Mutual Evaluation / Detailed Assessment Report Anti-Money Laundering and Combating the Financing of Terrorism Republic of Haiti

FINAL Page 1 sur 124 WORLD BANK M UTUAL E VALUATION / D ETAILED A SSESSMENT R EPORT A NTI -M ONEY L AUNDERING AND C OMBATING THE F INANCING OF T ERRORISM REPUBLIC OF HAITI June 23, 2008 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized 2 TABLE OF CONTENTS 1 GENERAL INFORMATION.............................................................................................................15 1.1 G ENERAL I NFORMATION O N H AITI ................................ ................................ ................................ 15 1.2 G ENERAL S ITUATION OF M ONEY L AUNDERING AND F INANCING OF T ERRORISM ......................... 17 1.3 O VERVIEW OF THE F INANCIAL S ECTOR AND D ESI GNATED N ON - F INANCIAL B USINESSES AND P ROFESSIONS ................................ ................................ ................................ ................................ .............. 19 1.4 O VERVIEW OF COMMERCIA L LAWS AND MECHANISM S GOVERNING LEGAL PE RSONS AND ARRANGEMEN TS ................................ ................................ ................................ ................................ ......... 23 2 LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES ....................................28 2.1 C RIMINALIZATION OF M ONEY L AUNDERING (R.1 & 2) ................................ ................................ 28 2.1.1 D E SCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 28 2.1.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 31 2.1.3 C OMPLIANCE WITH R ECOMMENDATIONS 1 & 2 ................................ ................................ ............ 32 2.2 C RIMINALIZATION OF T ERRORIST F INANCING (SR.II) ................................ ................................ ... 32 2.2.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 32 2.2.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 33 2.2.3 C OMPLIANCE WITH S PECIAL R ECOMMENDATION II ................................ ................................ ...... 33 2.3 C ONFISCATION , F REEZING AND S EIZING OF P ROCEEDS OF C RIME (R.3) ................................ ....... 33 2.3.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 33 2.3.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 37 2.3.3 C OMPLIANCE WITH R ECOMMENDATION 3 ................................ ................................ ..................... 38 2.4 F REEZING OF F UNDS U SED FOR T ERRORIST F INANCING (SR.III) ................................ .................. 38 2.4.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 38 2.4.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 38 2.4.3 C OMPLIANCE WITH S PECIAL R ECO MMENDATION III ................................ ................................ ..... 38 2.5 T HE F INANCIAL I NTELLIGENCE U NIT AND ITS F UNCTIONS (R.26) ................................ ................. 39 2.5.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 39 2.5.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 44 2.5.3 C OMPLIANCE WITH R ECOMMENDATION 26 ................................ ................................ ................... 44 2.6 L AW ENFORCEMENT , PROSECUTION , AND OTHER COMPETENT AUTHORITIES – FRAMEWORK FOR THE IN VESTIGATION AND PROS ECUTION OF OFFENCES , AND FOR CONFISCATION AND FREEZING (R.27 & 28) 45 2.6.1 D ES CRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 45 2.6.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 50 2.6.3 C OMPLIANCE WITH R ECOMMENDATIONS 27 & 28 ................................ ................................ ........ 51 2.7 R EPORTING / COMMUNICATION OF CRO SS - BORDER TRANSACTIONS (SR.IX) ................................ .. 51 2.7.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 51 2.7.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 53 2.7.3 C OMPLIANCE WITH S PECIAL R ECOMMENDATION IX ................................ ................................ ..... 53 3 PREVENTIVE MEASURES – FINANCIAL INSTITUTIONS .....................................................54 3.1 R ISK OF MONEY LAUNDER ING OR TERRORIST FIN ANCING ................................ .............................. 54 3.2 C USTOMER DUE DILIGENC E , INCLUDING EN HANCED OR REDUCED ID ENTIFICATION MEASURE S (R.5 TO 8) 54 3.2.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 54 3.2.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 61 3.2.3 C OMPLIANCE WITH R ECOMMENDATIONS 5 TO 8 ................................ ................................ ........... 62 3.3 T HIRD PARTIES AND INT RODUCERS ( INTRODUCED BUSINESS - R.9) ................................ ............... 62 3.3.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 62 3.3.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 63 3 3.3.4 C O MPLIANCE WITH R ECOMMENDATION 9 ................................ ................................ ..................... 63 3.4 F INANCIAL INSTITUTION SECRECY OR CONFIDEN TIALITY (R.4) ................................ ..................... 63 3.4.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 63 3.4.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 65 3.4.3 C OMPLIANCE WITH R ECOMMENDATION 4 ................................ ................................ ..................... 66 3.5 R ECORD KEEPING AND WI RE TRANSFER RULES (R.10 & SR.VII) ................................ .................. 66 3.5.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 66 3.5.2 R ECOMMEN DATIONS AND C OMMENTS ................................ ................................ .......................... 67 3.5.3 C OMPLIANCE WITH R ECOMMENDATION 10 AND S PECIAL R ECOMMENDATION VII ...................... 67 3.6 M ONITORING OF TRANSAC TIONS AND RELATIONSHIPS (R.11 & 21) ................................ .............. 67 3.6.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 67 3.6.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 69 3.6.3 C OMPLIANCE WITH R ECOMMENDATIONS 11 & 21 ................................ ................................ ........ 69 3.7 S USPICIOUS TRANSACTIO N REPORTS AND OTHER REPORTING (R.13 - 14, 19, 25 & SR.IV) ............ 69 3.7.1 Description and Analysis ................................ ................................ ................................ .......... 69 3.7.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 71 3.7.3 C OM PLIANCE WITH R ECOMMENDATIONS 13, 14, 19, AND 25 ( CRITERION 25.2) AND S PECIAL R ECOMMENDATION IV ................................ ................................ ................................ ............................... 72 3.8 I NTERNAL CONTROLS , COMPLIANCE , AND FOREIGN BRANCHES (R.15 & 22) ................................ 72 3.8.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 72 3.8.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 74 3.8.3 C OMPLIANC E WITH R ECOMMENDATIONS 15 & 22 ................................ ................................ ........ 74 3.9 S HELL BANKS (R.18) ................................ ................................ ................................ ..................... 75 3.9.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 75 3.9.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 75 3.9.3 C OMPLIANCE WITH R ECOMMENDATION 18 ................................ ................................ ................... 75 3.10 T HE SUPERVIS ORY AND OVERSIGHT SY STEM – COMPETENT AUTHORITIE S AND SELF - REGULATORY ORGANIZAT IONS (SRO S ) ................................ ................................ ................................ ............................ 76 R OLE , FUNCTIONS , OBLIGATIONS , AND POWERS ( INCLUDING SANCTIONS ) (R.17, 23, 25, 29, 30 & 32) .... 76 3.10.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ .... 76 3.10.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ ...................... 84 3.10.3 C OMPLIANCE WITH R ECOMMENDATIONS 17, 23 ( CRITERIA 23.2, 23.4, 23.6 - 23.7), 29, & 30 .. 84 3.11 M ONEY / VALUE TRANSFER SERVI CES (SR.VI) ................................ ................................ ............... 85 3.11.1 D ESCRIPTION AND A NALYSIS ( SUMMARY ) ................................ ................................ ................ 85 3.11.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ ...................... 85 3.11.3 C OMPLIANCE WITH S PECIA L R ECOMMENDATION VI ................................ ................................ 86 4 PREVENTIVE MEASURES – DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS ............................................................................................................................................86 4.1 C USTOMER DUE DILIGENC E AND RECORD KEEPING (R.12) ................................ ............................ 86 4.1.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 86 4.1.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 88 4.1.3 C OMPLIANCE WITH R ECOMMENDATION 12 ................................ ................................ ................... 88 4.2 S USPICIOUS TRANSACTIO N REPORTING (R.16) ................................ ................................ .............. 89 4.2.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 89 4.2.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 89 4.2.3 C OMPLIANCE WITH R ECOMMENDATION 16 ................................ ................................ ................... 89 4.3.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 89 4.3.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 90 4.3.3 C OMPLIANCE WITH R ECOMMENDATIONS 24 & 25 ( CRITERION 25.1, NON - FINANCIAL BUSINESSES AND PROFESSIONS ) ................................ ................................ ................................ ................................ ...... 90 4.4 OTHER NON-FINANCIAL BUSINESSES AND PROFESSIONS – MODERN AND SECURE TRANSACTION TECHNIQUES (R.20) ..................................................................................91 4.4.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 91 4.4.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 91 4 4.4.3 C OMPLIANCE WITH R ECOMMENDATION 20 ................................ ................................ ................... 91 5 LEGAL PERSONS AND ARRANGEMENTS AND NONPROFIT ORGANIZATIONS...........92 5.1 L EGAL PERSONS – G CCESS TO BENEFICIAL OWNERSHIP AND CONTRO L INFORMATION (R.33) ...... 92 5.1.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 92 5.1.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 93 5.1.3 C OMPLIANCE WITH R ECOMMENDATION 33 ................................ ................................ ................... 93 5.2 L EGAL ARRANGEMENTS – G CCESS TO BENEFICIAL OWNERSHI P AND CONTROL INFORM ATION (R.34) 94 5.2.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 94 5.2.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 94 5.2.3 C OMPLIANCE WITH R ECOMMENDATION 34 ................................ ................................ ................... 94 5.3 N ONPROFIT ORGANIZATIO NS (SR.VIII) ................................ ................................ ......................... 94 5.3.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 94 5.3.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 96 5.3.3 C OMPLIANCE WITH S PECIAL R ECOMMENDATION VIII ................................ ................................ .. 97 6 NATIONAL AND INTERNATIONAL COOPÉRATION..............................................................97 6.1 N ATIONAL COOPERATION AND COORDINATION (R.31) ................................ ................................ .. 97 6.1.1 D ESCRIPTION AND A NALYSIS (R. 31 & 32 ( CRITERION 32.1 ONLY )) ................................ ............ 97 6.1.2 R ECOMMENDATIONS AND C OMMENTS (R. 31 & 32 ( CRITERION 32.1 ONLY )) ............................... 98 6.1.3 C OMPLIANCE WITH R ECOMMENDATION 31 ................................ ................................ ................... 98 6.2 C ONVENTIONS AND U NITED N ATIONS S PECIAL R ESOLUTIONS (R.35 & SR.I) .............................. 98 6.2.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 98 6.2.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ .......................... 99 6.2.3 C OMPLIANCE WITH R EC OMMENDATION 35 AND S PECIAL R ECOMMENDATION I ........................... 99 6.3 M UTUAL LEGAL ASSISTAN CE (R.36 - 38 & SR.V) ................................ ................................ .......... 99 6.3.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ........ 99 6.3.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ ........................ 102 6.3.3 C OMPLIANCE WITH R ECOMMENDATIONS 36 - 38 AND S PECIAL R ECOMMENDATION V ................ 102 6.4 E XTRADITION (R.37 & 39 & SR.V) ................................ ................................ ............................ 103 6.4.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ...... 103 6 .4.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ ........................ 103 6.4.3 C OMPLIANCE WITH R ECOMMENDATIONS 37 & 39 & S PECIAL R ECOMMENDATION V ................ 103 6.5 O THER FOR MS OF INTERNATIONAL COOPERATION (R.40 & SR.V) ................................ .............. 104 6.5.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ...... 104 6.5.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ ........................ 105 6.5.3 C OMPLIANCE WITH R ECOMMENDATION 40 AND S PECIAL R ECOMMENDATION V ....................... 105 7 OTHER ISSUES ...............................................................................................................................105 7.1 R ESOURCES AND STATIST ICS ................................ ................................ ................................ ....... 105 7.1.1 D ESCRIPTION AND A NALYSIS ................................ ................................ ................................ ...... 105 7.1.2 R ECOMMENDATIONS AND C OMMENTS ................................ ................................ ........................ 106 7.2 O THER RELEVANT AML/CFT MEASURES OR ISSUES ................................ ................................ ... 106 7.3 G ENERAL STRUCTURE OF THE AML/CFT SYSTEM ( CF . ALSO S ECTION 1.1) ................................ 107 5 ABBREVIATIONS AND ACRONYMS BAFE Bureau des Affaires Financières et Economiques – Financial and Economic Investigation Bureau BEL B anque d’Epargne et de Logement – Savings and Housing Bank BLTS Bureau de Lutte contre le Traf ic de Stupéfiants – Drug Trafficking Investigation Bureau WB World Bank BRH Banque de la République d’Haïti – Central Bank of Haiti CEC Caisse d’Epargne et de Crédit – Savings and Credit Union CIC Code d’Instruction Criminelle – Criminal Investigation C ode CIN Carte d’Identité Nationale – National Identity Card CIP Carte d’Identité Professionnelle – Professional Identity Card CNLBA Comité National de Lutte contre le Blanchiment des Avoirs – National Anti - Money Laundering Committee CONALD Commission Na tionale de Lutte contre la Drogue – National Anti - Drug Commission CP Code Pénal – Criminal Code CSCCA Cour Supérieure des Comptes et du Contentieux Administratif – Superior Audit and Administrative Court DCASG Direction Centrale de l’Administration et des Services Généraux – Department of Administration and General Services DCPJ Direction Centrale de la Police Judiciaire – Criminal Investigation Department DEA Drug Enforcement Administration DGI Direction Générale des Impôts – Tax Department DGPN Di rection Générale de la Police Nationale – National Police Department IMF International Monetary Fund FATF Financial Action Task Force CFATF Caribbean Financial Action Task Force GRH Government of the Republic of Haiti IGPN Inspection Générale de la Po lice Nationale – National Police Inspectorate JO Journal Officiel – Official Gazette AML/CFT Anti - Money Laundering and Combating the Financing of Terrorism MINUSTAH United Nations Stabilization Mission in Haiti NGO Non - Governmental Organization GNP Gr oss National Product PNH Police Nationale d’Haïti – National Police of Haiti PEP Politically Exposed Person TI Tran s parency International UCAONG Unité de Coordination des Activités des ONG – NGO Coordination Unit UCREF Unité Centrale de Renseignement s F inancier s – Central Financial Intelligence Unit ULCC Unité de Lutte Contre la Corruption – Anti - Corruption Unit UNPOL United Nations Police 6 PREFACE Information and methodology used for the evaluation of the Republic of Haiti 1. The evaluation of the anti - money laundering and combating the financing of terrorism (AML/CFT) regime of the Republic of Haiti 1 was based on the Forty Recommendations 2003 and the Nine Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force (FATF), an d was prepared using the AML/CFT Methodology 2004 2 . The evaluation was based on the laws, regulations and other materials supplied by Haiti, and information obtained by the evaluation team during its on - site visit to Haiti from 24 September to 5 October 20 07, and throughout the evaluation process. During the on - site visit, the evaluation team met with officials and representatives from all relevant Haitian Government agencies and the private sector. A list of the bodies met is provided in Annex 2 to the Mu tual Evaluation Report . 2. The evaluation was carried out by an evaluation team made up of criminal law experts from the World Bank and criminal prosecution and regulatory specialists. The evaluation team consisted of Marianne Mathias (legal expert, consultan t), André Cuisset ( law enforcement expert, consultant) and Jean Pesme (financial sector, World Bank, team leader). The experts reviewed the institutional framework, the relevant AML/CFT laws, regulations, guidelines and other requirements, and the regulato ry and other systems in place to deter money laundering (ML) and the financing of terrorism (FT) through financial institutions and Designated Non - Financial Businesses and Professions (DNFBP), as well as examining the capacity, the implementation and the e ffectiveness of all these systems 3. This report provides a summary of the AML/CFT measures in place in Haiti as of the date of the on - site visit or immediately thereafter (before December 1, 2007). It describes and analyzes those measures. It also rates Hait i’s compliance with the FATF 40+9 Recommendations (see Table 1) and provides recommendations on how certain aspects of the system could be improved (see Table 2). 1 In this report, Haiti denotes the Republic of Haiti. 2 As amended in June 2007. 7 EXECUTIVE SUMMARY 4. This summary of the AML/CFT measures in force in the Republic of Haiti a s of the date of the on - site visit, from 24 September to 5 October 2007 and immediately thereafter, describes and analyzes those measures and provides recommendations on how certain aspects of the system could be strengthened. It also rates Haiti’s complia nce with the FATF 40 + 9 Recommendations (see Table 1: Ratings of Compliance with FATF Recommendations), 5. This evaluation was prepared using the AML/CFT Methodology 2004, as amended in June 2007. The evaluation was based on the laws, regulations and other m aterials supplied by the Haitian authorities. Key Findings 6. In 2001, Haiti enacted an AML Law encompassing the fundamental elements of the fight against money laundering, but has not yet adopted a legal framework to counter the financing of terrorism . The A ML framework sets out a money laundering offence, seizure and confiscation mechanisms, prevention and detection requirements and the basis for international cooperation (limited to mutual legal assistance and the Financial Intelligence Unit). It presents h owever several significant weaknesses with regard to the international standard (dealing inter alia with the scope of the predicate offences, the coverage of designated non financial businesses and professions, the transparency of legal entities and of non - profit organizations, the restrictions to the lifting of banking secrecy). 7. The implementation of the existing regime is insufficient, ineffective and weakly coordinated, and is not up to the money laundering and terrorism financing risks facing the country . The key institutions necessary to the well - functioning of the legislative framework are in place, but have not yet sufficiently used the tools provided for by the 2001 AML Law. No money laundering prosecution has been completed thus far; the number of s uspicious transactions reports, which were filed only by the banking sector, remains very small; the compliance by the financial sector with its AML obligations is not properly supervised. 8. Haiti should adopt a more strategic approach and clarify the roles and objectives of each of the actors of the AML regime, by focusing first on the implementation of the AML regime currently in place . The efforts should deal, from now on, with the strengthening of the capacity of these various players, their refocusing on their core missions (notably the financial intelligence unit), and the deepening of the cooperation and coordination between these. Haiti should adopt a Law on countering the financing of terrorism, defining a terrorism financing offence and setting up a terrorist asset freezing regime, and should launch a substantial training effort, tailored to the specific mandates of each institution of the AML framework. 1. General information 8 9. The political reconciliation process and the Government ’s economic policie s have led to a resumption of growth in Haiti. The country’s economic and social development indicators are all low; poverty is very high, and the unemployment rate is extremely high. Haiti’s economy is dominated by the informal sector. It is a cash econom y, with a high degree of dollarization. The financial sector is relatively underdeveloped, with a small proportion of the population holding bank accounts and concentration in the banking sector. 10. Haitian authorities’ efforts in recent months (with the back ing of MINUSTAH 3 in particular) to step up the fight against insecurity have produced positive results, even though the gains are still fragile. Before 2004, political instability fostered crime and insecurity. The commitment at the highest levels of Gover nment to fight corruption, drug trafficking and financial crime (including money laundering) has been reaffirmed in the strongest terms in recent months and provides a critical foundation for stepping up the fight against organized crime. 11. Geographical, eco nomic and social factors mean that Haiti must cope with a high level of criminal activity. Its location means that the country is generally considered to be a transit hub for drug traffic between South American countries and North America; the level of cor ruption is described as high; smuggling, illegal immigration and other types of trafficking, such as illegal arms, are widespread. The scale of the laundering of the proceeds of these crimes in Haiti is hard to determine, however, it seems that the money - l aundering techniques used in Haiti are fairly simple, and involve real estate and trade. 12. The dominant role of the informal sector in the economy, the prevalence of cash, institutional weaknesses, and corruption are challenges for the effectiveness of any a nti - money laundering system. It is a delicate matter to distinguish between the proceeds of crime and the proceeds of informal economic activity. Enhancing transparency for the purposes of combating money laundering could have the unintended effect of shif ting certain economic activities into the informal sector. Providing a lasting solution to cope with these special structural features must not rely solely on combating money laundering; a strategic approach, taking a long view and building on other struct ural reforms, is now needed more than ever. 2. Legal system and related institutional measures 13. The Law of February 21, 2001 defines the offence of laundering the proceeds of illegal drug trafficking and other serious offences . The definition of money la undering in Haiti is broadly in line with the Vienna Convention and the Palermo Convention. Haiti has ratified the Vienna Convention and signed the Palermo Convention, but neither has been transposed into Haitian law. The scope of the predicate offences is too narrow. Many categories of offences that are especially relevant in the local context, such as corruption or smuggling, are not crimes carrying prison sentences of more than three years and, therefore, they do not constitute predicate offences. The La w of February 2001 establishes the liability of legal persons in cases of money laundering, albeit too restrictively. A number of prosecutions are currently in the investigation stage and, to date, no convictions have been obtained, even from the lower cou rts. Prosecutions still seem to focus on predicate offences and deal with money laundering in connection with drug trafficking only. A more determined policy to prosecute money laundering is critical. It would help establish practices and build up a body o f case law dealing with financial crimes. 14. Haiti has not ratified the United Nations Convention for the Suppression of the Financing of Terrorism and it has not criminalized the financing of terrorism. The 3 MINUSTAH: United Nations Stabilization Mission in Haiti 9 authorities must criminalize the financing of terro rism as soon as possible, in keeping with their international commitments. 15. The Law of February 2001 establishes a comprehensive and satisfactory system for confiscating property related to money laundering, which can even be used to confiscate funds in cases where no conviction for money laundering has been obtained. The Law also introduces additional instruments for freezing or seizing assets. The authorities have started using these instruments, to offset the absence of prosecution of money laundering in some cases, but there is still too much confusion about the responsibilities and powers of the various players involved. One source of concern is the number of court decisions releasing seized assets. We encourage the authorities to continue using these in struments, but in a more strategic approach that is more in line with the letter and the spirit of the law, particularly with regard to respecting the powers of the institutions concerned (courts, Financial Intelligence Unit, law enforcement agencies). 16. Haiti does not have a legal framework for implementing United Nations Security Council Resolutions 1267 and 1373, which means it cannot freeze terrorist assets. The authorities have distributed lists to credit institutions, but without making any distinction between the lists related to Resolution 1267 and the lists related to Resolution 1373. To date, no matching names have been found. The authorities must adopt a legal framework that complies with the respective requirements of the two Resolutions soon. 17. The Law of February 2001 created a Financial Intelligence Unit in Haiti, the Unité Centrale de Renseignements Financiers (UCREF). UCREF has been in operation since 2004 and has adequate resources overall. UCREF is an administrative unit and its tasks are to re ceive, analyze, and disseminate Suspicious Transaction Reports and automatically - filed reports on transactions that exceed a given threshold (reports of origin). To date, fewer than ten Suspicious Transaction Reports have been sent to UCREF, and the very h igh number of reports of origin apparently exceeds its management and analysis capacities. In the meantime, UCREF plays an increasingly important role in freezing accounts, seiz ing assets, and manag ing seized assets. It carries out investigations that are not the result of Suspicious Transaction Reports, but cases referred to various administrative and legal authorities. Consequently, UCREF is turning into a de facto investigation agency. The authorities must refocus UCREF on its core tasks and push for an increase in the number of Suspicious Transaction Reports filed in order to strengthen law enforcement authorities and their action to fight money laundering. 18. The powers to investigate and prosecute money laundering are vested in the National Police of Haiti and the Public Prosecutor’s office. The investigative authorities can use the instruments available under ordinary law, such as interrogations and searches. The Law of February 2001 creates some more sophisticated investigation techniques, such as teleph one taps and undercover operations, which require a court warrant. The integrity of the police and the courts is often described as inadequate and the Haitian authorities have recently undertaken an ambitious program of reform and renewal. The police and t he courts are also suffering from a lack of capacity that has not yet been remedied by sporadic training in fighting money laundering. The authorities have experimented with specialized law enforcement action to fight money laundering and other financial c rimes, and have started discussions on reorganizing investigation and enforcement tasks with regard to money laundering. We encourage the authorities to promote the professionali z ation of prosecutors dealing with financial crimes and to ensure a more coher ent enforcement policy. This could result in giving unique jurisdiction to the Port - au - Prince prosecutor’s office. The authorities should also expand their efforts to have specialized judges and to enhance coordination between the prosecutor’s office, inve stigative magistrates and 10 investigation authorities. We encourage the authorities to clarify responsibilities for investigations and to set up a strong specialized structure within the National Police to help prosecutors in money - laundering cases. 19. The Anti-Money Laundering Law prohibits cash transfers of more than two hundred thousand Gourdes (approximately five thousand dollars). Enforcement of this prohibition is a major challenge, except at the Port - au - Prince airport. The customs administration regularly seizes funds subject to this prohibition, but several of these seizures have been overturned by the courts, to the detriment of the legitimacy of the legal framework. At the same time, the courts have never applied the seemingly disproportionate penalties for violations of the provisions dealing with international funds transfers. We encourage the authorities review these provisions, which do not seem to be suited to the structure of the Haitian economy, and to move towards a system for declaring cross - bor der transfers with more proportionate penalties for violators. 3. Preventive measures – Financial institutions 20. The Anti-Money Laundering Law of 2001 defines the due diligence and preventive measures for the financial sector . This definition covers the financial activities mentioned by the FATF that are relevant in the Haitian context. However, the very broad definition of the activities covered by the anti - money laundering statute is not operational and the lack of communication about the Law means tha t it is , in practice , applied essentially by banks. The structure of Haiti’s financial sector and the lower risks incurred in the insurance and micro - finance sector mean that the main measures to strengthen the system should focus on banks, money transfer companies, foreign exchange dealers, and credit unions. 21. The due diligence measures date back to before 2003 and do not reflect the stricter requirements of the revised standard. The fundamental due diligence principles are in place, (customer identificatio n, record keeping, Suspicious Transaction Reports). There are no specific provisions dealing with anonymous accounts and accounts in fictitious names, even though a circular from the Central Bank of Haiti has covered deposit accounts since 1994. The Law do es not require identification of the beneficial owners, the gathering of information about the purpose and the nature of the business relationships, constant due diligence in business relationships, periodic updates of identification data, identification o f customers with whom business relationships took place before the Law became effective , enhanced due diligence for vulnerable customers and Politically Exposed Persons, risk management in business relationships conducted at a distance, a lower identificat ion threshold for wire transfers, or identification of correspondent banking relationships. The authorities should strengthen laws and regulations to remedy these weaknesses of the 2001 Law . The authorities should also change due diligence requirements for a more subtle and risk - based approach, given the unreliability of identity documents for natural and legal persons, weaknesses in company registers (see below), and the unsuitability of certain current requirements in the Haitian context (address informat ion). Most banks seem to have adopted stricter due diligence systems than required by law, but the lack of in - depth verification by the banking supervisor makes it impossible to ascertain the effectiveness of the system. 22. Banking secrecy is usually lifted in the fight against money laundering, especially for UCREF and prosecutors . However, legal restrictions on lifting banking secrecy for the banking supervisor may constrain the effectiveness of the Haitian system to fight money laundering. The authorities m ention that they have not encountered any problems with banking 11 secrecy in practice, and the new B anking Law should provide a sound legal basis for this practice in the future. 23. The February 2001 Law institutes the requirement to file Suspicious Transaction Reports , and a requirement to provide a report of origin for any transaction over five thousand US dollars. Fewer than ten Suspicious Transaction Reports have been transmitted to UCREF. On the other hand, several tens of thousands of reports of origin hav e been sent in, but they have not been analyzed. Under these circumstances, the attention that the banking supervisor and UCREF have focused solely on requiring reports of origin seems misplaced. Efforts to mobilize the financial sector should be quickly r edirected to ensuring the effectiveness of Suspicious Transaction Reports. 24. The ban on tipping off customers when a Suspicious Transaction Report is filed and the protection of reporting entities or individuals from criminal or civil liability are satisfactory. However, the lack of Suspicious Transaction Reports seems to be explained by grave concerns about the confidentiality of the reports, the protection of the identity of the reporting person , and the personal risks that the reporting individual might in cur. Under such circumstances, it is critical for the authorities to agree on mechanisms that unambiguously ensure compliance with these requirements and create a climate of greater confidence for financial institutions; otherwise the whole system will be pointless. 25. There is no feedback mechanism for reporting entities , and no information has yet been provided about typologies or guidelines. 26. The Anti-Money Laundering Law and a Central Bank circular (for banks) require financial institutions to have anti-money laundering programs and internal control systems . These requirements include naming a compliance officer, providing training for financial institutions’ personnel, and, in the case of banks, periodic internal and external audits. There are no provisions regarding foreign branches and subsidiaries, even though one money transfer company has locations outside of Haiti. 27. There are no shell banks in Haiti. There are no provisions governing Haitian financial institutions’ correspondent banking relationships wi th shell banks. 28. At present, there is no regulation or supervision of insurance companies or micro- finance institutions. The Central Bank of Haiti is the supervisory authority for banks, money transfer companies, foreign exchange dealers, and credit unions. The Anti - Money Laundering Law makes the supervisory authorities for the financial sector responsible for enforcing the anti - money laundering requirements for financial institutions. 29. The laws and regulations governing supervision of banks, foreign exchange dealers, and money transfer companies are old and do not provide a sound and clear legal foundation for the Central Bank of Haiti to perform its supervisory tasks effectively. In practice, these concerns do not seem to place excessive constraints on the C entral Bank of Haiti, and the ongoing and planned reviews of most of these laws and regulations should enhance the Central Bank of Haiti’s capacity for action. The main weaknesses of the current laws and regulations relate to the communication of relevant documents and the ability to impose dissuasive fines. The authorities should take advantage of the ongoing review of financial sector supervision to enhance their supervisory capacities, particularly with regard to sanctions. The requirements for market en try are outdated on the whole. They include the basic elements regarding expertise and integrity, but without identifying the beneficial owners. 30. Off-site and on-site supervision by the banking supervisor focuses on formal aspects and reports of origin, and is limited to banks at this time. No sanctions for money laundering - related offences had been handed down as of the date of the evaluation team’s visit. Supervisory 12 authorities must redirect their efforts to supervising the substance and effectiveness of financial institutions’ anti - money laundering programs, with special emphasis on customer due diligence and Suspicious Transaction Reports. 31. The main sanctions for financial institutions that fail to meet the due diligence requirements are criminal penalties; administrative sanctions are either inexistent or very limited and restrictive. The lack of a graduated scale of sanctions means that the system is not proportionate, d issuasive or effective. 32. The manpower and capacity of financial sector supervisors must be increased. A comprehensive supervisory system for preventing money laundering in the insurance and micro - finance sectors does not seem to be a priority at this point, in light of the low risk levels. However, the authorities should set requirements ( l icensing or registration , fit and proper) to ensure that criminals cannot take over insurance companies or micro - finance institutions. 4. Preventive Measures – Designated Non-Financial Businesses and Professions 33. The Anti-Money Laundering Law gives a very broad definition of the activities covered by the anti-money laundering system, but it sets explicit requirements only for casinos and real-estate transactions. This approach, which could be seen as covering virtually all economic players in Haiti, could not reasonably be interpreted as requiring other Designated Non - Financial Businesses and Professions to exercise due diligence and file Suspicious Transaction Reports. The authorities must include the other Designated Non - Financial Businesses and Pro fessions in the anti - money laundering system, along with real - estate agencies and casinos. The authorities also must conduct an analysis of the risk of other businesses and professions, such as private lotteries (“ borlettes ”) and other games of chance, bei ng misused for the purposes of money laundering. 5. Legal Persons, Legal Arrangements, and Non-Profit Organizations 34. Legal arrangements, such as trusts, are not recognized under Haitian law. Therefore, Recommendation 34 does not apply. 35. Mandatory registration of different types of corporations (partnerships, joint-stock companies) with the Ministry of Trade provides minimal transparency about the shareholders and directors of legal persons, but information about the beneficial owners is usually unavailable or out of date. Data updates are inadequate and there is a risk of falsification of identification information relating to legal persons. Company registry information is public and accessible to investigators and prosecutors, but it has not been computeri zed. 36. Lawyers, notaries and chartered accountants are under no obligation to identify beneficial owners when they are involved in forming partnerships or joint-stock companies . 37. The lack of rules and a coherent status for non-profit organizations means that supervision of charitable organizations is very fragmented and incomplete. There is no legal provision for non - profit organizations, which have no legal personality and are de facto bodies that can engage in business relationships with financial institutio ns. Foundations that manage property for philanthropic purposes must register with municipalities, but there is no central oversight, and such foundations are not supervised after they have been formed. Non - Governmental Organizations for development are su pervised by the Ministry of Planning and 13 External Cooperation and their exposure to the risk of terrorist financing has never been reviewed. We encourage the authorities to conduct a review of the risk of misuse of charitable organizations for the purposes of terrorist financing. 6. National and International Cooperation 38. Current legislation provides for a body to coordinate and lead the fight against money laundering, the National Anti-Money Laundering Committee (CNLBA). The Committee is made up of G overnment authorities and representatives of the financial sector. Its task is to play an active role in cooperation between various players at the national level. However, it does not seem to have performed is assigned tasks, apparently for structural rea sons. Consequently, a cross - sector group has recently been set up to promote successful cooperation between the various Government authorities responsible for fighting financial crime. 39. At the international level, the Law of February 21, 2001 introduces measures for cooperation on mutual legal assistance and extraditions. These provisions seem to be in line with international standards in these matters. However, inadequate criminalization of money laundering is a constraint because of the dual criminality pr inciple, as well as because treating acts committed in other countries as crimes requires that the same acts be crimes under Haitian law. International legal assistance cannot be provided for terrorist financing since it is not a crime in Haiti. In practic e, Haiti has yet to engage in international legal assistance. 40. International cooperation by the National Police of Haiti is based primarily on Interpol and on operational relations with foreign authorities. The fact that the National Police has not been mo bilized to fight money laundering to date makes it impossible to assess the effectiveness of these mechanisms. 41. The laws and regulations in force do not provide a legal basis for the Central Bank of Haiti’s international cooperation in its capacity as the banking supervisor. The revision of the Banking Law should provide an opportunity for remedying this situation. This weakness must also be remedied with regard to the Central Bank of Haiti’s other supervisory tasks. 42. The Financial Intelligence Unit is empowered to engage in international cooperation with its counterparts. UCREF has used this power and has also signed information - sharing agreements with certain foreign counterparts. UCREF has also exchanged information with foreign institutions that are not F inancial Intelligence Units. 7. Other issues 43. Haiti must analyze the risk of money laundering to develop a more strategic approach and to clarify the roles and objectives of the players in the system. Such an approach would make more efficient use of the limited resources and capacities available. Haiti’s objective should be to strengthen the legitimacy, credibility, and effectiveness of the anti - money laundering system by obtaining convictions. 44. The current anti-money laundering framework has its weaknesses, but it constitutes a sound foundation. The main institutions are already in place, and efforts should now focus on capacity - building, refocusing these institutions on their core tasks, and enhancing coordination and cooperation between them. Haiti will not be able to adopt all of the reinforcing measures identified during the evaluation at once. Real results and greater effectiveness could be achieved over the next two years by adopting the following measures: 14  Adopting legislation on terrorist financing, criminalizing such acts and establishing a system for freezing terrorist assets  Increasing criminal sanctions for the categories of predicate offences to make them crimes (including corruption, embezzlement of Government funds, smuggling, and trafficking in human beings)  Adopting a new Banking Law to give greater supervisory powers to the Central Bank of Haiti and to strengthen supervision of compliance with the substance of anti - money laundering requirements  Mobili