Anti Money Laundering Blog

A number of Caribbean countries have been assailed by the United States for their alleged continued facilitation of money laundering and financial crimes.

In the second part of the 2011 International Narcotics Control Strategy Report (INCSR), the United States’ State Department was particularly concerned about efforts made by several jurisdictions in addressing these crimes. The countries named by the authority were the Cayman Islands, Belize, the British Virgin Islands, Antigua and Barbuda, and the Bahamas.

Arab governments are getting together with a view to fight terrorist financing by joining forces to struggle money laundering.

Arab interior and justice ministers signed 5 agreements. One of these documents is the agreement aimed to control money laundering. This pact calls on nations to set up their own programs for generating information and monitoring money transfers.

To sign the agreements, the ministers met at the Arab League headquarters on December 21. The accords were signed by all 22 members. While the statement did not name particular terrorist groups, several Arab countries are targets of al-Qaida.

Other agreements signed by ministers deal with organized crime, technical data fraud, counterfeiting, and pornography and sexual exploitation.

As many governments all over the globe are fighting against money laundering, Uruguay is also planning to make some steps to try to defeat this problem.

The President of Uruguay, Jose Mujica recently announced the intention to loosen the country’s bank secrecy laws, which is a necessary step to run after Uruguayan money launderers both in Uruguay and abroad.

However, President Mujica should expect many people to oppose this move as the additional 12% tax for deposits and investments made abroad is to be introduced.

The US Department of State has prepared a report that details drug trafficking and money laundering activities in Kenya.

The International Narcotics Strategy Report reviews 2009 drug trafficking and money laundering in Kenya.

This report could have been the basis for the banning of 5 Kenyans from visiting the United States of America.

According to the report, Kenya is a significant transit country for cocaine, heroin and hashish, as well as it serves as a money laundering hub. It says: “Quantities of heroin and hashish transiting in Kenya, mostly from Southwest Asia bound for Europe and United States have markedly increased in recent years”.

The document blames lack of resources and rampant corruption for the 2 vices. It suggests that Kenya’s financial system may be laundering more than USD 100 million yearly, including an undetermined amount of drug money and Somali piracy earnings.

The report emphasizes that, in spite of Parliament passing the Proceeds of Crime and Anti-Money Laundering Law, 2009 signed by President Kibaki on December 31, 2009, money laundering continues unabated in Kenya. This law has not come into force because of the Ministry of Finance that has not gazetted its commencement date. However, it was indicated that such date shall not exceed 6 months after the date of assent.

The USA has passed 8 major anti-money laundering laws. This legislation defines how to deal with money laundering and related crime.

These anti-money laundering laws are as follows:

- Bank Secrecy Act of 1970
Provides the requirements for record keeping and reporting by banks, individuals, and some other financial institutions. Obliges the financial systems to file Currency Transaction Reports (“CTRs”) with the Financial Crimes Enforcement Network (“FinCEN”) at the IRS’s Detroit Computing Center for any transactions over USD 10 000 in cash.

- Money Laundering Control Act of 1986
Addresses the prohibition of deposit structuring in order to avoid the USD 10 000 reporting ceiling.

- Anti-Drug Abuse Act of 1988
Requires car dealers and real estate closing personnel to file CTRs for transactions that involve more than USD 10 000. Requires sellers of financial instruments of USD 3 000 or more to verify the identity of the buyer.

- Annunzio-Wylie Anti-Money Laundering Act of 1992
The Suspicious Activity Report (“SAR”) form is established as a replacement for the previously used Form 366 Criminal Referral. SARs are filed with FinCen at the IRS’s Detroit Computing Center.

- Money Laundering Suppression Act of 1994
Money Services Businesses must register with FinCEN. Banking agencies must review and enhance their anti-money laundering training as well asdevelop anti-money laundering examination procedures. Banks are required to establish improved procedures for referring suspected anti-money laundering cases to the appropriate law enforcement officials.

- Intelligence Reform & Terrorism Prevention Act of 2004
Requires specific financial institutions to report cross-border electronic transmittals of funds.

- Money Laundering and Financial Crimes Strategy Act of 1998
The banking agencies are required to include anti-money laundering training in their bank examiner training programs.

- USA Patriot Act
Strengthens customer identification procedures for financial institution. Financial institutions are required to establish adequate due diligence procedures for offshore and foreign bank accounts. Prevents the US financial institutions from having business with foreign shell banks.

Bangladesh Finance Minister has said that the country will enact two amendments to the existing anti-money laundering legislation to strengthen it and to prevent the flow of funds used for terrorism. The amendments will be brought in Anti Money Laundering Act 2009 and Terrorist Financing Act, 2009, including the issues of anti-money laundering and terrorist financing in the existing Extradition Act, enacting Mutual Legal Assistance Act and ratifying the UN Convention against Transnational Organised Crime (Palermo Convention) and ratifying the UN Security Council Resolutions 1267 and 1373. Last week, the Minister chaired a meting of the national coordination council to review the overall progress in drafting the amendments.

According to the press, this initiative of Bangladesh government followed warnings of international anti-money laundering organizations which consider that country’s laws to fight the increasing money laundering and terrorism financing are ‘unsatisfactory’. By this issue, the country could even be included in the group of ‘ill-prepared countries’. The Asia Pacific Group (APG), the delegation from which visited Bangladesh last month, and the Financial Action Task Force (FATF) organization have expressed their concerns over country’s non-compliance with international standards. The new legislation is necessary to let the global organizations know that Bangladesh is right on track to fight money laundering and terrorism financing. 

The government of Bangladesh has asked for the U.S. government cooperation to update its anti-money laundering and terrorist financing acts. The officials of the U.S. Department of Justice will also extend their cooperation to finalise the amendments in keeping them with the international standard. The issue between the U.S. and Bangladesh governments will be coordinated by the Asia-Pacific Group on Money Laundering (APG).

In October, the APG group will work to review Bangladesh’s progress in strengthening its positions in anti-money laundering and terrorism financing. Along with Bangladesh, APG will follow preparations of Thailand, Sri Lanka, Myanmar, Indonesia, the Philippines and Vietnam. India and Pakistan have already enacted the necessary laws and their review was completed.

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.