Countries/Jurisdictions of Primary Concern - Uruguay
Although the Government of Uruguay continued to take affirmative steps in 2015 to counter money laundering and terrorism financing activities and made progress in enforcement, Uruguay remains vulnerable to these threats. Uruguay has a highly dollarized economy, with the U.S. dollar often used as a business currency; about 80 percent of deposits and 55 percent of credits are denominated in U.S. dollars. Officials from the Uruguayan police and judiciary assess that Colombian, Mexican, and Russian criminal organizations are operating in Uruguay. There is continued concern about transnational organized crime originating in Brazil. Since 2013, there have been at least five high-profile money laundering cases, including one related to FIFA and several linked to alleged laundering of funds from Peru, Argentina, and Spain.
Laundered criminal proceeds derive primarily from foreign activities related to drug trafficking organizations. Drug dealers also participate in other illicit activities like car theft and human trafficking, and violent crime is increasing significantly. Publicized money laundering cases are primarily related to narcotics and/or involve the real estate sector. Public corruption does not seem to be a significant factor behind money laundering or terrorist financing. Uruguay has porous borders with Argentina and Brazil and, despite its small size, price differentials between Uruguay and neighboring countries support a market for smuggled goods. Bulk cash smuggling and trade-based money laundering occur.
Given the longstanding free mobility of capital in Uruguay, money is likely laundered via the formal financial sector (onshore and offshore). Offshore banks are subject to the same laws, regulations, and controls as local banks, with the government requiring licenses through a formal process that includes a background investigation of the principals. The three offshore banks operating in Uruguay cannot initiate new operations since they are in the process of being liquidated. Offshore trusts are not allowed. There are twenty representatives of offshore financial entities. Bearer shares may not be used in banks and institutions under the authority of the Central Bank of Uruguay, and any share transactions must be authorized by the central bank. Uruguay’s offshore financial services cater primarily to Latin American clients, especially to middle class Argentinians.
There are 12 free trade zones (FTZs) located throughout the country. Three FTZs accommodate a variety of tenants offering a wide range of services, including financial services; two were created exclusively for the development of the pulp industry; one is dedicated to science and technology; and the rest are devoted mainly to warehousing. Some of the warehouse-style FTZs and Montevideo’s free port and airports are used as transit points for containers of counterfeit goods (generally manufactured in China) or raw materials bound for Brazil and Paraguay.
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: List approach
Are legal persons covered: criminally: NO civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, currency exchange houses, stockbrokers, pension funds, insurance companies, casinos, art dealers, real estate and fiduciary companies, lawyers, accountants, and other persons who carry out financial transactions or manage commercial companies on behalf of third parties
Number of STRs received and time frame: 290: January – October 2015
Number of CTRs received and time frame: 7,607,016: January – October 2015
STR covered entities: Banks; financial services firms (which can offer credits and diverse financial services but not deposits); financial houses (which can loan to residents but only receive deposits from non-residents); offshore financial institutions; financial cooperatives; private loan consortia; credit providers; exchange houses; representatives of offshore financial firms; wire companies; companies providing administration, accounting and data processing services; pension funds; insurance companies; stock exchanges; stock brokers; investment advisors; issuers of initial public offers; investment fund managers; financial trusts; professional trust managers; private companies with government’s participation; casinos; real estate brokers, intermediaries, and developers; notaries; auctioneers; dealers in antiques, fine art, and precious metals or stones; FTZ operators and direct users; business dealers; and other persons or companies who carry out financial transactions or administer corporations on behalf of third parties
money laundering criminal Prosecutions/convictions:
Prosecutions: 51: January – October 2015
Convictions: 7: January – July 2015
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Uruguay is a member of the Financial Action Task Force of 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/Uruguay_3era_Ronda_2009.pdf
Enforcement and implementation issues and comments:
Significant AML/CFT developments in 2015 include the inclusion of three articles in the quinquennial budget bill that task the Anti-Money Laundering Secretariat (AMLS) with the supervision of designated non-financial businesses and professions (DNFBPs). Law 19,355, enacted in December 2015, substantially enhances the supervisory and enforcement powers of the AMLS and should have the effect of increasing STR reporting by these entities, which have traditionally submitted few suspicious transaction reports (STRs). Staffing will almost triple to enable the AMLS to implement effective supervision over 20,000 new obligated entities.
Several programs continued in 2015 with the assistance of the international donors. One program seeks to upgrade Uruguay’s money laundering risk assessment and its compliance with international standards. Other programs seek to enhance the effectiveness of Uruguay’s AML investigations, improve the country’s technological platform and statistical system, and provide better tools to the inter-institutional working groups. One donor is assisting the central bank to create a strategic analysis division within UIAF, the financial intelligence unit, and is also helping the UIAF to strengthen its capabilities to assess the risk of individual financial institutions. A risk-based matrix that was tested in ten institutions in 2015 will be implemented throughout the entire financial system in 2016. Following a 2014 decree, the UIAF started supervising providers of securities transportation and safety deposit boxes in 2015.
In 2015, Uruguay continued its strategy of increased transparency by eliminating approximately 85,000 bearer share corporations that failed to register the owners of their shares at the UIAF (about 30,000 corporations registered). Uruguay also began adhering to the automatic exchange of tax information with some jurisdictions and announced that, starting in 2017, it will begin an automatic exchange of tax information with countries with which it has bilateral agreements. However, foreign authorities seeking information on their residents’ undeclared bank accounts cannot easily discover evidence of malfeasance; they may only seek “confirmation” from Uruguay after a specific taxpayer and a related bank account have already been identified. Implementation of the new policy will require a major relaxation of Uruguay’s longstanding bank secrecy policy.
In 2014, the Uruguayan Customs Authority created a working group on AML, and in 2015 Uruguay passed legislation that authorizes customs officials to impose significantly tighter controls over the FTZs. A financial inclusion law passed in May 2014 provides for mandatory payment of wages, pensions, and specified transactions by electronic means, thereby diminishing money laundering risks by increasing economic formalization. Following the new financial inclusion regulations, the UIAF started receiving daily reports for simplified savings accounts in 2015.
The government worked in 2015 to develop an integrated strategy against terrorism, which will be submitted to the parliament for approval in 2016. In early December 2015, the government will submit a bill to Parliament that would strengthen its anti-terrorism stance and clarify several points that were subject to interpretation. Also in 2015, an inter-ministerial working group continued analyzing the inclusion of tax evasion as a predicate crime for money laundering.
Uruguay has made progress in the collection and dissemination of statistics related to prosecutions, convictions, and the amount of seized assets related exclusively to AML/CFT cases. Money laundering prosecutions can take several years, and most end with a conviction. Uruguay is considering amending its legislation to allow for full non-conviction based forfeiture. At present, assets may be forfeited without the conviction of a person only in very narrow circumstances, including when the owner of the assets is missing or no owner can be found. Besides the convictions and prosecutions, in 2015 the UIAF froze assets on six occasions for a total of $614,000, fined a real estate agent and a notary, and imposed sanctions on several financial institutions, one of which was closed.
Uruguay should amend its legislation to provide for criminal liability for legal persons. It also should continue improving its statistics related to money laundering, continue working with covered non-financial entities, and improve the management of seized assets and funds.