US embassy cable - 04MAPUTO1627

UNCLAS SECTION 01 OF 03 MAPUTO 001627 
 
SIPDIS 
STATE FOR INL/C, AF/S, DS/IP/AF, DS/IP/ITA 
JUSTICE FOR OIA AND AFMLS 
TREASURY FOR FINCEN 
E.O. 12958: N/A 
TAGS: KCRM, PTER, KSEP, SNAR, KTFN, EFIN, MZ, KCOR 
SUBJECT: INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT 
(INSCR), MONEY LAUNDERING AND FINANCIAL CRIMES 
 
REF: SECSTATE 254401 
 
1. Below are post answers to INSCR questions pertaining 
to money laundering and financial crimes, organized in 
response to the subheadings provided in State 254401. 
 
General Questions 
---------------------- 
2. Mozambique is not a regional financial center. Money 
laundering is fairly common and local authorities 
believe that narcotics proceeds have helped finance the 
recent proliferation of new restaurants, shopping 
centers, hotels, and mosques in the country, especially 
in the capital. These businesses reputedly conceal 
profits made by those importing hashish, heroin, and 
synthetic drugs from South Asia (often via Tanzania) 
and, to a lesser extent, cocaine from South America via 
Brazil. Most narcotics are destined for South African 
and European markets; Mozambique is not a significant 
consumption destination and is rarely a transshipment 
point to the United States. Local organized crime 
controls narcotics trafficking operations in country, 
with recent immigrants from Pakistan and India playing a 
prominent role. Money laundering in the banking sector 
is also considered to be a serious problem; in recent 
years, prominent public figures in the Central Bank, the 
law enforcement community and the media have been 
murdered for investigating fraud and money laundering in 
these institutions. Despite these problems, there are no 
known links between Mozambique-based drug traffickers, 
money launderers and the financing of terrorists. 
 
3. The financial sector is not experiencing any reported 
increase in crimes such as money laundering, but very 
few instances of laundering are formally reported or 
investigated. Black markets for smuggled goods and 
financial services are widespread, dwarfing the formal 
retail and banking sectors in most parts of the country, 
making it difficult to determine when and where 
laundering of narcotics money takes place. Local 
officials are often directly involved with drug 
trafficking and the laundering of profits, including the 
ex-chief of the Criminal Investigative Police and 
several of his top officers who are now awaiting trial 
in Inhambane province on narcotics trafficking charges. 
Evidence of money laundering was cited by the government 
as a reason for arresting these officials in 2003, but 
they are being prosecuted for narcotics trafficking, not 
money laundering. 
 
Laws and Regulations to Prevent Money 
Laundering/Terrorist Financing 
--------------------------------------------- ----------- 
4. Money laundering has long been a criminal offense in 
Mozambique, but criminal charges and prosecutions for 
money laundering have been rare because the law had not 
been narrowly defined until enactment of the 2002 Anti- 
Money Laundering Act. Implementing regulations for most 
components of this law were only issued in September 
2004, with more regulations forthcoming in 2005. The law 
contains specific statutes related to narcotics 
trafficking, but covers a wide range of laundering 
sources and agents. No money laundering arrests have 
taken place in 2004, nor have any prosecutions taken 
place. Since implementing regulations for the 2002 law 
were only recently issued, it is too early to tell how 
well the law will work. 
 
5. According to the 2002 law, banks and exchange houses 
must immediately record and report to the Attorney 
General's office any cash transaction valued at 441 
times the national minimum wage, which amounts to about 
$18,000. In addition, exchange houses are required to 
turn in records of all transactions on a daily basis. 
All credit card transaction attempts over $5,000 must be 
reported also, and can only be processed with approval 
from the Bank of Mozambique, i.e. the Central Bank. 
Banks and exchange houses are required to keep 
transaction records for 15 years (Article 15 of 2002 
law). Financial institutions are required to report any 
suspicious transactions immediately to the Attorney 
General's office (Article 16). The Attorney General, in 
turn, is required to determine within 48 hours whether 
to permit the transaction (Article 19). Individual 
bankers who cooperate with law enforcement authorities 
in good faith receive protection under the 2002 law 
(Article 21). Secrecy laws exist in Mozambique but do 
not apply in the case of suspected money laundering 
(Article 17). 
 
6. The 1996 Money Exchange Act requires any individual 
carrying more than $5,000 over the border to file a 
report with Customs. Taking more than $5,000 in local 
currency out of the country is prohibited. The 2002 Anti- 
Money Laundering Act includes due diligence provisions 
that make both respective bankers and banks responsible 
if financial institutions launder money (Article 27). 
Money laundering controls apply to all formal non- 
banking financial institutions, including exchange 
houses, stock brokerages, casinos and insurance 
companies. Cash couriers must meet cross-border currency 
requirements, but usually fall outside the scope of anti- 
money laundering law because they generally work in the 
informal sector. 
 
7. Mozambique has not explicitly criminalized the 
financing of terrorism. Its 1991 Crimes against the 
Security of State Act criminalizes terrorism, but it 
does not address financing. The 2002 law does list 
terrorism finance as a serious crime subject to the 
scope of the law, but elaborates no further (Article 4). 
The same law codifies Mozambique's long-standing 
authority to identify, freeze, seize and/or forfeit the 
assets of those charged with financial crimes, including 
terrorist finance (Articles 5 and 6). Financial 
institutions do not have access to the list of 
individuals and entities included on the UN 1267 
Sanctions Committee or the USG lists; these lists are 
distributed only to the Central Bank, the Attorney 
General, and the Ministry of Foreign Affairs. 
Authorities in these institutions have not positively 
identified any of the agents on these lists operating in 
Mozambique, and therefore no assets have been 
identified, frozen, or seized. 
 
8. Authorities acknowledge that alternative remittance 
systems are common in Mozambique, many of which operate 
in exchange houses that, on paper, are heavily regulated 
but in fact can easily avoid reporting requirements. 
There are no serious legislative, judicial, or 
regulatory measures being considered to address this 
problem. Charitable institutions must receive approval 
by the Ministry of Justice before receiving a charter, 
and are subject to investigation by the MOJ thereafter. 
There is no evidence of the MOJ seriously investigating 
any charities at this time. 
 
9. In October 2002, the Council of Ministers ratified 
the 1999 International Convention for the Suppression of 
the Financing of Terrorism. 
 
Offshore Financial Centers and Free Trade Zones 
--------------------------------------------- ----------- 
10. Mozambique is not considered an offshore financial 
center. Many local businessmen use offshore banking in 
nearby countries, such as Mauritius. There are no free 
trade zones in Mozambique. 
 
International Cooperation 
-------------------------------- 
11. Mozambique is a party to the 1988 UN Drug Convention 
and has signed the Eastern and Southern Africa Anti- 
Money Laundering Group Memorandum of Understanding. The 
government has also signed the 2000 UN Convention 
against Transnational Organized Crime, but has not 
ratified it. The Mozambican government has enacted 
significant anti-drug and anti-money laundering laws as 
a means of enforcing these commitments. Mozambique has 
entered a series of formal agreements with neighboring 
countries to share financial information required by law 
enforcement bodies. Cooperation with the United States 
on these matters has taken place on an informal basis. 
 
Asset Forfeiture and Seizure Legislation 
--------------------------------------------- ---- 
13. The 2002 Anti-Money Laundering Act contains 
provisions authorizing seizure and forfeiture of assets, 
including legitimate businesses used to launder money. 
In such a case, the Central Bank would be responsible 
for the initial tracing of assets and the Attorney 
General would be responsible for freezing and 
confiscating assets. The Attorney General also has 
authority to auction off confiscated assets and to 
distribute proceeds to a range of parties. Despite this 
legal framework, the institutions authorized to 
implement the law do not have an established system for 
identifying and freezing narcotics-related assets, and 
no assets have been seized to date under the 2002 Anti- 
Money Laundering Act. 
 
14. Mozambican law does allow for both civil and 
criminal forfeiture. An example of civil forfeiture 
would be the seizure of cash in excess of the $5,000 
limit from an individual who tried, secretly, to carry 
this amount across the border. The seized funds would be 
referred by Customs to the Central Bank. Appeals then 
could be made directly to the Bank. Private financial 
institutions are more closely regulated by criminal 
forfeiture acts, as listed in the 2002 law and its 
predecessors, but are also subject to civil suits. 
Financial institutions also have the right to file a 
civil suit against the government for loss of business 
in cases of unreasonable suspension, a provision that 
will likely discourage enforcement of the law. 
 
15. Mozambique faces many other obstacles to enforcement 
of its money laundering and drug-trafficking laws. These 
include resource constraints affecting the Attorney 
General's office and the Criminal Investigative Police 
and significant corruption of the latter. Investigative 
prosecutors at the Attorney General's Anti-Corruption 
Unit often receive threats of physical violence from 
organized crime. In 2001, Antonio "Siba-Siba" Macuacua, 
Chief of Banking Supervision at the Central Bank, was 
murdered in the stairwell of a bank that had been under 
investigation. The environment for effective 
prosecution of criminal cases, financial or otherwise, 
has improved little since then. 
LA LIME