Countries/Jurisdictions of Primary Concern - Peru
Peru is neither a major regional financial center nor an offshore financial center. According to 2013 U.S. government statistics, Peru remained the world’s top producer of cocaine. Money laundering is often used as a tool to integrate significant illegal earnings from drug trafficking and other transnational organized criminal activity into the Peruvian economy. As the Peruvian economy grows, financial crimes also increase. The most common methods of money laundering in Peru are believed to be illegal mining, real estate sales, casinos, business investments, high-interest loans, construction, export businesses, hotels, and restaurants. Other factors which facilitate money laundering include Peru’s cash-based and heavily-dollarized economy, a large informal sector (estimated to be 70 percent of GDP), and deficient regulatory supervision of designated non-financial businesses and professions (DNFBPs), such as informal money exchanges and wire transfer services.
A large black market for pirated and smuggled goods exists, exacerbated by cash transactions. Pervasive corruption remains an issue of serious concern in Peru. There are reports that illicit funds may make up 3.5 percent of Peru’s GDP.
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.: YES
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, insurance companies, stock funds and brokers, stock and commodities exchanges, credit and debit card companies, money exchange houses, mail and courier services, travel and tourism agencies, hotels and restaurants, notaries, the customs agency, casinos, auto dealers, construction or real estate firms, notaries, and dealers in precious stones and metals
Number of STRs received and time frame: 4,624: January - September 2014
Number of CTRs received and time frame: 33.7 million: January - September 2014
STR covered entities: Banks; casinos; investment houses; dealers of arms, antiques, art, pawned goods, jewelry, and precious metals and stones; warehouses, construction, and real estate firms; financial and insurance companies; travel agents; vehicle dealerships, import and export agents; credit card companies, courier and postal services, money lenders, and money exchanges; customs; mining companies; individuals and enterprises that manufacture and commercialize explosives or chemical components used in drugs and explosives; public entities that receive funds from other than the national treasury; traders and/or rental agents of machinery and equipment that can be used for illegal mining and/or logging; and non-governmental organizations that receive donations
money laundering criminal Prosecutions/convictions:
Prosecutions: 158: January - September 2014
Convictions: 2: January - September 2014
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Peru is a member of the Financial Action Task Force in Latin America (GAFILAT), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.gafilat.org/UserFiles/documentos/es/evaluaciones_mutuas/Peru_3era_Ronda_2008.pdf
Enforcement and implementation issues and comments:
In 2014, the Government of Peru continued the implementation of the “National Plan to Combat Money Laundering and Terrorist Financing” (National Plan). The most notable advancement was the Public Ministry’s creation of a dedicated Specialized Office of Prosecutors on Money Laundering and Asset Forfeiture (ML/AF) in January 2014. The Specialized Office is led by the National Superior Prosecutor and Coordinator (NSP/C) for ML/AF, a new position designed to facilitate interagency coordination and information sharing. The Specialized Office has responsibility for all complex money laundering cases with national or international import where illicit activities involve more than one judicial district. The NSP/C can also assume jurisdiction for money laundering cases that involve organized criminal organizations under Resolution 227-2014-MP-FN. Cases involving less significant forms of money laundering will continue to be handled by prosecutors investigating the predicate crime. The NSP/C determines what constitutes a “less significant” case as there are not yet any common guidelines driving this process. The NSP/C’s most noteworthy case is the ongoing investigation into a former president for money laundering and conspiracy in connection with a series of multi-million dollar real estate deals. The Specialized Office consists of two Superior Prosecutors’ offices (with 24 prosecutors), an expert unit, and an administrative division. In addition to its casework, the NSP/C is working to create a common database of money laundering statistics that include investigations, prosecutions, and convictions.
The government also designated the National Commission for Seized Assets (CONABI) as an Executive Unit (under Law N°30114). While CONABI remains under the authority of the Prime Minister’s Office, it now has greater administrative and budgetary authority, such as hiring, contracting goods and services, and developing operational plans. Additionally, on November 12, 2014, the Ministry of Interior created a specialized National Police Unit for combatting money laundering. The ministry will determine this unit’s staffing and mandate over the coming months.
On July 1, 2014, Peru also put into effect the implementing regulations for its 2013 Organized Crime Law (N°0077). These implementing regulations remove obstacles that had impeded investigations to prosecute organized crime and money laundering. The new regulations allow for heavier sentencing, establish modern investigative techniques, and redirect all cases involving organized crime to the National Superior Criminal Court.
On October 13, 2014, the government passed resolution SBS 6729-2014, which expands the list of entities that must now report to the Financial Intelligence Unit, the UIF. Entities and persons who conduct the following activities must now report to the UIF: the trade and/or rental of machinery and equipment that can be used for illegal mining and/or logging, the production and/or trade of chemicals and controlled substances/goods, agencies and non-governmental organizations that receive donations, and the sale and/or trade of vehicles, currency, construction, jewelry, art, real estate, and pawned goods.
Casinos remain an area of money laundering concern. Much of this concern relates to the casinos’ supervisory authority. The Ministry of Foreign Commerce and Tourism (MINCETUR) is the principal regulator of casinos. The UIF cannot monitor or investigate casinos for money laundering independent of MINCETUR. MINCETUR is a participant in the National Plan and provides information to the UIF by requiring casinos to report suspicious transactions.
Currently, businesses involved in the transfer of funds only need prior authorization by the Peruvian Banking Authority (SBS) while cash couriers need a signed agreement with the Ministry of Transportation and Communication. Informal remittance businesses, including travel agencies and small wire transfer businesses, remain unsupervised and vulnerable to money laundering. Peru would benefit from expanded supervision and regulation of financial institutions and DNFBPs; however, the UIF needs additional resources to deal with its monitoring responsibilities.
Peru continues to need capacity building in its prosecutorial system – including in the conduct of investigations; the presentation and the use of clearer language when writing investigative reports for prosecutors; and improvement of prosecutorial capacity. Even with the creation of the Specialized Office for ML/AF, prosecutors complain they cannot understand the format or language of many of the UIF’s investigative results; the lack of financial experts to decode the UIF’s reports makes it difficult for prosecutors to investigate the results within the required 120-day time frame. Compounding the problem, many judges lack adequate training to manage the technical elements of money laundering cases, and banks often delay providing information to judges and prosecutors. Convictions tend to be for lesser offenses or predicate crimes, such as tax evasion or drug trafficking, which are easier offenses to prosecute successfully.
Peru’s bank secrecy law remains a primary obstacle to effective investigation and enforcement. The National Plan emphasizes the importance of adopting legislation that allows the SBS and UIF to have greater access to bank and tax records, but two important bills have been pending before the Peruvian Congress’s Banking, Finance, and Financial Intelligence Committee since February, 2012. One would grant the UIF access to information currently protected by bank secrecy laws and privileged information on the assets of public officials. The other would bring Peruvian financial reporting entities in line with international standards and empower the UIF to establish standard operating procedures, regulate suspicious activities reports, and create an official registry and minimum obligations for money exchange agencies.
From January to September 2014, 77 Financial Intelligence Reports totaling $3.13 billion were submitted to the Public Ministry. There is no common database tracking money laundering convictions, and the UIF, police, prosecutors, and public prosecutors have different figures on money laundering convictions. Many convictions are registered under a different predicate crime rather than money laundering, which likely explains the low number of convictions during the reporting period. According to the Peruvian Judiciary’s International Affairs and Technical Cooperation Office, there were two money laundering convictions for the first nine months of 2014.
While taking welcome steps to implement the National Plan, Peru should publicly recognize the growing threat of money laundering and associated crimes in the country. A workable AML/CFT infrastructure exists. Sufficient resources must be allocated. Most importantly, the political will must be developed to aggressively recognize, investigate, and prosecute money launderers.