Countries/Jurisdictions of Primary Concern - Laos
Laos’ booming economy, weak governance, and geographic position at the heart of mainland Southeast Asia combine to make it vulnerable to money laundering and terrorism finance. Domestic credit in Laos has grown by over 30 percent in each of the last six years, though showed signs of slowing in 2014. The financial sector in Laos is expanding rapidly and in spite of new legislation on money laundering, the sector remains under-regulated compared to other nations in the region, presenting an attractive target for money launderers. The gaming industry has little effective oversight and presents another money laundering opportunity. The combination of foreign investment, lending, growing government revenues, and development assistance from donors continued to increase the flow of funds into and out of the country in 2014.
Corruption permeates all levels of society and government. Drug trafficking is widespread, and human trafficking is a concern. Traffickers are likely taking advantage of the increased flow of funds to launder the proceeds of their crimes. Smuggling is widespread across porous borders. Bulk cash smuggling to Thailand, China, and Vietnam is likely occurring. Laos has a large underground economy and uses informal value transfer systems.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.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.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: Combination approach
Are legal persons covered: criminally: NO civilly: NO
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO
KYC covered entities: Banks; microfinance institutions; insurance companies; casinos, games, and lotteries; lending and finance companies; pawn shops; financial leasing companies; currency transfer companies; companies or agents for sales and management of payment instruments, credit cards, traveler’s checks, and bank drafts; securities and investment companies, intermediaries, managers, and advisors; foreign exchange shops; dealers in precious metals and antiques; attorneys and notaries
Number of STRs received and time frame: 35 in 2014
Number of CTRs received and time frame: Not applicable
STR covered entities: Banks; microfinance institutions; insurance companies; casinos, games, and lotteries; lending and finance companies; pawn shops; financial leasing companies; currency transfer companies; companies or agents for sales and management of payment instruments, credit cards, traveler’s checks, and bank drafts; securities and investment companies, intermediaries, managers, and advisors; foreign exchange shops; dealers in precious metals and antiques; attorneys and notaries
money laundering criminal Prosecutions/convictions:
Prosecutions: 0 in 2014
Convictions: 0 in 2014
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: NO
With other governments/jurisdictions: YES
Laos is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/countries/j-m/laopeoplesdemocraticrepublic/documents/mutualevaluationoflaopeoplesdemocraticrepublic.html
Enforcement and implementation issues and comments:
With donor assistance, the Bank of Laos (BOL) drafted new legislation to combat money laundering, which was pending approval by the president at year end. Analysts have noted some shortcomings in the final text of the legislation that will need to be addressed through implementing regulations. The BOL’s Anti-Money Laundering Intelligence Unit (AMLIU), the financial intelligence unit, is scheduled to sign a Memorandum of Understanding on Intelligence Information Exchanges with the Economic Crimes Police Department. Although suspicious transaction reports (STRs) are rising (a total of 120 were filed from 2007 – 2014), there has still never been a comprehensive money laundering investigation leading to a prosecution in Laos.
The new legislation contains enforceable KYC provisions. Other than banks, most covered entities required to file STRs remain unsupervised. Additionally, although Lao law directs the gaming industry to report suspicious transactions, the AMLIU has yet to receive any reports. There is no protection against liability for individuals reporting suspicious activity, although tipping off of suspects would be criminalized in the new legislation. The pending legislation also includes enhanced due diligence for identifying high-risk persons, both Lao and foreign, to include politically exposed persons (PEPs) and others having a high-risk profile. The AMLIU and banks have the means to detect and refer money laundering cases to the Economic Police, but Government of Laos leadership lacks the capacity to follow through on investigations.
Terrorist financing will be criminalized in the new legislation. It is unknown if terrorist financing occurs in Laos; in any case, Laos lacks experience and capacity to investigate cases. The new draft legislation does provide for asset seizure, but only in cases of money laundering and not in cases of terrorist financing. Specific procedures for seizure are not delineated in the draft law.
The Government of Laos should work to implement an effective AML/CFT regime that adheres to international standards. Laos should finalize its pending legislation. The government should develop and implement safe harbor protection rules. The government should implement an asset forfeiture regime covering both terrorism financing and money laundering, which includes a system for accounting for forfeited assets and for ensuring they are disposed of in accordance with the law. Coordination among the BOL, Ministry of Finance, law enforcement entities, and the banking industry should be improved, with the goal of successful investigations, prosecutions, and convictions of money launderers.