Anti-Money Laundering:
Latin America
Ben Tonner
Attorney
www.samsonandmcgrath.com
1
OUTLINE
(Anti) Money Laundering
The Financial Action Task Force
AML, Trusts and Estates
AML and Latin America
Changes: the FATF 40 Recommendations
Trends and Tips for the future
2
Money Laundering
• The goal of a large number of criminal acts is to generate
a profit.
• Money laundering is the processing of these criminal
proceeds to disguise their illegal origin.
• Stages: Placement, layering and integration
• Anti-Money Laundering and CFT
3
The Financial Action Task Force
http://www.fatf-gafi.org/
4
Role of FATF
• Global standards
– 40 Recommendations
– National legislation/regulations
• Mutual Evaluation
– Compliance ratings
– Non-cooperative jurisdictions
– Countermeasures
•
Typologies
5
FATF Affiliates/ FSRBs
www.gafisud.info
www.cfatf-gafic.org
6
Latin America
The risk of money laundering in Latin America is ‘possibly
the highest in the world…somewhere between 2.5 and
6.3 percent of the region’s gross domestic product.’
http://www.iadb.org/
7
Scope of the problem
‘It has been brought to our attention that the
name of FATF/GAFI is being used for fraudulent
purposes: people wishing to make international
transfers of funds are allegedly asked by the
FATF/GAFI to pay fees for fictitious services
relating to verification of the origin of the funds.’
http://www.fatf-gafi.org/pages/faq/fraudwarning/
8
FATF and Latin America
9
LATIN AMERICA
 Variations within region
 Types and levels of risk between countries
 Difficulties
 R. 19 Higher risk countries
 E.g. Argentina, Bolivia, Ecuador
 Resources, education, co-operation
 Corruption
10
11
LATIN AMERICA
 Problems not exclusive to Latin America
 Engaged
 Typologies
 Permanent members
 Improving
 Brazil: The Mensalão, recent legislation
 Mexican ACL
 Honduras, Paraguay and Cuba
12
AML, Trusts and Estates
• Relevance of AML
– Wealth management
– Products and fiduciary
services
– Reputation
– FATF R. 22 and 23
13
Level of FATF compliance:
Trusts and Estates
 Bad news:
 Low compliance scores
in Lat Am countries
 Good news:
 Signs of improvement
 IFCs – high standard of
compliance
 Level of ML not
significant
14
Revisions to FATF Recommendations
• February 2012
• 40 + 9 now 40
• Ahead of 4th round
MEV
www.fatf-gafi.org/recommendations
• National revisions
15
The Revised FATF
40 Recommendations
16
General
• Greater emphasis on enforcement (of legislation and
regulation)
• Recommendation 2:
– Greater co-operation between nations
(Formerly recommendation 31)
17
Specific
 Risk Based Approach (RBA)
 Tax crime now predicate offence
 Ultimate Beneficial Ownership (UBO)
 Politically Exposed Persons (PEPs)
18
Risk Based Approach
• Recommendation 1
‘Countries should require financial institutions and designated
non-financial businesses and professions (DNFBPs) to
indentify, assess and take effective action to mitigate their
money laundering and terrorist financing risks’
19
FATF Guidance
FATF
• Guidance for Trusts and Companies Service Providers
• Typologies for Money Laundering Using TCSPs
• The Misuse of Corporate Vehicles, including TCSPs
GAFISUD
• Regional Typologies (for South America)
• www.fatf-gafi.org/ and www.gafisud.info/
20
Ultimate Beneficial Ownership
• R. 24 (formerly 33):
Transparency and beneficial ownership of legal
person
• R. 25 (formerly 43)
Transparency and beneficial ownership of legal
arrangements
21
Transparency and beneficial ownership
of legal arrangements
‘Countries should ensure that there is adequate,
accurate and timely information on express trusts,
including information on the settlor, trustee and
beneficiaries, that can be obtained or accessed in a
timely fashion by competent authorities’
22
Beneficial owner
‘the natural person(s) who ultimately owns or controls
a customer and/or the natural person on whose behalf
a transaction is being conducted. It also includes those
persons who exercise ultimate effective control over a
legal person or arrangement.’
‘Ultimately owns or
controls/ultimate effective control’
Refers ‘to situations in which ownership/control is
exercised through a chain of ownership or by means of
control other than direct control’.
23
Politically Exposed Persons
• R. 12
• Defined at p.118
Interpretive Notes
• Foreign and domestic
• Enhanced Due
Diligence
24
Trends and Tips
 Consider 40 now
 Keep an eye on plenary
17-19 October 2012
• RBO + more rigorous
enforcement
• FATF mandate
• Spotlight on Lat Am
 Examine MEVs
25
Ben Tonner
Attorney
Cayman Islands
btonner@samsonandmcgrath.com
www.samsonandmcgrath.com
September 2012
26