The World Bank UNODC AML CFT Newsletter, November 2013

ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM (AML/CFT) NEWSLETTER FOR CENTRAL ASIA Issue 83. November 2013 Available online at http://www.imolin.org

CALENDAR OF EVENTS

1 UNODC GPML Donors and Partners Meeting 5 FATF Working Group and Plenary Meeting

Date: 6 December 2013 Date: 10 – 14 February 2013 Organizer: UNODC Organizer: FATF Location: Vienna, Austria Location: Paris, France Contact information: Contact information: [email protected]

2 43rd MONEYVAL Plenary Meeting 6 Egmont Group Plenary and Working Group meetings

Date: 9 – 13 December 2013 Date: 16 – 20 February 2013 Organizer: MONEYVAL Organizer: Egmont Group Location: Strasburg, France Location: Contact information: [email protected] Contact information:

3 FATF Europe Eurasia Regional Review Group

Date: 16 – 17 January 2013 Organizer: FATF Location: Paris, France Contact information: [email protected]

4 World Bank AML/CFT mission to Astana, Kazakhstan

Date: January/February 2013 Organizer: World Bank Location: Astana, Kazakhstan Contact information: [email protected]

AML/CFT Developments in Central Asia

Kyrgyz State Financial Intelligence Service - AFGHANISTAN SFIS (FIU) became a member of the Egmont Group in May 2009. Kyrgyzstan is a member TURKMENISTAN Afghanistan enacted an AML/CFT law in of EAG and co-chairs the EAG Working 2004. The FIU was established in 2005. Group on Counteraction of Financing Drug The AML/CFT law was adopted in May The on-site visit of Afghanistan’s mutual Business, Crime and Terrorism. The Mutual 2009. A Financial Intelligence Unit (FIU) APG-IMF evaluation took place in January Evaluation Report of Kyrgyzstan was adopted was established under the Ministry of 2011. Afghanistan is a member of the Asia by EAG in June 2007. In October 2011 Finance in 2009 and in July 2012 it became Pacific Group (APG) and an observer to the Kyrgyzstan was included in the FATF public an observer to the Egmont Group. EAG. Afghan FIU became an Egmont document “Improving Global AML/CFT Turkmenistan became a member of EAG in Group member in June 2010. Compliance: On-going Process”. In its recent June 2010. The Mutual Evaluation Report statement from October 2013 the FATF and the first Follow-up Report of encouraged Kyrgyzstan to address the Turkmenistan were adopted by the EAG in BELARUS remaining issues in the criminalization of June 2011. The FATF during its June 2012 ML/TF, issues related to identification and plenary meeting decided to remove The AML/CFT Law of Belarus was adopted freezing terrorist assets and implement Turkmenistan from its monitoring process in 2000. Belarus became a member of the effective AML/CFT supervisory program . In under its on-going global AML/CFT November 2013 the EAG adopted the compliance process. The FATF welcomed Egmont Group in 2007. Belarus is a th member of EAG and co-chairs the EAG 9 Mutual Evaluation Follow-up of Kyrgyzstan Turkmenistan’s significant progress in Working Group on Counteraction of and requested Kyrgyzstan to present its next improving its AML/CFT regime and noted Financing Drug Business, Crime and follow-up report at the next EAG plenary that Turkmenistan has largely met its Terrorism. The Mutual Evaluation Report of meeting, when a possible removal of commitments in its Action Plan regarding Belarus was adopted by EAG in December Kyrgyzstan from the follow-up procedure will the strategic deficiencies identified by 2008. Three Mutual Evaluation Follow-up be discussed. FATF. In November 2012 Turkmenistan Reports were adopted by EAG in presented its 4th follow-up report to the EAG and EAG decided to remove December 2009, December 2010 and RUSSIAN FEDERATION November 2012. Turkmenistan from its follow-up procedure. A Mutual Evaluation Report of Russian Federation was adopted by FATF/Moneyval/ UZBEKISTAN CHINA EAG in June and July 2008. The second 3rd round progress report of the Russian The AML/CFT law came into force in Federation was adopted by Moneyval in Uzbekistan is a member of EAG and co- January 2007. The Mutual Evaluation September 2011. In October 2013 the chairs the EAG Working Group on Report of China was adopted by FATF in Russian Federation submitted its sixth follow- Supervision. The Mutual Evaluation Report June 2007 and by EAG in December 2007. up report to the FATF Plenary and has been of Uzbekistan was adopted by EAG in June The fifth Mutual Evaluation Follow-up taken off the regular follow up process . The 2010 and by November 2012 the EAG Report was adopted by EAG in December Russian Federation is a member of FATF, adopted two f ollow-up reports of 2010. China is a member of EAG, FATF Moneyval and EAG; it chairs the FATF and Uzbekistan. The amendments to the Uzbek and APG, and co-chairs the EAG co-chairs the EAG Technical Assistance, the AML/CFT Law came into force on 22 April Evaluation/ Legal Working Group. In 2012 a Typologies, the Mutual Evaluation and Legal 2009 and amendments to additional 16 representative of China was appointed as a Issues, the Supervision and the laws were adopted in September 2009. In rotating APG. In February 2012 the FATF Counteraction on Financing Drug Business, its February 2010 statement the FATF adopted the follow up report of China and Crime and Terrorism Working Groups. welcomed Uzbekistan’s significant progress decided to take off China from its regular in improving its AML/CFT regime and noted follow-up process. China shall report back that Uzbekistan addressed the AML/CFT to the FATF Plenary on any further TAJIKISTAN deficiencies that the FATF had identified in improvements to its AML/CFT regime on a February 2008. Uzbekistan is no longer biennial basis. The AML/CFT Law was adopted in March subject to the FATF’s enhanced monitoring 2011. In October 2011 the Financial process. Uzbek FIU became an Egmont KAZAKHSTAN Monitoring Department (FIU) was established Group member in July 2011. under the National Bank of Tajikistan. In July The AML/CFT law came into force in March 2012 the Tajik FIU became a member of the 2010. The Financial Monitoring Committee Egmont Group. Tajikistan is a member of INDIA (FIU) was established within the Ministry of EAG. The World Bank mutual evaluation report was adopted by EAG in December Finance in April 2008. In July 2011 the FIU A Financial Intelligence Unit (FIU - IND) 2008. In December 2008 the EAG placed became a member of the Egmont Group. was established in November 2004 as Tajikistan under the enhanced follow up Kazakhstan is a member of EAG and since independent body reporting directly to the procedure . In November 2013 the EAG November 2013 it holds a position of a Economic Intelligence Council headed by adopted the 10 th follow-up report of Tajikistan Vice-Chair of EAG, and co-chairs the EAG the Finance Minister. FIU-IND is a member and requested Tajikistan to present its next Technical Assistance Working Group. The of Egmont Group. India has criminalised follow-up report at the next EAG Plenary Mutual Evaluation Report of Kazakhstan money laundering under the Prevention of meeting, when a possible removal of was adopted in June 2011 and in May 2013 Money Laundering Act and the Narcotic Tajikistan from the follow-up procedure will Kazakhstan submitted its first follow-up Drugs and Psychotropic Substances Act. be discussed. In June 2011 Tajikistan was report to the EAG plenary. In November These laws came into force in 2005 and included in the FATF public document 2013 Kazakhstan presented its interim were amended in 2009. India is a member “Improving Global AML/CFT Compliance: On- report during the EAG plenary and EAG of FATF, APG and EAG. In November 2013 going Process”. In its recent statement from requested Kazakhstan to present the India became the Chair of the EAG. The October 2013 the FATF recommended follow-up report at the next EAG plenary Mutual Evaluation Report of India was Tajikistan to:(1) address remaining issues meeting. adopted by FATF in June 2010. In June regarding TF; (2) establish and implement the 2013 the FATF adopted the follow up report adequate procedures for the confiscation of of India and decided to take off India from funds related to ML and identifying and its regular follow-up process. KYRGYZSTAN freezing terrorist assets; (3) address the

remaining issues relating to the customer due diligence measure.

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

Three 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/restricted/eagkyrgyz.pdf

Seven 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

Two 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

‹ The 19 th EAG Plenary and EAG Working Group meeting was held in Ashgabat, Turkmenistan from 12 to 15 November 2013. During the meeting the following topics were discussed/agreed:

° Dr. K.P. Krishnan (India) was elected as the new EAG Chairman. Kazakhstan became Co-Chair of the EAG; ° The follow-up reports of Russia and India were adopted. The EAG Plenary removed China, India and Russia from the EAG monitoring process; ° Kazakhstan provided an update on the legislative developments and improvements in their national AML/CFT system. The EAG Plenary expressed its concerns regarding the delays in adoption of the amendments to the AML/CFT law and other draft legislation indicated in the EAG follow-up report and decided to consider applying follow-up measures in accordance with its procedures at the next plenary meeting in June 2014. Kazakhstan shall present its next follow-up report in June 2014; ° Kyrgyzstan won the first contest for the best cooperation of the state authorities in AML/CFT among the EAG member-states. Kazakhstan and China became the laureates of the contest; ° The EAG concluded its 1st round mutual evaluation procedures and started to prepare for the 2nd round of mutual evaluations; ° The outcomes of the joint EAG/APG workshop on typologies and capacity building and Regional workshop on the freezing requirement pertaining to Security Council Resolution 1373 (2001) were presented; ° The progress report of Tajikistan was discussed and adopted. The Plenary noted the significant progress made by Tajikistan and recommended to continue improving its national AML/CFT system. Tajikistan shall present its next follow-up report during the 20 th EAG plenary in June 2014. The EAG Plenary will discuss the possible removal of Tajikistan from the follow-up procedure; ° The progress report of Kyrgyzstan was discussed and adopted. The Plenary noted the significant progress made and encouraged Kyrgyzstan to continue its work on improving the national AML/CFT system and eliminating remaining deficiencies. Kyrgyzstan shall present its next follow-up report during the next EAG Plenary meeting in June 2014. The EAG Plenary will discuss the possible removal of Kyrgyzstan from the follow-up procedure.

For more information on workshop please visit EAG website: http://www.eurasiangroup.org/ TA update

‹ The Eurasian Group on Combating Money-Laundering and Terrorism Financing (EAG) and the International Training and Methodology Centre for Financial Monitoring of the Russian Federation (ITMCFM), acting in close cooperation with the Counter-Terrorism Committee Executive Directorate (CTED), held a workshop on the freezing of assets under Security Council resolution 1373 (2001) on 10 and 11 November 2013. The workshop was held in Ashgabat, Turkmenistan in the margins of the 19th EAG plenary meeting.

Nine EAG member countries (Belarus, China, India, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Turkmenistan and Uzbekistan) and two observer States (Armenia and Ukraine) gave detailed overviews of their legal and operational regimes for freezing terrorist assets. Experts from Belgium, the United Kingdom and the United States of America, as well as from CTED, the UN 1267 Committee, UNODC, the World Bank, MONEYVAL and the OSCE, took part in the discussions.

The event was part of a global initiative launched by CTED in October 2012 aimed at helping States establish or enhance national mechanisms for freezing terrorist assets in accordance with resolution 1373 (2001). Two similar regional events have already been held for member States of the West African Economic and Monetary Union and Eastern African countries.

Resolution 1373 (2001) requires Member States to freeze without delay funds and other financial assets of people who commit, or attempt to commit, terrorist acts. The assets of those who participate in or facilitate the commission of these acts should also be frozen in an effort to disrupt terrorism financing. To comply with the resolution's provisions, States must build a national designation mechanism that is in line with due process guarantees, examines third-country requests and conducts outreach to the private sector. Most EAG member countries have recently amended their laws on asset–freezing, which are generally implemented by their national financial intelligence units.

For more information please visit http://www.un.org/en/sc/ctc/news/2013-11-15_ashgabat_meeting.html

‹ Effective mechanisms to prevent and combat money laundering were the focus of an OSCE-organized workshop that took place in Ashgabat on 18 November 2013.

The workshop was organized by the OSCE Centre in Ashgabat and the Office of the Co-ordinator of OSCE Economic and Environmental Activities (OCEEA). It brought together 20 officials from the Finance Ministry, the Financial Intelligence Unit, the Economy and Development Ministry, the Ministry of Foreign Affairs, the State Tax Service, the law-enforcement agencies and banks. Experts from Poland, Serbia and the OSCE Secretariat talked about building an institutional framework, enhancing professional skills and knowledge to successfully prevent and combat money laundering.

The workshop participants discussed issues related to national risk assessment and activities to combat money laundering and the financing of terrorism in Turkmenistan. The training workshop is a follow-up to a workshop on anti-corruption mechanisms held in April 2013; it is part of the Centre’s project on reinforcement of good governance principles in Turkmenistan. Other activities under the project in 2013 included also a study tour to Serbia for officials from Turkmenistan to discuss anti-corruption and anti-money-laundering practices with their Serbian counterparts.

http://www.osce.org/ashgabat/108455

OECD update

Third International Forum on Tax and Crime was held in Istanbul, Turkey on 7-8 November 2013. The Forum was jointly hosted by the Turkish Tax Administration, Tax Inspection Board and Financial Intelligence Unit.

Building on previous events in Oslo and Rome, the Third Forum on Tax and Crime provided an opportunity for senior government officials from tax and customs administrations, anti-money laundering and anti-corruption authorities, police and law enforcement, public prosecutors, financial regulators and government Ministries, as well as international organisations and NGOs, to discuss current issues and country experiences on key policy and operational topics in combating all forms of financial crime.

Sessions focused on the following: - Models for improving inter-agency co-operation in fighting financial crimes, including the launch of the updated OECD report on Effective Inter-Agency Co-operation in Fighting Tax Crimes and Other Crimes; - Current issues in combating corruption, including a panel discussion with senior government experts and presentation on the new OECD Bribery and Corruption Awareness Handbook for Tax Examiners and Auditors; - Removing legal and operational barriers to effective international co-operation in combating financial crimes; - The use of Suspicious Transaction Reports in fighting tax crimes; - Combating financial crime in the Fisheries Sector, including presentations on INTERPOL’s new Project Scale and the OECD report on tax crime in the sector; - Current strategies for detecting and combating tax evasion through electronic sales suppression; - Addressing issues of tobacco smuggling and its impact on other crimes including money laundering and tax offences; - Current strategies for stemming illicit flows from developing countries.

http://www.oecd.org/ctp/crime/forumontaxandcrime.htm

Egmont Group update

“Egmont” Group Case study: Use of Anonymous Asset Types

The national FIU in a Northern European country received two suspicious transaction reports, which triggered a financial investigation:

Dennis, Muriel and Patrick worked for a drugs trafficking organisation, although they had no criminal records and had not been identified by the police as being in any way involved in drugs trafficking activities. Other members of the trafficking organisation transferred large amounts of money into accounts that the three had opened in a bank in the Northern European country. Shortly after the transfers, the money was withdrawn in cash. At this stage the bank became concerned and decided to disclose to the national FIU. Daniel, Muriel, and Patrick transported the money in cash form to other European jurisdictions where it was still possible to obtain anonymous numbered accounts. Once within the jurisdictions, they opened more than 40 different accounts between them to make the fund movements as complex as possible for any investigation by the authorities in that country. The cash that they had smuggled into the country was split up into the various accounts. The three individuals used the receipts from the banks where they had withdrawn the money to ‘prove’ the legal origin of the funds - and because they spread the anonymous accounts across a range of banks they were able to use the same documentation in support of multiple account openings. Once the accounts had been successfully opened, the three returned to their initial country with the account documentation.

However, following an investigation by FIU and police, the three were arrested upon their return and convicted to a total of ten years imprisonment for drug trafficking offences and drug money laundering. Approximately US$6,000,000 was confiscated in total.

Indicators: ‹ Multiple transfers into a personal account ‹ Large-scale cash transactions ‹ 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 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/unodc/secured/wdr/wdr2013/ The World Drug Report 2013 provides in depth trend analysis of the World_Drug_Report_2013.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

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 6 Stroligo at [email protected] 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

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