anti-money laundering and counter-terrorist financing measures in honduras

Anti-money laundering and counter-terrorist financing measures in Honduras – Mutual Evaluation Report – October 2016 1

Anti-money laundering and counter-terrorist financing (AML/CTF) measures in Honduras Mutual Evaluation

Key findings, ratings and priority actions October 2016 www.fatf-gafi.org/topics/mutualevaluations/documents/mer-Honduras-2016.html

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Anti-money laundering and counter-terrorist financing measures in Honduras – Mutual Evaluation Report – October 2016

Ratings – Effectiveness (1/3)

2

Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF)

Extent to which Honduras has achieved this objective

1. ML and TF risks are understood and, where appropriate, actions co-ordinated domestically to combat ML and TF

Moderate

2. International co-operation delivers appropriate information, financial intelligence, and evidence, and facilitates action against criminals and their assets

Substantial

3. Supervisors appropriately supervise, monitor and regulate financial institutions and designated non-financial businesses and professions (DNFBPs) for compliance with AML/CFT requirements commensurate with their risks.

Moderate

4. Financial institutions and DNFBPs adequately apply AML/CFT preventive measures commensurate with their risks, and report suspicious transactions.

Moderate



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5. Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments

Low

6. Financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations.

Moderate

7. Money laundering offences and activities are investigated and offenders are prosecuted and subject to effective, proportionate and dissuasive sanctions

Moderate

8. Proceeds and instrumentalities of crime are confiscated. High



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9. Terrorist financing offences and activities are investigated and persons who finance terrorism are prosecuted and subject to effective, proportionate and dissuasive sanctions.

Substantial

10. Terrorists, terrorist organisations and terrorist financiers are prevented from raising, moving and using funds, and from abusing the non-profit sector.

Moderate

11. Persons and entities involved in the proliferation of weapons of mass destruction are prevented from raising, moving and using funds, consistent with the relevant United Nations Security Council Resolutions.

Low


Ratings – Effectiveness

5

1

2

6

2

HighSubstantialModerateLow


Ratings – technical compliance (1/5)

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AML/CFT POLICIES AND COORDINATION1. Assessing risks & applying a risk-based approach par par par par partially compliant2. National cooperation and coordination larg larg larg larg largely compliantMONEY LAUNDERING AND CONFISCATION3. Money laundering offence larg larg larg larg largely compliant4. Confiscation and provisional measures comcomcomcom compliantTERRORIST FINANCING AND FINANCING OF PROLIFERATION5. Terrorist financing offence larg larg larg larg largely compliant6. Targeted financial sanctions related to terrorism & terrorist financing larg larg larg larg largely compliant7. Targeted financial sanctions related to proliferation par par par par partially compliant8. Non-profit organisations larg larg larg larg largely compliant



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PREVENTIVE MEASURES9. Financial institution secrecy laws comcomcomcom compliantCustomer due diligence and record keeping10. Customer due diligence larg larg larg larg largely compliant11. Record keeping comcomcomcom compliantAdditional measures for specific customers and activities12. Politically exposed persons larg larg larg larg largely compliant13. Correspondent banking comcomcomcom compliant14. Money or value transfer services comcomcomcom compliant15. New technologies comcomcomcom compliant16. Wire transfers par par par par partially compliant



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PREVENTIVE MEASURES (continued)Reliance, Controls and Financial Groups17. Reliance on third parties par par par par partially compliant18. Internal controls and foreign branches and subsidiaries larg larg larg larg largely compliant19. Higher-risk countries comcomcomcom compliantReporting of suspicious transactions20. Reporting of suspicious transactions comcomcomcom compliant21. Tipping-off and confidentiality comcomcomcom compliantDesignated non-financial Businesses and Professions (DNFBPs)22. DNFBPs: Customer due diligence larg larg larg larg largely compliant23. DNFBPs: Other measures par par par par partially compliant

Anti-money laundering and counter-terrorist financing measures in Honduras – Mutual Evaluation Report – October 2016 2-Nov-16 9


TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS24. Transparency and beneficial ownership of legal persons No Non Non No Non compliant25. Transparency and beneficial ownership of legal arrangements larg larg larg larg largely compliantPOWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURESRegulation and Supervision26. Regulation and supervision of financial institutions larg larg larg larg largely compliant27. Powers of supervisors comcomcomcom compliant28. Regulation and supervision of DNFBPs par par par par partially compliantOperational and Law Enforcement29. Financial intelligence units larg larg larg larg largely compliant30. Responsibilities of law enforcement and investigative authorities comcomcomcom compliant31. Powers of law enforcement and investigative authorities comcomcomcom compliant32. Cash couriers comcomcomcom compliant

Anti-money laundering and counter-terrorist financing measures in Honduras – Mutual Evaluation Report – October 2016 2-Nov-16 10


POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES (continued)General Requirements 33. Statistics par par par par partially compliant34. Guidance and feedback Non No No No Non compliantSanctions35. Sanctions par par par par partially compliantINTERNATIONAL COOPERATION36. International instruments larg larg larg larg largely compliant37. Mutual legal assistance larg larg larg larg largely compliant38. Mutual legal assistance: freezing and confiscation larg larg larg larg largely compliant39. Extradition larg larg larg larg largely compliant40. Other forms of international cooperation larg larg larg larg largely compliant


Ratings – technical compliance

11

13

17

8

2

Compliant

Largely compliant

Partially compliant

Non compliant


Key findings

Honduras has a FIU that carries out the intelligence cycle in a comprehensive manner. Prosecutors and legal operators, the sole final recipients of the FIU’s information, expressed that the information provided by the Unit that carries out the financial intelligence of the country is useful, appropriate and relevant in the investigation and prosecution phases of ML, terrorist financing and asset forfeiture proceedings. However, the FIU must strengthen its analysis capacities through the development of strategic analysis and red flags, and typologies that are updated and adapted to the reality of the country. Likewise, an IT system that ensures secrecy and confidentiality must be implemented for the reception of STRs.

The crime definition of ML in Honduras establishes a threshold of criminal sanctions against individuals and legal entities that is effective, proportionate and dissuasive.

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Key findings

The Honduran AML/CFT system has the power to continue investigating and taking to court cases of sophisticated ML, which shows an internal inter-institutional organization and international cooperation. Currently, there are no enforced judgments related to sophisticated operations of MLML. Nevertheless, based on a criminal proceeding currently in progress, the assessment team observed that the Public Prosecutor of Honduras is prepared at a judicial and operational level to investigate and take to court complex cases and of significant national impact of ML that include an international component. Investigations derived from corruption and extortion cases are required to be linked to ML processes.

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Key findings

Special investigation techniques. In criminal investigations of ML and TF offenses, and in exercise of asset forfeiture, prosecutors can use special investigation techniques expressly authorized by law, such as controlled delivery, undercover agent and interception of communications.

Honduras has an efficient legal framework that enables it to seize and secure any type of illicit asset through the criminal confiscation and the asset forfeiture act. The confiscation of assets, instruments and properties of organized criminal structures is one of the pillars and objectives of the criminal policy aimed at maintaining the national defense and security.

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Key findings

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There is a system of disclosure of currencies that enables the autonomous imposition of administrative fines, the initiation of criminal proceedings of ML and the initiation of asset forfeiture. The State of Honduras, through the Executive Directorate of Revenue (DEI), has established a mechanism for the disclosure of currencies and securities with a threshold of USD $10.000, as established in the international threshold. This disclosure system is implemented at airports, ports and terrestrial cross-borders. It is necessary to use these declarations in the processes of development of financial intelligence carried out by the FIU.


Key findings

The State has a specialized entity that administers the properties and assets seized from organized crime, either by confiscation or asset forfeiture. The Administrative Office of Seized Property (OABI, for its Spanish acronym) is the high body in Honduras in charge of the guard, custody and administration of all the criminal properties, products and instruments seized and confiscated that the competent authority puts at its disposal in its exercise of the Asset Forfeiture Act, the Anti- Money Laundering Law, the Law on the Misuse, Illicit Trafficking of Narcotic Drugs and Psychotropic Substances, and the Law against the Financing of Terrorism.

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Key findings

Parallel financial investigations. In the cases of significant national impact that involve predicate offenses, such as drug trafficking, corruption or arms smuggling, the Specialized Prosecutor’s Office in Organized Crime (FESCCO, for its Spanish acronym) initiates parallel investigations on ML and asset forfeiture.

The Honduran security and intelligence forces have a technological platform that integrates several public and private databases, which enables the secure access in real time to useful information in the fight against ML, TF and State defense and security.

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Priority Actions for Honduras to strengthen its AML/CFT System

The country should formalize the national strategy against the ML/TF risks.

Considering the results of the NRA, the country should implement measures that specifically address the findings and conclusions of said document. The regulation must take into consideration aspects such as the updating of the risk assessment and its use as an input for the allocation of resources and policy priorities.

The country should improve its future ML/TF NRA processes and, include the DNFBPs and NPOs. The NRA results must be disseminated to all financial and non-financial obliged subjects with the purpose they include these results in their own risk assessments and implement measures to mitigate such risks.

The processes for producing and updating statistics for the AML/CFT system should be strengthened. As for national cooperation and coordination, the regulations of the CIPLAFT must be updated as CIPLAFT functions and responsibilities need to be clearly defined, including its capacity to formulate national AML/CFT policies and the frequency of CIPLAFT meetings, among others aspects.

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The FIU must strengthen its operational analysis capacities through the development of strategic studies, red flags indicators and typologies, which are updated and consistent with the criminal reality of Honduras.

For reasons of security and confidentiality of the information, it is imperative and urgent for this Unit to implements electronic STRs, as the obliged entities currently file them in paper.

The FIU must provide constant and regular feedback to reporting entities and supervisors in order to improve the quality of STRs.

Moreover, it is extremely important to have reaching programs with the financial sector, DNFBPs and especially NPOs for these to know and be aware of the risks to which they are exposed to as regards targeted financial sanctions, and to understand their obligations and the importance of their compliance. Honduras must also provide training to relevant authorities as regards targeted financial sanctions. 19


Honduras must adapt its legal framework in order to implement targeted financial sanctions related to FPWMD.

Honduras must implement measures, both at a regulatory and supervisory level, to ensure consistency in the understanding and implementation of preventive measures by financial institutions and DNFBPs. The obligations should permit that institutions do not to carry out customer due diligence in case it would tip-off the customer, and be allowed to issue a STR instead.

As for DNFBPs, they must standardize all the obligations, such as those related to training, other measures of internal control and actions against high-risk countries, among others. These measures must include all types of DNFBPs, especially the dealers of precious metals and stones.

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As priority action, it is recommended that the regulation regarding the supervision of DNFBPs is clear enough to determine who supervises and that the supervisor is suitable to carry out this function. Moreover, as for the supervision of DNFBPs, it is recommended to work with a risk-based approach.

It is also essential to increase the transparency of legal persons. Competent authorities must work on the identification of all the legal persons, systematisedatabases and the adequate identification of the beneficial owner, as legal persons are still important vehicles for money laundering networks. The Trade Registry must work in the registry’s platform to have consolidated data at a national level.

Given the importance of the control function of notaries in the system of incorporation of legal persons, authorities should carry out awareness activities addressed to these professionals to promote a better understanding of ML/TF risks and to develop guidelines on additional measures that could or should be implemented as part of the obligations. 2-Nov-16 21



It is recommended to reassess the application of the Law for Employment Generation, Promotion of Entrepreneurship, Business Formalization and Protection of Investor Rights, given the risks that its applications imply in achieving the purpose of Immediate Outcome 5.

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anti-money laundering and counter-terrorist financing measures in honduras

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