Title: Timor-Leste Enacts Strict Laws to Prevent Money Laundering and Terrorism Financing

Introduction

The Democratic Republic of Timor-Leste has taken a significant step towards combating money laundering and terrorism financing by enacting Law No. 17/2011 on December 28, 2011. This law establishes the legal regime for preventing and combating money laundering and terrorism financing in the country. In this article, we’ll explore the motivation behind the law, its key provisions, and the impact on financial entities and the Financial Information Unit (FIU).

Motivation and Importance

Money laundering and terrorism financing have become global threats, with growing impact on local and international financial systems. These criminal activities can compromise the stability and integrity of financial systems, affecting economies and public trust. Timor-Leste’s legislature recognized the need to combat these crimes and preserve the Rule of Law and democratic institutions:

1. Impact on financial systems and economies
2. Preserving the Rule of Law and public trust

Key Provisions

The new law covers several aspects aimed at providing continuous surveillance, ensuring transparency, and ultimately preventing the compromise of the financial system. The provisions include:

1. Coverage for financial and non-financial entities
2. Creation of the Financial Information Unit (FIU)
3. Identification of clients and verification of identities
4. Special control of transactions and record-keeping

Financial and Non-Financial Entities

Financial entities such as credit institutions, insurance companies, financial and financial leasing companies, entities issuing and managing credit and debit cards, and individuals dealing with money transactions, are subject to the law. Non-financial entities, including casinos, providers of financial services, accountants, and auditors, are also included.

Financial Information Unit (FIU)

The FIU was created to strengthen Timor-Leste’s fight against money laundering and terrorism financing. The law sets out the nature, organization, and operation of the FIU, while giving it the necessary powers to perform its duties effectively.

Identification of Clients and Verification of Identities

Financial and non-financial entities are required to identify their clients and actual beneficiaries and ascertain their identities. This includes collect documentation from independent sources and data, as well as information on the aims and intentions of the business relationship. Entities must also adhere to due diligence requirements to prevent money laundering and terrorism financing.

Sanctions for Non-Compliance

To ensure the enforcement of these measures, sanctions for non-compliance have been established. Companies or individuals that fail to comply with the obligations and duties set out in the law, or do not comply with the prescribed procedures, will face penalties.

Conclusion

By enacting this law, Timor-Leste has reaffirmed its commitment to combating money laundering and terrorism financing, joining a global effort to protect the integrity of financial systems and safeguard the economic stability of nations. This comprehensive legislation covers various aspects, from the identification of clients to the creation of the Financial Information Unit. Together, these provisions aim to provide continuous surveillance, ensure transparency, and ultimately prevent the compromise of the financial system.