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C6 intelligence Simiplified Due Dilligence whitepaper

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This document contains a general overview of the Simplified Due Diligence (SDD) provision of the EU Third Directive (Directive 2005/60/EC of the European Parliament and of the Council of 26 October …

This document contains a general overview of the Simplified Due Diligence (SDD) provision of the EU Third Directive (Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing) and the UK Money Laundering Regulations 2007. It is designed to aid the development of a white list for carrying out SDD.

EU Third Directive allows relevant persons to rely on simplified due diligence in case their customers are based in equivalent jurisdiction for Anti-Money Laundering (AML) purposes. Furthermore, in pursuant to the provision of simplified due diligence, the EU member states have drawn up a list of third countries which are deemed to have equivalent AML regimes. The latest list was published in June 2012 and is periodically reviewed.

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  • 1. C6 WhitepaperFor public distribution Date: 20 July 2012Simplified Due Diligence© C6 Intelligence Information Systems Limited, 2012NO PART OF THIS PUBLICATION MAY BE REPRODUCED, OR TRANSMITTED WITHOUTTHE PRIOR PERMISSION OF C6 INTELLIGENCE INFORMATION SYSTEMS LTD
  • 2. Contents Contents ................................................................................................................................... 2 1. Simplified Due Diligence - Background .......................................................................... 4 2. Money Laundering Regulation 2007.............................................................................. 5 3. Equivalent Jurisdiction Threat and Vulnerability Assessment ........................................ 8 Australia........................................................................................................................... 8 Austria ............................................................................................................................ 8 Belgium ............................................................................................................................ 8 Brazil ............................................................................................................................ 8 Bulgaria ............................................................................................................................ 9 Canada ............................................................................................................................ 9 Cyprus ............................................................................................................................ 9 Czech Republic ................................................................................................................. 9 Denmark ........................................................................................................................ 10 Estonia .......................................................................................................................... 10 Finland .......................................................................................................................... 10 France .......................................................................................................................... 10 Germany ........................................................................................................................ 10 Greece .......................................................................................................................... 11 Hong Kong ..................................................................................................................... 11 Hungary ......................................................................................................................... 11 Iceland .......................................................................................................................... 11 India .......................................................................................................................... 12 Ireland .......................................................................................................................... 12 Italy .......................................................................................................................... 12 Japan .......................................................................................................................... 12 Latvia .......................................................................................................................... 12 Liechtenstein ................................................................................................................. 13 Lithuania ........................................................................................................................ 13 Luxembourg ................................................................................................................... 13 Malta .......................................................................................................................... 13 Mexico .......................................................................................................................... 13 Netherlands ................................................................................................................... 14 Norway .......................................................................................................................... 14 Poland .......................................................................................................................... 14 Portugal ......................................................................................................................... 14 Romania......................................................................................................................... 15 Singapore ....................................................................................................................... 15 Slovakia .......................................................................................................................... 15 Slovenia ......................................................................................................................... 15 South Africa ................................................................................................................... 15 South Korea ................................................................................................................... 16
  • 3. Spain .......................................................................................................................... 16 Sweden .......................................................................................................................... 16 Switzerland .................................................................................................................... 17 Turkey .......................................................................................................................... 17 United Kingdom ............................................................................................................. 17 United States of America ............................................................................................... 184. Sources ....................................................................................................................... 19
  • 4. 1. Simplified Due Diligence - BackgroundThis document contains a general overview of the Simplified Due Diligence (SDD) provision ofthe EU Third Directive (Directive 2005/60/EC of the European Parliament and of the Council of26 October 2005 on the prevention of the use of the financial system for the purpose ofmoney laundering and terrorist financing) and the UK Money Laundering Regulations 2007. Itis designed to aid the development of a white list for carrying out SDD. The informationcontained in the document does not constitute legal advice and assistance should be soughtfrom qualified legal professional if specific area mentioned in the document is likely to affectany aspect of your operations.EU Third Directive allows relevant persons to rely on simplified due diligence in case theircustomers are based in equivalent jurisdiction for Anti-Money Laundering (AML) purposes.Furthermore, in pursuant to the provision of simplified due diligence, the EU member stateshave drawn up a list of third countries which are deemed to have equivalent AML regimes.The latest list was published in June 2012 and is periodically reviewed.
  • 5. 2. Money Laundering Regulation 2007The simplified due diligence provision of 3rd EU Directive has also been implemented in theUK by means of the domestic legal instrument viz., Section 13 of the Money LaunderingRegulation, 2007.S 13 (1) states that a relevant person is not required to apply customer due diligence (CDD)measures…if he has reasonable ground to believe that the customer or the product falls in thebelow defined categories:A. The customer is1. a credit or financial institution subjected to the money laundering directive;2. a credit or financial institution or equivalent institution which is situated outside the EEAstate that imposes legal requirements which are equivalent to those laid down in the moneylaundering directive and where the compliance is closely supervised;3. a company whose securities are listed on a regulated market subject to specifieddisclosure obligation;4. an independent legal professional and the product in question is an account into whichmonies are pooled, provided that where the pooled account is held outside the EEA state, thestate imposes legal requirements to counter money laundering and terrorist financing whichare consistent to international standards and the independent legal profession is closelysupervised for compliance with those requirements and upon request, the information aboutthe identity of the persons on whose behalf monies are held in the pooled account is availableto the institution which acts as a depository institution for the account;5. a public authority in the United Kingdom6. a public authority which fulfils all the conditions set out in paragraph 2 of Schedule 2 ofthe regulation stated below;(a) the authority has been entrusted with public functions pursuant to the Treaty on theEuropean Union, the Treaties on the European Communities or Community secondarylegislation;(b) the authority’s identity is publicly available, transparent and certain;(c) the activities of the authority and its accounting practices are transparent;(d) either the authority is accountable to a Community institution or to the authorities of anEEA state, or otherwise appropriate check and balance procedures exist ensuring control ofthe authority’s activity.B. The product is
  • 6. 1. a life insurance contract where the annual premium is less or equal to 1,000 euro or wherea single premium of no more than 2,500 euro is paid;2. an insurance contract for the purposes of a pension scheme where the contract contains nosurrender clause and cannot be used as collateral;3. a pension, superannuation or similar scheme which provides retirement benefits toemployees, where contributions are made by an employer or by way of deduction from anemployee’s wages and the scheme rules do not permit the assignment of a member’sinterest under the scheme (other than an assignment permitted by section 44 of the WelfareReform and Pensions Act 1999) (disapplication of restrictions on alienation) or section 91(5)(a)of the Pensions Act 1995) (inalienability of occupational pension)); or4. electronic money, within the meaning of Article 1(3)(b) of the electronic money directive,where—(a) if the device cannot be recharged, the maximum amount stored in the device is no morethan 150 euro; or(b) if the device can be recharged, a limit of 2,500 euro is imposed on the total amounttransacted in a calendar year, except when an amount of 1,000 euro or more is redeemed inthe same calendar year by the bearer (within the meaning of Article 3 of the electronic moneydirective).5. The product and any transaction related to such product fulfils all the conditions set out inparagraph 3 of Schedule 2 to these Regulations as stated below. (a) the product has a written contractual base;(b) any related transaction is carried out through an account of the customer with a creditinstitution which is subject to the money laundering directive or with a credit institutionsituated in a non-EEA state which imposes requirements equivalent to those laid down in thatdirective;(c) the product or related transaction is not anonymous and its nature is such that it allows forthe timely application of customer due diligence measures where there is a suspicion ofmoney laundering or terrorist financing; (d) the product is within the following maximum threshold—(i) in the case of insurance policies or savings products of a similar nature, the annual premiumis no more than 1,000 euro or there is a single premium of no more than 2,500 euro;(ii) in the case of products which are related to the financing of physical assets where the legaland beneficial title of the assets is not transferred to the customer until the termination of thecontractual relationship (whether the transaction is carried out in a single operation or inseveral operations which appear to be linked), the annual payments do not exceed 15,000euro; (iii) in all other cases, the maximum threshold is 15,000 euro;
  • 7. (e) the benefits of the product or related transaction cannot be realised for the benefit of thirdparties, except in the case of death, disablement, survival to a predetermined advanced age,or similar events;(f) in the case of products or related transactions allowing for the investment of funds infinancial assets or claims, including insurance or other kinds of contingent claims—(i) the benefits of the product or related transaction are only realisable in the long term; (ii) the product or related transaction cannot be used as collateral; and(iii) during the contractual relationship, no accelerated payments are made, surrender clausesused or early termination takes place.6. The product is a child trust fund within the meaning given by section 1(2) of the Child TrustFunds Act 2004.The SDD provision however does not absolve a relevant person from conducting CDD wherehe suspects money laundering or terrorist financing as required under S 7 (c) of the regulationor where a risk-sensitive approach in relation to customers, products or locations dictates thatfull CDD should be carried out.
  • 8. 3. Equivalent Jurisdiction Threat and Vulnerability AssessmentThe section below lists the countries included in the equivalent jurisdiction by the Europeanmember states. Summary of threat from criminal activities and vulnerability to moneylaundering risk is also presented. The information thus provided is based on the FATF MutualEvaluation Reports (MER) and the US State Department Money Laundering.AustraliaMember of FATFFATF Mutual Evaluation 2005 mentions the country is non-compliant with the CDD provision.The country is a regional financial centre and fraud-related and narcotics offenses provide asubstantial source of crime proceeds.AustriaMember of FATF and the EUFATF MER 2009 mentions the country is only partially compliant with the CDD provision. Thecountry is a major regional financial centre. Both banking system and non-bank financialinstitutions and businesses are vulnerable to the risk of money laundering. Illegal funds areprimarily derived from crimes such as serious fraud, smuggling, corruption, narcotics andhuman trafficking.BelgiumMember of FATF and the EUFATF MER 2005 mentions the country is largely Compliant with the CDD provision. However,the country is prone to laundering of criminal funds derived from serious forms of financialcrime, including tax crime, and drug trafficking by means of remittance transactions and shellcompanies. The funds are primarily handled by non-financial sectors, in particular lawyers, realestate entities and non-profit organizations. In 2010, the authorities have identified the use of“money mules” for laundering money. Internet scams as well as fraud committed through theEuropean carbon market have also been identified as the sources of illegal funds. The Belgiandiamond industry is also vulnerable to money laundering.BrazilMember of FATFFATF MER 2010 mentions the country is only partially compliant with the CDD provision. Thecountry is a regional financial centre for Latin America. Brazil is both the destination andtransit country for drug traffickers. Therefore, it is vulnerable to money laundering involvingdrugs money. Corruption, organized crime, gambling and illegal trade in contrabands are other
  • 9. major threats. Funds are channelled through the banking sector, real estate investment, highvalue goods, financial assets, and remittances networks. Sao Paulo, Rio de Janeiro, MatoGrosso do Sul, Parana and the Tri-Border Area (TBA) of Brazil, Argentina, and Paraguay areparticularly considered to be vulnerable to money laundering. Weapons, narcotics, and a widevariety of counterfeit goods, including CDs, DVDs, and computer software (much of it of Asianorigin), are mainly smuggled across the border from Paraguay into Brazil.BulgariaMember of the EUFATF MER 2008 mentions the country is only partially compliant with the CDD provision. Acombination of lack of effective enforcement of AML regulation and the developing financialsector, large underground economy, prevalent use of cash transactions make the countryvulnerable to money laundering. The major sources of illegal funds are derived mostly fromdomestic and foreign criminals involved in drug trafficking, smuggling, human trafficking, taxfraud, credit card fraud, and internet fraud. The country is a major transit point into WesternEurope for the trafficking of drugs and persons. Corruption also remains a serious threat.Criminal elements mostly establish small cash-based businesses such as casinos and gaming,night clubs along with car dealerships, tourism and wholesale traders are commonlyassociated with money laundering in the country. Contrabands such as cigarettes, alcohol, andfuel are also smuggled in the country.CanadaMember of FATFFATF MER 2008 mentions the country is only partially compliant with the CDD provision,Money laundering activities in Canada are primarily results from illegal narcotics, psychotropicsubstances, or chemical smuggling. The country is also identified as a leading supplier ofecstasy (to the US) and methamphetamine internationally. Cigarette smuggling related andtrade-based money laundering also occurs in the country.CyprusMember of the EUFATF MER 2006 mentions the country is only partially compliant with the CDD provision. Thecountry is a major regional financial centre with a strong financial services industry attractinglarge amount of non-resident businesses partly due to its preferential tax regime and doubletax treaties with 44 countries (including the United States, several European Union (EU)nations, and former Soviet Union nations). Consequently the country faces risks from moneylaundering and illicit finance activities. The biggest threats for money laundering are primarilyfrom simple financial crime domestically and tax evasion internationally.Czech RepublicMember of the EUFATF MER 2008 mentions the country is only partially compliant with the CDD provision.Furthermore, the country’s central location in Europe and open market economy increase its
  • 10. vulnerability to money laundering. Major source of illegal funds come from fraud and taxevasion. Both domestic and overseas criminal group, mainly from the former Soviet republics,the Balkans and Asia target country’s banks, investment companies, real estate agencies,currency exchange offices, casinos, and other gaming establishments for laundering money.The country is also vulnerable to cigarettes smuggling and other tobacco products, as well aspirated products from Asia, including CDs, DVDs, and counterfeit designer goods.DenmarkMember of FATF and the EUFATF MER 2006 mentions the country is only partially compliant with the CDD provision.Denmark is vulnerable from foreign criminal activity and is primarily related to the sale ofillegal narcotics, specifically cocaine, heroin and amphetamines. Furthermore, the country isgeographically serves as a transit country for smuggling into Sweden and Norway.EstoniaMember of the EUFATF MER 2008 mentions the country is largely compliant with the CDD provision and thecountry has one of the most developed banking systems in the Eastern Europe. Transnationaland organized crime groups are attracted to the territory due to its location between Easternand Western Europe.FinlandMember of FATF and the EUFATF MER 2007 mentions the country is only partially compliant with the CDD provision.Money Laundering threat comes from illegal proceeds generated financial crimes. These fundsare laundered through currency exchangers and gambling establishments.FranceMember of FATF and the EUFATF MER 2011 mentions the country is largely compliant with the CDD provision. Narcoticsand human trafficking, smuggling, and other crimes associated with organized crime are themajor threat. The following jurisdictions are French Overseas Territories and therefore areconsidered to be equivalent jurisdiction: French Polynesia, Mayotte, New Caledonia, SaintPierre and Miquelon and Wallis and Futuna.GermanyMember of FATF and the EUFATF MER 2010 mentions the country is only partially compliant with the CDD provision.Germany is one of the largest financial centres in Europe. The country is a consumer and amajor transit hub for narcotics. Consequently, organized criminal groups involved in drug
  • 11. trafficking and other illegal activities are constant threat to the financial system. In particular,electronic payment systems; financial agents, i.e., persons who are solicited to make theirprivate accounts available for money laundering transactions; and trade in CO2 emissioncertificates are vulnerable.GreeceMember of FATF and the EUFATF MER 2007 mentions the country is only partially compliant with the CDD provision. Thecountry is a regional financial centre in the developing Balkans. It also serves as a bridgebetween Europe and the Middle East. Corruption, organized crime, and a large shadoweconomy make the country vulnerable to money laundering and terrorist financing. Otherthreats include drugs trafficking, trafficking in persons and illegal immigration, prostitution,smuggling of cigarettes and other contraband, serious fraud or theft, illicit gaming activities,and large scale tax evasion. Illegal funds are invested in real estate, the lottery, and the stockmarket.Hong KongMember of FATFFATF MER 2008 mentions the country is only partially compliant with the CDD provision. It is amajor international financial and trading centre. Due to the nature of simplified tax regimeand sophisticated banking system the country is vulnerable to the risk of money laundering.The major sources of illegal funds are illegal gambling, fraud, financial crimes, loan sharking,and goods smuggling activities.HungaryMember of the EUFATF MER 2005 mentions the country is largely compliant with the CDD provision.Nevertheless, the country is attractive to international criminal organizations because of itsstrategic location which links the former Soviet Union and Western Europe and due to itscash-based economy co-existing with a well-developed financial services sectorIcelandMember of FATF and the European Economic Area (EEA)FATF MER 2006 mentions the country is only partially compliant with the CDD provision. Thecountry is vulnerable to money laundering due to narcotics smuggling and trading but is notconsidered a major problem. Criminal proceeds tend to derive from domestic organizationswith some linkages to foreign groups.
  • 12. IndiaMember of FATFFATF MER 2010 mentions the country is partially compliant with the CDD provision. India’sinformal economy and remittance systems along with uncontrolled borders, corruption, andonerous tax administration and currency controls make it vulnerable to economic crimes(including fraud, cybercrime, and identity theft), money laundering, and terrorist financing.Laundered funds are derived from corruption narcotics trafficking and trafficking in persons,transnational organized crime, and illegal trade. Criminal networks exchange high-qualitycounterfeit currency for genuine notes, which facilitates money laundering.IrelandMember of FATF and the EUFATF MER 2006 mentions the country is partially compliant with the CDD provision. Thecountry is considered to be an offshore financial centre. The primary sources of fundslaundered in the country are prostitution, cigarette smuggling, drug trafficking, fuel laundering,domestic tax violations and welfare fraud. While money laundering occurs via creditinstitutions such as banks, money has also been laundered through schemes involvingremittance companies, solicitors, accountants, and second-hand car dealerships.ItalyMember of FATF and the EUFATF MER 2005 mentions the country is only partially compliant with the CDD provision. It alsois a major European transit country for illegal narcotics. Corruption, illegal immigration, humantrafficking are other threats to the financial sector of the country.JapanMember of FATFFATF MER 2008 mentions the country is non-compliant with the CDD provision. It facessubstantial risk of money laundering from organized crime groups, extremist religious groupsetc. The major sources of money laundering proceeds include drug trafficking, fraud, loan-sharking, remittance frauds, the black market economy, prostitution, and illicit gambling. Inthe past year, there has been an increase in financial crimes by citizens of West Africancountries, such as Nigeria and Ghana, who are resident in Japan.LatviaMember of the EUFATF MER 2006 mentions the country is only partially compliant with the CDD provision. Drugstrafficking, corruption and contraband smuggling is the primary source of illegal funds in thecountry.
  • 13. LiechtensteinMember of the European Economic Area (EEA)FATF MER 2007 mentions the country is only partially compliant with the CDD provision. ThePrincipality of Liechtenstein has a well-developed offshore financial services sector, liberalincorporation and corporate governance rules, relatively low tax rates, and a tradition of strictbank secrecy. All of these conditions significantly contribute to the ability of financialintermediaries in Liechtenstein to attract both licit and illicit funds from abroad.LithuaniaMember of the EUFATF MER 2006 mentions the country is only partially compliant with the CDD provision. Thesale of narcotics does not generate a significant portion of money laundering activity inLithuania. Value added tax (VAT) fraud is one of the biggest sources of illicit income, throughunderreporting of goods’ value. Most financial crimes, including VAT embezzlement,smuggling, illegal production and sale of alcohol, capital flight, and profit concealment, aretied to tax evasion by Lithuanians.LuxembourgMember of FATF and the EUFATF MER 2010 mentions the country is only partially compliant with the CDD provision. It is arecognised offshore financial centre. While Luxembourg is not a major hub for illicit narcoticsdistribution, the size and sophistication of its financial sector create opportunities for moneylaundering, tax evasion, and other financial crimes.MaltaMember of the EUFATF MER 2007 mentions the country is largely compliant with the CDD provision. However,its location between Italy and North Africa makes it vulnerable to money laundering involvingfunds originating from narcotics, human trafficking, fraud, embezzlement and forgeryMexicoMember of FATFFATF MER 2008 mentions the country is only partially compliant with the CDD provision. Thecountry also is a major narcotics producing and transiting country. Other sources of illegalfunds are corruption, kidnapping, and trafficking in firearms and persons.
  • 14. NetherlandsMember of FATF and the EUFATF MER 2011 mentions the country is partially compliant with the CDD provision. TheNetherlands is a major financial centre and consequently an attractive venue for launderingfunds generated from illicit activities, including activities often related to the sale of cocaine,cannabis, or synthetic and designer drugs, such as ecstasy. Financial fraud, especially tax-evasion, is believed to generate a considerable portion of domestic money laundering.The following jurisdictions have membership of the Kingdom of Netherlands and are thereforeconsidered to be equivalent jurisdiction: Aruba, Bonaire, Curacao, Saba, Sint Eustatius and SintMaartenNorwayMember of FATF and the European Economic Area (EEA)FATF MER 2005 mentions the country is partially compliant with the CDD provision. Howeveris considered to be a low money laundering risk jurisdiction.PolandMember of the EUFATF MER 2007 mentions the country is non-compliant with the CDD provision. Poland liesdirectly along one of the main routes used by narcotics traffickers and organized crime groupsbetween the former Soviet Union republics and Western Europe. According to Polishgovernment estimates, narcotics trafficking, organized crime activity, auto theft (declining),smuggling, extortion, counterfeiting, burglary, and other crimes generate criminal proceeds inthe range of less than $2 billion each year.PortugalMember of FATF and the EUFATF MER 2008 mentions the country is largely compliant with the CDD provision. The countryis an entry point for narcotics transiting into Europe. The majority of money laundered inPortugal is narcotics-related. Its long coastline, vast territorial waters and privilegedrelationships with countries in Latin America and Africa make it a gateway country for LatinAmerican cocaine and a trans-shipment point for drugs coming from West Africa enteringEurope. Criminal funds can also originate from smuggled commodities, particularly tobaccoproducts. Additionally, criminal proceeds can be derived from corruption, traffic in works ofart and cultural artifacts, extortion, embezzlement, tax offenses, and facilitating illegalimmigration. Currency exchanges and real estate purchases are often used for launderingcriminal proceeds.
  • 15. RomaniaMember of the EUFATF MER 2008 mentions the country is only partially compliant with the CDD provision. Thecountry is not a regional financial centre but the country’s geographical location makes it anatural transit country for trafficking in narcotics, stolen vehicles, persons and arms bytransnational organized criminal elements. As a result, Romania is vulnerable to financialactivities associated with such crimes, including money laundering. Tax fraud, fraudulentclaims in consumer lending, and trans-border smuggling of counterfeit goods are additionaltypes of financial crimes common in the country.SingaporeMember of FATFFATF MER 2008 mentions the country is largely compliant with the CDD provision. The countryis a major international financial and investment centre as well as a major offshore financialcentre. Secrecy protections and a lack of routine large currency reporting requirements, andthe size and growth of Singapore’s private banking and assets management sector posesignificant money laundering (ML) risks. The jurisdiction is potentially attractive as a moneylaundering/terrorist financing destination for drug traffickers, transnational criminals, foreigncorrupt officials, terrorist organizations and their supporters.SlovakiaMember of the EUFATF MER 2006 mentions the country is only partially compliant with the CDD provision. Thecountry is a transit and destination country for counterfeit and smuggled goods, stolen autos,value-added tax (VAT) fraud, and trafficking in persons, weapons and illegal drugs. Criminalactivity is characterized by a high level of domestic and foreign organized crime, mainly fromeastern and south-eastern Europe. A number of the same groups are also involved inlaundering funds raised from these criminal activities. Trade-based money laundering andpossible terrorist financing also occur in Slovakia.SloveniaMember of the EUFATF MER 2006 mentions the country is largely compliant with the CDD provision. The countryis not a major narcotics producer, but is a transit country for drugs moving via the Balkans toWestern Europe.South AfricaMember of FATFFATF MER 2009 mentions the country is only partially compliant with the CDD provision. SouthAfrica’s position as the major financial centre in the region, its sophisticated banking and
  • 16. financial sector, and its large, cash-based market make it vulnerable to exploitation bytransnational and domestic crime syndicates. The largest source of laundered funds in thecountry is proceeds from the narcotics trade. Fraud, theft, racketeering, corruption, currencyspeculation, credit card skimming, poaching, theft of precious metals and minerals, humantrafficking, stolen cars, and smuggling are also sources of laundered funds. Many criminalorganizations are also involved in legitimate business operations. There is a significant blackmarket for smuggled and stolen goods. In addition to criminal activity by South Africannationals, observers note criminal activity by Nigerian, Pakistani, Andean and Indian drugtraffickers, Chinese triads, Taiwanese groups, Bulgarian credit card skimmers, Lebanesetrading syndicates, and the Russian mafiaSouth KoreaMember of FATFFATF MER 2009 mentions the country is only partially compliant with the CDD provision. Whilemost money laundering in South Korea is associated with domestic criminal activity andofficial corruption, locally-based criminal groups associate with international crime syndicatesinvolved in human trafficking, contraband smuggling, and related organized crime. Koreanmoney launderers use illegal game rooms, customs and trade fraud, intellectual property theft,and counterfeit goods to conceal proceeds. They also exploit the zero value added tax (VAT)rates on gold bars. Launderers frequently use cash transactions or fraudulent bank accounts toconceal proceeds from illicit activities.SpainMember of FATF and the EUFATF MER 2006 mentions the country is only partially compliant. The country is a majorEuropean centre of money laundering activities as well as an important gateway for illicitnarcotics entering Europe. Drug proceeds from other regions enter the country as well,particularly proceeds from hashish from Morocco and cocaine from Latin America. Passengerstraveling from Spain to Latin America reportedly smuggle sizeable sums of bulk cash. Informalmoney transfer services facilitate cash transfers between Latin America, particularly Colombia,and Spain. An unknown percentage of drug trafficking proceeds are invested in Spanish realestate, particularly in the once-booming coastal areas in the south and east of the country.Criminal groups also place money in other sectors, including services, communications,automobiles, art work, and the financial sector.SwedenMember of FATF and the EUFATF MER 2006 mentions the country is only partially compliant with the CDD provision. Whilethe country is not a regional financial centre, money laundering occurs either throughindividuals who use the financial system to turn over illicit funds, or with the help ofcorporations that use financial system services. Money laundering is further facilitated bycriminals having contacts or acquaintances within, or influence over corporations and actorswithin the financial system. Laundered money originates from narcotics, tax fraud, economiccrimes, robbery, and organized crime.
  • 17. SwitzerlandMember of FATF and the European Economic Area (EEA)FATF MER 2005 mentions the country is only partially compliant with the CDD provision. Thecountry is a major international financial centre. Criminals attempt to launder illegal proceedsin the country from a wide range of criminal activities conducted worldwide. These illegalactivities include, but are not limited to, financial crimes, narcotics trafficking, arms trafficking,organized crime, terrorist financing and corruption. Although both Swiss and foreignindividuals or entities launder money in Switzerland, foreign narcotics trafficking organizations,often based in Russia, the Balkans, Eastern Europe, South America and West Africa, dominatethe narcotics-related money laundering operations in Switzerland.TurkeyMember of FATFTurkey features in FATF High Risk and Non-cooperative Jurisdictions in June 2012. FATF furthermaintains that if Turkey does not take significant actions by October 2012, it will call upon itsmembers to apply countermeasures proportionate to the risks associated with the country. InJune 2011, FATF had added Turkey to its list of “Jurisdictions with strategic AML/CFTdeficiencies that have not made sufficient progress in addressing the deficiencies.” FATF MER2007 mentions the country is non-compliant with the CDD provisions. The country is animportant regional financial centre, particularly for Central Asia and the Caucasus, as well asfor the Middle East and Eastern Europe. It continues to be a major transit route for SouthwestAsian opiates moving to Europe. In addition to drugs related money, other significant sourcesof criminal fund include invoice fraud and tax evasion, and to a lesser extent, smuggling,counterfeit goods, and forgery. Terrorist financing and terrorist organizations with suspectedinvolvement in narcotics trafficking and other illicit activities are also present in Turkey.Money laundering takes place in banks, non-bank financial institutions, and the undergroundeconomy. Money laundering methods in Turkey include: the large-scale cross-bordersmuggling of currency; bank transfers into and out of the country; trade fraud; and thepurchase of high-value items such as real estate, gold, and luxury automobiles. Turkish-basedtraffickers transfer money and sometimes gold via couriers, the underground banking system,and bank transfers to pay narcotics suppliers in Pakistan or Afghanistan. Funds are oftentransferred to accounts in the United Arab Emirates, Pakistan, and other Middle Easterncountries.United KingdomMember of FATF and the EUFATF MER 2007 mentions the country is only partially compliant with the CDD provision. Thecountry is a major financial centre not only in Europe but internationally and remainsattractive to money launderers. In addition to narcotics, financial fraud and the smuggling ofpeople and goods, have become increasingly important sources of illegal proceeds. There alsohas been an increase in credit/debit card fraud, use of the internet for fraud, and the purchaseof high-value assets to disguise illegally obtained money. The MER indicates that the overallthreat to the country from serious organized crime and related money laundering was high.
  • 18. There has also been an increase in the movement of cash via the non-bank financial system.The use of bureau de change, cash smugglers (into and out of the UK), and traditionalgatekeepers (including solicitors and accountants) to move and launder criminal proceeds hasalso been risingUnlike France and the Netherlands, the following UK dependencies are not automaticallyconsidered equivalent jurisdiction. The UK Crown dependencies may or may not be treated asan equivalent jurisdictions: Guernsey, Isle of Man and JerseyUnited States of AmericaMember of FATFFATF MER 2008 mentions the country is only partially compliant with the CDD provision. Thecountry is a source, transit, and destination country for human trafficking, debt bondage,document servitude, and sex trafficking. FATF MER 2008 mentions the country is partiallycompliant with the CDD provision. The United States is a source, transit, and destinationcountry for men, women, and children subjected to forced labour, debt bondage, documentservitude, and sex trafficking. Trafficking occurs for commercial sexual exploitation in streetprostitution, massage parlours, and brothels, and for labour in domestic service, agriculture,manufacturing, janitorial services, hotel services, hospitality industries, construction, healthand elder care, and strip club dancing.
  • 19. 4. SourcesSource ID nº: 1 Date retrieved July 2012 Annex nº - (if source document annexed)Source Name Official Journal of the European Union (Eur-Lex Europa.eu)URL: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:309:0015:0036:en:PDFDescription: Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on theprevention of the use of the financial system for the purpose of money laundering and terrorist financingSource ID nº: 2 Date retrieved July 2012 Annex nº - (if source document annexed)Source Name Legislation.gov.ukURL: http://www.legislation.gov.uk/uksi/2007/2157/contents/madeDescription: The text of the UK Money Laundering Regulations (2007)Source ID nº: 3 Date retrieved July 2012 Annex nº - (if source document annexed)Source Name Financial Action Task ForceURL: http://www.fatf-gafi.org/Description: Mutual Evaluation reports of individual countries.Source ID nº: 4 Date retrieved July 2012 Annex nº - (if source document annexed)Source Name US Department of StateURL: http://www.state.gov/j/inl/rls/nrcrpt/2012/vol2/index.htmDescription: International Narcotics Control Strategy Report, Volume II: Money Laundering and Financial Crimes.
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