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Singapore
As a significant international financial and investment center and,in particular, as a major offshore financial center, Singapore isvulnerable to money launderers. Stringent bank secrecy laws and the lackof routine currency reporting requirements make Singapore a potentiallyattractive destination for drug traffickers, transnational criminals,terrorist organizations and their supporters seeking to launder money.Additionally, there are terror finance risks. The authorities have takenaction against Jemaah Islamiyah and its members and have identified andfrozen terrorist assets held in Singapore. Structural gaps remain infinancial regulations that may hamper efforts to control these crimes,and financial crimes enforcement needs strengthening. To address some ofthese deficiencies, Singapore is implementing legal and regulatorychanges to better align itself with the international standards foranti-money laundering/counterterrorist financing (AMLCTF) regimes.
Offshore Center: Yes
Singapore has a sizeable offshore financial sector. As of December2009, there were 42 offshore banks in operation, all offshoreforeign-owned. Singapore does not permit shell banks. Singapore hasincreasingly become a center for offshore private banking and assetmanagement. However, due to the global financial crisis, total assetsunder management in Singapore declined 26 percent in 2008 to $864billion.
Free Trade Zones: Yes
Singapore has five free trade zones (FTZs), four for seaborne cargoand one for airfreight, regulated under the Free Trade Zone Act. TheFTZs may be used for storage, repackaging of import and export cargo,assembly and other manufacturing activities approved by the DirectorGeneral of Customs in conjunction with the Ministry of Finance.
Criminalizes narcotics money laundering: Yes
Singapore's Corruption, Drug Trafficking, and Other SeriousCrimes (Confiscation of Benefits) Act (CDSA) has undergone manyrevisions, with the latest occurring in February 2008. The keyamendments add several new categories to its "Schedule of SeriousOffenses." The CDSA criminalizes the laundering of proceeds fromnarcotics transactions and other predicate offenses.
Criminalizes other money laundering, including terrorism-related:Yes
Included in the CDSA are crimes associated with terroristfinancing, illicit arms trafficking, counterfeiting and piracy ofproducts, environmental crime, computer crime, insider trading, riggingcommodities and securities markets, transnational organized crime,maritime offenses, pyramid selling, importation and exportation ofradioactive materials/irradiating apparatus, customs offenses, andfalsification or use of false Singapore passports.
Criminalizes terrorist financing: Yes
(Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
The Terrorism (Suppression of Financing) Act that took effect in2003 criminalizes terrorist financing. In addition to making it acriminal offense to deal with terrorist property (including financialassets), the Act criminalizes the provision or collection of anyproperty (including financial assets) with the reasonable belief thatthe property will be used to commit any terrorist act or for variousterrorist purposes. The Act also provides that any person in Singapore,and every citizen of Singapore outside the country, who has informationabout any transaction or proposed transaction in respect of terroristproperty, or who has information that he/she believes might be ofmaterial assistance in preventing a terrorist financing offense, mustimmediately inform the police. The Act gives the authorities the powerto freeze and seize terrorist assets.
Know-your-customer rules: Yes
The Monetary Authority of Singapore (MAS) has issued a series ofregulatory guidelines ("Notices") requiring banks to applyknow-your-customer standards. Banks must obtain documentation such aspassports or identity cards from all individual customers to verifynames, permanent contact addresses, dates of births and nationalities.Banks must also check the bona fides of company customers. Theregulations specifically require financial institutions to obtainevidence of the identity of the beneficial owners of offshore companiesor trusts. Similar guidelines and notices exist for finance companies,merchant banks, life insurers, brokers, securities dealers, investmentadvisors, futures brokers and advisors, trust companies, approvedtrustees, and money changers and remitters. In May 2009, MAS issued apublic consultation paper proposing amendments to clarify the currentAML/CFT requirements on Simplified Customer Due Diligence andPerformance of Customer Due Diligence Measures by Intermediaries.
Bank records retention: Yes
Sections 36 and 37 of the CDSA requires financial institutions tomaintain all "financial transaction documents" for at leastfive years after the date on which the transaction takes place or theaccount is closed.
Suspicious transaction reporting: Yes
The CDSA also mandates specific reporting requirements and outlinesexamples of suspicious transactions that should prompt reporting.Section 39 of the CDSA requires any person who, in the course of his/herprofessional or business duties, knows or has reasonable grounds tosuspect that any property may represent the proceeds of drug traffickingor criminal conduct to report to the Suspicious Transaction ReportingOffice (STRO), Singapore's financial intelligence unit (FIU).
Large cash transaction reporting: No
Narcotics asset seizure and forfeiture: Yes
Singapore law provides for the tracing, freezing, and seizure ofassets. Narcotics asset sharing authority:
As ancillary to a foreign criminal prosecution, Singapore mayprovide assistance to foreign governments in the enforcement of aforeign confiscation or restraint order if the property is reasonablybelieved to be located in Singapore.
Cross-border currency transportation requirements: Yes
Singapore requires in-bound and out-bound travelers to report cashand bearer-negotiable instruments in excess of Singapore $30,000(approximately $21,400).
Cooperation with foreign governments: Yes
Singapore's rigid bank secrecy is sometimes an impediment toeffective international cooperation in financial crimes enforcement.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
According to Singapore authorities, domestic corruption is minimal.Singapore has consistently ranked in the top five nations inTransparency International's Corruption Perception Index (CPI). In2009, Singapore was rated third out of 180 countries in the CPI.
In 2008, there were a total of 23 prosecutions and 24 convictionsfor money laundering offenses. U.S. related currency transactions:
No information available.
Records exchange mechanism with U.S.:
In November 2000, Singapore and the United States signed theAgreement Concerning the Investigation of Drug Trafficking Offenses andSeizure and Forfeiture of Proceeds and Instrumentalities of DrugTrafficking (Drug Designation Agreement or DDA). The DDA is a limitedbilateral mutual legal assistance treaty (MLAT) between Singapore andthe United States. The DDA facilitates the exchange of banking andcorporate information on drug money laundering suspects and targets,including access to bank records. It also entails reciprocal honoring ofseizure/forfeiture warrants. This agreement applies only to narcoticscases, and does not cover non-narcotics related money laundering,terrorist financing, or financial fraud.
The Financial Crimes Enforcement Network (FinCEN) entered into amemorandum of understanding
with the STRO on September 2, 2004.
International agreements:
For a number of years, Singapore's only mutual legalassistance agreements with other countries covered drug offenses. InApril 2006, the Mutual Assistance in Criminal Matters Act was amended toprovide a
bilateral case-by-case initiative that would be available to allcountries in all instances in which Singapore and the foreign governmentwould agree to provide the same type of assistance in a similarreciprocal request. The STRO has signed MOUs with 13 counterparts.
Singapore is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--Yes
Singapore is a member of the Financial Action Task Force (FATF) andthe Asia/Pacific Group on Money Laundering, a FATF-style regional body.Its most recent mutual evaluation can be found here:
http://www.fatf-gafi.org/dataoecd/36/42/40453164.pdf
Recommendations:
The Government of Singapore (GOS) should continue close monitoringof its domestic and offshore financial sectors. The government shouldadd tax and fiscal offenses to its schedule of serious offenses. The GOSshould continually work to strengthen its AML/CFT enforcement abilities.Singapore police are fairly successful at identifying domestic predicateoffenses; however, given the potential attractiveness of Singapore as alarge, stable and sophisticated financial center through which tolaunder money, the STRO and criminal investigators are encouraged tomore strongly focus on the identification of money laundering thatoriginates from foreign sources and offenses. The conclusion of broadmutual legal assistance agreements is also important to furtherSingapore's ability to work internationally to counter moneylaundering and terrorist financing. Singapore should lift its rigid banksecrecy restrictions to enhance its law enforcement cooperation in areassuch as information sharing and to conform to international standardsand best practices. Singapore should also strictly enforce bordercontrols and give greater attention to trade-based money laundering.
Spain
Spain is a major European center of money laundering activities aswell as a major gateway for illicit narcotics. Drug proceeds from otherregions enter Spain as well, particularly proceeds from Afghan hashishentering from Morocco, cocaine entering from Latin America, and heroinentering from Turkey and the Netherlands. Tax evasion in internalmarkets and the smuggling of goods along the coastline also continue tobe sources of illicit funds in Spain. The smuggling of electronics andtobacco from Gibraltar remains an ongoing problem. Passengers travelingfrom Spain to Latin America reportedly smuggle sizeable sums of bulkcash. Colombian cartels reportedly use proceeds from drug sales in Spainto purchase goods in Asia. They subsequently sell these goods legally inColombia or at stores run by drug cartels in Europe. Credit cardbalances are paid in Spanish banks for charges made in Latin America,and money deposited in Spanish banks is withdrawn in Colombia throughATM networks.
An unknown percentage of drug trafficking proceeds are invested inSpanish real estate, particularly in the once-booming coastal areas inthe south and east of the country. Up to twenty percent of the 500 euronotes in use in Europe were reported to be in circulation in Spainduring 2009, directly linked to the purchase of real estate to laundermoney. Efforts by Spain's tax authority to deter fraudulentactivity involving these large bank notes have kept the number of 500euro notes at October 2008 levels (around 110 million notes).
Offshore Center: No
Free Trade Zones: No
Criminalizes narcotics money laundering: Yes
Money laundering is criminalized by Article 301 of the Penal Code,added in 1988 when laundering the proceeds from narcotics traffickingwas made a criminal offense.
Criminalizes other money laundering, including terrorism-related:Yes
The law was expanded in 1995 to cover all serious crimes thatrequire a prison sentence greater than three years. Amendments to thecode, which took effect in 2004, make all forms of money launderingfinancial crimes. Any property, of any value, can form the basis for amoney laundering offense, and a conviction or a prosecution for apredicate offense is not necessary to prosecute or obtain a convictionfor money laundering. Spanish authorities can also prosecute moneylaundering based on a predicate offense in another country, if thepredicate offense would be a crime in Spain.
In October 2009, the European Commission filed a complaint againstSpain in the European Court of Justice for inadequate implementation ofEU norms against money laundering. In December, the Council of Ministerssubmitted to Congress a draft of a new anti-moneylaundering/counter-terrorist financing (AML/CFT) law. The legislationaims to codify existing AML/CFT laws and will supersede Law 12/2003 onthe Prevention and Blocking of the Financing of Terrorism, which wasnever fully implemented.
Criminalizes terrorist financing: Yes
See above. In addition, crimes of terrorism are defined in Article571 of the Penal Code, and penalties are set forth in Articles 572 and574. Terrorist financing issues are governed by a separate code of law.
Know-your-customer rules: Yes
Money laundering controls apply to most entities active in thefinancial system, including banks, mutual savings associations, creditcompanies, insurance companies, financial advisers, brokerage andsecurities firms, pension fund managers, collective investment schemes,postal services, currency exchange outlets, and individuals andunofficial financial institutions exchanging or transmitting money. Mostcategories of designated nonfinancial businesses and professions(DNFBPs) are subject to the same core obligations as the financialsector. The list of DNFBPs includes realty agents; dealers in preciousmetals, stones, antiques and art; legal advisors and lawyers;accountants; auditors; notaries; and casinos.
Bank records retention: Yes
Spanish financial institutions are required by law to maintainfiscal information for five years and mercantile records for six years.
Suspicious transaction reporting: Yes
The financial sector is required to report suspicious transactions.Reporting entities are required to report each suspicious transaction tothe financial intelligence unit (FIU). In 2008, the FIU received 2,904suspicious transaction reports (STRs). Of those received, 328 weresubmitted by non-bank financial entities.
Large currency transaction reporting: Yes
Law 19/2003 obliges financial institutions to make monthly reportson large transactions. Banks are required to report all internationaltransfers greater than 50,000 Euros (approximately $71,300). The lawalso requires the declaration and reporting of internal transfers offunds greater than 100,000 Euros (approximately $143,000). Foreignexchange and money remittance entities must report transactions above5,000 Euros (approximately $7,100).
Narcotics asset seizure and forfeiture:
Article 127 of the Penal Code allows for broad confiscationauthority by applying it to all crimes or summary offenses under theCode. Instrumentalities used to commit the offense and the profitsderived from the offense can all be confiscated. Article 127 alsoprovides for the confiscation of property intended for use in thecommission of any crime or offense. It also applies to property that isderived directly or indirectly from proceeds of crime, regardless ofwhether the property is held or owned by a criminal defendant or by athird party. Article 374 of the Penal Code calls for the confiscation ofgoods acquired through drug trafficking-related crimes and of any profitobtained. This allows for the confiscation of instrumentalities used forillegal drug dealing, as well as the goods or proceeds obtained from theillicit traffic.
Narcotics asset sharing authority: Yes
The Fund of Seized Goods of Narcotics Traffickers, establishedunder the National Drug Plan, receives seized assets. The division ofassets from seizures involving more than one country depends on therelationship with the country in question. European Union (EU) workinggroups determine how to divide the proceeds for member countries.Outside of the EU, bilateral commissions are formed with countries thatare members of the Financial Action Task Force (FATF), FATF-styleregional bodies (FSRBs), and the Egmont Group, to coordinate thedivision of seized assets. With other countries, negotiations areconducted on an ad hoc basis.
Cross-border currency transportation requirements: Yes
Individuals traveling internationally are required to report theimportation or exportation of currency greater than 10,000 Euros(approximately $14,300). Confiscation provisions apply to personssmuggling cash or monetary instruments that are related to moneylaundering or terrorist financing. Gold, precious metals, and preciousstones are considered to be merchandise and are subject to customslegislation. Failing to file a declaration for such goods may constitutea case of smuggling and would fall under the responsibility of thecustoms authorities.
Cooperation with foreign governments: Yes
Spain regularly cooperates with other countries investigating moneylaundering, terrorist financing, and other financial crimes.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
Although Spanish authorities have taken steps to neutralize themsince 1998, ensuring that mere possession cannot serve as proof ofownership, bearer shares still exist, and the requirements to determinethe beneficial owner are inadequate.
Spain has long been dedicated to fighting terrorist organizations,including ETA, GRAPO, and more recently, al-Qaida. Spanish lawenforcement entities have identified several methods of terroristfinancing: donations to finance nonprofit organizations (including ETAand Islamic groups); establishment of publishing companies that printand distribute books or periodicals for the purposes of propaganda,which then serve as a means for depositing funds obtained throughkidnapping or extortion; fraudulent tax and financial assistancecollections; the establishment of "cultural associations" usedto facilitate the opening of accounts and provide a cover for terroristfinancing activity; and alternative remittance system transfers.
Spanish authorities recognize the presence of alternativeremittance systems. Informal non-bank outlets such as"locutorios" (communication centers that often offer wiretransfer services) are used to move money in and out of Spain by makingsmall international transfers for members of the immigrant community.Spanish regulators also note the presence of hawala networks in theIslamic community.
Spain regularly circulates to its financial institutions the listof individuals and entities that have been included on the UNSCR 1267Sanctions Committee consolidated list. No assets associated withentities listed by the UNSCR 1267 Sanctions Committee were reported tobe in Spain in 2009.
A small percentage of the money laundered in Spain is believed tobe used for terrorist financing. It is primarily money from theextortion of businesses in the Basque region that is moved through thefinancial system and used to finance the Basque terrorist group ETA.Throughout 2009, Spanish authorities conducted numerous AML/CFToperations that resulted in arrests and seizures. In July, the CivilGuard arrested 13 members of a trafficking network operating out of theBarcelona airport, including seven airport employees. Police seizedcocaine, 12,000 Euros in cash (approximately $18,000) and 85,000 Eurosin jewels (approximately $130,000). In September, police raided an areain Mallorca and seized unspecified amounts of drugs, along with 4.3million Euros (approximately $6,400,000), 8,000 U.S. dollars, and 7.5kilos of jewelry. In October, five high-ranking ex-officials from theCatalan regional government were arrested for their involvement in acorruption and money laundering case.
U.S.-related currency transactions:
There are no known currency transactions of significance involvinglarge amounts of U.S. currency and/or direct narcotics proceeds fromU.S. sales.
Records exchange mechanism with U.S.:
Spain's mutual legal assistance treaty with the United Stateshas been in effect since 1993. Spain has a robust information exchangewith a variety of U.S. law enforcement agencies.
International agreements:
The Government of Spain has signed criminal mutual legal assistanceagreements with a number of countries and has also entered intobilateral agreements for cooperation and information exchange on moneylaundering issues with 14 countries, as well as with the United States.The FIU has bilateral agreements for cooperation and informationexchange on money laundering issues with more than 25 FIUs.
Spain is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--Yes
Spain is a member of the FATF and is an observer to the SouthAmerican Financial Action Task Force and a cooperating and supportingnation to the Caribbean Financial Action Task Force, both FATF-styleregional bodies. Its most recent mutual evaluation can be found here:http://www.fatfgafi.org/dataoecd/52/3/37172019.pdf
Recommendations:
The scale of money laundering and the sophisticated methods used bycriminals represent a major threat to Spain. The Government of Spain(GOS) should review the resources available for industry supervision,and ensure that its FIU has the independence and resources it needs toeffectively discharge the duties entrusted to it. The GOS should work toclose the loopholes in the areas of customer due diligence, beneficialownership of legal persons, and the continued use of bearer shares.Congressional approval and implementation of Spain's new AML/CFTlegislation will greatly enhance the authorities' capacity tocombat terrorist financing. The GOS should clarify whether its lawsallow civil asset forfeiture. Spain should maintain and disseminatestatistics on investigations, prosecutions and convictions, includingthe amounts and values of assets frozen or confiscated. Spain shouldcontinue its efforts to actively participate in international fora andto assist jurisdictions with nascent or developing AML/CFT regimes.
Switzerland is a major international financial center. Reportingindicates that criminals attempt to launder illegal proceeds inSwitzerland from a wide range of criminal activities conductedworldwide. These illegal activities include, but are not limited to,financial crimes, narcotics trafficking, arms trafficking, organizedcrime, terrorist financing and corruption. Although both Swiss andforeign individuals or entities launder money in Switzerland, foreignnarcotics trafficking organizations, often based in the Balkans, EasternEurope, or South America, dominate the narcotics-related moneylaundering operations in Switzerland. The country's centralgeographic location, relative political, social, and monetary stability,the range and sophistication of financial services it provides, and itslong tradition of bank secrecy not only contribute to Switzerland'ssuccess as a major international financial center, but also exposeSwitzerland to potential money laundering abuse.
Offshore Center: Yes
Switzerland is one of the world's largest offshore centers,with estimates that the country manages as much as one-third of anestimated $7 trillion of offshore money worldwide. WhileSwitzerland's banking industry offers the same account services forboth residents and nonresidents, many Swiss banks offer additionaloffshore services, including permitting non-residents to form offshorecompanies to conduct business. However, Swiss commercial law does notrecognize any offshore mechanism per se and its provisions apply equallyto residents and nonresidents. In April 2009, the Organization forEconomic Cooperation and Development (OECD) placed Switzerland on itgrey list of tax havens. The country was subsequently removed from thelist in September 2009 after having renegotiated a series of Double TaxAgreements (DTAs). The agreements include provisions for extendedadministrative assistance in tax matters.
Free Trade Zones: Yes
Switzerland has approximately 17 duty free zones located mainly inborder cantons like Geneva and Basel. Customs authorities supervise theadmission into and the removal of goods from customs warehouses.Warehoused goods may only undergo manipulations necessary for theirmaintenance, such as repacking, splitting, sorting, mixing, sampling andremoval of the external packaging; any further manipulation is subjectto authorization. Goods may not be manufactured in these zones. Swisslaw has full force in the duty free zones, and export laws on strategicgoods, war material, and medicinal products, as well as laws relating toanti-money laundering prohibitions, all apply.
Criminalizes narcotics money laundering: Yes
Money laundering related to all crimes (including narcoticstrafficking) is criminalized in Article 305 bis of the Swiss Penal Code,which provides that anyone who commits an act intended to obstruct theidentification of the origin, discovery or confiscation of property thathe knew or should have presumed was derived from a crime, shall beliable to imprisonment or a fine.
Criminalizes other money laundering, including terrorism-related:Yes
Article 305 bis of the PC and The Federal Act on Combating MoneyLaundering and Terrorist Financing in the Financial Sector of October1997 (AML/CFT Act) form the legal basis of Switzerland's anti-moneylaundering (AML) regime. Switzerland revised its AML regulationseffective February 1, 2009. The regulations, aimed at the banking andsecurities industries, codify a risk-based approach to suspicioustransactions and client identification and install a globalknow-your-customer risk management program for all banks, includingthose with branches and subsidiaries abroad. Under the revised AMLA,Swiss law recognizes certain criminal offenses as predicate offenses formoney laundering, including illegal trafficking in migrants,counterfeiting and pirating of products, smuggling, insider trading, andmarket manipulation.
Criminalizes terrorist financing: Yes
(Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
Terrorism-related money laundering is criminalized in the AML/CFTAct. Revisions to the Swiss Penal Code regarding terrorist financingentered into force on October 1, 2003. Article 100 of the Penal Codeextends criminal liability for terrorist financing to include companies.However, the Swiss Penal Code currently criminalizes the financing of anact of criminal violence, not the financing of an individual,independent of a particular act.
Swiss authorities regularly request that banks and nonbankfinancial intermediaries check their records and accounts against theU.S. and UN lists and those generated by the Swiss Economic and FinanceMinistries.
Know-your-customer rules: Yes
Swiss money laundering laws and regulations apply to both banks andnonbank financial institutions. The Swiss Bankers Association DueDiligence Agreement was drafted by the Swiss banking industry. Theguidelines were most recently revised on January 17, 2003. Theregulations contain obligations to keep records of all clients'dates of birth and nationality. Customers have to prove their identitywith an official document, even if they are known by a bank employee. Inthe case of accounts held for legal entities, the individual opening theaccount has to reveal his identity, while clients opening Internetbanking accounts have to provide a copy of their passport or identitycard. Financial intermediaries must conduct additional due diligence inthe case of higher-risk business relationships. The regulations requireincreased due diligence for politically exposed persons (PEPs), ensuringthat decisions to commence relationships with such persons be undertakenby at least one member of the senior executive body of a financialinstitution.
Bank records retention: Yes
The AML/CFT Act requires financial intermediaries to keep recordsof transactions for a minimum of ten years after the termination of thebusiness relationship, or after completion of the transaction.
Suspicious transaction reporting: Yes
Switzerland's AMLA requires financial institutions to reportsuspicious transactions to Switzerland's financial intelligenceunit (FIU), the Money Laundering Reporting Office (MROS). In addition tofinancial institutions, designated nonfinancial businesses andprofessions (DNFBPs) such as attorneys, commodities and precious metalstraders, asset managers and investment advisers, distributors ofinvestment funds, securities traders, and credit card companies are alsorequired to report. There is no currency reporting threshold forsuspicious transaction report (STR) filing. MROS received 851 STRs in2008, and forwarded 81 percent of these to Swiss law enforcement. As wasthe case in the previous years, "fraud" was by far the mostfrequently suspected predicate offense (38.5 percent). An amendment toArticle 9-1 of the AMLA provided for reporting of suspected terroristfinancing.
Large currency transaction reporting: No
Narcotics asset seizure and forfeiture: Yes
Switzerland has implemented legislation for identifying, tracing,freezing, seizing, and forfeiting assets. If financial institutionsbelieve that assets derive from criminal activity, they must freeze theassets immediately until a prosecutor decides on further action. UnderSwiss law, suspect assets may be frozen for up to five days while aprosecutor investigates the suspicious activity.
Narcotics asset sharing authority: Yes
Switzerland has shared large amounts of seized narcotics assetswith the United States and other countries. In addition, Switzerland hasreturned a total of $1.6 billion in illegal PEP assets to homecountries. Most prominently, Switzerland returned $684 million in assetsdeposited by Ferdinand Marcos to the Philippines and $700 million inassets deposited by Sani Abacha to Nigeria. Historically, Switzerlandhas required court rulings in both Switzerland and the PEP's homecountry before returning the assets.
Cross-border currency transportation requirements: No
Cooperation with foreign governments: Yes
Swiss authorities cooperate with counterpart bodies from othercountries and no legal issues hamper the government's ability toassist foreign governments in mutual legal assistance requests
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
Because there are no laws for declaration of currency and monetaryinstruments, Swiss authorities cannot effectively initiate bulk cashinvestigations.
Switzerland ranks third in the highly profitable global artworktrading market, exporting $1.5 billion of artwork in 2008. Because ofthe size of the Swiss art market, organized crime groups have attemptedin the past to transfer stolen art or to use art to launder criminalfunds via Switzerland. The United States is by far Switzerland'smost important trading partner in this area, having purchased $476million worth of works of art in 2008. This sum represents 29% percentof total Swiss artwork exports.
The Swiss Attorney General froze 21 accounts representing aboutSFr. 21 million (approximately $20.5 million) on the grounds that theywere related to terrorism financing. As of November 2009, the StateSecretariat for Economic Affairs (SECO) advised that 25 bank accountstotaling Sfr. 17 million (approximately $16.3 million) relating toal-Qaida and the Taliban remained frozen.
U.S.-related currency transactions:
No information available.
Records exchange mechanism with U.S.:
Switzerland has a mutual legal assistance treaty (MLAT) in placewith the United States, and Swiss law allows authorities to furnishinformation to U.S. regulatory agencies, provided it is keptconfidential and used for law enforcement purposes. Switzerland hasworked closely with the U.S. on numerous money laundering cases andcooperates with U.S. on efforts to trace and seize assets. Swisslegislation permits "spontaneous transmittal," a processallowing the Swiss investigating magistrate to signal to foreign lawenforcement authorities the existence of evidence regarding suspiciousbank accounts in Switzerland. However, Swiss privacy laws make itextremely difficult for bank officials and Swiss police to divulgefinancial crime information to U.S. authorities absent a MLAT request orLetters Rogatory. The Swiss FIU exchanges information regularly with theFIU of the United States without a memorandum of understanding in place.
International agreements:
Switzerland is a party to various information exchange agreementswith countries in addition to the United States; authorities can shareinformation or provide assistance to foreign jurisdictions in mattersrelating to money laundering or other financial crimes.
Switzerland is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--Yes
Switzerland is a member of the Financial Action Task Force. Itsmost recent mutual evaluation can be found here:http://www.fatf-gafi.org/dataoecd/29/11/35670903.pdf
Recommendations:
The Government of Switzerland (GOS) has been trying to change thecountry's image as a haven for illicit banking services for manyyears. The Swiss believe their system of self-regulation, whichincorporates a "culture of cooperation" between regulators andbanks, equals or exceeds that of other countries. The GOS should addressdeficiencies with regard to correspondent banking regulations andbeneficial owner identification requirements. Switzerland should enactand implement cross-border currency reporting requirements and considerthe implementation of a reporting system for large currencytransactions. The GOS should outlaw bearer shares completely, andimplement effective AML legislation and rules that monitor and regulatemoney service businesses and the DNFBP sectors, including ensuring thatthe competent authorities have the resources to conduct outreach andcomplete their regulatory missions.
Taiwan
Taiwan's modern financial sector and its role as a hub forinternational trade make it susceptible to money laundering.Taiwan's location astride international shipping lanes makes itvulnerable to transnational crimes, such as narcotics trafficking, tradefraud, and smuggling. There has traditionally been a significant volumeof informal financial activity through unregulated non-bank channels,but in recent years Taiwan has taken steps to shift much of thisactivity into official, regulated financial channels. Most illegal orunregulated financial activities are related to tax evasion, corruption,racketeering, fraud, or intellectual property violations. An emergingtrend in money laundering is underground alternative remittance systemsoperated by jewelry stores which usually use couriers to move gold andcurrency cross-border.
Offshore Center: Yes
Legislation ratified in 2006 allows the expansion of offshorebanking unit (OBU) operations to the same scope as Domestic BusinessUnits (DBU). This was done to assist China-based Taiwan businesspeoplein financing their business operations. DBUs engaging in cross-straitfinancial business must follow the regulations of the "ActGoverning Relations between Peoples of the Taiwan Area and the MainlandArea" and "Regulations Governing Approval of Banks to Engagein Financial Activities between the Taiwan Area and the MainlandArea." According to the Central Bank, as of September 2009, Taiwanhosted 63 offshore banking units. Offshore banks, internationalbusinesses, and shell companies must comply with the disclosureregulations from the Central Bank, the Banking Bureau of the FinancialSupervisory Commission, and the Anti-Money Laundering Division (AMLD).Supervisory agencies conduct background checks on applicants for bankingand business licenses. Offshore casinos and Internet gambling sites areillegal.
Free Trade Zones: Yes
Taiwan has five Free Trade Zones (FTZ)--in Keelung and the areas ofTaipei, Taichung, Kaohsiung, and Taoyuan. Each zone is associated with aparticular function/industry, categorized as international logistics,high value-added industries, warehousing, transshipment, processing ofcargo, and/or mature industrial clusters. The values of shipmentsthrough these FTZs in the first nine months of 2009 was NT$145.5 billion(approximately $4.5 billion), up from NT$86.6 billion (approximately$2.57 billion) for the same period in 2008. In 2009, an amendment toArticle 3 of Taiwan's Act for the Establishment and Management ofFree Trade Zones was passed, providing for the establishment of a FreeTrade Zone Coordination Committee. The Committee will be the designatedauthority charged with reviewing and examining the development policy ofthe FTZ, the demarcation and designation of FTZs, and inter-FTZcoordination.
Criminalizes narcotics money laundering: Yes
The offense of money laundering is criminalized under the MoneyLaundering Control Act 1996 (the MLCA), most recently amended in 2009.Provisions found within the Organized Crime Prevention Act, theNarcotics Hazards Control Act, and Article 38 of the Criminal Codefurther support the criminalization and subsequent prosecution of drugrelated money laundering offenses.
Criminalizes other money laundering, including terrorism-related:Yes
The predicate offenses for money laundering are defined in Article3 of the MLCA and combine both a threshold and list approach, including"serious crimes" which have a minimum punishment ofimprisonment of five years or more. July 2007 amendments to the MLCAexpand its coverage to include a new agricultural bank, trust companies,and newly licensed currency exchanges as well as hotels, jewelry stores,postal offices, temples, and bus/railway stations, essentially allentities that may be involved in currency exchange.
Criminalizes terrorist financing: Yes
(Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
Terrorist financing was established as a separate criminal offensein May 2009 with revisions to Article 11 of the amended MLCA. Theamended law subjects individuals to criminal liability when they collectfunds or use them for themselves or others to commit one or more of 26designated crimes aimed to blackmail people, coerce the government, orcoerce an international organization. Additionally, Article 3establishes terrorist financing as a predicate to money laundering andenables the government to exercise broader power in punishing nationalswho commit terrorist offenses outside of their jurisdiction.
Know-your-customer rules: Yes
The "Regulations Governing Bank Handling of Accounts withSuspicious or Unusual Transactions" requires banks to establishclear know-your-customer (KYC) policies and procedures that includestandards for monitoring of deposit accounts and transactions. Thedirections issued by the Financial Supervisory Commission for banks,securities firms, and life insurance companies engaged in wealthmanagement business require such financial institutions to tailor theirKYC rules according to the risk characteristics of each type ofbusiness. The directions also require financial institutions to applystricter customer due diligence (CDD) and approval procedures toindividuals of certain background or professions identified as high riskand their family members. Current legislation does not have explicitrequirements calling for enhanced CDD measures for Politically ExposedPersons (PEPs).
The threshold for occasional cash transactions that triggers a CDDobligation was lowered from NT$1 million (approximately $31,200) to NT$500,000 (approximately $ 15,600). Those who transfer funds overNT$30,000 (approximately $930) at any bank in Taiwan must produce aphoto ID, and the bank must record the name, ID number and telephonenumber of the client.
Bank records retention: Yes
Record keeping requirements are broadly provided under Article 7 ofthe MLCA that requires financial institutions to keep transaction andcustomer identification records for five years only for cashtransactions exceeding NT$1,000,000 (approximately $31,200). Article 8of the MLCA also requires financial institutions to keep transaction andcustomer identification records for suspicious transactions.
Suspicious transaction reporting: Yes
Financial institutions are required to identify, record, and reportthe identities of customers engaging in significant or suspicioustransactions. Revisions to the MLCA extend suspicious transactionreporting to suspected terrorist financing activity. There is nothreshold amount specified for filing suspicious transaction reports(STRs). Certain designated nonfinancial businesses and professions(DNFBPs) are also subject to anti-money laundering/counter-terroristfinancing (AML/CFT) reporting requirements. The Ministry of EconomicAffairs revised the STR reporting forms for jewelry stores in May 2009to facilitate timelier reporting. Ethics Rules adopted by the Ministryof Interior in December 2008 obligate members of the National RealEstate Broking Agencies Association to report suspicious transactions tothe association when they occur.
The Anti-Money Laundering Division (AMLD) of the Ministry ofJustice's Investigation Bureau (IBMJ) is Taiwan's financialintelligence unit (FIU). The AMLD receives, analyzes, and disseminatesSTRs, currency transaction reports and cross-border currency movementdeclaration reports. In 2008, the AMLD received 1,643 STRs, 23 of whichresulted in prosecutions based on the MLCA.
Large currency transaction reporting: Yes
The "Regulations Governing Cash Transactions Reports andSuspicious Transaction Reports by Financial Institutions" issuedtook effect in March 2009. Per the regulation, the threshold amounttriggering cash transaction reporting was lowered from NT$1 million(approximately $31,200) to NT$500,000 (approximately $15,600). The orderimposes similar due diligence obligations and currency transactionreporting on agricultural financial institutions for transactionsexceeding NT$500,000. In 2008, the AMLD received 1,133,014 CashTransaction Reports (CTRs).
When foreign currency in excess of NT$500,000 (approximately$15,600) is transferred into or out of Taiwan via the Taiwan bankingsystem, the transfer must be reported to the Central Bank. Priorapproval is required for exchanges between New Taiwan dollars andforeign currency when the amount exceeds $5 million for an individualresident or $50 million for a corporate entity.
Narcotics asset seizure and forfeiture: Yes
The MLCA, Article 9, provides that whenever the prosecutor obtainssufficient evidence to prove the offender has committed a crimeprescribed in Article 11 (stipulating money laundering and terroristfinancing offenses) by transporting or transferring a monetaryinstrument or funds, the prosecutor may request the court to order thefinancial institution to freeze that specific transaction to preventwithdrawal, transfer, or other disposition of the involved funds for aperiod not more than six months. Assets of drug traffickers, includinginstruments of crime and intangible property, can be seized along withlegitimate businesses used to launder money. The law does not allow forcivil forfeiture.
To support these efforts the Ministry of Justice organized a"laws and decrees amendment researching" task force in March2009. The group of multi-disciplinary stakeholders is charged withdeveloping a comprehensive seizure and confiscation regime.
Narcotics asset sharing authority: Yes
Taiwan has promulgated drug-related asset seizure and forfeitureregulations that stipulate that--in accordance with treaties orinternational agreements--Taiwan's Ministry of Justice shall shareseized assets with foreign official agencies, private institutions, orinternational parties that provide Taiwan with assistance ininvestigations or enforcement.
Cross-border currency transportation requirements: Yes
According to legislation passed in July 2007, individuals arerequired to report currency transported into or out of Taiwan in excessof NT$60,000 (approximately $1,900), $10,000 or equivalent in foreigncurrency, 20,000 Chinese Yuan (approximately $2,930), or gold worth morethan $20,000.
Cooperation with foreign governments: Yes
Taiwan provides information to international counterparts uponrequest, based on the principles of mutual benefits and reciprocity.With regard to mutual legal assistance requests made by foreignjurisdictions (where there is no agreement or memorandum ofunderstanding (MOU) with Taiwan), the Ministry of Justice in accordancewith established procedure, forwards the requests to the relevantprosecutors' office to provide the assistance requested. The Act ofHandling Foreign Court-Commissioned Cases and the Taiwan-AmericanAgreement on Mutual Legal Assistance in Criminal Matters establish abasis through which Taiwan can respond to requests of foreign nationsthat do not relate to a case under prosecution.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
Taiwan prosecuted 33 cases involving money laundering in 2008.Among the 33 cases, 19 involved financial crimes, such as unregisteredstock trading, credit card theft, currency counterfeiting or fraud; fourwere corruption-related.
Amendments to the Foreign Exchange Control Act and the OffshoreBanking Act on April 29, 2009 implement the requirements of UNSCRs 1267and 1373 on combating the financing of terrorism.
U.S.-related currency transactions:
Direct two-way remittance of funds between Taiwan and the PeoplesRepublic of China (PRC) started on February 26, 2009. In Taiwan, thetransfer of funds to the PRC is handled at branches designated byChunghwa Post. Since no mechanism is in place for the cross-Straitsettlement of the Renminbi (RMB) and New Taiwan Dollar (NT$) currencies,cross-Strait remittances currently have to be denominated in
U.S. dollars.
The possession, distribution and use of counterfeit US FederalReserve Notes and fraudulent US Bonds continues to occur in Taiwan,often in concert with other illicit activity. During 2009, the UnitedStates Secret Service (USSS) continued on-going investigations,involving over $4 million in counterfeit currency. In 2009, there was anew case involving the seizure of $75.5 billion in fraudulent US Bonds.
Records exchange mechanism with U.S.:
A mutual legal assistance agreement (MLAA) between the AmericanInstitute in Taiwan (AIT) and the Taipei Economic and CulturalRepresentative Office in the United States (TECRO) entered into force inMarch 2002. It provides a basis for Taiwan and U.S. law enforcementagencies to cooperate in investigations and prosecutions for narcoticstrafficking, money laundering (including the financing of terrorism),and other financial crimes.
The AMLD is able to exchange information with the Financial CrimesEnforcement Network (FinCEN).
International agreements:
Revisions to the MLCA in 2007 reduced restrictions on mutual legalassistance where previously mutual legal assistance treaties or MLAAwere required. Taiwan is now able to exchange information based on theprinciples of reciprocity and mutual benefits. Since June 2008, Taiwanhas signed MOUs to establish mechanisms for cooperation with countriesand jurisdictions including the United States, Macedonia, theNetherlands Antilles and Aruba. Customs became a member of the CustomsAsia Pacific Enforcement Reporting System and has signed MOUs withcounterparts in the U.S., Australia, and the Philippines for sharingcustoms information.
Taiwan is unable to ratify UN Conventions because of long standingpolitical issues. However, it has enacted domestic legislation toimplement the standards in the key AML/CFT UN Conventions. The newamendment of the MLCA has incorporated related laws to fully implementthe provisions of the Vienna, Palermo and Terrorist Financingconventions and resolutions.
Taiwan is a member of the Financial Action Task Force-styleregional body Asia/Pacific Group on Money Laundering (APG). Its mostrecent mutual evaluation can be found here:http://www.apgml.org/documents/docs/17/Chinese%20Taipei%20MER2 FINAL.pdf
Recommendations:
Taiwan continues to improve and implement an anti-money launderingregime that largely comports with international standards. Taiwan shouldpass legislation to criminalize terrorism and terrorist financing as anautonomous crime. It should exert more authority over its nonprofitorganizations. The authorities on Taiwan should continue to strengthenthe existing anti-money laundering regime as they implement new measuresincluded in the 2009 MLCA amendments. Taiwan should abolish all shellcompanies and prohibit new shell companies of any type from beingestablished. Taiwan should enhance implementation of legislationregarding alternate remittance systems and Taiwan law enforcement shouldenhance investigations of underground finance and its links to tradefraud and trade-based money laundering.
Thailand
Thailand is a centrally located, developed Southeast Asian countrysurrounded by economically less vibrant neighbors along an extremelyporous border. Thailand is vulnerable to money laundering from its ownunderground economy as well as many categories of cross-border crime,including illicit narcotics and other contraband smuggling. The Thaiblack market includes a wide range of pirated and smuggled goods, fromcounterfeit medicines to luxury automobiles. Money launderers andtraffickers use banks, as well as non-bank financial institutions andbusinesses to move the profits of narcotics trafficking and othercriminal enterprises. Thailand is a significant destination and sourcecountry for international migrant smuggling and trafficking in persons,a production and distribution center for counterfeit consumer goods and,increasingly, a center for the production and sale of fraudulent traveldocuments. Illegal gambling, underground lotteries, and prostitution areall problems. Underground finance and remittance systems are used tolaunder illicit proceeds. In addition to its home-grown and regionalcriminal problems, some parts of Thailand are becoming havens forcriminal elements from other regions, particularly West Africa and theformer Soviet Union. The capacity of Thailand's criminal justicesystem to deal with these daunting challenges is low.
Offshore Center: No
Free Trade Zones: No
Criminalizes narcotics money laundering: Yes
Thailand's anti-money laundering legislation, the 1999Anti-Money Laundering Act (AMLA) and subsequent amendments, criminalizemoney laundering for narcotics trafficking.
Criminalizes other money laundering, including terrorism-related:Yes
The AMLA and subsequent amendments criminalize money laundering forthe following nine offenses: narcotics trafficking, trafficking in womenor children for sexual purposes, public fraud, financial institutionfraud, public corruption, customs evasion and blackmail, terroristactivity, and illegal gambling.
Criminalizes terrorist financing: Yes
Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
In 2003, the Royal Thai Government (RTG) issued two EmergencyDecrees to enact measures related to terrorist financing. The firstDecree amended Section 135 of the Thai Penal Code. The second Decreeamended Section 3 of the AMLA to add the offenses related to terrorismunder the Thai Penal Code,
including the financing of terrorism, as predicate offenses formoney laundering. Parliament endorsed the status of such decrees aslegal acts in April 2004. However, terrorist financing has not beencriminalized consistent with international standards, as the terroristfinancing offense does not conform to the UN Convention for theSuppression of the Financing of Terrorism. Further, Thai legislationdoes not criminalize all situations for the provision or collection offunds for an individual terrorist or a terrorist organization, nor doesthe terrorist financing offense extend to the unlisted individualterrorist or terrorist organization.
Know-youi-customer rules: Yes
In 2009, a new amendment to the AMLA was passed broadening therange of non-bank businesses required to follow reporting andidentification requirements. Unlike the requirements for financialinstitutions, only suspicious transactions or those exceeding certainamounts are subject to the identification requirement. Apart frominvestment advisors, the amended AMLA also covers eight additionalnon-bank businesses, including jewelry and gold shops, automotivehire-purchase businesses or car dealers, real-estate agents/brokers,antiques shops, personal loan businesses, electronic card businesses,credit card businesses, and electronic payment businesses. However, theminimum monetary thresholds for reporting business transactions have notyet been finalized.
Bank records retention: Yes
Under AMLA requirements, financial institutions are required tokeep customer identification and specific transaction records for aperiod of five years from the date an account was closed, or from thedate a final transaction occurred, whichever is longer.
Suspicious transaction reporting: Yes
The AMLA requires financial institutions (private banks, stateowned-banks, finance companies, insurance companies, savingscooperatives, etc.), and land registration offices to report suspicioustransactions to the Thai Anti-Money Laundering Office (AMLO) whichserves as the financial intelligence unit (FIU). During the 2009 fiscalyear (October 08--September 09), AMLO received 11,951 suspicioustransaction reports and disseminated 23 reports within AMLO and to otheragencies.
Large currency transaction reporting: Yes
The AMLA also requires that obligated entities report mostfinancial transactions exceeding Bt 2 million (approximately $60,500),including purchases of securities and insurance, and propertytransactions exceeding Bt 5 million (approximately $151,300).
Narcotics asset seizure and forfeiture: Yes
The Act for the Suppression of Drugs Offenders of 1991 provides forthe tracing, freezing, and seizure of assets. In addition, the AMLAprovides for civil forfeiture of property involved in a money launderingoffense. Money and property derived from commission of a predicateoffense, from aiding or abetting the commission of a predicate offense,or derived from the sale, distribution, transfer, or returns of suchmoney or assets may be seized under section 3 of the AMLA. AMLO, throughthe Transaction Committee, is responsible for tracing, freezing, andseizing assets. The AMLA makes no provision for substitute seizures ifauthorities cannot prove a relationship between the asset and thepredicate offense.
Narcotics asset sharing authority: Yes
Under the Suppression of Drugs Offenders Law Thai law enforcemententities may share assets as a function of a bilateral agreement, thoughin practice this has rarely happened.
Cross-border currency transportation requirements: No
There are no restrictions or reporting obligations on theimportation or exportation of foreign currency (or bearer-negotiableinstruments). Export of domestic currency is subject to authorizationwhen the amount exceeds 50,000 baht ($1,500), or 500,000 baht ($15,100)when traveling to adjacent countries.
Cooperation with foreign governments: Yes
The RTG routinely cooperates with other jurisdictions in financialcrimes investigations. U.S. or international sanctions or penalties: NoEnforcement and implementation issues and comments:
AMLO, the Bank of Thailand, the Securities and Exchange Commissionand the Department of Special Investigation are all responsible forinvestigating financial crimes, with overlapping jurisdictions and quitevaried levels of competence.
Thailand does not have mechanisms in place for freezing funds orother assets of persons designated under UNSCRs 1267 and 1373.
The AMLO prosecuted 15 cases and seized Bt 18.4 million(approximately $529,000) during the first six months of FY 2008 fiscalyear. However, the prosecution process ceased in April 2008 because anamendment to the AMLA in early 2008 required that both the Anti-MoneyLaundering Board and the Transaction Committee be dissolved (in March2008) and replaced by new bodies in line with the amended AMLA. Withoutthese two bodies, asset forfeiture and financial asset seizure cannot beprocessed, as the AMLA does not have any provision to allow existingbodies to continue their work while the selection process of new memberstakes place. The selection process also was delayed due to three changesof government in 2008, and a later disagreement between the Cabinet andthe Parliament on the proposed list of experts for the AML Board.Although asset forfeiture and financial asset seizure operations are onhold, the AMLO retains the power to investigate cases, and pursued 184of them during FY 2009.
U.S.-related currency transactions:
Currency transactions between the US and Thailand are voluminous,mostly related to trade matters. It is likely that currency transactionsresulting from the illicit narcotics trade do transit the Thai bankingsystem.
Records exchange mechanism with U.S.:
Thailand and the United States are parties to a bilateral mutuallegal assistance treaty (MLAT). AMLO is able to exchange informationwith the Financial Crimes Enforcement Network (FinCEN).
International agreements:
Thailand has MLATS with ten additional countries and is party tothe regional Association of Southeast Asian Nations (ASEAN) Mutual LegalAssistance Agreement. Thailand is also a party to various informationexchange agreements. Thai authorities can share information or provideassistance to foreign jurisdictions in matters relating to moneylaundering or other financial crimes without need for a treaty. AMLO hasmemoranda of understanding (MOUs) on money laundering cooperation with36 other FIUs. It also actively exchanges information with nations withwhich it has not entered into an MOU, including the United States,Singapore, and Canada.
Thailand is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Transnational Organized Crime--No
* the UN Convention against Corruption--No
Thailand is a member of the Asia/Pacific Group on Money Laundering(APG), a Financial Action Task Force-style regional body. Its mostrecent mutual evaluation can be found here: www.apgml.org)
Recommendations:
During the past several years, the Royal Thai Government (RTG) hasdemonstrated more of a commitment to the adoption of anti-moneylaundering/counter-terrorist financing (AML/CFT) international bestpractices. While many improvements have already been identified andadopted by Thai agencies, there are important actions still pending,including the passage of key bills, regulations, or measures which willhelp augment the current AML/CFT regime in Thailand. The RTG must takesteps to amend the process by which the Anti-Money Laundering Board andTransaction Committee members are replaced to preclude lengthyinterruption of the prosecution process. Until the RTG provides a viablemechanism for all of its financial institutions to be examined forcompliance with the AMLA, Thailand's AML/CFT regime will not fullycomport with international standards. Thailand should institutemandatory cross-border currency reporting requirements. The RTG shouldtake steps to eliminate overlapping jurisdictions or to clarifyinvestigative responsibilities. Additionally, the RTG should ensure itsinvestigative agencies receive the appropriate training to enable themto competently perform their duties. The RTG should take additionalmeasures to address the vulnerabilities presented by alternativeremittance systems. The RTG should become a party to the UN Conventionagainst Transnational Organized Crime and the UN Convention againstCorruption.
Turkey
Turkey is an important regional financial center, particularly forCentral Asia and the Caucasus, as well as for the Middle East andEastern Europe. It continues to be a major transit route for SouthwestAsian opiates moving to Europe. However, narcotics-trafficking is onlyone source of the funds laundered in Turkey. Other significant sourcesinclude invoice fraud and tax evasion, and to a lesser extent,smuggling, counterfeit goods, and forgery. Terrorist financing andterrorist organizations with suspected involvement innarcotics-trafficking and other illicit activities are also present inTurkey. Money laundering takes place in banks, non-bank financialinstitutions, and the underground economy. Informed observers estimateas much as 40 to 50 percent of the economic activity is derived fromunregistered businesses. Money laundering methods in Turkey include: thelarge-scale cross-border smuggling of currency; bank transfers into andout of the country; trade fraud; and the purchase of high-value itemssuch as real estate, gold, and luxury automobiles. Turkish-basedtraffickers transfer money and sometimes gold via couriers, theunderground banking system, and bank transfers to pay narcoticssuppliers in Pakistan or Afghanistan. Funds are often transferred toaccounts in the United Arab Emirates, Pakistan, and other Middle Easterncountries.
Offshore Center: No
Free Trade Zones: Yes
There are 19 free trade zones (FTZ) in Turkey: Mersin, Antalya,Adana-Yumurtalik, Izmir, Denizli, Izmir Menemen, Istanbul Thrace,Istanbul Ataturk Airport, Istanbul Leather and Industry, Europe FTZ,Kocaeli, TUBITAK MAM Technology, Bursa, Trabzon, Rize, Samsun, Mardin,Gaziantep and Kayseri. These FTZs have a wide range of activities,including manufacturing, trading, storing, packing, banking and finance,software, and research and development. All the companies wishing tooperate in FTZs must apply to the FTZ's General Directorate in theForeign Trade Undersecretariat. Full identification of all applicants isrequired. The companies are also required to report on their activitiesto the zone directorate, which regularly sends reports to theUndersecretariat. The General Directorate of FTZs has the authority tocancel operating licenses if the companies are involved in activitiesnot included in the initial description of their field of activity, orif they fail to pay taxes. The companies are also required to submitidentification information on any personnel they employ or dismissduring their time of activity in the zone.
Criminalizes narcotics money laundering: Yes
Turkey's Law on Prevention of Money Laundering, most recentlyamended in September 2009 and numbered 5918, criminalizes moneylaundering. It provides for penalties of three to seven years in prisonfor money launderers, a fine of 20,000 TL (approximately $13,700) plusasset forfeiture provisions.
Criminalizes other money laundering, including terrorism-related:Yes
The present code defines money laundering predicate offenses as alloffenses for which the punishment is imprisonment for one year or more.
Criminalizes terrorist financing: Yes
Existing Turkish law criminalizing terrorist financing include:Articles 2, 7, and 8 of the Law to Fight Terrorism numbered 3713; andvarious articles of the penal code which can be used to punish thefinancing of terrorism. A separate law, Number 5549 (October 2006),includes significant provisions to prevent money laundering andterrorist financing. The laws are limited to acts committed by membersof organizations operating against the Turkish Republic, so thecollection, donation and movement of funds by terrorist organizationswould not be prohibited if the funds could not be linked to a specificdomestic terrorist act. Turkey issued additional regulations to combatterrorist financing in January 2008.
Know-your-customer rules: Yes
Under a 2007 Ministry of Finance (MOF) banking regulation circular,all banks and regulated financial institutions, including the CentralBank, securities companies, post office banks, and Islamic financialhouses are required to record tax identity information for all customersopening new accounts, applying for checking accounts, or cashing checks.The circular also requires exchange offices to sign contracts with theirclients. The MOF also mandates that a tax identity number be used forall financial transactions.
Bank records retention: Yes
The Council of Ministers passed a set of regulations that requiringknow-your-customer provisions and bank maintenance of transactionrecords for five years.
Suspicious transaction reporting: Yes
Turkish law provides safe harbor protection to the filers ofsuspicious transaction reports (STRs). The law also covers a range ofentities subject to reporting requirements, to include severaldesignated non-financial businesses and professions (DNFBPs), such asart dealers, insurance companies, lotteries, vehicle sales outlets,antique dealers, pension funds, exchange houses, jewelry stores,notaries, sports clubs, and real estate companies. In November 2007, theGovernment of Turkey (GOT) issued a General Communique of SuspiciousTransaction Reporting Regarding Terrorist Financing to require thereporting of suspicious transactions related to terrorist financing.
MASAK, the Financial Crimes Investigation Board, is Turkey'sfinancial intelligence unit (FIU). MASAK receives, analyzes, and refersSTRs for investigation. In 2008, 4,924 STRs were filed, of which 228were linked to terrorist financing activities. Nine were from brokeragehouses, 15 were from factoring entities, and 10 were from insurancecompanies. As of October 2009, there have been 7,797 STRs filed.
Large currency transaction reporting: No
Narcotics asset seizure and forfeiture: Yes
Turkey has a system for identifying, tracing, freezing, and seizingassets that are not related to terrorism, although the law allows onlyfor their criminal, not administrative, forfeiture. Applicable lawprovides for the confiscation after conviction of all property andassets (including derived income or returns) that are the proceeds of amoney-laundering predicate offense. The law allows for the confiscationof the instrumentalities of money laundering and the equivalent value ofdirect proceeds that could not be seized. The defendant must own theproperty subject to forfeiture. Legitimate businesses can be seized ifused to launder drug money or support terrorist activity, or are relatedto other criminal proceeds.
Narcotics asset sharing authority:
There is no specific provision in Turkish law for the sharing ofseized assets with other countries; however the United States and Turkeyshared seized assets in one narcotics case.
Cross-border currency transportation requirements: Yes
Travelers may take up to $5,000 (approximately 7,750 Turkish Lira)or its equivalent in foreign currency notes out of the country. Turkeydoes have cross-border currency reporting requirements, and the lawgives Customs officials the authority to sequester valuables oftravelers who make false or misleading declarations and impose fines forsuch declarations. The currency reporting thresholds and whether therequirements are both in and outbound are not known.
Cooperation with foreign governments:
There are no known impediments to cooperation.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
According to MASAK statistics, as of December 31, 2008 it hadpursued 1532 money laundering investigations since 2003. Of these, 459were referred for further investigation, but only 19 cases resulted inconvictions. There are still 188 cases pending in the courts. Moreover,all of the convictions are reportedly under appeal. There is a lack ofspecialization and understanding of AML/CFT provisions among relevantauthorities, which has contributed to the high number of acquittals inmoney laundering cases. In 2008, the GOT opened 34 money launderingcases, of which seven resulted in a conviction. It should be noted thereis no way to corroborate the accuracy of these statistics, as TurkishCriminal Court records are closed to the public.
The GOT's non-profit sector is vulnerable to terroristfinancing. Turkey's investigative powers, law enforcementcapability, oversight and outreach are weak and lacking in all thenecessary tools and expertise to effectively counter this threat througha comprehensive approach; all these areas need to be strengthened. Thenonprofit sector is not audited on a regular basis for counter-terroristfinance vulnerabilities and does not receive adequate anti-moneylaundering/counter-terrorist financing (AML/CFT) outreach or guidancefrom the GOT. The General Director of Foundations (GDF) issues licensesfor charitable foundations and oversees them. However, there are alimited number of auditors to cover more than 70,000 institutions
Turkey has not taken sufficient steps to implement an effectiveregime to combat terrorist financing, especially as it relates to UNSCRs1267 and 1373. For example, while the GOT has implemented UNSCR 1267, ithas failed to establish punishment or sanctions for institutions thatfail to observe a freezing order, and it has not established proceduresfor delisting entities or unfreezing funds. Additionally, the GOT hasnot taken steps that would allow it to freeze the assets of entitiesdesignated by other jurisdictions, as required under UNSCR 1373.
U.S.-related currency transactions:
No information provided.
Records exchange mechanism with U.S.:
Turkey and the United States have a Mutual Legal Assistance Treaty(MLAT) and cooperate closely on narcotics and money launderinginvestigations. Turkey and the United States are both members of theEgmont Group and occasionally exchange financial intelligence.
International agreements:
The GOT cooperates closely with its neighbors in the SoutheastEurope Cooperation Initiative (SECI). Turkey is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--Yes
Turkey is a member of the FATF. It's most recent 2007 mutualevaluation can be found here:http://www.fatf-gafi.org/dataoecd/14/7/38341173.pdf
Recommendations:
The Government of Turkey (GOT) should regulate and investigateremittance networks to thwart their potential misuse by terroristorganizations or their supporters. The GOT should expand its narrowlegal definition of terrorism and take steps to fully implement UNSCRs1267 and 1373. The GOT must also strengthen its oversight of foundationsand charities, which currently receive only cursory overview andauditing. AML and CFT prosecutions, convictions, and penalties remainlow and many have been overturned on appeal. In order to betterinvestigate and prosecute cases, law enforcement and judicialauthorities should enhance their knowledge of AML/CFT issues and whatconstitutes an offense.
Ukraine
In the Ukraine, high risks of money laundering have been identifiedin foreign economic activities, credit and finance, the fuel and energyindustry, and the metal and mineral resources market. Illicit proceedsare primarily generated through corruption, fictitious entrepreneurship,fraud, drug trafficking, arms trafficking, organized crime,prostitution, tax evasion, and trafficking in persons. Variouslaundering methodologies are used including the use of real estate,insurance, bulk cash smuggling, and financial institutions
Offshore Center: No
Free Trade Zones: Yes
In 2005, the Government of Ukraine (GOU) eliminated the tax andcustoms duty privileges available in 11 Special Economic Zones (SEZs)and nine Priority Development Territories (PDTs) operating withinUkraine, which have been associated with rampant evasion of customsduties and taxes.
Criminalizes narcotics money laundering: Yes
In November 2002, Ukraine enacted an anti-money laundering (AML)package entitled "On Prevention and Counteraction of theLegalization (Laundering) of the Proceeds of Crime" (the Basic AMLLaw), which serves as the legal basis for a national anti-moneylaundering/counter-terrorist financing (AML/CFT) regime. Specificelements of the money laundering offense are also contained in Article306 of the Criminal Code, which addresses laundering of proceedsgenerated from drug trafficking.
Criminalizes other money laundering, including terrorism-related:Yes
With the exception of market manipulation and financing ofterrorism (in all its forms) the range of offenses set out in theCriminal Code which are predicate offenses to money laundering includeall categories of offenses included in the international standards.However, certain offenses and acts are not sufficiently covered.
On November 6, 2009, Parliament passed significant amendments tothe Basic AML law, designed to address many of the identifieddeficiencies and to take significant steps to bring the regime intocompliance with international standards. However, the President vetoedthe bill on December 8 in response to pressure from the financialcommunity, which complained of onerous additional reportingrequirements.
Criminalizes terrorist financing: Yes
(Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
The Ukrainian legal framework does not criminalize terroristfinancing as an autonomous offense. The terrorism offense iscriminalized in article 258 of the Criminal Code. However, the CriminalCode only provides for the criminalization of terrorist financing basedon funding linked to a specific terrorist act and does not cover solefunding for an individual terrorist or a terrorist organization.
Know-your-customer rules: Yes
The legal framework for customer due diligence is set out in avariety of documents. All types of financial institutions are covered byAML/CFT obligations for customer due diligence through a combination ofthe Basic AML Law, the Law on Financial Services and State Regulation ofFinancial Markets, and the Law of Ukraine on Securities and StockMarket. The measures apply to legal persons, authorized representatives,and beneficial owners. Additional requirements stipulate the proceduresfor conducting customer identification that apply to non-bankinginstitutions, insurance companies, gambling institutions, credit unions,depositories, securities traders, registers, pawn shops, and leasingproviders.
Bank records retention: Yes
Article 5 of the Basic AML Law requires financial institutions tokeep documents on financial transactions for five years following thecompletion of the transaction. The Law on Banks and Banking repeats thisrequirement. However, non-bank financial institutions are not requiredto maintain such records. There is also no requirement that transactionrecords should be sufficient to permit reconstruction of individualtransactions.
Suspicious transaction reporting: Yes
The Basic AML Law requires reporting to the financial intelligenceunit (FIU) of all transactions that appear to be suspicious and certainforms of attempted transactions. However, there is no explicit legalrequirement to report all types of attempted transactions, not justthose that have been refused by the obligated entities. There are fewSTRs regarding terrorist financing. According to the Basic AML Law,there is no reporting threshold for suspicious transactions.
Large currency transaction reporting: Partially
Any transaction of 80,000 UAH (approximately $9,300), or foreigncurrency equivalent, must be reported if the transaction meets one ofseveral suspicious activity criteria set out in article 11 of the BasicAML Law. In 2008, the FIU received 1,083,461 transaction reports, whichinclude STRs and large currency transaction reports, and sent 641separate cases to law enforcement agencies.
Narcotics asset seizure and forfeiture:
Ukraine has a general asset forfeiture regime that is largely aninappropriate and ineffective relic of Soviet-era legislation. Article59 of the Ukrainian Criminal Code provides for the mandatory seizure ofall or a part of the property of any person convicted for "grave orparticularly grave offenses," as defined in the code, regardless ofwhether this property bore any relation to the crime of conviction. Withrespect to money laundering, Article 209 allows for the forfeiture ofcriminally obtained money and other property. However, confiscation ofinstrumentalities intended for use in the commission of a moneylaundering offense; property of corresponding value; and income, profitsor other benefits from the proceeds of crime do not appear to becaptured by the Ukrainian legislation.
Narcotics asset sharing authority:
Ukrainian authorities have indicated that sharing of confiscatedassets with other countries might be resolved by bilateral agreements oncoordination of seizure and confiscation actions. Mechanisms forinternational cooperation on confiscation measures have not yet beentested. Civil confiscation orders are not recognized in the Ukrainiancriminal legislation.
Cross-border currency transportation requirements: Yes
Cash smuggling is substantial in Ukraine, although it is reportedlymore related to unauthorized capital flight than to criminal proceeds orterrorist funding. Beginning in May 2008, as a result of amendments tothe "Resolution on the Adoption of Instructions Regarding Movementof Currency, Precious Metals, Payment Documents, and Other BankingDocuments over the Customs Border of Ukraine," travelers mustdeclare both inbound and outbound cross-border transportation of cashexceeding euro 10,000 (approximately $14,100) and name the origin ofsuch funds. Precious metals also subject to reporting are defined asgold, silver, and platinum. Persons may not import or export preciousmetals exceeding 500g in weight without a written declaration submittedto customs.
Cooperation with foreign governments:
Ukraine provides mutual legal assistance (MLA) on the basis ofmultilateral international treaties and bilateral agreements, and in theabsence of an agreement, requests for legal assistance are considered onthe basis of the reciprocity principle via diplomatic channels. TheBasic AML Law provides that the FIU shall cooperate internationally toexchange experience and information with relevant foreign agencies onthe basis of international agreements in force or on a reciprocitybasis.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
Ukraine's AML/CFT legal framework is significantly deficientin that the laws do not provide for autonomous prosecution of moneylaundering--a money laundering conviction requires prior or simultaneousconviction for a predicate offense linked to the laundered proceeds;cover all predicate crime categories; cover conversion or transfer ofproperty; or cover terrorist financing in all its aspects or as aseparate offense. In addition, Ukraine appears to have seriousdifficulties implementing the law.
Ukraine's customer due diligence (CDD) regime does notadequately cover all institutions and types of transactions. Forexample, the definition of beneficial owner does not cover naturalpersons, and there is no requirement that financial institutionsdetermine the identity of the natural persons who ultimately own orcontrol the customer; securities institutions are only required toidentify the control structure and beneficial owners of the customer andto obtain information on the purpose and nature of the businessrelationship in higher risk situations; there is no specific requirementfor any institution to conduct ongoing due diligence; and, there is nogeneral requirement to perform enhanced due diligence for higher riskcategories of customers, business relationships or transactions.
Suspicious transaction reporting requirements are not wellunderstood outside of the banking sector. Additionally, there is apronounced lack of guidance to reporting institutions on how to detectsuspicious transactions related to terrorism.
Ukraine lacks any functional regime for locating or seizingforfeitable assets. In particular, Ukraine lacks legislation allowing inrem forfeiture or the seizure of corporate assets, has no specializedasset forfeiture prosecutors or officials, and lacks any entity toadminister forfeited assets.
In 2008, law enforcement agencies initiated 354 formal criminalinvestigations and submitted indictments in 117 of those cases; therewere 76 convictions.
Through their regulatory agencies, banks and non-bank financialservices receive the U.S. designations of suspected terrorists andterrorist organizations under Executive Order 13224 and other U.S.authorities and are instructed to report any transactions involvingdesignated individuals or entities.
U.S.-related currency transactions:
The local currency (hryvnia) is tied to the dollar. Dollars and,increasingly, Euros are ubiquitous. It is the common view that dollarsare for savings kept at home and for big purchases, while hryvnias arefor day-to-day expenses. Ukrainians are still mistrustful of theirmonetary system so many people still prefer to secrete dollars in hidingplaces rather than deposit them in a bank.
Records exchange mechanism with U.S.:
The U.S.-Ukraine Treaty on Mutual Legal Assistance in CriminalMatters entered into force in February 2001. A bilateral Convention forthe Avoidance of Double Taxation and the Prevention of Fiscal Evasionwith Respect to Taxes on Income and Capital, which provides for theexchange of information in administrative, civil, and criminal matters,is also in force.
International agreements:
As of December 2009, the FIU has signed memoranda of understanding(MOUs) with the FIUs of 46 countries. In July, 2009, Ukraine amended thelaw on Banks and Banking to permit international exchange of informationbetween the National Bank and respective regulators of other countriesfor purposes of combating money laundering.
Ukraine is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism -Yes
* the UN Convention against Transnational Organized Crime -Yes
* the 1988 UN Drug Convention -Yes
* the UN Convention against Corruption--Yes
Ukraine is a member of MONEYVAL and an observer to the EurasianGroup on Combating Money Laundering and the Financing of Terrorism(EAG), both Financial Action Task Force-style regional bodies.Ukraine's most recent mutual evaluation can be found here:
http://www.coe.int/t/dghl/monitoring/moneyval/Evaluations/Evaluation reports en.asp
Recommendations:
The Government of Ukraine (GOU) has strengthened and clarified itslegislation and established a comprehensive anti-money launderingregime. However, Ukraine's ability to implement this regime throughconsistent successful criminal prosecutions has yet to be proven. TheGOU should adopt draft legislation to bring its AML/CFT regime intocloser accordance with both the language and the intent of internationalstandards. The recent veto of amendments that would do just this isunfortunate. The GOU also should consider carefully the consequences ofreestablishing tax and customs privileges that have been abused in thepast. Ukraine should provide guidance to all reporting institutions,bank and non-bank, on the reporting requirements for suspicioustransactions related to both money laundering and terrorist financing.Law enforcement officers, customs, and the judiciary need a betterunderstanding of the theoretical and practical aspects of identifying,investigating and prosecuting money laundering cases, especially in theregions where implementation is poor. The GOU also should moreaggressively address public corruption by investigating, prosecuting andconvicting corrupt public officials.
United Arab Emirates
The United Arab Emirates (UAE) is an important financial center inthe Gulf region. Dubai, in particular, is a major international bankingand trading center. The country also has a growing offshore financialfree zone. The UAE's robust economic development, politicalstability, and liberal business environment have attracted a massiveinflux of people, goods, and capital, which makes the countrysusceptible to possible money laundering activities. The UAE also issusceptible to money laundering due to its geographic location as theprimary transportation and trading hub for the Gulf States, East Africa,and South Asia; longstanding trade relations with Iran; its expandingtrade ties with the countries of the former Soviet Union; and laggingrelative transparency in its corporate environment.
The potential for money laundering is exacerbated by the largenumber of resident expatriates (roughly 80-85 percent of totalpopulation) who send remittances to their homelands. However, in 2009the Ministry of Labor introduced a new electronic wage protectionsystem, designed to replace cash salary payments with direct depositsinto a personal bank account. Given the country's proximity toAfghanistan, narcotics traffickers are increasingly reported to beattracted to the UAE's financial and trade centers. Other moneylaundering vulnerabilities in the UAE include hawala, trade fraud,smuggling, the real estate sector, the misuse of the international goldand diamond trade, the misuse of shell companies and the use ofUAE-based companies to assist in transactions that violate U.S. and/orU.N sanctions. Reportedly, the UAE is used as a financial center bypirate networks operating off the coast of Somalia and for corruptofficials in Afghanistan and Pakistan.
Offshore Center: Yes
In March 2004, the Government of the UAE (GUAE) passed Federal LawNo. 8, regarding the Financial Free Zones (FFZs) (Law No. 8/2004).Although the new law exempts FFZs and their activities from UAE civiland commercial laws, FFZs and their operations are still subject tofederal criminal laws including the Anti-Money Laundering Law (Law No.4/2002) and the Anti-Terror Law (Law No. 1/2004). As a result of Law8/2004 and a subsequent federal decree, the UAE's first financialfree zone (FFZ), known as the Dubai International Financial Center(DIFC), was established in September 2004, supervised by the DubaiFinancial Services Authority (DFSA). By September 2005, the DIFC hadopened its securities market, the Dubai International Financial Exchange(DIFX). The law prohibits companies licensed in the FFZ from dealing inUAE currency (i.e., dirham), or taking domestic deposits. Further, thelaw stipulates that the licensing standards of companies shall becomparable to those for domestic companies. Insurance activitiesconducted in the FFZ are limited by law to reinsurance contracts only.
Free Trade Zones: Yes
The number of FTZs is growing, with 38 currently operating in theUAE. Every emirate has at least one functioning FTZ. There are over5,000 multinational companies located in the FTZs, and thousands moreindividual trading companies. The FTZs permit 100 percent foreignownership, no import duties, full repatriation of capital and profits,no taxation, and easily obtainable licenses. Companies located in thefree trade zones are considered offshore or foreign entities for legalpurposes. However, UAE law prohibits the establishment of shellcompanies and trusts, and does not permit nonresidents to open bankaccounts in the UAE. The larger FTZs in Dubai are well-regulated.
Criminalizes narcotics money laundering: Yes
Criminalizes other money laundering, including terrorism-related:Yes
The UAE has enacted the Anti-Money Laundering Law No. 4/2002, andthe Anti-Terrorism Law No. 1/2004. Both pieces of legislation, inaddition to the Cyber Crimes Law No. 2/2006, serve as the foundation forthe country's anti-money laundering/counter-terrorist financing(AML/CFT) efforts. Law No. 4/2002 criminalizes all forms of moneylaundering activities.
Criminalizes terrorist financing: Yes
(Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
In July 2004, the UAE government strengthened its legal authorityto combat terrorism and terrorist financing by passing Federal LawNumber No. 1/2004. The law specifically criminalizes the funding ofterrorist activities and terrorist organizations.
Know-your-customer rules: Yes
Administrative Regulation No. 24/2000 requires banks, moneyexchange houses, finance companies, and any other financial institutionsto follow customer due diligence procedures for accountholders and toverify a customer's identity and maintain transaction details(i.e., name and address of originator and beneficiary) for all exchangehouse transactions over the equivalent of $545 and for allnon-accountholder bank transactions over $10,900. The regulationdelineates the procedures to be followed for the identification ofnatural and juridical persons. Amendments to the Regulations in July2006 add enhanced due diligence requirements for charities; and, inAugust 2009, the Central Bank issued a circular instructing local banksnot to handle accounts belonging to politically exposed persons (PEPs).
Bank records retention: Yes
Regulation 24/2000 calls for customer records to be maintained fora minimum of five years and further requires they be periodicallyupdated as long as the account is open.
Suspicious transaction reporting: Yes
In the first five months of 2009, 6,198 suspicious transactionreports (STRs) were filed. In 2008, 13,101 STRs were filed. Of the totalSTRs filed in the UAE from 2002 to date, 285 have been referred to theUAE Public Prosecutor's office, of which 20 have reached thecourts.
Large currency transaction reporting:
Law No. 4/2002 calls for stringent reporting requirements for wiretransfers exceeding 2000 dirhams (approximately $545) and currencyimports above 40,000 dirhams (approximately $10,900).
Narcotics asset seizure and forfeiture:
Law No. 1/2004, addressing terrorism and terrorist financing, alsoprovides for asset seizure and confiscation. Article 31 gives theAttorney General the authority to seize or freeze assets until theinvestigation is completed. Article 32 confirms the Central Bank'sauthority to freeze accounts for up to seven days if it suspects thefunds will be used to fund or commit any of the crimes listed in thelaw. Amendments to the Central Bank Regulations 24/2000 in July 2006require financial institutions to freeze transactions they believe maybe destined for funding terrorism, terrorist organizations, or forterrorist purposes.
Narcotics asset sharing authority: No Cross-border currencytransportation requirements:
The Central Bank requires any cash imports over the equivalent of$10,900 to be declared to Customs; otherwise undeclared cash may beseized upon attempted entry into the country. However, enforcementmechanisms are ineffectual and failure to declare is not specificallypenalized. Because movements of bulk cash across borders is often usedto support trade for countries in the region with underdeveloped
banking systems, customs officials, police, and judicialauthorities tend to not regard large cash imports as potentiallysuspicious or criminal activities, and it is not unusual for people tocarry significant sums of cash. The UAE has not set any limits on theamount of cash that can be imported into or exported from the country.No reporting requirements currently exist for cash exports, constitutinga significant vulnerability in the UAE's enforcement regime.
Cooperation with foreign governments (including refusals):
There is a reference in UAE law that enables the UAE to provideinternational "judicial" cooperation, but this provision hasbeen interpreted narrowly. However, there have been recent examples ofUAE cooperation in pending US criminal cases, including the productionof financial records and the identification of criminal assets.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
The free trade zones are monitored by the local emirate rather thanfederal authorities. Although some trade-based money launderingundoubtedly occurs in the large FTZs, a higher potential for financialcrime exists in some of the smaller FTZs located in the northernemirates. The UAE is also a hub for re-export activity that permits Iranto evade internationally imposed sanctions.
Although firms operating in the DIFC are subject to Law No. 4/2002,the DFSA has issued its own anti-money laundering regulations andsupervisory regime, which has caused some ambiguity about the CentralBank's and the FIU's respective authorities within the DIFC.
No cross-border currency transportation reporting requirementscurrently exist for cash exports.
In 2003, the Central Bank issued regulations to help improve theoversight of hawala, including registration of hawala brokers. Theregulations require hawaladars to submit the names and addresses of alloriginators and beneficiaries of funds and to file STRs on a monthly orquarterly basis. However, since the inception of the program, therereportedly have not been any STRs filed by hawaladars.
The Central Bank states it circulates an updated UNSCR 1267Sanctions Committee's consolidated list of suspected terrorists andterrorist organizations to all the financial institutions under itssupervision.
In June 2009, a Dutch suspect was arrested in Dubai for suspectedinvolvement in international money laundering, reportedly based on anInterpol request. The accused, who was looking to open a commercialcompany in a UAE free trade zone, was suspected of being part of aEuropean gang involved in drug trafficking and of supplying SouthAmerican narcotics to European countries and South Africa. Dubai Policealso reported the disruption of a narcotics-related international moneylaundering operation worth $28 billion.
U.S.-related currency transactions:
No information available.
Records exchange mechanism with U.S.:
There is no mutual legal assistance treaty (MLAT) between the U.S.and the UAE, which has historically prevented timely UAE compliance withUS investigative requests in financial crimes cases. However, the UAEAttorney General has expressed an interest in removing certainpreconditions that have historically prevented the signing of an MLATwith the U.S., and discussions between the U.S. and the UAE on thisissue are anticipated to be ongoing. The UAE FIU exchanges and sharesinformation with FinCEN, the FIU of the United States. The DFSA has amemorandum of understanding (MOU) with the U.S. Commodity FuturesTrading Commission. On October 23, 2007, the DFSA entered into a MOUwith the five U.S. banking supervisors.
International agreements:
The DFSA has undertaken a campaign to reach out to otherinternational regulatory authorities to facilitate information sharing.The DFSA has MOUs with more than 41 other regulatory bodies, includingthe UK's Financial Services Authority and the Securities andExchange Board of India. The UAE Central Bank has signed a number ofMOUs with Egmont member countries, including Nigeria, the Philippines,Canada and Holland, and continues this effort. In May 2008, the UAE andRussia signed an executive plan for enforcement of the Anti-CrimeCooperation Agreement.
The UAE is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--Yes
The UAE is a member of The Middle East and North Africa FinancialAction Task Force (MENAFATF), a Financial Action Task Force-styleregional body. It's most recent mutual evaluation can be foundhere: www.MENAFATF.org
Recommendations:
The Government of the UAE (GUAE) has shown some progress inenhancing its AML/CFT program. However, several areas continue to needfurther action by the GUAE. Most importantly, the UAE should adoptoutbound cash and gold declaration requirements, a key vulnerability inthe UAE's AML/CFT regime. Additionally, law enforcement and customsofficials should be more proactive in developing cases based oninvestigations, rather than on STRs, and should step up inquiries intolarge and undeclared cash imports into the country. The GUAE shouldcontinue to strengthen its regulatory and enforcement regime tointerdict potential illicit
cash couriers transiting major airports. All forms of trade-basedmoney laundering must be given greater scrutiny by UAE customs and lawenforcement officials, including customs fraud, the trade in gold andprecious gems, commodities used as counter-valuation in hawalatransactions, and the misuse of trade to launder narcotics proceeds. TheUAE FIU remains under-resourced and lacks investigative capacity. TheGUAE should increase the resources it devotes to supervision andinvestigation of AML/CFT both federally and at the emirate level,including ensuring all free trade zones are adequately supervised.Moreover, the absence of meaningful statistics across all sectors is asignificant hindrance to the assessment of the effectiveness of theAML/CFT program. The Central Bank should review the effectiveness of itshawaladar registration and dramatically step up its enforcement andoversight of this sector. The UAE should also continue its regionalefforts to promote sound charitable oversight. Action also should betaken to clamp down on Iranian activity in the UAE that evadesinternational sanctions regimes.
United Kingdom
The United Kingdom (UK) plays a leading role in European and worldfinance and remains attractive to money launderers because of the size,sophistication, and reputation of its financial markets. Althoughnarcotics are still a major source of illegal proceeds for moneylaundering, the proceeds of other offenses, such as financial fraud andthe smuggling of people and goods, have become increasingly important.The past few years have witnessed the movement of cash placement awayfrom banks and mainstream financial institutions as these entities havetightened their controls and increased their vigilance. The use ofbureaux de change, cash smugglers (into and out of the UK), andtraditional gatekeepers (including solicitors and accountants) to moveand launder criminal proceeds has been increasing. Also on the rise arecredit/debit card fraud and the purchasing of high-value assets todisguise illegally obtained money. Additionally, the Internetincreasingly provides criminals with a variety of money makingopportunities and methods to launder funds.
The UK Threat Assessment conducted by the Serious Organized CrimeAgency (SOCA) estimated the annual proceeds from crime were between 19billion [pounds sterling] (approximately $32 billion) and 48 billion[pounds sterling] (approximately $80 billion) with 25 billion [poundssterling] (approximately $42 billion) representing a realistic figurefor the amount laundered each year.
Offshore center: No
Free trade zones: Yes
The UK has five designated Free Zones in which non-European Union(EU) goods are treated as outside the customs territory of the EU forthe purposes of import duties until the goods are released for freecirculation. Import VAT and excise duty are also suspended until thegoods are removed to the UK market or used or consumed within the FreeZone. The Free Zones are located in Liverpool, Prestwick, Port ofSheerness, Southampton, and Port of Tilbury.
Criminalizes narcotics money laundering: Yes
Criminalizes other money laundering, including terrorism-related:Yes
The Proceeds of Crime Act (POCA) of 2002 consolidates and expandspre-existing legislation criminalizing money laundering. POCA covers allcrimes as predicate offenses. It also creates a new criminal offense,applicable to all regulated sectors, of failing to disclose suspicioustransactions.
Criminalizes terrorist financing: Yes
(Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
The Terrorism Act of 2000 criminalizes terrorist financing.Additionally, the Terrorism (United Nations Measures) Order 2006 and theAl-Qaida and the Taliban (United Nations Measures) Order 2006 providethe Treasury with designation authority. The Counter-Terrorism Act of2008 (CTA) came into effect on November 27, 2008. Schedule 7 of the CTAgives the Treasury additional powers to act against terrorist financingand money laundering.
Know-your-customer rules: Yes
The Money Laundering Regulations of 2007 implement in part theEU's Third Money Laundering Directive and include an obligation toestablish and maintain appropriate and risk-sensitive policies andprocedures relating to customer due diligence measures and ongoingmonitoring, reporting, record keeping, and risk assessment. Coveredentities include credit and financial institutions, auditors,accountants, tax advisers and insolvency practitioners, independentlegal professionals, trust or company service providers, estate agents,high value dealers, and casinos.
Bank records retention: Yes
Pursuant to the Money Laundering Regulations of 2007, relevantpersons must retain transaction records and identity verificationdocuments for at least five years.
Suspicious transaction reporting: Yes
Business sectors subject to formal suspicious transaction reporting(STR) requirements include attorneys, solicitors, accountants, realestate agents, and dealers in high-value goods, such as cars andjewelry. Sectors of the betting and gaming industry that are notcurrently regulated are being encouraged to establish their own codes ofpractice, including a requirement to disclose suspicious transactions.In fiscal year 2008, 210,524 STRs were filed with the UK FinancialIntelligence Unit (UK FIU).
Large currency transaction reporting:
The UK government considered the feasibility of a fixed thresholdcurrency transaction reporting system, but made a policy decision not tointroduce such a system.
Narcotics asset seizure and forfeiture:
UK legislation, most notably the Serious Crime Act of 2007 whichconsolidates existing laws on forfeiture and money laundering, providesfor the confiscation of laundered property which represents proceedsfrom, instrumentalities used in, and instrumentalities intended for usein the commission of money laundering, terrorist financing, or otherpredicate offenses, and property of corresponding value. The UK has inplace four different schemes for confiscation and recovery with regardto proceeds of crime: confiscation following a criminal conviction,civil recovery, taxation, and seizure-forfeiture of cash.
Narcotics asset sharing authority:
The UK is able to share confiscated and forfeited assets with othercountries that have assisted operations to bring the confiscation tofruition. The UK has authority to share up to 50% of the proceeds ofconfiscation, net of costs. The UK can share with other countries on anad hoc case-by-case basis.
Cross-border currency transportation requirements: Yes
The Control of Cash (Penalties) Regulations of 2007 provides forpenalties for failing to declare movement of cash amounting to 10,000[euro] (approximately $14,500) or more into and out of the EuropeanCommunity.
Cooperation with foreign governments: Yes
The UK cooperates with international anti-money launderingauthorities on regulatory and criminal matters.
U.S. or international sanctions or penalties: No. Enforcement andimplementation issues and comments:
Businesses in the UK that are particularly attractive to moneylaunderers are those with high cash turnovers and those involved inoverseas trading. Illicit cash is consolidated in the UK, and then movedoverseas where it can enter the legitimate financial system, eitherdirectly or by other means such as purchasing property or trade goods.Because cash is the mainstay of the illicit narcotics trade, traffickersmake extensive use of money transmission agents (MTA), cash smuggling,and alternative remittance systems such as hawala to transfer money andvalue from the UK.
U.S.-related currency transactions:
No information available.
Records exchange mechanism with U.S.:
A Mutual Legal Assistance Treaty (MLAT) between the US and the UKhas been in force since 1996, and the two countries signed a reciprocalasset sharing agreement in 2003. There is a memorandum of understanding(MOU) in force between the U.S. Immigration and Customs Enforcement andHM Revenue and Customs. The U.S. Department of Treasury's FinancialCrimes Enforcement Network also signed a MOU with the UK in 1995 andregularly exchanges information with the UK FIU.
International agreements:
The UK is a party to various information exchange agreements withcountries in addition to the United States. Authorities can shareinformation or provide assistance to foreign jurisdictions in mattersrelating to money laundering or other financial crimes without need fora treaty. While the UK legislative framework does not require MLATS, theUK has signed treaties with over 30 countries in order to executerequests.
The UK is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--Yes
The UK is a member of the Financial Action Task Force (FATF). Itsmost recent mutual evaluation can be found here:
http://www.fatf-gafi.org/dataoecd/55/29/39064399.pdf
Recommendations:
The United Kingdom has a comprehensive AML/CFT regime. The UKshould continue its active participation in international fora and itsefforts to provide assistance to jurisdictions with nascent ordeveloping anti-money laundering/counter-terrorist financing regimes.
Uruguay
Uruguay's financial system remains vulnerable to the threatsof money laundering and terrorist financing. Officials from theUruguayan police and judiciary assess that there is a growing presenceof Mexican and Colombian cartels in the Southern Cone and fear they willbegin operating in earnest in Uruguay. Drug dealers are slowly startingto participate in other illicit activities like car theft andtrafficking in persons. The Government of Uruguay (GOU) acknowledgesthat there is a growing risk of money laundering in the real estatesector, in free zones and in bureaus that administer corporations.
Offshore Center: Yes
The six offshore banks are subject to the same laws, regulations,and controls as local banks, with the GOU requiring them to be licensedthrough a formal process that includes a background investigation of theprincipals. Offshore trusts are not allowed. Bearer shares may not beused in banks and institutions under the authority of the Central Bank,and any share transactions must be authorized by the Central Bank.
Free Trade Zones: Yes
There are 12 free trade zones located throughout the country. Whilemost are dedicated almost exclusively to warehousing, two were createdexclusively for the development of the paper and pulp industry, andthree accommodate a wide variety of tenants offering a wide range ofservices, including financial services. Some of the warehouse-style freetrade zones have been used as transit points for containers ofcounterfeit goods bound for Brazil and Paraguay.
Criminalizes narcotics money laundering: Yes
Money laundering is criminalized under Law 17.343 of 2001, Law17.835 of 2004, and Law 18.494 of 2009. Decrees 296/09 and 305/09 (fromJune 22, 2009 and October 26, 2009, respectively) create the first"Comprehensive Permanent National Plan against Drug Trafficking andMoney Laundering."
Criminalizes other money laundering, including terrorism-related:Yes
Law 17.343 identifies money laundering predicate offenses toinclude narcotics-trafficking; corruption; terrorism; smuggling (ofitems valued at more than $20,000); illegal trafficking in weapons,explosives and ammunition; trafficking in human organs, tissues, andmedications; trafficking in human beings; extortion; kidnapping;bribery; trafficking in nuclear and toxic substances; and illegaltrafficking in animals or antiques. Law 18.494 incorporates seven newpredicate offenses: fraud; embezzlement; fraudulent bankruptcy;fraudulent insolvency; offenses against trademarks and intellectualproperty rights; offenses related to trafficking in persons and sexualexploitation; and counterfeiting or alteration of currency.
Criminalizes terrorist financing: Yes
Law 17.835 and Law 18.494 significantly strengthen the GOU'santi-money laundering/counter-terrorist financing (AML/CFT) regime byincluding specific provisions related to terrorist financing and thefreezing of assets linked to terrorist organizations. Under Law 17.835,terrorist financing is a separate, autonomous offense. Under Law 18.494a direct relationship between the funds provided and a terrorist act isno longer required as the following have been included as elements ofthe offense: a) that the purpose is to finance a terrorist organization,a member of a terrorist organization, or an individual terrorist, and b)that it is an offense regardless of whether a terrorist act iscommitted.
Know-your-customer rules: Yes
Obligated entities are mandated to know their customers. Under Law17.835, all obligated entities must implement AML policies, such asthoroughly identifying customers, recording transactions of more than$10,000 in internal databases, and reporting suspicious transactions tothe financial intelligence unit (FIU). This obligation extends to allfinancial intermediaries, including banks, currency exchange houses,stockbrokers, insurance companies, casinos, art dealers, and real estateand fiduciary companies. Lawyers, accountants, and other non-bankingprofessionals that habitually carry out financial transactions or managecommercial companies on behalf of third parties are also required toidentify customers whose transactions exceed $15,000 and reportsuspicious activities of any amount.
Bank records retention:
Obligated entities are mandated to know their customers on apermanent basis, keep adequate records and report suspicious activitiesto the FIU.
Suspicious transaction reporting: Yes
Law 18.494 obliges ten new types of individuals or enterprises toreport unusual or suspicious transactions: businesses that performsafekeeping, courier or asset transfer services; professional trustmanagers, investment advisory services; casinos; real estate brokers andintermediaries; notaries, when carrying out certain operations;auctioneers; dealers in antiques, fine art and precious metals orstones; free trade zones operators; and natural or judicial persons whocarry out transactions or administer corporations on behalf of thirdparties. The law also requires reporting of suspected terroristfinancing activity. Fines can be levied for failure to report.
The FIU received 174 suspicious transaction reports (STRs) in 2009.Banks and exchange houses accounted for 60 percent and 19 percent oftotal reports, respectively. In 2009, eight cases stemming from STRswere sent to prosecutors. Four cases stemming from STRs have ended inprosecutions in recent years.
Large currency transaction reporting: Yes
Central Bank Circular 1.978 mandates financial intermediaries toreport the conversion of foreign exchange or precious metals over$10,000 into cash, bank checks, deposits or other liquid instruments;cash withdrawals over $10,000; and wire transfers over $1,000.
Narcotics asset seizure and forfeiture:
The courts have the power to seize and confiscate property,products or financial instruments linked to money laundering activities.Law 18.494 improves the seizure regime by listing the kind of propertythat can be seized while establishing the possibility of seizing assetsof similar worth or imposing a fine when listed property cannot beseized. Based on a prosecutor's request, courts can seize:prohibited narcotics and psychotropic substances confiscated in theinvestigation; property or instruments used in committing the criminaloffense; property and products considered proceeds of the criminaloffense. In 2009, the FIU froze $17 million in assets.
Narcotics asset sharing authority:
No information was available on the legal provisions addressingasset sharing authority. Both Uruguay and the U.S. have expressed theirwillingness to sign an agreement to share the value of assets seized injoint operations, but no progress has been made as of December 2009.
Cross-border currency transportation requirements: Yes
Law 17.835 and Law 18.494 extend reporting requirements to allpersons entering or exiting Uruguay with more than $10,000 in cash ormonetary instruments. New legislation and enforcement efforts resultedin the detection of $2.5 million in undeclared cross-border cash andother financial instrument movements.
Cooperation with foreign governments: Yes
Tax evasion is not an offense in Uruguay, which in practice limitscooperation possibilities because the FIU cannot share tax-relatedinformation with its counterparts.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
Law 18.494, passed in June 2009, significantly upgradesUruguay's AML efforts by giving national authorities moreflexibility to fight money laundering and terrorist financing. The GOUapplied the set of new investigative techniques (the use ofcollaborators and the improved electronic surveillance) provided by Law18.494 for the first time. These recent developments have led to theprosecution of39 individuals. The use of new techniques has triggered amoderate public debate over the need to keep a balance betweeninvestigative requirements, respect for the privacy of individuals, andpotential uncertainty in the practice of law. There have been noreported cases or investigations related to terrorist financing.
The way real estate is registered complicates efforts to trackmoney laundering in this sector, especially in the partiallyforeign-owned tourist sector. Authorities must obtain a judicial orderto gain access to the names of titleholders.
The FIU has circulated to financial institutions the list ofindividuals and entities included in UN 1267 Sanctions Committee andpublished it on its web page.
U.S.-related currency transactions: No
Records exchange mechanism with U.S.:
Uruguay and the United States are parties to a mutual legalassistance treaty that entered into force in
1994.
International agreements:
The FIU may exchange information relevant to AML/CFT investigationsand is becoming increasingly active in cooperation with counterpart FIUsand judiciaries from other countries. The FIU is not currently a memberof the Egmont Group of Financial Intelligence Units.
Uruguay is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--Yes
The GOU is a member of the Organization of American StatesInter-American Drug Abuse Control Commission (CICAD) Experts Group toControl Money Laundering. Uruguay is a founding member of the FinancialAction Task Force of South America (GAFISUD), a Financial Action TaskForce-style regional body. Its most recent evaluation can be found here:http://www.gafisud.info/pdf/InformedeAvanceUruguay 1.pdf
Recommendations:
The Government of Uruguay (GOU) has taken significant steps overthe past few years to strengthen its AML/CFT regime. To continue itsrecent progress, Uruguay should continue its implementation andenforcement of recently enacted legislation. The FIU should prioritizeefforts to gain membership in the Egmont Group; such a step would enableit to share financial information with other FIUs globally. The GOUshould exert greater vigilance in detecting undeclared and cross-bordermovements of cash and other monetary instruments. The GOU should enhanceits regulation and monitoring of the real estate sector and sportsindustries.
Venezuela
According to the UNODC 2009 World Drug Report, Venezuela is one ofthe principal drug-transit countries in the Western Hemisphere.Venezuela's proximity to drug producing countries, weaknesses inits anti-money laundering regime, refusal to cooperate regularly withthe United States in mutual legal assistance matters, including oncounter-narcotics activities, and alleged substantial corruption in lawenforcement and other relevant sectors continue to make Venezuelavulnerable to money laundering. The main sources of money laundering areproceeds generated by drug trafficking organizations, the embezzlementof funds from the petroleum industry, and illegal transactions thatexploit Venezuela's currency controls. Trade-based moneylaundering, such as the Black Market Peso Exchange, through which moneylaunderers furnish narcotics-generated dollars in the United States tocommercial smugglers, travel agents, investors, and others in exchangefor Colombian pesos, remains a prominent method for laundering regionalnarcotics proceeds. Venezuela is not a regional financial center anddoes not have an offshore financial sector, although many local bankshave offshore affiliates in the Caribbean.
Offshore Center: No
Free Trade Zones: Yes
The Free-Trade Zone Law of Venezuela (1991) provides for free tradezones/free ports. The three existing free trade zones (FTZs) are locatedin the Paraguana Peninsula on Venezuela's northwest coast, Atuja inthe State of Zulia, and Merida. These zones provide exemptions from mostimport and export duties and offer foreign-owned firms the sameinvestment opportunities as host country firms. The Paraguana and Atujazones provide additional exemption of local services such as water andelectricity. Venezuela also has two free ports that also enjoyexemptions from most tariff duties: Margarita Island (Nueva Esparta) andSanta Elena de Uairen in the state of Bolivar. The FTZ law designatesthe customs authority of each jurisdiction as responsible for itsrespective FTZ. The Ministry of Economy and Finance is responsible forthe oversight of the customs authority with regard to FTZs. It isreported that many black market traders ship their wares throughMargarita Island's free port.
Criminalizes narcotics money laundering: Yes
The 2005 Organic Law against Organized Crime (OLOC) criminalizesmoney laundering as an autonomous offense.
Criminalizes other money laundering, including terrorism-related:Yes
Those who cannot establish the legitimacy of possessed ortransferred funds, or are aware of the illegitimate origins of thosefunds, can be charged with money laundering. Predicate offenses formoney laundering under the OLOC include: trafficking, trade, retailing,manufacture and other illicit activities connected with, inter alia,narcotics and psychotropic substances, child p*rnography, corruption,extortion, trafficking in persons and migrants, smuggling and othercustoms offenses. The most common predicate offenses for moneylaundering are illicit drug trafficking and trading.
Criminalizes terrorist financing: Yes
(Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
Under the OLOC, terrorist financing is a crime against public orderin Venezuela and is criminalized to the extent that an individualfinances, belongs to, acts or collaborates with armed bands or criminalgroups with the purpose to commit violent acts or to subvert theconstitutional order or gravely alter the public peace. Terroristfinancing, however, is not adequately criminalized in accordance withinternational standards. The law does not establish terrorist financingas a separate crime, nor does it provide adequate mechanisms forfreezing or confiscating assets.
Know-your-customer rules: Yes
Under the OLOC and Resolution 185.01 of the Superintendencia deBancos y Otras Instituciones Financieras (SUDEBAN), anti-moneylaundering controls have been implemented that include strict customeridentification requirements. These know-your-customer (KYC) controlsapply to all banks (commercial, investment, mortgage, and private),insurance and reinsurance companies, savings and loan institutions,financial rental agencies, currency exchange houses, money remitters,money market funds, capitalization companies, frontier foreign currencydealers, casinos, real estate agents, construction companies, cardealerships, hotels and the tourism industry, travel agents, and dealersin precious metals and stones. In practice the institutions often havedifficulty obtaining all the data or information for every customer.
Bank records retention: Yes
Banks and other financial institutions supervised by SUDEBAN arerequired to retain documents or records of customer transactions andbusiness relationships for five years, including customer identificationdocumentation.
Suspicious transaction reporting: Yes
The entities that must comply with KYC rules also are required tofile suspicious and cash transaction reports with Venezuela'sfinancial intelligence unit (FIU), the Unidad Nacional de InteligenciaFinanciera (UNIF). However, insurance and reinsurance companies, taxcollection entities and public service payroll agencies are not requiredto file suspicious transaction reports (STRs). The VenezuelanAssociation of Currency Exchange Houses (AVCC), which counts all but oneof the country's money exchange companies among its membership,voluntarily complies with the same reporting standards as those requiredof banks. SUDEBAN Circular 3759 of 2003 requires its supervisedfinancial institutions to report suspicious activities related toterrorist financing. The UNIF analyzes STRs and other reports, andrefers those deemed appropriate for further investigation to the PublicMinistry (the Office of the Attorney General). In 2009, 1,234 STRs werereceived by UNIF and 529 were forwarded to the Public Ministry.
Large cash transaction reports: Yes
The UNIF receives reports on currency transactions exceedingapproximately $10,000. UNIF also receives reports on the sale andpurchase, and the domestic transfer of foreign currency exceeding$10,000. An exemption process is available for customers who frequentlyconduct otherwise reportable currency transactions in the course oftheir businesses.
Narcotics asset seizure and forfeiture: Yes
The OLOC also expands Venezuela's mechanisms for freezingassets tied to illicit activities. A prosecutor may now solicit judicialpermission to freeze or block accounts in the investigation of any crimeincluded under the law. However, to date, there have been no significantseizures of assets and few if any successful money launderingprosecutions as a result of the law's passage.
Narcotics asset sharing authority: No
Cross-border currency transportation requirements:
Article 4 of the Law against Exchange Offenses stipulates thatnatural or legal persons who import or export foreign currency in anamount in excess of $10,000, or the equivalent in other currencies, arerequired to declare to the competent authority the amount and type offunds. However, the law also states that all foreign currency acquiredby non-resident natural persons in transit or tourists whose stay in thecountry less than 180 continuous days are exempt from this obligation,thereby negating the overall effectiveness of the requirement.
Cooperation with foreign governments:
Venezuela has regularly refused to cooperate with the United Statesin mutual legal assistance matters, including on counter-narcoticsactivities.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
Corruption is a very serious problem in Venezuela and appears to beworsening. Transparency International's Corruption Perception Indexfor 2009 ranks Venezuela at 162 of 180 countries on the index. Venezuelahas laws to prevent and prosecute corruption, and accepting a bribe is acriminal act. However, the judicial system has been ineffectivehistorically and is accused of being overtly politicized. The currentregime of price and foreign exchange controls also has providedopportunity for corruption.
There is little evidence the Government of Venezuela (GOV) has madeenforcement of anti-money laundering laws and regulations a priority.Reportedly, many, if not most, judicial and law enforcement officialsremain ignorant of the OLOC and its specific provisions, and the UNIFdoes not have the necessary autonomy to operate effectively. Accordingto reported statistics, from 2006-2008 there were 335 money launderinginvestigations resulting in one conviction.
The SUDEBAN has distributed to its supervised financial entitiesthe list of individuals and entities included on the UNSCR 1267sanctions committee's consolidated list. No statistics areavailable on the amount of assets frozen, if any.
U.S.-related currency transactions:
U.S.-Venezuelan commercial ties are deep. The United States isVenezuela's most important trading partner, with U.S. goodsaccounting for about 26% of imports, and approximately 60% of Venezuelanexports going to the United States. In turn, Venezuela is the UnitedStates' third-largest export market in Latin America. Venezuela isone of the top four suppliers of foreign oil to the United States. Thereis also a large movement of currency between both countries (in thebillions). However, Venezuela has strict currency exchange controls andlimits the access of its citizens to the US dollar. Despite thesecontrols, dollars are illegally offered for sale on the black market atalmost twice the official rate. The US dollar is the currency of choicein Venezuela and the surrounding region for narcotics-traffickingorganizations.
Records exchange mechanism with U.S.:
Venezuela and the United States signed a Mutual Legal AssistanceTreaty (MLAT) in 1997. In 2009, there was no money launderinginformation exchange between Venezuela and the United States. TheFinancial Crimes Enforcement Network (FinCEN) suspended the exchange ofinformation with the UNIF in January 2007 due to the unauthorizeddisclosure of information provided by FinCEN, and the relationship hasnot resumed to date.
International agreements:
UNIF has signed bilateral information exchange agreements withcounterparts worldwide.
Venezuela is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism -Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--No
Venezuela participates in the Organization of American StatesInter-American Commission on Drug Abuse Control (OAS/CICAD) MoneyLaundering Experts Working Group. Venezuela also is a member of theCaribbean Financial Action Task Force, a Financial Action TaskForce-style regional body. Its most recent mutual evaluation can befound here: http://www.cfatfgafic.org/downloadables/mer/Venezuela 3rdRound MER %28Final%29 English.pdf
Recommendations:
The Government of Venezuela (GOV) took no significant steps toexpand its anti-money laundering regime in 2009. The 2005 passage of theOrganic Law against Organized Crime was a step toward strengthening theGOV's abilities to fight money laundering; however, Venezuela needsto enforce the law by implementing the draft procedures to expediteasset freezing, establishing an autonomous financial investigative unit,and ensuring that law enforcement and prosecutors have the necessaryexpertise and resources to successfully investigate and prosecute moneylaundering cases. The GOV should also adequately criminalize thefinancing of terrorism and establish procedures for freezing terroristassets in order to conform to international standards. SUDEBAN shouldsupervise currency exchange operators, particularly those situated closeto the frontiers. Cross-border currency declarations should beestablished that adhere to international standards. Venezuelan customsand law enforcement officials should investigate trade-based moneylaundering and value exchange. The UNIF should take the necessary stepsto ensure that information exchanged with other FIUs is subject to theappropriate safeguards mandated by the Egmont Group.
Zimbabwe
Though Zimbabwe is not a regional financial center, it facesproblems related to money laundering and official corruption. Inaddition to regulatory weaknesses in the financial sector, deficienciesinclude a lack of trained regulators and investigators and limited assetseizure authority. These deficiencies in the Government ofZimbabwe's regulatory and enforcement framework contribute toZimbabwe's attractiveness as a money laundering destination. Moneyis most often laundered through the financial sector, encompassing boththe formal and the informal financial sector. Building societies,moneylenders, insurance brokers, realtors and lawyers are alsovulnerable to exploitation by money launderers. Financial crime isfueled by smuggling of precious minerals.
In 2009 the Government of Zimbabwe (GOZ) abolished the Zimbabwedollar and switched to a multi-currency system based predominantly onthe U.S. dollar and South African rand. This has reduced opportunitiesfor money laundering and financial crime committed by government elitesand well-connected insiders. The elimination of the Reserve Bank ofZimbabwe's (RBZ) capacity to print money and the withdrawal of theZimbabwe dollar has shut down a parallel foreign-exchange market thatrewarded officials loyal to President Robert Mugabe and sustained theZimbabwe African National Union - Patriotic Front (ZANU-PF) party.Additionally, in February 2009, the formation of an inclusive governmentrepresenting ZANU-PF and two factions of the rival Movement forDemocratic Change party (MDC-T and MDC-M) has increased scrutiny ofgovernment activities and expenditures. For instance, the Ministry ofFinance--led by the MDC-T--has sought to further curtail the RBZ'scapacity to fund unbudgeted expenditures by promoting legislation thatimproves oversight of RBZ activities. As of yearend 2009, the amendmentto the RBZ statute was awaiting passage by Parliament.
Offshore Center: No
Free Trade Zones: No
Criminalizes narcotics money laundering: Yes,
Zimbabwe criminalizes money laundering under Sections 63 and 64 ofThe Serious Offenses (Confiscation of Profits) Act. Money Laundering isa specified offense under Section 2, in which money laundering isreferred to in relation to the proceeds of a serious narcotics offense.
Criminalizes other money laundering, including terrorism-related:Yes
The GOZ's Anti-Money Laundering and Proceeds of Crime Act,enacted in December 2003, criminalizes money laundering. In 2004 ,theGOZ adopted the Bank Use Promotion and Suppression of Money LaunderingAct (the 2004 Act), which extends the anti-money laundering law to allserious offenses, criminalizes terrorist financing, and authorizes thetracking and seizure of assets. In 2008 the government amended theschedule of fines applicable to those convicted of financial crimes. Thenew guidelines established minimum penalties, allowing judges to applywhatever maximum fine they determine appropriate to the offense.
Criminalizes terrorist financing: Partially
(Please refer to the Department of State's Country Reports onTerrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)
Zimbabwe has criminalized terrorist financing, but the law does notcomport with international standards, as it has not criminalized (i)conspiracy to commit money laundering or terrorist financing outside ofthe context of an organized criminal group; and (ii) obtaining orcollecting funds/assets to be used by a terroristorganization/individual terrorist where their use/intended use cannot beconnected with a specific terrorist act.
Know-your-customer rules: Yes
The Bank Use Promotion and Suppression of Money Laundering Act 2002(BUPSMLA) requires designated institutions to identify customers.Although Zimbabwe has implemented basic customer identificationobligations, it has not implemented full customer due diligence (CDD)requirements for all financial institutions and designated nonfinancialbusinesses and professions (DNFBPs). In May 2006, the RBZ issued newAnti-Money Laundering Guidelines that reinforce requirements forfinancial institutions and DNFBPs. These binding requirements addresspolitically exposed persons, mandating obligated entities to gather morepersonal data on these high-profile clients.
Bank records retention: Yes.
Financial institutions must keep records of accounts andtransactions for at least ten years.
Suspicious transaction reporting: Yes.
The law requires financial institutions, money transfer businessesand DNFBPs, including trustee companies, casinos, real estate agencies,precious metals and stones dealers, and accountants, to file suspicioustransaction reports (STRs) with the Financial Intelligence Inspectorateand Evaluation Unit (FIIE), Zimbabwe's financial intelligence unit(FIU). The BUPSMLA Guidelines provide in detail how the BUPSMLA shouldbe implemented by all obligated institutions. However, compliance fromthe DNFBP sector is lacking.
Large currency transaction reporting: Yes
In June 2007, the RBZ installed an electronic surveillance systemto track all financial transactions in the banking system.
Narcotics asset seizure and forfeiture:
The 2001 Serious Offenses (Confiscation of Profits) Act establishesa protocol for asset forfeiture. The BUPSMLA also provides forconfiscation, seizure and forfeiture of proceeds of crime andincorporates money laundering among the bases for the GOZ to confiscateassets. The Attorney General may request confiscation of illicit assetswithin six months of the conviction date. The court can then issue aforfeiture order against any property. However, the system has not yetbeen tested in relation to money laundering offenses. The legislation isunclear as to whether instrumentalities used in, or intended for use in,money laundering are subject to freeze or forfeiture provisions.
Narcotics asset sharing authority:
No information available.
Cross-border currency transportation requirements: Yes
The Exchange Control Act provides for a reporting system thatrequires all persons to make a declaration of goods and currency theyare carrying when exiting the country. This includes the reporting ofsuspicious cross-border transportation of currency. Under the Act,cross-border monitoring of cash is enforced by the Zimbabwe RevenueAuthority (ZIMRA). Currency crossing the Zimbabwe borders undersuspicious circ*mstances is investigated by ZIMRA, which will pass theinvestigation on to the Zimbabwe Republic Police. However, ZIMRA doesnot report declarations, seizures or suspicious persons or activities tothe FIU.
Cooperation with foreign governments (including refusals):
Mutual legal assistance is regulated by the Attorney General'sDepartment of Zimbabwe. In general, there are no legal or practicalimpediments to rendering assistance, providing both Zimbabwe and therequesting country criminalize the conduct underlying the offense. Sinceterrorist financing has not yet been criminalized there is no scope formutual legal assistance or extradition. Zimbabwe can only respond toboth mutual legal assistance and extradition requests regarding otherserious offenses.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
Zimbabwe's laws and regulations are ineffective in combatingmoney laundering. The RBZ is the lead agency for prosecuting moneylaundering offenses. The BUPSML Guidelines came into force in April 2006and as yet no sanctions have been taken against institutions fornon-compliance. Burdensome GOZ regulations and difficult businessclimate encourage circumvention of the law by otherwise legitimatebusinesses. Furthermore, the government's anti-money launderingefforts throughout the year appeared to be directed less to ensuringcompliance than to targeting opponents.
Despite having the legal framework in place to combat moneylaundering, the sharp contraction of the economy over the past decade,vulnerability of the population, and decline of judicial independenceraise concerns about the capacity and integrity of Zimbabwean lawenforcement. The 2004 Act has reportedly raised human rights concernsdue to the GOZ's history of selective use of the legal systemagainst its political opponents. But to date the 2004 Act has not beenassociated with any reported due process abuses.
Charitable organizations are obligated to register with theMinistry of Public Service, Labor and Social Welfare; but Zimbabwe hasnot implemented regulations or enforcement to combat the exploitation ofcharities by money launderers or terrorist financiers.
U.S.-related currency transactions:
In March 2009, the Minister of Finance introduced a revised GOZbudget that legalized the replacement of the Zimbabwe dollar withseveral foreign currencies, including the U.S. dollar. The Minister hasmaintained his commitment to exclusive use of foreign currencies in the2010 budget delivered in December 2009.
Records exchange mechanism with U.S.:
Zimbabwe and the United States are not parties to a bilateralmutual legal assistance treaty that provides for exchange ofinformation, but the banking community and the RBZ have cooperated withthe United States in global efforts to identify individuals andorganizations associated with terrorist financing.
International agreements:
Mutual legal assistance and extradition measures apply to moneylaundering since money laundering is a criminal offense, and both theCriminal Matters (Mutual Assistance) Act and the Extradition Act providethat measures must be taken against "any" criminal offense andin the absence of an applicable treaty.
Zimbabwe is a party to:
* the UN Convention for the Suppression of the Financing ofTerrorism--Yes
* the UN Convention against Transnational Organized Crime--Yes
* the 1988 UN Drug Convention--Yes
* the UN Convention against Corruption--No
Zimbabwe is a member of the Financial Action Task Force-styleregional body, the Eastern and Southern Africa Anti-Money LaunderingGroup (ESAAMLG). Its most recent mutual evaluation can be found here:www.esaamlg.org
Recommendations:
The Government of Zimbabwe (GOZ) leadership should work to developand maintain transparency, prevent corruption, and subscribe topractices ensuring the rule of law. The GOZ can illustrate itscommitment to combating money laundering and terrorist financing byusing its legislation for the purposes for which it was designed,instead of using it to persecute opponents of ZANU-PF andnongovernmental organizations which disagree with GOZ policies. Oncethese basic prerequisites are met, the GOZ should endeavor to developand implement an anti-money laundering/counter-terrorist financingregime that comports with international standards. The GOZ also shouldbecome a party to the UN International Convention for the Suppression ofthe Financing of Terrorism and revise its counter-terrorist financinglegislation to bring it in line with international standards.
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