According to the International Monetary Fund (IMF) Report on the Observance of Standards and Codes on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) in Uruguay, published in December 2006, the current regime is largely underdeveloped. However, the report also states that Uruguay has put in place many of the basic legal elements for an AML/CFT regime albeit much remains to be done to fully implement and comply with most of the Financial Action Task Force (FATF) recommendations. Moreover, the IMF assessment indicates that, there is political commitment to introduce much needed reforms to meet the requirements of the FATF recommendations. While, money laundering was criminalized in Uruguay in 1998, the financial crisis of 2002 contributed to reduce attention and resources to AML/CFT issues. The Uruguayan authorities have taken important steps to address some of the weaknesses in the AML/CFT framework. Two pieces of legislation were passed during 2004 and 2005 (Law 17.835/2004 and Decree 86/2005) that, inter alia, introduced CFT measures, reinforced the role of the financial intelligence unit (FIU), and imposed AML/CFT requirements for most Designated non-Financial Business and Professions (DNFBPs). Enhancing resources and increasing the level of awareness of Money Laundering and Financing Terrorism risk across all sectors will be key challenges to effective implementation. According to the US Department of State, Law 17.835/2004 significantly strengthened the Government of Uruguay's money laundering regime.

General Overview

According to the International Monetary Fund (IMF) Report on the Observance of Standards and Codes on Anti-Money Laundering and Combating the Financing of Terrorism in Uruguay, published in December 2006, the current AML/CFT regime is largely underdeveloped. Nonetheless, there is political commitment to introduce much needed reforms to meet the requirements of the Financial Action Task Force (FATF) Recommendations. The new Government of Uruguay took office on March 1, 2005, and has placed AML efforts as one of its priorities. While Uruguay has put in place many of the basic legal elements for an AML/CFT regime, much remains to be done to fully implement and comply with most of the FATF Recommendations. Enhancing resources and increasing the level of awareness of Money Laundering (ML) and Financing Terrorism (FT) risk across all sectors will be key challenges to effective implementation. (IMF 2006, pp. 2-3)

The IMF notes that the Uruguayan authorities have taken important steps to address some of the weaknesses in the AML/CFT regime. Two pieces of legislation were passed during 2004 and 2005 (Law 17,835/2004 and Decree 86/005) that, inter alia, introduced CFT measures, reinforced the role of the FIU, and imposed AML/CFT requirements for most DNFBPs. A multi-agency group has also been created to coordinate the AML/CFT activities at national level. The governmental bodies that will lead the AML/CFT efforts, both in terms of policy and operational issues, are: (1) the Ministry of Economy and Finance (MEF); (2) the Anti- Money Laundering Training Center (CeCPLA) and; (3) the Financial Information and Analysis Unit (UIAF-the financial intelligence unit). The Central Bank (BCU), the Ministry of the Interior (MOI), and the Ministry of Defense (MDN) also play important roles in AML/CFT activities. (IMF 2006, p. 3)

The IMF further observes that Uruguay has two agencies that are involved in counter-terrorism activities. The Directorate for State Intelligence (in the MDN) has been responsible for gathering intelligence on terrorism at national and international levels, while the Directorate of Information and Intelligence (in the MOI) is responsible for the prevention and fight against terrorism. These agencies are not solely dedicated to combating terrorism but are also involved in efforts against organized crime. A provision in the Budget Law 2006 will hand over the task of coordinating organized crime and terrorism issues to a National Intelligence Coordinator. (IMF 2006, p. 3)

However, the IMF warns that like other countries, Uruguay is vulnerable to Money Laundering and Financing Terrorism risk. While local criminality is considered to be relatively low, its role as an offshore financial center, offering a wide range of financial and corporate services to non-residents, makes it particularly vulnerable to transnational Money Laundering and Financing Terrorism. Deficiencies in the implementation of AML/CFT requirements in key sectors (e.g., securities, corporate services, and casinos) also add to these risks. Considering that the corporate law and the registration system do not provide for adequate transparency of ownership and control of legal persons, a key concern involves the potential use of bearer-share corporations (especially Uruguayan offshore companies known as SAFIs) for illicit purposes. The Government has presented to Congress a bill that would discontinue registration of new SAFIs and would gradually reduce their attractiveness by incorporating existing ones into the general corporate regime. (IMF 2006, p. 3)

During the IMF mission, there was one Money Laundering prosecution underway but before then there had been no prosecutions in Uruguay. Very few suspicious transaction reports (STRs) were filed in the past four years. The authorities are concerned about the relatively low number of STRs, and have taken important steps to address the issue. The AML/CFT Law 17,835 of September 2004 introduced legal protection to reporting institutions for filing STRs, and this is believed to have contributed to an increase in the number of STRs filed from 11 in 2004 to 42 in 2005. Money laundering was criminalized in 1998, but the financial crises of 2002 contributed to reduced attention and resources to AML/CFT issues. There is now an urgent need to refocus resources to Money Laundering and Financing Terrorism risk, including enhancing awareness, compliance and enforcement in the private sector. No systemic review of Money Laundering and Financing Terrorism risks in the jurisdiction had been conducted until 2006. Such review is necessary to underpin the development of a more risk-based approach to AML/CFT strategies, guidelines and controls, and to help raise awareness of the ML/FT vulnerabilities in the system. (IMF 2006, p. 4)

The key IMF recommendations to strengthen the AML/CFT regime in Uruguay are: (1) develop, as planned, a coordinated national AML/CFT strategy scheduled for start of implementation in 2006; (2) improve CFT legislation, and the regulatory framework for all financial institutions (FIs); (3) cover missing elements of the DNFBP sectors in the AML/CFT legislation, and prioritize implementation in the company services and casino sectors; (4) strengthen and enforce customer due diligence (CDD) requirements in all sectors, and give priority to CDD for offshore/cross-border business and legal entities (e.g. beneficial ownership and control of companies); (5) enhance and expand AML/CFT supervision in all sectors, particularly on-site inspections of nonblank and offshore institutions; (6) establish formal cooperation and information exchange mechanisms with other overseas supervisors that include AML/CFT elements (e.g., Argentina, Brazil and Paraguay); (7) raise Money Laundering and Financing Terrorism risk awareness in all areas particularly for higher risk sectors; (8) improve the registration system for legal entities, real estate, and other property; (9) strengthen control mechanisms in key sectors (e.g., public sector casinos); (10) improve the efficiency and resources of the judiciary, prosecution, and law enforcement agencies; and (11) enhance capacity and resources in the financial intelligence unit (UAIF) and the BCU's supervisory units (e.g., for on-site inspections of securities, insurance, bureaux de change, and money remittance business). (IMF 2006, p. 4)

The U.S. Department of State's 2006 Report adds that the Government of Uruguay (GoU) has taken steps to bring it into compliance with the FATF Special Recommendations on Terrorist Financing. Some of these recommendations, such as the criminalization of terrorism financing and provisions for the freezing of terrorist assets, were met by Law 17,835 of 2004 on money laundering law. (U.S. DoS 2006)

The Principles

1. Legal Systems and Related Institutional Measures

EN

According to the 2006 International Monetary Fund (IMF) assessment, the current anti-money laundering/combating the financing of terrorism (AML/CFT) regime in Uruguay is largely underdeveloped. However, the Uruguayan authorities have taken important steps and enacted legislation to address some of the weaknesses in the AML/CFT regime and meet the requirements of the Financial Action Task Force (FATF) Recommendations. (IMF 2006, pp. 2-3)

With respect to Recommendations 1 and 2 regarding criminalization of Money Laundering, the IMF notes that Uruguay criminalized it in October 1998, but Law Decree 14,294 does not cover all the categories of serious (predicate) offenses that are required by the FATF recommendations. In this regard, the IMF recommends that Uruguay include all serious predicate offences contained in the FATF list; enhance AML/CFT training programs for judges; and compile and maintain relevant statistics to review effectiveness of AML/CFT system. (IMF 2006, pp. 10-11)

While originally restricted to drug related offences, the legislation now covers a broader range of crimes. Money Laundering is a separate offense from the underlying crimes and extends to predicate offenses committed in other countries, provided it meets the dual criminality test. There are no legal impediments for prosecuting an offender separately for laundering the proceeds of his/her own crime (self-laundering), and prior conviction for the predicate offense is not required for Money Laundering prosecution. One Money Laundering prosecution had been undertaken since Money Laundering was criminalized, which was in process during the IMF mission. (IMF 2006, p. 5)

The U.S. Department of State's 2006 Report adds that the Government of Uruguay (GoU) took steps in 2004 and 2005 to strengthen its anti-money laundering and counterterrorist financing regime. Over the past five years, the GoU has instituted several legislative and regulatory reforms in its anti-money laundering regime. The May 2001 Law 17,343 extends the predicate offenses beyond narcotics trafficking and corruption to include: terrorism; smuggling (value over $20,000); illegal trafficking in weapons, explosives and ammunition; trafficking in human organs, tissues and medications; trafficking in human beings; extortion; kidnapping; bribery; trafficking in nuclear and toxic substances; and illegal trafficking in animals or antiques. The courts have the power to seize and confiscate property, products or financial instruments linked to money laundering activities. Money laundering is considered a crime separate from underlying crimes such as narcotics trafficking, administrative corruption, terrorism and smuggling. (U.S. DoS 2006)

With respect to Special Recommendation 2 regarding criminalization of Financing of Terrorism, the IMF states that Uruguay criminalized Financing of Terrorism in September 2004, but Law 17,835 only covered the financing of terrorist acts. Financing of Terrorism is defined as a separate autonomous offense that can be prosecuted independently from other terrorism-related crimes, and applies where the terrorist act is committed in another country. The law covers the financing of terrorists or terrorist organizations where specific terrorist acts have been committed or are being planned. The mere provision or collection of funds on behalf of known terrorists or terrorist organizations for purposes other than terrorist acts, are not specifically covered by the law, which is a significant limitation. As of 2006, there were no specific mechanisms for the implementation of the United Nations Security Council Resolutions (UNSCR) 1267, 1373, and successor resolutions, except for the administrative suspension of transactions ordered by the financial intelligence unit (FIU) for up to 72 hours. As of 2006, there had been no Financing of Terrorism cases in Uruguay. (IMF 2006, p. 5)

However, the IMF further recommends that Uruguay amend Articles 14 and 16 of Law 17,835 to sufficiently cover funds that are collected or provided with the intention and/or the knowledge that they will be used to carry out a terrorist act, regardless of whether the act is carried out or not, and to cover the provision or collection of funds to terrorist organizations or to individual terrorists. (IMF 2006, p. 11)

With respect to Recommendation 3 regarding confiscation, freezing and seizing of the proceeds of crime, the IMF observes that the Uruguayan courts have broad powers to seize and confiscate property or financial instruments linked to Money Laundering and the predicate offenses. In practice, however, inefficiencies in the national registers would complicate efficient access to information on the identity of the owners of companies, real estate, and other property available for seizure and confiscation. The confiscation system in Uruguay is conviction-based and applies to all serious crimes, including Money Laundering, at any time and without prior notice. Uruguay's judicial system allows for the seizure or confiscation of assets that were totally or partially processed, transformed, or mixed with other goods. It is also possible to confiscate the property of third parties and there is some capacity to order the permanent forfeiture to the State without a final conviction. (IMF 2006, pp. 5-6) The IMF recommends that Uruguay improve coordination between judges and prosecutors with respect to provisional measures in criminal proceedings; improve the real estate registration system to facilitate tracing and identification; and establish procedures for unfreezing of the assets of persons inadvertently affected by a freezing order. (IMF 2006, p. 11)

The U.S. Department of State's 2006 Report adds that despite the power of the courts to confiscate property linked to money laundering, real estate ownership is not publicly registered in the name of the titleholder, complicating efforts to track money laundering in this sector, especially in the partially foreign-owned tourist industry. The Financial Information and Analysis Unit (UIAF) and other government agencies must obtain a judicial order to have access to the name of titleholders. The GoU is in the process of implementing a national computerized registry that will facilitate the UIAF's access to titleholders' names. (U.S. DoS 2006)

With respect to Recommendations 26, 30 and 32 regarding the FIU and its functions, the IMF notes that an FIU with the name of Financial Information and Analysis Unit (UIAF) had been established but was not yet fully operational by 2006, mainly due to the lack of adequate resources. The UIAF is a division within the Central Bank of Uruguay (BCU) but is operationally independent from line management. It is responsible for the receipt and analysis of suspicious transaction reports (STRs) received from reporting institutions and persons, and for disseminating information to the appropriate law enforcement and prosecution authorities. The decision to disseminate a case to the judicial authorities only requires consultation with the Steering Committee of the UIAF. Reporting entities include financial institutions supervised by the BCU, as well as casinos; money remitters; real estate agents; dealers in antiques, art, precious metals; and certain company services providers. Legal secrecy provisions do not impose restrictions on the UIAF, which is authorized to request any information from reporting institutions for purposes of its functions. There is an urgent need to strengthen the UIAF's funding, staff, and other resources. Further, the UIAF should also help enforce reporting requirements by all entities; develop internal operating rules; and improve statistics on STRs and confidential transaction reports (CTRs). The UIAF is not a member of the Egmont Group of Financial Intelligence Units. (IMF 2006, pp. 6, 11)

With respect to Recommendations 27, 28, 30 and 32 regarding law enforcement, prosecution and other competent authorities, the IMF observes that the lack of adequate law enforcement and prosecution resources contributes to a backlog of criminal cases, and judges or prosecutors have not been sufficiently trained to undertake AML/CFT cases. There are no courts or prosecution units specifically trained to deal with AML/CFT or economic crimes. Criminal court judges supervise investigations but a lack of adequate resources in the courts and in the Ministry of Public Prosecutions (MPF) have produced a significant backlog of criminal cases. Law 17,835 provides for the conversion of lower criminal courts in Montevideo and of the national prosecutor offices into specialized units for the investigation and prosecution of Money Laundering and predicate offenses. Funding for this process is included in the Budget Law of 2006. Law enforcement agencies (LEAs) can participate in AML/CFT operations. They are empowered to use special investigation techniques such as controlled delivery, undercover operations, phone tapping, informants, and mail interception. The Budget Law also makes provision for the use of confiscated assets by LEAs. (IMF 2006, p. 6)

The IMF recommends that Uruguay train prosecutors, and staff at MPF in financial matters, and Information technology; provide more specialized training and resources for the judiciary and law enforcement bodies; and implement staff screening procedures to ensure competence and integrity of UIAF, MPF, customs and police. (IMF 2006, p. 11)

With respect to Special Recommendation 9 regarding cross border declaration and disclosure, the IMF recommends that Uruguay issue regulations to implement the cross-border reporting requirement, and establish mechanisms within the Directorate of National Customs (DNA) to enforce compliance with this declaration; ensure in law that both non-declaration and false declaration are sanctionable; clarify in the proposed regulations that the obligation applies to physical transportation through containerized cargo, by mail or any other means; and explicitly empower customs to stop or restrain in case of noncompliance, and where there are suspicions of terrorist financing or money laundering. (IMF 2006, p. 12)

2. Preventive Measures - Financial Institutions

EN

The IMF made specific recommendations for improving the AML/CFT regulatory and supervisory framework for Financial Institutions. These include: (1) introduce enhanced risk-based CDD requirements; (2) explicitly require CDD/identification for ultimate beneficiaries of accounts/transactions in all cases, including for principal beneficial owners and controllers of legal entities and arrangements; (3) introduce specific CDD guidelines/requirements for non-resident/cross-border business; (4) remove/clarify secrecy restrictions (Article 25 of Law 15,322) to allow for the inclusion of account numbers in wire transfers; (5) issue specific CDD guidelines/requirements for introduced business particularly from overseas; (6) implement consolidated AML/CFT supervision on a group-wide basis; and (7) establish formal supervisory cooperation mechanisms with other overseas supervisors (e.g., Argentina and Brazil). (IMF 2006, p. 8)

With respect to Recommendations 5, 6, 7, and 8 regarding customer due diligence (CDD), the IMF notes that CDD requirements should be more risk-based stressing clients and services that pose a greater degree of Money Laundering and Financing of Terrorism risk. CDD requirements and practice can be enhanced in key areas especially with respect to legal entities. The absence of a clear and explicit requirement to conduct CDD on the principal beneficial owners and controllers of corporate customers in all cases is an important deficiency. This is particularly important given Uruguay's role as provider of offshore corporate services. (IMF 2006, pp. 6-7)

With respect to Recommendation 4 regarding financial institution secrecy and confidentiality, the IMF observes that secrecy restrictions in the financial institutions law (Article 25 of Law 15,322) limits, in practice, compliance with CDD and the FATF Recommendations. These restrictions are generally interpreted as prohibiting financial institutions from including full originator information in wire transfers, namely account numbers. Except for disclosures to the UIAF, such information can only be provided with the express or written consent of the customer or by judicial order under certain circumstances. (IMF 2006, p. 7)

The IMF warns that increased Money Laundering and Financing of Terrorism risk awareness across all financial sectors is necessary to support effective implementation of the AML/CFT requirements. While the level of domestic Money Laundering predicate crimes is considered relatively low, there is considerable Money Laundering and Financing of Terrorism risk from international sources associated with Uruguay's cross-border operations. The perception that these transactions are largely associated with capital flight and/or tax matters constitutes a narrow view of Money Laundering and Financing of Terrorism risks, and creates vulnerabilities by reducing vigilance. In addition, it is not usually possible for financial institutions (FIs) to differentiate e.g., between tax avoidance/evasion and Money Laundering. Enhanced risk awareness efforts should be undertaken to increase vigilance and strengthen suspicious activity reporting practices. (IMF 2006, p. 7)

With respect to Recommendations 13, 14, 19, 25 and SR 4 regarding suspicious transaction reports and other reporting, the U.S. Department of State's 2006 Report states that BCU regulations require all banks, currency exchange houses, stockbrokers and insurance companies to implement anti-money laundering policies, such as thoroughly identifying customers, recording transactions over $10,000 in internal databases, and reporting suspicious transactions to the UIAF. Law 17,835 of 2004 makes this a legal obligation, extended to all financial intermediaries, including casinos, art dealers, real estate and fiduciary companies. Additionally, the law extends the reporting requirement to all persons entering or exiting Uruguay with over $10,000 in cash or in monetary instruments. Regulations for the 2004 law have been issued by the BCU for all entities it supervises, and are in the process of being issued by the MEF for all other reporting entities. It further states that Law 17,835 of 2004 expands the realm of entities required to file SARs and makes reporting of such activities a legal obligation. It specifically confers to UIAF, the role of receiving and analyzing SARs, and the authority to request additional related information. Created in 2000, the UIAF receives, analyzes, and disseminates suspicious financial reports to judicial authorities. BCU Circular 1722, which created the UIAF, provides the authority to respond to requests for international cooperation. (U.S. DoS 2006)

According to the 2006 International Monetary Fund (IMF) assessment, very few STRs were filed in the past four years. The authorities are concerned about the relatively low number of STRs, and have taken important steps to address the issue. The AML/CFT Law 17,835 of September 2004 introduced legal protection to reporting institutions for filing STRs, and this is believed to have contributed to an increase in the number of STRs filed from 11 in 2004 to 42 in 2005. (IMF 2006, p. 4)

With respect to Recommendation 15 regarding internal control, compliance and audit, the IMF recommends that Uruguay should require: (1) FIs to implement risk-based AML/CFT policies and procedures; (2) insurance companies to appoint ML/FT compliance officers, and securities and insurance companies to require intern audit of AML/CFT controls; (3) insurer companies to include their agents and brokers in their AML/CFT policies, procedures and controls, including training; and (4) external auditors to review for AML/CFT compliance by the larger bureaux de change, including those that conduct services such as transfers and safekeeping. (IMF 2006, pp. 12-13)

With respect to Recommendation 18 regarding shell banks, the IMF recommends that Uruguay prohibit FIs from providing correspondent accounts to shell banks at any level; and review the operations of offshore banks (IFEs) to ascertain whether they sufficiently meet the mind and management physical presence requirements. (IMF 2006, p. 13)

With respect to Recommendations 17, 23, 29, 30, 32 and 25 regarding the supervisory and oversight system, the IMF notes that AML/CFT supervision is more advanced for the banking sector and is underdeveloped for the others. Since the financial crises of 2002, supervisory attention to AML/CFT issues was reduced but in 2004-2005, the BCU started to pay more attention to AML/CFT issues, including the development of enhanced on-site inspection procedures for banks. A key challenge for the BCU will be its ability to conduct ongoing on-site examinations given the relatively large number of institutions under its responsibility, especially in the bureaux de change and securities sectors. Focusing on those sectors and institutions considered to present higher degree of Money Laundering and Financing of Terrorism risk should be given priority in supervisory programs. Further, supervision of compliance with AML/CFT requirements in the securities and insurance sectors is negligible, especially on-site examinations. There were, as of 2006, no specific AML/CFT examination procedures for these sectors, and reports of examination did not include AML/CFT elements. Insurance and securities firms are required to submit to the BCU annual AML/CFT compliance reports prepared by external auditors, but there is little evidence of action taken based on these reports. The IMF identified the need to intensify AML/CFT supervision of the securities sector, especially on-site inspections of securities brokers and agents that are active in cross-border activities, including banks that provide such services whether or not they maintain customer investment accounts. (IMF 2006, pp. 7-8)

With respect to Recommendation 22 regarding money or value transfer services, the IMF recommends that Uruguay require registration of all money remitters. Further, the BCU and the MEF need to solve the legal impediments for the implementation of preventive measures with respect to informal money remitters. If necessary, Uruguay should amend the financial institutions Law 15,322 to authorize the BCU to monitor compliance by non-supervised money remitters. Uruguay must also issue implementing regulations for money remittance firms; and commence an AML/CFT compliance review of the main money remittance firms. (IMF 2006, pp. 13-14)

With respect to Recommendation 22 regarding foreign branches of banks, the U.S. Department of State's 2006 Report states that offshore banks are subject to the same laws and regulations as local banks, with the GoU requiring them to be licensed through a formal process that includes a background investigation. There are six offshore banks and 21 representative offices of foreign banks. Offshore trusts are not allowed. Bearer shares may not be used in banks and institutions under the authority of the BCU, and any share transactions must be authorized by the BCU. (U.S. DoS 2006)

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

EN

With respect to Recommendations 12 regarding customer due diligence and record keeping by Designated non-Financial Business and Professions (DNFBPs), the IMF states that DNFBPs were very recently covered as reporting entities under Law 17,835 of September 2004, and by Decree 86 of February 2005. (IMF 2006, pp. 8)

The IMF states that Decree 86 of February 2005 covers casinos, real estate agents, professional company administrators, money remitters, dealers in antiques, art, precious metals, and certain company services providers, among others. It only covers lawyers, accountants, and other professionals if they habitually carry out financial transactions or manage commercial companies on behalf of third parties. These DNFBPs are required to identify customers when transactions exceed US$15,000, report suspicious activities of any amount, and keep records of such identity and transactions. Casinos were effectively excluded from the customer due diligence (CDD) requirements by Decree 86. Implementation of the AML/CFT legal requirements by DNFBPs has not commenced, and the authorities will need an outreach strategy to raise awareness of their AML/CFT obligations and expedite compliance. The Government has established an inter-agency working group to propose the regulations and policies for implementing the AML/CFT requirements in these sectors. (IMF 2006, pp. 6, 8)

With respect to Recommendation 16 regarding suspicious transaction reporting by DNFBPs, the IMF recommends that Uruguay issue the Ministry of Economy and Finance (MEF) regulations and guidance tailored to each type of DNFBP covered by Law 17,835, and prioritize the regulation of corporate service providers and casinos, and clarify in regulations or guidelines for DNFBPs that the reporting obligation applies even when suspicion arises in the context of what appears to be a tax matter. (IMF 2006, p. 14)

With respect to Recommendation 20 regarding other non-financial businesses and professions, the IMF recommends that Uruguay encourage the development of secured automated transfer systems and other modern techniques for conducting financial transactions; assess the possible risks of ML/FT in the several businesses administered by the Directorate of National Lotteries and adopt AML/CFT controls as appropriate; establish a mechanism for cooperation between the Financial Information and Analysis Unit (UIAF) and the Directorate of National Lotteries for the detection and reporting of suspicious transactions; and review the extent to which unauthorized currency exchange businesses may be used to evade the preventive measures applied in the formal market. (IMF 2006, pp. 14-15)

The U.S. Department of State's 2006 Report states that Law 17,835 of 2004 extends the reporting requirement to all persons entering or exiting Uruguay with over $10,000 in cash or in monetary instruments. Regulations for the 2004 law have been issued by the BCU for all entities it supervises, and are in the process of being issued by the MEF for all other reporting entities, such as casinos, real estate brokers and art dealers. (U.S. DoS 2006)

With respect to Recommendations 24 and 25 regarding regulation, supervision and monitoring, the IMF observes that supervision of DNFBPs is still in the planning stage. Law 17,835 assigns this responsibility primarily to the MEF, which in turn delegated much of that responsibility to one of its dependencies, the National Internal Audit Office (AIN). This seems reasonable given the AIN's oversight experience over a wide range of economic sectors, but AIN will need to be adequately resourced and trained for this new function. In addition, the IMF advises that Uruguay should issue regulations for enforcing the AML/CFT obligations, and develop sector-specific guidance to support compliance. Priority should be given to the company services and casino sectors. Further, Uruguay should establish a multi-agency working group to develop common guidelines and share best practices for all their casinos, and implement measures in the AIN to supervise DNFBPs, including reallocation of staff and resources as necessary. It should also enhance fit and proper procedures of all proponents/applicants of gaming ventures, and introduce provisions for sanctioning senior management of DNFBPs, which are legal persons. (IMF 2006, pp. 9, 14)

4. Legal Person and Arrangements & Non-Profit Organizations

NC

With respect to Recommendation 33 and 34 regarding legal persons and arrangements, the IMF notes the corporate law and the registry of companies do not provide for adequate transparency of ownership and control of legal persons. In addition, not all company services providers are covered under the new AML/CFT law, and there is as yet no effective AML/CFT oversight over them. It advises that transparency of legal persons should be enhanced, especially of non-Profit organizations (NPOs) and bearer-share corporations, including offshore companies. The IMF welcomes Uruguay's commitment in this respect and encourages it to explore additional mechanisms to facilitate efficient identification of controlling persons and beneficiary owners, including for criminal investigations and international cooperation purposes. The company registry (Dirección Nacional de Registros) has taken initial but important steps towards building a more efficient and transparent registration system for legal entities and arrangements, but its resources are very limited. Modernization of the registries is needed to facilitate access and searches of the databases. Recent legislation made it mandatory for companies to register any change of directors or domicile, but not of ownership. Overall, company data in the registry remains largely outdated. (IMF 2006, p. 9)

In this regard, the IMF recommends that Uruguay implement legal mechanisms to provide competent authorities with access to information on the ownership of bearer-share and any other companies; prioritize the modernization of the registry of companies; and explore operational mechanisms to allow the registry to expeditiously respond to requests for information from abroad. As for legal arrangements, the IMF advises that Uruguay should create a system for the registration of trust information, allowing efficient access by the competent authorities. (IMF 2006, p. 15)

With respect to Special Recommendation 8 regarding non-profit organizations, the IMF observes that detailed information related to trusts will be readily accessible. There were no trusts in Uruguay prior to Law No. 17,703 of October 2003. This law required that all the information contained in trust deeds (including grantors/settlors and beneficiaries) be registered and publicly available. In addition, professional trustees must be registered with the BCU. The IMF recommends that Uruguay implement AML/CFT controls for the authorization, registration and supervision of NPOs, and review the adequacy of the existing NPO legal/regulatory framework, as well as legally require NPOs to update their information in the registry, e.g. changes in control, and authorize the MEC or the AIN, as appropriate, to enforce compliance. (IMF 2006, pp. 9, 15)

5. National and International Co-operation

II

With respect to Recommendations 31 and 32 regarding national cooperation and coordination, the IMF report states that there are no formal arrangements for coordination between all of the competent law enforcement authorities in charge of combating Money Laundering and Financing of Terrorism. The Secretary General of the National Drug Council (NDC) is responsible for promoting and coordinating initiatives relating to ML, the predicate offenses, and international organized crime. The Director of the Center for Training on Money Laundering (Centro de Capacitación en Prevención de lavado de Activos - CeCPLA) serves as coordinator for all government entities involved in the formulation of general policy guidelines and the implementation of the Government's policies. In addition, there is active coordination between the Directorate of National Customs (DNA) and the police forces involved in AML/CFT. In the Budget Law for 2006, the authorities proposed to create a National Intelligence Coordinator for dealing with organized crime and terrorism issues. Supervisory coordination and cooperation across the domestic financial sectors are facilitated by the BCU, which is an integrated supervisor for all financial institutions. The IMF recommends that Uruguay establish interdepartmental agreements and joint task forces to support AML/CFT law enforcement efforts. (IMF 2006, pp. 9-10, 15) However, there is insufficient information as to Uruguay's compliance with the FATF recommendation relating to this Principle.

With respect to Recommendations 32 and 40 and Special Recommendation 5 regarding other forms of international cooperation, the IMF observes that Uruguay has not implemented formal supervisory cooperation and information exchange arrangements with key counterparts in Latin America and elsewhere, even though a large proportion of financial institutions operating in Uruguay are foreign owned. During the mission, the BCU signed a memorandum of understanding (MOU) with the Bank of Spain to facilitate supervisory cooperation. Other formal supervisory cooperation arrangements that include AML/CFT elements are necessary, particularly with countries such as Argentina and Brazil, two of Uruguay's principal markets for cross-border financial services. The BCU indicates, however, that it maintains regular informal contact with counterparts from these countries, and more formal arrangements are being considered especially with Argentina. (IMF 2006, pp. 6-7)

With respect to Recommendation 35 and Special Recommendation 1 regarding the conventions and UN special resolutions, the IMF states that Uruguay is a party to the Vienna Convention, the Palermo Convention, the Terrorist Financing Convention, and to 9 of the 11 UN instruments concerning terrorism-related crimes. However, the report also recommends that Uruguay review legislation to determine need for amendments to fully implement the Palermo and Terrorist Financing Convention and United Nations Security Council Resolutions (UNSCRs) 1267 and 1373 and their successors. (IMF 2006, pp. 10, 15)

Uruguay is also a party to the Inter-American Convention Against Corruption and has signed the UN Convention Against Corruption. Mutual legal assistance (MLA) in criminal matters can be rendered either on the basis of treaties to which Uruguay is a party, or on the basis of reciprocity in the absence of a treaty. Judicial cooperation is carried out through the Central Advisory Authority for International Legal Cooperation (Central Authority) when there is a treaty or by means of diplomatic or consular channels in their absence. The Central Authority is also the competent body for international cooperation on investigations and prosecutions relating to corruption, Money Laundering or any of its predicate offenses. The Ministry of Foreign Affairs is the competent authority for processing requests from countries in the absence of MLA treaties. Foreign requests to lift financial secrecy can be granted by order of the competent criminal court. (IMF 2006, p. 10)

The U.S. Department of State's 2006 Report adds that the GoU is a member of the Organization of American States (OAS) Inter-American Drug Abuse Control Commission (CICAD) Experts Group to Control Money Laundering. The United States Government and the GoU are parties to extradition and mutual legal assistance treaties that entered into force in 1984 and 1994, respectively. Uruguay is also a founding member of the Financial Action Task Force for South America (GAFISUD), created in December 2000 and based in Buenos Aires. (U.S. DoS 2006)

With respect to Recommendations 32, 36, 37 and 38, and Special Recommendation 5 regarding mutual legal assistance, the IMF recommends that Uruguay revoke Article 15 of Decree 398/999; adopt mechanisms to coordinate seizure/confiscation actions with other countries; maintain comprehensive statistics on MLA requests relating to Money Laundering and Terrorist Financing; and adopt efficient procedures to respond to MLA requests in the absence of a treaty. (IMF 2006, p. 15)

With respect to Recommendation 37 and 39 and Special Recommendation 5 regarding extradition, the IMF notes that all offenses are extraditable under Uruguayan legislation, including for Money Laundering and Terrorist Financing related offenses. Extradition provisions in the Criminal Code, Criminal Procedures Code, and the Anti-corruption law do not establish a different treatment for Uruguayan citizens, which make their extradition possible. Requests for extradition for the commission of terrorist acts are not refused on the grounds that they are political in nature. In this regard, the IMF recommends that Uruguay establish administrative procedures to expedite extradition requests and allow for alternative simplified procedures for extradition on a case-by-case basis, and maintain statistics regarding extradition requests indicating the number of extradition requests received, granted, or the average processing time for the requests. (IMF 2006, pp. 10, 15)