VZCZCXYZ0016
PP RUEHWEB

DE RUEHBU #0048/01 0141443
ZNR UUUUU ZZH
P 141443Z JAN 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 0034
INFO RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEABND/DEA HQS WASHINGTON DC PRIORITY
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC PRIORITY
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY
RHMFIUU/HQ USSOUTHCOM MIAMI FL PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY

UNCLAS BUENOS AIRES 000048 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR INL, SCT, EEB 
JUSTICE FOR OIA, AFMLS, OPDAT 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM KTFN PTER SNAR AR
SUBJECT: ARGENTINA 2007-2008 INCSR PART II:  FINANCIAL 
CRIMES AND MONEY LAUNDERING 
 
REF: STATE 137250 
 
¶1. The following is Embassy Buenos Aires' input for the 
2007-2008 International Narcotics Control Strategy Report 
(INCSR) part II -- Financial Crimes and Money Laundering. 
Marked-up text sent separately via email.  Post POC is 
EconOff Chris Landberg (LandbergCA@State.Gov). 
 
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 continuing 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 
nonbank 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 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. 
 
In 2006 and 2007, the National Coordination Unit in the 
Ministry of Justice and Human Rights became fully functional, 
managing the government's anti-money laundering and 
counter-terrorism finance efforts and representing Argentina 
to the Financial Action Task Force (FATF) and South American 
FATF (GAFISUD).  The Attorney General's special investigative 
unit set up to handle money laundering and terrorism finance 
cases began operations in 2007.  The Argentine Banking 
Superintendent's (part of Central Bank) proposal to create a 
specialized anti-money laundering and counter-terrorism 
finance examination program is awaiting authorization and is 
not yet operational. 
 
The most noteworthy event in 2007 was the Argentine Congress' 
passage in June of anti-terrorism and counter-terrorism 
finance legislation (Law 26.268, "Illegal Terrorist 
Associations and Terrorism Financing").  The law, which 
entered into effect in mid-July, amends the Penal Code (Law 
No. 25.246, "Cover-Up and Laundering of Assets Act") to 
criminalize acts of terror, terrorism financing, and money 
laundering for the purpose of financing terrorism.  The new 
law technically provides the legal foundation for Argentina's 
financial intelligence unit (the Unidad de Informacion 
Financiera, or UIF), Central Bank, and other regulatory and 
law enforcement bodies to investigate and prosecute such 
crimes.  Argentina joins Chile, Colombia, Mexico, and Uruguay 
as the only countries in Latin America to have 
counter-terrorism finance laws. 
 
On September 11, 2007, President Nestor Kirchner signed into 
force the National Anti-Money Laundering and 
Counter-Terrorism Finance Agenda.  The overall goal of this 
Agenda is to serve as a road-map for fine-tuning and 
implementing existing money laundering and terrorism finance 
laws and regulations.  The Agenda's 20 individual objectives 
focus on closing legal/regulatory loopholes and improving 
interagency cooperation.  The next challenge is for Argentine 
law enforcement and regulatory institutions, including the 
Central Bank and UIF, to implement the National Agenda and 
aggressively enforce the newly strengthened and expanded 
legal, regulatory, and administrative measures available to 
them to combat financial crimes. 
 
Argentina's primary anti-money laundering legislation is Law 
25.246 of May 2000 (noted above). Law 25.246 expanded 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 National Insurance Superintendency 
(Superintendencia de Seguros de la Nacion, or SSN). The law 
forbids institutions to notify their clients when filing 
suspicious transaction reports (STRs), 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 September 30, 2006, the UIF had received 2851 reports 
of suspicious or unusual activities since its inception in 
2002, forwarded 165 suspected cases of money laundering to 
prosecutors for review, and assisted prosecutors with 121 
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 Law 25.246, in order to address 
Financial Action Task Force (FATF) concerns regarding the 
inadequacies in Argentine money laundering and terrorism 
financing legislation and enforcement. The FATF conducted a 
mutual evaluation of Argentina in October 2003, which 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 anti-money laundering 
legislation, as well as the lack of terrorist financing 
legislation or a national anti-money laundering and 
counterterrorist financing coordination strategy. 
 
Law 26.087 responds to many of the deficiencies noted by the 
FATF. It makes substantive improvements to existing law, 
including lifting bank, stock exchange and professional 
secrecy restrictions on filing suspicious activity reports; 
partially lifting tax secrecy provisions; clarifying which 
courts can hear requests to lift tax secrecy requests, and 
requiring decisions within 30 days. Law 26.087 also lowers 
the standard of proof required before the UIF can pass cases 
to prosecutors, and eliminates the so-called "friends and 
family" exemption contained in Article 277 of the Argentine 
Criminal Code for cases of money laundering, while narrowing 
the exemption in cases of concealment. Overall, the law 
clarifies the relationship, jurisdiction, and 
responsibilities of the UIF and the Attorney General's 
Office, and improves information sharing and coordination. 
The law also reduces restrictions that have prevented the UIF 
from obtaining information needed for money laundering 
investigations by granting greater access to STRs filed by 
banks. However, the law does not lift financial secrecy 
provisions on records of large cash transactions, which are 
maintained by banks when customers conduct a cash transaction 
exceeding 10,000 pesos (approximately $3,225). 
 
The UIF, which began operating in June 2002, has issued 
resolutions widening the range of institutions and businesses 
required to report 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), Customs, banks, currency exchange houses, 
casinos, securities dealers, insurance companies, postal 
money transmitters, accountants, notaries public, and dealers 
in art, antiques and precious metals. The resolutions issued 
by the UIF also provide guidelines for identifying suspicious 
or unusual transactions. All suspicious or unusual 
transactions, regardless of the amount, must be reported 
directly to the UIF. Prior to the passage of Resolution 
4/2005 in 2005, only suspicious or unusual transactions that 
exceeded 50,000 pesos (approximately $16,130) had to be 
reported; prior to 2004, suspicious transactions that were 
below a 500,000 peso threshold were first reported to the 
appropriate supervisory body for pre-analysis. 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, amending Law 
25.246 to modify the composition of the UIF. The law 
 
reorganized the UIF's executive structure, changing it 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 established a 
UIF Board of Advisors, comprised of representatives of key 
government entities, including the Central Bank, AFIP, the 
Securities Exchange Commission, the national counternarcotics 
secretariat (SEDRONAR), and the Justice, Economy, and 
 
SIPDIS 
Interior Ministries. The Board of Advisors' opinions on UIF 
decisions and actions are nonbinding. 
 
The Central Bank requires by resolution that all banks 
maintain a database of all transactions exceeding 10,000 
pesos, 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 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. 
 
Prior to the passage in 2007 of terrorist financing 
legislation, the Central Bank was the primary Argentine 
entity engaged in fighting such crimes.  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 regularly updates and modifies the original Circular. 
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. 
 
On December 6, 2006, the U.S. Department of Treasury 
designated nine individuals and two entities that have 
provided financial or logistical support to Hizballah and 
operate in neighboring countries' territories that border 
Argentina (in the region commonly referred to as the 
Triborder Area between Argentina, Brazil and Paraguay). 
According to the designation, the nine individuals have 
provided financial support and other services for Specially 
 
Designated Global Terrorist Assad Ahmad Barakat, who was 
previously designated by the U.S. Treasury in June 2004 for 
his support to Hizballah leadership. The two entities, 
Galeria Page and Casa Hamze, are located in Ciudad del Este, 
Paraguay, and have been utilized in generating or moving 
terrorist funds. The GOA joined the Brazilian and Paraguayan 
governments in publicly disagreeing with the designations, 
stating that the United States had not provided new 
information proving terrorist financing activity is occurring 
in the Triborder Area. 
 
Working with the U.S. 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 Triborder Area, which is 
bound by Puerto Iguazu, Argentina, Foz do Iguacu, 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, FATF 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 against Terrorism, and the UN 
Convention against Transnational Organized Crime. Argentina 
ratified the UN Convention against Corruption on August 28, 
¶2006. Argentina participates in the "3 Plus 1" Security Group 
(formerly the Counter-Terrorism Dialogue) between the United 
States and the Triborder Area countries. The UIF has been a 
member of the Egmont Group since July 2003, and has signed 
memoranda of understanding regarding the exchange of 
information with a number of other financial intelligence 
units. 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.  The Argentine 
government and Central Bank assert that they remain committed 
to freezing assets of terrorist groups identified by the 
United Nations if detected in Argentine financial 
institutions. 
 
With passage of counter-terrorism financing legislation, 
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 combat and prevent money laundering and 
terrorism financing.  Furthermore, the new national 
anti-money laundering and counter-terrorism finance agenda 
provides the structure for the government to improve existing 
legislation and regulation and enhance inter-agency 
coordination.  The challenge now is for Argentine law 
enforcement and regulatory agencies and institutions, 
including the Justice Ministry, Central Bank and UIF, to 
implement the National Agenda and aggressively enforce the 
newly strengthened and expanded legal, regulatory, and 
administrative measures available to them to combat financial 
crimes. 
 
The GOA could further improve the legal/regulatory structure 
by implementing the following reforms: enact legislation to 
expand the UIF's role to enable it to investigate money 
laundering arising from all crimes, rather than just six 
enumerated crimes; establish money laundering as an 
 
independent offense; and eliminate the currently monetary 
threshold of 50,000 pesos required to establish a money 
laundering offense. To comply with FATF recommendations on 
the regulation of bulk money transactions, Argentina should 
review the legislation vetoed in 2003 to find a way to 
regulate such transactions consistent with its MERCOSUR 
obligations.  Other continuing priorities are the effective 
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. There is also a need for 
increased public awareness of the problem of money laundering 
and its connection to narcotics, corruption and terrorism. 
 
End Text. 
KELLY