Cross-border Transfer of Currency or Assets through Informal Systems or Networks for Use in the Financing of Terrorism

1. Cross-border Transfer of Currency or Assets through Informal Systems or Networks for Use in the Financing of Terrorism CICTE Ninth Regular Session Washington D.C., March 5, 2009

2. Contents • International legislation and standards on the financing of terrorism • What is GAFISUD? • Situation in the region • GAFISUD actions • Best practices • Typologies • Cross-border currency control exercises

3. Financing of TerrorismSpecial Recommendations I. Ratification and implementation of UN instruments II. Criminalizing the financing of terrorism (FT) III. Freezing terrorist assts IV. Reporting suspicious transactions V. International cooperation VI. Alternative remittance VII. Wire transfers VIII. Non-profit organizations IX. Cash couriers

4. FT / Wire transfers • Special Recommendation VI: Alternative remittance • Special Recommendation VII: Wire transfers • Special Recommendation IX: Cash couriers

5. Special Recommendation VIAlternative Remittance Objective • To increase transparency in cash movements, ensuring that jurisdictions establish anti-money laundering and terrorism financing controls, especially in those sectors outside the formal financial system.

6. Special Recommendation VIAlternative Remittance Essential elements • To require wire transfer company licensing or registration • To ensure that wire transfer companies implement the FATF recommendations applicable to financial institutions on: • Customer identification • Record-keeping • Reporting suspicious transactions • To implement administrative, civil, or criminal oversight and sanctioning procedures

7. Special Recommendation VII Objective • To prevent easy access by terrorists and other criminals to wire transfers to move their funds and to detect this illicit practice when it occurs.

8. Special Recommendation VII Essential elements • Minimum information for accurate identification of transfer originators • Information remains available through the payment chain. • Scrutiny and monitoring of suspicious wire transfer activities with incomplete originator or beneficiary information.

9. Special Recommendation IX Objectives • To prevent terrorists and other criminals from financing their activities or laundering the proceeds of their crimes through cross-border transport of currency or any other bearer negotiable instrument. • To stop or restrain cash and bearer negotiable instruments that are suspected to be related to terrorist financing or money laundering, or that are falsely declared or disclosed.

10. Special Recommendation IX Essential elements • A declaration system or other disclosure obligation to detect the physical cross-border transport of currency and bearer negotiable instruments. • Legal authority to restrain money concealed or falsely declared. • Effective, proportionate and dissuasive sanctions against persons who make false declarations. • Pertinent measures, including legislative ones, to confiscate currency or bearer negotiable instruments potentially related to terrorist financing or money laundering

11. What is GAFISUD?

12. Working groups

13. Situation in the region

14. GAFISUD Activities • Wire transfer guidelines • Guidelines on physical cross-border transport of currency or assets • Study of GAFISUD typologies of complex asset laundering and terrorism financing techniques • Regional currency and asset border control exercises

15. Wire Transfer Guidelines • Main measures: • Specific designation of an agency to issue regulations and effect supervision • Licensing or registration as a prior requirement for carrying out the activity • Minimum capital • Shareholder suitability • Guidelines for, inter alia, customer identification, reporting suspicious transactions, maintaining transaction records, and civil, administrative, and criminal sanctions

16. Guidelines on Physical Cross-border Transport of Currency or Assets Main measures: • To implement declaration system or other disclosure obligation, whose reports are available to FIUs. • To authorize authorities to request additional information on the origin and destination of falsely declared funds detected. • To grant authority to retain and confiscate falsely declared funds. • Creation of a database of over-threshold transactions.

17. GAFISUD typologies. Study of complex ML/FT techniques Three key aspects (one or any combination) • Wire transfer companies: controls may or may not be imposed in the region in accordance with international recommendations in this area • Exchange sector: lack of or inadequate supervision and regulation in some countries of the region • Physical cross-border transport: thresholds, or lack thereof, for currency entry and departure

18. GAFISUD typologies. Study of complex ML/FT techniques • Typology name • Description: Explanation of the “money laundering” process used by criminals in each typology. • Alert signal: Any element that may allow for the detection of “money laundering” transactions related to the described typology. • Example: Presentation of a generic case related to the typology. • Example diagram: Graphic representation of the example.

19. Scheme

20. Regional Cash and Asset Border Control Exercises • In the last two years, the GAFISUD Police Working Group conducted four currency and asset control exercises per border • Countries control entry/departure for 24 hours at border posts and airports • Information entered in a spreadsheet and analyzed by the Group

21. Regional Cash and Asset Border Control Exercises Conclusions • Lack of training of personnel to detect and analyze cash smuggling situations (a drug-detection approach has been taken) • Lack of currency detection technology • Lack of departure controls (forms are required and efforts targeted at country ports of entry)

22. Thank you! www.gafisud.org contacto@gafisud.org José Alberto Balbuena Balbuena uifmex@hacienda.gob.mx