The World Bank UNODC AML CFT Newsletter, April 2013 English

ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM (AML/CFT) NEWSLETTER FOR CENTRAL ASIA Issue 77. April 2013 Available online at http://www.imolin.org

CALENDAR OF EVENTS

1 FATF Europe/Eurasia Regional Review Group 5 The FATF Plenary and Working Group Meetings Meeting

Date: 16 – 17 May 2013 Date: 17 - 21 June 2013 Organizer: FATF Organizer: FATF Location: Paris, France Location: Oslo, Norway Contact information: [email protected] Contact information: [email protected]

2 Joint EAG/Egmont Group workshop to exchange 6 21st Egmont Group Plenary Meeting experience on new IT technologies for financial monitoring in the AML/CFT sphere

Date: 20 May 2013 Date: 1 - 5 July 2013 Organizer: EAG Organizer: The Egmont Group Location: Minsk, Belarus Location: South Africa Contact information: [email protected] Contact information:

3 18th EAG Plenary and Working Group Meetings 7 The 42nd MONEYVAL Plenary Meeting

Date: 21 - 24 May 2013 Date: 16 – 20 September 2013 Organizer: EAG Organizer: Moneyval Location: Minsk, Belarus Location: Strasbourg, France Contact information: [email protected] Contact information: [email protected]

4 The Final NRA Workshop

Date: 28 - 30 May 2013 Organizer: World Bank/OSCE/Kyrgyz FIU Location: Bishkek, Kyrgyzstan Contact information: [email protected]

We welcome contributed articles of up to one page in length! To submit information for inclusion to the newsletter or to be added to or removed from the distribution list, please contact Mr. Klaudijo Stroligo at [email protected]

AML/CFT Developments in Central Asia deficiencies and encouraged Kyrgyzstan to Finance in 2009. Turkmenistan became a work on implementing its action plan to member of EAG in June 2010. The Mutual address these deficiencies. In its recent Evaluation Report and the first Follow-up AFGHANISTAN statement from February 2013 the FATF Report of Turkmenistan were adopted by encouraged Kyrgyzstan to swiftly enact the the EAG in June 2011. The FATF during its Afghanistan enacted an AML/CFT law in adequate amendments related to countering June 2012 plenary meeting decided to 2004. The FIU was established in 2005. terrorist financing. In November 2012 the remove Turkmenistan from its monitoring The on-site visit of Afghanistan’s mutual 7th Mutual Evaluation Follow-up Report was process under its on-going global AML/CFT APG-IMF evaluation took place in January adopted by the EAG Plenary. EAG decided to compliance process. The FATF welcomed 2011. Afghanistan is a member of the Asia place Kyrgyzstan under the enhanced Turkmenistan’s significant progress in Pacific Group (APG) and an observer to the monitoring procedure, thus requiring improving its AML/CFT regime and noted EAG. Afghan FIU became an Egmont reporting to the EAG during the next plenary that Turkmenistan has largely met its Group member in June 2010. meeting. commitments in its Action Plan regarding the strategic deficiencies identified by FATF. Turkmen FIU became an observer to RUSSIAN FEDERATION Egmont Group during its 20th Plenary BELARUS meeting in July 2012. In November 2012 A Joint AML/CFT Mutual Evaluation of Turkmenistan presented its 4th follow-up The AML/CFT Law of Belarus was adopted Russian Federation was conducted by in 2000. Belarus became a member of the report to the EAG and EAG decided to FATF/Moneyval/EAG in 2007. The Mutual remove Turkmenistan from its follow-up Egmont Group in 2007. Belarus is a Evaluation Report was adopted by member of EAG. The Mutual Evaluation FATF/Moneyval/EAG in June and July 2008. procedure. Report of Belarus was adopted by EAG in In December 2010 the Russian Federation December 2008. Two Mutual Evaluation submitted its second follow-up report to the Follow-up Reports were adopted by EAG in EAG Plenary. The second 3rd round UZBEKISTAN December 2009 and December 2010 . In progress report of the Russian Federation November 2012 Belarus submitted its third was adopted by Moneyval in September Uzbekistan is a member of EAG. The follow-up report to the EAG Plenary. 2011. The Russian Federation is a member Mutual Evaluation Report of Uzbekistan of FATF, Moneyval and EAG; it chairs the was adopted during the EAG Plenary EAG and Moneyval and co-chairs the EAG meeting in Almaty in June 2010. The 2nd CHINA Technical Assistance, Typologies, Evaluation Mutual Evaluation Follow-up Report was / Legal, and Supervision Working Groups. adopted by EAG in November 2012. The The AML/CFT law came into force on 1 amendments to the Uzbek AML/CFT Law January 2007. The Mutual Evaluation came into force on 22 April 2009. Report of China was adopted by FATF in TAJIKISTAN Amendments to other 16 laws were June 2007 and by EAG in December 2007. adopted by the Parliament in September The fifth Mutual Evaluation Follow-up On 25 March 2011 the AML/CFT Law was 2009. In its February 2010 statement the Report was adopted by EAG in December adopted by the Parliament and signed by the FATF welcomed Uzbekistan’s significant 2010. China is a member of EAG and President. A decision to establish the progress in improving its AML/CFT regime FATF, and co-chairs the EAG Evaluation/ Financial Monitoring Department (FIU) under and noted that Uzbekistan addressed the Legal Working Group. In February 2012 the the National Bank of Tajikistan was taken by AML/CFT deficiencies that the FATF had FATF adopted the follow up report of China the President on 20 October 2009. Tajikistan identified in February 2008. Uzbekistan is and decided to take off China from its is a member of EAG. The World Bank mutual no longer subject to the FATF’s enhanced regular follow-up process. China will report evaluation report was adopted by EAG in monitoring process. Uzbek FIU became an back to the FATF Plenary on any further December 2008. In December 2008 the EAG Egmont Group member in July 2011. improvements to its AML/CFT regime on a placed Tajikistan under the enhanced follow biennial basis. up procedure . In November 2012 Tajikistan th presented its 8 follow-up report to the EAG INDIA Plenary and the EAG decided to keep KAZAKHSTAN Tajikistan on the enhanced follow up A Financial Intelligence Unit (FIU-IND) was procedure, thus requiring reporting to the set by the Government of India in The AML/CFT law was adopted in June EAG during the next plenary meeting. In July November 2004 and is a member of 2009 and came into force on 9 March 2010. 2012 during the 20 th Egmont Plenary meeting Egmont Group. FIU-IND is an independent The Financial Monitoring Committee (FIU) in Saint Petersburg the Tajik FIU became a body reporting directly to the Economic was established within the Ministry of member of the Egmont Group. In June 2011 Intelligence Council headed by the Finance Finance on 24 April 2008. Kazakhstan is a Tajikistan was included in the FATF public Minister. India has criminalised money member of EAG, and co-chairs the EAG document “Improving Global AML/CFT laundering under the Prevention of Money Technical Assistance Working Group. In Compliance: On-going Process”. The FATF Laundering Act and the Narcotic Drugs and October 2010 Kazakhstan underwent an encouraged Tajikistan to address its Psychotropic Substances Act. These laws EAG AML/CFT Mutual Evaluation. The remaining deficiencies and continue the came into force in 2005 and were amended Mutual Evaluation Report was adopted process of implementing its action plan. In its in 2009. The Unlawful Activities during the EAG Plenary in June 2011. In recent statement from February 2013 the (Prevention) Act was amended in 2004 to July 2011 during the Egmont plenary FATF recommended Tajikistan to:(1) address criminalize, inter alia, terrorist financing, meeting in Yerevan, Armenia the Kazakh remaining issues regarding criminalization of and it was further amended in December FIU became a member of the Egmont ML and TF; (2) establish and implement the 2008 to broaden its scope and to bring the Group. adequate procedures for the confiscation of legislation more in line with the funds related to ML and identifying and requirements of the International freezing terrorist assets; (3) address the KYRGYZSTAN Convention for the Suppression of the remaining issues relating to the FIU, STR Financing of Terrorism. India is a member reporting requirements, and customer due of FATF and APG and in December 2010 diligence measure. Kyrgyz State Financial Intelligence Service became also a member of EAG. India holds - SFIS (FIU) became a member of the a position of a Vice-Chair of EAG. The Egmont Group in May 2009. Kyrgyzstan is st Mutual Evaluation Report of India was a member of EAG. The EAG 1 round adopted by FATF in June 2010. Mutual Evaluation Report of Kyrgyzstan TURKMENISTAN was adopted in June 2007. In October 2011 Kyrgyzstan was included in the FATF public The AML/CFT law was adopted by the document “Improving Global AML/CFT Parliament and signed by the President in Compliance: On-going Process”. FATF has May 2009. A Financial Intelligence Unit (FIU) determined certain strategic AML/CFT was established under the Ministry of 2

EUROASIAN GROUP (EAG) update

Schedule of EAG member-states’ AML/CFT Mutual Evaluations On-Site Plenary Country Evaluators Evaluation Discussion Mutual Evaluation Reports [MER]

MER and Summary in English: http://www.fatf- gafi.org/media/fatf/documents/reports/mer/MER%20China%20full.p df 8th Follow-up report: http://www.fatf- Completed gafi.org/media/fatf/documents/reports/mer/Follow%20Up%20MER CHINA FATF, EAG 2006 Adopted: %20China.pdf FATF (June 2007) EAG (Dec 2007) EAG First MER, Progress report in English: http://eurasiangroup.org/ru/restricted/chinareport.pdf

Five Follow up Reports are on EAG website BELARUS EAG July 27 – Aug Adopted: 3, 2008 EAG MER and Summary in English: (December 2008 ) http://eurasiangroup.org/ru/restricted/bel_report.pdf

MER and Summary in Russian: http://eurasiangroup.org/ru/restricted/bel_report.doc

Two Progress Reports are available on EAG website MER in English: http://www.eurasiangroup.org/ru/restricted/MER_2011_1_KAZ_rev.1 _eng.doc

KAZAKHSTAN EAG October 2 -10, Adopted: MER in Russian: 2010 EAG (June 2011) http://www.eurasiangroup.org/ru/restricted/MER_2011_1_KAZ_rev.1 _rus.doc

MER with Summary in English: KYRGYZSTAN EAG Feb 2007 Adopted: http://eurasiangroup.org/ru/news/eagkyrgyz.pdf EAG (June 2007) MER and Summary in Russian: http://eurasiangroup.org/ru/news/eagkyrgyz.pdf

Six Follow up Reports are on EAG website MER and Summary in English: RUSSIAN EAG, FATF, Sept 24 – Oct Adopted: http://www.fatf-gafi.org/dataoecd/51/27/40945440.pdf FEDERATION MONEYVAL 2, FATF (June 2008) Nov 12-23, Moneyval (July MER and Summary in Russian: 2007 2008) http://www.eurasiangroup.org/files/MERs%20-%20RUS/russia.pdf EAG (July 2008) Two Follow up Reports are on EAG website Adopted: MER in English: TAJIKISTAN EAG, World June 2007 EAG (December http://eurasiangroup.org/ru/news/tajikistan.pdf Bank 2008) MER in Russian: http://eurasiangroup.org/ru/restricted/EAG_ME_2008_2_rus_.doc

Seven Follow up Reports are on EAG website MER in English: http://eurasiangroup.org/ru/restricted/EAG_ME_2010_1_eng_amend ed.doc

UZBEKISTAN EAG November 8- Adopted: MER in Russian 14, 2009 EAG (June 2010) http://eurasiangroup.org/ru/restricted/EAG_ME_2010_1_amended_fi nal.doc

First Follow up Report is on EAG website MER in English: http://eurasiangroup.org/ME_2011_2_eng_rev3.doc

MER in Russian TURKMENISTAN EAG November 7 - Adopted: http://eurasiangroup.org/ME_2011_2_rus_rev3.doc 14, 2010 EAG (June 2011) Three Follow up Reports are on EAG website Adopted: MER and Summary in English: INDIA Nov 30 – Dec FATF (June 2010) http://www.fatf-gafi.org/countries/d- FATF, APG 12, 2009 APG (July 2010) i/india/documents/mutualevaluationofindia.html

3 We welcome contributed articles of up to one page in length! To submit information for inclusion to the newsletter or to be added to or removed from the distribution list, please contact Mr. Klaudijo Stroligo at [email protected]

TECHNICAL ASSISTANCE update

‹ Regional Workshop on FIU Strategic Analysis was held from 1 to 3 April 2013 in Borovoe, Kazakhstan.

The workshop was organized by the World Bank, the Kazakh FIU (CFM), the Egmont Group, the EAG, the American Embassy in Kazakhstan and the ITMCFM (Russian Training Center). All together 30 FIU analysts from Kazakhstan, Russian Federation, Tajikistan, Uzbekistan, Kyrgyzstan, Turkmenistan, Belarus, China, Ukraine, Montenegro, Armenia, Azerbaijan, and Slovenia participated in this event.

The main objective of this workshop was to enhance skills of the Kazakh FIU and other participating FIUs analysts to undertake strategic analysis. World Bank experts presented and delivered the Egmont Group's training course on FIU Strategic analysis (SAC). The training course was a combination of theory and practice and consisted of 10 sessions. Most sessions were interactive and the participants split in 5 groups, each representing a fictitious country and worked together in preparation of a case study - Global exercise. During the last day each group presented their findings and analysis related to the case study.

The Egmont training modules were well received by all participants. In their comments, participants noted that materials and suggestions related to analytical thinking will be useful for their work and they also praised the opportunity to cooperate with colleagues from other FIUs .

‹ National Workshop on Revised FATF Recommendations was held from 4 to 5 April 2013 in Borovoe, Kazakhstan.

The workshop was organized by the World Bank, the Kazakh FIU (CFM), the OSCE, and the American Embassy in Kazakhstan. The main objective of the workshop was to raise awareness of all competent Kazakh AML/CFT authorities and representatives of the private sector regarding the revised Financial Action Task Force (FATF) Standards.

All together 40 representatives of all relevant Kazakh AML/CFT stakeholders and representatives of financial institutions, DNFBPs and their associations participated in the workshop. A team of international and World Bank experts delivered the training by using the FATF training material on the revised FATF Recommendations. Each presentation was followed by Questions & Answers sessions, during which the participants asked questions, related to the implementation of the revised standards and discussed the revised standards with speakers and participants from different AML/CFT bodies.

‹ The Sixth Regional FIU to FIU Meeting among the West and Central Asian Countries was held from 9 to 10 April 2013 in Almaty, Kazakhstan.

The FIU to FIU Meeting under the CASH Initiative under Sub-Programme 2 (International/Regional Cooperation in Legal Matters) of the Regional Programme for Afghanistan and Neighbouring Countries was organized in close cooperation with Central Asian Regional Information and Coordination Centre (CARICC) and with the participation of Regional Programme countries (except Afghanistan and Turkmenistan), representatives of CARICC member countries, including the United States, the United Kingdom, the Russian Federation, Turkey, France, Norway and Germany.

The main objective of this meeting was to: (i) discuss the Regional/Bilateral AML/CFT MoUs; (ii) facilitate the establishment of an AML Group of Experts among the countries in the region; (iii) agree on an AML Road Map for future cooperation among the countries in West and Central Asia; and (iv) facilitate better exchange of information and best practices among the FIUs of the countries in the region.

The "FIU to FIU" meeting was organized within the framework of the UNODC “Regional Programme for Afghanistan and Neighboring Countries (2011-2014)” – Sub-programme 2 on “International/Regional Cooperation in Legal Matters". These meetings are intended to promote international/regional cooperation on AML/CFT matters. In particular, they are designed to foster dialogue, build reciprocal trust, and promote operational cooperation and exchange of information amongst the regional FIUs and their foreign counterparts.

MONEYVAL update

° The 41 st MONEYVAL Plenary meeting was held from 9 to 12 April 2012 in Strasbourg, France. During the meeting the following decisions were taken:

- The 4 th round Mutual Evaluation Report on Poland was adopted; - The 4 th round follow-up reports on Slovenia, Hungary and Albania were adopted. The plenary decided to remove Slovenia from the regular follow-up procedure due to the progress made; - Due to the progress made, Albania was moved from the Moneyval Compliance Enhancing Procedure to the regular follow-up reporting procedure; - Bosnia and Herzegovina will remain under the Compliance Enhancing Procedure and has to report back in September 2013; - Countries with identified important deficiencies in the 3 rd round MERs: Moldova has to report back to the plenary in December 2013; FYR of Macedonia has to report back in September 2013; the Croatian progress report will be discussed in September 2013, at which time the MER on Croatia will also be discussed; 4 We welcome contributed articles of up to one page in length! To submit information for inclusion to the newsletter or to be added to or removed from the distribution list, please contact Mr. Klaudijo Stroligo at [email protected]

- The FATF Secretariat delivered a presentation on the recently adopted Methodology for assessing countries' compliance with the FATF Recommendations; - The Moneyval project team presented the draft Report on "Postponement of financial transactions and the monitoring of bank accounts", which was adopted by the plenary; - Moneyval adopted the typologies projects on "The use of internet gambling for ML and TF purposes"; - Mr. Anton Bartolo from Malta was elected as the new Moneyval Chairmen and Mr. Daniel Thelesklaf from Liechtenstein was elected as Vice-Chairmen; - Moneyval will conclude its 4rd round of evaluations in 2014 and will start the new round (based on the new methodology) in 2015; - Moneyval will prepare and discuss its new rules of procedure in September and December 2013.

For more information please visit MONEYVAL website: http://www.coe.int/moneyval

Egmont Group update

“Egmont” Group Case study: Use of false identities, documents or straw men

Steven, a citizen of an Asian country, made a living by smuggling heroin from his home country to his clients in a pacific nation. His customers paid for the heroin by transferring money to the accounts of Steven’s accomplices, who include his wife Suzy, his sister Annabella and several other acquaintances. Steven used this money to fund new shipments of the heroin as well as to support a luxurious lifestyle. The profits of the deals were shared amongst Steven and his co-conspirators.

In order to conceal the stream of money from the Pacific country to the Asian country, the customers split US$ 6,000,000 into two different currencies spread between personal accounts of Steven and his nine accomplices. Initially the Pacific customers remitted the money frequently, and for amounts just under the mandatory reporting threshold in place in the Pacific nation of approximately US $ 6,000.

To any experienced financial analyst, the ‘smurfing’ activity would have been obvious in the first twenty remittances to Steven’s accounts. On receipt of a remittance, Steven usually withdrew all of the funds in cash or transferred them to another account with the same institution. After transferring the funds to another account, the account holder, usually Steven himself dispersed the funds immediately by cash, cheque or cashier order. Following each transaction there was usually a period of inactivity on the account. Other than the remittances from the pacific country, there was no other activity on the accounts concerned. In order to receive the remittances, Steven and his accomplices had opened a wide range of accounts. Individuals who were not residents of the Asian country opened a number of the accounts. They tended to use false identity documents to further confuse the laundering activity. Other individuals were given control of the accounts opened in this way. The amounts of money received on these accounts were far greater than seen in other accounts held by these individuals. Steven, for instance, claimed to be a mechanic and Suzy said she was a housewife. The other accomplices claimed to have jobs such as drivers, casual workers, interior decorators and account clerks. The amount of money moving through the accounts was clearly not commensurate with their declared employments.

Finally, because the bank officials thought that the amount of money going through the accounts of Steven, Suzy and Annabella were extraordinarily high in comparison to their known employment, they reported three disclosures to the national FIU. Based upon the reports, law enforcement units undertook investigations and managed to gather a great deal of evidence against the three family members. Steven was convicted of conspiracy to traffic in dangerous drugs and money laundering. Steven’s wife, Suzy, and his sister, Annabella, were both convicted of assisting Steven to launder the proceeds of the drug trafficking. Furthermore, in the pacific country, the police arrested the receivers of the heroin shipments following intelligence generated by the arrests in the Asian nation. At time of writing the receivers had pleaded guilty to charges of drug trafficking and were awaiting sentence.

Indicators: ‹ Atypical or uneconomical fund transfer to/or from foreign jurisdiction ‹ Change of account behavior without explanation ‹ Unrealistic wealth compared to client profile

«Egmont» group 100 Sanitized cases are available at: http://www.egmontgroup.org/files/library_sanitized_cases/100casesgb.pdf

Publications and Websites of Interest

http://www.unodc.org Official website of the UNODC. (In English, Russian, Spanish)

http://www.amlcft.org World Bank’s AML/CFT website. (In English)

http://www.worldbank.org/StAR World Bank and UNODC’s Stolen Assets Recovery Initiative (StAR) website

5 We welcome contributed articles of up to one page in length! To submit information for inclusion to the newsletter or to be added to or removed from the distribution list, please contact Mr. Klaudijo Stroligo at [email protected] http://www.imolin.org International Money Laundering Information Network administered by UNODC Global Program against Money Laundering, Proceeds of Crime and the Financing of Terrorism (GPML) on behalf of a partnership of eleven international organizations and offering model laws, legal library, calendar of key events and other AML/CFT related information. (In English, with some Russian) http://www.eurasiangroup.org The EurAsian Group is the FATF-Style Regional Body serving Central Asia. (In English and Russian) http://www.imolin.org/pdf/imolin/MLawRussian_IM UNODC Model Law in Russian oLIN.pdf http://www.fatf- The Guidance on the Risk-Based Approach to combating Money gafi.org/dataoecd/43/46/38960576.pdf Laundering and Terrorist Financing adopted by the FATF. It outlines the high-level principles involved in applying the risk-based approach, and indicates good public and private sector practice in the design and implementation of an effective risk-based approach. http://www.fatf- Guidance on Capacity Building for Mutual Evaluations and gafi.org/dataoecd/61/28/40248726.pdf Implementation of the FATF Standards Within Low Capacity Countries - is primarily intended to support low capacity countries (LCCs) in implementing the FATF standards in a manner reflecting their national institutional systems, is consistent with the ML/FT risks they face, and takes account of their limited resources

http://www.fatf- The study identifies four strategies which could help in further gafi.org/dataoecd/28/43/40285899.pdf strengthening counter-terrorist financing efforts: (a) Action to address jurisdictional issues, including safe havens and failed states; (b) Outreach to the private sector to ensure access to the information necessary to detect terrorist financing; (c) Building a better understanding of terrorist financing across the public and private sectors; and (d) Using financial investigation, enhanced by financial intelligence. http://www.eurasiangroup.org/rus/index-5.htm Russian version of 40 FATF Recommendations [AML]

Russian version of 9 FATF Special Recommendations [CFT] with Interpretive Notes http://www.fatf- FATF’s first in-depth study, which examines its vulnerabilities to gafi.org/dataoecd/45/31/40705101.pdf misuse for money laundering and terrorist financing in real estate sector.

http://www.unodc.org/documents/data-and- The World Drug Report 2012 provides in depth trend analysis of the analysis/WDR2012/WDR_2012_web_small.pdf four main drug markets in its first section. It also contains an in-depth look at the development of the international drug control system and a small statistical annex which provides a detailed look at production, prices and consumption. http://www.assetrecovery.org Asset Recovery Knowledge Center of the International Centre for Asset Recovery (ICAR) www.egmontgroup.org The Egmont Group of Financial Intelligence Groups http://www.coe.int/t/dghl/monitoring/moneyval/ MONEYVAL - Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism http://www.caricc.org CARICC - Central Asian Regional Information and Coordination Centre for combating the illicit trafficking of narcotic drugs, psychotropic substances and their precursors, established within the Memorandum of Understanding on sub-regional drug control cooperation dated May 4 1996 (Tashkent, Uzbekistan) between the Republic of Azerbaijan, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, the Republic of Tajikistan, Turkmenistan, the Republic of Uzbekistan and UN Office on Drugs and Crime (UNODC). http://www.oecd.org/corruption/acn Anti-Corruption Network for Eastern Europe and Central Asia

This publication contains recent news stories collected from print and other media. These materials areare gathered from external sources, and therefore the accuracy and completeness cannot be guaranteed. Moreover, the presentation of material and the designations do not imply the expression of any opinion by the World Bank or United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or the delimitation of any frontiers or boundaries.We welcome Ascontributed the World articles Bank of up or to one the page United in length! Nati ons do not always own the copyright to these materials, permissionTo submit from information the copyright for inclusion owner to the must newslett beer soughtor to be addedfor further to or removed use. from the distribution list, please contact Mr. Klaudijo 6 Stroligo at [email protected]