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Countries/jurisdictions of primary concern.

Cyprus

Cyprus has been divided since the Turkish military intervention of 1974, following a coup d'etat directed from Greece. Since then, the Republic of Cyprus (ROC) has controlled the southern two-thirds of the country, while a Turkish Cypriot administration calling itself the "Turkish Republic of Northern Cyprus (TRNC)" controls the northern part. Only Turkey recognizes the "TRNC." The U.S. Government recognizes only the Republic of Cyprus. This report primarily discusses the area controlled by the ROC but also includes a separate section on the area administered by Turkish Cypriots.

Cyprus is a major regional financial center with a robust financial services industry and a significant amount of nonresident businesses. A number of factors have contributed to the development of Cyprus as a financial center: a preferential tax regime; double tax treaties with 44 countries (including the United States, several European Union (EU) nations, and former Soviet Union nations); a sophisticated telecommunications infrastructure; and EU membership. In 2003, Cyprus introduced tax and legislative changes effectively abolishing all legal and substantive distinctions between domestic and offshore companies. Cyprus has also lifted the prohibition from doing business domestically and companies formerly classified as offshore are now free to engage in business locally.

Like any financial center, Cyprus remains vulnerable to money laundering and illicit finance activities. Simple financial crime constitutes the biggest threat for domestic money laundering and tax evasion internationally. There is no significant black market for smuggled goods in Cyprus. What little black market trade exists is typically related to small scale transactions, typically involving fake clothing or cigarettes across the UN-patrolled buffer zone separating the ROC from the "TRNC".

Offshore Center: Yes

International business companies are allowed to be registered in Cyprus but their ultimate beneficial ownership must be disclosed to the authorities. Cyprus has a system in place allowing full access to information on the beneficial owners of every registered company. This includes companies doing business abroad and companies with foreign beneficial owners and shareholders. Bearer shares are not permitted in Cyprus. Nominee (anonymous) directors and/or trustees are not allowed. There are over 220,000 companies registered in Cyprus, many of which are non-resident. The same disclosure, reporting, tax and other laws and regulations apply equally to all registered companies. Cypriot authorities are aware of the risks posed by the large number of non-resident businesses and monitor potential money laundering activities. Companies not registered in Cyprus may open bank accounts here, but the banks must perform appropriate due diligence and follow Know-Your-Customer (KYC) regulations.

Free Trade Zones: Yes

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

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The Law for the Prevention and Suppression of Money Laundering Activities (LPSMLA) passed in 2007. The LPSMLA consolidated and superseded Cyprus' initial anti-money laundering legislation. The LPSMLA criminalizes all money laundering, with the definition of predicate offense being any criminal offense punishable by a prison term exceeding one year, including narcotics related money laundering.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

Sections four and eight of Ratification Law 29 (III) of 2001 criminalize terrorist financing. The implementing legislation criminalizes the collection of funds in the knowledge that they would be used by terrorists or terrorist groups for violent acts. The LPSMLA criminalizes the general collection of funds with the knowledge that terrorists or terrorist groups would use them for any purpose (i.e., not just for violent acts); and explicitly covers terrorist finance.

Know-your-customer rules: Yes

The LPSMLA establishes know-your-customer (KYC) regulations that apply to traditional financial institutions as well as many designated non-financial businesses and professions (DNFBP), such as auditors, tax advisors, accountants, and in certain cases, attorneys, real estate agents, and dealers in precious stones and gems. The LPSMLA describes the method and timeline for applying customer due diligence and identification procedures, as well as enhanced due diligence. Central Bank money laundering directives place additional obligations on banks, including requirements on customer acceptance policy and the updating of customers' identification data and business profiles. Banks must have computerized risk management systems to verify whether a customer is a politically exposed person (PEP) and have adequate management information systems for on-line monitoring of customers' accounts and transactions.

Bank records retention: Yes

Obligated entities must retain client identification data, transaction records and business correspondence for five years upon termination of the business relationship or date of the last business transaction.

Suspicious transaction reporting: Yes

Bank employees must report all suspicious transactions to the bank's compliance officer, who determines whether to forward a report to the Cypriot financial intelligence unit (FIU) for investigation. Banks also must file monthly reports with the Central Bank indicating the total number of STRs submitted to the compliance officer and the number forwarded by the compliance officer to the FIU. Reporting individuals are fully protected by the law with respect to their cooperation with law enforcement authorities. Failure to report suspicious transactions is punishable under the law. Between January 1 and December 1, 2009, MOKAS, the Cypriot FIU, received 387 STRs.

Large currency transaction reporting: Yes

All banks must report to the Central Bank on a monthly basis individual cash deposits in any currency exceeding 10,000 euro (approximately $15,000).

Narcotics asset seizure and forfeiture:

Cyprus has enacted comprehensive legislation and established systems for identifying, tracing, freezing, seizing, and forfeiting narcotics-related assets and assets derived from other serious crimes. Like most EU countries, though, Cyprus has no provisions allowing civil forfeiture of assets. The Police and the FIU are responsible for tracing, seizing and freezing assets and they fully enforce existing legislation. Cyprus has an independent national system and mechanism for freezing terrorist assets, and has also engaged in bilateral and multilateral negotiations with other governments to enhance its asset tracking and seizure system. In March 2009, MOKAS was designated officially as Cyprus' Asset Recovery Office. Cyprus' asset forfeiture fund is managed by the Law Office of the Republic. Seized assets are passed on either to victims of the pertinent crime or to the government's consolidated budget. In 2009, MOKAS issued two confiscation orders for a total of approximately 5.5 million [euro] ($8.2 million), 16 Freezing orders, 3 registrations of foreign freezing or confiscation orders, and 18 Administrative Orders for postponement of transactions.

Narcotics asset sharing authority: Yes

Cyprus has enacted laws for the sharing of seized assets with foreign governments. Cross-border currency transportation requirements: Yes

All travelers entering or leaving Cyprus with cash or gold valued at more than 10,000 euro (approximately $15,000) must declare it to Customs. Cash declaration and smuggling reports are entered into a database maintained by Customs, and shared with the Cypriot FIU and other government agencies.

Cooperation with foreign governments (including refusals): Yes

There are no legal issues hampering Cyprus' ability to assist foreign governments in mutual legal assistance requests.

U.S. or international sanctions or penalties: No Enforcement and implementation issues and comments:

Since 2004, there have been 261 prosecutions for money laundering derived from police and MOKAS investigations, eight of which took place in 2009 by MOKAS investigations. Of the 261 prosecutions, 132 have resulted in convictions.

The "TRNC's" lack of an adequate legal and institutional framework to provide effective protection against the risks of money laundering and terrorist financing could contribute to

U.S.-related currency transactions:

There is no information relating to whether currency transactions involving international narcotics trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States or that otherwise significantly affect the United States are occurring in Cyprus.

Records exchange mechanism with U.S.:

Cyprus and the United States are parties to a bilateral mutual legal assistance treaty that provides for exchange of information. The Cypriot FIU is able to share information with other FIUs without having an MOU in place.

International agreements:

Cypriot law allows MOKAS to share information with other FIUs without benefit of a memorandum of understanding (MOU).

In July 2009, a new amending law (N 73(I)/2009) came into effect amending the structure, responsibility and powers of the Cyprus Securities and Exchange Commission (CSEC). The amendment allows the CSEC to cooperate fully with foreign regulators and to obtain information regarding the beneficial owners of any Cypriot-registered company.

Cyprus is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--Yes

Cyprus is a member of the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body (FSRB). It's most recent mutual evaluation can be found here: www. coe.int/t/dghl/monitoring/moneyval/default en.asp

Area Administered by Turkish Cypriots

The Turkish Cypriot community continues to lack the legal and institutional framework necessary to provide effective protection against the risks of money laundering, although significant progress has been made over the last year with the passage of laws better regulating the onshore and offshore banking sectors and casinos. There are currently 22 domestic banks in the area administered by Turkish Cypriots and Internet banking is available. The offshore sector consists of 13 banks and 34 companies. The offshore banking sector remains a concern. The offshore banks may not conduct business with residents of the area administered by Turkish Cypriots and may not deal in cash. Under revised laws passed in 2008, the "Central Bank" took over the regulation and licensing of offshore banks from the "Ministry of Finance" thereby improving oversight. The "Central Bank" audits the offshore entities, which must submit an annual report on their activities. The new law permits only banks previously licensed by Organization for Economic Co-operation and Development (OECD)-member nations or Turkey to operate an offshore branch in northern Cyprus. Despite the 2009 promulgation of more strict laws, the 23 operating casinos remain essentially unregulated due to the lack of an enforcement or investigative mechanism by the casino regulatory body and efforts to de-criminalize any failure by casinos to follow KYC regulations.

The Turkish Cypriot community is not part of any FSRB and thus is not subject to normal peer evaluations. In 2007, FATF conducted an informal review and found numerous shortcomings in AML laws and regulations as well as insufficient resources devoted to the effort. After including the northern part of Cyprus as an area of concern for money laundering in February 2008, FATF found "significant progress" had been made by its October 2008 meeting and subsequently removed the northern part of Cyprus as an area of concern in February 2009.

Adoption of essential laws and regulations:

Turkish Cypriot authorities have taken steps to address the risk of financial crime, including enacting an anti-money laundering "law" (AMLL) for the area and formally establishing an FIU equivalent. The "law" aims to reduce the number of cash transactions in the area administered by Turkish Cypriots as well as improve the tracking of any transactions above 10,000 Euros (approximately $15,000). Under the AMLL, banks must report to the "Central Bank" and the "Money and Exchange Bureau" any electronic transfers of funds in excess of $100,000. Such reports must include information identifying the person transferring the money, the source of the money, and its destination. Under the new "law," banks, nonbank financial institutions, and foreign exchange dealers must report all currency transactions over 10,000 Euros (approximately $15,000) and suspicious transactions in any amount to the "Money and Exchange Bureau". Banks must follow a KYC policy and require customer identification. Banks also must submit STRs to a five-member "Anti-Money Laundering Committee" which decides whether to refer suspicious cases to the police and the "attorney general's office" for further investigation. The five-member committee is composed of representatives of the "police," "customs," the "Central Bank," and the "Ministry of Economy". According to the Turkish Cypriot authorities, 102 STRs were received by the "FIU" in 2009.

Cross border currency transportation requirements:

The AMLL requires individuals entering the area administered by Turkish Cypriots to declare cash over 10,000 Euros (approximately $15,000) and prohibits individuals leaving the area administered by Turkish Cypriots from transporting more than 10,000 Euros (approximately $15,000) in currency. However, "Central Bank" officials note that this "law" is difficult to enforce.

Recommendations:

The Government of the Republic of Cyprus has put in place a comprehensive anti-money laundering/counterterrorist financing regime, which it continues to upgrade. It should continue its planned improvements.

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

Dominican Republic

The Dominican Republic (DR) is not considered an important regional financial center. However, the DR has the largest economy in the Caribbean and it is a major transit point for narcotics. The existence of six international airports, as well as several seaports and a long frontier with Haiti, at which security is poor, present the authorities with serious challenges. Financial institutions in the DR engage in currency transactions involving the proceeds of international narcotics trafficking, including significant amounts of currency derived from illegal drug sales in the United States. The smuggling of bulk cash by couriers and the use of wire transfer remittances are the primary methods for moving illicit funds from the United States into the DR. Once in the DR, currency exchange houses, money remittance companies, real estate and construction companies, and casinos are commonly used to facilitate the laundering of illicit funds. The lack of a viable financial intelligence unit exacerbates, and the proposed creation of an offshore financial center may worsen the Dominican Republic's vulnerability to money laundering.

Offshore Center: Legally authorized

In December 2008, the DR passed a law allowing for the creation of "International Financial Zones" (IFZs) in which the full range of financial services can be conducted completely separately from traditional monetary, banking and financial regulatory oversight. The IFZs will have their own regulatory and supervisory authority, which is independent from that of the domestic financial system. This appears to create a risk that IFZs cannot be regulated on anti-money laundering/counter-terrorist financing (AML/CFT) matters. The 2008 law has not yet been implemented.

Free Trade Zones: Yes

The Dominican Republic has approximately 50 Free Trade Zone parks, focused on textiles, tobacco, small electric devices, and medical and pharmaceutical products.

Criminalizes narcotics money laundering: Yes

Money laundering in the DR is criminalized under Act 17 of 1995 (the 1995 Narcotics Law) and Law No. 72-02 of 2002. Under these laws, the predicate offenses for money laundering include illegal drug activity, trafficking in human beings or human organs, arms trafficking, kidnapping, extortion related to recordings and electronic tapes, theft of vehicles, counterfeiting of currency, fraud against the state, embezzlement, and extortion and bribery related to drug trafficking. Law 183-02 also imposes financial penalties on institutions that engage in money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

See above. Terrorist financing is also a predicate offense for money laundering. Criminalizes terrorist financing: Yes

In August 2008, the Government of the Dominican Republic (GODR) criminalized terrorist financing with the enactment of the Anti-Terrorism Law 267-8.

Know-your-customer rules: Yes

Under Law No. 72-02 and Decree No. 288-1996, numerous financial and non-financial institutions are subject to anti-money laundering provisions. Obligated entities include banks, currency exchange houses, stockbrokers, securities brokers, cashers of checks or other types of negotiable instruments, issuers/sellers/cashers of travelers checks or money orders, credit and debit card companies, remittance companies, offshore financial service providers, casinos, real estate agents, automobile dealerships, insurance companies, and certain commercial entities such as those dealing in firearms and precious metals.

Bank records retention: Yes

Records must be maintained for a minimum of five years. Suspicious transaction reporting: Yes

In 1997, the DR established a requirement that reporting entities in the financial sector file suspicious transaction reports (STRs).

Large currency transaction reporting: Yes

Reporting entities must report all currency transactions exceeding $10,000.

Narcotics asset seizure and forfeiture:

The 1995 Narcotics Law allows preventive seizures and criminal forfeiture of drug-related assets, and authorizes international cooperation in forfeiture cases. Law No. 78-03 permits the seizure, conservation and administration of assets that are the product or instrument of criminal acts pending judgment and sentencing. However, there is a lack of regulations to implement the legislation which has led to ineffective asset inventory and management. In addition, according Dominican Republic officials, the Civil Code (articles 1131, 1349, and 1350) provides for the annulment of agreements or contracts entered into to disguise the ownership of property. However, there is no indication that these provisions have yet been used.

In December 2009, over 20 DR properties worth millions of dollars were seized from a Spanish citizen linked to an international network of narcotics traffickers that used the country to launder hundreds of millions of dollars.

Narcotics asset sharing authority: Yes

The GODR has bilateral agreements with other countries and is in the process of enhancing asset tracing, freezing and seizure abilities. The United States is negotiating an Asset Sharing Agreement with Dominican Republic officials in light of several multi-million joint forfeiture cases which are pending.

Cross-border currency transportation requirements: Yes

Individuals must declare cross-border movements of currency that are equal to or greater than the equivalent of $10,000 in domestic or foreign currency.

Cooperation with foreign governments: Yes

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The absence of political will and corruption continue to be major factors limiting enforcement efforts. For example, large sums of bulk cash are allowed to transit the country by corrupt military and law enforcement, in return for a fee. Also, a significant market exists for smuggled, counterfeit, copied and stolen goods, especially pharmaceuticals. There is virtually no enforcement of regulations to prohibit the sale of smuggled goods, and patent/copyright laws only call for civil penalties.

In 1997, the DR created an FIU. Subsequently, in 2002, a second FIU was established that was given the mandate to receive STRs from both financial and non-financial reporting entities, as well as present leads to the prosecutors' office. According to the GODR, the second entity has replaced the original FIU as the official FIU of the Dominican Republic. This duplicity of FIUs caused, and still causes, confusion among obligated entities regarding their reporting requirements. Also, the DR lost its membership in the Egmont Group in November 2006 as its present FIU is not the legally recognized FIU of the Dominican Republic. The DR does not currently have representation in the Egmont Group.

From January 2004 to July 2009, there have been 50 money laundering investigations and 12 convictions.

U.S.-related currency transactions:

A tremendous amount of bulk cash smuggling takes place, representing the proceeds of narcotics that transit the DR.

Records exchange mechanism with U.S.: No

The DR and the United States do not have a mutual legal assistance treaty in place. The United States continues to encourage the GODR to sign and ratify the Inter-American Convention on Mutual Assistance in criminal matters, and to sign related money laundering conventions.

The 1909 U.S.-Dominican Extradition Treaty lists crimes for which suspects or fugitives may be delivered to the other nation. These crimes include embezzlement, "obtaining [or] receiving money [etc.] knowing the same to have been unlawfully obtained" and fraud.

International agreements:

The Dominican Republic is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--Yes

The DR is a member of the Caribbean Financial Action Task Force (CFATF). Its most recent mutual evaluation can be found here: http://www.cfatf gafic.org/downloadables/mer/Dominican Republic 3rd Round MER %28Final%29 English.pdf

Recommendations:

Weak implementation of anti-money laundering legislation leaves the Dominican Republic vulnerable to criminal financial activity. Resources dedicated to combat money laundering need to be increased and roles need to be clearly defined in enforcement efforts. Moreover, it does not appear that the Dominican judiciary is well prepared to handle complex financial crimes. There should be enhanced supervision of money service businesses. The Government of the Dominican Republic (GODR) should bolster the operational capacity of the fledgling FIU and ensure a full transition of FIU functions. The FIU should have budgetary independence. The GODR should not establish International Financial Zones, which will greatly increase the risk of all-source money laundering. Specific steps should be taken to combat corruption within both government and industry.

France

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

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

France criminalizes money laundering through Articles 222-38 (2002) and 324-1 through 324-6 (2002) of the Penal Code and Article 415 of the Customs Code.

Criminalizes other money laundering, including terrorism-related: Yes

France criminalizes money laundering through Articles 222-38 (2002) and 324-1 through 324-6 (2002) of the Penal Code and Article 415 of the Customs Code. The legal procedure for criminal conspiracy applies to money laundering crimes. The Third European Union (EU) Money Laundering Directive is implemented by Ordinance No. 2009-104 of January 30, 2009. Decree No. 2009-874 of July 16, 2009, and Decree No. 2009-1087 of September 2, 2009 have been enacted in order to make the EU Directive effective.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

Terrorist financing is a criminal offense under Article 421-2-2 of the Penal Code (2001). Know-your-customer rules: Yes

Before entering into a contractual relationship or assisting a customer in the preparation or conduct of a transaction, financial entities subject to transaction reporting requirements must identify their customers and verify their identities via presentation of a document bearing a photograph of the client. Financial entities must identify and verify the identity of occasional customers with respect to transactions above euro 8000 or rental of a safe-deposit box. For casinos and other gaming entities, the threshold is euro 1500. Know-your-customer (KYC) regulations also apply to credit institutions, financial institutions, casinos, and insurance companies and brokers.

Bank records retention: Yes

Financial entities are required to retain all documents relating to the identity of their regular and occasional customers and documents pertaining to transactions for five years following the closing of the account or the termination of the business relationship, or the date of completion of the transaction.

Suspicious transaction reporting: Yes

Obligated entities are required to submit suspicious transaction reports (STRs) to the Unit for Treatment of Intelligence and Action Against Clandestine Financial Circuits (TRACFIN) France's financial intelligence unit (FIU). TRACFIN received 14,565 STRs in 2008... The FIU referred 359 cases to the judicial authorities in 2008.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Law No. 96-392 of 1996 institutes procedures for seizure and confiscation of the proceeds of crime. French law permits seizure of all or part of property. In cases of terrorist financing, France has promulgated an additional penalty of confiscation of the total assets of the terrorist offender.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

Travelers entering or leaving the EU and carrying any sum equal to or exceeding euro 10,000 (approximately $14,000) or negotiable monetary instruments are required to make a declaration to the customs authorities. No reporting is required when crossing country borders within the EU.

Cooperation with foreign governments: Yes

There are no known impediments to international cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

French law enforcement authorities actively investigate money laundering and terror finance.

French authorities have moved rapidly to identify and freeze financial assets of organizations associated with al-Qaida and the Taliban under UNSCR 1267.

U.S.-related currency transactions:

Currency transactions involving international narcotics trafficking proceeds do not appear to include significant amounts of U.S. currency.

Records exchange mechanism with U.S.:

The United States and France entered into a mutual legal assistance treaty (MLAT) in 2001. Through MLAT requests and by other means, France and the United States have exchanged large amounts of data in connection with money laundering and terrorist financing. TRACFIN has an information-sharing agreement with the U.S. Financial Crimes Enforcement Network (FinCEN).

International agreements:

TRACFIN may exchange information with foreign counterparts that observe similar rules regarding reciprocity and confidentiality of information. TRACFIN has information sharing agreements with 32 foreign FIUs, including FinCEN. France is a party to various information exchange agreements and is an active participant in international efforts to combat global money laundering, terrorist finance, and transnational crime.

France is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* UN Convention against Corruption--Yes

France is a member of the Financial Action Task Force (FATF). It is a Cooperating and Supporting Nation to the Caribbean Financial Action Task Force (CFATF) and an Observer to the Financial Action Task Force of South America (GAFISUD), both FATF-style regional bodies. Compliance with the FATF recommendations was evaluated in a report prepared by the International Monetary Fund's Financial Sector Assessment Program. The report can be found here: http://www.imf.org/external/np/fsap/fsap.asp#

Recommendations:

The Government of France (GOF) has established a comprehensive anti-money laundering/counter-terrorist financing (AML/CFT) regime and is an active partner in international efforts to control money laundering and the financing of terrorism. France should continue its active participation in international organizations and its outreach to lower-capacity recipient countries to combat the domestic and global threats of money laundering and terrorist financing. The GOF should enact a compulsory written cash declaration regime at its airports and borders to ensure that travelers entering and exiting France provide, in writing, a record of their conveyance of currency or monetary instruments.

Germany

Germany is one of the largest financial centers in Europe. Most of the money laundering that occurs in Germany relates to white-collar crime. Although not a major drug producing country, Germany continues to be a consumer and a major transit hub for narcotics. Organized criminal groups involved in drug-trafficking and other illegal activities are an additional source of money laundering in Germany.

Offshore Center: No

Free Trade Zones: Yes

Free Trade Zones of Hamburg, Bremerhaven, and Cuxhaven

Criminalizes narcotics money laundering: Yes

The German Criminal Code Section 261.

Criminalizes other money laundering, including terrorism-related: Yes

German Criminal Code, Sections 261 ("Money Laundering: concealment of Unlawfully Acquired Assets"), 129 ("Formation of Criminal Organization"), 129a ("Formation of Terrorist Organizations"), and 129b ("Criminal and Terrorist Organizations Abroad"). Section 261 was incorporated into the Criminal Code through the "Act on Suppression of Illegal Drug Trafficking and other Manifestations of Organized Crime" which became effective in 1992. Since 1992, the Act has been amended several times, mainly to extend the list of predicate offenses for money laundering. In 2002, terrorist financing was added to the Criminal Code as a predicate offense for money laundering.

In August 2008, the passage of the Act amending the Money Laundering Suppression Act updated and replaced the original 1993 Money Laundering Act. It also incorporates the requirements of the Third EU Money Laundering Directive into German law and provides an enhanced legal definition for terrorist financing.

Criminalizes terrorist financing: Yes

(Please also refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/.)

See previous section.

Know-your-customer rules: Yes

In August 2008, new legislation entered into force that contains further provisions on customer due diligence and other internal risk-management measures to prevent money laundering and terrorist financing. The new regulations apply to banks, insurance companies, and a number of professional groups (e.g., financial services providers, lawyers, notaries public, tax advisors, and other business operators).

Bank records retention: Yes

Covered institutions are obligated to record all details obtained for the purposes of identification. The information obtained is to be recorded in the data files of the institution or a copy of the identity documents may be made and retained. In addition to the recording and retaining of customer identification data, along with the accompanying contractual and/or account opening documents and relevant correspondence, institutions must also keep a complete record of the information pertaining to all transactions effected by the customer within the scope of a business relationship.

Suspicious transaction reporting: Yes

Financial and non-financial institutions must file suspicious transaction reports (STRs) when there are suspicions that a transaction serves or--if accomplished--would serve the purpose of money laundering or of financing a terrorist group. There is currently no currency reporting threshold for suspicious transaction filing. Reporting is mandated by a variety of entities, including notaries, accountants, tax consultants, casinos, luxury item retailers, and attorneys. Information for 2009 was unavailable, but in 2008, obligated entities filed 7,349 STRs, generating 2,197 indications of potential criminal offenses.

Large currency transaction reporting: No

No requirement exists for systematic reporting of large cash transactions.

Narcotics asset seizure and forfeiture:

German law provides for the tracing, freezing, and seizure of assets. An amendment to the Banking Act institutes a broad legal basis for Germany to order frozen assets of EU residents suspected as terrorists. Authorities primarily concentrate on financial assets. Germany's system allows immediate identification of financial assets that can be potentially frozen, and German law enforcement authorities can freeze accounts for up to nine months. However, unless the assets belong to an individual or entity designated by the UNSCR 1267 Sanctions Committee, Germany cannot seize money until authorities prove in court that the funds were derived from criminal activity or intended for terrorist activity. Germany participates in United Nations and EU processes to monitor and freeze the assets of terrorists. The names of suspected terrorists and terrorist organizations listed on the UNSCR 1267 Sanctions Committee's consolidated list and those designated by EU or German authorities are regularly disseminated to financial institutions. A court can order the freezing of nonfinancial assets. Germany has taken the view that the EU Council Common Position requires, at a minimum, a criminal investigation to establish a sufficient legal basis for freezes under the EU 931 Working Party process. Proceeds from asset seizures and forfeitures go into the federal government treasury.

Narcotics asset sharing authority:

Legislation implementing the EU Council Framework Decision 2006/783/JHA, on the application of the principle of mutual recognition of confiscation orders, entered into force on October 22, 2009. The legislation amended the law on International Cooperation in Criminal Matters and allows for assets to be shared with other EU member states. The new legislation also makes it possible for Germany to share confiscated assets with non-EU member states on a case-by-case basis.

Cross-border currency transportation requirements: Yes

As of June 15, 2007, travelers entering Germany from a non-EU country or traveling to a non-EU country with 10,000 Euros (approximately $14,559) or more in cash must declare their cash in writing. The definition of "cash" includes currency, checks, traveler's checks, money orders, bills of exchange, promissory notes, shares, debentures, and due interest warrants (coupons). The written declaration must also include personal data, travel itinerary and means of transport as well as the total amount of money being transported, its source, its intended purpose, and the identities of the owner and the payee. If authorities doubt the information given, or if there are other grounds to suspect money laundering or the funding of a terrorist organization, the cash will be placed under customs custody until the matter has been investigated. Penalties for non-declaration or false declaration include a fine of up to one million Euros (approximately $1,455,900).

Cooperation with foreign governments (including refusals):

No legal issues hamper the government's ability to assist foreign governments in mutual legal assistance requests

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There are no known implementation issues.

U.S.-related currency transactions:

Currency transactions related to international narcotics trafficking do not evidence an extensive connection to the United States nor do they involve a significant amount of U.S. currency.

Records exchange mechanism with U.S.:

Germany and the United States are parties to a bilateral mutual legal assistance treaty (MLAT) that entered into effect on October 18, 2009, that provides for exchange of information. Germany exchanges law enforcement information with the United States through bilateral law enforcement agreements and informal mechanisms, and the United States and German authorities have conducted joint investigations. Instruments of ratification to implement the Second Supplementary Treaty to the Treaty between the U.S. and Germany concerning Extradition were exchanged in 2009 and the agreement will enter into force on February 1, 2010. The German FIU does not have a memorandum of understanding (MOU) in place with FinCEN, and German law does not require that an MOU be in effect prior to exchanging information with foreign financial intelligence units.

International agreements:

The German government has mutual legal assistance treaties in criminal matters with numerous countries. Germany is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--Yes

Germany is a member of the Financial Action Task Force (FATF). When the FATF reviews and adopts Germany's third round mutual evaluation report in February 2010, it will be posted on the FATF website: www.fatf-gafi.org

Recommendations: The Government of Germany's AML laws and its ratification of international instruments underline Germany's continued efforts to combat money laundering and terrorist financing. Germany should amend its wire transfer legislation to ensure that originator information applies to all cross-border transfers, including those within the EU. Germany should also consider the adoption of large currency transaction reporting requirements. It should also amend legislation to waive the asset freezing restrictions in the EU 931 Working Party process for financial crime and terrorist financing, so that the freezing process does not require a criminal investigation; as well as amend its legislation to allow asset sharing with other countries. Germany should ratify the UN Convention against Corruption.

Greece

Greece is becoming a regional financial center in the rapidly developing Balkans as well as a bridge between Europe and the Middle East. Anecdotal evidence of illicit transactions suggests an increase in financial crimes in the past three to four years. Greek law enforcement proceedings indicate that Greece is vulnerable to narcotics trafficking, trafficking in persons and illegal immigration, prostitution, cigarette and other forms of smuggling, serious fraud or theft, illicit gambling activities, and large scale tax evasion. Criminally-derived proceeds historically are most commonly invested in real estate, the lottery, and the stock market. Criminal organizations from southeastern Europe and the Balkan region execute a large percentage of crime generating illicit funds. The widespread use of cash facilitates a gray economy as well as tax evasion. Due to the large informal economy--estimated by the OECD to be between 25 and 37 percent of GDP--it is difficult to determine the amount of smuggled goods into the country, including whether any of it is funded by narcotic proceeds or other illicit proceeds. There is increasing evidence that domestic terrorist groups are involved with drug-trafficking.

Offshore Center:

Greek authorities maintain that Greece is not an offshore financial center. Under Law 3427/2005, foreign and domestic companies may provide specific services to enterprises not established in Greece. These companies must employ at least four employees and have at least 100,000 Euros (approximately $144,000) in annual operating expenses in Greece. These entities must apply for a special license with the Ministry of Finance (MoF). They do not receive a tax exemption and must comply with anti-money laundering/counter-terrorist financing (AML/CFT) requirements. Pursuant to Article 10 of Law 3691/2008, the MoF will need to obtain and catalog additional registry information.

Shipping companies, known for their complex corporate and ownership structures, and which reportedly can be used to hide the identity of the beneficial owner, are not governed by Law 3427, but rather by Laws 27/1975 and 378/1968. Although companies must keep a receipts and expenses book, they have no obligation to publish financial statements. These firms frequently fall under the authority of non-Greek jurisdictions and often operate through a large number of intermediaries, potentially serving as a vehicle for money laundering. Greek law allows banking authorities to check these companies' transactions, but authorities need the cooperation of other jurisdictions for audits to be effective.

Free Trade Zones: Yes

Greece has three free trade zones, located at the ports of Piraeus, Thessalonica, and Heraklion, where foreign goods may be imported without payment of customs duties or other taxes if they are subsequently transshipped or re-exported. There is no information regarding whether criminals use these zones in trade-based money laundering (TBML) or in terrorist financing schemes.

Criminalizes narcotics money laundering: Yes

See below.

Criminalizes other money laundering, including terrorism-related: Yes

On August 5, 2008, Greece passed Law 3691/2008 that clearly defines money laundering (a criminal offense) and includes as predicate offenses all offenses punishable by a minimum penalty of more than six months imprisonment and which generate any economic benefit. The law makes a money laundering conviction possible without a conviction for a predicate offense and extends the definition of illicit proceeds to include any type or value of property involved.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

Law 3691/2008 stipulates that terrorist financing is both a stand-alone offense and a predicate offense for money laundering. An amendment of the penal code extends the scope of terrorist financing to include individual terrorist acts and individual terrorists. The law does not require that a terrorist act actually occur or that funding be used to finance a particular act, only that funds be used to finance terrorist organizations or groups, or individual terrorists or terrorist acts.

Know-your-customer rules: Yes

Law 3691/2008 mandates a risk-based approach for all financial institutions, now inclusive of bureaux de change, money remitters, brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators, and designated nonfinancial businesses and professions, with enhanced due diligence for some clients and politically exposed persons. The law also mandates identification of beneficial owners, defined as individuals who own or control 25 percent plus one share of a legal entity. Per rule 109/2008 issued in December 2008, all customer due diligence provisions (CDD) now apply to insurance intermediaries, such as brokers and agents. Under a March Decision by the Bank of Greece, offshore companies and special purpose vehicles as well as nonprofit organizations with bank accounts in Greece are designated as high risk and subject to enhanced due diligence.

Bank records retention: Yes

The law requires that banks and financial institutions maintain adequate records and supporting documents for at least five years after ending a relationship with a customer, or, in the case of occasional transactions, for five years after the date of the transaction.

Suspicious transaction reporting: Yes

Law 3691/2008 mandates that banks, nonbank financial institutions, and designated non-financial businesses must submit suspicious transaction reports (STRs) for any unusual or suspicious transactions or attempted transactions where money laundering or terrorist financing is suspected. Of the 2,899 STRs received in 2008, 1,102 were investigated, 103 of those resulted in prosecution, and ten resulted in the issuance of freezing orders by the financial intelligence unit (FIU). In 2009, of the 2,304 STRs filed, 1,514 were investigated, 81 resulted in prosecution, and 118 resulted in the issuance of freezing orders by the FIU.

Large currency transaction reporting:

No information provided.

Narcotics asset seizure and forfeiture:

Law 3691/2008 provides for freezing, seizing, and confiscation of direct and indirect proceeds of a crime, or in the attempt of a crime, and empowers the FIU to freeze direct and indirect assets of persons involved in money laundering cases. In addition, the FIU can now freeze assets in urgent money laundering and terrorist financing cases without first having to open a criminal investigation. According to Article 46 of Law 3691, assets derived from a predicate offense, acquired directly or indirectly out of the proceeds of such offenses, or the means that were used or were going to be used for committing these offenses shall be seized and, if there is no legal reason for returning them to the owner, shall be compulsorily confiscated by virtue of the court's sentence." A total of 14.55 million Euros (approximately $20.9 million) in assets were frozen by the FIU in 2009.

With regard to terrorist financing, Article 49 of Law 3691 provides that by administrative decisions of the Minister of Finance, assets of any nature of persons (natural or legal), entities or groups listed in the United Nations Security Council Resolution (UNSCR) 1267 Sanctions Committee consolidated list, European Union (EU) catalogues, and EU regulations or decisions may be immediately frozen upon identification. Moreover, the judicial authorities and the Greek FIU may order the immediate freezing of any assets which appear to be linked to terrorist activities in general.

Narcotics asset sharing:

There is no information on whether Greece has enacted laws for sharing of seized assets with other governments.

Cross-border currency transportation requirements: Yes

According to the Government of Greece (GOG), EU Regulation 1889/2005 on cross-border declaration and disclosure is applicable in Greece. Customs exercise cash controls by persons entering or leaving the country. As such, they make use of the mandatory declaration system at borders. They have the legal authority to impose sanctions (25 percent of the undeclared amount). If the funds prove to have money laundering or terrorist financing roots, they are seized according to Law 3691.

Cooperation with foreign governments (including refusals): Yes

No known impediments exist.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues/comments:

The Greek authorities indicate the FIU finalized a new STR form in June 2009 for the banking and financial sector; however, such forms are still not available for the remaining entities. The FIU claims it is in the process of finalizing such a form for the non-bank financial sector. Additionally, the FIU has insufficient physical and electronic security systems in place to securely protect the information it holds. Although the FIU has established a database to track STR submissions, it is insufficient to meet the FIU's needs, as STRs are hand delivered to the FIU on paper.

In 2008, there were 247 money laundering cases under investigation, 42 prosecutions, and 34 convictions; for the first half of 2009, there were 219 cases under investigation, an unknown number of prosecutions, and 20 convictions.

U.S.-related currency transactions:

Currency transactions involving international narcotics-trafficking proceeds do not appear to include significant amounts of U.S. currency.

Records exchange mechanism with U.S.:

Greece exchanges information on money laundering through its mutual legal assistance treaty (MLAT) with the United States, which entered into force November 20, 2001. The Bilateral Police Cooperation Protocol provides a mechanism for exchanging records with U.S. authorities in connection with investigations and proceedings related to narcotics trafficking, terrorism, and terrorist financing. Cooperation between the U.S. Drug Enforcement Administration and the GOG has been and continues to be extensive.

International agreements:

Greece has signed bilateral police cooperation agreements with 19 countries. It also has a trilateral police cooperation agreement with Bulgaria and Romania, and a bilateral agreement with Ukraine to combat terrorism, drug-trafficking, organized crime, and other criminal activities. The Greek FIU cooperates smoothly with its counterparts internationally. The FIU has enhanced its cooperation with other FIUs bilaterally by signing memoranda of understanding (MOUs).

Following an initiative of the Bank of Greece, a multilateral MOU was signed, on high-level principles of co-operation and coordination, by the banking supervisors of Southeastern Europe. As of August 2008, the signing parties were: the Bank of Albania, the Bank of Greece, the National Bank of the Republic of the Former Yugoslav Republic of Macedonia, the National Bank of Romania, the Bulgarian National Bank, the National Bank of Serbia, the Central Bank of Cyprus, Bosnia and Herzegovina, and the Central Bank of Montenegro. Regarding money laundering and terrorist financing, the signing parties will cooperate to ensure that the cross-border banking groups apply effective CDD policies and procedures across their operations. In addition, the parties will exchange views on trends and methods (typologies) of money laundering and/or terrorist financing prevailing in the region with a view to developing guidance for the institutions under their supervision.

Greece is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--No

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption -Yes

Greece is a member of the FATF. Its most recent mutual evaluation can be found here: http://www.fatfgafi.org/dataoecd/2/55/38987373.pdf

Recommendations:

The Government of Greece should make available adequate human and financial resources to ensure the FIU is able to fulfill its responsibilities. The GOG should ensure the FIU gets the necessary funding and training to develop an improved data management system capable of meeting the needs of the FIU. This includes improving its technical standards and capabilities so that analysts can effectively use its database. In addition, Greece should dedicate additional resources to the investigation and prosecution of money laundering cases, and increase specialization and training on money laundering and terrorist financing for law enforcement and judicial authorities. The GOG should ensure adequate regulation and supervision of lawyers, notaries, and nonprofits, and should ensure that supervision carried out by the supervisory bodies is effective. The GOG should issue clear guidance to financial institutions and DNFBPs on freezing assets; improve their asset freezing capabilities, and develop a clear and effective system for identifying and freezing terrorist assets. Greece should also ensure uniform enforcement of its cross-border currency reporting requirements and take further steps to deter the smuggling of currency across its borders; and explicitly abolish company-issued bearer shares. Greece also should ensure that companies operating within its free trade zones are subject to the same anti-money laundering/counter-terrorist financing (AML/CFT) requirements and CDD provisions as in other sectors and bring charitable and nonprofit organizations under the AML/CFT regime. Finally, Greece should ratify the UN Convention against Transnational Organized Crime.

Guatemala

Historically weak law enforcement and judiciary systems coupled with endemic corruption and increasing organized crime activity contribute to a favorable climate for significant money laundering in Guatemala. According to law enforcement agencies, narcotics trafficking and corruption are the primary sources of money laundered in Guatemala; however, the laundering of proceeds from other illicit activities, such as human trafficking, contraband, kidnapping, tax evasion, and vehicle theft, is substantial.

Offshore Center: Yes

In June 2002, Guatemala enacted the Banks and Financial Groups Law (No. 19-2002), which placed offshore banks under the supervision of the Superintendence of Banks (SIB). The law requires offshore

banks that belong to a Guatemalan financial group to be authorized by the Monetary Board and to maintain an affiliation with a domestic institution. It also prohibits an offshore bank that is authorized in Guatemala from conducting financial intermediation activities in another jurisdiction. Banks authorized by other jurisdictions may do business in Guatemala under certain limited conditions. By law, no offshore financial services businesses, other than banks, are allowed. There are no exchange controls and dollar accounts are common. Some larger banks conduct significant business through their offshore subsidiaries.

Free Trade Zones: Yes

Guatemala's relatively small free trade zones target regional "maquila" (assembly line industry) and logistics center operations and are not considered by officials to be a major money laundering concern, although some proceeds from tax-related contraband may be laundered through them. The Ministry of Economy reviews and approves applications for companies to open facilities in free trade zones and confirms their business operations meet legal requirements.

Criminalizes narcotics money laundering: Yes

Decree 67-2001, the Law against Money and Asset Laundering, criminalizes money laundering in Guatemala. Conspiracy and attempt to commit money laundering are also penalized.

Criminalizes other money laundering, including terrorism-related: Yes

The law applies to money laundering from any crime where illegal proceeds are generated and does not require a minimum threshold to be invoked.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

In June 2005, the Guatemalan Congress passed legislation criminalizing terrorist financing, the Law Against the Financing of Terrorism. Implementing regulations were enacted by the Monetary Board in December 2005. The counter-terrorist financing legislation also clarifies the legality of freezing assets in the absence of a conviction where the assets were destined to support terrorists or terrorist acts. The Law Against the Financing of Terrorism also requires remitters to maintain name and address information on senders (97 percent are U. S. based) of transfers equal to or over $2,000.

Know-your-customer rules: Yes

The Guatemalan Monetary Board's Resolution JM-191, which approved the Regulation to Prevent and Detect the Laundering of Assets (RPDLA), establishes anti-money laundering requirements for financial institutions including know-your-customer provisions. Financial institutions are required to keep a registry of their customers. In 2009, the FIU developed a list of Politically Exposed Persons (PEPs) and began requiring individuals on the list and their immediate family members to explain the source of deposited funds.

Bank records retention: Yes

Financial institutions must keep customer registries and records of transactions for five years. Suspicious transaction reporting: Yes

Financial institutions are also mandated by law to report all suspicious transactions to the financial intelligence unit (FIU). The FIU received 330 suspicious transaction reports (STRs) in 2008 and 214 from January to October 2009.

Large currency transaction reporting: Yes

Financial institutions must keep records of cash transactions exceeding $10,000 or more per day. Cash transaction reports are forwarded to the FIU. As of June 1, 2009, the FIU issued new regulations requiring all individuals and legal entities involved in the purchase or sale of real estate, motorized vehicles (including cars, tractors, motorcycles, and boats), jewelry, gems, precious metals, art and antiques to report transactions in cash above $10,000.

Narcotics asset seizure and forfeiture: Yes

Current law permits the seizure of any assets linked to money laundering. The FIU, the National Civil Police, and the Public Ministry have the authority to trace assets; the Public Ministry can seize assets temporarily in urgent circumstances, and the courts (administered by the Supreme Court of Justice) have the authority to permanently seize assets. In 2006, Guatemala passed an Anti-Organized Crime Law. The Anti-Organized Crime Law also provides for a summary procedure to forfeit the seized assets and allows both civil and criminal forfeiture.

In 2009, the Legislative and Constitutional Affairs Committee of Congress developed a draft Asset Forfeiture Law with the aim of creating a civil forfeiture process that would be complimentary to the provisions in the Anti-Organized Crime Law. The draft bill has not yet been presented to the full Congress.

Narcotics asset sharing: No

The international sharing of seized assets is not permitted.

Cross-border currency transportation requirements: Yes

Decree 67-2001 obligates individuals to declare the cross-border movement of currency in excess of approximately $10,000 at the ports of entry. The declaration forms are provided and collected by the tax authority at land borders, airports, and ports. The Law Against the Financing of Terrorism penalizes the omission of a declaration with a sentence from one to three years in prison.

As of late 2009, approximately $727,000 has been seized at the airports--a very small sum that suggests that proceeds from illicit activity are transported across Guatemalan borders. There is little official monitoring of compliance with cross-border currency reporting. Further complicating cross-border currency reporting is the Central American Four Agreement, which allows free movement of the citizens of Guatemala, Honduras, Nicaragua, and El Salvador across their respective borders.

Cooperation with foreign government: Yes

Guatemala is leading an effort within the Caribbean Financial Action Task Force (CFATF) to develop a regional list of persons and entities involved in money laundering as well as a method for sharing information among regional FIUs. Guatemala has cooperated, when requested, with U.S. law enforcement agencies.

U.S. or international sanctions or penalties:

In 2009, the Organization for Economic Co-operation and Development (OECD) placed Guatemala on its list of countries that have committed to the internationally agreed tax standard but have not yet substantially implemented the standard. The ability of companies to issue bearer shares as well as strong bank secrecy rules have made it difficult for Guatemala to enter into tax information exchange agreements with OECD member countries.

Enforcement and implementation issues and comments:

At the end of 2009, the FIU referred 18 complaints and 12 reports to the anti-money laundering (AML) Unit in the Public Ministry. In 2009, the AML Unit detained 13 individuals and received sentences against 11.

There is no central tracking system for seized assets, and it is currently impossible for the Supreme Court to provide an accurate listing of the seized assets it is holding in custody. The lack of access to the resources of seized assets, and the failure of the judiciary to share seized assets with law enforcement entities, has made sustaining seizure levels difficult for the resource-strapped enforcement agencies.

Gambling is not legal in Guatemala, however, a number of casinos, games of chance and video lotteries began operating in 1993, both onshore and offshore. There is no regulatory oversight or legal framework for their operation, therefore the Superintendence of Banks and the Superintendence of Tax Administration are not able to supervise or audit gambling operations. Unsupervised gambling represents a severe money laundering vulnerability.

In September 2009, the FIU uncovered a trade based money laundering scheme involving 13 companies, many of which could be fictitious, that exported cardamom to seven countries in the Middle East (Saudi Arabia, Bahrain, United Arab Emirates, Iran, Egypt, Israel, and Iraq). The case involved approximately $120 million of suspicious goods movements from September 11, 2008 to April 28, 2009. The Attorney General's office is investigating the entities and movements.

The GOG has fully cooperated with U.S. efforts to track terrorist financing funds and distributes the UN 1267 sanctions committee's consolidated list to Guatemalan financial institutions. No reports or cases of terrorist financing were reported in 2009.

U.S.-related currency transactions:

Guatemala is a major transit country for illegal narcotics from South America, revenues from illegal drug sales in the U.S. and precursor chemicals from Europe and Asia. Mexican drug traffickers are increasing their presence in the country. The U.S. dollar dominates the regional narcotics trade.

Records exchange mechanism with U.S.: Yes

Guatemala and the United States are party to a bilateral mutual legal assistance treaty that provides for exchange of information. The FIU is able to exchange financial information on money laundering issues with the U.S. Financial Crimes Enforcement Network (FinCEN).

International agreements:

The FIU has signed a number of memoranda of understanding regarding the exchange of information on money laundering issues, some of which also include the exchange of information regarding terrorist financing.

Guatemala is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption -Yes

Guatemala is a member of the Caribbean Financial Action Task Force, a Financial Action Task Force-style regional body. Its most recent mutual evaluation was conducted in June of 2009 and will be available to the public in May 2010 here: http://www.cfatf-gafic. org/mutual-evaluation-reports.html#

Recommendations:

The Government of Guatemala (GOG) should eliminate the use of bearer shares and regulate both onshore and offshore gaming and casino establishments. The GOG should also continue efforts to improve enforcement of existing regulations, establish units to execute undercover operations and controlled deliveries authorized in the Anti-Organized Crime Law, and pursue much needed reforms in the law enforcement and judicial systems. Guatemala should increase its capacity to successfully investigate and prosecute money laundering cases. Additionally, the GOG should create an asset forfeiture fund and a

centralized agency to manage and dispose of seized and forfeited assets, at least a portion of which should be provided to law enforcement agencies to provide the resources necessary to successfully fight money laundering, terrorist financing, and other financial crimes. In addition, the GOG should enhance its pursuit of confiscation and forfeiture of the proceeds of arms smuggling, human trafficking, corruption, and other organized criminal activities, and should enact domestic laws permitting international sharing of confiscated assets.

Guernsey

The Bailiwick of Guernsey (the Bailiwick) encompasses a number of the Channel Islands (Guernsey, Alderney, Sark, and Herm). A Crown Dependency of the United Kingdom, it relies on the United Kingdom (UK) for its defense and international relations. Alderney and Sark have their own separate parliaments and civil law systems. Guernsey's parliament legislates in matters of criminal justice for all of the islands in the Bailiwick. The Bailiwick is a sophisticated financial center and, as such, it continues to be vulnerable to money laundering.

Offshore Center: Yes

The Bailiwick is an offshore financial center. As of September 2009, the financial services industry consisted of 45 banks, all of which have offices, records, and a substantial presence in the Bailiwick. The banks are licensed to conduct business with residents and nonresidents alike. The approximately 18,800 companies registered in the Bailiwick do not fall within the standard definition of an international business company (IBC). Guernsey and Alderney incorporate companies, but Sark, which has no company legislation, does not. Companies in Guernsey must disclose beneficial ownership to the Guernsey Financial Services Commission. In 2008, there were approximately 714 international insurance companies and 829 collective investment funds.

Free Trade Zone: No

Criminalizes narcotics money laundering: Yes

Money laundering involving drug trafficking is covered by the Drug Trafficking (Bailiwick of Guernsey) Law 2000, as amended (DTL).

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering is criminalized with the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law 1999, as amended (POCL). The POCL covers proceeds of all serious offenses.

Criminalizes terrorist financing: Yes

Terrorist financing is criminalized by the Terrorism and Crime (Bailiwick of Guernsey) Law 2002, as amended (TCL).

Know your customer rules: Yes

The Bailiwick does not permit bank accounts to be opened unless there has been a know your customer (KYC) inquiry and the customer provides verification details. The Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (Bailiwick of Guernsey) Regulations 2007, as amended (2007 Regulations) set forth customer due diligence (CDD) obligations for financial services businesses and the Criminal Justice (Proceeds of Crime) (Legal Professionals, Accountants and Estate Agents) (Bailiwick of Guernsey) Regulations 2008 (2008 Regulations) apply to prescribed businesses: lawyers, accountants and estate agents.

Bank records retention: Yes

Financial services businesses and prescribed businesses are required to maintain CDD information pursuant to the 2007 and 2008 Regulations. CDD information, suspicious transaction reports, and transaction documents should be kept for five years.

Suspicious transaction reporting: Yes

The Disclosure (Bailiwick of Guernsey) Law 2007 makes failure to disclose the knowledge or suspicion of money laundering a criminal offense. The duty to disclose suspicious activity extends to all businesses. The Financial Intelligence Service (FIS) is the Bailiwick's financial intelligence unit. The FIS serves as the central point for the receipt, collection, analysis, and dissemination of all financial crime intelligence.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Guernsey authorities approved further measures to strengthen the existing anti-money laundering/counterterrorist finance (AML/CFT) regime with the passage of numerous legislation, regulations, and ordinances in 2008 including a comprehensive civil forfeiture law.

Narcotics asset sharing authority: Yes

There are currently no specific legislative provisions relating to the sharing of confiscated assets with other jurisdictions. Asset sharing is negotiated on a case-by-case basis. With regards to sharing with the U.S., the 1988 U.S.-UK Agreement Concerning the Investigation of Drug Trafficking Offenses and the Seizure and Forfeiture of Proceeds and Instrumentalities of Drug Trafficking, as amended in 1994, was extended to the Bailiwick in 1996.

Cross-border currency transportation requirements: Yes

Those carrying euro 10,000 (approximately $14,100) or greater, or the equivalent amount in any currency, must complete and submit a cash declaration form to Customs upon entering or leaving the Bailiwick.

Cooperation with foreign governments: Yes

Guernsey cooperates with international law enforcement on money laundering cases. The FSC also cooperates with regulatory/supervisory and law enforcement bodies. The Criminal Justice (International Cooperation) (Bailiwick of Guernsey) Law, 2000 furthers cooperation between Guernsey and other jurisdictions by allowing certain investigative information concerning financial transactions to be exchanged. In cases of serious or complex fraud, Guernsey's Attorney General can provide assistance under the Criminal Justice (Fraud Investigation) (Bailiwick of Guernsey) Law 1991.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Not all designated nonfinancial businesses and professions are covered by the AML/CFT regulations.

U.S.-related currency transactions:

No information provided.

Records exchange mechanism with U.S.:

The 1988 U.S.--UK Agreement Concerning the Investigation of Drug Trafficking Offenses and the Seizure and Forfeiture of Proceeds and Instrumentalities of Drug Trafficking, as amended in 1994, was extended to the Bailiwick in 1996. On September 19, 2002, the United States and Guernsey signed a Tax Information Exchange Agreement, which came fully into force in 2006. The agreement provides for the exchange of information on a variety of tax investigations, paving the way for audits that could uncover

tax evasion or money laundering activities. The FIS shares information with the U.S. Department of Treasury's Financial Crimes Enforcement Network.

International agreements:

As a British Crown Dependency, the Bailiwick is not empowered to sign or ratify international conventions on its own behalf. However, following a request by the Guernsey Government, the UK may extend ratification of any convention to the Bailiwick. Application of the 1988 UN Drug Convention was extended to the Bailiwick in 2002. The UN Convention for the Suppression of the Financing of Terrorism was also extended to the Bailiwick in 2008 as was the UN Convention against Corruption in

2009.

Guernsey's compliance with the FATF recommendations was evaluated in a report prepared by the International Monetary Fund's Financial Sector Assessment Program. The report can be found here: http://www.ogbs.net/evaluations.htm.

Recommendations:

Guernsey should continue to amend its legislation to meet international AML/CFT standards and should ensure complete implementation of its new 2008 legislation. Guernsey also should take steps to ensure the obliged entities uphold their legal obligations, and the regulatory authorities have the tools they need to provide supervisory functions, especially with regard to non-financial businesses and professions not currently regulated. Guernsey should ensure all obliged entities receive the UN 1267 Sanctions Committee's consolidated list of entities and individuals.

Guinea-Bissau

Guinea-Bissau is not a regional financial center. Increased drug trafficking and the prospect of oil production increase its vulnerability to money laundering and financial crime. Drug traffickers transiting between Latin America and Europe have increased their use of the country. Guinea-Bissau is often the placement point for proceeds from drug payoffs, theft of foreign aid, and corrupt diversion of oil and other state resources headed for investment abroad. A recent boom in the construction of luxury homes, hotels and businesses, and the proliferation of expensive vehicles, stands in sharp contrast to the conditions in the poor local economy. It is likely that at least some of the new wealth derives from money laundered from drug trafficking. Banking officials also think the country is vulnerable to trade-based money laundering. Transparency International's 2009 Corruption Perception index ranks Guinea-Bissau 162 out of 180 countries.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

The legal basis for Guinea-Bissau's anti-money laundering/counter-terrorist financing (AML/CFT) framework is the Anti-Money Laundering Uniform Law No. 2004-09 (AML Uniform Law). As the common law to be passed by the members of the West African Economic and Monetary Union (WAEMU), all member states are required to enact and implement the legislation. The legislation largely meets international standards with respect to money laundering. Guinea-Bissau has an "all crimes" approach to money laundering. It is not necessary to have a conviction for the predicate offense before prosecuting or obtaining a conviction for money laundering. Criminal liability applies to all natural and legal persons.

Criminalizes terrorist financing:

Article 203, Title VI of Guinea-Bissau's penal code criminalizes terrorist financing. However, because the penal code only criminalizes the financing of terrorist groups or organizations, and only when the money is used to commit terrorist acts, the legislation does not address financing of a single or individual terrorist.

Know-your-customer rules: Yes

Obligated institutions include financial institutions and nonbank financial institutions such as exchange houses, microfinance institutions, securities firms, brokerages, cash couriers, casinos, insurance companies, charities, nongovernmental organizations (NGOs), and intermediaries such as lawyers, accountants, notaries and broker/dealers.

Bank records retention: Yes

Financial institutions must keep records and documents relating to transactions and to client identification for a period of ten years.

Suspicious transaction reporting: Yes

The law requires obligated entities to file suspicious transaction reports (STRs) with the financial intelligence unit (FIU). No STRs were filed in 2008, and the operations of the FIU have been suspended, pending identification of new premises.

Large currency transaction reporting: Yes

Narcotics asset seizure and forfeiture:

Legal authorities have the powers to identify, freeze, seize and confiscate goods or funds obtained from the proceeds of major offenses. Articles 16 and 17 of the Drug Law provide for confiscation of the instrumentalities and proceeds from drug trafficking and money laundering. Further, Article 45 of the AML Uniform Law provides for the confiscation of assets resulting from money laundering offenses, and Articles 41 and 42 provide for the confiscation of the instrumentalities of the crime as well as the proceeds.

Narcotics asset sharing authority: Yes

Although the law provides for the sharing of confiscated assets, a lack of coordination mechanisms to facilitate requests for cooperation in freezing and confiscation from other countries hampers cooperation.

Cross-border currency transportation requirements: No

There is no reporting requirement for cross-border currency transportation within the WAEMU internal border area. Currency importation from outside the WAEMU boundaries is not limited, although if the value exceeds 300,000 CFA it must be brought to a licensed intermediary within eight days. Currency exportation should be disclosed when the value exceeds 2 million CFA. However, there is no cash declaration system, and no universal written declaration.

Cooperation with foreign governments (including refusals):

No information available.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The Commission Bancaire, the entity responsible for bank inspections, does not execute a full AML examination during its standard bank compliance examinations.

The AML Uniform Law does not comply with international standards concerning politically-exposed persons (PEPs), and lacks certain compliance provisions for nonfinancial institutions.

Reportedly, banks are reluctant to file STRs because of the fear of "tipping off" by an allegedly indiscrete judiciary. Article 26 of National Assembly Resolution No. 4 of 2004 stipulates that if a bank suspects money laundering it must obtain a declaration of all properties and assets from the subject and notify the Attorney General, who must then appoint a judge to investigate. The bank's solicitation of an asset list from its client could also amount to "tipping off" the subject.

Reportedly, corruption in the Customs agency exacerbates problems with porous borders and cash smuggling.

Despite the 2004 AML Uniform Law, no operational FIU exists in the country. Lack of capacity, corruption, instability, and distrust (particularly of the judicial sector), could significantly hamper progress in the FIU's development. The Attorney General's office houses a small unit to investigate corruption and economic crimes, but the ability to use special investigative measures is limited to drug trafficking and distribution. In 2008, no money laundering investigations were initiated. There are no known prosecutions of money laundering.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

Guinea-Bissau and the United States are not parties to a bilateral mutual legal assistance treaty that provides for exchange of information.

International agreements:

Multilateral Economic Community Of West African States (ECOWAS) treaties deal with extradition and legal assistance.

Guinea-Bissau is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--No

* the UN Convention against Transnational Organized Crime--No

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--No

Guinea-Bissau is a member of the Financial Action Task Force-style regional body, the Intergovernmental Action Group against Money Laundering in West Africa (GIABA). While Guinea-Bissau has undergone a mutual evaluation the report has not yet been published. When it is published, it will be found here: www.giaba.org

Recommendations:

The Government of Guinea-Bissau (GOGB) should continue to work with its partners in GIABA, WAEMU and ECOWAS to establish and implement a comprehensive AML/CFT regime that comports with all international standards. The GOGB should speed up the establishment of an operational FIU that could exchange information and share intelligence with other law enforcement bodies, both inside and outside the country. It should establish and staff the FIU and ensure that resources are available to sustain its capacity. The GOGB should ensure the sectors covered by its AML Uniform Law have implementing regulations and competent authorities to ensure compliance with the law's requirements. The GOGB should clarify, amend or eliminate Article 26 of the 2004 National Assembly Resolution that appears to mandate actions resulting in the tipping off of suspects. It also should adopt and enact a comprehensive WAEMU Uniform Law related to terrorist financing and amend the definitions in its penal code to comport with the international standards regarding financing of individual terrorists and terrorist groups engaging in acts other than terrorism. The GOGB should work to improve the training and capacity of its police and judiciary to combat financial crimes, and address any issues resulting from a lack of

understanding of money laundering and terrorist financing. Guinea-Bissau should undertake efforts to eradicate systemic corruption and become a party to the UN Convention for the Suppression of the Financing of Terrorism and the UN Conventions against Corruption and Transnational Organized Crime.

Haiti

Haiti is a major drug-transit country with money laundering activity linked principally to narcotics trafficking and kidnapping. Official corruption also generates illicit proceeds. While the informal economy in Haiti is significant and is partly funded by illicit narcotics proceeds, smuggling is prevalent and predates narcotics trafficking. Haiti's geographical location, lack of an efficiently functioning judiciary system, poorly controlled land and sea borders, inadequately-sized police force (less than one police officer per 1,000 inhabitants), insufficiently resourced anti-money laundering prosecutorial unit, and endemic corruption create favorable conditions for money laundering. Banks and casinos, as well as foreign currency and real estate transactions, facilitate money laundering and other financial crimes. Dire economic conditions and an unstable political situation inhibit the country from advancing the development of its formal financial sector.

Offshore Center: No

Haiti's commercial law does not allow incorporation of offshore companies. Free Trade Zones: No information provided. Criminalizes narcotics money laundering: Yes

The 2001 Law on Money Laundering from Illicit Drug Trafficking and other Crimes and Punishable Offenses (AMLL) criminalizes money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

See above.

Criminalizes terrorist financing: No

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

Haiti has yet to pass legislation criminalizing terrorist financing, although counter-terrorist financing legislation has been drafted with USG assistance.

Know-your-customer rules: Yes

The AMLL regulations were amended in 2008 and require financial institutions to verify the identity of customers who open accounts or conduct transactions that exceed 400,000 Haitian Gourdes (HTG), equivalent to approximately $10, 000. The regulations also require exchange brokers and money remitters to compile information on the source of funds exceeding 120,000 HTG (approximately $3,000) or its equivalent in foreign currency.

Bank records retention: Yes

Banks are required to maintain records for five years. Bank secrecy or professional secrecy cannot be invoked as grounds for refusing information requests from authorities.

Suspicious transaction reporting: Yes

The AMLL establishes a wide range of financial institutions as obligated entities, including banks, money remitters, exchange houses, casinos, and real estate agents. Insurance companies, which are only nominally represented in Haiti, are not covered. Haiti's financial intelligence unit (FIU), the Unite Centrale de Renseignements Financiers (UCREF), receives the reports submitted by financial institutions.

The number of suspicious transactions reports (STRs) is very small. The financial sector's compliance with its anti-money laundering obligations is not properly supervised.

Large currency transaction reporting: Yes

Financial institutions, including banks, credit unions, exchange brokers, lawyers, accountants, and casinos, are required to file a cash transaction report (CTR) with UCREF for all transactions exceeding 400,000 HTG (approximately $10,000). Money transfer companies, given the high risk associated with them, must file CTRs for all transactions of 120,000 HTG (approximately $3,000) or more. Failure to report such transactions is punishable by imprisonment and/or a fine.

Narcotics asset seizure and forfeiture:

The AMLL contains provisions for the seizure and forfeiture of assets; however, the Haitian government cannot seize and declare the assets forfeited until there is a conviction. The Government of Haiti (GOH) has expanded the legal interpretation of conviction to include convictions obtained in foreign jurisdictions. In the fourth quarter of 2008, Haitian authorities, with U.S. Drug Enforcement Administration assistance, began seizing properties in Haiti belonging to drug traffickers incarcerated in the United States for use or disposal by the GOH. In 2008, there were 14 properties including residences, businesses and bank accounts, valued at approximately $16.44 million, seized and forfeited to the GOH based on U.S. convictions. An additional 20 other properties are the subject of this new initiative. In 2009, $23 million and some 16 properties with an estimated value of $8.27 million were seized.

During 2009, President Preval was instrumental in adopting official pre-seizure planning guidelines to attempt to better regulate the management of the increasing number of assets seized for forfeiture. Corruption and provisional use (official use before final forfeiture) continue to be of concern in this area. Despite the numerous seizures made, Haiti has not yet obtained a final order of forfeiture with respect to any assets.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: No

The AMLL does prohibit cash transfers of more than 200,000 HTG (approximately $5,000). Enforcement of this prohibition is a major challenge, except at the Port-au-Prince airport. The customs administration regularly seizes funds subject to this prohibition, but several of these seizures have been overturned by the courts, to the detriment of the legitimacy of the legal framework.

Cooperation with foreign governments:

The AMLL introduces measures for cooperation on mutual legal assistance and extraditions. These provisions seem to be in line with international standards. However, inadequate criminalization of money laundering is a constraint because of the dual criminality principle. International legal assistance cannot be provided for terrorist financing since it is not a crime in Haiti. In practice, Haiti has yet to engage in international legal assistance. International cooperation by the National Police of Haiti is based primarily on Interpol and operational relations with foreign authorities.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

There has been a reassignment of all criminal investigative responsibilities to the Bureau of Financial and Economic Affairs (BAFE), a component of the Haitian National Police Office of Judicial Police. A number of prosecutions are currently in the investigation stage. No convictions have yet been obtained. Prosecutions focus on predicate offenses and deal with money laundering in connection with drug-trafficking only.

The integrity of the police and the courts is often described as inadequate and the Haitian authorities have recently undertaken an ambitious program of reform and renewal. The police and the courts are also suffering from a lack of capacity that has not yet been remedied as they have received only sporadic training in fighting money laundering.

The AMLL may provide sufficient grounds for freezing and seizing terrorists' assets; however, given that there is currently no indication of terrorist financing in Haiti, this has not yet been tested.

U.S.-related currency transactions:

The U.S. dollar is commonly used in both the formal and informal economies. The dollar is the currency of choice for smuggling.

Records exchange mechanism with U.S.:

Haitian authorities provide evidence to support prosecutions in the United States. The UCREF and the BAFE are currently assisting the United States in three major investigations that have lead to the indictments of persons prominent in the Haitian telecommunications industry.

International agreements:

Mutual legal assistance is allowed. The UCREF is not a member of the Egmont Group of financial intelligence units but has memoranda of understanding (MOUs) with the FIUs of the Dominican Republic, Panama, Guatemala and Honduras.

Haiti is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--No

* the UN Convention against Transnational Organized Crime--No

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--Yes

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

Recommendations:

The implementation of the Government of Haiti's (GOH) existing anti-money laundering/counter-terrorist financing regime is insufficient, ineffective and weakly coordinated. It is not sufficient to fight the money laundering and terrorism financing risks facing the country. The key institutions necessary to the satisfactory functioning of the legislative framework are in place, but they have not yet sufficiently used the tools provided by the AMLL. The GOH should move to enact the draft pieces of legislation pertaining to anticorruption and the new Customs Code bill. Haiti should update its criminal code and reform the civil tax code. Other areas in need of improvement include the country's ineffective court system, weak enforcement mechanisms and poor knowledge of current laws governing this area. The GOH should expedite prosecution of corruption, narcotics trafficking and money laundering cases. This would send a positive message that financial crimes will be punished to the fullest extent of the law and also help garner broader public support for the rule of law--something that is beginning to occur with the recent asset seizures. Finally, initiatives are needed to enhance the UCREF's capacity to provide timely and accurate reports on suspicious financial activities and meet Egmont Group membership standards.

Hong Kong

Hong Kong, a Special Administrative Region of the People's Republic of China, is a major international financial center. As of October 2009, with a total market capitalization of $2.18 trillion, Hong Kong's stock market was the seventh largest in the world and third largest in Asia. Hong Kong was also the

world's 15th largest banking center and the world's sixth largest foreign exchange trading center. In July 2009, Hong Kong launched a pilot program whereby Hong Kong banks with correspondent relationships in mainland China can engage in Chinese Renminbi (RMB) trade settlement.

Hong Kong's low and simplified tax system, coupled with its sophisticated banking system, shell company formation agents, and the absence of currency and exchange controls facilitate financial activity but also make Hong Kong vulnerable to money laundering. The primary sources of laundered funds in Hong Kong are corruption, tax evasion, fraud, illegal gambling and bookmaking, prostitution, loan sharking, commercial crimes, and intellectual property rights infringement. Criminal proceeds laundered in Hong Kong are derived from local and overseas criminal activities, but Hong Kong law enforcement authorities attribute only a small percentage of these to drug-trafficking organizations.

Offshore Center: Yes

Hong Kong does not make a distinction between onshore and offshore entities, including banks. Its financial regulatory regimes are applicable to residents and nonresidents alike. All companies must be incorporated or registered under the Companies or Trustee Ordinances and file information annually with the Companies Registry, including annual accounts, details on registered offices, directors, company secretary, etc. Companies require licensing to engage in asset management or fund advisory activities in Hong Kong. As of October 2009, 715 corporations held licenses. No differential treatment is provided for nonresidents, including taxation and exchange controls. Bearer shares are not permitted.

Free Trade Zones: No

Hong Kong is a free port without foreign trade zones. Hong Kong's modern and efficient infrastructure supports Hong Kong's role as a regional trade, financial and services center

Criminalizes narcotics money laundering: Yes

Narcotics money laundering is a criminal offense in Hong Kong under the Drug Trafficking Recovery of Proceeds Ordinance (DTROP) and the Organized and Serious Crimes Ordinance (OSCO). Introduced in 1989, the DTROP provides that it is a criminal offense for a person to deal in property "knowing or having reasonable grounds to believe" that the property "in whole or in part directly or indirectly represents any person's proceeds of drug-trafficking." There have been no recent amendments to this law.

Criminalizes other money laundering, including terrorism-related: Yes

DTROP and OSCO criminalize the laundering of proceeds from all indictable offenses. Laundering, to include self-laundered money, of any property that represents in whole or in part, directly or indirectly, the proceeds of crime are an offense.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

Terrorism and terrorist financing were criminalized in 2002 with the enactment of The United Nations Anti-Terrorism Measures Ordinance (UNATMO), Cap. 575. An amendment to the legislation in 2004 provides for the freezing of terrorist related assets. However, the offense is viewed as being narrow in scope and certain key provisions of this ordinance are not yet in force. Not covered in the current legislation is terrorism directed at an international organization or where the financing is in the form of assets other than 'funds'.

Know-your-customer rules: Yes

Banking, securities and insurance entities must identify and verify the identity of customers, including any beneficial owners, before establishing a business relationship. Only basic customer-due-diligence

obligations are in place for money remitters and money exchange companies, and there are no due-diligence obligations for money lenders, credit unions and financial leasing companies. Guidelines impose obligations on banking and insurance institutions to exercise enhanced due diligence with respect to politically exposed persons. However, these guidelines do not specify that senior management approval is required to continue a business relationship with a customer discovered to be a politically exposed person. A supplement to the Banking Guidelines issued in November 2007 added the requirement of obtaining the purpose and reason for opening an account.

Bank records retention: Yes

Financial institutions are required to know and record the identities of their customers and maintain records for five to seven years. Remittance agents and moneychangers must register their businesses with the police and keep customer identification and transaction records for cash transactions above a HK 8,000 (approximately $1,032) threshold for at least six years.

Suspicious transaction reporting: Yes

Hong Kong's reporting obligations require the reporting of suspected money laundering or terrorist financing irrespective of the amount involved. The legal obligations for all persons, including financial institutions, to file suspicious transaction reports (STRs) are articulated in the DTROP for narcotics proceeds, OSCO for the proceeds of indictable offenses and organized crime, and UNATMO for terrorism finance. As of October 2009, Hong Kong's financial intelligence unit (FIU) received 13,553 STRs and referred 1,926 to law enforcement agencies for further investigation.

Large currency transaction reporting: No

Narcotics asset seizure and forfeiture: Yes

Under the DTROP and OSCO, a court may issue a restraining order against a defendant's property at or near the time criminal proceedings are instituted. Property includes money, goods, real property, and instruments of crime. A court may issue confiscation orders at the value of a defendant's proceeds from illicit activities. Cash imported into or exported from Hong Kong that is connected to narcotics-trafficking may be seized, and a court may order its forfeiture. However, restraint and confiscation provisions are limited in their availability as they can be used only for those indictable offenses listed in OSCO and restraint may only occur where the amount involved is over HK 100,000 (approximately $12,900). Some types of instrumentalities are subject to forfeiture. According to Hong Kong government statistics as of September 30, 2009, the value of frozen assets was $324.2 million while the value of assets under a court confiscation order but not yet paid to the government was $14.62 million.

Under DTROP section 28, the Chief Executive may promulgate orders designating countries whose confiscation orders can be considered as though they were made pursuant to DTROP (with some modifications). The net effect of such designations is to confer legal recognition upon confiscation orders of certain other countries. Pursuant to this power, the Chief Executive has promulgated the Drug Trafficking (Recovery of FATF/ME (2008)4 186 Proceeds) (Designated Countries and Territories) Order.

Narcotics asset sharing authority: Yes

Hong Kong's Mutual Legal Assistance Ordinance (MLAO), DTROP, and various administrative measures provide a platform for the sharing of seized assets with other governments. Bilateral agreements generally incorporate provisions on asset sharing that provide for assets to remain with the requested jurisdiction, subject to sharing on a case by case basis. In practice, realized funds over a threshold of HK$10million (approximately $1,290,000) are shared equally.

Cross-border currency transportation requirements: No

Hong Kong does not require reporting of the movement of any amount of currency across its borders.

Cooperation with foreign government: Yes

UNATMO, DTROP and OSCO enable information sharing with relevant authorities outside Hong Kong to prevent and suppress the financing of terrorist acts, drug-trafficking and other crimes.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

The formal banking sector is believed to be the primary means of money laundering in Hong Kong. For 2008, Hong Kong police reported 4,653 cases of deception; 20 business fraud cases; and 1,190 forgery and coinage cases. Crime statistics for 2009 were not available. From January to September 2009, Hong Kong prosecuted 340 persons for Money Laundering. One significant case involved the arrest and prosecution of 16 persons for money laundering by the Hong Kong Customs and Excise Department.

No provisions are in place for forfeiture of proceeds and instrumentalities of terrorist acts or terror finance. There were no prosecutions for terrorist financing as of September 2009.

U.S.-related currency transactions:

No information provided.

Records exchange mechanism with U.S.:

Hong Kong's mutual legal assistance agreements generally provide for asset tracing, seizure, and sharing. Hong Kong signed and ratified a mutual legal assistance agreement (MLAA) with the United States that came into force in January 2000. Law enforcement cooperation remains a central pillar of U.S.--Hong Kong relations.

Legislative amendments to DTROP and OSCO in 2004 now allow the financial intelligence unit to disseminate information derived from STRs to overseas counterparts and non-counterparts for the purposes of combating crime, without the need for any reciprocity.

International agreements:

As of November 2009, Hong Kong has signed bilateral MLAAs with 27 jurisdictions. Hong Kong has also signed surrender-of-fugitive-offenders (extradition) agreements with 18 countries, including the United States, and has signed agreements for the transfer of sentenced persons with ten countries, also including the United States. Hong Kong authorities exchange information on an informal basis with overseas counterparts and with Interpol.

Hong Kong is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--Yes

The above conventions apply to Hong Kong through mainland China's participation in the conventions.

Hong Kong is a member of the FATF and the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. It's most recent 2008 mutual evaluation can be found here: http://www.fatfgafi.org/dataoecd/19/38/41032809.pdf

Recommendations:

Hong Kong should institute mandatory oversight for the designated non-financial businesses and professions and money remitters. Hong Kong should establish mandatory cross-border currency reporting requirements. The anti-money laundering/counter-terrorist financing framework should be further enhanced with the establishment of threshold reporting requirements for currency transactions and

by putting into place "structuring" provisions to counter evasion efforts. As a major trading center, Hong Kong should seriously examine trade-based money laundering.

India

India's emerging role in regional financial transactions, its large system of informal cross-border money flows, large underground economy, widespread use of hawala, and historically disadvantageous tax administration and currency controls all contribute to the country's vulnerability to money laundering activities. While much money laundering in India aims to facilitate widespread tax avoidance, criminal activity contributes substantially. Common sources of illegal proceeds in India include: narcotics trafficking, illegal trade in endangered wildlife, trade in illegal gems (particularly diamonds), smuggling, trafficking in persons, and income tax evasion. Corruption, both in the private and public sectors, is also a potential source of money laundering. Money laundering methods are diverse. In domestic crimes, the most common money laundering methods are opening multiple bank accounts, intermingling criminal proceeds with assets of a legal origin, purchasing bank checks with cash, and routing through complex legal structures. In transnational organised crimes, offshore corporations and trade based money laundering may be used to disguise the criminal origin of the funds. Money laundering also takes place in India through charities and non-profit organizations. Because of its location between the heroin-producing countries of the Golden Triangle and Golden Crescent, India continues to be a drug-transit country. The 2008 terrorist attacks in Mumbai intensified concerns about terrorist financing in India. Major sources for terrorist financing include: funds/resources from organizations outside India including; extortion; counterfeiting of currency; and use of formal channels and new payment methods.

Offshore Center: No

India does not have a traditional offshore financial center but does license offshore banking units (OBUs) to operate in the Special Economic Zones (SEZs). Nine OBUs have been set up in specific zones, although they can provide services across the entire network. These units are prohibited from engaging in cash transactions and are restricted to lending to the SEZ wholesale commercial sector. Although located in India, they essentially function as foreign branches of Indian banks. India licenses and regulates OBUs the same way as domestic commercial banks, and they are subject to the same anti-money laundering/counter-terrorist financing (AML/CFT) provisions as the domestic sector.

Free Trade Zone: Yes

Special Economic Zones (SEZs) are being established to promote export-oriented commercial businesses, including manufacturing, trading and services (mostly information technology). As of December, 2009, approximately 350 SEZs had been proposed throughout India. The SEZs have defined physical boundaries, with access controlled by Customs officers. In November 2009, the Government of India (GOI) gave permission to various investigative agencies to conduct searches, inspect, seize and investigate the consignments inside the SEZs without permission from the SEZ development commissioner.

Criminalizes narcotics money laundering: Yes

The Prevention of Money Laundering Amendment Act (PMLA), 2009 [No. 21 of 2009] criminalizes narcotics-related money laundering.

Criminalizes other money laundering, including terrorism-related: Yes

PMLA amendments introduced a new category of predicate offenses, cross-border crimes such as fraud and theft, with no threshold amount for prosecution. Offenses under the Unlawful Activities (Prevention) Act (UAPA) relating to terrorism and terrorist financing are included as predicate offenses, as are insider trading and market manipulation. Offenses relating to human trafficking, smuggling of migrants, counterfeiting, piracy, environmental crimes, and over- and under-invoicing under the Customs Act have become punishable under the amended PMLA.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

The UAPA was amended in 2004 to criminalize terrorist acts, including raising funds for terrorism. However, the Act did not provide a comprehensive framework for dealing with the tripartite offenses of terrorism, namely, financing of terrorism, terrorists acts and terrorist organizations. In December 2008, India's parliament enacted an amendment to the UAPA containing provisions to address the legal authority and enforcement mechanism for freezing the funds of terrorist entities, including an explicit authority to freeze the funds of terrorist entities designated under UNSCRs 1267 and 1373. In August 2009, the government issued orders to implement the UAPA for terrorist-related predicate offenses. India has seized, attached and forfeited property of Dawood Ibrahim Kaskar, a designated individual, valued at more than INR 1.5 billion.

Know-your-customer rules: Yes

In October 2009, the Reserve Bank of India (RBI) strengthened its "Know Your Customer (KYC) Norms/Anti Money Laundering Standards/Combating of Financing of Terrorism" guidelines by issuing notifications to all banks and financial institutions on appropriate procedures regarding customer identification and verification. Entities covered by KYC regulations include banks, securities firms and broker dealers, insurance companies, authorized money changers (money remitters, bureaus de change, money changers) and payment systems operators. In November 2009, the RBI tightened the KYC norms for authorized money transfer service agents, requiring enhanced due diligence for new customers based on a customer's risk profile and increased monitoring of receipts considered especially risky based on indicators such as country of origin, sources of funds, and type of transaction. The RBI also has directed banks to take additional precautions on customers' business transactions with entities or banks from Iran, Pakistan, Uzbekistan, Turkmenistan, and Sao Tome.

Bank records retention: Yes

The PMLA obligates every banking company, financial institution, and intermediary of the securities market (such as stock brokers) to maintain records of all transactions and customer verification for ten years.

Suspicious transaction reporting: Yes

In June 2009, amendments to the PMLA came into force, adding additional entities to those subject to reporting requirements, including: casinos, authorized money changers; money transfer service agents (Western Union); and, international payment gateways (e.g., Visa and Master Card). Following a listing in the Official Gazette in November 2009, charitable trusts including temples, churches, mosques, nongovernmental bodies, and educational institutions, even if registered as non-profit organizations, are under the purview of the amended PMLA. These entities need to disclose their source of funds and must report both suspicious transactions and large monetary transactions. Obligated entities are required to submit suspicious transaction reports (STRs) to India's financial intelligence unit (FIU). According to the FIU's 2009 fiscal year Annual Report, the FIU received 4,409 STRs, of which 2,450 were shared with relevant law enforcement agencies. According to FIU officials, income tax evasion has been readily detected in the STRs and has also led to the arrest of suspected terror operatives.

Large cash transaction reports: Yes

The PMLA requires every bank, financial institution and intermediary to furnish to the FIU information relating to cash transactions of more than 1 million rupees (approximately $21,700), or its equivalent in foreign currency. Indian outlets of wire transfer services and casinos have also been ordered to report their transactions every month. Individual cash transactions below 50,000 rupees (approximately $1,080) need not be reported.

Narcotics asset seizure and forfeiture: Yes

The 1973 Code of Criminal Procedure, Chapter XXXIV (Sections 451-459), establishes India's basic framework for confiscating illegal proceeds. The Narcotic Drugs and Psychotropic Substances Act (NDPSA) as amended in 2000, requires the tracking and forfeiture of assets that have been acquired through narcotics trafficking and prohibits attempts to transfer and conceal those assets. The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act of 1976 (SAFEMA) allows for the seizure and forfeiture of assets linked to Customs Act violations. The Competent Authority (CA), within the Ministry of Finance, administers both the NDPSA and the SAFEMA. The 2001 amendments to the NDPSA allow the CA to seize any asset owned or used by an accused narcotics trafficker immediately upon arrest; previously, assets could only be seized after a conviction.

Narcotics asset sharing authority:

No information available.

Cross-border currency transportation requirements: Yes

A declaration must be made upon entering India with an aggregate value of Indian currency notes, bank notes, or traveler's checks exceeding $10,000 or its equivalent, and/or an aggregate value of foreign currency notes of $5,000 or its equivalent.

Cooperation with foreign governments: Yes

The GOI routinely cooperates with other jurisdictions in anti-money laundering and financial crimes investigations. India's Customs Service shares enforcement information with countries in the Asia/Pacific region.

U.S. or international sanctions or penalties: No Enforcement and implementation issues and comments:

India's widespread informal remittance systems, such as hawala, and its large underground economy are non-transparent and resistant to money laundering countermeasures. According to Indian observers, funds transferred through the hawala market are equal to between 30 to 40 percent of the formal market, totaling between $13 and $17 billion. The RBI estimates that remittances to India sent through legal, formal channels during fiscal year 2009 (ending March 31, 2009) amounted to $46.4 billion.

Smuggled goods such as computer parts, gold, and a wide range of imported consumer goods are routinely sold through the black market. However, the volume in business-related smuggled goods has fallen significantly. Nonetheless, private analysts estimate India's black market to range from $2.1--$2.5 trillion.

India is one of the most active members of the Asian Clearing Union (ACU), a regional clearing house based in Tehran for participants to settle trade transactions in Euros and dollars. The ACU could be used for financing trade with countries such as Iran and Burma, while avoiding U.S. sanctions.

The GOI requires charities to register with the Registrar of Societies but enforcement of GOI regulations governing charities remains weak. The Foreign Contribution Regulation Act (FCRA) of 1976 regulates the use of foreign funds received by charitable/nonprofit organizations. Their coverage under the PMLA is a good step toward more effective oversight but is too recent to evaluate. Some religious trusts and charities operate as sources of funds for terrorist organizations under anonymous/fictitious names. There are over a million charitable and private organizations registered in India. There is insufficient integration and coordination between charities' regulators and law enforcement authorities regarding the threat of terrorist financing.

To date, India has had very few money laundering prosecutions, particularly for a country and financial sector of its size.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.:

The FIU is able to exchange financial intelligence with the Financial Crimes Enforcement Network (FinCEN).

International agreements:

India is a party to various information exchange agreements. Authorities can share information or provide assistance to foreign jurisdictions in matters relating to money laundering or other financial crimes without need for a treaty. The FIU has signed bilateral MOUs to further facilitate and expedite financial intelligence information sharing.

India is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--No

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--No

India is a member of the Asia/Pacific Group on Money Laundering (APG), a Financial Action Task Force-style regional body. India's mutual evaluation report can be found here: http://www.apgml.org/documents/docs/8/India%20ME1%20-%20Final.pdf

Recommendations:

The Government of India (GOI) amended the PMLA in order to strengthen its AML/CFT regime. However, the GOI should extend the PMLA to dealers in precious stones and metals; real estate agents; lawyers, notaries and other independent legal professionals; and accountants. Further tax reform, loosening of currency controls, and facilitating the development of money transfer services should enhance the availability of legal alternatives to hawala and reduce ML/TF vulnerabilities. Given the fact that in India hawala is directly linked to terrorist financing, the GOI should take action to provide increased transparency in alternative remittance systems. India should take measures to demonstrate that it is also applying the full range of its AML/CFT measures to transactions conducted under the Asian Clearing Union with Iran and other participating countries. India should become a party to the UN Conventions against Transnational Organized Crime and Corruption. Also, India should pass the Foreign Contribution Regulation Bill for regulating nongovernmental organizations, including charities. India should devote more law enforcement and customs resources to curb abuses in the diamond trade. It should also consider the establishment of a Trade Transparency Unit (TTU) to promote trade transparency; in India, trade is the "back door" to underground financial systems.

Indonesia

Although neither a regional financial center nor an offshore financial haven, Indonesia is vulnerable to money laundering and terrorist financing due to gaps in financial system regulation, a cash-based economy, a lack of effective law enforcement, and the increasingly sophisticated tactics of major indigenous terrorist groups, such as Jemaah Islamiya, and their financiers from abroad. Most money laundering in the country is connected to non-drug criminal activity such as gambling, prostitution, bank fraud, theft, credit card fraud, maritime piracy, sale of counterfeit goods, illegal logging, and corruption. Indonesia also has a long history of smuggling, a practice facilitated by thousands of miles of unpatrolled coastline, weak law enforcement, and poor customs infrastructure. The proceeds of illicit activities are easily moved offshore and repatriated as needed for commercial and personal needs. Although Indonesia's corruption indicators are improving, corruption remains a very significant issue for all aspects of Indonesian society and a challenge for anti-money laundering/counter terrorist financing (AML/CFT) implementation.

Offshore Center: No

Free Trade Zones: Yes

The Government of Indonesia (GOI) has established special economic zones to attract both foreign and domestic investment. In 2007, the House of Representatives approved establishment of free trade zones (FTZs) in the Batam, Bintan and Karimun (BBK) islands. Batam Island, located just south of Singapore, has long been a bonded zone in which investment incentives have been offered to foreign and domestic companies. In 2009, the BBK FTZ officially became effective. As of the end of 2008, more than 1,015 domestic and foreign companies and joint ventures had invested more than $10 billion in the zone. Supervision of the FTZs includes confirming the identities of investors. In March 2009, the GOI issued regulations providing additional authority for Customs & Excise officials to regulate the flow of goods through the new BBK FTZ, given its vulnerability to smuggling.

Criminalizes narcotics money laundering: Yes

Indonesia's Law 15/2002 concerning the Crime of Money Laundering as amended by Law 25/2003 ("The AML Law") came into force in April 2003. Article 1 provides a definition of money laundering; Article 2 defines assets and predicate offenses, to include narcotics-trafficking; and Articles 3-7 establish the money laundering offense.

Criminalizes other money laundering, including terrorism-related: Yes

Law 15/2002 identifies 15 predicate offenses related to money laundering, including narcotics-trafficking and most major crimes. The law criminalizes the laundering of "proceeds" of crimes. Because it is often unclear to what extent terrorism generates proceeds, terrorist financing is not fully included as a predicate for the money laundering offense.

Criminalizes terrorist financing: Yes

Terrorist financing is criminalized in Articles 11-13 of Law 15/2003 Concerning Government Regulation in Lieu of Law 1/2002 Concerning Combating Criminal Acts of Terrorism. However, there are serious criticisms of the enabling legislation.

Know-your-customer rules: Yes

The GOI's financial regulatory authorities have issued regulations, decrees, and rules that set out obligations for their respective sectors to implement know your customer (KYC) principles. Anonymous and fictitious accounts are prohibited. Effective January 1, 2009, money remitters are subject to KYC and suspicious transaction reporting (STR) guidelines.

Bank records retention: Yes

Article 17 of the AML Law states that covered institutions must maintain records and documents concerning the identity of users of financial services for five years from the end of the business relationship.

Suspicious transaction reporting: Yes

Article 13 of the AML Law requires providers of financial services to report suspicious financial transactions to the Indonesian financial intelligence unit (FIU)--the Financial Transactions Reports and Analysis Centre (PPATK). The obligation to report a suspicious financial transaction is based on a "reasonable grounds to suspect" that funds are the proceeds of crime. Financial institutions are required to report suspicious transactions regardless of the amount of the transaction. From January through November 30, 2009, the PPATK received 21,600 STRs from banks and non-bank financial institutions.

Large currency transaction reporting: Yes

The threshold for cash transaction reports (CTRs) is Rp 100,000,000 (approximately $10,900). The PPATK reported that in 2009 it received more than 791,000 CTRs from banks, moneychangers, rural banks, insurance companies, and securities companies.

Narcotics asset seizure and forfeiture:

The GOI has limited formal instruments to trace and forfeit illicit assets. Under the Indonesian legal system, confiscation against all types of assets must be effected through criminal justice proceedings and be based on a court order. The AML Law provides that investigators, public prosecutors, and judges are authorized to freeze any assets that are reasonably suspected to be the proceeds of crime.

Narcotics asset sharing authority: No

Cross-border currency transportation requirements:

Article 16 of the AML Law contains a reporting requirement for any person taking cash into or out of Indonesia in the amount of Rp 100 million (approximately $10,900) or more, or the equivalent in foreign currency. The requirement does not cover bearer negotiable instruments.

Cooperation with foreign governments: Yes

There are no known issues that hamper the GOI's ability to assist foreign governments in mutual assistance requests. Authorities can share information or provide assistance to foreign jurisdictions in matters related to money laundering or other financial crimes without the need for a treaty.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Given the size of the country and the money laundering and terrorist financing threat level, the Indonesian National Police (POLRI) lacks capacity to proactively initiate investigations. Although the POLRI has successfully arrested more than 400 terrorists in recent years, the agency had not generally investigated terrorist financing related to those cases.

Through November 2009, there have been six money laundering convictions for the year. These six cases involved predicate offenses of embezzlement, bribery, corruption, and narcotics.

The GOI has no clear legal mechanism to trace and freeze assets of individuals or entities on the UNSCR 1267 Sanctions Committee's consolidated list, and there is no clear administrative or judicial process to implement this resolution and UNSCR 1373.

Although the Limited Liability Company Law (Law 40/2007) prohibits bearer shares, complete implementing regulations have not yet been issued, and the process for removing bearer shares from the system is not clear. Previously issued bearer shares appear to remain valid.

U.S.-related currency transactions:

No information available.

Records exchange mechanism with U.S.: No

Indonesia and the United States are not parties to a bilateral mutual legal assistance treaty that provides for exchange of information. Indonesian and U.S. law enforcement entities have a close working relationship.

International agreements:

Indonesia has signed Mutual Legal Assistance Treaties with Australia, China, and South Korea. Indonesia joined other Association of Southeast Asian Nations (ASEAN) members in signing the ASEAN Treaty on Mutual Legal Assistance in Criminal Matters on November 29, 2004. It enacted Law 15/2008

to ratify the treaty, effective April 30, 2008. The PPATK has concluded 31 MOUs with other FIUs and

has entered into an Exchange of Letters enabling international exchange with Hong Kong. Authorities can share information or provide assistance to foreign jurisdictions in matters related to money laundering or other financial crimes without the need for a treaty.

Indonesia is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--Yes

Indonesia is a member of the Asia/Pacific Group on Money Laundering (APG). Its most recent mutual evaluation can be found at:

http://www.apgml.org/documents/docs/17/Indonesia%20MER2_FINAL.pdf Recommendations:

The Government of Indonesia (GOI) has made progress in constructing an AML regime. It has also recently taken steps to strengthen its legal and regulatory framework for combating terrorist financing. Increased prosecution of high-profile corruption cases in 2008 and 2009 was an important advance in the GOI's efforts to eradicate pervasive corruption. Further investment in human and technical capacity is needed to develop a truly effective AML/CFT regime. Authorities should ensure the PPATK has access, directly or indirectly, to required financial, administrative, and law enforcement information on a timely basis. Indonesian police and customs authorities should be encouraged to initiate money laundering investigations at the "street level" and not be dependent on financial intelligence filed with the PPATK. Law enforcement agencies should systematically investigate money laundering in parallel with their investigations of predicate offenses. The GOI should issue the regulations necessary to eliminate bearer shares. The GOI also should establish comprehensive controls or oversight over the provision of wire transfers. Indonesia's cross-border currency declarations should also cover bearer negotiable instruments. Indonesia should establish clear legal mechanisms and administrative or judicial processes to trace and freeze assets of entities included on the UNSCR 1267 Consolidated List and to implement its obligations under UNSCR 1373. The GOI must continue to improve capacity and interagency cooperation in analyzing suspicious and cash transactions, investigating and prosecuting cases, and achieving deterrent levels of convictions. As part of this effort, the GOI should review and streamline its process for reviewing UN designations and identifying, freezing, and seizing terrorist assets.

Iran

Iran is not a regional financial center and its economy is marked by a bloated and inefficient state sector and over-reliance on the petroleum industry. A combination of price controls and subsidies continue to weigh down the economy and, along with widespread corruption, have undermined the potential for private sector-led growth. As a state sponsor of terrorism, the threat of terrorism finance emanating from Iran is so significant that the Financial Action Task Force (FATF) has issued seven statements to alert its members to concerns about this risk and has advised jurisdictions around the world to impose financial countermeasures on Iran to protect against this threat. Iran has a large underground economy, spurred by restrictive taxation, widespread smuggling, currency exchange controls, capital flight, and a large Iranian expatriate community.

Iran has established an international banking network, with many large state-owned banks establishing foreign branches in Europe, the Middle East, and Asia. In 1994, Iran authorized the creation of private credit institutions. Licenses for these banks were first granted in 2001, and three new banks were added in August 2009. In a number of cases, Iran has used its state owned banks to channel funds to terrorist organizations. The U.S. designated Bank Saderat in October 2007 for its role in channeling funds to terrorist organizations, including Hizballah, Hamas, PFLP-GC, and the Palestinian Islamic Jihad. According to the statement issued with this action, between 2001 and 2006, Bank Saderat transferred $50 million from the Central Bank of Iran through Bank Saderat's subsidiary in London to its branch in Beirut for the benefit of Hizballah fronts that support acts of violence. Hizballah also used Bank Saderat to send funds to other terrorist organizations, including Hamas, which itself had substantial assets deposited in Bank Saderat as of early 2005.

Offshore Center:

No information available.

Free Trade Zones: Yes

Iran has six free trade zones (FTZs), including a large FTZ located on Kish Island.

Criminalizes narcotics money laundering: Yes

A new Iranian anti-money laundering (AML) law was approved by the Islamic Parliament on January 22, 2008 and by the Guardian Council on February 6, 2008. The law creates a High Council on Anti-Money Laundering chaired by the Minister of Economic Affairs and Finance. The High Council coordinates and collects information and evidence concerning money laundering offenses. Nonetheless, the new anti-money laundering law falls significantly short of meeting international standards and the status of its implementation is not known.

Criminalizes other money laundering, including terrorism-related: See above

Criminalizes terrorist financing: No

The U.S. Department of State has designated Iran as a state sponsor of terrorism.

Know-your-customer rules: Yes

According to the AML law, all legal entities including the Central Bank, banks, financial and credit institutions, insurance companies, the Central Insurance, interest-free funds, charity organizations and institutions, municipalities, notary public offices, lawyers, accountants, auditors, authorized specialists of the Justice Ministry, and official inspectors are obligated to produce the information necessary for the implementation of this law, which, per Article 7a includes, "Verification of the identity of the client, and where relevant verification of the identity and relationship of the client's representative or proxy, as well as verification of the identity of the principal, in case there are evidences of offense."

Bank records retention: Yes

According to the AML law, Article 7d, obligated entities are required to maintain records on client identification, account history, operations and transactions "as long as determined in the executive bylaw."

Suspicious transaction reporting: Yes

According to Article 7c of the AML law, obligated entities must report suspicious transactions and operations to a competent authority as designated by the Anti-Money Laundering High Council. No information is available on the implementation of Article 7c.

Large currency transaction reporting:

No information available.

Narcotics asset seizure and forfeiture:

According to Article 9 of the AML law, "Those who engage in the crime of money laundering will, in addition to returning the assets and the proceeds derived from the crime comprising the original assets and the profits there of (and if nonexistent, the equivalent or the price), be sentenced to a fine of one fourth of the value of the proceeds of the crime which should be deposited into the public Revenues Account with the Central Bank of the Islamic Republic of Iran." If the proceeds have been converted into other property, that property will be seized. The order to seize the assets and their derived profits can be issued and exercised if the accused "has not been subject to this order under predicate offenses." No information was available on the implementation of Article 9.

Narcotics asset sharing:

No information available.

Cross-border currency transportation requirements:

No information was available on whether persons physically crossing the border are subject to any requirements.

Cooperation with foreign governments: No

Iran does not cooperate with the international community regarding anti-money laundering/counter-terrorist financing (AML/CFT) matters.

U.S. or international sanctions or penalties: Yes

In 1984, the Department of State designated Iran as a state sponsor of international terrorism. Iran continues to provide material support, including resources and guidance, to multiple terrorist organizations and other groups that undermine the stability of the Middle East and Central Asia. Hamas, Hizballah, and the Palestinian Islamic Jihad (PIJ) maintain representative offices in Tehran in part to help coordinate Iranian financing and training. In November 2008, Treasury revoked the license authorizing "U-turn" transfers involving Iran, thus terminating Iran's ability to access the U.S. financial system indirectly via non-Iranian foreign banks.

Since 2006, the U.S. has taken a number of targeted financial actions against key Iranian financial institutions, entities, and individuals under proliferation, terrorism, and Iraq-related authorities, i.e., Executive Order 13382, Executive Order 13224, and Executive Order 13438, respectively. To date, the Departments of Treasury and State have designated 117 Iranian entities and individuals under Executive Order 13382.

The following are some examples of notable designations under Executive Orders: Four state-owned Iranian banks (Bank Sepah, Bank Melli, Bank Mellat, and the Export Development Bank of Iran, as well as all of their foreign operations) were designated for facilitating Iran's proliferation activities. One state-owned Iranian bank (Bank Saderat and its foreign operations) was designated for funneling money to terrorist organizations. The Qods Force, a branch of the IRGC, was designated for providing material support to the Taliban, Lebanese Hizballah, and Palestinian Islamic Jihad. The Iran-based Martyrs Foundation (also known as Bonyad Shahid) was designated. The Martyrs Foundation is an Iranian parastatal organization that channels financial support from Iran to several terrorist organizations in the Levant, including Hizballah, Hamas, and the Palestinian Islamic Jihad (PIJ). The designation includes the Lebanon-based Martyrs Foundation which is staffed by Hizballah leaders and members and provides financial support to the organization, and the U.S-based fundraising office established by the Martyrs Foundation to support the organization in Lebanon.

Iran's defiance of the international community over its nuclear program and the role of Iranian banks in facilitating proliferation activity have also led to a number of international multilateral actions on Iran's financial sector. Since July 2006, the United Nations Security Council (UNSC) has passed five related resolutions (UNSCRS), three of which call for financial restrictions on Iran.

On October 11, 2007, the FATF released a statement of concern that "Iran's lack of a comprehensive anti-money laundering/counter-terrorist finance regime represents a significant vulnerability within the international financial system." The FATF has subsequently issued six additional statements, the most recent of which was released on October 16, 2009. The statement expressed concerns about Iran's failure to "address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system" and urged all jurisdictions to "apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism (ML/FT) risks emanating from Iran."

Since February 2007, the European Union (EU) has adopted numerous Common Positions to implement the UNSCRs on Iran. While these regulations strictly implement the provisions of the UNSCRs, they also go beyond the requirements of the UNSCRs to require additional action from member states. For example, the EU has designated numerous additional entities and individuals that had not been included in the annexes of UNSCRs 1737, 1747, or 1803, including Bank Melli and IRGC subsidiary Khatam al-Anbiya. The EU regulations also include, among other provisions, a prohibition on the provision of financial assistance and training to Iran, restrictions on export credits, and enhanced vigilance on all Iranian banks, and, specifically, on Iran's Bank Saderat.

Numerous countries around the world have also restricted their financial and business dealings with Iran in response to both the UNSC measures on Iran as well as the FATF statements on Iran's lack of adequate AML/CFT controls. Many of the world's leading financial institutions have essentially stopped dealing with Iranian banks, in any currency, and Iranian companies and businesses are facing increased difficulty in obtaining letters of credit. For example, in October 2009 the United Kingdom announced domestic sanctions against IRISL and Bank Mellat under its 2008 Counterterrorism Act. In September 2008, Australia took domestic action against Iran by designating Banks Melli and Saderat, as well as implementing a series of other financial measures designed to pressure a change in Iran's course.

Enforcement and implementation issues and comments:

Iran is ranked 168 out of 180 countries listed in Transparency International's 2009 Corruption Perception Index. There is pervasive corruption within the ruling elite, government ministries, and government controlled business enterprises.

In Iran and elsewhere in the region, proceeds from narcotics sales are sometimes exchanged for trade goods via value transfer. The United Nations Global Program against Money Laundering also reports that illicit proceeds from narcotics trafficking are used to purchase goods in the domestic Iranian market; those goods are often exported and sold in Dubai. Iran's merchant community makes active use of hawala and moneylenders. Counter-valuation in hawala transactions is often accomplished via trade, thus trade-based money laundering is likely a prevalent form of money laundering. Many hawaladars and traditional bazaari are linked directly to the regional hawala hub in Dubai. Over 400,000 Iranians reside in Dubai, with approximately 10,000 Iranian-owned companies based there. Iranian front companies based in Dubai are a key factor in thwarting U.S. and international sanctions.

Iran's real estate market is often used to launder money. Frequently, real estate settlements and payments are made overseas. In addition, there are reports that billions of dollars in Iranian capital has been invested in the United Arab Emirates, particularly in Dubai real estate.

U.S.-related currency transactions:

Prior to the revocation of the U-turn exemption, Iran transacted more than a trillion dollars of U.S. dollar payments through the United States over a roughly five-year period. In addition to payments which were,

at the time, presumed legal under the U-turn exemption, Iran transacted more than a billion dollars through the United States financial system over a five-year period in violation of U.S. law.

Records exchange mechanism with U.S.: No

International agreements:

Iran is a party to:

* the 1988 UN Drug Convention--Yes

* the UN Convention for the Suppression of the Financing of Terrorism--No

* the UN Convention against Transnational Organized Crime--No

* the UN Convention against Corruption--No

Iran is not a member of a FATF-style regional body.

Recommendations:

The Government of Iran (GOI) should vigorously pursue the implementation of a viable anti-money laundering/terrorist financing regime, including effective legislation and proper regulations that adhere to international standards and seek to address the risk of terrorist financing emanating from Iran. Above all, the GOI should cease its financial and material support of terrorist organizations and terrorism, as well as its abuse of the international financial system to facilitate proliferation. Iran should be more active in countering regional smuggling. Iran should create an anti-corruption law with strict penalties and enforcement, applying it equally to figures with close ties to the government, ruling class, business leaders, and the clerical communities. Iran should become a party to the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, and the UN Convention for the Suppression of the Financing of Terrorism.

Isle of Man

Isle of Man (IOM) is a British crown dependency, and while it has its own parliament, government, and laws, the United Kingdom (UK) remains constitutionally responsible for its defense and international representation. Offshore banking, manufacturing, and tourism are key sectors of the economy. The government offers incentives to high-technology companies and financial institutions to locate on the island. Its large and sophisticated financial center is potentially vulnerable to money laundering. Most of the illicit funds in the IOM are from fraud schemes and narcotics-trafficking in other jurisdictions, including the UK. Identity theft and Internet abuse are growing segments of financial crime activity.

Offshore Center: Yes

Isle of Man is an offshore financial center. As of December 31, 2008, there were 40 banking, building society and Class 1 deposit taking license holders; 81 investment business and Class 2 investment business license holders; 61 managers of collective investment schemes and Class 3 services to collective investment schemes license holders; 204 corporate service providers and Class 4 corporate services license holders; and 131 trust service providers and Class 5 trust services license holders.

Free Trade Zone: Yes

Isle of Man has one Freeport, the Ronaldsway Freeport.

Criminalizes narcotics money laundering: Yes

Narcotics-related money laundering is criminalized through the Proceeds of Crime Act 2008.

Criminalizes other money laundering, including terrorism-related: Yes

Money laundering is criminalized broadly in the Proceeds of Crime Act 2008. All relevant categories of predicate offenses are covered, including terrorism.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

Terrorist financing is criminalized in the Isle of Man by sections 7-10 of the Anti-Terrorism and Crime Act 2003. A new Terrorism (Finance) Act 2009 (TFA) came into force on July 15, 2009. The TFA allows the IOM authorities to compile its own list of suspects subject to sanctions when appropriate.

Know-your-customer rules: Yes

Coverage of preventive measures in the IOM includes all of the main financial businesses covered by the FATF definition of "financial institution." The Criminal Justice (Money Laundering) Code 2008 includes an obligation to identify (and to take reasonable steps to verify) all customers and beneficial owners. Appropriate requirements apply in relation to legal persons, parties to legal arrangements, and persons acting on behalf of others. The TFA provides the Treasury with powers to issue directions to individuals or companies to enhance Customer Due Diligence (CDD), monitoring or systematic reporting.

Bank records retention: Yes

Pursuant to the Criminal Justice (Money Laundering) Code 2008, transaction records and identity verification documents must be retained for at least five years.

Suspicious transaction reporting: Yes

The Financial Crime Unit (FCU), the IOM's financial intelligence unit, is the national center for receiving, analyzing and disseminating suspicious transaction reports (STRs) and other relevant intelligence. In 2008, 918 STRs were filed.

Large currency transaction reporting: No

The IOM authorities have considered the feasibility and relative utility of introducing a threshold-based reporting system for currency transactions. They determined, however, that such a reporting system was not feasible for the IOM and that the continuation of the current system based on suspicious transaction reporting was more appropriate.

Narcotics asset seizure and forfeiture: Yes

The Proceeds of Crime Act 2008 allows the recovery of property which is or represents property obtained through unlawful conduct, or which is intended to be used in unlawful conduct. It also provides for confiscation orders in relation to persons who benefit from criminal conduct and for restraint orders to prohibit dealing with property.

Narcotics asset sharing authority:

There are currently no specific legislative provisions relating to the sharing of confiscated assets with other jurisdictions. Asset sharing is negotiated on an individual case by case basis. The Proceeds of Crime Act 2008 contains a provision allowing the Treasury to enter into asset sharing agreements on behalf of the IOM.

Cross-border currency transportation requirements: Yes

Travelers entering or leaving the Isle of Man and carrying any sum equal to or exceeding 10,000 Euros (or its equivalent in other currencies or easily convertible negotiable instruments) are required to make a declaration to the customs authorities.

Cooperation with foreign governments (including refusals): Yes

The IOM cooperates with international authorities on regulatory and criminal matters. Under the 1990 Criminal Justice Act, the provision of documents and information is available to all countries and territories for the purposes of investigations into serious or complex fraud, drug-trafficking and terrorism. All decisions for assistance are made by the Attorney General of the IOM on a case-by-case basis, depending on the circumstances of the inquiry.

The Proceeds of Crime Act 2008 contains provisions to give effect to overseas requests and orders related to property found or believed to be obtained through criminal conduct. The Customs and Excise (Amendment) Act 2001 permits Customs and Excise to release information to any agency within or outside the IOM for the purposes of any criminal investigation and proceeding, either spontaneously or upon request.

U.S. or international sanctions or penalties: No.

Enforcement and implementation issues and comments:

IOM legislation provides powers to constables, including customs officers, to investigate whether a person has benefited from any criminal conduct. These powers allow information to be obtained about that person's financial affairs. These powers can be used to assist in criminal investigations abroad as well as in the IOM.

U.S.-related currency transactions:

The U.S. dollar is the most commonly used currency for criminal activity in the IOM.

Records exchange mechanism with U.S.:

In 2003, the U.S. and the UK agreed to extend to the IOM the U.S.-UK Treaty on Mutual Legal

Assistance in Criminal Matters. The FCU is able to exchange information with the Financial Crimes Enforcement Network (FinCEN).

International agreements:

As a British Crown Dependency, the IOM is not empowered to sign or ratify international conventions on its own behalf. However, following a request by the IOM Government, the UK may extend ratification of any convention to the IOM. Application of the 1988 UN Drug Convention was extended to the IOM in 1993. The UN Convention for the Suppression of the Financing of Terrorism was also extended to the IOM in 2008 as was the UN Convention against Corruption in 2006.

The IOM is a party to various information exchange agreements with countries in addition to the United States; authorities can share information or provide assistance to foreign jurisdictions in matters relating to money laundering or other financial crimes without need for a treaty.

Compliance with the FATF recommendations was evaluated in a report prepared by the International Monetary Fund's Financial Sector Assessment Program. The report can be found here: http://www.imf.org/external/pubs/ft/scr/2009/cr09275.pdf

Recommendations:

The Isle of Man has had anti-money laundering/counter-terrorist financing (AML/CFT) legislation in place for well over a decade. The new regulatory regime consolidates and simplifies the old regime and provides a transparent and user-friendly regulatory environment, further promoting the Isle of Man as a leading offshore market. Isle of Man officials should continue to support and educate the local financial sector to help it combat current trends in money laundering and terrorist financing. The IOM should ensure that obligated entities understand and respond to their new and revised responsibilities. The authorities also should continue to work with international AML/CFT authorities to deter financial crime and the financing of terrorism and terrorists.

Israel

Israel is not regarded as a regional financial center. It primarily conducts financial activity with the markets of the United States and Europe, and to a lesser extent with the Far East. Criminal groups in Israel with ties to the former Soviet Union, United States, and European Union often utilize a maze of offshore shell companies and bearer shares to obscure beneficial owners. Recent studies by the authorities estimate illegal gambling profits at over $2 billion per year and domestic narcotics profits at $1.5 billion per year. Human trafficking is considered the crime-for-profit with the greatest human toll in Israel, and public corruption the crime with the greatest social toll. Black market penetration in Israel remains low and is comparable in scale to that of western, industrialized nations. While there have been some reports of trade-based money laundering, Israeli enforcement capacity is adequate to keep the problem to minimum levels. With the exception of a few isolated incidents involving the sales of drugs in the United States by Israeli organized crime, Israel's illicit drug trade is domestically focused and has little to no connection with illegal drug sales in the United States.

Offshore Center: No

Free Trade Zones: No

Criminalizes narcotics money laundering: Yes

Criminalizes other money laundering, including terrorism-related: Yes

In August 2000, Israel enacted its anti-money laundering legislation, the Prohibition on Money Laundering Law (PMLL, Law No. 5760-2000). Among other things, the PMLL criminalizes money laundering and includes 18 serious crimes, in addition to offenses described in the prevention of terrorism ordinance, as predicate offenses for money laundering, even if committed in a foreign jurisdiction.

Criminalizes terrorist financing: Yes

(Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

In December 2004, the Israeli Parliament adopted the prohibition on terrorist financing law 5765-2004, which further modernizes and enhances Israel's ability to combat terrorist financing and to cooperate with other countries on such matters. The Law went into effect in August 2005, criminalizing the financing of terrorism.

Know-your-customer rules: Yes

In 2001, Israel adopted the Banking Corporations Requirement Regarding Identification, Reporting, and Record Keeping Order. The Order establishes specific procedures for banks with respect to customer identification, record keeping, and the reporting of irregular and suspicious transactions.

Bank records retention: Yes

Amendments to the PMLL authorize the issuance of regulations requiring financial service providers to identify, report, and keep records for specified transactions for seven years.

Suspicious transaction reporting: Yes

Clarifications to the PMLL were approved in Orders 5761-2001 and 5762-2002 requiring that, in addition to banks, suspicious transactions be reported by members of the stock exchange, portfolio managers, insurers or insurance agents, provident funds and companies managing a provident fund, providers of currency services, money services businesses and the Postal Bank. Suspected terrorist financing activity must also be reported.

Through November 2009, IMPA received 23,902 suspicious transaction reports and disseminated 418 intelligence reports to law enforcement agencies and 205 to foreign FIUs.

Large currency transaction reporting: Yes

Financial institutions must report all transactions that exceed a minimum threshold that varies based on the relevant sectors and the risks that may arise, with more stringent requirements for transactions originating in a high-risk country or territory.

Narcotics asset seizure and forfeiture:

Israeli law provides for the tracing, freezing, and seizure of assets. In 2009, the Israeli National Police (INP) reported a significant increase in the amount of monetary seizures over the previous year--more than triple the amount of 2008. Through November 2009, the INP reported narcotics-related monetary seizures of NIS 20.2 million (approximately $5.32 million), anti-money laundering-related seizures of NIS 49.9 million (approximately $13.14 million), and NIS 6.6 million for other seizures (approximately $1.74 million). Through September 2009, IMPA reports that about NIS 11.9 million (approximately $3.2 million) was frozen, seized, or confiscated in AML/CFT-related actions.

Israel's International Legal Assistance Law enables Israel to offer full and effective cooperation to authorities in foreign states, including enforcement of foreign forfeiture orders in terror financing cases (both civil and criminal).

On December 24, 2008, the Security Cabinet approved the designation of 35 foreign terrorist organizations, all of which were related to Al Qaeda or the Taliban, and appeared on both the UNSCR 1267 Sanctions Committee consolidated list and the list of Specially Designated Global Terrorists designated by the United States pursuant to E.O. 13224. On November 5, 2009 Israel also designated an additional 50 foreign terrorist organizations, based on the UN Security Council Resolution 1267 list.

Narcotics asset sharing authority:

No information provided.

Cross-border currency transportation requirements: Yes

Regulations establish methods of reporting to the Customs Authority monies brought into or out of Israel, and criteria for financial sanctions for violating the law. The regulations require the declaration of currency transferred (including cash, travelers' checks, and banker checks) into or out of Israel for sums above 90,000 new Israeli shekels (NIS) (approximately $23,600). This applies to any person entering or leaving Israel, and to any person bringing or taking money into or out of Israel by mail or any other methods, including cash couriers. On September 24, 2009, an additional draft Bill for PMLL (Amendment No. 8) was published. Among its amendments: the threshold regarding the obligation to report monies upon entry to/exit from Israel was reduced to approximately $10,000 and the differentiation of assets and "willful blindness" exemption were removed; and cross-border declarations must now include all negotiable instruments.

Cooperation with foreign governments (including refusals): Yes

No known impediments exist to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

In 2009, there were several changes to Israel's anti-money laundering/counter-terrorist financing (AML/CFT) legislation, and a significant increase in the number of reported seizures related to financial crime by the INP.

Through September 2009, IMPA reported 30 investigations (concerning 66 persons), 10 prosecutions (concerning 21 persons) and six final convictions (concerning 14 persons) relating to money laundering and/or terrorist financing. Through November 2009,

U.S.-related currency transactions:

In May 2008, Agents from U.S. Immigration and Customs Enforcement (ICE) and officers from U.S. Customs and Border Protection (CBP) conducted joint bulk currency interdiction operations with Israeli law enforcement counterparts in Israel and at U.S. airports as part of the Department of Homeland Security's (DHS) "Hands Across the World" initiative. The coordinated law enforcement effort resulted in an arrest and two seizures in the United States and 14 seizures in Israel. The combined seizures totaled nearly $500,000 in cash, negotiable checks, gold and diamonds.

In October 2006, the U.S. Department of Treasury, the Federal Deposit Insurance Corporation, and the New York State Banking Department penalized Israel Discount Bank $12 million to settle charges that its AML procedures were lax. The action was specifically related to the transfer of billions of dollars of illicit funds from Brazil to Israel Discount Bank's New York offices.

Records exchange mechanism with U.S.:

Israel has a Mutual Legal Assistance Treaty with the United States, as well as a bilateral mutual assistance agreement in customs matters. On November 20 2009, the Constitution, Law and Justice Committee of the Knesset approved an amendment to the International Legal Assistance Law of 1998 concerning additional related predicate offences. This amendment will improve international cooperation by increasing Israel's effectiveness in providing mutual legal assistance to foreign countries related to the freezing, seizure and confiscation of instruments and proceeds of crime. This amendment will enable the enforcement of foreign forfeiture orders in Israel according to requests of another state and enforcement of forfeiture orders abroad according to requests on behalf of the state of Israel. Customs, IMPA, the INP and the Israel Securities Agencies routinely exchange information with U.S. agencies through their regional liaison offices, as well as through the Israel Police Liaison Office in Washington.

The U.S. Financial Crimes Enforcement Network (FinCEN) and the IMPA engage in sharing and exchanging financial intelligence information.

International agreements:

The Israeli FIU can share information or provide assistance to foreign counterparts in matters relating to money laundering or other financial crimes without need for a treaty.

Israel is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--No

Israel is an observer of the Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. Its most recent mutual evaluation can be found at: www.coe.int/moneyval

Recommendations:

The Government of Israel has developed an AML/CFT financial regulatory sector and enforcement capacity that compares with advanced, industrialized nations. Israel remains deficient, however, in regulating its diamond trade, intermediaries such as accountants and lawyers, and other nonbank sectors. Following the establishment of a new government in 2009, Israel should continue its aggressive investigation of money laundering activity associated with organized criminal groups. Israel should ratify the UN Convention against Corruption.

Italy

Italy is fully integrated into the European Union (EU) single market for financial services. Money laundering is a concern because of the prevalence of homegrown organized crime groups as well as criminal organizations from abroad, especially from Albania, Bulgaria, China, Israel, Romania and Russia. Italy is both a consumer country and a major transit point for heroin coming from South Asia through the Balkans en route to Western/Central Europe and, to a lesser extent, the United States. The heavy involvement of organized crime groups in narcotics-trafficking complicates narcotics-related anti-money laundering (AML) activities because of the sophistication of the laundering methods used by these groups. Italian and ethnic Albanian criminal organizations work together to funnel drugs to Italy and, in many cases, on to third countries. Additional important trafficking groups include Balkan organized crime entities, as well as Nigerian, Colombian, and other South American trafficking groups. In addition to the narcotics trade, laundered money originates from myriad criminal activities, such as alien smuggling, contraband cigarette smuggling, counterfeit goods, extortion, human trafficking, and usury. Financial crimes not directly linked to money laundering, such as credit card fraud, Internet fraud, and phishing have increased over the past year.

Money laundering occurs both in the regular banking sector and in the nonbank financial system, including casinos, money transfer houses, and the gold market. There is a substantial black market for smuggled goods in the country, but it is not believed to be funded significantly by narcotics proceeds. Italy's underground economy is an estimated 15-17 percent of Italian GDP, totaling about 226 to 250 billion Euros (approximately $336 billion to $371 billion), though a substantial fraction of this total is related to tax evasion of otherwise legitimate commerce.

Offshore Center: No

Free Trade Zones: Yes

Free trade zones are located in Trieste and Venice Criminalizes narcotics money laundering: Yes

All criminal offenses are predicates to the crime of money laundering, regardless of the applicable sentence for the predicate offense.

Criminalizes other money laundering, including terrorism-related: Yes

Law 197 of July 1991 is Italy's framework AML legislation. It was amended in 2007 by Anti-Money Laundering/Counter-Terrorist Financing (AML/CFT) Legislative Decree 231/2007 which broadens the range of predicate offenses. The Decree consolidates the existing AML/CFT regulations and stipulates the general principles and definitions of AML/CFT measures; authorities in charge; customer due diligence (CDD) requirements and obligations, record keeping and suspicious transaction reporting; prohibition of bearer instruments, anonymous accounts and saving books; and sanctions. Article 648 of the Penal Code criminalizes money laundering.

Criminalizes terrorist financing: Yes; (Please refer to the Department of State's Country Reports on Terrorism, which can be found here: http://www.state.gov/s/ct/rls/crt/)

Article 270 of the Penal Code criminalizes terrorist financing.

Know-your-customer rules: Yes

Legislative decree 231 of 2007 sets out CDD requirements. Italy utilizes the risk-based approach. Covered entities include banks, Italian postal services, electronic money institutions, investment firms, insurance companies, agencies providing tax collection services, stock brokers, financial intermediaries, trust companies, lawyers, accountants, auditors, and casinos. Anonymous accounts are prohibited, as are bearer passbooks with a balance exceeding 12,500 Euros (approximately $16,900).

Bank records retention: Yes

Records must be retained for a period of ten years after the continuous relationship or professional service has ended.

Suspicious transaction reporting: Yes

There is no reporting threshold for suspicious transaction report (STR) filing. The financial intelligence unit (FIU) received 14,068 STRs in 2008, and 9,600 in the first half of 2009 from credit and financial institutions. It received an additional 173 STRs in 2008, and 83 through June 2009 from designated non-financial businesses and professions.

Large currency transaction reporting:

Financial institutions are required to maintain a centralized electronic AML database for all transactions (including wire transfers) over 15,000 Euros (approximately $20,250) and to submit this data monthly to the FIU.

Narcotics asset seizure and forfeiture:

Italy has established reliable systems for identifying, tracing, freezing, seizing, and forfeiting assets from narcotics-trafficking and other serious crimes, including terrorism. These assets include currency accounts, real estate, vehicles, vessels, drugs, legitimate businesses used to launder drug money, and other instruments of crime. Under anti-mafia legislation, seized financial and nonfinancial assets of organized crime groups can be forfeited. The burden of proof is on the Italian government to make a case in court that assets are related to narcotics-trafficking or other serious crimes. Law enforcement officials have adequate powers and resources to trace and seize assets, with judicial concurrence. The Agenzia del Demanio (State Property Agency) is responsible for managing both frozen terrorist-related assets and sequestered criminal assets.

Italy currently has frozen 177,833 Euros (approximately $240,075) in funds in 36 accounts, belonging to 30 persons designated terrorists under UNSCR 1267and domestic authority, which is used to implement UNSCR 1373.

Narcotics asset sharing: Yes

Italy shares seized assets with member states of the European Union. Currently, assets can be shared bilaterally only if agreement is reached on a case-specific basis.

Cross-border currency transportation requirements: Yes

Italy applies the 10,000 euro-equivalent (approximately $14,500) reporting requirement to cross-border transport of domestic and foreign currencies and negotiable bearer instruments. Italy has a declaration system, rather than disclosure system, and the fines for failure to declare a cross-border transaction or transportation of funds may be up to 40 percent of the amount beyond the threshold.

Cooperation with foreign governments (including refusals): Yes

To date, Italy has never refused a request for assistance in providing information to another nation's FIU. There are no known impediments to cooperation.

U.S. or international sanctions or penalties: No

Enforcement and implementation issues and comments:

Italian law does not allow someone to be prosecuted for laundering the proceeds of crimes they themselves committed (self-laundering).

In 2009, Italy declared a Tax Amnesty to encourage the repatriation of otherwise legitimate funds sent abroad purely to evade taxes. The Italian government insists that all AML obligations for STRs are still in place; therefore, it does not believe the tax amnesty will present new opportunities for the conversion of illicit funds.

Currently, approximately 1.3 billion Euros worth of 'old' lira are still outstanding in the economy. The Ministry of Economics and Finance (MEF) estimates that between 700-800 million Euros worth of these lira are crime related and will have to be laundered prior to the 2012 deadline for converting them into Euros. The MEF has issued a directive to private sector financial intermediaries to be aware of this and to strictly adhere to all STR obligations.

U.S.-related currency transactions:

Money launderers predominantly use nonbank financial institutions for the export of undeclared or illicitly obtained currency--primarily U.S. dollars and Euros--for laundering in offshore companies.

Records exchange mechanism with U.S.:

Italy and the United States are parties to a bilateral mutual legal assistance treaty (MLAT) that provides for exchange of information. In May 2006, the U.S. and Italy signed a new bilateral instrument on mutual legal assistance as part of the process of implementing the U.S.--EU Agreement on Mutual Legal Assistance. Once ratified, the new U.S./Italy bilateral treaty will allow for joint investigative teams, easier asset freezing, and faster sharing of financial information. The U.S. Senate has already ratified the treaties. On the Italian side, the treaties were approved by the Council of Ministers in November 2008; as of November 2009, Italy had not yet ratified the treaty.

The Italian FIU regularly exchanges information with the FIU of the United States, FinCEN, through the Egmont Group information sharing process. The Italian FIU has also signed a memorandum of understanding (MOU) with FinCEN.

International agreements:

Italy is a party to various information exchange agreements with numerous foreign governments. Italy is a party to:

* the UN Convention for the Suppression of the Financing of Terrorism--Yes

* the UN Convention against Transnational Organized Crime--Yes

* the 1988 UN Drug Convention--Yes

* the UN Convention against Corruption--Yes

Italy is a member of FATF. It's most recent mutual evaluation can be found here: http://www.fatfgafi.org/dataoecd/52/29/3 6221355.pdf

Recommendations:

Given the relatively low number of STRs being filed by nonbank financial institutions, Italy should improve its training efforts and supervision in this sector and should clarify attorney/client privilege. Italy should take steps to allow for civil in rem forfeiture of criminal proceeds. Italian law enforcement agencies should take additional steps to understand and identify underground finance and value transfer methodologies employed by Italy's burgeoning immigrant communities. Italy also should ensure its new regulations on PEPs are enforced. The Government of Italy should ratify the bilateral instrument on Mutual Legal Assistance. Finally, Italy should continue its active participation in multilateral fora dedicated to the global fight against money laundering and terrorist financing and its assistance to jurisdictions with nascent or developing AML/CFT regimes.
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Title Annotation:Cyprus-Italy
Publication:International Narcotics Control Strategy Report
Article Type:Report
Geographic Code:1USA
Date:Mar 1, 2010
Words:24805
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