Major Money Laundering Countries

Bureau of International Narcotics and Law Enforcement Affairs
Report

Every year, U.S. officials from agencies with AML responsibilities assess the money laundering situations in approximately 200 jurisdictions. The review includes an assessment of the significance of financial transactions in the country’s financial institutions involving proceeds of serious crime, steps taken or not taken to address financial crime and money laundering, each jurisdiction’s vulnerability to money laundering, the conformance of its laws and policies to international standards, the effectiveness with which the government has acted, and the government’s political will to take needed actions.

The 2014 INCSR identifies money laundering priority jurisdictions and countries using a classification system that consists of three different categories: Jurisdictions of Primary Concern, Jurisdictions of Concern, and Other Jurisdictions Monitored.

“Jurisdictions of Primary Concern” are those that are identified, pursuant to INCSR reporting requirements, as “major money laundering countries.” A major money laundering country is defined by statute as one “whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.” However, the complex nature of money laundering transactions today makes it difficult in many cases to distinguish the proceeds of narcotics trafficking from the proceeds of other serious crime. Moreover, financial institutions engaged in transactions that involve significant amounts of proceeds from other serious crimes are vulnerable to narcotics-related money laundering. The category “Jurisdiction of Primary Concern” recognizes this relationship by including all countries and other jurisdictions whose financial institutions engage in transactions involving significant amounts of proceeds from all serious crimes or are particularly vulnerable to such activity because of weak or nonexistent supervisory or enforcement regimes or weak political will. Thus, the focus in considering whether a country or jurisdiction should be included in this category is on the significance of the amount of proceeds laundered, not of the AML measures taken. This is a different approach than that of the Financial Action Task Force’s International Cooperation Review Group exercise, which focuses on a jurisdiction’s compliance with stated criteria regarding its legal and regulatory framework, international cooperation, and resource allocations. A government (e.g., the United States or the United Kingdom) can have comprehensive AML laws on its books and conduct aggressive AML enforcement efforts but still be classified a “Primary Concern” jurisdiction. In some cases, this classification may simply or largely be a function of the size and/or sophistication of the jurisdiction’s economy. In such jurisdictions, quick, continuous, and effective AML efforts by the government are critical.

All other countries and jurisdictions evaluated in the INCSR are separated into the two remaining groups, “Jurisdictions of Concern” and “Other Jurisdictions Monitored,” on the basis of several factors that may include: (1) whether the country’s financial institutions engage in transactions involving significant amounts of proceeds from serious crimes; (2) the extent to which the jurisdiction is or remains vulnerable to money laundering, notwithstanding its money laundering countermeasures, if any (an illustrative list of factors that may indicate vulnerability is provided below); (3) the nature and extent of the money laundering situation in each jurisdiction (e.g., whether it involves drugs or other contraband); (4) the ways in which the U.S. government regards the situation as having international ramifications; (5) the situation’s impact on U.S. interests; (6) whether the jurisdiction has taken appropriate legislative actions to address specific problems; (7) whether there is a lack of licensing and oversight of offshore financial centers and businesses; (8) whether the jurisdiction’s laws are being effectively implemented; and (9) where U.S. interests are involved, the degree of cooperation between the foreign government and the United States. Additionally, given concerns about the increasing interrelationship between inadequate money laundering legislation and terrorism financing, terrorism financing is an additional factor considered in making a determination as to whether a country should be considered a “Jurisdiction of Concern” or an “Other Jurisdiction Monitored.” While the actual money laundering problem in jurisdictions classified as “Jurisdictions of Concern” is not as acute as in those considered to be of “Primary Concern,” they too must undertake efforts to develop or enhance their AML regimes. Finally, while jurisdictions in the “Other Jurisdictions Monitored” category do not pose an immediate concern, it is nevertheless important to monitor their money laundering situations because, under certain circumstances, virtually any jurisdiction of any size can develop into a significant money laundering center.

Vulnerability Factors

The current ability of money launderers to penetrate virtually any financial system makes every jurisdiction a potential money laundering center. There is no precise measure of vulnerability for any financial system, and not every vulnerable financial system will, in fact, be host to large volumes of laundered proceeds. A checklist of factors that contribute to making a country or jurisdiction particularly vulnerable to money laundering or other illicit financial activity, however, provides a basic guide. The checklist includes, but is not limited to:

  • Failure to criminalize money laundering for all serious crimes or limiting the offense to narrow predicates.
  • Rigid bank secrecy rules that obstruct law enforcement investigations or that prohibit or inhibit large value and/or suspicious or unusual transaction reporting by both banks and non-bank financial institutions.
  • Lack of or inadequate know-your-customer requirements to open accounts or conduct financial transactions, including the permitted use of anonymous, nominee, numbered, or trustee accounts.
  • No requirement to disclose the beneficial owner of an account or the true beneficiary of a transaction.
  • Lack of effective monitoring of cross-border currency movements.
  • No reporting requirements for large cash transactions.
  • No requirement to maintain financial records over a specific period of time.
  • No mandatory requirement to report suspicious transactions, or a pattern of inconsistent reporting under a voluntary system, and a lack of uniform guidelines for identifying suspicious transactions.
  • Use of bearer monetary instruments.
  • Well-established non-bank financial systems, especially where regulation, supervision, and monitoring are absent or lax.
  • Patterns of evasion of exchange controls by legitimate businesses.
  • Ease of incorporation, in particular where ownership can be held through nominees or bearer shares, or where off-the-shelf corporations can be acquired.
  • No central reporting unit for receiving, analyzing, and disseminating to the competent authorities information on large value, suspicious, or unusual financial transactions that might identify possible money laundering activity.
  • Lack of or weak bank regulatory controls, or failure to adopt or adhere to the Basel Committee’s “Core Principles for Effective Banking Supervision,” especially in jurisdictions where the monetary or bank supervisory authority is understaffed, under-skilled, or uncommitted.
  • Well-established offshore financial centers or tax haven banking systems, especially jurisdictions where such banks and accounts can be readily established with minimal background investigations.
  • Extensive foreign banking operations, especially where there is significant wire transfer activity or multiple branches of foreign banks, or limited audit authority over foreign-owned banks or institutions.
  • Jurisdictions where charitable organizations or money or value transfer systems, because of their unregulated and unsupervised nature, are used as avenues for money laundering or terrorism financing.
  • Limited asset seizure or confiscation authority.
  • Limited narcotics, money laundering, and financial crime enforcement, and lack of trained investigators or supervisors.
  • Jurisdictions with free trade zones where there is little government presence or other supervisory authority.
  • Patterns of official corruption or a laissez-faire attitude toward the business and banking communities.
  • Jurisdictions where the U.S. dollar is readily accepted, especially jurisdictions where banks and other financial institutions allow dollar deposits.
  • Well-established access to international bullion trading centers in New York, Istanbul, Zurich, Dubai, and Mumbai.
  • Jurisdictions where there is significant trade in, or export of, gold, diamonds, and other gems.
  • Jurisdictions with large parallel or black market economies.
  • Limited or no ability to share financial information with foreign law enforcement authorities.

Changes in INCSR Priorities for 2013

Jurisdiction moving from the “Other Jurisdictions Monitored” column to the “Jurisdiction of Concern” column: Benin

In the Country/Jurisdiction Table directly below, “major money laundering countries” that are in the “Jurisdictions of Primary Concern” category are identified for purposes of INCSR statutory reporting requirements. Identification as a “major money laundering country” is based on whether the country or jurisdiction’s financial institutions engage in transactions involving significant amounts of proceeds from serious crime. It is not based on an assessment of the country or jurisdiction’s legal framework to combat money laundering; its role in the terrorism financing problem; or the degree of its cooperation in the international fight against money laundering, including terrorism financing. These factors, however, are included among the vulnerability factors when deciding whether to place a country or jurisdiction in the “Jurisdictions of Concern” or “Other Jurisdictions Monitored” category.

Note: Country reports are provided for only those countries and jurisdictions listed in the “Primary Jurisdictions of Concern” category

Countries and Jurisdictions Table

Countries/ Jurisdictions
of Primary Concern

Countries/Jurisdictions
of Concern

Other Countries/
Jurisdictions Monitored

Afghanistan

Latvia

Albania

Malaysia

Andorra

Mali

Antigua and Barbuda

Lebanon

Algeria

Marshall Islands

Anguilla

Malta

Argentina

Liechtenstein

Angola

Moldova

Armenia

Mauritania

Australia

Luxembourg

Aruba

Monaco

Bermuda

Mauritius

Austria

Macau

Azerbaijan

Mongolia

Botswana

Micronesia FS

Bahamas

Mexico

Bahrain

Montenegro

Brunei

Montserrat

Belize

Netherlands

Bangladesh

Morocco

Burkina Faso

Mozambique

Bolivia

Nigeria

Barbados

Nicaragua

Burundi

Namibia

Brazil

Pakistan

Belarus

Peru

Cabo Verde

Nauru

British Virgin Islands

Panama

Belgium

Poland

Cameroon

Nepal

Burma

Paraguay

Benin

Portugal

Central African Republic

New Zealand

Cambodia

Philippines

Bosnia and Herzegovina

Qatar

Chad

Niger

Canada

Russia

Bulgaria

Romania

Congo, Dem Rep of

Niue

Cayman Islands

Singapore

Chile

Saudi Arabia

Congo, Rep of

Norway

China, People Rep

Somalia

Comoros

Senegal

Croatia

Oman

Colombia

Spain

Cook Islands

Serbia

Cuba

Palau

Costa Rica

St. Maarten

Cote d'Ivoire

Seychelles

Denmark

Papua New Guinea

Curacao

Switzerland

Czech Republic

Sierra Leone

Dominica

Rwanda

Cyprus

Taiwan

Djibouti

Slovak Republic

Equatorial Guinea

Samoa

Dominican Republic

Thailand

Ecuador

South Africa

Eritrea

San Marino

France

Turkey

Egypt

St. Kitts and Nevis

Estonia

Sao Tome & Principe

Germany

Ukraine

El Salvador

St. Lucia

Ethiopia

Slovenia

 

Greece

United Arab Emirates

Ghana

St. Vincent

Fiji

Solomon Islands

Guatemala

United Kingdom

Gibraltar

Suriname

Finland

South Sudan

Guernsey

United States

Grenada

Syria

Gabon

Sri Lanka

Guinea Bissau

Uruguay

Guyana

Tanzania

Gambia

Sudan

Haiti

Venezuela

Holy See

Trinidad and Tobago

Georgia

Swaziland

Hong Kong

Zimbabwe

Honduras

Turks and Caicos

Guinea

Sweden

India

 

Hungary

Vanuatu

Iceland

Tajikistan

Indonesia

 

Ireland

Vietnam

Kyrgyz Republic

Timor-Leste

Iran

 

Jamaica

Yemen

Lesotho

Togo

Iraq

 

Jordan

 

Liberia

Tonga

Isle of Man

 

Kazakhstan

 

Libya

Tunisia

Israel

 

Korea, North

 

Lithuania

Turkmenistan

Italy

 

Korea, South

 

Macedonia

Uganda

Japan

 

Kosovo

 

Madagascar

Uzbekistan

Jersey

 

Kuwait

 

Malawi

Zambia

Kenya

 

Laos

 

Maldives

 


Comparative Table Key

The comparative table that follows the Glossary of Terms below identifies the broad range of actions, effective as of December 31, 2013, that jurisdictions have, or have not, taken to combat money laundering. This reference table provides a comparison of elements that include legislative activity and other identifying characteristics that can have a relationship to a jurisdiction’s money laundering vulnerability. With the exception of number 5, all items should be answered “Y” (yes) or “N” (no). All answers indicating deficiencies within the country’s/jurisdiction’s AML/CFT regime should be explained in the “Enforcement and implementation issues and comments” section of the template, as should any responses that differ from last year’s answers.

Glossary of Terms

  1. “Criminalized Drug Money Laundering”: The jurisdiction has enacted laws criminalizing the offense of money laundering related to the drug trade.
  2. “Criminalized Beyond Drugs”: The jurisdiction has enacted laws criminalizing the offense of money laundering related to crimes other than those related to the drug trade.
  3. “Know Your Customer Provisions”: By law or regulation, the government requires banks and/or other covered entities to adopt and implement Know Your Customer/Customer Due Diligence programs for their customers or clientele.
  4. “Report Large Transactions”: By law or regulation, banks and/or other covered entities are required to report large transactions in currency or other monetary instruments to designated authorities.
  5. “Report Suspicious Transactions”: By law or regulation, banks and/or other covered entities are required to report suspicious or unusual transactions to designated authorities. On the Comparative Table the letter “Y” signifies mandatory reporting; “P” signifies reporting is not required but rather is permissible or optional; “N” signifies no reporting regime.
  6. “Maintain Records over Time”: By law or regulation, banks and/or other covered entities are required to keep records, especially of large or unusual transactions, for a specified period of time, e.g., five years.
  7. “Disclosure Protection - ‘Safe Harbor’”: By law, the jurisdiction provides a “safe harbor” defense against civil and criminal liability to banks and/or other covered entities and their employees who provide otherwise confidential banking data to authorities in pursuit of authorized investigations.
  8. “Criminalize ‘Tipping Off’”: By law, disclosure of the reporting of suspicious or unusual activity to an individual who is the subject of such a report, or to a third party, is a criminal offense.
  9. “Financial Intelligence Unit”: The jurisdiction has established an operative central, national agency responsible for receiving (and, as permitted, requesting), analyzing, and disseminating to the competent authorities disclosures of financial information in order to counter money laundering. An asterisk (*) reflects those jurisdictions that are not members of the Egmont Group of FIUs.
  10. “Cross-Border Transportation of Currency”: By law or regulation, the jurisdiction has established a declaration or disclosure system for persons transiting the jurisdiction’s borders, either inbound or outbound, and carrying currency or monetary instruments above a specified threshold.
  11. “International Law Enforcement Cooperation”: No known legal impediments to international cooperation exist in current law. Jurisdiction cooperates with authorized investigations involving or initiated by third party jurisdictions, including sharing of records or other financial data, upon request.
  12. “System for Identifying and Forfeiting Assets”: The jurisdiction has established a legally authorized system for the tracing, freezing, seizure, and forfeiture of assets identified as relating to or generated by money laundering activities.
  13. “Arrangements for Asset Sharing”: By law, regulation or bilateral agreement, the jurisdiction permits sharing of seized assets with foreign jurisdictions that assisted in the conduct of the underlying investigation. No known legal impediments to sharing assets with other jurisdictions exist in current law.
  14. “Criminalized the Financing of Terrorism”: The jurisdiction has criminalized the provision of material support to terrorists, terrorist activities, and/or terrorist organizations as required by the UN International Convention for the Suppression of the Financing of Terrorism and UN Security Council Resolution 1373.
  15. “Report Suspected Terrorist Financing”: By law or regulation, banks and/or other covered entities are required to record and report transactions suspected to relate to the financing of terrorists, terrorist groups or terrorist activities to designated authorities.
  16. “Ability to Freeze Terrorist Assets w/o Delay”: The government has an independent national system and mechanism for freezing terrorist assets in a timely manner (including but not limited to bank accounts, other financial assets, airplanes, autos, residences, and/or other property belonging to terrorists or terrorist organizations).
  17. “States Party to 1988 UN Drug Convention”: States party to the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, or a territorial entity to which the application of the Convention has been extended by a party to the Convention.
  18. “States Party to the UN International Convention for the Suppression of the Financing of Terrorism”: States party to the International Convention for the Suppression of the Financing of Terrorism, or a territorial entity to which the application of the Convention has been extended by a party to the Convention.
  19. “States Party to the UN Convention against Transnational Organized Crime”: States party to the United Nations Convention against Transnational Organized Crime (UNTOC), or a territorial entity to which the application of the Convention has been extended by a party to the Convention.
  20. “States Party to the UN Convention against Corruption”: States party to the United Nations Convention against Corruption (UNCAC), or a territorial entity to which the application of the Convention has been extended by a party to the Convention.
  21. “U.S. or International Sanctions/Penalties”: The U.S., another jurisdiction and/or an international organization, e.g., the UN or FATF, has imposed sanctions or penalties against the jurisdiction. A country’s inclusion in the FATF’s International Cooperation Review Group exercise is not considered a sanction or penalty unless the FATF recommended countermeasures against the country/jurisdiction. 

Go to Comparative Table

INCSR Volume II Template Key

Introductory Paragraph

This section provides a historical and economic picture of the country or jurisdiction, particularly relating to the country’s vulnerabilities to money laundering/terrorist financing (ML/TF). Information on the extent of organized criminal activity, corruption, drug-related money laundering, financial crimes, smuggling, black market activity, and terrorist financing should be included.

This section also should include a brief summary of the scope of any offshore sector, free trade zones, the informal financial sector, alternative remittance systems, or other prevalent area of concern or vulnerability. Deficiencies in any of these areas will be further discussed in the “Enforcement and Implementation Issues and Comments” section, below.

The below referral statement and link to the Department of State’s Country Reports on Terrorism follows the introductory paragraph.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: //2009-2017.state.gov/j/ct/rls/crt/

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR ILLEGAL DRUG SALES THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.:

This question addresses whether the jurisdiction’s financial institutions engage in currency transactions involving international narcotics trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States or that otherwise significantly affect the United States.

CRIMINALIZATION OF MONEY LAUNDERING:

“All serious crimes” approach or “list” approach to predicate crimes: (specify)

Are legal persons covered: criminally: (Y/N) civilly: (Y/N)

In general, two methods of designating money laundering predicate crimes are in use. The response to this question indicates which method of designation the country uses - does the country list specific crimes as predicate crimes for money laundering in its penal code? Conversely, does it use an “all serious crimes” approach, stating that all crimes with penalties over a specified amount or that carry a threshold minimum sentence are money laundering predicate crimes?

The second question addresses whether legal persons, that is, corporations, partnerships, organizations, or any legal entity or arrangement, are liable for money laundering/terrorist financing activity and whether they are subject to criminal penalties, such as fines. Additionally, are they subject to civil or administrative penalties, such as civil money penalties, or suspension or loss of license?

KNOW-YOUR-CUSTOMER (KYC) RULES:

Enhanced due diligence procedures for PEPs: Foreign: (Y/N) Domestic: (Y/N)

KYC covered entities: A list of the types of financial institutions and designated non-financial businesses and professions (DNFBPs) covered by KYC rules

Countries should be using a risk-based approach to customer due diligence (CDD) or know-your-customer (KYC) programs. Using that approach, types of accounts or customers may be considered either less or more risky and be subject to varying degrees of due diligence. Politically exposed persons (PEPs) should be considered high risk and should be subject to enhanced due diligence and monitoring. PEPs are those individuals who are entrusted with prominent public functions in a country, for example, heads of state; senior politicians; senior government, judicial, or military officials; senior executives of state-owned corporations; and important political party officials. This response should indicate whether the jurisdiction applies enhanced due diligence procedures to foreign PEPs and/or domestic PEPs.

CDD or KYC programs should apply not only to banks or financial institutions but also to DNFBPs. Covered institutions should be required to know, record, and report the identity of customers engaging in significant transactions. Entities such as securities and insurance brokers, money exchanges or remitters, financial management firms, gaming establishments, lawyers, real estate brokers, high-value goods dealers, and accountants, among others, should all be covered by such programs.

This response should list the specific types of financial institutions and DNFBPs covered by KYC laws and rules, whether or not they actually have programs in place in practice.

REPORTING REQUIREMENTS:

Number of STRs received and time frame:

Number of CTRs received and time frame:

STR covered entities: A list of the types of financial institutions and DNFBPs covered by reporting rules

If available, the report will include the number of suspicious transaction reports (STRs) received by the designated government body and the time frame during which they were received. The most recent information, preferably the activity in 2013, will be included.

Suspicious transaction reporting requirements should apply not only to banks or financial institutions but also to DNFBPs. Entities such as securities and insurance brokers, money exchanges or remitters, financial management firms, gaming establishments, lawyers, real estate brokers, high-value goods dealers, and accountants, among others, should all be covered by such programs.

Similarly, if the country has a large currency transaction reporting requirement, whereby all currency transactions over a threshold amount are reported to a designated government body, the report will include the number of currency transaction reports (CTRs) received by the designated government body and the time frame during which they were received. The most recent information, preferably the activity in 2013, will be included. The report will not include information on CTRs not required to be forwarded to a designated government body but held in institutions for government review.

This response should list the specific types of financial institutions and DNFBPs covered by reporting laws and rules, whether or not they are reporting in practice.

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: (Number and time frame)

Convictions: (Number and time frame)

If available, the report will include the numbers of money laundering prosecutions and convictions and the relevant time frames. The most recent information, preferably the activity in 2013, will be included.

RECORDS EXCHANGE MECHANISM:

With U.S.: MLAT: (Y/N) Other mechanism: (Y/N)

With other governments/jurisdictions: (Y/N)

(Country/jurisdiction) is a member of the Financial Action Task Force OR _________, a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: (relevant FATF or FSRB website)

This response will indicate if the country/jurisdiction has in place a mutual legal assistance treaty with the United States and/or other mechanisms, such as memoranda of understanding or other agreements, to facilitate the sharing with the United States of records and information related to financial crimes, money laundering, and terrorist financing.

Similarly, it will indicate if the country/jurisdiction has in place treaties, memoranda of understanding, or other agreements with other governments to share information related to financial crimes, money laundering, and terrorist financing.

The report will indicate if the country/jurisdiction is a member of the Financial Action Task Force (FATF) and/or one or more FATF-Style Regional Bodies (FSRB). A link to the website with its most recent mutual evaluation will be shown.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Information in this section should include changes in policy, law, and implementation of regulations occurring since January 1, 2013, and any issues or deficiencies noted in the country’s/jurisdiction’s AML/CFT program. These may include the following: resource issues, legislative and/or implementation deficiencies; information on any U.S. or international sanctions against the country/jurisdiction; whether the country has cooperated on important cases with U.S. government agencies, or has refused to cooperate with the United States or foreign governments, as well as any actions taken by the United States or any international organization to address such obstacles, including the imposition of sanctions or penalties; any known issues with or abuse of non-profit organizations, alternative remittance systems, offshore sectors, free trade zones, bearer shares, or other specific sectors or situations; any other information which impacts on the country’s/jurisdiction’s ability to successfully implement a comprehensive AML/CFT regime or provides information on successful, innovative policies or procedures.

Any changes to the Comparative Table responses for the relevant jurisdiction also should be discussed in this section.