In October 2004, GAFISUD (the Financial Action Task Force style regional body for South America) conducted a mutual evaluation of Colombia to assess compliance with the FATF 40 plus 8 Special recommendations on AML/CFT. The assessment indicates that the Colombian authorities are deeply committed to combating money laundering and have achieved a significant number of convictions. Colombian AML legislation makes money laundering an autonomous offense and covers most serious predicate offenses. The financial intelligence unit (UIAF) is one of the leading authorities in AML/CFT controls in Colombia with adequate powers and systems. Nevertheless, despite comprehensive anti-money laundering legislation regulations which have allowed the government to refine and improve its ability to combat financial crimes and money laundering, enforcement continues to be a challenge in Colombia. Limited resources for prosecutors and investigators have made financial investigations problematic. Congestion in the court system, procedural impediments, and corruption remain as continuing problems. In addition, the government has not specifically criminalized the financing of terrorism, although terrorist financing crimes can be prosecuted under other sections of law.

General Overview

In October 2004, GAFISUD conducted a mutual evaluation of Colombia to assess compliance with the FATF 40 plus 8 Special Recommendations on AML/CFT. The assessment indicates that the Colombian authorities are deeply committed to combating money laundering and have achieved a significant number of convictions. Colombian AML legislation makes money laundering an autonomous offense and covers most serious predicate offenses, although it should also incorporate smuggling and piracy among them. With respect to confiscation of illicit property, Colombian legislation is among the few that provide for domain extinction which facilitates the forfeiture of illicit property through a process separate from money laundering criminal procedures. However, Colombia has not ratified the UN Convention for the Suppression of Financing of Terrorism, and there is no specific legislation that criminalizes the financing of terrorism. (FSSA Update 2005)

The financial intelligence unit (Unidad de Información y Análisis Financiero) is one of the leading authorities in AML/CFT controls in Colombia with adequate powers and systems. (FSSA Update 2005)

Colombia, a major drug producer, is a regional leader in the fight against money laundering. Comprehensive anti-money laundering legislation regulations have allowed the government to refine and improve its ability to combat financial crimes and money laundering. Nevertheless, the laundering of drug money from Colombia's large and lucrative cocaine and heroin trade continues to penetrate its economy and affect its financial institutions. Additionally, a complex legal system and limited resources for anti-money laundering programs constrain the effectiveness of the Government of Colombia's efforts. The extent of money laundering is related to a number of criminal activities--narcotics-trafficking, commercial smuggling for tax and import duty evasion, kidnapping for profit, and arms trafficking and terrorism connected to violent paramilitary groups and guerrilla organizations)--and is carried out, to a significant degree, by officially recognized Foreign Terrorists Organizations (FTO's). The government and post law enforcement organizations (LEO's) are closely monitoring transactions that could disguise terrorist finance activities for local FTOs or Islamic terror organizations. (BINLEA 2005)

Money launderers in Colombia employ a wide variety of techniques. Trade-based money laundering, such as the Black Market Peso Exchange (BMPE)--through which money launderers furnish narcotics-generated dollars in the United States to commercial smugglers, travel agents, investors and others in exchange for Colombian pesos in Colombia--remains a prominent method for laundering narcotics proceeds. Colombian authorities have also noted increased body smuggling of U.S. and other foreign currencies and an increase in the number of shell companies operating in Colombia. Smart cards, Internet banking, and the dollarization of the economy of neighboring Ecuador represent some of the growing challenges to money laundering enforcement in Colombia. From a money laundering standpoint, casinos in Colombia lack regulation and transparency, making them a target ripe for abuse. Free trade zones in some areas of the country likewise present opportunities for smugglers to take advantage of lax customs regulation or the corruption of low-level officials to move products into the informal economy. (BINLEA 2005)

Despite Colombia's comprehensive anti-money laundering laws and regulations, enforcement continues to be a challenge in Colombia. Limited resources for prosecutors and investigators have made financial investigations problematic. Continued difficulties in establishing the predicate offense further contribute to Colombia's limited success in achieving money laundering convictions and successful forfeitures of criminal property. Congestion in the court system, procedural impediments, and corruption remain as continuing problems. (BINLEA 2005)

The Government of Colombia should specifically criminalize the financing of terrorism. Colombia should also amend its anti-money legislation to include all serious crimes and should penalize all covered entities that do not file SARs or CTRs. Colombia should also take legislative action to strengthen forfeiture and other aspects of money laundering enforcement, eliminate procedural impediments, and devote additional resources to prosecutors and investigators dealing with money laundering and asset forfeiture. (BINLEA 2005)

The Principles

1. Legal Systems and Related Institutional Measures

EN

Colombia has broadly criminalized money laundering. In 1995, Colombia established the "legalization and concealment" of criminal assets as a separate criminal offense. In 1997, Colombia more generally criminalized the laundering of the proceeds of extortion, illicit enrichment, rebellion, and narcotics-trafficking. Effective in 2001, Colombia's criminal code extended money laundering predicates to reach arms trafficking, crimes against the financial system or public administration, and criminal conspiracy. (BINLEA 2005)

Colombian law provides for both conviction-based and non-conviction-based in asset forfeiture, giving it some of the most expansive forfeiture legislation in Latin America. A general criminal forfeiture provision for intentional crimes has existed in Colombian penal law since the 1930s. Since then, Colombia has adopted more specific criminal forfeiture provisions in other statutes; most notably those contained in Colombia's principal counternarcotics statute, Law 30 of 1986. In 1996, Colombia added non-conviction-based forfeiture with the enactment of Law 333 of 1996, which establishes a process that allows for the extinguishing of ownership rights for assets tainted by criminal activity. Despite an expansive legislative regime, procedural and other difficulties led to only limited forfeiture successes in the past, with substantial assets tied up in proceedings for years. (BINLEA 2005)

The financial intelligence unit (Unidad de Información y Análisis Financiero) is one of the leading authorities in AML/CFT controls in Colombia with adequate powers and systems. The regulatory and supervisory elements of AML/CFT are mainly led by the financial supervisory agencies, the BRC, and the revenue and customs (Direccción de Impuesto y Aduanas Nacionales) authorities. The SBC recently overhauled its AML/CFT regulations and is adapting its supervisory practices accordingly, while governmental oversight of other sectors subject to AML obligations require additional efforts. (FSSA Update 2005)

In September of 2002, the government took additional forceful measures to remove practical obstacles to the effective use of forfeiture to combat crime by issuing a decree to suspend application of Law 333 and implement more streamlined procedures in forfeiture cases. In December, the government refined and formally adopted these reforms when it enacted Law 793 of 2002 strengthening its ability to administer seized and forfeited assets by enacting Law 785 of 2002. In 2004, the Department of Administration of Property within the Prosecutor General's office seized nearly 17,000 properties. (BINLEA 2005)

The Colombian government has been aggressively pursuing the seizure of assets obtained by drug traffickers through their illicit activities. (BINLEA 2005)

Colombia formally adopted legislation in 1999 to establish a unified, central financial intelligence unit, the "Unidad de Informacion y Anlisis Financiero (UIAF)", within the Ministry of Finance and Public Credit with broad authority to access and analyze financial information from public and private entities in Colombia. (BINLEA 2005)

Colombia became a signatory to the UN International Convention for the Suppression of the Financing of Terrorism in October of 2001, and ratified the convention in September, 2004.The government has not specifically criminalized the financing of terrorism, although terrorist financing crimes can be prosecuted under other sections of law. The government has signed, but not ratified the UN Convention against Corruption and the UN Convention against Transnational Organized Crime, along with the protocol on trafficking in persons, in August, 2004. (BINLEA 2005)

2. Preventive Measures - Financial Institutions

EN

Colombian law requires that financial institutions maintain records of account holders and financial transactions. Financial entities must issue Suspicious Activity Reports (SAR's) on any transaction that raises concern. Colombia's banks operate under strict compliance controls, and work closely with the government, other foreign governments, and private consultants to ensure system integrity. Secrecy laws have not been an impediment to bank cooperation with law enforcement officials. Authorities often initiate money laundering investigations on the basis of the details provided by SAR reporting. Citizens are afforded rights to privacy, however, and authorities carry out money laundering investigations in accordance with legal requirements to protect those rights. Financial institutions are not protected by law nor are they exempt from compliance with law enforcement obligations. General negligence laws and criminal fraud provisions ensure that the financial sector complies with its responsibilities while protecting consumer rights. Colombian law is unclear about the government's authority to block assets of individuals and entities on the UNSCR 1267 Sanctions Committee's Consolidated List. The government distributes the list widely among financial sector participants and banks are able to close accounts, but not seize assets. (BINLEA 2005)

Colombia formally adopted legislation in 1999 to establish a unified, central financial intelligence unit, the "Unidad de Informacion y Anlisis Financiero (UIAF)", within the Ministry of Finance and Public Credit with broad authority to access and analyze financial information from public and private entities in Colombia. Covered entities-including financial institutions, institutions regulated by the Superintendence of Securities and the Superintendence of Notaries, export and import intermediaries, credit unions, wire remitters, exchange houses and public agencies are required to file suspicious transaction reports with the UIAF, and are barred from informing their clients of their reports. Currency transactions and cross-border movements of currency in excess of $10,000 must also be reported, and exchange houses must file currency reports for transactions involving $700 or more. Unfortunately, there is no penalty for non-compliance, and financial institutions are believed to underreport transactions. The UIAF is widely viewed as a hemispheric leader in efforts to combat money laundering and supplies considerable expertise in organizational design and operations to other financial intelligence units in Central and South America. The UIAF is a member of the Egmont Group. (BINLEA 2005)

In 2005, the IMF stated that the UIAF is one of the leading authorities in AML/CFT controls in Colombia with adequate powers and systems. (FSSA Update 2005)

In addition, the Superintendence of Banks has instituted "know your customer" regulations for the entities it regulates, including banks, insurance companies, trust companies, insurance agents and brokers, and leasing companies. (BINLEA 2005)

Among other things, the Superintendence of Banks also has authority to rescind licenses for wire remitters. (BINLEA 2005)

Colombia is improving its ability to regulate alternative remittance systems. These systems include networks of informal cash remittances through family member connections or the use of smuggling rings that forms the backbone of the Black Market Peso Exchange. (BINLEA 2005)

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

II

There is no information publicly available that directly addresses this principle.

4. Legal Person and Arrangements & Non-Profit Organizations

II

There is no information publicly available that directly addresses this principle.

The government regulates charities and NGOs to ensure compliance with Colombian law and to guard against their involvement in terrorist activity. The NGO regulation consists of several layers of scrutiny, including the regulation of incorporation procedures and the tracing of suspicious financial flows via the collection of intelligence or SAR reporting. (BINLEA 2005)

5. National and International Co-operation

ID

Colombia is a member of the South American Financial Action Task Force (GAFISUD), the Financial Action Task Force (FATF) regional anti-money laundering organization. In 2004, Colombia continued to participate in the mutual evaluation process by providing experts for the mutual legal evaluations of other GAFISUD countries. (BINLEA 2005)

Colombia also participates in a multilateral initiative with the governments of the United States, Venezuela, Panama, and Aruba designed to address the problem of trade-based money laundering through the BMPE. Colombia became a signatory to the UN International Convention for the Suppression of the Financing of Terrorism in October of 2001, and ratified the convention in September, 2004.The government has not specifically criminalized the financing of terrorism, although terrorist financing crimes can be prosecuted under other sections of law. The government has signed, but not ratified the UN Convention against Corruption and the UN Convention against Transnational Organized Crime, along with the protocol on trafficking in persons, in August, 2004. (BINLEA 2005)