Financial Crime World

Title: Timor-Leste’s Anti-Money Laundering Regime Evaluated in APG Report

APG Report on Timor-Leste’s Progress against Money Laundering and Terrorist Financing (2012)

In July 2012, the Asia/Pacific Group on Money Laundering (APG) published a report on Timor-Leste’s progress in the fight against money laundering (ML) and terrorist financing (TF). This article presents the key findings from the report, focusing on the strengths and areas for improvement within the country’s regulatory framework.

Evaluation of Timor-Leste’s AML/CFT Regime

Timor-Leste, an APG member since 2003, underwent a mutual evaluation by the group. The evaluation covered various aspects of the country’s anti-money laundering and combating the financing of terrorism (AML/CFT) regime.

Key Findings

  1. Vulnerabilities to ML and TF:

    • Proximity to Indonesia
    • Weak border controls
    • Cash-based economy

  2. Lack of Prosecutions and Convictions:

    • ML and TF have been criminal offenses since 2009
    • No reported prosecutions or convictions

  3. Recent Regulatory Developments:

    • New AML/CFT Law in late 2011

  1. Criminalization of ML and TF:

    • ML is a criminal offense, with a combined approach for specified predicate offenses
    • Terrorist financing and terrorist acts criminalized since 2009

  2. Challenges in Seizure and Confiscation:

    • Domestic law limitations

  3. Financial Intelligence Unit (FIU):

    • Established as a separate entity within the Central Bank of Timor-Leste (BCTL)

Preventive Measures—Financial Institutions

  1. Moderately Low ML/TF Risk:

    • Domestic financial sector, but gaps in customer due diligence and related preventative measures

  2. Foreign PEPs:

    • Banks must implement enhanced customer due diligence measures
    • No explicit definition of PEPs provided in the law

  3. Correspondent Relationships:

    • Approval from senior management needed to establish new relationships
    • Documentation of respective AML/CFT responsibilities

Next Steps

  1. National AML/CFT Strategy:

    • Developing a comprehensive strategy based on national priorities

  2. FIU Independence and Implementation:

    • Setting up the FIU as an independent body
    • Updating examination manuals, providing additional training for supervisors

Conclusion

By identifying these findings, Timor-Leste can take steps to strengthen its AML/CFT regime significantly. The recent regulatory developments offer opportunities to enhance its preventive measures, especially regarding customer due diligence and risk assessments. Ultimately, the country’s commitment to combating ML and TF will contribute to promoting financial stability and security within the Asia-Pacific region.