International Narcotics Control Strategy Report -- Part II: Money Laundering and Financial Crimes

Morocco
March 2006

Morocco is not a regional financial center, and the extent of the money laundering problem in the country is not known. Morocco remains an important producer and exporter of cannabis, with estimated revenues of $13 billion annually, according to a joint study released in May 2005 by the United Nations Office on Drugs and Crime (UNODC) and Morocco’s Agency for the Promotion and the Economic and Social Development of the Northern Prefectures and Provinces of the Kingdom. Some of these proceeds may be laundered in Morocco and abroad. There is no indication that international or domestic terrorist networks have engaged in widespread use of the narcotics trade to finance terrorist organizations and operations in Morocco.

Morocco has a significant informal economic sector, including remittances from abroad and cash-based transactions. There are unverified reports of trade-based money laundering, including bulk cash smuggling, under-and over-invoicing, and the purchase of smuggled goods. Banking officials have indicated that the country’s system of unregulated money exchanges provides opportunities for potential launderers. Morocco has a free trade zone in Tangier, with customs exemptions for goods manufactured in the zone for export abroad. There have been no reports of trade-based money laundering schemes or terrorist financing activities using the Tangier free zone or the zone’s offshore banks, which are regulated by an interagency commission chaired by the Ministry of Finance. A Free Trade Agreement with the United States will go into effect in 2006.

There were no reported arrests or prosecutions for money laundering or terrorist financing in Morocco in 2005. Morocco has a relatively effective system for disseminating U.S. Government (USG) and United Nations Security Council Resolution (UNSCR) terrorist freeze lists to the financial sector and law enforcement. Morocco has provided detailed and timely reports requested by the UNSCR 1267 Sanctions Committee. A handful of small value accounts have been administratively frozen based on the U.S. list of Specially Designated Global Terrorists, designated pursuant to E.O. Executive Order 13224.

The Moroccan financial sector is modeled after the French system and consists of 16 banks, five government-owned specialized financial institutions, approximately 30 credit agencies, and 12 leasing companies. The monetary authorities in Morocco are the Ministry of Finance and the Central Bank, Bank Al Maghrib (CBM), which monitors and regulates the banking system. A separate Foreign Exchange Office regulates international transactions. Morocco has used administrative instruments and procedures to freeze suspect accounts.

The CBM issued Memorandum No. 36 in December 2003, in advance of the passage of still pending anti-money laundering legislation, instructing banks and other financial institutions to conduct their own internal analysis/investigations. It also mandates "know your customer" procedures, reporting of suspicious transactions and the retention of suspicious activity reports. Morocco also has in effect: legislation prohibiting anonymous bank accounts; foreign currency controls that require declarations to be filed when transporting currency across the border (although these are not strictly enforced); and internal bank controls designed to counter money laundering and other illegal/suspicious activities.

In June 2003, Morocco adopted a comprehensive counterterrorism bill that provided the legal basis for the lifting of bank secrecy to obtain information on suspected terrorists, freeze suspect accounts and prosecute terrorist finance-related crimes. The law also provides for the seizing and confiscation of terrorist assets and for international cooperation with regard to foreign requests for freezing assets of a suspected terrorist entity. This law was designed to bring Morocco into compliance with UNSCR 1373 requirements for the criminalization of the financing of terrorism.

As of December 2005, Morocco has enacted two banking/financial sector reform bills that will further strengthen Morocco’s anti-money laundering system. A specific anti-money laundering (AML) bill is in the process of being presented to Parliament for passage. The proposed law reportedly includes, among other provisions, a suspicious transaction reporting scheme and the creation of a Financial Intelligence Unit (FIU). All three bills are based on the Financial Action Task Force (FATF) Forty Recommendations and Egmont Group guidelines and will help bring Morocco’s financial sector in line with international standards.

Together, the three bills will enhance the supervisory and enforcement authority of the Central Bank and outline investigative and prosecutorial procedures. The Central Bank has already mandated "know your customer" requirements and the reporting of suspicious transactions by financial institutions. All money transfer activities that take place outside the realm of the official Moroccan banking system-as set by the CBM guidelines-are deemed illegal. The bills also expand the CBM’s regulatory authority over non-banking financial transactions. Other significant provisions include: the lifting of bank secrecy during investigations, as well as legal liability protection of bankers and investigators for cooperation during investigations.

Morocco is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of Financing of Terrorism, and the UN Convention against Transnational Organized Crime; in fact, Morocco has ratified or acceded to 11 of the 12 UN and international conventions and treaties related to counterterrorism. Morocco is a charter member of the Middle East and North Africa Financial Action Task Force (MENAFATF) that was inaugurated in Bahrain in November 2004. The MENAFATF is a FATF-style regional body. The creation of the MENAFATF is critical for pushing the region to improve the transparency and regulatory frameworks of its financial sectors.

Morocco should strengthen its AML capacity by moving expeditiously to pass the anti-money laundering bill. Upon passage of the AML legislation, and as part of a comprehensive anti-money laundering program, Morocco should establish a centralized Financial Intelligence Unit (FIU) that will receive and analyze suspicious transaction reports and disseminate them to appropriate law enforcement agencies for investigation.