Anti Money Laundering Blog

President of Mexico Felipe Calderon proposed new legislation aimed at fighting money laundering and cash smuggling and at preventing Mexican cartels from using billions in U.S. drug profits to finance their criminal organizations. Legislation introduced by  the Mexican president administration and named “unprecedented” by Calderon includes the following measures:

- It would be illegal to purchase real estate in cash;
- The purchase of vehicles, boats, airplanes and luxury goods would be limited to 100,000 pesos (about US$7,700) in cash. Violation of this rule would lead to being sentenced in prison up to 15 years.

If passed, new anti-money laundering law by Calderon would counter the common practice in Mexico, when even in legitimate transactions people prefer cash to avoid being taxed.

Senior Mexican official who investigates financial crimes, states that criminals in this country are increasingly using cash transactions to launder their vast profits. This official, as well as his U.S.  counterparts say that the criminals use billions of dollars in cash to buy airplanes, ranches and businesses to circumvent new Mexican laws that require banks to report large cash movements.

According to the National Drug Intelligence Center, each year Mexican drug cartels and their suppliers from Colombia generate, launder and remove from the U.S. US$18 billion to US$39 billion, largest part of it is transported in cash. It is stated in the recent report by Douglas Farah, a consultant for the Woodrow Wilson International Center for Scholars, that “very little is effectively being done to either impede the movement of drug money into the formal economy or significantly reduce the flow of bulk cash across the U.S.-Mexico border.” No more than 1 percent of this cash is seized by U.S. and Mexican agents.

The Department of Home Affairs of the Isle of Man informed all designated non-financial businesses and professionals operating in the island about the Proceeds of Crime (Money Laundering) Code 2010 that will enter into force on September 1, 2010. 

Speaking about the letter informing on the new anti-money laundering legislation, Home Affairs Minister of the British Crown Dependency said that one of the purposes of writing it was ‘to remind people of their responsibilities under anti-money laundering legislation, which was first introduced in September 2007′. Another purpose was to inform the persons and businesses required to comply with the legislation where they can access details of the new Code. He added that ‘compliance with AML laws is essential in ensuring the island is protected from people who would use it for laundering of funds for criminal or terrorist related purposes’, and for maintaining the international reputation of the island.

The Financial Supervision Commission of the Isle of Man also provided information about the update of the
Anti-Money Laundering and Countering the Financing of Terrorism Handbook, in which new guidance on the new anti-money laundering code was included. Additional amendments have been made to suit the recommendations of the International Monetary Fund.

India has been welcomed as full member of the Financial Action Task Force (FATF), and became the 34th country member of organization. Since February 2007, India has participated as an observer at FATF, having made its first steps in obtaining full membership. Since 2009, the country took important steps to meet FATF guidelines. The laws amended or passed by the Parliament of India to follow the requirements of FATF (among them the Prevention of Money Laundering (Amendment) Bill, 2009 aimed to combat money laundering, terrorist financing as well as cross-border economic offences) are now in line with FATF 40+9 recommendations, having enabled India’s entering into the organization.

US Charge d’Affaires in India Steven J White said in his comments on India’s membership in FATF that the country ‘has made significant progress over the last several years in moving toward an anti-money laundering and terrorist financing (AML/CFT) regime that meets international standards, and has committed itself to continue to improve its AML/CFT system.’

On 9 August, 2010 the Ministry of Justice of New Zealand released consultation document regarding the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the AML/CFT Act), which was passed in last year October. This document sets out proposals for regulations and codes of practice under the AML/CFT Act, and provides an opportunity to the interested parties to influence the positions established in the new regime, for example, which entities and transactions are to be exempt, applicable threshold values, customer due diligence (CDD), third party reliance and designated business group issues, as well as annual reporting requirements and other issues. The deadline for submission of proposals is 6 September 2010. 

The changes put forward in the proposals concern persons required to be authorised financial advisers  under the Financial Advisers Act 2008 (FAA). These persons will be included within the definition of “reporting entity”, meaning they will be required to comply with all the obligations set by the AML/CFT Act.

Certain exemptions are proposed for a number of entities and transactions, among them lawyers and accountants who provide financial adviser services, securities registries;  general risk-based insurance and reinsurance products, premium funding agreements that relate to insurance products not covered by the AML/CFT Act, low-value life insurance products, workplace-based and low-value superannuation funds, debt collection agencies, and some others. Transitional exemptions are proposed for a number of second-phase entities.

One of the fundamental issues that are not fully covered by the consultation document is that “there is still no guidance on what exactly money laundering is”, while reporting entities will be required to have AML/CFT programmes to detect, manage and eliminate the risk of money laundering.

The supervisor of customs operations at Salmi, Abdali and Khabari Al-Awazem exits Farhan Al-Ajmi said that any person caught with more than KD 3 000 in cash or equivalent (such as jewelry) at all land, maritime and air exits will be accused of money-laundering and referred to authorities.

This measure will be taken not in order to limit personal freedom of travelers, but to limit deception and money laundering activities, especially because traders of prohibited substances and drugs are resorting to such activities for hiding the source of their illegal money.

Farhan Al-Ajmi stated that, in accordance with international customs procedures, travelers must reveal what they possess. If one is caught with funds exceeding the maximum limit of KD 3,000 in Kuwait, the funds can be confiscated and the traveler transferred to specialized authorities to face money laundering charges.

On July 13, it was discussed at an Asia/Pacific Group (APG) meeting that every country needs to have in place robust anti-money laundering and counter terrorist-financing regimes in order to effectively stem global criminal and terrorist activities.

When opening the 13th Annual Meeting of the Asia-Pacific Group on Money Laundering held in Singapore, Singapore Law Minister K Shanmugam said that no country could act alone in fighting this global problem. He said that it is not enough to have a national-level response to defeat a transnational enemy. To be successful, the regimes should be effective on all fronts from enforcement, detection and deterrence to prevention.

Shanmugam stated that the region would be much safer from criminal and terrorist elements only if jurisdictions had in place regimes capable of not only catching and penalising launderers and terrorist financiers, but also deterring them from action. However, without funding, money launderers and terrorists would not carry out their activities for long, therefore it is important to control flows of money through financial systems. Advances in technology (e.g. pre-paid cards, mobile payments, Internet payment services) had made the task of enforcement agencies and regulatory authorities more difficult because criminals had learnt to use them to their advantage.

According to Shanmugam, the Financial Action Task Force (FATF) needed to develop new ways for measuring a regime’s effectiveness in deterring financial crimes, so that they would measure the actual level of deterrence and disruption on the group.

Nepal is to sign a deal with Mongolia, Thailand and Malaysia in order to facilitate financial information exchange aimed at preventing money laundering and terrorist financing.

The Memorandum of Understanding will be signed at the 13th annual general meeting of the Asia-Pacific Group on Money Laundering (APG). The meeting will be held in Singapore from July 12-16.

In accordance with the Memorandum of Understanding, it will be mandatory for the 2 sides to provide each other financial information on bank balance, investment in real estate, shares and about persons suspected in money laundering and terrorist financing.

Also, such an agreement is to be signed between Nepal and India within a few months.

Nepal has recently asked Hong Kong to sign a Memorandum of Understanding in the light of alleged capital flight to Hong Kong in the name of importing wool.

At the APG event, Nepal will forward its opinion on compliance on anti-money laundering and combating financing on terrorism measures. The country has already enforced anti-money laundering legislation and enforced some rules regarding banks and financial institutions, insurance companies, money transfer agencies, money changers, government agencies, cooperatives and casinos.

On May 5, 2010, the 3rd Anti-Money Laundering Directive (2005/60/EC) was finally transposed in Ireland by the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. The aim of the 3rd Directive is widening the scope of previous legislation on anti-money laundering and terrorist financing based on the revised recommendations of the Financial Action Task Force (FATF).

According to the confirmation made by the Department of Justice and Law Reform, the commencement date for the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 will be July 15, 2010. The exception is Chapter 9 of Part 4 (Authorisation of Trust and Company Service Providers) that leaves a very short time frame for designated persons to comply with the new rules.

The responsibilities of designated persons as regards preventing and detecting money laundering and terrorist financing has widened significantly with the implementation of the new Act. The new legislation is aimed to consider the implications of the increased responsibilities on designated persons, including credit institutions, financial institutions, life assurance companies and intermediaries providing life assurance and other investment related services, auditors, external accountants, tax advisors, independent legal professionals, trust or company service providers, property service providers, casinos, private members’ clubs in relation to gambling activities and any person who is trading in goods in cash for a total of at least EUR 15 000.

As the Act will be commencement on July 15, 2010, designated persons need to ensure that their policies and procedures are updated in order to meet and comply with the new requirements. Non-compliance with the requirements may result in a prison sentence of up to 5 years and/or a fine.

The rules and regulations regarding anti-money laundering and counter-terrorist financing that were followed by the Qatar’s 3 financial sector regulatory bodies have now been aligned with the jutrisdiction’s new law on this aspect. This was announced by the National Anti Money-Laundering and Combating Terrorism Committee (NAMLC).

On June 17, the NAMLC issued a statement to praise the collective efforts of those who deal with developing a regulatory infrastructure in line with the NAMLC’s AML/CFT national vision and strategy and the highest demands of AML/CFT international best practice.

It should be noted that an 18-month intensive review of legislative framework on anti-money laundering and combating financing of terrorism (AML/CFT) was recently completed in Qatar. As a result, Qatar’s new Law No. (4) of 2010 on Anti-Money Laundering and Combating the Financing of Terrorism (Law) was enacted, which commenced on April 30.

It is worth noting that before the enactment a tripartite committee of financial sector regulatory bodies, formed by the Qatar Central Bank, Qatar Financial Markets Authority and the Qatar Financial Centre Regulatory Authority were involved in a highly collaborative exercise aimed at coordinating and harmonising their respective AML/CFT rules and regulations.

NAMLC said: “Each body’s AML/CFT rules and regulations have now been brought into force and have been designed to ensure alignment both with the new law and their compliance with Financial Action Task Force (FATF) recommendations and standards”.

A new piece of anti-tax haven legislation has been introduced into the US House of Representatives by Lloyd Doggett (D-Texas).

HR 5328, The International Tax Competitiveness Act, includes many clauses previously included in similar pieces of legislation that did not make it to the statute book due to Republican resistance. Doggett was one of the sponsors of the Stop Tax Haven Abuse Act. That law was not passed, however, much of it was incorporated in the Foreign Account Tax Compliance Act of 2009 (HR 3933, S 1934), which became law as part of the Hiring Incentives to Restore Employment (HIRE) Act, changing the system of withholding on payments made to non-US persons.

Key points of the new legislation would be as follows:
- to tighten corporate residency rules to prevent corporations with a preponderance of US officers from basing themselves overseas;
- to make it much more difficult for corporations to receive income from IP assets in foreign (low-tax) jurisdictions;
- to repeal the 80% ‘active income’ provision;
- to repeal the ‘boot-within-gain’ rule which allows favorable tax treatment of dividends paid during corporate reorganizations.

It should be noted that previous attempts to pass clauses like the above-mentioned have met resistance from major business organizations and from Republicans in general.