Title: Timor-Leste’s Financial Institutions Take a Lead Role in Crime Prevention: Key Provisions of the New Anti-Money Laundering and Counter-Terrorism Financing Law

Date: March 15, 2023

Background

Timor-Leste’s parliament has passed Law No. 17/2011, setting out the legal regime for preventing and combating money laundering and financing of terrorism within the country. The legislation is a response to the growing international effort to address these illicit activities, which pose a threat to global financial stability.

Money laundering and related crimes, such as drug trafficking, corruption, abduction, and terrorism, have gained significant momentum in the last two decades. Their impact extends beyond local economies, compromising economic activities and causing instability in financial systems.

Timor-Leste’s Commitment to Prevention

In line with numerous states and international organizations, Timor-Leste recognizes the importance of preventing financial institutions and non-financial professions from facilitating these criminal activities. The new legislation is designed to ensure the constant surveillance of vulnerable institutions, protecting financial system stability and the reputation of Timorese institutions.

Key Provisions of the Law

The following provisions are some of the most significant elements of the new legislation, known as the Law Against Money Laundering and Terrorism Financing in Timor-Leste.

Transparency of Financial Transactions

Financial institutions must maintain a physical presence in Timor-Leste or be part of a registered financial group subject to efficient and consolidated supervision.
Financial institutions cannot enter or continue commercial relations with banks or financial institutions registered in jurisdictions without efficient and consolidated supervision.

Transparency of Legal Persons and Centers of Collective Interests

Legal persons established in Timor-Leste must provide adequate and necessary information on the actual beneficiaries and their control structure to the competent authority upon request.

Client Identification

Financial and non-financial entities are mandated to identify and verify their clients’ identities under certain conditions.
For individuals: full name and national identification number.
For legal persons: name, address, and relevant company records.

Special Identification Procedures

Certain types of transactions and businesses, such as insurance companies, casinos, dealers in precious metals, and real estate agents, are subject to special identification procedures.

Internal Programmes

Financial and non-financial institutions are required to devise and implement programmes aimed at the prevention of money laundering and financing of terrorism.

Electronic Transfers

Financial institutions whose activities include electronic transfers must acquire and verify specific information related to the transfers.

Recording and Reporting

Financial institutions are required to keep records of specific information on transactions and identify all parties involved in suspicious transactions.
These reports must be provided to the Financial Intelligence Unit (FIU) or another supervisory authority established by law whenever requested.

Confidentiality

All FIU employees and agents are subject to the duty of confidentiality, prohibiting them from disclosing any information they acquire within the scope of their duties.

Conclusion

Timor-Leste’s comprehensive approach to combating money laundering and financing of terrorism will help maintain its position as a stable and reputable financial hub. By implementing the new legislation, the country will further demonstrate its commitment to the international effort to prevent these pernicious activities from causing harm to its financial institutions and the broader economy.