Financial Crime World

Title: Timor-Leste Faces Financial Crime Threat: Mutual Evaluation Report Uncovers Gaps in AML/CFT Regime

Subtitle: Asia/Pacific Group on Money Laundering Assesses Timor-Leste’s Efforts to Prevent Money Laundering and Terrorist Financing

[Intro]

In a revealing report, the Asia/Pacific Group on Money Laundering (APG) assessed Timor-Leste’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regime, identifying key areas for improvement (APG, 2012). Although Timor-Leste had no previous convictions for money laundering or terrorist financing, the report highlighted the country’s vulnerability to these threats given its ‘dollarized’ and cash-based economy, porous borders, and perceived lack of enforcement capabilities.

[Key Findings]

1. Vulnerable Target Country

  • Timor-Leste is an attractive destination for organized crime due to weak border controls.
  • Its cash-based economy makes it susceptible to ML and FT.
  • Majority of proceeds of crime in the country originate from corruption, tax avoidance, smuggling, human trafficking, and illegal gambling.
  • Timor-Leste criminalized ML and FT since 2009.
  • Passage of Law No. 17/2011 expanded the scope of AML/CFT regulations.
  • A legal basis for setting up a financial intelligence unit (FIU) within the Central Bank of Timor-Leste was created.

3. FIU and Enforcement Agencies

  • The FIU establishment within the Central Bank of Timor-Leste (BCTL) is yet to take place due to lack of an enacted decree.
  • 3 existing ML investigations are being carried out by agencies like PPO, ACC, and PNTL.
  • These agencies may lack the resources and expertise to effectively investigate and prosecute ML and FT cases.

4. Cross-Border Measures

  • Declaration system for cross-border transportation of currency and bearer negotiable instruments is set up in the new AML/CFT Law but not fully implemented.
  • The border with Indonesia is a prime area of concern regarding financial crimes.

5. Preventive Measures for Financial Institutions

  • Timor-Leste’s financial sector is relatively low-risk but gaps exist in implementing adequate CDD and transaction monitoring procedures.
  • Banks may follow home-country AML/CFT requirements but significant deficiencies have been identified.

[Conclusion]

Timor-Leste acknowledges the weaknesses in its AML/CFT regime and plans to address them by implementing the new regulation and enhancing the capacity of law enforcement and regulatory agencies. The APG urges immediate action to establish the FIU and improve cross-border collaboration, while encouraging financial institutions to strengthen their CDD procedures and transaction monitoring capabilities to mitigate the risks of ML and FT.

The [Mutual Evaluation Report of Timor-Leste on AML/CFT measures] serves as a constructive call to action for the country to strengthen its defenses against financial crimes in the face of an increasingly complex and interconnected global threat landscape.


References:
APG. (2012). Moneyval Mutual Evaluation Report on Timor-Leste - 2011. Retrieved from https://web.moneyval.org/cms/home/documents/MutualEvaluationReports/MER_Timor_Leste/MER%20Timor%20Leste.pdf