CORRUPTION AND MONEY-LAUNDERING INVESTIGATION AND ITS
CHALLENGES IN TIMOR-LESTE
Augusto da Costa Castro*

I. INTRODUCTION
In today’s world, there is no single country that is immune to the criminal activities regardlessof how big or small and how rich or poor it is. The criminals are always trying to explore any
opportunities for their illicit interests. It seems that in every moment the criminals are competingwith the state to show their existence through the occurrences of the criminal activities that are
conducted either in a single show or in a form of organization. As the State manages and organizes
itself toward economic and social development to fulfil its citizens’ demands and necessities, atthe same time the criminals also organize themselves to conduct criminal activities with types andpatterns that vary from time to time, utilizing every single moment and loophole to squeeze theState’s resources for their private interest.
Comparing the criminal activities in Timor-Leste in the early stages and current situation, it
has a significant change, where in its early stages people committed crime in a very traditional
way on the basis of retaliation and/or social jealousy because of the economic disparities, and thatis quite easy for the authorities to uncover. But in today’s era, people who commit crime utilize
modern management and technology to conceal their criminal activities and proceeds. Furthermore,
the criminal activities that they are involved in are as their routine activities and also as a sourceof income for economic and financial gain, and the types of crime they commit are the types ofcrime which can produce massive financial benefits within a short period of time, such as
corruption, tax evasion, drug trafficking, fraud, human trafficking and sexual exploitation,
smuggling and evasion of excise duties, illegal gaming, organized criminal groups andracketeering, contraband smuggling, counterfeit IT product smuggling, motorbikes and vehicle
theft and smuggling of wildlife. Ironically, all proceeds derived from those crimes are stashed andlaundered not only within the jurisdiction of Timor-Leste (domestically), but they are also stashedand laundered in foreign jurisdictions as well, such as in neighbouring countries through moneylaundering schemes.
Under Timor-Leste’s legislation, money-laundering is considered as a follow-up crime
because it comes from various predicate offences. According to Article 313 of the Penal Code andits amendment of Law No. 5/2013, a number of predicate offences for the money-laundering andterrorist financing are set out. They include terrorism, trafficking of arms and nuclear products,
human trafficking, pornography of minors, corruption, fraud and extortion, tax fraud, illicit
exploitation of gaming, trafficking of protective species, and trafficking of human organs and also
any other crimes that are punishable above two years of imprisonment.1*
1

Deputy Commissioner of Investigation, Anti-Corruption Commission (ACC), Timor-Leste.
The Penal Code was approved with Decree Law No. 19/2009 of 8 April.

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With all these predicate offences, corruption is the major crime committed by the perpetrators
during the last three years from 2016 to 2018, making this crime the primary source of criminal
proceeds. According to the data from the Anti-Corruption Commission (ACC), in 2016 the ACC
investigated 29 corruption cases from which the total estimated State loss amounted to about
US$18,615,980.522; in 2017 the ACC investigated 24 corruption cases and the total estimatedState loss was about US$1,552,100.733; and in 2018 there were 36 corruption cases investigated
and the total estimated State loss was about US$998,202.85.4 Most of the cases involved public
officials, which places the public sector at a very high risk for corruption. The vulnerability of thesector is because most of the economic activities are relying on the public investment by the Statethrough the procurement and public works where the systems and controls over these two are
considered to be poorly designed and implemented, and also the economy of the country still
remains as a cash-based economy where people can easily keep and transport the cash in bulk
within or outside of the country for various purposes including money-laundering.
However, Timor-Leste criminalized money-laundering in article 313 of the Penal Codethrough Decree Law No. 19/2009, and since the beginning there were several money-launderingcases that are being investigated by the law enforcement authorities, but the progress still has along way to go, especially related to the proceeds of crime that are laundered in foreign
jurisdictions because of the difficulties of dealing with the authorities in foreign jurisdictions interms of cooperation and mutual legal assistance.
II. EFFORTS ON COMBATING MONEY-LAUNDERING IN TIMOR-LESTE
Money-laundering always involves a linkage between predicate offences and proceeds ofcrimes because when there is no linkage between these two basic elements, there is no moneylaundering. So, in Timor-Leste, in order to effectively investigate money-laundering, there are two
approaches that are applied by the law enforcement authorities in investigating and prosecuting
cases: first, investigation of predicate offences in order to discover and root out any possibility thatthe perpetrator used money-laundering methods to launder their ill-gotten assets and, second,
direct investigation of the money-laundering as independent offences according to article 313 (4)of the Penal Code.
A. The Investigation of Predicate Offences
As stated in the previous paragraphs, according to the Timor-Leste Penal Code there are several
predicate offences for money-laundering offences such as terrorism, trafficking of arms andnuclear products, human trafficking, pornography of minors, corruption, fraud and extortion, tax
fraud, illicit exploitation of gaming, trafficking of protective species, trafficking of human organs
and also any other crimes punishable by more than two years of imprisonment. With all thesepredicate offences, the ACC is only mandated to investigate the corruption crimes with all of its
forms, such as passive corruption for illicit acts, passive corruption of licit acts, active corruption,embezzlement of moveable and immoveable State assets or properties, abuse of power andeconomic participation in public affairs that are committed by public officials during and after
Comissão Anti-Corrupção (CAC), Relatoriu Anuál 2016, Dili, March 2017, pg. 8.
Comissão Anti-Corrupção (CAC), Relatoriu Anuál 2017, Dili, March 2018, pg. 16.
4
Comissão Anti-Corrupção (CAC), Relatoriu Anuál 2018, Dili, April 2019, pg. 20.
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performing their official duties. During investigating of these corruption crimes, the ACC conducts
parallel investigation of criminal elements of the offences on one hand and financial investigationon the other. In the investigation of the elements of crime mainly focused on the fulfilment ofsubjective and objective elements of each crime, financial investigation is focusing on the financial
elements and assets which are derived from the practicing of each of the corruption crimes startingfrom the ways of acquisition until final use of the assets. While conducting the financial
investigation, the ACC asks the FIU for assistance through formal requests in order to do financial
analysis on the incoming and outgoing transactions and flow of the money in suspect bankaccounts. After receiving the financial analysis report from the FIU, the ACC immediately follows
up with detailed analysis, such as net worth analysis and expenditure analysis. During this detailed
analysis and upon detecting that there is a gap between legal income, expenditures andaccumulated assets and the investments of the suspect, the ACC will inform the General
Prosecutor’s Office through interim reports in order to open money-laundering cases against thesuspects’ investment businesses. When the case is open, as the agency in charge of criminal
proceedings,5 the General Prosecutor’s Office will order the ACC, based on the available evidence,
to proceed with further investigation for freezing and confiscating all assets and investments until
recovering them when proved in court.
One of the prominent cases that came from this process is an embezzlement case that finallybecame a money-laundering case. The crime was committed by Mr. Ritimoko, a Timorese national,
who worked as a financial officer in the Planning and Financial Management Capacity Building
Programme (PFMCBP) of the Ministry of Finance. In this case, when we started investigating it
was a normal embezzlement case involving a tax fund totalling US$ 346,712.33. Mr. Ritimoko, asa financial officer, had to transfer this amount of money to the East Timor Revenue Services (ETRS,
the then tax authority) account at UNB Bank, 10% of the income tax withholding that came frommonthly staff salaries who work for the PFMCBP. Instead of transferring the money to the ETRS
account, he opened a new account on his own called East Timor Services (ETS) at the same bank,and he started depositing the money into this account on a monthly basis, totalling about
US$ 34,671.23 each month for 10 consecutive months starting from March to December 2011. Mr.
Ritimoko used the money firstly to build three fuel stations, and then one and a half years later hebought four passenger busses, then fifteen head of cattle (buffalo), 2 hectares of rice fields and hebuilt a luxurious two-story house complete with sport facilities such as a swimming pool and tennis
and basketball courts in his home town. The case was revealed three years later in 2014 when the
ETRS sent a notification letter to the head of the PFMCBP for the ten months of unpaid income
tax, and then the PFMCBP initiated an internal investigation and finally the case reached us in the
middle of 2015. We started to investigate it thoroughly and solved it in the middle of 2018. In thiscase the suspect committed embezzlement and domestic money-laundering crimes which weresuccessfully investigated and, finally, all of the proceeds of crime were recovered by the state.
B. Direct Investigation of Money-Laundering as Independent Offences
Aware of the serious threat of money-laundering to the Timor-Leste economy and financial
sector, the direct investigation is also considered important as an effective way to fight againstmoney-laundering in Timor-Leste. In this process, the State authorities can investigate andprosecute money-laundering as an independent crime. In order to start, the financial and nonAccording to article 132 (1) of the Timor-Leste Constitution, the Public Prosecutor’s Office is the only institutionthat can execute the criminal proceeding, which includes criminal investigation and prosecution.
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financial institutions are required to report any suspicious transactions to the Financial Intelligence
Unit (FIU) on the movement and transaction of money and assets of someone that are notcompatible with his or her profile. After analysing the suspicious transaction report (STR), the FIU
is required to report its final result to the General Prosecutor’s Office in order to follow it up withthe opening of a money-laundering case and investigate the case either by itself or dispatchedthrough the delegation of competence directly to the Scientific Criminal Police Investigation 6(Polícia Científica de Investigação Criminal, or PCIC, in Portuguese) to conduct further criminal
investigation regardless of the nature of the predicate offences. According to the data from the
FIU, in 2018 there were 109 STRs reported. From this number about 20 STRs were substantiatedand reported to the General Prosecutor’s Office for further criminal proceedings.7 Of the 20 STRs
that were reported to the General Prosecutor’s Office, six of them were officially opened andinvestigated by the PCIC.8
III. CHALLENGES
The investigation of money-laundering has made some progress; however, there are still somechallenges faced along the way:
A. Cash-based Economy
One of the major challenges of effective fighting against corruption and money-laundering
crimes in Timor-Leste is that the country’s economy is still relying on cash. According to theCentral Bank of Timor-Leste, only about 45% of the adult population has access to financial
services.9 This situation brings difficulties to the law enforcement authorities when conducting aneffective investigation, such as paper or electronic trails using tracing methods. This also exposes
the vulnerability of the country’s economy and financial system to illicit funds and counterfeit
money.
B. Lack of International Cooperation on Mutual Legal AssistanceInternational cooperation on mutual legal assistance in criminal matters is one of the ways thatis available for the states to cooperate and help each other in gathering evidence and some othermatters as stated in article 46 of UNCAC in order to support the cases in the investigation,prosecution and other judicial proceedings. According to Law No. 15/2011 on International
Cooperation on Criminal Matters, article 19 (1) designates the General Prosecutor’s Office as thecentral authority for the management of the outgoing and incoming requests for mutual legal
assistance, but there have been no positive results in this area due to the reluctance of the foreignauthorities to fulfil MLA requests from Timor-Leste.

6
PCIC is a one of the criminal police bodies that is mandated to investigate organized crime including moneylaundering cases.
7
Unidade Informasaun Financeira (UIF), 4th Edition of Annual Report 2018, Dili, April 2019, pg. 28
8
Polícia Científica de Investigação Criminal (PCIC), 1a Edição Balanço das Realizações das Actividades de 2015 a
2018, Dili, 2018, pg. 11.
9
Comissão Nacional para a Implementação das Medidas Destinadas ao Combate ao Branqueamento de Capitais e
ao Financiamento do Terrorismo (CNCBC), National Risk Assessment of Money Laundering and Terrorist
Financing, Dili, June 2016, pg. 23.

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C. Lack of Human Resources
Another challenge in fighting against corruption and money-laundering in Timor-Leste islimited human resources in terms of quality and quantity. There are only twenty-four investigators
at the ACC and only five specialized public prosecutors that are dedicated to handle corruption,
money-laundering and organized crime for the entire country. Besides insufficient numbers, thequality is also an issue when coordinating, communicating and cooperating with foreign authorities
on mutual legal assistance and joint investigation.
IV. CONCLUSION
The threat of money-laundering in Timor-Leste is significant. Since the beginning, the law
enforcement authorities are putting serious effort into fighting against not only money-laundering
as an independent crime but also its predicate offences such corruption, among others, throughvery rigorous investigation using tracing methods. Nationally, corruption is the primary source of
the illicit income of the offenders in committing money-laundering crimes either domestically ortransferring their proceeds of crime to a foreign country. There are a number of money-laundering
investigations, and those which were committed domestically are having some good progress, butwhen dealing with foreign money-laundering cases, the results are far from expected. This isbecause during the investigation processes, Timor-Leste authorities are facing difficulties in
obtaining cooperation from foreign authorities. In order to overcome this situation, there should
be intensive dialogue between Timor-Leste authorities and their foreign counterparts in order toovercome barriers and achieve successful investigation, prosecution and asset recovery to serve
justice for all in Timor-Leste.

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