REPORTS
OF THECOURSERESOURCE MATERIALSERIES
No. 58
GROUP 1METHODS FOR OBTAINING INTELLIGENCE FORINVESTIGATION OF MONEY LAUNDERING
Chairperson
Co-Chairperson
Rapporteur
Co-Rapporteur
Members

Advisors

Mr. Sudhir Kumar Awasthi
Mr. Dappula P. J. De Livera
Mr. Kevueli Tunidau
Mr. Tatsuo Ueda
Mr. Phoung Sophy
Mr. Raymond Porter Aguilar
Mr. Ryouichi Chihara
Mr. Bader Talib AL-Shaqsi
Prof. Yuichiro Tachi
Prof. Shinya Watanabe
Prof. Mikiko Kakihara

I. INTRODUCTION
Money laundering and those who engage
in it have gone global and “pose a serious
threat worldwide in terms of national andinternational security, as well as political,
economic, financial and social
disruptions.”1 It is a formidable problem
for the international community, a newform of geopolitics and one of the mostpernicious forms of criminality of which thedimensions have yet to be fully measured
and the impact fully determined.2
Since money laundering is theprocessing of the criminal proceeds toconceal their illegal origin, the objective ofthe launderer is to disguise the illicit originof the substantial profits generated by thecriminal activity so that such profits canbe used as if they were derived from alegitimate source.3
1

Zvekic, “International Cooperation andTransnational Organized Crime” (1996) ASIL 537.
2 See Report of the Secretary-General, 4 April 1996
at p.4; UN Press Release SOC/CP/179 20 May 1996;
UNCPJ Newsletter nos. 30/31, Dec 1995 at p.5.

446

(India)(Sri Lanka)(Fiji)(Japan)(Cambodia)(Costa Rica)(Japan)(Oman)(UNAFEI)(UNAFEI)(UNAFEI)

It appears to be accepted that there arethree phases or stages in the laundering
process. The first is the placement, where
cash enters the financial system. This is
the choke point or the nerve center of theprocedure, where the launderer is more
vulnerable and the attempt to launder caneasily be identified. The second stage isthe layering where the money is involvedin a number of transactions so that the
tracing of the origin of the money is lost.
Finally the third stage is integration, wheremoney is mixed with lawful funds or
integrated back into the economy, with theappearance of legitimacy. The thrust of thisreport is on the important first stage.
The United States of America
implemented the first national anddomestic initiative to counter money
laundering.4 It is apparent however thatin a time of globalization of financial
3

Countering Money Laundering: The FATF, The
European Union and the Portuguese Experiences Past and Current Developments, Dr. Gil Galvao Paper presented at 117 th International Senior
Seminar, UNAFEI, Tokyo, at p.1.

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE
markets, it is not sufficient to havedomestic measures to combat money
laundering. It is paramount therefore that
action against money laundering andmeasures to prevent it are universally
applied.5
In 1988, the United Nations Convention
Against Illicit Traffic in Narcotic Drugs andPsychotropic Substances (the Vienna
Convention) was adopted and theincrimination of money laundering was
included in an international treaty for the
first time.
A. Financial Action Task ForceThe Financial Action Task Force6 (FATF)
was founded in 1989 by the G-7 Summit in
Paris to examine ways to combat money
laundering. It published a report in 1990
with forty Recommendations7 which were
to become the standard by which antimoney laundering measures should be
judged. In 1996 the recommendations wererevised to reflect the changes which haveoccurred in the money laundering problem.
The relevant provisions within the broad
ambit of intelligence are recommendations
4

The United States criminalized money launderingon October 27, 1986 by passing the Money
Laundering Control Act of 1986.
5 See Footnote 3, supra, at p.5.
6 The FATF currently consists of 26 countries andtwo international organizations. Its membership
includes the major financial center countries ofEurope, North America and Asia. It is a multidisciplinary body - as is essential in dealing withmoney laundering - bringing together the policymaking power of legal, financial and law
enforcement experts.
7 The forty recommendations set out the basic
framework for anti-money laundering efforts andthey are designed to be of universal application.
They cover the criminal justice system and law
enforcement, the financial system and its
regulation, and international co-operation.

10-12, 14, 15, 19, 21-25, 28 and 29
respectively.8
B. Egmont Group of Financial
Intelligence Units9 (EgmontGroup)
Following the FATF Recommendations
several countries put in place legislation
to counter money laundering andestablished their Finance Intelligence
Units (FIU). The Egmont Group which
comprises of the FIUs’ of the world, defined
an FIU as“A central national agency responsible
for receiving (and, as permitted,
requesting), analyzing and disseminating
to the present authorities, disclosures offinancial information
(i)
(ii)

concerning suspected proceeds ofcrime, orrequired by national legislation or
regulation,in order to counter money laundering.”10
8

For the full text of these recommendations pleasesee appendix 1.
9 The Egmont Group meetings named after the
Egmont-Arenburg palace in Brussels on April 1995,
consists of countries that have operational
Financial Units. The group currently consists of
53 countries including: Aruba, Australia, Austria,
Belgium, Bermuda, Bolivia, Brazil, British Virgin
Islands, Bulgaria, Chile, Colombia, Costa Rica,
Croatia, Cyprus, Czech Republic, Denmark,
Dominican Republic, Estonia, Finland France,
Greece, Guernsey, Hong Kong, Hungary, Iceland,
Ireland, Isle of Man, Italy, Japan, Jersey, Latvia,
Lithuania, Luxembourg, Mexico, Monaco,
Netherlands, NL Antilles, New Zealand, Norway,
Panama, Paraguay, Portugal, Romania, Slovakia,
Slovenia, Spain, Sweden, Switzerland, Taiwan,
Turkey, United Kingdom, United States, Venezuela.
10 This definition was adopted at the plenary meetingof the Egmont Group in Rome in November 1996
and reaffirmed in the Madrid meeting.

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RESOURCE MATERIAL SERIES No. 58
In it’s statement of purpose11 the EgmontGroup, among other things, recognized theinternational nature of money launderingand realized that many governments haveboth imposed disclosure obligations on
financial institutions and designated FIU’s
to receive, analyze and disseminate tocompetent authorities such disclosures offinancial information. It is also increase
the effectiveness of individual FIUs andcontribute to the success of the global fightagainst money laundering.
The 18 countries represented in thisseminar have different legal stages incombating money laundering andestablishment of FIUs. A majority has
draft proposals for legislation againstmoney laundering. Countries such as Fiji,South Africa and Tanzania have legislation
but short of an independent FIU althoughin each of these countries suspicioustransaction reports (STRs) are either madeto the police or the Director of Public
Prosecution (DPP) by Financial
Institutions and/or by persons conducting
a business or who are in charge of abusiness undertaking.
C. UN Convention against TOC
In November 2000, United Nations
Convention against Transnational
Organized Crime was adopted by theUnited Nations General Assembly and it
was opened for signature by member statesin December 2000. It requires member
countries among other things, as follows:“Article 7, Paragraph 1
Each State Party:(a) Shall institute a comprehensive
domestic regulatory andsupervisory regime for banks andnon-bank financial institutions ...
which regime shall emphasize
11 Resolved in Madrid on 24 June 1997.

448

(b)

requirements for customer
identification, record-keeping andthe reporting of suspicioustransactions;... shall consider the establishmentof a financial intelligence unit toserve as a national center for thecollection, analysis anddissemination of information
regarding potential moneylaundering.”

D. Techniques of “Placement” ofIllicit Funds into the Financial
System
We submit that it is important in thisreport to identify the various techniquesmoney launderers utilize the financial
system to launder their money.
1. The Banking Sector(i)Banks remain an importantmechanism for the disposal of
criminal proceeds, though there
appears to be a recognition bymoney launderers that obvious
techniques such as depositing
large sums of cash into bankaccounts for subsequent transfer islikely to be reported to law
enforcement authorities, and thus
extra steps are being taken. The
technique of “smurfing” or“structuring” was commonly used
- this technique entails making
numerous deposits of small
amounts below a reporting
threshold, usually to a large
number of accounts.
(ii)

Accounts in false names or
accounts held in the name ofrelatives, associates or otherpersons operating on behalf of thecriminal. Other methods used tohide the beneficial owner of theproperty include the use of shellcompanies.

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE(iii) Use of “collection account”.
Immigrants from foreign countries
would pay many small amounts
into one account and the money
would then be sent abroad. Often
the foreign account would receive
payments from a number ofapparently unconnected accounts
in the source country.
(iv)

(v)

(vi)

Use of “payable through accounts”.
These are demand deposits
account maintained at financial
institutions by foreign banks or
corporations. The foreign bankfunnels all the deposits andcheques of it’s customers into one
account that the foreign bank holds
at the local bank. The foreign
customers have signatory
authority to the account as subaccount holders and can conduct
normal international banking
activities. The payable throughaccounts pose challenge to “knowyour customer” policies and STR
guidelines.
Loan back arrangements inconjunction with cash smuggling.
By this technique, the launderer
usually transfers the illegal
proceeds to another country, andthen deposit the proceeds as asecurity or guarantee for a bankloan, which is then sent back to theoriginal country. This method not
only gives the laundered money
the appearance of a genuine loan
but also often provides tax
advantages.
Telegraphic transfers, bank drafts,money orders and cashier ’scheques are common instruments
for money laundering.

2. Non-Bank Financial Institutions
Banks offer a wide range of financial
products and hold the largest share of thefinancial market and accordingly theservices they provide are widely used formoney laundering. However, non-bankfinancial institutions and non-financial
businesses are becoming more attractive
avenues for introducing ill-gotten gains
into regular financial channels as the anti
money laundering regulations in thebanking sector becomes increasingly
effective. The channels used include:(i)

Bureau de change, exchange
offices or casa de cambio. They
offer a range of services which are
attractive to criminals such as:(ii)

Exchange services which can beused to buy or sell foreign
currencies, as well as consolidatingsmall denomination bank notes
into larger ones;(iii) Exchanging financial instruments
such as traveler’s cheques; and(iv)

Telegraphic transfer facilities.

(v)

Remittance services.

(vi)

Use of hawala, hundi or so called“underground banking”.

3. N o n - F i n a n c i a l B u s i n e s s e s o rProfessions(i)
These include lawyers,
accountants, financial advisors,
notaries, secretarial companies
and other fiduciaries whose
services are employed to assist in
the disposal of criminal profits.
(ii)

Casinos and other businesses
associated with gambling.

(iii) Purchase and cross border delivery

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RESOURCE MATERIAL SERIES No. 58
of precious metals such as gold andsilver.
II. METHODS OF OBTAININGINTELLIGENCE
A. STR System
The objective of an STR system is tofacilitate the detection of illicit proceeds ofcrime as it enters the financial system via
the financial institutions, i.e. at theplacement stage of the money laundering
process. This is the “choke point” wheremoney laundering is most vulnerable. It
is important therefore that a legal checks
and balance system is put in place to(i)legally recognize the STR systemdomestically in compliance with
the FATF recommendations;(ii) exert obligatory compliance byfinancial institutions to the STR
provisions;(iii) sanction non-compliance byfinancial institutions of the legal
STR obligations; and(iv) safeguard the integrity of thefinancial system12.
12 A typical example is the BCCI (The Bank of Credit

and Commerce International) case. Unlike any
ordinary bank, BCCI was from its earliest days
made up of multiplying layers of entities, related
to one another through an impenetrable series ofholding companies, affiliates, subsidiaries, bankswithin-banks, insider dealings and nominee
relationships. By fracturing corporate structure,
record keeping, regulatory review, and audits, thecomplex BCCI family of entities was able to evade
ordinary legal restrictions on the movement of
capital and goods as a matter of daily practice androutine. Thus it becomes an ideal mechanism forfacilitating illicit activity by others, including many
governments’ officials whose laws BCCI was
breaking.
BCCI’s criminality included fraud by BCCI and
BCCI customers involving billions of dollars; money
laundering in Europe, Africa, Asia, and the for

450

This requires a methodical and practical
approach to the form of STR relevant tosuit a given situation in each jurisdiction.
For instance, the form of STR expectedfrom a financial institution would varyfrom a law or accountant firm due to thenature of the transactions peculiar to them.
In this report we propose to examine the
STR of financial institutions and briefly the
FIU of Japan and a comparative glimpseof Hong Kong13 and the United States aswell.
1. The Japanese STR System14 and FIU
In 1992, the STR system was first
introduced into Japanese legislation by theenactment of the Anti-Drug Special Law.
Subsequent to this, the Anti-Organized
Crime Law was enacted in year 2000 which
introduced a comprehensive STR system.
The scope of predicate offence of money
laundering was expanded to almost allorganized crimes. Based on the law, theJapan Financial Intelligence Office(JAFIO) was established in the Financial
Services Agency (FSA) as the Japanese
Financial Intelligence Unit.
example, use of shell corporations. Americas;
BCCI’s bribery of officials in most of those locations;
support of terrorism, arms trafficking, and the saleof nuclear technologies; management of
prostitution; the commission and facilitation ofincome tax evasion, smuggling, and illegal
immigration; illicit purchases of banks and realestate and a panoply of financial crimes limited onlyby the imagination of its officers and customers.
It is important to note also that among BCCI’s
principal mechanisms (techniques) for committing
crimes are that which we noted at item 1.4 above,
13 See Appendix 4 for the guidelines issued by the
Monetary Authority of Hong Kong to financial
institutions for the prevention of money laundering.
14 See Appendix 2 & 3 for the standard form of STRs
by financial institutions and the full text of a typical
STR in Japan.

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSEAt present, depository institutions(banks), insurance companies, securities
brokers and other non-bank financial
institutions are covered in the STR system.
However, non-financial institutions orother relevant professionals (so called
gatekeepers) are not covered. Complianceby financial institutions is mandatory but
no legal sanction is provided for nondisclosure of STRs.
B. Better quality STRs vis a vis
Know Your Customer Policy andRules
In order to facilitate better quality andreliable suspicious transaction reportsbanks and other financial institutions
should know their customers.

Who are they dealing with?
The customer tells the banks who theyare. It would be necessary to obtainevidence of identity-reliablecircumstantial-hearsay?
The customer gives and an address. Is
it correct?
Verification would be necessary. How?
What if the customer:(i)
Is a foreigner?
(ii) A child?
(iii) Wife?
(iv) Housebound?
Where are we dealing with them?

What does that mean?
(i)
Making every reasonable effort todetermine the true identity andbeneficial ownership of theaccounts.
(ii) Knowing the source of the funds.
(iii) K n o w i n g t h e n a t u r e o f t h ecustomers business.
(iv) K n o w i n g w h a t c o n s t i t u t ereasonable account activity.

Traditionally, a customer would be seen
in person.
In the world of:(i)
Postal banking(ii) Electronic banking(iii) Telephone banking(iv) Internet banking

Why are bankers concerned?
(i)
Can they simply take people at facevalue?
(ii) Who are they dealing with?
(iii) Where do they come from?
(iv) How do we prove this information
accurate?
(v) Where are we dealing with them?
(vi) Why should we bother?

To protect profits, reputation, obey thelaw and be the good citizens.

Why cannot they simply take people atface value?
Unfortunately, quite a lot of people are
not honest. The net result could be a bad
debt or fraud. More importantly being
involved with criminals puts theirreputation at risk.

What would be the situation?
Why should they bother?

What are the implications for theauthorities?
(i)

The need to recognize that in a very
few countries there is a completely
reliable identification system.
(ii) The need to recognize that remote
identification is here to stay.
(iii) The need to keep ahead of thecounterfeitor.
(iv) Accept that there will be instancesthat identification cannot be
proved absolutely.

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RESOURCE MATERIAL SERIES No. 58
Therefore, it could be said that
identification is rarely certain and difficult
to prove. This statement would also be true
in relation to the place of residence ordomicile. Thus the way ahead is closer
partnership to reduce difficulties.
C. Recommended Guidelines for
STRs
In the context of the report, the following
guidelines are recommended.
1. Cash Transactions(i)Large deposits and withdrawals
without rational reasons.
(ii) Transactions frequently made inshort periods of time andaccompanied by large deposits andwithdrawals without rational
reasons.
(iii) Transactions where large amountsof small-denomination coins orbills without rational reasons.
(iv) Large cash deposits into night safe
facilities or rapid increase ofamount without rational reasons.
2. Opening of New Accounts(i)
New accounts in fictitious names
or in the name of other persons.
(ii) Accounts that are suspected ofhaving been opened in fictitious
names or in the names of otherpersons.
(iii) Accounts bearing the names ofcorporations that are suspected ofnever having existed.
(iv) Customers who wish to have cash
cards sent to destinations otherthan their addresses.
(v) Customers who have tried to open
accounts by mail-order without
proper information.
(vi) Customers who attempt to open
multiple accounts without rational
reasons.
(vii) Customers who have no convincing
reasons to make transactions at aparticular branch.

452

3. Transactions through Existing Accounts(i)
Accounts that have been used forlarge deposits and withdrawals
during a short period of time after
their opening and have then beenclosed or discontinued for any
other transactions without
rational reasons.
(ii) Transactions where large deposits
and withdrawals are madefrequently without rational
reasons.
(iii) A c c o u n t s w i t h f r e q u e n tremittances to a large number ofpeople without rational reasons.
(iv) Accounts that customers use forreceiving frequent remittancesfrom a large number of people
without rational reasons.
(v) Accounts that have not been active
for a long time and suddenly
experiences large deposits andwithdrawals without rational
reasons.
(vi) Transactions those are unusualfrom the viewpoint of economic
rationality.
4. Trading in Bonds and/or Other
Securities(i)
Transactions where customers
bring in large amounts of bonds
and/or other securities to sell themfor cash without rational reasons.
(ii) Customers settle trading in bonds
and/or other securities with checks
drawn by/or remittances fromthird parties without rational
reasons.
(iii) Customers attempting to buy large
amounts of bonds for cash orchecks and then request to receive
bond certificates while refusing touse depositary services without
rational reasons.

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE
5. Transactions Related to Safekeeping
Deposit and Safety Boxes(i)
Customers use safety box facilities
frequently without rational
reasons.
6. Cross-border Transactions(i)
Customers who provide
information which is suspected ofbeing falsified or ambiguous
information.
(ii) Customers make frequent large
overseas remittances within shortperiods of time without rational
reasons.
(iii) Customers send large overseas
remittances for economicallyunreasonable purposes.
(iv) C u s t o m e r s r e c e i v e l a r g e
remittances from abroad that areeconomically unreasonable.
(v) Customers frequently order orencash large amounts of traveler’sor remittance checks without
rational reasons.
(vi) Customers who are based injurisdictions which do notcooperate with international antimoney laundering efforts or areshipping illegal drugs.
(vii) Customers carry out with parties
based in NCCTs (Non-Cooperative
Countries and Territories 15 ) or
jurisdictions which are shipping
illegal drugs.
(viii) Customers introduced by parties
based in NCCTs or jurisdictions
which are shipping illegal drugs.
7. Loan Transactions(i)
Customers unexpectedly makerepayments of overdue loan.
(ii) L o a n a p p l i c a t i o n s w h e r eborrowing customers put up assets

held by third parties as collateral.
8. Other Transactions(i)
Customers who jointly visit a bankbranch and request different
tellers to make large cash or
foreign exchange deals.
(ii) Customers who refuse to explain
reasons or submit information
when requested to verify theintended beneficiary.
(iii) Transactions that are made byemployees of banks or theirrelatives to benefit parties that are
unknown.
(iv) Transactions where employees ofbanks are suspected of committing
crimes.
(v) Transactions where deposits are
made with forged or stolen moneyor securities and the customers are
suspected of knowing that themoney or securities are forged orstolen.
(vi) C u s t o m e r s w h o u n u s u a l l yemphasize the secrecy of the deals,
and customers who attempt to ask,
force or bribe bank officials.
(vii) Transactions that are identified as
unusual by bank officials based on
their knowledge and previous
experience, and transactions
involving customers whose
attitudes or actions are identified
as unusual by bank officials.
III. OTHER METHODS OFINTELLIGENCE16
Apart from STRs detected through thefinancial institutions, there are othermethods of intelligence to detect money
laundering offences. These include:

15 These are countries identified by FATF to haveinsufficient laws and regulations to assist in thefight against money laundering.

16 Some of the methods mentioned in this sub topic

are also canvassed by Group 3 in their report.

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RESOURCE MATERIAL SERIES No. 58
A. Private Informers
The use of private informers could serve
as a useful source of intelligence in money
laundering investigations. However, one
should expect the perils of using private
informers as a source of intelligence ininvestigation. It is most prudent if possible
to maintain the anonymity of theseinformers. The disclosure of their identity
and the nature of information may risk thetruth seeking mission of the criminal
justice systems in using rewarded
criminals as witnesses.
B. Surveillance (Electronic/Cyber)Interception of private communication
is a commonly used method of intelligencegathering. The use of electronic devices
and computers feature a common tool inthese operations. The use of persons insurveillance could also be described asanother means in this regard. The wire
tap as it is commonly known may not berecognized as a legitimate source ofintelligence in certain jurisdiction however
it is believed to be used widely as a sourceof intelligence gathering in investigation.
C. Undercover Operations
The courts 17 have long upheld thevalidity of undercover operations as ameans of intelligence gathering ininvestigation. The conduct of personnel inthis operation must be that which does not
violate fundamental fairness and does not
impeach the fundamental rights ofindividuals.
D. Information derived from a
Criminal Investigation
This source is derived throughinterrogation. The usage of interrogationin criminal investigation would in certain
instances serve to alert the investigator
about sources that target intelligence inregard to other crime. No one person is
17 As in the Operation Casablanca case.

454

likely to know the full extent of criminal
enterprise. Therefore these interviews ofdifferent persons in criminal investigation
could contribute as a source of intelligencegathering with regard to further criminal
activity.
IV. PROBLEMS IN THE
FUNCTIONING OF FINANCIAL
UNIT AND PROPOSED SOLUTIONS
Financial Intelligence Units arefunctioning in some countries like UnitedStates of America, Japan, Hong Kong, etc.
envisaged in their statutes to combat
money laundering. Various problems havebeen experienced in it’s functioning to makeit a potent weapon against this crime.
Money laundering has become a global
phenomenon with the help of modern
technology and it needs a global effort tocombat it. Some major problems to fight
this menace are enumerated here.
A. Lack of Relevant Legislation to
Criminalize Money Laundering
A number of countries do not have thelegislation to criminalize money
laundering. All such countries need tomake enactments in this connection to
make this global effort successful.
International pressure also needs to bebrought on such countries to take
immediate steps in this direction.
B. Absence of FIU
Some countries have the legislation tofight against money laundering but they
have not created FIU. Fiji is an example
where money laundering legislation exists
but there is no FIU to build financial
intelligence system. Such countries needto create FIUs expeditiously suitable totheir situation in order to fight money
laundering effectively.

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE
C. Limited Scope of FIU
There are countries like Japan whichhave the required legislation and FIU but
their STRs are limited to only banks andfinancial institutions. Transactions
relating to real-estate, luxury cars, jewelers
are not covered. In some countries, postoffices also conduct financial transactions
just like banks. Real estate transactions
are made through lawyers and attorneys.
A significant part of illegal money islaundered through real-estatetransactions. Similarly accountants,
money-changers, businesses and trades
can also be required to submit STRs to FIU
to broaden the scope of FIU and facilitate
analysis. Each country can think ofbroadening the scope of FIU according to
it’ s situation and requirement.
D. Improper Analysis of STRs
In most cases, receiving the STRs frombanks and financial institutions without
other relevant information about thetransaction and proper analysis does notserve a useful purpose in identifying anddetecting that the transaction relates tomoney-laundering. FIUs need to haveaccess to wider data-bases of enforcement
agencies like police, anti drug-trafficking
enforcement agencies, anti-corruption
agencies, customs and income-tax
departments in order to analyze the STRs
meaningfully.
The system of submission of STRs to
FIUs and analysis by FIUs need to becomputerized with the help of suitablesoftware to make the job of analysis
meaningful. Sometimes it may benecessary for analysis purposes to haveadditional information about the nature of
the transaction and the persons involvedin the transaction. For this purpose, FIU
should have the authority to access further
information from banks, financial
institutions and law enforcement
authorities.

E. Quality of STRs
Banks and financial institutions may
find it difficult to identify as to whichtransaction is suspicious and which is not.
In an attempt to overcome this difficulty,
for instance, the USA has adopted thethreshold approach in addition to STR
system. Their legislation provides thatcash transactions of $10,000 and above
should be reported to the FIU and theconcept of Currency Transaction Report(CTR) was introduced. This approach
results in receiving large number of CTRs
which makes the process of identifying asuspicious transaction and analysis
difficult. However, an accessible database
was created for law enforcement
authorities.18
In the case of Costa Rica, record keeping
by financial institutions in a prescribed
form is also undertaken on a thresholdbasis for access by law enforcement
authorities when necessary.
Another approach may be proper
education and training of personnel ofbanks and financial institutions in
identifying suspicious transactions.
Countries like Japan and Hong Kong haveissued detailed guidelines to banks andfinancial institutions as to whichtransactions are to be suspected. There isalso a necessity of monitoring banks andfinancial institutions and ensuring thatthey comply with instructions andguidelines regarding submission of STRs.
In Hong Kong, a bank official has been
designated as a compliance officer whomonitors that guidelines are enforced. The
experience has been found to be useful andcan be useful for adoption by othercountries.
18 The Financial Crimes Enforcement Network(FinCEN) is the US FIU. It has a large data basethat is accessible by law enforcement authorities
and likewise, FinCEN can access their data bases.

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RESOURCE MATERIAL SERIES No. 58
F. Absence of Sanctions for NonDisclosure of STRs
The provision of sanctions for noncompliance of guidelines to submit STRs
by banks and other financial institutions
need to be made in the relevant statute.
Some countries do not have any criminal
sanction for non-compliance. Each country
should provide appropriate sanction for
non-compliance in its legislation.
G. Extension of STRs to NonFinancial Institutions
STRs need to be broad based in order tofight money laundering. It has been foundin countries where legal provisions for
mandatory reporting to FIU exist thatmoney launderers have turned toalternative avenues of money 1aundering
due to tightening of controls in financial
sectors. Legal provisions can be made tobring in the gate-keepers (lawyers andaccountants), tax advisors, real-estateagents, dealers in high value goods andcasinos etc. requiring them to file STRs.
Gate-keeper is a new anti-money
laundering jargon and defined as someone
who is responsible for allowing someone
else access to a field although he does not
own the gate or the field. They provide
several services that may open the “gate”
to financial transactions, management ofdeposits or securities accounts, real-estatetransactions, investment services,company formation, creation of trusts andfinancial and tax-advice. This is a delicate
and controversial issue and a balanced
approach needs to be adopted reconciling
requirements of professional secrecy andfight against money laundering.
The dividing line may be ascertaining
the legal position for a client or
representing a client in a legal proceeding
and participation in a financial transaction
involving money laundering. Here again,
the problem of identification of a particular456

transaction being suspicious by persons andinstitutions may arise. The solution may
be found either in threshold approach or
public education and awareness. It will
depend on each country to adopt a
particular approach or a combinationaccording to it’s own conditions.
The European Union had brought in a
directive in 1991 making STRs by financial
institutions mandatory which came into
effect in 1993. It has now brought anamendment to this directive in the year
2000 that the above-mentioned gatekeepers, business and trade-institutions
should also be brought in the ambit ofmandatory reporting of suspicioustransactions.
In addition to STR, the USA also has
provisions of filing CTR by casinos andInternal Revenue Service (IRS 8300) bytrades and businesses. A Currency
Monetary Instrument Report (CMIR) is
required to be filed to customs authorities
whenever money is transported in or out of
the country.
V. CONCLUSION
It should be noted that a good number ofjurisdictions do not have anti-money
laundering legislation and do not have a
Financial Intelligence Unit system. They
should be encouraged to enact legislationin this contest and take constructive
measures to set up suitable Financial
Intelligence Units.
The jurisdictions who possess necessary
legislation to tackle the laundering problem
should identify and be mindful of
deficiencies money in their systems andtake appropriate measures to remedy thesituation.
It would also be appropriate to suggestthat suitable public awareness programmes

117TH INTERNATIONAL SEMINARREPORTS OF THE COURSE
be set up to educate both official and thegeneral public in the sensitivities to theworking of the anti-money launderingsystem.
Relevant jurisdictions should also takenote of all matters discussed above andadopt appropriate recommendations withregard to the solutions discussed.

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