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 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”.

On June 8, AML Partners released the latest version of Country Evaluator, a list that rates countries as they pertain to Anti Money Laundering and Sanctions risk.

AML Partners is a consulting company that helps financial institutions comply with the Bank Secrecy Act.

The Country Evaluator can be utilized by financial institutions to conduct risk assessments of their customer base. It can also be used for determining the level of monitoring needed for customer transactions depending on the level of anti-money laundering risk the country possesses.

According to Marcelo Di Bello, representative of the Latin American Federation of Banks (Felaban), Latin American banks are being threatened by money laundering.

During the Latin American Congress of Internal Audit and Risk Evaluation (Clain-Felaban 2010) that was held in Panama City on May 12-14, Bello said that drug-trafficking and weapons-trafficking are the illegal businesses seriously threatening financial institutions through money laundering. He also said that corruption and human trafficking are crimes connected with money laundering; however, they do not play the same roles as drug- trafficking and weapons-trafficking.

Bello warned that threats posed by criminal activities could eventually undermine the banks’ operations and reputations, and added that “The financial institutions related to these activities could be led to bankruptcy”.

The Clain-Felaban 2010 is sponsored by the Banking Association of Panama. The event gathers Latin American bankers and finance experts in order to discuss common policies that would improve the development of the regional financial systems.

On April 20, Governor of Central Bank of Iran (CBI) Mahmoud Bahmani discussed adoption of new approaches by CBI in fighting money laundering.

He said: “Gradually and upon entry of large bills to the economic system, Iran-checks, amounting to one million and half a million rials, will be collected from the market.” He added that, in the first phase, there will be an attempt to remove 500 000 rial Iran-checks from the market in order to control money laundering because large Iran-checks can cause problems as regards economic corruption and money laundering (they are not cross signed). According to Bahmani, “based on a new plan, banks will sell the remaining Iran-checks in the market with the signature of buyer so that if necessary they can be tracked down with this controlling system”.

Bahmani recalled that in the 1st half of 2009-2010 the industrial sector grew by 6.4% and the mine sector by 8.2%. However, growth of agro sector was negative – it decreased by 10% because of drought.