Financial Crime World

Timor-Leste’s Crackdown on Financial Crime and Terrorism Funding: New Law Enforces Strict Regulations

The Democratic Republic of Timor-Leste has taken a decisive step towards combating money laundering and terrorism financing with the enactment of Law No. 17/2011. This new legislation equips the nation with robust measures to prevent illicit activities from jeopardizing the stability of its financial system and the trust of Timorese institutions.

The Global Threat of Money Laundering and Terrorism Financing

  • Money laundering, an increasingly global threat, can harm individuals and communities, compromise the economic wellbeing of nations, and undermine the integrity of financial institutions.
  • This issue has long surpassed local boundaries, leading to international efforts to combat money laundering and terrorism financing.
  • The last decade has seen significant progress in developing legal frameworks and cooperation among states and international organizations to tackle money laundering and terrorism financing.

Timor-Leste’s Response to the Challenge

  • Aware of these developments, Timor-Leste cannot afford to be complacent.
  • Money laundering and terrorism financing enable activities such as drug trafficking, arms smuggling, terrorism, abduction, and corruption.
  • These criminal practices threaten the rule of law and public trust.

Key Provisions of the New Legislation

The new legislation covers the following areas:

  • General Provisions
  • Financial Information Unit (FIU)
  • Prevention
  • Financial and Non-Financial Entities Identification
  • Transborder Transfers

The goal is to ensure constant surveillance and reporting of any suspicious transactions involving financial and non-financial entities.

The Role of Timor-Leste’s Financial Information Unit (FIU)

  • Under this legislation, Timor-Leste’s Financial Information Unit (FIU) will be established in the Central Bank.
  • This organization will be responsible for receiving and analyzing suspicious transaction reports (STRs) and cooperating with law enforcement and other authorities to investigate potential money laundering or terrorist financing activities.
  • All financial institutions are obligated to submit STRs to the FIU.

Stricter Due Diligence Measures

The law mandates stricter due diligence measures for financial and non-financial entities in identification of their clients, including:

  • Verifying the actual beneficiaries
  • Checking against international terrorist lists and other watchlists

Financial Institutions’ Responsibilities

Financial institutions must comply with the following measures to prevent and combat money laundering and terrorism financing:

  • Identifying suspicious transactions
  • Cooperating with authorities
  • Establishing internal programs for the prevention and combat of money laundering and terrorism financing

Consequences of Non-Compliance

Non-compliance can result in significant fines and penalties.

East Timor’s Reputation as a Well-Regulated Financial Jurisdiction

The stricter regulatory environment will not only benefit Timor-Leste but also strengthen its reputation as a well-regulated and accountable financial jurisdiction. The enactment of this law is a crucial step towards strengthening the nation’s financial security and ensuring the protection of its institutions and people.