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U.S. Department of State
1997 International Narcotics Control Strategy Report, March 1998
Released by the Bureau for International Narcotics and Law Enforcement Affairs, U.S. Department of State
Washington, DC, March 1998
MONEY LAUNDERING AND FINANCIAL CRIMES
What Is Money Laundering?
People who commit crimes need to disguise their money so that they can
then use it. This truism is the basis for all money laundering and tax
fraud, whether that of the drug trafficker, organized criminal, terrorist,
arms trafficker, blackmailer, or credit card swindler. Money laundering
generally involves a series of multiple transactions used to disguise the
source of financial assets so that those assets may be used without
compromising the criminals who are seeking to use the funds. Through money
laundering, the criminal tries to transform the monetary proceeds derived
from illicit activities into funds with an apparently legal source.
Due to the clandestine nature of money laundering, it is difficult to
estimate the total volume of laundered funds circulating internationally.
Analytic techniques are highly imprecise, involving such measures as
multiplying the volume of trade in an illicit activity-such as drug
trafficking, arms trafficking, or fraud-by the value of that trade. Such
rough estimates place the annual, worldwide value of laundered funds in the
range of $300-500 billion.
Weak financial regulatory systems, lax enforcement, and corruption are
key factors that make certain jurisdictions particularly attractive for
laundering illicit proceeds by international drug trafficking and other
criminal organizations, by terrorist groups financing their activities, and
by pariah states undertaking financial transactions to evade international
sanctions and to acquire technologies and components for weapons of mass
destruction.
As the United States assesses a jurisdiction's vulnerability to money
laundering, it evaluates the role of the jurisdiction's financial services
sector in facilitating illicit financial transactions, including: the
laundering or otherwise improper transfer or distribution of funds or
maintenance of accounts; the nature and extent of legislation and
regulations to prevent illicit transactions; the capabilities and
willingness of the government to enforce existing legislation and
regulations and the results of the government's actions to enforce those
laws; and, the volume of illicit transactions detected by US law
enforcement agencies in the financial services sector of that
jurisdiction.
There are three elements to the complete laundering of funds, beginning
with the placement of currency into a financial services institution
("placement"), continuing with the movement of funds from
institution to institution to hide the source and ownership of the funds
("layering"), and concluding with the reinvestment of those funds
in an ostensibly legitimate business ("integration").
While countermeasures to all three components of money laundering are
important, laundered money is most vulnerable to detection at the placement
stage. As a consequence, international regulatory and law enforcement
efforts have concentrated especially on developing methods to make it
difficult to place illicit funds without detection by developing measures
such as suspicious transaction reporting requirements, cross-border
monetary declaration requirements, and "know your customer" rules
for those accepting cash deposits.
International standards to discourage layering have also begun to
develop, through a focus on transparency and through pressure to eliminate
techniques such as the use of nominees and numbered accounts to disguise
the actual ownership of assets. Of additional importance has been the
growing international recognition that bank secrecy rules must give way to
permit law enforcement agencies to review financial records in cases where
there is an active criminal investigation pertaining to the source of the
funds.
Finally, integration of illicit proceeds can be fought through the
strengthening of asset forfeiture laws, by which governments can seize the
proceeds of criminal activity even when those proceeds have been reinvested
in ostensibly legitimate enterprises. Currently, the United States and its
international partners are examining methods by which asset forfeiture
regimes, and asset sharing among law enforcement agencies of different
countries, can be strengthened to place more pressure on money launderers
and to make it more difficult for them to assume that after
"integration" they have successfully protected their money from
the law.
Why Is It Important To Fight Money Laundering?
Money laundering has devastating social consequences and is a threat to
national security because money laundering provides the fuel for drug
dealers, terrorists, arms dealers, and other criminals to operate and
expand their criminal enterprises. In doing so, criminals manipulate
financial systems in the United States and abroad. Unchecked, money
laundering can erode the integrity of a nation's financial
institutions. Due to the high integration of capital markets, money
laundering can also negatively affect national and global interest rates as
launderers reinvest funds where their schemes are less likely to be
detected rather than where rates of return are higher because of sound
economic principles. Organized financial crime is assuming an increasingly
significant role that threatens the safety and security of peoples, states
and democratic institutions. Moreover, our ability to conduct foreign
policy and to promote our economic security and prosperity is hindered by
these threats to our democratic and free-market partners.
In recent years, crime has become increasingly international in scope
and the financial aspects of crime have become more complex due to the
rapid advances in technology and globalization of the financial services
industry. Money laundering can have devastating effects on financial
institutions and undermine the stability of democratic nations. Modern
financial systems permit criminals to transfer instantly millions of
dollars though personal computers and satellite dishes. Money has been
laundered through currency exchange houses, stock brokerage houses,
casinos, automobile dealerships, insurance companies, and trading
companies. The use of private banking facilities, offshore banking, wire
systems, shell corporations, and trade financing all have the ability to
mask illegal activities. The criminal's choice of money laundering
vehicles is only limited by his or her creativity. Ultimately, this
laundered money flows into global financial systems where it can undermine
national economies and currencies. Money laundering is not only a law
enforcement problem but a serious national and international security
threat as well.
There is now worldwide recognition that we must deal firmly and
effectively with increasingly elusive, well financed, and technologically
adept criminals who are determined to use every means available to subvert
the financial systems that are the cornerstone of legitimate international
commerce. Money launderers can impact countries by reducing tax revenues
through underground economies, competing unfairly with legitimate
businesses, damaging financial systems, and disrupting economic
development. Money laundering is now being viewed as a central dilemma in
dealing with all forms of international organized crime because financial
gain means power. Fighting money launderers not only reduces financial
crime, but it also deprives criminals of the means to commit other serious
crimes.
Many countries around the world already engage in a concerted effort to
combat money laundering and other financial crimes. Through the enactment
of counter-money laundering laws, bilateral and multilateral agreements,
and other cooperative efforts, nations have joined together to foster an
international awareness of the seriousness and threat of this criminal
activity.
With a complex and sophisticated financial system that is often a target
for money laundering, the United States is working hard both at home and
abroad to fight this crime. An increasing number of countries have also
moved to deny criminals unfettered access to their financial systems. While
much progress has been made, there are still nations that are not yet
adequately addressing this problem. And the international criminal is
taking full advantage, moving vast sums of illicit money through the
world's financial systems. International criminals know no geographic
boundaries and still operate in "safe haven" jurisdictions that
permit, or even encourage, this criminal activity.
If the United States, along with its international partners and allies,
is ultimately going to be successful in this fight, then we must make it
even more difficult for criminals. Efforts must focus on both those areas
where criminals are now operating and where they will try to infiltrate in
the future, and we must foster cooperation with those nations that,
heretofore, have allowed criminal enterprises to flourish unchecked.
Money Laundering Trends and Typologies
Current Global Trends in Money Laundering
Several general observations can be made regarding the current
characteristics of money laundering. One, drawn from the two most recent
Financial Action Task Force (FATF) typologies exercises, is that the global
nature of the money laundering phenomenon has rendered geographic borders
increasingly irrelevant. Launderers tend to move their activity to
jurisdictions where there are few or weak money laundering
countermeasures. Two, no significant new methods of money laundering have
been identified during the past year, and a number of traditional money
laundering techniques, such as smurfing and the use of offshore businesses,
continue to be prominent methods for hiding the proceeds of crime. Three,
while changes continue to be observed in usage of various traditional money
laundering methods, there is a growing trend of money launderers moving
away from the banking sector to the non-bank financial institution
sector. In the non-bank financial sector, the use of bureaux de change
(currency exchange houses) and money remittance businesses (such as wire
transfer companies) to dispose of criminal proceeds remain among the most
often cited threats.
Four, there is also a continuing increase in the amount of criminal cash
being smuggled out of countries for placement into financial systems
abroad. In many European and other countries there are no cross-border
controls on the movement of cash, and it is relatively simple for
launderers to take large sums of cash by road to neighboring countries. As
with drugs, law enforcement officials believe that while passengers are
carrying large amounts of cash on their persons, an even greater amount of
cash is probably being hidden in cargo shipments. This trend of cash
smuggling appears to be mostly attributable to the success of anti-money
laundering measures in banks and other financial institutions.
Finally, the most noticeable trend is the increase in the use by money
launderers of non-financial businesses or professions related to banking
institutions. Money launderers are increasingly receiving the assistance of
professional facilitators such as accountants, notaries, lawyers, real
estate agents, and agents for the purchase and sale of luxury items,
precious metals and even consumer durables, textiles and other products
involved in the import-export trade-who utilize a variety of vehicles to
mask the origin and ownership of tainted funds. The use of shell companies,
usually incorporated in offshore jurisdictions, is a common technique.
Laundering of accounts held by relatives or friends is also popular.
International Gold Trade
The international gold trade is being used to launder significant
amounts of criminally derived funds. There are many reasons for gold's
popularity with money launderers. It is a readily acceptable medium of
exchange, it offers easy anonymity, and the trade is readily
manipulated. Gold is one of the only commodities that acts very much like
currency.
There are many different scenarios for the laundering of funds via the
purchase of gold. For example, in the US, illicit cash from street drug
sales can be accumulated and then laundered by purchasing gold. A drug
trafficker in the US could manipulate import records to launder illicit
funds by: (1) importing gold at higher than market price; (2) importing
gold at the market rate, but substituting it with a lower priced metal (for
example, with gold-plated lead bars); (3) overstating the quantity of the
gold imported; or (4) importing and paying for merchandise legitimately,
but "selling" or giving back the merchandise to the
exporter. These schemes allow criminals to move large sums of money out of
the US as payments to a foreign "supplier."
The next step in the laundering cycle is to consolidate the gold
purchases. One of the unique characteristics of gold is that it can be
easily converted into its various forms such as bars, jewelry, and
scrap. United States law enforcement sources indicate that most major gold
dealers/brokers have several bookkeeping accounts-gold accounts, silver
accounts, dollar accounts, and local currency accounts. An easy method to
layer illegal funds is simply to transfer the gold on a gold broker's books
to these other accounts. This method makes it extremely difficult for
criminal investigators to trace the trail of illicit funds. There is an
obvious need for countries to have better tools to combat this problem and
to monitor the international movement of gold.
Black Market Peso Exchange
A primary money laundering scheme used by Colombian drug cartels
involves use of the Colombian black market peso exchange. The brokers who
operate the black market peso exchange are international financiers who are
capable of facilitating multi-million dollar transactions outside
Colombia's legitimate financial system. In this money laundering scheme,
the Colombian cartels sell drug-related, US currency to black market peso
brokers in Colombia who, with their US-based agents, place the US currency
into US bank accounts while trying to circumvent the US Bank Secrecy Act
(BSA) reporting requirements. The exchangers then sell monetary instruments
drawn on their bank accounts in the US to Colombian importers who use these
instruments to purchase foreign goods. This method is the single most
efficient and extensive money laundering scheme in the Western Hemisphere
and works as follows:
- A Colombian drug cartel arranges the shipment of drugs to the United
States;
- The drugs are sold in the US in exchange for US currency;
- The cartel sells its US currency to the Colombian black market peso
broker's agent in the United States. The US currency is sold at a discount
because the broker and his agent must assume the risk of evading the BSA
reporting requirements when later placing the US dollars into the US
financial system;
- Once the dollars are delivered to the US-based agent of the peso
broker, the peso broker in Colombia deposits the agreed upon equivalent in
Colombian pesos into the cartel's account in Colombia. At this point, the
cartel has laundered its money because it has successfully converted its
drug dollars into pesos;
- The Colombian broker and his agent now assume the risk for
introducing the laundered drug dollars into the US banking system, usually
through a variety of surreptitious transactions;
- The Colombian black market peso broker now has a pool of laundered
funds in US dollars to sell to Colombian importers who use the dollars to
purchase goods, either from the US or from other markets; and
- Finally, those goods are transported to Colombia, often via smuggling
in order to avoid applicable Colombian law.
Money Laundering Activity in the US
The United States continues to have a serious money laundering problem
because of the complexity, strength, and stability of our economy and
financial system. Examples of money laundering techniques identified by US
law enforcement during the past year appear to indicate that the same
techniques-structuring, smuggling, and currency exchange-continue to be
among the most utilized within the United States. Structuring involves the
deliberate division of large amounts of cash into transactions amounting to
less than the $10,000 currency reporting threshold in order to evade the
BSA reporting requirement, and it still plays a major part in many large
scale US money laundering schemes. Increased scrutiny by US banks has
caused the actual structuring level to be reduced to less than $3,000 in
most cases.
Asset or Monetary Instrument Purchases with Cash Proceeds
One important money laundering technique identified in the US is the
conversion of consumer products purchased with dirty currency which are
then exported to Colombia, for example, where they are sold for
pesos. Consumer electronics, especially computers, are popular products
purchased for export. Other durable goods, such as telephones and jewelry,
are also exported. Law enforcement information clearly indicates that some
major retailers (including warehouse clubs and home improvement chain
stores) in the Miami area and in other major US cities make large (over
$10,000) cash sales to individuals, who then forward the merchandise,
usually through a shipping broker, to Colombia. Area distributors in these
cities have told investigators that there is a very high demand for
unreported cash sales.
Private Bankers
Some US law enforcement agencies believe that private or personal
banking service representatives, i.e., bank employees who provide special
services to high-value customers, may be vulnerable to money
laundering. Several examples have included instances of private banking
representatives establishing bank accounts for foreign nationals without
requesting adequate customer identification, and one private banking
officer reportedly has assisted "smurfs" (persons who structure
cash deposits) by warning them of upcoming audits in order to avoid
detection by bank auditors.
Non-Bank Financial Institutions
Non-bank financial institutions (NBFIs) continue to be used as sites for
money laundering in the US despite a number of efforts at both federal and
state levels. NBFIs subject to the BSA include brokers and dealers of
securities, the US Postal Service, money order vendors, casinos, money
transmitters, check cashiers, and bureaux de change. With over 200,000
NBFIs in the United States, monitoring of these businesses for money
laundering is a complicated matter. Moreover, the role of these
institutions in money laundering operations varies. Some, such as the US
Postal Service or certain casinos, may be used by others as unwitting
facilitators in the process; while others, such as certain bureaux de
change or money transmitters, may be knowingly involved in laundering
illegal proceeds. Among NBFIs, US law enforcement continues to cite bureaux
de change and money transmitters as most heavily involved in laundering
operations.
Non-Financial Businesses and Professions
The United States has increasingly seen the use of non-financial
businesses or professions as mechanisms of money laundering, such as the
international gold market and the black market peso exchange system.
One US case involved a prominent attorney in a large US city whose
practice centered on operating a money laundering network which used
domestic and international financial institutions, especially in offshore
jurisdictions. The offshore institutions were located in Bermuda, the
British Virgin Islands, the Cayman Islands, Isle of Man, and Jersey. The
attorney had clientele ranging from drug dealers to tax evaders. One client
was responsible for an $80 million dollar insurance fraud in which the
attorney assisted him by transferring the money into financial institutions
in countries with little or no anti-money laundering provisions. The
attorney would establish accounts in these various offshore banks under
false corporate and individual names. The illicit funds would be deposited
in the form of cash and various types of checks. This money was then
commingled by use of wire transfers throughout various other accounts which
the attorney controlled. It is perhaps significant that because of the
lawyer's status as a prominent attorney, domestic banks did not question
the nature of the transactions being conducted.
In another US case, the sole owner of a now defunct insurance company,
which had become the leading insurer of student accident and school
association liability coverage in the United States, was convicted by a
federal jury on money laundering and related charges in a scheme defrauding
clients of over $1.6 million in trust fund monies that he had
misappropriated from state school activities associations. This amount
represented money paid by the various state school associations into a
single common pool of trust funds that the defendant contracted to maintain
for the associations' exclusive use as a self-risk retention liability
program. It was established during trial that the defendant was effectively
operating a Ponzi scheme and was not properly funding the trust fund
pool. A "Ponzi scheme" is defined as an investment swindle in
which some early investors are paid off with money put up by subsequent
investors in order to encourage additional and larger risks. The defendant
laundered the monies by commingling and integrating the fraudulently
obtained insurance premiums into his own accounts and using the monies to
pay his business and personal expenses instead of adequately funding the
trust fund, and he disguised the laundering by creating false financial
statements.
New Payment Technologies
Electronic money (e-money) has the potential to make it easier for
criminals to hide the source of their proceeds and move those proceeds
without detection. While the application of new technologies to electronic
or cyber-payments systems is still in its infancy, it is prudent to
recognize their potentially broader impact. The technology exists which
could permit these systems to combine the speed of the present bank-based
wire transfer systems with the anonymity of currency. E-money transactions
could also be effected in multiple currencies without limits and conducted
entirely without intermediaries.
Although no money laundering prosecutions have yet been undertaken to
combat abuse of new payment technologies, many countries have reported the
increased use of Internet banking and gambling via the Internet. United
States law enforcement authorities have several cases under active
investigation involving criminals who have made use of these technologies
to solicit clients or to move funds. Countries should pay close attention
to the emerging threats made possible by these and other new payment
technologies being used in money laundering schemes, and they should
consider developing of preventative countermeasures. Moreover, even
legitimate banking and gambling through the Internet raises many legal and
practical issues for law enforcement. These include questions of
jurisdiction, customer identification and broken audit trails.
What We Need To Do
In an electronic world in which the banking system operates through
linked computers 24 hours a day, there must be increased global emphasis
upon thorough vetting of personal, company and financial institution
accounts at the bank of origin. There is no substitute for a thoroughly
applied know-your-customer policy, especially as applied to those placing
currency into the system and converting it to an account susceptible to
immediate transfer outside the jurisdiction.
Considerable attention also must be focused by anti-money laundering
authorities on establishing international standards, obtaining agreements
to exchange information, establishing linkages for cooperative
investigations, and overcoming political resistance in various key
countries to ensure such cooperation.
Governments need laws and regulations that: establish corporate criminal
liability for bank and non-bank financial institutions for money laundering
violations; apply to all financial transactions, not just to cash
transactions at the teller's window; apply reporting and anti-money
laundering measures to serious crimes, not just drug trafficking;
criminalize investments in legitimate industry if the investment proceeds
were derived from illegal acts; and enable the sharing of financial and
corporate ownership information with law enforcement agencies and judicial
authorities.
Governments also need strategies that focus on changes in both the
operations of financial systems and the methods criminals develop to
exploit them-strategies which look at specific governments and specific
financial systems.
Over time, a number of specific continuing actions are needed to keep
pace with the dynamics of money laundering in a high-tech world. Continuous
action is needed on each of the following categories in 1998 and for the
foreseeable future:
- Adoption and Implementation of International Anti-Money Laundering
Standards. The development of international standards to reduce
jurisdictions' vulnerability to money laundering and to enhance financial,
regulatory and law enforcement of anti-money laundering regimes has been at
the forefront of the fight against this crime. Accordingly, it is critical
that these standards, which continue to be refined and strengthened, be
adopted on a global basis. Today, these standards include, among others:
the FATF 40 Recommendations, the Aruba 19 Recommendations (CFATF), the OAS
Model Regulations on Money Laundering, the Summit of the Americas December
1995 Buenos Aires Communiqué Plan of Action, the European Directive
on Money Laundering, and the Basle Principles.
- Constant Monitoring of Money Laundering Patterns, Trends and
Typologies. More sophisticated techniques, involving both bank and
non-bank financial institutions, in a wide array of traditional and
non-traditional financial centers, have complicated identification, tracing
and investigation. Information exchanges have been improving, but critical
gaps in know-how must be closed in tandem with improved cooperation. There
is a high priority need to share data, even critical intelligence. The
pervasive corruption in some systems remains a barrier to information
sharing.
- Analysis of Money Management Practices. We need improved
information from more countries on what factors influence drug traffickers
and their money managers to use particular systems in specific countries,
to keep reserves in cash and other monetary instruments, to invest rather
than park funds. Interviews of arrested drug money managers are producing
detailed profiles of money management schemes. The best data so far applies
to the cocaine trade, but we need to develop the same level of knowledge
about heroin and marijuana syndicates.
- Tightening Restrictions Against Non-Drug Related Money Laundering
and Other Financial Crimes. We need to identify the parallels between
drug money laundering on the one hand, and non-drug related money
laundering and other financial crimes on the other, and achieve an
effective international capability to investigate and prosecute all these
crimes. While a number of governments are willing to impose new
restrictions on drug-related financial crimes, many hesitate to apply such
strictures to other non-drug money laundering and other forms of financial
crime.
- Equating Economic Power with Political Clout. The increasing
concentrations of wealth among criminal groups in a number of jurisdictions
is a concern, not only because of possible impacts on investments, real
estate values, legitimate commerce and government integrity, but also
because these organizations have the wealth to make large financial
contributions to government officials who may compromise decisions in order
to assist the criminals. We need to assess the national security, foreign
policy, and political implications of these accumulations and transfers of
wealth in all financial centers where such wealth is being concentrated.
Corrupt officials and non-transparent financial systems represent a
continuing threat to democracy and free markets in literally every region
of the world.
- Eliminating Systemic Weaknesses. Banks need to maintain
similar records on their financial institution clients as they do for other
customers and to report suspicious transactions involving such
clients. Some available but underutilized tracking mechanisms include
revocation of licenses, changes in ownership and management, levying of
fines, and prosecutions. Perhaps the most intrinsic weakness is the lack of
qualified personnel, not only in government regulatory agencies, but also
within many banking systems, who are trained not only in implementing and
managing such oversight systems, but also in handling today's complex
monetary transactions. The enhanced training reported in recent
international meetings is encouraging, but more is necessary.
- Assessing the Criminal as Entrepreneur. We need to explore the
extent to which criminal organizations are penetrating legitimate financial
and other businesses, using their vast resources to gain control and to
influence economic, financial and business decisions. More data and
systematic analysis are needed, for example, on the role played by the
trafficker and money launderer in foreign exchange markets, including their
use of and creation of gray markets. There is good reason to question the
overt as well as covert ownership of banks and financial institutions in
many parts of the world.
- Analyzing the Impact of Money Laundering on National Governments
and Economies. We need more analysis of the impact of a country's
political and structural factors on its receptivity to money laundering and
more analysis of the impact of money laundering and political life and
economic life of the jurisdiction. Among the questions requiring analysis
is the extent to which structural macro-economic factors, such as commodity
deflation, sustained high levels of unemployment, and recession make a
jurisdiction susceptible to becoming a money laundering haven. At the
sectoral level, we need to determine the influence of black markets on
legitimate enterprises. At the institutional level, we need to identify
the major factors that may influence bankers and other financial managers
in some jurisdictions to accept money they have reason to believe is
tainted. As we better identify where money laundering is most likely to
have a macro-economic or political impact, we need to evaluate the
potential effectiveness of economic countermeasures. These could include
limiting or excluding access to the global financial system of entities or
states identified as major problems.
- Regulating Exchange Houses and Remittance Systems. There is
ample evidence that the various underground "hundi",
"hawala", and "chop" remittance systems, so essential
to economic life in the Middle East, South and East Asia, are being used by
drug traffickers, just like the "cambios" of Latin America, and
non-bank institutions of all kinds, are being used in the western financial
community. They serve vital functions for key sectors of many
economies. Systems for regulating the laundering of the proceeds of crime
are essential, but they will fail unless they take into account the very
informality that makes underground banking effective and desirable.
- Continuing to focus attention on offshore banking. The
Financial Action Task Force (FATF), working with the Offshore Group of
Banking Supervisors (OGBS) and other relevant organizations, have been
quite effective in working together, and some of offshore banking centers
are either members of FATF or the Caribbean Financial Action Task Force
(CFATF) or have participated in FATF/CFATF seminars which provided guidance
on adopting and implementing FATF and UN guidance. The agreement in Paris
in February 1997 to undertake compatible mutual evaluations of these
constituencies should be given a high priority for early
implementation. More analysis is needed of the methods used to move money
through offshore banks, and OGBS should be supported in its efforts to
include as many offshore banking centers as possible within its membership
and a parallel effort to evaluate progress by its members.
- Expanding the global use of the mutual evaluation process.
The CFATF has an on-going mutual evaluation process to assist its members'
anti-money laundering regimes, and the Council of Europe is also beginning
to implement such a process for jurisdictions in the Newly Independent
States of the former Soviet Union (NIS) and in Central and Eastern
Europe. These important regional initiatives should continue apace and can
serve as prime examples in spreading money laundering countermeasures to
other regions, such as Asia, Africa and the Middle East.
- Consolidated supervision of the international banking system: The
Basle Principles. The Basle Committee on Banking Supervision released
its Core Principles for Effective Banking Supervision in September
1997. This document establishes 25 Core Principles to serve as a basis for
supervision in all countries. They are comprehensive in their coverage,
addressing the preconditions for effective banking supervision, licensing
and structure, prudential regulations and requirements, methods of ongoing
banking supervision, information requirements, formal powers of supervisors
and cross-border banking. Principle 15 requires banking supervisors to
determine that the banks they supervise have adequate policies, practices
and procedures in place, including strict "know your customer"
rules, that promote high ethical and professional standards in the
financial sector and prevent the banks from being used, intentionally or
unintentionally, by criminal elements. Supervisory authorities throughout
the world will be encouraged to endorse the Principles by no later than
October 1998. The Principles have been designed to be verifiable by
supervisors, regional supervisory groups, and the market at large. The
Basle Committee will play a role, together with other interested
organizations, in monitoring progress made by individual countries in
implementing the Principles.
- Adopting Information Standards. The adoption by governments
of information standards such as those recommended by FATF and the Society
for Worldwide Interbank Financial Telecommunication (SWIFT) network is a
welcome, if not yet universal, step. Many more governments need to
cooperate in adopting regulations to help curb the misuse of electronic
transfer and payment mechanisms to launder illicit funds.
- Detecting Counterfeit Instruments. Governments and banking
systems must be more vigilant in efforts to detect counterfeit currency and
other monetary instruments. The schemes involving counterfeit bonds and
other securities, usually as collateral, suggest the need for an
international clearinghouse to assist banking and financial systems outside
the major centers in determining the authenticity of documents.
- Identifying and Preventing Financial Crimes. Governments and
banking systems must exert greater efforts to identify and prevent a wide
range of financial crimes, beyond drug and non-drug money laundering,
including financial frauds such as credit card fraud and prime bank
guarantees. The history of such frauds suggests a need for a clearinghouse
which can assist the financial services industry in identifying customers
and authenticating documents.
- Ratifying and Implementing the l988 UN Drug Convention. The
United Nations Drug Control Program (UNDCP) should intensify its efforts to
ensure that all significant financial center countries are implementing
fully the anti-money laundering and asset forfeiture provisions of the 1988
UN Drug Convention. As an immediate priority, UNDCP should focus on
securing ratification or accession of the significant financial center
governments which have not yet become parties to the Convention.
- Pursuing A Continuously Evolving Strategy. Nearly every
opportunity that global businesses and finance companies have to offer
legitimate commerce is today used by money launderers and financial
fraudsters. Financial regulation, supervision and enforcement needs to
expand to cover transactions that transcend national boundaries and to
cover the widening array of financial service businesses. Similarly, there
is a growing need to reduce the increasing use of non-financial service
providers in the commission of these crimes.
US Money Laundering Countermeasures
In the United States, nearly 5,000 personnel-from at least 75
agencies-are directly involved at the federal and state levels in the
prevention and detection of money laundering and the enforcement of
anti-money laundering laws. United States anti-money laundering policy is
based on the belief that it is more effective when agencies that are
engaged in money laundering countermeasures work together than when each
works alone. This means that in the anti-money laundering area, the US
relies heavily on joint investigations or task force operations to bring
together what might otherwise be a diffused effort of individual
agencies. It also means that the US effort depends heavily on developing
cooperative relationships among law enforcement, financial regulators, and
the financial private sector to ensure that as many vulnerabilities to the
financial system as possible are reduced.
Partnership with Financial Institutions
The United States continues to look for creative ways to facilitate a
productive dialogue among law enforcement, regulators, and banking
officials. Most recently, US agencies have turned their attention to
examining Suspicious Activity Reports (SARs), which since April 1996 have
been required to be submitted by depository institutions, including banks,
thrifts and credit unions. These reports are entered into a database and
made available to federal and state financial regulators and to federal and
state law enforcement agencies.
Analyses of SARs-especially in the context of interagency investigator
and prosecutor review teams-help identify broadly the types of suspicious
activities which may be money laundering schemes reported by banks and
permit proactive, rather than reactive, targeting. A comparison of SARs
against issues of concern in specific investigations should facilitate
communications among law enforcement, bank regulators and the banking
community about how best to focus suspicious activity reporting
efforts. The objectives are for the government to provide guidance to the
financial community on suspect activity identified by law enforcement and
to seek insight from the financial community on how both the public and
private sector can work together to prevent and detect abuses of the
financial system.
Geographic Targeting Orders
Money transmitters, sometimes referred to as money remitters, are
businesses which receive money-usually cash-from customers and arrange for
payment to designated recipients in exchange for a commission of up to 10
percent of the value of the transfer. They provide a valuable, legitimate
financial service and traditionally serve the "unbanked" segment
of the population, typically new immigrants, or other persons who do not
maintain bank accounts.
However, in the United States, Colombian drug cartels have been
suspected of using certain money transmitters in the New York City
metropolitan area to launder their drug profits. Evidence gathered by law
enforcement authorities initially indicated that 12 state-licensed money
transmitter companies in the New York metropolitan area and their agents
were particularly vulnerable to abuse by cartel money launderers. Under the
Bank Secrecy Act, a Geographic Targeting Order (GTO) was issued on August
7, 1996 against these 12 money transmitters and their 1,600 agents.
A GTO is a 60-day tool used to impose stricter reporting and record
keeping requirements for a limited time period by specified financial
service providers in a certain geographical area. The Colombia GTO required
the transmitters in question to report all cash remittances to Colombia of
$750 or more. The reporting amount was set at $750 so as to not interfere
with the average legitimate international remittance of $200 to $500. The
original GTO-expanded to include a total of 23 licensed transmitters and
approximately 3,500 agents-was extended six times, finally expiring in
October 1997. The GTO was expanded to include a total of 23 licensed
transmitters and approximately 3,500 agents.
The Colombia GTO caused an immediate and dramatic reduction in the flow
of narcotics proceeds to Colombia through New York City money
transmitters. The targeted money transmitters' business volume to Colombia
dropped approximately 30 per cent. Transmitter business to Colombia
declined even from money transmitters not subject to the GTO, suggesting
that much of the money remitted to Colombia was controlled centrally by
high-level cartel money brokers.
Also during the first six months of the GTO, US law enforcement agencies
observed a marked increase in interdiction and seizure activity of cash at
east coast US borders-over $50 million in the six-month period,
approximately four times more than in prior years.
This GTO also had a significant impact on money laundering activity
among the targeted transmitters. Several stopped sending funds to Colombia
or went out of business altogether. Approximately 900 agents of these money
transmitters, often storefront businesses, closed their doors or moved
without leaving a forwarding address. Several money transmitter agents
have pled guilty to structuring transactions to avoid the reporting
requirements, and law enforcement authorities made numerous additional
arrests.
On August 22, 1997, the Department of the Treasury issued two new GTOs
(the Dominican Republic GTOs) targeting cash-purchased money remittances of
$750 or more to the Dominican Republic. The Dominican Republic GTOs apply
to 21 money remitters and their agents in Puerto Rico and the New York City
metropolitan area who in recent years have been remitting annually hundreds
of millions of dollars to the Dominican Republic. The terms of these GTOs
parallel those of the one focused on remittances to Colombia. The
Dominican Republic GTOs were made effective on September 2, 1997 for an
initial 60-day term; they have been renewed twice, so they are scheduled to
expire on February 28, 1998. Issuance and renewal of the Dominican Republic
GTOs represent the first time that a GTO has been used in Puerto
Rico. Initial reports indicate that the Dominican Republic GTOs have
dramatically reduced the volume of cash remittances from Puerto Rico to the
Dominican Republic.
Development of Anti-Money Laundering Accounting Standards
The United States has followed with interest the development in foreign
jurisdictions of accounting standards specifically designed to counter
money laundering within financial institutions. As a result, the United
States has embarked on the development of appropriate accounting standards
to counter money laundering within financial institutions, and has created
a sub-group of the Bank Secrecy Act Advisory Group to focus efforts and
attention on this process. Members of the sub-group include the primary US
regulator of the accounting industry, the Securities and Exchange
Commission, the Controller General of the United States, the US Department
of the Treasury, large accounting firms, and foreign experts in this
area.
Targeting Cash Proceeds Money Laundering
In 1997, the Departments of Justice and the Treasury co-sponsored for
the first time two major anti-money laundering conferences. The objectives
of these joint conferences, held in Washington, D.C., were to acquaint the
participants with new anti-money laundering developments both at home and
abroad and to seek input for attacking, through a coordinated financial
sector targeting approach, the laundering of billions of dollars of drug
proceeds in, through and out of the United States. The first conference,
held in May 1997, was attended by approximately 160 representatives from
the US Attorneys' Offices and federal and state law enforcement agencies
from 14 core money laundering districts, as well as representatives from
the financial regulatory authorities.
The conference presentations reviewed recent anti-money laundering
developments including: the use of the New York City/New Jersey GTO; the
use of FinCEN advisory notices to alert banks and other financial
institutions to suspicious financial activities such as the use of foreign
bank drafts; suspicious activity reporting by banks and nonbank financial
institutions; wire transfer record keeping requirements for banks and other
financial institutions; the proposed FinCEN regulations with respect to
money service businesses; US Postal Inspection Service, US Customs Service
(USCS) and the federal regulators' recent anti-drug proceeds money
laundering initiatives.
A follow-up conference was held in December 1997 and was attended by
more than 200 Assistant US Attorneys and federal and local law enforcement
agents from 20 districts. Immediately preceding the second conference,
interagency working groups convened to examine and discuss two specific
money laundering methods: the use of money orders to launder drug cash
proceeds and the shipping of bulk cash into and out of the United
States. Representatives from these working groups reported their findings
to the conference and made recommendations to enhance enforcement in these
areas. The money order working group was led by a representative of the US
Postal Inspection Service. The bulk cash working group was led by
representatives of the USCS.
Like the first conference, the second conference provided an opportunity
for money laundering prosecutors, agents and forfeiture attorneys from
around the country to examine the money laundering issue on a national
level and to coordinate their efforts to maximize the results from their
investigations and prosecutions. By spending a significant amount of time
discussing the Black Market Peso Exchange scheme, law enforcement actions
on a local level take on more significance as they become part of a larger
picture. Similarly, by increasing awareness of law enforcement and
regulatory tools, as well as legal developments in foreign countries, the
participants were able to begin to prepare a coordinated plan of attack
against money laundering both domestically and internationally.
In October and November 1997, the Attorney General issued three
memoranda to the 94 US Attorneys, the Director of the FBI, and the
Administrator of the DEA, stating:
Laundering the billions of illicit dollars produced on the streets of
our cities requires a highly sophisticated and tightly controlled financial
structure for use by the cartels producing, transporting and selling their
illicit products. At the same time, where organized criminal activity
generates its profits in the form of cash, the sheer volume of this illicit
cash and the need of the enterprise to enter it into the legitimate
financial system are vulnerabilities for that criminal enterprise, and
could provide law enforcement with perhaps its best opportunity to target
those illicit proceeds.
Accordingly, she directed these Department of Justice components to give
their immediate attention as follows:
Where cash proceeds money laundering is a significant problem in your
district, allocate the personnel, time and effort necessary to develop
interagency expertise to identify, target, and take a comprehensive
approach to dismantling the drug money launderers' use of financial
sectors, or their methods of moving the cash physically in bulk.
Enforcement Cases
Mexican Drug Conspiracy
The United States Customs Service completed a civil investigation that
resulted in the seizure and forfeiture of $9,041,599 in narcotics proceeds
from the former Mexican Deputy Attorney General Mario Ruiz Massieu. From
December 1994 to March 1995, Inspector General Jorge Stergios of the
Mexican Attorney General's Office of Mexico transported more than
$9,000,000 in cash from Mexico into the Houston Intercontinental Airport in
Texas. Stergios transported this cash in suitcases and cardboard boxes
during more than twenty trips into Houston. Stergios completed the required
Currency and Monetary Instruments Report on each trip. The cash was
subsequently deposited into an account held by Ruiz Massieu at the Texas
Commerce Bank (TCB). The TCB completed the required Currency Transaction
Report on each transaction.
In March 1997, a federal district judge ruled that there was probable
cause to believe that Ruiz Massieu and Stergios were involved in a drug
conspiracy with Mexican drug traffickers and other Mexican law enforcement
officers. A federal jury then determined that almost $7.9 million of the
monies deposited in TCB had come to Ruiz Massieu as a result of bribes paid
by the drug traffickers and, as such, should be forfeited to the United
States.
Illegal Importation of Controlled Refrigerant Gas
Refrigeration USA, a Miami and Hallandale, Florida based corporation,
and its president, along with a bookkeeper and an import/export clerk, all
pled guilty-only six days into a projected six week jury trial-to
conspiring with others to import the controlled refrigerant gas, CFC-12,
without holding consumption allowances required by the Federal Clean Air
Act. They orchestrated an involved scheme featuring bogus bills of lading
filed with the USCS, the Environmental Protection Agency, and the IRS. The
defendants purchased CFC-12 from a variety of sources in Europe and caused
payment for the gas to be made from accounts opened under fictitious names
in Switzerland and the Channel Islands. The president of the corporation
falsely claimed to hold a virtually exclusive license to import the gas
into Florida, thus accounting for the inordinate amounts of money flowing
through the accounts.
The defendants also employed nominee corporations in the Turks and
Caicos islands to conceal their activities from US authorities and to
further their efforts to impede the IRS in collection of excise taxes due
to domestic sale of the gas. During the presentation of evidence in the
criminal trial, the government employed bank records to illustrate the
illegal transactions. The documents were provided through the cooperation
of the Turks and Caicos pursuant to a MLAT between the United States and
the United Kingdom on behalf of Turks and Caicos.
The plea agreement by the president of the corporation required the
immediate surrender to the United States of over $4,470,000 in cash held in
offshore accounts, the forfeiture of real property in Miami and London,
England, valued at over $3,400,000, the forfeiture of stock in a domestic
bank, and the surrender of 11,200 thirty-pound cylinders of gas seized by
the USCS in December 1994, which had a market value of $6,700,000. The
United States District Court levied a fine of $37 million and ordered
payment of $30 million in delinquent taxes.
The importation of CFC-12 is subject to strict regulation by the US
Environmental Protection Agency. The United States has international treaty
obligations under the Montreal Protocol on Substances that Deplete the
Ozone Layer to reduce and/or phase out the production and consumption of
ozone depleting substances, including CFC-12. In order to protect the
environment from depletion of the ozone layer, Congress imposed significant
excise taxes on the sale or use of such chemicals. In 1993, the earliest
year of the activity identified in the indictment, the excise tax was $3.35
per pound. Thereafter, the excise tax increased each year by an additional
dollar to $5.35 per pound in 1995. The US Attorney in Miami, Florida noted
that this is one of the largest forfeitures of assets achieved in an
environmental crimes case.
Queens Money Remitter
On July 22, 1997, one of Queens, New York's largest money remitters was
indicted for allegedly sending hundreds of millions of dollars, most of
which were laundered drug profits, to Colombian cartels through branch
offices in Queens. The company and its former chief executive officer were
indicted for laundering narcotics proceeds and for structuring financial
transactions, and the government seeks the forfeiture of at least $10
million, representing the proceeds of the money laundering and structuring
activities. The CEO eventually pled guilty to conspiracy to launder
money.
The case was investigated jointly by the USCS and the New York Police
Department (NYPD) under the auspices of the El Dorado Task Force. The
investigation arose from allegations of money laundering and structuring
cash deposits in amounts less than $10,000 so as to avoid the Bank Secrecy
Act (BSA) filing requirements. The government alleges that the defendants
remitted in excess of $775 million to Colombia, the bulk of which consisted
of narcotics proceeds. As the investigation progressed toward the
indictment of the company and its CEO, approximately twenty-five persons
were convicted on money laundering charges over a three-year period.
Collectively, these agents accounted for more than $195 million of the
funds remitted to Colombia.
Nigerian Fee Scam
Three Nigerian nationals were indicted on charges that they conspired
with others to defraud several German nationals out of more than
$800,000. This Nigerian scheme involved the promise to release $22.3
million on deposit with the Central Bank of Nigeria once certain fees had
been paid. Approximately $500,000 in fees were initially paid in three
installments by the Germans directly to an account in London, England. The
defendants then made an additional demand for a 1.5 per cent "cable
and communication charge" totaling $330,000. On May 13, 1994, $330,095
was wire transferred from a Luxembourg bank, an account belonging to the
victims, to one of the defendant's personal accounts at Boatmen's First
National Bank of Oklahoma, Oklahoma City, Oklahoma. After the money was
credited to the account, the defendant was directed by the other
co-defendants to conduct numerous transactions to dissipate the funds. This
included the purchase of several luxury cars, a night club, and several
large wire transfers to the People's Republic of China, England, and
Washington D.C. The German victims never received the $22.3 million.
American Express Bank International
In June 1994, Antonio Gerald and Lourdes Reategui, officials with
American Express Bank International (AEBI), were convicted on money
laundering conspiracy and other charges for laundering the drug trafficking
proceeds of the notorious Mexican drug trafficker Juan Garcia Abrego. The
Giraldi investigation resulted in leads that Giraldi and Reategui were also
laundering drug trafficking proceeds for a Texas man later indicated on
drug trafficking, money laundering and related charges.
In February 1989, the Texas defendant had become a client of Giraldi and
Reategui at Bankers Trust, (New York) and later at AEBI. Giraldi and
Reategui created a series of offshore holding companies for the defendant
and opened bank accounts in the names of the various offshore companies,
into which the defendant secreted his drug trafficking proceeds via
electronic wire transfers. From February 1989 through 1993, the defendant
wire transferred approximately $17 million into these accounts. All of the
$17 million was traced to Mexican banks or to accounts held by Mexican
banks in US banks in El Paso, Texas. During 1993, the defendant liquidated
the funds held by his offshore companies through wire transfers to Mexican
bank branches and to another offshore investment company. The US government
utilized Mutual Legal Assistance Treaty (MLAT) requests to Mexico,
Switzerland, and the Cayman Islands during the investigation to gather
information and documentary evidence for prosecution, as well as to attempt
to identify the disposition of the funds after the defendant liquidated his
accounts in l993.
An investigation of the Texas defendant had been initiated by the USCS
Financial Crimes Task Force (Operation Costa Rica) comprised of the USCS,
IRS-CID, DEA, and the Pharr, Texas, Police Department. The investigation
revealed that from at least 1986 to 1996, the defendant was involved in the
transportation of large quantities of cocaine from Mexico into the United
States. The defendant's drug trafficking activities ranged in area from
South Texas throughout the southwest border region to Los Angeles,
California, and included the transportation of 21 tons of cocaine, seized
at Sylmar, California, in September 1989.
On August 13, 1996, a federal grand jury in Brownsville, Texas returned
a five-count indictment charging the Texan defendant with conspiracy to
launder money, money laundering, narcotics and criminal forfeiture
charges. On March 27, 1997, he pled guilty to money laundering and drug
trafficking conspiracy charges. On June 30, 1997, he was sentenced to life
in prison.
Presidential Decision Directive (PDD) - 42
In his statement before the 52nd session of the UN General Assembly on
September 22, 1997, President Clinton remarked that: "In the 21st
century, our security will be challenged increasingly by interconnected
groups that traffic in terror, organized crime and drug smuggling. Already
these international crime and drug syndicates drain up to $750 billion a
year from legitimate economies. That sum exceeds the combined GNP of more
than half the nations in this room." In the two years since October
1995 when the President declared international crime to be a threat to the
national security interest of the United States in Presidential Decision
Directive (PDD) 42, the United States has made international cooperation
and collaboration in confronting new security threats that defy borders and
unilateral solutions a key priority of United States domestic and foreign
policy.
In particular, in his October 1995 address to the UN General Assembly,
the President called for international cooperation to address the threats
posed by money laundering, narcotics trafficking and terrorism, noting that
the forces of international crime "jeopardize the global trend toward
peace and freedom, undermine fragile democracies, sap the strength from
developing countries, [and] threaten our efforts to build a safer, more
prosperous world." Immediately, the President signed PDD-42, ordering
the Departments of Justice, State and Treasury, the Coast Guard, National
Security Council, intelligence community, and other federal agencies to
increase and integrate their efforts against international crime syndicates
and money laundering. Specifically, the President noted the corrosive
effect on markets and governments of the laundering of massive illicit
profits and ordered US government agencies to increase efforts in going
after those criminal proceeds. The United States strategy has been to
integrate domestic and international efforts and to expand cooperation and
consultation among its agencies to reduce international crime.
A key component of PDD-42 has been the imposition of sanctions under the
International Emergency Economic Powers Act (IEEPA), attacking the
finances, companies and individuals owned or controlled by the Cali cartel
as well as other Colombian drug cartels, freezing their assets in the
United States, identifying their front companies and barring Americans from
doing business with them. On January 15, 1997, the Treasury Department
identified an additional 21 businesses and 57 individuals determined to be
directly involved with illegal traffickers and their so-called legitimate
business fronts. Over the past two years, a total of 426 individuals and
businesses have been subjected to these IEEPA sanctions. As part of the
PDD-42 process, an interagency group reviews whether measures can be taken
against other international criminals. Also under PDD-42, agencies work
together to deny visas to a broad range of organized and other
international criminals and their families to prevent them from entering
the United States.
United States agencies continued to identify money laundering centers
that have important implications for US national security and where
expanded cooperation would significantly strengthen global anti-money
laundering efforts. Several of these centers have been approached by the
United States in an effort to increase cooperation bilaterally as well as
multilaterally and to reduce the threat posed by money laundering.
Combating the rise of international crime requires far-reaching
cooperation among US agencies as well as with other nations. Under PDD-42,
US agencies have worked together to collaborate with foreign law
enforcement and other government authorities to support US law enforcement
abroad, seize accounts, and prosecute, convict, and imprison
criminals. United States agencies have increased, and more effectively
targeted, assistance and training and have sought better ways of
collecting, analyzing and sharing intelligence globally regarding money
laundering and other financial crimes. Bilateral and multilateral
initiatives to stop criminals from moving funds throughout the
international financial system have been launched in tandem with other
nations.
Bilateral Activities
Training and Technical Assistance
During 1997, a number of US law enforcement and regulatory agencies
provided training on money laundering countermeasures and financial
investigations to their law enforcement, financial regulators, and
prosecutorial counterparts around the globe. These courses have been
designed to give financial investigators, bank regulators, and prosecutors
the necessary tools to recognize, to investigate, and to prosecute money
laundering, financial crimes, and related criminal activity. Courses have
been provided at US locations as well as within the countries to which the
programs were targeted.
Department of State
The Department of State's Bureau of International Narcotics and Law
Enforcement Affairs (INL) has developed a fiscal year 1997 $36.2 million
dollar program for providing law enforcement, rule of law, and central bank
training and assistance to emerging democracies. A prime focus of the
training program is a multi-agency approach to addressing international
financial crimes, law enforcement development, organized crime, and
counternarcotics training. Supported by and in cooperation with INL, the
Department of Justice (DOJ), Treasury Department component agencies
(including the Financial Crimes Enforcement Network (FinCEN) and the Office
of the Comptroller of the Currency (OCC)), the Board of Governors of the
Federal Reserve (FRB), and non-government organizations offered law
enforcement and criminal justice programs worldwide.
During 1997, INL funded numerous programs to combat international
financial crimes, including money laundering. Nearly every federal law
enforcement agency assisted in this effort by providing basic and advanced
training courses in all aspects of financial criminal activity. In
addition, many federal agencies were provided funding to conduct
assessments and develop specialized training in identified countries
worldwide.
As in previous years, INL training programs continue to focus on the
interagency approach and bring together, where possible, law enforcement,
judicial, and central bank authorities in assessments and training
programs. This approach allows for an exchange of information and a
dialogue usually not undertaken by those attending the training
seminars. This approach has proved successful in various parts of the
globe, from Central and South America to Russia, the Newly Independent
States (NIS) of the former Soviet Union, and Central Europe. INL provides
funding for many of the training and technical assistance programs offered
by the various law enforcement agencies, including those at the
International Law Enforcement Academy (ILEA) - Budapest.
Customs Service (USCS)
The USCS Office of Investigations (Financial Investigations Branch) is
extensively involved in multi-agency international money laundering
training programs. The USCS has developed and implemented anti-money
laundering and asset forfeiture programs for law enforcement and banking
officials in Argentina, Venezuela, Russia, Vietnam, Indonesia, Cyprus, and
Jersey. As participants in the multi-agency money laundering assessments,
USCS has met with officials in Kazakhstan, Kyrgyzstan, Uzbekistan, Romania,
Cyprus, and Antigua to evaluate the extent of money laundering and to
determine possible training needs.
As co-hosts with the Internal Revenue Service Criminal Investigation
Division (IRS-CID), USCS has conducted money laundering training for
officials in Brazil, El Salvador, and Barbados.
USCS also participated in two money laundering and anti-corruption
training programs held at the International Law Enforcement Academy in
Budapest, Hungary, for officials from Uzbekistan and Kazakhstan. In
addition, USCS conducted United States Agency for International Development
(USAID) grantee sponsored training for central bank and law enforcement
officials in Kiev, Ukraine.
USCS co-hosted with the Drug Enforcement Administration (DEA) money
laundering and asset forfeiture training for law enforcement officials and
prosecutors from Mexico, Israel, Costa Rica, Ecuador, and the Bahamas. USCS
has also participated with the US Secret Service in training for Russian
bank officials, customs officers and law enforcement officials.
In addition, USCS has briefed high-level government officials from
Panama, Thailand, Italy, Japan, Paraguay, India, Malaysia, Ireland,
Denmark, Singapore and Brazil, as well as the Taiwan authorities,
concerning USCS money laundering programs and initiatives.
Internal Revenue Service (IRS)
The IRS Criminal Investigation Division (IRS-CID) continued to play a
significant role in multi-agency international training and technical
assistance programs to foreign law enforcement agencies during the past
year. The training included instruction in financial investigative
techniques, utilization of suspicious activity and currency transaction
reports, and management of multi-agency money laundering
investigations.
A Suspicious Activity Report/Currency Transaction Report training
seminar was conducted by IRS-CID representatives in Mexico for money
laundering law enforcement investigators and members of the Hacienda.
Regional seminars on anti-money laundering were also provided to
executives of law enforcement investigative agencies of Trinidad and
Tobago, El Salvador, and Brazil. The focus of these seminars was to
establish an awareness of the overall threat posed from money laundering
and its impact on these regions. The overall goal was to foster an
atmosphere of cooperation and exchange between these countries and the
United States in a joint effort to combat global money laundering
activities.
IRS-CID conducted a financial investigative techniques course in
St. Petersburg, Russia. The presentation was directed to high and mid-level
directors and managers of the Tax Police. This training was conducted under
the auspices of the Freedom Support Act (FSA).
A financial investigative techniques course was also provided to
investigative officials of Estonia, Latvia and Lithuania at the Federal Law
Enforcement Training Center (FLETC). This training was conducted under the
auspices of the Support for Eastern European Democracy Program (SEED).
In addition, a financial investigative techniques course was provided in
Kiev, Ukraine. The course was tailored to more advanced programs with
special emphasis on computer based investigative techniques. Also, a
financial investigative techniques course was given at FLETC to Russian Tax
Police. Both classes were conducted under the auspices of the FSA.
Federal Law Enforcement Training Center (FLETC)
An international financial fraud training program course was conducted
at FLETC for participants from Thailand, Hong Kong, Brazil, Venezuela,
Honduras, and Trinidad and Tobago. The course was conducted under the
auspices of the Internal Revenue Service, Office of Tax Advisory Assistance
Service.
Federal Bureau of Investigation (FBI)
The Federal Bureau of Investigation continues to develop and deliver
international training programs for foreign law enforcement officials in
the area of financial crimes, including money laundering, to support the
FBI's international and domestic investigative responsibilities.
In addition to the white collar crime courses conducted at the
International Law Enforcement Academy in Budapest, Hungary, the FBI
conducted thirteen money laundering training courses during fiscal year
1997 in Albania, Chile, People's Republic of China, Colombia, the Czech
Republic, Egypt, Latvia, Malaysia, Mexico, Moldova, the Philippines,
Romania, and Russia. One practical case training initiative involving money
laundering was conducted in Panama.
Drug Enforcement Administration (DEA)
During fiscal year 1997, the DEA International Training Section (TRI)
conducted three asset forfeiture and money laundering seminars. The three
seminars were conducted in Israel, Ecuador, and the Bahamas. The seminar in
Israel was taught in Jerusalem and attended by forty students from Israel
and five students from Cyprus. The seminar in Ecuador was conducted in
Quito and attended by thirty-nine participants from Ecuador, Bolivia,
Colombia, Peru, Venezuela, Costa Rica and Panama. The last seminar was
conducted in Nassau, Bahamas, and attended by thirty-nine delegates from
throughout the Caribbean including: the Bahamas, Grenada, the Cayman
Islands, St. Kitts, St. Vincent, St. Lucia, Aruba, Caracas, Jamaica,
Belize, Turks and Caicos, Trinidad and Tobago, Barbados, and the Dominican
Republic.
The funding for these seminars came from the US Department of Justice
Asset Forfeiture Fund. In FY 98, DEA/TRI plans to conduct four additional
seminars. These seminars would be conducted with participation from various
DEA components (TRI, Financial Investigations Section (HQS), Asset
Forfeiture Section (HQS), DEA field elements) as well as with the DOJ
Office of International Affairs, the US Marshal's Service, and the Customs
Service.
Secret Service
The Secret Service continues its involvement in the training of foreign
law enforcement officials in the areas of investigative techniques, types
of international fraud schemes, and identification of systemic weakness in
their financial systems that lead to fraudulent financial activity. During
1997, the Secret Service provided training to foreign law enforcement and
banking officials from the following countries: Russia, Latvia, Estonia,
Lithuania, Belarus, Poland, Ukraine, Hungary, Bulgaria, Romania, Moldova,
Slovakia, Czech Republic, Cyprus, Hong Kong, Thailand, Cambodia, Indonesia,
Singapore, Laos, Vietnam, Korea, South Africa, and Mexico.
Financial Crimes Enforcement Network (FINCEN)
FinCEN, the US financial intelligence unit (FIU), has an international
training program with two main components: (1) instruction provided to a
vast array of US and foreign government officials, financial regulators,
bankers and others on the subjects of money laundering and FinCEN's mission
and operation; and (2) training in financial analysis and in the creation
and operation of FIUs, modeled after FinCEN and other FIUs throughout the
world. FinCEN works closely with other agencies in supporting US interests
overseas by (1) advising foreign government officials on how to establish
advanced systems for detecting, preventing and prosecuting financial
crimes; (2) recommending ways in which to develop a partnership between
government and financial institutions to prevent money laundering; (3)
offering specialized training and technical assistance in computer systems
architecture and operation; and (4) providing assessments of money
laundering regulations and procedures. While much of FinCEN's international
training is done abroad, increasingly FinCEN is providing training and
technical assistance to foreign officials at its offices in Vienna,
Virginia.
In 1997, FinCEN provided an overview of its role and mission in the
global fight against financial crime to delegations visiting from:
Argentina, Aruba, Australia, the Cayman Islands, the People's Republic of
China, Colombia, Costa Rica, the Dominican Republic, Ecuador, France,
Germany, Ghana, Hong Kong, India, Ireland, Japan, Mexico, Moldova, the
Netherlands, Panama, Paraguay, Poland, Romania, Russia, Singapore, Spain,
Sweden, Switzerland, Taiwan, Thailand, Trinidad and Tobago, the United
Kingdom, Uruguay, and Venezuela.
FinCEN worked closely with Mexico and Panama throughout this past year
by providing support and technical assistance to their respective
FIUs. FinCEN's technical staff made several trips to Mexico's Secretaria de
Hacienda y Credito Publico (Hacienda) to assess the technological
requirements of the FIU, including the development of a suspicious activity
report (SAR) and analytical database. FinCEN provided specialized
intermediate analytical training to the Director of the Mexico FIU, and in
September, six intelligence analysts received intensive overall analytical
training on theory, concepts and process. In addition to FinCEN personnel,
trainers from the IRS, USCS, DEA, FDIC, OCC, FRB, FBI, and New Jersey State
Police made presentations that were specifically tailored to meet the
training needs of the participants. In November 1997, FinCEN hosted a
delegation of members of Mexico's National Banking and Securities
Commission (CNBV) and representatives from the Mexico Banker's
Association.
In March 1997, FinCEN provided technical and analytical training to
analysts from Panama's financial analysis unit (FAU). Representatives from
the FBI, IRS, DEA, FDIC, OCC, and FRB also provided training to the
delegation from Panama. In September 1997, the Director of the Panamanian
FAU participated in the training provided for the Mexican FIU.
In March 1997, FinCEN and Panama hosted a financial seminar in Vienna,
Virginia. Participants included high-level Panamanian and USG officials
from both the private and public sectors, including law enforcement,
regulatory agencies, and banking communities. Use of third party checks,
foreign bank drafts, and money orders as a means of furthering the money
laundering process dominated the discussions. As a follow-up to the
seminar, FinCEN and the Panamanian FAU reached an agreement to conduct a
joint study of Panama's Colon Free Trade Zone.
This past year, a Department of Justice legal detailee to FinCEN and
senior FinCEN legal and analytical personnel have provided legal and
technical assistance to a number of countries in drafting and revising
their anti-money laundering legislation. These countries included Costa
Rica, Ecuador, El Salvador, Nicaragua, and Venezuela.
In late 1997, a FinCEN representative visited India, Sri Lanka, and
Nepal. In India, consultations were held with government officials involved
in the drafting of India's anti-money laundering legislation. Research was
also conducted on the hawala alternate remittance system as part of a joint
FinCEN-INTERPOL/FOPAC study on parallel banking in Asia. Finally,
groundwork was laid for the "Asia Watch" survey of money
laundering in South Asia that will be conducted jointly by FinCEN and
INTERPOL/FOPAC in early 1998. In Sri Lanka, FinCEN consulted with senior
law enforcement personnel on draft money laundering legislation. In Nepal,
FinCEN worked closely with Embassy officials in Katmandu to provide
detailed assistance to the Nepali officials involved with drafting Nepal's
anti-money laundering legislation. In addition, FinCEN reviewed a proposal
for the establishment of offshore banking facilities in Nepal and conducted
research on the Nepali gaming industry.
FinCEN hosted a delegation consisting of members of the Cyprus Unit for
Combating Money Laundering and a representative of the Central Bank of
Cyprus, in which the OCC and FRB also participated.
FinCEN hosted several visitors from Paraguay's anti-money laundering and
anti-drug unit (SENAD) in September 1997 to discuss technical and training
assistance needs for Paraguay's future financial intelligence unit.
In December 1997, FinCEN sent a working level needs assessment team to
Venezuela to meet with Venezuelan law enforcement, banking, and regulatory
officials. The purpose of the visit was to gain a better understanding of
the status of the anti-money laundering legislation and the roles of the
various organizations in Venezuela concerned with combating money
laundering and to help FinCEN better advise the officials of Venezuela on
how to establish and operate a financial intelligence unit.
Also in December 1997, FinCEN sent a delegation to Jamaica to meet with
Jamaican officials to discuss their anti-money laundering system and to
explore the possibility of providing assistance in developing an FIU in
that country.
International Law Enforcement Academy (ILEA) - Budapest
Five 12-hour training segments were presented at ILEA in Budapest.
These segments provided instruction in financial investigative techniques
and money laundering. They were attended by participants from the region,
including representatives from Hungry, Croatia, and the Former Yugoslav
Republic of Macedonia, Estonia, Latvia, and Lithuania. These courses were a
portion of a consolidated interagency curriculum presented by various US
law enforcement agencies during an 8-week period.
Treaties And Agreements
Mutual Legal Assistance Treaties (MLATs) allow generally for the
exchange of evidence and information in criminal and related matters. In
money laundering and asset forfeiture cases, they can be extremely useful
as a means of exchanging banking and other financial records with our
treaty partners. MLATs, which are negotiated by the Department of State in
cooperation with the Department of Justice, are in force with the following
countries: Argentina, the Bahamas, Canada, Hungary, Italy, Jamaica, Mexico,
Morocco, the Netherlands, Panama, the Philippines, Spain, South Korea,
Switzerland, Thailand, Turkey, the United Kingdom, the United Kingdom with
respect to its Caribbean dependent territories (the Cayman Islands,
Anguilla, the British Virgin Islands, Montserrat, and the Turks and Caicos
Islands), and Uruguay. MLATs have been signed but not yet brought into
force with another 21 governments: Antigua and Barbuda, Australia, Austria,
Barbados, Belgium, Brazil, Colombia, the Czech Republic, Dominica, Grenada,
Hong Kong, Israel, Latvia, Lithuania, Luxembourg, Nigeria, Poland,
St. Kitts and Nevis, St. Lucia, Trinidad and Tobago and Venezuela. The
United States is actively engaged in negotiating additional MLATs around
the world. The United States has also signed the Organization of American
States' MLAT.
In addition, the United States has entered into executive agreements on
forfeiture cooperation, including: (1) an agreement with the United Kingdom
providing for forfeiture assistance and asset sharing in narcotics cases,
and (2) a forfeiture cooperation and asset sharing agreement with the
Netherlands. The United States has asset sharing agreements with Canada,
Colombia, Ecuador, Mexico, and the United Kingdom on behalf of Anguilla,
the British Virgin Islands, the Cayman Islands, Montserrat, and Turks and
Caicos.
Financial Information Exchange Agreements (FIEAs) facilitate the
exchange of currency transaction information between the US Treasury
Department and other governments' finance ministries. The United States has
FIEAs with Colombia, Ecuador, Mexico, Panama, Paraguay, Peru, and
Venezuela. FinCEN has a Memorandum of Understanding or an exchange of
letters in place to facilitate exchange of information with the FIUs of the
following countries: Argentina, Australia, Belgium, France, Slovenia,
Spain, and the United Kingdom.
The United States has Customs Mutual Assistance Agreements (CMAAs) with
the European Community and with the following countries: Argentina,
Australia, Austria, Belarus, Belgium, Canada, Cyprus, the Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Italy, Japan, Korea,
Mexico, Mongolia, New Zealand, Norway, Poland, Portugal, the Russian
Federation, Slovakia, Spain, Sweden, Ukraine, the United Kingdom, and
Yugoslavia. (The US view is that the Socialist Federal Republic of
Yugoslavia (SFRY) has dissolved and that the successors that formerly made
up the SFRY-Bosnia and Herzegovina, Croatia, the Former Yugoslav Republic
of Macedonia, Slovenia, and the Federal Republic of Yugoslavia (Serbia and
Montenegro)-continue to be bound by the agreement with the SFRY at the time
of dissolution.) The United States has also concluded CMAAs which are not
yet in force with the following countries: Honduras, Ireland, Kazakhstan,
the Netherlands, Turkey, and Venezuela. In addition, the United States has
non-binding CMAAs with both Hong Kong and the United Kingdom. All of these
agreements are patterned after a World Customs Organization Model
CMAA. Since assistance can be provided under these agreements in the
enforcement of any laws related to customs, the USCS uses these agreements
to assist in the gathering of information and evidence for criminal and
civil cases involving trade fraud, smuggling, violations of export control
laws, and most recently, in the growing effort to combat narcotics
trafficking and money laundering.
Asset Sharing
Pursuant to the provisions of the 1988 UN Drug Convention, the
Departments of Justice, State and Treasury have aggressively sought to
encourage foreign governments to cooperate in joint investigations of drug
trafficking and money laundering, offering the inducement of sharing
forfeited assets. A parallel goal has been to encourage use of these assets
to improve narcotics law enforcement. The long term goal has been to
encourage governments to improve asset forfeiture laws and procedures so
that they will be able to conduct investigations and prosecutions against
property within their own borders. The United States and its partners in
the Eight (formerly the G-7 industrialized nations plus Russia) are
currently examining ways of strengthening asset forfeiture and asset
sharing regimes. To date, Canada, Switzerland, Jersey and the United
Kingdom have shared forfeited assets with the United States.
From 1989 through December 1997, the international asset sharing
program, administered by the Department of Justice, resulted in the
forfeiture in the US of $190,275,879 of which $66,096,963 was shared with
foreign governments which cooperated and assisted in the investigations. In
1997, the Department of Justice transferred forfeited proceeds to: Canada
($84,669); the Cayman Islands ($58,439); Luxembourg ($18,104,348) and the
United Kingdom ($244,238). Prior recipients of shared assets (1989-1996)
include: Argentina, the Bahamas, the British Virgin Islands, Canada, the
Cayman Islands, Colombia, Costa Rica, Ecuador, Egypt, Guatemala, Guernsey,
Hungary, Israel, Liechtenstein, Luxembourg, Paraguay, Romania, St. Maarten,
Switzerland, the United Kingdom and Venezuela.
Multilateral Activities
Financial Action Task Force (FATF)
The Financial Action Task Force on Money Laundering (FATF), which was
established at the G-7 Economic Summit in Paris in 1989, is an
inter-governmental body whose purpose is the development and promotion of
policies to combat money laundering. These policies aim to prevent proceeds
of crime from being utilized in future criminal activities and from
affecting legitimate economic activities.
The FATF currently consists of 26 jurisdictions and two international
organizations. Its membership includes the major financial center countries
of Europe, North America and Asia. The 26 FATF member countries and
governments are: Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the
Kingdom of the Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United
States. The two international organizations are the European Commission and
the Gulf Cooperation Council. One of the guiding principles of the FATF is
that money laundering is a complex economic crime which cannot be
effectively controlled by conventional law enforcement methods alone, and
that finance ministries, financial institutions, and regulators must work
closely with law enforcement agencies in combating money
laundering. Accordingly, the FATF is a multi-disciplinary body, bringing
legal, financial and law enforcement experts into the policy-making
process.
In 1997, the FATF focused on several major initiatives. Perhaps the
greatest achievement during 1997 is that all FATF members now have
anti-money laundering legislation substantially in line with the FATF 40
Recommendations. With the strong encouragement of its FATF co-members,
Turkey passed significant anti-money laundering legislation and enacted
implementing regulations which put the law into force in 1997.
The FATF's second round of mutual evaluations, which commenced in early
1996 and is currently underway, is focused on the practical effectiveness
of members' anti-money laundering measures and also assesses follow-up
action taken in response to the recommendations for improvement made in the
first round. During 1997, FATF conducted 11 second round mutual
evaluations. Denmark, the United States, Austria, Belgium, Switzerland,
Canada, Netherlands, Germany, Italy, Norway and Japan. In addition, the
Gulf Cooperation Council (GCC) agreed to institute a self-assessment
program for its member states. This is a first step in addressing the
problem that although the GCC is a FATF member, the GCC member states are
not subject to FATF member requirements.
In February 1997, discussion began on the future of the FATF after
1999. At the Denver Economic Summit held in June 1997, the G-7 Heads of
State issued a Statement which "urged the FATF to review ways to
advance its essential work and consider renewal of its mandate for an
additional five-year period." Specific issues, such as expansion of
membership and identification of possible new members, will be discussed by
the FATF in early 1998. The FATF will then provide a report outlining its
conclusions to the G-7 prior to the May 1998 Birmingham Summit.
Importantly, last year, the Society for Worldwide Interbank Financial
Telecommunications (SWIFT) agreed to the FATF proposal to change the SWIFT
message format to allow for inclusion of additional information useful to
financial investigators. A major concern for financial investigators in the
past had been the absence of key data in the message format regarding
international funds transfers. The previous SWIFT message format did not
include a designated field for the originator's account number (or other
numeric identifier). SWIFT introduced a new and revised SWIFT message
format in November 1997, known as MT 103, that includes a designated field
for the originator's account number (or other numeric identifier). SWIFT
will encourage senders to complete this field in their messages. This is
an important success that has been long sought by law enforcement agencies
around the globe.
The FATF adopted a policy allowing those international organizations
that have agreed to carry out mutual evaluations of their members and whose
evaluation procedures have been validated by the FATF Plenary to attend the
discussions of the FATF mutual evaluation reports and to receive the
related documents. Specifically, the FATF endorsed the mutual evaluation
procedures of the Caribbean Financial Action Task Force (CFATF), the
Council of Europe (which will be focusing on those of its members which are
not FATF members), and the Offshore Group of Banking Supervisors
(OGBS). The FATF will provide guidance to these organizations and may issue
public statements regarding efforts made by non-members to combat money
laundering. This will further encourage non-FATF members to adopt the
FATF's recommendations and procedures.
In addition, several Multilateral Development Banks, including the
International Monetary Fund (IMF) and the World Bank, are increasingly
focusing on anti-money laundering issues, and the FATF has established a
constructive dialogue with them. The FATF has approached these
organizations and attempted to gain their support for inclusion of
anti-money laundering programs in their operations.
Other external relations activities included the participation of FATF
representatives in the June 1997 United Nations Center for International
Crime Prevention's Regional Ministerial Workshop on Organized Crime in
Dakar, Senegal. In September 1997, a FATF mission to Cyprus was conducted
to assess the money laundering situation and measures to combat it. In
October 1997, the FATF co-hosted a money laundering seminar with the Bank
of Russia in St. Petersburg. FATF provided a detailed exposition of
anti-money laundering guidelines and recommendations of various FATF member
countries and addressed the issue of cooperation between the financial
sector and law enforcement authorities. FATF plans to co-host another money
laundering seminar with the Black Sea Economic Cooperation (BSEC) in early
1998.
In June 1997, Mr. Jean Spreutels of Belgium assumed the FATF Presidency
for FATF's ninth round of work (1997-1998). In June of 1998, FATF will
continue to work with the private financial services sector by hosting
another Financial Services Forum. The President-Elect for FATF-X
(1998-1999) is Mr. Jun Yokota from Japan's Ministry of Foreign
Affairs. This will be the first time an Asian FATF member will serve as
President of the FATF.
During June 1997, FATF established an Internet web site that allows it
to reach a much wider audience, providing access to basic FATF documents,
such as the 40 Recommendations and the annual Typologies Reports on money
laundering methods and trends, as well as other key documents on money
laundering (including the 1988 UN Drug Convention, the 19 Aruba
Recommendations, and the Riga Declaration), and other documents of concern
to FATF members. The site also serves as a single location in which the
texts of various anti-money laundering statutes and regulations for both
FATF and non-FATF members may be placed. Additionally, users will be able
to find still more related information either through links to other
related sites or through contact information provided within the site. The
FATF web site can be found at http://www.oecd.org/fatf.
In 1997, FATF created a regional Ad Hoc Group on Central and Eastern
Europe, chaired by the Netherlands, to support, coordinate and exchange
information between the other international organizations who are
conducting anti-money laundering initiatives in the region. There are
currently Ad Hoc Groups on Asia (Australian Chair) and Latin America
(French Chair). The regional ad hoc groups serve as a catalyst for external
relations efforts in each particular region and have been instrumental in
creating FATF regional bodies.
An Ad Hoc Group on Estimating the Magnitude of Money Laundering, chaired
by FinCEN's Director, was also established last year to develop a
methodology to measure the money laundering problem from a global
perspective. The purpose is to confirm that money laundering is a
significant element in the global financial system and to quantify the
amount of money laundering activity. Each participating country has formed
an advisory board of experts for the purpose of identifying the
quantifiable sources of data. This Ad Hoc Group will compile a draft
methodology which will be used to develop a quantifiable estimate of the
problem. Several international organizations, including the OECD, IMF,
INTERPOL, Commonwealth Secretariat, and OAS/CICAD, are actively
contributing to the work of this group. Once determined, this figure will
allow policy makers and the public, through press reporting, to appreciate
the critical value of anti-money laundering programs and their relationship
to ensuring the integrity of the global financial system.
In November 1997, the FATF concluded a highly successful meeting on
money laundering typologies. The purpose of the typologies exercise is to
provide a forum for law enforcement experts-those primarily tasked with
combating money laundering-to discuss recent trends in the laundering of
criminal proceeds, emerging threats, and effective
countermeasures. Discussions focused primarily on new payment technologies,
remittance services and the use of non-financial businesses in money
laundering schemes. Money laundering countermeasures were also discussed in
greater detail than in prior years. Overall, FATF jurisdictions found that
conventional money laundering methods are still being used with refinements
being made to existing techniques. In addition, as new countermeasures are
developed, money launderers continue to shift from traditional financial
institutions to non-financial businesses. As in the past two years, the
FATF will produce two versions of the typologies report-an internal version
and a public version. The public version of the report is expected to be
issued in early 1998.
Asia Pacific Group on Money Laundering (APG)
In order to make progress in the external relations work of the
Financial Action Task Force (FATF), an "FATF Asia Secretariat"
was created in 1994 to set up a regional anti-money laundering body in the
Asia/Pacific region. The United States has been working with the FATF to
create regional anti-money laundering groups to form an international
alliance against money laundering. Through the results of the FATF Asia
Secretariat and other FATF members, the Asia Pacific Group on Money
Laundering (APG) was formally established in February 1997 at the Fourth
Asia/Pacific Money Laundering Symposium in Bangkok, Thailand. Initial
membership of the group consists of Australia, Bangladesh, Hong Kong,
Japan, New Zealand, People's Republic of China, Philippines, Singapore, Sri
Lanka, Taiwan, Thailand, the United States, and Vanuatu. The establishment
of this group is a positive step toward recognizing that money laundering
is a significant international issue that affects the Asia/Pacific region
and that jurisdictions within the region need to cooperate in combating
money laundering.
The APG will meet twice yearly to provide a focus for regional
anti-money laundering efforts and will work in close cooperation with the
FATF and the CFATF. The first goal of this group is to develop a statement
of principles and measures for application within the region.
The Fourth Asia/Pacific Money Laundering Symposium also resulted in a
set of proposed recommendations and a consensus that money laundering is a
serious threat that must be addressed globally. Participants recognized
that money laundering undermines the integrity of the region's financial
institutions and that anti-money laundering controls have a positive effect
on economic growth by attracting legitimate investments and capital. There
was agreement that bank secrecy laws should not interfere with the ability
to ensure the integrity of financial institutions and that central banks
and Finance Ministries play a very important role. It was also recognized
that the offense of money laundering should cover all serious crimes.
In July 1997, the first meeting of the APG's Working Party was held in
Beijing, China. The Working Party developed a work program and a statement
of principles and measures for application within the region in relation to
money laundering. The Working Party agreed that the APG accepts the FATF 40
Recommendations in principle as the "international standard" and
discussed how they can be applied in the region. The APG will have members
complete anti-money laundering "jurisdiction reports" which will
include each jurisdiction's relevant laws as well as identify what training
is needed.
In 1997, the Asia Pacific Economic Cooperation (APEC) continued to
express support for anti-money laundering initiatives. The APEC Finance
Ministers issued a Joint Ministerial Statement on April 6, 1997 which
supported the establishment of the APG. The anti-money laundering text of
that statement follows:
Anti-Money Laundering. Money laundering remains a priority concern
because of the threat it can pose to the integrity of legitimate financial
institutions. In this regard, we welcome the establishment of the
Asia-Pacific Group on Money Laundering of which several APEC economies are
members. We pointed out however that money laundering is a global
phenomenon and in this regard, we encourage all other economies to join in
a determined global effort to effectively address it . We ask the
assistance of the relevant international organizations to integrate support
for anti-money laundering activities in their operations to strengthen the
integrity of financial systems.
Caribbean Financial Action Task Force (CFATF)
The Caribbean Financial Action Task Force (CFATF) continues its
important anti-money laundering initiatives in the region. The CFATF
requires its member jurisdictions to implement the FATF 40 Recommendations
as well as an additional 19 recommendations specific to the region that
CFATF adopted (the Aruba 19 Recommendations). Barbados currently chairs
the organization, and Attorney General David Simmons will serve as Chairman
until October 1998. The Cayman Islands has been elected as the next CFATF
chair. The Secretariat of the CFATF is housed in Trinidad and Tobago.
In October 1996, the CFATF adopted a Memorandum of Understanding (MOU)
which formalizes the organization by delineating its mission, objectives,
and membership requirements. Since November 1996, the following have been
CFATF members: Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Barbados,
Belize, Bermuda, the British Virgin Islands, the Cayman Islands, Costa
Rica, the Dominican Republic, Grenada, Guatemala, Montserrat, the
Netherlands Antilles, Nicaragua, Panama, St. Lucia, St. Vincent and the
Grenadines, Turks and Caicos, and Trinidad and Tobago. In October 1997,
Jamaica and Venezuela subscribed to the CFATF MOU, and in December 1997,
Dominica subscribed as well, raising the organization's membership to a
total of 24 members. Additional countries are expected to sign the MOU in
the near future. There has been no change in membership of the five
Cooperating and Supporting Nations (Canada, France, the Netherlands, the
United Kingdom, and the United States), which have provided financial and
other support to CFATF since its inception.
The pace of CFATF's activities has continued to increase. In 1997, CFATF
conducted mutual evaluators of four of its members (the Dominican Republic,
Barbados, St. Vincent and the Grenadines, and the Bahamas). Six additional
CFATF mutual evaluations are scheduled to occur in 1998: Antigua and
Barbuda, Turks and Caicos, Bermuda, St. Lucia, St. Kitts and Nevis,
Nicaragua.
In July 1997, CFATF and FinCEN co-sponsored a Casino Regulatory
Conference in Aruba as part the CFATF typologies exercise. The conference
identified vulnerabilities to money laundering within the gaming industry
and as well as minimum regulatory and legislative standards needed to
address those vulnerabilities. Representatives from Aruba, the Bahamas,
Belize, Brazil, the British Virgin Islands, Canada, Cayman Islands, Chile,
Colombia, Costa Rica, Dominica, the Dominican Republic, France, Jamaica,
the Netherlands Antilles, Panama, Peru, St. Lucia, the Netherlands,
Trinidad and Tobago, the United Kingdom, the US Virgin Islands, Uruguay,
the United States, and Venezuela attended the conference.
CFATF also completed two typologies exercises, which are used to assess
current trends in money laundering in the Caribbean and to develop
effective countermeasures. The first typologies exercise focused on
domestic financial institutions, and the second addressed the casino and
gaming industry in the region.
The CFATF will play a leading role in implementing the joint US- EU
anti-money laundering training and technical assistance initiative for the
Caribbean. This comprehensive program, covering financial, legal, law
enforcement, and regulatory measures, is the culmination of a number of
efforts to develop a regional training and technical assistance program by
the US, EU, CFATF, and UNDCP. At the December 1997 regional meeting held in
the Dominican Republic to review the progress in implementing the May 1996
Barbados Plan of Action, the participants agreed, in the Santo Domingo
Declaration, to implement the regional anti-money laundering project
through CFATF in association with the EC, the US, and other cooperating and
supporting countries. Funding to implement this project has been committed
jointly by the European Commission and the United States government. The
CFATF Council is to determine the location of the project office by March
1, 1998, and it is anticipated that the training and technical assistance
program activities will begin as early as 1998.
Summit of the Americas Follow-Up
With respect to the money laundering issue, the Summit of the Americas
in Santiago, Chile in April 1998 will focus on measures needed to support
the Inter-American Drug Abuse Control Council of the OAS (OAS/CICAD) in its
efforts to adopt and implement the December 1995 Buenos Aires
Communiqué Plan of Action on money laundering.
OAS/CICAD
In recognition of the growing importance of money laundering issues and
the need to develop a framework to assist member governments in
implementing the provisions of the Buenos Aires communiqué, the
OAS/CICAD reconvened the CICAD Experts Group to Control Money Laundering in
June 1996. Substantive discussion of regional money laundering issues now
regularly occurs within this Experts Group under the OAS framework.
In its most recent meeting in Santiago in October 1997, the Experts
Group made a number of significant recommendations, which were officially
adopted by the OAS/CICAD in its November 1997 meeting in Lima, Peru. Among
the recommendations of the Experts Group were:
- To amend, for the first time, the OAS Model Regulations on money
laundering by adding language which encourages governments to establish
Financial Intelligence Units (FIUs) in accordance with the Egmont Group
definition.
- To harmonize the OAS Model Regulations with the provisions of the
Summit of the Americas Buenos Aires Communiqué Plan of Action, and
to examine the Model Regulations to determine if the Model Regulations need
to be revised further in order to keep them abreast of new money laundering
methods.
- To formulate a comprehensive training and technical assistance plan to
assist governments in their efforts to implement the provisions of the 1995
Buenos Aires Communiqué Plan of Action. This training plan will
include provisions for training and technical assistance in the financial
sector, for FIUs, and for law enforcement personnel, judges, magistrates
and prosecutors.
The Experts Group agreed to conduct a yearly typologies exercise to
determine the money laundering methods being utilized in the hemisphere by
sharing experiences in dealing with this problem. Annual typologies
reports will be produced.
An initial analysis of member responses to the CICAD Self-Assessment
Questionnaire (used to determine progress in implementing the Buenos Aires
Communiqué Plan of Action) was produced and an English text will be
widely circulated in the near future.
Finally, progress also continues on the joint Organization of American
States/Inter-American Development Bank Anti-Money Laundering Training and
Technical Assistance Initiative. It is expected that the IDB will provide
funding in 1998 for a pilot project focused on "know your
customer" policies and reporting of suspicious transactions for
banking regulators and key management positions within financial
institutions as well.
Financial Intelligence Units (FIUs) and the Egmont Group
Over the past five to seven years, a number of specialized governmental
agencies have been created as countries develop systems to deal with the
problem of money laundering. These entities are commonly referred to as
"financial intelligence units" or "FIUs". These units
have attracted increasing attention with their ever more important role in
anti-money laundering programs.
How FIUs Differ from Other Anti-Money Laundering Agencies
The FIU concept has developed rapidly during the past two years. In
spite of the specialized nature of such units, there has often been some
confusion between FIUs "financial intelligence units" and other
official entities with seemingly similar responsibilities. Police units
established for the purpose of investigating financial and white-collar
crime-to include money laundering-have often been dubbed "financial
investigative units" with the acronym "FIU". These units
certainly play an important and useful role in their countries' overall
anti-money laundering effort; however, the simple designation
"FIU" does not necessarily mean that the unit functions as
defined by the Egmont Group.
A number of countries have resolved this confusion by continuing to call
the purely police unit an "FIU" ("financial investigative
unit"), while terming the intelligence unit an "FAU"
("financial analysis unit"). Making this distinction then allows
some countries to avoid the word "intelligence" (which has a
somewhat negative connotation in certain areas) by focusing on the function
of the unit rather than the material with which it works.
An FIU, quite simply, is a central office that obtains financial
disclosure information, processes it in some way and then provides it to an
appropriate government authority in support of a national anti-money
laundering effort. Although the definition states that the activities
performed by an FIU include "receiving, analyzing, and
disseminating" information, it does not exclude other activities that
may be performed on the basis of this material. Therefore, an FIU could
conceivably perform the activities mentioned in the definition and
investigate and/or prosecute violations indicated by the disclosures.
The creation of FIUs has been shaped by two major influences: law
enforcement and detection:
- Law Enforcement: Most countries have implemented anti-money laundering
measures alongside already existing law enforcement systems. Certain
countries, due to their size and perhaps the inherent difficulty in
investigating money laundering, decided to provide a clearinghouse for
financial information. Agencies created under this impetus were designed,
first and foremost, to support the efforts of multiple law enforcement or
judicial authorities with concurrent or sometimes competing jurisdictional
authority to investigate money laundering.
- Detection: Through the FATF 40 Recommendations and regional
organizations initiatives such as the European Union, the Council of
Europe, CFATF, and OAS/CICAD, the concept of suspicious transaction
disclosures has become a standard part of money laundering detection
efforts. In creating transaction disclosure systems, some countries saw the
logic in centralizing this effort in a single office for receiving,
assessing and processing these reports. FIUs established in this way often
play the role of a "buffer" between the private financial sector
and law enforcement and judicial/prosecutorial authorities. This has, in
some cases, fostered a greater amount of trust in the anti-money laundering
system with the FIU serving as the honest broker between the private and
government sectors.
Over time, FIUs in the first category have tended to add the disclosure
receiving function to their list of attributions. Moreover, regulatory
oversight has also increasingly become a function of a number of
FIUs. Since a disclosing requirement mandates the receiving agency to deal
with the disclosing institution, it was logical that some FIUs would become
primary forces in working with the private sector to find ways to perfect
anti-money laundering systems.
The Egmont Group
Despite the fact that several FIUs were created throughout the world in
the early 1990s, their creation was at first seen as individualized
phenomena related to the specific needs of the jurisdictions establishing
them. Since 1995, a number of FIUs have begun working together in an
informal organization known as the Egmont Group (named for the location of
the first meeting at the Egmont-Arenberg Palace in Brussels). The goal of
the Group is to provide a forum for FIUs to find ways of improving support
to their respective national anti-money laundering programs. This support
includes expanding and systematizing the exchange of financial intelligence
information, improving expertise and capabilities of personnel of such
organizations, and fostering better communication among FIUs through
application of technology. Within the Egmont Group, working groups are
focused on three major areas: legal matters, technology, and training.
Recent Egmont Meetings
The fourth meeting of the Egmont Group took place on November 21-22,
1996 in Rome, Italy. With over thirty countries in attendance, along with
four international organisations, the Egmont Group moved one step closer to
becoming the primary framework for co-operation among FIUs. The Egmont
Group examined the functions of the various FIUs and similar agencies so as
to determine those missions and functions that are carried out in
common. The conference came to an agreement on the definition of an FIU, a
definition that will likely facilitate the establishment of new units by
setting a minimum standard for such a unit.
According to this definition, a financial intelligence unit is "a
central, national agency responsible for receiving (and, as permitted,
requesting), analysing [sic] and disseminating to the competent
authorities, disclosures of financial information: (i) concerning suspected
proceeds of crime, or (ii) required by national legislation or regulation,
in order to counter money laundering."
The purpose of defining an FIU was to develop a specific identity for
the Egmont Group as distinct from FATF or other international organizations
concerned with money laundering. The definition was meant to be specific
enough to describe these apparently distinct agencies from other types of
government authorities, yet generic enough to include the many variations
as found in the countries establishing such units. The definition also
specifically avoids emphasizing any particular type of organization (i.e.,
police, judicial, administrative, or regulatory). Since its adoption, the
definition appears to have become a standard against which newly forming
units are being measured.
The fifth meeting of the Egmont Group took place on June 23-24, 1997 in
Madrid, Spain. There were 35 countries and 5 international organisations
present at this meeting. The Egmont Group took a significant step forward
in several areas. Perhaps the most important of these was the adoption by
the Group of its Statement of Purpose, which describes the work
accomplished so far, as well as current goals within the framework of
assisting national and international anti-money laundering efforts. The FIU
definition adopted in Rome was applied to all participating agencies-28 of
them were found to meet it-and this definition was incorporated into the
Statement of Purpose. A comprehensive Egmont Group training program for FIU
personnel began to take shape over the course of the conference. Finally,
the Egmont Group decided to study ways to continue enhancing information
exchange among FIUs and ultimately create a more formalized structure for
the Group itself. The next meeting of the Egmont Group is scheduled to be
held in Buenos Aires, Argentina in June 1998.
Secure Information Exchange: The Egmont Secure Web
The effort to increase communication among FIUs has been furthered by
development of a secure web site or "virtual private network"
that was first demonstrated in Rome. This web site permits Egmont FIUs to
access information on other FIUs (missions, organisations, and
capabilities), money laundering trends, financial analysis tools, and
technological developments. It also permits the participating FIUs to
communicate by means of a secure electronic mail system. Since the web
site is not accessible to the public, FIUs may share certain types of
sensitive information in this protected environment, a capability that is
not available anywhere else for FIUs. The "Egmont Secure Web"
became operational in February 1997, when FinCEN and four European FIUs
(from Belgium, the Netherlands, the United Kingdom, and France) became the
first units to be connected. Connections to the FIUs in Spain, Sweden, and
Slovenia in May 1997 were followed by those to the units in the Czech
Republic, Slovakia, and Austria in August 1997. Monaco was connected to the
web site in November 1997, bringing the total number of units on-line to
twelve. More connections will be made as units already meeting the Egmont
Group FIU definition acquire appropriate software and computer
configurations.
Other International Conferences and Multilateral Activities
In early 1997, a FinCEN paper entitled "Black Hawala, Financial
Crimes and the World Drug Trade" was presented at a conference on
Global Drugs Law sponsored by the United Nations Drug Control Program
(UNDCP) and the Indian Law Institute (ILI). This paper was well received,
and has subsequently been published by the ILI.
In April 1997, the United States government and INTERPOL co-hosted a
conference in Buenos Aires on the Analysis of Financial Records.
Presentations included case studies dealing with money laundering from law
enforcement and banking personnel. Representatives from Argentina, Aruba,
Australia, the Bahamas, Barbados, Belgium, Bolivia, Brazil, Canada, Chile,
Colombia, Costa Rica, Denmark, the Dominican Republic, Ecuador, France,
Germany, Guinea, Haiti, India, Italy, Japan, Mexico, the Netherlands,
Panama, Paraguay, Peru, St. Lucia, Spain, the United Kingdom, the United
States, Uruguay, and Venezuela attended the conference.
In October 1997, the United States government gave presentations and
chaired the Law Enforcement Workshop at the FATF and Bank of Russia Money
Laundering Seminar. The seminar provided guidance to Russian law
enforcement, financial, regulatory, and banking officials on the
establishment of effective money laundering controls within Russia.
Money Laundering Comparative Chart
Each year, US officials from the various agencies with anti-money
laundering responsibilities meet to assess the money laundering situations
in more than 200 nations and territories, including steps taken or not
taken to address those situations, each jurisdiction's vulnerability to
money laundering, the conformance of its laws and policies to international
standards, the effectiveness with which the government has acted, and the
government's political will to take needed actions.
The 1998 INCSR assigns priorities to more than 150 nations and
territories, using a new classification system consisting of three
differential categories titled Countries of Primary Concern, Countries of
Concern, and Other Countries Monitored. The 1997 INCSR used a system of six
categories titled High Priority, Medium-High Priority, Medium Priority,
Low-Medium Priority, Low Priority, and No Priority. The 1998 INCSR
collapses the six 1997 INCSR categories into the new three-tiered system
for clearer classification and ease of comparison. In the conversion, the
former High Priority and Medium-High Priority categories have become the
new Countries of Primary Concern category. The former Medium Priority and
Low-Medium Priority categories have become the new Countries of Concern
category, and the former Low Priority and No Priority categories have
become the new Other Countries Monitored category. This conversion is
designed to facilitate presentation to the reader. It does not represent
any change whatsoever in the analyses of the money laundering situations in
the various jurisdictions.
INCSR priorities draw upon a number of factors which indicate: (1) the
extent to which the jurisdiction is or remains vulnerable to money
laundering, notwithstanding its money laundering countermeasures, if any;
(2) the nature of the money laundering situation in each jurisdiction (for
example, whether it involves drugs or other contraband); (3) the ways in
which the US regards the situation as having international ramifications;
(4) the situation's impact on US interests; (5) whether the jurisdiction
has taken appropriate legislative actions to address specific problems; (6)
whether there is a lack of licensing and oversight of offshore banks and
businesses; (7) whether the jurisdiction's laws are being effectively
implemented; and (8) where US interests are involved, the degree of
cooperation between the foreign government and US government
agencies. There are approximately two dozen sub-factors that are also
considered. These sub-factors (Category Criteria) are explained below.
Note: A government can have comprehensive laws on its books and
conduct aggressive anti-money laundering enforcement efforts, but still be
prioritized as a Primary Concern jurisdiction if the volume of money
laundering continues to be substantial and/or continued vigilance and
effective enforcement by the government is essential to the effectiveness
of the overall international effort.
When the severity of the money laundering problem places a jurisdiction
in the Primary Concern category and other deficiencies exist, this
categorization indicates that this jurisdiction needs to take immediate
action to develop or enhance its anti-money laundering regime and will
receive near-term priority attention from the US government. In
categorizing a jurisdiction as a Primary Concern jurisdiction, the US
belief is that near-term remedial action by that jurisdiction is needed to
address the problems cited in the individual country summaries or reflected
in the Comparison Table. Jurisdictions categorized in the Countries of
Concern category need to develop or to review their anti-money laundering
regimes, including their offshore licensing, supervisory and regulatory
authorities, for enhancement to protect their financial systems from
criminal abuse. Jurisdictions in the Other Countries Monitored category are
not of immediate concern, but they will be monitored for changes in their
money laundering activity.
Category Criteria
As any financial system can be penetrated, every country and territory
has the potential of becoming a money laundering center. There is no
precise measure of vulnerability for any financial system, but a checklist
of what drug money managers reportedly look for provides a basic guide.
- Failure to criminalize money laundering from all serious crimes or
limiting the offense to narrow predicates, such as prior conviction of a
drug trafficking offense.
- Rigid bank secrecy rules that cannot be penetrated for authorized law
enforcement investigations or that prohibit or inhibit large value and/or
suspicious or unusual transaction reporting by both banks and non-bank
financial institutions.
- Lack of adequate "know your client" requirements to conduct
financial transactions, or allowed use of anonymous, nominee, numbered or
trustee accounts.
- No requirement to disclose the beneficial owner of an account or the
true beneficiary of a transaction.
- Lack of effective monitoring of cross-border currency movements.
- No reporting requirements for large cash transactions.
- No requirement to maintain financial records over a specific period of
time.
- No mandatory requirement to report suspicious transactions or a
pattern of inconsistent reporting under a voluntary system; lack of uniform
guidelines from which to identify suspicious transactions.
- Use of bearer payable monetary instruments.
- Well-established non-bank financial systems, especially where
regulation, supervision, and monitoring are lax.
- Patterns of evasion of exchange controls by nominally legitimate
businesses.
- Ease of incorporation, especially where ownership can be held through
nominees or bearer shares, or where off-the-shelf corporations can be
acquired.
- No central reporting unit for receiving, analyzing and disseminating
to the competent authorities, large value, suspicious or unusual
transaction financial information that might identify possible money
laundering activity.
- Limited or weak bank regulatory controls, or failure to adopt or
adhere to the Basle Principles for International Banking Supervision,
especially in countries where the monetary or bank supervisory authority is
understaffed, underskilled or uncommitted.
- Well-established offshore or tax-haven banking systems, especially
countries where such banks and accounts can be readily established with
minimal background investigations.
- Extensive foreign banking operations, especially where there is
significant wire transfer activity or multiple branches of the foreign
banks, or limited audit authority over foreign-owned banks or
institutions.
- Limited asset seizure or confiscation capability.
- Limited narcotics and money laundering enforcement and investigative
capabilities.
- Countries with free trade zones where there is little government
presence or other supervisory authority.
- Patterns of official corruption or a laissez-faire attitude toward the
business and banking communities.
- Countries where the US dollar is readily accepted, especially
countries where banks and other financial institutions allow dollar
deposits.
- Well-established access to international bullion trading centers in
New York, Istanbul, Zurich, Dubai and Mumbai.
- Countries where there is a significant trade in or export of gems,
particularly diamonds.
- Countries with large parallel or black market economies.
- Limited or no ability to share financial information with foreign law
enforcement.
Changes In INCSR Priorities, 1997-1998
Upgrades
Australia | Medium Priority - Country of Primary Concern |
Bahamas | Medium Priority - Country of Primary Concern |
Burma | Medium Priority - Country of Primary Concern |
France | Medium Priority - Country of Primary Concern |
Guernsey | Medium Priority - Country of Primary Concern |
Indonesia | Medium Priority - Country of Primary Concern |
Jersey | Medium Priority - Country of Primary Concern |
Lebanon | Medium Priority - Country of Primary Concern |
The Isle of Man | Medium Priority - Country of Primary Concern |
Albania | No Priority - Country of Concern |
Barbados | Low Priority - Country of Concern |
British Virgin Islands | Low Priority - Country of Concern |
Cook Islands | Low Priority - Country of Concern |
El Salvador | Low Priority - Country of Concern |
Ireland | Low Priority - Country of Concern |
North Korea | Low Priority - Country of Concern |
Marshall Islands | No Priority - Country of Concern |
Nauru | No Priority - Country of Concern |
Romania | Low Priority - Country of Concern |
Samoa | Low Priority - Country of Concern |
Seychelles | Low Priority - Country of Concern |
Turks and Caicos | No Priority - Country of Concern |
Ukraine | Low Priority - Country of Concern |
Vietnam | Low Priority - Country of Concern |
Yugoslavia FR | Low Priority - Country of Concern |
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Downgrades | |
Argentina | Medium-High Priority - Country of Concern |
Kuwait | Medium Priority - Other Countries Monitored |
Cuba | Low-Medium Priority - Other Countries Monitored |
Montserrat | Low-Medium Priority - Other Countries Monitored |
| |
The following comparative table identifies the actions taken by each of
the governments to combat money laundering. This reference table provides a
comparison of a broad range of elements which define legislative activity
and identify other characteristics that can have a relationship to money
laundering vulnerability.
Glossary of Terms
- "Criminalized Drug Money Laundering": The government has
enacted laws criminalizing the offense of money laundering related to drug
trafficking.
- "Criminalized Beyond Drugs": The government has extended
anti-money laundering statutes and regulations to include non-drug-related
money laundering.
- "Record Large Transactions": By law or regulation, banks are
required to maintain records of large transactions in currency or other
monetary instruments.
- "Maintain Records Over Time": By law or regulation, banks are
required to keep records, especially of large or unusual transactions, for
a specified period of time, e.g., five years.
- "Report Suspicious Transactions": By law or regulation, banks
are required to record and report suspicious or unusual transactions to
designated authorities. This is indicated by an "M" for Mandatory
in the column. A "P" indicates that by law or regulation, banks
are permitted to record and report suspicious transactions. An effective
know-your-customer policy is considered a prerequisite in this category.
- "Financial Intelligence Unit": The government has established
a central, national agency responsible for receiving (and, as permitted,
requesting), analyzing, and disseminating to the competent authorities,
disclosures of financial information concerning suspected proceeds of
crime, or required by national legislation or regulation, in order to
counter money laundering. These reflect those countries that have met the
Egmont definition of an FIU.
- "System for Identifying and Forfeiting Assets": The
government has enacted laws authorizing the tracing, freezing, seizure and
forfeiture of assets identified as relating to or generated by money
laundering activities.
- "Arrangements for Asset Sharing": By law, regulation or
bilateral agreement, the government permits sharing of seized assets with
third party governments which assisted in the conduct of the underlying
investigation.
- "Cooperates w/Domestic Law Enforcement.": By law or
regulation, banks are required to cooperate with authorized law enforcement
investigations into money laundering or the predicate offense, including
production of bank records, or otherwise lifting the veil of bank secrecy.
- "Cooperates w/International Law Enforcement": By law or
regulation, banks are permitted/required to cooperate with authorized
investigations involving or initiated by third party governments, including
sharing of records or other financial data.
- "International Transportation of Currency": By law or
regulation, the government, in cooperation with banks, controls or monitors
the flow of currency and monetary instruments crossing its borders. Of
critical weight here are the presence or absence of wire transfer
regulations and use of reports completed by each person transiting the
country and reports of monetary instrument transmitters.
- "Mutual Legal Assistance": By law or through treaty, the
government has agreed to provide and receive mutual legal assistance,
including the sharing of records and data.
- "Non-Bank Financial Institutions": By law or regulation, the
government requires non-bank financial institutions to meet the same
customer identification standards and adhere to the same reporting
requirements that it imposes on banks.
- "Disclosure Protection 'Safe Harbor'": By law, the government
provides a "safe harbor" defense to banks or other financial
institutions and their employees who provide otherwise confidential banking
data to authorities in pursuit of authorized investigations.
- "Offshore Financial Centers": By law or regulation, the
government authorizes the licensing of offshore banking facilities.
- "States Parties to 1988 UN Drug Convention": The country is a
party to the 1988 United Nations Convention Against Illicit Traffic in
Narcotic Drugs and Psychotropic Substances, or the country that is
responsible for the jurisdiction's international relations has extended the
application of the Convention to the jurisdiction.
- "Compliance w/UN Convention": The government is meeting the
goals of the 1988 UN Drug Convention by effectively applying implementing
legislation.
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