UK: A Month in Money Laundering - August 2005

Welcome to the August 2005 edition of A Month in Money Laundering

This edition includes news on an agreement by Latin American banks to share information related to money laundering crimes (2 August), changes to Indian Central Bank KYC rules (3 August), and grants from the Asian Development Bank to Thailand and the Philippines to develop anti-money laundering measures (15 and 24 August).

These issues and others are summarised in this edition of A Month in Money Laundering.

Regards
Michael Corrigan
Partner, Governance and Regulation
Deloitte & Touche LLP

Latin American banks agree on joint initiative on money laundering. 623 banks based in Latin America have resolved to share information related to financial crime and money laundering. The agreement is part of the US Government's "Buddy Banks" initiative, designed to prevent money laundering in the region. The banks will discuss best practice models and techniques for detection of money laundering activities. The plan is being supported by the US Treasury Department. It has been estimated that some US$1bn is laundered in Latin America each year.

Australia and Indonesia open joint law enforcement centre. The final stage of a new regional centre for joint law enforcement efforts between Indonesia and Australia was opened in Indonesia by Australian Justice Minister, Chris Ellison, today. The centre includes classrooms and conference facilities for training anti-money laundering officers. The Australian Government is contributing more than AUS$38 million over five years to the development of the facility.

Indian Central Bank relaxes money laundering identification rules. The Reserve Bank of India (RBI) has responded to industry pressure and relaxed its 'know your customer' (KYC) rules on deposit accounts for amounts between US$1,100 and US$45,000. Previously rules required banks to establish customers’ identities by relying on documents such as a passport or driving licence but in many instances this was proving difficult. Several banks complained to the RBI of the enormous burden of identifying customers who are often illiterate, poor and undertaking relatively small transactions. In some circumstances, new customers may now be identified by way of referral from an existing customer.

Spanish anti-money laundering office reports increase in activity. Spanish anti-money laundering agencies have reported a rise in money laundering activity during 2004. Some 334,452 cases of suspected money laundering were reported to Sepblac, the Spanish antimoney laundering office in 2004, an increase of 14 per cent on 2003. The office also announced that fines for breaches of money laundering regulations totalled just under some €28m for the year.

IMF hosts training workshop for African countries. The International Monetary Fund (IMF) has conducted a five-day workshop on Combating the Financing of Terrorism (CFT) in Tunisia. The workshop was held in collaboration with the Joint African Institute and was attended by representatives from Djibouti, Egypt, Eritrea, Ethiopia, Libya, Sudan and Tunisia. The IMF's Legal Department, the World Bank, and the United Nations Office against Drugs and Crime provided training to 30 delegates on developing a legislative framework on money laundering.

Nauru aiming to be removed from FATF list of non-cooperative countries. Money laundering experts in Nauru have said the country should be removed from the Financial Action Task Force's (FATF) list of non-cooperative countries and territories when the group meets in October. Dr Kieren Keke, Chairman of Nauru's anti-money laundering unit, cited the Government’s significant progress towards developing anti-money laundering reforms. The Asia Pacific Review Group of the FATF have approved a visit to Nauru within the next month. Dr Keke added, "I can say with confidence that Nauru does not pose any money laundering risk to the international community and this is a statement that senior officials of the APG have made directly to me".

Vietnam to issue guidance for banks on money laundering decree. The State Bank of Vietnam (SBV) is to issue guidance on the implementation of the new anti-money laundering decree in response to concerns about the complexity of the rules and the security of confidential information. The decree requires credit organisations to report to the Anti-Money Laundering Centre any cash transaction over US$13,300 and any savings deposit of more than US$33,000. The guidance stresses that no third party individuals or organisations can access information contained in reports without the permission of the Government.

Ukrainian ministers resolve to toughen fight on money laundering. The Cabinet of Ministers’ resolution requires ministries to submit their response to proposals on implementation of an anti-money laundering framework to the State Department for Financial Monitoring within a month. The proposal provides for analysis of the current anti-money laundering framework in the country and guidance on the development of the system to international standards. The proposals follow the Ukraine’s removal from the FATF’s list of noncooperative countries and territories and it is hoped that the implementation of stricter rules will help the international perception of Ukraine’s financial markets.

9 August US Treasury Secretary praises Latvia’s progress with preventing money laundering. John Snow, US Treasury Secretary, has praised the Latvian Government’s measures against money laundering. Mr Snow praised the involvement of the Prime Minister as head of Latvia’s anti-money laundering task force and pledged US help in providing training for Latvian officials and financial experts. He also raised the possibility of increased information exchange between the countries. The Latvian Prime Minister, Aigars Kalvitis, has openly voiced his aim for Latvia’s inclusion in the Financial Action Task Force (FATF).

European Commission (EC) assists Philippines’ campaign against laundered money. The Philippines Government has agreed a deal with the EC aimed at fortifying the Philippines’ Anti-Money Laundering Council (AMLC) campaign against laundered money. The Government has said that the project will help prevent and minimise money laundering by strengthening the investigatory powers of the Central Bank and the AMLC. The staff of supervising authorities, financial institutions, and judicial and law enforcement agencies will benefit from training in anti-money laundering rules and procedures, and basic financial investigation methods.

11 August  Africa holds sub-regional workshop on anti-money laundering. This workshop, funded by the Commonwealth Secretariat aims to develop cooperation between the public and private sectors on money laundering issues. This five day workshop will cover various topics including the responsibilities of governments, financial institutions, law enforcement agencies and the requirements of international standards as well as addressing current issues.

12 August  Financial Action Task Force require New Zealand to adopt firmer controls against money laundering. Following a recent evaluation of the nation’s financial sector by the Financial Action Task Force (FATF), New Zealand Foreign Minister, Phil Goff, admitted that "some re-regulation will be required." While the FATF found no specific evidence that New Zealand was being used to launder money or finance terrorism, the report called for more stringent anti-money laundering regulations to ensure that problems did not arise in the future.

Asian Development Bank (ADB) provides grant to Thailand to help fight money laundering. The grant of US$300,000 will help Thailand formulate a 3 year action plan to comply with requirements of the FATF recommendations. Thailand has taken a number of steps to combat money laundering over recent years but still has gaps that it needs to fill. "Thailand can benefit from more developed countries' experiences while sharing its own experiences in establishing legal and institutional frameworks with its Mekong neighbours." said ADB official, Shigeko Hattori.

Singapore passes Bill with tougher measures for remittance firms and money changers. A new Bill passed in Parliament will require remittance licence holders to carry out business only if they are incorporated as a company with a minimum paid-up capital of US$100,000. "The higher entry requirement will ensure these companies have a minimum level of financial resources to implement anti-money laundering measures and make weaker players exit the market", said Mr Tharman Shanmugaratnam, Deputy Chairman of the Monetary Authority of Singapore (MAS).

Indonesia and Singapore work on draft extradition agreement. Delegates have held a two day technical meeting to discuss a draft extradition agreement. During the meeting, delegates exchanged versions of the draft document. Indonesian Foreign Minister, Hassan Wirayudha, said at least 20 crimes, including, money laundering and terrorism financing, will be included in the final draft. Indonesia already has extradition agreements with Australia, Thailand, Philippines, Malaysia and the Hong Kong Special Administrative Region.

Argentina looking to amend money laundering bill with help from United States. Argentinean Economy Minister, Roberto Lavagna, Senior US Treasury Official, Daniel Glaser, and six other US officials, met in Argentina to discuss revisions to a bill dealing with bank secrecy rules applying to financial institutions, the national tax and Argentina's Financial Information Unit. The amendments need to be passed by both of Argentina’s houses of Congress and may still meet opposition.

Macedonia to set up Government advisory agency on money laundering. The Macedonian Government has announced plans for a new advisory body for combating money laundering and terrorism financing and appointed Vladimir Naumovski, current Director of the Directorate for Money Laundering Prevention, as the new body’s Chairman. Ministers earlier adopted a draft agreement between the US and Macedonian Governments on technological cooperation on money laundering prevention.

Peru to restructure banking supervision on money laundering. Peru's banking and insurance regulator announced today that it will restructure its anti-money laundering financial intelligence unit (FIU) to strengthen supervision of the country's banks, insurers and pension fund managers in the near future. The proposed changes will allow it to monitor more transactions. Between 1998 and July 2005, the regulator investigated about 800 reports of possible money laundering.

Japan proposes to extend the scope of money laundering controls. The Japanese Government is to tighten its control over money laundering by requiring non-financial firms such as jewellers to identify their customers and report suspicious transactions. Although the proposals still need to be discussed by Ministers, the Government is hoping to extend the scope of businesses placed under the planned controls to including jewellers, precious metal dealers, real estate firms and leasing companies.

US concerned about money laundering in Venezuela. The US Government has expressed concern that Venezuela isn't doing enough to comply with international recommendations on money laundering control. "It's important for Venezuela to meet its obligations in the international community and be part of the solution to money laundering and terrorism financing in this region," said US Treasury Official, Daniel Glaser. Glaser, US representative to the Financial Action Task Force, was in Brazil to meet with authorities regarding the region's efforts to combat money laundering.

Asian Development Bank gives anti-money laundering grant to Philippines. The Asian Development Bank (ADB) is helping the Philippines combat money laundering with a technical assistance grant of US$400,000. The ADB will undertake an assessment of key ‘vulnerabilities’ to money laundering. The grant, from the ADB's Cooperation Fund for Regional Trade and Financial Security Initiative, is supported by the Governments of Australia, Japan, and the United States.

New Zealand to tighten its money laundering laws. The New Zealand Government is proposing tighter money laundering laws following advice from the Financial Action Task Force earlier this month. The recommendations include a comprehensive monitoring framework for institutions, a registration requirement for those dealing with money transfers or currency exchange services and evaluations for "fit and proper persons". Further changes would involve statutory requirements for firms to comply with customer due diligence, and a requirement to verify and retain the identities of senders of wire transfers.

US to aid Bangladesh in combating money laundering. Senior officials and bankers in Bangladesh are to receive training from the US FBI in relation to investigating money laundering activities. The training is a result of the Government’s initiative to ratify a new law against money laundering. An enforcement and prosecution agency is also to be established to implement the proposed act

Looking Forward

Casinos will be required to track the identity of gamblers making cash transactions of more than HK$500,000 (US$65,000), according to a draft bill to be presented to the legislature after Hong Kong’s elections next month.

The Egyptian city of Sharm al-Sheikh will host an economic forum on money laundering and terror finance, said Union of Arab Banks (UAB) Secretary General, Fuad Shakir. The two-day event will consider means to combat money laundering and trace terrorist funds without jeopardising the secrecy of bank accounts and transactions.

The Middle Eastern and North African Financial Action Task Force (MENAFATF) will hold its second Plenary Meeting in Beirut, Lebanon on 26 September 2005. 

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