,” because in such cases the law requires no proof that the money stems directly or indirectly from prior offenses.

Amendments to the Customs Procedures Act and the Tax Crimes Act of 2004 and 2006 address the problem of cash couriers and international transportation of currency and monetary instruments from illicit sources. Austrian customs authorities do not automatically screen all persons entering Austria for cash or monetary instruments. However, to implement the European Union (EU) regulation on controls of cash entering or leaving the EU, the Government of Austria (GOA) requires an oral or written declaration for cash amounts of 10,000 euros (approximately U.S. $13,500) or more. This declaration, which includes information on source and use, must be provided when crossing an external EU border. In December 2007 the new Schengen countries were adopted, making it possible to travel from Estonia to Portugal without border controls. Spot checks for currency at border crossings and on Austrian territory do occur. Customs officials have the authority to seize suspect cash, and will file a report with the Austrian Financial Intelligence Unit (FIU) in cases of suspected money laundering. Austria has no database for cash smuggling reports.

The Banking Act of 1994 creates customer identification, record keeping, and staff training obligations for the financial sector. Entities subject to the Banking Act include banks, leasing and exchange businesses, safe custody services, and portfolio advisers. The law requires financial institutions to identify all customers when beginning an ongoing business relationship. In addition, the Banking Act requires customer identification for all transactions of more than 15,000 euros (U.S. $20,250) for customers without a permanent business relationship with the bank. Identification procedures require that all customers appear in person and present an official photo identification card. These procedures also apply to trustees of accounts, who must disclose the identity of the account beneficiary. Procedures allow customers to carry out nonface-to-face transactions, including Internet banking, on the basis of a secure electronic signature or a copy of a picture ID and a legal business declaration submitted by registered mail.

To implement the EU’s Third Money Laundering Directive (Directive 2005/60/EC), an amendment to the Banking Act has been in effect since January 1, 2008. The new regulations will tighten customer identification procedures by requiring renewed identification in case of doubt about previously obtained ID documents or data as well as requiring personal appearances of trustees. Regulations will also require institutions to determine the identity of beneficial owners and introduce risk-based customer analysis for all customers. Financial institutions must also begin to implement these requirements in their subsidiaries abroad. The 2008 Banking Act amendment also broadens the reporting requirement by replacing “well-founded suspicion” with “suspicion or probable reason to assume” that a transaction serves the purpose of money laundering or terrorist financing or that a customer has violated his duty to disclose trustee relationships.

Enhanced due diligence obligations will apply if the customer has not been physically present for identification purposes (for example, nonface-to-face transactions, Internet banking), and with regard to cross-border correspondent banking relationships. In cases where a financial institution is unable to establish customer identity or obtain other required information on the business relationship, it must decline to enter into a business relationship or process a transaction, or terminate the business relationship. The institution must also consider reporting the case to the FIU. The law also requires financial institutions to keep records on customers and account owners. The Securities Supervision Act of 1996, which covers trade of securities, shares, money market instruments, options, and other instruments listed on an Austrian stock exchange or any regulated market in the EU, refers to the Banking Act’s identification regulations. The Insurance Act of 1997 includes similar regulations for insurance companies underwriting life policies. An amendment to the Insurance Act of 1997, in effect since January 1, 2008, tightened record keeping requirements for insurance companies.

The Banking Act includes a due diligence obligation, and the law holds individual bankers responsible if their institutions launder money. The Banking Act and other laws provide “safe harbor” to obligated reporting individuals, including bankers, auctioneers, real estate agents, lawyers, and notaries. The law excuses those who report from liability for damage claims resulting from delays in completing suspicious transactions. Although there is no requirement for banks to report large currency transactions, unless they are suspicious, the FIU provides outreach and information to banks to raise awareness of large cash transactions.

On January 1, 2008, responsibility for on-site inspections of banks, exchange businesses and money transmitters moved from the Financial Market Authority (FMA) to the Austrian National Bank. These on-site inspections, including inspections at subsidiaries abroad, are all-inclusive, and will require analysis of financial flows and compliance with money laundering regulations. Money remittance businesses require a banking license from the FMA and are subject to supervision. Informal remittance systems such as hawala exist in Austria, but are subject to administrative fines for carrying out banking business without a license. On its website, the FMA has published several circular letters with details on customer identification, money laun