U.S. DEPARTMENT OF STATE
INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT MARCH 1996:
FINANCIAL CRIMES AND MONEY LAUNDERING

United States Department of State

Bureau for International Narcotics and Law Enforcement Affairs

INCSR 1996 COUNTRY CHAPTERS
The Bahamas to Burma

The GCOB has simplified procedures for registering shell corporations, known as international business companies (IBCS), which can issue bearer shares. Reporting requirements for IBCS, currently numbering over 38,000, are minimal and they could be used by criminals to facilitate money laundering. Under Bahamian law, the assets of a convicted drug offender are subject to forfeiture. A procedure also exists for the civil forfeiture of assets which are the proceeds of trafficking or which are used for trafficking. Over the last few years, the GCOB has had difficulty making effective use of the asset forfeiture tools available to it, in part because of the delays which plague the country's legal system. During 1995, however, a joint effort by the Ministry of Finance and Attorney General seemed to be producing positive results in this area. Moreover, during 1995, drawn-out forfeiture proceedings against valuable real estate formerly owned by Carlos Lehder, a Colombian kingpin now jailed in the United States, were completed, with the GCOB receiving uncontested title.

Bangladesh. (No Priority) The BDG has uncovered no evidence of money laundering in Bangladesh. The Department of Narcotics Control (DNC) proposed in 1994 to amend the 1990 Narcotics Control Act to encompass money laundering, extradition, and controlled delivery, but DNC officials say there has been no movement on this proposal in 1995. Provisions for court-ordered examination of financial records or confiscation of assets have been largely ineffective because of detailed burden of proof requirements which discourage poorly trained law enforcement officials from pursuing that avenue during investigations.

Belize. (Medium) Money laundering is considered a major potential threat in Belize. Over 1000 companies are registered under the International Business Companies Act (IBC). Belize Bank, a subsidiary of Belize Holdings, is the only entity authorized to register companies under the IBC. There are no laws in Belize making money laundering a crime. There are no laws regulating the movement of currency in Belize. Belize law also allows unrestricted use of bearer negotiable instruments to conduct financial transactions. Inadequate regulations governing off-shore investments are of concern. The GOB is considering new legislation governing this sector and is preparing legislation that will open up and govern off- shore banking as well. The GOB participated actively in hemispheric meetings which gave rise to a recent anti-money laundering communique.

Belgium. (Medium) Belgium is principally a transit country for illicit drugs bound for larger markets in Western Europe, but the recent volume of suspicious transaction reports suggests that Belgium is also a money laundering center. Belgian law enforcement agencies see a continued increase in drug trafficking from Asia and the Middle East via the countries which formerly made up the Soviet Union. The report by the financial analysis unit to the Ministries of Finance and Justice on suspicious financial transactions showed 352 transactions in the first ten months of 1995 which were referred to prosecutors for further investigation.

The special unit (CTIF) set up in 1993 to look into suspicious transactions reported by banks and other financial institutions actually reports cases; from January 12, 1993 to June 30, 1995, the unit transmitted 211 cases which involved 2,126 transaction reports. The large volume of cases and reports and the value of these transactions -- over usd one billion in the first ten months of 1995 -- is a significant volume for a country of 9 million inhabitants.

A Belgian law of 1990 provides criminal penalties for officials of financial institutions who engage in money laundering under a "due diligence" test whereby it need only be established that the officials knew or should have known that the transactions involved proceeds from criminal activity. Reporting a suspect transaction effectively immunizes a financial institution from criminal prosecution, so coverage is believed to be effective. A shortcoming of the Belgian law is that the Ministry of Finance may only report to prosecutors cases where there is evidence linking those involved in the transaction to specified criminal activities (which include drug trafficking), rather than a blanket provision covering all serious crimes. Officials involved in investigating these cases say that the majority involved exchange houses in Antwerp and Brussels being used by non-Belgian residents to convert money from the currency of the country of origin (especially pounds sterling) into the currency of the ultimate destination (most commonly the Netherlands). Most of the rest of the total seems to be tax fraud transactions, mainly involving the value added tax.

The 1990 money laundering law includes provisions to seize assets derived from illegal activities when sufficient specific, concrete evidence linking identifiable individuals is available to present to a court of law. However, asset forfeiture and seizure has been minimal to date.

Belgium is a member of the Financial Action Task Force and has implemented the EU Directive on Money Laundering. Belgium has ratified the 1988 UN Convention.

Benin. (No Priority) Benin is not considered an important financial center in West Africa or in the world. There is no effective policy to deal with money laundering in Benin. The laws on the books do not adequately address the issue. There are no requirements to report significant cash deposits in banks. Even if there were such requirements, it is questionable how effective they would be given Benin's large informal sector which is essentially a cash economy. Significant cash deposits by market women are common and unremarkable. There are no indicators available describing the extent to which money laundering occurs in Benin, but determined money launderers in Benin probably do not have difficult obstacles to overcome.

Bolivia. (Medium) With total bank deposits of little more than US$ 2 billion, the Bolivian financial system is not a significant participant in international, or even regional, money laundering. Money laundering is not a crime under Bolivian law, which provides instead strict bank secrecy standards. To gain access to bank records, law enforcement authorities must first obtain a court order and then file a request with the Superintendent of Banks. International cooperation on record- sharing is nil.

The Association of Banks has promulgated a code of conduct which calls on banks to be alert to the possibility of money laundering and to avoid dealings of a suspicious nature, but in the absence of sanctions and a relaxing of bank secrecy provisions, the code is likely to accomplish little. Resistance to change within the Bolivian financial sector reflects a long tradition of corruption, tax evasion and contraband.

On the brighter side, Bolivia signed a new extradition treaty with the United States in 1995 which will explicitly include drug money laundering as an offense and require extradition of Bolivian nationals.

According to the prevailing interpretation of Bolivia's constitution, a seized asset belonging to a narcotics trafficker may only be forfeited after the trafficker is convicted. Because all cases must be appealed to the Supreme Court, which is hopelessly backlogged, that can take years. While the case is in progress, maintenance and upkeep of seized assets is the responsibility of the government. On paper, the government has custody of over $300 million in seized assets, but in reality it holds much less -- the result of fraud, theft, and deterioration of properties. As a partial remedy, the government issued a decree in late December permitting the auctioning of seized assets with the consent of the owner, with the proceeds available to the owner if and when he is found innocent. This should prove attractive to the government and traffickers alike in cases where assets depreciate quickly or require constant care (e.g., new automobiles, cattle herds). The government with technical assistance from the US Embassy is developing mechanisms for using the revenues generated for counternarcotics purposes.

Botswana. (No Priority)

Brazil. (Medium High) Gauging money laundering levels in Brazil is somewhat difficult, due to Brazil's failure to criminalize money laundering. A strong economy has increased the risk of money laundering in Brazil, and estimates of illegal funds circulating range from tens of millions to hundreds of billions of dollars. The Brazilian Justice Minister has stated that Brazil will become a haven for illegal capital if its controls continue to lag behind the rest of the world. There are reports of foreign criminal interests buying up failing businesses such as hotels, air taxi services, and transport, construction and insurance companies to serve as repositories for laundering illicit profits.

On the international front, Brazil's lack of domestic legislation has limited its ability to cooperate with other countries on money laundering investigations. The GOB did contribute positively to the Buenos Aires money laundering conference. The US/Brazil counterdrug cooperation agreement signed in April of this year calls for the parties to adopt and implement appropriate legislation on money laundering and asset forefeiture. During 1995, two US agencies (the Customs Service and FinCEN) presented seminars to Brazilian officials on measures to control money laundering.

The Cardoso administration intends to submit legislation to congress early in 1966 criminalizing money laundering and establishing a financial crimes intelligence center. The law is expected to follow OAS/CICAD recommendations in terms of easing bank secrecy, requiring suspicious transaction reporting, establishing effective currency reporting systems, and setting adequate sanctions for non-compliance.

British Virgin Islands. (Low) While sharing some degree of the vulnerability of other offshore centers, especially due to its chartering of international bearer share companies. Money laundering in the BVI is currently considered minimal by US agencies.

Bulgaria. (Medium) Bulgaria is not considered an important financial center, tax haven or off-shore banking center in the region. GOB officials consider Bulgaria highly vulnerable to money laundering both in the banking and non-banking financial systems although there is no hard data on its extent. The money laundering which does occur may relate to the sometimes illegal conversion of state assets to private hands and other forms of illegal trade, as well as to narcotics proceeds. There is no evidence that government policy or senior officials encourage, facilitate or engage in money laundering activities.

Bulgarian and US law enforcement agencies generally cooperate well in counternarcotics investigatory efforts and information-sharing. Information on in-progress Bulgarian criminal investigations subsequent to arrest is held in secret, but is releasable to foreign law enforcement agencies at the discretion of the prosecutor's office.

Although Bulgaria has signed and ratified the 1988 Convention and is also a signatory to the 1990 Council of Europe Convention on laundering, search, seizure and confiscation of proceeds from crime, it has not yet passed implementing legislation on money laundering. The GOB has no bilateral agreements with other countries on money-laundering.

Although the GOB has under a consideration a draft money laundering law to reflect its obligations under the 1990 Council of Europe Convention, money laundering is not now a criminal offense in Bulgaria, except in some cases where it constitutes criminal concealment of another crime. There have been no Bulgarian arrests or prosecutions for money- laundering, and the current lack of comprehensive financial legislation provides broad opportunities for traffickers to shield assets and launder money.

Banks are not currently required to report the identity of customers engaging in significant or suspicious, large currency transactions; the draft law under consideration would require banks to report large transactions only if they appeared suspicious and would not require regular reporting. Although there is bank secrecy protection under the law, banks are required to keep records to reconstruct significant transactions through financial institutions to respond to information requests from the government on criminal matters. This requirement also appears in the draft law. Such money laundering controls would be applied to money exchangers as well as banks.

There are controls on the ways money may be transferred into and out of the country. There are not, however, due diligence or banker neglect laws that make individual bankers responsible if their institutions launder money. The draft law would criminalize intent but not neglect in this regard.

Narcotics-related assets may be temporarily seized if directly related to a narcotics-related crime, but they can not be forfeited except in the context of a judicial sentence. The public prosecutor can request seizure of a legitimate business if used to launder criminal proceeds and hence conceal criminal activity. The GOB enforces asset seizure or forfeiture if mandated in a judicial conviction or in a court decision under the commercial code.

Burma. (Medium) The 1993 Narcotic Drugs and Psychotropic Substances Law brought the Burmese legal code into technical conformity with the 1988 UN Convention. As such, the 1993 law contains useful legal tools for addressing money laundering, the seizure of drug-related assets, and the prosecution of drug conspiracy cases. However, to date these provisions remain largely unused as Burmese police and judicial officials have been slow to implement the law, targeting few if any major traffickers and their drug related assets. The lack of vigorous enforcement against money laundering leaves Burma vulnerable to the growing influence of traffickers through the use of drug proceeds in legitimate business ventures.