Financial Crime World

Title: Timor-Leste’s Legal Arsenal Against Money Laundering and Terrorist Financing: An Overview

The Democratic Republic of Timor-Leste has joined the global fight against financial crimes, such as money laundering and terrorist financing, by enacting Law No. 17/2011 on the Prevention of and Combat Against Money Laundering and Terrorism Financing (ML/TF Law). This article provides an overview of the ML/TF Law’s objectives, key definitions, and mechanisms.

Motives

Money laundering and related crimes, including drug trafficking, corruption, extortion, and terrorism, have detrimental effects beyond local scales. These practices compromise economic activities, create instability in financial systems, and threaten the integrity and reputation of national institutions.

The international community is addressing this issue by fostering international cooperation to ensure compliance with measures to prevent money laundering and terrorism financing.Timor-Leste, recognizing the significance of this global initiative, seeks to establish a legal framework to prevent these illicit activities from undermining its financial system and democratic rule of law.

Overview of the ML/TF Law

The ML/TF Law consists of three chapters: General Provisions, Prevention, and Sanctions & Supervisory Authorities.

  1. Chapter I, General Provisions: This chapter sets the law’s objectives, definitions, and institutional framework.

    • Objectives: Prevent and combat money laundering and terrorism financing (Article One).
    • Coverage: Financial entities, such as banks and insurance companies, and non-financial entities, including casinos and real estate agents (Article Three).
    • Institutional Framework: The Financial Information Unit (FIU) will play a crucial role in the implementation and enforcement of the ML/TF Law (Article Four).

  2. Chapter II, Prevention: This chapter covers provisions related to financial transactions, identification of clients, and record keeping.

    • Transparency: Financial institutions must ensure transparency in their financial transactions.
    • Client Identification: Financial institutions must identify and monitor their clients and transactions to prevent and report suspicious ones (Articles Eight, Ten, Eleven, and Twelve).

  3. Chapter III, Supervisory Authorities and Sanctions: This chapter outlines the duties and powers of supervisory authorities, the registration and supervision of certain activities and professions, and the sanctions for non-compliance.

    • Supervisory Authorities: The supervisory authorities have the duty to ensure compliance with the ML/TF Law.
    • Sanctions: Non-compliance with obligations can result in administrative sanctions, such as fines, and severe cases may lead to license revocation (Articles Twenty-Seven and Thirty-One).

Conclusion

Timor-Leste’s legal regime for the prevention and combat of money laundering and terrorism financing is an essential step in strengthening its financial system and upholding the rule of law. By implementing this comprehensive legislative framework, Timor-Leste affirms its commitment to international efforts to fight these illicit activities.

  • Keywords: Timor-Leste, ML/TF Law, Money laundering, Terrorism financing, Prevention, Compliance, Financial institutions, Non-financial entities, Sanctions, Supervisory authorities.