CVM Circular Letter CVM/SMI/SIN 01/2012

CVM CIRCULAR LETTER/CVM/SMI/SIN/Nº 001/2012
São Paulo, March 29, 2012.
Subject: Communications published by FATF.

To the Responsible Directors of CVM Instruction No. 301, of April 16, 1999,

1. With a view to the faithful compliance with CVM Instruction No. 301/99, in particular, the provisions of item VIII, of article 6, and item I of § 1, of the same article,
   we inform you that on February 16, 2012, the Financial Action Task Force against Money Laundering and the Financing of Terrorism (FATF), in plenary session, approved and published communications whose versions in Portuguese and disclosed on the electronic address of the Financial Activities Control Council (Coaf), https://www.coaf.fazenda.gov.br/, we transcribe below:

Paris, February 16, 2012. - The Financial Action Task Force (FATF) is the body that establishes global standards in the field of prevention of money laundering and combating the financing of terrorism (AML/CFT). To protect the international financial system from risks and encourage greater observance of AML/CFT standards, the FATF identified jurisdictions that have strategic deficiencies to, together with them, address such deficiencies that put the international financial system at risk.

Jurisdictions subject to the FATF's call for its members and other jurisdictions to apply counter-measures to protect the international financial system from current and substantial risks of money laundering and terrorist financing (ML/TF), originating from the jurisdictions*.
Iran
Democratic People's Republic of Korea (DPRK)

Jurisdictions with strategic AML/CFT deficiencies that have not achieved the expected progress in addressing the deficiencies or have not committed to an action plan developed together with the FATF to solve the deficiencies. The FATF alerts its members of the risks associated with the deficiencies of each jurisdiction, as described below.
Cuba
Bolivia
Ethiopia
Ghana
Indonesia
Kenya
Myanmar

Nigeria
Pakistan
Sao Tome and Principe
Sri Lanka
Syria
Tanzania
Thailand
Turkey

• The FATF had previously issued public communications, calling for counter-measures in Iran and the DPRK. These communications are updated below.
  Cuba has not committed to the FATF process.

On February 16, 2012, the FATF published the revised FATF Recommendations:
"International Standards for Combating Money Laundering and the Financing of Terrorism and Proliferation" document in which the FATF revised and identified the jurisdictions based on the 40+9 FATF Recommendations, of 2003. Thus, references to Recommendations or Specific Special Recommendations (e.g., R1, REII etc.) in this document refer to the 40+9 Recommendations of 2003.

Iran
The FATF is particularly and exceptionally concerned with Iran's failure to address the risk of terrorist financing and the serious threat this represents to the integrity of the international financial system, despite Iran's involvement with the FATF.

The FATF reiterates the appeal to its members and urges all jurisdictions to direct their financial institutions to pay special attention to relations and commercial operations with Iran, including Iranian companies and financial institutions. In addition to enhanced analysis, the FATF reiterates the appeal of February 25, 2009, made to its members, and urges all jurisdictions to apply effective counter-measures to protect their financial sectors from the risks of money laundering and terrorist financing (ML/TF) emanating from Iran. The FATF continues to alert jurisdictions to protect themselves from correspondent relationships used to avoid or circumvent counter-measures and risk mitigation practices, consider ML/TF risks when analyzing requests from Iranian financial institutions to open branches or subsidiaries in their jurisdiction. Due to the continuing threat of terrorist financing coming from Iran, jurisdictions should consider measures already adopted and possible additional safeguards, or the strengthening of existing ones.

The FATF urges Iran to address its ML/TF deficiencies immediately and significantly, mainly in the sense of criminalizing terrorist financing and implementing requirements for reporting unusual transactions (RUTs).
If Iran does not take concrete measures to improve its AML/CFT regime, the FATF may appeal to its members and all jurisdictions to reinforce the counter-measures in February 2012.

Democratic People's Republic of Korea (DPRK)
The FATF remains concerned with the DPRK's failure to address the major deficiencies in its anti-money laundering and counter-terrorist financing (AML/CFT) regime and with the serious threat this represents to the integrity of the international financial system. The FATF urges the DPRK to address its AML/CFT-related deficiencies seriously and immediately.

The FATF reiterates its request of February 25, 2011 and asks its members and all jurisdictions to direct their financial institutions to give greater attention to relations and commercial operations with the DPRK, as well as with companies and financial institutions of the DPRK. In addition to enhanced analysis, the FATF asks all jurisdictions to apply effective counter-measures that protect their financial sectors from the risk of money laundering and terrorist financing (ML/TF) that arise from the DPRK. Jurisdictions must also protect themselves from correspondent relationships used to avoid or circumvent counter-measures and risk mitigation practices, and consider ML/TF risks when analyzing requests from DPRK financial institutions to open branches or subsidiaries in their jurisdiction.

The FATF recognizes the latest appeal of the DPRK to the FATF and remains prepared to assist the DPRK directly in addressing its AML/CFT deficiencies.

Cuba
Cuba has not committed to complying with international AML/CFT standards, nor has it engaged in a direct and constructive manner with the FATF. At the same time, Cuba attended a FATF-SUD plenary as a guest and prepared an informal document on its AML/CFT regime. The FATF identified that Cuba has strategic AML/CFT deficiencies that put the international financial system at risk. The FATF asks Cuba to develop an AML/CFT regime in accordance with the international standard and encourages Cuba to establish a direct and constructive dialogue with the FATF and is willing to work together with the Cuban authorities for this purpose.

Bolivia
Bolivia has made progress in improving its AML/CFT regime, including through new CFT legislation. However, despite high political commitment to work in partnership with the FATF and with FATF-SUD to address its strategic AML/CFT deficiencies, Bolivia has not satisfactorily implemented its action plan, and some strategic AML/CFT deficiencies remain. Bolivia must address these deficiencies: (1) ensuring the proper criminalization of money laundering (Recommendation 1); (2) properly criminalizing terrorist financing (Special Recommendation II); (3) establishing and implementing an adequate legal framework to identify and freeze assets belonging to terrorists (Special Recommendation III); (4) creating a fully operational and effective Financial Intelligence Unit (Recommendation 26). The FATF encourages Bolivia to address its existing deficiencies and proceed with the process of implementing its action plan.

Ethiopia
Despite the high political commitment of Ethiopia to work with the FATF to address its AML/CFT deficiencies, Ethiopia has not progressed enough in implementing its action plan and some deficiencies remain. Ethiopia must address these deficiencies: (1) properly criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) ensuring a fully operational and effective FIU (Recommendation 26); (4) implementing effective, proportionate and dissuasive sanctions to deal with natural and legal persons who fail to comply with national AML/CFT requirements (Recommendation 17). The FATF encourages Ethiopia to address the deficiencies and continue the process of implementing its action plan.

Ghana
Ghana has made progress in improving its AML/CFT regime, including by ratifying the United Nations Convention against Transnational Organized Crime and publishing CDD guidelines. However, despite high political commitment to work in partnership with the FATF and with GIABA to address its strategic AML/CFT deficiencies, Ghana has not satisfactorily implemented its action plan, and some strategic AML/CFT deficiencies remain. Ghana must address these deficiencies: (1) properly criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate measures for the confiscation of assets related to money laundering (Recommendation 3); (3) establishing a fully operational and effective Financial Intelligence Unit (Recommendation 26); and (4) establishing and implementing an adequate legal framework that can identify and freeze terrorist assets (Special Recommendation III). The FATF encourages Ghana to address existing deficiencies and proceed with the process of implementing its action plan.

Indonesia
Indonesia has made significant progress in improving its AML/CFT regime, including through new AML legislation in 2010 and the development of a comprehensive CFT bill. However, despite high political commitment to work in partnership with the FATF and with APG to address its strategic AML/CFT deficiencies, Indonesia has not satisfactorily implemented its action plan, and some strategic AML/CFT deficiencies remain. Indonesia must address these deficiencies: (1) properly criminalizing terrorist financing (Special Recommendation II); (2) establishing and implementing an adequate legal framework that can identify and freeze terrorist assets (Special Recommendation III); and (3) modifying and implementing laws or other legal instruments to fully implement the International Convention for the Suppression of the Financing of Terrorism of 1999 (Special Recommendation I). The FATF encourages Indonesia to address existing deficiencies and proceed with the process of implementing its action plan.

Kenya
Despite the high political commitment of Kenya to work with the FATF and with ESAAMLG to address its AML/CFT deficiencies, Kenya has not progressed enough in implementing its action plan and some deficiencies remain. Kenya must address these deficiencies: (1) properly criminalizing terrorist financing (Special Recommendation II); (2) ensuring a fully operational and effective FIU (Recommendation 26); (3) establishing and implementing an adequate legal framework that can identify and freeze terrorist assets (Special Recommendation III); and (4) implementing effective, proportionate and dissuasive sanctions to deal with natural and legal persons who fail to comply with national AML/CFT requirements (Recommendation 17). The adoption of the ESAAMLG mutual evaluation report is welcomed, and the FATF will work with Kenya in light of new deficiencies identified in the report. The FATF encourages Kenya to address existing deficiencies and proceed with the process of implementing its action plan and also AML legislation and creating its FIU.

Myanmar
Despite the high political commitment of Myanmar to work with the FATF and with the Asia-Pacific Group (APG) to address its AML/CFT deficiencies, Myanmar has not progressed enough in implementing its action plan and some deficiencies remain. Myanmar must address these deficiencies: (1) properly criminalizing ML (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) strengthening the extradition framework related to terrorist financing (Recommendation 35 and Special Recommendation I); (4) ensuring a fully operational and effective FIU (Recommendation 26); (5) improving financial transparency (Recommendation 4); and (6) strengthening customer due diligence measures (Recommendation 5). The FATF encourages Myanmar to address existing deficiencies and proceed with the process of implementing its action plan.

Nigeria
Nigeria has taken measures to improve its AML/CFT regime, including through new AML/CFT legislation and supervision across all sectors. However, despite high political commitment to work with the FATF and with GIABA to address its AML/CFT deficiencies, greater involvement of Nigeria is needed to clarify whether such deficiencies have been addressed, including: (1) properly criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); and (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III). The FATF encourages Nigeria to address its existing deficiencies and continue the process of implementing its action plan.

Pakistan
Pakistan has made significant progress in improving its AML/CFT regime, including by strengthening the capacity of its FIU, approving an AML/CFT strategy and ensuring that relevant stakeholders receive training. Despite high political commitment to work with the FATF and with APG to address its strategic AML/CFT deficiencies, Pakistan has not progressed enough in implementing its action plan, and some deficiencies remain. Pakistan specifically needs legislation to ensure compliance with FATF standards regarding the crime of terrorist financing (SR II) and the ability to identify and freeze terrorist assets (Special Recommendation III). The FATF encourages Pakistan to address existing deficiencies and continue implementing its action plan, including demonstrating effective regulation of financial service providers and implementing effective controls on cross-border cash transactions (Special Recommendation VI and Special Recommendation IX).

Sao Tome and Principe
Despite the high political commitment of Sao Tome and Principe to work with the FATF to address its AML/CFT deficiencies, Sao Tome and Principe has not progressed enough in implementing its action plan and some deficiencies remain. Sao Tome and Principe must address these deficiencies: (1) properly criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing a fully operational and effective Financial Intelligence Unit (Recommendation 26); (3) ensuring that financial institutions and DNFBPs are subject to adequate regulation and supervision (Recommendations 23, 24 and 29); and (4) implementing effective, proportionate and dissuasive sanctions to deal with non-compliance with national AML/CFT requirements (Recommendation 17). The FATF encourages Sao Tome and Principe to address existing deficiencies and proceed with the process of implementing its action plan.

Sri Lanka
Despite the high political commitment of Sri Lanka to work with the FATF and with the Asia-Pacific Group (APG) to address its AML/CFT deficiencies, Sri Lanka has not progressed enough in implementing its action plan and some deficiencies remain. Sri Lanka must address these deficiencies: (1) properly criminalizing terrorist financing (Special Recommendation II); and (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III). The FATF encourages Sri Lanka to address existing deficiencies and proceed with the process of implementing its action plan, including continuing work on its AML/CFT legislation.

Syria
Syria has taken measures to improve its AML/CFT regime, including improving legal arrangements to freeze assets belonging to terrorists. Despite the high political commitment of Syria to work with the FATF and with FATF-MENA, greater commitment from Syria is needed to clarify whether existing deficiencies have been addressed: (1) implementing adequate procedures to identify and freeze assets belonging to terrorists (Special Recommendation III); (2) ensuring that financial institutions are aware of and comply with their obligations to submit suspicious transaction reports related to ML and TF (Recommendation 13 and Special Recommendation IV) and (3) ensuring that there are appropriate laws and procedures to provide mutual legal assistance (Recommendations 36-38, Special Recommendation V). The FATF encourages Syria to demonstrate that deficiencies have been addressed to allow the FATF to properly assess the country's progress.

Tanzania
Tanzania has made progress in improving its AML/CFT regime, including through amendments to the Money Laundering and Proceeds of Crime Act and the Zanzibar AML Act. However, despite the high political commitment of Tanzania to work with the FATF and ESAAMLG to address its AML/CFT deficiencies, Tanzania has not made sufficient progress in implementing its action plan, and certain AML/CFT deficiencies remain. Tanzania must address these deficiencies: (1) determining whether money laundering has been properly criminalized (Recommendation 1; (2) properly criminalizing terrorist financing (Special Recommendation II); (3) establishing and implementing adequate procedures to identify and freeze assets belonging to terrorists, as well as implementing UNSCRs 1267 and 1373 through legislation, regulations or other legal means (Special Recommendation III); (4) establishing adequate CDD measures (Recommendation 5); (5) establishing adequate record-keeping requirements (Recommendation 10); (6) establishing a fully operational and effective Financial Intelligence Unit (Recommendation 26); and (7) designating competent authorities to ensure compliance with AML/CFT requirements (Recommendation 23). The FATF encourages Tanzania to address existing deficiencies and continue the process of implementing its action plan.

Thailand
There was high political commitment to work with the FATF and APG to address its deficiencies, but Thailand has not made sufficient progress in implementing its action plan, and some strategic AML/CFT deficiencies remain, despite Thailand facing external difficulties between 2009 and 2011, which had a significant impact on the legislative process for the necessary laws and regulations. Thailand has made progress in improving its AML/CFT regime, including by conducting a complete assessment of the AML/CFT risks of its financial sector. Thailand must address existing deficiencies: (1) properly criminalizing terrorist financing (Special Recommendation II); (2) establishing and implementing adequate processes to identify and freeze assets belonging to terrorists (Special Recommendation III); and (3) strengthening AML/CFT supervision (Recommendation 23). The FATF encourages Thailand to address existing deficiencies and continue the process of implementing its action plan.

Turkey
Turkey has taken measures to improve its AML/CFT regime, including presenting CFT legislation to Parliament. Despite the high political commitment of Turkey to work with the FATF to address its ML/TF deficiencies, the FATF is still not satisfied with the progress in implementing its action plan and has identified that some deficiencies remain. Turkey must address these deficiencies: (1) properly criminalizing terrorist financing (Special Recommendation II); and (2) implementing an adequate legal framework to identify and freeze assets belonging to terrorists (Special Recommendation III). The FATF encourages Turkey to address remaining deficiencies and proceed with the process of implementing its action plan.

Enhancing Global AML/CFT Compliance: Ongoing Process – February 16, 2012 Paris, February 16, 2012 – As part of its current analysis of compliance with AML/CFT standards, the FATF has identified so far the following jurisdictions with strategic AML/CFT deficiencies for which an action plan has been developed in partnership with the FATF. As the situation differs from one jurisdiction to another, each jurisdiction has submitted in writing its high-level political commitment to address the identified deficiencies. The FATF encourages such commitments.

Several jurisdictions have not yet been examined by the FATF. The FATF continues to identify other jurisdictions that pose a risk to the international financial system. It has already initiated a preliminary analysis of other jurisdictions as part of this process and will present its conclusions next year.

The FATF and regional FATF-style bodies (FSRBs) will continue to work with the jurisdictions listed below and will communicate their progress in addressing the identified deficiencies. The FATF urges these jurisdictions to complete the implementation of action plans efficiently and within the proposed deadlines. The FATF will monitor the implementation of these action plans and encourages its members to consider the information presented below.

On February 16, 2012, the FATF published the revised FATF Recommendations:
"International Standards for Combating Money Laundering and the Financing of Terrorism and Proliferation" document in which the FATF revised and identified the jurisdictions based on the 40+9 FATF Recommendations, of 2003. Thus, references to Recommendations or Specific Special Recommendations (e.g., R1, REII etc.) in this document refer to the 40+9 Recommendations of 2003.

Algeria
In October 2011, Algeria showed high-level political commitment to work with the FATF and the Middle East and North Africa Financial Action Task Force (MENAFATF) to address its strategic deficiencies in AML/CFT. Since then, Algeria has worked to improve its AML/CFT regime, including through AML/CFT legislation. However, the FATF has not yet assessed such legislation, as it is too recent. The FATF will assess the legislation and Algeria should continue working to implement its action plan to address such deficiencies: (1) adequately criminalizing terrorist financing (Special Recommendations I and II); (2) establishing and implementing adequate procedures to identify and freeze terrorist funds (Special Recommendation III); (3) strengthening customer due diligence measures and ensuring they apply to all financial institutions (Recommendation 5); (4) establishing a fully operational and effective Financial Intelligence Unit, particularly regarding the FIU's operational autonomy and authority to request and access information (Recommendation 26); and (5) enacting and implementing mutual legal assistance legislation (Special Recommendation V). The FATF encourages Algeria to address the deficiencies and proceed with the implementation process of its action plan.

Angola
In June 2010, Angola showed high-level political commitment to work with the FATF to address its strategic deficiencies in AML/CFT. Since October 2011, Angola has worked to address its strategic deficiencies, including by enacting a new AML/CFT Law. The FATF has identified, however, certain strategic deficiencies in AML/CFT. Angola should continue working on implementing its action plan to eliminate these deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing a fully operational and effective Financial Intelligence Unit (Recommendation 26); and (3) establishing and implementing an adequate legal framework to identify, trace, and freeze terrorist funds (Special Recommendation III). The FATF encourages Angola to address the remaining deficiencies and proceed with the implementation process of its action plan.

Antigua and Barbuda
In February 2010, Antigua and Barbuda showed strong political commitment to work with the FATF and the Caribbean Financial Action Task Force (CFATF) to address its strategic deficiencies in AML/CFT. Since October 2011, Antigua and Barbuda has taken measures to improve its AML/CFT regime, including finalizing the methodology of its supervision program and making progress in the registration and regulation of Cooperative Societies. However, the FATF identified that certain strategic deficiencies remain. Antigua and Barbuda should continue implementing its action plan to address such deficiencies, continuing the process of improving the overall supervision framework (Recommendation 23). The FATF encourages Antigua and Barbuda to address the existing deficiencies and proceed with the implementation process of its action plan.

Argentina
In June 2010, Argentina showed strong political commitment to work with the FATF to address its strategic deficiencies in AML/CFT. Since then, Argentina has made progress in improving its AML/CFT regime, including through legislation that significantly improves the criminalization of terrorist financing in Argentina, and also through FIU Resolutions improving CDD measures for the insurance, securities, real estate, and cooperative and mutual association sectors. The FATF has identified, however, that certain strategic deficiencies remain. Argentina should continue implementing its action plan to address such deficiencies: (1) addressing existing deficiencies regarding the criminalization of money laundering (Recommendation 1); (2) establishing and implementing adequate procedures to confiscate funds linked to money laundering and identifying and freezing terrorist funds (Recommendation 3 and Special Recommendation III); (3) increasing financial transparency (Recommendation 4); (4) ensuring a fully operational and effective Financial Intelligence Unit and improving suspicious transaction reporting requirements (Recommendation 13, Special Recommendation IV and Recommendation 26); (5) implementing an adequate AML/CFT supervision program for all financial sectors (Recommendations 17, 23 and 29); (6) enhancing and expanding customer due diligence measures (Recommendation 5); and (7) establishing appropriate channels of international cooperation and ensuring their effective implementation (Recommendation 36, Recommendation 40 and Special Recommendation V). The FATF encourages Argentina to address the existing deficiencies and proceed with the implementation process of its action plan.

Bangladesh
In October 2010, Bangladesh showed strong political commitment to work with the FATF and the Asia-Pacific Group (APG) to address its strategic deficiencies in AML/CFT. Since October 2011, Bangladesh has taken measures to improve its AML/CFT regime, including the publication of the Prevention of Money Laundering Regulations, 2012, a Regulation to amend the Anti-Terrorism Act (ATA), 2009, and the Mutual Legal Assistance in Criminal Matters Regulations, 2012. Additionally, Bangladesh revised its Voluntary Tax Compliance (VTC) Program, through a Statutory Regulatory Order (SRO) that rescinded the previous VTC program to address concerns expressed by the FATF in the public statement present in the President's Summary following the October 2011 plenary meeting. However, the FATF identified that certain strategic deficiencies remain. Bangladesh should continue working on implementing its action plan to address such deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing an adequate legal framework to identify and freeze funds belonging to terrorists (Special Recommendation III); (3) implementing adequate procedures to confiscate funds linked to money laundering (Recommendation 3); (4) creating a fully operational and effective Financial Intelligence Unit (Recommendation 26); (5) improving suspicious transaction reporting requirements (Recommendation 13 and Special Recommendation IV); (6) improving international cooperation (Recommendation 36 and 39 and Special Recommendation V); and (7) publishing guidelines for capital market intermediaries to effectively extend AML/CFT obligations, including regarding the VTC program (Recommendation 5). The FATF encourages Bangladesh to address the existing deficiencies and continue with the implementation process of its action plan.

Brunei
In June 2011, Brunei showed strong political commitment to work with the FATF and the Asia-Pacific Group (APG) to address its strategic deficiencies in AML/CFT. However, the FATF identified that certain strategic deficiencies remain. Brunei should continue working on implementing its action plan to address such deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing an adequate legal framework to identify and freeze funds belonging to terrorists (Special Recommendation III); (3) implementing adequate procedures to confiscate funds linked to money laundering (Recommendation 3); (4) improving suspicious transaction reporting requirements (Recommendation 13 and Special Recommendation IV); (5) creating a fully operational and effective Financial Intelligence Unit (Recommendation 26); and (6) enacting and implementing appropriate mutual legal assistance laws (Recommendation 36 and Special Recommendation V). The FATF encourages Brunei to address the existing deficiencies and continue with the implementation process of its action plan.

Cambodia
In June 2011, Cambodia showed strong political commitment to work with the FATF and the Asia-Pacific Group (APG) to address its strategic deficiencies in AML/CFT. The FATF identified that certain strategic deficiencies remain. Cambodia should continue working on implementing its action plan to address such deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing an adequate legal framework to identify and freeze funds belonging to terrorists (Special Recommendation III); (3) implementing adequate procedures to confiscate funds linked to money laundering (Recommendation 3); (4) creating a fully operational and effective Financial Intelligence Unit (Recommendation 26) and (5) improving and implementing effective controls for cross-border cash movements (Special Recommendation IX). The FATF encourages Cambodia to address the existing deficiencies and continue with the implementation process of its action plan.

Kyrgyzstan
In October 2011, Kyrgyzstan showed strong political commitment to work with the FATF and the Eurasian Group (EAG) to address its strategic deficiencies in AML/CFT. The FATF identified, however, certain strategic deficiencies in the country. Kyrgyzstan should work on implementing its action plan to resolve such deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) creating and implementing adequate procedures to identify and freeze terrorist funds (Special Recommendation III); (3) establishing and implementing adequate procedures to confiscate funds linked to money laundering (Recommendation 3); (4) creating customer due diligence measures for all financial institutions (Recommendation 5); and (5) implementing an adequate and efficient AML/CFT supervision program for all financial sectors (Recommendation 23). The FATF encourages Kyrgyzstan to address the deficiencies and continue its action plan implementation process.

Mongolia
In June 2011, Mongolia showed strong political commitment to work with the FATF and the Asia-Pacific Group (APG) to address its strategic deficiencies in AML/CFT. Since October 2011, Mongolia has been progressing with regard to its AML/CFT regime, including through the capacity building of the FIU and supervisory authorities. However, the FATF identified that certain deficiencies remain. Mongolia should continue working on implementing its action plan to address such deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing an adequate legal framework to identify and freeze funds belonging to terrorists (Special Recommendation III); (3) implementing adequate procedures to confiscate funds linked to money laundering (Recommendation 3); (4) establishing suspicious transaction reporting requirements (Recommendation 13 and Special Recommendation IV); (5) creating a fully operational and effective Financial Intelligence Unit (Recommendation 26) and (6) showing effective regulation of financial service providers. The FATF encourages Mongolia to address the existing deficiencies and continue with the implementation process of its action plan.

Morocco
In February 2010, Morocco showed strong political commitment to work with the FATF and the Middle East and North Africa Financial Action Task Force (MENAFATF) to address its strategic deficiencies in AML/CFT. Since then, Morocco has made progress in its AML/CFT regime, adopting amendments to expand the scope of ML and TF offenses; expanding customer due diligence requirements and working to operationalize the FIU. However, the FATF identified certain strategic deficiencies. Morocco should continue working on implementing its action plan to resolve such deficiencies, including adequately criminalizing terrorist financing (Special Recommendation II).

Namibia
In June 2011, Namibia showed strong political commitment to work with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to address its strategic deficiencies in AML/CFT. Namibia has taken measures to improve its AML/CFT regime, including by strengthening AML/CFT supervision of financial institutions and publishing a Central Bank Determination that allows penalties. However, the FATF identified that certain deficiencies remain. Namibia should continue working on implementing its action plan to address such deficiencies: (1) adequately criminalizing terrorist financing (Special Recommendation II); (2) establishing and implementing an adequate legal framework to identify and freeze funds belonging to terrorists (Special Recommendation III); (3) implementing an adequate AML/CFT supervision program with sufficient competencies (Recommendations 23 and 29); (4) creating a fully operational and effective Financial Intelligence Unit, specifically addressing the operational autonomy of the FIU (Recommendation 26); (5) implementing effective, proportionate and dissuasive sanctions to deal with non-compliance with national AML/CFT requirements (Recommendation 17) and (6) implementing the 1999 International Convention for the Suppression of the Financing of Terrorism (Special Recommendation I). The FATF encourages Namibia to address the existing deficiencies and continue with the implementation process of its action plan.

Nepal
In February 2010, Nepal showed strong political commitment to work with the FATF and the APG to address its strategic deficiencies in AML/CFT. However, the FATF identified certain strategic deficiencies. Nepal must address these deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist funds (Special Recommendation III); (3) implementing adequate procedures to confiscate resources linked to ML (Recommendation 3); (4) enacting and implementing appropriate mutual legal assistance laws (Recommendation 36); (5) creating a fully operational and effective Financial Intelligence Unit (Recommendation 26) and (6) establishing STR reporting obligations for ML and TF (Recommendation 13 and Special Recommendation IV). The FATF encourages Nepal to resolve the existing deficiencies and continue the implementation process of its action plan.

Nicaragua
In June 2011, Nicaragua showed strong political commitment to work with the FATF and the Caribbean Financial Action Task Force (CFATF) to address its strategic deficiencies in AML/CFT. Since then, Nicaragua has been addressing its strategic deficiencies, including through legislation to regulate the microfinance sector. However, the FATF identified certain strategic deficiencies. Nicaragua must address these deficiencies: (1) establishing efficient customer due diligence measures and adequate record-keeping requirements, mainly for entities not regulated by the supervisory authority (Recommendation 5 and Recommendation 10); (2) establishing the obligation to report adequate suspicious transaction reports for ML and TF (Recommendation 13 and Special Recommendation IV); (3) implementing an adequate AML/CFT supervision program in all financial sectors (Recommendation 23); (4) establishing a fully operational and effective Financial Intelligence Unit (Recommendation 26) and (5) establishing adequate procedures to identify and freeze terrorist funds (Special Recommendation III). The FATF encourages Nicaragua to address the remaining deficiencies and proceed with the process.

Sudan
In February 2010, Sudan showed strong political commitment to work in partnership with the FATF and the Middle East and North Africa Financial Action Task Force (MENAFATF) to address its strategic deficiencies in AML/CFT. Since October 2011, Sudan has taken measures to improve its AML/CFT regime, introducing a bank inspection program. The FATF identified, however, certain deficiencies against ML/TF. Sudan should continue working on implementing its action plan to eliminate these deficiencies: (1) implementing adequate procedures to identify and freeze terrorist funds (Special Recommendation III); (2) ensuring a fully operational and effective Financial Intelligence Unit (Recommendation 26); and (3) implementing a supervision program so that supervisors ensure compliance with the provisions of the new law and regulations (Recommendation 23). The FATF encourages Sudan to eliminate the existing deficiencies and proceed with the implementation process of its action plan.

Tajikistan
In June 2011, Tajikistan showed strong political commitment to work with the FATF and the Eurasian Group (EAG) to address its strategic deficiencies in AML/CFT. Since October 2011, Tajikistan has made progress in its AML/CFT regime, including by addressing concerns expressed by the FATF regarding its Voluntary Tax Compliance (VTC) Program in February 2011, and by improving the functionality and operational independence of the FIU. However, the FATF identified that certain deficiencies remain. Tajikistan must address these deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) implementing adequate procedures to confiscate resources linked to money laundering and identify and freeze terrorist funds (Recommendation 3 and Special Recommendation III); (3) increasing financial transparency (Recommendation 4); (4) creating a fully operational and effective Financial Intelligence Unit and improving suspicious transaction reporting requirements (Recommendation 13, Special Recommendation IV and Recommendation 26); (5) establishing efficient customer due diligence measures (Recommendation 5). The FATF encourages Tajikistan to eliminate the existing deficiencies and proceed with the implementation process of its action plan.

Turkmenistan
In June 2010, Turkmenistan showed strong political commitment to work with the FATF and the Eurasian Group (EAG) to address its strategic deficiencies. Since then, Turkmenistan has made progress in improving its AML/CFT regime, establishing legislation to criminalize terrorist financing and money laundering, approving legislation that strengthens CDD measures, establishing a legal framework to freeze assets belonging to terrorists and working on creating its Financial Intelligence Unit. The FATF will visit the country to confirm that the process of implementing the reforms and actions necessary to address the deficiencies identified by the FATF is underway.

Trinidad and Tobago
In February 2010, Trinidad and Tobago showed strong political commitment to work with the FATF and the Caribbean Financial Action Task Force (CFATF) to address its strategic deficiencies against ML/TF. However, the FATF identified that certain deficiencies remain. Trinidad and Tobago should continue working on implementing its action plan to address such deficiencies: (1) implementing adequate procedures to identify and freeze, without delay, the assets of terrorists (Special Recommendation III); and (2) ensuring a fully operational and effective FIU, with supervisory powers (Recommendation 26). The FATF encourages Trinidad and Tobago to eliminate the existing deficiencies and proceed with the implementation process of its action plan.

Venezuela
In October 2010 Venezuela showed strong political commitment to work with the FATF and the Caribbean Financial Action Task Force (CFATF) to address its strategic deficiencies against ML/TF. Since then, Venezuela has made progress in its AML/CFT regime, including by approving AML/CFT amendments. However, the FATF identified that certain deficiencies remain. Venezuela must continue working with the FATF and the CFATF in implementing its action plan to address these deficiencies: (1) adequately criminalizing terrorist financing (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist funds (Special Recommendation I and III); (3) ensuring a fully operational and effective Financial Intelligence Unit (Recommendation 26); (4) establishing adequate customer due diligence measures for all sectors (Recommendation 5); and (5) establishing the obligation to report adequate suspicious transaction reports for ML and TF (Recommendation 13 and Special Recommendation IV). The FATF encourages Venezuela to address these remaining deficiencies and continue with the implementation of its action plan.

Zimbabwe
In June 2011, Zimbabwe showed strong political commitment to work with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to address its strategic deficiencies in AML/CFT. However, the FATF identified that certain deficiencies remain. Zimbabwe should continue implementing its action plan to address such deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing an adequate legal framework to identify and freeze funds belonging to terrorists (Special Recommendation III); (3) creating a fully operational and effective Financial Intelligence Unit (Recommendation 26); (4) ensuring that financial institutions are

clients and comply with their obligations to forward communications of suspicious operations related to ML and TF (Recommendation 13 and Special Recommendation IV); (5) decreeing and implementing legislation on mutual legal assistance (Special Recommendation V) and (6) implementing the United Nations International Convention for the Suppression of the Financing of Terrorism of 1999 (Special Recommendation I). The FATF encourages Zimbabwe to eliminate existing deficiencies and continue the process of implementing the action plan.

Honduras
The FATF congratulates Honduras for the significant progress in its AML/CFT regime and highlights that the country has fulfilled its commitments in the Action Plan regarding the strategic deficiencies identified by the FATF in February 2010. Therefore, Honduras is no longer subject to FATF monitoring in its process of global compliance with AML/CFT. Honduras will join the FATF while addressing all AML/CFT issues identified in its Mutual Evaluation Report, to strengthen its AML/CFT regime.

Paraguay
The FATF congratulates Paraguay for the significant progress in its AML/CFT regime and highlights that the country has fulfilled its commitments in the Action Plan regarding the strategic deficiencies identified by the FATF in February 2010. Therefore, Paraguay is no longer subject to FATF monitoring in its process of global compliance with AML/CFT. Paraguay will join the FATF while addressing all AML/CFT issues identified in its Mutual Evaluation Report, mainly with respect to the implementation of Special Recommendation VI and Special Recommendation IX.

Jurisdictions that are not progressing sufficiently The FATF is still not satisfied with the progress made by the following jurisdictions in their action plan in accordance with the FATF. The most important action plans and/or most of their action plans have not been addressed. If these jurisdictions do not take sufficient measures to implement significant components of their action plans by June 2012, the FATF will classify them as non-compliant with the combined action plans and will go further, calling on its members to consider the risks arising from these deficiencies associated with the jurisdiction.

Ecuador
Ecuador has taken measures to improve its AML/CFT regime, including proposing amendments to its TF legislation. Despite Ecuador's strong commitment to working with the FATF and the FATF-SUD to address its strategic AML/CFT deficiencies, the FATF is not satisfied with the progress made by Ecuador in implementing its action plan, and certain deficiencies remain. Ecuador must continue working on the implementation of its action plan to address these deficiencies: (1) ensuring the adequate criminalization of terrorist financing (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) implementing adequate procedures to confiscate funds linked to money laundering (Recommendation 3); and (4) strengthening and improving the coordination of financial sector supervision (Recommendation 23). The FATF encourages Ecuador to address the existing deficiencies and continue the process of implementing its action plan and encourages Ecuador to approve the recently proposed TF legislation.

Philippines
The Philippines have worked to improve their AML/CFT system with two legislative proposals in the Senate on money laundering and terrorist financing classified as urgent by the President, and which are awaiting approval. Despite the high political commitment of the Philippines to work with the FATF and the Asia-Pacific Group (APG) to address their strategic AML/CFT deficiencies, the FATF is not satisfied with the progress made by the Philippines in implementing their action plan. The Philippines must continue working to address their deficiencies: (1) ensuring the adequate criminalization of money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) implementing adequate procedures to identify and freeze assets belonging to terrorists and confiscate funds related to money laundering (Special Recommendation III and Recommendation 3); (3) increasing financial transparency (Recommendation 4); and (4) increasing the coverage of reporting entities (Recommendations 12 and 16). The FATF encourages the Philippines to address the existing deficiencies and continue the process of implementing their action plan. The FATF gives strong support, mainly, to the Philippines enacting the legislative amendments to their AML/CFT regime that are pending.

Vietnam
Vietnam published an Inter-Ministerial Circular regarding money laundering. Despite Vietnam's strong commitment to working with the FATF and the Asia-Pacific Group (APG) to address their strategic AML/CFT deficiencies, the FATF has identified that certain strategic deficiencies remain. Vietnam must continue working on the implementation of its action plan to address such deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) making legal persons subject to criminal liability, in accordance with FATF Recommendation 2, or showing that there is a constitutional impediment to such action; (4) improving the overall supervisory structure (Recommendation 23); (5) improving and expanding customer due diligence measures and requirements (Special Recommendation 5, 13 and Special Recommendation IV); and (6) strengthening international cooperation (Recommendations 36 and 40). The FATF encourages Vietnam to address the remaining deficiencies and continue with the process of implementing its action plan.

Yemen
Despite Yemen's strong political commitment to working with the FATF and the FATF-MEAN to address its strategic deficiencies, the FATF is still not satisfied with the progress made by the country, and certain strategic deficiencies remain. Yemen must continue working on the implementation of its action plan with the aim of eliminating these deficiencies: (1) adequately criminalizing money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) developing the monitoring and supervisory capacity of financial sector supervisory authorities and the FIU, to ensure the compliance of financial institutions with their obligations to report suspicious operations, especially with respect to TF (Recommendation 23); and (4) ensuring a fully operational and effective FIU (Recommendation 26). The FATF encourages Yemen to eliminate the remaining deficiencies and proceed with the process of implementing its action plan.

Sincerely,
Waldir de Jesus Nobre
Superintendent of Market Relations and Intermediaries Francisco José Bastos Santos Superintendent of Institutional Investor Relations