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PP RUEHWEB

DE RUEHBU #2767/01 3521655
ZNR UUUUU ZZH
P 181655Z DEC 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 6773
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UNCLAS BUENOS AIRES 002767 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR INL, WHA/BSCD, EB/ESC/TFS 
JUSTICE FOR OIA AND AFMLS 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM KTFN PTER SNAR AR
SUBJECT: ARGENTINA 2006-2007 INCSR PART II:  FINANCIAL 
CRIMES AND MONEY LAUNDERING 
 
REF: STATE 157000 
 
a.  The following is Embassy Buenos Aires' input for the 
2006-2007 International Narcotics Control Strategy Report 
(INCSR) part II -- Financial Crimes and Money Laundering. 
 
Begin Text: 
 
Argentina is neither an important regional financial center 
nor an offshore financial center. Money laundering related to 
narcotics trafficking, corruption, contraband, and tax 
evasion is believed to occur throughout the financial system, 
in spite of the efforts of the Government of Argentina (GOA) 
to stop it.  The financial sector's gradual recovery from the 
2001-02 financial crisis and post-crisis capital controls may 
have reduced the incidence of money laundering through the 
banking system.  However, transactions conducted through 
non-bank sectors and professions, such as the insurance 
industry, financial advisors, accountants, notaries, trusts, 
and companies, real or shell, remain viable mechanisms to 
launder illicit funds.  Tax evasion is the predicate crime in 
the majority of all Argentine money laundering 
investigations. Argentina has a long history of capital 
flight and tax evasion, and Argentines hold billions of 
dollars offshore, much of it legitimately earned money that 
was never taxed. 
 
The GOA took several important steps to combat money 
laundering in 2006, including enacting amendments to its 
money laundering legislation (Law 26.087) on March 29, 2006, 
empowering Argentina's Financial Intelligence Unit ("Unidad 
de Informacion Financiera" or "UIF"), creating a new National 
Coordination Unit in the Ministry of Justice and Human Rights 
to oversee and manage overall GOA money laundering efforts, 
and creating a Special Prosecutors Unit within the Attorney 
General's Office for money laundering and terrorism finance 
cases.  In addition, the Central Bank of Argentina (BCRA) 
completed plans for a specialized bank examination unit, 
announced in 2005, devoted specifically to money laundering 
and terrorism finance. 
 
These positive actions followed the steps the GOA took in 
2005 to improve the effectiveness of its money laundering 
regime, including the ratification of the UN International 
Convention for the Suppression of the Financing of Terrorism 
and the Inter-American Convention Against Terrorism, and 
regulatory changes to improve its anti-money laundering and 
counterterrorist financing systems.  The Central Bank of 
Argentina expanded its requirements for financial 
institutions to check transactions against the terrorism 
lists of the United States, European Union, Great Britain, 
and Canada, in addition to the UN 1267 Sanctions Committee 
consolidated list. 
 
Argentina's primary anti-money laundering legislation is Law 
25.246 of May 2000.  Law 25.246 expands the predicate 
offenses for money laundering to include all crimes listed in 
the Penal Code, sets a stricter regulatory framework for the 
financial sectors, and creates the UIF under the Ministry of 
Justice and Human Rights.  The law requires customer 
identification, record keeping, and reporting of suspicious 
transactions by all financial entities and businesses 
supervised by the Central Bank, the Securities Exchange 
Commission ("Comision Nacional de Valores" or "CNV"), and the 
Superintendent for Insurance ("Superintendencia de Seguros de 
la Nacion" or "SSN").  The law forbids the institutions to 
notify their clients when filing suspicious financial 
transactions reports, and provides a safe harbor from 
liability for reporting such transactions.  Reports that are 
deemed by the UIF to warrant further investigation are 
forwarded to the Attorney General's Office. 
 
As of October 31, 2006, the UIF had received 2174 reports of 
suspicious or unusual activities, forwarded 136 suspected 
cases of money laundering to prosecutors for review, and 
assisted prosecutors with 107 cases.  There have been only 
two money laundering convictions in Argentina since money 
 
laundering was first criminalized in 1989, and none since the 
passage of Law 25.246 in 2000. 
 
On March 29, 2006, the Argentine Congress passed Law 26.087, 
amending and modifying anti-money laundering Law 25.246, in 
order to address Financial Action Task Force (FATF) concerns 
regarding the perceived inadequacies in Argentine money 
laundering and terrorism financing legislation and 
enforcement.  FATF conducted a mutual evaluation of Argentina 
in October 2003. The mutual evaluation report was accepted at 
the FATF plenary in June 2004 and at the plenary meetings of 
the Financial Action Task Force for South America (GAFISUD) 
in July 2004.  While the evaluation of Argentina showed the 
UIF to be functioning satisfactorily, it identified 
weaknesses in Argentina's current anti-money laundering 
legislation, as well as the lack of terrorist financing 
legislation or a national anti-money laundering/counter 
terrorism finance coordination strategy. 
 
Law 26.087 responds to many of FATF's criticisms.  It makes 
five substantive improvements to existing law:  1) lifts 
bank, stock exchange, and professional secrecy objections to 
filing suspicious activity reports; 2) partially lifts tax 
secrecy provisions; 3) clarifies which courts can hear 
requests to lift tax secrecy requests, and requires decisions 
within 30 days; 4) lowers the standard of proof required 
before the UIF can pass cases to prosecutors; and 5) 
eliminates the so-called "friends and family" exemption 
contained in Article 277 of the Argentine Criminal Code for 
cases of money laundering and narrows it for cases of 
concealment.  Overall, the law clarifies the relationship, 
jurisdiction, and responsibilities of the UIF and the 
Attorney General's Office, improves information sharing and 
coordination, and reduces restrictions that have prevented 
the UIF from obtaining information needed for money 
laundering investigations by granting greater access to 
Suspicious Activity Reports (SARs) filed by banks.  However, 
the law does not lift financial secrecy provisions on cash 
transaction reports. 
 
The UIF, which began operating in June 2002, has issued 
resolutions widening the range of institutions and businesses 
required to report on suspicious or unusual transactions to 
the UIF beyond those identified in Law 25.246.  Obligated 
entities include the tax authority ("Administracion Federal 
de Ingresos Publicos" or "AFIP," equivalent to the U.S. IRS), 
Customs, banks, currency exchange houses, casinos, securities 
dealers, dealers in art, antiques, and precious metals, 
insurance companies, postal money transmitters, accountants, 
and notaries public.  The resolutions issued by the UIF also 
provide guidelines for identifying suspicious or unusual 
transactions.  In 2005, the UIF eliminated a previous 
resolution requiring obligated entities to report only 
suspicious or unusual transactions that exceeded 50,000 pesos 
(approximately $16,130); UIF Resolution 4/2005 now requires 
entities to report all suspicious or unusual transactions 
regardless of their amount. Suspicious or unusual 
transactions are now reported directly to the UIF; prior to 
2004, all suspicious transactions below a 500,000 peso 
threshold were first reported to the appropriate supervisory 
body for pre-analysis due to budget constraints at the UIF. 
Obligated entities are required to maintain a database of 
information related to client transactions, including 
suspicious or unusual transaction reports, for at least five 
years and must respond to requests from the UIF for further 
information within 48 hours. 
 
In September 2006, Congress passed Law 26.119, which amends 
Law 25.246 to modify the composition of the UIF.  In 
particular, the new law reorganizes the UIF's executive 
structure from a five member directorship with rotating 
presidency to a structure that has a permanent, politically 
appointed President and Vice President.  Law 26.119 also 
establishes a UIF Board of Advisors, comprised of 
representatives of key government entities -- approved by the 
Executive Power -- including the Central Bank, AFIP, the 
Securities Exchange Commission, the national 
 
counter-narcotics secretariat (SEDRONAR), and the Justice, 
Economy, and Interior Ministries.  The Advisory Board's 
opinions on UIF decisions and actions are non-binding. 
 
The Central Bank requires by resolution that all banks 
maintain a database of all transactions exceeding 10,000 
Argentine pesos (approximately $3,225), and periodically 
submit the data to the Central Bank.  Law 25.246 requires 
banks to make available to the UIF upon request records of 
transactions (equivalent of CTRs) involving the transfer of 
funds (outgoing or incoming), cash deposits, or currency 
exchanges that are equal to or greater than 10,000 pesos. 
The UIF further receives copies of the declarations to be 
made by all individuals (foreigners or Argentine citizens) 
entering or departing Argentina with over US$10,000 in 
currency or monetary instruments.  These declarations are 
required by Resolutions 1172/2001 and 1176/2001 issued by the 
Argentine Customs Service in December 2001.  In 2003, the 
Argentine Congress passed Law 22.415/25.821, which would have 
provided for the immediate fine of 25 percent of the 
undeclared amount, and for the seizure and forfeiture of the 
remaining undeclared currency and/or monetary instruments. 
However, the President vetoed the law because it allegedly 
conflicted with Argentina's commitments to MERCOSUR (Common 
Market of the Southern Cone). 
 
Argentina's Narcotics Law of 1989 authorizes the seizure of 
assets and profits, and provides that these or the proceeds 
of sales will be used in the fight against illegal narcotics 
trafficking. Law 25.246 provided that proceeds of assets 
forfeited under this law can also be used to fund the UIF. 
 
Although Law 25.246 of 2000 expands the number of predicate 
offenses for money laundering beyond narcotics-related 
offenses and created the UIF, it limits the UIF's role to 
investigating only money laundering arising from six specific 
crimes.  The law also defines money laundering as an 
aggravation after the fact of the underlying crime.  A person 
who commits a crime cannot be prosecuted for laundering money 
obtained from the crime; only someone who aids the criminal 
after the fact in hiding the origins of the money can be 
guilty of money laundering.  Another impediment to 
Argentina's anti-money laundering regime is that only 
transactions (or a series of related transactions) exceeding 
50,000 pesos can constitute money laundering; transactions 
below 50,000 pesos can constitute only concealment, a lesser 
offense. 
 
Also in response to FATF concerns, as reported in the mutual 
evaluation report, the Argentine government established a new 
National Coordination Unit in the Ministry of Justice and 
Human Rights, which represents Argentina to the FATF/GAFI and 
GAFISUD, and has the lead in developing money laundering and 
terrorism finance legislation, and manages the government's 
overall money laundering and terrorism finance efforts. 
 
Terrorism and terrorist acts are not specifically 
criminalized under Argentine law.  Because these acts are not 
autonomous offenses, terrorist financing is not a predicate 
offense for money laundering.  In 2005, Argentina ratified 
the UN International Convention for the Suppression of the 
Financing of Terrorism and the Inter-American Convention 
Against Terrorism, but it has not yet passed domestic 
legislation.  During 2005 and 2006, several bills were 
introduced in the Congress to implement the provisions of 
those treaties under Argentine law.  Various ministries in 
the government, as well as the "Comision Mixta" (Mixed 
Commission -- comprised of the Central Bank, Congress, 
Ministry of Economy, SEDRONAR, and Judicial branch), have 
also developed draft counter terrorism finance laws. 
Argentina's new National Coordinator is responsible for 
reviewing and harmonizing the draft laws, with the goal of 
completing a final draft for the President to submit to 
Congress. 
 
In the absence of legislation, the Central Bank issued 
Circular A 4273 in 2005 (titled, "Norms on 'Prevention of 
 
Terrorist Financing'") requiring banks to report any detected 
instances of the financing of terrorism.  The Central Bank 
has regularly updated and modified the original Circular, 
with the latest being Circular A 4599 (November 17, 2006). 
Bankers complain that the regulation is not backed by any 
legal definition of what constitutes terrorist financing in 
Argentina, and that the absence of domestic legislation means 
that they are not protected from lawsuits by clients if they 
report suspected cases of terrorist financing.  The Central 
Bank of Argentina also issued Circular B-6986 in 2004, 
instructing financial institutions to identify and freeze the 
funds and financial assets of the individuals and entities 
listed on the list of Specially Designated Global Terrorists 
designated by the United States pursuant to E.O. 13224.  It 
modified this circular with Resolution 319 in October 2005, 
which expands Circular B-6986 to require financial 
institutions to check transactions against the terrorist 
lists of the United Nations, United States, European Union, 
Great Britain, and Canada.  No assets have been identified or 
frozen to date. 
 
Working with the United States Department of Homeland 
Security's Office of Immigration and Customs Enforcement 
(ICE), Argentina has established a Trade Transparency Unit 
(TTU).  The TTU examines anomalies in trade data that could 
be indicative of customs fraud and international trade-based 
money laundering.  The TTU will generate, initiate, and 
support investigations and prosecutions related to 
trade-based money laundering and the movement of criminal 
proceeds across international borders.  One key focus of the 
TTU, as well as of other TTUs in the region, will be 
financial crimes occurring in the tri-border area, which is 
bounded by Puerto Iguazu, Argentina, Foz do Iguazu, Brazil, 
and Ciudad del Este, Paraguay.  The creation of the TTU was a 
positive step towards complying with FATF Special 
Recommendation VI on Terrorist Financing via alternative 
remittance systems.  Trade- based systems such as hawala 
often use fraudulent trade documents and over and under 
invoicing schemes to provide counter valuation in value 
transfer and settling accounts. 
 
The GOA remains active in multilateral counternarcotics and 
international anti-money laundering organizations.  It is a 
member of the Organization of American States Inter-American 
Drug Abuse Control Commission (OAS/CICAD) Experts Group to 
Control Money Laundering, the FATF (or GAFI), and GAFISUD. 
The GOA is a party to the 1988 UN Drug Convention, the UN 
International Convention for the Suppression of the Financing 
of Terrorism, the Inter-American Convention on Terrorism, and 
the UN Convention against Transnational Organized Crime. 
Argentina ratified the UN Convention Against Corruption on 
August 28, 2006.  Argentina has been a member of the Egmont 
Group since July 2003 and participates in the "3 Plus 1" 
Counter-Terrorism Dialogue between the United States and the 
Triborder Area countries (Argentina, Brazil and Paraguay). 
The UIF has signed memoranda of understanding regarding the 
exchange of information with a number of financial 
intelligence units, including Australia, Belgium, Bolivia, 
Brazil, Chile, Colombia, El Salvador, Guatemala, Honduras, 
Panama, Paraguay, Peru, Romania, Spain, and Venezuela.  The 
GoA and the USG have a Mutual Legal Assistance Treaty that 
entered into force in 1993, and an extradition treaty that 
entered into force in 2000. 
 
With strengthened mechanisms available under Laws 26.119, 
26.087, and 25.246, the ratification of the UN International 
Convention for the Suppression of the Financing of Terrorism, 
a reorganized UIF, and enhanced enforcement capability via 
the Special Prosecutors Unit and Central Bank's specialized 
bank examination unit, Argentina has the legal and regulatory 
capability to prevent and combat money laundering more 
effectively.  However, additional legislative and regulatory 
changes would significantly improve the anti-money 
laundering/counterterrorism finance regime in Argentina, 
particularly the passage of domestic legislation that 
criminalizes the financing of terrorism.  Additionally, to 
comply with the latest FATF recommendation on the regulation 
 
of bulk money transactions, Argentina will need to review the 
legislation vetoed in 2003 to find a way to regulate such 
transactions consistent with its MERCOSUR obligations. 
Continuing priorities are the forceful sanctioning of 
officials and institutions that fail to comply with the 
reporting requirements of the law, the pursuit of a training 
program for all levels of the criminal justice system, and 
the provision of the necessary resources to the UIF to carry 
out its mission.  Additionally, there is a need for increased 
public awareness of the problem of money laundering and its 
connection to narcotics, corruption, and terrorism.  Finally, 
the new National Coordinator's Office should alleviate the 
past problems of inadequate coordination and cooperation 
between government agencies.  It remains to be seen whether 
the National Coordinator will be able to develop and 
implement a national strategy on money laundering that would 
link and coordinate GOA resources devoted to intelligence and 
to counternarcotics and anti-financial crime efforts. 
 
End Text. 
WAYNE