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Cablegate: 2006-2007 Guinea-Bissau Incsr Part Ii:

VZCZCXRO4932
RR RUEHMA RUEHPA
DE RUEHDK #2779/01 3251020
ZNR UUUUU ZZH
R 211020Z NOV 06
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC 6903
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 05 DAKAR 002779

SIPDIS

SIPDIS

STATE FOR INL, AF/RSA, AF/W, EB/ESC/TFS AND INR/AA
JUSTICE FOR AFMLS, OIA AND OPDAT
TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: EFIN KCRM KTFN PTER SNAR PU
SUBJECT: 2006-2007 GUINEA-BISSAU INCSR PART II:
FINANCIAL CRIME AND MONEY LAUNDERING

REF: STATE 157136

OVERVIEW
--------
1. This cable is Part Two of the 2006-2007 National
Narcotics Control Strategy Report (INCSR), Financial
Crimes and Money Laundering report for Guinea-Bissau.
Included is a narrative overview (paras 2-12). Para
13 contains responses keyed to the numbered questions
beginning with Reftel paragraph 17.

2. Despite increased drug trafficking and the specter
of oil production, Guinea-Bissau?s instability and
tiny economy make it an unlikely site for major money
laundering, except as the placement point for proceeds
from drug payoffs, theft of foreign aid and corrupt
diversion of oil and other state resources, headed for
investment abroad.

3. Guinea-Bissau has adopted the uniform AML law and
hopes to have an operational FIU by the end of the
year. Real progress, however, will be hampered if not
entirely stalled by lack of capacity, corruption,
instability, and distrust, particularly of the
judicial sector. As one banker commented, Guinea-
Bissau is small and the judiciary is indiscreet;
accordingly only a blatant transaction would likely
cause the bank to incur the risk of filing a STR.

4. Three banks operate in Guinea-Bissau. Western
Union and MoneyGram are associated with the banks.
The Central Bank of West African States (BCEAO), based
in Dakar, is the Central Bank for the countries in the
West African Economic and Monetary Union (WAEMU or
UEMOA): Benin, Burkina Faso, Cote d?Ivoire, Guinea-

SIPDIS
Bissau, Mali, Niger, Senegal and Togo, all of which
use the French-backed CFA franc currency, which is
linked to the euro. The Commission Bancaire,
responsible for bank inspections, is based in Abidjan.

5. On November 2, 2004, Guinea-Bissau became the
third WAEMU country to enact the WAEMU Uniform Law on
Money Laundering (the Uniform Law). The new
legislation largely meets international standards with
respect to money laundering; it does not comply with
FATF recommendations concerning politically-exposed
persons, and lacks certain compliance provisions for
non-financial institutions. The law does not deal
with terrorist financing.

6. On May 29, 2006, the Minister of Finance
promulgated a decree establishing an FIU, although the
FIU is not yet operational. As of the date of
writing, members had been selected, but not yet
appointed by the President. The FIU is expected to be
in place by the end of the year, headquartered in the
old BCEAO building in Bissau.

7. Official statistics regarding the prosecution of
financial crimes are unavailable. There are no known
prosecutions of money laundering.

8. The penal code of Guinea-Bissau criminalizes
terrorist financing. However, there are no reporting
requirements or attendant regulations. The BCEAO is
working on a directive against Terrorist Financing.
The directive is expected to be presented to the WAEMU
Council of Ministers in December 2006. If adopted,
the member states would be directed to enact a law
against terrorist financing, which most likely would
be presented as a Uniform Law in the same manner as
the AML law. Because, like the AML law, it is a penal
law, each national assembly must then enact the law.
(NOTE: Since the uniform AML law was adopted by WAEMU
in 2002, four of the eight member countries have
enacted it. END NOTE.) In addition, the FATF-style
regional body for the 15-member Economic Community of
Western African States (ECOWAS), African Anti-Money
Laundering Inter-governmental Group (GIABA) has
drafted a uniform law, which it hopes to have enacted
in all of its member states, not just the WAEMU
states. GIABA will present is draft at a conference
November 21-23 in Niamey.

9. The UN 1267 Sanctions Committee consolidated list
is circulated both by the BCEAO to commercial

DAKAR 00002779 002 OF 005


financial institutions and the Ministry of Finance.
To date, no assets relating to terrorist entities have
been identified. The WAEMU Council of Ministers
issued a directive in September 2002 requiring banks
to freeze assets of entities designated by the
Sanctions Committee.

10. Multilateral ECOWAS treaties deal with
extradition and legal assistance. Other bilateral
accords are not known. Under the Uniform Law, once
established, the FIU may share information freely with
other FIUs in WAEMU.

11. Guinea-Bissau is a party to the 1988 UN Drug
Convention, has signed but not ratified the UN
Convention against Transnational Organized Crime, and
has not signed or ratified the UN Convention against
Corruption. The status of the 1999 UN International
Convention for the Suppression of the Financing of
Terrorism and the African Union Convention on
Terrorism Finance is not known.

12. The Government of Guinea-Bissau should continue
to work with its partners in WAEMU and ECOWAS to
establish a comprehensive anti-money laundering and
counter-terrorist financing regime. Guinea-Bissau
should fully install its FIU, and work to improve the
training and capacity of its police and judiciary to
combat financial crimes.

RESPONSES TO SPECIFIC REFTEL QUESTIONS
--------------------------------------
13. The following responses are to specific Reftel
paragraphs/questions:

GENERAL QUESTIONS
-----------------
Question 17: Is the country (or territory or
dependency) considered an important regional financial
center (such as Hong Kong, Singapore, Panama,
Switzerland, etc.)? What is its significance in terms
of money laundering?

-- Guinea-Bissau is neither a regional financial
center, nor is money laundering thought to be
significant. Bissau?s banking sector is governed by
the BCEAO, which issues the euro-pegged CFA franc
(CFAF). Along with the BCEAO, the ?Commission
bancaire? is a supranational supervisory entity, based
in Abidjan, Cote d?Ivoire, created in April 1990 to
control and oversee financial institution operations.
There are three banks in Guinea-Bissau, two of which
(Banco da Uniao and Banco Regionale de Solidariedade)
have begun operations in the last year and have
between 6,000 and 9,000 accounts each. The third
bank, Banco da Africa Ocidental (BAO), began operating
in 1999 as an investment bank and entered the retail
market after the failure of then-other bank in Bissau,
the Banco Internacional da Guine-Bissau, in 2002. As
of 2004, the BAO had approximately 7,000 accounts.

Question 18: To the extent it is known, is money
laundering/terrorist financing primarily related to
narcotics proceeds? (If applicable, specify drug.)
If not, what is the major source(s) of the proceeds?
Also to the extent known, do the criminal proceeds
laundered in the jurisdiction derive primarily from
domestic or foreign criminal activity? Are the money
laundering proceeds controlled by local drug-
trafficking organizations, organized crime, or
terrorist groups?

-- Guinea-Bissau is increasingly being used by drug
traffickers transiting between Latin America and
Europe. There is no evidence that drug proceeds are
laundered in Bissau, however, other than proceeds that
are used to buy off local officials or procure local
cooperation. For example, two reputed-to-be
Columbians were arrested in 2006 with over 600 kilos
of cocaine. The two were later released and
disappeared. It seems likely that drug proceeds were
involved.

Question 19: Is there a significant black market for
smuggled goods in the country? If so, do you believe
it is significantly funded by narcotic proceeds or

DAKAR 00002779 003 OF 005


other illicit proceeds? Does contraband smuggling
generate funds that are laundered through the banking
system?

-- Arms smuggling is believed to be prevalent, and
drug proceeds likely fund arms purchases.

Question 20: Does money laundering/terrorist financing
occur in the banking system, within an offshore
financial center or free trade zone, or in the non-
bank financial system (e.g., exchange houses) or via
alternative remittance systems such as hawala, or all
areas? Is the country experiencing an increase in
financial crimes, not limited to money laundering or
terrorist financing, such as bank fraud and
counterfeit currency? Please explain.

-- The banking sector demonstrated a relatively high
awareness of money laundering risks and all banks
reportedly had compliance programs in place. However,
banking officials believed Bissau to be vulnerable to
laundering, particularly via over- and under-invoicing
of imports. Guinea-Bissau has no known free trade
zones and is not linked to offshore centers. Official
statistics regarding prosecution of financial crimes
are unavailable.

Question 21: To the post?s knowledge, do the country?s
financial institutions engage in currency transactions
involving international narcotics trafficking proceeds
that include significant amounts of United States
currency or currency derived from illegal drug sales
in the United States or that otherwise significantly
affect the United States?

-- Guinea-Bissau appears to be a transit point between
Latin America and Europe and does not significantly
affect the U.S. Bissau?s financial institutions do
not appear to have a significant role in laundering
drug proceeds.

OFFSHORE FINANCIAL CENTERS
--------------------------
Questions 22 to 24: These questions are not
applicable, and are not reproduced, as Bissau has no
offshore banking or other institutions.

FREE TRADE ZONES
----------------
Question 25: Are there free trade zones operating in
the jurisdiction? If so, please give the number and
briefly describe operations, capability and function.

-- Bissau has no known free trade zones.

Questions 26 and 27 pertain to free trade zones and
are not reproduced.

LAWS AND REGULATIONS TO PREVENT MONEY LAUNDERING
--------------------------------------------- ---
Question 28: Is money laundering a criminal offense in
this country?

-- Yes, in 2004, Guinea-Bissau became the third WAEMU
country to pass WAEMU harmonized legislation
establishing a uniform law on money laundering.

Question 28 (continued): Does the law apply only to
drug-related money laundering? Does the country list
specific crimes or take an all serious crimes
approach? Note: In some jurisdictions, anti-money
laundering laws cover ?all serious crimes? which are
defined as crimes that carry a threshold minimum
sentence in the jurisdiction?s penal code. If the
country lists specific crimes, what offenses are
covered? If there is a threshold minimum, what is
that threshold?

-- Under the new legislation, the source of the
proceeds can be any crime.

Question 29: Has the country enacted secrecy laws that
prevent disclosure of client and ownership information
by domestic and offshore financial services companies
to bank supervisors and law enforcement authorities?


DAKAR 00002779 004.2 OF 005


-- The uniform law on money laundering enables banking
information to be shared with law enforcement
authorities. The law states: ?Notwithstanding all
contrary legal provisions or rules, professional
secrecy may not be invoked . . . to refuse providing
information to the control authorities.?

QUESTION 30: Do current laws provide for the
establishment and funding of a financial intelligence
unit (FIU)?

-- The current law provides for the establishment,
albeit not funding, of an FIU. A directive
establishing an FIU was signed in May 2006, but the
FIU has not yet begun operations.

FINANCIAL SECTOR
----------------
Question 31: Who supervises and examines financial
institutions for compliance with anti-money
laundering/counter-terrorist financing laws and
regulations?

-- The Banking Commission has the responsibility to
supervise financial institution compliance with
AML/CTF laws and regulations. The Commission
reportedly has conducted some AML compliance
examinations; however, due to the fact that half of
the member states have not adopted the uniform law,
its efforts have been limited.

Question 32: Are banks and other financial
institutions required to know, record, and report the
identity of customers engaging in significant
transactions, including the recording of large
currency transaction at thresholds appropriate to the
country?s economic situation? What is the statutory
threshold?

-- National Assembly resolution number four in 2004
deals with money laundering. Article 26 stipulates
that if a bank suspects money laundering it must
obtain a declaration of all properties and assets from
the suspect and notify the Attorney General who is
then required to appoint a judge to investigate.

Question 33: Are banks and other financial
institutions required to maintain for an adequate time
records necessary to reconstruct significant
transactions through financial institutions in order
to be able to respond quickly to information requests
from appropriate government authorities in narcotics-
related or other money laundering or terrorist finance
cases? For how long?

-- The law requires financial institutions to preserve
records for at least ten years.

Question 34: Are the money laundering controls applied
to non-banking financial institutions, such as
exchange houses, stock brokerages, cash couriers,
casinos, insurance companies, etc., and to
intermediaries, such as lawyers, accountants, or
brokers/dealers? Who supervises such entities for
compliance?

-- The law applies to a host of sectors, including all
of those listed above and others. Some entities have
government regulatory authorities; others (such as
attorneys and accountants) have professional
supervisory authorities, while others have no
effective regulator.

Question 35: Do financial institutions report
suspicious transactions? Is such reporting mandatory
or voluntary? Is reporting required for all
suspicious transaction, or is there a threshold amount
below which suspicious transaction reports are not
required? Are non-bank financial institutions
required to report such transactions?

-- The law requires financial institutions to report
suspicious transactions to the FIU; there is no
minimum threshold. Non-bank financial institutions
are also required to report. As yet, however, there
is no FIU.

DAKAR 00002779 005.2 OF 005


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