Bureau of International Narcotics and Law Enforcement Affairs
Report
March 7, 2012

Afghanistan

Afghanistan is not a regional or offshore center. Terrorist and insurgent financing, money laundering, cash smuggling, abuse of informal value transfer systems, and other illicit activities designed to finance organized criminal activity continue to pose serious threats to the security and development of Afghanistan. Afghanistan remains a major drug trafficking and drug producing country, and is the world’s largest opium producer and exporter.

The growth in Afghanistan’s banking sector has slowed considerably in recent years; and traditional payment systems, particularly hawala networks, remain significant in their reach and scale. The weaknesses of the banking sector, as demonstrated by the Kabul Bank crisis, further incentivize the use of informal mechanisms and exacerbate the difficulty of developing a transparent formal financial sector in Afghanistan. The narcotics trade, corruption and contract fraud are major sources of illicit revenue and laundered funds. The unlicensed and unregulated hawalas in major drug areas such as Helmand likely account for a substantial portion of the illicit proceeds being moved in the financial system, undetected by authorities. There are estimates that hawaladars in Kandahar, the country’s second largest city, and the opium producing province of Helmand handle $1 billion in drug money per year. Despite ongoing efforts by the international community to build Afghanistan’s capacity to regulate its financial sector and the capacity of law enforcement to investigate financial crimes, it is unable to consistently uncover and disrupt financial crimes because of limited resources, lack of expertise, corruption, and insufficient political will. Proposed reforms and efforts to urge law enforcement and the judiciary to take action on financial crimes often conflict with established, traditional processes, which can delay compliance with international standards.

Corruption permeates all levels of Afghan government and society and has a direct impact on the willingness of authorities to investigate financial crimes. Afghanistan ranked 180 out of 182 countries surveyed in Transparency International’s 2011 Corruption Perception Index. Afghanistan’s laws related to terrorist financing are not in line with international standards and do not criminalize the full scope of the terrorist financing offense.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: NO

Know-your-customer (KYC) rules:

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

KYC covered entities: Central Bank of Afghanistan (DAB), banks, registered money service providers, insurance companies, dealers in precious metals and stones, lawyers, accountants, securities dealers, and real estate agents

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 417 from January to October 2011

Number of CTRs received and time frame: 1,744,169, from June 2006 to October 2010

STR covered entities: Financial institutions and money service businesses including informal funds transfer providers such as hawaladars

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: None

Convictions: None

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Afghanistan is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Afghanistan%20-%20published%20DAR.pdf .

Enforcement and implementation issues and comments:

Money laundering and terrorist financing investigations in Afghanistan are hampered by a lack of political commitment by the Government of Afghanistan (GOA), and the limited capacity of the regulatory regime and criminal justice system.

Less than 5% of the Afghan population uses banks, depending instead on the entrenched hawala system, which provides a range of financial and non-financial business services in local, regional, and international markets. Approximately 90% of financial transactions run through the hawala system, including foreign exchange transactions, funds transfers, micro and trade finance, as well as some deposit-taking activities. While the hawala system and formal financial sector are distinct, hawaladars often keep accounts at banks and use wire transfer services to settle their balances with other hawaladars abroad. Due to limited bank branch networks, banks occasionally use hawaladars to transmit funds to hard-to-reach areas within Afghanistan. Licensed hawaladars and other money service providers submit few STRs, which does not reflect their exposure to the risk of exploitation by money launderers and terrorist financiers. The GOA should create an outreach program to notify and educate hawaladars about the licensing and STR filing processes.

Border security continues to be a major challenge throughout Afghanistan, with only 14 official border crossings under central government control. Most border areas are under-policed or not policed at all, and are particularly susceptible to cross-border trafficking, trade-based money laundering, and bulk cash smuggling. Kabul International Airport lacks stringent inspection controls for all passengers, and includes a VIP lane that does not require subjects to undergo any inspections or controls. The GOA should strengthen inspection controls for airport passengers.

Corruption continues to be an obstacle in the Customs service, although some improvements have been made with assistance from international partners. Approximately $1 billion a year of declared cash flows from Afghanistan into Gulf countries, with Dubai cited as the primary destination. The declared cash leaving Afghanistan, primarily from Kabul International Airport, exceeds Afghanistan’s official revenue of about $900 million.

The GOA has no formal extradition or mutual legal assistance arrangements with the United States. Requests for extradition and mutual legal assistance are processed on an ad hoc basis, with assistance from the Afghan Attorney General’s Office. Newly drafted extradition-related legislation is currently pending before the upper house of the Afghan parliament.

The GOA lacks a comprehensive structure for maintaining administrative freezes on seized terrorist assets, and there is no mechanism for asset sharing. The GOA should revise its asset seizure process to ensure its ability to seize and freeze terrorist assets, maintain these asset freezes, and establish a procedure for sharing seized assets with foreign partners. The GOA should increase the capacity of enforcement officers, prosecutors, and judges to provide them a better understanding of the basis for seizing and forfeiting assets.

Antigua and Barbuda

Antigua and Barbuda is a significant offshore center that, despite recent improvements, remains susceptible to money laundering due to its offshore financial sector and Internet gaming industry. Illicit proceeds from the transshipment of narcotics and from financial crimes occurring in the U.S. also are laundered in Antigua and Barbuda.

Antigua and Barbuda uses the Eastern Caribbean (EC) dollar and its monetary authority is the Eastern Caribbean Central Bank (ECCB). Seven other island economies are also members of the ECCB: Anguilla, Dominica, Grenada, Montserrat, St Kitts and Nevis, St. Lucia, and St Vincent and the Grenadines. The existence of this common currency may raise the risk of money laundering, but there is little evidence that the EC dollar is a primary vehicle for money laundering.

As of 2011, Antigua and Barbuda has 15 international banks, two international trusts, 27 offshore insurance companies, 3,497 international business corporations (IBCs), ten interactive gaming companies, six interactive wagering companies, six money services businesses, and 22 corporate management and trust services providers. In addition, there are five casinos. Bearer shares are permitted for international companies but the names and addresses of directors (who must be natural persons), the activities the corporation intends to conduct, the names of shareholders, and the numbers of shares they will hold are required to be disclosed. Registered agents or service providers are required by law to know the names of beneficial owners. All licensed institutions are required to have a physical presence, which means presence of at least a full-time senior officer and availability of all files and records. Shell companies are not permitted. Internet gaming companies are required to incorporate as IBCs and to have a physical presence, meaning the primary servers and the key person are resident in Antigua and Barbuda.

A nominal free trade zone (FTZ) in the country seeks to attract investment in areas deemed as priority by the government. Casinos and sports book-wagering operations in Antigua and Barbuda’s FTZ are supervised by Antigua and Barbuda’s Office of National Drug and Money Laundering Control Policy (ONDCP), and the Directorate of Offshore Gaming.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: Yes

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, agricultural credit institutions, money exchangers, accountants, notaries, gaming centers, auto dealers and securities dealers

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 93 in 2011

Number of CTRs received and time frame: 48 in 2011

STR covered entities: Banks, agricultural credit institutions, money exchangers, notaries, gaming centers, and securities dealers

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: Two in 2011

Convictions: None in 2011

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Antigua and Barbuda is a member of Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here:

http://www.cfatf-gafic.org/downloadables/mer/Antigua_and_Barbuda_3rd_Round_MER_Final(Eng).pdf

Enforcement and implementation issues and comments

The Government of Antigua and Barbuda (GOAB) has taken steps to combat money laundering and terrorist financing by passing relevant legislation that applies to both domestic and offshore financial institutions, and establishing a regulatory regime. The GOAB also should implement and enforce all provisions of its AML/CFT legislation, including the comprehensive supervision of its offshore sector and gaming industry. Continued efforts should be made to enhance the capacity of law enforcement and customs authorities to recognize money laundering typologies that fall outside the formal financial sector. Continued international cooperation, particularly with regard to the timely sharing of statistics and information related to offshore institutions, and enforcement of foreign civil asset forfeiture orders will likewise enhance Antigua and Barbuda’s ability to combat money laundering.

Internet gaming companies are required to report all payouts over $25,000 to the ONDCP. They also are required to submit quarterly and annual audited financial statements and maintain records relating to all gaming and financial transactions of each customer for six years.

In 2011, the Supervisory Authority more vigorously exercised its supervisory powers in relation to money remitters, having imposed administrative sanctions for inadequate implementation of AML/CFT due diligence measures, source of funds accountability and failure to provide statutorily required reports. The Supervisory Authority also initiated comprehensive onsite examinations of financial institutions and designated non-financial businesses and professions, including entities engaged in real property business and car dealerships.

The GOAB says it has a “poor understanding” of certain foreign cash transactions taking place within the jurisdiction that have raised their concerns. The possibility exists that they could be an indication of proceeds from human trafficking. Separately, the police have instituted criminal charges for prostitution-related human trafficking and have traced alleged proceeds to accounts held in the domestic banking sector, and also suspect repatriation of proceeds through money remitters.

Argentina

Argentine and international observers express the concern that money laundering related to narcotics trafficking, corruption, contraband, and tax evasion occurs throughout the financial system. It is also believed that most money laundering operations in Argentina are conducted through transactions involving specific offshore centers. The most common money laundering operations in the non-financial sector involve transactions made through attorneys, accountants, corporate structures, and in the real estate sector. The widespread use of cash in the economy also leaves Argentina vulnerable to money laundering. Tax evasion is the predicate crime in the majority of Argentine money laundering investigations.

Argentina has a long history of capital flight and tax evasion, and it is estimated that Argentines hold billions of dollars outside the formal financial system, both offshore and in-country, much of it legitimately earned money that was not taxed. The general vulnerabilities in the system also expose Argentina to a risk of terrorist financing. Despite these risks associated with money laundering and terrorist financing (ML/TF), there have been only two convictions for ML and only five prosecutions are ongoing.

Argentina is a source country for precursor chemicals and a transit country for cocaine produced in Bolivia, Peru, and Colombia, and for marijuana produced in Paraguay. While most of the cocaine transiting Argentina is bound for the European market, virtually all of the marijuana is for domestic or regional consumption, and domestic drug consumption and production have increased. Argentine officials also have identified smuggling, corruption and different types of fraud as major sources of illegal proceeds.

In addition to tax evasion and drugs, a substantial portion of illicit revenue comes from black market peso exchanges or informal value transfers. Informal value transfers occur when unregistered importers, for example, use entities that move U.S. currency in bulk to neighboring countries where it is deposited and wired to U.S. accounts or to offshore destinations. Products from the U.S. are often smuggled into Argentina, or the shipping manifests are changed to disguise the importer and merchandise. The tri-border area (Argentina, Paraguay and Brazil) is considered a major source of smuggling, especially of pirated products. Through the Three Plus One Initiative, the Government of Argentina (GOA) authorities ostensibly cooperate with the two neighboring countries, as well as with the United States, to address security issues in this region; however, this mechanism has been largely ineffective in recent years due to GOA and USG political differences, among other reasons.

The Financial Action Task Force’s (FATF) third-round mutual evaluation report of Argentina found Argentina partially compliant or non-compliant with 46 of the 49 FATF Recommendations. Argentina is subject to an enhanced follow-up procedure during which Argentina is expected to immediately address deficiencies relating to its criminalization of both money laundering and terrorist financing. Argentina is also publicly identified by the FATF for its strategic AML/CFT deficiencies, which Argentina has developed an action plan to address. The FATF expects Argentina to urgently address these deficiencies, and while some progress has been made, significant AML/CFT deficiencies remain.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

DO Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC Covered entities: Banks, financial companies, credit unions, tax authority, customs, currency exchange houses, casinos, securities dealers, insurance companies, accountants, notaries public, dealers in art and antiques, jewelers, real estate registries, money remitters, and postal services

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 3,169 in 2010

Number of CTRs received and time frame: Not available

STR Covered entities: Banks, financial companies, credit unions, tax authority, customs, currency exchange houses, casinos, securities dealers, insurance companies, accountants, notaries public, dealers in art and antiques, jewelers, real estate registries, money remitters and postal services

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: Five (ongoing)

Convictions: Two - in December 2010 and June 2011

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdiction: YES

Argentina is a member of the Financial Action Task Force (FATF) and the Financial Action Task Force against Money Laundering in South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/3/60/46695047.pdf

Enforcement and implementation issues and comments:

On June 21, 2011, Argentina passed Law 26683, which amends Law 25246, to modify the criminalization of ML as well as to implement other AML/CFT measures. While the new law addresses a number of important shortcomings, particularly with respect to the criminalization of ML, a large number of other previously identified deficiencies persist. Some of the key features of the June 2011 law include: new measures criminalizing ML as a stand-alone crime; provisions for confiscation of assets without conviction for ML or TF; provisions to allow a judge to suspend an arrest warrant or the seizure of instruments or effects, or postpone the adoption of other restraining or evidentiary measures in the context of a ML/TF investigation; broadening of the predicate offenses which the FIU is authorized to handle and disseminate; removing previous tax secrecy restrictions in the framework of an STR; increasing the entities covered by preventive measures, including mutual associations, cooperatives, and the real state sector; incorporating more detailed customer due diligence (CDD) and record keeping measures; improving record-keeping measures with a requirement that all CDD data be kept for at least five years and properly recorded for reconstruction purposes; and incorporating the FIU’s role (previously in Decree 1936/2010) to establish supervision, control, and on-site inspection procedures to verify compliance with the law, and guidelines and instructions issued pursuant to the law.

Notwithstanding these improvements, technical deficiencies and challenges still remain in closing legal and regulatory loopholes and improving interagency cooperation. Most significantly, there is a general lack of prosecutions and penalties actually imposed for the offense of ML. Moreover, although financial regulators are empowered to audit and conduct on-site inspections, there are too few trained people with the expertise to carry them out rigorously.

In 2007, Argentina passed Law 26268 which criminalizes terrorist associations and the financing of these associations; however, the law is not in accordance with international standards. In October 2011, the executive branch presented a draft bill to the Congress which aims to modify the existing law to meet internationally accepted standards for countering the financing of terrorism.

In November 2011, the GOA published resolution 388/2011 announcing the creation of a new Financial Intelligence Unit (FIU) within AFIP, the government’s federal tax agency. The creation of the FIU follows the implementation of a series of comprehensive government measures to monitor and control the FX market and stem capital flight. The new FIU’s objectives are to monitor foreign currency transactions (FX) and to investigate infractions under the government’s new foreign exchange restrictions. The resolution also notes that the new FIU will monitor and investigate the trading of stocks, bonds and other assets, as well as monitor all types of bank credit and loan transactions. It is presumed AFIP’s new FIU will focus primarily on investigating FX transactions in order to reduce capital flight, which has been eroding Central Bank reserves. The FIU also is tasked with investigating criminal transactions related to money laundering and the financing of terrorism (ML/FT), although it is unclear how the new FIU will interface with the already existing Financial Intelligence Unit (UIF) within the Ministry of Justice, which has traditionally been responsible for probing financial crimes.

In 2009, FinCEN suspended information sharing with the UIF after information given to the UIF was leaked to the local press. The UIF and Argentine government are working to reestablish the exchange of data.

To more fully meet international standards, Argentina’s continuing priorities should be to address its systemic AML/CFT deficiencies, including by: implementing the new ML offense and criminalizing terrorist financing; establishing and implementing adequate procedures for the confiscation of funds related to money laundering, and identifying and freezing terrorist assets; enhancing financial transparency; ensuring a fully operational and effectively functioning FIU; improving and broadening CDD measures for non-banking and non-foreign exchange sectors, establishing appropriate channels for international co-operation; the effective sanctioning of officials and institutions that fail to comply with the requirements of the law; the pursuit of training programs for all levels of the financial, criminal justice, and judicial systems; and the provision of the necessary resources and incentives to financial regulators and law enforcement authorities to carry out their missions. There is also a need for increased public awareness of the problem of money laundering and its connection to narcotics, corruption, and terrorism.

Australia

Australia is a regional financial center. The majority of illegal proceeds are derived from fraud-related offenses, though narcotics offenses provide a substantial source of crime proceeds. The Government of Australia (GOA) maintains a comprehensive system to detect, prevent, and prosecute money laundering. Australian law enforcement agencies investigate an increasing number of cases that directly involve offenses committed overseas. Continuous consultation between government agencies and the private sector enables Australia to identify and address new money laundering and terrorist financing risks.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do financial institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of U.S. currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of money laundering:

All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks; gaming and bookmaking establishments and casinos; bullion and cash dealers and money exchanges and remitters, including electronic funds transferors; insurers and insurance intermediaries; securities or derivatives dealers; registrars and trustees; issuers, sellers or redeemers of travelers checks, money orders or similar instruments; preparers of payroll in whole or in part in currency on behalf of other persons; currency couriers

Suspicious transaction reporting (STR) requirements:

Number of STRs received and time frame: 44,775 from January 2010 to October 2011

Number of CTRs received and time frame: 30,342 from January 2010 to October 2011

STR covered entities: Banks, gaming and bookmaking establishments and casinos; bullion and cash dealers and money exchanges and remitters, including electronic funds transferors; insurers and insurance intermediaries; securities or derivatives dealers; registrars and trustees; issuers, sellers or redeemers of travelers checks, money orders or similar instruments; preparers of payroll in whole or in part in currency on behalf of other persons; currency couriers

Money laundering criminal prosecutions/convictions:

Prosecutions: 224 from January 2010 to October 2011

Convictions: 104 from January 2010 to October 2011

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Australia is a member of the Financial Action Task Force (FATF) and of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body (FSRB). Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/60/33/35528955.pdf

Enforcement and implementation issues and comments:

Australia has a robust regime to detect and deter money laundering and terrorism financing. The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) provides the legal framework and establishes obligations. The Attorney-General’s Department is the policy agency responsible for the AML/CTF Act. The Australian Transaction Reports and Analysis Centre (AUSTRAC) administers the Act, is Australia’s financial intelligence unit and also the country’s anti-money laundering regulator.

As of November 2011, the GOA extended its AML/CFT regulation to cover non-financial businesses and professions such as lawyers, accountants, jewelers, and real estate agents. In comparison to the size of the Australian economy and the comprehensive anti-money laundering countermeasures in place, the number of convictions for money laundering remains very low.

Third-party deposits, which can be used as vehicles to facilitate money laundering, are legal in Australia. However, authorities are working to limit the associated risks in Australia’s financial system. On October 1, 2011, additional AML/CFT provisions came into effect, which require banking institutions to identify third parties undertaking transactions of $10,000 or more. This obligation is in addition to reporting the details of the account holder involved in the transaction, and builds on existing customer due diligence and STR obligations.

The Australian government recently established a new Criminal Assets Confiscation Taskforce, which brings together agencies with key roles in the investigation and litigation of proceeds of crime matters, to enhance the identification of potential asset confiscation matters and strengthen their pursuit.

Austria

Austria is a major regional financial center, and Austrian banking groups control significant shares of the banking markets in Central, Eastern, and Southeastern Europe. Money laundering occurs within the Austrian banking system as well as in non-bank financial institutions and businesses. Money laundered by organized crime groups derives primarily from serious fraud, smuggling, corruption, narcotics trafficking, and trafficking in persons. Theft, drug trafficking and fraud are the main predicate crimes in Austria according to conviction and investigation statistics. Austria is not an offshore jurisdiction and has no free trade zones.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: Combination

Legal persons covered: criminally: YES civilly: NO

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

KYC covered entities: Banks and credit institutions, financial institutions, leasing and exchange businesses, safe custody services, portfolio advisers, brokers, securities firms, money transmitters, insurance companies and intermediaries, casinos, all dealers including those in high value goods, auctioneers, real estate agents, lawyers, notaries, certified public accountants, and auditors

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 2,211 in 2010

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks and credit institutions, financial institutions, leasing and exchange businesses, safe custody services, portfolio advisers, brokers, securities firms, money transmitters, insurance companies and intermediaries, casinos, all dealers including those in high value goods, auctioneers, real estate agents, lawyers, notaries, certified public accountants, auditors, and customs officials

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 582 in 2010

Convictions: Six in 2010

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Austria is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/22/50/44146250.pdf

Enforcement and implementation issues and comments:

Austria has a combination of both an “all serious crimes” approach plus a list of predicate offenses which do not fall under the domestic definition of serious crimes, but which Austria includes to comply with international legal obligations and standards.

Asset freezing authority applies to all economic resources including financial funds, real estate, companies, and vehicles. On March 15, 2011, a bilateral asset sharing agreement between the United States and Austria to share assets seized from convicted criminals went into effect.

On July 7, 2011, Parliament adopted an amendment to the Stock Corporation Act, which went into effect August 1, 2011 and sharply restricts the issuance and use of bearer shares. The new legislation eliminates bearer shares for all companies except those listed on a recognized stock exchange.

Even absent a specific suspicion, new regulations require tax authorities to inform the FIU of all cases where private foundations do not disclose the founding deed, including all appendices and supplementary documentation, as well as beneficial owners of hidden trusteeships.

Bahamas

The Commonwealth of the Bahamas is an important regional and offshore financial center. The economy of the country is heavily reliant upon tourism, tourist-driven construction and the offshore sector. The Bahamas is a transshipment point for cocaine bound for the United States and Europe. Money laundering trends include the purchase of real estate, large vehicles and jewelry, as well as the processing of money through a complex web of legitimate businesses and international business companies (IBCs) registered in the offshore financial sector. Drug traffickers and other criminal organizations take advantage of the large number of IBCs and offshore banks registered in The Bahamas to launder significant sums of money despite strict know-your-customer (KYC) and transaction reporting requirements.

The country has one large free trade zone, Freeport Harbor. This zone is managed by a private entity, the Freeport Harbor Company, which is owned and operated through a joint venture between Hutchison Port Holdings (HPH) and The Port Group (The Grand Bahama Port Authority, the parastatal regulatory agency). Businesses at the harbor include private boat, ferry and cruise ship visits, roll-on/roll-off facilities for containerized cargo, and car transshipment. Freeport Harbor has the closest offshore port to the United States, and the entire country is relatively accessible by medium sized boats. This makes smuggling and bulk cash money laundering relatively easy. While it is illegal for citizens of The Bahamas to gamble, gambling is legal for tourists and there are three main casinos located on Grand Bahama and New Providence Islands.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of U.S. currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES

Criminalization Of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crime: List approach

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC Covered entities: Banks and trust companies, insurance companies, securities firms and investment fund administrators, financial and corporate service providers, cooperatives, societies, casinos, lawyers, accountants, real estate agents, and company service providers

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received for 2011: 45 in 2010

Number of CTRs received for 2011: Not available

STR covered entities: Banks and trust companies, insurance companies, securities firms and investment fund administrators, financial and corporate service providers, cooperatives, societies, casinos, lawyers, accountants, real estate agents, and company service providers

Money Laundering Criminal Prosecutions/Convictions:

Number of Prosecutions for 2011: None

Number of Convictions for 2011: None

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

The Bahamas is a member of the Caribbean Financial Action Task Force, (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/The_Bahamas_3rd_Round_MER_(Final)_English.pdf

Enforcement and implementation issues and comments:

The Government of the Commonwealth of the Bahamas should provide adequate resources to its law enforcement, judicial, and prosecutorial bodies in order to enforce existing legislation and safeguard the financial system from possible abuses. The Bahamas should continue to enhance its anti-money laundering/counter-terrorist financing regime by implementing the National Strategy on the Prevention of Money Laundering; by ensuring full compliance with UNSCRs 1267 and 1373; criminalizing participation in an organized criminal group; tightening the currency transaction reporting system; and by implementing a system to collect and analyze information on the cross border transportation of currency. It should also ensure there is a public registry of the beneficial owners of all entities licensed in its offshore financial center.

Belize

Belize is not a major regional financial center but, in an attempt to diversify its economic activities, authorities have encouraged the growth of offshore financial activities that are vulnerable to money laundering, including offshore banks, insurance companies, trust service providers, mutual fund companies, and international business companies. Belize has pegged the Belizean dollar to the U.S. dollar and continues to offer financial and corporate services to nonresidents in its offshore financial sector.

Belize is a transshipment point for marijuana, cocaine, and precursor chemicals for methamphetamines. Money laundering proceeds are related to proceeds from the trafficking of illegal narcotics, psychotropic substances, and chemical precursors, and they are controlled by drug trafficking organizations and organized criminal groups.

Belizean officials suspect that money laundering occurs at a significant level in Belize. Belizean officials believe the large Corozal Commercial Free Zone (CFZ) that operates at the border with Mexico is involved in trade based money laundering. Casinos and on-line gaming are legal but authorities acknowledge they are under-regulated which may pose a money laundering risk.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: No

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: Both

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: YES

KYC covered entities: Domestic and offshore banks; venture risk capital; money broker, exchange and transmission services; moneylenders and pawnshops; insurance; real estate; credit unions and building societies; trust and safekeeping services; casinos; motor vehicle dealers; jewelers; international financial service providers; attorneys and notaries public; and accountants and auditors

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 76, January 1 through October 24, 2011

Number of CTRs received and time frame: Not applicable

STR covered entities: Domestic and offshore banks; venture risk capital; money broker, exchange and transmission services; moneylenders and pawnshops; insurance; real estate; credit unions and building societies; trust and safekeeping services; casinos; motor vehicle dealers; jewelers; international financial service providers; attorneys, notaries public, accountants & auditors

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: Two - January 1 through October 24, 2011

Convictions: Two - January 1 through October 24, 2011

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Belize is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here:

http://www.cfatf-gafic.org/downloadables/mer/Belize_3rd_Round_MER_(Final)_(English).pdf

Enforcement and implementation issues and comments:

Belize lacks the resources and political will to effectively enforce anti-money laundering rules. Belize’s financial intelligence unit (FIU) has a broad mandate and a small staff. The FIU staff has limited training or experience in identifying, investigating, reviewing, and analyzing evidence in money laundering cases. There were credible reports of at least one investigation being halted because of political pressure on the FIU. Prosecutors and judges also need additional training on financial crimes, including money laundering. Belize should implement an arrangement for asset sharing to provide additional resources to the FIU.

Belize should significantly strengthen its laws and regulations on financial information systems, beneficial ownership, customer due diligence and wire transfers in line with international standards and recommendations. Belize should undertake a review of whether it is appropriate to implement a large currency transaction reporting regime.

While it is widely believed that abuse occurs within the offshore sector and in the free trade zones (FTZ), no one from these organizations has been charged with a financial crime. Belize should require the FTZ companies to be reporting entities.

The Government of Belize should become a party to the UN Convention against Corruption.

Bolivia

Bolivia is not a regional financial center, but money laundering activities continue to take place. These illicit financial activities are related primarily to narcotics trafficking, corruption, tax evasion, and smuggling and trafficking of persons. Casinos, cash transporters, informal exchange houses, and wire transfer businesses are not subject to anti-money laundering controls. The Bolivian banking supervision entity has declared that any non-registered exchange houses will be shut down. The Bolivian financial system is highly dollarized, with approximately 40% of deposits and loans distributed in U.S. dollars rather than Bolivianos, the local currency (down from 90% in 2004). Bolivia has 13 free trade zones for commercial and industrial use located in El Alto, Cochabamba, Santa Cruz, Oruro, Puerto Aguirre, and Desaguadero.

In December 2008, the Egmont Group expelled the Financial Investigation Unit (UIF), Bolivia’s financial intelligence unit (FIU), from its membership, due to a lack of terrorism financing legislation in Bolivian law. To regain Egmont membership, Bolivia must reapply and provide written evidence of its FIU’s compliance with Egmont FIU definitions and requirements.

Bolivia is included in the October 2011 Financial Action Task Force (FATF) Public Statement because it has not made sufficient progress in implementing its action plan and continues to have certain strategic AML/CFT deficiencies, including inadequacies in its criminalization of both money laundering and terrorist financing.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, insurance companies, securities brokers and financial intermediaries

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

STR covered entities: Banks, insurance companies, securities brokers and financial intermediaries

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 110 cases related to money laundering, corruption, and terrorist financing in 2011

Convictions: Not available

Records exchange mechanism:

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

With other governments/jurisdictions: Not available

Bolivia is a member of the Financial Action Task Force on Money Laundering in South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.gafisud.info/pdf/InformeBolivia.pdf

Enforcement and implementation issues and comments:

The expulsion of the U.S. Drug Enforcement Administration from Bolivia in November 2008 has continued to diminish the effectiveness of several financial investigative groups operating in the country, including Bolivia’s Financial Investigative Team, the Bolivian Special Counternarcotics Police, and the Bolivian Special Operations Force. Nevertheless, the Counternarcotics Police’s Financial Intelligence and Analysis Group provided the investigative leads for three major cases in 2011, two related to investigations by regional counterparts. Most money laundering investigations continue to be in the Department of Santa Cruz and are associated with narcotics trafficking organizations.

Bolivia’s expulsion from the Egmont Group bars the UIF from participating in Egmont Group meetings or using the Egmont Secure Web (the primary means of information exchange among Egmont Group member FIUs). Bolivia is currently working toward rejoining the Egmont Group and the passage of its TF law in 2011 is a step in the right direction.

Bolivia’s AML law does not include all offenses recommended in the international standards. Bolivia should seek to extend its laws to the widest range of predicate offenses.

In September 2011, the Government of Bolivia (GOB) passed new legislation criminalizing terrorist financing. Like the AML law, this law is not sufficiently broad to meet international standards. All terrorist activity must be connected to a group, and “terrorism” appears to be narrowly defined. The financing of an individual terrorist would be covered only if he/she also takes part in such a group. At present there is neither regulation nor guidance on the treatment of suspicious transactions potentially related to terrorist financing, though Bolivian authorities stated guidance will be issued in the last quarter of 2011 and workshops will be organized to communicate the guidelines to responsible entities. Some progress has been made with the new legislation criminalizing TF. However, Bolivia has still to demonstrate that its procedures for monitoring sanctions lists and taking freezing actions can occur in a matter of hours and that the freeze can be maintained indefinitely.

In 2011, the UIF investigated 395 cases involving 1,338 people for suspicious transactions and referred 39 cases to the prosecutor's office. Eleven entities doing banking transactions illegally were closed down. The continued lack of personnel, combined with inadequate resources and weaknesses in Bolivia’s basic legal and regulatory framework, limits the UIF’s reach and effectiveness. Given the UIF’s limited resources relative to the size of Bolivia’s financial sector, compliance with reporting requirements is extremely low. The exchange of information between the UIF and appropriate police investigative entities is also limited, although the UIF does maintain a database of suspect persons that financial entities must check before conducting business with clients.

Brazil

As of 2011, Brazil is the world’s seventh largest economy by nominal GDP. Brazil is considered a regional financial center for Latin America. It is a major drug-transit country, as well as one of the world’s largest consumer countries. Money laundering in Brazil is primarily related to domestic crime, especially drug trafficking, corruption, organized crime, gambling, and trade in various types of contraband. Laundering channels include the use of banks, real estate investment, financial asset markets, luxury goods, remittance networks, informal financial networks, and trade-based money laundering.

Sao Paulo and the Tri-Border Area (TBA) of Brazil, Argentina, and Paraguay are particular areas that possess high risk factors for money laundering. In addition to weapons and narcotics, a wide variety of counterfeit goods, including CDs, DVDs, and computer software (much of it of Asian origin), are routinely smuggled across the border from Paraguay into Brazil. In addition to Sao Paulo and the TBA, other areas of the country are also of growing concern. The Government of Brazil (GOB) and local officials in the states of Mato Grosso do Sul, and Parana, for example, have reported increased involvement by Rio de Janeiro and Sao Paulo gangs in the already significant trafficking in weapons and drugs that plagues Brazil’s western border states.

For additional information focusing on terrorist financing, p lease refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: NO civilly: NO

Know-your-customer (KYC) rules:

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

KYC covered entities: Commercial and savings banks and credit unions; insurance companies and brokers; securities, foreign exchange, and commodities brokers/traders; real estate brokers; credit card companies; money remittance businesses; factoring companies; gaming and lottery operators and bingo parlors; dealers in jewelry, precious metals, art and antiques

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame:

Number of CTRs received and time frame:

1,038,505 STRs/CTRs in 2010 (only combined figures are available)

STR covered entities: Commercial and savings banks and credit unions; insurance companies and brokers; securities, foreign exchange, and commodities brokers/traders; real estate brokers; credit card companies; money remittance businesses; factoring companies; gaming and lottery operators and bingo parlors; dealers in jewelry, precious metals, art and antiques

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: Not available

Convictions: Not available

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdiction: YES

Brazil is a member of the Financial Action Task Force (FATF) and the Financial Action Task Force on Money Laundering in South America (GAFISUD), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/document/53/0,3746,en_32250379_32236963_45538741_1_1_1_1,00.html

Enforcement and implementation issues and comments:

The GOB has achieved visible results over the last few years from investments in border and law enforcement infrastructure that were executed with a view to gradually control the flow of goods, both legal and illegal across Brazil’s land borders. Anti-smuggling and law enforcement efforts by state and federal agencies have increased. Brazilian Customs and the Brazilian Tax Authority (Receita Federal) continue to take effective action to suppress the smuggling of drugs, weapons, and contraband goods along the border with Paraguay. Because of the effective crackdown on the Friendship Bridge connecting Foz do Iguaçu, Brazil, and Ciudad del Este, Paraguay, most smuggling has migrated to other sections of the border. The Federal Police have Special Maritime Police Units that aggressively patrol the maritime border areas.

Legal persons are not subject to direct civil or administrative liability for committing money laundering (ML) offenses. Corporate criminal liability is not possible due to fundamental principles of domestic law. Natural and legal persons are not subject to effective sanctions for ML because systemic problems in the court system seriously hamper the ability to obtain final convictions and sentences. There are very few final convictions for ML, and convictions in the first instance are low given the level of ML risk and size of the financial sector. The GOB should take legislative action to establish direct civil or administrative corporate liability for ML and ensure that effective, proportionate and dissuasive sanctions may be applied to legal persons. Brazil also should continue to support the Specialized Federal Courts and other measures to ameliorate the negative impact of some of the systemic problems in the court system which are undermining the ability to effectively apply final sanctions for ML. The GOB should continue taking measures to ensure the overlapping jurisdiction among federal and state law enforcement authorities does not impede the effectiveness of their ability to investigate ML. Brazil also should continue the PNLD training program and extend it as widely as possible to ensure that police, prosecutors and judges at both the state and federal levels have sufficient training in the investigation and prosecution of ML cases.

Most high-priced goods in the TBA are paid for in U.S. dollars, and cross-border bulk cash smuggling is a major concern. Large sums of U.S. dollars generated from licit and suspected illicit commercial activity are transported physically from Paraguay through Uruguay and Brazil to banking centers in the United States. Brazil maintains some controls of capital flows and requires disclosure of the ownership of corporations.

U.S. Immigration and Customs Enforcement established a Brazil-based partner Trade Transparency Unit (TTU) to aggressively analyze, identify, and investigate companies and individuals involved in trade-based money laundering activities between Brazil and the United States. As a result of the TTU, Brazil has identified millions of dollars of lost revenue.

The GOB has generally responded to U.S. efforts to identify and block terrorist-related funds, although the GOB has consistently said there is no evidence of terrorist financing within Brazil despite arrests and designations related to terrorist financing activity within the country.

Although Brazil is a party to the United Nations International Convention for the Suppression of the Financing of Terrorism, it has not criminalized terrorist financing in a manner that is consistent with international standards. Terrorist financing is a predicate offense for money laundering but is not an autonomous offense in Brazil. A bill that has been pending legislative action for over two years contains language that could resolve this gap.

British Virgin Islands

The British Virgin Islands (BVI) is a United Kingdom (UK) overseas territory with a population of approximately 22,000. The economy depends greatly on tourism and its offshore financial sector. BVI is a well-established financial center offering accounting; banking and legal services; captive insurance; company incorporations; mutual funds administration; trust formation; and shipping registration. The Financial Services Commission (FSC) is the sole supervisory authority responsible for the licensing and supervision of financial institutions under the relevant statutes. As of March 2011, there were 45,666 active companies, seven licensed banks, 216 other fiduciary companies and 2,627 investment businesses registered with the FSC. The banking sector has assets valued at $2.4 billion as of September 2011. Exploitation of its offshore financial services, BVI’s unique share structure that does not require a statement of authorized capital, and the lack of mandatory filing of ownership information pose significant money laundering risks.

Tourism accounts for 45% of the economy and employs the majority of the workforce; however, financial services contribute over half of government revenues. BVI’s proximity to the U.S. Virgin Islands and the use of the U.S. dollar for its currency pose additional risk factors for money laundering. The BVI are a major target for drug traffickers, who use the area as a gateway to the United States. Drug trafficking in general is a serious problem.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks; currency exchanges; charities and nonprofit associations; dealers in autos, yachts, and heavy machinery; dealers in precious metals and stones; and leasing companies

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 191 in 2010

Number of CTRs received and time frame: Not available

STR covered entities: Banks; currency exchanges; charities and nonprofit associations; dealers in autos, yachts, and heavy machinery; dealers in precious metals and stones; and leasing companies

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: None in 2010

Convictions: None in 2010

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

BVI is a member of the Caribbean Financial Action Task Force, (CFATF), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/Virgin_Islands_3rd_Round_MER_(Final)_English.pdf

Enforcement and implementation issues and comments

The BVI has improved its international cooperation and information exchange regime and has concluded and enforced Tax Information Exchange Agreements with 20 countries, including the U.S., which all contain provisions sufficient to allow the BVI to exchange relevant information.

While BVI legislation has strengthened due diligence requirements where a representative is acting on another person’s behalf, or when the customer is resident in another country, and has extended regulation to money value transfer service operators, these laws are too recent to be evaluated. The FSC has increased its staffing in order to meet the recommended inspection and reporting requirements, especially in light of the new entities covered under the law. The lack of prosecutions for money laundering and a reported decline in number of inspections suggests the FSC should work closely with law enforcement and other authorities.

BVI needs to urgently clarify its publication of data - no data was available for the number of STRs and prosecutions for 2011. In addition, while real estate agents, lawyers, other independent legal advisers, accountants, and dealers in precious metals and stones are covered by the AML/CFT regulations, there appears to be no effective mechanism (i.e., supervision) to ensure compliance with AML/CFT requirements.

The British Virgin Islands is a United Kingdom (UK) Caribbean overseas territory and cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the BVI’s international affairs and may arrange for the ratification of any convention to be extended to the BVI. The 1988 Drug Convention was extended to the BVI in 1995. The UN Convention against Corruption was extended to the BVI in 2006. The International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime have not yet been extended to the BVI.

Burma

Burma is not a regional or offshore financial center. Its economy is underdeveloped and largely isolated from the international financial system. However, Burma’s prolific drug production and lack of transparency make it attractive for domestic money laundering. While its underdeveloped economy is not adequate as a destination to harbor funds, the low risk of enforcement and prosecution makes it appealing to the criminal underground. In addition to drug trafficking, trafficking in persons and public corruption are major sources of illicit proceeds. Money launderers also exploit the illegal trade in wildlife, gems, and timber; and trade-based money laundering is of increasing concern.

Burma is second only to Afghanistan in opium production and is increasingly a source of methamphetamine and amphetamine type substances. Its long, porous borders are poorly patrolled. In some remote regions where smuggling is active, ongoing ethnic tensions, and in some cases armed conflict, impede government territorial control. In other areas, political arrangements between traffickers and Burma’s government allow organized crime groups to function with minimal risk of interdiction. The Government of Burma (GOB) considers drug enforcement secondary to security and is willing to allow narcotics trafficking in border areas in exchange for cooperation from ethnic armed groups.

The government dominates the economy. State-owned enterprises and military holding companies control a substantial portion of Burma’s resources. A move toward privatization in 2010 transferred significant assets to private parties. This was followed in 2011 by sales of government buildings and plots of land, mostly in Rangoon; however, most new owners appear to be business associates of the former ruling generals or politicians in the current civilian government and some are allegedly connected to drug trafficking.

Corruption is endemic in both business and government. Transparency International’s 2010 Corruption Perception Index ranks Burma 176 out of 178 countries. This extensive corruption, overall lack of governmental transparency, and an extremely weak financial regulatory system have stymied the GOB’s recent, preliminary gestures toward financial reform. In the past several years, the GOB enacted several reforms intended to reduce vulnerability to drug money laundering in the banking sector. However, connections to powerful patrons still outweigh rule of law, and Burma continues to face significant risk of drug money being funneled into commercial ventures.

Since 1997, the United States has imposed economic sanctions on Burma due to large-scale repression of the country’s democratic opposition. Executive Order 13047 (1997) prohibits U.S. persons from making or facilitating new investments in Burma. Subsequent measures expand the scope of economic sanctions. In 2003, the Burmese Freedom and Democracy Act and Executive Order 13310 added a ban on importing Burmese products and exporting financial services to Burma and blocked the assets of the former military government (SPDC) and three designated Burmese foreign trade financial institutions. A 2007 Executive Order (E.O. 13348) freezes the assets of additional designated individuals responsible for human rights abuses and public corruption. In July 2008, Congress enacted legislation that expands the categories of individuals and entities subject to asset freezes and travel restrictions and of Burmese products subject to import bans.

In 2003, the United States also designated Burma as a jurisdiction of primary money laundering concern and imposed countermeasures, pursuant to Section 311 of the USAPATRIOT Act, because of its extremely weak anti-money laundering /counter-terrorist financing (AML/CFT) regime.

In its October 2011 Public Statement, the Financial Action Task Force (FATF) notes concern that Burma continues to have significant strategic AML/CFT deficiencies and has not reported any progress in addressing these deficiencies in accordance with its action plan. In response to FATF Public Statements concerning Burma, the United States continues to issue advisories to financial institutions, alerting them of the risk posed by Burma’s AML/CFT deficiencies and of the need to conduct enhanced due diligence with respect to financial transactions involving Burma.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: no

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: NO

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 214 from January to October 2011

Number of CTRs received and time frame: 137,910 from January to October 2011

STR covered entities: Banks (including bank-operated money changing counters), customs officials, state-owned insurance company and small loans enterprise, securities exchange, accountants, the legal and real estate sectors, and dealers of precious metals and stones

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: Not available

Convictions: Not available

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Burma is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Myanmar%202008.pdf

Enforcement and implementation issues and comments:

Burma’s financial sector is extremely underdeveloped and most currency is held outside the formal banking system. The informal economy generates few reliable records, and the GOB makes no meaningful efforts to ascertain the amount or source of income or value transfers. Regulation of financial institutions is likewise extremely weak. While some Burmese financial institutions may engage in currency transactions related to international narcotics trafficking that include significant amounts of U.S. currency, the absence of publicly available GOB information precludes confirmation of such conduct. Burmese law does not contain any customer due diligence (CDD) requirements, although the Central Bank (CB) issues guidelines for banks to follow and some entities implement CDD procedures under other, non-AML related legal provisions.

Burma does not specifically criminalize terrorist financing or designate it as a predicate offense for money laundering, nor is terrorist financing an extraditable offense.

Corruption is pervasive in every level of Burma’s government. Senior military officials are essentially above the law and free to engage in a range of activities designed to enrich themselves and maintain their hold on power. Government workers do not receive a living wage and routinely seek bribes as additional “compensation.” Any efforts to address the rampant corruption are impeded by the military’s control over all civilian authority, including the police. The GOB should end all policies that facilitate corrupt practices and money laundering, including strengthening regulatory oversight of the formal financial sector and implementing a transparent transaction reporting regime. The FIU should become a fully funded independent agency that functions without interference, and the GOB should supply adequate resources to administrative and judicial authorities for their enforcement of government regulations. The GOB should also move the CB from under the operational control of the Ministry of Finance and make it an operationally independent entity.

The GOB should become a party to the UN Convention against Corruption.

Cambodia

Cambodia is neither a regional nor an offshore financial center. Cambodia is at significant risk for money laundering due to its cash-based and dollarized economy, porous borders, rapidly growing formal banking sector, weak judicial system, and endemic corruption. The National Bank of Cambodia has limited capacity to oversee the growing financial and banking industries, and there is little monitoring of casinos.

Cambodia has a significant black market for smuggled goods, including drugs and imported precursors for local production of the methamphetamine ATS. Regardless of size, both licit and illicit transactions are frequently conducted outside formal financial institutions and are difficult to monitor. Cash proceeds from crime are readily channeled into land, housing, luxury goods, or other forms of property without passing through the formal banking sector.

For additional information focusing on terrorism financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

KYC covered entities: Banks; micro-finance institutions; credit cooperatives; security brokerage firms and insurance companies; leasing companies; exchange offices/money exchangers; real estate agents; money remittance services; dealers in precious metals, stones and gems; post offices performing payment transactions; lawyers, notaries, accountants, auditors, investment advisors and asset managers; casinos and gambling institutions; and NGOs and foundations doing business and raising funds

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 138 in 2011

Number of CTRs received and time frame: 611,976 in 2011

STR covered entities: Banks; micro-finance institutions; credit cooperatives; security brokerage firms and insurance companies; leasing companies; exchange offices/money exchangers; real estate agents; money remittance services; dealers in precious metals, stones and gems; post offices performing payment transactions; lawyers, notaries, accountants, auditors, investment advisors and asset managers; casinos and gambling institutions; and NGOs and foundations doing business and raising funds

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: None

Convictions: None

Records exchange mechanism:

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

With other governments/jurisdiction: YES

Cambodia is a member of the Asia/Pacific Group on Money Laundering, a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.apgml.org/documents/docs/17/Cambodia%20World%20Bank%20DAR%20July%2007.pdf

Enforcement and implementation issues and comments:

Cambodia’s 2007 AML/CFT law defines money laundering, but does not adequately criminalize money laundering and terrorist financing due to the lack of penalty provisions for offenses other than those relating to reporting obligations. The existing penal code, amended in 2010, criminalizes money laundering, but only criminalizes the act of concealment, and does not meet international standards. Furthermore, the AML/CFT law only covers terrorist financing if it is related to a specific terrorist act, and does not cover material support of an individual terrorist or terrorist organization. The Government of Cambodia (GOC) is in the process of amending the AML/CFT law and should ensure the AML/CFT amendment comprehensively criminalizes money laundering and terrorist financing, consistent with international standards.

Cambodia lacks a clear legal or regulatory basis to identify and freeze terrorist assets. While the 2007 Counter Terrorism Law authorizes prosecutors to freeze terrorist assets, the AML/CFT regulations provide for an administrative freeze that places the obligation of identifying and freezing terrorist assets on the banks. Cambodia should address this inconsistency and provide clear measures in the law and regulation that allow for the implementation of international standards. In addition, procedures for the confiscation of funds related to money laundering are inadequate, and the GOC lacks effective controls for cross-border cash transactions. The GOC should establish enforceable instructions for freezing terrorist assets without delay and impose more stringent cross-border cash transaction controls.

Cambodia’s nascent financial intelligence unit (FIU) lacks both the capacity and the authority to engage fully in AML/CFT efforts. While the FIU can raise concerns with law enforcement, it forwards CTRs and STRs to the Ministry of the Interior, which determines whether to pursue an investigation. The lack of a clear and coherent reporting and enforcement structure undermines FIU independence and compromises AML/CFT activities. Few covered entities follow STR reporting guidelines. The GOC should rationalize the STR and CTR reporting process to ensure law enforcement agencies have the data they need and covered entities understand the purpose of, and process for, filing STRs. The GOC should also provide training to commercial bank officers, law enforcement agencies, and regulatory bodies.

Canada

Money laundering activities in Canada are primarily a product of illegal narcotics, psychotropic substances, or chemical precursors. In the UN’s 2009 and 2011 World Drug Reports, Canada is cited as the leading supplier of ecstasy in North America as well as a major producer and shipper of methamphetamine for markets around the world. The criminal proceeds laundered in Canada derive primarily from domestic activity which is controlled by drug trafficking organizations and organized crime.

Canada does not have a significant black market for illicit or smuggled goods. Cigarettes are the most commonly smuggled good in the country. There are indications that trade-based money laundering occurs in the jurisdiction. There is no certainty that this activity is tied to terrorist financing activity.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks and credit unions; life insurance companies, brokers, and agents; securities dealers; casinos; real estate brokers/agents; agents of the Crown; money services businesses; accountants and accounting firms; lawyers; dealers in precious metals and stones; and notaries in Quebec and British Columbia

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 1,616 in 2011

Number of CTRs received and time frame: 3,049 in 2011

STR covered entities: Banks and credit unions; life insurance companies, brokers, and agents; securities dealers; casinos; real estate brokers/agents; agents of the Crown; foreign exchange and money services businesses; accountants and accounting firms; lawyers; dealers in precious metals and stones; and notaries in Quebec and British Columbia

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 35 through 2010

Convictions: One

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Canada is a member of the Financial Action Task (FATF) and the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/document/58/0,3746,en_32250379_32236963_40199098_1_1_1_1,00.html

Enforcement and implementation issues and comments:

Reported incidents involving money laundering have increased substantially in Canada over the last decade. The vast majority of money laundering cases in Canada, however, have failed to lead to convictions. Statistics Canada reported in 2011 that out of 29 cases involving money laundering in 2009 and 2010, only 34% resulted in a conviction. The same report indicated that many cases of money laundering go unsolved in Canada. Canadian law enforcement was able to identify a suspect in only 18% of reported money laundering cases in 2009. Money laundering offenses have a higher threshold for prosecution and conviction than the offense of benefiting from the proceeds of crime. Criminals appear willing to forfeit assets and plead guilty to lesser charges to avoid prosecution under AML and proceeds of crime statutes.

The Financial Transactions Reports Analysis Centre of Canada (FINTRAC) is Canada’s financial intelligence unit. FINTRAC plays a central role in Canada’s fight against money laundering and terrorism. The time between FINTRAC’s initial receipt of STRs and the conclusion of an investigation can be quite lengthy, a noted criticism (average number of days for a report dropped from 68 to 56 from 2010-2011).

Lawyers in several provinces have successfully challenged the applicability of the AML law based upon common law attorney-client privileges; therefore, lawyers are not completely covered by the AML provisions.

Deficiencies have been identified in Canada’s anti-money laundering/counter-terrorist financing regime relating to its customer due diligence obligations. In 2011, the Canadian government proposed changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations in order to address those deficiencies and to improve Canada’s compliance with international standards. The proposed changes would require reporting entities to better identify customers and understand their business, which will consequently enable them to identify transactions and activities that are at greater risk for money laundering or terrorist financing.

While the law provides sufficient powers to Canadian law enforcement to pursue money launderers, the budget for relevant law enforcement authorities has not increased; additional resources could increase the effectiveness of existing laws. Provincial and federal statistics should be tracked jointly. Appropriately tracking these cases could reveal a more robust rate of money laundering related convictions.

Canada should continue its work to strengthen its AML/CFT measures within the casino industry and reduce the length of time needed for FINTRAC to prepare reports used by law enforcement authorities. Canada also should continue to ensure its privacy laws do not excessively prohibit provision of information to domestic and foreign law enforcement that might lead to prosecutions and convictions.

Cayman Islands

The Cayman Islands, a United Kingdom (UK) Caribbean overseas territory, is an offshore financial center. Most money laundering that occurs in the Cayman Islands is primarily related to fraud and drug trafficking. Due to its status as a zero-tax regime, the Cayman Islands is also considered attractive to those seeking to evade taxes in their home jurisdictions.

The Cayman Islands is home to a well-developed offshore financial center that provides a wide range of services, including banking, structured finance, investment funds, various types of trusts, and company formation and management. As of December 2010, the banking sector had $1.73 trillion in assets. There were approximately 250 banks, 150 active trust licenses, 730 captive insurance companies, nine money service businesses, and more than 85,000 companies licensed or registered in the Cayman Islands. According to the Cayman Islands Monetary Authority, at year end 2010, there were approximately 9,000 registered mutual funds, of which 435 were administered and 133 were licensed. Shell banks are prohibited, as are anonymous accounts. Bearer shares can only be issued by exempt companies and must be immobilized.

Gambling is illegal; and the Cayman Islands do not permit the registration of offshore gaming entities. There are no free trade zones, and the authorities do not see risks from bulk cash smuggling related to the large number of cruise ships that dock at the island.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: No

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, trust companies, investment funds, fund administrators, insurance companies and managers, money service businesses, corporate and trust service providers, money transmitters, dealers of precious metals and stones, and the real estate industry

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 353 between April 2010 and March 2011.

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks, trust companies, investment funds, fund administrators, insurance companies and managers, money service businesses, corporate and trust service providers, money transmitters, dealers of precious metals and stones, and the real estate industry

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: Eight between 2003 and 2010

Convictions: One since 2006

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

The Cayman Islands is a member of the Caribbean Financial Action Task Force (CFATF), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/Cayman_Islands_3rd_Round_MER_(Final)_English.pdf

Enforcement and implementation issues and comments:

While the Cayman Islands has increased both its regulatory and law enforcement staffing, the number of prosecutions and convictions is extremely low given the vast scale of the country’s financial sector; only six successful prosecutions for money laundering, and only one conviction in the last four years.

International reporting suggests agents for private trust companies and individuals carrying on trust businesses may not consistently maintain identity and ownership information for all express trusts for which they act as trustees. In addition, there remains a lack of penalties for failing to report ownership and identity information, which undermines the effectiveness of identification obligations. This is a particular problem for an estimated 3,000 unregulated mutual funds resident in the Cayman Islands. There also is a need to pay greater attention to the risks and proper supervision of non-profit organizations.

The Cayman Islands continues to develop its network of exchange of information mechanisms. Since 2010, the Cayman Islands has signed a further five tax information exchange agreements, with Canada, Mexico, Japan, India and South Africa, which meet the international standard. It now has a network of 24 information exchange agreements, with 12 of those already in force.

The Cayman Islands is a United Kingdom (UK) Caribbean overseas territory and cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the Cayman Islands’ international affairs and may arrange for the ratification of any Convention to be extended to the Cayman Islands. The 1988 Drug Convention was extended to the Cayman Islands in 1995 and is implemented through several laws. The UN Convention against Corruption and the UN Convention against Transnational Organized Crime have not yet been extended to the Cayman Islands. However, the full implementation platform for the anti-corruption convention exists under current Cayman law. A 2002 request for extension of the International Convention for the Suppression of the Financing of Terrorism to the Cayman Islands has not yet been finalized by the UK, although the provisions of the Convention also are implemented by domestic laws.

China, People’s Republic of

China is swiftly becoming a major global financial center, with a rapidly growing economy and increased integration in the international market. The primary sources of criminal proceeds are corruption, narcotics and human trafficking, smuggling, economic crimes, intellectual property theft, counterfeit goods, crimes against property, and tax evasion. Money is generally laundered through bulk cash smuggling, trade-based fraud (over/under pricing of goods, falsified bills of lading and customs declarations, counterfeit import/export contracts), real estate, and both the formal and underground banking systems.

Most money laundering cases currently under investigation involve funds obtained from corruption and bribery. Proceeds of tax evasion, recycled through offshore companies, often return to China disguised as foreign investment and, as such, receive tax benefits. Chinese officials have noted that most acts of corruption in China are closely related to economic activities that accompany illegal money transfers.

Chinese authorities have observed that the increase in AML efforts by banks has been accompanied by increased laundering through the underground banking system and trade fraud. Value transfer via trade goods, including barter exchange, is a common component in Chinese underground finance. Many Chinese underground trading networks in Africa, Asia, the Middle East, and the Americas participate in the trade of Chinese-manufactured counterfeit goods.

China is not a major offshore financial center. China has multiple Special Economic Zones (SEZs) and other designated development zones at the national, regional, and local levels. SEZs include Shenzhen, Shantou, Zhuhai, Xiamen, and Hainan, along with 14 coastal cities and over 100 designated development zones.

For additional information focusing on terrorism financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, securities dealers, insurance companies

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 61,852,018 in 2010

Number of CTRs received and time frame: China does not separate STRs and CTRs

STR covered entities: Banks, securities dealers, and insurance companies

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: Not available

Convictions: 11,456 in 2010

Records exchange mechanism:

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

With other governments/jurisdictions: YES

China is a member of the Financial Action Task Force (FATF), as well as the Asia/Pacific Group on Money Laundering (APG) and the Eurasian Group on Combating Money Laundering and Terrorist Financing (EAG), both of which are FATF-style regional bodies (FSRB). Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/33/11/39148196.pdf

Enforcement and implementation issues and comments:

In 2011, the Government of China (GOC) adopted special legislation that defines the legal scope of “terrorist activities” related to the crime of terrorist financing (among other crimes) and provides the legal basis for the establishment of a national, interagency terrorist asset freezing body that, if robustly implemented, should bring China into greater compliance with the requirements of UNSCRs 1267 and 1373.

The GOC should strengthen AML/CFT enforcement efforts to keep pace with the sophistication and reach of criminal and terrorist networks. Although mandatory, the courts do not systematically pursue the confiscation of criminal proceeds, which undermines any disincentive to commit the crime. The GOC should ensure that all courts are aware of and uniformly implement the mandatory confiscation laws. China also should enhance coordination among its financial regulators and law enforcement bodies to better investigate and prosecute offenders. China’s Ministry of Public Security should continue ongoing efforts to develop a better understanding of how AML/CFT tools can be used to support the investigation and prosecution of a wide range of criminal activity.

U.S. law enforcement agencies note that the GOC has not cooperated sufficiently on financial investigations and does not provide adequate responses to requests for financial investigation information. In addition to the lack of law enforcement based cooperation, the GOC’s inability to enforce U.S. court orders or judgments obtained as a result of non-conviction based forfeiture actions against China-based assets remains a significant barrier to enhanced U.S. - China cooperation in asset freezing and confiscation.

The GOC should expand cooperation with counterparts in the United States and other countries, and pursue international linkages in AML/CFT efforts more aggressively. U.S. agencies consistently seek to expand cooperation with Chinese counterparts on AML/CFT matters and to strengthen both policy- and operational-level cooperation in this critical area. While China continues to make significant improvements to its AML/CFT legal and regulatory framework and is gradually making progress toward meeting the international standards, implementation, particularly in the context of international cooperation, remains lacking.

Colombia

The Government of Colombia (GOC) is a regional leader in the fight against money laundering and terrorist financing. The GOC has a forceful anti-money laundering/counter-terrorist financing (AML/CFT) regime; however, the laundering of money from Colombia’s illicit cocaine and heroin trade continues to penetrate its economy and affect its financial institutions. Laundered funds also are derived from commercial smuggling for tax and import duty evasion; kidnapping; arms trafficking; and terrorism connected to violent, illegally-armed groups and guerrilla organizations, including U.S. Government-designated terrorist organizations.

Both drug and money laundering organizations use a variety of methods to repatriate their illicit proceeds to Colombia. These methods include the Black Market Peso Exchange (BMPE), bulk cash smuggling, wire transfers, remittances, smuggled merchandise (contraband) and more recent methods, such as through the securities markets (both U.S. and Colombian), casinos, electronic currency and prepaid debit cards as well as illegal mining. Criminal elements have used the banking sector, and Colombian money brokers, primarily concentrated in Bogota, but also in Medellin and Cali, are additional entities that facilitate money laundering activities. The trade of counterfeit items in violation of intellectual property rights is an ever increasing method to launder illicit proceeds. Casinos, free trade zones (FTZs) and the postal money order market in Colombia present opportunities for criminals to take advantage of inadequate regulation and transparency.

Money laundering also has occurred via trade and the non-bank financial system, especially transactions that support the informal or underground economy. Trade-based money laundering by Colombian organizations with connections to Mexico, China, Ecuador, Peru and Panama has grown exponentially in recent years. In the BMPE, or trade-based money laundering scheme, goods from abroad (China has replaced the United States) are bought with drug dollars. Many of the goods are either smuggled into Colombia or brought directly into Colombia’s customs warehouses, thus avoiding various taxes, tariffs and legal customs duties. In other trade-based money laundering schemes, goods are over-or-under invoiced to transfer value. According to people who have worked for years in the BMPE industry, evasion of the normal customs charges is frequently facilitated through the corruption of Colombian oversight authorities by the drug and money laundering groups.

Official corruption has also aided money laundering and terrorist financing in geographic areas controlled by the Revolutionary Armed Forces of Colombia (FARC). Although corruption of government officials remains a problem, President Juan Manuel Santos has taken a hard line on corruption and has demonstrated that he is serious about punishing corrupt officials at the highest level. Since Santos entered office, four former ministers, three former security directors of the Administrative Department, and other government officials have been dismissed from office, taken to court, or jailed.

In 2005, Colombia’s Congress passed a comprehensive FTZ modernization law that opens investment to international companies, allows one-company or stand-alone FTZs, and permits the designation of pre-existing plants as FTZs. As of September 2011, there are 91 FTZs in Colombia. Companies within FTZs enjoy a series of benefits such as a preferential corporate income tax rate and exemption from customs duties and value-added taxes on imported materials. The Ministry of Commerce administers requests for establishing FTZs, but the government does not participate in their operation. The DIAN (Colombia’s Tax and Customs Authority), regulates activities and materials in FTZs, and there are identification requirements for companies and individuals who enter or work in the FTZs. The Santos Administration is revising the FTZ and tax exemption scheme in order to limit their use in the near future.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: YES

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: List approach

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

KYC covered entities: Banks, stock exchanges and brokers, mutual funds, investment funds, export and import intermediaries, credit unions, wire remitters, money exchange houses, public agencies, notaries, casinos, lottery operators, car dealers, and foreign currency traders

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 4,904 January through August 2011

Number of CTRs received and time frame: 98,076 January through August 2011

STR covered entities: Banks, securities broker/dealers, trust companies, pension funds, savings and credit cooperatives, depository and lending institutions, lotteries and casinos, vehicle dealers, currency dealers, importers/exporters and international gold traders

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 115 in 2010

Convictions: 95 in 2010

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Colombia is a member of GAFISUD, a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.gafisud.info/pdf/InformedeEvaluacinMutuaRepblicadeColombia_1.pdf

Enforcement and implementation issues and comments:

The Government of Colombia continues to make progress in the development of its financial intelligence unit, regulatory framework and interagency cooperation within the government. However, referrals from the Colombian UIAF (Financial Intelligence Unit) to the public ministry for ML/TF cases substantially decreased in 2011 and therefore prosecutions have decreased as well. Placing greater focus and priority on money laundering investigations, including increasing resources and training, will be necessary to ensure continued and improved progress. The GOC should take steps to foster better interagency cooperation, including coordination between the UIAF, Colombia’s financial intelligence unit; National Police; Colombia’s Trade Transparency Unit; and the tax and customs authority in order to combat the growth in contraband trade to launder illicit drug proceeds. Congestion in the court system, procedural impediments, and corruption remain problems that need to be addressed.

Colombian law lists specific predicate crimes upon which it bases money laundering violations. The included crimes generally involve illegal armed groups and criminal syndicates and their related activities.

The Colombian legal system has evolved with the introduction of the adversarial oral system. Related to this, the Prosecutor General’s Office (Fiscalia), has undergone a transformation that has resulted in the loss of significant institutional knowledge and professional ability. This has been due, in large part, to a court decision requiring staffing changes whereby many experienced prosecutors were let go and new hires replaced them. The office is in the process of reconstructing its capabilities, but its effectiveness has been affected..

The Colombian Superintendency of Companies (SuperSociedades) has been working on new anti-money laundering regulations and know-your-customer regulations for the private sector that should be announced by the end of 2011.

While the Colombian financial system has banking controls and government regulatory processes in place, it is reported that drug and money laundering groups have influenced high level bank officials in order to circumvent both established anti-money laundering controls and government regulations.

Colombian law is unclear on the government’s authority to block assets of individuals and entities on the UN 1267 Sanctions Committee’s consolidated list. Banks are able to close accounts, but not to seize assets. Colombian law should be clarified to spell out the government’s authority to block assets of individuals and entities on the UN 1267 Sanctions Committee’s consolidated list.

The GOC should put in place streamlined procedures for the liquidation and sale of seized assets under state management and should revise procedures to permit expedited forfeiture of seized assets. A five to 15 year time frame for forfeiture opens opportunities for waste, fraud and abuse while limiting the deterrent effect that could result from rapid asset forfeiture. Colombian prosecutors could take steps to not only seize the physical assets (real property) of narcotics traffickers but also seize their bank accounts in Colombia. This element is frequently not a part of regular Colombian asset seizure operations. In addition, the GOC should increase the number of judges that oversee asset forfeiture and money laundering cases to expedite the judicial process.

The GOC works extensively with U.S. law enforcement agencies to identify, target and prosecute groups and individuals engaged in financial and drug crimes. The GOC should explore steps to foster increased cooperation between the UIAF and the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) as case exchanges substantially decreased in 2011.

Costa Rica

While not a major regional financial center, Costa Rica remains vulnerable to money laundering and other financial crimes, including various schemes that target U.S.-based victims. Money laundering activities are primarily related to the foreign proceeds of international trafficking in cocaine. A sizeable internet gaming industry also launders millions of dollars in illicit proceeds through Costa Rica and offshore centers annually. To a lesser extent, proceeds are laundered in Costa Rica from domestic criminal activities, including trafficking narcotics, persons or arms; fraud; corruption; and contraband smuggling. A significant market exists in the smuggling of contraband liquors from bordering countries. The Government of Costa Rica (GOCR) reports that Costa Rica is primarily used as a bridge to send funds to and from other jurisdictions using, in many cases, companies or banks established in offshore financial centers.

Money laundering occurs across the formal financial sector; the non-financial sector, especially via both licensed and unlicensed money remitters; and within the free trade zones (FTZs). Nicaraguan nationals residing in Costa Rica send over $200 million in remittances annually to family members in their home country, much of which is sent via unlicensed money remitters. Both these unlicensed and licensed money services businesses are a significant risk for money laundering and a potential mechanism for terrorist financing. In addition, Costa Rica’s 35 FTZs, used by approximately 284 companies, are susceptible to money laundering. The smuggling of bulk currency across borders with Panama and Nicaragua is also prevalent. Trade-based money laundering, while utilized, has not been detected with the same frequency as the other typologies described above. The GOCR has not reported investigations of terrorism financing in 2011.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: NO civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, credit institutions, and savings and loan cooperatives; pension funds; insurance companies and agents; money exchangers and remitters; trust managers, investment fund and safekeeping companies; issuers, sellers or redeemers of travelers checks and postal money orders; and securities dealers

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 294 from January – September 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks, credit institutions, and savings and loan cooperatives; pension funds; insurance companies and agents, money exchangers and remitters; trust managers, investment fund and safekeeping companies; issuers, sellers or redeemers of travelers checks and postal money orders; and securities dealers

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: Nine from December 2010 to October 2011

Convictions: Two from December 2010 to October 2011

Records exchange mechanism:

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

With other governments/jurisdictions: YES

Costa Rica is a member of the Financial Action Task Force on Money Laundering in South America (GAFISUD), a Financial Action Task Force-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Enforcement and implementation issues and comments:

In October 2010, the Judicial Branch appointed a new Attorney General. As part of a subsequent restructuring, in December 2010, the Attorney General’s Office (AGO) transferred the prosecution of money laundering cases from the Organized Crime Bureau to the Economic Crimes Bureau. In addition, the Attorney General appointed a new bureau chief to the renamed Economic Crimes, Taxation, and Money Laundering Bureau. Based on these changes, beginning in January 2011, there has been a significant emphasis placed on money laundering investigations, including those involving advanced typologies and transnational crime. Nevertheless, the AGO and the Judicial Police still lack adequate resources to effectively investigate and prosecute many of the complex money laundering cases linked to Costa Rica.

Moreover, the legal doctrine of “self-laundering” (autolavado in Spanish) prevents prosecutors from charging money laundering in many cases. Under Costa Rican law, a person who commits a predicate crime and who subsequently launders the proceeds of that crime cannot be charged with money laundering as an additional offense (e.g., a drug dealer who is convicted on drug charges cannot also be prosecuted for laundering the drug proceeds). In Costa Rica, money launderers oftentimes use legitimate businesses and shell corporations to launder illegal proceeds. However, criminal liability does not extend to legal persons.

Land-based casinos and internet gaming companies are effectively not regulated in Costa Rica and represent a significant risk for money laundering. The online gaming industry transacts billions of dollars annually and employs thousands of Costa Rican nationals. Most of its proceeds are laundered in offshore centers but millions of dollars still circulate in Costa Rica.

The GOCR reports that Costa Rican attorneys oftentimes conduct large cash purchases of real estate on behalf of persons located in the United States. While many of these transactions appear legal, the GOCR has concerns that some of the international wire transfers ostensibly for legitimate real estate transactions are, in fact, the proceeds of illegal activities in the United States.

In 2011, the GOCR pursued its first case under the 2009 civil forfeiture law. The presiding judge subsequently referred the case to the Costa Rican Supreme Court for an advisory opinion which has yet to be issued. It is still unclear whether the GOCR will assist other countries in obtaining non-conviction-based forfeiture.

While it has demonstrated a genuine commitment to strengthening its anti-money laundering/counter-terrorist financing (AML/CFT) regulatory regime, the GOCR has not fully implemented recently enacted risk-based regulations. The GOCR and its regulators have focused considerable attention on the formal financial sector; however, they have not adequately supervised money service businesses, especially money remitters, and issuers, sellers or redeemers of travelers checks and postal money orders. While the FIU is tasked with oversight authority with respect to these entities, it lacks the resources, personnel, or capacity to comply with this mandate. Additionally, designated non-financial businesses and professions (DNFBPs), such as dealers of precious stones and metals, accountants, real estate agents, lawyers and notaries, are not covered by the AML/CFT provisions.

Curacao

In late 2010, Curacao became a new autonomous country within the Kingdom of the Netherlands. Curacao enjoys a high degree of autonomy on most internal matters but defers to the Kingdom of the Netherlands (KON) in matters of defense, foreign policy, final judicial review, human rights, and good governance. Curacao is a regional financial center and a transshipment point for drugs from South America bound for the United States and Europe. Money laundering is primarily related to proceeds from illegal narcotics. Money laundering organizations can take advantage of banking secrecy and use offshore banking and incorporation systems, economic zone areas, and resort/casino complexes to place, layer and launder drug proceeds. Another possible area of money laundering activity may be through wire transfers between the island and the Netherlands. Bulk cash smuggling is a continuing problem due to the close proximity of Curacao to South America.

Curacao has two free economic zones. It is not known to what extent “contrabanding” (using bulk cash to buy actual products which are shipped to South America and sold, thus legitimizing the profits) occurs. The worldwide financial recession has significantly slowed the economic activities of the zones. Curacao has an active “e-zone” which provides potential e-commerce investors a variety of tax saving opportunities and could be vulnerable to illegal activities.

Curacao’s offshore financial sector consists of trust service companies providing financial and administrative services to an international clientele, including offshore companies, mutual funds, and international finance companies. The extent of this sector is not clear, but it has declined in scale due to the worldwide financial crisis. Banking regulations require international banks to have a physical presence and maintain records on the island. Bearer shares of international companies must be kept in custody and onshore companies are not allowed to have bearer shares. Several casinos and Internet gaming companies operate.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Onshore and offshore banks, saving banks, money remitters, credit card companies, credit unions, life insurance companies and brokers, trust companies and other service providers, casinos, customs, lawyers, notaries, accountants, tax advisors, jewelers, car dealers, real estate agents, administration offices, tax advisors, lawyers, and accountants

Suspicious transaction reporting (STR) requirements:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

STR covered entities: Local and international banks, saving banks, money remitters, credit card companies, credit unions, life insurance companies, insurance brokers, company and other service providers , casinos, customs, lawyers, notaries, accountants, tax advisors, jewelers, car dealers, real estate agents, administration offices, and other tax, legal, and accountancy experts

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 24 - January - May 2010

Convictions: 23 - January - May 2010

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Curacao is a member of the Caribbean Financial Action Task Force, (CFATF), a Financial Action Task Force-style regional body. The first AML/CFT evaluation of Curacao occurred in August/September of 2011. Once adopted, the mutual evaluation report will be found here: http://www.cfatf-gafic.org/mutual-evaluation-reports.html

Enforcement and implementation issues and comments:

A new penal code was passed by parliament and was to be published on November 15, 2011. Terrorism financing is now specifically criminalized and legal persons are subject to criminal and administrative penalties.

Curacao should ensure that it continues its regulation and supervision of the offshore sector and free trade zones, as well as pursuing money laundering investigations and prosecutions. Curacao should work to fully develop its capacity to investigate and prosecute money laundering and terrorist financing cases.

The Mutual Legal Assistance Treaty between the KON and the U.S. applies to Curacao; however, the treaty is not applicable to requests for assistance relating to fiscal offenses addressed to the Netherlands Antilles.

Curacao is part of the Kingdom of the Netherlands and cannot sign or ratify international conventions in its own right. Rather, the Netherlands may arrange for the ratification of any convention to be extended to Curacao. The 1988 Drug Convention was extended to Curacao in 1999. The International Convention for the Suppression of the Financing of Terrorism was extended to the Netherlands Antilles, and as successor, to Curacao on March 22, 2010. The UN Convention against Transnational Organized Crime and the UN Convention against Corruption have not yet been extended to Curacao.

Cyprus

Since 1974, Cyprus has been divided de facto into the government-controlled two-thirds of the island and the Turkish Cypriot-administered one-third. The Government of the Republic of Cyprus (ROC) has continued to be the only internationally recognized authority; in practice, its authority extends only to the government-controlled area. In 1983, the Turkish Cypriots declared an independent “Turkish Republic of Northern Cyprus” (“TRNC”). The United States does not recognize the “TRNC,” nor does any country other than Turkey. This section of the report discusses the area controlled by the ROC. A separate section on the area administered by Turkish Cypriots follows.

Cyprus is a major regional financial center with a robust financial services industry and a significant amount of nonresident businesses. A number of factors have contributed to the development of Cyprus as a financial center: a preferential tax regime; double tax treaties with 44 countries (including the United States, several European Union (EU) nations, and former Soviet Union nations); well developed and modern legal, accounting and banking systems; a sophisticated telecommunications infrastructure; and EU membership. There are no legal or substantive distinctions between domestic and offshore companies. Cyprus has also lifted the prohibition from doing business domestically, and companies formerly classified as offshore are now free to engage in business locally. International business companies are allowed to be registered in Cyprus but their ultimate beneficial ownership must be disclosed to the authorities. There are over 240,000 companies registered in Cyprus, many of which belong to non-residents. The same disclosure, reporting, tax and other laws and regulations apply equally to all registered companies.

Like any financial center, Cyprus faces risks from money laundering and illicit finance activities. The Cypriot authorities are aware of those risks and take legislative and other measures to counter and suppress such activities. The biggest threats for money laundering are primarily from simple financial crime domestically and tax evasion internationally. There is no significant black market for smuggled goods in Cyprus. What little black market trade exists is usually related to small scale transactions, typically involving fake clothing, pirated CDs/DVDs and cigarettes moved across the UN-patrolled buffer zone separating the ROC from the “TRNC”.

Cyprus has three free trade zones (FTZs). Two, located in the main seaports of Limassol and Larnaca, are used only for transit trade, while the third, located near the international airport in Larnaca, can also be used for repacking and reprocessing. These areas are treated as being outside normal EU customs territory. Consequently, non-EU goods placed in FTZs are not subject to any import duties, VAT or excise tax. FTZs are governed under the provisions of relevant EU and Cypriot legislation. The Department of Customs has jurisdiction over all three areas and can impose restrictions or prohibitions on certain activities, depending on the nature of the goods.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

KYC covered entities: Banks, cooperative credit institutions, securities and insurance firms, payment institutions including money transfer businesses, trust and company service providers, auditors, tax advisors, accountants, real estate agents, dealers in precious stones and gems, and in certain cases, attorneys

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 510 in 2010

Number of CTRs received and time frame: Not available

STR covered entities: Banks, cooperative credit institutions, securities and insurance firms, payment institutions including money transfer businesses, trust and company service providers, auditors, tax advisors, accountants, real estate agents, dealers in precious stones and gems, and in certain cases, attorneys, plus any person who in the course of his profession, business or employment knows or reasonably suspects that another person is engaged in money laundering or terrorist financing activities

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 41 in 2010

Convictions: 15 in 2010

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Cyprus is a member of the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force-style regional body (FSRB). Its most recent mutual evaluation report can be found here: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Cyprus_en.asp

Enforcement and implementation issues and comments:

There are no legal issues hampering Cyprus’ ability to assist foreign governments in mutual legal assistance requests. Cypriot law allows MOKAS, the Cypriot financial intelligence unit (FIU) to share information with other FIUs without benefit of a memorandum of understanding (MOU).

Cyprus has enacted comprehensive legislation and established systems for identifying, tracing, freezing, seizing, and forfeiting narcotics-related assets and assets derived from other serious crimes. Like most EU countries, though, Cyprus has no provisions allowing civil forfeiture of assets without a criminal case. The police and the FIU are responsible for tracing, seizing and freezing assets and they fully enforce existing legislation. Cyprus has an independent national system and mechanism for freezing terrorist assets, and has also engaged in bilateral and multilateral negotiations with other governments to enhance its asset tracking and seizure system.

Area Administered by Turkish Cypriots

The Turkish Cypriot community continues to lack the legal and institutional framework necessary to provide effective protection against the risks of money laundering, although significant progress has been made in recent years with the passage of “laws” better regulating the onshore and offshore banking sectors and casinos. There are currently 21 domestic banks in the area administered by Turkish Cypriots and Internet banking is available.

The offshore banking sector remains a concern. The offshore sector consists of 11 banks and 90 companies. The offshore banks may not conduct business with residents of the area administered by Turkish Cypriots and may not deal in cash. The “Central Bank” provides the regulation and licensing of offshore banks and audits the offshore entities, which must submit an annual report on their activities. The “law” permits only banks previously licensed by Organization for Economic Co-operation and Development (OECD)-member nations or Turkey to operate an offshore branch in northern Cyprus.

The Turkish Cypriot community is not part of any FSRB and thus is not subject to normal peer evaluations. Turkish Cypriot authorities have taken steps to address the risk of financial crime, including enacting an “anti-money laundering law (“AMLL”)” for the area and formally establishing an FIU equivalent. The “AMLL” aims to reduce the number of cash transactions in the area administered by Turkish Cypriots as well as improve the tracking of any transactions above 10,000 Euros (approximately $13,000).

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: no

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

KYC covered entities: Banks, cooperative credit societies, finance companies, leasing/factoring companies, portfolio management firms, investment firms, jewelers, foreign exchange bureaus, real estate agents, retailers of games of chance, lottery authority, accountants, insurance firms, cargo firms, antique dealers, auto dealers, lawyers

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 105 in 2011 (as of October 30, 2011)

Number of CTRs received and time frame: Not available

STR covered entities: Banks, cooperative credit societies, finance companies, leasing/factoring companies, portfolio management firms, investment firms, jewelers, foreign exchange bureaus, real estate agents, retailers of games of chance, lottery authority, accountants, insurance firms, cargo firms, antique dealers, auto dealers, lawyers

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: None

Convictions: None

Records exchange mechanism:

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

With other governments/jurisdictions: YES – with Turkey only

The area administered by Turkish Cypriots is not a member of any FSRB.

Enforcement and implementation issues and comments:

Despite the 2009 promulgation of more strict “laws,” the 24 operating casinos (four in Nicosia, five in Famagusta and 15 in Kyrenia) remain essentially unregulated due to the lack of an enforcement or investigative mechanism by the casino regulatory body and efforts to de-criminalize any failure by casinos to follow KYC regulations.

Banks and other designated entities must submit STRs to the “FIU”. The “FIU” then will forward any STRs to the five-member “Anti-Money Laundering Committee” which decides whether to further refer suspicious cases to the “attorney general’s office,” and then if necessary, to the “police” for further investigation. The five-member committee is composed of representatives of the “Ministry of Economy,” “Money and Exchange Bureau,” “Central Bank,” “police” and “customs”.

The Turkish Cypriot “AMLL” provides better banking regulations than were in force previously, but without ongoing enforcement its objectives cannot be met. A major weakness continues to be the many casinos, where a lack of resources and expertise leave the area essentially unregulated, and therefore, especially vulnerable to money laundering abuse. Amendments to a “law” to regulate potential AML activity in casinos that would essentially decriminalize failure to implement KYC rules have been pending for over one year. The largely unregulated consumer finance institutions and currency exchange houses are also of concern. The Turkish Cypriot authorities should continue efforts to enhance the “FIU,” and adopt and implement a strong licensing and regulatory environment for all obligated institutions, in particular casinos and money exchange houses. Turkish Cypriot authorities should stringently enforce the cross-border currency declaration requirements. Turkish Cypriot authorities should continue steps to enhance the expertise of members of the enforcement, regulatory, and financial communities with an objective of better regulatory guidance, more efficient STR reporting, better analysis of reports, and enhanced use of legal tools available for prosecutions.

Dominican Republic

The Dominican Republic (DR) is not a major regional financial center, despite having one of the largest economies in the Caribbean. The DR continues to be a major transit point for the transshipment of illicit narcotics destined for the United States and Europe. The six international airports, 16 seaports and a large porous frontier with Haiti present Dominican authorities with serious challenges.

Corruption within the government and the private sector, the presence of international illicit trafficking cartels, a large informal economy, and a fragile formal economy make the DR vulnerable to money laundering and terrorist financing threats. The large informal economy is a significant market for illicit or smuggled goods. The under-invoicing of imports and exports by DR businesses is a relatively common practice for those seeking to avoid taxes and customs fees. U.S. law enforcement believes there is some evidence that arms smuggling across Dominican borders has reached systemic levels as there are identifiable networks smuggling weapons into the DR from the U.S. The increase in drug related violence throughout the DR is partially attributable to arms trafficking as evidenced by the seizures of illicit weapons at ports of entry over the past year. The major sources of laundered proceeds stem from illicit trafficking activities, tax evasion and fraudulent financial activities, particularly transactions with forged credit cards.

There are no reported hawala or other money or value transfer services operating in the DR. A significant number of remittances are transferred through banks. Casinos are legal in DR and unsupervised gaming activity represents a significant money laundering risk. While the country has a law creating an international financial zone, implementing regulations will not be issued until the law is reformed to avoid perceptions that the zone will be left out of the DR’s AML regulatory regime.

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: Yes

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, currency exchange houses, securities brokers, cashers of checks or other types of negotiable instruments, issuers/sellers/cashers of travelers checks or money orders, credit and debit card companies, remittance companies, offshore financial service providers, casinos, real estate agents, automobile dealerships, insurance companies, and dealers in firearms and precious metals

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

STR covered entities: Banks, agricultural credit institutions, money exchangers, notaries, gaming centers, securities dealers, art or antiquity dealers, jewelers and precious metals vendors, attorneys, financial management firms and travel agencies

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 12 in 2011

Convictions: Seven in 2011

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

The Dominican Republic is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found here: http://www.cfatf-gafic.org/downloadables/mer/Dominican_Republic_3rd_Round_MER_%28Final%29_English.pdf

Enforcement and implementation issues and comments:

The DR has made progress on the functioning of its financial intelligence unit (FIU), but problems remain. Progress includes greater clarity on the areas covered by disclosure and reporting requirements; however, there remains a lack of publicly available information about the numbers of reports submitted by the various reporting sectors.

The DR also strengthened its laws on PEPs and correspondent relationships but international experts have outlined key weaknesses to address. In addition, the DR urgently needs to pass regulations to provide safe harbor protection for STR filers and criminalize tipping off. The government also should work to better regulate casinos and non-bank businesses and professions, in particular real estate companies, and strengthen regulations for financial cooperatives and insurance companies.

The DR’s asset forfeiture regime is improving but has weaknesses because it does not cover confiscation of instrumentalities intended for use in the commission of a money laundering offense; property of corresponding value; and income, profits, or other benefits from the proceeds of crime. The DR should implement legislation to bring its asset forfeiture regime up to international standards.

In July 2011, Dominican authorities announced they had dismantled the core of a narcotics trafficking and money laundering organization based in the DR. The alleged profits from the narcotrafficking operation were laundered using banks and other financial instruments throughout the Western Hemisphere. The group allegedly had branches in Canada, Colombia, Venezuela, Jamaica and elsewhere. The investigation was coordinated by agents from the DR, Central America, South America, North America, and Interpol.

The Egmont Group expelled the FIU in 2006 due to a lack of compliance with the definition of an FIU. To date, the FIU has not been reinstated into that worldwide organization. This seriously hinders U.S. law enforcement in the exchange of information with its Dominican counterparts through the two countries’ FIUs. The Egmont Group has specified the formal steps the DR would need to take to re-apply for Egmont membership, thereby allowing the FIU to efficiently and securely share sensitive financial information with the Financial Crimes Enforcement Network (FinCEN), the U.S. FIU, as well as with the rest of the Egmont membership. However, there are still impediments in the Dominican law keeping the FIU from being considered for membership, such as Law 480/08 which enables the creation of another FIU-like organization to regulate international financial zones. The DR should modify the law to eliminate the possibility of a second FIU, and re-apply for membership in the Egmont Group.

France

France remains an attractive venue for money laundering because of its sizable economy, political stability, and sophisticated financial system. Narcotics and human trafficking, smuggling, and other crimes associated with organized crime are among its vulnerabilities.

France can designate portions of its customs territory as free trade zones and free warehouses in return for commitments in favor of employment. France has taken advantage of these regulations in several specific instances. The French Customs Service administers these zones.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

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

KYC covered entities: Banks, credit institutions, money-issuing institutions, investment firms, money exchangers, investment management companies, mutual insurers and benefit institutions, insurance brokers and intermediaries, notaries, receivers and trustees in bankruptcy, financial investment advisors, real estate brokers, chartered accountants, auditors, dealers in high-value goods, auctioneers and auction houses, bailiffs, lawyers, participants in stock exchange settlement and delivery, commercial registered office providers, gaming centers, and companies involved in sports bets and horse-racing tips

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 20,252 in 2010

Number of CTRs received and time frame: Not available

STR covered entities: Banks, credit institutions, money-issuing institutions, investment firms, money exchangers, investment management companies, mutual insurers and benefit institutions, insurance brokers and intermediaries, notaries, receivers and trustees in bankruptcy, financial investment advisors, real estate brokers, chartered accountants, auditors, dealers in high-value goods, auctioneers and auction houses, bailiffs, lawyers, participants in stock exchange settlement and delivery, commercial registered office providers, gaming centers, and companies involved in sports bets and horse-racing tips

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 276 in 2010

Convictions: 35 in 2010

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

France is a member of the Financial Action Task Force (FATF). France is also a Cooperating and Supporting Nation to the Caribbean Financial Action Task Force (CFATF), a FATF-style regional body. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/3/18/47221568.pdf

Enforcement and implementation issues and comments:

The French government has a comprehensive anti-money laundering/counter-terrorist financing (AML/CFT) regime and is an active partner in international efforts to control money laundering and terrorist financing. France maintains the ability to designate individuals or entities under French domestic authorities in addition to those designated by European Union (EU) regulations. France and the Unites States have exchanged large amounts of data in connection with money laundering and terrorist financing. France still does not have the capacity to share forfeited assets with other jurisdictions.

France applies the 2006/70/CE European Union directive by which politically exposed persons from the EU states may benefit from simplified vigilance procedures, but only in a limited number of cases.

In September 2011 the Prudential Control Authority (ACP) took several measures to improve its ability to fight money laundering and terrorism financing. The ACP has provided guidelines to help financial institutions define and research “the effective beneficiary” of money laundering or terrorism financing. The ACP also has defined new reporting obligations for money exchangers.

France should continue its active participation in international organizations and its outreach to lower-capacity recipient countries to combat the domestic and global threats of money laundering and terrorist financing.

Germany

While not an offshore financial center, Germany is one of the largest financial centers in Europe. Although not a major drug producing country, Germany continues to be a consumer and a major transit hub for narcotics. Organized criminal groups involved in drug trafficking and other illegal activities are an additional source of laundered funds in Germany. Trends in money laundering include electronic payment systems; financial agents, i.e., persons who are solicited to make their private accounts available for money laundering transactions; and trade in CO2 emission certificates. Free Zones of control type I exist in Bremerhaven, Cuxhaven, and Hamburg, i.e., freeports. Deggendorf and Duisburg are control type II Free Zones (unfenced inland ports).

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: Both

Legal persons covered: criminally: NO civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

KYC covered entities: Credit institutions, financial services institutions, payment institutions and e-money institutions as well as their agents; financial enterprises; insurance companies and intermediaries; investment companies; lawyers, legal advisers, auditors, chartered accountants, tax advisers and tax agents; trust or company service providers; real estate agents; casinos; and persons trading in goods

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 11,042 in 2010

Number of CTRs received and time frame: Not applicable

STR covered entities: Credit institutions, financial services institutions, payment institutions and e-money institutions as well as their agents; financial enterprises; insurance companies and intermediaries; investment companies; lawyers, legal advisers, auditors, chartered accountants, tax advisers and tax agents; trust or company service providers; real estate agents; casinos; and persons trading in goods

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 684 in 2010

Convictions: 606 in 2010

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Germany is a member of the Financial Action Task Force. Its most recent mutual evaluation can be found here: http://www.fatf-gafi.org/dataoecd/44/19/44886008.pdf

Enforcement and implementation issues and comments:

Germany strengthened its AML/CFT regime in 2011, including by: amending AML/CFT provisions governing the financial sector through the Act to Implement the Second E-Money Directive which entered into force at the end of April 2011; extending the list of predicate offenses to include market manipulation, product piracy and insider trading through the Act to Improve the Combating of Money Laundering and Tax Evasion, effective May 3, 2011; clarifying the powers - such as the right to obtain information and enter premises - of the supervisory authorities responsible for non-financial institutions; and submitting the draft Act to Optimize the Prevention of Money Laundering to the German parliament, with adoption envisaged before the end of 2011. While Germany has no automatic CTR requirement, large currency transactions frequently trigger a STR.

Tipping off is a criminal offense only if it is committed with the intent to support money laundering or obstruct justice, and applies only to previously-filed STRs. Otherwise, it is an administrative offense that carries a fine of up to € 50,000 (approximately $68,000) under the Money Laundering Act; draft legislation would increase the fine up to € 100,000 (approximately $133,000). Legal persons are only covered by the Administrative Offenses Act, and are not criminally liable under the Criminal Code.

The numbers of prosecutions and convictions included in this report only reflect cases in which the money laundering violation carried the highest penalty of all the crimes of which the offender was convicted.

Notably, on March 10, 2011, a German-Lebanese criminal group was sentenced for laundering money from narcotics sales throughout Europe by transporting it to Lebanon. Assets amounting to € 9.2 million (approximately $12.271 million) were forfeited. Germany has no federal statistics on the amount of assets forfeited in criminal money laundering cases. Assets can be forfeited as part of a criminal trial or through administrative procedures such as claiming back taxes.

Germany should become a party to the UN Convention against Corruption.

Greece

Greece is considered to be a regional financial center in the developing Balkans, as well as a bridge between Europe and the Middle East. Official corruption, the presence of organized crime, and a large shadow economy make the country vulnerable to money laundering and terrorist financing. Greek law enforcement proceedings indicate that Greece is vulnerable to narcotics trafficking, trafficking in persons and illegal immigration, prostitution, smuggling of cigarettes and other contraband, serious fraud or theft, illicit gaming activities, and large scale tax evasion. Anecdotal evidence of illicit transactions suggests an increase in financial crimes in the past few years and that criminal organizations (some with links to terrorist groups) increasingly are trying to use the Greek banking system to launder illicit proceeds. Criminally-derived proceeds historically are most commonly invested in real estate, the lottery, and the stock market. Criminal organizations from southeastern Europe and the Balkan region are responsible for a large percentage of the crime that generates illicit funds. The widespread use of cash facilitates a gray economy as well as tax evasion, though as part of Greece’s reform commitments under its European Union (EU)-IMF bailout program, the government is trying to crack down on both trends. Due to the large informal economy – estimated by the Organization for Economic Co-operation and Development and others to be between 25 and 37 percent of GDP – it is difficult to determine the value of goods smuggled into the country, including whether any of the smuggled goods are funded by narcotic or other illicit proceeds. There is increasing evidence that domestic terrorist groups are involved with drug trafficking.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found here: http://www.state.gov/j/ct/rls/crt/

Do Financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: NO

Criminalization of Money Laundering:

“All serious crimes” approach or “list” approach to predicate crimes: A combination of a list of predicate offenses and a threshold approach

Legal persons covered: criminally: NO civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

KYC covered entities: Banks, savings banks, and cooperative banks; credit companies, money remitters, financial leasing and factoring companies, bureaux de change, and postal companies; stock brokers, investment services firms, and collective and mutual funds; life insurance companies and insurance intermediaries; accountants, auditors, and audit firms; tax consultants, tax experts, and related firms; real estate agents and companies; casinos (including internet casinos) and entities engaging in gaming activities; auction houses, dealers in high value goods, auctioneers, and pawnbrokers; notaries, lawyers, and persons providing services to companies and trusts

Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame: 3,479 in 2011

Number of CTRs received and time frame: Not available

STR covered entities: Banks, savings banks, and cooperative banks; credit companies, money remitters, financial leasing and factoring companies, bureaux de change, and postal companies; stock brokers, investment services firms, and collective and mutual funds; life insurance companies and insurance intermediaries; accountants, auditors and audit firms; tax consultants, tax experts and related firms; real estate agents and companies; casinos (including internet casinos) and entities engaging in gaming activities; auction houses, dealers in high value goods, auctioneers, and pawnbrokers; notaries, lawyers, and persons providing services to companies and trusts

Money Laundering Criminal Prosecutions/Convictions:

Prosecutions: 134 in 2011

Convictions: 58 in the first half of 2011

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Greece is a member of the Financial Action Task Force (FATF). Its most recent mutual evaluation can be found here: http://www.fatf-afi.org/document/23/0,3343,en_32250379_32236963_38916695_1_1_1_1,00.html

Enforcement and implementation issues and comments:

The Government of Greece (GOG) has been working to improve the effectiveness of the Greek financial intelligence unit (FIU). Greek authorities have hired sufficient staff to carry out the extensive functions with which the FIU is tasked. The GOG has also made available adequate financial resources to ensure the FIU is able to fulfill its responsibilities, ensure its powers are in line with the international standards related to a financial intelligence unit, and ensure its technical and data management systems and capacities support its functions.

Greece still needs to ensure that its confiscation regime is more effectively implemented and used. While the 2008 anti-money laundering/countering the financing of terrorism (AML/CFT) law contains provisions allowing civil asset forfeiture under special circumstances, Greek authorities advise it is not practical to launch civil procedures and currently do not do so. The government also should develop an arrangement for the sharing of seized assets with third party jurisdictions that assist in the conduct of investigations.

In March 2011, an amendment to the 2008 AML/CFT law (Law 3932/A49/10-3-2011) established a new entity, the Financial Sanctions Unit (FSU). The FSU is tasked with designating terrorists in accordance with UNSCR 1373, outside the EU listing system, and issuing executive orders to freeze the assets of internationally designated terrorists. It is unclear if the executive order procedure applies to suspected terrorists designated domestically. The GOG has provided guidance to financial institutions and designated non-financial businesses and professions on freezing assets without delay, and has begun to monitor for compliance, though the effectiveness of the monitoring is still undetermined. The GOG is authorized to impose sanctions on entities for noncompliance with freeze orders.

While Greece has made positive strides in the supervision area, particularly with its transfer of supervisory powers over the insurance sector to the Bank of Greece, a shortage of personnel at the Hellenic Capital Markets Commission (which supervises securities firms, brokers, other financial intermediaries, and clearing houses) remains, but is difficult to address in light of a general hiring freeze in the public sector due to Greece’s debt crisis. It also remains unclear whether the Ministry of Justice has enough resources available to deal with money laundering or terrorist finance related cases.

The GOG has instituted regulatory measures requiring that transactions above €3,000 (approximately $3,850) be executed with credit cards, checks or cashiers’ checks and that all business-to-business transactions in excess of €3,000 (approximately $3,850) be carried out through checks or bank account transfers. All credit and financial institutions, including payment institutions, must also report on a monthly basis all transfers of funds abroad executed by credit card, check or wire transfer. Nevertheless, the GOG should adopt a system for reporting large currency transactions across all regulated sectors and explicitly abolish company-issued bearer shares. It should also continue to improve enforcement of its cross-border currency reporting requirements and improve efforts to deter the smuggling of currency across its borders. Greece also should ensure that companies operating within its free trade zones are subject to the same level of enforcement of AML/CFT controls as other sectors and work steadfastly to bring charitable and nonprofit organizations under the AML/CFT regime.

Countries/Jurisdictions of Primary Concern - Guatemala through Mexico