Yemen – Know Your Customer (KYC) Rules

 

 

The financial system in Yemen is not well developed and the extent of money laundering is not known. Yemen is not considered a regional financial center. However, government corruption, substantial politicization of government institutions, a largely cash based economy, and lax government enforcement of existing laws and regulations render Yemen vulnerable to money laundering and other financial abuses—including possible terrorist financing. Yemen has a large underground economy due, in part, to the profitability of the smuggling of trade goods and contraband. Criminal proceeds in Yemen tend to emanate from foreign criminal activity, including smuggling by criminal networks, and, possibly, terrorist groups operating locally, although the extent is unknown. There have been a number of U.S. investigations of Yemeni and East African natives smuggling khat from the East African region, including Yemen, Somalia and Ethiopia, into the United States with profits laundered and repatriated via hawala networks.

Yemen has a free trade zone (FTZ) in the port city of Aden. Identification requirements within the FTZ are enforced. Truckers must file the necessary paperwork in relevant trucking company offices and must wear ID badges. FTZ employees must undergo background checks by police, the Customs Authority and employers. There is no evidence the FTZ is being used for trade based money laundering or terrorist financing schemes.

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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: NO
    • Domestic PEP: YES

Yemen – KYC covered entities

 

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

    • Banks
    • Exchange companies
    • Insurance companies
    • Funds transfer companies
    • General Post and Postal Savings Authority
    • Real estate agents
    • Gold or precious metal dealers
    • Public notaries
    • Lawyers
    • Accountants
    • Financial and investment services companies
    • Various government ministries such as the Central Organization for Control and Audit, Central Bank of Yemen, Ministry of Industry and Trade, and others

Yemen – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 35 in 2010

Number of CTRs received and time frame: Not available

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

    • Banks
    • Exchange companies
    • Insurance companies
    • Funds transfer companies
    • General Post and Postal Savings Authority
    • Real estate agents
    • Gold or precious metal dealers
    • Public notaries
    • Lawyers
    • Accountants
    • Financial and investment services companies
    • Various government ministries such as the Central Organization for Control and Audit, Central Bank of Yemen, Ministry of Industry and Trade, and others

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: None in 2011
Convictions: None in 2011

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Yemen‘s law 1/2010 requires obliged sectors to file STRs and establishes the Financial Information Unit (FIU) in the Central Bank of Yemen. The FIU has promulgated regulations, Circular Number 1 for 2010, pursuant to this law; however, in practice, compliance is limited, both with the law and with standard KYC requirements. The FIU has only a few employees and no computerized database, nor is it networked to other government or regional financial data systems. The FIU needs substantial improvement of its operational capacity, especially its analytical capacity, to effectively fulfill its responsibilities.

The government needs to develop an anti-money laundering/counter-terrorist financing regime that conforms to international standards. Even with the 2010 law, the Government of Yemen (GOY) needs to improve its inter-ministerial coordination, standards, policies, and procedures to enable it to effectively detect, investigate, and prosecute money laundering activities. Law enforcement as well as border control agencies are reactive rather than proactive in money laundering matters. The GOY needs to investigate and prosecute any abuse of money/value transfer systems such as hawala networks with regard to money laundering and terrorist financing. Law enforcement and customs authorities also need to examine trade-based money laundering and customs fraud. Yemen has a cross-border declaration or disclosure requirement for cash; however, compliance is lax and customs inspectors do not routinely file currency declaration forms if funds are discovered.

The GOY has no effective institutionalized coordination or information sharing procedures for terrorism matters among the different ministries and has yet to implement steps listed under the UN international terrorism protocols, to which Yemen is a party. Any request to Yemen for mutual assistance is to be conducted through diplomatic channels rather than through faster and more expedient administrative channels. The GOY lacks specific legislation with respect to forfeiture of the assets of suspected terrorists. Yemen has not applied UN mandated sanctions or frozen the assets of Sheikh Abdul Majid Zindani, who was added to the UN 1267 Sanctions Committee‘s consolidated list in February 2004. There is no information on whether Yemeni authorities have frozen, seized, or demanded forfeiture of other assets related to terrorist financing. The GOY should enhance institutions that address terrorism financing and money laundering issues and strive to implement the UN counter-terrorism protocols.

Limited resources have hampered the government‘s ability to enforce AML laws and regulations. There is reportedly a lack of political support for full and vigorous enforcement of some aspects of the AML laws and related regulations. In 2011, civil strife further hindered the government‘s capacity on AML issues.