Aml/Cft) Newsletter for Central Asia

The World Bank

ANTI-MONEY LAUNDERING AND COUNTERING THE FINANCING OF TERRORISM (AML/CFT) NEWSLETTER FOR CENTRAL ASIA

Issue 9, May 2006 Available online at http://www.imolin.org

I. Calendar

1 AML/CFT Training for Financial Sector Supervisors and Supervisors of Non-Financial Businesses and Professions

Dates: 25 April 2006 Organizer/s: UNODC and World Bank Location: Bishkek, Kyrgyzstan Contact Information: Cari Votava, [email protected]

2 AML/CFT Technical Assistance Coordination Meeting

Date: 11 May 2005 at 10:00 Organizer/s: UNODC andWorld Bank Location: World Bank Central Asia Regional Office, Almaty Contact Information: Shane Michael Riedel, [email protected]

3 On-Site Visit of the EuroAsian Group (EAG) Chairman to Dushanbe, Tajikistan

Dates: 15-17 May 2006 Organizer/s: EuroAsian Group (EAG) Contact Information: Victor Kochenov, [email protected]

4 AML/CFT Training for Judges from Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan and Turkmenistan

Date: 18-20 May 2006 Organizer/s: ABA/CEELI Location: Almaty, Kazakhstan Contact Information: Lynne Kocen, [email protected]

5 IMF Workshop on Combating the Financing of Terrorism for Officials from Armenia, Azerbaijan, Belarus, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Macedonia, Moldova, Montenegro, Romania, Serbia, Tajikistan, Ukraine and Uzbekistan

Date: 22-26 May 2006 Organizer/s: International Monetary Fund (IMF) Location: Siracusa, Italy Contact Information: Giuseppe Lombardo, [email protected]

We welcome contributions to this newsletter. To receive this newsletter, to submit information for inclusion or to be removed from the distribution list, please contact Aigerim Yesetova at [email protected] or Shane Michael Riedel at [email protected].

6 EuroAsian Group (EAG) Plenary and Working Group Meetings

Date: 29-31 May 2006 Organizer/s: EuroAsian Group (EAG) Location: St. Petersburg, Russian Federation Contact Information: Victor Kochenov, [email protected]

8 Role of the Financial Control Authorities (Chamber of Accounts) in Countering International Money Laundering

Date: 8-9 June 2006 Organizer/s: Chamber of Accounts of the Russian Federation Location: Moscow, Russian Federation Contact Information: [email protected]

9 14th Annual Egmont Group Plenary

Date: 12-16 June 2006 Organizer/s: Egmont Group & MOKAS (Cypriot FIU) Location: Limassol, Cyprus Contact Information: Ludovic d'Hoore, [email protected]

10 EuroAsian Group (EAG) Evaluator Training Seminars

Dates: 26-30 June 2006 Organizer/s: EuroAsian Group (EAG) Location: Moscow, Russian Federation Contact Information: Victor Kochenov, [email protected]

II. Announcements

The United Nations Office on Drugs and Crime (UNODC) is pleased to announce the arrival of Rick McDonell as the new Chief of the Global Programme against Money Laundering in Vienna.

Rick is a lawyer with over 25 years experience in the criminal law field in government, the private sector, academia and international organizations.

He has been a federal prosecutor in Australia and National Coordinator of organized crime investigation Task Forces both domestically and internationally.

Rick McDonell, the Chief of the UNODC Global He has extensive experience in anti-money laundering and Programme against Money Laundering in terrorist financing policy and practice, having established the Vienna, Austria. Financial Action Task Force Asia Secretariat in 1995 and been the founding Head of the Asia/Pacific Group on Money Laundering from 1997 until 2006.

Rick is well versed in all facets of the international standards applying to money laundering and terrorist financing including implementation of best practices, compliance assessments, methods and trends research and technical assistance analysis and delivery.

2 II. Monthly Technical Assistance Update

A group of Kazakhstani Members of Parliament and FIU Financial Intelligence Unit representatives of the General Prosecutor’s Office and the FATF Financial Action Task NGO Forum of Entrepreneurs, participated in an OSCE Force Centre in Almaty-organized study trip to Latvia and Russia FSRB FATF-Style Regional to raise awareness of ways to fight money-laundering and Bodies the financing of terrorism. EAG EuroAsian Group

The Kazakhstani delegation met Latvian and Russian experts from Financial Intelligence Units, as well as law enforcement agencies, National Banks and parliamentarians.

The International Narcotics and Law Enforcement Affairs Office (INL) of the US Embassy in Almaty organized a study tour to Denmark for a Kazakstani delegation comprised of eight parliamentarians, representative of the General Prosecutor in the Parliament and one chief consultant of the Parliament (all members of the Majilis From left: Kazakhstani Senator Abdygali Akhmetov, Aldis working group on the draft AML law) from 29 to 31 March. Lieljuksis, Deputy Head of the Latvian Financial Intelligence and Roza Dossymbekova, Advisor to the Participants met with two deputy directors of the Danish Kazakhstani General Prosecutor's Office discuss AML/CFT Public issues in Riga, Latvia. Prosecutor for Serious Economic Crimes (FIU): Ulla Hoeg and Jens Madsen, representatives of the Financial Supervisory Authority, the Bankers Association, Danske Bank (Denmark’s Largest Bank) and the Danish Association of Entrepreneurs.

The delegation discussed Danish experiences in as well as international standards for the establishment of the FIU and other aspects of the draft anti-money

laundering law that is currently under discussion in the Members of the Kazakhstani delegation and Danish experts Majilis. pose for a photo in Copenhagen.

IV. EuroAsian Group (EAG) Report

The first EAG Training Seminar for Evaluators was held on March 20-24, 2006 in Moscow. The program of the Seminar was based on the FATF Evaluator Methodology. The Seminar was aimed at training the experts who will take part in the first EAG Mutual Evaluation planned for the third quarter of 2006.

International experts from the Central Bank of Russia, EAG, FATF, IMF, the Maltese FIU, Moneyval, Rosfin Monitoring, UNODC and the World Bank, all of whoim brought practical knowledge and experience in conducting mutual evaluations, oled the training seminar. Thirty-eight experts from all EAG member-states and Ukraine were invited to take part in the Seminar as students.

Trainers presented an intensive series of 17 training modules, specifically designed the the FATF, the World Bank, the IMF and others to train evaluators to use the AML/CFT Methodology for evaluating implimentaion of international AML/CFT standards. Later, simulated evaluation group exercises in which participants were divided into six evaluation teams which conducted interviews with the ministers of a hypothetical country. At the end of the session the trainers drew the attention of students to their mistakes made during the interviews.

The evaluation teams are now drafting evaluation reports and ratings, wish will be reviewed in the next training session in June. This format of evaluator training is also used by FATF and FSRBs globally to train evaluators and to increase the effectiveness of implimentation of international standards and best practices.

www.euroasiangroup.org 3

III. AML/CFT in Central Asia: What you should know…

Launch of UNODC’s Mutual Legal Assistance Request Writer Tool

Mutual legal assistance is one of the most important weapons the justice system has against serious international crime. Requests often need to be generated at very short notice and in ways that avoid legal pitfalls and obstacles that can arise when different legal systems try to lend each other their criminal justice powers. In response the United Nations Office on Drugs and Crime’s Legal Advisory Programme has developed a Mutual Legal Assistance Request Writer Tool to assist criminal justice practitioners in drafting correct and effective requests thereby enhancing international cooperation between States.

The MLA Tool writes the request from inputs the user is guided to make step-by-step and requires virtually no prior knowledge or experience of mutual legal assistance. It is user friendly, easily adjustable to any country’s substantive and procedural law, works for all criminal law casework and covers all mutual legal assistance types of assistance derived from international best practice.

For an extensive period the MLA Tool was tried, tested and accepted by practitioners for practitioners as well as by a wider network of UNODC’s professional legal and inter-governmental partners.

UNODC’s Legal Advisory Programme has now globally deployed the MLA Tool with the launch of the website: http://www.unodc.org/mla. The website contains background information and documentation about the MLA Tool including a video demonstration.

Competent national authorities can download the MLA Tool from this website in English, French and Spanish. The Russian language version is due for launch at the end of the 2nd quarter of 2006 followed by the Arabic and Chinese versions.

The MLA Tool is designed to support in mutual legal assistance request writing; extradition follows a different legal regime. The Legal Advisory Programme is currently developing an Extradition Request Writer Tool which is expected to be available before the end of this year.

For any questions, please contact:

UNODC Legal Advisory Programme P.O. Box 500 A-1400 Vienna Austria Email: [email protected]

V. AML/CFT Case Study

Geoffrey visited several branches of his bank in Europe to deposit significant amounts of cash into his company account. The amounts ranged from US$15,000-40,000. He visited all the branches in a single day, and the branches were all within a short distance of each other. Since this financial institution had automated account-monitoring procedures, the different deposits raised an initial alert for further examination by a human operator.

Geoffrey was a citizen of an African country and according to the customer records at the bank ran a business importing second hand electrical goods from Africa. Fund transfers were made in an irregular basis to accounts in Africa – presumably payments for goods. The credit deposits were apparently proceeds from the sale of the goods in Europe, although the financial institution was concerned at the pattern of deposits. If these credits were legitimate, than why wouldn’t Geoffrey deposit the whole amount at his own branch? The bank decided to report the credit deposits to the national FIU.

To allow some time for an investigation to be developed, the FIU granted the bank the authority to continue to operate Geoffrey’s account normally. After analyzing the transaction reports and bank records, the FIU decided to seek further documentary evidence concerning the shipment of goods from Africa. The FIU directed the bank to ask Geoffrey’s accountant to produce them. A short time later, a number of airway bills and invoices which purported to support the alleged shipments were brought produced for the financial institution and passed on to the FIU. 4

The FIU served production orders on the account in order to obtain formal records of all transactions through the account over the previous few years. The FIU also contacted the Customs service and requested attention to be focused on future shipment of the electrical goods linked to Geoffrey’s company as they entered Europe from Africa. Customs identified a shipment that was found to contain a large quantity of Cannabis with a street value of over US$300,000.

The African principal organizer – who was not Geoffrey – was identified and subsequently convicted to six years imprisonment for the substantive drug trafficking offence. Further financial and other investigations also identified that the African principal had been involved in eight similar drug importations. He was sentenced to a further ten years imprisonment for these importations to run concurrently. The court further upheld that he had benefited from drug trafficking in excess of US$1,500,000 and made a confiscation order for this amount. Geoffrey fled the country, and a warrant was issued for his arrest for money laundering and other offences.

Suspicious Indicators:

1. Large-scale cash transactions 2. Deposits at a variety of branches and times for no logical reason (possible evidence of ‘smurfing,’ or the use of multiple transactions below the reporting threshold to avoid detection) 3. Questionable rationale of underlying business – importing used consumer goods from Africa to Europe is unusual

This case has been adapted from the “FIU’s in Action,” a compilation of 100 sanitized cases from Egmont Group members. The full version is available at www.egmontgroup.org.

V. Websites of Interest

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

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

http://www.imolin.org International Money Laundering Information Network administered by UNODC Global Program against Money Laundering (GPML) on behalf of a partnership of nine 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.euroasiangroup.org The EuroAsian Group is the FATF-Style Regional Body serving Central Asia. (In English and Russian)

http://www.egmontgroup.org The Egmont Group is the international network of FIUs which work together to deter international money laundering efforts. (In English)

http://www.fatf-gafi.org Financial Action Task Force Against Money Laundering (FATF). (In English)

http://www.unodc.org/mla UNODC Mutual Legal Assistance Request Writer Tool (In English, French and Spanish)

http://www.adb.org/Documents/Others/ Asian Development Bank’s Anti-Money Laundering Toolkit. OGC-Toolkits/Anti-Money- (In English) Laundering/default.asp

http://www.bis.org/publ/bcbs85.pdf Basel Committee Information on Due Diligence for Banks (In English)

5 http://www.iosco.org/library/resolutions/ International Organization of Securities Commissions pdf/IOSCORES5.pdf Resolution on Anti-Money Laundering (In English) http://www.bis.org/publ/bcbsc137.pdf Basel Committee: Prevention of criminal use of the banking system for the purpose of money-laundering (In English) http://www.bis.org/publ/joint05.pdf Joint Note from the Basel Committee on Banking Supervision, International Association of Insurance Supervisors and International Organization of Securities Commissions on Initiatives to Combat Money Laundering and the Financing of Terrorism (In English)

This publication contains recent news stories collated from print and other media. These materials are gathered from external sources, and therefore the accuracy and completeness cannot be guaranteed. Mo reover, 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. As the World Bank or the United Nations do not always own the copyright to these materials, permission from the copyright owner must be sought for further use.