On 2 March, the State Department published the 2020 International Narcotics Control Strategy Report (INCSR), an annual report to Congress that describes the efforts of key countries to attack all aspects of the international drug trade in Calendar Year 2019. Volume I: drug and chemical control activities. Volume II: money laundering and financial crimes. Volume II focuses on the exposure to the AML/CFT threat in the specific context of narcotics-related money laundering. Amongst the matters discussed or highlighted are –
- “Off-the-shelf” international business companies (IBC), often purchased via the internet, remain a significant concern by creating a vehicle through which nominee directors from a different country may effectively provide anonymity to the true beneficial owners;
- While the report demonstrates that beneficial ownership transparency remains a vulnerability in many jurisdictions, it also highlights a number of significant steps that have been taken on the issue. For example, the UK and BVI have implemented registers of beneficial owners, and St. Lucia has new beneficial ownership registers for IBC and international trusts. Panama and Senegal are finalising legislation to create similar registers. Trinidad and Tobago passed amendments to its Companies Act, improving the adequacy and accuracy of beneficial ownership information, and the Ukrainian parliament passed in the first reading a new Bill that would improve disclosure of beneficial owners;
- Another long-standing area of concern is trade-based money laundering (TBML), and systems such as hawala, the black market peso exchange, and the use of commodities such as gold and diamonds are not captured by many financial reporting requirements;
- The growing network of Trade Transparency Units (TTU), now numbering close to 20, has revealed the extent of transnational TBML through the monitoring of import and export documentation. The TTU focus on detecting anomalies in trade data — such as deliberate over and under-invoicing — that can be a powerful predictor of TBML;
- In Africa, the rapid rise in mobile phone use, and the ability to transfer funds between parties without involving banks or other financial institutions severely restricts the transparency of mobile payments and raises the risk criminal and terrorist organisations will co-opt these payment services.
- Virtual currencies are growing in popularity and expanding their reach, and their rapid development poses policy, legal, and enforcement challenges. Some states are moving towards regulation, whilst India has drafted legislation calling for possible prison sentences for those holding, selling, or dealing in crypto-currencies;
- Following the FATF recent focus on money laundering methodologies used by human trafficking networks, members of FATF and the FATF style-regional bodies have moved to reinforce their efforts in these areas;
- The report highlights action several governments are taking to more effectively address corruption and its links to money laundering. As with money laundering, while legislative and institutional reforms are an important foundation, robust and consistent enforcement is also key.
https://www.state.gov/2020-international-narcotics-control-strategy-report/
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