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FINANCIAL CRIMES AND MONEY LAUNDERING

MONEY LAUNDERING


OVERVIEW

In 1992, the major trends affecting money laundering policy 
were:  (1) further sophistication of money laundering 
practices;  (2)  greater investment of drug and other illicit 
proceeds into established businesses, both to conceal money 
movements and to capitalize on illicit profits;  (3)  the 
internationalization of money laundering networks whose 
operations involve an ever larger number of countries and 
territories, regardless of their importance as financial 
centers or as drug producing or transit countries; and (4) 
the intensified involvement of the Sicilian Mafia and other 
criminal organizations in Europe, Asia and the Western 
Hemisphere who comingle proceeds from many crimes to confound 
investigators, and are now acting as brokers for funds 
unrelated to their own trafficking activities.  These trends 
have made it more difficult to differentiate between drug-
related money laundering and other forms of illegal money 
movements.  

Over the last three years, narcotics money laundering has 
evolved into an important foreign policy and financial 
management priority in small as well as large financial 
center countries.  Many governments are tightening controls 
to counter what they perceive as a threat to the stability 
and integrity of their financial systems and, for some, to 
their political and social stability.  Many have made 
wholesale changes to laws and regulations, ratified the 1988 
UN Convention, and adopted the recommendations of the 
Financial Action Task Force (FATF.)  Regionally, many 
countries have also complied with the European Community's 
policy directive on money laundering and the Organization of 
American States' model regulations and other commitments.

As many as 100 governments have adopted or are now 
considering provisions which criminalize money laundering, 
regulate the flow of currency and monetary instruments, 
mandate records of currency and other monetary instrument 
transactions, require declarations of beneficial owners of 
accounts, and compel disclosure of suspicious transactions.

In many countries, "due diligence" conventions and other 
sanctions require banks to accept responsibility for ensuring 
that their institutions take necessary steps to prevent 
narcotics money laundering.  Banking systems in many key 
countries have created effective barriers, especially against 
cash transactions by money launderers, thanks to the adoption 
of these new laws and regulations.  Such changes, however, 
must be globally enforced to ensure that the kinds of 
narcotics-related transactions attributed to BCCI and other 
banks do not continue or recur.

At the same time, money laundering is taking place in a 
second and even third tier of countries which were not of 
major concern three years ago.  Traffickers seek out 
countries and territories with weak central banks, limited 
controls on foreign exchange, and restrictive bank secrecy 
practices.  Money laundering continues even in leading 
financial centers like the US, UK, Germany and Switzerland, 
where governments and banks have adopted laws and practices 
to prevent it, a reflection of the increasing sophistication 
and changing tactics of narcotics and other money launderers.

While a large number of major banking systems are less 
vulnerable today to direct cash placements, recently detected 
patterns of money flows indicate that many systems remain 
vulnerable to placements through offshore branches, non-bank 
financial institutions and wire transfers.  Rodriguez Gacha 
laundered an estimated $130 million, using 82 company and 
other accounts in 16 countries, including the US, BVI, 
Panama, Colombia, Luxembourg, Hong Kong, UK (London, Channel 
Islands, Isle of Man), Switzerland, Austria and Germany.  
More recently, the raids conducted by the Colombian National 
Police reveal that a single money manager had bank accounts 
in 40 countries--only 15 of them members of FATF.  Although 
the adoption of new laws is gratifying, the test is in the 
enforcement of these policies and laws.  Adoption and 
implementation of law and controls in many countries still 
lag behind changing practices of professional money 
launderers.

The developed nations have the technical and enforcement 
capability and, in most instances, the political will to 
revise strategies to meet new challenges.  The 26 FATF 
national members, the 12 EC nations, the EFTA countries, and 
the 72 states party to the UN Convention are adopting 
legislation that will ultimately improve their individual and 
collective capabilities.  By 1993, every EC nation was 
obliged to mandate the reporting of suspicious transactions, 
and criminalize money laundering.  (Several governments 
missed the January 1 target date but legislative changes are 
underway throughout the EC.)  Between 1992 and 1995, all FATF 
members must be evaluated on performance in implementing FATF 
recommendations, a certain reckoning that has already 
promoted change.

CONCERNS.  The following concerns remain paramount:

--  The vulnerability of many financial systems where the 
need for capital or capital replenishment could undermine 
prudent banking practices and safeguards;

--  The concentration of economic power in the hands of 
Colombian and other cocaine traffickers in this Hemisphere 
and of criminal organizations in Europe and Asia which could 
be translated into political influence;

--  The use of more sophisticated money laundering techniques 
to exploit liberal economic regimes in several countries, 
while simultaneously avoiding national and international 
countermeasures;

--  The use of professional money laundering specialists by 
drug trafficking organizations;

--  Delayed reaction by many governments to counter the 
threats they face from drug money launderers;

--  The increasing use of unevenly regulated, non-bank 
financial systems, for the placement of cash.

--  The conspicuous gap between many governments' ability to 
investigate and identify accounts and their authority to 
freeze, seize and forfeit drug and money laundering proceeds.

--  The need to impose sanctions on individuals and financial 
institutions which repeatedly fail to take prudent measures 
to prevent money laundering;

--  The need for continuous fine-tuning of bilateral and 
multilateral strategies, which define responsibilities and 
objectives on a country-by-country basis, and set specific 
goals for cooperation with the varying money laundering and 
money transit countries.

--  The unchecked flow of funds into second and even third-
tier financial systems, including countries which had not 
been of prior concern to anti-money laundering efforts.

--  The continued exploitation of US financial systems, at 
levels probably not approached by any other country.

--  The reluctance of governments to expand predicate 
offenses for money laundering beyond narcotics.

--  The continued reluctance of some bankers and governments 
to adopt anti-money laundering regulations, despite the 
obvious weakness of many voluntary control systems and 
despite reports from government after government that 
adoption of such statutes had not caused declines in deposits 
or resulted in threats from traffickers.

--  The role of European banks in money laundering in Latin 
America.  These banks and West European regulators and 
enforcement officials could do more to ensure that money 
laundering countermeasures are practiced abroad as well as at 
home.

--  Loose incorporation standards and the legality of bearer 
shares in countries which otherwise control money laundering.

DIVERSITY.  Records seized in Colombia and other 
investigations indicate that the Cali and Medellin cartels, 
directly or through their money managers, have conducted 
financial operations in at least 40 countries, including:  
Brazil, Chile, Bolivia, Suriname, Venezuela, Ecuador, 
Argentina, Paraguay, Uruguay, Nicaragua, Honduras, Costa 
Rica, Mexico, Bahamas, Aruba, Netherlands Antilles, Cayman 
Islands, Panama, United States, Canada, United Kingdom, 
Austria, Liechtenstein, Italy, Spain, Portugal, Netherlands, 
Germany, Finland, Hungary, Luxembourg, Switzerland, Nigeria, 
Ghana, Taiwan, South Korea, Japan, Hong Kong and Australia.  
Only 15 of these 40 governments are members of FATF, a point 
which underscores the determination of FATF (as well as UNDCP 
and other organizations) to engage these and other 
governments in adopting and implementing FATF and other 
counter-measures consistent with the 1988 UN Convention.

THE SICILIAN CONNECTION (and other Mafias).  Throughout 
Central and Eastern Europe, and indeed many other parts of 
the drug world, the term "mafia" is used to describe a 
kaleidoscope of organizational structures, including the 
Sicilian/Italian Mafia (La Cosa Nostra) which is the dominant 
player.  The Italian Camorra, 'Ndrangheta, and Nuova Sacra 
Corona Unita are also important factors.  The newest players 
are the "mafiya" in the former Soviet Union, organizations 
which are present throughout Central and Eastern Europe whose 
members frequently include former officials of the Soviet 
KGB.  Other players in those areas include former Stasi 
agents, Afghanistan war veterans, Islamic fundamentalists 
from Uzbekistan and Tajikistan with links to Iran, Chechens 
from the Caucasus, the so-called "karate mafia" of martial 
arts experts, as well as so-called "regular" criminals.  The 
activities of the more than 5,000 organized crime sub-groups 
operating in the area have prompted Russian President Yeltsin 
to declare a "war on crime."  Asia continues to be dominated 
by ethnic Chinese groups, just as Africa and Latin American 
nationals dominate their regions.

National boundaries, however, no longer circumscribe their 
activities.  Colombian groups are known to have established 
connections in Poland and Hungary for more than a year, and 
Nigerian couriers have also plied Eastern Europe.

The best-organized and most powerful group is the Sicilian 
Mafia which not only traffics in heroin and cocaine but uses 
its worldwide network to take advantage of the price 
differentials for these drugs in the US and Europe.  Barters 
are becoming more common.  That same network has positioned 
the Mafia to become the money broker for many other 
organizations. For fees of 20 percent or more, it reportedly 
guarantees the safety of its "placements" which include 
investments in stocks, bonds, real estate, and a very 
diversified list of businesses, many of which become fronts 
for laundering money.  The difficulty in identifying these 
front companies is that many of them have been well-
established for years, and usually have a legitimate activity 
which generates funds.  The Mafia invests in Spain, France, 
Luxembourg, Liechtenstein, the Netherlands, Switzerland as 
well as Italy.  A favorite target in every country is the 
construction industry, controlled directly or compelled to 
buy goods and services from businesses controlled by the 
Mafia.

FURTHER STEPS.  At the policy and regulatory levels, 
organizations like the UN, FATF, EC, COE, OECD, CFATF and OAS 
help ensure the burden of responsibility for change is 
shared.  But, there is a need for quick, flexible action by 
the maximum number of governments, including the second and 
third tier of vulnerable countries.  There is a high demand 
for training and technical assistance.  A comprehensive UNDCP 
training program supported by experts from FATF governments 
could be invaluable, as would a major program of assistance 
underwritten by the EC, or by OAS in our region. 

FATF and US officials have had useful discussions with UNDCP 
officials about the training needs associated with the effort 
to build a global alliance.  UNDCP plans to train financial 
investigators and draw upon experts from many countries; FATF 
has agreed to provide the UN with a list of national experts 
who would be appropriate as trainers.  UNDCP has just 
conducted its first training course in Canada, with an 
audience drawn from every part of the globe.

BILATERAL ACTIVITIES.  The U.S. Department of the Treasury 
has completed cash transaction information exchange 
agreements with Colombia, Ecuador, Peru, Panama (as part of 
the MLAT), and Venezuela.  In addition to formal negotiations 
on treaties and agreements, bilateral meetings on a range of 
money laundering issues, variously involving State, Justice 
and Treasury, were held in 1992 with Australia, the Bahamas 
and Spain.

Mutual legal assistance treaties (MLATs) are now in force 
with nine countries:  Switzerland, Turkey, Italy, the 
Netherlands, Canada, Mexico, the Bahamas, Argentina and the 
United Kingdom with respect to its dependent territories (the 
Cayman Islands, Anguilla, British Virgin Islands, the Turks 
and Caicos Islands and Montserrat).  MLATs have been approved 
by the U.S. Senate with seven other countries (Uruguay, 
Jamaica, Spain, Thailand, Belgium, Morocco and Colombia) and 
are awaiting ratification by those governments.  The Senate 
has not taken action on the MLAT with Panama.  Similar 
treaties with a number of key money laundering jurisdictions 
are in various stages of negotiation.

TRAINING AND TECHNICAL ASSISTANCE.  The U.S. Treasury 
Department, with funding by AID, has established bank 
training institutes in Poland, Hungary, Czechoslovakia and 
other East European countries.  In an offset of this program, 
Treasury's Office of Financial Enforcement (OFE) conducted 
anti-money laundering seminars in Malaysia, Nigeria, 
Venezuela, Ecuador and Bolivia.  Other participants in 
various of these seminars included US Customs, Justice 
(Office of International Affairs) and DEA.

A multi-agency group completed a financial assessment of the 
anti-money laundering system in Ecuador in April-May 1992.

Justice's Asset Forfeiture Office sponsored the second U.S. - 
Canada asset forfeiture conference in August 1992, and a 
similar conference in September for the UK and its dependent 
territories and dependencies.  Other conferences on asset 
forfeiture are planned for the Caribbean.  Justice's 
International Affairs Office provided training in money 
laundering prosecution for French magistrates.

DEA proposes to provide training in asset forfeiture in 1993 
through four regional seminars, which are expected to attract 
at least 98 foreign officials from 49 countries.  The week-
long seminars will be held in Guatemala, Malaysia, Romania 
and the Netherlands Antilles.

US Customs held money laundering training programs in 1992 
for 217 officials in Brazil, Malaysia, Bahamas and Ecuador, 
part of an overall training effort involving 38 countries and 
971 officials.

ASSET FORFEITURE.  Justice shared $18.7 million in seized 
assets with 10 countries in the period July 1990 to February 
1993.  Recipients include Canada, Switzerland, United 
Kingdom, British Virgin Islands, Cayman Islands, Colombia, 
Venezuela, Paraguay, Guatemala and Costa Rica.  Additional 
requests, which require approval of the Secretary of State, 
are pending.  Still other transfers were made by US Customs, 
during the period, including $226,506 in seized assets with 
Canada (three awards) and Trinidad and Tobago during 1992.

ENFORCEMENT.   Operation GREEN ICE was the first of a series 
of coordinated international enforcement actions.  Led by 
DEA, USG agents targetted a list of top cocaine traffickers 
and sought not only to arrest them but to disrupt their money 
laundering operations.  Culminating in raids last fall, Green 
Ice was carried out in Spain, the United Kingdom, Italy, 
Canada, the Cayman Islands, Costa Rica and Colombia, with 
coordinated actions in Houston, Miami, Ft. Lauderdale, 
Chicago, New York, San Diego and Los Angeles.

The raids resulted in seizures of $47.7 million, and the 
freezing of 140 bank accounts containing $7.3 million, and 
dozens of arrests, including that of Carlos Rodrigo Polania-
Camargo, Director of Special Investigations for the Colombian 
Superintendent of Banking.

Operation CABBAGE FARM was a joint investigation by the FBI, 
IRS and DEA which targetted a major network in Chicago, Los 
Angeles, Miami and Houston which laundered money for 
Colombian drug organizations.  The investigation detected $36 
million in cocaine proceeds the network laundered in the US, 
and identified more than 90 bank accounts in the US, 
Colombia, Panama, Canada, Spain, Switzerland, the UK and 
Venezuela which were used to launder cocaine proceeds.

Operation CHOZA-RICA is a long-term undercover money 
laundering operation, begun in 1990, in which undercover 
Customs agents, posing to US bankers and Mexican "casa de 
cambio" owners as currency facilitators for narcotics and 
arms traffickers.  The operation seized more than $40 million 
in currency and financial instruments.  In March 1992, 
violators from three different banks and 10 Mexican nationals 
associated with the cambio activity were arrested.  Following 
up, USG agents traced accounts in California and Texas to a 
New York bank where $35 million was seized.  Also in March, a 
25-count indictment for various money laundering, bank fraud 
and conspiracy charges was unsealed, resulting in the arrests 
of high level officials from Texas banks, as well as owners 
and operators of cambios in Monterrey.

FINCEN.  The Financial Crimes Enforcement Network (FinCEN) 
continues to expand its support to federal, state and local 
law enforcement as well as regulatory agencies.  Through 
international training modules, a financial records analysis 
workshop in Lyon, France, which will become a yearly offering 
in cooperation with INTERPOL, and extensive participation in 
FATF, FinCEN has also extended its support to foreign 
government agencies throughout the world.

FinCEN's tactical reports continue to provide analytical 
support to some of the most complex and far-reaching 
international money laundering investigations.  These reports 
are based on information collected from commercial and law 
enforcement data bases and are used to identify assets for 
seizure and forfeiture, as well as to provide leads for 
further investigation.  FinCEN's Office of Strategic Analysis 
has more fully developed its Country Profile and 
International Money Laundering Gazeteer report series to 
assist in identifying money laundering vulnerabilities in 
each of the world's geographic areas.  In 1992, it published 
new assessments and updates on more than 20 nations.  It has 
also published a number of reference documents, including a 
multilingual glossary (English, French, German, Italian and 
Spanish) of financial investigation terms, as well as papers 
on various funds transfers systems.

MULTILATERAL ACTIVITIES.   The Financial Action Task Force 
(FATF), created by the Economic Summit in 1989, now includes 
26 financial center governments: US, France, Germany, UK, 
Canada, Japan, Belgium, Netherlands, Luxembourg, Sweden, 
Denmark, Norway, Finland, Iceland, Ireland, Spain, Portugal, 
Greece, Austria, Switzerland, Turkey, Australia, New Zealand, 
Hong Kong, Singapore, and two regional organizations, the 
Commission of the European Communities, and the Gulf 
Cooperation Council.

The FATF Secretariat is housed in the Organization for 
Economic Cooperation and Development.   FATF consults with 
the UN Drug Control Program, Council of Europe, World Bank, 
European Bank for Reconstruction and Development, 
International Monetary Fund, Interpol, Customs Cooperation 
Council, and the Organization of American States.

FATF operates through a six-member steering committee.  It 
includes the President (Australia), the past President 
(Switzerland), the next President (UK), and the chairmen of 
three working groups: Legal Issues (Italy), Financial 
Cooperation (Netherlands) and Policy/External Relations (US).  
The Deputy Secretary of the Treasury heads the US delegation; 
the Department of State chairs Working Group III (external 
relations).

Five FATF Members (US, UK, France, Netherlands and Canada) 
cosponsored the Caribbean Financial Action Task Force which 
met in Kingston on November 5-6.  This Task Force involves 
most Caribbean governments including dependent territories as 
well as selected Central and South American governments.  The 
Task Force changed significantly at its meeting in June, 
where it was evident that the Caribbean and Latin nations in 
attendance had taken political control of the process.  In 
November, ministerial-level delegates endorsed 59 objectives 
(40 FATF recommendations plus 19 recommendations drafted at 
the Caribbean Drug Money Laundering Conference in Aruba in 
June 1990), and committed to their implementation.  They also 
adopted a number of resolutions, including one which commits 
them to evaluate their progress at one and three year 
intervals, and another which named Trinidad and Tobago as the 
new chair of CFATF and authorized Trinidad to form a small 
secretariat to assist with training and technical assistance 
and hosting next year's conference.

Governments participating included: Antigua and Barbuda, 
Aruba, Bahamas, Brazil, British Virgin Islands, Canada, 
Cayman Islands, Colombia, Dominican Republic, France, 
Grenada, Jamaica, Mexico, Netherlands, Netherlands Antilles, 
Panama, St. Vincent and the Grenadines, Trinidad and Tobago, 
Turks and Caicos, United Kingdom, United States and 
Venezuela.

FATF also supports the OAS experts group which recently 
produced model laws to implement the UN Convention, models 
which also incorporate FATF standards.

The Caribbean conference and follow-on training is but one 
element of a global plan which FATF endorsed at Sydney in 
September to assess worldwide money laundering practices, 
trends and typologies.  It includes a symposium for 
financial, judicial, and regulatory policy makers from East 
and South Asia to be held in Singapore April 21-23, 1993.  
Governments invited include Pakistan, India, Bangladesh, 
Nepal, Sri Lanka, Myanmar, Thailand, Laos, Malaysia, 
Indonesia, Brunei, Korea, People's Republic of China, Taiwan 
and the Philippines, as well as FATF Members Singapore, Hong 
Kong, Japan, New Zealand, Australia, UK and US.

FATF conducted seminars on money laundering countermeasures 
featuring presentations by experts from eight nations and 
four international organizations in Budapest, February 3-10, 
1993 for officials from financial, judicial and enforcement 
ministries from Hungry, Poland, Czech Republic, Slovakia, 
Albania, Bulgaria and Romania.  A second seminar was held in 
Warsaw, March 1-4.  Additional seminars are planned for 
Russia and the NIS republics in the fall; another Eastern 
European seminar in 1993 is also possible.  National experts 
were provided by US, UK, France, Germany, Italy, Netherlands, 
Switzerland and Austria.  The EC Commission, Council of 
Europe, UNDCP and INTERPOL participated.

FATF met with several African policy makers in November in 
Paris (Morocco, Nigeria, Kenya, Central Africa Republic, and 
Cote d'Ivoire), and plans a region-by-region approach to 
Africa.  FATF has also agreed to collaborate with the Gulf 
Cooperation Council on a meeting May 4-6, 1993, of its six 
Arab Member states, and will participate in Council of Europe 
conferences for Baltic nations and NIS republics in 1993.

As the 1992-93 round progresses, FATF will also be 
considering direct responses to situations in Russia and 
other republics of the former Soviet Union.  FATF will also 
support Australia's initiative with the Pacific Island 
nations, some of which are becoming more deeply involved in 
money laundering.

In November, FATF (Working Group III) gave the Third 
Committee of the United Nations a detailed assessment of 
global money laundering and the responses proposed by FATF 
and other international groups.  A similar presentation was 
made at the Conference on International Economic Crime at 
Oxford University in September.

OAS Legal Experts Group.  During 1991-92, a 13-nation group 
of experts prepared model legislation on narcotics-related 
money laundering and asset forfeiture for the Inter-American 
Drug Abuse Control Commission (CICAD) of the Organization of 
American States (OAS).  The drafting process was completed in 
early 1992 and the model statutes were adopted by CICAD on 
March 10, 1992.  On May 22, 1992, the OAS unanimously 
approved the model legislation and recommended that it be 
enacted by the 34 OAS member states.

The model statutes consist of 19 articles which focus on 
three areas of regulatory and enforcement activity.  The 
first three articles provide definitions and set forth a 
model statute to criminalize money laundering.  The second 
group of articles sets forth model statutes for the seizure 
and forfeiture of assets.  The third set provides a framework 
for regulations involving financial institutions and currency 
transaction reporting.

The OAS is now conducting a series of regional conferences to 
encourage member governments to adopt the model statutes and 
participate in a cooperative effort to combat money 
laundering.  The first conference was held in Santiago, 
Chile, in December, with representatives from Argentina, 
Bolivia, Brazil, Chile, Paraguay, Peru and Uruguay.  
Additional conferences are planned for 1993 in Panama, Mexico 
City and in the Caribbean region.

STATUTORY REPORTING REQUIREMENTS.  The accompanying charts 
are provided to comply with P.L. 102-583, which established 
reporting requirements for FY 1993 and 1994, including a 
requirement that the INCSR identify the major money 
laundering countries, and provide specific information for 
each such country.

There is no uniformly reliable way of estimating the volume 
of currency or monetary instruments flowing through a given 
financial system, and therefore no mathematical definition of 
"major money laundering country."  However, there is enough 
information about the majority of nations and territories to 
identify them as high, medium or low priority.

From such rankings, an inference can be made that a given 
nation or territory is a major concern to the USG if it is 
considered a high or medium-to-high priority.  That inference 
guided construction of the following chart designating each 
nation or territory as (H), (M) or (L), or (NP) for no 
priority.  Using this construction, governments shown as (M-
H) or (H) could reasonably be considered as "major money 
laundering concerns."

A country can be considered High priority for different 
reasons.  The UK, for example, is high priority because its 
cooperation is needed, not only to stem money laundering in 
Great Britain, but also to ensure uniform application of laws 
in its associated and dependent territories, some of which, 
like Hong Kong and the Cayman Islands, are high priority 
themselves.  Panama is a high priority for what it is not 
doing or is doing inadequately about the high volume of money 
laundering suspected to occur there.  These priorities can 
change.  India was a medium priority last year as a potential 
money laundering country on the basis of the flow of money 
related to India's role in the SWA heroin trade.  Now, with 
Colombian and other traffickers laundering money through 
India, it has a high priority.

A High priority country is also one in which new or improved 
laws more effectively applied would have an impact in the 
money laundering world and probably, as in the case of 
Switzerland, would prompt movements of money to other 
locales.

A Medium priority county designation can indicate a country 
in transition, where the threat is real but hasn't fully 
materialized, or simply a country where a significant but not 
market-shaping volume of money laundering is believed to 
occur, or one which gives moderate but important assistance 
to anti-money laundering enforcement efforts.

A Low priority country is one in which there is only a 
moderate amount of money laundering, and where we do not 
expect the situation to worsen in the immediate future.  By 
definition, we would not expend major resources in such a 
country.  No Priority means that we either are not aware of 
any money laundering or it is too insignificant to be a 
factor in the international drug money market.

These rankings, like the material in the country summaries, 
were developed in a series of meetings involving State, 
Justice, Treasury, Federal Reserve, Comptroller of the 
Currency, Central Intelligence Agency, Drug Enforcement 
Administration, Customs, Federal Bureau of Investigation, 
Financial Crimes Enforcement Network, Internal Revenue 
Service, Comptroller of the Currency, and the Office of 
National Drug Control Policy.

Nations/Territories:  Afghanistan (NP), Algeria (NP), 
Anguilla (NP), Antigua (L-M), Argentina (M), Armenia (NP), 
Aruba (M), Australia (M), Austria (M), Azerbaijan (NP), 
Bahamas (M), Bahrain (M), Bangladesh (NP), Barbados (L), 
Belarus (NP), Belgium (M), Belize (M), Benin (NP), Bolivia 
(M-H), Botswana (NP), Br Virgin Islands (M), Brazil (M-H), 
Brunei (NP), Bulgaria (M), Burkina Faso (NP), Burma (M), 
Cambodia (L), Cameroon (NP), Canada (H), Cape Verde (NP), 
Cayman Islands (H), Chad (NP), Chile (M), China (PRC) (L-M), 
Colombia (H), Comoros (NP), Costa Rica (M), Cote d'Ivoire (M-
H), Cuba (NP), Cyprus (M), Czech Republic (L), Denmark (M), 
Dominica (NP), Dominican Republic (L), Ecuador (M-H), Egypt 
(M), El Salvador (L), Equatorial Guinea (L), Estonia (NP), 
Ethiopia (NP), Fiji and Tonga (NP), Finland (L), France (M), 
Gambia (NP), Germany (H), Ghana (L), Gibraltar (M), Greece 
(M), Grenada (L), Guatemala (M), Guyana (NP), Haiti (L), 
Honduras (L), Hong Kong (H), Hungary (M), Iceland (NP), India 
(M-H), Indonesia (L), Iran (L), Iraq (L), Ireland (L), Israel 
(M), Italy (H), Ivory Coast (M-H), Jamaica (L), Japan (M-H), 
Jordan (NP), Kenya (M), Korea (M), Kuwait (M), Kyrghyzstan 
(NP), Laos (NP), Latvia (NP), Lebanon (L), Lesotho (NP), 
Liberia (NP), Liechtenstein (M-H), Lithuania (NP), Luxembourg 
(M-H), Madeira and Azores (M), Malaysia (L-M), Mali (L), 
Malta and San Marino (L), Martinique (NP), Mauritania (NP), 
Mauritius (NP), Mexico (H), Moldova (NP), Monaco (L), 
Montserrat (M), Morocco (M), Mozambique (NP), Nauru (L), 
Nepal (M), Netherlands (H), New Zealand (NP), Nicaragua (NP), 
Niger (NP), Nigeria (H), Norway (L), Netherlands Antilles (L-
M), Oman (NP), Pakistan (M-H), Panama (H), Papua N Guinea 
(NP), Paraguay (M-H), Peru (M), Philippines (M), Poland (M), 
Portugal (M), Qatar (NP), Romania (NP), Russia (M), Saudi 
Arabia (L), Senegal (L), Seychelles (NP), Sierra Leone (NP), 
Singapore (H), Solomon Islands (NP), South Africa (NP), Spain 
(H), Sri Lanka (L), St. Kitts (NP), St. Lucia (L-M), St. 
Vincent (L), Sudan (NP), Suriname (L), Swaziland (NP), Sweden 
(L), Switzerland (H), Syria (M), Taiwan (M), Tajikistan (NP), 
Tanzania (NP), Thailand (H), Togo (NP), Trinidad and Tobago 
(L), Tunisia (NP), Turkey (M-H), Turkmenistan (NP), Turks and 
Caicos (NP), UAE (M-H), Uganda (NP), Ukraine (NP), United 
Kingdom (H), Uruguay (M-H), Vanuatu (L), Venezuela (H), Yemen 
(NP), Yugoslavia (NP), Western Samoa (NP), Zaire (NP), Zambia 
(NP), Zimbabwe (M).  

The table below responds to Section 409(a)(7) of the Act.  In 
each listed country, a significant but unestimated amount of 
U.S. and other drug-related currency flows through the 
financial system, in an amount or manner of importance to the 
U.S.  With each listed country, the USG either has agreements 
in force which permit needed exchanges of data and other 
information or there is sufficient compatibility of laws to 
permit such sharing as needed.  Each of the governments to 
whom the USG has proposed agreements of the kind envisioned 
by the Act has negotiated or is negotiating in good faith.  
There have been no refusals to cooperate with the USG on 
narcotics money laundering cases.  The table indicates 
whether a government has ratified the 1988 UN Convention 
(UN88).  

Subsection 7(B)(ii) asks about the existence of legal 
assistance agreements between foreign governments.  As more 
governments prosecute the offense of money laundering, 
particularly those cases which are international in 
character, the indication is that their needs for cooperation 
and evidence from other governments is also increasing.  
While only a few governments, notably the US and UK, have 
such agreements today, the expectation is that this number 
will increase significantly in the years to come.

The table indicates, in response to Subsection (7)(C) and to 
the extent that information is available, whether a country 
designated in this report as High or Medium-High priority 
has: 

(i) criminalized narcotics money laundering;

(ii) required banks and other financial institutions to know 
and record the identity of customers engaging in significant 
transactions, including the recording of large currency 
transactions at threshholds appropriate to that country's 
economic situation;

(iii) required banks and other financial institutions to 
maintain, for an adequate time, records necessary to 
reconstruct significant transactions through financial 
institutions in order to be able to respond quickly to 
information requests from appropriate government authorities 
in narcotics-related money laundering cases;

(iv) required or allowed financial institutions to report 
suspicious transactions;

(v) established systems for identifying, tracing, freezing, 
seizing, and forfeiting narcotics-related assets;

(vi) enacted laws for the sharing of seized narcotics assets 
with other governments;

(vii) cooperated, when requested, with appropriate law 
enforcement agencies of other governments investigating 
financial crimes related to narcotics; and

(viii) addressed the problem of international transportation 
of illegal source currency and monetary instruments.


[A Chart titled "Compliance Table -- Major Money Laundering 
Countries" appears here in the hard copy.]


WESTERN HEMISPHERE

CANADA has a drug money laundering problem that may be as 
large as US$10 billion, and possibly increasing.  Canada is 
considered a significant money laundering threat because it 
is a transit point for drugs and money destined for the US 
from South America, the Middle East and Asia, traffic which 
compounds the money laundering problem created by domestic 
use.

The domestic drug market generates proceeds in Canadian 
dollars but international drug organizations are using Canada 
to launder proceeds from their worldwide operations.  South 
American cocaine cartels launder drug proceeds from U.S. 
sales through Canadian financial institutions.  A Colombian 
kingpin who held an account in a Canadian bank wrote several 
checks to various individuals as payment for the purchase of 
cocaine base from a Bolivian trafficker.  The checks were 
ultimately deposited into European bank accounts.  A 
prominent Middle Eastern heroin trafficking and money 
laundering organization is also known to launder drug money 
through Canada.  Drug profits have been laundered through 
import/export businesses, and have been used to purchase real 
estate in Canada.

Operation Green Ice used undercover operations, in 
cooperation with the Royal Canadian Mounted Police (RCMP), to 
trace Colombian cocaine proceeds. The RCMP seized 
approximately US$1.6 million.

In general, Canada is meeting the goals and objectives of the 
UN Convention, but some deficiencies remain.  Canadian law 
(1988) permits the freezing and subsequent seizure of assets 
related to drug trafficking and makes money laundering a 
separate criminal offense.  Canadian law (1991) requires bank 
and non-bank financial institutions to maintain records on 
transactions and make those records available to law 
enforcement agencies.  A major problem with the Canadian 
money laundering program is the failure to enact measures to 
address the problem of cross-border currency movements, a 
problem which the government has acknowledged but has been 
slow to address.

In 1992, the Solicitor General set up special teams in 
Montreal, Toronto, and Vancouver, comprised of RCMP officers, 
full time prosecutors, administrative staff and local police 
officers to investigate and prosecute drug-related money 
laundering offenses.  The anti-drug profiteering program 
resulted in seizures of $C15.2 million ($Cl equals about 80 
U.S. cents) in assets in 1991, and in $C13 million in the 
first seven months of 1992.  The addition of provisions for 
administrative seizure of assets would facilitate the work of 
law enforcement.

Although the money laundering law is four-years old, there 
have been few prosecutions.  Asset seizures are minimal 
compared to the amount of known drug money and money 
laundering occurring in Canada. The tracing and seizure of 
the proceeds of drug crime in Canada are largely the 
responsibility of the Royal Canadian Mounted Police, which is 
understaffed, particularly in the sections devoted to asset 
seizure/forfeiture.  Seizures were approximately C$35 million 
in 1989; C$20 million in 1990; and C$21.2 million ($ClO 
million in seizures and $C11.2 million in fines) in 1991.  
This is considerably more than in years previous to the 
enactment of the 1988 Act, but small when compared to the 
estimate of C$10 billion in drug monies. The formation this 
year of special joint teams may contribute to more seizures 
of assets as well as more arrests.   The Government continues 
to refine a formula to share seized assets among federal, 
provincial, municipal, and possibly foreign authorities. 

The UNITED STATES' money laundering "problem" has been 
variously estimated at $100 to $200 billion annually from the 
sales of heroin, cocaine and marijuana.  USG enforcement 
agencies continue to escalate their efforts, launching such 
successful campaigns as Operation Green Ice, Cabbage Patch 
and others, involving with increasing frequency multi-agency 
teams of investigators, intelligence analysts, prosecutors 
and other officials.  Yet, despite a continuing pace of 
record seizures of both proceeds and products, the US remains 
the world's principal money laundering country.  This 
situation reflects not only the great diversity of the 
American financial system, but also the continuing high 
levels of demand and payment for illicit drugs.  As noted in 
the Executive Summary, where USG bilateral and multilateral 
programs are discussed in more detail, the US has greatly 
intensified its commitment to anti-money laundering measures 
which have a high foreign policy as well as enforcement 
priority.


CENTRAL AMERICA

BELIZE is a dormant but potential money laundering country.  
A few businessmen are able to launder drug-related money for 
large drug cartels.  The potential lies in the absence of 
laws and enforced regulations, and the adoption of the 1990 
International Business Companies Act (IBC) which was designed 
to help Belize's financial sector.  While the potential for 
money laundering through IBCs exists, there have been no 
indications that IBCs are being exploited.  Companies under 
the IBC act are exempt from local taxation and exchange 
control.  They offer complete anonymity for owners, who may 
be non-Belizeans.  Bearer shares may be issued and owned by 
one individual who need not reside in Belize.  No annual 
accounts or financial statements need to be filed, nor is the 
IBC required to be audited.

Belize has laws regulating the buying and selling of foreign 
currencies and bank-to-bank transfer of these currencies, but 
no regulations controlling the actual movement of money in 
the country, and money laundering is not a crime.  Belize 
passed a tough drug-related asset forfeiture law in 1990, but 
no assets have been forfeited.  There have been seizures of 
US currency (the largest was $265,000).  The government seems 
serious about countering the money laundering threat, and has 
requested training.

COSTA RICA played an important role in Operation Green Ice, 
reflecting both its increased significance from a money 
laundering perspective and its cooperation with US agencies.  
Four Colombian money launderers arrested in Costa Rica face 
97 counts of money laundering in addition to cocaine 
trafficking charges.  Extradition to the US, however, hinges 
on a Costa Rican court decision on the constitutionality of 
the extradition treaty, which was signed in 1982 and finally 
came into effect in 1991.  The US requested the extradition 
of Colombian money launderer Carlos Figueroa in September 
1992, but his case has been tied up on appeals as to the 
constitutionality of the extradition treaty.

Costa Rica is a tax haven with strict bank secrecy laws.  
Liberalization of the economy may have created money 
laundering opportunities through bearer share-controlled 
corporations.

DEA officials emphasize the need for changes in Costa Rica's 
asset seizure laws.  Cooperation between the United States 
and Costa Rica in this area is improving; however, assets of 
drug traffickers in Costa Rica may only be seized if they 
were directly used in the act of drug trafficking, not just 
if they were purchased with drug proceeds.  An increasing 
number of Colombians are reportedly buying land over its 
market value in Costa Rica, purchases allegedly part of a 
money laundering operation.

In addition to financial crimes investigation training, there 
is a need to strengthen drug conspiracy laws.  Drug 
trafficking and money laundering conspiracies are presently 
very difficult to prove by Costa Rican law.  There is also a 
need for investigative mechanisms such as permitting the use 
of wire-taps which would greatly enhance drug conspiracy 
prosecutions.

EL SALVADOR's involvement with drug money laundering has not 
been estimated, but there are indications that money 
laundering through licensed exchange houses is widespread.  
These exchange houses process an estimated US$500 million a 
year, and conduct large hard currency transactions with 
foreign banking institutions.

Money laundering is a criminal offense.  The government has 
access to bank accounts as well as to tax information, and 
can freeze bank accounts suspected of being narcotics 
related.  All money exchanging operations are required to 
report weekly to the central bank's exchange department on 
transactions involving US$10,000 or more.  There are no 
controls on the amount of currency which can be brought into 
or out of the country. However, the central bank can require 
written information from commercial banks and money exchanges 
on international operations carried out by individuals or 
firms.

GUATEMALA has the potential to become a money laundering 
center:  tight bank secrecy laws, inaccessibility of foreign 
tax returns, and strict corporate confidentiality.  The 
Guatemalan government and banking community believe that 
money laundering is increasing, and noting that the banking 
sector has grown faster than the rest of the country's 
legitimate economy. 

The GOC enacted a narcotics law in September 1992, providing 
for the death penalty, seizures of property used to commit 
drug-related crimes, and criminal conspiracy convictions in 
drug prosecutions. The US and Guatemala exchanged letters of 
agreement in May 1992 on case-specific asset sharing 
arrangements in drug cases, and exchanged letters of 
agreement again in July 1992 in order to give Guatemala a 
portion of drug proceeds seized in joint U.S.- Guatemalan 
operations.

Guatemalan representatives of Medellin's Rodriguez Orejuela 
organization and other traffickers use several Florida banks 
to launder drug proceeds.

HONDURAS has made the confiscation of drug-related assets a 
crucial weapon against drug trafficking, but shortcomings 
exist in other areas of the law.  Extradition of Hondurans is 
unconstitutional, and bank secrecy is fairly tight, making 
the tracing of drug money difficult.  Tight bank secrecy laws 
would seem to make Honduras a potential money laundering 
center.  Such activity, however, has not been significant 
because of strict controls over foreign currency transactions 
and a shortage of international banking affiliations 
preventing the wire transfer (and therefore the layering) of 
drug money.  

MEXICO is an increasingly important money laundering center, 
particularly for cash transactions by "casas de cambio" along 
the U.S.border.  Mexican laws do not require banks to keep 
stringent records on large currency transactions or identify 
customers making them.  There are no controls on the amount 
of money that can be brought into or transferred out of the 
country, and no limit on, or reporting of, currency 
transactions in exchange houses.  The USG has urged Mexico to 
make money laundering a criminal rather than a fiscal 
violation, but the GOM has not moved in that direction.  

The Mexican Treasury Department (Hacienda) normally detects 
money laundering schemes when conducting fiscal 
investigations on business entities, organizations and 
individuals involved in multi-million dollar transactions 
with tax haven countries to circumvent Mexican tax laws.  In 
1992, the US Customs Service and the Internal Revenue Service 
worked with them on investigations of corruption and bribery 
among Mexican government authorities.  One investigation led 
to the seizure of $6 million in assets in the US.  In 1992, 
the GOM seized properties related to narcotics trafficking, 
but passed the assets to the Mexican Treasury rather than to 
law enforcement agencies.  In March 1992, US officials 
arrested eight Mexicans and three Texas bankers involved in a 
money laundering conspiracy.  As a result, $31 million in a 
New York bank account and an apartment complex were seized by 
US Customs from a major Monterrey drug money launderer.  
While Mexican authorities did not participate in the US 
investigation, US authorities reported good cooperation by 
Mexican officials after the arrests were made.  

Similarly, in March 1992, Mexican officials cooperated in the 
seizure of 60 real estate properties related to the seizure 
by US authorities of 22 tons of cocaine in Los Angeles, 
California, in 1989.  Mexican and US officials also 
cooperated in a bilateral sting operation in 1992 against a 
Canadian motorcycle gang's attempts to launder drug money 
through the purchase of assets in Mexico.

PANAMA is, second only to the US itself, the primary money 
laundering concern in the Western Hemisphere.  Panama remains 
a principal conduit for financial transactions by Colombian 
drug cartels, who continue to rely on Panama for its 
established international connections.  Although it has begun 
taking some of the right steps, there is a clear need for 
more effective intervention by the Government of Panama 
(GOP).

Several factors make Panama an important regional financial 
center:  a dollar-based economy; offshore banking; strict 
bank secrecy laws; loose standards for incorporation; 
corporate ownerships through bearer shares, etc.  Long 
established as a tax haven, Panama offers the kind of 
sophisticated, confidential banking that is essential to the 
professionally managed schemes used today by the cartels.

The country is both a transit point for money and the site 
for conversion of funds within the financial system and the 
Colon Free Trade Zone (CFTZ).  While there is no precise 
method of measuring volume, there is no doubt among US 
enforcement agencies that Panama is a venue of choice.  Many 
of the money transfers which US agents have traced to Europe, 
Asia, the Caribbean and the US have Panama as a common link.

Although it is difficult to estimate degrees of money 
laundering, one possible measure is the amount of surplus US 
cash returned from Panamanian banks, which increased in 1992.  
While some of this surplus may be explained by legal 
transactions, in particular cash sales in the CFTZ which 
offer a legitimate basis for at least part of the surplus, 
the amount of currency being returned in $50 and $100 
denominations is alarmingly high (over 50% of the surplus 
return in 1992).  The US stopped issuing $50 and $100 notes 
to Panama in 1986.  A large volume of high denomination bills 
is usually indicative of money laundering.

Money laundering activities are connected principally to the 
cocaine
industry and the drug proceeds are primarily owned by 
external, mostly Colombian, organizations.  Money laundering 
is believed to occur within the bank and non-bank financial 
sectors (credit and loan companies), and through Panamanian 
companies.

Drug money laundering is a criminal offense, but is difficult 
to prove.  There have been no successful money laundering 
prosecutions in Panama since money laundering was 
criminalized in December 1986.  Banks must record 
transactions of more than $10,000.  These reports are subject 
to inspection by the National Banking Commission (CBN) to 
determine compliance.  The reporting process is not supported 
by extensive or efficient examinations by bank regulators.  
Banks also are required to retain currency transaction forms 
for five years, and to identify customers engaging in 
significant, large currency transactions.  The GOP does not 
require currency transaction records from non-bank financial 
institutions.  There are procedures for identifying, tracing 
and freezing narcotics related assets; however, legal means 
to forfeit these funds have not yet been perfected.  There is 
no limit on the amount of currency that can be brought into 
or out of Panama, though the Cabinet has shown interest this 
year in requiring currency import-export declarations by 
persons transporting large amounts of cash into and out of 
the country.  The government has not adopted "due diligence" 
or "negligence" laws, but is considering other new laws.

A running feud between the head of the Panamanian National 
Assembly's Drug Commission, Leo Gonzalez, other key members 
of the counternarcotics establishment, and Attorney General 
Rogelio Cruz overshadowed money laundering and other 
counternarcotics investigations during much of 1992.  The 
feud stemmed in part from Cruz's handling of bank accounts 
which had been frozen on grounds they contained drug assets, 
and over Cruz' past involvement with a bank associated with 
Colombian drug kingpins.  While Cruz argues he had authority 
(citing US precedents) to release the funds when there was 
insufficient evidence of drug transaction origin, the Supreme 
Court ruled that such authority to unfreeze such accounts 
rested exclusively with the courts.  Upon recommendation by 
Solicitor General Ballesteros, who is charged with 
investigating allegations of wrongdoing by Cruz, the Supreme 
Court suspended the attorney general from office.  Charges 
are pending and may possibly lead to an impeachment trial.  
The Drug Secretary was also removed from office.

Numerous documents found at Celeste International, a major 
front company laundering money for the Rodriguez Orejuela 
organization which was raided by Panamanian police in 
cooperation with DEA in July 1992, illustrate the extent of 
money laundering in the Colon Free Trade Zone.  The CFTZ has 
long been believed to be a money laundering mecca for drug 
traffickers.  The discovery of numerous pre-signed and pre-
stamped blank invoices for fictitious import/export companies 
in Colombia suggests that false invoicing is being used as a 
method of laundering money.  The 1992 seizure of $10 million 
dollars secreted in shipping containers also indicates the 
use of Panama to ship drug currency in bulk from the US to 
Latin America.  In one instance, Panamanian Customs officials 
seized more than $7 million in cash arriving in a container 
from Miami; they charged the man responsible for failing to 
report the "merchandise."

There is particular concern that traffickers are investing 
drug proceeds in the construction industry in Panama, as they 
have in Colombia, Thailand and other countries where 
traffickers "invest" their proceeds.

In January, $7.7 million was seized from the account of Hong 
Kong Bank (Panama) S.A. because it was believed to have been 
used to negotiate millions of dollars of domestic US postal 
money orders in a drug money laundering scheme.  The case 
came out of an investigation by the Postal Inspection Service 
into the money laundering activities of Colombian drug 
cartels.  Hong Kong Bank sent large blocks of money orders 
purchased by the cartels to its account at Marine Midland 
Bank in New York for collection and ultimate credit to the 
original Panamanian accounts.  An estimated $180 million in 
U.S.Postal money orders, purchased in a structure pattern 
typical of money launderers, cleared through Panamanian banks 
in 1992.

While Panama has not ratified the 1988 UN convention, GOP 
officials contend that many of the convention's provisions 
regarding money laundering are reflected in Panamanian law or 
in the MLAT which awaits U.S. ratification.  The MLAT, for 
example, will expedite access to bank documents and other 
evidence needed in money laundering investigations.  Panama 
sent a ministerial level delegation to the CFATF meeting in 
November.  The GOP is considering incorporating in the new 
narcotics law some of the CICAD model regulations.

Legislation is being considered which will improve 
possibilities for the seizure and forfeiture of narcotics 
related assets and for sharing these assets with other 
countries.  While Panama cooperated in the blocking of more 
than 350 bank accounts in the past three years, none of these 
accounts have been forfeited, and a number of these accounts, 
including the Rodriguez Gacha funds, were released by Cruz 
(most of the Gacha funds, however, remain frozen, according 
to officials in Panama).  Still, Panama continues to provide 
bank documents and information to support US money laundering 
investigations, and efforts will be made to pass new 
legislation in 1993.  The MLAT would permit the sharing of 
these assets once forfeited.  Assets subject to seizure under 
current and proposed legislation include instruments and 
proceeds of crime, both tangibles and intangibles (bank 
accounts).  Legal loopholes allow traffickers to shield 
assets.  Secrecy laws governing corporation ownership allow 
traffickers to set up corporations with anonymous boards of 
directors and bearer share ownership through which it is 
possible to launder narcotics funds.  Neither current law nor 
the proposed law allows for civil forfeiture. 

Certain provisions of the MLAT and the proposed law have 
generated concern among bankers that such regulations may 
make Panama a less attractive international banking center.  
In addition, business persons from the CFTZ have reacted with 
alarm about major narcotics money laundering related arrests 
in the Zone, fearing that investigations and a concomitant 
unsavory reputation as a drug center may adversely affect 
their booming business.  Leading CFTZ merchants and banks 
have expressed interest, however, in gaining U.S. assistance 
for controlling the drug trade there.  

The banking community has cooperated with government efforts 
to freeze assets and has not taken steps to expand bank 
secrecy laws.  Freezing the accounts of the Hong Kong Bank in 
the postal money order scam and the suspension of Cruz have 
sent cautionary signals to the banking sector which may serve 
to counter the signals sent by the failure to forfeit seized 
accounts and the unfreezing of some accounts linked to 
narcotraffickers.  The government needs to increase the 
pressure by moving to secure forfeiture of any seized 
accounts.


SOUTH AMERICA

ARGENTINA's sophisticated transportation system, 
international seaports and airports, and a growing economy 
have made it an attractive location for drug trafficking and 
money laundering.  To counter money laundering, President 
Menem issued a decree creating a Joint Control Commission to 
study money laundering methods and to propose measures to 
detect and penalize money launderers.  Nonetheless, money 
laundering has intensified.

Effective January 1, 1993, Argentine citizens may hold U.S. 
dollar accounts and write checks in U.S. dollars, which 
dominate the Argentine economy.  Drug-related and non-drug 
money laundering may increase during the second phase of 
MERCOSUR, the Southern Cone's common market trade agreement, 
which will allow free entry and exit of cargo vehicles from 
neighboring countries.

The "casas de cambio", which are not regulated like banks, 
have been convenient vehicles through which to launder drug 
proceeds.  Since early 1992, the United States Drug 
Enforcement Administration has been investigating a money 
laundering and drug trafficking organization which operates 
throughout the U.S., Europe and Latin America.  Numerous 
Argentines are associated with this organization which 
facilitates their money laundering activities.

BOLIVIA has not criminalized money laundering, nor does it 
impose restrictions on the movement of foreign currency in or 
out of the country, even though cocaine profits continue to 
make up a substantial part of all foreign exchange entering 
the country.  Banks are supposed to report transactions 
involving more than $20,000 to supervisory authorities, and 
exchange houses or "casas de cambio" are required to maintain 
records of currency transactions.

A new banking law, proposed in August, 1991 but still 
unpassed, would bring financial houses under the control of 
the Superintendency of Banks.  The law would also alter the 
rules for financial intermediaries not subject to current 
banking law, and would override other laws in regulating all 
operations of the financial system.  

Bolivia has an asset forfeiture law of sorts.  Drug money can 
be seized, but only if the money can be tied to the drugs.  
Under the Coca and Controlled Substances Law, property seized 
as a result of offenses will be auctioned off, pursuant to 
execution of judgement.  Money seized and proceeds from fines 
are to be distributed to various governmental departments, 
bureaus, and services.  Bolivia has not yet met the goals and 
objectives of the UN Convention with respect to money 
laundering.

BRAZIL has not been a major money laundering concern in the 
past, but recent investigations by Brazilian agencies suggest 
that financial institutions are increasingly used as a link 
between Colombian cocaine suppliers and major U.S. and 
European cocaine distributors.  Brazil has the largest 
economy in Latin America and the most sophisticated financial 
sector in its region.  

Hundreds of millions of dollars are estimated to have passed 
between the U.S., Europe and Brazil in the last 4-5 years, 
with the movement of such assets centered in Rio de Janeiro 
and Sao Paulo.  The U.S. connection is for dollars from 
street sales; money laundered in Brazil is usually routed to 
the Caribbean, Europe and Asia.  There are indications that 
money has been laundered for the Medellin and Cali cartels, 
as well as for traditional Italian organized crime elements.  
Narcotics money is usually laundered through money exchanges 
and brokerage houses.  Drug proceeds are also laundered 
through front companies and purchases of gold and real 
estate.  

Foreign currency restrictions have prompted Brazilians to 
smuggle massive amounts of cash out of the country.  These 
restrictions have created a vast, semi-legal parallel market 
where "cruzeiros" exchanged for dollars compound the problems 
of estimating the magnitude of money laundering.  Many 
wealthy Brazilians hold accounts overseas, often in the U.S. 
or Paraguay, also used to move currency.

Brazil, which maintains good relations with U.S. law 
enforcement agencies, permits access to bank records under a 
court order; other disclosure is prohibited.  Money 
laundering is prosecuted as a violation of the tax code, not 
as a narcotics violation.  However, there is legislation 
pending to punish persons, including bankers, who engage in 
laundering narcotics assets.  

CHILE is attractive to money launderers because of its 
booming and stable, open market economy in which it is not an 
offense to invest proceeds from criminal activities.   The 
export development policy of the Aylwin Government has 
unwittingly afforded Andean cocaine and heroin producers a 
new, less suspect route for smuggling their products, and has 
resulted in a growth in money laundering, as drug traffickers 
use their proceeds to buy import/export companies, travel 
agencies, transportation and other finance-related 
businesses.

Money laundering commonly involves the use of Peruvian bearer 
bonds to purchase legitimate goods for export to Peru.  Money 
exchange houses and money transmitters also facilitate 
integration of illicit income back to source countries.

Chilean officials confirm that drug money is being laundered 
through the booming construction and fishing industries 
throughout Chile.  Arica, a coastal town bordering Peru, is 
considered a center for large scale drug trafficking and 
money laundering.  Numerous "casas de cambio" are known to be 
laundering drug money from Peru, Colombia and Bolivia.  GOC 
officials attribute this to the increasing level of cocaine 
trafficking since last year.

Strict bank secrecy laws and the lack of enforcement 
authority and anti-money laundering laws prevent the Chilean 
government from thoroughly investigating drug related 
financial crimes.  To combat the country's expanding drug 
problem, the Chilean government in 1992 developed a 
comprehensive counternarcotics legislative package, which the 
Congress is expected to approve in 1993.  This legislation 
includes laws on money laundering (which the bankers strongly 
oppose), precursor chemicals, police undercover work, 
forfeiture of trafficker assets, and penalties for drug use.  
Police will be able to obtain access to any bank account 
suspected of laundering drug money.  Much of this legislation 
breaks new ground.  Many of the proposed laws are based on 
model legislation from the OAS's Inter-American Drug Abuse 
Control Commission (CICAD).  

COLOMBIA joins Panama, Mexico and the US as the primary money 
laundering concerns in the Western Hemisphere.  The major 
cocaine traffickers are headquartered there, and the myriad 
cocaine money deals that now span the globe either begin in 
Colombia are or controlled from Colombia, or both.   Like 
Panama, Colombia has not ratified the 1988 UN Convention and 
is the only Andean country failing to do so.  While the 
Colombian government has cooperated with the USG in cases 
such as Operation Green Ice, Colombia does not yet meet the 
goals and objectives of the UN Convention with respect to 
money laundering.

Prior to the decree allowing Colombian citizens to hold US 
dollar accounts, drug cartels were transferring the majority 
of their drug profits from the United States to accounts in 
Europe.  Now, the drug cartels transfer their profits to 
Colombia first before transferring them to Europe.  However, 
while this "opening" in Colombia initially resulted in such a 
massive influx of dollars that cash transactions diminished 
in parts of the Caribbean and elsewhere, there have been some 
recent shifts in the handling of cash, prompted by a 
Colombian tax on the conversion of US dollars into pesos.

Drug profits are physically transported to Colombia by air 
and sea.  Wire transfers are used to launder drug money to 
and from the U.S. and Europe.  The cartels import and resell 
expensive products, such as automobiles and heavy equipment, 
to launder drug profits, and are believed to have bought a 
degree of control of the heavy construction industry.  Front 
companies, precious metals dealers, and legitimate businesses 
are used to launder narcotic proceeds throughout the US, 
Latin America and Europe.

DEA investigations reveal that Venezuelan banks are being 
used heavily by Colombian traffickers to avoid a tariff on US 
dollars entering Colombia.  US dollars are converted into 
Venezuelan bolivares or other non-US currency; once 
converted, the proceeds are transferred into Colombia by wire 
or physical movement without paying any tariffs.  Millions of 
dollars in cocaine profits have entered Colombia via 
Venezuela.  Venezuelan banks have opened branches or bought 
banks in Colombia, some of which are believed to be owned or 
influenced by the cartels.

DEA's Operation Green Ice, which climaxed last September, 
targetted Colombian traffickers in Spain, Costa Rica, United 
Kingdom, Canada, Colombia, the Cayman Islands, the US and 
Italy, where the Italian Mafia was cooperating with Colombian 
traffickers.  In all, 634 KGS of cocaine were seized, assets 
seized were valued at US $47.7 million, and 164 people were 
arrested.  Police authorities from each nation involved 
cooperated to the full extent with United States authorities 
in executing the operation.

While money laundering is not a crime in Colombia, the 
Colombian law on unjust enrichment could be used to prosecute 
money launderers in certain circumstances.  The GOC has taken 
some measures to track narcotics revenues.  Substantial 
inflows of foreign capital enter the Colombian economy under 
the stimuli of a liberalized exchange regime, high real 
interest rates, and a limited tax amnesty during 1991 and 
early 1992.  In February, 1991, Colombia required that all 
financial institutions maintain cash transaction records 
(CTR's) on currency exchange transaction amounts over 
$10,000, for a period of five years.  The Superintendent of 
Exchange Control oversees all exchange houses, and also 
requires CTR's; he began investigations in mid-1992 to shut 
down institutions suspected of laundering money, remove 
street traders, and deal with funds laundered through 
contraband trade.  Colombia has signed a money laundering 
information exchange agreement with the US.

The Colombian banking association recently issued industry-
wide guidelines following many of the OAS/CICAD 
recommendations and called on the Government to establish a 
centralized data bank, which few institutions to date have 
developed.  "Banker's negligence" laws do not yet exist, but 
recent measures enacted under state of emergency decrees 
(primarily targeted to control funds held by guerrilla 
groups) assign greater responsibility to  institutions for 
notifying judicial authorities of suspicious transactions.  
These same decrees reiterate that divulgence of financial 
information in conjunction with a judicial investigation does 
not constitute a violation of bank secrecy laws.

ECUADOR is an important money laundering center because of 
its bank secrecy laws and the easy accessibility of its 
financial system to Colombian and Peruvian narcotics 
traffickers.  DEA believes these traffickers have laundered 
millions of cocaine-generated dollars through Ecuador, much 
of it through the construction industry.

In June 1992, the Ecuadorian National Police raided locations 
used by Jorge Reyes-Torres drug trafficking organization 
(JRTO), the largest in Ecuador and one of the most powerful 
in Latin America.  It was well connected to Colombian 
traffickers with whom it conducted joint ventures.  The raids 
revealed JRTO money laundering methods, resulting in the 
seizure of approximately $30 million in Switzerland, 
Liechtenstein, Montserrat and the US.  Additional accounts 
have been uncovered and seizure proceedings initiated.

The multi-agency US team which met with Ecuadorian officials 
last July reported that the GOE has made some efforts to 
implement countermeasures.  Money laundering is illegal.  The 
law, which became effective in 1990, applies to both banking 
and non-banking financial institutions.  Ecuador has largely 
based its new narcotics law on the 1988 UN Convention.  The 
Superintendency of Banks requires that banks maintain records 
on currency transactions over $2,000 but some financial 
institutions reportedly do not comply.  The regulations do 
not require the financial institution to file regular 
currency transaction reports.  While the Superintendency of 
Banks has full access to banking records, it cannot easily 
share the information with police or prosecutors because of 
bank secrecy laws.  The GOE, however is considering amending 
the bank secrecy act to permit reporting.  The GOE signed a 
money laundering information exchange agreement with the USG 
in 1992 that provides for the exchange of money laundering 
information/intelligence between the two governments.  
Negotiations are continuing on an asset sharing agreement.  
The GOE does not limit the amount of money which can be 
brought into and out of Ecuador.  The GOE has not taken 
action to address the problem of international transportation 
of illegal-source currency and monetary instruments.  

In October 1992, the U.S. Treasury Department provided 
Ecuadorian bank officials and government officials seminars 
on the prevention and detection of money laundering.  Ecuador 
has requested assistance regarding the prosecution of its 
money laundering laws which have not been enforced.  The U.S. 
Department of Justice has been assisting the Ecuadorian 
Justice Department with the prosecution of Reyes-Torres who 
is under detention with his accomplices pending trial.

Ecuadorian law provides for seizure by the national police, 
the military customs police and/or the armed forces of assets 
belonging to persons arrested for narcotics offenses.  
Several properties belonging to Jorge Reyes Torres were taken 
into custody in 1992 by the police, including residences and 
businesses in Quito and a cargo airline.  Several bank 
accounts in Ecuador were also frozen.

GUYANA is not known to have been used as a site for 
laundering drug money.

PARAGUAY, like many South American countries, has laws or 
practices which facilitate money laundering, such as bank 
secrecy and use of dollar accounts, and there are indications 
that money laundering occurs in Asuncion, Ciudad del Este, 
and Pedro Juan Caballero.  Moreover, Paraguay is a transit 
point for drug-generated cash, which moves through banks, 
"financieras" and exchange houses.  There are no controls on 
the amount of currency which may be brought into or out of 
the country.  The informal or contraband sector of the 
Paraguayan economy is particularly well established and has 
flourished due to lax financial oversight.  The movement of 
large sums of money emanating from the contraband trade 
complicates efforts to identify narcotics-related money 
laundering.  Paraguay could become an even more significant 
money laundering center if traffickers take advantage of 
financial system "modernizing" changes through which Paraguay 
hopes to become a regional financial center.

In 1992, the GOP initialled a financial information exchange 
agreement with the US, which should be ratified in 1993, and 
Parliament is considering CICAD model regulations on money 
laundering and asset forfeiture, as part of a reform of the 
national narcotics law.

Money laundering is not illegal.  While banks and financial 
institutions are required to report to the Central Bank all 
transactions of more than $10,000, the GOP lacks the 
resources to monitor results.  There have been no arrests or 
prosecutions related to money laundering.  DEA notes that 
"casas de cambio" in Paraguay are laundering drug money 
worldwide.  Based on DEA information, the most powerful money 
exchange house in Paraguay, Cambios Guarani, was investigated 
and found to be laundering drug profits.  The Cambios Guarani 
and numerous other exchange houses such as Cambios Amonday 
and Indumex are handling such large amounts of drug profits, 
DEA adds, that the spread of these profits are filling 
financial institutions and banks throughout Paraguay.  The 
Superintendency of Banks lacks sufficient manpower to 
regulate these institutions fully.

Ethnic Chinese groups operating in Paraguay are stepping up 
their efforts to create new narcotics markets and money 
laundering centers in anticipation of Hong Kong's reversion 
to Chinese rule in 1997.  They are attempting to infiltrate 
the banking systems of Latin America, and members of the 14K 
group have been tracked to Paraguay.  These groups operate 
underground banking activities to conceal money and would use 
such practices in Paraguay, if they are not already doing so.

PERU is not an important international financial center or 
tax haven.  Peruvian drug traffickers have traditionally kept 
much of their proceeds outside Peru, but US dollars are 
entering the banking system amidst indications that Peruvian 
drug traffickers, increasingly independent from Colombia's 
drug barons, are keeping more money at home.  One Peruvian 
group is known to have smuggled $10 million from Miami to 
Lima.

Peruvian law protects bank secrecy and permits anonymous 
accounts.  Investment laws enacted in 1991 to attract foreign 
capital also facilitate money laundering.  President Fujimori 
has boasted that Peru now has the most liberal foreign 
investment structure on the continent.  The investment law 
provides a full remittance of profits, capital and dividends 
without prior government approval.  There are no restrictions 
on currency transfers, and bank accounts may be held in any 
currency.  Investors need not register their holdings with 
the government, and exchange availability is guaranteed.  
Most importers and exporters can buy and sell foreign 
exchange without Central Bank intervention.

A recent US Customs investigation revealed a "partnership" 
between drug traffickers and money changers ("cambistas") 
operating between Lima and the Huallaga Valley; these groups 
also have close ties to drug lords and guerrillas.

During 1992, the Fujimori government, using special decree 
powers, amended the criminal code to make narcotics-related 
money laundering a criminal offense, and to provide for 
prosecution of persons, including banking officials, who 
knowingly participate in or facilitate money laundering.  In 
1991, Peru signed a bilateral agreement with the US which 
requires maintenance of records of cash transactions in 
excess of $10,000 and provides for exchange of information on 
such transactions by the superintendency of banking and the 
US Treasury.  The Superintendency of Banking has issued 
regulations requiring financial institutions to maintain such 
records.  No requests for information have been made by the 
US.

There is no established system for identifying, tracing, 
freezing, seizing and forfeiting narcotics-related assets.  
The criminal code, as amended by the 1992 decree on money 
laundering, gives the GOP legal authority to seize and 
forfeit assets, but regulatory and enforcement capabilities 
to actually do so remain weak.  

SURINAME's tight restrictions on banks, the unconvertible 
local currency and the limited scope of its financial system 
make the country an unattractive center for major money 
laundering.  Although money laundering does occur, the 
financial system cannot handle major currency transactions 
without attracting attention.  Suriname does not provide for 
asset seizure nor are there legal provisions which permit 
financial investigations of money laundering activities.  
Drug money may be part of the parallel currency market.

URUGUAY is an important Southern Cone financial center and 
tax haven which offers customers complete bank secrecy, 
dollar accounts, no foreign exchange controls, and no taxes 
on incomes or deposits.  Montevideo, the banking , caters to 
flight capital from neighboring countries.  The financial 
sector is significant to the Uruguayan economy:  in 1991, 
banks in Montevideo were holding more than $2.5 billion in 
foreign currency deposits, and a reported $4.3 billion in 
non-resident dollars were on deposit.  The economy is open to 
foreign investment with few restrictions or controls on 
investment or ownership by foreign nationals.  There are no 
restrictions on the movement of money offshore or bringing 
dollars into the country.  

Uruguay has no regulations governing its 50 exchange houses, 
making these institutions a prime target for money 
launderers.  Many of the registered exchange houses are held 
by anonymous corporations controlled through bearer shares.  
However, Central Bank officials do not permit new exchange 
houses to be registered if controlled through such shares.

It is hard to determine the degree of money laundering in 
Uruguay because traffickers' funds are difficult to separate 
from the flows of outward bound capital originating in 
Uruguay and among its neighbors. U.S. law enforcement 
officials believe that narcotics money is deposited in and 
easily transferred through the exchange houses to accounts 
worldwide.  Securities, gold and foreign exchange from around 
the world come to Uruguay, which exports gold, but does not 
produce a single gram.

While the GOU can seize laundered drug money from banks or 
businesses, the GOU has rarely done so.  Businesses proven to 
have knowingly laundered drug money could be seized, although 
the GOU has never seized a legitimate business for such a 
crime.  The law allows for criminal forfeiture, but the GOU 
has never used the law against convicted narcotics 
traffickers.  No assets were forfeited or seized in 1992.  
Banks and exchange houses routinely delay, but eventually 
comply in providing courts with requested information on 
accounts and transactions.

In October 1991, the Uruguayan Appeals Court ruled that while 
drug trafficking constituted an extraditable offense , money 
laundering did not.  In September 1991, the United States and 
Uruguay signed a mutual legal assistance treaty that 
concerned drug trafficking and drug money laundering, but the 
agreement still has to be ratified by one house of 
Parliament.   Recently, the Government of Uruguay completed 
final drafts for improved anti-drug measures which include 
increasing penalties for smuggling, distributing and 
processing drugs.  In addition, a separate money laundering 
measure would enable the government to seize assets involved 
in drug related offenses.

VENEZUELA has become a significant center for money 
laundering.  US officials believe that upwards of US $3 
billion is laundered annually through Venezuela.  There are 
indications that professional smugglers and money launderers 
headquartered in the Caribbean have set up off-site 
facilities in Venezuela.  On Margarita Island, money 
launderers use real estate transactions, gambling and night 
club facilities, exchange houses, the increasing gold trade 
and the black market.  In Bolivar, there is significant 
activity involving the local gold and diamond markets.

Money laundering is not a crime, nor are there other anti-
money laundering laws.  There are no "banker negligence" or 
"due diligence" laws.  The Venezuelan constitution prohibits 
the confiscation of real estate or other proceeds of criminal 
activity but allows the confiscation of cars, boats, 
aircraft, etc., used in violations of drug laws.

Protected by bank secrecy laws, narcotics traffickers 
frequently use Venezuela as a staging point for money 
laundering.  Narcodollars are deposited into Venezuelan 
financial centers and then transferred to European or 
Colombian banks.  Venezuelan banks and Venezuelan-owned banks 
in Colombia are used heavily by Colombian traffickers since 
Colombia imposed a tariff on U.S. dollars.  (See report on 
Colombia.)

Members of the Cali and Medellin cartels are known to hold 
real estate and commercial investments in Venezuela.  Since 
there are limited controls on the movement of money in 
Venezuela, importation of contraband plays a large part in 
the economy of the North-East region of Maracaibo.  Goods 
from Panama and Colombia, purchased with narcotic proceeds, 
are smuggled into Venezuela and sold for Venezuelan bolivars, 
which are then deposited into bank accounts in Maracaibo. 

In January 1992, the Venezuelan National Guard dismantled a 
drug trafficking organization working with the Cali cartel in 
shipping cocaine to the US and Europe.  The National Guard 
confiscated more than 1500 million bolivars from 12 
businesses used as front companies.  Also seized were several 
farms, luxury cars and a yacht.  

The GOV and U.S. have not used a 1990 money laundering 
information exchange agreement.  Better results come from 
informal exchanges of information between Venezuelan 
investigative and banking institutions and U.S. agencies.  
Because money laundering is not a crime, legal action on 
suspected money laundering practices occurs only when the 
suspected crime involves drug trafficking.  Otherwise there 
is no legal basis to investigate and make arrests for money 
laundering.  The GOV instituted the filing of cash 
transaction reports (CTRs) on transactions in amounts over 
$10,000 by all financial institutions licensed to deal in 
foreign exchange.  However, there is no centralized data bank 
for CTRs which lessens the usefulness of CTRs for 
investigative purposes.  

The GOV may make money laundering a crime by passing a drug 
law reform package in early 1993.  While some banking 
institutions have agreed to work informally with U.S. 
agencies on a case-by-case basis, others appear to oppose a 
money laundering bill, publicly stating that money laundering 
is not a problem in Venezuela.  The drug law reform package 
reportedly provides for the seizure and forfeiture of drug-
derived assets.  Under the 1984 drug law, seizure of assets 
is provided for, but forfeiture provisions are nebulous, 
effectively resulting in no mechanism for channeling drug-
derived assets to drug law enforcement efforts.  


THE CARIBBEAN

ARUBA has increased its cooperation with U.S. enforcement 
agencies but lacks the legislative authority to prosecute 
money laundering and seize narcotics proceeds.  Aruba is 
dependent upon enactment of legislation by the Kingdom of the 
Netherlands to implement the 1988 UN Convention.  There is 
also a significant political threat to the continuation of 
the Oduber government, which has been responsible for 
improved relations with the U.S. on this matter.  The degree 
of money laundering in Aruba does not appear to have worsened 
significantly over 1991, although the same organizations 
continue to operate.

THE BAHAMAS is an important international financial center, 
with 300 banking and trust institutions and approximately 
50,000 offshore companies registered.  It is a tax haven with 
bank secrecy laws attracting an influx of international 
monies for capital preservation.  The new government seems 
quite serious in its intentions to prevent narcotics money 
laundering, but equally concerned about maintaining 
traditional bank secrecy and remaining competitive with other 
financial centers, especially those in the Cayman Islands and 
Panama.

During the 1980's, the Bahamas was a haven for cash from drug 
transactions entering the financial system, but U.S. and GCOB 
officials concur in a belief that cash money laundering has 
diminished.  The majority of banks now seem to be 
administering effectively a know-your-customer policy which 
helps deter cash money laundering by non-account holders 
and/or transients.  However, there is not uniform compliance 
with voluntary requirements for recording significant cash 
transactions, and requirements for reporting suspicious 
transactions are not uniformly applied to all customers or 
transactions.  The GCOB, which waives its tight bank secrecy 
laws to permit investigations, amended its laws in 1992 to 
provide for the confiscation of laundered assets, and 
upgraded the reporting requirements for corporations.

Money laundering and money transshipments still occur, albeit 
on a reduced basis.  Most suspected scenarios involve 
electronic transactions through international banks and 
offshore companies with Bahamian offices which use bearer 
shares.  While some cash still enters Bahamian banks, U.S. 
agents believe that non-cash transfers are carried out 
through wire transfers from Bahamian banks to foreign banks, 
e.g., in Colombia, Aruba and Europe.  There are also 
unconfirmed reports of bulk shipments of money by aircraft 
departing the U.S., stopping in the Bahamas, then flying to 
points in Latin America, particularly Colombia; these monies 
are apparently not "landed" in the Bahamas but remain in 
transit.

Six weeks after taking office in August 1992, the Ingraham 
administration held talks on money laundering with U.S. 
officials from Treasury, State, and Justice, in which it 
assured the USG of its willingness to cooperate and discuss 
these issues.  The U.S. officials agreed that cash money 
laundering seemed to have diminished, but expressed concern 
whether the GCOB laws and policies were adequate to prevent 
or detect the new and more sophisticated methods used by 
professional money managers.  The delegation noted that one 
possible cause of the decline in cash money laundering in the 
Bahamas may have been the new availability of dollar accounts 
in Colombian banks.  The U.S. delegation also expressed 
continued concern about the use of bearer shares to control 
shell corporations and the use of monetary certificates made 
out to bearers.

Following these discussions, the U.S. delegation recommended 
a formal request be made that the GCOB: criminalize money 
laundering; standardize and mandate adequate bank record-
keeping; standardize and mandate suspicious transaction 
reporting; analyze cash intensiveness to determine the proper 
threshhold for recording and reporting transactions; conduct 
a cash flow analysis of casino operations; assess the 
adequacy of asset forfeiture and seizure laws; and consider 
adoption of a due diligence convention for bankers, lawyers 
and accountants which would hold them liable for ensuring 
proper disclosures of their clients to banks and which would 
prosecute them for facilitating money laundering.

After reviewing GCOB laws, the U.S. delegation believes the 
GCOB has not criminalized money laundering as fully as some 
other governments.  They also advised that the laws on asset 
forfeiture are weak and do not give the government the full 
measure of authority which international advisory 
organizations and other jurisdictions believe to be needed.  
They further advised the GCOB to improve the fullness and 
timeliness of responses to requests for mutual legal 
assistance.

The GCOB requested information from which to initiate 
investigations on alleged money laundering schemes and 
reiterated its commitment to keep its system free of drug-
tainted monies.

The cornerstone of the Bahamas' money laundering control 
system is deterrence through a central bank policy of "know 
your customer."  The GCOB believes that money laundering is a 
crime under its Tracing and Forfeiture of Proceeds of Drug 
Trafficking Act, but, to date, sanctions remain untested 
before the courts due to a lack of investigations completed 
which specifically target money laundering.  The USG-GCOB 
Mutual Legal Assistance Treaty (MLAT) facilitates the 
exchange of information on money laundering and the USG has 
successfully received information through this mechanism.  
The GCOB has no "due diligence" or "bankers' negligence" laws 
making individual bankers responsible if their institutions 
launder money, and no really accountable auditing of their 
institutions.  Instead, the GCOB, when faced with 
questionable actions on the part of financial institutions, 
requests the closure of the institution.  One such closure 
occurred in 1991.

Under Bahamian law, asset forfeiture can occur following the 
conviction of an individual for a drug offense.  While the 
need to fully adjudicate a case before forfeiture slows the 
process, the asset forfeiture statute is adequate.  In 1992, 
the Royal Bahamas Police Force made administrative changes 
that encourage closer coordination of drug investigations and 
asset forfeiture investigations.  Formerly these two type of 
investigations were conducted by separate sections within the 
force.

The GCOB is active in international fora on the subject of 
drug money laundering.  The GCOB has a representative on the 
experts' group of the Caribbean Financial Action Task Force 
(CFATF) and the deputy Prime Minister attended the CFATF 
ministerial conference in Kingston, Jamaica in November.

BARBADOS is not a major financial center.  Money laundering 
is illegal under the Drug Abuse Prevention and Control Act of 
1990.  There are strict controls on amounts of money which 
can be converted into foreign currency and taken out of the 
country.  Banks are expected to report large or unusual 
transactions voluntarily.  Law enforcement agencies cooperate 
with U.S. and other countries' attempts to trace and seize 
assets.

THE CAYMAN ISLANDS is a major money laundering center which 
ranks sixth among the world's banking centers, has 23,500 
registered corporations and 548 banks which hold assets of 
some $400 billion, but only 26,000 inhabitants.  All but four 
of the 50 most important international banks in the world are 
represented here, but, of the 548 banks, only 68 have offices 
and staff in Georgetown.  The vast majority have 
"representative offices" or "brass plate offices," and some 
exist only on paper.

The Cayman Islands thrive on the offshore banking industry.  
Its inhabitants enjoy one of the highest per capita annual 
incomes ($20,000) in the Western Hemisphere.  The Islands' 
tax-free status, and very tight bank secrecy laws, make the 
Caymans an attractive tax haven for many corporations.  
Although London appoints the Islands' governors and the 
British Foreign and Commonwealth Office controls the Caymans' 
foreign policy, the Bank of England (Britain's central bank) 
has no direct control over Caymans' financial regulations.

The Caymans Government cooperated closely with DEA on 
Operation Green Ice and other investigations.  In Green Ice, 
Caymanian authorities set up shell companies and undercover 
bank accounts; when the targets were arrested and their 
assets frozen, DEA seized $400,000 in drug-related currency 
in an undercover Caymanian account.  In May 1992, the Cayman 
Islands signed an agreement allowing U.S. "confiscation 
orders" to be "registered and enforced" in the Cayman 
Islands.  According to reports, a U.S. confiscation order 
from a recognized U.S. court will allow local law enforcement 
officers and bank inspectors to seize bank accounts, real 
estate, cars, homes, and other assets.

DOMINICA is not a major financial center.  There is no 
indication that money laundering occurs on the island.

THE DOMINICAN REPUBLIC is not a major regional financial 
center or significant money laundering center.  Foreign 
currency exchanges and currency exports are strictly 
controlled, limiting the appeal of the commercial banking 
system.  An estimated $800 million is sent to the Dominican 
Republic annually from approximately one million Dominicans 
residing in the US, some of which could be drug dollars.  

GRENADA is not considered an important financial or money 
laundering center.

HAITI serves a greater role as a transshipment point for 
narcotics than as a center for money laundering, which is not 
a criminal offense.  What laundering occurs is primarily done 
through money changers operating on the black market rather 
than through banks.

JAMAICA is not an important narcotics money laundering 
center.  The chair and host of the 1992 meetings of the 
Caribbean Financial Action Task Force, Jamaica has committed 
to enacting money laundering laws.  

MONTSERRAT is increasingly used as a money laundering haven.  
The most prominent case came to light upon analysis of the 
financial documents seized when the Ecuadorian National 
Police, working with DEA, raided the Jorge Reyes Torres drug 
trafficking/money laundering organization in June 1992.  
Because Ecuador prohibits the holding of U.S. dollar accounts 
by Ecuadorian banks, Reyes-Torres established an offshore 
bank in Montserrat and a branch of this bank in Quito, which 
he used to deposit millions of U.S. dollars in drug-related 
currency, and evade Ecuador's currency control laws.  Reyes 
would wire transfer the funds in his bank (Banco de los Andes 
Internacional) to other banks around the world.

NETHERLANDS ANTILLES experiences both drug trafficking and 
money laundering, primarily associated with St. Maarten and 
Aruba (see separate report).

The St. Maarten laundering operations are very extensive.  
Included in the many activities are resorts, casinos, 
restaurants, airlines, banks, construction businesses, a 
transportation company, and a travel agency.  These 
activities appear to be concentrated in St. Maarten but there 
is evidence that parts of the network have spread to other 
islands of the Netherlands Antilles, as well as to St. Kitts 
and the British Virgin Islands.

ST. LUCIA is not a major financial center, although the 
government is interested in attracting offshore facilities.   
In 1992, there was some evidence that allegedly fraudulent 
banks had sought registration and licensing in St. Lucia; a 
special government committee has been set up to investigate 
this matter.  Legislation is before Parliament requiring that 
any offshore company or financial institution first be 
licensed with the Ministry of Finance before being registered 
in St. Lucia.  There are controls on amounts of money which 
can be converted into foreign currency and taken out of the 
country.  The Ministry of Finance investigates unusual 
exchange requests.  

ST. VINCENT is not a major financial center, but there is a 
possibility its offshore institutions may be used to transfer 
funds gained from narcotics trafficking and other illegal 
activities to banks in the U.S. and elsewhere.

TRINIDAD & TOBAGO is not a major financial or money 
laundering center.  The government, which has assumed the 
chair of the CFATF, has criminalized money laundering.  
However, more detailed legislation is needed.  A number of 
local banks have recently agreed to monitor large cash 
deposits in an attempt to prevent money laundering.  
Beginning last December, banks are required to complete a 
source-of-funds form on transactions of more than $6,000, and 
may be held liable for facilitating the retention of drug 
proceeds.  The procedures have not yet been implemented, and 
it is unclear how comprehensive or effective they will be.  
There are stringent currency controls.


WESTERN EUROPE

AUSTRIA is neither an important financial center, tax haven 
or offshore banking center, nor do U.S. and foreign officials 
consider Austria a major money laundering center.  However, 
its bank secrecy laws create the potential for money 
laundering and some money laundering does occur.

GOA officials are closing loopholes to discourage money 
laundering.  They propose to amend banking laws to comply 
with EC regulations in anticipation of EC membership in this 
decade.  In 1992, the Ministry of Justice proposed 
legislation that would make money laundering a specific 
crime; however, this bill, which the government approved on 
December 1, has not passed Parliament and has drawn serious 
opposition.  Efforts are also underway to amend the penal 
code; both actions are needed to allow ratification of the 
1988 UN Convention.  There have been no arrests or 
prosecutions for money laundering.

Banks must maintain records of large currency transactions, 
and report this data regularly to the Austrian central bank.  
Bankers are not allowed to report "dubious" monies to the 
Justice ministry, but, should the banking bill become law, 
banks would be required to report such cases to the 
responsible public prosecutor.  The Chamber of Commerce 
updated the banking industry's code of conduct in February.  
The code lowers the ceiling for customer identification and 
reporting of transactions to AS 200,000 (about $18,100) and 
was broadened to include all currencies, not just U.S. 
dollars.

Debate continues over the future of anonymous bank accounts 
for Austrian residents; Austria is the last European country 
to allow anonymous accounts which have some potential for 
money laundering because they are in effect paid to bearer.  
These accounts are very popular with small savers.  Both 
anonymous accounts and bank secrecy remain politically 
sensitive issues; the debate results in slow and careful 
implementation of countermeasures.

BELGIUM is an important financial center but not a 
significant money laundering haven.  Belgian police and DEA, 
however, received information that a Colombian Cartel cell 
laundered $8-10 million through Belgian exchange houses and 
other financial institutions during the past two years.  
Belgian law provides for seizure of assets directly linked to 
a crime.  Bank secrecy laws, however, are still so strong 
that the police do not have the tools to actually enforce the 
law.  The law does not apply to non-financial banking 
institutions, such as exchange houses.  Authorities have 
seized $400,000 and arrested two currency couriers.  There 
have been no prosecutions for money laundering.

DENMARK is not an important money laundering center.  It is 
an important financial center, however,  and (non-drug) money 
transits Denmark in large amounts.  Denmark is the largest 
foreign exchange dealer among Nordic countries, accounting 
for about 45 per cent of turnover.

Denmark is not a transit point for drug money, but is seen by 
drug traffickers as one more hiding place where law 
enforcement authorities would not normally look -- the money 
laundered here has been both local and foreign, and all 
within the banking system.  Banks are not required to 
maintain records of large currency transactions, but all bank 
transactions are linked to a central computer, which is 
accessible to law enforcement authorities with court 
approval.  There is no requirement to report suspicious 
transactions, nor controls on the amount of money that can be 
brought into or out of Denmark.

Because money laundering statutes are not yet in force, there 
have been no arrests for money laundering per se.  Denmark, 
however, has laws making possession of criminal proceeds 
illegal.  If the police investigate a drug case and the 
suspects have money, the money can be seized.  There were two 
recent, major cases of money laundering by Colombian drug 
smugglers in which the pertinent bank accounts were seized 
under this law.

FINLAND attracts illicit money because of its bank secrecy 
laws, and because money laundering is not a crime.  Western 
narcotics proceeds and Russian "mafia" funds enter the 
banking system.  The government is taking steps to 
criminalize money laundering and lift bank secrecy.  
Parliament is expected to enact a bill in early 1993.  
Although Finnish banks do not wish to lose the banking 
secrecy provisions in current law, they have not opposed 
these changes as they do not wish to be the target of 
narcotics money.  The new legislation will bring Finland 
fully into compliance with the 1988 UN Convention.

FRANCE imposed new requirements for reporting suspicious 
transactions on banks and other financial institutions.  A 
law adopted January 1993 widens the authority of its 
centralized financial intelligence service, Tracfin.  
Suspicious transactions which must be reported include those 
possibly involving drug proceeds. France and Italy are the 
only EC members which the EC Commission says were in 
compliance with its money laundering policy directive on 
January 1, 1993.

France has "agent provocateur" laws which make it extremely 
difficult for law enforcement personnel to participate in 
undercover operations, but, in late 1991, France passed a law 
to allow certain undercover operations, under controlled 
conditions, with the concurrence of a magistrate or judge of 
instruction.  If a judge concurs with a joint US-French 
undercover operation, all transactions would be directed 
through French counterparts.  French officials are receptive 
to opening "dollar" accounts to allow wire transfers of funds 
as part of an investigation.  They are also considering the 
use of undercover money laundering operations similar to U.S. 
Operations.

Under French law, money laundering is only a crime if it is 
associated with a drug offense.  Monetary instruments used in 
committing a crime or acquired by a criminal offense, may be 
seized, and can be returned to the country whose laws have 
been violated by decision of the French judicial authorities.  
French law does not allow for civil forfeiture. 

GERMANY is increasingly used as a money laundering center for 
the Colombian cartels as well as other trafficking 
organizations (e.g., the Italian Mafia as well as Turkish and 
West African heroin organizations).  Germany has taken 
several initiatives to curb this activity, including new 
legislation, while also seeking  cooperation from other 
governments.  The Bundeskriminalamt (BKA), the German Federal 
Police, has identified several suspicious accounts and has 
asked the U.S. for assistance in obtaining further background 
information on the account holders.  However, The U.S. 
Justice Department says that none of its several requests to 
German authorities to freeze bank accounts containing drug 
proceeds has been honored to date.

On September 15, 1992, the Organized Crime Act came into 
effect; inter alia, it made money laundering a criminal 
offense.  The Act calls for fines and imprisonment, not only 
for those who conceal property from any felony offense, or 
drug violation, or acts by a criminal organization, but also 
punishes gross negligence for not recognizing the illegal 
source of property in transactions.  The Act also provides 
for forfeiting assets of persons convicted of such offenses.

A bill introducing reporting requirements for financial 
institutions with respect to suspicious transactions, and 
demanding identification of depositors and beneficiaries for 
larger transactions is still pending in the Bundestag, where 
it is strongly opposed by financial institutions.

GIBRALTAR actively encourages the development of its banking 
business to establish itself as a leading international 
financial center.  Its offshore banking and secrecy laws 
attract drug money, but the extent of such activity and its 
relationship to drug trafficking has not been estimated.  
Gibraltar offers tax-free status to offshore financial 
institutions that do business only outside the Rock.  
Gibraltar also has no exchange controls and no tax treaties, 
so people who invest through Gibraltar companies are assured 
of
complete confidentiality.

GREECE continues to be an important financial center and tax 
haven.  While it is difficult to determine degree, Greek and 
U.S. authorities assume that drug money laundering takes 
place.  In 1992, the Government drafted anti-money laundering 
legislation to comply with the UN Convention and EC Policy 
Directive.  The overall gross of "black" money (derived not 
only from drug trafficking but also from illegal arms sales, 
smuggling of gold and electronic items, gambling, etc.) is 
modestly estimated at more than 300 billion drachmas per year 
(approximately $1.8 billion).  Money laundering would become 
a criminal offense under the proposed legislation drafted by 
the Commission on International Criminal Law.  In January 
1992, DEA conducted a seminar on money laundering  for Greek 
prosecutors and judges, in connection with ratification of 
the UN convention.

A Presidential decree in March 1991 allowed for 
"investigation of the origin of private capital in order to 
expose money laundering."  After arresting two Greek and one 
Syrian heroin traffickers in early 1992, police froze a bank 
account worth 8 million drachmas (approximately U.S. 
$500,000), the only known example of such action taken by 
Greek authorities.  

ICELAND, a party to other international conventions, has not 
yet ratified the 1988 UN Convention, presumably because 
ratification would require major changes in legislation to 
prevent money laundering.  Though there is no specific 
legislation criminalizing money laundering, the extremely 
small size of the Icelandic banking system precludes 
significant money laundering activity.

IRELAND officials fear that money laundering is becoming more 
common, especially in the cases of investment in legitimate 
businesses by the Provisional Irish Republican Army (PIRA) 
and the purchase of real estate by foreigners.  Irish 
authorities believe the PIRA is becoming more involved in 
racketeering, including narcotics trafficking.

ITALY approved the "Anti-Mafia Law" in August 1992, in the 
wake of the murders of Judges Falcone and Borsellino.  
Italian police authorities are now using the law's provisions 
requiring banks to work with law enforcement to uncover 
suspicious accounts.  The law also authorized undercover 
operations and controlled deliveries in drug-related money 
laundering cases.

Despite this new legislation, and its compliance with the EC 
policy directive, Italy is quickly becoming one of the 
leading money laundering centers in Europe, as shown by 
Operation Green Ice.  Colombian and other South American 
cocaine trafficking organizations want to establish money 
laundering businesses in Italy where they already have 
cocaine importation and distribution networks.  Also, funds 
generated from the continued rash of kidnappings in Italy are 
being used to purchase drugs from South America and sold back 
in Italy, thus recycling criminal proceeds.  Thus, while 
Italy has taken steps to combat money laundering, and is 
generally in compliance with the goals and objectives of the 
UN Convention, it is clear that it must take additional 
measures in order to implement effectively these new policies 
and laws.

The Servizio Centrale Operativo (SCO) assisted Operation 
Green Ice by providing the DEA Rome office and the Operation 
with a storefront in Italy.  As a result of the participation 
in Green Ice, SCO has been able to identify approximately 40 
Colombian cell members associated with Cosa Nostra, Camorra 
and 'Ndrangheta organized crime families.  DEA and Italian 
officials seized nearly $6 million during Operation Green 
Ice, which resulted in 41 arrests and the indictment of an 
additional 100 individuals, and other seizures.  As a result 
of DEA cooperation with the Guardia di Finanza), more than 
$55 million was seized in the U.S. and multi-hundred 
kilograms of cocaine were seized in Italy and France.  The 
drug proceeds belonged to the 'Ndranghetta crime family.

The Italian Parliament, in anticipation of the European 
Community's Second Banking Directive, passed a series of laws 
to limit confidentiality of account holders, but some bank 
secrecy persists.  Italian authorities have adequate access 
to account information and legislation is in place which 
establishes reporting mechanisms for suspect transactions.  
Further, Italian authorities have created a special unit to 
investigate financial crimes.

Italy has a variety of controls on non-bank financial 
activity, which could be considered a potential threat area 
for money laundering.  However, there is concern that bearer 
bonds, a common investment for Italians from every economic 
group, can be used by the Mafia to shelter funds.

Based on the high tax rate, recent legislation to curb tax 
evasion, and Italy's tradition of small businesses, there is 
a strong motive for using a "submerged" or black market 
economy.  Italy has no reporting requirements for cash 
purchases, but high-value cash purchases have been prohibited 
and consumers must use financial instruments (which can be 
traced), a feature of Italy's efforts to channel financial 
transactions through its banking system.  There is a 
significant trade in fine art, jewelry and gold (to a more 
limited extent), which provides excellent opportunities for 
laundering illicit funds via conversion to assets.  The U.S. 
Customs Service and Italian authorities have documented 
numerous cases where this type of activity has occurred.  
U.S. Customs has also documented cases where importers of 
gold from Italy have been involved with drug trafficking 
organizations.  Italian authorities say real estate firms 
have been directly involved in laundering illicit funds, 
especially for the Sicilian Mafia.

LIECHTENSTEIN strengthened its Banking Commission, and money 
laundering and judicial assistance legislation, which took 
effect in March, criminalizes money laundering related to 
drug offenses.  A more comprehensive money laundering bill 
which would prohibit the laundering of proceeds from all 
criminal activity is under consideration.  Pursuant to an 
MLAT request by  the U.S., Liechtenstein blocked a bank 
account in the name of an Ecuadorian endowment in the amount 
of $8 million.  A total of U.S. $17 million is currently 
frozen at the request of U.S. authorities.  Although 
Liechtenstein is not a party to the UN Convention, these 
actions indicate that it is moving toward meeting the 
Convention's goals and objectives with respect to money 
laundering.

LUXEMBOURG is a major world financial center, hosting more 
than 180 international banks which operate as "universal 
banks" with an unrestricted range of activities.  Luxembourg 
is considered a tax haven due to its strict bank secrecy 
laws, absence of exchange controls, lack of withholding tax 
on interest and politically stable environment.  Bank secrecy 
does not apply in criminal cases.

Government officials acknowledge that narcotics money 
laundering occurs, but they do not consider Luxembourg more 
of a "center" for such activity than other places with highly 
developed banking systems.  Authorities believe most drug 
money laundering is related to cocaine trafficking.  Most of 
the money laundering cases involved funds introduced into the 
world financial system elsewhere (often in the US) and then 
channeled through Luxembourg's banking system en route to a 
final destination.  Even in these cases, however, Luxembourg 
law holds bankers personally liable if they fail to establish 
the bona fides of the beneficial owners of funds when 
received.  The Monetary Institute has stepped up its efforts 
to police the banks' anti-money laundering performance. 

Although there have been no indications that the non-banking 
financial sector has been involved, the government is 
assessing whether building companies, real estate agencies, 
jewelry stores, art galleries, or antique dealers have 
engaged in money laundering activities.

Bankers and other financial sector professionals are required 
to keep documents on transactions for at least five years, 
and to report suspicious transactions to the public 
prosecutor.  Currency traders, lawyers, notary publics, and 
bankers who handle securities are under the same obligation.  
Bankers are criminally responsible if their institution 
knowingly launders drug money.  Client identity must be 
verified for transactions exceeding 500,000 francs ($15,500).  
There are no controls on money brought into or taken out of 
the country. 

Banking groups have accepted the money laundering law, and 
authorities contend there has been no reduction in bank 
deposits since the law took effect.  However, provisions 
holding senior bank officers criminally liable for any money 
laundering transaction which occurs in their banks have not 
been popular among bankers.  No charges have been brought 
under the "professional responsibility" provision.  However, 
the legal requirement for banks "to know the client" has 
resulted in careful scrutiny of existing accounts and review 
of new clients for possible money laundering connections. 

In April 1992, the Luxembourg Court found Jose Jurado-
Rodriguez and Edgar Garcia-Montilla, the alleged chief money 
launderer of the Cali Cartel, guilty of money laundering.  
The guilty verdicts mark the first time in Europe that drug 
money launderers have been successfully prosecuted on 
specific drug money laundering statutes.  The defendants were 
convicted of laundering approximately $36 million throughout 
Europe,of which $8 million is frozen in Luxembourg.  The 
money reportedly belongs to Jose Santacruz Londono, the 
reputed head of the Cali Cartel.  Other Cali funds linked to 
Jurado and Garcia are frozen in France, UK, Finland, Italy, 
the Netherlands, Monaco and Hungary.  The government is 
appealing a Luxembourg court decision which held that the $8 
million should be returned to Santacruz-Londono's relatives, 
because the funds were not directly related to a drug 
offense.  The technical point (loophole) on which the Court 
ruled has subsequently been overcome by legislation.  

Asset forfeiture remains a problem, although forfeiture can 
follow conviction of the money launderer as well as the 
trafficker.  Courts can enforce foreign forfeiture orders 
relating to drug offenses, but it is not clear whether the 
courts will enforce civil forfeiture orders.  GOL and U.S. 
officials are exploring the possibility of obtaining a civil 
forfeiture order from the U.S. to release $40 million frozen 
in four Luxembourg banks which cannot be forfeited because 
Medellin cartel leader Rodriguez-Gacha, the beneficial owner, 
is dead and cannot be convicted,  A civil suit is also being 
considered against $10 million belonging to Pablo Escobar.

MALTA AND SAN MARINO are potential money laundering sites.  
Given Malta's proximity to Italy and San Marino's location 
inside of Italy, they are attractive locations for Italian 
organized crime groups to conduct off-shore banking activity.  
Malta and San Marino may benefit from the erosion of bank 
secrecy in other European countries.

MONACO considers finance a major industry.  But, since the 
seizure of Medellin cartel records involving Gonzalo 
Rodriguez-Gacha, which showed that Monegasque banks had been 
used to launder some of its profits, no other evidence of 
money laundering has emerged.  Nevertheless, Monaco remains a 
potential money laundering site because it has no income tax, 
low business taxes, and thrives as a tax haven for 
individuals who have established residence and for foreign 
companies that have set up businesses and offices there.  
Theoretically, Monaco's casinos could be exploited by money 
launderers but no cases have emerged.  

THE NETHERLANDS, one of Europe's oldest and most active 
financial centers, is a significant factor in both European 
and Caribbean money laundering.  Banks are not required to 
report suspicious transactions, nor maintain records of large 
currency transactions.  On August 27, 1992, the Dutch Cabinet 
announced it had reached agreement on introducing legislation 
compelling banks and other financial institutions (securities 
brokers, insurance companies, collective investment schemes, 
credit card companies and exchange houses) to report any 
unusual transactions.  A reporting office for "unusual 
financial transactions" will be set up.  The cabinet also 
agreed to tighten the rules for compulsory identification for 
financial transactions in banks, life insurance and stock 
brokerages.  The measures are in line with EC directives.  
During 1992, major banks have been reporting and recording 
transactions of dubious nature on a voluntary basis, and 
reported suspect transactions worth 350 million Dutch 
guilders (approximately $195 million).  Most of these 
reported transactions involved the laundering of drug money.

The government estimates the volume of money laundering to be 
in the range of $600 million to $2 billion per year, 
involving more than 100 money laundering organizations 
representing every ethnic group in the Netherlands.  Money 
laundering proceeds are owned by both local organizations and 
groups located in other countries.  Money laundered is 
subject to confiscation.

There has been a rapid growth in the number of exchange 
houses which are unregulated by the government and are only 
required to be registered with the Chamber of Commerce.  In 
Amsterdam alone the number has increased from about 10 in 
1991 to between 120 and 150 in 1992.  Banks will no longer 
exchange large amounts of cash for individuals unless they 
present proper identification, part of a greater diligence 
approach by banks.  As a result, coffee shops have begun to 
handle large volumes of cash.  One coffee shop allegedly 
exchanged U.S. $100 million in one year.  

 The Netherlands is signatory to such instruments as the UN 
Convention and the 1990 COE convention; it is examining 
domestic legislation and regulation to ensure conformity with 
those conventions prior to ratification.  Legislation has 
been drafted which will make money laundering a separate and 
distinct criminal offense; it is currently covered by general 
provisions of law dealing with property of criminal origin.  
Banks will be required to maintain records of large currency 
transactions and report unusual transactions, which major 
banks have been doing on a voluntary basis throughout 1992. 

On November 20, 1992, the U.S. and The Netherlands signed a 
US/Dutch Asset Sharing Agreement.  Pending legislation 
provides for both civil and criminal forfeiture. 

NORWAY treats drug money laundering as a criminal offense.  
Banks must report to the Norwegian Central Bank any 
international cash transactions over 25,000 kroner ($4,000) 
and international monetary transactions which exceed 60,000 
kroner ($10,000).  Norwegian law on asset seizure in drug 
cases is very strong and adequate to ensure fulfillment of 
both international and national obligations.  Under present 
law the government can seize and retain any assets which can 
be linked to criminal activity.  The Director General of 
Prosecution takes an aggressive approach to asset seizures 
and the values of assets seized have increased in recent 
years.

PORTUGAL now requires its banks to report suspicious 
transactions, under a law effective this January, which 
brings Portugal's laws into compliance with EC directives.  
Banks must maintain records of large currency transactions 
($10,000 or more) and report suspicious transactions to law 
enforcement authorities.  Bank secrecy laws may be waived in 
three instances: official corruption; suspected illegal drug 
transactions; and when checks are issued against insufficient 
funds.  The Portuguese escudo is not convertible and is 
unattractive to money launderers.

Although Portugal is not a leading financial center or money 
laundering threat, there is concern about offshore banking 
activity in Madeira and the Azores.  These two regions are 
autonomous and are not subject to Portuguese law.  There are 
no bank reporting requirements for the offshore banks (only 
aggregate totals are reported to the Central Bank of 
Portugal).  Seventeen banks have been licensed to operate 
offshore banks in Madeira and some 350 companies are 
registered at Madeira's offshore center (predicted to rise to 
more than 800 by the end of 1992).  Portuguese narcotics 
investigators suspect that the offshore center is being used 
by narcotics traffickers to launder money.

SPAIN is becoming a major money laundering center which 
attracts funds from Colombian Cartel and criminal 
organizations, who use Spain as a base for European money 
laundering operations.  To counter this threat, the 
Parliament adopted legislation last November which 
strengthens its narcotics enforcement efforts concerning 
money laundering, seizure and forfeiture of assets, chemical 
precursors, and controlled deliveries.  For the first time, 
drug money laundering is a crime in Spain.

Many of the same conditions which make Spain attractive as 
both a financial and drug transit country have been 
exacerbated, FinCEN believes, by the EC "open borders" 
policy.  South American, Nigerian and Middle Eastern 
organizations have joined Europeans in routing money through 
Spain, with much of the money believed to have been invested 
there because of the strength and stability of its economy.

During Operation Green Ice, Spanish National Police (SNP) 
assisted in three pick-ups totalling $329,535, and arrested 
12 defendants, one of whom is considered to be a major money 
broker for the Cali Cartel.  The defendant has admitted 
laundering more than $4 million during the preceding 18 
months.  The Spanish broke a major money laundering ring in 
Cadiz which may have laundered as much as $75 million through 
70 banks, and was handling drug proceeds for Turkish and 
other organizations.  In October 1992, the SNP arrested 14 
individuals and seized foreign and U.S. currency valued at 
$1,485,333, including a cashiers check payable to "bearer" in 
the amount of U.S. $800,000.

SWEDEN is not a major money laundering center, but Swedish 
police are investigating an organization of Bolivians and 
Swedes who are bringing large quantities of U.S. dollars into 
Sweden.  

SWITZERLAND is one of the world's leading financial centers.  
Swiss banks have a reputation for financial soundness, 
reliability, and for the confidentiality with which they 
handle clients' money, which made Switzerland a priority 
venue for money launderers.  The Government's response has 
been strong legislation that virtually ended the historic 
numbered Swiss bank account while establishing a code of 
conduct for banks to cooperate with authorities.

Switzerland has delayed ratification of the UN Convention 
because it lacks a national consensus on the requirement to 
punish narcotics users.  The Swiss penal code was amended in 
1990 to make money laundering a criminal offense.  The new 
law also makes it a criminal offense for financial 
institutions or agents to fail to exercise due diligence in 
identifying the beneficial owner of assets entrusted to their 
care.

The government plans to present to the Parliament in 1993 
legislation which would punish membership in or cooperation 
with organized crime, permit easier confiscation of assets 
derived from crime, and allow bank employees to denounce 
suspicious transactions without fear of violating bank 
secrecy.  The Swiss Banking Commission issued a "circular 
letter," which took effect in early 1992, designed to 
implement recommendations of FATF.  Swiss banks are already 
self-regulated on the issue of customer identification 
through the "due diligence convention" of 1987.  

Banks must maintain records of currency transactions of 
100,000 sfr or more.  The Banking Commission, in consultation 
with the banks, plans to lower this threshhold to 25,000 sfr.  
Banks are not required to report suspicious transactions.  
There are no controls on the amount of currency which can be 
brought into or out of Switzerland.

Non-banking financial institutions, such as exchange houses, 
are not governed by the due diligence convention or regulated 
by circular letters from the Banking Commission.  They are, 
however, subject to the penal code, notably the code's 
prohibition on money laundering and its requirement for due 
diligence in identifying the beneficial owner of assets.  

Despite Swiss voters' rejection of the EEA on December 6, 
1992, authorities still want their nation to accept the EC 
money laundering directive, which does oblige banks to report 
suspicious transactions.  Switzerland would have to adjust 
its internal regulations in order to conform.

Switzerland is also signatory to the Council of Europe 
convention on money laundering and confiscation of criminal 
assets.  The government plans to ask Parliament for 
ratification of the convention in 1992.

US and Swiss authorities have cooperated in many important 
cases, including the Noriega case in which the Swiss blocked 
accounts and obtained bank records.  Swiss authorities have 
also blocked accounts of the Medellin cartel and furnished 
bank records at U.S. request.  The changes already undertaken 
or proposed present important new opportunities in U.S.-Swiss 
law enforcement cooperation.  Bankers consulted with the 
government on new legislation but did not object in principle 
to the change.  While Swiss banks have not complained about a 
decline in deposits, there is evidence that money launderers, 
aware of the mechanism now in place, have turned elsewhere 
(e.g., Germany. Eastern Europe and other locations).

TURKEY has emerged as a major money laundering concern.  
Turkish organizations control the bulk of the European heroin 
trade, and millions of illicit drug dollars are consequently 
secreted out of Europe into Turkey.  Payment for shipments of 
heroin to Europe is brought into Turkey by trucks and 
international buses, or through underground banking channels, 
or other methods.  Or, funds are deposited into European 
banks and wire transferred into international accounts.  
Money laundering is not a crime, and Turkish authorities have 
no conspiracy law with which to prosecute money launderers 
linked to drug trafficking.  Foreign exchange may be freely 
purchased by nationals, and foreign exchange accounts may be 
opened.  Transactions are reported only in the aggregate to 
the Central Bank.

It is likely that significant amounts of narcotics profits 
return to Turkey and are invested in legitimate businesses.  
A major money laundering and heroin trafficking operation 
based in Istanbul uses legitimate business transactions, such 
as travel and tourism agencies, real estate deals, and 
currency exchanges.  Currency exchange transactions and wire 
transfers among bank accounts in Europe, Canada, the US and 
Turkey are popular methods of laundering drug money.  Without 
laws against laundering, it is virtually impossible to track 
these inflows or estimate their magnitude.  

UNITED KINGDOM banks and other financial institutions share 
the vulnerability to money laundering experienced by the 
world's major banking centers.  Narcotics proceeds are 
converted in the UK but also transit the country.  The 
Channel Islands and the Isle of Man have offshore banking 
facilities that are also believed to attract drug funds, and 
have adopted money laundering countermeasures.

The UK has four primary acts in force which relate to money 
laundering and drug trafficking:  1) the Drug Trafficking 
Offenses Act, 1986;  2) the Criminal Justice (Scotland) Act, 
1987;  3) The Criminal Justice Act, 1988; and 4) the Criminal 
Justice (international cooperation) Act, 1990.

The Drug Trafficking Offenses Act of 1986, as amended, 
provides banks and other institutions with a means of 
reporting suspicious transactions through voluntary 
disclosure to the NCIS and protects them from prosecution for 
breaching bank confidentiality.  Money laundering controls 
also apply to non-banking financial institutions, such as 
exchange houses.  All proceeds of drug trafficking, following 
a criminal conviction, can be seized, including instruments 
of crime and tangible property.  Additionally, the misuse of 
drugs act and the powers of the criminal courts allow for 
forfeiture of tangible property as the court sees fit.  A 
Home Office working group has proposed recommendations for 
significant improvements in the act.  The directive will make 
mandatory the disclosure of suspicious transactions, 
identification of account holders, and the exertion of due 
diligence in dealing with suspicious transactions. 

Proposed legislation and regulations would amend the 
confiscation provisions of the Drug Trafficking Offenses Act 
of 1986, and strengthen the existing legislation on money 
laundering to allow the implementation of the European 
Community directive on money laundering.  They would also 
confirm the powers of HM Customs and Excise to investigate 
and prosecute offenses; amplify existing provisions regarding 
enforcement of an overseas forfeiture order; and simplify the 
process of designating countries under these Acts.  

The Criminal Justice (international cooperation) Act of 1990 
enhanced money laundering authorities, including the ability 
to detain cash up to two years if a narcotics connection is 
suspected, with potential for civil forfeiture.  Money 
laundering is a criminal offense if it is related to drug 
trafficking or terrorism.

HMG has reached agreement with the U.S. on a mechanism for 
exchanging adequate records in connection with narcotics 
investigations and proceedings, and adopted laws and 
regulations which ensure the availability of adequate records 
of narcotics investigations to appropriate U.S. personnel and 
those of other governments.

UK banks are not required to maintain records of large 
currency transactions or report the data regularly to a 
central authority, and there is no statutory requirement to 
report the identity of customers engaging in large currency 
transactions.  HMG has not adopted "due diligence" or "banker 
negligence" laws.  However, the law provides financial 
institutions a means of reporting suspicious transactions to 
the NCIS.  HMG continues to address the problem of 
international transportation of illegal-source currency and 
monetary instruments.  There have been 24 prosecutions for 
money laundering in 1992 and 42 prosecutions are in process.

Technically, all proceeds of drug trafficking, including 
substitute assets when proceeds are not obtainable, can be 
seized.  Additionally, the misuse of drugs act allows for 
forfeiture of tangible property as the magistrate sees fit.  
Legitimate businesses used to launder drug money cannot be 
seized; however, proceeds including substitute assets 
(trafficker proceeds) can.  Legal loopholes which allow 
traffickers to shield assets are possible because of the lack 
of ability to track and trace funds internationally and the 
lack of UK civil forfeiture procedures, except in certain 
cases.  The Treasury Consolidated Fund for domestic seizures 
receives proceeds from narcotics asset seizures and 
forfeitures.  An asset forfeiture fund has been established 
for international sharing based on external confiscation 
orders and asset sharing gifts.  The obstacle or disincentive 
to passing such laws on seizure and forfeiture is balancing 
the needs of law enforcement against the public liberties of 
individuals.  Upon conviction for a drug offense and on an 
order of the court, i.e., issuance of a confiscation or 
default order, HMG has the authority to forfeit seized 
assets.

HMG authorities appear to be very aggressive in enforcing 
existing drug-related asset seizure and forfeiture laws.  The 
police, HM customs, and the NCIS are responsible for tracing 
and seizing assets.  Pending legislation should provide them 
additional powers.  Approximately $12 million of assets were 
forfeited and/or seized in the past year.

HMG is engaged extensively in negotiations to harmonize 
efforts regarding asset tracing and seizure, multilaterally 
through the EC, and bilaterally.  It has  12 bilateral 
confiscation agreements in force and a further 15 which have 
yet to be brought into force.  The UK ratified the Council of 
Europe convention in September 1992.  HMG laws do not permit 
sharing of forfeited assets with other countries.  However, 
pending legislation which would allow the UK to share assets.

In September 1992 India and Great Britain signed an 
extradition treaty and an agreement on the confiscation of 
terrorists' property and assets.  This agreement will prevent 
the illegal movement or laundering of money, particularly 
through the hawala system which is widely used in the UK.

Recently enacted legislation dictates that financial 
institutions in the Channel Islands (which are tax havens) 
must now report "suspicious" accounts and/or transactions 
that they believe are drug related.  Since the enactment, 
Jersey and Guernsey authorities have elicited DEA London's 
advice on a number of suspicious transactions, which have not 
been confirmed as drug related.

The UK assisted in Operation Green Ice by providing an 
undercover policeman to pick up trafficker funds in London.  
Through the operation, approximately U.S. $1.8 million kg 
sample of cocaine was received.  During the "takedown" of 
Operation Green Ice, the United Kingdom seized 42 additional 
kilograms of cocaine, U.S. $5.6 million (in pounds sterling), 
one yacht and arrested 4 individuals.


EASTERN EUROPE

For purposes of this report, Eastern Europe is defined as 
including Albania, Bulgaria, Czechoslovakia, Hungary, Poland, 
Romania and the remnants of Yugoslavia.  We note, however, 
that in recent international fora, the Hungarians in 
particular refer to themselves as Central Europeans.

While much attention is being focused on money laundering in 
Eastern Europe, there may be a practical ceiling for at least 
a few years on money laundering  as opposed to other types of 
financial crime which seem to be flourishing.   Political and 
economic uncertainty, strict exchange controls, high 
inflation, and the dearth of sophisticated financial 
institutions make money laundering in Eastern Europe a chancy 
proposition.  

Drug money managers tend to avoid unnecessary risk in their 
financial decisions, and money laundering in Eastern Europe 
remains a chancy proposition, given the region's significant 
political and economic uncertainty.  Most countries still 
have strict exchange controls, inflation is high, and 
sophisticated financial institutions are scarce.  Ironically, 
the money laundering potential increases as governments 
modernize their financial sectors, and offer such services as 
wire transfers, free exchange of currencies, access to other 
financial markets, and the use of instruments like bearer 
bonds and letters of credit.

BULGARIA is not a narcotics money laundering center.  
However, authorities fear that its antiquated banking laws 
and it location on the "Balkan route" for heroin might 
attract such funds.  Bulgaria's banking sector is beginning 
to decentralize but the lack of a convertible currency 
prevents it from becoming an important regional financial 
center.  Bulgarian authorities have stated their readiness to 
assist in investigating any money laundering activities and 
are drafting new laws on money laundering and asset seizure.

There is no legislative mechanism to regulate control at the 
banking level where suspicious transactions would normally be 
spotted.  There is concern that the Italian Mafia, Colombian 
drug cartels and other criminal syndicates may be investing 
in Bulgaria, and or be laundering illicit proceeds through 
Bulgarian banks.  

CZECH AND SLOVAK FEDERAL REPUBLIC (CSFR) dissolved into 
separate republics on January 3, 1993.  Domestic laws of the 
former Czechoslovakia were not automatically transferred to 
the new republics; rather, each republic must decide what 
laws to adopt anew.  However, both republics have agreed to 
accept international agreements and UN commitments.  The 
appraisal given here was written prior to that separation and 
discusses laws in operation on that date.

Money laundering does not appear to be of great concern in 
the CSFR.  Central Bank authorities fear possible large scale 
investments by foreign organized crime groups, and are trying 
to find ways to stem the influx of such money.  The CSFR 
Penal Code makes it a crime to help, hide or hinder 
investigation into the origins of assets derived from 
criminal activity. 

Many newly-founded import-export firms appeared in the CSFR 
during 1992.  Police are concerned that some of the foreign-
owned firms may be involved in money laundering and/or the 
importing and exporting of precursor chemicals.  One company 
belongs to the brother of a Colombian cocaine kingpin; the 
brother, who has been connected to bank accounts in the US, 
also set up a forwarding company that attempted to ship 200 
kilograms of cocaine from Czechoslovakia to the Netherlands.  
The shipment was seized by Czech authorities.

Banking regulations require that financial institutions 
record transactions of more than 100,000 Czechoslovak crowns 
($3,500).  The requirement, however, ends there, since 
neither the federal nor republic government have offices to 
record or analyze these large transactions to identify 
possible instances of money laundering.

The Czechoslovak penal code allows confiscation of assets 
derived from criminal activity, but there is no preemptive 
element.  A court must determine that a felony was committed 
before the resulting assets can be confiscated.

HUNGARY, with the most advanced financial system in the 
Central/Eastern group, has the most significant money 
laundering problem.  The financial system has been 
infiltrated by Italian and other organized crime groups.  An 
aspirant to EC membership, Hungary is aware that anti-money 
laundering legislation must be adopted in accordance with EC 
directives, and, February 1993, hosted an FATF seminar on 
money laundering for regulators, bankers, prosecutors, 
investigators, and others, who received guidance on FATF and 
EC regulations and their implementation.  Hungary has issued 
new banking regulations which, inter alia, require banks to 
report suspicious transactions and maintain adequate records.  
But a strong tradition of secrecy prevails, which pending 
legislation must address.  The FATF seminar concluded with 
experts from eight FATF member nations offering formal 
guidance to the major ministries on changes needed.  The 
seminar was attended by officials from Hungary, Poland, the 
Czech Republic, Slovakia, Bulgaria, Romania and Albania.

POLAND has issued regulations requiring banks to report 
suspicious transactions and maintain customers' identities 
and other transaction data for five years.  Poland has 
drafted additional anti-money laundering legislation.  In 
March 1993, Poland hosted an FATF seminar, at which 40 
experts from six nations offered formal and informal guidance 
on the various aspects of money laundering controls.

A Polish banker reported that many banks were being used by 
clients from the former Soviet Union and from West Africa to 
deposit large amounts of hard currency.  In one instance a 
West African attempted to deposit nearly U.S. $1 million; the 
transaction was refused by the bank.

RUSSIA AND THE NEWLY INDEPENDENT REPUBLICS are emerging as 
significant money laundering concerns.  All indications are 
that Russian organized crime is making substantial inroads 
into the Western European drug market.  Easy access to Asian 
heroin and hashish, worldwide criminal connections, and the 
chaotic economic situation leave the door open for organized 
crime to engage in international drug trafficking and money 
laundering.

RUSSIA is not considered an important financial center or tax 
haven, but its reputation as a narcotics money laundering 
center is likely to grow in the coming years, according to 
estimates by the Russian government.  In 1992, the security 
functions of the former KGB were restructured, into the 
Ministry of Security (MVD), which is charged with suppressing 
drug trafficking, organized crime, and financial crimes.  The 
MVD strongly supports the enactment of anti-money laundering 
legislation. The ministry is drafting laws to deal with this 
issue, but because lawmakers have been addressing more 
pressing matters, the MVD says it is unclear when such laws 
will be enacted.

The MVD reports efforts by organized smuggling groups to set 
up ties in Russia to launder drug money.  Authorities' lack 
of control of joint ventures and other private enterprises in 
Russia as it moves toward a market economy hinders the 
government's ability to control such activity. The MVD's lack 
of money-tracing mechanisms compounds the problem.  

The major Russian organized crime groups appear to be 
integrating themselves into the global trafficking network.  
They have taken advantage of the unstable ruble and the black 
market to launder drug money.  According to reports, rubles 
are sold to South American drug dealers for hard currency at 
black-market rates.  The drug traffickers then purchase 
commodities inside the Commonwealth of Independent States 
(CIS), such as gold, oil, or diamonds, which are then sold on 
the world market.

Russian lawmakers have taken few effective measures to combat 
organized crime and drug trafficking, although legal 
regulations have been put into place regarding asset seizure 
and money laundering.  However, the use of the telephone 
intercept was undermined by a recent law.  Russia initiated 
new banking laws in 1991 which rescinded bank confidentiality 
requirements and prohibited cooperative organizations, such 
as political organizations and government agencies, from 
operating financial institutions.  Licenses are required for 
foreign currency transactions.

AZERBAIJAN has not experienced significant money laundering, 
largely due to the lack of an efficient commercial bank 
system.  However, money laundering is a reality but remains 
virtually undetectable by authorities because the economy 
operates largely on a cash basis in both dollars and rubles.   
As a commercial banking system develops, enforcement experts 
believe Azerbaijan can expect domestic and foreign 
traffickers to launder proceeds there.

TURKMENISTAN's poor international transportation connections 
and its undeveloped banking system make it a weak candidate 
for either drug trafficking or money laundering.   The other 
NEWLY INDEPENDENT STATES are also not significant from a 
money laundering perspective.


MIDDLE EAST:  The Persian Gulf

GULF COOPERATION COUNCIL, a member of FATF, has six members -
- Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Oman 
and Qatar -- which have been working with the GCC on adoption 
and implementation of FATF recommendations.  An assessment of 
their progress will be made during a GCC and FATF sponsored 
seminar in May, 1993.

BAHRAIN is a significant Middle East financial center with an 
open market economy and a government which seeks to eliminate 
all impediments to growth.  It is of medium significance in 
terms of money laundering.

KUWAIT, a major financial center in the Middle East, is also 
a potential money laundering threat.  Subsequent to the 
Persian Gulf War, the flow of capital bank into Kuwait forced 
the banking system to become quickly operational.  Due to the 
intense redevelopment effort ongoing in Kuwait, rapid 
transfers of large sums of money are not uncommon.  Upheaval 
and voluminous activity in Kuwait's financial sector may be 
attractive to drug traffickers and money launderers who are 
moving away from the tightening controls of European banks.

OMAN is not a money laundering threat.  The Central Bank has 
implemented regulations to combat money laundering in 
compliance with FATF recommendations.  The Central Bank has 
also issued a number of directives which require banks to pay 
special attention to transactions, and to account holders 
from countries that do not adhere to strong anti-money 
laundering measures. 

QATAR is not considered significant from a money laundering 
perspective.

SAUDI ARABIA is contemplating changes in its banking laws to 
ensure that money laundering does not occur.  Saudi Arabia 
has agreed with FATF to conduct a seminar on money laundering 
for the Gulf states on May 4-6.

UNITED ARAB EMIRATES (UAE) is a major financial center in the 
Middle East.  The UAE's open banking system and free currency 
exchange make it attractive to international money launderers 
and drug traffickers.  The UAE has not met the goals and 
objectives of the UN Convention with respect to money 
laundering.  For example, money laundering is not a criminal 
offense in the UAE.  Banks are not required to report 
currency transactions to a central authority, although bank 
officials have shown a willingness to inform authorities of 
exceptionally significant transactions.  Numbered bank 
accounts are not permitted; banks are required to verify the 
identity of account holders. Since bank secrecy is a custom 
in the UAE, the Central Bank can subpoena records only 
through a court order.  The dirham is freely convertible.  No 
records are kept of currency exchange transactions.  Due to 
the high number of foreign guest workers in the UAE, currency 
exchange houses are very active.  They are licensed by the 
Central Bank and subject to periodic inspection.  In May 
1991, the UAE Cabinet allowed offshore banks to operate as 
tax shelters; final regulations were to have been issued in 
1992 but were delayed.

The UAE's free port, Dubai, is a major gold market, and a 
major center for gold smuggling throughout the Middle East 
and Southwest Asia, which often involves drug proceeds 
laundered by Indian and Pakistani traffickers.  Nationals and 
foreigners may purchase and sell gold in any form.  Hawala 
dealers with ties to the drug trade were involved with BCCI 
in the UAE and laundered money through it.


OTHER MIDDLE EASTERN STATES

CYPRUS is used as a conduit within money laundering schemes 
or transit point for drug money but is not intended as a 
final destination of trafficker funds.  Little money is 
believed to be laundered in the domestic economy (due in part 
to restrictions on foreign ownership of real property and 
currency controls).  The increased use of Cyprus in money 
laundering operations is partially attributed to the 
political situation of nearby Lebanon.  In response to the 
money laundering threat, the Central Bank of Cyprus advised 
domestic and offshore banks to implement a "know your 
customer" policy and also conducted a special survey of large 
cash transactions at sixteen offshore banks.

EGYPT is a limited money laundering threat but liberalization 
of monetary control laws and a long-established drug trade 
make the country a potential money laundering center.  Egypt 
is neither a tax haven nor an offshore banking center.  
Although numbered accounts are permitted, the Egyptian 
Central Bank maintains fairly strict control over the banking 
system to prevent abuses which might facilitate money 
laundering.  Bank secrecy laws stipulate that information on 
accounts may be disclosed only with a court order.   Egyptian 
officials have the authority to seize "unexplained" assets in 
criminal cases, whether drug-related or not.  These assets 
are retained for five years, after which they are returned, 
provided the subject has not engaged in further illegal 
activity.

IRAQ has been rendered an ineffective financial center and an 
insignificant money laundering threat by war, economic 
sanctions, and international isolation.

ISRAEL is considered a potential money laundering threat, 
given the alleged links between Israeli organized crime 
figures and drug money launderers.  Money laundering is not a 
crime in Israel.  One money laundering organization which 
included Israeli nationals operated out of New York City and 
is known to have laundered over $20 million in drug proceeds 
between 1991 and 1992.  

JORDAN is not a significant money laundering threat.  The 
Central Bank of Jordan is continuing to ease restrictions on 
foreign currency, which may increase the potential for 
manipulation.

LEBANON's civil war and political instability have 
substantially eroded the financial and banking systems.   
Lebanon's extensive drug trade continues to raise concern 
about money laundering.  Lebanese drug traffickers operate 
throughout the U.S.  Lebanese drug proceeds are known to have 
been invested in real estate in the U.S, including businesses 
which are used as fronts.   Drug money may also be entering 
Lebanon through several African nations with loose banking 
regulations.  Some Lebanese drug money flows through Europe, 
involving Lebanese-owned jewelry stores, gem import/export 
businesses and other enterprises which have been identified 
as money laundering fronts.

SYRIA is not a money laundering country, due to its strict 
foreign exchange controls and policies prohibiting foreigners 
from holding Syrian bank accounts.  The country, however, has 
no specific laws to combat money laundering.  


SOUTHWEST ASIA

BANGLADESH has a primitive banking industry and is not a 
significant money laundering threat.  However, the banking 
sector has come under increasing scrutiny in recent months.  
The Banking Companies Act of 1991 mandated improved oversight 
of the banking system, but the Central Bank failed to do so.  
Finance Minister Saifur Rahman has criticized bankers for 
inefficiency and dishonesty.  In April, 1992, the Central 
Bank ordered the closure of two investment banks for money 
laundering and illegally operating and lending.  
Investigations are continuing into other investment 
institutions. 

INDIA is increasing in significance from a money laundering 
perspective.  Raids conducted in August, 1992 against a 
Colombian money launderer working for the Cali and Medellin 
cocaine cartels revealed that drug money was being deposited 
in an account in Punjab.  A multilateral effort was recently 
initiated to target a well-known Colombian cocaine kingpin 
who has used at least one bank account in India to facilitate 
the transfer of funds from the U.S.  Although there have been 
no arrests/prosecutions for money laundering, investigation 
of a major stock market scandal in Bombay has developed leads 
indicating possible ties to narcotics-related activities.

In general, India is meeting the goals and objectives of the 
UN Convention with respect to adopting money laundering 
legislation, but enforcement needs improvement.  Money 
laundering is a crime.  Indian banks are required to maintain 
records on large currency transactions that are over 20,000 
rupees (approximately $800), and to report them to the 
Central Bank.  However, reliance on manual bookkeeping for 
some 60,000 branches and loose accounting practices have 
created abundant opportunities for fraud.  The Central Bank 
created a separate bank supervising board in March 1993 to 
address the widespread perception that bank supervision is 
weak and ineffective.

The major difficulty law enforcement agencies face in the 
successful pursuit of financial investigations is that the 
GOI asset seizure law is a criminal statute requiring a 
criminal conviction to effect asset forfeiture.  The law 
contains so many loopholes and requires so many years to 
prosecute as a criminal matter that U.S. officials consider 
it ineffective.  In March, 1992, duties on imports were 
reduced, and a variety of currency and foreign exchange 
requirements were liberalized.  Restrictions on gold and 
silver imports were also relaxed.  In September 1992, the 
Indian Government announced that foreign institutions will be 
allowed to invest directly in all stock market instruments, 
operate foreign currency accounts, and convert funds to 
rupees at market rates.

"Hawalla," the Indian form of an underground banking system 
traditional throughout the Middle East and Asia has links to 
drug trafficking.  With the easing of foreign exchange 
controls and the unified exchange rate, Hawalla activity has 
apparently slowed.  There has been a 40% increase in 
remittances by nonresident Indians through banking channels.  
Indian Customs reports a recent increase in large currency 
importations.  Indian law requires declarations for imported 
currency exceeding U.S. $10,000.  However, records are 
maintained by hand and investigations rarely follow.  While 
the long-term effects of India's liberalization measures 
remain to be seen, the Hawala system will continue to be used 
by persons involved in such illicit activities as tax 
evasion, drug trafficking, money laundering, and arms 
smuggling.  Invoice manipulation is pervasive and is used 
extensively to launder illicit proceeds.

NEPAL is not an important regional financial center but links 
may exist between drug traffickers in Nepal and money 
launderers in traditional centers like Hong Kong, Singapore, 
and Bombay.  The GON is committed to maintaining control on 
the movement of hard currency in and out of the country; 
however, in practice, all hard currencies are available on 
the black market in Kathmandu.  Banks inform the Rastra 
(central bank) of all foreign exchange transactions through a 
regular reporting system, but there are no laws or penalties 
for money laundering, nor has the government mounted any 
investigations.  Nepal has yet to apply its asset seizure law 
but anticipates doing so as the narcotics enforcement unit 
increases the sophistication of its investigations.  

PAKISTAN is a significant money laundering concern, primarily 
due to its prominence in the production and trafficking of 
heroin and hashish.  Pakistan does not yet meet the goals and 
objectives of the UN Convention.  While Pakistan is making 
understandable efforts to channel funds from underground 
currency movement systems into mainstream banking, its 
relaxation of currency controls and other steps, which can be 
exploited by drug traffickers, combined with its failure to 
update its narcotics control legislation and practices, 
heightens the potential for money laundering.

Undercover investigations into Pakistani drug traffickers and 
money launderers have revealed the international scope of 
their operations.  Pakistani heroin networks have laundered 
their profits through banks throughout the United States and 
Middle Eastern nations.

Strict hard currency laws inhibit the outward flow of cash 
but Pakistanis use the worldwide underground networks, known 
as "Hundi" in Pakistan, to overcome outgoing currency 
exchange restrictions, evade taxes, or move their illicit 
proceeds.  One official estimates as much as U.S. $2 billion 
a year flows through Pakistan's Hundi system, and a 
significant part of this money may be derived from drug 
trafficking.  Gold smuggling is also a means of laundering 
money. The Hundi system is a major target of recent foreign 
exchange reforms which are designed to bring the money 
flowing through the black market and the Hundi system into 
the formal economy.  The GOP has liberalized foreign currency 
restrictions and gold import policies, and launched various 
bond schemes.  Pakistanis may now negotiate foreign currency 
transactions and remit offshore profits made with foreign 
exchange outside of Pakistan.  In addition, Pakistani banks 
offer foreign currency accounts that guarantee complete 
secrecy.  The GOP is encouraging its banks with offices in 
the Middle East to establish money changing operations in 
countries with large Pakistani populations, who might 
otherwise use the Hundi system.  An estimated US$1 billion 
has flowed into Pakistan since the foreign exchange controls 
were liberalized.

In an attempt to attract foreign capital, Prime Minister 
Sharif announced in March, 1992, the issuance of interest 
bearing bonds, denominated in US dollars.  The bonds were 
advertised, "No questions asked about Source of Funds."  Nor 
was the identification of the purchaser required.  The GOP 
admitted the bond scheme was an effort to make "black" money 
"white."  Under pressure from the international community, 
the GOP withdrew the bond issue five days after the 
advertisements appeared.

Money laundering is not a criminal offense, and there have 
been no arrests or prosecutions for money laundering.  Under 
1991 regulations, banks are no longer required to maintain 
records of large currency transactions, nor to report the 
identity of customers engaging in large cash transactions, 
and controls on the amount of currency moving in or out of 
Pakistan were removed.  Foreign exchange assets in the 
Pakistani banking system have increased significantly since 
the new foreign exchange regime came into being.  According 
to some sources, these assets may have grown by as much as 
400 percent.  GOP officials have recognized the money 
laundering potential of these regulations and have begun to 
consider ways of remedying this defect, but no plans exist at 
present.  "Prudential banking regulations" exist, but do not 
adequately address the problem.  These regulations do not 
apply to exchange houses, or to the informal financial 
sector.

The law provides for forfeiture of drug-related assets but 
requires a life sentence before being invoked.  An amendment 
under review would lower the minimum sentence triggering 
forfeiture from life to two years, whether the conviction is 
handed down in Pakistani or foreign courts.

The United Arab Emirates (UAE), particularly Dubai, is a 
widely-used repository for Pakistani drug proceeds.  In 
Pakistan, invoice manipulation can benefit drug traffickers, 
as it allows them to defraud the government, which offers 
export incentives.  Hundi transactions and invoice 
manipulation have been used to launder money through Dubai.

SRI LANKA is not a significant money laundering country. The 
government, however is seeking to attract capital from Hong 
Kong and other East Asian countries by offering numbered 
foreign currency bank accounts.  There are limited controls 
on the amount of currency which can be brought into or out of 
the country.  There are no money laundering laws but a 
forthcoming master plan is expected to address money 
laundering; however, bank secrecy regulations remain 
obstacles to such legislation.  Money laundering 
investigations, due diligence conventions and asset seizure 
are uncharted territories for Sri Lankan law enforcement 
agencies.


SOUTHEAST ASIA AND THE PACIFIC

AUSTRALIA  has taken a leading role in international efforts 
to encourage governments of financial center countries to 
adopt more effective legislation.  It currently holds the 
Presidency of the Financial Action Task Force, and hosted a 
plenary session of FATF which was also attended by 
governments from Southeast Asia and the Pacific region.

Australia requires centralized reporting of significant 
currency transactions, mandatory reporting of suspicious 
transactions, and mandatory reporting of currency imports and 
exports.  Its data center, AUSTRAC, like the U.S. FinCEN, 
assists investigations by tracing accounts and transactions 
and provides analysis and intelligence. Australia is the 
first country to develop a system of centralized monitoring 
and reporting of wire transfers.  Like its other reporting 
systems, the wire transfer regulations were adopted in 
consultation with the banking community, which has been 
supportive of Australia's diverse program.  Parliament is 
evaluating the AUSTRAC system during 1993.

Australia passed federal legislation in November 1992 which 
enabled the government to ratify the 1988 UN Convention.  
Australia already had in place asset forfeiture laws and 
currency transaction reporting legislation.  Asset forfeiture 
is dependent upon conviction for a narcotics crime.

One of the largest cocaine seizures in Australian history 
occurred in September 1992.  One hundred and twenty kilograms 
of cocaine were confiscated in Sydney.  Two fugitives who 
were the target of a major money laundering investigation and 
several South Americans were arrested.  One of the fugitives 
was considered by Sydney area enforcement authorities to be a 
major cocaine distributor and his associate was known to have 
assisted him in laundering U.S. $500,000 out of Australia to 
New York.

BURMA (MYANMAR) drug traffickers shun the government banking 
system, as do gem, gold and other smugglers, relying instead 
on the extensive money exchange network known as the ethnic 
Chinese underground banking system (CUBS).  Significant money 
laundering takes place through smuggling of precious gems and 
gold into and out of the country from Thailand and India, as 
well as drug trafficking.  Although money laundering is 
widespread (the open-market exchange rate is 20 times the 
official one), most profits from Burma's drug trade are held 
outside the country.

On January 7, Burma's ruling State Law and Order Restoration 
Council promulgated a new drug law which closes several gaps 
in the 1974 drug legislation, particularly with regard to 
money laundering, asset seizure, financial investigations, 
corruption and conspiracy.  The new law, which is intended to 
comply with the UN Convention, criminalizes various aspects 
of money laundering and financing of narcotics activities as 
well as "constructive possession."  Previous laws did not 
deal specifically with money laundering, but Burma could 
successfully prosecute money laundering suspects for non-
payment of taxes.  There is little or no domestic capacity 
for carrying out sophisticated financial investigations, and 
the test now is for Burma to enforce the law in the spirit of 
international obligations.

Narcotics officials are looking for money to combat their 
country's drug problem.  Their suggestion however, was to 
have other countries who have seized the assets of convicted 
drug traffickers channel them back to Burma for their 
country's use.  Instead, it is believed that an international 
asset sharing agreement which would allow the GOB to share in 
assets and proceeds from drug investigations in which they 
participate would be more appropriate.  The GOB has also been 
unwilling to acknowledge the existence of a valid extradition 
treaty with the United States and this issue hampers DEA's 
ability to cooperate in pursuit of narcotics traffickers.

CAMBODIA is not a financial or money laundering center.

CHINA does not have a significant money laundering problem, 
but PRC officials realize they need to address the financial 
problems which the growing narcotics trafficking situation is 
creating.  Most drug profits seem to be smuggled out of China 
for placement into the financial systems of other East Asian 
and Pacific governments.  The National Narcotics Control 
Commission noted in a June 1992 symposium that among its 
accomplishments was the increased cooperation with 
international anti-drug agencies and the efficiency in 
processing drug-related criminal cases.

Chinese criminal law is aggressively administered and 
punishments, including confiscation of property and asset 
seizure, are enforced.  There are no known legal 
technicalities drug traffickers could use to shield assets.  
The Chinese criminal code allows the confiscation of part or 
all of the property personally owned by a person convicted of 
a crime.  Laws relating to "crimes of undermining the 
socialist economic order" list confiscation of property as 
one of the punishments for smuggling.  The 1990 drug law 
lists confiscation of property as a penalty for trafficking 
in drugs.  In October 1992, the National Narcotics Control 
Commission requested a copy of U.S. laws concerning the use 
of forfeited assets to combat drug trafficking.  There are 
indications that China may implement similar laws.  

HONG KONG is a major international financial center used by 
drug traffickers to launder proceeds in both the banking and 
non-bank systems.  The Hong Kong government, however, has 
taken aggressive steps to curb drug money laundering.  The 
territory, a member of FATF, has expressed its intention to 
comply with as many of the FATF recommendations as possible 
before the territory is evaluated by FATF in April 1994.  The 
UK ratified the 1988 UN Convention in June, 1991, with 
applicability extending to Hong Kong as soon as the territory 
has the complying legislation in place.  Compliance with the 
Convention and FATF Recommendations should result in changes 
in HK laws  and regulations, e.g., with respect to currency 
transactions.

The 1989 Drug Trafficking (Recovery of Proceeds) Ordinance 
empowers the government to trace, freeze and confiscate 
proceeds of persons convicted of drug trafficking offenses. 
It provides for enforcement of confiscation orders submitted 
by designated foreign jurisdictions, including the US.  The 
basis for U.S. designation is a bilateral executive 
agreement, which contemplates sharing of assets.  The HK 
Court of Appeal has upheld the freezing and forfeiture of 
assets based upon U.S. civil forfeiture proceedings.

The HKG, which currently retains all assets seized in Hong 
Kong, is considering a U.S. request involving the forfeited 
assets of accused drug trafficker Law Kin Man, who was 
extradited to the U.S. in late 1992 and faces prosecution in 
the Eastern District of New York.  Since enactment of the 
ordinance, about $40 million in drug-related assets have been 
frozen at the request of the U.S. and over $18 million has 
been confiscated by Hong Kong authorities pursuant to U.S. 
forfeiture orders.  A wide variety of assets can be seized, 
including bank accounts, cash, jewelry, cars, and real estate 
as well as legitimate businesses used as fronts.  Hong Kong 
created two new financial investigation groups, one police 
and the other customs, to enforce the ordinance. 

Section 25 of the 1989 Ordinance was intended to criminalize 
money laundering.  That section defines the offense as 
"assisting another to retain the benefit of drug 
trafficking."  Under the ordinance, the authorities have 
arrested people for assisting another to retain the benefit 
of drug trafficking (activities which are considered as money 
laundering in the US).  However, a High Court decision on 
August 4, 1992, ruled that this provision was inconsistent 
with the presumption of innocence contained in the bill of 
rights, passed by the legislature in June 1991, and Section 
25 of the 1989 Ordinance was repealed.  The HKG, which takes 
the position that this decision does not preclude prosecution 
of new money laundering cases, has nevertheless suspended 
prosecution of new cases until this matter is adjudicated.  
It has appealed this decision to the UK Privy Council, which 
is scheduled to hear the case on March 26, 1993.

A major consequence of the August 4 ruling has been the 
dramatic drop in the number of reports from banks despite 
government assurances that the ruling did not affect the 
provision which protected them from civil liabilities arising 
from making such disclosures.  Compared to 245 reports from 
January 1 to August 4, 1992, involving $8.8 million, the 
number plummeted to less than 20 from August 4 to early 
December, 1992.  The authorities can still obtain information 
but only after obtaining a court order for a search warrant.  
Pending the Privy Council ruling, a compromise has been 
worked out with the banking association.  Under this 
arrangement, banks will maintain an internal record of all 
suspicious transactions since August 4.  If the Privy Council 
decision should be favorable to the government, then the 
banks will make the reports available on a retroactive basis. 

Financial institutions are not required to maintain records 
of large currency transactions and there are no currency 
controls.  The HKG and the bankers believe it is not 
desirable to have any requirement to maintain records of 
and/or report large currency transactions.   However, banks 
and deposit-taking companies are required under the 1989 
ordinance to report suspicious drug-related financial 
transactions.  The Association of Banks and Deposit-Taking 
Companies Association issued guidelines, modelled closely on 
a statement by the Basel Committee, to assist banks to 
identify and report such transactions.  Hong Kong is also 
focusing on ways other parts of the regulated financial 
sector - securities and insurance - will similarly report on 
such transactions. 

A far more difficult problem is how to bring the unregulated 
sector including money changers, gold shops, and money 
lenders into the reporting network, which conducts much of 
the drug financing and money laundering.

JAPAN may be more involved in money laundering than available 
records would indicate.  Until the Diet passed financial 
control laws in October 1991, which became fully effective 
one year later, there were virtually no legal tools available 
to Japanese narcotic enforcement officers to seize funds 
acquired through drug trafficking.  Bank secrecy statutes 
made it extremely difficult for law enforcement agencies even 
to examine drug traffickers' financial institution records.  
As a consequence, there have been very few investigations 
which can support or deny the belief that a great deal of 
money laundering takes place in Japan. 

DEA Tokyo believes that a significant amount of money 
laundering has been occurring in Japan for years.  The  
87,000-member organized crime syndicates (boryokudan) are 
likely to have taken advantage of the wide-open banking 
system.  With approximately 40 percent of their illicit 
income estimated to be derived from drug trafficking, it is 
improbable that they would not exploit the opportunities 
which existed before adoption of these controls, and may have 
layered their funds to prevent subsequent detection.  

U.S. officials believe South American cocaine cartels have 
continued establishing a presence in Japan over the past year 
as they look to expand their markets into the Far East.  DEA 
has evidence that Colombian cocaine cartels have been using 
Japanese money launderers who operate front companies and 
import/export businesses to launder cocaine money.

The 1991 Currency Transaction Reporting laws are not 
difficult for money launderers to evade.  Banks must report 
transactions of more than approximately $240,000 for single 
domestic transactions and $34,300 for overseas remittances.  
These new laws, while not too restrictive, do help to conform 
Japan's laws to the 1988 UN Convention which Japan has 
ratified.

KOREA is not a major money laundering country. There are no 
known cases of money laundering, which is not illegal. There 
are, however, strict controls on the transit of large sums of 
money.  Tax evasion is another means of prosecuting a person 
for money laundering.  Given its bank secrecy laws, the 
ability to open bank accounts with third party or fictitious 
names, and the amount of methamphetamine produced for export, 
Korea would seem to be a relatively easy country through 
which to launder drug proceeds.  Financial liberalization 
measures currently underway will reduce restrictions on the 
banking system, allowing banks to sell gold as well as 
currency, and make capital investments in the leasing 
industry.  Foreign exchange services, however, will not be 
permitted by most domestic banks.  The foreign exchange 
control laws are strict and could be used in an anti-money 
laundering effort.  

LAOS is not a place where one would consider laundering money 
because large transactions would attract the sort of 
attention money laundering is meant to avoid.  Laos is not an 
important financial center, and is only now establishing a 
commercial banking system.  There is no non-bank financial 
system.  Several Thai banks may begin branch banking activity 
in 1993.  The Lao kip is not convertible and the GOL 
restricts its export.  There are no specific laws on the 
laundering of currency as none have been considered necessary 
to date.  The GOL does not require records of large currency 
transactions.  There are also no special efforts to interdict 
money launderers.  The legal system is also in an early stage 
of development.  Lao law provides for asset seizure, but none 
has been reported.

MALAYSIA is becoming more important as a financial center but 
is not currently significant as a money laundering center.   
It has an advanced financial infrastructure and active 
banking industry.  In 1990, Parliament created a tax haven on 
Labuan, an island off the coast of the East Malaysian state 
of Sabah.  Malaysia could become a significant money 
laundering center, should the Labuan tax haven become a major 
financial center.  There are indications that other financial 
organizations, especially in Penang, may be laundering funds 
from narcotics trafficking.

Malaysia has limited asset seizure and forfeiture laws.  
There are no financial reporting requirements, although 
legislation is being considered.  Because domestic laws have 
not been brought into compliance, Malaysia has not yet 
ratified the 1988 UN Convention.  

Malaysian law provides police investigators with full access 
to bank records, notwithstanding bank secrecy laws.  It also 
specifically permits sharing investigatory material with 
foreign law enforcement authorities.  The police have pursued 
money laundering and asset seizure cases and cooperated 
closely with DEA and other foreign enforcement agencies.  
Police have seized traffickers' assets worth nearly $2 
million.

NEW ZEALAND is not a significant location for money 
laundering, which is not a criminal offense.  Banks monitor 
large currency transactions but the reporting requirements 
are such that the information is useless to law enforcement 
officers attempting to identify and control transactions by 
narcotics traffickers.  Money laundering legislation is in 
the preliminary drafting stage and enactment is expected to 
face considerable resistance by the banking industry.  The 
GNZ relies on conspiracy laws to control money laundering.  
There have been no money laundering prosecutions.   On July 
1, 1992, the Proceeds of Crime Act authorizing asset seizure 
and forfeiture went into effect but it has not been tested in 
court.  

THE PHILIPPINES is not significant as a money laundering 
center.  While there have been only a few reports of money 
laundering in the Philippines, mostly related to drugs 
shipped to Australia, tax evasion is considered a way of 
life.  Residents conceal their true worth through shell 
companies, hold dollar accounts under false names and also 
hold foreign bank accounts (usually in Hong Kong).  Asset 
forfeiture legislation allow assets to be seized only if 
found with the drugs or in a conveyance.  The Philippines has 
strict bank secrecy laws which effectively prevent 
criminal/civil investigations of narcotics-related assets.  
Local officials have not developed any investigative tools 
with which to conduct financial investigations due to the 
lack of more effective asset forfeiture or money laundering 
statutes.

SINGAPORE is a major financial center and ranks among the top 
five foreign exchange centers in the world.  The presence of 
dozens of offshore banks, the stability of the economy and 
government, bank secrecy and the strength of the Singapore 
dollar would appear to make this an attractive target for 
money launderers.  U.S. authorities suspect that significant 
narcotics money laundering has occurred but the Monetary 
Authority of Singapore (MAS) disputes the contention.

The recently-passed Drug Trafficking (Confiscation of 
Benefits) law criminalizes money laundering and lifts certain 
bank secrecy restrictions regarding financial information.  
This legislation should establish guidelines for U.S. and 
other countries to access bank account information.  The U.S. 
is keenly interested in negotiating an agreement with 
Singapore, in response to its new law.

The legislation, based on the UK and Hong Kong laws, provides 
for freezing of assets and ultimate confiscation; enforcement 
of foreign forfeiture orders, potentially including civil 
forfeiture orders; and seizure of assets attributable to 
drug-related criminal conduct occurring in and outside of 
Singapore.  The law presumes that assets earned or acquired 
six years before conviction on a drug trafficking offense 
were derived from drug trafficking.  Perhaps most significant 
from the U.S. perspective, the legislation lifts restrictions 
concerning financial information even if the criminal 
investigation is initiated outside of Singapore. 

The new law enables enforcement agencies to freeze and 
confiscate assets obtained as a result of drug trafficking 
activities, though authorities will be required to seek a 
court order at each stage of their investigation.  The GOS 
will only be able to obtain the forfeited properties of a 
person who has been convicted of a drug offense.  The 
government's concern is to ensure this law will not infringe 
upon the confidentiality of their depositors, investors and 
property owners.

Although Singapore has not yet ratified the 1988 UN 
Convention, the legislation authorizes bilateral agreements 
or treaties for facilitating mutual assistance in drug cases 
and criminalizes the laundering of drug proceeds in 
conformity with the Convention.  Singapore has shown a 
greater willingness to cooperate in multilateral efforts to 
combat money laundering.  Singapore is a member of FATF and, 
in April, will host the FATF/Commonwealth Secretariat seminar 
on money laundering for policy makers from Asian and Pacific 
governments.

TAIWAN is not a major transit point for money in the region, 
although funds entering Taiwan can be transferred from the 
official banking system to the traditional but unofficial 
remittance system and vice versa, and it is believed that 
narcotics proceeds from the Asian heroin trade have been 
laundered through both systems.  Taiwan is neither an 
important tax haven nor an offshore banking center.

Taiwan is not a signatory to the 1988 UN Convention, and 
therefore has not adopted formal articles of ratification.  
However, money laundering is a criminal offense.  Banks in 
Taiwan are required to maintain records of financial 
transactions in excess of one million new Taiwan dollars 
(exchange rate as of December 11 is NTD 25.46=  $1.00), 
though there is no central authority which monitors such NTD 
transactions nor any requirement that banks report such 
transactions.  Taiwan law places a ceiling of five million 
U.S. dollars or the equivalent in other foreign currencies, 
per entity and per annum, on all outward and inward 
remittances of foreign currencies, and banks that deal in 
foreign currencies are required to report foreign exchange 
transactions to the central bank in excess of $ 500,000.  
Banks in Taiwan are required to report suspicious financial 
transactions, but there are no official guidelines which 
define suspicious transactions.

The Ministry of Justice Investigation Bureau is considering 
drawing up legislation which addresses money laundering and 
in November 1992 asked DEA for any model legislation relative 
to this subject as well as information on methods of 
financial investigations.

A Memorandum of Understanding (MOU) on judicial assistance 
was signed between the American Institute in Taiwan and the 
Coordinating Council of North American Affairs in October, 
1992, and calls for Taiwan to allow law enforcement officials 
to testify and present evidence at U.S. criminal trials.

THAILAND is becoming increasingly important as a money 
laundering center, and U.S. officials believe its full 
potential is only now being exploited.  Thailand serves as a 
conduit for funds being transferred to Hong Kong, Singapore, 
Taiwan and Malaysia, all of whose currencies are more readily 
convertible than the Thai baht.  Thai authorities believe 
that narcotics-related financial transactions may be a much 
larger problem than previously perceived -- a concern 
reinforced by recent revelations that certain local 
commercial banks were helping suspected drug traffickers to 
launder money.  Thailand permits numbered bank accounts and 
the use of nominees is a common practice.  While Thailand 
requires declarations to Customs by persons entering the 
country with more than $10,000 in their possession, the 
regulation is only sporadically enforced and no central 
registry is maintained.

Thailand does not have anti-money laundering laws, but the 
Parliament passed narcotics conspiracy and asset forfeiture 
laws and is in the process of ratifying the MLAT with the US.  
Modeled on similar laws successfully enacted in the U.S., UK 
and several other countries, the new asset seizure law 
stipulates the burden of proof rests with the suspects who 
will be required to prove their assets have been acquired 
through legal means.  All assets can be seized as soon as the 
offenders are apprehended and will go to the state for use in 
anti-drug operations.

The law also enables law enforcement officials to ask 
commercial banks and financial institutions to cooperate in 
tracing the assets of suspected and convicted traffickers by 
releasing financial records, and requiring individuals who 
deposit large sums of cash to report sources of income.  
However, financial institutions are not obligated by law to 
cooperate and many have chosen not to out of fear of losing 
accounts and ensuing legal action by their customers.

Narcotics control officials are reluctant to proceed with any 
new anti-money laundering measures after encountering strong 
opposition by various groups to the asset forfeiture and 
narcotics conspiracy law before its introduction.  However, a 
senior U.S. Treasury official met with Thai officials in 
Bangkok in September 1992, and representatives of the Central 
Bank, ONCB and the Permanent Secretary for Finance declared 
their readiness to address the money laundering issue and 
seek enactment of needed laws.

Thailand has very stringent bank secrecy laws, and 
confidentiality is strongly protected.  Laotian officials 
tried in 1992 to gain access to bank records to trace Laotian 
depositors, but the courts rejected the request.

The Thai banking system is undergoing a major change.  In 
September 1992, the government authorized creation of a 
Bangkok International Banking Facility (BIBF) which will 
permit foreign and local banks to set up offshore banking 
units.  The short-term objective is to channel investment 
funds to Cambodia, Laos and Vietnam, which are emerging from 
long periods of political and economic stagnation.  A longer 
term objective is to make Bangkok into a regional financial 
center.  The offshore banks will be allowed to take deposits 
and borrow money from abroad in foreign currencies and make 
loans in foreign currencies to Thai and overseas borrowers.  
The units can also handle overseas trade and foreign exchange 
transactions, and guarantee foreign currency loans extended 
to overseas borrowers.  Until this new law was passed, 
Thailand had not allowed new foreign banks into the country 
for many years.

VANUATU has been a major offshore financial center for more 
than 20 years, but there is no evidence of significant money 
laundering. It has strict bank secrecy provisions and no 
foreign exchange controls.  Offshore investors deal through 
more than 100 foreign banks from Thailand, Hong Kong, France 
and the UK, as well as from South American countries.

PAPUA NEW GUINEA, WESTERN SAMOA, FIJI, and other Asian and 
Pacific countries were reviewed but are not considered 
important financial or money laundering centers.


AFRICA

ALGERIA has liberalized measures in force, but the banking 
sector is still largely dependent on the state, making the 
financial climate not conducive to an influx of foreign 
capital.  Currency exchange restrictions also act as a 
disincentive to capital inflows.

GHANA is not an international money laundering center.  

COTE d'IVOIRE (Ivory Coast) is an important financial center 
in West Africa and may be a transit and conversion point for 
money laundering.  Cote d'Ivoire has made money laundering a 
criminal offense.  Banks are required to maintain records on 
large currency transactions and to report the data to the 
GOCI.  Financial institutions are required to report 
"suspicious" transactions. Cote d'Ivoire has asset seizure 
laws but the modalities for their application have yet to be 
determined.   The law covers vehicles, cash, and other 
property, and allows the GOCI to freeze bank accounts.  
Legitimate businesses used to launder drug money can be 
seized after a conviction.  There are controls on the amount 
of money that enter or leave the country.  Individual bankers 
are not accountable for the activities of their institutions.  
Money laundering controls are not applied to non-banking 
institutions.  There were no arrests or prosecutions for 
money laundering in 1992.  Although Cote d'Ivoire is moving 
toward fulfilling the UN Convention's goals and objectives on 
money laundering, it will not be in full compliance until the 
gaps noted above are closed.

KENYA.The money flow associated with narcotics activity in 
Kenya involves both commercial banks and wire transfers, and 
the hawala system operated by ethnic Indians.  Most illicit 
money is transferred out of the country through the hawala 
system.  Much of the money is deposited into banks in the UK.

MAURITIUS is concerned about the potential for money-
laundering in the nascent off-shore banking industry and has 
assigned a high priority to obtaining foreign assistance for 
monitoring such activities and developing legislation for 
preventing abuse of the banking system.

MOROCCO, which expressed interest in working with FATF on 
anti-money laundering programs during a meeting in Paris last 
November, agreed with the Commission of the European 
Communities last May to establish a joint narcotics experts 
group in Rabat to examine methods of expanding Morocco's 
anti-drug efforts.  Both moves, as well as the ratification 
of the UN Convention, are part of Morocco's intensified 
narcotics program begun in 1992.

The networks that export hashish repatriate profits to 
Morocco in the form of contraband goods and electronic 
equipment.  Profits are also invested in businesses and real 
estate in Northern Morocco, or banked.  The volume of bank 
deposits in cities like Tangiers and Nadour in the North are 
reportedly far greater than those which would be commensurate 
with the level of economic activity in the region.  Like many 
nations, Morocco has a forfeiture law but it is limited to 
those instruments used in the commission of a crime.  Thus if 
there are any seizures of assets involved in a drug case it 
is usually only seizure of the vehicles used to transport the 
drugs and the proceeds go into to the national treasury.  
There is no real seizure of asset legislation.

There is no evidence that the financial system of Morocco is 
used to launder drug money.  Officials are concerned about 
European drug proceeds transiting Morocco or being 
transshipped through currency exchange houses.  There have 
been currency exchange violations:  in 1990 Moroccans 
convicted for exchange violations were using banks in 
Switzerland and the Bahamas.  There is not total bank 
secrecy, for Moroccan law permits designated Moroccan 
Government officials access to bank records for investigative 
purposes.  There now is discussion about establishing 
offshore banking in Morocco, which could increase the 
potential for money laundering.

NIGERIA is not currently an important regional or 
international financial center.   Nigerian drug traffickers 
use the country's financial system to convert drug proceeds 
into naira and to launder these funds for use elsewhere.  
Moreover, the influx of drug money following the Nigerian 
drug trade gives rise to the possibility that Nigeria could 
become a more important money laundering center.  Business 
fraud and financial swindles are serious problems in Nigeria 
and affect perceptions of business practices and financial 
transactions.

There are no laws governing the movement of hard currency 
into Nigeria nor the departure of hard currency.  Once a bank 
account has been established in Nigeria, deposits of any size 
can be made with no questions asked.  The government can 
freeze bank accounts and seize assets, but only subsequent to 
a conviction.  Even though legal mechanisms are in place to 
combat money laundering, no attempt has been made to enforce 
the laws.

Nigerian residents can maintain foreign currency denominated 
domiciliary accounts at domestic banks, and need not disclose 
the source of funds.  A large number of non-bank financial 
institutions, including finance houses, mortgage banks and 
others, perform many of the functions of banks but are not 
subject to the same level of oversight from government 
authorities.  Nigeria also has a network of licensed foreign 
exchange bureaus authorized to trade in foreign currency 
notes and traveler's checks.  Banks, non-bank financial 
institutions, and exchange bureaus are all susceptible to 
drug money laundering.

During the summer of 1992 a Nigerian heroin trafficking group 
attempted to use banks in Bulgaria to wire U.S. $6.1 million 
from Nigeria through Bulgaria to the US.  The money never 
entered the Bulgarian financial system because the banks were 
much slower than in Western Europe to clear the transactions, 
and the Nigerian was arrested by Bulgarian authorities.  

The national drug law enforcement decree bars willful 
attempts to disguise the nature, source, location, ownership, 
or control of proceeds from narcotics trafficking, as well as 
the international transport of funds derived from or used in 
narcotics trafficking.  Violation of the decree is a criminal 
offense, with stipulated penalties of up to 25 years 
imprisonment and heavy fines.  However, there have been no 
prosecutions under this authority. 

There are regulations calling for the reporting of large cash 
transactions by banks, but enforcement of this rule, which 
was introduced during a currency reform period and was not 
directed at money laundering, appears to have lapsed in 
recent years.  One major constraint on attempts to monitor or 
control money laundering is that Nigeria lacks an effective 
oversight mechanism for the banking system.  While the import 
or export of Nigerian currency is prohibited, except in token 
amounts, there are no rules on the import or export of 
foreign currency.  Incoming travelers are supposed to declare 
the import of foreign currency in amounts of $ 5,000 or more, 
but this requirement is not enforced.  There have been no 
arrests or prosecutions for money laundering in Nigeria.

There is no legislation in place regarding seizure or 
forfeiture of assets of narcotics traffickers, but new 
legislation is under consideration.

SENEGAL is not a major money-laundering center.  

BURKINA FASO, CHAD, ETHIOPIA, THE GAMBIA, LESOTHO, SOUTH 
AFRICA, SUDAN, TOGO, TUNISIA and ZIMBABWE were reviewed, and 
are neither important financial nor money laundering centers.
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[EDITOR'S NOTE:  Charts referenced to in brackets [ ] are 
available only in hard copy of report.]


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