Colombia
Financial Sector Assessment Program-Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism

This report provides a summary of the anti-money laundering/combating the financing of terrorism (AML/CFT) measures in place in Colombia as at the date of the onsite visit (June 5 to 22, 2017). It analyzes the level of compliance with the Financial Action Task Force (FATF) 40 Recommendations and the level of effectiveness of Colombia’s AML/CFT system, and provides recommendations on how the system could be strengthened.

Abstract

This report provides a summary of the anti-money laundering/combating the financing of terrorism (AML/CFT) measures in place in Colombia as at the date of the onsite visit (June 5 to 22, 2017). It analyzes the level of compliance with the Financial Action Task Force (FATF) 40 Recommendations and the level of effectiveness of Colombia’s AML/CFT system, and provides recommendations on how the system could be strengthened.

Executive Summary

This report provides a summary of the anti-money laundering/combating the financing of terrorism (AML/CFT) measures in place in Colombia as at the date of the onsite visit (June 5 to 22, 2017). It analyzes the level of compliance with the Financial Action Task Force (FATF) 40 Recommendations and the level of effectiveness of Colombia’s AML/CFT system, and provides recommendations on how the system could be strengthened.

Key Findings

1. Colombia has an reasonable understanding of its main domestic money laundering/terrorist financing (ML/TF) risks. The country’s understanding of risks relies particularly on the results of the 2013 and 2016 National Risk Assessments (NRAs).

2. The 2016 NRA has yielded reasonable findings with respect to the identification of the main ML threats and vulnerabilities.

3. The AML/CFT supervisory systems and tools are not entirely in line with the risk-based approach (RBA), and there are significant gaps in the supervision of designated non-financial businesses and professions (DNFBPs).

4. Colombia investigates and prosecutes ML effectively, but not in a manner that is commensurate with its ML risks.

5. The main TF threat in Colombia is the proceeds-generating criminal activity of domestic organized armed groups (Grupos Armados Organizados—GAOS). The primary source of funds for domestic criminal organizations are drug trafficking and other criminal activities.

6. The financial intelligence produced by the Financial Analysis and Information Unit (Unidad de Información y Análisis Financiero—UIAF) is generally a key input to initiate investigtions regarding predicate offenses and tracing assets, specially such financial intelligence generated upon the request of the Fiscalía General de la Nación (FGN—Public Prosecutor’s Office). However, while the FGN uses most of the UIAF’s disseminations for preliminary inquiries, the financial intelligence disseminated spontaneously by the UIAF has led to less ML cases and no TF cases.

7. There are significant deficiencies in the customer due diligence (CDD) framework and its implementation, as well as the enhanced risk mitigation measures under the existing AML/CFT framework that negatively impact the overall effectiveness of preventive measures.

8. The UIAF can accede to various types of financial information that allows it to produce financial intelligence of good quality.

9. Overall, financial institutions have a reasonable understanding of ML risks and of AML obligations. DNFBPs, except for casinos, have a lower level of awareness of ML/TF risks and obligations than financial institutions.

10. Confiscation and asset forfeiture are pursued as a priority policy objective. Law enforcement agencies (LEAs) are well trained and have adequate skills and resources to trace and recover proceeds of crime (POC). Asset forfeiture (extinción de dominio) is being applied with important results. Colombia has an effective system for managing the POC as well.

11. Colombia has a legal framework to apply targeted financial sanctions (TFS) related to TF, but its framework for TFS related to the financing of proliferation of weapons of mass destruction (WMD) has technical and operational deficiencies.

12. While basic information of legal persons is updated annually and accessible in the public registries and supervisors’ databases, the authorities have difficulty obtaining accurate and up-to-date information on the beneficial ownership (BO) of complex corporate structures and when there is foreign ownership or control involved.

13. Overall, Colombia provides timely, good quality, and constructive mutual legal assistance (MLA) and extradition. Its approach to international cooperation is proactive and collaborative. Constructive international cooperation is provided timely both upon request and spontaneously.

Risks and General Situation

14. Colombia’s main ML threat comes from organized crime groups. The most vulnerable sectors are banking, gold mining, lawyers, real estate, accountants, statutory auditors (revisores fiscales),1 auditors, and the real sector. Overall, financial institutions (banks, securities, and insurance firms, as well as savings and loans cooperatives) have a good understating of ML risks. DNFBPs generally have a lower level of understanding of ML risks than financial institutions, while both appear to have less understanding of TF risks. An RBA to AML/CFT supervision has been applied to varying degrees, and is the most advanced in the case of the Financial Superintendent of Colombia (Superintendencia Financiera de Colombia—SFC). Other supervisory agencies are still in the process of developing adequate supervisory frameworks and cannot yet demonstrate effectiveness in mitigating risks.

15. The main TF threat in Colombia is the proceeds-generating criminal activities of GAOS. GAOS have used drug trafficking, kidnapping, extortion, and other crimes as sources of income. While the authorities deem the risk for TF as medium to high, the assessment of TF risk in the NRA is insufficient. While there is better understanding of TF risks by LEAs, the TF factor is not sufficiently considered by supervisory agencies and awareness of TF risks affecting their sectors is generally low.

Assessment of Risks, Coordination and Policy Setting (Chapter 2—IO.1; R. 1, R.2, R.33)

16. Colombia has made significant efforts to identify, asses, and understand its ML/TF risks. The main agencies responsible in the fight against ML/TF have a good understanding of the main threats that Colombia faces. The country’s understanding of the risks is mainly based on the results of the 2013 and 2016 NRAs, which broadly address the main threats and vulnerabilities. Overall, the exercise confirmed the authorities’ view on the main domestic ML/TF threats, but did not factor in other relevant threats nor properly assess other existing risks in the country (i.e., risks associated with simplified joint stock companies (sociedades anónimas simplificadas—SAS), tax evasion, threats derived from the informal sector, and threats of foreign origin, among others. National coordination and cooperation on AML/CFT at a policy level has improved since the last mutual evaluation in 2008 and is relatively sound. However, operational cooperation is partially fragmented and inadequately coordinated. The AML/CFT policies include an articulated strategy to strengthen the AML/CFT regime in Colombia and broadly address the main ML/TF risks. Specific measures to prevent or mitigate ML/TF risks based on the findings of the 2016 NRA have not yet been implemented, due in part to the recent adoption of the report and the fact that the adoption of a revised policy depends on a wider decision of the Government. Other specific AML/CFT policies are included in relevant public documents such as the National Development Plan 2014–2018, addressing some of the previously identified risks.

Financial Intelligence, Money Laundering and Confiscation (Chapter 3—IOs 6–8; R.3–4, R.29–32)

17. The UIAF conducts high-quality operational and strategic analysis and supports the operational needs of LEAs, spontaneously and upon request. However, despite collaboration between the UIAF and LEAs, spontaneously disseminated financial intelligence has resulted in a limited number of ML and predicate crime investigations and not at all for TF. The good collaboration between the UIAF and the LEAs, and the financial intelligence provided by the UIAF supports the operational needs of the LEAs in asset forfeiture cases and existing ML investigations. The UIAF has access to a wide range of information sources and has the authority to request any information from reporting entities and other relevant authorities regarding ML/TF. The UIAF has an effective process for prioritizing and analyzing suspicious transaction reports (STRs). However, a few factors negatively impact on the more efficient use of financial intelligence, such as the poor quality of STRs from certain reporting entities, the inexperience of certain reporting entities regarding the fulfillment of their reporting obligation, and insufficient reporting by some DNFBPs. The UIAF makes a significant effort to verify and analyze the information in the STRs, along with the information in its own databases.

18. Colombian authorities can investigate and prosecute ML through a wide range of legal tools and well-resourced investigative bodies. Nevertheless, most of the cases involve simple ML schemes comprising low amounts of funds. Most ML cases that are investigated and prosecuted are related to illegal drug trafficking and few involve pursuing ML originating from other predicate crimes. The number of ML investigations and prosecutions is rising, but is still insufficient given the country’s ML risk profile.

19. Colombia has a robust legal framework for confiscating and forfeiting POC, and confiscation is pursued as a priority policy objective. LEAs are well skilled, trained, and sufficiently resourced for tracing and recovering instrumentalities and POC. The physical transportation of proceeds of drug trafficking such as cash and bearer negotiable instruments (BNIs) is a common ML technique in Colombia. Nondeclared and nondisclosed cross-border currency is routinely being seized and confiscated. Competent authorities pursue proceeds and instrumentalities through criminal confiscation and asset forfeiture mechanisms. Asset forfeiture is being applied effectively with important results. Asset forfeiture proceedings are autonomous and are independent from criminal prosecution. There is room for improvement regarding confiscation of proceeds moved to other countries and the repatriation of assets. At the time of the onsite visit, there were no cases of sharing of confiscated proceeds with foreign counterparts. Colombia has an effective system for managing the POC. The country seizes, forfeits, and confiscates currency which is falsely declared or which is not disclosed during cross-border movements.

Terrorist Financing and Financing Proliferation (Chapter 4—IOs 9–11; R.5–8)

20. The significant number of terrorist acts committed shows a high risk for domestic TF. The TF offense is investigated and prosecuted to a limited extent. There have been some significant TF convictions, but the number of standalone TF investigations and prosecutions is small in comparison with the magnitude of the threat. Colombia has established a registration regime for nonprofit organizations (NPOs), but risk-based supervision or monitoring for CFT is lacking. Colombia has not identified the subset of organizations falling under the FATF definition and has not identified the features and types of NPOs which are likely to be at risk for TF abuse.

21. Colombian legislation establishes the general obligation to circulate UN sanctions lists to the competent authorities without delay and requires that freezing be carried out through judicial proceedings under the Asset Forfeiture Law (AFL). The authorities have not received any notifications to date relating to assets or funds belonging to persons designated pursuant to UN Security Council Resolutions (UNSCRs) and have not yet designated any person under UNSCRs 1267 or 1373. According to Colombian authorities, freezing actions on proliferation financing (PF) would also follow the AFL process. However, since AFL can only be applied to assets linked to criminal offenses, it cannot be applied to assets of designated persons or entities by the UN in the PF lists.

Preventive Measures (Chapter 5—IO.4; R.9–23)

22. Significant gaps in the legal framework negatively impact on the effective implementation of preventive measures. Postal transfer operators (PTOs) are not explicitly listed as reporting entities, and as such, they are not legally required to apply AML/CFT measures, including CDD. There are also shortcomings in the legal framework regarding the identification and verification of the identity of the beneficial owner, and there is no requirement to collect BO’s information in all cases. While the regulatory framework presents some shortcomings, financial institutions and those DNFBPs classified as reporting entities generally apply adequate risk mitigating measures for politically exposed persons (PEPs), correspondent banking, new technologies, wire transfer rules, and TFS related to TF. Financial institutions generally have a good understanding of the obligations imposed by the Sistema de Administración del Riesgo de Lavado de Activos y de la Financiación del Terrorismo (Risk Management System for ML/TF— SARLAFT) or equivalent risk management systems, including for enhanced due diligence and record-keeping requirements. Financial institutions understand their STR obligations, but shortcomings were identified with respect to reporting attempted transactions among financial institutions and DNFBPs. Lastly, there are several categories of DNFBPs that, under the existing AML/CFT framework, are not considered reporting entities and are not subject to the AML/CFT obligations.

Supervision (Chapter 6—IO.3; R.26-28, R.34–35)

23. The understanding of ML/TF risks by supervisors is still evolving with most being well informed of the main ML threats facing the Colombian financial system. However, awareness of TF risks affecting their sectors was generally low, with none of the risk-based supervisory models specifically assessing exposure to TF. In addition, most supervisors focus on domestic threats and do not take adequate account of foreign-sourced risks. The licensing regime, including fit and proper checks on owners and directors of financial institutions and DNFBPs, appears to be robust with respect to Colombian nationals, but less stringent for foreign beneficial owners. Scope limitations in Colombia’s AML/CFT legal framework for financial institutions and most DNFBP sectors also constrain supervisors’ understanding of sectoral risks and their effectiveness in risk mitigation. Many lawyers, accountants, real estate agents, and dealers in precious metals and stones (except in relation to gold) are outside the scope of the AML/CFT regime. The application of proportionate and dissuasive sanctions across all sectors is generally weak, with more reliance placed on warning letters than other more stringent administrative sanctions and fines.

24. The SFC has improved its risk-based framework for offsite and onsite AML/CFT supervision in recent years. Other supervisors are still developing their offsite risk identification and assessment systems and cannot yet demonstrate their effectiveness in mitigating risks and compliance supervision. Supervisors are also facing emerging challenges in adapting their risk assessment and mitigation systems to take account of the integration of ex-Fuerzas Armadas Revolucionarias de Colombia-Ejército del Pueblo (Revolutionary Armed Forces of Colombia-People’s Army—FARC) members into the formal financial system, including their control of credit unions.

Transparency of Legal Persons and Arrangements (Chapter 7—IO.5; R.24–25)

25. Basic information of all legal persons held by registries is publicly available and is updated every year by the legal entities. Back-up documents kept by registries are not public, but are easily obtained by the authorities when requested. Shareholder information of legal persons is also obtained easily and in a timely fashion by authorities using different sources, such as public registries, books of shareholders, and supervisors’ databases. However, BO information of legal persons is only partially available: authorities may get BO information from these sources for simple corporate structures, but have limitations to get BO information for complex corporate structures and when there is foreign ownership or control involved. Authorities have adopted several types of measures to prevent the misuse of legal persons, including strict regulations, supervision, powers of supervisors, and easy access to information of legal persons. Bearer shares are not allowed. Currently, 54 percent of the commercial companies are SAS, which only require a simple private document for their creation. The ML/TF risks arising from this type of company have not been analyzed by the authorities. Fiduciae are an important financial market and only licensed fiduciary companies (26) can provide fiduciary services. All information on the participants and terms of the fiduciae must be updated in the SFC registries. Fiduciary services face a high ML risk, but there are no requirements for enhanced AML/CFT mitigation measures specific for this sector beyond the regular obligations for financial institutions. Specific measures ultimately depend on internal rules of each fiduciary company.

International Cooperation (Chapter 8—IO.2; R.36–40)

26. Colombia has a robust legal and institutional framework which allows competent authorities to provide constructive, good quality, and timely MLA and extradition to third countries. The Colombian approach to international cooperation is overall proactive and collaborative. International cooperation is provided both upon request and spontaneously. Overall, LEAs’ procedures for protecting information, prioritizing, and executing international cooperation requests are in place and adequate. Colombia regularly submits extradition requests to other countries related to ML, TF, and terrorism, as well as for asset forfeiture. Financial supervisory authorities, the UIAF, and other LEAs exchange information with their foreign counterparts and implement measures to protect the confidentiality of the information. The implementation of international cooperation procedures of the Dirección de Impuestos y Aduanas Nacionales (National Tax and Customs Office—DIAN) could be further improved. Colombia can identify and exchange basic information on domestic legal persons and arrangements. Regarding the BO information, shortcomings related to its availability would limit Colombia’s ability to respond in a timely manner to specific foreign requests in this regard.

Priority Actions

  • Extend the scope and approach of the NRA to provide for a more in-depth ML/TF threat and vulnerability analysis to cover additional areas (e.g., tax evasion, foreign threats, and cross-border financial flows, among others).

  • Articulate a national AML/CFT policy with clear objectives, timeline, and allocation of responsibilities, as well as a mechanism to monitor/measure progress, and maintain more comprehensive statistics.

  • Improve implementation of risk mitigating measures, including for enhanced measures, and fully extend AML/CFT requirements to sectors that are completely or partly out-of-scope, including unregulated lenders, internet casinos, real estate intermediaries, lawyers, accountants, and dealers in precious metals and stones.

  • Fully implement the risk-based supervisory systems for all financial institutions and DNFBP sectors, including with respect to onsite inspections and cross-border supervision of financial groups.

  • The UIAF should support the requirements of LEAs for ML/TF investigations to a greater extent.

  • The UIAF should systematically provide feedback to supervisors and reporting entities regarding the quality of STRs.

  • Establish a mechanism to maintain accurate and updated information on beneficial owners readily available to competent authorities.

  • Colombia should widen the scope of the ML investigations to extend to cases where the underlying criminal activities are different from drug trafficking, at least to those that have been indicated as a high risk in the NRA.

  • Enhance the use of available legal measures to combat TF offense and not rely only on alternative judicial measures to tackle TF activities.

  • Require physical and legal persons, not only reporting entities, to implmement the UCSCRs on TF and PF for WMD.

  • Colombia should strengthen its capacity to provide international cooperation on BO information.

Effectiveness and Technical Compliance Ratings

Effectiveness Ratings (High, Substantial, Moderate, Low)

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Technical Compliance Ratings (C—compliant, LC—largely compliant, PC—partially compliant, NC—non compliant)

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Technical Compliance Ratings (C—compliant, LC—largely compliant, PC—partially compliant, NC—non compliant)

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Detailed Assessment Report

Preface

This report summarizes the AML/CFT measures in place as of the date of the onsite visit. It analyzes the level of compliance with the FATF 40 Recommendations and the level of effectiveness of the AML/CFT system, and recommends how the system could be strengthened.

This evaluation was based on the 2012 FATF Recommendations, and was prepared using the 2013 Methodology. The evaluation was based on information provided by the country, and information obtained by the evaluation team during its onsite visit to the country from June 5 to 22, 2017.

The evaluation was conducted by an assessment team consisting of:

  • Antonio Hyman-Bouchereau (team leader, IMF),

  • Francisco Figueroa (financial sector expert, IMF),

  • Carolina Claver (financial sector expert, IMF),

  • Esteban Fullin (legal expert, IMF),

  • Manuel Vasquez (financial sector expert, IMF consultant),

  • Gonzalo Gonzalez de Lara (DNFPB expert, IMF consultant),

  • Alejandra Medina Carrillo (financial intelligence expert, IMF consultant),

  • and Juan Cruz Ponce (legal expert, GAFILAT Secretariat).

Alejandra Quevedo provided support from the Grupo de Acción Financiera de Latinoamérica (GAFILAT) Secretariat. The report was reviewed by the FATF Secretariat and Matthew Shannon (Department of Finance, Canada).

Colombia previously underwent a GAFISUD (now GAFILAT) Mutual Evaluation in 2008, conducted using the 2004 FATF Methodology. The December 2008 evaluation and July 2009 follow-up report have been published and are available at http://www.gafilat.org/content/biblioteca/.

That previous Mutual Evaluation concluded that the country was compliant with 19 Recommendations; largely compliant with 21; partially compliant with 8; and noncompliant with 1. Colombia was rated compliant or largely compliant with 5 of the 16 Core and Key Recommendations. Because of the evaluation, Colombia was placed under the regular follow-up process by GAFILAT immediately after the adoption of its 3rd Round Mutual Evaluation Report (MER). Colombia exited the GAFILAT follow-up process in 2013 based on improvements in implementing the technical requirements of Core and Key Recommendations. However, the 2008 rating of these Recommendations was not increased. Accordingly, Recommendation 5 and Special Recommendations I and III remained rated as partially compliant.

ML/TF Risks and Context

27. Colombia is situated northeast of South America and with a land area of 1,038,700 km2 bordering the Caribbean Sea and the North Pacific Ocean, and neighbor to Brazil, Ecuador, Panama, Peru, and Venezuela. The population of Colombia is 49,210,124 (2017 estimate)2 making it the second most populous country in South America after Brazil, and the third largest Spanish-speaking population in the world, after Mexico and Spain. The official currency of Colombia is the Colombian peso (COP). The Republic of Colombia is a unitary republic organized in 32 districts beside the capital city of Bogota. It is a civil law jurisdiction. The executive power is vested in the president, who is elected by direct popular vote for a one four-year term on a single ticket with his vice president. The president is both the head of government and the chief of state. He appoints the ministers and directors of departments. There is a bicameral legislature consisting of a Senate and a House of Representatives directly elected to four-year terms. The judicial power is vested in four high courts including the Supreme Court of Justice (14 judges for civil and criminal matters); Constitutional Court (9 magistrates); Council of State (31 members for administrative law); and the Superior Judiciary Council (13 magistrates).

A. ML/TF Risks and Scoping of Higher-Risk Issues

Overview of ML/TF Risks

28. Colombia’s prime ML threat comes from organized crime groups operating both inside the country and abroad. The last decade has seen a proliferation of Colombian organized crime groups that commit crimes for hire in various countries (e.g., assassinations, kidnappings, and terrorist acts) on behalf of other criminals or for illegal armed groups (oficinas de cobro or “collecting agencies”). The 2016 NRA identified illegal drug trafficking, smuggling, human trafficking (i.e., smuggling of migrants), illegal gold mining, corruption, and extortion as the main predicate offenses for ML. The foregoing crimes are committed mainly by criminal organizations, among which are the GAOS,3 criminal drug trafficking networks, criminal gangs (bandas criminals—BACRIM), and others. Per the country’s 2016 NRA, the sectors facing the highest risks for ML are the banking, real estate, gold mining, lawyers, notaries, accountants, and auditors.

29. A range of estimates of the amounts of money that are laundered in Colombia illustrate the extent of ML in Colombia. The authorities have estimated the figure at 5.4 percent of GDP,4 but the assessment of the current numbers suggests that the percentage of ML in relation to the GDP may be larger. The volume of assets laundered in the Colombian economy has been estimated in a World Bank study to amount to 7.5 percent of GDP.5 Colombia is the world’s top producer of cocaine, as well as a source country of heroin and marijuana.6 The main driver of the production of drugs are foreign markets.7

30. The ML risk emanating from other countries is significant. Casinos, the postal money order market, bulk cash smuggling, wire transfers, remittances, electronic currency, and prepaid debit cards are being used to repatriate illicit proceeds to Colombia, mainly from drug trafficking.

31. International trade appears to be used by criminal organizations for counterfeiting and smuggling activities. In that regard, counterfeit and smuggled goods are readily available in well-established black markets in most major cities in Colombia, with proceeds from the sales of some of these goods directly benefiting criminal enterprises. The 2,219 km2 Colombia-Venezuela border region has long been a center for the movement of black market products. Smugglers resort to bribes to facilitate the transport of goods crossing the borders.

32. The main TF threat in Colombia are the proceeds-generating criminal activities from the two largest GAOS. GAOS have used drug trafficking, kidnappings, extortion and other crimes as sources of leverage and income. TF is facilitated through ML in areas that are controlled by GAOS and organized criminal groups. For instance, illegal mining of gold, emeralds and tungsten is a key source of income for GAOS. The value of illegal gold exports from Colombia is said to exceed the value of cocaine exports.8 Authorities have estimated that roughly 50percent of Colombian mines are illegal and many are dominated by various armed groups, which manage, extort and provide security for illegal mining operations.9 GAOS and BACRIM are involved in most of the areas where illegal gold mining takes place. The authorities have not adequately considered the external TF issues and therefore information on risk is imperfect. Extortion is on the rise in Colombia and is another main source of income for Colombia’s GAOS, BACRIM, and common criminals. According to the FGN, during the period 2008–2014, 33,225 extortion cases were reported at the national level.10

Country’s Risk Assessment and Scoping of Higher Risk Issues

33. Colombia updated its NRA, following a four-month exercise, which concluded in December 2016. The 2016 NRA was led by the UIAF, the Minister of Justice, and the University of Rosario, and approved in January 2017 by the Inter-Agency Coordination Committee for the Control of ML (Comisión de Coordinación Interinstitucional para el Control del Lavado de Activos—CCICLA) as the national AML/CFT coordinator body. Colombia’s updated NRA utilized a revised methodology based on the one implemented in 2013. The 2016 NRA was recently complemented by a sectoral level assessment conducted by the UIAF and finalized in early June 2017. Authorities stated that due to national security reasons, the assessment of TF risks was addressed through other national confidential policies carried out by national intelligence agencies. Therefore, the assessment team did not have access to these policy documents. The findings of the NRA were disseminated to relevant parties that participated in the exercise but not to the broader private sector community (only the executive summary was shared). There was no evidence that concrete policies and implementation actions were taken to address the identified ML/TF risks at the time of the onsite assessment.

34. The 2016 NRA considers the nature and relative importance of the ML threats associated with the main sources of criminal activities: drug trafficking, corruption, extortion, human trafficking, and smuggling. Overall, it reflects close coordination among concerned agencies and participants. However, some key stakeholders did not participate in the NRA or had limited participation (e.g., the DIAN and the SFC). Similarly, there is no consideration of other ML risks, for example those emanating from other countries

35. In deciding what issues to prioritize, the assessment team reviewed material provided by Colombia on technical compliance and effectiveness, as well as supporting documentation, including reports relating to ML/TF risk, and open-source information. Based on Colombia’s threat environment and the vulnerabilities identified in the material provided, the assessment team gave increased attention to the following issues which it considered posed the highest ML/TF risk in Colombia or warranted more detailed discussions:

  • Efforts to prevent and combat the laundering of the proceeds of drug trafficking, corruption and tax evasion11 as a criminal offense.

  • Exposure of the Colombian economy to risks emanating from cross-border ML and TF transactions, including through: cash smuggling, wire-transfers, remittances, and domestic PEPs transferring funds out of Colombia.

  • Effectiveness of supervision, adequacy of tools, and scope of the supervisory work, particularly for banks, foreign currency houses, real estate sector and money remitters.

  • The degree to which Colombia has been successful at combating TF.

36. The insurance and securities sectors were assessed as lower risk and were therefore not a priority focus of the assessment team.

Materiality

37. Colombia is Latin America’s fourth largest economy measured by GDP.12 Colombia’s economy has experienced rapid growth over the past three years despite a serious armed conflict. The country has substantial oil reserves and is a major producer of gold, silver, emeralds, platinum and coal. Colombia is the world’s fourth largest coal exporter and Latin America’s fourth largest oil producer. The economy is heavily dependent on energy and mining exports. The GDP was US$292.1 billion as of 2015.13 The Gross National Income per capita is around US$8,000. The structure of the economy as a percentage of GDP is composed of service activities (56 percent), manufacturing industry (38 percent), and agriculture (6 percent).

38. Colombia has a well-developed financial system, dominated by multifaceted financial conglomerates and with a variety of intermediaries. Over the past decade assets of the financial system has risen from about 60 percent percentpercentof GDP in 2000 to about 160 percent of GDP in 2016.14 Credit granting institutions (mostly banks)15 account for about half of the financial system assets, with the balance held by non-banks (largely private pension funds, trust companies, and insurance companies, among others). Large domestic complex conglomerates dominate the financial landscape. Three of these conglomerates hold about 80 percent of total financial sector assets. Recently, major Colombian conglomerates have expanded into Central America through mergers and acquisitions.

39. The percentage of financial inclusion has presented a sustained increase since 2011, reaching 72.5 percent in 2014.16 The portion of the population employed in the informal sector, where the use of cash is prevalent, has decreased from 51.30 percent to 47.20 percent between 2011 and 2015.17 The share of cash to GDP increased in the period 2011–2015 from 4.49 percent to 5.58 percent, reflecting an increase in the availability of cash in the economy.18

40. Among the DNFBPs, the real estate agencies handle one of the largest sectors in the Colombian economy. According to the Superintendence of Companies (Superintendencia de Sociedades—Supersociedades), the real estate sector contains the largest amount of assets in the economy, with a value of around US$18.6 billion. Residential property prices increased significantly between 2005 and 2016. In the main three cities of Colombia (Bogota, Cali, and Medellin), house prices rose by around 200 percent in nominal terms (110 percent in real terms) from 2005 to mid-2016. Real estate transactions present a high risk for ML, which can be facilitated by criminally inclined real estate brokers, lawyers, notaries, and accountants. Colombia has around 1,000 real estate firms, 280,000 lawyers, 900 notaries, and 250,000 accountants.

Structural Elements

41. Most of the structural elements needed to ensure an effective system of preventing and combatting ML/TF are present in Colombia. Colombia has stable democratic institutions, represented by a republican, democratic, and representative political system in which there is a clear division of the executive, legislative, and judicial powers. Political and institutional stability, accountability, transparency, and rule of law are all present. The stability of democratic institutions was maintained throughout the prolonged armed conflict. Over the past 15 years, Colombia has undergone a remarkable improvement of its internal security, which has extended state presence to all the country’s territory. While there is a professional and independent judiciary, the optimal operation of the courts is undermined by corruption and extortion as bribes are often exchanged to obtain favorable court decisions. Corruption also compromises Colombia’s fight against drug trafficking and other crimes. Despite these challenges, Colombia’s legal and institutional framework allow the implementation of its AML/CFT regime.

Background and Other Contextual Factors

42. The dimension of the informal economy creates major problems for the authorities in terms of the sustainability and effectiveness of the AML/CFT framework. Colombia has high levels of employment in the informal sector relative to its level of economic development, with 47 percent of workers conducting economic activities that lie outside of governmental regulation (est. 2015). Nevertheless, the percentage of financial inclusion has shown a sustained increase since 2011, reaching 75 percent in 2015. The proportion of cash over GDP increased in the 2011–2015 period from 4.49 percent to 5.58 percent, which reflects an increase in the availability of cash in the economy.

43. The risk of FARC members becoming criminal organizations after demobilization begins appears to be very high. Although the 2016 peace agreement19 has the objective of producing a major reduction in terrorist and associated organized criminal activities in Colombia, the possibility of dissident FARC members turning the transition camps into bases from which to continue to commit crimes is cause for concern. Similarly, other criminal groups are already replacing FARC in control of the coca fields, illicit gold mines and other criminal activities. In addition, the curtailment of coca cultivation has made it more profitable. The integration of former FARC members into the formal sector also poses a compliance and risk management challenge for financial institutions, DNFBPs, and their supervisors. While the government has had, exploratory peace talks with the National Liberation Army (Ejército de Liberación Nacional— ELN), that group reportedly continues its criminal activities.

Implications of FARC Peace Process

Special Jurisdiction for Peace (Jurisdicción Especial para la Paz): This will exercise judicial functions as part of the Integral System of Truth, Justice, Reparation, and Non-Repetition. FARC members cannot be sentenced to more than eight years if they fully cooperate with investigations and acknowledge their criminal responsibilities. Those failing to come forward and who are subsequently declared guilty by the Tribunal for Peace will be convicted to prison terms of up to twenty years in ordinary enforcement conditions.

FARC assets and reparation of victims: The FARC will provide an inventory of all assets to representatives of the national government with full information disclosure relating to these. Such assets will be used to provide material reparation to the victims within the framework of the integral reparation measures.

Special Jurisdiction for Peace (Jurisdicción Especial para la Paz): This will exercise judicial functions as part of the Integral System of Truth, Justice, Reparation, and Non-Repetition. FARC members cannot be sentenced to more than eight years if they fully cooperate with investigations and acknowledge their criminal responsibilities. Those failing to come forward and who are subsequently declared guilty by the Tribunal for Peace will be convicted to prison terms of up to twenty years in ordinary enforcement conditions.

FARC assets and reparation of victims: The FARC will provide an inventory of all assets to representatives of the national government with full information disclosure relating to these. Such assets will be used to provide material reparation to the victims within the framework of the integral reparation measures.

FARC drug trafficking: Since earnings from drug trafficking by rebels was used to fund their rebellion, this activity is considered a political crime. This means that extradition requests may be refused by the Colombian government. However, each drug trafficking case will be reviewed separately to confirm that the funds were deployed in the rebel cause and not for personal enrichment. Any cases of personal enrichment will be tried under normal criminal jurisdiction. Those involved in drug trafficking must also disclose all routes, contacts and the inner workings of the trade to qualify for to be tried under the Special Jurisdiction for Peace (Jurisdicción Especial para la Paz).

Amnesties and pardons: Colombia’s Constitution allows granting amnesties or pardons for the political crime of rebellion and certain crimes related to it. An Amnesty Law will determine the behaviors that will not be eligible for amnesty, based on the following criteria: (i) Crimes specifically related to advance the rebellion; Crimes in which the passive subject of the conduct is the State; and (ii) Behaviors aimed at facilitating, supporting, financing or concealing the rebellion.

Source: Acuerdo final para la terminación del conflicto y la construcción de una paz estable y duradera (24.08.2016).

44. Corruption in Colombia is a pervasive problem.20 The large patronage networks are particularly established in the public contracting sector. The government has generally implemented anti-corruption laws effectively, but there have been some instances of impunity reported. While there is a professional and independent judiciary, the justice system is undermined by corruption and extortion as irregular payments and bribes are often exchanged to obtain favorable court decisions.21 However, the Constitutional Court and the Supreme Court are perceived to act independently. Corruption also compromises Colombia’s fight against drug trafficking and other crimes. Proceeds from corruption are thought to be around US$7.5 billion every year, which is almost 10p ercent of the government’s 2017 budget. In the 2016–2017 Global Competitiveness Index, the World Economic Forum noted that corruption was the second most problematic factor in doing business in Colombia.

Overview of AML/CFT Strategy

45. Policies and objectives of the Colombian government are established in the National Development Plan (2014–2018).22 Pursuant to the current plan, the National Council of Economic and Social Policy (CONPES) approved document 3793—the National Anti-Money Laundering and Counter-Terrorism Financing Policy—in December 2013. This policy document was previously prepared and approved by CCICLA. CONPES 3793, establishes the guidelines to strengthen the prevention, detection, investigation, and prosecution of ML and TF. The key aims of CONPES 3793 are (i) increasing the participation of the public sector as reporting entities to the UIAF; (ii) increasing the protection of the real sector of the economy; (iii) improving the quality of information, data and statistics, particularly in the field of financial intelligence; (iv) strengthening research capacity and the effectiveness of the judiciary; (v) strengthening the regulations and supervisory frameworks; and (vi) promoting cultural values in favor of legality.

46. The AML/CFT policies, as set forth under the CONPES, include an articulated strategy and priorities aimed at strengthening the AML/CFT regime in Colombia. The AML/CFT policies address in general terms the ML/TF risks identified in the 2013 NRA. Although all activities included in the CONPES Action Plan have been completed, the policies remain in effect until a new AML/CFT policy is approved.

Overview of the Legal and Institutional Framework

Ministries and Coordinating Committees

47. The Inter-Agency Coordination Committee for the Control of ML (CCICLA) leads public policy processes related to AML/CFT and coordinates the actions developed by the Colombian State to combat ML and TF. CCICLA is chaired by the Minister of Justice and Law and its Technical Secretariat is carried out by the UIAF.23 Its mandate also includes, inter alia, responsibilities to support other relevant agencies with AML/CFT responsibilities, and ensure effective cooperation and coordination among agencies on the development and implementation of policies.

48. The Ministry of Justice and Law (MINJUS) is responsible for public policy relating to the legal system, justice, and legal security, including the design of the state’s criminal and penitentiary policy, crime prevention, and actions against organized crime. In addition, MINJUS promotes and enforces, the rules on asset forfeiture and directs the policies and agenda for the destination of seized and forfeited assets.

49. The Ministry of National Defense participates with other governmental institutions in the definition, development, and execution of national defense and security policies.

50. The Ministry of Information and Communication Technologies (MINTIC) regulates and supervises the PTOs in relation to postal payment services.

51. The Ministry of Foreign Affairs (Ministerio de Relaciones Exteriores—MINREX) publishes the lists of entities and persons associated with terrorist organizations and the proliferation of WMD.

Criminal Justice and Operational Agencies

52. The National Intelligence Directorate (Dirección Nacional de Inteligencia—DNI) is the main intelligence agency of Colombia and the successor organization to the Administrative Department of Security (DAS). Its main task is gathering and analyzing intelligence both domestically and abroad, and counter intelligence, including for the purposes of national security and defense, prevention, detection, monitoring, and control of ML and TF.

53. The Public Prosecutor’s Office (FGN) initiates criminal proceedings on behalf of the State and participates in the design of criminal policy. The National Unit of Asset Forfeiture and Against the Laundering of Assets is part of the FGN. The FGN is also the central authority for the UN conventions on criminal matters, as well as for bilateral treaties in criminal matters.

54. The Financial Analysis and Information Unit (UIAF) is the country’s financial and economic intelligence unit and a member of the Egmont Group of Financial Intelligence Units.

55. The National Police coordinates with judicial authorities the activities to be carried out in the conduct of investigations. The National Police has several specialized investigative directorates with AML/CFT functions: Directorate of Criminal Investigation and Interpol (Dirección de Investigación Criminal e INTERPOL—DIJIN), Police Intelligence Directorate (Dirección de Inteligencia Policial—DIPOL), Anti-Narcotics Directorate (Dirección de Antinarcóticos), Fiscal and Customs Police (Policía Fiscal y Aduanera—POLFA). The National Police also includes the Investigative Group for the Asset Forfeiture and ML, whose mission is to investigate criminal organizations engaged in ML, TF, illicit enrichment, acting as a figurehead (testaferrato) and related offenses.

Financial Sector Supervisors

56. The National Tax and Customs Office (DIAN) supervises currency exchange firms to detect unusual or suspicious transactions to prevent their use in the laundering of POC in foreign currency. NPOs are required to register with DIAN for tax purposes.

57. The Financial Superintendent of Colombia (SFC) regulates and supervises banks, insurance companies, securities firms, fiduciary (trust) companies, exchange intermediation and special financial services companies (e.g., currency exchange firms), financial cooperatives (i.e., those that conduct business with the public) and other financial entities.

58. The Superintendent of Solidarity-Based Economy (Superintendencia de Economía Solidaria—SES) supervises financial cooperatives (i.e,. credit unions that conduct savings and loans business only with their members) and other cooperatives.

DNFBP Supervisors and Self-Regulatory Bodies

59. The Superintendent of Companies (Superintendencia de Sociedades—Supersociedades) is attached to the Ministry of Commerce, Industry and Tourism and supervises and controls commercial companies.

60. The Superior Judiciary Council (Consejo Superior de la Judicatura—CSJ) conducts the administrative and disciplinary role of the Judiciary. The CSJ regulates lawyers and maintains the national registry of the lawyers. The CSJ was eliminated by the constitutional reform 2015, and its functions were attributed to the National Commission for Judicial Discipline (Comisión Nacional de Disciplina Judicial) and the National Judicial Governance Council (Consejo Nacional de Gobierno Judicial). The CSJ continues to exercise its functions transitorily until the members of the new bodies are designated. The Council is not a designated AML/CFT supervisor.

61. The Superintendent of Notaries and Registry (Superintendencia de Notariado y Registro—SNR) conducts inspections, monitoring, and control of notaries. The SNR is also responsible for investigating and sanctioning disciplinary offenses by notaries.

62. The National Superintendent of Health (Superintendencia Nacional de Salud— Supersalud) regulates and supervises NPOs related to the health sector.

63. The State Industrial and Commercial Company for the Administration of Gaming Monopoly (Empresa Industrial y Comercial del Estado Administradora del Monopolio Rentístico de los Juegos de Suerte y Azar—Coljuegos) supervises casinos and other legal persons exploiting gaming professionally. Coljuegos has competence and powers of supervision and regulation regarding game operators at the national level.

64. The Administrative Department of Sport, Recreation, Physical Activity and the Use of Free Time (Departamento Administrativo del Deporte, la Recreación, la Actividad Física y el Aprovechamiento del Tiempo Libre—Coldeportes) registers and supervises professional sport clubs, sport leagues and federations.

65. The Colombian Confederation of Chambers of Commerce (Confederación Colombiana de Cámaras de Comercio—Confecámaras) is a private body that conducts several public functions delegated by the government, such as keeping several registries including the Single Business and Company Registry (Registro Único Empresarial y Social—RUES).

Overview of the Financial Sector and DNFBPs

66. There are more than 1,800 different entities that are subject to the AML/CFT framework. The SFC is an omnibus regulator responsible for all the core principles financial institutions24 and of most other non-bank financial institutions and fiduciary (trust) companies (hereinafter financial institutions), totaling some 418 entities. These financial institutions account for most of the financial assets in the system.

Table 1.

Types of Financial Institutions

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Table 2.

Other Reporting Entities by Sector 1/

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There are other sectors that are subject to AML/CFT obligations in Colombia, but are not required by the FATF standard: foreign trade users, value carriers, shielding companies, conveyors of land cargo, lottery operators, permanent betting games and bets on horse races, vehicle trading, building construction, Health Promoting Entities, Health Care Institutions, Prepaid Medicine Companies, Prepaid Ambulance Services, among others.

The SFC reports that there are some 23,244 trusts under administration which excludes civil trusts.

Covered by AML/CFT requirements only in limited circumstances.

Overview of Preventive Measures

67. The table below indicates the relevant legal provisions governing AML/CFT preventive measures for each type of reporting entity.

Table 3.

AML/CFT Preventive Measures

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Overview of Legal Persons and Arrangements

68. The types of legal persons that can be established or created in Colombia are: Joint Stock Company (Sociedad Anónima), Simplified Joint Stock Company (Sociedad Anónima Simplificada), Limited Liability Company (Sociedad de Responsabilidad Limitada), Limited Partnership with shares (Sociedad en Comandita por Acciones), Limited Partnership (Sociedad en Comandita Simple), Single Corporation (Empresa Unipersonal), General Partnership (Sociedad Colectiva), Civil Partnership (Sociedad Civil), Foundation (Fundación) and Association (Asociación).

69. The Colombian Code of Commerce (arts. 294 to 497); the Law 222 of 1995 and the Law 1258 of 2008—which creates the SAS—establish the framework that regulates the different types, forms, and characteristics of the legal persons in Colombia, the process for their formation, their legal regime, and the information required. The incorporation procedure applicable to all entities regulated by the Commerce Code is the same, except for the SAS which does not require a public deed. It involves the execution of a public deed that contains the bylaws of the company. Once such a public deed is executed it must be registered with the Chamber of Commerce in the municipality where the company is going to have its principle place of business. The SAS is the preferred type of business entity. This type of company requires only one director and shareholder who can be either an individual or a legal entity. The director/shareholder can be of any nationality and reside in any country.

Table 4.

Number of Entities Registered as of May 2017

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Denotes number of entities registered with the DIAN.

70. Regarding legal arrangements, Colombian law includes the fiducia, which is an arrangement with similar characteristics to the common-law trust. There are some 23,244 fiduciae under administration. Fiduciary companies provide a variety of asset management services throughout the Colombian economy, such as payment administration, real estate, bursarial, and guaranty trustee. The most common use for fiduciae is for construction and real estate.

Overview of Supervisory Arrangements

71. Colombian AML/CFT supervisory framework is made up of several supervisors. The SFC is the omnibus financial sector supervisor for 418 institutions including banks, insurance companies, securities intermediaries, and other non-bank financial institutions. The SES is the lead supervisor for the other 181 savings and loans cooperatives that only conduct business with their members. Other financial institutions are supervised by MINTIC and DIAN. MINTIC is responsible for supervising five domestic payment operators, two of which can engage in cross-border business. All eight operators conduct business through 112 agents and around 27,800 customer service centers. DIAN is the supervisor of 1,263 licensed currency exchange firms.

72. Coljuegos is charged with the supervision of casinos and other games of chance at the national level. Online casinos and betting operators are not yet under its full regulatory and supervisory control. Currently, it is responsible for 383 licensed casinos and other games of chance. There are yet no procedures for supervising online casinos even though two were licensed post mission. The SNR supervises notaries of which there are 902. The Superintendencia de Sociedades is the designated supervisor for all registered companies in Colombia. It is also responsible for AML/CFT supervision of a small number of legal and accounting firms, dealers in precious metals and real estate firms. Only legal entities with annual revenues above relatively high thresholds are subject to the AML/CFT regime and supervision by Supersociedades. The new AML/CFT regulations for these DNFBPs will not come into full effect until end-2017.

National AML/CFT Policies and Coordination

A. Key Findings

  • The Colombian authorities have a reasonable understanding of the country’s main domestic ML/TF risks, which is evolving in the right direction.

  • The 2016 NRA has yielded reasonable findings with respect to the identification of the main threats and vulnerabilities. However, the approach and scope used to understand ML/TF risks could have been more comprehensive to provide the authorities with a a holistic picture of the ML/TF risks, both domestic and foreign that affect the country.

  • AML/CFT policies are informed by the ML/TF risks identified by the authorities and generally track the risks that were identified in the 2013 NRA.

  • National coordination and cooperation on AML/CFT issues at a policy level has improved since the 2008 mutual evaluation and is strong. While operational coordination on AML/CFT issues is good in some areas, it could be further improved for some agencies.

  • The understanding of ML/TF risks is more advanced in the case of the SFC and uneven for the rest of the supervisory agencies.

  • The UIAF demonstrates an appropriate level of understanding of risks and has aligned its activities with the findings of its sectoral assessment. LEAs and prosecutors have a good understanding of risks, but to date their activities are only partially aligned with identified ML/TF risks.

  • DNFBPs have a lower level of understanding of ML risks than financial institutions.

  • The level of understanding of TF risks is mixed across all relevant stakeholders. While there is a good understanding of TF risks by LEAs, the understanding among financial institutions, DNFBPs, and most supervisory agencies is less developed.

  • On TF, the activities and priorities of the responsible authorities (FGN with support from other relevant agencies) are broadly consistent with the identified risks but have not yet achieved the expected results.

B. Recommended Actions

  • Continue to develop its understanding of risks to provide for a more in-depth ML/TF threat and vulnerability analysis to cover additional areas, such as tax evasion, all type of legal persons, overseas threats, cross-border financial flows, terrorism, and TF risks associated with cash-intensive businesses, ML risks associated with corporate vehicles, the misuse of certain DNFBPs activities.

  • Set up a mechanism or process to act upon the results of the 2016 NRA and develop AML/CFT policies or strategies which are informed by the ML/TF risks recently identified.

  • Establish a system to enhance national AML/CFT coordination and cooperation at an operational level, including with respect to NPOs and the PF of WMD.

  • Ensure that there is a robust system in place to monitor progress and measure the effectiveness of the AML/CFT framework. This will facilitate the prioritization of key risks and the strategic allocation of resources.

  • Ensure that the activities and objectives of all relevant AML/CFT agencies are consistent with the identified ML/TF risks and adjusted in line with evolving risks.

  • Strengthen communication and information sharing by competent authorities to ensure a better understanding of the ML/TF risks by DNFBPs.

  • Increase the level of understanding of TF risks among financial institutions, DNFBPs and supervisory agencies.

The relevant Immediate Outcome considered and assessed in this chapter is IO.1. The recommendations relevant for the assessment of effectiveness under this section are R.1–2.

C. Immediate Outcome 1 (Risk, Policy and Coordination)

Country’s Understanding of its ML/TF Risks

73. Colombia has made significant efforts to identify, assess and understand its ML/TF risks. The main agencies responsible for AML/CFT have a good understanding of the main threats affecting Colombia. The country’s understanding of risks relies primarily on the results of the 2013 and 2016 NRAs, which generally address the main ML/TF threats and vulnerabilities. However, there were some limitations in terms of approach and scope employed to develop a more comprehensive and holistic picture of the ML/TF risks affecting the country. In addition, some data gaps were identified, and lack of participation by some relevant agencies also impacted to an extent the degree to which the authorities and the private sector stakeholders understand the ML/TF risks.

74. The 2016 NRA consists of an assessment of both ML and TF national threats and vulnerabilities as of December 2016, which has generally yielded reasonable findings with respect to the identification of the main national ML threats (i.e., drug trafficking, corruption, illegal mining, smuggling, and human trafficking). The report is focused mainly on domestic predicate crimes, and pays less attention to ML/TF risks arising from offenses committed abroad.

75. Although the 2016 NRA appears to reflect overall good cooperation among the agencies that participated in the assessment, it also, in some instances, seems to represent a collection of individual opinions by competent authorities rather than a collective view of ML/TF risks present in the country. Discussions with the main authorities suggested that their understanding of the ML/TF risks is generally good and is still evolving in other areas. Some authorities suggested that the exercise confirmed, to an extent, their previous understanding of some ML/TF risks present in the country but did not consider or properly assess other existing risks (i.e., tax evasion, risks arising from SAS threats derived from the informal sector, and foreign threats).

76. The 2016 NRA involved both government agencies and the private sector which collected information from participants to form a picture of the country’s threats and vulnerabilities. A two-tiered system was established to coordinate input and provide guidance and direction across agencies. A “coordinating working group” led the process with primary input from four thematic working groups. However, some key stakeholders had limited, involvement in the development of the NRA, which impacts the overall understanding of risks (i.e., there was no participation from the DIAN or SFC in the identification of ML threats, and limited participation of key agencies in the anti-corruption area).

77. The understanding of risks independently of the findings of the NRA, presents some limitations. Although they shared awareness of the main threats, in some cases government and private sector stakeholders were not aware of other threats and vulnerabilities relevant to the country, which were not addressed under the NRA (e.g., tax evasion, risks associated with certain types of DNFBPs).

78. The findings of the sectoral assessments carried out by the UIAF in 2017 was overall comprehensive, but reflect some disconnection with the findings of the 2016 NRA, regarding the relevance of certain risks. For instance, while the sectoral assessment by the UIAF in 2017 identified firearms trafficking and commerce as activities that are being used by organized crime for ML/TF purposes, these were not considered in the 2016 NRA. Migrant trafficking was one of the major crimes identified in the 2016 NRA, but the sectoral assessment did not identify this crime as a threat to ML.

79. The TF threat has been deeply embedded in Colombia for decades, with various GAOS committing terrorist acts. The authorities deem the risk for TF as medium/high. However, the assessment of TF risk under the NRA is not very developed, but according to the authoriries, this was addressed more deeply by the intelligene agencies in other confidential documents.

80. Overall, the exercise confirmed the authorities’ view of the main domestic ML/TF threats, although new information could have been provided on specific LA/TF methods and trends, and other useful sources were not considered (i.e., LEAs’ contributions, intelligence reports, expert opinions). The NRA demonstrated that the mitigation measures point to the most important risks to which the country is exposed, however, some measures that could have supported the conclusions were missing. For instance, there is no analysis of tax evasion, or an assessment of certain types of legal persons like the SAS, although these could be vulnerable to ML/TF risks. Greater attention could have been paid to threats from high-risk jurisdictions, cross-border financial flows, the risks posed by unregulated lenders, the use of gatekeepers and complex corporate structures, and the misuse of certain other DNFBP activities. The authorities acknowledged that the 2016 NRA could have been more pragmatic/actionable to facilitate effective prioritization by relevant authorities.

81. The report is also limited to including a summary of the results related to the numerical weights/scores assigned to the threats, vulnerabilities, and sectors considered, but does not properly justify the score assigned nor does it identify all high-risk activities, products, services, or delivery channels.

82. The informal sector was identified as a national vulnerability, but little attention was given to this issue. The prevalence and cash intensive nature of some businesses and the threats related to tax evasion were not given sufficient attention, thus affecting the general understanding of risks.

83. Overall to assess ML/TF risks, the 2016 NRA relies heavily on qualitative information (i.e., private sector input, expert judgement, etc.) and there is, in some instances, insufficient consideration of quantitative information and research on trends, methods, and typologies used to launder POC. The use of statistics relevant to ML is uneven. The analysis and findings are based in few instances on reliable and varied sources of data. In other cases, there is little or no consideration of other relevant data or independent sources of information (i.e., strategic analysis, law enforcement input, intelligence reports, operational cases, expert views, perception surveys, statistics on international cooperation or financial transactions, etc.).

84. While overall there is a better understanding of ML/TF risks by LEAs, the understanding by some supervisory agencies and financial institutions is less developed with respect to TF risks. The TF factor is in most cases not specifically considered by most supervisory agencies in their activities. There is no clear understanding of TF risks with respect to the NPO sector.

National Policies to Address Identified ML/TF Risks

85. The CCICLA is responsible for policy setting and serves as the national coordinating body for AML/CFT and assessment of risks. The CCICLA played an active role in the 2013 NRA after being tasked to act as a coordinating authority for AML/CFT issues. Its involvement in the 2016 NRA was through the Minister of Justice, who heads the CCICLA, and the UIAF (which is acting as a the CCICLA technical secretary). The 2016 NRA was then endorsed and approved by the rest of the members of the CCICLA. The CCICLA elaborated jointly with the CONPES the AML/CFT national policies.

86. The AML/CFT policies, as set forth under CONPES 3793, include an articulated strategy aimed at strengthening the AML/CFT regime in Colombia. The authorities indicated that the 2013 NRA and CONPES (AML policies) were developed simultaneously, so CONPES 3793 could not take into consideration all the results of the 2013 NRA. However, the policies broadly address the main ML/TF risks.

87. The diagnostic and the action plan and policies developed were discussed and formulated based on the decision taken by the four operational committees within the CCICLA. Although all activities included in the CONPES Action Plan have been completed, the current policies remain in effect until a new AML/CFT policy is approved. Similarly, specific measures to prevent or mitigate ML/TF risks based on the findings of the 2016 NRA have not been put in place yet, due in part to the recent adoption of the report and the fact the adoption of a revised policy is dependent on a broader decision from the government.

88. Similarly, other specific AML/CFT policies are included in relevant public documents like the National Development Plan 2014–2018 (which had input from the CONPES 3793 and the 2013 NRA), the National Intelligence Plan, and recommendations provided under the 2013 NRA. These policies address some of the risks previously identified. The FGN has addressed some of the TF risks with the adoption of a Prioritization Plan that was approved in 2015, which has contributed to a better understanding of the problem and a more effective prioritization of cases.

89. At an individual level, the authorities demonstrated initiatives aimed at addressing some of the recommendations included in the 2013 NRA, where coordination was overall effective, but there remain some areas where no actions have been taken. For instance, a sectoral assessment by the UIAF has just been completed in line with recommendations developed in the 2013 NRA, and a strategic plan with targeted objectives to fight organized crime has been adopted by the Attorney General (2016–2020). A package of regulatory amendments was issued to strengthen the preventive measures. However, other areas received little or no attention. There is no evidence that sufficient measures have been put in place to address the ML/TF risks in DNFBPs (for lawyers, accountants, dealers in precious metals and stones, and real estate agents, which are not properly covered in the AML/CFT framework) or the risk of cash-intensive businesses. For legal arrangements (fiduciary services), although considered by the authorities as a high-risk sector, no enhanced or mitigation measures have been applied in accordance with the identified ML/TF risks.

90. While some policies have been established to mitigate some of the risks that were identified in the 2013 NRA, there are some areas where the mitigation measures have not been implemented. The authorities have taken certain actions to address some existing threats through the National Development Plan 2014–2018, which include among others, policies related to AML/CFT, and the development of a National Intelligence Plan. However, the interplay between these documents and the 2013 and 2016 NRA exercises and the effectiveness of coordination at an operational level among competent authorities responsible for the implementation of the AML/CFT policies is unclear.

91. The UIAF was heavily involved in the 2016 NRA and demonstrates an overall appropriate level of understanding of ML/TF risks, although in practice the UIAF’s activities are focused on the findings of its own sectoral assessment, and not necessarily addressing all the risks identified in the 2016 NRA. For instance, the UIAF pays little attention to migrant trafficking, which has been identified as one of the six main predicate crimes to ML in Colombia by the 2016 NRA, which was a key factor.

Exemptions, Enhanced and Simplified Measures

92. While Colombia applies the AML/CFT framework to sectors that are not covered under the standard (e.g., freight transport, games of chance, transport of valuables, mining, car dealers, health, football teams, among others), this does not appear to have been based on an assessment of the risks. However, in the authorities’ view, these are relevant sectors that warrant the application of AML/CFT controls. The AML/CFT framework does not apply to all DNFBPs which constitutes a significant loophole in terms of risks. Despite the findings of the 2013 NRA with respect to DNFBPs, lawyers, accountants, and real estate agents are only subject to the AML/CFT framework under limited circumstances, and dealers in precious metals and stones are out of the scope of AML/CFT regime.

93. These exemptions are not supported by a risk assessment and constitute a gap in terms of risk given the findings of the NRAs and the affirmation made by some authorities that many of these sectors (i.e., mining sector, including persons that commercialize stones and the real estate sector) are used as an entry point for illicit purposes.

94. The SFC, which is the main financial supervisory authority, has allowed financial institutions to apply simplified CDD measures involving prescribed categories of clients, locations and financial products, which are set out in Circular 55/2016. The analysis supporting the application of simplified measures is based on an internal SFC assessment of ML/TF risks where low ML/TF risks were identified, and driven by the need to ensure financial inclusion.

95. Colombia has not identified any high-risk scenario that, in the authorities’ view, would require the application of enhanced measures. However, there are higher risk scenarios (e.g., high risk for ML/TF arising from cross-border linkages to domestic transfers, the high-risk currency exchange firms, and unregulated money lenders).

Objectives and Activities of Competent Authorities

96. Due to recent adoption of the 2016 NRA, the authorities are still in the process of focusing some of the risks identified in that NRA. However, regarding the risks identified in the 2013 NRA, the authorities have taken measures such as the sectorial risk assessment conducted by the UIAF and the strengthening of AML/CFT preventive measures. The day-to-day activities of the relevant authorities seem to be partially targeted towards addressing identified risks. For the most part, relevant authorities seem to be conducting their activities based on their own priorities rather than as a result of the risks identified (see discussions on this point in IO.3, IO.6, and IO.7).

97. On the supervisory front, the consistency between the identified risks and the objectives and activities of relevant agencies is varied. The RBA to AML/CFT supervision is still evolving with varying levels of implementation among supervisory agencies. While the understanding of ML/TF risks is more advanced in the case of the SFC, which is reflected in the development of more robust risk-based supervisory tools for offsite supervision, it is uneven for the rest of the supervisory authorities for financial institutions. Some DNFBP supervisors are still in the process of developing a risk-based supervisory framework, while some are yet to commence and cannot yet demonstrate effectiveness in addressing ML/TF risks.

98. The plans of individual agencies aimed at combating ML risks tend to focus more on combating the underlying predicate crimes. LEAs and prosecutors’ efforts are only aligned partially with the ML/TF risks since they are mainly primarily focused on certain categories of offenses, primarily drug trafficking, with no sufficient evidence in pursuing ML derived from other major predicate crimes in line with the identified ML/TF risks.

99. Regarding TF, while the responsible authorities (the FGN with support from other relevant agencies) have a vast understanding of the risks, their activities and priorities point to the application of alternative measures.

100. However, the authorities have not yet taken any action to address the risks associated with NPOs, money or value transfer systems (MVTS), or cash couriers which could be particularly exploited for TF purposes in Colombia. The Peace Agreement signed recently with the FARC is a significant achievement and may help to mitigate the TF risk.

National Coordination and Cooperation

101. National AML/CFT coordination and cooperation efforts have improved since the last mutual evaluation in 2008. CCICLA is the overarching coordination body for the development and implementation of national policies to combat ML/TF. It is comprised of some key agencies with AML/CFT responsibilities, such as the UIAF (which acts as its secretariat), the Treasury, the Ministry of Justice, Defense, and the Attorney General, but does not include other relevant authorities (i.e., supervisory agencies). The commission acts as a policy but not operational coordination body.

102. Other mechanisms are used to coordinate the implementation of national policies, such as: the interinstitutional Group for Fighting the Finances of Terrorist Organizations (GILFOT); the Coordination Center against the finances of criminal organizations (C3FTD); the Inter-Agency Commission to combat smuggling; the Committee to combat human trafficking, which have overall worked in practice.

103. National AML/CFT coordination at the operational level has been, challenging, due in part to the existence of a large number of agencies with AML/CFT responsibilities. Although results from ad hoc interagency working groups have shown some relatively positive results, overall there is in some instances some fragmented and uncoordinated response to the identified risks with some agencies pursuing their own priorities rather than ensuring an articulated effort. The Colombian authorities are aware of the challenges that they have been facing in coordination and cooperation at an operational level, which has been particularly acknowledged by the 2016 NRA and confirmed in interviews with key agencies. In this respect, it was noted that cooperation is not working in a wholly adequate manner, and although no legal obstacles seem to be in place, further efforts are needed to ensure that agencies systematically coordinate on AML/CFT priorities. Similarly, there is no mechanism or system to monitor and measure the effectiveness of the coordination arrangements in place.

104. There is overall effective communication and coordination between the UIAF and LEAs but collaboration between the UIAF and financial sector and DNFBPs’ supervisors needs to improve further, with respect to improving the quality of STRs.

105. Coordination is effective overall regarding terrorism and TF. The FGN approved a Prioritization Plan which has contributed to understanding the risks and enhancing cooperation and coordination among responsible authorities. Coordination with respect to the FP of WMD is less evident, considering the gaps identified under IO.11.

Private Sector’s Awareness of Risks

106. Representatives from the private sector participated in the 2016 NRA and were informed of the results. For the wider public, an executive summary of the 2016 NRA containing the relevant results of the national ML/TF risk assessment was published on the UIAF’s website. At a sectoral level, the document was shared with all relevant competent authorities that participated in the assessment. The authorities informed the assessment team that results of the 2016 NRA were also disseminated and shared with the private sector entities that participated in the 2016 NRA through meetings with the UIAF in which the compliance officers participated (May 2017).

107. The level of understanding of ML/TF risks amongst the regulated private sector is uneven. While most financial institutions and DNFBPs indicated that they participated in the NRA, it was also noted that only the executive summary of the report was made available, which did not provide all the underlying sources and causes and limited their understanding of the findings and conclusions. Some entities commented that the NRA exercise has been useful overall, however, other private sector entities demonstrated little understanding of the ML/TF risks present in the country. The institutions that were aware of the findings of the 2016 NRA, appear to agree with its overall conclusions, with some reservations. For instance, while the 2016 NRA identifies some of the vulnerabilities in the fiduciary sector, it does not necessarily reflect all the concerns expressed by some financial institutions, and other participants in the NRA, which consider that the risks in the sector are very high.

108. As far as the financial sector is concerned, overall, financial institutions are aware of ML risks but less with respect to TF risks. Banks, securities and insurance firms, and savings and loans cooperatives have developed risk management systems in line with the requirements of the SARLAFT, aimed at identifying, measuring, controlling and monitoring the ML risks inherent within their sectors. However, there is no supporting documentation that the measures as developed and implemented by financial institutions are effectively mitigating the identified risks. financial institutions

109. DNFBPs are generally considered to have a basic level of awareness of ML risks due in part to the recent enactment of regulations, including the requirement to implement risk management systems, applicable to this sector which will came into effect at the end of September 2017. In addition, some participants had only recently been made aware of the results of the 2016 NRA. Both financial institutions and DNFBPs appear to have little understanding of TF risks.

110. In light if the recent adoption and dissemination of 2016 NRA, additional time is needed for the private sector to effectively establish mitigating measures in line with the identified risks.

Overall Conclusions on Immediate Outcome 1

111. Colombia has achieved a substantial level of effectiveness for IO.1.

Legal System and Operational Issues

A. Key Findings

Immediate Outcome 6

  • Financial intelligence is generally a key input to initiate predicate crime investigations and the tracing of assets, specially such financial intelligence generated at the request of the FGN. However, while the FGN uses the majority of UIAF disseminations in preliminary inquiries, it has conducted less ML cases and no TF cases.

  • The UIAF has access to a wide range of information sources and has the authority to request any information from reporting entities and other appropriate authorities regarding ML/TF, but additional efforts are needed to have access in a timely manner to information collected by the DIAN and from real estate agents, notaries, law firms, accounting firms, and BO information.

  • Limited and poor-quality reporting of suspicious transactions by DNFBPs—including by higher risk sectors—diminish the effectiveness of financial intelligence produced by the UIAF.

Immediate Outcome 7

  • Colombia has the resources and legal provisions to investigate and prosecute ML effectively, but does not apply them in a way which is commensurate with its ML risks. Most of the cases pursued involve simple ML schemes with low amounts of funds, which is not in line with Colombia’s risk profile.

  • Current cases generally involve the predicate offense of illegal enrichment of individuals (illicit enrichment of nonpublic officials). There is no evidence that investigations seek to trace the illicit activity behind this offense.

  • There is limited experience of pursuing the ML component of other predicate crimes.

  • Some cases result in complex investigations conducted in coordination of the different LEAs agencies including the UIAF.

  • Most of the ML convictions have involved low amounts and simple ML schemes. In these cases the sanctions applied are proportionate and effective.

  • While the authorities are conducting investigations and prosecutions of some officials for corruption, they do not appear to be pursuing corruption related ML activities.

  • Legal persons are frequently misused in ML schemes, but the legal framework prevents them from being held criminally liable.

  • Colombia also relies, with limited success, on alternative criminal justice measures to assist the targeting of the financial structures of organized criminal activities.

Immediate Outcome 8

  • Confiscation is pursued as a priority policy objective in Colombia. In this regard, competent authorities pursue proceeds through criminal confiscation and asset forfeiture mechanisms.

  • LEAs are skilled, well trained, and sufficiently resourced to trace and recover POC.

  • Asset forfeiture is being applied effectively with important results, and it is the most prevalent instrument used to deprive criminal from their assets.

  • In turn, there is room for improvement regarding conviction-based confiscation of property derived indirectly through the commission of an offense.

  • There is positive and constructive cooperation between the FGN and LEAs. Competent authorities periodically establish task forces and working groups to coordinate actions in asset forfeiture proceedings.

  • Colombia has a sound legal framework allowing international sharing of assets. However, there have been no cases involving sharing of confiscated proceeds with foreign counterparts

  • Colombia seizes, forfeits, and confiscates currency which is falsely declared or which is not disclosed during cross-border movements. Competent authorities have statistics on currency seized and currency moved across the borders. Colombia applies effective, proportionate, and dissuasive sanctions falsely or undeclared cross-border transaction of currency.

  • Colombia has effective system for managing the POC. The Fondo para la Rehabilitación, Inversión Social y Lucha contra el Crimen Organizado (Fund for Rehabilitation, Social Investment and Fight against Organized Crime—FRISCO) and the Sociedad de Activos Especiales, SAS (SAE) manage a large number of assets of different nature and high value with important results. Statistics maintained in relation to the FRISCO and SAE and assets managed are comprehensive.

  • Confiscation is generally in line with the country’s risk profile in terms of the range of the main threats. There is room for improvement regarding other high-risk offenses (extortion, smuggling, and illegal mining).

  • Available statistics on forfeited assets are comprehensive. Statistical information on criminal confiscation is more limited.

B. Recommended Actions

Immediate Outcome 6

  • Improve feedback mechanisms between UIAF and LEAs, as well as UIAF’s capabilities to provide effective and proactive operational assistance to FGN and other LEAs, so that disseminated financial intelligence can serve as a key input to investigations and prosecutions of ML/TF and predicate offenses, and not only collaborate with LEAs once an investigation has already been started by the FGN.

  • Expand the UIAF’s access to relevant financial information sources such as information collected by the DIAN regarding written declarations of cross-border transportation of currency and BNIs, information regarding lawyers, accountants and real estate companies, as well as BO information.

  • Develop guidance and warning signs for the reporting entities for STR on TF.

  • Provide feedback to supervisors and reporting entities regarding the quality of STRs and other relevant information sent to the UIAF to improve private sector’s capacity to effectively report STRs. This will also in turn improve the UIAF’s capacity to produce financial intelligence.

Immediate Outcome 7

  • Allocate adequate resources to the FGN. The FGN should focus ML investigations on larger and more complex ML schemes related to the major organized crime organizations that operate in the country.

  • Pursue a concerted policy of conducting parallel financial investigations, especially for all serious proceeds generating crimes, including those with an international dimension, to increase the number of investigations and prosecutions of ML activities in line with Colombia’s risk profile, including all the threats detected by the NRA.

  • Establish criminal liability for legal persons.

Immediate Outcome 8

  • Further efforts should be made by the FGN and the Judiciary to enhance the confiscation of property derived indirectly through the commission of an offense.

  • The FGN should make further efforts to obtain the repatriation of proceeds moved to other countries. International sharing of assets should be further sought as well.

  • Colombia should further pursue the confiscation of proceed related to other high-risk offenses (extortion, smuggling, and illegal mining).

  • Colombia should improve the statistical information on confiscation.

The relevant Immediate Outcomes considered and assessed in this chapter are IO.6–8. The recommendations relevant for the assessment of effectiveness under this section are R.3, R.4, and R.29–32.

C. Immediate Outcome 6 (Financial Intelligence ML/TF)

Use of Financial Intelligence and Other Information

112. The UIAF is an administrative financial intelligence unit (FIU) producing financial intelligence based on the receipt of different types of reports (STRs, cash transaction reports, foreign currency transaction reports, remittances transaction reports and threshold reports). The UIAF has direct and indirect access25 to a wide range of information from the Colombian intelligence agencies, law enforcement, and supervisory authorities. Additionally, since 2002, the DIAN has been sending to the UIAF reports on cross-border transportation of currency and BNIs every three months.26 The FGN and LEAs can request financial information available at the FIU to use it in the ML/TF and underlying crime investigations and trace of criminal proceeds.

113. The UIAF uses financial information received from reporting entities, DIAN, the FGN, and LEAs, and information collected through external sources to produce intelligence products like financial reports, typologies and strategic analysis studies. Additionally, the UIAF collaborates with other national authorities through various committees, such as the Joint Intelligence Committee, for the analysis and investigation of TF cases. Considering the TF risks in Colombia, the UIAF’s focus on the analysis TF risks is low, and there is little awareness-raising to reporting entities on this issue. There are few typologies on the TF risks of financial and DNFBP sectors and other strategical studies like the NRA do not cover TF risks at all, so more work is needed to properly cover this issue.

Table 5.

Information Accessed by the UIAF

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During the onsite visit (June 2017), authorities informed that since September 2017, the UIAF will have direct access to this information due to a collaboration agreement signed between the UIAF and the DIAN.

114. The UIAF regularly receives requests of information from the FGN, the National Police, military authorities, and the DIAN. From 2012 to 2016, requests remained relatively stable. The standard time for a reply is usually 10 days, which in urgent cases could impact the ability of LEAs to collect relevant financial intelligence information in a timely manner to inform ongoing ML/FT investigations.

Table 6.

Information Requests Sent to the UIAF (2012–2016)

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115. Once the UIAF receives these information requests, it carries out a financial analysis, while keeping the authority updated.

116. The FGN, LEAs, and national authorities highlighted UIAF’s collaboration in responding to specific requests for financial intelligence and the good quality of financial information received. This intelligence information was used for developing evidence and tracing assets in ongoing investigations of predicate offenses and a smaller number of ML investigations

117. From July 2012 to August 2017, 422 cases were disseminated to the FGN. Of these, 334 were spontaneous reports, and 88 were reports submitted on request. Of the 422 cases, the FGN started 242 criminal proceedings, 151 are under the stage of preliminary inquiry, 27 are current investigations, and there are 16 convictions. Of the remaining 180 cases submitted to the FGN, 111 where used in asset forfeiture processes. Also, 20 percent (88) of the 422 cases disseminated, were elaborated upon request from the FGN.

118. The UIAF could benefit from having more information about BO and on cross-border transportation of currency and BNI. The reports on cross-border transportation reports of currency and BNIs received by the UIAF in some cases lack precise information and the information on the total amount declared is not available for authorities.27 In turn, this information could be potentially used by the LEAs in developing evidence and tracing criminal proceeds related to ML/TF and associated predicate offenses. This is particularly important in a context where timely access to cross-border transportation reports of currency and BNIs was identified as one of the weaknesses of the AML/CFT system in the 2013 NRA. The 2016 NRA did not comprehensively analyze the vulnerability of the cross-border declaration system, but noted that—from 2011 to 2015—the use of cash payments increased from 4.49 percent to 5.8 percent. Reliance on cash in the economy is an important TF vulnerability since there is evidence that cash constitutes an important financing source for subversive groups that conduct terrorist’s activities.28

119. Despite the poor quality of some STRs, the UIAF makes a significant effort to verify and analyze the information in the STRs along with the information in its own databases. The UIAF analyzes the financial information of all natural and legal personas identified in an STR to detect trends into detect trends in the suspicious transaction, the possible illegal origin of the resources and links with criminal organizations.

120. The UIAF has the means to obtain information regarding legal persons. Basic information and BO information can be obtained from public registers, shareholder books and supervisory databases. However, in some cases, the authorities may not count on BO information that is accurate, complete, useful and updated in a timely manner for financial investigations (see IO.5).

121. Lack of comprehensive statistics is another weakness of the AML/CFT system identified in the 2013 and 2016 NRAs. In 2016, the UIAF designed a statistical system that must be completed with information sent by the FGN, LEAs, and MINREX, among other authorities. However, these authorities send the information to the UIAF only on an annual basis. Even though the UIAF can request any information from competent authorities, resources could be used more efficiently if an up to date and accurate statistical system were implemented (see R.33). This issue affects the effectiveness of the UIAF’s analysis of STRs.

122. Due to the shortcomings of the information available to the UIAF, the information disseminated to the FGN and LEAs is not always accurate, complete, or up to date. This affects the ability of these authorities to use the UIAF’s spontaneous disseminations to trigger ML/TF investigations, or use it when requested for purposes of an ongoing investigation.

STRs Received and Requested by Competent Authorities

123. The number of the STRs submitted by reporting entities to the UIAF increased from 7,615 in 2011 to 10,002 in 2016. The UIAF receives a wide range of reports from the financial institutions and DNFBPs.

Table 7.

Reports Received from Financial and DNFBP Sectors

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124. In general terms, financial institutions understand and comply with their overall reporting obligation, and there is a significant number of STRs received. Some minor deficiencies are presented by the low level of reports submitted by some DNFBPs, particularly by casinos, law firms, accounting firms, real estate agents, and dealers in precious metals and stones (besides gold import/export entities and gold foundries). This is a particular weakness taking into account that both 2013 and 2016 NRAs confirmed that these sectors are highly vulnerable to ML/TF.

125. Given the high risks in these sectors, the low number of STRs submitted by DNFBPs limits the ability of the UIAF to produce good financial intelligence for use for financial investigations.

126. The majority of the STRs are ML related, but 3,704 were TF related. According to reporting entities, supervisors do not provide sufficient TF guidance, which may also affect the quality of TF-related STRs submitted to the UIAF.

127. Colombia has designated the mining sector, sports clubs, hydrocarbon sector, and health sector as reporting entities that are not covered by the FATF standard. Some of these entities were not aware of the obligation to send STRs to the UIAF, among other AML/CFT obligations or the potential ML/TF risks associated with their activities (see IO.1). Sports clubs, mining, and health sectors submit a minimal number of STRs to the UIAF, and these STRs were of poor quality due to the lack of understanding of their reporting obligations.

Table 8.

STRs Received by Main Reporting Entities

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128. Supervisors and reporting entities shared with the assessment team that since 2014 the UIAF ceased providing feedback reports named “IEROS,” related specifically to the quality of financial information submitted by reporting entities through STRs (see IO.1, IO.3, and IO.4). Authorities explained that the decision for the suspension was to work on improving the system and that other kind of feedback was provided to reporting entities. Additionally, the UIAF has a thorough electronic system which blocks reporting entities from submitting incomplete STRs. However, the interruption of this feedback mechanism may be affecting the quality of some STRs submitted to UIAF, as was stated by many reporting entities.

129. The UIAF has authority to request additional information from reporting entities. Most of these requests are addressed to financial entities and information is used to extend its financial analysis and to strengthen ML/TF cases that UIAF disseminated to the FGN.

Table 9.

UIAF Requests of Additional Information

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130. CONPES 3793 mentions the need to increase the quality of information, data, and statistics for a better financial intelligence. The UIAF considers that there has been an improvement in the quality of the reports submitted by reporting entities, although there is no evidence to support that conclusion. Effective interagency collaboration between the UIAF and supervisory authorities is needed to improve the quality of reports submitted by reporting entities, specifically by DNFBPs. As stated above, reporting entities indicated they need more precise feedback on how they submitted reports to UIAF. Notwithstanding the UIAF’s collaboration within the Joint Intelligence Committee, the UIAF focuses on sharing with authorities and reporting entities mainly ML threats and gives little attention to the sharing of its views on TF threats. This affects the ability of reporting entities to understand and identify TF.

Operational Needs Supported by FIU Analysis and Dissemination

131. The UIAF performs functions to support operational needs of LEAs, spontaneously and upon request, such as providing financial information related to specific investigation targets and information for ongoing investigations. The strategic department of the UIAF generates intelligence products and identifies new ML/TF trends and threats. By the time of the onsite visit (June 2017), the UIAF was working on the elaboration of strategic analysis studies in line with the ML/TF threats identified in the 2016 NRA, so the assessment team was not able to verify how UIAF intelligence supports the understanding of the identified national risks. Sectoral assessments carried out by the UIAF in 2017, identified firearms trafficking, commerce and real estate agents as sectors that are being used by organized crime for ML/TF purposes, but only the real estate agents were analyzed in 2016 NRA. Migrant smuggling was one of the major crimes identified in 2016 NRA, but results of regional assessments did not identify this crime as one of the most important related with ML.

132. The UIAF has an effective process for prioritizing and analyzing STRs. Since 2015, UIAF’s process is as follows: all STRs are received through an electronic system called “SIREL.” Information contained in STRs is stored on the UIAF’s database. Then, it is analyzed by a computerized automated system which classifies STRs according to financial information of natural and legal persons reported, identifies if an STR has relevant information according to alerts, parameters and UIAF’s criteria, and determines whether further analysis from UIAF’s operational area is needed.

133. Analysts review the STR selected by the automated system according to UIAFs internal procedures and the quality of the report, and if there is a reason to believe that an STR points to a possible case of ML/TF and predicate offenses, the UIAF opens a case. Analysts use all the information available in the UIAF database to develop their cases. The Deputy Director of Operational Analysis forms a tactical committee with two analysts, a member of the Strategical Analysis area, and a representative of the General Directorate to decide if the case is relevant and if an intelligence report should be disseminated to the FGN.

134. Since 2013, the UIAF has used analysis techniques of big data and data mining to detect complex criminal networks through the identification of different economic variables of all the subjects included in its databases. The UIAF uses all financial intelligence information available to determine if a subject is related to a criminal organization of a specific financial investigation. The UIAF provides a couple of recent cases related to corruption and gold dealers where the analysis techniques of big data and data mining were used. Through financial information accessed, the UIAF determined whether a person subject of an STR is linked to other STRs, other persons within a criminal network, or international financial transactions with high-risk countries. The UIAF also compares the subject’s tax declarations with information provided by DIAN, and if any other subject included in the database of the UIAF is related or had any transaction with related criminal organizations. Additionally, UIAF could identify which regions of the country represent a higher risk for ML/TF activities.

135. The weak quality of some reports submitted to the UIAF can also limit its ability to produce and disseminate precise financial intelligence to the FGN and LEAs. The main source of UIAF’s intelligence is the STR database and other threshold reports received from reporting entities (e.g., cash transactions reports, currency transaction reports, wire transfer reports and remittances transactions reports). However, there is minimal reporting by some DNFBPs, such as casinos. There is also a lack of reporting of lawyers, accountants, real estate agents, and dealers in precious metals and stones because these entities are not subject to the AML/CFT regime. This is an important weakness of the system because according to NRA 2013 and 2016 and sectoral assessment 2017, DNFBPs represent a prime ML/TF threat for Colombia as they are frequently used by organized crime. There are also other issues that may affect the quality of STRs submitted, like feedback between UIAF, supervisors and reporting entities and the modest level of training and awareness conducted for reporting entities on ML/TF risks in their own sectors.

136. The number of STRs that led to opening a case within UIAF decreased substantially from 2012 to 2016. Authorities stated that this was due to a revision in UIAF’s procedures to guarantee that ML/TF cases are only initiated when there are clear suspicions of ML/TF. Also, the UIAF informed that a new strategy for analyzing reports and initiating cases within the UIAF was implemented in 2017. This strategy is focused mainly on the analysis of big criminal networks and financial cases related with crimes identified as major ML/TF risks in the National Intelligence Plan. However, the strategies implemented by the UIAF since 2012 and in 2017 have not led to substantially more financial investigations and convictions (see IO.7).

Table 10.

STRs Leading to UIAF Cases

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137. From 2011 to 2016, UIAF produced strategic analysis studies which reporting entities stated were useful, but were focused on sectors and issues that not necessarily were related with the major risks identified in both NRAs, 2013 and 2016 (see IO.1).

138. The UIAF organizes working sessions with national authorities of the intelligence community to discuss, among others, ongoing investigations, results of NRAs, and national intelligence documents like the National Intelligence Report. The UIAF spontaneously disseminates the following intelligence products to the FGN: (i) financial intelligence reports with ML/TF cases, and (ii) financial reports elaborated jointly by the Strategic and Operational Departments of the UIAF.

139. The UIAF responds to FGN’s information requests and coordinates working sessions between both authorities to work jointly and assist the FGN in the ongoing ML investigations. During these working sessions, the UIAF shares with the FGN all information available in its databases and in other internal and external information sources. Issues discussed through these working sessions were in relation to with the most important national cases. During 2017, the FGN requested support from the UIAF for the discussion of 22 cases related to ML associated with drug trafficking, corruption, and human trafficking crimes. According to the FGN, between 2015 and 2016, cooperation requested to the UIAF led to the dismantling of 102 criminal organizations.

140. The UIAF and the FGN work jointly at an early stage of the investigation process. The UIAF provides all information available such as linkages with other STRs, cash transactions, and accessible data on legal persons and real properties. This UIAF’s input provides some added value to the FGN’s understanding of a case. As mentioned before, the information shared by the UIAF is sometimes inaccurate or out of date. This limits the UIAF’s value added to the work of the FGN and LEAs. However, there are other cases where the UIAF’s collaboration in ML investigation was effective (see Box 2). Indeed, as a result of UIAF’s participation in this ML investigations, it was awarded in 2013 with the Best Egmont Case Award (2013).

UIAF Case “Loco Barrera”

Daniel Barrera, a.k.a. “El Loco Barrera,” is a Colombian drug trafficker arrested on September 2012 in Venezuela, thanks to the important operational support of the UIAF and with the collaboration of national and international authorities.

In 2011, the UIAF was able to identify the relation among six ML cases spontaneously disseminated to the FGN. For the development of the case, the UIAF closely collaborated with the FGN since the early stage of the investigation. The principal information source was the STRs database, information exchanged between national authorities and international counterparts, as well as open information sources. The UIAF could identify financial information of the subjects related to the STRs, properties, vehicles and cash transactions. For the development of the case, UIAF suggested the creation of a working group to coordinate the analysis of financial operations, analysis of economic profiles, and the collection of evidence.

The financial analysis process carried out by UIAF lead to the identification of more legal and natural persons related with this case who belong to criminal organizations and illegal armed groups related with “El Loco Barrera.” Also, these individuals were members of a network dedicated to the transportation of cocaine abroad through logistics and aviation companies. The money derived from this illicit activity was laundered through companies dedicated to livestock farming and through the same logistics and aviation companies.

As a result of the case, it was possible to identify 306 natural persons, 88 legal persons, and 2,843 properties with a total value of approximately US$439 million.

141. As mentioned above, there are major concerns on the extent to which the UIAF spontaneously supports the operational needs of competent authorities. Of 422 ML cases disseminated between 2012 and 2017, only 27 led to a judicial process.

Table 11.

Number of Cases Disseminated to the FGN

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142. Once the FGN receives the UIAF report, they use all the information provided to design a Methodological Plan to analyze this data and request additional information from national authorities, reporting entities, and private sector. The FGN analyzes the received information and identifies and searches physical evidence that may support the UIAF reports. Then the FGN orders search warrants and the beginning of the formal investigation. The authorities explained that sometimes is very difficult to confirm information provided in UIAF cases, or the FGN does not find reasonable grounds to continue to the second stage of the process with a formal accusation, investigation, and public trial. The UIAF has disseminated 422 cases to the FGN during the period 2012–2017, of which 353 resulted in criminal proceedings. Among these criminal proceedings, there were 111 asset forfeiture processes.

143. From 2011 to 2016, the UIAF disseminated 51 TF cases to the FGN, none of which triggered TF investigations, but the information from these cases was used in asset forfeiture processes. Of the few prosecutions and convictions related to TF in Colombia, there have been no cases involving the provision of money to terrorist’s networks, which is a major concern (See IO.9). The UIAF provides little added value for the investigations of TF, since the FGN is the authority that coordinates TF investigations and the information exchange between relevant authorities. As stated above, the UIAF collaborates with competent authorities providing the available financial information once an investigation has been triggered by the FGN in collaboration with other competent authorities. Also, the UIAF has disseminated relevant information for the investigation of subversive and organized crime groups.

144. The UIAF responds FGN and LEAs information requests supplying them with inputs for ongoing investigations. However, major efforts need to be made by the UIAF to identify and disseminate useful TF cases to the FGN (see IO.9).

Cooperation and Exchange of Information/Financial Intelligence

145. The UIAF cooperates and exchanges financial information with other national competent authorities, including Colombia’s intelligence community. Through these meetings, all competent authorities share useful operational information for cases under investigation by the FGN. The UIAF disseminates available financial information to strengthen and support operational capacities of the FGN. LEAs, and particularly the FGN, can request to UIAF support and technical assistance to understand financial information and financial intelligence. The FGN can request meetings with the UIAF to review confidential information stored in UIAFs databases. The UIAF and the FGN work jointly at an early stage of the investigation process. UIAF provides all information available such as linkages with other STRs, cash transactions, and accessible data on legal persons and real properties. Through this interagency collaboration, UIAF provides financial information needed so the FGN can decide if the case merits attention and investigation.

Table 12.

Working Sessions Between UIAF and FGN

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146. Inter-agency collaboration between the UIAF and the FGN has improved since the 2008 MER. From 2014 to 2016, the UIAF and the FGN organized 573 operational meetings to cooperate on ML/TF ongoing investigations and provide relevant financial information for the investigation process. Through these meetings, the UIAF shares the recent findings of its financial analysis when both authorities are working together on a case. Under this methodology, between 2015 and 2017, the UIAF has developed and delivered 24 files of information. The UIAF disseminates financial information founded, so the FGN can continue with the ongoing investigations.

147. Twenty-two information exchange agreements were signed with LEAs, supervisors, migration authorities and self-regulated bodies to exchange information on a regular basis. Regardless of whether a cooperation agreement exists, the UIAF has the authority to request information from any authority or reporting entity. Despite these collaboration agreements, further effective cooperation between authorities is needed. There are numerous national committees to facilitate collaboration at different levels with the same functions and composed of the same authorities. The multiplicity of national committees may result in duplication of efforts and inefficient coordination.

148. The UIAF also exchanges information with customs authorities for ongoing investigations of predicate offenses. However, the UIAF needs to strengthen collaboration with national anticorruption authorities regarding policy development considering the heightened risk of ML relating to corruption, as identified in the 2016 NRA. An agreement between the FGN and the UIAF was signed on May 2017 to increase collaboration on ML investigations related to corruption. However, due to the recent adoption of this agreement, the assessment team was not able to verify the effective implementation of this arrangement.

149. The UIAF and competent authorities have mechanisms and protocols to guarantee the confidentiality of information received from national authorities and international counterparts. Additionally, there is another mechanism designed only for the information exchange between UIAF and national authorities (VPN-FTP). These systems and protocols are working properly and include security measures to specify the persons with permitted access to authorities’ databases. Staff of competent authorities is aware of the importance of confidentiality and understand the administrative and legal consequences of dissemination of confidential information. The only authority that can request access to the original UIAF’s classified information stored at its database with judicial authorization.

Overall Conclusions on Immediate Outcome 6

150. Colombia has achieved a substantial level of effectiveness for IO.6.

D. Immediate Outcome 7 (ML Investigation and Prosecution)

ML Identification and Investigation

151. ML cases are primarily identified from LEA’s investigations of predicate offenses, intelligence, and, in fewer instances, the UIAF’s proactive disseminations. Also, many ML cases are identified through the collaboration with foreign countries (e.g., the U.S.). The FGN (which directs the investigations) reported that all prosecutors have been instructed to conduct parallel financial investigations in cases of serious predicates offenses. This was reinforced by FGN Directive 001/16 issued in 2016, which stated that all prosecutors must initiate parallel financial investigations drug trafficking cases involving large sums of money. Results showed that only in some cases financial investigations are carried out by the prosecutors. Most of the parallel financial investigations derived from an asset forfeiture action rather that from a ML investigation or prosecution.

152. All prosecutors can conduct ML investigations linked to the predicate offenses they are already investigating. However, very few of these cases have led to an ML investigation and conviction consistent with the risk context of the country.

153. The various LEAs and the UIAF adequately coordinate their efforts, at the strategic, operational and intelligence levels, through working groups and meetings (see IO.6). Specific joint task-forces are established among the LEAs to work major cases (mostly related to drug cartels) within the LEAs, which helps minimize duplicative investigative efforts while enhancing cooperation.

154. The FGN oversees investigation and prosecution of ML and its predicate offenses. The FGN can take advantage of the expertise of several investigative police units to address the different ML threats. The FGN is supported by both, the Judicial Police and the National Police to carry out investigations on ML and organized crime. Both the Judicial Police and the National Police have the necessary resources (legal, operational and financial) to carry out their duties, and can carry out complex ML investigations and use special investigative techniques. Although LEAs do not have direct access to the UIAF’s database, prosecutors can formally request the UIAF for all financial intelligence they need; requests are normally processed within 10 days. This enables the LEAs to have financial information to be used in their investigations, but the 10-day processing period impacts the LEAs’ ability to collect relevant financial intelligence in a timely manner.

155. Colombia has established policies and allocated resources to identify and prioritize ML cases. Nevertheless, most of these cases are not linked to complex investigations of predicate offenses or to investigations involving large sums of money, but rather on those that do not impact greatly on the criminal organizations. Complex cases are being pursued in only in limited instances. Nevertheless, according to the information provided, convictions on complex cases involving large amounts of funds are gradually increasing.29

156. The UIAF disseminates financial intelligence reports to the FGN and processes financial information requests to support the operational needs of competent authorities. The UIAF disseminations are used mainly in ongoing investigations and in general do not trigger new cases. The total number of investigations conducted by the LEAs with the participation of the FGN are in line with the threats faced by the country and while many result in asset forfeiture, most do not lead to ML convictions.

Table 13.

Number of FGN ML Investigations

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Consistency of ML Investigations and Prosecutions with Threats and Risk Profile, and National AML Policies

157. According to the information provided, illegal mining and drug trafficking are amongst the main sources of illicit money. There are criminal organizations dedicated to committing these crimes and there are other subversive armed organizations like the FARC that also perpetrate these crimes to finance their activities. Corruption was also highlighted as a main predicate offense.

158. Regarding the underlying criminal activity, the authorities were not able to present statistics identifying the predicate offense involved in ML cases.30 Nevertheless, they informed the assessment team that in most ML cases investigated the predicate offenses were illicit enrichment of individuals and criminal associations. This information was corroborated by an analysis conducted by the assessment team of all ML convictions of 2016 and part of 2017.

159. Most of the ML cases reviewed by the assessment team confirm that the Colombian authorities mainly prosecute ML associated with the illicit enrichment of individuals and criminal associations with connections mostly to drug trafficking activities. The FGN investigates cases involving organized crime, but often these cases are also not investigated for ML.

160. Prosecuting and convicting a person for ML related to the offense of illicit enrichment of individuals is done effectively. The FGN must establish an unjustified increase in the accused patrimony to get a conviction under this offense. The link with a criminal activity in this case does not require direct proof, but a logical inference based on circumstantial evidence (including the inability of the accused to provide an explanation of the legal origin of the assets in question), which makes it possible to convict a person without specifically knowing the predicate offense. As a result, it is possible to convict a person without knowing the specific act that generated the illicit proceeds laundered (see criterion 7.5).

161. The predicate crime of criminal cases that are investigated and prosecuted are consistent with some of the country’s main ML threats, such as drug trafficking. Investigations and convictions related to the other main predicate offenses (e.g., corruption, trafficking of arms and of migrants) are not carried out in numbers commensurate with the ML risk. Corruption and other non-drug trafficking predicate crimes have been identified as major threats in the NRA, and yet there has been a low number of ML investigations and prosecutions based on these predicate offenses. On the other hand, ML derived from seeking tax refunds combined with smuggling and the crime of massive and habitual fundraising from the public without authorization31 (generally linked to Ponzi schemes),32 which were not highlighted as a priority concern produced some complex ML cases involving high amounts of funds.33

162. Corruption in Colombia is a pervasive problem at all levels of government, however the Constitutional Court and the Supreme Court are perceived to act independently. While there is a professional and independent judiciary, the justice system is undermined by corruption and extortion as irregular payments and bribes are often exchanged to obtain favorable court decisions. Corruption has thus been highlighted as major threat in the 2013 and 2016 NRAs. However, the limited number of ML cases investigated and prosecuted are not commensurate with the threats of corruption, and other crimes.

163. Most of the ML cases that are pursued, involve simple ML schemes or low amounts of assets and/or funds. Nevertheless, there are some cases that focused on the activities of specific criminal organizations involving larger amounts of assets and/or funds, resulting mostly from drug trafficking activities. Although the FGN has instructed the prosecutors to prioritize cases of significant impact, only some have been pursued but not nearly enough considering the risk context of the country. The cases examined show that the authorities are capable of pursuing cases in accordance to the ML risk of the country. However, this was only done in a few instances. The number of complex cases prosecuted and sentenced are relatively few and, although increasing in number, are not in line with the risk context of the country, which is a major concern. The FGN would also benefit from more resources to be able to pursue these types of cases.

Cash Couriers and ML

The use of cash couriers to introduce illicit proceeds into Colombia is a well-known typology. The National Police jointly with the DIAN, and the FGN have established a coordinated system to detect and prosecute this activity with positive results. With more than 25 interventions, these activities were prosecuted mainly under ML from illicit enrichment of individuals. Couriers were found carrying usually more than US$100,000 or its equivalent in Colombian pesos or euros. More than US$5 million were confiscated between 2014 and July 2017 and over Col$41 billion (approx. US$13 million) during the same time.

164. Two cases in 2016 that involved the laundering for criminal organizations are worth mentioning. The first involved assets derived from drug trafficking by one of FARC’s front companies. Shell companies, cattle dealers, and a telephone-remittance service company were all used to launder the illegal proceeds (Radicado 1100107040005200800 2016). The other case involved two important MVSP companies that laundered money through a check-cashing operation that was used to give appearance of legality to criminal income (Radicado 76001007003291012). These cases demonstrate that complex schemes used to launder the illegal proceeds of criminal organizations have, in some instances, been successfully investigated and prosecuted. However, as mentioned above, there have been few such cases, and they have largely concerned drug trafficking and no other major threats. Besides, their number is still not commensurate with the threats posed by criminal activity.

165. While the authorities are investigating different kinds of predicate offenses, very few of these cases have led to an ML investigation and prosecution. Table 14 below shows that there are many different predicate offenses that could trigger a ML investigation and prosecution, but they do not in practice. Therefore, the results of the ML investigations are not in line with the risk perceived by the authorities, and point to the need to pursue more ML cases generally and more ML cases based on a broader range of major threats.

166. The ML unit of the FGN is part of the Prosecutor’s Drug Trafficking office. Even so, ML investigations arising from other predicate crimes can be conducted by other offices within the FGN. The decision to assign ML investigations to the same office in charge of drug trafficking cases, has likely led to the crowding out of ML investigations involving other predicate offenses.34

Table 14.

Convictions by Type of Offense

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Statistics on offenses on firearms and illicit drugs, included also possession (which is not a predicate offense), and it was not possible to disaggregate them; therefore, it was not possible to separate important offenses that might be linked to a potential ML from those that are not.

167. The FGN approved a 2016/20 Strategic Plan which calls for focusing investigations on criminal organizations that operate in more than one jurisdiction within the country, rather than on small local criminal operations. This document explains that, despite some positive results obtained in the fight against ML so far, they have not yet achieved the intended results.35

168. Legal persons are frequently misused in ML schemes in Colombia, usually in the form of simple, rather than complex corporate structures where the legal and beneficial owners are one and the same. Experience in seeking BO information from abroad is limited. Given that the focus of ML investigations is being redirected to more complex schemes and structures involving different predicate offenses, it is doubtful that the authorities would be able to as easily identify beneficial owners, particularly when involving foreign corporate vehicles. As presented in IO.5, there are some gaps in the mechanisms to ensure that information on the BO of a company is obtained and available in a timely manner by the competent authorities.

Types of ML Cases Pursued

169. Colombia can investigate and prosecute all kinds of ML cases, including those involving foreign predicate offenses, third-party laundering, self-laundering, and as a stand-alone offense.

170. Most ML convictions in 2016 and 2017 have been for the illicit enrichment of individuals predicate offense. Such cases do not require a conviction on the illicit activity that increases the wealth of the accused, as explained above. Also, almost all convictions have been obtained through a plea bargain agreement.

171. Despite being able to prosecute ML autonomously, all ML cases analyzed by the assessment team are self-laundering cases that include the conviction for the predicate offense. This situation is also derived from the possibility of charging a person for illicit enrichment of individuals and for ML derived from that activity, hence in practice all the sentences analyzed include a concurrent conviction for the predicate crime. Some other activities could be covered by the testaferrato and illicit enrichment of individuals not connected to a ML conviction, but again, the number of convictions under these offenses is very low.

172. Only two ML convictions in the last three years were achieved based on a foreign predicate offense. With most of the “drug trafficking business” occurring outside the country some illegal flows are most likely repatriated and laundered in Colombia. However, these flows are not being detected in the analyzed cases. One possible explanation is that the criminal justice system makes it possible to convict a person with only proving his/her relationship with a criminal activity but without the need of establishing the domestic or foreign source of those assets. In several of the cases analyzed, the predicate criminal activity was the attempt to enter the country with foreign currency, which suggests that a predicate offense was committed abroad. However, the ML investigations instead focused on the cash smuggling in Colombia.

173. The statistics provided by the authorities do not differentiate between the different types of ML (e.g., third-party laundering, stand-alone, or predicate offenses involved, among others). The results of the ML indictments and prosecutions showed that there has been an increase in the number of indictments in the recent years but a drop in the conviction rate. Authorities explained that the drop is due to the growing complexity of the cases. Nevertheless, it remains of serious concern.

Table 15.

ML Indictments and Convictions

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Some convictions are from indictments in previous years.

Five ML sentences informed for 2017 at the time of the onsite visit.

Effectiveness, Proportionality and Dissuasiveness of Sanctions

174. The level of sanctions available and effectively applied for ML are proportionate in relation to other serious crimes. ML is sanctioned in the Criminal Code (CC) from 10 to 30 years of imprisonment. These sanctions are among the highest in the CC, and although in practice cases result in applying a lower penalty, authorities still believe that the sanctions are adequate. Sanctions also appear to be dissuasive (e.g., no cases of reoffenders have been reported), and even though most ML cases brought to court are minor (they do not include complex schemes involving large amounts of assets), they have resulted in heavy sanctions. Even though most of the cases end in a plea bargain, sentences have been imposed for terms longer than five years of imprisonment. In cases where there has been no plea bargain, the term of imprisonment has risen to more than 10 years. In 2016 and 2017, of the last 42 judgments, only one imposed a sentence of less than four years. According to the authorities, the actual period of imprisonment in these cases exceeds two-thirds of the penalty imposed which shows that they are effective. Fines have also been imposed. The fines established in the CC range from Col$1,000 to Col$50,000 minimum wages (between US$230,000 and US$11,490,885). The fines imposed in ML cases are generally imposed by comparing the range with the imprisonment sanction applied. A five-year imprisonment sanction is followed by a fine of Col$500 minimum wages and a ten-year conviction is followed by a fine of Col$1,000 minimum wages.

175. Legal persons cannot be held criminally liable for ML in Colombia. Only accessory penalties can be applied once the individual has been convicted. The judge can suspend the legal person and later order the termination of the legal person at the end of the process if it was involved fully or partially in the illegal activity.36 In the convictions analyzed, these sanctions have rarely been imposed except in some complex cases where the judge ordered the extinction of the legal person. Considering the frequent use of legal persons in ML schemes in Colombia, the lack of criminal corporate liability is an impediment to greater sanctions effectiveness.

Alternative Criminal Justice Measures

176. Colombia also relies on pursuing other crimes than ML to combat ML activities. The offense of “illicit enrichment of individuals,” testaferrato,37 and conspiracy to undertake ML activities has been used to pursue ML activities. In many cases, as was explained, the investigation of these offenses can be more effective that the investigation of ML.

Table 16.

Illicit Enrichment vs. Testaferrato

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177. Every major ML investigation triggers a parallel asset forfeiture investigation. One of the main objectives of the competent authorities is to dismantle criminal networks through a well-coordinated criminal asset recovery policy. Asset forfeiture actions have proven to be very effective in depriving criminal enterprises from their illicit assets, including legal persons involved in financial crime (see also IO.8). The success of these measures generally has the outcome that ML sentences do not include the confiscation of the assets involved, since ther have been already forfeited, which can affect the decision to prosecute ML in some cases.

178. Despite the important results obtained using alternative criminal measures, these cannot replace the pursuit of a ML conviction. Alternative criminal measures should only be used where it is not possible, for justifiable reasons, to secure a ML conviction. Authorities should not rely solely on this mechanism to target criminal finances and more ML cases should be pursued.

Overall Conclusions on Immediate Outcome 7

179. Colombia has achieved a low level of effectiveness for IO.7.

E. Immediate Outcome 8 (Confiscation)

Confiscation of Proceeds, Instrumentalities and Property of Equivalent Value as a Policy Objective

180. Colombian authorities place a high priority on asset forfeiture and seek to recover proceeds, instrumentalities, and property of corresponding value as a policy objective. This conclusion is based upon on discussions with the UIAF, the FGN, the National Police, the Judiciary, and a range of other relevant authorities. The Strategic Plan 2016–2020 of the FGN, analysis of confiscation statistics, and case examples supported this conclusion. The assessment team could verify that high value asset recovery remains a priority in investigation and is in line with the “follow the money” approach.

181. One of the main objectives of the competent authorities is to dismantle criminal networks through a well-coordinated criminal asset recovery policy. The FGN’s Strategic Plan 2016–2020 establishes as its strategic objective No. 1 “to strongly impact organized crime.” For that purpose, the FGN’s main strategy is the pursuit of the finances of criminal organizations, with the aim of increasing asset forfeiture.

182. Colombia has two main mechanisms enabling confiscation of assets: confiscation and asset forfeiture. While confiscation results from a conviction, asset forfeiture is an autonomous process which is independent of criminal proceedings and it applies to illegal assets (assets of unlawful origin). Asset forfeiture is the predominant mechanism to recover illegal assets.

183. Unlike confiscation, asset forfeiture does not require the existence of a predicate offense nor a previous criminal conviction. Asset forfeiture does not pursue persons but assets. Its autonomous procedure makes it independent of ML cases or criminal investigations, although criminal investigations could trigger asset forfeiture investigations.

184. Regarding the evidentiary standard of proof for asset forfeiture proceedings, the dynamic burden of proof applies. The dynamic burden of proof entails that whomever is in better conditions to prove a fact should bring the evidence to the asset forfeiture proceeding. Thus, given that the owner of the suspected illegal assets is in a better position to demonstrate its legal origin, then he/she should provide evidence for that purpose and to refute the evidence brought by the competent authorities. This mechanism allows the FGN to obtain effective results and—at the same time—to speed up the proceedings. Additionally, at the time of the onsite visit, a bill was being discussed in the legislative branch aimed at strengthening the procedures related to asset forfeiture further.38

185. Both asset forfeiture proceedings and confiscation are effective in depriving criminals from the proceeds of their crime, instrumentalities and property of equivalent value. Precautionary or provisional measures over assets can be applied effectively in the framework of both criminal and asset forfeiture proceedings. The FGN and LEAs aim to ensure that asset forfeiture is applied effectively. The FGN articulates and coordinates the investigation, prosecution and asset forfeiture strategies regarding the instrumentalities and POC and directs the Judicial Police and other LEAs in that respect.

186. Particularly, the FGN, the UIAF, and the National Police (through the DIJIN and DIPOL divisions) periodically establish task forces and working groups to coordinate actions in asset forfeiture proceedings as well as in ML and drug-related cases of high impact and large scale. In the framework of these working groups, the competent authorities share relevant information and define and undertake common strategies to trace and confiscate instrumentalities, proceeds and property of corresponding value. As a result of the coordinated action between prosecutors and LEAs, large-scale investigations often open parallel asset forfeiture investigations.

187. LEAs are well resourced, trained, and skilled for tracing and recovering instrumentalities and POC. There is a special Judicial Police on Asset Forfeiture in the FGN since 2014. Regarding the National Police, a special section for asset forfeiture was created within the DIJIN in 2015. In addition, GILFOT was created within the structure of DIPOL to trace and recover assets from terrorist organizations and armed groups.

188. The assessment team verified that, consistent with this stated priority, specialized prosecutors, and LEAs have a good capacity to conduct parallel financial investigations to trace assets in relevant cases. Furthermore, representatives from the Judiciary, prosecutors, and LEAs demonstrated during the onsite visit that they have a good understanding of the available tools aimed at recovering illegal assets. Coordination and cooperation between the competent authorities is good as well. Overall, it can be concluded that confiscation of proceeds, instrumentalities and property of equivalent value is a priority policy objective in Colombia.

Confiscation of Proceeds from Foreign and Domestic Predicates, and Proceeds Located Abroad

189. Colombia provided and explained several case examples demonstrating that authorities pursue confiscation of instrumentalities and POC. Prosecutors tend to pursue criminal assets mainly by means of the asset forfeiture rather than through criminal confiscation, since it is a more effective and expeditious tool for recovering the instrumentalities, proceeds and property of corresponding value.

190. Asset recovery is led by specialized prosecutors in the FGN, particularly within the National Division for Asset Forfeiture, which is comprised of 76 prosecutors, 90 percent of whom have received specialized training. The Division for Criminal Finances oversees identifying assets, and the Special Division on Asset Forfeiture of the Judicial Police is comprised of 32 investigators.

191. The Division on Asset Forfeiture of the FGN also receives important support from the PEF. The PEF was created in 2014, to provide technical assistance and support to prosecutors in complex investigations. PEF also produces typologies and conducts strategic studies related to ML and other relevant offenses involving criminal finances. PEF has sufficient and qualified staff to carry out its functions properly: it currently employs 130 agents from multidisciplinary fields. PEF receives inputs and feedback from the UIAF and other LEAs to develop its products.

192. According to the CSJ there were 1,334 judicial decisions on asset forfeiture from 2012 to 2016.

Table 17.

Judicial Decisions on Asset Forfeiture

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193. At the same time, the FGN reported that for the period 2011–2016, there were 292 legal decisions forfeiting 1,405 assets. Furthermore, for the period 2014–May 2017, the FGN reported that there were 13,941 assets subject to provisional measures in the framework of asset forfeiture proceedings, amounting to Col$17,002,618,979.074 (around US$5,620,000,000). Moreover, for the period from January to June 2017, the FGN reported that they have obtained the final asset forfeiture of 166 assets for an amount of Col$376,615,632,908 (around US$133,853,223).

194. Since the AFL entered into force in July 2014, and replaced the former procedure, the average time of the investigation was reduced from 7 years to 1.5 years. Moreover, the AFL improved the effectiveness of the asset forfeiture proceedings and their results. In this regard, statistics show that under the former procedure (Law 793/2002) there were 891 cases that resulted positive and 585 negative, meaning this a positive result in 60.37percent of the cases, while under the AFL procedure the result was positive in 286 cases and negative in 43 cases, with positive outcome in 86.93 percent of the cases.

Table 18.

Judicial Decisions on Asset Forfeiture Before and After the AFL

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Table 19.

Assets Under Provisional Measures in the Framework of Asset Forfeiture Proceedings

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Table 20.

Asset Forfeiture Proceedings with Positive and Negative Results (2011–2015)

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195. Currently, there are 3,492 ongoing proceedings on asset forfeiture.

Table 21.

Ongoing Proceedings for Asset Forfeiture

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196. Colombia provided several cases were the asset forfeiture mechanism was successfully applied in high-value cases.

197. Without prejudice to the foregoing, MINJUS has the power to take part in asset forfeiture proceedings. To this end, the Working Group on Asset Forfeiture was created within the Ministry in 2013. This group focuses its participation in relevant cases according to the following criteria: cases of national interest, property owned by criminal organizations, and property of high value. By January 2017, the Ministry has taken part in 1,703 cases resulting in 245 legal decision forfeiting assets for an amount of US$15,120,318, €801,765, and Col$5,516,615,750.

198. Statistics provided by Colombian authorities regarding asset forfeiture is generally comprehensive and enabled the assessment team to analyze the outputs that are being produced by the system. The official information with respect to asset forfeiture cases at the national level is held by the FGN.

199. There are no detailed statistics available concerning confiscation. At the time of the onsite visit, Colombian authorities did not maintain detailed data on the property confiscated across the country, or the numbers on value-based confiscation.39 Notwithstanding the foregoing, the assessors could obtain the relevant information on proceeds and instrumentalities through the ML case law provided by the FGN.

Examples Where the Asset Forfeiture Mechanism was Successfully Applied in High-Value Cases

Case Enilce López, alias “La Gata”:

Through a report submitted by the Judicial Police, the FGN learned that the criminal organization led by Enilce López was engaged in drug trafficking, ML and concealment of criminal property. In addition, it was verified that the illegal money came from the ex-paramilitary named Salvatore Mancuso. Thus, an asset forfeiture proceeding was initiated in May 2014, affecting 1,384 assets amounting around US$366,000,000).

Case “Ignacio Álvarez Meyendorff”:

This case was related to members of a transnational drug trafficking organization the group exported drugs to several countries in Central America and the United States by using boats. The Special Prosecutor’s Office No. 12 of the Asset Forfeiture Division of the FGN initiated an asset forfeiture proceeding against 210 real estate properties, 30 commercial companies, a real estate office and a service station, among others. The real estate properties were in different areas of the country and comprise 12,140 hectares, mostly dedicated to livestock, sugar cane and dry palm. Illegal assets amounted around Col$1,000,000,000,000 (approx. US$340,000,000).

Case “El Papero”:

This case was related to multiple illegal activities related to drug trafficking attributed to Marco Antonio Gil Garzón, alias “El Papero.” The investigation conducted by LEAs led to multiple assets arising from several alleged offenses, including drug trafficking, ML, illicit enrichment, “testaferrato,” conspiracy, among others. Based on inputs from the Judicial Police and information from criminal proceedings against “El Papero,” as well as from information received from the OFAC and the U.S. Embassy, a case was built to exert the asset forfeiture proceeding, which resulted in the forfeiture of 141 assets valued in Col$300,000,000 (approx. US$100,000).

Case “Loco Barrera”:

Daniel Barrera, known as “El Loco Barrera,” is a prominent Colombian narcotrafficker captured on September 18, 2012 in Venezuela, in an operation that was coordinated by the National Police from Washington, D.C., with the aid of the Venezuelan and British governments. “El Loco Barrera” had his main center of operations in the Oriental Plains of Colombia and was one of the most-wanted “capos” in the country. In December 2016, the judiciary forfeited 11 vehicles, 4 real estate properties, and shares of a company amounting around Col$5,365,000,000 (approx. US$1,877,750). For further information please see Box 7 in IO.2.

200. Additionally, there is relevant available information on confiscated assets which are under the management of the Special Fund of the FGN, as referred below. The assessment team could verify that the number of seizure orders requested by the FGN increased during 2016.

Table 22.

Number of Seizure Orders of the FGN (2012–2016)

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201. After analyzing ML convictions for the period 2016–2017, the assessment team concluded that confiscation was being mostly applied to instrumentalities and proceeds arising directly from the crime. Colombia would benefit more if further efforts to confiscate property derived indirectly through the commission of crimes was made. However, given the positive results are being achieved by means of the asset forfeiture proceedings, this is not considered a major issue in the Colombian context.

202. Regarding asset recovery cases based on foreign predicate offenses or POC located or moved abroad, Colombia indicated at the time of the onsite visit there was only one case of repatriation of assets with a final legal decision. Provisional measures aimed at repatriating assets located abroad have been obtained by the FGN in several cases, but these were still pending at the time of the onsite visit. So far, there have not been cases involving sharing of confiscated proceeds with foreign counterparts. In this respect, Colombia could benefit from making further efforts to repatriate proceeds moved abroad and to obtain the international sharing of assets.

203. Colombia provided relevant information concerning high value property that was confiscated and forfeited from certain armed groups operating in the country, which reveals important results in that area.

204. Colombia has a sound legal basis for managing criminal proceeds frozen, seized, and confiscated. There are two mechanisms in place for this purpose, depending on whether assets were confiscated under a criminal proceeding or an asset forfeiture proceeding.

205. On the one hand, proceeds confiscated under the criminal confiscation mechanism are managed by the “Special Fund for Assets Management” (SFAM) of the FGN, as established by Articles 82–86 of the CPC. The fund has broad powers to manage and dispose of property.

206. By November 30, 2015, the SFAM was managing property seized and confiscated valued in US$95,945,517.78. The value of proceeds confiscated which are being managed by the SFAM are relevant to see the results produced by the system in this field.

Table 23.

Value of Property Managed by the SFAM (by November 30, 2015)

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207. The Special Fund also was managing foreign currency amounting US$1,423,831, €1,084,000, and 344 Honduran Lempiras. A breakdown of property under the management of this fund is included below.

Table 24.

Breakdown of Seized Property Managed by SFAM (by November 30, 2015)

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Table 25.

Breakdown of Confiscated Property Managed by SFAM (by November 30, 2015)

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Table 26.

Currency Confiscated Managed by SFAM (by November 30, 2015)

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208. In turn, proceeds seized and confiscated under an asset forfeiture proceeding are managed by the Fund for Rehabilitation, Social Investment and Fight against Organized Crime (FRISCO, its acronym in Spanish), as set out by Chapter VIII of the AFL and Decree 2136/2015. This fund is located under the Ministry of Finance and Public Credit (MEF) and it is managed by the SAE. FRISCO is granted with broad management and disposal powers as well.

209. By June 2017, FRISCO was managing property seized and confiscated for approximately US$1,620,377,460. This includes assets forfeited for an amount of US$319,409,092 and assets under provisional measures amounting around US$1,300,968,368. The SAE provided examples of successful management of companies. Please see tables below for further details regarding the assets being managed by the FRISCO.

Table 27.

Assets Managed by FRISCO (by June 2017)

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The exchange rate used in this table is US$1.00 = Col$2,843.36.

Property owned by companies.

Table 28.

Assets (Legal Entities) Managed by FRISCO (by June 2017)

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The exchange rate used in this table is US$1.00 USD = Col$2,843.36.

210. As shown in the tables above, Colombia has a robust system for managing property confiscated and forfeited. Both funds have experience regarding the management of assets of different nature as well as with companies in activity. The high value of the assets under the management of both funds is also an important aspect to highlight, and it reveals the effectiveness of Colombia not only with respect to asset forfeiture but also in taking measures to use the proceeds efficiently.

Confiscation of Falsely or Undeclared Cross-Border Transaction of Currency/BNI

211. Colombia has a declaration system for all incoming and outgoing cross-border transportation of currency and BNI, which applies to all natural and legal persons whether by air travel or through mail and cargo. The threshold to submit a written declaration to the relevant authorities is US$10,000. The DIAN has authority to seize currency or BNI only when there is a false declaration or a failure to submit the declaration.

212. Upon discovery of a false declaration or a failure to declare, the DIAN has the authority to require additional information regarding the person, the carrier and the falsely declared assets. Failure to comply with the Colombian declaration system constitutes an administrative infringement and eventually an offense. When performing its functions, the DIAN has the support of the POLFA. Authorities carry out the relevant controls in accordance with the risk profile of the traveler, which is built on migratory information, flight information, luggage, currency declarations, and other relevant inputs.

213. If the amount exceeds US$10,000, or if there is a false declaration or a failure to submit the declaration, the DIAN seizes the currency or the BNIs and starts an administrative proceeding for sanctioning the alleged infringement. If there is a ML/TF suspicion, regardless of the amount, the POLFA starts the proceeding for capturing the suspected person and the case is referred to the FGN for conducting a criminal investigation. FGN can request the DIAN to send the currency and BNI to serve as evidence. If the case is pursued, then the funds are transferred to the FGN. The DIAN has a specific division which collaborates with the FGN in those cases involving cross-border movements of currency and BNIs.

Table 29.

Currency Seized by the DIAN (2013–2017)

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214. It should be noted that the DIAN applies effective, proportional and dissuasive administrative sanctions irrespective of eventual the criminal sanction. From 2013 to March 2017, DIAN has applied 1,207 sanctions for Col$13,251,180,870, amounting US$4,732,756. There was no information on the amount finally confiscated or forfeited in criminal proceedings related to these cases.

Table 30.

Sanctions Applied by the DIAN for a False Declaration or a Failure to Declare

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215. While there are cases of non-declared, or non-disclosed cross-border currency being seized and confiscated, Colombia could benefit from improving controls over cross-border movements of BNIs It. Colombia maintains statistics regarding the amount of currency moved across the borders.

216. Colombian authorities provided several case examples demonstrating seizure of property related to falsely/non-declared or disclosed cross-border movements of currency. A successful case of action taken by authorities is shown in Box 4 below.

“Azafatas” Case

Based on information received from the US Immigration and Customs Enforcement, an investigation was initiated against a criminal organization devoted to ML steaming from cross-border illegal currency trafficking.

The criminal organization used personnel from commercial airlines from Colombia, Spain, Mexico, and the United States. It was confirmed that these people received from third parties’ significant amounts of foreign currency to introduce into Colombia. In the framework of the investigation, 19 raids took place, 7 of which involved seizures of currency. It was determined that the group moved U.S. dollars and Euros with an approximate value of Col$8,500,000,000.

Moreover, in March 2016, 13 persons were arrested, including flight attendants. They were charged with ML, illicit enrichment of individuals and conspiracy. Five of these accused persons made an agreement with the prosecutor and were convicted to 75 months of imprisonment.

Consistency of Confiscation Results with ML/TF Risks and National AML/CFT Policies and Priorities.

217. Colombia has a robust legal framework for confiscating, forfeiting and managing POC. In the framework of its 2013 NRA, Colombia considered the following predicate offenses as those of higher risk: drug trafficking, corruption, extortion, and migrant smuggling. The 2016 NRA also referred to these predicate offenses and included illegal mining and smuggling.

218. The Division on Asset Forfeiture of the FGN provided a breakdown of underlying offenses in asset forfeiture cases. According to this information, drug trafficking appears as the underlying offense in 57 percent of the cases, ML in 8 percent, corruption in 4 percent, and conspiracy in 3 percent.

219. Overall, asset forfeiture is in line with the country’s risk profile in terms of the range of the main threats. Information provided by the Division on Asset Forfeiture of the FGN allowed the assessment team to identify the main underlying offenses in asset forfeiture cases. There are positive results regarding drug trafficking, ML, and corruption cases, which are the predicate offenses producing a major volume of illicit gains. In turn, there are cases of asset forfeiture related to conspiracy, extortion, illicit enrichment of Individuals, kidnap for ransom, and weapons trafficking. There is room for improvements regarding other offenses considered as high risk, such as extortion, smuggling, and illegal mining.40

220. The available information related to asset forfeiture is comprehensive overall. However, statistics regarding criminal confiscation are more limited. There is no breakdown referred to underlying offenses involving assets recovered by means of confiscation. In this regard, Colombia could benefit further strengthening the statistical system related to criminal could benefit from further strengthening.

Table 31.

Breakdown of Underlying Offenses in Asset Forfeiture Cases

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Overall Conclusions on Immediate Outcome 8

221. Colombia has achieved a substantial level of effectiveness for IO.8.

Terrorist Financing and Financing of Proliferation

A. Key Findings

Immediate Outcome 9

  • Colombia faces a high TF risk which is mainly domestic, with drug trafficking and other illegal activities conducted by domestic organizations (GAOS such as FARC or the ELN) as its main sources. Authorities are aware of this risk, but the authorities rely heavily on judicial alternative measures to target TF, particularly by pursuing the crime that generates the illicit funds.

  • As a result, the TF offense has been used only in limited domestic cases to prosecute persons who do not belong to a terrorist organization. Other offenses different from TF are used to prosecute TF activities, but there is no obstacle for authorities to pursue also the TF offenses in such cases.

  • The risk of foreign terrorism and its financing is low, and no investigation or judicial procedure involving foreign TF has taken place.

  • CFT efforts are adequately coordinated.

  • Although the results obtained in pursuing the illegal sources of domestic TF are noteworthy, they are not commensurate enough with the high TF risk. The number of stand-alone TF investigations and prosecutions is small in comparison with the magnitude of the threat.

Immediate Outcome 10

  • Colombia has a legal system to apply TFS on TF that allows for freezing of terrorist assets.

  • Banks regularly check UN lists, but the level of awareness is lower in other sectors.

  • Freezing is ordered by a prosecutor after assessing whether requirements of the AFL are fulfilled and determining a probable link of funds/assets with any illegal activity.

  • The authorities have not received any notifications to date related to assets or funds belonging to persons designated pursuant to UNSCR 1267 or 1373, which is consistent with Colombia’s TF risk profile where this activity has usually been committed by domestic groups.

  • The authorities have not yet designated any person or entity domestically under UNSCR 1373, despite the presence of groups in Colombia that commit terrorist acts and TF.

  • Colombia has not identified the subset of organizations that fall under the FATF definition nor identified the features and types of NPOs which are likely to be at specific risk for TF abuse.

  • Competent authorities have not engaged with the NPOs sectors on CFT matters.

Immediate Outcome 11

  • AFL freezing measures described for IO.10 could not be adopted for assets of designated persons/entities in PF UNSCRs. AFL is a judicial process that can only apply for assets linked to criminal offenses or to those activities for which a law expressly provides AFL measures.

  • Only AML/CFT reporting entities are required to monitor UN lists and inform authorities in case of match. Level of awareness is higher in FIs, but DNFBPs not classified as reporting entities do not check lists.

B. Recommended Actions

Immediate Outcome 9

  • Investigate, prosecute, and convict using the TF offense in line with Colombia’s risk profile, including for large scale cases of TF.

  • Investigate identified TF activities with the objective to charge an individual or an organization for TF. Only in situations where it is not practicable to secure a TF conviction, competent authorities should use alternative measures to disrupt potential TF.

Immediate Outcomes 10 and 11

  • Establish and implement freezing mechanisms on TF and PF TFS in line with the standards. These mechanisms should (i) require all natural and legal persons, including all DNFBPS, not only AML/CFT reporting entities, to apply TFS; (ii) require freezing all funds and assets of the listed persons/entities without additional conditions, such as links to illegal activities; (iii) ensure that UNSCRs immediately apply regardless additional investigations or assessments by authorities.

  • Authorities should use the tools provided by UNSCR 1373 to combat TF in line with the country’s risk profile.

  • Identify the subset of NPOs falling under the FATF definition, and identify the features and types of NPOs which are likely to be at specific risk for TF abuse. Apply focused and proportionate measures to such NPOs identified as being vulnerable to TF abuse in line with the risk-based approach.

  • Reach out to the NPO sector to increase its understanding and mitigation of TF risks, and provide further guidance regarding CFT measures and trends.

  • Raise awareness of Colombian authorities and natural and legal persons on the application of the TFS related to PF. Increase coordination amongst authorities involved.

  • Ensure that all financial institutions and DNFBPS are subject to monitoring and sanctions for infringements on TF and PF UNSC Resolutions.

The relevant Immediate Outcomes considered and assessed in this chapter are IO.9–11. The recommendations relevant for the assessment of effectiveness under this section are R.5–8.

C. Immediate Outcome 9 (TF Investigation and Prosecution)

Prosecution/Conviction of Types of TF Activity Consistent with the Country’s Risk-Profile

222. Several domestic criminal organizations commit terrorist acts in Colombia. Subversive groups (GAOS) such as the FARC, the ELN, and the People’s Liberation Army (EPL), as well as BACRIM41 that engage in organized crime activities are among the organizations that commit terrorist acts in the country. The significant number of terrorist acts committed shows that the risk of domestic TF is high.

223. The situation in Colombia regarding TF is complex. The authorities recognize that there are several criminal and subversive groups acting in the territory that have committed terrorist acts. Nevertheless, these groups have never been formally defined as terrorist organizations by the Colombian authorities, nor have been proposed at any level in the international community as such. These groups operate within an armed conflict against the Colombian armed forces that has been recognized internationally for many years. Therefore, the financing of these organizations should not be, according to the authorities, categorized as TF. Only the specific financing of a terrorist attack within Colombia would be considered TF according to the authorities, not the actions taking place within the context of the armed conflict. However, there have been some investigations and prosecutions of TF that focus on this offense regardless of the qualification made by the authorities (in fact the TF offense includes also the financing of these subversive groups without qualifying them as terrorist).

224. The risk of financing foreign terrorist organizations on the other hand has been identified as low by the national authorities. No case occurred or has been prosecuted for the TF of a foreign organization, nor have any links with UNSC-listed persons or organizations been identified. The authorities’ experience regarding TF regards local activities only. The authorities have received some request MLA requests on terrorism from foreign countries, but these were related to Colombian organizations. Nevertheless, the authorities confirmed that there are safeguards in place in the financial system to identify possible suspicions of international TF, and that they are prepared to investigate and prosecute them if any do arise. The main TF risk identified relates to the illegal activities of domestic criminal organizations, including drug trafficking, illegal mining, kidnapping, and oil theft, among others.

225. Colombia prioritizes the fight against the sources of illicit funds of the GAOS and BACRIM over pursuing the TF offense itself, by directly tackling the criminal activity behind the financing of the organization. Authorities understand that to make an impact on the financing of an organization, it is necessary to go after the underlying activity that generates the funds. As a result, Colombia has not been developing stand-alone TF cases and prosecutions commensurate with the risk for TF. The TF offense in domestic cases is investigated and prosecuted in limited circumstances when the person providing the support does not belong to the organization or in some cases members of smaller subversive organizations active in small cities that provide support by means of their local criminal activities. A low number of cases has resulted in convictions (only five since 2013), which is a concern.42 The TF offense (Article 345, CC) encompasses jointly the financing of terrorist organizations and of organized crime groups, so it is not clear if the convictions based on this offense are for financing a terrorist organization or an organized crime group. In fact, judges sometimes use both terms in their sentences.

226. The FGN informed that only 5 persons have been convicted for the TF offense since 2013. These convictions are not linked to a terrorist attack but to persons that collected and provided funds to the GAOS through the commission of crimes, generally extorsion. Although the results in combating the finances of these organizations through the prosecution of the underlying crime have been acceptable, the low number of prosecutions and convictions for TF is not commensurate with Colombia’s risk profile.

227. Colombian authorities explained that the low number of stand-alone TF investigations and prosecutions relates to the fact that the GAOS and BACRIM are not terrorist organizations, and thus they cannot be prosecuted as such. Nevertheless, there is no obstacle to pursue the TF offense even in cases that investigate and prosecute the underlying crime that generates the funds. Moreover, LEAs possess the required skills to address TF at all phases from identification to investigation and prosecution. In Colombia, one action can result in several criminal offenses, one action can violate more than one legally protected interest and so it is possible to prosecute for the underlying offense and for TF, if the funds are provided to a GAOS or BACRIM. Moreover, the criminal offense in Article 345 does not require the categorization of the recipient organization as a terrorist, since the offense encompasses terrorists, GAOS, and criminal organizations altogether. However, the authorities decided not to pursue this offense under Article 345 systematically.

228. Finally, Colombia explained that some TF cases could be covered by investigations and prosecutions under the crimes of “rebellion and illegal association or conspiracy.” The rebellion offense is the crime usually used to prosecute the members of a GAOS or a BACRIM, case laws have been extending the interpretation of the actions included in the definition of rebellion to cover also persons that support these organizations without them wearing a uniform or carrying a weapon. Although, the use of this crime enables the prosecution of TF activities, only 175 persons43 have been convicted for this crime in the last five years (mostly GAOS combatants), and the fact that this crime requires political will to overthrow the government or the constitutional system adds a condition that is not required by the international definition of TF and might also impede international cooperation as the double criminality between rebellion and TF might not be configured.

TF Identification and Investigation

229. The same prioritization and investigation processes established to categorize and pursue criminal activities conducted by the GAOS and BACRIM, analyzed under IO.7 is used in tackling TF activities committed by these organizations. LEAs and the FGN have identified and targeted larger criminal groups that operate in different parts of the country and have a large number of members. The UIAF also has proactively disseminated some TF cases to the FGN.44 TF activities are being identified and investigated, but not prosecuted as TF.

230. The judiciary and the FGN explained that when a person is a member of a GAOS and provides material support to the organization, this person is prosecuted for being part of the organization and not for committing TF. This is supported by the assessment team’s analysis of the convictions, that showed that TF is mostly prosecuted in cases where the person or persons providing support are not part of the subversive or criminal organization. TF cases investigated vary between a few major cases and a larger number of small cases. These cases relate to TF through the support of a subversive or criminal organization by providing materials, information, or any other kind of support; there are no cases involving the provision of money. These investigations identify the specific role played by the terrorist financier.

231. Due to this approach, the number of prosecutions and convictions for TF is very low despite the high threats of internal TF that Colombia faces. The product of many other crimes investigated in Colombia is channeled to GAOS and, therefore, finances terrorism. However, these criminal activities are only prosecuted for the underlying crime that generates the funds.

Providing Weapons to the FARC

During the years 2009 and 2010, a person dedicated himself to selling arms to a FARC front. Executing a search warrant issued based on information obtained mainly by legal wiretapping, the police found illegal arms. This material was later proven to be destined for the FARC.

The court considered that the FARC is a group that executes terrorist acts; also, that the provision of weapons to the FARC represents providing assets and supporting an organization that commits terrorist acts. Therefore, that providing weapons to the FARC constitutes TF. The UIAF, through its reports, collaborated in proving that the buyers were members of the FARC and in establishing the relationship of the accused with those members through the analysis of financial operations.

In addition to the sanctions for arms trafficking, given that the person was a not a member of the FARC he was sentenced to 13 years in prison for a TF offense. 1/

1/ He was also fined 1,300 official minimum wages. In August 2016, this would be roughly equivalent to a fine of US$300,000.

TF Investigation Integrated with—and Supportive of—National Strategies

232. All investigative and prosecutorial efforts on counter-terrorism are closely related to national strategies for combatting the finances of criminal or subversive groups committing terrorist acts. The FGN has a strategy to directly attack the funding sources of these groups. There is good coordination among the competent authorities the FGN in charge of the investigation coordinates its activities with the FIU, competent ministries and supervisory agencies.

233. The financing of criminal or subversive groups committing terrorist acts in Colombia is directly linked to the commission of crimes such as drug trafficking, illegal mining, and theft of fuel and oil. The investigations are integrated in a strategy to attack the sources of illicit funds derived from criminal activities. In that regard, the FGN has signed collaboration agreements with Ecopetrol (the state oil company), and the National Police to strengthen the investigative and prosecutorial capacity related to crimes at the source of TF. In 2015, the FGN approved a Prioritization Plan of the Directorate of Terrorism to prioritize cases more effectively. Nevertheless, the strategy does not include the use of the TF offense to support it.

234. The authorities focus on combatting the GAOS at various levels, including the structure, armed combatants, support networks, and their areas of influence with the purpose of achieving their dismantling, ensuring the investigation of all its members.

235. Authorities are also aware that different GAOS focus on some offenses more than others to finance their activities, depending on the economic activities of the region where they are located. Sources of income are extortion, ransoms for kidnapping, cattle theft, and illegal mining. However, the main source of funding is channeled through direct participation in the drug trafficking chain.

236. Illegal mining in recent years has taken an increasing role in financing. The extraction of gold has been especially profitable for criminal organizations. Authorities are responding by placing an important part of their resources in tackling this illegal activity.

237. The investigations that specifically pursue the TF offense have been relegated to only some specific cases, and thus they have not been used to support the national counter-terrorism strategies and terrorist investigations.45

Effectiveness, Proportionality and Dissuasiveness of Sanctions

238. A review of the cases submitted by the authorities showed that sanctions ranging from 6 to more than 10 years of imprisonment for TF crimes are effective, dissuasive, and proportional.

239. Although the authorities did not present comprehensive statistics on the sanctions imposed, the analysis of domestic TF cases from 2014–2016 showed that convictions on average entailed over 10 years of imprisonment, and fines imposed are near the minimum range (US$300,000). Even in plea bargained cases, penalties imposed exceed seven years of imprisonment, which is adequate regarding the cases analyzed.

240. While legal persons are not criminally liable according to Colombian legislation, penalties for legal persons can be applied upon the conviction of a natural person.46 However, these types of penalties are not imposed frequently and it is unclear how often legal persons are used to commit TF due to the narrow scope of cases prosecuted. The Supersociedades informed the mission that they have imposed administrative sanctions in many cases on corporations linked to the GAOS.

241. According to information presented by the authorities, specifically regarding the FARC, the number of FARC forfeited assets over the period from 2012 to 2016 amounts to 1,798 assets, with an approximate value of US$268.4 million, of which US$158.9 million is the result of actions carried out in 2016 alone.

Alternative Measures Used Where TF Conviction is Not Possible (e.g., Disruption)

242. Colombia places a high importance in the fight against these subversive organizations. This is done by investigating and prosecuting: (i) the fact of belonging to a GAOS; (ii) the illegal activity that finances the organization; and (iii) cases involving ML activities; as well as by using the asset forfeiture mechanism.

243. Colombia makes effective use of other measures to disrupt TF activities without the need to secure a TF conviction (and thus also to confiscate assets and instrumentalities without a TF conviction). In this regard, the FGN provided information on several cases where GAOS and BACRIM were deprived from high-value assets through the asset forfeiture mechanism. This is an expeditious and effective way to recover illegal assets without the need to prove that a criminal act has been committed. These procedures have been used in multiple cases related to TF (see IO.8) without the need to secure a TF conviction.

244. Authorities also point to the coordinated work within the FGN specialized units with the purpose of dismantling TF networks. Both the National Division on Asset Forfeiture and the Directorate of Specialized National Prosecutor against Terrorism coordinate their investigations and exchange relevant information. Moreover, the National Division on Asset Forfeiture developed a specific strategy for pursuing assets related to illegal armed groups through the creation of a working group. This working group follows up criminal proceedings related to the guerrilla, traces the armed group assets, analyzes information and articulates actions with the relevant military intelligence units.

245. Colombia relies on other measures to disrupt TF activities in the country; this work has translated into numerous convictions regarding different crimes related to the GAOS. While these do not constitute alternative measures, they have assisted in disrupting TF activity to some extent. The authorities have not justified pursuing this approach instead of also pursuing the TF offense. In the assessment team’s view there is no impediment to apply to the TF offense in parallel, pursuing also the TF offense would add value to the process and the sanctions imposed.

Table 32.

Persons Related to Terrorist Organizations Convicted by Type of Offense (2012–2016)

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246. There have been some positive results in fighting the financing of these organizations, particularly with the use of other measures to disrupt their finances. These include, pursuing the criminal activity that generates the funds, the use of the rebellion and conspiracy offenses and the positive results of the use of the asset forfeiture actions. Although the authorities are making immense efforts to fight these organizations, more should be done regarding its financing. There is a need to prosecute the TF offense to cover more complex cases and covering a wider scope of financing and support of the terrorist networks acting in the country. The results obtained by the limited pursuit of the TF offense and of the alternate measures are not impacting the GAOS and BACRIM to a significant extent. The TF risk that the country is facing requires a larger number of TF investigations and prosecutions that will result in more convictions for this crime.

Overall Conclusions on Immediate Outcome 9

247. Colombia has achieved a low level of effectiveness for IO.9.

D. Immediate Outcome 10 (TF Preventive Measures and Financial Sanctions)

Implementation of Targeted Financial Sanctions for TF without Delay

248. In the event of a match between a person designated by the UNSC and the existence of assets or funds, a maximum time of 48 hours is considered for executing measures to freeze issued by the FGN. However, the authorities informed the assessment team that simulations carried out with financial institutions determined that the freezing can be achieved in around three hours after the reporting entity detects assets belonging to a listed person. Once the FGN receives information of a match from an institution supervised by the SFC or from the UIAF, it would immediately initiate the process of asset forfeiture as a precautionary measure pursuant to the AFL (Law 1708 of 2014). The FGN considers that the fact of being included in the sanctions list are sufficient grounds to believe a TF offense has been committed, which meets the requirement for commencing asset forfeiture proceedings (see R.6). Most DNFBPs are not reporting entities and are not required to check UN lists, among others.

249. To expedite this process, all parties to the Inter-Administrative Agreement have created a dedicated email address to receive notifications, and the UIAF has established an automatic mechanism for searching designated persons or entities in its own database to immediately inform the FGN in case of a match. In addition, the UIAF has developed a process that automatically searches the UN lists every 12 hours and crosses them with all its databases to detect any listed natural or legal person. In case of a positive match, the system automatically sends an email to the referred dedicated email address. This process is fully automated, runs every day of the year, and does not require any action from the UIAF staff.

250. No notifications have been received to date relating to assets or funds belonging to persons designated pursuant to UNSCRs 1267, 1989, and 1988. The authorities have not yet designated any person domestically under UNSCR 1373. It was indicated that no requests from foreign countries have been made to Colombia to initiate freezing actions against assets of a listed person or entity. In case of receiving a request from a foreign country and that the analysis of the FGN is favorable, the FGN will issue the asset forfeiture order.

251. No assets or instrumentalities of terrorists, terrorist organizations, and terrorist financiers have been frozen or forfeited. At the time of the onsite, no financial institutions had identified any positive matches against the Consolidated List, and no accounts or transactions have been frozen. As described earlier, the Colombian TF threat emanates from domestic armed groups. It has not been established to date that resources or funds from international terrorist organizations has circulated through the Colombian financial system.

Targeted Approach, Outreach and Oversight of At-Risk Nonprofit Organizations

252. Colombia’s understanding of the TF risk in relation to the NPO sector is limited. Colombia has a broad and diverse NPO sector, comprised of a significant variety of different legal forms and different bodies are responsible for their regulation and oversight. 263,506 NPOs are registered under the competent Chambers of Commerce and 6,335 religious NPOs are registered under the Ministry of Interior. By 2016, 70,554 NPOs in activity have been assigned a Single Tax Registration Form (RUT) by the DIAN, to obtain tax exemptions. NPOs are required to register at the district level in locations where their operations take place as well.47

253. At the time of the onsite visit, Colombia had not conducted a review of the NPO sector to identify the subset of organizations falling under the FATF definition nor had identified the features and types of NPOs which are likely to be at specific risk for TF abuse. While the 2016 NRA provides some relevant information on ML/TF risks, the assessment is mostly focused in the domestic context and considers certain vulnerabilities related to a limited set of NPOs. According the 2016 NRA, NPOs are a low risk of TF. Strategic and sectoral studies conducted by the UIAF are a positive step, although TF risks of NPOs defined by the FATF are not particularly addressed. This prevents the country from applying effective, focused and proportionate measures to NPOs vulnerable to TF abuse, in line with the risk-based approach.

254. During the onsite visit, the assessment team noted that there was not a clear understanding of the TF risk faced by the NPO sector, particularly with respect to those NPOs involved in international funds transfers and foreign NPOs.

255. Oversight of NPOs by supervisors such as Coldeportes, Supersolidaria, Supersalud, and the Mayor’s Office of Bogota is not targeted on CFT matters nor is it based on TF risk.

256. Competent authorities have adequate legal powers to gather relevant information from NPOs and have the capability to act against those entities which are suspected of TF. However, more sustained engagement with the NPO sector is needed to understand and effectively mitigate the TF risks. Further guidance regarding CFT measures and trends is needed as well.

257. Authorities have conducted some training activities and meetings aimed at NPOs covered by the AML/CFT legal framework. However, further awareness on TF risks among the NPO sector is needed, particularly for those NPOs beyond those subject to AML/CFT requirements. Colombia has demonstrated a low level of effectiveness in implementing a targeted approach, conducting adequate outreach and oversight of at-risk NPOs.

Deprivation of TF Assets and Instrumentalities

258. The authorities have defined the deprivation of the finances of BACRIM and GAOS (particularly the FARC) as a strategic objective. Colombian authorities have been employing the AFL to forfeit assets of individuals convicted of TF or the administration of resources related to terrorist activity (see IO.9). From 2011 to 2015 there have been 20 asset forfeiture proceedings, with 96 individuals convicted for FARC-related TF during the same period.

259. Both the FGN and DIJIN are adequately resourced, trained and have mechanisms to quickly identify terrorist assets. In that regard, the FGN has prioritized dismantling the economic and financial structures of the FARC. The value of the assets forfeited from FARC from 2011 to March 2017 amounted to US$376,701,578. This amount is significant and in line with the risk posed by TF by the FARC.

Consistency of Measures with Overall TF Risk Profile

260. Colombian authorities focus their TF efforts and resources on the national terrorism threat, which is considered high. The threat from foreign terrorist organizations is considered low by the authorities as there have not been found to be operating in Colombian territory.

Overall Conclusions on Immediate Outcome 10

261. Colombia has achieved a moderate level of effectiveness for IO.10.

E. Immediate Outcome 11 (PF Financial Sanctions)

Implementation of Targeted Financial Sanctions Related to Proliferation Financing without Delay

262. The mechanisms for identification of funds/assets described for IO.10 partially apply for IO.11. However, the obligation set in the law for reporting entities to monitor the lists and inform authorities and UIAF of the presence of listed persons/entities, funds or property is only related to “international lists of persons and entities associated with terrorist organizations,” (i.e., for designated by UNSCRs related to terrorism and TF, as discussed under IO.10). In addition, the law makes no reference whatsoever to any obligation for the private sector regarding checking designations by UNSC lists on PF. Therefore, TFS obligations on PF for each type of entity differ depending on the enforceable regulations issued by the supervisors:

  • For financial institutions under the SFC (not all the financial institutions), obligations on PF-WMD are laid down in the Basic Legal Circular, SARLAFT. The Inter-Administrative Cooperation Agreement contains the obligations for the SFC.

  • For other reporting entities, obligations are set out in instructions and circulars recently issued by Supersociedades, SNR, and Coljuegos.

  • For individuals and entities not classified as reporting entities, as is the case for most DNFBPS, there are no specific obligations regarding designated persons on PF-WMD Resolutions.

263. None of these instructions include any obligation to freeze funds or assets of designated persons on PF-WMD. In order to adopt any possible freezing action, the reporting entities must receive an order of precautionary measure issued by the Prosecutor Office, FGN, pursuant to the AFL judicial process, as described in R.7 and the discussion for IO.10.

264. Reporting entities must monitor the lists of the UNSCRs, including PF lists, and inform the authorities in case of a match. In such case, according to the Colombian authorities, the AFL freezing procedure described for IO.10 would also apply for freezing actions on PF, but it has never been applied in practice. However, the assessment team noted that AFL freezing measures can only apply to goods and assets linked to criminal offenses or to those activities48 that deteriorate social morality for which a law expressly provides so. Consequently, AFL freezing orders could not be issued for assets of designated persons/entities in PF Resolutions simply because being listed by the UNSCRs on PF is not a crime. Moreover, it does not imply a link to any criminal offense, and there are no legal provisions in Colombia authorizing AFL measures for listed persons/entities in the PF UNSCR.

Identification of Assets and Funds Held by Designated Persons/Entities and Prohibitions

265. There have not been any identification of assets/funds held in Colombia under the PF or under any other UNSCR. No information has been received from the authorities on any case of request for transfer or sale of conventional weapons and related material or material articles, equipment, goods, and technologies related to the PF-WMD programs indicated in the UNSCRs. Financial and trade flows with Iran and DPRK are not economically relevant (e.g., US$1.2 million exports to Iran in 2015) and exposure to PF risks does not appear to be significant.

266. The Colombian system permits freezing of funds/assets that are directly or indirectly proceeds of an “illegal activity” or those that form part of an unjustified equity increase when there are grounds to prove they come from illegal activities. The assessment team notes that freezing measures may only extend to lawful assets if the specific causes listed in the law occur: when licit assets are used to conceal goods of illicit origin, when licit assets are mixed with goods of illicit origin, and when licit assets have an equivalent value to that of illicit goods that cannot be located. Therefore, freezing cannot include all funds/assets owned or controlled by the designated persons/entities in all circumstances, since possible freezing of assets with licit origin is limited to the specific circumstances listed in the AFL.

Financial Institutions and DNFPBs’ Understanding of and Compliance with Obligations

267. During the onsite visit, some financial institutions, mainly banks, seemed to be aware of their obligations of routinely monitoring UNSCR lists, including PF, but no persons/entities were identified at the time of the visit. The level of awareness is lower in other sectors, especially DNFBPs, because monitoring UNSCR lists is only required for those classified as reporting entities under Colombia’s AML/CFT legislation, and since many DNFBPs are not classified as AML/CFT reporting entities, they do not check UN lists

268. Colombian authorities informed the mission of a TFS simulation exercise to test the effectiveness of measures for the identification of designated persons and adoption of freezing actions without delay. The exercise was carried out with the participation of many financial institutions and the relevant authorities. A one-day workshop was also held in 2016 on freezing funds and assets which included elements on TFS. However, no specific guidance has been released for any sector to ease the application of PF UNSCRs TFS in the country.

269. Following SAGRLAFT, Supersociedades may design and define templates that must be used and complied for TFS matters by the entities under its supervision. These templates might be adjusted according to the characteristics of each industry or economic sector of the different types of companies, but at the time of the onsite visit nothing had been issued by the supervisors.

Competent Authorities Ensuring and Monitoring Compliance

270. There are several authorities in charge of ensuring application of PF sanctions. The MINREX, through the Directorate of Multilateral Political Affairs, disseminates information on PF UNSCR among national authorities (UIAF, SFC, Supersociedades, and others) responsible for ensuring and monitoring compliance, but some communications were not conducted in a timely manner. Trade restrictions are monitored and authorized by the Ministry of Defense and Industria Militar49 (for authorizations on any dual materials or weapons); by the DIAN (for customs controls of all trading activities with countries on TFS Resolutions and for materials and equipment listed in the UNSCRs), Ministry of Commerce, Maritime General Directorate, Civil Aviation Directorate, among others.

271. There are legal prohibitions and restrictions for the importation of goods from countries on which the UNSC has imposed measures in this matter and Colombian foreign trade operators need to have in place mechanisms of PF prevention and risk management determined by the DIAN to obtain the customs authorizations to operate.

272. To coordinate possible actions, on March 2011, an Inter-Institutional Committee was established to review, monitor and promote compliance with the requirements established by the UNSCRs related to PF-WMD. This committee acted as a centralized unit for permanent consultation, information exchange and technical advisor. Also, since 2015, a sectoral commission called National Authority for Prohibition of Development, Production, Storage and Use of Chemical Weapons was created with participation of several ministries.

273. The DIAN oversees monitoring PF trading obligations and sanctioning infringements, and the SFC monitors financial institutions’ compliance with their obligations of checking PF lists. This is performed as part of the inspection process of the AML/CFT obligations based on the SARLAFT, but there are no specific supervisory activities on PF. The SFC can issue instructions and sanctions for noncompliance of these duties, but no specific instructions have been issued in this matter. As for the other reporting entities, there are no activities on monitoring compliance related to nor is there for TFS obligations on PF. Once again, it must be noted that most entities of the DNFBPs supervised by Supersociedades are not included as reporting entities and are not monitored in their AML/CFT obligations.

274. Supervisors can only supervise and sanction compliance with monitoring lists and notification obligations. However, they cannot sanction infringements on freezing obligations ordered by prosecutors under AFL, since this is part of a judicial process. Breaches of prosecutor’s orders could only be supervised and sanctioned by the Prosecutor’s Office.

275. It must be noted that according to different documents provided to the assessment team at the time of the onsite visit, the authorities were not aware of the changes to the regime of the UNSC sanctions of Iran contained in UNSCR 2231

Overall Conclusions on Immediate Outcome 11

276. Colombia has achieved a low level of effectiveness for IO.11.

Preventive Measures

A. Key Findings

  • Overall, financial institutions have a reasonable understanding of the ML risks and AML obligations. DNFBPs, except for casinos, have a lower level of awareness of ML risks and obligations compared to financial institutions.

  • Colombia has brought most of the categories of DNFBPs under the existing AML/CFT framework. However, law firms, accounting firms, the real estate sector, and dealers in precious metals and stones (except for gold dealers) are not covered.

  • There are significant legal and regulatory gaps as well as serious deficiencies in implementation of CDD and enhanced risk mitigation measures under the existing AML/CFT framework that negatively impact the overall effectiveness of preventive measures by reporting entities.

  • Implementation of CDD and risk mitigating measures, including for BOs, within most financial institutions appear low. MVTS are not consistently maintaining records of the information, and documentation obtained to identify and verify the identity of the customer.

  • Financial institutions and DNFBPs have established risk management systems in line with the obligations established by the SARLAFT or equivalent systems considering their size, complexity of operations, and other factors.

  • While most financial institutions that are subject to the core principles seem to be complying with the requirements to report suspicious transactions, the volume of reporting by the DNFBPs, including categories considered high risk, is negligible because of lack of awareness.

  • Financial institutions and DNFBPs seem reluctant to and, in some cases, unaware of the obligation to report to the UIAF attempted transactions when they are not able to able to match customer information to the government-issued identity card during the CDD process.

B. Recommended Actions

  • Work closely with the financial sector and DNFBPs to increase the level of awareness and understanding of potential ML and TF risks, and improve the volume of STRs.

  • Revise the existing framework to establish the obligation to conduct CDD in law; fully extend the AML/CFT obligations to the real estate sector, all law firms, accounting firms, and dealers in precious metals and stones; explicitly designating in the law the PTOs as reporting entities subject to all AML/CFT obligations; establishing an obligation on savings and loans cooperatives and notaries to identify and verify the identity of the BO when establishing a business relationship; enhancing the process for determining the BO in line with the standard, and addressing other technical shortcomings identified in the Technical Compliance Annex.

  • Place additional supervisory efforts to ensure that financial institutions and DNFBPs have a thorough understanding of their obligations and implement enhanced risk mitigation measures, when needed.

  • Ensure that risk management systems to be developed, adopted, and implemented by real estate agents, lawyers, accountants, and professionals engaged in the purchase and sale of foreign currency are adequate, consider the results of the 2016 NRA, and include comprehensive AML/CFT measures in line with the inherent risks of their respective sectors.

The relevant Immediate Outcome considered and assessed in this chapter is IO.4. The recommendations relevant for the assessment of effectiveness under this section are R.9–23.

C. Immediate Outcome 4 (Preventive Measures)

Understanding of ML/TF Risks and AML/CFT Obligations

277. Financial institutions have a reasonable understanding of their ML risks and AML/CFT obligations as imposed by the existing legal and regulatory regime. However, the level of understanding of ML risk and AML/CFT obligations for DNFBPs is considered basic. Financial institutions’ understanding is facilitated by the development, adoption, and implementation of a comprehensive risk management system for AML/CFT known as the SARLAFT. The SARLAFT was established by the SFC and applies to all institutions under its supervisory responsibility. The SARLAFT consists of two phases. The first one corresponds to risk prevention, and the second one corresponds to the control environment. For purposes of the SARLAFT, institutions must consider at least the following risk factors: customers and users, products, distribution channels, and jurisdictions which is in line with the standard.

278. In complying with the obligations established by the SARLAFT, financial institutions provided the assessment team with documentation supporting the risk management systems developed, adopted, and implemented that comprise the following stages: identification, measurement or evaluation, control, and monitoring of ML/TF risks. Within these stages, financial institutions have developed customized policies, internal and operating procedures, recordkeeping requirements, organizational and operational structures, established management committees and/or control bodies, established technological infrastructure that interfaces with the core activities system by sector, adopted disclosure of information procedures, risk-rating criteria and heat maps, and training programs. Although the requirements of the SARLAFT or equivalent system also extend to DNFBPs, in terms of TF risks and coverage of TF in evaluating the four risk factors, this is considered low, reflecting an insufficient understanding and awareness due in part to the recent modifications (established on December 2016) to the regulations applicable to DNFBPs that came into effect at the end of September 2017. Among financial institutions and DNFBPs, TF understanding is limited to the implementation of the UNSCR and OFAC lists. The authorities argued that in the case of Colombia, TF is considered as an internal threat and not as an international one.

279. During the recent NRA exercise, many financial institutions participated and contributed to the NRA and validated the threats and vulnerabilities identified within their sectors (drug trafficking, corruption, illegal mining, and smuggling). Meetings with representatives from financial institutions revealed a widespread practice used across all sectors when determining the customer risk profile. This included using the International Standard Classification System (Clasificacion Industrial Internacional Uniforme—CIIU), as the first step in the process for categorizing customer risk. In addition to the CIIU, financial institutions, and DNFBPs apply other criteria to determine the final inherent risk with customers. Other criteria are also applied to determine the inherent risk identified within products, distribution channels, and jurisdictions, as required by the SARLAFT.

280. As implemented the CIIU provides for a systematic, consistent, and uniform classification of all economic activities related to the different customer categories. In addition to the CIIU, when determining risks inherent in geographic areas, institutions made use of various external sources like: (i) a report compiled by the national police highlighting predicate offenses within the 32 municipalities in Colombia; (ii) reports from the UNODC related to drug zones; (iii) countries listed by the FATF and reports published by the UIAF; (iv) information obtained from the national security agency; and (v) information available from the Attorney General’s Office.

281. The SARLAFT and other equivalent risk management systems applicable to other sectors together with the CIIU methodology as implemented, have generated a long list of categories of customers (mainly based on their economic activities) classified as “high risk” which are commonly included in the institutions’ policies. These include: mining, casinos, real estate (including real estate developers/construction), cash intensive businesses, currency exchange businesses, businesses involved in the buying/selling of arms, businesses involved in the creation of web pages, adult entertainment businesses, telecommunications, gaming, former FARC members, money remitters, pawnshops, political action committees (PACs), notaries, lawyers, chemical companies, politically (and publicly) exposed persons, NPOs, and embassies.

282. In determining customer risk categories, the SARLAFT provides a general framework that allows institutions to develop their own risk management systems. In practice, institutions have developed, adopted, and established a variety of risk-rating systems ranging from a three-risk level categorization (low, medium, and high), to others adopting categories with up to eight levels of risk. Supporting evidence of their risk management systems and meetings with representatives from financial institutions indicated that the scope and application of their preventive measures regimes, including for simplified and enhanced CDD measures, are implemented in line with the risk category assigned to their customers. The assessors are of the view that although comprehensive risk management systems and technical resources have been invested in developing these system, additional adjustments/calibrations are needed in some instances to better customize the systems to the customer categories, and complexity of activities and operations undertaken by the institutions. Furthermore, considering the many and diverse risk-rating levels and scales currently adopted by the institutions, additional guidance and training is needed. This will ensure consistency and uniformity in the development and application of the SARLAFT and equivalent risk management systems.

283. With respect to DNFBPs, the level of awareness and understanding of ML risks and AML/CFT obligations is lower than that of financial institutions. Casinos were the only exception, with an awareness of the vulnerabilities and ML risks to which their sector is exposed. A major contributor to this low level of awareness and understanding among DNFBPs is that many of the enhancements to existing AML/CFT regulations requiring risk management systems and obligations were established at the end of December 2016, and some were not in force until September 2017.50

284. Regulations addressing risk management systems like the SAGRLAFT imposed by the Supersociedades in December 2016, on real estate companies, law firms, accounting firms, professionals engaged in the purchase and sale of foreign currency are too recent to adequately assess effectiveness. On a positive side, meetings with representatives from some of the DNFBP sectors revealed that the CIIU is also considered as the first step for categorizing customers as part of the process for assigning a customer risk profile when establishing business relationships, which in line with the approach used by financial institutions. Going forward, additional oversight is needed to ensure that all revisions to the obligations, risk management systems, and policies are adequately developed in line with the four risk factors and effectively implemented when the regulations come into effect.

285. There are several categories of DNFBPs that under the existing AML/CFT framework are not considered reporting entities, and are not subject to the AML/CFT obligations until their financial activities surpass a pre-determined threshold. In practice, most of these DNFBPs do not understand ML/TF risks and AML/CFT obligations in Colombia as confirmed during meetings conducted. These include the real estate sector, lawyers, and accountants. Moreover, dealers in precious metals and stones are not designated as AML/CFT reporting entities. None of these DNFBPs participated or contributed to the NRA exercise process. In addition, understanding of TF seems less evident, and mostly focused on the internal threats, among both financial institutions and DNFBPs. The understanding of TF risk, based on the meetings held, was mostly limited to complying with the obligations related to the implementation of the UNSCRs and OFAC lists.

286. On a positive note, Colombia has designated other high- to medium-risk non-financial institutions as reporting entities that go beyond those listed in the FATF Recommendations. These are: games of chance (lottery, permanent betting, and equestrian betting), mining and quarrying, car dealers and football clubs that are subject to the AML/CFT obligations, only after surpassing the established income threshold.

Application of Risk Mitigating Measures

287. As indicated above, financial institutions subject to the SARLAFT or equivalent risk management systems are, at a minimum, required to develop, adopt, and establish: policies, procedures, documentation requirements, organizational structure, control mechanisms, technological infrastructure, mechanisms for disseminating information, and training. As established, the SARLAFT and equivalent systems only provide a general framework and overarching obligations of what financial institutions are required to have in place, as such, the policies, procedures, controls, IT, risk criteria and heat maps, platforms and training programs differed among financial institutions as expected. Representatives from financial institutions indicated that, regardless of their size, complexity of activities and operations, lines of business, and other factors, all financial institutions are required to comply with the core obligations established by the SARLAFT-equivalent systems. Private sector representatives indicated that for many years now their institutions have dedicated significant resources in terms of time, IT systems, and human resources to develop and implement risk management systems in line with their size, complexity, and operations (including those with a presence abroad) and that their current initiatives included calibrating those risk management systems to take into account recent changes in operations, products, presence in new jurisdictions, and revisions to the regulatory framework.

288. In determining and assessing the level of understanding and compliance by financial institutions with respect to the sound and effective implementation of their risks management systems and controls, the authorities provided the assessment team with a sample of 22 inspections reports. These inspection reports, as indicated by the authorities, reflected their ML/TF risk perception with respect to each financial institution inspected. That is, these financial institutions were selected for an inspection visit, because their ML/TF risk profiles, as assessed by the authorities resulted in high to medium-high risk exposures. The inspection reported covered the following institutions:

Table 33.

Risk Profiles of Financial Institutions

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289. A review of these inspections reports, which reflected a comprehensive implementation of supervisory procedures, revealed shortcomings in several areas of the financial institutions’ preventive regimes. To address these shortcomings, the authorities implemented corrective measures and actions through formal action plans specific actions and timelines. However, there was no indication that sanctions had been imposed on any of these institutions. A summary of the most common findings, by sector is presented below.

Table 34.

Findings of Supervision of Financial Institutions

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List of shortcomings:

1—implementation of the SARLAFT or equivalent risk management system

2—implementation of CDD measures (including customer information updates)

3—internal audit

4—compliance officer

5—detection, analysis of unusual transactions and/or reporting suspicious transactions

6—IT systems (including limitations with respect to UNSC lists’ consultations)