The following is a summary of the strengths and weaknesses of the laws and regulations in place in the major offshore jurisdictions and international financial centres according to the State Department report:

Antigua & Barbuda

Antigua and Barbuda has comprehensive legislation in place to regulate its financial sector, but remains susceptible to money laundering because of its offshore financial sectors and Internet gaming industry. Money laundering in the region is related to both narcotics and fraud schemes, as well as to other crimes, but money laundering appears to occur more often in the offshore sector than in the domestic financial sector.

The Government of Antigua and Barbuda should continue its international cooperation, and rigorously implement and enforce all provisions of its anti-money laundering legislation. Antigua and Barbuda should vigorously enforce its anti-money laundering laws by actively prosecuting money laundering and asset forfeiture cases.

Aruba

Due to its geographic location and excellent infrastructure Aruba is both attractive and vulnerable to money launderers and narcotics trafficking.

The Government of Aruba has shown a commitment to combating money laundering by establishing a solid anti-money laundering regime that is generally consistent with the recommendations of the FATF and the CFATF.

Aruba should immobilize bearer shares under its fiscal framework and should enact its long-pending ordinance addressing the supervision of trust companies.

Bahamas

Money laundering in the Bahamas is related to financial fraud and the proceeds of drug trafficking. Illicit proceeds from drug trafficking usually take the form of cash or are quickly converted into cash.

The strengthening of anti-money laundering laws has made it increasingly difficult for most drug traffickers to deposit large sums of cash. As a result, a new trend has developed of storing extremely large quantities of cash in security vaults at properties deemed to be safe houses. Other money laundering trends include the purchase of real estate, large vehicles, and jewelry, and the processing of money through a complex national or international web of legitimate businesses and shell companies.

The GCOB has enacted substantial reforms that could reduce its financial sector’s vulnerability to money laundering; however, it must steadfastly and effectively implement those reforms. The Bahamas should provide adequate resources to its law enforcement and prosecutorial/judicial personnel to ensure that investigations and prosecutions are satisfactorily completed, and requests for international cooperation are efficiently processed.

Barbados

As a transit country for illicit narcotics, Barbados is both attractive and vulnerable to money launderers. The Government of Barbados (GOB) has taken a number of steps in recent years to strengthen its anti-money laundering legislation.

Although the GOB has strengthened anti-money laundering legislation, it should consider adopting civil forfeiture and asset sharing legislation. Barbados must steadfastly enforce the laws and regulations it has adopted. The GOB should be more aggressive in conducting examinations of the financial sector and maintaining strict control over vetting and licensing of offshore entities.

In 2005, there was a disproportionate number of SARS reported compared to the number of financial institutions. The GOB should ensure adequate supervision of non-governmental organizations and charities. It should also work to improve information sharing between regulatory and enforcement agencies.

Additionally, Barbados should continue to provide adequate resources to its law enforcement and prosecutorial personnel, to ensure Mutual Legal Assistance Treaty requests are efficiently processed. The GOB should adequately staff its FIU as a first step toward bolstering its ability to prosecute anti-money laundering cases.

Belize

Belizean officials suspect that money laundering occurs primarily within the country’s offshore financial sector. The local casas de cambios (money exchange houses), which were suspected of money laundering, were closed effective July 11, 2005. Money laundering, primarily related to narcotics trafficking and contraband smuggling, also occurs through banks operating in Belize.

Criminal proceeds laundered in Belize are derived primarily from foreign criminal activities. There is no evidence to indicate that money laundering proceeds are primarily controlled by local drug-trafficking organizations, organized criminals or terrorist groups. Allegedly, there is a significant black market for smuggled goods in Belize. However, there is no evidence to indicate that the smuggled goods are significantly funded by narcotics proceeds, or evidence to indicate significant narcotic-related money laundering. The funds generated from contraband are undetermined.

Belizean officials have reported an increase in financial crimes, such as bank fraud, cashing of forged checks, and counterfeit Belizean and United States currency. The Central Bank of Belize has engaged in public awareness activities and trainings to regulate counterfeit currency.

The Government of Belize should increase resources to law enforcement and should provide adequate training to those responsible for enforcing both Belize’s anti-money laundering/counterterrorist financing laws and its asset forfeiture regime.

Belize should take steps to address the vulnerabilities in its supervision of its offshore sector, particularly the lack of supervision of the gaming sector, including Internet gaming facilities. Belize should immobilize bearer shares and mandate suspicious activity reporting for the offshore financial sector.

Bermuda

Bermuda is a major offshore financial center, and has a strong reputation internationally for the integrity of its financial regulatory system. The Government of Bermuda (GOB) cooperates with the United States and the international community to counter money laundering and terrorist financing, and continues to update its legislation and procedures in conformance with international standards.

The Government of Bermuda should continue its efforts to update its financial services legislation relating to anti-money laundering and counterterrorism. It should also enact the proposed measures to strengthen provisions relating to the cross-border transportation of cash and monetary instruments and to include gatekeepers, such as accountants and attorneys, as covered entities under its anti-money laundering laws.

Botswana

Botswana is a developing regional financial center as well as a nascent offshore financial center. Botswana has a relatively well-developed banking sector and is vulnerable to money laundering.

Neither the narcotics trade nor the laundering of its proceeds appears to be a major problem in Botswana. Financial crimes such as bank fraud and counterfeit currency were down marginally from 2004. Reportedly, illicit diamonds are smuggled from Botswana into South Africa and other neighboring countries.

The Government of Botswana is preparing a draft strategy to combat money laundering and the financing of terrorism, including interagency procedures and coordination. Although Botswana does not yet have a full-fledged financial intelligence unit, the Directorate on Corruption and Economic Crime has responsibility for investigating suspected instances of money laundering, and it can demand access to bank records if needed during the course of an investigation.

Government agencies are actively considering the need for broader asset forfeiture to allow a financial intelligence unit to effectively combat money laundering and the financing of terrorism. Legislation authorizing a financial intelligence unit and granting it sufficient powers to investigate would increase the government’s capacity to combat financial crimes.

British Virgin Islands

During 2005, the United States has not developed any new information on money laundering vulnerabilities and countermeasures in the BVI. Yet the BVI remains vulnerable to money laundering, primarily due to its financial services industry.

The Government of the British Virgin Islands should continue to strengthen its anti-money laundering regime by fully implementing its programs and legislation.

Cayman Islands

The Cayman Islands, a United Kingdom (UK) Caribbean overseas territory, continues to make strides in strengthening its anti-money laundering program, including its first successful prosecution of a money laundering case in February 2005. Nevertheless, the islands remain vulnerable to money laundering due to their significant offshore sector.

The IMF found that the Cayman’s regime for combating money laundering and the financing of terrorism is compliant with international standards.

The Cayman Islands should continue its efforts to implement its anti-money laundering regime.

Cook Islands

After the Government of the Cook Islands remedied deficiencies in its anti-money laundering regime, the Financial Action Task Force (FATF) removed the Cook Islands from its Non-Cooperative Countries and Territories list in February 2005. The Cooks had been on the list since 2000.

By enacting The Financial Transactions Reporting Act (FTRA) 2003, and eight other legislative acts on May 7, 2003, and additional legislation in 2004, Cook Islands authorities strengthened its anti-money laundering/counterterrorism financing (AML/CTF) legal and institutional framework.

The Cook Islands should continue to implement legislation designed to strengthen its nascent institutions, should maintain vigilant regulation of its offshore financial sector, and should abolish "flee clauses" in new asset protection trusts to ensure that it comports with international standards.

Costa Rica

Costa Rica is not a major financial center, but it remains vulnerable to money laundering and other financial crimes. This is due in part to narcotics trafficking in the region, particularly of South American cocaine, and the presence in Costa Rica of Internet gaming companies.

Reforms to the Costa Rican counternarcotics law in 2002, which expand the scope of anti-money laundering regulations, also create a loophole by eliminating the government’s licensing and supervision of casinos, jewelers, realtors, attorneys, and other non-bank financial institutions.

The GOCR should pass legislation that clarifies contradictions regarding the supervision of its offshore banking sector, and should extend its anti-money laundering regime to cover the Internet gaming sector, exchange houses, gem dealers, casinos and other non-bank financial institutions. Costa Rica also should pass counterterrorism and terrorist finance legislation.

Cyprus

The Republic of Cyprus is a major regional financial center with a robust financial services industry, both domestic and offshore, which contributes about 6.1 percent of the country’s gross domestic product. Like other such centers, it remains vulnerable to international money laundering activities. Fraud and, to some extent, narcotics trafficking are the major sources of illicit proceeds laundered in Cyprus.

Over the past nine years, Cyprus has put in place a comprehensive anti-money laundering legal framework that comports with international standards. The GOC continues to revise these laws to meet evolving international standards. In recent years the Central Bank has introduced many new regulations aimed at strengthening anti-money laundering vigilance in the banking sector.

The Turkish Cypriot community continues to lack the legal and institutional framework needed to provide effective protection against the risks of money laundering. Turkish Cypriot authorities have, however, developed a greater appreciation of the dangers of unchecked money laundering and have begun taking limited steps to address these risks.

It is believed that the 23 essentially unregulated, and primarily Turkish-mainland owned, casinos are the primary vehicles through which money laundering occurs.

The offshore banking sector also remains a concern.

Gibraltar

As part of the European Union (EU), Gibraltar is required to implement all relevant EU directives, including those relating to anti-money laundering.

Gibraltar was one of the first jurisdictions to introduce and implement money laundering legislation that covered all crimes.

The Financial Services Commission (FSC) is responsible for regulating and supervising Gibraltar’s financial services industry. It is required by statute to match UK supervisory standards. Both onshore and offshore banks are subject to the same legal and supervisory requirements.

Gibraltar should put in place reporting requirements for cross-border currency movements.

Grenada

the GOG implemented and strengthened its legislation and regulations necessary for adequate supervision of Grenada’s offshore sector, which prompted the FATF to remove Grenada’s name from the NCCT list in February 2003.

Although the Government of Grenada has strengthened the regulation and oversight of its financial sector, it must remain alert to potential abuses and must steadfastly implement the laws and regulations it has adopted. Grenada should also continue to enhance its information sharing, particularly with other Caribbean jurisdictions.

Guernsey

The Bailiwick is a sophisticated financial center and, as such, it continues to be vulnerable to money laundering at the layering and integration stages.

Guernsey has put in place a comprehensive anti-money laundering regime, and has demonstrated its ongoing commitment to fighting financial crime.

Hong Kong

The primary sources of laundered funds are narcotics trafficking (particularly heroin, methamphetamine, and ecstasy), tax evasion, fraud, illegal gambling and bookmaking, and commercial crimes. Laundering channels include Hong Kong’s banking system, and its legitimate and underground remittance and money transfer networks.

Hong Kong is substantially in compliance with the Financial Action Task Force’s (FATF) Forty Recommendations on Money Laundering, and has pledged to adhere to the revised FATF Forty Recommendations. Overall, Hong Kong has developed a strong anti-money laundering regime, though improvements should be made.

Ireland

"Shell" companies that have no physical presence and normally have nominee directors are contrary to FATF’s international standards. These "paper companies" are convenient vehicles for the laundering of funds and could be used to finance terrorism.

The GOI should consider strengthening measures to prevent the establishment of such companies. Similarly, law enforcement should have a stronger role in identifying the true beneficial owners of shell companies as well as of trusts in the course of investigations.

Isle of Man

Its large and sophisticated financial center is potentially vulnerable to money laundering at the layering and integration stages. Identity theft and Internet abuse are growing segments of financial crime activity.

Isle of Man officials should continue to support and educate the local financial sector to help it combat current trends in money laundering. The authorities also should continue to work with international anti-money laundering authorities to deter financial crime and the financing of terrorism and terrorists.

Jersey

Jersey’s sophisticated array of offshore services is similar to that of international financial services centers worldwide.

The Government of Jersey has established an anti-money laundering program that in some instances, such as the regulation of trust company businesses and the requirement for companies to file beneficial ownership with Jersey’s Financial Services Commission (JFSC) go beyond what international standards require, in order to directly address Jersey’s particular vulnerabilities to money laundering.

Jersey should establish reporting requirements for the cross-border transportation of currency and monetary instruments. Jersey should continue to demonstrate its commitment to fighting financial crime by enhancing its anti-money laundering/counterterrorist financing regime in areas of vulnerability.

Labuan

The Government of Malaysia continues to make a broad, sustained effort to combat money laundering and terrorist financing flows within its borders. To further strengthen its anti-money laundering regime, Malaysia should insist on the identification and registration of the true beneficial owners of the more than 5,000 international business companies of Labuan.

Liechtenstein

The Principality of Liechtenstein’s well-developed offshore financial services sector, relatively low tax rates, liberal incorporation and corporate governance rules, and tradition of strict bank secrecy have contributed significantly to the ability of financial intermediaries in Liechtenstein to attract funds from abroad. These same factors have historically made the country attractive to money launderers.

Rumors and accusations of misuse of Liechtenstein’s banking system persist in spite of the progress the principality has made in its efforts against money laundering.

Luxembourg

With $1.4 trillion under management, Luxembourg is the second largest mutual fund investment center in the world, following the United States. The majority of banks registered in Luxembourg are foreign subsidiaries of banks in Germany, France, and Belgium. For this reason (and also due to the proximity of these three nations to Luxembourg), a significant share of Luxembourg’s suspicious transaction reports (STRs) are generated from transactions involving clients in these three countries.

While Luxembourg is not a major hub for illicit drug distribution, the size and sophistication of its financial center create opportunities for drug-related and other forms of money laundering and terrorist financing.

The Government of Luxembourg has enacted laws and adopted practices that help to prevent the abuse of its bank secrecy laws and has enacted a comprehensive legal and supervisory anti-money laundering and counterterrorism financing regime. Further action should be taken to address issues such as the lack of a distinct legal framework for the financial intelligence unit and the small number of money laundering investigations and prosecutions.

Monaco

The second-smallest country in Europe, the Principality of Monaco is known for its tradition of bank secrecy, network of casinos, and favorable tax regime. Russian organized crime and the Italian Mafia reportedly have laundered money in Monaco. Monaco remains on an OECD list of so-called "non-cooperative" countries in terms of provision of tax information.

The Government of Monaco should amend the Criminal Code to include an "all-crimes" approach, rather than the current list of predicate offenses. Monaco should also amend its legislation to implement full corporate criminal liability.

Monaco should continue to enhance its anti-money laundering and confiscation regimes.

Netherland Antilles

The Government of the Netherlands Antilles has shown a commitment to combating money laundering.

The Netherlands Antilles should continue its focus on increasing regulation and supervision of the offshore sector and free trade zones and pursuing money laundering investigations and prosecutions.

The Netherlands Antilles should criminalize the financing of terrorism, and should enact the necessary legislation to implement the UN International Convention for the Suppression of the Financing of Terrorism.

Panama

Panama is a major drug-transit country, and particularly vulnerable to money laundering because of its proximity to major drug-producing countries, its sophisticated international banking sector, its U.S. dollar-based economy, and the Colon Free Zone (CFZs). Some goods originating in or transshipped through the CFZ are purchased with narcotics proceeds (mainly via dollars obtained in the United States) through the Colombian Black Market Peso Exchange.

Despite significant progress to strengthen Panama’s anti-money laundering regime, Panama must remain vigilant to the threat that money laundering continues to pose to the stability of the country’s legitimate financial institutions.

After Hong Kong and the British Virgin Islands, Panama has the highest number of offshore-registered companies, approximately 350,000.

Russia

Russia has been slow to complete structural reforms of the banking sector, and overall public confidence in Russian banks remains low.

Through aggressive enactment and implementation of comprehensive money laundering and counterterrorism financing legislation, Russia now has well-established legal and enforcement frameworks to deal with money laundering and terrorism financing.

Nevertheless, some vulnerabilities remain. To meet President Putin’s stated goal of combating money laundering and corruption, Russia needs to follow through on its commitment to improve CBR oversight of shell companies and scrutinize more closely those banks that do not carry out traditional banking activities.

To prevent endemic corruption and deficiencies in the business environment from undermining Russia’s efforts to establish a well functioning anti-money laundering and counterterrorism finance regime, Russia should strive to stamp out official corruption, particularly at high levels, and to increase transparency in the financial sector and the corporate environment.

Seychelles

A major weakness of the Seychelles’ offshore program is that it still permits the issuance of bearer shares, a feature that can facilitate money laundering by making it extremely difficult to identify the beneficial owners of an IBC.

Seychelles should expand its anti-money laundering efforts by moving to prohibit bearer shares and requiring the complete identification of beneficial owners of international business companies (IBCs). Seychelles should establish a financial intelligence unit to collect, analyze, and share financial data with foreign counterparts, in order to effectively combat money laundering and other financial crimes. Seychelles should criminalize the financing of terrorism and continue to actively participate in ESAAMLG.

St Kitts & Nevis

The federation is at major risk for corruption and money laundering, due to the high volume of narcotics trafficking activity through and around the islands and the presence of known traffickers on the islands. An inadequately regulated economic citizenship program adds to the problem.

St. Kitts and Nevis should determine the number of Internet gaming sites present on the islands. Oversight of these entities is crucial, as they are vulnerable to abuse by criminal and terrorist groups. Additionally, St. Kitts and Nevis should curtail its economic citizenship program.

St Vincent & the Grenadines

St. Vincent and the Grenadines remains vulnerable to money laundering, other financial crimes, and the facilitation of terrorist financing, as a result of the rapid expansion and inadequate regulation of its offshore sector.

The Government of St. Vincent and the Grenadines should address all remaining concerns raised by the international community in regard to its anti-money laundering regime. These include the areas of customer identification, money remitters, outstanding bearer shares, and money laundering prosecutions. St. Vincent and the Grenadines should continue to provide training to its regulatory, law enforcement, and Financial Intelligence Unit personnel in money laundering operations and investigations.

The GOSVG should also ensure that it properly supervises the offshore sector. St. Vincent and the Grenadines should pass counterterrorist financing legislation that will provide the authority to identify, freeze and seize terrorist assets.

Switzerland

Authorities suspect that Switzerland is vulnerable at the layering and integration stages of the money laundering process. Switzerland’s central geographic location, relative political, social, and monetary stability, wide range and sophistication of available financial services, and long tradition of bank secrecy are all factors that make Switzerland a major international financial center. These same factors also make Switzerland attractive to potential money launderers.

While generally positive, Switzerland’s recent FATF mutual evaluation report nonetheless identified weaknesses in the Swiss anti-money laundering and counterterrorist financing regime, including problems with correspondent banking, identification of beneficial owners, and the cross-border transportation of currency. The Government of Switzerland should continue to improve on its regime while simultaneously working toward full implementation of existing laws and regulations. It should ratify the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Turks & Caicos

Its location has made it a transshipment point for narcotics traffickers. The TCI is vulnerable to money laundering because of a large offshore financial services sector as well as because of bank and corporate secrecy laws and Internet gaming activities.

The Government of the Turks and Caicos Islands have put in place a comprehensive system to combat money laundering with the relevant legislative framework and an established FIU. The FSC has made steady progress in developing its regulatory capability and has some experienced senior staff. Recently, a number of on-site examinations were conducted and one resulted in an enforcement action against an institution. Notwithstanding, the current regulatory structure is not fully in accordance with international standards.

United Arab Emirates

The UAE’s robust economic development, political stability, and liberal business environment have attracted a massive influx of people and capital and as a result, has the potential to be a major center for money laundering. The large number of resident expatriates from the above regions, many of whom are engaged in legitimate trade with their homelands, or send remittances there, exacerbates that potential.

The UAEG has begun constructing a far-reaching anti-money laundering program, and it is considered a regional leader in these efforts. However, there remain areas requiring further action.

Vanuatu

Vanuatu’s offshore sector is vulnerable to money laundering, as Vanuatu has historically maintained strict banking secrecy provisions that have the effect of preventing law enforcement agencies from identifying the beneficial owners of offshore entities registered in the sector.

The Government of Vanuatu should immobilize bearer shares and require complete identification of the beneficial ownership of international business companies (IBCs). It should implement all the provisions of its Proceeds of Crime Act and enact all additional legislation that is necessary to bring both its onshore and offshore financial sectors into compliance with international standards.