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
Finland to Guyana

France. (Medium) France's asset seizure law is considered one of the strongest in western europe. Money laundering legislation pending in the national assembly will strengthen criminal penalities for money laundering and further expand authority to seize, secure and share assets. Undercover work by police and customs officers is permitted in money laundering cases but is used very selectively. Some american law enforcement techniques, such as "sting" operations, are legal, but have not been widely accepted or employed.

A finance ministry office (TRACFIN) conducts initial investigations of suspicious bank activities; it refers money laundering cases to a magistrate for subsequent referral to the police or customs for more extensive investigations. Before cases are referred to a magistrate, however, TRACFIN must establish at least a possible connection to drug activity.

Some money laundering takes place in the French Caribbean, and drug proceeds may enter the French banking system through Caribbean branches. St. Martin, in particular, is considered a site for money laundering.

French West Indies. (Low) Martinique, Guadeloupe and French Guiana are departments of France, subject to French law. Money launderers are active in the islands, especially on the French side of St. Martin and on St. Barthelemy, which are part of the Guadeloupe department. The free port status, offshore banking, heavy flow of tourists and easy access to the less-controlled Dutch half of St. Martin make that island the most susceptible to money laundering. The expectation is that additional money laundering legislation, including strengthened criminal penalties and authority to seize and share assets, will be enacted in early 1996. Drug proceeds enter the French banking system through branches in the Caribbean.

Georgia. (No Priority) While there is no anti-money laundering legislation in place, the small scale of the economy and lack of an effective electronic bank transfer and clearing system makes it unlikely that Georgia will become significant in this area.

Germany. (High) Money laundering in Germany involves narcotics proceeds as well as proceeds from other illegal activities. Two significant cooperation cases between DEA and BKA have highlighted the increased use of Germany as a money laundering center by international drug trafficking organizations. Money laundering occurs in both the banking system and the non-bank financial system, and money laundering proceeds are controlled by both local and international organizations. According to press accounts, money laundering has increased to approximately DM 80 billion (US$57 billion) annually. Banks appear to the main medium of exchange; lawyers and tax accountants are also involved.

German authorities have taken several initiatives to curb this activity, including new legislation, while also seeking cooperation from other governments. There are reports of German financial institutions being used for currency transactions involving international narcotics trafficking proceeds that include significant amounts of United States currency, and currency derived from illegal drug sales in the United States. Germany has cooperated with law enforcement agencies of the USG and other governments investigating financial crimes related to narcotics; for example, FRG and US authorities have identified suspicious accounts and cooperated in obtaining further background information on the account holders.

Money laundering is a criminal offense (both drug-related and other criminally-related money laundering). Banks and other financial institutions are required to know, record, and report the identity of customers engaging in significant, large currency transactions. They are required to maintain necessary records to reconstruct significant transactions through financial institutions in order to respond quickly to information requests from appropriate government authorities in narcotics-related cases. Germany requires that financial institutions report transactions of more than dm 20,000 (approx US$ 14,300) to state central authorities. The banking community cooperates with enforcement efforts. Bankers are protected by law with respect to cooperation with law enforcement entities. There are no controls on the amount of currency which can be brought into or out of Germany. Money laundering controls are not applied to some non-banking financial institutions, such as exchange houses. The controls, however, are applied to other financial institutions, such as insurance companies.

The government has the authority to forfeit seized assets and the law allows for civil and criminal forfeiture. But other than normal inventory procedures, Germany has not established separate systems for identifying, tracing, freezing, seizing, and forfeiting narcotics- related assets; nor has it enacted laws for sharing seized narcotics assets with other governments; nor is new legislation being considered. The obstacles to passing such laws are political. Weakness in reporting requirements may allow traffickers to shield assets.

The drug-related asset seizure and forfeiture laws that exist are enforced by the government. Numerous government entities are responsible for enforcement including state prosecuting attorneys, the BKA, and the customs department. The police have adequate resources to seize assets. The exact value of all assets, seized by all entities in all states, is unknown. German authorities cooperate with US efforts to trace or seize assets and the government makes use of tips from other country enforcement officials regarding the flow of drug-derived assets. National laws do not permit sharing of forfeited assets with other countries.

Ghana. (Low) Ghana reportedly experiences some money laundering, believed to be proceeds of sales of cocaine and heroin. Money laundering a criminal offense, not limited to drug trafficking proceeds. Banks and financial institutions are required to report large currency transactions of customers who come under investigation by law enforcement authorities. Banks are required to maintain records to reconstruct significant transactions to respond quickly to requests from appropriate government authorities in narcotics- related cases, but are not required to report suspicious transactions. Data is reported only upon request by a central authority. Bankers are protected by law if requested to cooperate with law enforcement entities. There are controls on currency amounts brought into and out of the country. Ghana has established systems to identify, trace, freeze, seize or forfeit narcotics-related assets. In October 1994, GOG and its UNDCP sub- regional neighbors put into place a multilateral agreement to harmonize efforts regarding asset tracing and seizure.

Gibraltar. (Medium) After months of intense pressure from the UK, Gibraltar passed the Criminal Justice Ordinance which is intended to ensure that its offshore banks conform to the European Union's money laundering directive. Gibraltar disputes Spain's contentions about the volume of money laundering on the Rock, and the head of Gibraltar's Financial Services Commission contends that the new law will have little affect because the banks have always been well supervised and regulated. In mid-December, a money laundering squad was established as the central authority for receiving suspicious transactions information, and is led by a London-based Metropolitan police officer.

Greece. (Medium) In August the Greek parliament approved a law supplementing existing legislation which outlawed all forms of money laundering. The law creates various enforcement mechanisms and proof of identity requirements, and permits controlled delivery of narcotics for enforcement purposes. Greece is not currently considered a major financial or money laundering center. However, Greece remains vulnerable to money laundering because purchasers of government debt issues receive tax free income, and, if paid for in cash, are not subject to identity requirements; the sale of Greek treasury obligations now amounts to about usd 22.5 billion annually, or one quarter of Greece's GNP. In addition, seven new casinos (convenient vehicles for money laundering) were licensed in Greece in 1995.

Guatemala. (Medium) The potential for money laundering in Guatemala is very high because of the lack of either effective monitoring and control of financial transactions, or of laws specifically designed to combat money laundering. The amount of drug money being laundered through Guatemala is difficult to determine given the lack of controls, however current investigations indicate that money laundering is increasing. Financial institutions in Guatemala are highly vulnerable to the illicit introduction and movement of currency among Guatemala, the United States, and off-shore banks. During the last year, the GOG has made little progress on criminalizing money laundering or investigating financial cases.

Guyana. (No Priority) Guyana has no laws governing money laundering nor is there evidence any significant volume of money laundering occurs. The Attorney General has said that a new financial institutions act will include anti-money laundering legislation.