Timor-Leste’s Financial Sector Under Scrutiny: Three Cash Seizures Since 2002 Highlight Need for Improved Controls and Training
Dili, East Timor
The financial sector in East Timor is facing increasing scrutiny following three cash seizures since 2002. In response, customs staff are calling for further training to maintain high professional standards and confidentiality.
Lack of Coordination Impedes Anti-Money Laundering Efforts
According to a recent report, there is currently no arrangement for coordinated exchange of information between domestic agencies or with other countries regarding anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts. This lack of coordination may impede the ability of authorities to access information required to combat money laundering or terrorist financing.
Key Areas for Improvement
The report highlights several key areas that require improvement, including:
- Strengthening AML/CFT controls and reporting requirements: Enhancing the country’s financial system by introducing stricter regulations and standards.
- Enhancing training for customs staff and financial institutions: Providing adequate training to ensure high professional standards and confidentiality among customs staff and financial institutions.
- Improving coordination between domestic agencies and with other countries: Establishing a coordinated exchange of information between domestic agencies and with other countries to combat money laundering and terrorist financing.
- Regulating the informal remittance sector: Bringing the informal remittance sector under regulatory oversight to prevent money laundering and terrorist financing.
New Legislation Introduced
In a bid to improve its AML/CFT framework, East Timor has introduced new legislation aimed at strengthening its financial system. The law provides requirements for financial institutions to establish internal control systems for AML/CFT and prohibits shell banks from operating in the country.
Challenges Ahead
Despite efforts to improve its AML/CFT framework, East Timor still faces several challenges. The report notes that:
- Low STR reporting rates: Only 20 suspicious transaction reports (STRs) were submitted prior to the introduction of the new law, with nil STRs since its passage.
- Insufficient human and technical resources: The Bank of Central Timor (BCTL) needs adequate human and technical resources to ensure effective implementation of the new regime.
Conclusion
East Timor’s financial sector faces significant challenges in its efforts to combat money laundering and terrorist financing. To address these challenges, the country must:
- Strengthen AML/CFT controls and reporting requirements
- Enhance training for customs staff and financial institutions
- Improve coordination between domestic agencies and with other countries
- Regulate the informal remittance sector
By addressing these areas of improvement, East Timor can strengthen its financial system and effectively combat money laundering and terrorist financing.