1. Anti-Money Laundering: Latin America Ben Tonner Attorney www.samsonandmcgrath.com 1

2. OUTLINE  (Anti) Money Laundering  The Financial Action Task Force  AML, Trusts and Estates  AML and Latin America  Changes: the FATF 40 Recommendations  Trends and Tips for the future 2

3. Money Laundering The goal of a large number of criminal acts is to generate a profit. Money laundering is the processing of these criminal proceeds to disguise their illegal origin. Stages: Placement, layering and integration Anti-Money Laundering and CFT 3

4. The Financial Action Task Force http://www.fatf-gafi.org/ 4

5. Role of FATF Global standards – 40 Recommendations – National legislation/regulations Mutual Evaluation – Compliance ratings – Non-cooperative jurisdictions – Countermeasures Typologies 5

6. FATF Affiliates/ FSRBs www.gafisud.infowww.cfatf-gafic.org 6

7. Latin America The risk of money laundering in Latin America is ‘possibly the highest in the world…somewhere between 2.5 and 6.3 percent of the region’s gross domestic product.’ http://www.iadb.org/ 7

8. Scope of the problem ‘It has been brought to our attention that the name of FATF/GAFI is being used for fraudulent purposes: people wishing to make international transfers of funds are allegedly asked by the FATF/GAFI to pay fees for fictitious services relating to verification of the origin of the funds.’ http://www.fatf-gafi.org/pages/faq/fraudwarning/ 8

9. FATF and Latin America 9

10. LATIN AMERICA  Variations within region  Types and levels of risk between countries  Difficulties  R. 19 Higher risk countries  E.g. Argentina, Bolivia, Ecuador  Resources, education, co-operation  Corruption 10

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12. LATIN AMERICA  Problems not exclusive to Latin America  Engaged  Typologies  Permanent members  Improving  Brazil: The Mensalão, recent legislation  Mexican ACL  Honduras, Paraguay and Cuba 12

13. AML, Trusts and Estates Relevance of AML – Wealth management – Products and fiduciary services – Reputation – FATF R. 22 and 23 13

14. Level of FATF compliance: Trusts and Estates  Bad news:  Low compliance scores in Lat Am countries  Good news:  Signs of improvement  IFCs – high standard of compliance  Level of ML not significant 14

15. Revisions to FATF Recommendations February 2012 40 + 9 now 40 Ahead of 4 th round MEV National revisions www.fatf-gafi.org/recommendations 15

16. 16 The Revised FATF 40 Recommendations

17. General Greater emphasis on enforcement (of legislation and regulation) Recommendation 2: – Greater co-operation between nations (Formerly recommendation 31) 17

18. Specific  Risk Based Approach (RBA)  Tax crime now predicate offence  Ultimate Beneficial Ownership (UBO)  Politically Exposed Persons (PEPs) 18

19. Risk Based Approach Recommendation 1 ‘Countries should require financial institutions and designated non-financial businesses and professions (DNFBPs) to indentify, assess and take effective action to mitigate their money laundering and terrorist financing risks’ 19

20. FATF Guidance FATF Guidance for Trusts and Companies Service Providers Typologies for Money Laundering Using TCSPs The Misuse of Corporate Vehicles, including TCSPs GAFISUD Regional Typologies (for South America) www.fatf-gafi.org/ and www.gafisud.info/ www.fatf-gafi.org/www.gafisud.info/ 20

21. Ultimate Beneficial Ownership R. 24 (formerly 33): Transparency and beneficial ownership of legal person R. 25 (formerly 43) Transparency and beneficial ownership of legal arrangements 21

22. Transparency and beneficial ownership of legal arrangements ‘ Countries should ensure that there is adequate, accurate and timely information on express trusts, including information on the settlor, trustee and beneficiaries, that can be obtained or accessed in a timely fashion by competent authorities’ 22

23. Beneficial owner ‘the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.’ ‘Ultimately owns or controls/ultimate effective control’ Refers ‘to situations in which ownership/control is exercised through a chain of ownership or by means of control other than direct control’. 23

24. Politically Exposed Persons R. 12 Defined at p.118 Interpretive Notes Foreign and domestic Enhanced Due Diligence 24

25. Trends and Tips RBO + more rigorous enforcement FATF mandate Spotlight on Lat Am  Consider 40 now  Keep an eye on plenary 17-19 October 2012  Examine MEVs 25

26. Ben Tonner Attorney Cayman Islands btonner@samsonandmcgrath.com www.samsonandmcgrath.com btonner@samsonandmcgrath.com www.samsonandmcgrath.com September 2012 26