ACAMS 10th Annual AML & Financial Crime Conference

ACAMS-London-2014

 

The ACAMS 10th Annual AML & Financial Crime Conference is taking place 29-30 May in London, will host industry’s most influential financial crime experts. Join us for the region’s premiere forum on critical topics ̶ including the EU Money Laundering Directive, international tax initiatives, trade and economic sanctions and virtual attacks.

This year’s assembly of influential thought-leaders includes:

    • Fabrice Borsello, Chief AML Risk Officer and Vice President, Western Union
    • James Cadwallader, Global Head of Intelligence and Analysis, Financial Crime Risk Operations, Standard Chartered
    • Tim Goodrick, AML/CFT Policy Analyst, Financial Action Task Force
    • Gerard Green, Head of AML – Europe, Middle East and Americas, Franklin Templeton Investments
    • Charles Monteith, Head of Legal and Case Consultancy, Basel Institute on Governance
    • Samantha J. Sheen, Head of Financial Crime and Authorisations Division,Guernsey Financial Services Commission

 

Topics to be discussed are:

    • Implementing a Robust AML Risk Assessment Process
    • Mitigating the Money Laundering Risks of Trade Finance
    • Leveraging Your Existing Compliance Programme in Response to Extraterritorial Tax Initiatives
    • Preparing for the Fourth Directive and its Impact on Your Institution
    • Applying Advanced Data Analytics to Improve Financial Crime Intelligence
    • Building a Compliance Framework for Complex Trade and Economic Sanctions Regimes
    • Financial Crime Trend Watch: Exposing the Latest Typologies and Preparing for New Schemes
    • Cyber Crime Update: Fortifying Your Institution Against Virtual Attacks

For the ACAMS 10th Annual AML & Financial Crime Conference Program Details see: http://www.amleurope.org/programme.asp

 

Algeria – Know Your Customer (KYC) Rules

 

 

The extent of money laundering through formal financial institutions in Algeria is thought to be minimal due to stringent exchange control regulations, a large segment of the economy that is cash-based, and an antiquated banking sector dominated by public banks. The restricted convertibility of the Algerian dinar enables the Central Bank to monitor all international financial operations carried out by public and private banking institutions. Notable criminal activity includes trafficking, particularly of drugs and cigarettes, but also arms and stolen vehicles; kidnapping for ransom (KFR); theft; extortion; and embezzlement. Public corruption remains a serious concern as does terrorism. Algerian authorities are increasingly concerned by cases of customs fraud and trade-based money laundering. Other risk areas for financial crimes include unregulated alternative remittance and currency exchange systems, tax evasion, abuse of real estate transactions, commercial invoice fraud, and a cash-based economy. Most money laundering is believed to occur primarily outside the formal financial system, given the large percentage of financial transactions occurring in the informal gray and black economies in general. Al-Qaida in the Islamic Maghreb, which originated in Algeria, is currently confined to outlying areas but has a history of terrorist activity in Algiers and elsewhere in the country, including suicide attacks, KFR, roadside bomb attacks, and assassinations.

Algeria-Flag-128

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: NO

Algeria – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Algerian Law:

 

    • Banks
    • Financial leasing institutions
    • Investment and shareholding companies

Algeria – Suspicious Transaction Reporting (STR) Requirements:

Number of STRs received and time frame:  1,373 in 2012

The following is a list of STR covered entities covered by Algerian Law:

    • Banks
    • Financial leasing institutions
    • Investment and shareholding companies
    • Real estate agents
    • Car dealers
    • Other financial professionals who advise or carry out transactions, such as deposits, exchanges, or other movements of capital

Algeria is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body.

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In 2012, the Government of Algeria (GOA) implemented a package of policies intended to diminish the informal sector, motivate Algerian business people to formalize their activities, and generate revenue for the central government. A new law enacted in February 2012 extends the scope of KYC obligations to all financial institutions and expands the list of professionals who must report suspicious activity to include real estate agents, car dealers, and financial professionals who advise or carry out transactions, such as deposits, exchanges, and other movement of capital. The law also gives the GOA the authority to freeze and/or seize assets belonging to or destined for terrorists or a terrorist organization for a renewable one-month period. However, the administrative processes associated with this new authority remain unclear, while the corresponding judiciary processes appear not to conform to international standards. The GOA should move forward with the implementation of these laws, issue implementing regulations where required, and continue to work to address the remaining deficiencies in its anti-money laundering/counter-terrorist financing regime.

Specifically, the GOA should take significant legislative action to criminalize the financing of terrorism for any purpose, i.e., regardless of a link to the planning or commission of a terrorist act, and to establish a formal legal framework to implement the targeted financial sanctions included in UNSCRs 1267 and 1373. According to the director of the Algerian Financial Intelligence Cell (CTRF), the financial intelligence unit, the GOA is in the process of developing legislation that would criminalize terrorist finance even where unconnected to a terrorist act. This legislation was delayed by the Algerian President’s medical crisis.

The CTRF should be the focal point for receiving and analyzing suspicious activity reports, and for the exchange of information regarding suspicious transactions related to money laundering/terrorist financing activity. This will require the CTRF to develop in-house analytical and information technology capabilities. The CTRF should continue outreach to the formal and informal financial sectors. In addition, given the scope of Algeria’s informal economy, new efforts should be made to identify value transfer mechanisms not covered by Algeria’s legal and regulatory framework. Algerian law enforcement and customs authorities should enhance their ability to investigate trade-based money laundering, value transfer, and bulk cash smuggling used to finance terrorism and other illicit activities.

KYC & AML Global Watchlists

What KYC & AML Global Watchlists should you refer to when compiling your datasets?

Know Your Customer (KYC) compliance requirements frequently require identity checks against known or suspected money laundering, terrorist, or other persons considered high risk. The following should be a start when compiling your datasets to check for your client KYC/AML program.

    • Bank of England Sanctions List (BOL)
    • Bureau of Industry & Security (BIS) Denied Persons List
    • Bureau of Industry & Security (BIS) Entity List
    • Bureau of Industry &Security (BIS) Unverified List
    • CIA World leaders
    • DFAT (Department of Foreign Affairs and Trade) List (Consolidated) Australia
    • Directorate of Defense Trade Controls (DDTC): Debarred Parties List
    • European Union : Consolidated List of Persons, Group, Entities
    • European Union: EU Terrorist List
    • FinCEN Section 311 – Primary ML Concern
    • European Union CFSP list (Common Foreign and Security Policy)– Entities subject to EU Sanctions
    • HM Treasury list UK
    • OFAC SDN (Office of Foreign Assets Control Specially Designated Nationals List)– USA
    • OFAC PLC – Palestinian Legislative Council List
    • OFAC Sanctions Programs
    • OSFI (Office of the Superintendent of Financial Institutions) list – Canada
    • OCC Office of the Comptroller of Currency: Unauthorized Bank List
    • UK Secretary of State Terrorist List:  Home Office
    • UN Consolidated List — United Nations
    • US General Services Admin (GSA): Excluded Parties List
    • System US Immigration and Customs Enforcement: ICE Fugitives
    • US State Dept. FTO Foreign Terrorist Organizations List
    • US State Dept. WMD Non-Proliferation List
    • World Bank List of Debarred Parties (Ineligible Firms & Individuals)

In another article I explained how at C6 Intelligence they base the definition of a PEP  (Politically Exposed Person) on the FATF version.

See: http://paulrenner.com/C6-Intelligence/C6-Intelligence-what-is-a-PEP-Politically-Exposed-Person-By-Paul-Renner-C6.html

Foreign PEPs are individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials.

Domestic PEPs are individuals who are or have been entrusted domestically with prominent public functions, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials.

Persons who are or have been entrusted with a prominent function by an international organisation  refers to members of senior management, i.e. directors, deputy directors and members of the board or equivalent functions.

The definition of PEPs is not intended to cover middle ranking or more junior individuals in the foregoing categories.

PEP Categorisation

For more in depth Regulatory Data and Insight lists see: http://www.c6-intelligence.com/Data/What_We_Cover

Paul Renner is the co-founder of C6 Intelligence Information Systems which is used daily by banks, financial institutions, insurance companies, and regulators to take a risk-based approach to managing fraud, money laundering and staff compliance risks.

Paul Renner is also the co-author of ”Preventing Financial Instrument Fraud – The Money Launderer’s Tool”, originally published by the ICC (International Chamber of Commerce) Commercial Crime Services(CCS), now called the ICC Financial Investigation Bureau. The fraud models described within the publication has been referenced by the UK City of London Police and prosecution services, to support their case and secure convictions against fraudsters.

 

14th Annual FIBA AML Compliance Conference – February 20-21, 2014 – Miami

 

FIBA-AML-Conference-2014

Does your financial institution have a well-defined culture of compliance?

What does that even mean in terms of policies and procedures, controls, audit, hiring and training?
These are questions compliance personnel should consider in the current enforcement environment. Financial institutions are being subjected to heightened scrutiny as a result of the worst economic crisis that the world has suffered since the Great Depression:
  • J.P. Morgan Chase Bank recently agreed to pay a record-setting $2 billion to U.S. government agencies over claims that AML deficiencies caused the bank to fail to report suspicious activity involving longtime customer Bernard Madoff.
  • British banking giant HSBC agreed to a $1.9 billion settlement over AML matters.
  • TD Bank agreed to a total of $ 90 million in penalties related to Ponzi schemes by Florida attorney Scott Rothstein.

But how does a bank with a well-defined culture of compliance ensure that its employees are well trained to spot red flags and report any suspicions?

And how should those suspicions be escalated, documented and acted upon?

Does putting into place an enterprise-wide compliance structure necessarily equal a culture of compliance?

For banks that are serious about meeting their anti-money laundering requirements, these are questions that must be considered, and FIBA can help.

The upcoming 14th Annual FIBA AML Conference in Miami will offer sessions where compliance personnel can learn about the elements of a culture of compliance and put that information to work at their institutions.

With top industry experts and regulators on-hand to discuss trends and best practices, conference attendees have an opportunity to learn and network and prepare to protect their institutions.

Topics include:

What’s New in the AML Landscape – Speakers from multiple financial industry participants share perspectives on emerging money laundering and terrorist financing topics and highlight what’s looming on the horizon.

Evolution in Financial Intelligence Units – From their private sector beginnings in the late 1990s, banks’ FIUs have shifted from collecting and analyzing AML-related information to developing an environment of proactive financial intelligence relating to all financial crimes: money laundering, external and employee fraud, global sanctions, anti-corruption, even high risk customer due diligence. Panel will discuss this evolution and some current challenges, including cross-border information sharing and privacy issues across affiliates, and balancing often conflicting interests and expectations of law enforcement and regulators.

Corruption and Politically Exposed Persons – Enhanced due diligence on PEPs has raised significant implementation issues. Are politically exposed persons always critically significant or has the industry’s approach shifted? What proportionate factors should determine a PEP’s significance and whether a PEP has access to launder corrupt funds?

How have multilateral and private sector financial institutions developed sustainable mechanisms to identify corruption and mitigate these risks?

Nexus of Cyber Fraud and Money Laundering – What’s really taking place in anti-fraud and AML departments – parallel activities or joint collaboration? Cyber fraud has grown from intrusion and penetration of financial institutions to well organized, cross border financial crimes targeting banks’ and customers’ assets. What do financial institutions, security and compliance units need to know? How can they adapt to address these complex threats?

And much more…

For more details see : http://www.antimoneylaundering-fiba.com/pages/Agenda/

BBA Anti-Money Laundering Induction Workshop – Jan 24 2014

This induction workshop is an essential primer for all Officers assuming responsibilities for AML issues. The workshop explores and critiques the main concepts of the UK’s legal framework, POCA and reporting suspicions, Money Laundering Regulations, FCA requirements and industry guidance – key compliance obligations.

Date: 24/01/2014 

Venue: Pinners Hall, 105-108 Old Broad Street, London, EC2N 1EX

The workshop also covers a general introduction to sanctions regimes and screening, standards, compliance monitoring, and reporting to senior management, and has been fully revised and updated to reflect the Money Laundering Regulations 2007 and JMLSG Guidance notes and 3rd EU Directive, the requirement to follow a risk based approach.

Delegates will leave the workshop with a practical understanding of Fraud, Anti-Bribery & Corruption, Information Security, Market abuse & Insider dealing, and Sanctions; all critical components to AML.

Topics to be covered and objectives include:

    • Legal Obligations
    • Money Laundering Regulations 2007
    • JMLSG Guidance 2007
    • The Risk Based Approach
    • Managing the AML Process
    • New Dimensions in Financial Crime

 

Who should attend this workshop?

This workshop will be of particular interest to individuals working in the following areas:

    • Newly-appointed Financial Crime and Risk Management Officers
    • Newly-appointed MLROs and Deputies
    • Financial Regulation Managers
    • Internal Audit (assuming responsibilities for money laundering/financial crime issues)
    • Governance and Compliance Officers

Workshop Outline*:

Session I: The Current Legal & Regulatory Framework
Session II: Sanctions and counter-terrorism reporting
Session III: The MLRO Role in Practice
Session IV: Implementing a Risk-Based Due Diligence Regime
Session V: Managing an Effective Recognition and Reporting Regime
Session VI: Financial Crime – The Broader Perspective
Session VII: Workshop Summary and Q&A

Programme details:

Registration:  09:00
Start:  09:30
Close: 17:00
Lunch will be served and there will be two 15 minute breaks (mid-morning, mid-afternoon).

For more details:  http://www.bba.org.uk/events-and-training/event/anti-money-laundering-aml-induction-workshop

AUSTRAC typologies and case studies report 2013

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regulator and specialist financial intelligence unit (FIU).

AUSTRAC’s purpose is to protect the integrity of Australia’s financial system and contribute to the administration of justice through its expertise in countering money laundering and the financing of terrorism.

Typologies and case studies report

AUSTRAC offers a range of education and guidance to assist industry in complying with its AML/CTF obligations.

The AUSTRAC typologies and case studies report 2013 is one example of such guidance. The case studies within this report highlight the value of industry’s reporting of financial transactions and suspicious matters to AUSTRAC.

The case studies demonstrate how following the money trail is an effective way of detecting the activities of organised crime networks. The cases also highlight the value of a whole-of-government approach to combating organised crime. They detail successes achieved through AUSTRAC and revenue, regulatory and law enforcement
agencies working together and sharing information about criminal activities.

AUSTRAC typologies and case studies Industry’s contribution

Click image below to read the report:

AUSTRAC Typologies and case studies report 2013

 

See: http://kycmap.com/AUSTRAC-Typologies-and-case-studies-report-2013.pdf

Money Launderering – Vulnerability Factors

The current ability of money launderers to penetrate virtually any financial system makes every jurisdiction a potential money laundering center. There is no precise measure of vulnerability for any financial system, and not every vulnerable financial system will, in fact, be host to large volumes of laundered proceeds. A checklist of factors that contribute to making a country or jurisdiction particularly vulnerable to money laundering or other illicit financial activity, however, provides a basic guide.

The checklist includes, but is not limited to:

• Failure to criminalize money laundering for all serious crimes or limiting the offense to narrow predicates.

• Rigid bank secrecy rules that obstruct law enforcement investigations or prohibit or inhibit large value and/or suspicious or unusual transaction reporting by both banks and non-bank financial institutions.

• Lack of or inadequate “know your customer” requirements to open accounts or conduct financial transactions, including the permitted use of anonymous, nominee, numbered or trustee accounts.

• No requirement to disclose the beneficial owner of an account or the true beneficiary of a transaction.

• Lack of effective monitoring of cross-border currency movements.

• No reporting requirements for large cash transactions.

• No requirement to maintain financial records over a specific period of time.

• No mandatory requirement to report suspicious transactions or a pattern of inconsistent reporting under a voluntary system and a lack of uniform guidelines for identifying suspicious transactions.

• Use of bearer monetary instruments.

• Well-established non-bank financial systems, especially where regulation, supervision, and monitoring are absent or lax.

• Patterns of evasion of exchange controls by legitimate businesses.

• Ease of incorporation, in particular where ownership can be held through nominees or bearer shares, or where off-the-shelf corporations can be acquired.

• No central reporting unit for receiving, analyzing, and disseminating to the competent authorities information on large value, suspicious or unusual financial transactions that might identify possible money laundering activity.

• Lack of or weak bank regulatory controls, or failure to adopt or adhere to the Basel Committee’s “Core Principles for Effective Banking Supervision,” especially in jurisdictions where the monetary or bank supervisory authority is understaffed, under-skilled or uncommitted.

• Well-established offshore financial centers or tax-haven banking systems, especially jurisdictions where such banks and accounts can be readily established with minimal background investigations.

• Extensive foreign banking operations, especially where there is significant wire transfer activity or multiple branches of foreign banks, or limited audit authority over foreign-owned banks or institutions.

• Jurisdictions where charitable organizations or alternative remittance systems, because of their unregulated and unsupervised nature, are used as avenues for money laundering or terrorist financing.

• Limited asset seizure or confiscation authority.

• Limited narcotics, money laundering, and financial crime enforcement, and lack of trained investigators or regulators.

• Jurisdictions with free trade zones where there is little government presence or other supervisory authority.

• Patterns of official corruption or a laissez-faire attitude toward the business and banking communities.

• Jurisdictions where the U.S. dollar is readily accepted, especially jurisdictions where banks and other financial institutions allow dollar deposits.

• Well-established access to international bullion trading centers in New York, Istanbul, Zurich, Dubai, and Mumbai.

• Jurisdictions where there is significant trade in or export of gold, diamonds, and other gems.

• Jurisdictions with large parallel or black market economies.

• Limited or no ability to share financial information with foreign law enforcement authorities.

Egypt – Know Your Customer (KYC) Rules

 

 

Egypt is not considered a regional financial center or a major hub for money laundering. Egypt has a large informal cash economy, and many financial transactions are undocumented or do not enter the banking system. Cash remains by far the preferred means of payment in Egypt and, despite efforts by the Egyptian authorities, the use of the formal financial sector remains underdeveloped. Reportedly, arms are smuggled across Egypt‘s border with Gaza; the funding source and the destination of the proceeds are not clear. Authorities report trade-based money laundering is common, reportedly to avoid taxes and customs fees. Tax evasion also is common. Customs fraud and invoice manipulation also are found in regional value transfer schemes. Since the Egyptian revolution, the attention of Egypt‘s money laundering investigating agencies has been focused almost exclusively on investigating allegations of illicit gains or corruption under the Mubarak regime. The European Union has taken action to freeze the assets of Mubarak and several members of his regime based on their apparent misappropriation from the Egyptian state.

Egypt-Flag-128

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: YES

Egypt – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Egyptian Law:

    • Banks
    • Foreign exchange companies
    • Money transfer companies
    • the post office
    • Insurance companies
    • Security firms
    • Leasing companies
    • Factoring companies
    • Mortgage financing companies

Egypt – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 2,253 from June 2008 – June 2011

Number of CTRs received and time frame: Not applicable

The following is a list of STR covered entities covered by Egyptian Law:

    • Banks
    • Foreign exchange companies
    • Money transfer companies
    • the post office
    • Insurance companies
    • Security firms
    • Leasing companies
    • Factoring companies
    • Mortgage financing companies

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: One in 2011
Convictions: Seven from January 2008 – June 2011

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of Egypt (GOE) has been hesitant to utilize its money laundering statutes to their full legal extent. Overlapping jurisdiction and poorly defined areas of responsibility have hindered money laundering investigations in Egypt. Egypt‘s FIU also suffers from a lack of resources and analysts that is likely slowing enforcement efforts. The GOE should work to improve interagency coordination and information-sharing in investigations of suspicious transactions and financial activities. Egypt would benefit from increased funding and a greater number of investigators and prosecutors dedicated to pursuing money laundering crimes.

Specifically, Egypt should work to increase the number of successful money laundering investigations and prosecutions and improve its enforcement of cross-border currency controls, including by providing training on coordinating and conducting complex financial investigations and by enhancing coordination with regional and MENAFATF partners. The GOE should also work to more effectively manage its asset forfeiture regime, including the identification, seizure and forfeiture of assets.

Afghanistan – Know Your Customer (KYC) Rules

 

 

Afghanistan is not a regional or offshore center. Terrorist and insurgent financing, money laundering, cash smuggling, abuse of informal value transfer systems, and other illicit activities designed to finance organized criminal activity continue to pose serious threats to the security and development of Afghanistan. Afghanistan remains a major drug trafficking and drug producing country, and is the world‘s largest opium producer and exporter.

The growth in Afghanistan‘s banking sector has slowed considerably in recent years; and traditional payment systems, particularly hawala networks, remain significant in their reach and scale. The weaknesses of the banking sector, as demonstrated by the Kabul Bank crisis, further incentivize the use of informal mechanisms and exacerbate the difficulty of developing a transparent formal financial sector in Afghanistan. The narcotics trade, corruption and contract fraud are major sources of illicit revenue and laundered funds. The unlicensed and unregulated hawalas in major drug areas such as Helmand likely account for a substantial portion of the illicit proceeds being moved in the financial system, undetected by authorities. There are estimates that hawaladars in Kandahar, the country‘s second largest city, and the opium producing province of Helmand handle $1 billion in drug money per year. Despite ongoing efforts by the international community to build Afghanistan‘s capacity to regulate its financial sector and the capacity of law enforcement to investigate financial crimes, it is unable to consistently uncover and disrupt financial crimes because of limited resources, lack of expertise, corruption, and insufficient political will. Proposed reforms and efforts to urge law enforcement and the judiciary to take action on financial crimes often conflict with established, traditional processes, which can delay compliance with international standards.

Corruption permeates all levels of Afghan government and society and has a direct impact on the willingness of authorities to investigate financial crimes. Afghanistan ranked 180 out of 182 countries surveyed in Transparency International‘s 2011 Corruption Perception Index. Afghanistan‘s laws related to terrorist financing are not in line with international standards and do not criminalize the full scope of the terrorist financing offense

Afghanistan-Flag-128

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: YES

Afghanistan – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Afghanistan Law:

    • Central Bank of Afghanistan (DAB)
    • Banks
    • Registered money service providers
    • Insurance companies
    • Dealers in precious metals and stones
    • Lawyers
    • Accountants
    • Securities dealers
    • Real estate agents

Afghanistan – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 417 from January to October 2011

Number of CTRs received and time frame: 1,744,169 from June 2006 to October 2010

The following is a list of STR covered entities covered by Afghanistan Law:

    • Financial institutions and money service businesses including informal funds transfer providers such as hawaladars

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: None
Convictions: None

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Money laundering and terrorist financing investigations in Afghanistan are hampered by a lack of political commitment by the Government of Afghanistan (GOA), and the limited capacity of the regulatory regime and criminal justice system.

Less than 5% of the Afghan population uses banks, depending instead on the entrenched hawala system, which provides a range of financial and non-financial business services in local, regional, and international markets. Approximately 90% of financial transactions run through the hawala system, including foreign exchange transactions, funds transfers, micro and trade finance, as well as some deposit-taking activities. While the hawala system and formal financial sector are distinct, hawaladars often keep accounts at banks and use wire transfer services to settle their balances with other hawaladars abroad. Due to limited bank branch networks, banks occasionally use hawaladars to transmit funds to hard-to-reach areas within Afghanistan. Licensed hawaladars and other money service providers submit few STRs, which does not reflect their exposure to the risk of exploitation by money launderers and terrorist financiers. The GOA should create an outreach program to notify and educate hawaladars about the licensing and STR filing processes.

Border security continues to be a major challenge throughout Afghanistan, with only 14 official border crossings under central government control. Most border areas are under-policed or not policed at all, and are particularly susceptible to cross-border trafficking, trade-based money laundering, and bulk cash smuggling. Kabul International Airport lacks stringent inspection controls for all passengers, and includes a VIP lane that does not require subjects to undergo any inspections or controls. The GOA should strengthen inspection controls for airport passengers.

Corruption continues to be an obstacle in the Customs service, although some improvements have been made with assistance from international partners. Approximately $1 billion a year of declared cash flows from Afghanistan into Gulf countries, with Dubai cited as the primary destination. The declared cash leaving Afghanistan, primarily from Kabul International Airport, exceeds Afghanistan‘s official revenue of about $900 million.

The GOA has no formal extradition or mutual legal assistance arrangements with the United States. Requests for extradition and mutual legal assistance are processed on an ad hoc basis, with assistance from the Afghan Attorney General‘s Office. Newly drafted extradition-related legislation is currently pending before the upper house of the Afghan parliament.

The GOA lacks a comprehensive structure for maintaining administrative freezes on seized terrorist assets, and there is no mechanism for asset sharing. The GOA should revise its asset seizure process to ensure its ability to seize and freeze terrorist assets, maintain these asset freezes, and establish a procedure for sharing seized assets with foreign partners. The GOA should increase the capacity of enforcement officers, prosecutors, and judges to provide them a better understanding of the basis for seizing and forfeiting assets.

Kyrgyzstan – Know Your Customer (KYC) Rules

 

 

The Kyrgyz Republic (Kyrgyzstan) operates largely on a cash economy and with decentralized accounting systems, which makes money laundering difficult to detect. The banking sector is small and the Kyrgyz Republic is not a regional financial center. A significant percentage of the country‘s GDP comes from remittances from abroad, posing a money laundering vulnerability. Corruption, organized crime, and a significant shadow economy also make the country vulnerable to money laundering and terrorist financing. Narcotics trafficking, tax and tariff evasion, and corruption related to the performance of official duties or government contracts are generally regarded to be the major sources of laundered proceeds. Money laundering also allegedly occurs through trade-based fraud and bulk cash carriers.

The presence of hawalas, money or value transfer services, and free trade zones poses risks in regard to money laundering; however, there is little information available on these topics.

Kyrgyzstan-Flag-128

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: NO

Kyrgyzstan (Kyrgyz Republic) – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Kyrgyzstan (Kyrgyz Republic) Law:

    • Banks, credit institutions
    • Stock brokerages
    • Foreign exchange offices
    • Casinos
    • Insurance companies
    • Notaries
    • Tax consultants/auditors
    • Realtors
    • the state‘s property agency
    • Trustees
    • Jewelry stores and dealers

Kyrgyzstan (Kyrgyz Republic) – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

The following is a list of STR covered entities covered by Kyrgyzstan (Kyrgyz Republic) Law:

    • Banks, credit institutions
    • Stock brokerages
    • Foreign exchange offices
    • Casinos
    • Insurance companies
    • Notaries
    • Tax consultants/auditors
    • Realtors
    • the state‘s property agency
    • Trustees
    • Jewelry stores and dealers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: None 2008 – 2011
Convictions: None 2008 – 2011

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Government of the Kyrgyz Republic (GOKR) has adopted anti-money laundering/counter-terrorist financing (AML/CFT) legislation and established the Financial Intelligence Service (FIS). However, the lack of political will and interagency cooperation, resource constraints, inefficient financial systems, and corruption hamper efforts to effectively combat money laundering and terrorist financing. Also, the FIS is not recognized by other government entities as a ―legitimate‖ investigative agency, which causes a lack of cooperation and information sharing across agency lines. As of December 2011, the Kyrgyz Republic‘s Parliament and the GOKR were discussing the possibility of eliminating the FIS and transferring its functions to another government agency.

The banking system is at risk for money laundering, as oversight of the banking sector is generally weak, and key reporting issues need to be resolved: auto dealers and real estate developers are not included in the list of entities required to report large dollar transactions. Additionally, the statutory threshold amount that triggers mandatory reporting remains high at $25,000.

The GOKR should continue to strengthen legislation as it relates to money laundering and financial crimes that support terrorist organizations. In addition, the Kyrgyz Republic must increase and enhance training in AML/CFT investigative techniques. The GOKR developed an action plan to adequately criminalize money laundering and terrorist financing; establish and implement an adequate legal framework for identifying, tracing and freezing terrorist assets; establish and implement adequate measures for the confiscation of funds related to money laundering; establish effective customer due diligence measures for all financial institutions; and implement an adequate and effective AML/CFT supervisory program for all financial sectors.

As of January 1, 2012, casinos will be outlawed in the Kyrgyz Republic. This will provide one less opportunity for money launderers to hide and disperse assets under the cover of a legitimate business operation.