Asset Confiscation Debacle in San Marino: Jurisdiction at Odds Over “Equivalent Value”

Introduction

A recent judicial debate has led to a significant reduction in the amounts confiscated by first-instance judges, sparking controversy over the confiscation of assets previously seized during criminal investigations. The repatriation of assets seized abroad is also a major issue, with some requesting a more streamlined process.

Asset Recovery Agency’s Concerns

The Asset Recovery Agency (AT) notes that while controls on cross-border transactions are frequent, the number of sanctions applied does not allow for a final assessment of the system’s effectiveness and deterrent value.

Terrorist Financing Concerns

San Marino has been deemed to have a “low” risk of terrorist financing (TF), according to its 2019 National Risk Assessment. The determination is based on an analysis of ML/TF requests, suspicious transaction reports (STRs), cases, and the flow of funds to and from high-risk jurisdictions.

Key Findings

• No prosecutions or convictions for TF in San Marino
• Investigations are ongoing, mostly triggered by STRs
• Country uses various tools and techniques to detect and prevent TF, but some improvements could be made regarding intelligence gathering

Financial Institution Screening

Banks and other financial institutions (FIs) use robust systems to screen clients against UN designations and detect funds. However, some FIs may struggle to analyze and independently decide on cases of partial matches with TFS-related lists.

Non-Profit Organizations and Beneficial Ownership

A dedicated survey conducted by the Financial Intelligence Agency (FIA) together with the Office for Combating Money Laundering (OCA) identified vulnerabilities in non-profit organizations (NPOs) that may be susceptible to TF abuse. The country has implemented a risk-based approach towards these NPOs, but knowledge on TFS-related obligations and risks remains limited.

Proliferation Financing

San Marino applies freezing measures to persons designated by the UN pursuant to UNSCRs 1718 and 1737. The implementation of proliferation financing (PF) supervision follows a similar process as for TF. A working group has been established to identify interested parties and mandatory actions to combat PF.

Private Sector Awareness

• OEs are generally aware of the need to have measures in place to freeze assets without delay, but some rely on commercial databases or manual screening methods.
• The understanding of freezing obligations by DNFBPs is limited, with some representatives stating they would conduct enhanced customer due diligence (ECDD) or contact the FIA for further instructions.

Conclusion

The jurisdiction’s asset confiscation practices and TF risks remain under scrutiny as authorities work to improve management and compliance with international standards.