Money laundering through money remittance ... - Council of Europe

2010 - Money Laundering through Money Remittance and Currency Exchange Providers
Bolivia. Mr. A has been detained in 2007 by the authorities for being related to an alleged international
criminal organisation responsible for smuggling persons illegally to the United States. Several persons
coming from countries such as Malaysia, China, Korea, India, Iran, Irak and Egypt were sheltered in
Peru by Mr. A and his local associates. Then, they followed the route to the United States through
Ecuador, Guatemala and Mexico. According to the Peruvian police, there is a possible link between
Mr. A and a member of the terrorist group, who is detained in Venezuela. Among indicators having
triggered the suspicion was the fact that there was no link between the person making the transfers
and the variety of countries to which transfers were being made.
Source: Peru.
2.4 Informal money remittance services
81. Informal money remittance systems can be used to send money around the world. They are
often linked to a certain geographical region and go under specific names such as hawala, hundi, or
hawilaad, depending on the geographical or cultural links of the persons who establish or use them.
These are underground „banking‟ channels in which the transactions are settled by offsetting an
equivalent some at the receiving location. The transfer request is made in one location (where funds
the funds to be transferred are received). The counter value is then distributed to a beneficiary at
another geographic location through one of the network‟s correspondents. These systems have
numerous advantages: they are quick, discreet and reasonably priced, which makes these services
attractive for both legal and illegal use. In recent years it has become clear that informal money
remittance systems play an important role in international terrorism financing and that they are a
suitable medium for terrorists to transfer money 23 .
82. Detecting these underground systems is by definition very difficult. In countries with
alternative money remittance systems, it is often difficult to prove illegal activities in these systems as
they are often trust-based, secretive and unregistered, with indirect fund movements. It is therefore
difficult to assess the degree of compliance even when informal value transfer service providers are
legal. In most countries having experience with such systems, informal remittance services are illegal.
In others (Denmark, Sweden, United Kingdom, and United States, and in some cases in Germany),
their activities are regulated by the AML/CFT regime.
83. Underground remittance activity, particularly that which is carried out by immigrants, serves
a legitimate need, but also offers a potential for misuse for ML/TF purposes. For instance, due to the
lack of effective monitoring, anonymous customer transactions can take place and customer‟s
beneficial owner can be hidden.
84. To guarantee that informal systems are not operating in an unregulated manner, the
safeguards below are often used:
Adoption of legislation, in compliance with FATF SR VI, requiring the licensing and/or
registration of MR/CE services.
Regulating the operations of the MR/CE services, including licensing and /or registration,
identification and awareness-raising, the adoption of AML/CFT laws and regulations,
monitoring of compliance with those laws and regulations; and creation and
implementation of a sanctions regime.
Implementation of an effective currency transaction report and suspicious transaction
report system, which includes effective analysis by a supervisory agency that cooperates
with law enforcement. Non-registered MR/CE services are often identified through
23 FATF (2003), pp 11
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