The purpose of this FAQ is to provide a brief description of the work undertaken by Gibraltar to prevent it’s finance centre being abused by money launderers or those seeking to fund terrorism.
It sets out the strong deterrent measures in place and the independent assessments that have verified the effectiveness of these safeguards.
Money laundering is a global problem and it occurs in all jurisdictions, large or small. On occasions Gibraltar’s finance centre, like every other finance centre, will be targeted by launderers. The fight is ongoing and we like everyone else must remain vigilant and constantly review the adequacy of our safeguards. Our aim, like that of Government and the finance sector itself is to make such abuse less likely and its detection swifter.
The paper provides answers to these Frequently Asked Questions:
By every reasonable measure, Gibraltar is at the forefront of anti-money laundering practices.
It was one of the first jurisdictions worldwide to criminalise money laundering from all types of criminal activity not just drugs related offences. This was also recently extended to cover the financing of terrorism.
Gibraltar was the first jurisdiction to regulate the providers of fiduciary services (company management and formation as well as professional trustees) and to apply the provisions of the Anti-Money Laundering regime to this sector.
Gibraltar has transposed and given effect to the EU’s 3rd Money Laundering Directive.
Gibraltar is also largely compliant with the 40+9 special recommendations of the Financial Action Task Force (FATF/GAFI).
As money launderers get more sophisticated, regulatory and supervisory practices always need to evolve.
A significant threat internationally is that of terrorism and as was demonstrated in both 911 and the Madrid bombings these were financed with very little money. The challenge therefore is to focus the front line defences away from documentary evidence to satisfy KYC requirements towards one of monitoring transactions to detect possible money laundering or financing of terrorism.
The FSC updated its regulatory requirements in respect of Systems of Controls to prevent the financial system from being used for money laundering and terrorist financing (www.fsc.gi/amlgn) and will continue to monitor typologies and threats to ensure that regulatory practice keeps abreast of developments in these areas.
In relation to other jurisdictions both onshore and offshore, Gibraltar’s company management industry with only 30,000 active companies does not make it a large player worldwide. The risks posed by the sector itself is mitigated by the fact that the firms providing these services are vetted and regulated by the FSC. The firms providing these services are themselves required to apply the same standards as any financial institution in relation to the fight against money laundering and the combating of terrorism.
No, tax evasion is a criminal offence as the person committing such an offence will also be committing a number of other offences as well, all of which are defined as criminal offences under the Laws of Gibraltar. There is no differentiation drawn between tax evasion and other criminal activity in the legislation.
Gibraltar is geographically exposed to launderers from two main sources. The first of these is the existence of a major drug producing region (Morocco) and a large consumer and distribution network in Spain not only for drugs emanating from Morocco but also cocaine and designer drugs imported into Europe. Add this risk to the recent establishment of organised criminal activities from Eastern Europe into southern Spain and there is a huge potential for launderers to use Gibraltar as a base for money laundering.
These risks are mitigated by the small coastline and effective policing of the area preventing Gibraltar being used as a transhipment area for drugs or people smuggling. Secondly many of the Eastern Europeans settling in Southern Spain remain outside of the EU and therefore cannot travel physically into Gibraltar due to visa requirements. Meticulous border controls between Gibraltar and Spain also acts as a deterrent to potential launders wishing to use Gibraltar for placement stages of their activities.
The strongest defence mechanism for preventing layering stages, which is where Gibraltar is most vulnerable, is the regulation of every financial intermediary that operates in or from within Gibraltar with strong KYC requirements and linked to an effective enforcement agency network.
Evaluations have been effected by the FATF under the aegis of the Offshore Group of Banking Supervisors who found that Gibraltar’s standards were "close to complete adherence with the FATF 40 Recommendations."
FATF itself found that Gibraltar was a co-operative jurisdiction in the fight against money laundering and found "Gibraltar has in place a robust arsenal of legislation, regulations and administrative practices to counter money laundering."
The findings were further reinforced by a subsequent evaluation by the International Monetary Fund (IMF) and a independent review of the activities of the Financial Services Commission which concluded that "supervision is generally effective and thorough and Gibraltar ranks as a well-developed supervisor."
An IMF led assessment against the revised FATF+9 recommendations was published in 2006 (www.fsc.gi/imf/imf.htm).
The latest supervisory review of the FSC was conducted to establish whether the FSC matches UK regulatory practice. In relation to anti-money laundering practices the report praises the Gibraltar regime as "more robust than that of the UK in a number of areas" and says that regulations have been "developed to a good standard and staffed by competent regulators with a manifest determination to improve performance further." The review notes that Gibraltar's decision to regulate professional trustees and company management means that "enforcement of these requirements in Gibraltar now exceeds that in the UK, even taking account of the different risks posed by the business," It adds that the FSC imposed a review of the identification evidence held on all existing customers by Gibraltar financial institutions, and commented that "this requirement goes beyond the position in the UK. The FSC is to be particularly commended for this."
Gibraltar participates in the Egmont Group of Financial Intelligence
Units via the independently run Gibraltar Financial Intelligence Unit (GFIU)
which is manned by officers of the Royal Gibraltar Police and Customs
Department of the Government of Gibraltar.
Gibraltar has given full effect to the EU 3rd Money Laundering Directive as well other international obligations in relation to the Combating of Terrorist Financing. These are contained within the following statutes;
The Money-Laundering Offences related to;
For all types of criminal activity irrespective of whether or not these were
committed in Gibraltar or overseas.
Amongst the terrorism related offences are;
[1]
http://www.gibraltarlaws.gov.gi/articles/1995-06o.pdf
[2]
http://www.gibraltarlaws.gov.gi/articles/1995-14o.pdf
[3]
http://www.gibraltarlaws.gov.gi/articles/2005-43o.pdf
The Act defines criminal conduct as any activity, either committed in Gibraltar or elsewhere which if it had been conducted in Gibraltar would be indictable. This includes tax evasion as the committal of such an offence would normally also include the committal of other indictable offences.
GFIU is integrated into the Government of Gibraltar Co-ordinating Centre for Criminal Intelligence and Drugs. It is staffed by officers seconded from HM Customs Gibraltar and The Royal Gibraltar Police and is a member of the Egmont Group of Financial Intelligence Units.
All regulated entities are required by law to make a report to GFIU of any known or suspected money laundering or terrorist financing transaction which may have either been conducted or attempted.
The contact details for the GFIU is;
The Gibraltar Financial Intelligence Unit (GFIU)
Suite 832
Europort
Gibraltar
Tel 200 70211
Fax 200 70233
E-Mail gibintel@gibraltar.gi
The Financial Services Commission of Gibraltar is the authority that overseas the compliance frameworks of the regulated financial sector for AML/CFT systems of control. This is done primarily through the publication of Regulatory Requirements in the form of Guidance Notes to the industry (http://www.fsc.gi/amlgn).
The Guidance Notes place a strong emphasis on the Risk-Based approach to be taken by firm’s senior management and compliance with six statements of principles from which all regulatory requirements are taken from. These are;
The FSC monitors a firm’s compliance with these principles through its own risk assessment and on-site surveillance work of firms.