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U.S. DEPARTMENT OF STATE
INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT MARCH 1996:
FINANCIAL CRIMES AND MONEY LAUNDERING

United States Department of State

Bureau for International Narcotics and Law Enforcement Affairs


INCSR 1996 COUNTRY CHAPTERS
Cambodia to Dominican Republic

Cambodia. (Low Medium) Cambodia shares borders with Thailand, Laos and Vietnam, the Golden Triangle of Southeast Asian heroin production and trafficking, a factor which, with indications of an emergent involvement in the movement of narcotics proceeds, prompts raising the priority from Low to Low-Medium.

Cambodia's two year old democracy, installed after elections in 1993, still faces an active, although diminishing Khmer Rouge insurgency. Laws and legal institutions are still being developed. Enforcement agencies are also in the initial stages of operation. National and municipal police charged with anti-narcotics (and indeed all) law enforcement activities lack basic training in basic law enforcement techniques and drug enforcement measures, including drug identification. They have no communications equipment and few facilities.

Cambodia has approximately 33 banks, but the national bank only recently received legal authority to regulate them. Previous attempts by the central bank to audit local banks are reported simply to have been thwarted by private guards hired by those banks. The Royal Cambodian Government, recovering from over twenty years of warfare and internal strife, is heavily dependent on external assistance, and most ministries, including those charged with police functions, have funds sufficient only to cover salaries. The lack of funds for training and operations, coupled with the newness of Cambodia's democratic institutions, make Cambodia a vulnerable target for drug traffickers and money launderers operating in Southeast Asia.

There are no empirical data about the current extent of drug trafficking and money laundering in Cambodia, but the size of one heroin seizure, coupled with anecdotal evidence, indicates a growing problem.

Cambodia's constitutional monarch signed a decree establishing a national counternarcotics authority whose chairmen are Cambodia's two prime ministers and whose vice-chairman is the minister of justice.

The ministry of justice, with assistance of an advisor from the UNDCP, concluded a draft of anti-narcotics legislation which was recently reviewed by the council of ministers, and is expected to be sent shortly to the national assembly. The legislation contains a provision outlawing the laundering of drug proceeds. The legislation commits the government to becoming a party to the 1961 Single Convention on Narcotic Drugs, the 1971 Convention on Psychotropic Substances and the 1988 UN Convention.

Canada. (High) GOC officials estimate 80 percent of money laundering in Canada is international, i.e., money laundering occurs either from profits generated from drug sales in Canada, which must be laundered and returned to the source countries, or from drug money generated abroad, particularly in the US Canada's advanced financial sector, lack of mandatory reporting requirements and proximity to the US make it attractive to drug money launderers especially for the placement of currency generated from the sale of drugs. Canada does not impose cross-border currency reporting. Its bankers continue to oppose mandatory reporting of suspicious transactions, although complying with other international standards for bank recordkeeping. Canada reports a high level of compliance with the voluntary reports.

According to a report issued by the Solicitor General, drug money laundering in Canada takes place in banks and deposit-taking institutions, currency exchange houses, front companies, real estate transactions and gold shops. Banks are the most commonly used means to launder and move drug money because of the prominence of their branches in traditional tax haven countries, such as the Bahamas and other Caribbean nations. Currency exchange houses, particularly those located in cities along the US border, are suspected of moving large amounts of drug money between the two countries. Currency exchanges, like banks and other financial institutions, are not required to report large or suspicious transactions to authorities although they are required to maintain records of large cash transactions for five years.

Bulk currency shipments continue to be an alternative for money launderers. In some cases, US dollars are smuggled in bulk across the Canadian border, where they are deposited into local accounts where they may then be wire transferred virtually anywhere in the world.

Canada and the United States have a tradition of close cooperation on law enforcement matters, and signed an asset seizure agreement in March, 1995, that provides for mutual asset sharing in joint investigations. In addition, Canada and the United States have a mutual legal assistance treaty and a customs mutual assistance agreement. Canada has seized record amounts of currency in successive years but actual forfeitures are negligible by comparison because of laws requiring proof of a direct link between seized property or currency and specific drug transactions.

Caribbean Dependent Territories. This chapter contains individual summaries on Anguilla, the British Virgin Islands, Cayman Islands, Montserrat and Turks and Caicos Islands, because, notwithstanding their responding to a common policy, they have different degrees of vulnerability. The numerous offshore facilities in each island group may be abused by drug traffickers to launder money, although over recent years the UK has taken steps to tighten regulatory regimes and improve the quality of regulation in all of the territories.

Guidelines have been issued for new bank licenses, restricting such licenses to subsidiaries of established banks with effective home supervision. Given its tight secrecy laws and large offshore banking sector, the Cayman Islands are considered especially vulnerable to money launderers, particularly moving proceeds from the United States. The UK has extended the 1988 UN Convention to all of the CDTs, and each is subject to the US-UK mutual legal assistance and extradition treaties. Each of the CDTs, led by the Caymans, is working on an all-crimes money laundering statute to emulate recent British legislation. All of the territories are introducing "gateway" provisions in their financial services legislation to facilitate regulatory cooperation and to provide greater transparency with respect to beneficial ownership. Finally, as a further cooperative step, the UK is tentatively planning to move the Dependent Territories regional crime intelligence system from Tortola, BVI, to Miami, to facilitate increased liaison with US agencies. This follows the successful joint US-UK white colalr crime team established two years when Scotland Yard stationed an officer in Miami to work with the FBI.

Cayman Islands. (High) The Cayman Islands have set the pace in the Caribbean for legislation complying with the 1988 UN Convention and other international standards, and, in 1995, adopted laws complying with Convention standards on asset seizure and forfeiture and control of chemicals. A dependent territory of the United Kingdom, the Caymans had already adopted mandatory reporting of suspicious transactions, controls on international transfers of currencies and other banking reforms, following on its criminalization of drug money laundering. The Caymans has also increased regulation of mutual funds and the insurance sector. Still, Caymans is one of the largest offshore financial service centers and remains attractive to money launderers because of its sophisticated banking services, tradition of bank secrecy, and the ease with which shell companies can be created. Shell companies are believed to play a significant role in Cayman Islands money laundering; there are an estimated 26,000 companies which, along with several hundred banks, cannot be closely monitored given Caymans resources. Much of the money entering the Caymans is believed to originate in the US and Cayman authorities cooperate closely with USG officials.

Channel Islands & the Isle of Man. (Medium) The Channel Islands (Jersey and Guernsey) and the Isle of Man are major tax havens. Offshore banking centers and banking is their major industry. Money laundering is a criminal offense as it relates to drug proceeds, and banks are required to report suspicious transactions. Local laws also provide for asset seizure and forfeiture, as well as asset sharing. The islands banking systems are considered attractive to money launderers and are vulnerable, given that the great majority of money is received by wire transfers and large sums of money are sent to North and South American as well as European destinations. Local authorities cooperate closely with DEA in identifying possible traffickers and conducting investigations.

Chile. (Medium) The new counter-narcotics and anti-money laundering laws went into effect in October 1995, a year after passage. The initial legislation was invalidated by the Supreme Court because of constitutional issues related to asset forfeiture. The GOC anti-money laundering task force began operations shortly thereafter.

The question with Chile, as with numerous other governments with new anti-money laundering laws, is how vigorously the government will implement these measures. This question is especially pertinent in Chile's case, given the dual aspect of a robust economy which has the potential to attract drug dollars as well as legitimate investment and a banking sector which is opposed to any incursions upon bank secrecy.

As the law is currently written, money laundering is illegal only if the suspect financial transaction can be tied to drug proceeds. No estimates are available on the volume of illicit proceeds from other criminal activity. No evidence indicates corruption of senior public officials as related to narcotics.

It is not yet clear whether if the new law will ensure the availability of records to the USG or other governments. This law has yet to be tested in the court system. Measures to open the veil of bank secrecy are under consideration, but not widely supported by the public or private sector.

The new law allows banks to report suspicious activities, but it does not require them to do so. Because of the newness of the law, it is uncertain whether bankers and others are protected by law with respect to their cooperation with law enforcement entities. On one hand, the law attempts to protect sources of information, but on the other hand, it tries to protect law-abiding businesses and investors from false accusations.

Chile has cooperated in a limited manner with the USG in investigating financial crimes. Financial records are difficult to obtain without a court order.

The new counter-narcotics law does not provide for the seizure and forfeiture of narcotics-related assets. The law does provide for fines, imprisonment, revocation of professional licenses, and temporary closing of places of business.

China. (Medium) China is not yet a major money laundering country whose activities in that sector impact the US. Chinese officials are aware of, and concerned about, the possibility that some investors in China may be engaged in money laundering. There is no money laundering law per se in China, but Chinese officials cite a law prohibiting covering up the source of assets and laws against fraud as also covering money laundering offenses. Officials are very concerned about increasing economic crimes and illicit flows of money across borders, and have sought to strengthen both international ties and regulatory efforts. PRC officials appear to be receptive to Financial Action Task Force (FATF) information and recommendations. They have received four FATF delegations in less than two years, and have actively participated in FATF's Asian seminars. However, China has not adopted FATF recommendations into law.

Colombia. (High) Money laundering is a natural corollary of the cocaine trade in Colombia. Law 190 of 1995, enacted in June, makes money laundering a crime, not limited to the proceeds of drug trafficking, but inadequate regulation of the financial industry continues to facilitate laundering of narcotics profits and investments in legitimate business.

The legislation must be strengthened and adequately enforced; the legislation alone has no deterrent value and traffickers continue to collect and enjoy their illegal profits. The GOC must prosecute money launderers, shut down their operations, and institutionalize anti-money laundering efforts.

Colombian financial institutions engage in currency transactions involving international narcotics trafficking proceeds that include significant amounts of United States currency. Money laundering occurs both in the banking and non-bank financial system (exchange houses, travel agencies) and contraband, real estate and front companies.

Law 190 stipulates a penalty of three to eight years in prison for any person who "conceals, insures, transforms, invests, transfers, keeps in his custody, transports, administers, buys the material objects of a crime or the proceeds thereof, or makes such property/assets appear to be legal." Article 31 sets the sentence at four to twelve years if the value of the properties, the material object of the crime or the proceeds thereof, exceeds 1,000 monthly salaries (approximately USD 1.4 million). It also prescribes an increased penalty of one half to three fourths for cases involving kidnapping, extortion, or drug violations; if a foreign monetary/banking exchange was used in committing the crime; if property was introduced into the Colombian Customs territory; or if the crime was committed by individuals entering into a contract with individuals subject to inspection, control or supervision by the banking superintendent.

There have been no prosecutions for money laundering in Colombia. In December 1995 the Prosecutor General's Office (Fiscalia) established a special unit to investigate cases under the new law. The Fiscalia initiated an investigation of the finances of the Rodriguez-Orejuela family for possible violations of money-laundering provisions.

Since July 1995 the banking superintendency has levied fines of 20 million pesos each (approximately usd 24,000) against five major Colombian banks for failing to report suspicious transactions and accounts. All cases involved accounts at the Cali branches of banks showing high volume of activity involving large sums of money. The banking superintendency has stated that it intends to conduct more investigations of this nature, but that its personnel lack the technical expertise to analyze complex transactions and movement of funds. The superintendency has inquired into the possibility of US training assistance. The Fiscalia and the banking association agreed in December 1995 on a mutual training program on legal and financial aspects of money laundering.

Colombia's exchange control system requires that all financial institutions file reports on cash transactions exceeding USD 10,000, present a record of such transactions to the superintendent of banks every three months identifying the customers involved, and notify the authorities of suspicious activities. Bankers and others are protected by law with respect to their cooperation with law enforcement entities. Despite this protection, however, some bankers claim that failure to report is based partly on fear of reprisal. Colombia's financial statute requires due diligence and reporting to the banking superintendency while the new anti-corruption statute requires reporting to the Prosecutor General's Office (Fiscalia) and imposes criminal sanctions on bankers. Although some banks have been fined, no bankers have been prosecuted.

Colombia has not addressed the problem of international transportation of illegal-source currency and monetary instruments through specific legislation or policy, although laws regulating the international wire transfer of funds apply and there are controls limiting the amount of currency which can be brought into the country, but that law differs between citizens and foreigners.

Colombia has not adopted laws or regulations that ensure the availability of adequate records of narcotics investigations to appropriate USG personnel and those of other governments.

Colombia is a signatory to the 1988 UN Convention, and adopted formal articles of ratification. Due to reservations (in such key areas as extradition, asset forfeiture and money laundering), Colombia is not considered to be in compliance.

Money laundering controls are applied to non-banking financial institutions, but enforcement in this area is weak.

The Colombian National Police have cooperated with USG enforcement agencies on narcotics-related matters, within the constraints imposed by internal resources and capabilities -- but also the constraints inherent in a lack of legal authority, partially corrected by the 1995 law, the restraints on evidence sharing, and the restraints implicit in the uncertainties about the Colombian judicial process.

Colombia has not yet established effective systems for identifying, seizing and forfeiting narcotics-related assets. The GOC signed an MOU with the USG in July 1990 which is the basis for the United States to transfer assets forfeited in the United States with the assistance of the GOC. Asset seizure and forfeiture provisions embodied in Law 30 of 1974, amended in 1986, are inadequate. The GOC promised passage of stronger asset seizure and forfeiture legislation during 1995, but did not fulfill the promise. Obstacles in passing such legislation include the efforts made by narcotics traffickers to suborn and intimidate legislators. Under the current law, property rights are forfeited only if the individual is convicted of a crime or if the owner does not legally defend those rights within a year after being summoned. However, the GOC's inability to compile evidence and to prosecute and convict defendants on criminal charges brings into question the validity of the entire process. Few cases result in conviction. There are also legal loopholes which allow traffickers and others to shield assets. In practice many assets are seized but few are forfeited. The following assets can be seized and forfeited pursuant to judicial action: instruments of crime (such as conveyances used to transport narcotics), farms on which illicit crops are grown, and intangible property (such as bank accounts). To date, no business has been seized permanently for being used to launder drug money or other criminal proceeds.

In December 1995 the Colombian Senate passed a bill with an amendment (the so-called "narco-mico") which would have made prosecution for the crime of illicit enrichment virtually impossible, and would have effectively derailed ongoing illicit enrichment cases such as the "Caso 8000." The Camara (lower house) unanimously rejected the amendment; however, the Senate may attempt to reintroduce such a measure. Even in the absence of the narco-mico, conviction for illicit enrichment is nearly impossible. To date no such conviction for narcotics-related illicit enrichment has been achieved. Legislative attempts spurred by narco-traffickers to water down laws are not uncommon. Various politicians and legislators have attempted to modify or abolish the regional "faceless" justice system, which provides prosecutors or judges with anonymity.

The Colombian bankers association has declared its support for money laundering countermeasures. The banking community cooperates with enforcement efforts to trace funds and seize bank accounts to some extent. However, there is still general reluctance to be forthcoming. Traffickers have taken retaliatory actions related to money laundering investigations, government cooperation with the USG, and seizures of assets in the form of legislative challenges as well as threats and intimidation of GOC officials.

Costa Rica. (Medium High) Money laundering remains a serious problem in this busy banking center, giving rise both to mercurial accounts and fraudulent schemes. Costa Rica has yet to fully address the challenge posed by money laundering activity. Some launderers smuggle funds into the country and convert them into Costa Rican currency before depositing them into bank accounts. In the past, others, posing as entrepreneurs, apparently laundered dollars through purchases of tax payment certificates (CAT) which were designed to promote exports. While CAT certificates are no longer being issued, there is suspicion that revenues from drug trafficking are finding their way into real estate and tourism developments. Recent liberalization of the banking system facilitates money laundering by allowing virtually unrestricted exchange of the colon at near market rates through commercial banks and certain other financial institutions. No allegations have arisen regarding encouragement, facilitation, or involvement of senior officials in money laundering.

In 1995, Costa Rica established a national money laundering commission comprised of officials from government ministries and the banking sector. The GOCR is considering amendments to this law to incorporate the CICAD Model Regulations with appropriate changes to avoid constitutional problems. Officials are also considering changes to laws governing banking secrecy and access to information. Costa Rica joined the Caribbean Financial Action Task Force (CFATF) and ratified various international accords on money laundering. Three CFATF experts conducted a "mutual evaluation" of money-laundering controls in October. Costa Rica plans to host the 1996 CFATF Ministerial Level Meeting.

Costa Rican law establishes drug related money laundering as a criminal offense. Prosecutors, however, must prove that a defendant knew the funds came from drug trafficking, thereby making convictions difficult. Nonetheless, a Costa Rican court convicted drug trafficker Ricardo Alem of a 1988 money laundering offense in April after several trials. Banking secrecy exists, but courts may order national banks to reveal information on specific accounts. Laws require banks to maintain records, report suspicious transactions, and file large cash transaction reports.

Costa Rica has not yet signed bilateral agreements to share in the proceeds of successful money laundering or narcotics trafficking investigations. The GOCR has passed legislation and implementing regulations to facilitate the freezing and seizure of assets. The National Drug Council, under the Ministry of Justice, enforces Costa Rica's asset seizure law. The council is scrupulous in ensuring that the assets of traffickers are seized and either are sold or put at the disposal of drug related enforcement entities.

Cote D'Ivoire. (Low Medium) Cote D'Ivoire is an important financial center in West Africa. To the extent money laundering occurs, a significant portion is related to narcotics proceeds, and involves the banking system. Illicit activities are primarily related to heroin and cocaine, and money laundering proceeds are typically foreign owned, rather than owned by local trafficking organizations. The GOCI's financial institutions do not engage in currency transactions involving international narcotics trafficking proceeds that include significant amounts of US currency or currency derived from illegal drug sales in the US

There is no formal mechanism for exchanging adequate records in connection with narcotics investigations and proceedings. Nonetheless, to the extent feasible, the GOCI has indicated willingness to respond favorably to any request. The GOCI has not adopted any laws or regulations that ensure the availability of adequate records of narcotics investigations to appropriate usg personnel and those of other governments. Cote D'Ivoire is a signatory to the 1988 Vienna convention and has adopted the formal articles of ratification. The GOCI has not entered into any bilateral agreements with any countries for the purpose of exchanging information on money laundering.

Money laundering from drug and non-drug crimes is a criminal offense. Banks are required to maintain records on large currency transactions; to report the data to the GOCI; and to maintain for an adequate time the records necessary to reconstruct significant transactions through financial institutions. Bankers are protected by law with respect to their cooperation with law enforcement entities. The GOCI has, to date, not been formally requested to cooperate with any law enforcement agency of the usg in investigating financial crimes related to narcotics. The GOCI has not addressed the problem of international transportation of illegal-source currency and monetary instruments. There are controls on the amount of currency which can be brought into and out of Cote D'Ivoire. 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 1995.

Cuba. (Low Medium) The growing tourist trade, Cuba's aggressive pursuit of foreign investment, the establishment in Cuba during 1995 of several foreign banks, and Cuba's procedures for purchasing materials around the US trade embargo through third countries like Panama provide a potential framework for significant money laundering operations. Should Cuba permit shell corporations and protected bank accounts so as to compete with its neighbors, it could attract substantial sums of licit and illicit funds.

However, at present, the Cuban Peso is not accepted in international markets and Cuba is not considered an important financial center in the Caribbean region. There is little evidence to support or refute Cuba's claim that no corruption, including money laundering, occurs in Cuba. The exact quantity of US dollars in Cuba is unknown.

The Cuban penal code has no specific provision making money laundering a criminal offense. Section 4 of Article 190 of the code states that anyone who "helps or assists" drug offenders is subject to the same sentence as the offender. There are no known requirements for banks to report large currency transactions or other suspicious transactions. There were no reported arrests or prosecutions for money laundering during 1995. Cuba has no specific system for seizing and forfeiting assets derived from international narcotics trafficking, although the government regularly seizes and retains property suspected of being connected with illegal activity.

The lack of preventive action by the Cuban government and the potential for abuse prompt its inclusion in the Low-Medium category -- a country to be watched.

Cyprus. (Medium High) Despite passage of anti-money laundering and asset seizure laws, Cyprus is of increasing concern to the US as a center for laundering proceeds from a range of serious crimes, not limited to drug trafficking. The ranking for Cyprus has been raised to Medium-High -- a country where the US hopes to see remedial action and countermeasures in the coming year.

The certainty that performance, not just the passage of laws, is the true measure of political will, is well confirmed by the situation in Cyprus. Drug money laundering is but one of the USG financial crime concerns which have a common root in the penetration of Cyprus by organized criminal elements. A central question, given the laws and regulations which are described below, is why the situation is worsening. Just three years ago, the INCSR report said money laundering occurred outside the banking system, that Cyprus was a meeting ground where money and drugs were transferred.

Now, it is apparent that the concerns expressed in the 1995 INCSR were well-founded. There is increasing evidence of activity by Russian organized crime groups and other criminals exploiting some of the more than 15,000 offshore companies registered on Cyprus. There is also heightened concern about the offshore banks which have been established in Turkish Cyprus, and the possibility of a conduit for moving illicit funds to and from Turkey through branches of these banks located on the Turkish mainland. Not least, there is the concern that Cypriot banks have been used to facilitate financial crimes.

In July, the Cypriot Parliament ratified the Council of Europe convention on "laundering, search, seizure and confiscation of the proceeds from crime," which criminalizes money laundering from all illicit funds. Legislation to implement the convention is currently being drafted. The challenge Cyprus must confront is to implement as well as pass that legislation. Parallel to this legislative activity, cooperation between Cyprus and other countries in the field of mutual legal assistance, training and exchange of information is likely to be significantly strengthened.

The Cyprus police force has organized a working group of financial investigators and central bank officials to identify suspicious banking transactions and accounts. The central bank requested that all banks appoint a member of their managerial staff as the "money laundering compliance officer" to report suspicious transactions to the police. The central bank has also recommended that bank employees participate, on an on-going basis, in special training programs to combat money laundering.

The central bank, in cooperation with the association of commercial banks, is preparing a "code of conduct" to prevent the criminal use of the banking system for the purpose of money laundering.

Restrictions on foreign ownership of property and controls on currency and bullion transiting Cyprus are among the measures which discourage efforts to launder money through the domestic economy. Cyprus law strictly controls the amount of money that residents and non-residents can take out of the country each year. The central bank of Cyprus approves foreign currency accounts by authorized dealers and monetary activities in general. Cyprus customs and excise department closely monitors more stringent currency declaration requirements for transiting passengers.

Cyprus has a growing offshore banking sector comprised of a reported twenty banks. The central bank has supervisory powers over both sectors and has monitored large cash transfers to the offshore sector. Cypriot offshore banks may not accept foreign currency cash deposits unless accompanied by the appropriate customs declaration form. Over the years, the central bank has issued a series of circulars and recommendations to the financial sector, aiming to combat money laundering through the financial system. All banks in Cyprus, including domestic and offshore, have been requested to implement the recommendations (including "know your customer" policies). Also all banks are to notify the central bank of any cash deposits over usd 10,000 in local or foreign currencies.

Czech Republic. (Medium) Intensified concerns about the money laundering problem prompted raising the priority for the Czech Republic from Low to Medium.

Money laundering in the Czech Republic started to become a problem with the onset of (mostly) Russian organized crime activities in Czechoslovakia and the opening of the Czech economy. Recognizing its vulnerability to trafficking and money laundering, the government continued vigorous police efforts against trafficking; gave police the power to conduct undercover operations; and proposed a money laundering law.

The proposed law, introduced in November 1995, would criminalize money laundering, and, in addition to the current requirement for reporting all transactions above 100,000 crowns (which would rise to 500,000 Crowns or about US$38,000), require banks and all other financial institutions to confirm and retain records of identification for persons conducting transactions above that level, and also require them to report unusual transactions. A lower reporting threshold of 200,000 Crowns would be required for casinos, and 100,000 crowns for exchanges.

The proposed law would require reporting of cash crossing the Czech border. The Czech Republic signed the Council of Europe's convention on money laundering, seizure, and confiscation of proceeds from crime in December. As a successor to the Czech and Slovak Republic, the Czech Republic is a party to the 1988 UN Convention.

While the government has enacted laws authorizing asset forfeiture related to money laundering, it does not permit the sharing of funds. Similarly, banks are required to cooperate with domestic investigations, but at not permitted to cooperate with investigations by other governments.

Denmark. (Low Medium) There were no known cases of money laundering in Denmark in 1995, where both drug and non-drug related money laundering are crimes. Denmark has complied with FATF recommendations and requirements of the 1988 UN Convention.

Dominican Republic. (Medium) The Dominican Republic is not yet an important financial center nor an important tax haven or offshore banking center. But, indicators warn of its potential increased importance as a venue for money laundering. Those indications, coupled with an absence of preventive measures and enforcement actions, prompt raising the priority from Low-Medium to Medium for 1996.

President Balaguer took a very positive step on December 18, 1995, when he signed into law amendments to the narcotics laws which establish penalties for money laundering activities, require financial institutions to report suspicious transactions, and provide for seizure of assets derived from crime. The Bank Superintendent's Office and the National Drug Control Directorate are charged with enforcement of the new law. Financial institutions are now required to supply the courts, the National Drug Control Directorate and other government security agencies with any information they request, as soon as possible.

Foreign exchange transactions are legally supposed to go through the commercial banking system, but an informal process also exists for such transactions. Bank regulations have been modified to allow dollar accounts, but without further modification of the law, this is not profitable. There is no provision for money laundering in the new financial monetary code. Money gained from illegal drug activities by Dominicans in the United States is widely used to purchase or finance legitimate businesses, but there is no statistical data available as to the amount. The DNCD Financial Action Task Force exists in name but has been powerless to act. There have been no arrests for money laundering related offenses in the Dominican Republic. The GODR has been responsive to USG requests for information and assistance. Dominican representatives attend CFATF meetings. Money laundering is not a criminal offense. There are no restrictions on the importation of hard currency and up to US$ 5,000 can be freely exported. Justifications for larger movements are not difficult to obtain. There is no law allowing for the sharing of seized assets with other countries. There are no due diligence or banker negligence laws. While on paper the CND receives proceeds and disburses them for law enforcement and prevention programs, in reality few assets are turned over by the courts. Some seized airplanes, for example, are still in the legal process after 12 years.

Shielding assets is not difficult. The CND court watch program now focuses only on assets in any given case. The current law allows only for criminal forfeiture. To our knowledge, traffickers have taken no retaliatory actions. There is a bank secrecy law in the country, but the superintendent of banks has full access to commercial bank records. Banks are usually willing to cooperate with law enforcement agencies.

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