Countries/Jurisdictions of Primary Concern - Moldova

Bureau of International Narcotics and Law Enforcement Affairs
Report

Moldova is not a regional financial center. The economy is largely cash-based and remains highly vulnerable to money laundering activities. The Government of Moldova monitors money flows throughout the country, but does not exercise control over the breakaway region of Transnistria. Transnistrian authorities do not adhere to Moldovan financial controls and maintain a banking system independent of, and not licensed by, the National Bank of Moldova. The breakaway region of Transnistria is highly susceptible to money laundering schemes. Due to the Moldova government’s inability to enforce the laws on this territory Transnistrian banking and financial laws and regulations are not in compliance with any accepted international AML norms.

Criminal proceeds laundered in Moldova derive substantially from tax evasion, contraband smuggling, fraud, and corruption. Money laundering occurs within the banking system and in exchange houses, along with offshore financial centers in Transnistria. Fifteen banks constitute the Moldovan financial system. Neither offshore banks nor shell companies are permitted to operate in Moldova; despite this ban, shell companies continue to be used to launder illicit proceeds. Internet gaming sites exist, although no statistics are available on the number of sites in operation. Internet gaming comes under the same set of regulations as domestic casinos. Enforcement of the regulations is sporadic.

In 2014, money laundering became a significant issue of public discussion in Moldova. According to investigative press reports, $18 billion (nearly 2.5 times Moldova’s annual GDP) passed through the country’s banking system in one day. This incident appears to point to Moldova being used as a conduit for transferring illicit funds from Russia to Western financial institutions.

Moldova contains six free trade zones (FTZs), some of which are infrequently used. Reportedly, goods from abroad are sometimes imported into the FTZ and then resold and exported to other countries with documentation indicating Moldovan origin. Companies operating in FTZs are subject to inspections, controls, and investigations by inspectors from the Customs Service and

the Center for Combating Economic Crime and Corruption.

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: All serious crimes

Are legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES

KYC covered entities: Banks, currency exchange offices, investment funds, investment or fiduciary service providers and management companies, deposit companies, fiduciary

companies, securities dealers, stock exchange companies, brokers, insurance and reinsurance

companies, company formation agents and ownership registries, gaming and lottery

organizers and institutions (including Internet casinos), real estate agents, dealers of precious

metals or gems, auditors, accountants and financial consultants, lawyers, notaries, and

organizations which provide postal and telephone mandate exchange or value transfer

services

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 563, 697: January – November, 2014

Number of CTRs received and time frame: 885,133: January – November, 2014

STR covered entities: Banks, currency exchange offices, investment funds, investment or

fiduciary service providers and management companies, deposit companies, fiduciary

companies, securities dealers, stock exchange companies, brokers, insurance and reinsurance

companies, company formation agents and ownership registries, gaming and lottery

organizers and institutions (including Internet casinos), real estate agents, dealers of precious

metals or gems, auditors, accountants and financial consultants, lawyers, notaries,

organizations that provide postal and telephone mandate exchange or value transfer services, electronic money issuers/institutions, payment companies, postal service providers who offer payment services

money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: 0 in 2014

Records exchange mechanism:

With U.S.: MLAT: NO Other mechanism: YES

With other governments/jurisdictions: YES

Moldova is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Moldova_en.asp

Enforcement and implementation issues and comments:

Moldova continues to make progress in instituting a legal framework for combating money

laundering that is consistent with international standards. In 2014, the Moldovan Parliament passed a series of amendments to the Anti-Corruption Law. The amendments address the freezing of transactions suspected to be related to terrorism financing, including timeframes for court reviews and the actions reporting entities must undertake while freezing transactions. Also in 2014, the Law on Payment Services and Electronic Currency amended the AML law to expand the list of entities subject to suspicious transaction reporting (STR) requirements.

During the period of January – November 2014, the Office for Prevention and Control of Money Laundering, Moldova’s financial intelligence unit (FIU), drafted 204 analytical reports regarding various identified criminal schemes, and Moldovan law enforcement initiated approximately 30 money laundering-related criminal investigations. Various law enforcement authorities are involved in AML/CFT investigations, but responsibility rests primarily with the National Anti-Corruption Center’s Criminal Investigation Directorate and the Anticorruption Prosecution’s AML Section. The level of knowledge related to the financial aspects of investigations and asset identification and tracing does not appear to be very comprehensive. There is also a lack of cooperation and coordination among the various law enforcement authorities that pursue financial crimes.

The use of shell companies in money laundering schemes continues, and it appears neither

the current company registration rules nor corporate criminal liability have proved to be sufficient to entirely overcome this phenomenon. A lack of awareness by some of the reporting entities in the designated non-financial businesses and professions (DNFBP) sector is reflected in the continued minimal reporting from this sector.

In 2014, Moldovan authorities initiated a complex money laundering investigation into

billions of dollars of illicit proceeds allegedly stemming from the laundering of funds from Sochi Winter Olympics construction contracts. The funds reportedly originated in Russia and passed through the Moldovan financial system with the apparent complicity of members of the Moldovan judiciary who gave court orders for loan guarantors to pay off a string of fictitious bad debts. Members of the judiciary are being investigated for corruption. According to Moldovan law, a necessary component of proving money laundering is showing that the proceeds subject to laundering have illegal origins. Moldovan prosecutors have requested assistance from Russian authorities but have yet to receive any response.

Moldova should continue to review and amend the criminal procedure code to institute non-conviction based confiscation and to permit special investigative techniques to be applied to a wider range of offenses associated with money laundering and terrorism financing. Additionally, Moldova should criminalize tipping off and take steps to raise the awareness of the DNFBP sector regarding AML/CFT reporting requirements.