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Moldova is not considered an important regional financial center. Moldova remains predominantly a cash-based society and people reportedly have little faith in banks. Criminal proceeds laundered in Moldova are derived from both domestic and foreign criminal activity. Organized crime syndicates are active in the country. Widespread corruption in both commerce and government exacerbates the situation. There is a large underground economy in Moldova. Smuggling of consumer goods, including counterfeit items, is common. Moldova is also recognized as a major source country for trafficking in persons. A rise in internet-related fraud schemes is evident. Moldova has approximately five casinos, but they are neither well regulated nor controlled.

Additional money laundering threats are found in the separatist region of Trans-Dniester--a narrow strip of land between the Dniester River and the Ukrainian border--which proclaimed independence from Moldova in 1990. Trans-Dniester contains most of Moldova's industrial infrastructure, but its economic potential is limited by its international isolation. The region is plagued by corruption, organized crime and smuggling. There are persistent reports of Trans-Dniester illegal arms sales, narcotics trafficking, and of being the base of operations for Russian and Ukrainian organized crime syndicates.

Money laundering became a criminal offense in Moldova November 2001, and the law was amended in June 2002. It remained unchanged when the new criminal code was adopted in June 2003. The legislation applies to proceeds of "all crimes," not just narcotics activity, with banks and nonbank financial institutions (NBFIs) required to report transactions over a certain amount to the Center for Combating Economic Crimes and Corruption (CCECC). On July 1, 2004, the Law on Money Laundering was amended to raise the reporting threshold from 100,000 lei to 300,000 lei (approximately $8,040 to $24,100) for individuals, and from 200,000 lei to 500,000 (approximately $16,100 to $40,200) for legal entities. However, the amendments still require reporting transactions under the threshold if, when combined with other transactions during a one-month period, they reach a total which crosses that threshold. This amendment may actually increase the amount of reporting required. Current anti-money laundering legislation also covers gold, gems, and precious metals.

Banks must maintain transfer records for a period of five years after an account opens or after any financial transaction takes place and seven years after foreign currency contract transactions, whichever is later. They have submitted suspicious transactions reports (STRs), as required, since the law was enacted. However, Moldovan legislation exempts foreign nationals from being subject to STR reporting. Both banks and NBFIs are protected from criminal, civil, and administrative liability asserted as a result of their compliance with the reporting requirements, and no secrecy laws exist that would prevent law enforcement or banking authorities from accessing financial records. A May 2003 amendment states that forwarding such information to law enforcement entities or the courts is not a breach of confidentiality, as long as it is done in accordance with the regulations. Current legislation contains provisions authorizing sanctions of commercial banks for negligence.

Government of Moldova (GOM) efforts against the international transportation of illegal-source currency and monetary instruments largely focus on cross-border currency reporting forms, completed at ports of entry by travelers entering Moldova. It is not clear if these efforts are successful.

The CCECC houses Moldova's Financial Intelligence Unit (FIU). In 2004, the CCECC established an FIU from within, by creating a money laundering section of ten investigators to pursue suspicious financial transactions. Under Moldovan criminal procedure, cases first undergo a preliminary investigation by operative investigators before being sent to criminal investigators and prosecutors who decide whether a full investigation will be launched. The FIU is not a member of the Egmont Group, although it has been a candidate for membership since 2004. Reportedly, the FIU has drafted a new anti-money laundering/counterterrorist financing (AML/CTF) law, which is to be submitted to Parliament in early 2007. The legislation was developed with technical assistance from the Council of Europe.

Moldova is not considered an offshore financial center, and only two foreign banks exist in Moldova: "Banca Comerciala Romana," a Romanian bank; and "Unibank," in which the Russian bank "Petrocomert" holds 100 percent of the shares. These banks are regulated in the same manner as Moldovan commercial banks. Offshore banks are permitted, so long as they are licensed and background checks are conducted on shareholders and bank officials. Nominee (anonymous) directors are not allowed, and banks do not permit bearer shares. The Ministry of Finance (MOF) currently licenses five casinos, although they are reportedly not well regulated or controlled.

Reportedly, the GOM is seriously considering a package of amendments to existing legislation that would allow Moldova to emerge as a significant offshore center in the region. The GOM has indicated publicly that the proposed changes are designed to attract substantial inflows of capital and provide a much-needed economic boost to one of the poorest countries in Europe. According to the current draft of the proposed amendments, the changes call for a sharp decrease in reporting requirements and an increase in financial secrecy, including the ability to establish "anonymous" stock companies. As drafted, neither banks nor law enforcement would be able to determine the beneficial owner of legal entities, and the law would provide what would effectively equate to a fee schedule for the "legalization" of money of dubious origin. If passed in their current form, the amended laws would violate FATF recommendations and call into question Moldova's compliance with and commitment to international AML/CFT standards.

Article 106 of the Moldovan criminal code, enacted June 12, 2003, relates specifically to asset seizure and confiscation. The article, titled "Special Seizures," describes a special seizure as the forced transfer of ownership of goods used during, or resulting from, a crime to the state. The article may be applied to goods belonging to persons who knowingly accept assets acquired illegally, even when prosecution is declined. However, it remains unclear whether asset forfeiture may be invoked against those unwittingly involved in or tied to an illegal activity. Money laundering crimes are the purview of the CCECC, while narcotics-related seizures are within the jurisdiction of the Ministry of Interior (MOI). The GOM currently lacks adequate resources, training, and experience to trace and seize assets effectively. There are no accurate statistics available on seizures or confiscation.

Moldova codified the criminalization of terrorist financing in the Law on Combating Terrorism, enacted November 12, 2001. Article 2 defines terrorist financing, and Article 8/1 authorizes suspension of terrorist and related financial operations. Current GOM capabilities to identify, freeze, and seize terrorist assets are rudimentary, with investigators lacking advanced training and resources. While the NBM receives and regularly distributes the UNSCR 1267 Sanctions Committee's consolidated list of suspected terrorists, no related assets have been identified, frozen, or seized in Moldova. Investigation into misuse of charitable or nonprofit entities is non-existent, as the GOM has neither the resources nor ability to perform these tasks. In December 2004, the Parliament amended the law on money laundering to include provisions on terrorist financing. Moldova has made no arrests for terrorist financing. Moldova is a party to the UN International Convention for the Suppression of the Financing of Terrorism.

No agreements, bilateral or otherwise, exist between the USG and the GOM regarding the exchange of records in connection with narcotics, terrorism, terrorist financing, or other serious criminal investigation. Current legislation does not prohibit cooperation on a case-by-case basis. GOM authorities continue to solicit USG assistance on individual cases and cooperate with U.S. law enforcement personnel when presented with requests for information/assistance. There are no known cases of GOM refusal to cooperate with foreign governments or of sanctions or penalties being imposed upon the GOM for a failure to cooperate.

Moldova is a party to the 1988 UN Drug Convention and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime. Moldova has signed an agreement with CIS member states for the exchange of information on criminal matters, including money laundering. In 2004, the CCECC was accepted as an observer at the Eurasian Group on Combating Money Laundering and as a candidate in the Egmont Group. Moldova is a member of the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL).

In December, 2006 Moldova signed a $24.7 million Threshold Country Program with the Millennium Challenge Account that focuses on anticorruption measures. The GOM requested funding to address areas of persistent corruption including in the judiciary, health care system, and tax, customs and police agencies. Moldova is listed as 79 out of 163 countries in Transparency International's 2006 Corruption Perception Index.

The Government of Moldova should enhance its existing anti-money laundering/counterterrorist financing regime. The regime should adhere to internationally accepted standards. Moldova should improve the mechanisms for sharing information and forfeiting assets. Additionally, Moldova should provide appropriate training for its law enforcement personnel involved in the asset forfeiture program. Border enforcement and antismuggling enforcement should be priorities. Moldova should take specific steps to counter corruption and should become a party to the UN Convention on Transnational Organized Crime and the UN Convention against Corruption. Moldova should not pursue proposed legislative changes on offshores that would make Moldova's financial sector less transparent and more vulnerable to money laundering, terrorist financing, and other forms of illicit finance. As a member of MONEYVAL, the Government of Moldova has committed to adhering to the international standards set by the Financial Action Task Force to combat money laundering and terrorist financing. Establishing an offshore shore financial sector would belie that commitment.
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Title Annotation:Country Reports
Publication:International Narcotics Control Strategy Report
Geographic Code:4EXMO
Date:Jan 1, 2007
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