U.S. Department of State
1996 International Narcotics Control Strategy Report, March 1997

United States Department of State

Bureau for International Narcotics and Law Enforcement Affairs

FINANCIAL CRIMES AND MONEY LAUNDERING

BILATERAL ACTIVITIES

PRESIDENTIAL DECISION DIRECTIVE (PDD) 42

The President, in his address to the United Nations General Assembly on its 50th anniversary called for international cooperation to address the threat posed by money laundering, narcotics trafficking and terrorism, noting that the forces of international crime "jeopardize the global trend toward peace and freedom, undermine fragile democracies, sap the strength from developing countries, (and) threaten our efforts to build a safer, more prosperous world." Declaring international crime a threat to the national security interest of the United States in Presidential Decision Directive (PDD) 42, the President ordered the Departments of Justice, State and Treasury, the Coast Guard, National Security Council, Intelligence Community, and other federal agencies to step-up and integrate their efforts against international crime syndicates and money laundering.

A key component of PDD-42 was the imposition of sanctions under the International Emergency Economic Powers Act (IEEPA), blocking the assets of the leaders, cohorts and front companies of identified Colombian narcotics traffickers in the U.S. and in U.S. banks overseas. IEEPA authorizes the Secretary of the Treasury to impose sanctions, including freezing assets held in U.S. financial institutions, against nations and entities deemed to pose a threat to the national security, foreign policy or economy of the United States. Executive Order 12978, signed by President Clinton on October 21, 1995 under authority of IEEPA finds that the activities of significant foreign narcotics traffickers centered in Colombia and the unparalleled violence, corruption, and harm that they cause constitute an unusual and extraordinary threat to the United States' national security and economy. In addition, U.S. individuals and companies are barred from engaging in financial transactions or trade with those identified individuals or enterprises linked to the Colombian Cali Cartel.

On January 15, 1997 the Treasury Department identified an additional 21 businesses and 57 individuals determined to be directly involved with illegal traffickers and their so-called legitimate business fronts. This brings to a total of 359 the number of businesses and individuals whose assets have been blocked since 1995 under authority of the President's Executive Order. As part of the PDD 42 process an interagency group is reviewing whether measures can be taken against other international criminal cartels.

In his U.N. address, President Clinton stated that the United States was moving to take extraordinary steps against money launderers. To implement PDD 42, U.S. agencies identified nations where money laundering has important implications for U.S. national security and where expanded cooperation would significantly strengthen U.S. anti-money laundering efforts. Several of these nations have been approached by U.S. interagency teams in an effort to increase cooperation bilaterally as well as multilaterally and to reduce the threat posed by money laundering.

In response to the President's directive a comprehensive package of legislation was formulated to substantially assist U.S. law enforcement agencies in their efforts against drug traffickers, terrorists, and other international crime syndicates as well as to counter money laundering. The International Crime Control Act of 1996 ("ICCA") was sent to the U.S. Congress on September 27, 1996. The ICCA was devised to enhance the U.S. ability to go after violent international criminals by vigorously investigating and prosecuting them, taking their money, and depriving them of their ability to cross America's borders and strike at its domestic institutions.

TRAINING AND TECHNICAL ASSISTANCE

DEPARTMENT OF STATE

The Department of State's Bureau for International Narcotics and Law Enforcement Affairs, Office of International Criminal Justice (INL/ICJ) has developed a $18.2 million program of multi-agency training to address international organized crime, financial crimes, and narcotics trafficking. Specifically the FY96 program drew on $5 million in FY96 ESF, $8 million in Freedom Support Act (FSA) and $5.2 million in Support for Eastern European Democracies (SEED) funds. ATF, DEA, DSS, FBI, FinCEN, FLETC, ICITAP, IRS, US Secret Service Department of Justice/OPDAT and the US Customs Service, in cooperation with INL/ICJ offered law enforcement and criminal justice programs primarily in Eastern Europe, the New Independent States (NIS) and Latin America.

INL-funded programs to combat international financial crimes, including money laundering, included the FBI's white collar and financial fraud program, FLETC's international banking and financial fraud institute program, IRS Criminal Investigations Division training on money laundering and financial fraud, FBI's internal controls, DEA's drug money laundering investigations, FINCEN's initiatives to establish Financial Investigative Units (FIUs), and the US Secret Service programs in credit card fraud and counterfeiting. These advanced training programs have been designed for law enforcement officers from Central Europe, the NIS and Latin America.

One of the key elements of U.S. success in drafting legislation, investigating and prosecuting international financial crimes, from money laundering to bank fraud to counterfeiting of financial documents is interagency cooperation. Several INL sponsored programs have modelled such cooperation for foreign governments. For example, INL at the request of the Central Bank of Russia has put together a team of experts from U.S. regulatory agencies (Federal Reserve Board and Office of the Comptroller of the Currency) the Department of Justice Criminal Division and federal law enforcement agencies (IRS/CID, FBI, USSS, Customs, and FINCEN) to work with the Russian Central Bank, the Ministry of Interior, the Procuracy and other responsible Russian agencies. IRS/CID has taken the lead on organizing similar interagency teams to brief foreign officials on the task force approach to investigations and prosecutions.

DRUG ENFORCEMENT ADMINISTRATION

DEA conducted training programs in asset forfeiture and money laundering at eight international sites. Officials from Malta, Albania, Cyprus, Greece, Israel, Turkey, Spain, Italy, France and Ireland participated in DEA's program in Malta. Ecuador, Bolivia, Chile, Colombia, Paraguay, Peru and Venezuela sent officials to the DEA regional program in Ecuador.

DEA trained officials from Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan in a program within Kazakhstan.

Officials from key offshore centers -- Isle of Man, Guernsey and Jersey -- as well as officials from England, Scotland, Wales and Ireland attended the DEA London program.

Single country training programs were conducted in St. Petersburg, San Salvador, Kuala Lumpur and Interlaken.

INTERNAL REVENUE SERVICE

IRS Criminal Investigation Division special agents have developed, and continue to develop international training courses for law enforcement authorities ranging from Financial Investigative Techniques to the Utilization of Suspicious Activity and Currency Transaction Reports to Managing Multi-agency Money Laundering Investigations.

The IRS Criminal Investigation Division provided several Financial Investigative Techniques training courses in St. Petersburg, Russia, Estonia and Mexico. The IRS has also participated in eight money laundering courses at the International Law Enforcement Academy (ILEA), in Budapest, Hungary. These courses included participants from Estonia, Lithuania, Slovakia, Russia, Ukraine, Albania, Kyrgyztan, Moldova and Poland. Training materials covered basic financial investigative techniques which are designed to provide police officers with a general understanding and appreciation of financial crimes.

The Internal Revenue Service's Criminal Investigation Division conducted international money laundering training in Mexico City, Mexico. This training, which was conducted in conjunction with FinCEN, centered on the application, analysis and use of Suspicious Activity Reports (SAR's).

Three regional money laundering seminars were held in Port of Spain, Trinidad, San Salvador, El Salvador, and Brasilia, Brazil. These regional seminars concentrated on countries located in the Caribbean, Central and South America. The first of these was held in Port of Spain during the week of January 13-17, 1997. The participants included high level government and law enforcement representatives from Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Netherlands Antilles, Dominica, Cayman Islands, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and Grenadines, Suriname, Turks and Caicos, and Trinidad and Tobago. The second seminar was held in El Salvador the week of February 3-7, 1997. The participants in this conference included high level representatives from Costa Rica, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, and the Dominican Republic. The third seminar was held in Brasilia, Brazil the week of March 17-21, 1997. The participants in this conference included similar delegations from Colombia, Venezuela, Peru, Bolivia, Paraguay, Uruguay, Chile, Argentina and Ecuador.

The focus of the Internal Revenue Service's training seminars was: a) To establish an awareness of the overall threat posed money laundering and its impact on these regions; and b) to foster an atmosphere of cooperation and exchange between these countries and the US in a joint effort to combat global laundering activities.

At the request of the governments of Guatemala and Peru, IRS-CID provided one of its Special Agents to render advice on high level investigations currently underway in these countries.

FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCEN)

FinCen's international training program has two main components(1) instruction provided to a vast array of government officials, financial regulators and others on the subjects of money laundering and FinCEN's mission and operation; and (2) training on finanacial intelligence analysis and creation and operation of financial intelligence units, modeled after FinCen and other intelligence units throughout the world.

FinCEN works closely with other agencies in supporting US interests overseas. It participates in the Department of State Democracy and Law Program in Russia, the NIS, Eastern Europe as well as Ecuador and Panama. FinCEN's involvement encompasses (1) advising officials on how to establish advanced systems for detecting, preventing and prosecuting financial crimes; (2) recommending ways in which to develop a partnership between government and financial institutions to prevent money laundering, (3) offering specialized training and technical assistance in computer systems architecture and operation; and (4) providing assessments of money laundering regulations and procedures. While much of FinCEN's international training is done abroad, increasingly FinCEN is providing training and technical assistance to foreign senior officials at its headquarters in Vienna, Virginia.

In April 1997, FinCen and Interpol will co-host the '6th Meeting of the Working Group on the Analysis of Financial Records' in Buenos Aires, Argentina. Several countries will make presentations on the examination of suspicious activity reports from financial institutions.

For the first time both India and Egypt have approached FinCEN with an interest in addressing money laundering. India has expressed an interest in enacting anti-money laundering legislation, which may include the establishment of a Financial Intelligence Unit. FinCEN has responded to a request for a participant in a conference sponsored by the Indian Law Institute on drug-related issues (affiliated with India's Supreme Court) to be held in early 1997 and expects to receive additional request for support (especially for training and technical assistance) in mid-1997. In addition, Egypt has formally requested anti-money laundering training from FinCEN sometime this year. As a first step, Egypt envisions FinCEN training five members of the Administrative Control Authority in money laundering topics, including financial investigations and establishing a Financial Intelligence Unit (FIU).

During 1996, FinCEN made appreciable progress in facilitating moves by Japan and China to become more active in countering international money laundering.

Japan's National Police Agency (NPA) sent several of its officials--from the Deputy Commissioner General to various computer experts-- to consult with FinCEN on how to provide for communication links and a system for data storage and analysis needed to effectively work financial data. One FinCEN representative visited the NPA headquarters in Tokyo during 1996 to discuss continue FinCEN-NPA cooperation . As a result, the training and technical assistance provide by FinCEN throughout 1996 allowed the NPA to develop strong arguments for the enactment of legislation authorizing the NPA to more activley investigate financial crime in Japan.

China's Public Security Bureau accepted FinCEN's invitation for a closer relationship and sent two high-level delegations to visit FinCEN for technical assistance and briefings during 1996. Importantly, those two delegations also included representatives of the Peoples Bank of China and the Bank of China, the former having been tasked by the State Council of China to draft that nation's first laws and regulations designed to counter international money laundering. FinCEN representatives visited Beijing in 1996 for extensive discussions on money laundering matters.

FinCEN provided assistance to other Asian nations, such as Hong Kong, Singapore and the Philippines. During 1996, FinCEN provided lectures and briefing material for the Royal Hong Kong Police's highly-acclaimed course, open to all Asian nations, on countering financial crime. It supported dealings of Treasury Assistant Secretary (Enforcement) with the Philippines' Minister of Finance on how to improve that Asian nation's ability to cope with increases in money laundering. And FinCEN's Director met with two Philippine officials to demonstrate the benefits of a financial intelligence unit and to advise them on how to organize such an entity.

FinCen continues to lead an effort under the auspices of the Egmont Group to develop a curriculum(a) on financial crimes and money laundering intelligence analysis and (b) on creating and operating a Financial Intelligence Unit. The objective is to have an initial pilot course offered by mid-1997 at several venues internationally. In addition, FinCEN developed a secure web site prototype for use by the FIU members of Egmont which will permit members to access information within a protected environment on FIUs (missions, organization, and capabilities), money laundering trends, financial analysis tools, and technological developments. The prototype was demonstrated and accepted at the fourth meeting of the Egmont Group in November 1996 in Rome. FinCEN experts are traveling to many of the Egmont member countries to help with the set-up and train operators in its use. It will become operational in the first half of 1997.

The Pakistani Anti-Narcotics Force (P-ANF) has requested informal discussions regarding the review of their draft anti-money laundering legislation, the FATF 40 recommendations and anti-money laundering training. A FinCEN representative will travel to Pakistan in early 1997 to comply with this request. It is anticipated that Pakistan will make a formal request to additional technical assistance. Preliminary discussions with P-ANF officials suggest that an additional visit to Pakistan to provide this assistance will take place later in 1997.

A multi-agency working group on Nigerian crime is considering a FinCEN recommendation that an assessment be made of the organization and functions of the Central Bank of Nigeria, particularly as it relates to the prevention and detection of money launderers using the banking system and non-bank financial institutions. Nigeria is currently seeking information on enforcement strategies and creation of a financial intelligence unit from the U.S. In November 1996, the Mauritania Minister of Justice visited FInCEN to discuss money laundering issues.

FinCEN participated in the Southern African Development Community Finance Ministers Workshop in May 1996, Finance Ministers from Botswana, Malawi, Mauritius, Namibia, South Africa, Zambia, Lesotho, Swaziland, Mozambique and Zimbabwe discussed the legal framework for money laundering. FinCEN also participated in the Commonwealth Southern and Eastern African Money Laundering Seminar in October, jointly sponsored by the Commonwealth Secretariat and the Financial Action Task Force.

In continuing its anti-money laundering efforts throughout the Western Hemisphere, FinCEN made presentations at the seminar "The Investigation of Money Laundering" sponsored by the Chilean National Drug Council during December 1996; and at money laundering conferences sponsored by the Private Bankers Association of Paraguay and Panama.

During 1996, FinCEN provided technical assistance and training to Panama in connection with Panama's establishment of its financial analysis unit (FAU). FInCEN assisted the FAU staff by developing installing and customizing a Local Area Database Network at the FAU. The database will aid the analyst in collecting and analyzing the financial law enforcement, public information, the FAU obtains from various sources. FinCEN implemented the new software and hardware and provided the FAU staff with the initial database training. In furtherance of its training strategy in Panama, FinCEN sent two money laundering experts fluent in Spanish to participate in a money laundering conference co-sponsored by the Panama Bankers' Association and the FAU. This conference was intended to help bridge the communications between the Panama FAU and the Panamanian banking community. In March 1997, FinCEN will provide additional "focused" analytical hands-on database training for the FAU staff.

In October 1996, FinCEN hosted a visit with officials from the Money Laundering Directorate, Secretaria de Hacienda y Credito Publico. The officials were briefed on all planned technical and training strategies for Mexico intelligence analysts. In November 1996, FinCEN hosted a meeting with Mexico's Ambassador to the U.S., who was briefed on all planned technical and training strategies planned during 1997. As a result of these visits, Mexico's President Zedillo was briefed on the progress of USG assistance to Mexico in the area of anti-money laundering initiatives. In December 1996, FinCEN coordinated with IRS in providing training related to Suspicious Activity Reporting and Financial Investigations. During the upcoming year, FinCEN plans to provide and/or assist in providing to the Mexican financial intelligence unit several components of training. These components include: Technical Services and Training: Mexican Banking and Financial Institutions and Regulatory Authority Training; and Financial Law Enforcement Analyst Training: Theory and Concepts.

TREATIES AND AGREEMENTS

Mutual legal assistance treaties (MLATs) which are negotiated by the Department of State in cooperation with the Department of Justice to facilitate cooperation in criminal matters, including money laundering and asset forfeiture, are in force with 22 governments including: Argentina, the Bahamas, Canada, Italy, Jamaica, Mexico, Morocco, the Netherlands, Panama, the Philippines, Spain, Switzerland, Thailand, Turkey, the United Kingdom, the United Kingdom with respect to its Caribbean dependent territories (the Cayman Islands, Anguilla, British Virgin Islands, the Turks and Caicos Islands and Montserrat), and Uruguay. MLATs have been signed but not brought into force with thirteen other governments: Antigua, Austria, Barbados, Belgium, Colombia, Dominica, Grenada, Hungary, Nigeria, Poland, South Korea, St. Lucia and Trinidad and Tobago. Similar treaties are in various stages of negotiation elsewhere. The US also has signed the OAS Mutual Legal Assistance Treaty.

In addition, the US has entered into executive agreements on forfeiture cooperation, including: (1) a drug-related forfeiture agreement with Hong Kong; and (2) a forfeiture cooperation and asset sharing agreement with the Netherlands which is also in effect for the Netherlands Antilles but not yet in effect with Aruba. (See below for asset sharing)

Financial Information Exchange Agreements (FIEAs) are bilateral Executive Agreements which facilitate the exchange of currency transaction information between governments. The FIEA provides a mechanism for exchanges of such information between Treasury Department and the other government's Finance Ministry. The ability to quickly exchange currency transaction information in money laundering matters aids in achieving mutual enforcement goals. The United States has FIEAs in effect with Colombia, Ecuador, Panama, Peru, Venezuela, Paraguay, and Mexico. Each FIEA requires that both parties enact or have legislation which requires the reporting or recording of large currency transactions conducted at financial institutions. The Financial Crimes Enforcement Network (FinCEN) has also signed a Memorandum of Understanding (MOU) with the Government of Argentina.

US Customs has mutual assistance agreements with Argentina, Australia, Austria, Belarus, Belgium, Canada, Cyprus, Czechoslovakia (now extended to the Czech Republic and Slovakia), Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, Italy, Korea, Mexico, Mongolia, New Zealand, Norway, Poland, Portugal, Russia, Spain, Sweden, Ukraine and United Kingdom. Customs has negotiated agreements which are not yet in force with Honduras, Ireland, Israel, Netherlands, and Turkey.

ASSET SHARING

Pursuant to the provisions of the 1988 US law, the Departments of Justice, State and Treasury have aggressively sought to encourage foreign governments to cooperate in joint investigations of drug trafficking and money laundering, offering the inducement of sharing in forfeited assets. A parallel goal has been to encourage spending of these assets to improve narcotics law enforcement. The long term goal has been to encourage governments to improve asset forfeiture laws and procedures, and undertake independent investigations.

From 1989 through December 1996, the international asset sharing program administered by Justice resulted in the forfeiture in the US of $130,964,103.72 of which $47,596,328.18 was shared with foreign governments which cooperated in the investigations. In 1996, the Department of Justice transferred forfeited proceeds to: Canada ($207,142.72), the Cayman Islands ($12,470.87), Isle of Man ($335,862.39), Luxembourg ($1,000,000), Switzerland ($2,787,077.02, and the United Kingdom ($1,002.045.53). Prior recipients of shared assets (1989-1995) include: Argentina, the Bahamas, British Virgin Islands, Canada, Cayman Islands, Colombia, Costa Rica, Ecuador, Egypt, Guatemala, Guernsey, Hungary, Israel, Liechtenstein, Paraguay, Romania, St. Maarten, Switzerland, United Kingdom and Venezuela.

To date, Canada, Switzerland, the Isle of Jersey (Channel Islands) and the United Kingdom are the only jurisdictions that have shared forfeited assets with the United States as the result of the assistance of the United States to forfeitures effected under their own laws.