The Financial Action Task Force (FATF) conducted a mutual evaluation of Belgium's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime against the FATF's 40+9 recommendations and special recommendations. The FATF published its findings in a 2005 report, in which it concludes that Belgium is compliant with 21 recommendations and special recommendations; largely compliant with 20; partially compliant with 6; non-compliant with 1; and one recommendation does not apply to Belgium. The report notes that Belgium's legal and oversight framework for AML/CFT is broadly consistent with FATF standards, due partly to the implementation, in January 2004, of the Second European Union (EU) Anti-Money Laundering Directive, which broadened the scope of money laundering predicate offenses beyond drug-trafficking to include the financing of terrorist acts or organizations. Nevertheless, there are some minor areas where Belgium's AML/CFT regime could be enhanced. Most importantly, the FATF report notes that Belgium's freezing and confiscation regime is generally insufficient to meet the FATF Recommendations, since the EU regulation on freezing terrorist assets (S/RES/1373 of 2001), to which Belgium is a signatory, does not apply to European terrorists. In addition, Belgium is only "partially complaint" with the FATF's recommendations relating to Designated Non-Financial Business and Professions (DNFBPs), due partially to limited staff resources, which prevents authorities from adequately monitoring AML/CFT legislation adoption by DNFBPs. According to a 2008 report by the U.S. Department of State, Belgium was expected to implement the Third EU Money Laundering Directive in December 2007. This Directive contains the requirement that all EU member states implement the FATF's recommendations. However, a June 2008 press release by the EU, reports that the European Commission has decided to pursue infringement procedures against 15 member states, including Belgium, for failure to implement the Third Anti-Money Laundering Directive in national law.

General Overview

The Financial Action Task Force (FATF) conducted a mutual evaluation assessing Belgium's anti-money laundering and combating the financing of terrorism (AML/CFT) regime against the FATF's 40+9 recommendations (R) and special recommendations (SR). The findings of this mutual evaluation were released in a 2005 report by the FATF titled "3eme Rapport D' Evaluation Mutuelle De La Lutte Anti-Blanchiment De Capitaux Et Contre Le Financement Du Terrorisme: Belgique." A summary of this evaluation, in English, was released in the same year. According to this report, Belgium has made significant improvements in its AML/CFT regime since its January 2004 implementation of the Second European Union Anti-Money Laundering Directive, which broadened the scope of money laundering predicate offenses beyond drug-trafficking to include the financing of terrorist acts or organizations. In spite of these recent developments, the 2005 FATF report still identifies some shortcomings in Belgium's AML/CFT regime. Most importantly, the FATF report notes that Belgium's freezing and confiscation regime for terrorist financing is generally insufficient to meet the FATF Recommendations, since the EU regulation on freezing terrorist assets (S/RES/1373 of 2001), to which Belgium is a signatory, does not apply to European terrorists. In addition, Belgium is only "partially complaint" with two important FATF recommendations relating to Designated Non-Financial Business and Professions (DNFBPs), due partially to limited staff resources, which prevents authorities from adequately monitoring AML/CFT legislation adoption by DNFBPs. The FATF mutual evaluation observed that Belgium is compliant with 21 recommendations and special recommendations; largely compliant with 20; partially compliant with 6; non-compliant with 1; and one recommendation does not apply to Belgium.

Money laundering is criminalized pursuant to the Law on Preventing Use of the Financial System for Purposes of Money Laundering of January 11, 1993 (hereafter referred to as the Law of January 11, 1993). Article 505 of the Belgian Penal Code sets penalties of up to five years imprisonment for money laundering and mandates the reporting of suspicious transactions by financial institutions. In January 2004, Belgian domestic legislation implementing the Second European Union (EU) Anti-Money Laundering Directive entered into force, broadening the scope of money laundering predicate offenses beyond drug-trafficking, and including the financing of terrorist acts or organizations. Terrorism financing is criminalized pursuant to Belgian legislation implementing the EU Council's Framework Decision on Combating Terrorism, which also permits judicial freezes on terrorists' assets, according to the International Monetary Fund's (IMF) 2006 Report on the Observance of Standards and Codes (ROSC). In addition, Article 140 of the Belgian Penal Code makes it a crime to participate in the activities of a terrorist group, while Article 141 penalizes the provision of material resources, including financial aid, to a terrorist group. Under Articles 140 and 141, penalties range from five to ten years imprisonment. The ROSC points out that Belgium has a comprehensive confiscation, seizure, and freezing system, even though the legal regime for confiscation is not sufficiently clear regarding assets of equal value. The Law of January 11, 1993, the EU Council's Framework Decision on Combating Terrorism (to which Belgium has subscribed), and the Belgian Criminal (Penal) Code all have comprehensive provisions authorizing forfeiture of proceeds of crime, and such forfeiture may be used for all money laundering and terrorist financing offences and predicate offences. Belgium is also a signatory to EU Council Regulation No. 881 of 2002, which permits the freezing of assets of persons and entities associated with Osama Bin Laden or Al-Qaeda. Perhaps most importantly, the Central Office for Seizures and Confiscation (COSC), which operates under the Belgian Ministry of Justice, ensures that all freezing, confiscations, and seizures are done efficiently and in accordance with Belgian law.

Created in 1993 and supervised by the Ministries of Justice and Finance, the Belgian financial intelligence unit (FIU) is known in French as the Cellule de Traitement des Informations Financieres (CTIF-CFI), whose primary mission is to receive, analyze, and disseminate to the public prosecutor all suspicious transaction reports (STRs) submitted by regulated entities. According to a 2008 International Narcotics Control Strategy Report by the U.S. Department of State (DoS), in the first half of 2007, CTIF-CFI received 5,995 STRs and opened 2,301 case files, of which 551 were transmitted to the public prosecutor. By comparison, in 2006, the CTIF-CFI received 9,938 disclosures, opened 3,367 new cases, and transmitted 912 cases to the public prosecutor. According to the 2008 U.S. DoS report, Belgian courts have convicted 1,880 individuals for money laundering on the basis of cases forwarded by the CTIF-CFI. These convictions have yielded combined total sentences of 2,819 years, and Belgian authorities have confiscated approximately $788 million connected with money laundering crimes. The majority of convictions in relation to money laundering are based upon disclosures made by the financial institutions and others to CTIF-CFI. Nevertheless, according to the 2008 U.S. DoS report, Belgium should provide more resources to the CTIF-CFI to strengthen adherence to reporting requirements by some non-financial entities, such as lawyers, notaries, and nonprofit organizations.

In Belgium, there are other law enforcement agencies tasked with supervising and implementing AML/CFT measures. For instance, a department within the federal police, specifically its Central Office for the Fight Against Economic and Financial Crime (OCDEFO), is primarily responsible for investigating money laundering and terrorist financing offences. Like CTIF-CFI, the federal police must also transmit money laundering cases to the public prosecutor. On the judicial level, the federal prosecutor's office has financial divisions to handle money laundering cases. The Ministry of Justice can freeze assets related to terrorist funds, and the Ministry of Finance can freeze assets of individuals and entities associated with Al-Qaeda. Perhaps most importantly, the COSC, which operates under the Belgian Ministry of Justice, ensures that all freezing, confiscations, and seizures are done efficiently and in accordance with Belgian law.

The CTIF-CFI cooperates with numerous domestic and international bodies to bolster Belgium's AML/CFT regime. On the domestic side, the co-operation between various AML/CFT actors is done on an ad-hoc and bilateral basis. For instance, the CTIF-CFI cooperates with the federal police, specifically its OCDEFO and the COSC. The international alliances range from mutual legal assistance (MLA) treaties with numerous Western nations (i.e. an important MLA Treaty with the U.S. since 2000) to several memoranda of understanding (MoU) with various international FIU counterparts, including a memorandum of understanding with the CTIF-CFI counterpart in the U.S. The Convention Applying the Schengen Agreement allows requests for mutual assistance and related operational documents to be sent directly between the judicial authorities concerned. As reported in the 2008 U.S. DoS report, Belgium was expected to implement the Third EU Money Laundering Directive in December 2007. This Directive contains the requirement that all EU member states implement the FATF's recommendations. However, a June 9, 2008 press release by the EU reports that the European Commission has decided to pursue infringement procedures against 15 member states, which includes Belgium, for failure to implement the Third Anti-Money Laundering Directive.

The Principles

1. Legal Systems and Related Institutional Measures

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The 2005 FATF report found Belgium compliant with R1 regarding the money laundering offence and compliant with R2 on mental element and corporate liability. Money laundering is criminalized pursuant to the Law on Preventing Use of the Financial System for Purpose of Laundering Money and Terrorism Financing of 1993. Article 505 of the Belgian Penal Code sets penalties of up to five years imprisonment for money laundering and mandates the reporting of suspicious transactions by financial institutions. In January 2004, Belgian domestic legislation implementing the Second European Union Anti-Money Laundering Directive entered into force, broadening the scope of money laundering predicate offenses beyond drug-trafficking, and including the financing of terrorist acts or organizations. Between 2000 and 2003, of the 5,000 money laundering cases brought to Belgian courts, 800 led to convictions, thus confirming the effectiveness of the Belgian anti-money laundering regime, according to the 2006 IMF ROSC.

Belgium is compliant with SR-II on the criminalization of terrorist financing as noted in the 2005 FATF report. Terrorist financing is criminalized pursuant to Belgian legislation implementing the EU Council's Framework Decision on Combating Terrorism, which also permits judicial freezes on terrorist assets, according to the 2006 ROSC. In addition, Article 140 of the Belgian Penal Code makes it a crime to participate in the activities of a terrorist group, while Article 141 penalizes the provision of material resources (i.e. financial aid) to a terrorist group. Under Articles 140 and 141, penalties range from five to ten years imprisonment. However, as of February 2006, no convictions had been made based on these laws as noted in the ROSC.

Concerning confiscation, freezing, and seizing of proceeds of crime (R3), the FATF's mutual evaluation graded Belgium as largely compliant. The ROSC points out that Belgium has a comprehensive confiscation, seizure, and freezing system, even though the legal regime for confiscation is not sufficiently clear regarding assets of equal value. The Law on Preventing Use of the Financial System for Purposes of Money Laundering, the EU Council's Framework Decision on Combating Terrorism (to which Belgium has subscribed), and the Belgian Criminal Code all have comprehensive provisions authorizing forfeiture of proceeds of crime, and such forfeiture may be used for all money laundering and terrorist financing offences and predicate offences. Belgium is also a signatory to the EU Council Regulation No. 881 of 2002, which permits freezing of assets of persons and entities associated with Osama Bin Laden or Al-Qaeda. Perhaps most importantly, the Central Office for Seizures and Confiscation, which operates under the Belgian Ministry of Justice, ensures that all freezing, confiscations, and seizures are done efficiently and in accordance with Belgian law.

As for SR-III relating to the freezing of terrorist financing-related assets, the FATF mutual evaluation assessed Belgium as partially complaint, noting as a particular weakness Belgium's confiscation and seizure regime - the EU regulation on freezing terrorist assets (S/RES/1373 of 2001) to which Belgium is a signatory - does not apply to European terrorists. The ROSC recommends that Belgium have its own power to freeze terrorist assets, separate from the EU mandate, in order to be fully compliant with SR-III. According to the 2008 U.S. DoS report, the Belgian Ministry of Justice can freeze assets connected to terrorist crimes, even though the burden of proof in such cases is prohibitively high. Also, the Ministry of Finance can freeze assets of individuals and entities associated with Al-Qaeda, the Taliban, and Osama bin Laden listed on the United Nations 1267 Sanctions Committee's consolidated list.

In terms of the FIU and its functions, the FATF report classified Belgium as compliant with R26; partially compliant with R30 about resources, integrity, and training; and largely compliant with R32 on statistics keeping. The evaluation attributes the incomplete R30 compliance assessment to insufficient resources and suggested that the Belgium government devote more resources and investigative personnel to the police, prosecutors, and other Belgian AML/CFT agencies. Created in 1993 and supervised by the Ministries of Justice and Finance, the CTIF-CFI, whose primary mission is to receive, analyze, and disseminate to the public prosecutor all STRs submitted by regulated entities. In the first half of 2007, the CTIF-CFI received 5,995 STRs and opened 2,301 case files, of which 551 were transmitted to the public prosecutor. By comparison, in 2006, the CTIF-CFI received 9,938 disclosures, opened 3,367 new cases, and transmitted 912 cases to the public prosecutor. To date, Belgian courts have convicted 1,880 individuals for money laundering on the basis of cases forwarded by the CTIF-CFI. These convictions have yielded combined total sentences of 2,819 years, and Belgian authorities have confiscated more than approximately $788 million connected with money laundering crimes. The majority of convictions in relation to money laundering are based upon disclosures made by the financial institutions and others to the CTIF-CFI.

The FATF's mutual evaluation observes that Belgium is compliant with R27 on law enforcement authorities and compliant with R28 on the powers of competent authorities. An office within the federal police, specifically its Central Office for the Fight Against Economic and Financial Crime, is primarily responsible for investigating money laundering and terrorist financing offences. Like the CTIF-CFI, the federal police must also transmit money laundering cases to the public prosecutor. On the judicial level, the federal prosecutor's office has financial divisions to handle money laundering cases. At the time of the FATF mutual evaluation's release in November 2005, Belgium was non-compliant with SR-IX on cross border declaration and disclosure, since the country did not have a system to monitor cross-border currency movements at the time. Nevertheless, the Royal Decree of October 5, 2006 on Measures to Control Cross-border Transportation of Cash came into force on June 15, 2007. According to the 2008 U.s. DoS report, this decree implements Regulation 1889/2005 of the EU Council regarding controls of cash entering or leaving the EU. Under the decree, travelers must now declare transportation of currency into or out of the EU worth 10,000 euros (U.S. $14,600) or more. Since June 2007, the Belgian Customs and Excise administration has filed eight STRs with the CTIF-CFI and has confiscated $978, 2000, a clear sign of early success.

2. Preventive Measures - Financial Institutions

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The Law on Preventing Use of the Financial System for Purposes of Money Laundering of 1993 specifies the categories of financial institutions that are subject to legal obligations for the prevention of money laundering and terrorist financing. The IMF ROSC also notes that this Law does not provide any exemptions for any category of financial institutions in regards to anti-money laundering and terrorist financing obligations. The Law allows institutions to determine the best course of action in fulfilling these obligations depending on the on the level of risk represented by the customer, the business relationship and the nature of transaction.

The 2005 FATF report finds Belgium largely compliant with R5 relating to customer due diligence (CDD) and R6 concerning politically exposed persons. On correspondent banking (R7) and on new technologies and non face-to-face business (R8), Belgium is rated as compliant. According to the ROSC, Belgium has comprehensive customer due diligence requirements which "are spelled out very clearly and comprehensively in the regulations and circular of the Banking, Finance, and Insurance Commission (CBFA), especially with regard to clients that are legal entities and their beneficial owners" (p. 4). Nevertheless, regarding R5, the FATF report recommends that Belgian consumer credit companies and leasing firms be subject to detailed identification requirements. Similarly, for R6 the FATF report recommends that stricter acceptability measures for politically exposed persons (PEPs) be extended to beneficial owners that are considered to be PEPs.

The FATF's mutual evaluation assessed Belgium as compliant with R10 on record keeping, and largely compliant with SR-VII on wire transfer rules. According to the IMF ROSC: "record-keeping rules in Belgium comply with FATF obligations by requiring that all documents needed to reconstitute transactions be kept, and by all financial institutions. The competent authorities signaled no particular difficulty in obtaining the information they sought" (p. 4). On SR-VII, the report notes that obligations on wire transfer rules are stipulated in law, but its implementation rules are incorporated in circulars that do not have the force of law.

The FATF mutual evaluation rated Belgium as largely compliant with R13 relating to suspicious transaction reporting and compliant with R14 about protection and no tipping-off. With regard to R13, the evaluation recommends that the Belgium government: (1) strengthen adherence to reporting requirements by non-financial entities like lawyers and notaries and (2) enhance the regulations and reporting obligations for the non-profit and charitable sector. Belgium's system of suspicious transactions reporting is a preventive approach, targeting a list of predicate offences as opposed to the broader all-crimes approach. The Belgian authorities note that they have opted for the preventive approach so as not to inundate the authorities with less important crimes. On R19 regarding other forms of reporting, the mutual evaluation assessed Belgium as compliant, and as largely compliant with R25 on guidelines and feedback. The rating for R25 was due to a lack of specific guidelines for certain non-financial sectors, even if such texts are under development. The evaluation also assessed Belgium as "compliant" with SR-IV relating to suspicious transactions reporting linked with terrorism.

The 2005 mutual evaluation found Belgium largely compliant with R15 relating to internal controls, compliance, and audit. The main weakness was that certain obligations required by R15 are simply specified in the circular of the CBFA, which does not carry the force of law. The CBFA oversees how the financial institutions under its supervision comply with their AML/CFT obligations. However, the CBFA is deficient in that it does not collect data and, therefore, is unable to provide figures on the imposition of compulsory measures or the formulation of recommendations in cases of non-compliance with the AML/CFT requirements. On R22 addressing foreign branches and subsidiaries, Belgium is rated as "largely compliant," since some obligations attached to R22 are simply specified in the circular of the CBFA, which does not carry the force of law. Belgium was adjudged compliant with R18 pertaining to shell banks.

According to the 2005 FATF report, Belgium is largely compliant with R17 regarding sanctions and "partially compliant" with R23 relating to regulation, supervision and monitoring. Similarly, on R29 about supervisors, Belgium was rated largely compliant. Regarding R23, the FATF report recommended that the insurance sector and issuers or managers of credit cards other than credit institutions, leasing companies and consumer credit companies be subject to supervision regarding the AML/CFT obligations. Currently, these sectors are under-supervised and under-audited due to lack of funding and resources.

3. Preventive Measures - Designated non-Financial Business and Professions

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As stated in the IMF's 2006 ROSC, "the customer due diligence obligation and the record-keeping requirement are applicable to nonfinancial businesses and professions by virtue of the Law of January 11, 1993" (p. 7) and these obligations are applicable in all circumstances to estate agents, private security firms (funds transporters), diamond merchants, notaries, bailiffs, auditors, chartered accountants, external tax advisers, certified accountants, and certified tax accountants. The 2005 FATF report found that Belgium is partially compliant with R12 on CDD and record keeping obligations for DNFBPs. Belgium's CDD and record-keeping requirements (as set out in R5, R6, R8, and R11) do not sufficiently apply to some DNFBPs, such as lawyers and notaries. Also, the evaluation notes that Belgium has yet to implement specific AML/CFT measures addressing PEPs applicable to DNFBPs. The FATF report recommended the following: (1) procedures for applying the AML/CFT Law regarding requirements about the identification of legal persons and beneficial owners should be laid down in all non-financial professions; (2) supervisory authorities should draft texts implementing the law detailing the measures for identifying PEPs for all non-financial professions; (3) supervisory authorities should draft texts implementing the law detailing for non-financial professions the specific measures appropriate to face the increased risk that exists with a client who is not physically present for identification purposes; and (4) notaries, company auditors, external auditors, certified accountants, certified tax accountants, and lawyers should be obliged to draw up written reports on unusual transactions.

On R16 about STRs related to DNFBPs, Belgium is assessed as largely compliant. Concerning R24 about DNFBP regulation, supervision and monitoring, the 2005 FATF mutual evaluation categorized Belgium partially compliant. Primarily, the evaluation attributed the rating to R24 to CTIF-CFI's limited staff resources, which prevents the body from adequately monitoring AML/CFT legislation adoption by DNFBPs. The FATF report recommended that: (1) systems for overseeing and supervising compliance with AML/CFT obligations be established in all non-financial professions; and (2) self-regulatory organizations and the CTIF-CFI have adequate resources to fulfill their function.

4. Legal Person and Arrangements & Non-Profit Organizations

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The FATF's mutual evaluation reports that Belgium is partially compliant with R33 relating to legal persons and access to beneficial ownership and control information. In justifying the low rating, the evaluation points out that, in Belgium, the names of company directors and officers (along with information on property and control) can only be obtained by consulting the registry of the Commercial or Bankruptcy Court. The FATF recommends the improvement of knowledge of the ownership and control of public limited companies (societes anonyms) that issue bearer shares. Also, the report states that dematerialization of shares should not be left to the discretion of the issuing company. Legislation to that effect is currently being drafted.

The FATF's recommendation on legal arrangements and beneficial owners (R34) is not applicable to Belgium because legal arrangements for beneficial owners as defined by the FATF in its 2003 recommendations do not exist in Belgium. On SR-VIII relating to non-profit organizations (NPOs), the mutual evaluation found Belgium largely compliant. The law governing NPOs provides the authorities with oversight capabilities, requires NPOs to publish by-laws and membership registers, and stipulates mandatory reporting of accounts by NPOs with a public authority

5. National and International Co-operation

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The 2005 FATF report found that Belgium was largely compliant with R31 on national cooperation, and largely compliant with R32 on statistics. Regarding the rating assigned to R31, the evaluation notes that the CTIF-CFI and the Federal Department of Economic Affairs should step up their dialogue regarding the supervision of institutions and persons that are not subject to any prudential supervision. The IMF ROSC states that "on the whole, co-operation between the various agents responsible for carrying out AML/CFT measures in Belgium would appear to be done bilaterally and on an ad hoc basis... with regard to multilateral

consultations, the mechanisms in place are relatively formal, and the CTIF-CFI remains unofficially the co-coordinating body for AML/CFT measures" (p. 9)

The mutual evaluation assessed Belgium largely compliant with R35 regarding the ratification of international conventions, and largely compliant with SR-I on implementing UN instruments. Most importantly regarding R35, the FATF report recommended that Belgium: (1) adopt the necessary measures to tackle cash movement at borders (i.e. Articles 15, 17, and 19 of the Convention of Vienna and Article 7.2 of the Convention of Palermo); and (2) ensure the effectiveness of its extradition and mutual legal assistance measures (i.e. Articles 9 and 12 of the Convention). According to the 2008 DoS report, Belgium has ratified the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime. Belgium has signed, but not yet ratified, the UN Convention against Corruption.

The IMF ROSC notes that "in Belgium, mutual legal assistance measures are in place for investigations, prosecutions and related procedures concerning both money laundering and terrorist financing, [however], Belgium does not make existence of an international treaty a prerequisite to lending mutual assistance in criminal cases" (p. 9). According to the 2005 FATF report, Belgium is largely compliant with R36 concerning mutual legal assistance. The FATF report cites the absence of statistics as a shortcoming in Belgium's MLA framework as it makes it impossible to ascertain the effectiveness of the Belgium's MLA regime. Overall, the FATF report recommends that Belgium ensure the effectiveness of its MLA regime, especially in the absence of a bilateral agreement. Signed in December 2004, the U.S.-E.U. Extradition and Mutual Assistance Agreement is expected to boost Belgium's MLA regime. The agreement has yet to be ratified.

The FATF mutual evaluation ranked Belgium largely compliant with R37 on dual criminality and largely compliant with R38 pertaining to MLA on confiscation and freezing. On R38, the IMF ROSC states "Belgium is in broad compliance with its mutual legal assistance obligations (in particular with respect to the identification, seizure, and confiscation of assets). Yet the effectiveness of mutual legal assistance is still dependent on the existence of a convention, even if a new law (of December 2004) provides an initial response to this gap" (p. 11). With regard to SR-V on international cooperation, the mutual evaluation rated Belgium as largely compliant, adding that all elements missing in R38, R39, and R40 are also missing for SR-V. The evaluation also adjudged Belgium to be largely compliant with R39 relating to extraditions, adding that Belgium could improve its extraditions regime by ensuring the effectiveness of the extradition procedures applicable outside the EU. Extradition to member states of the European Union is governed by the Law of December 19, 2003 on European arrest warrants, and outside the European Union, it is the traditional principles of extradition that apply. Finally, on R40 pertaining to other forms of international co-operation, Belgium is rated as compliant.