The legal framework that defines anti-money laundering (AML) and combating the financing of terrorism (CFT) measures in Honduras is generally effective, according to a 2004 World Bank report. Despite this rather positive outlook projected by the World Bank report, there is little in this report that actually identifies Honduras' compliance with the Financial Action Task Force's 40+9 recommendations and special recommendations. Moreover, the report mentions several deficiencies in the Honduran AML/CFT regime, of which the lack of proper legislation criminalizing the financing of terrorism as a separate offence is the most glaring. The World Bank also suggested that the resources and skills of the staff of the supervisory agencies need to be improved. A 2008 report by the U.S. Department of State indicates that Honduran authorities are in the process of making amendments to its legislation so as to bring the country in line with international standards. The International Monetary Fund's 2006 report also refers to the efforts the authorities are making to improve the country's AML/CFT regime. The Honduran financial intelligence unit (FIU), called Unidad de Información Financiera, is a member of the Egmont Group.

General Overview

The World Bank in a 2004 report commented that "even though an effective legal framework to combat money laundering and the financing of terrorism is in place, the institutions involved in these areas need to be strengthened" (p. xv). The report goes on to point out several deficiencies in the anti-money laundering (AML) and combating the financing of terrorism (CFT) framework in the country. The most noticeable of these shortcomings is the lack of legislation criminalizing the financing of terrorism as a separate offense. Other significant deficiencies were the lack of resources, skills, and experience exhibited by the supervisory institution in the areas of AML and CFT. A 2008 International Narcotics Control Strategy Report by the U.S. Department of State (DoS) noted that the Honduran Congress "is currently considering legislation that, if adopted, would bring the government of Honduras up to international legal standards for illicit financing, including money laundering and terrorist financing." The report indicated that in 2007, the National Banking and Insurance Commission (NBIC), the Honduran financial sector regulator, proposed amendments to the AML legislation and recommended revising the penal code to incorporate the criminalization of terrorist financing. In a 2006 report, the International Monetary Fund also referred to efforts by Honduran authorities to improve the country's AML/CFT regime.

According to the 2008 DoS report, money laundering has been a criminal offense in Honduras since 1998. Law No. 27 of 1998 criminalizes the laundering of narcotics-related proceeds. The anti-money laundering framework was further strengthened by Decree No. 45 of 2002, which expanded the definition of money laundering and related crimes by including transfer of assets obtained from trafficking of drugs, arms, human organs or persons, auto-theft, kidnapping, financial fraud, and terrorism. The penalty for money laundering is 15 to 20 years imprisonment. Decree No. 45 created the Honduran financial intelligence unit, the Unidad de Información Financiera (UIF), which is housed within the NBIC. The NBIC has proposed amendments to the AML legislation that would give the UIF "oversight for collecting all suspicious transactions reports [STRs], and expand the scope of entities required to report suspicious transactions to the UIF beyond the financial scope" of the NBIC. These amendments, if and when adopted, will also empower the UIF to analyze and present these STRs to prosecutors. Additional laws dealing with money laundering include Decree No. 129 of 2004, which defines the responsibilities of banks to report information to the supervisory authorities and provisions regarding confidential information.

As noted in the 2008 U.S. DoS report, Decree No. 45 also strengthened the asset seizure provisions and established the Office of Seized Assets (OABI), which is authorized to "guard and administer all goods, products, or instruments of a crime and requires money seized or money realized from the auctioning of seized goods to be transferred to the public entities." However, the report observed that the OABI is poorly administered and the redistribution of money obtained from seized assets is often politically motivated. Also, the report found the law ambiguous with regard to seizure of laundered money from legitimate business enterprises.

Other law enforcement agencies responsible for supervising AML/CFT activities in Honduras are the Public Ministry of Honduras, the Attorney General's Office, and the police. The 2008 DoS report noted that "prior to 2004, there had been no successful prosecutions of crimes specifically labeled as money laundering in Honduras. Between 2004 and 2006, prosecutors obtained 11 convictions. Prosecutors initiated legal proceedings in eight cases in 2007, all of which are still ongoing, and obtained two additional convictions from prosecutions initiated in 2005." The DoS report adds that Honduras is a party to the 1988 United Nations (UN) Drug Convention and the UN Convention against Transnational Organized Crime, the UN International Convention for the Suppression of the Financing of Terrorism, and the Organization of American States (OAS) Inter-American Convention on Terrorism. Additionally, Honduras is a member of the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Group of Experts to Control Money Laundering, and the Caribbean Financial Action Task Force (CFATF). In 2005, the UIF became a member of the Egmont Group. Furthermore, the DoS report pointed out that Honduras has signed memoranda of understanding (MoU) on money laundering-related investigations with Panama, El Salvador, Guatemala, Mexico, Peru, Colombia, and the Dominican Republic.

The Principles

1. Legal Systems and Related Institutional Measures

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There is little information publicly available addressing Honduras' compliance with the FATF's requirements relating to this principle. According to the 2008 DoS report, money laundering has been a criminal offense in Honduras since 1998. Law No. 27 of 1998 criminalizes the laundering of narcotics-related proceeds. The anti-money laundering framework was further strengthened by Decree No. 45 of 2002, which expanded the definition of money laundering to cover offences involving the transfer of assets that proceed directly or indirectly from trafficking of drugs, arms, human organs or persons, auto theft, kidnapping, bank and other forms of financial fraud, and terrorism. Terrorist financing, in Honduras, is not yet defined as a separate crime but the NBIC has proposed amendments to the penal code that would achieve this. The 2008 U.S. DoS report noted that the Honduran Congress "is currently considering legislation that, if adopted, would bring the government of Honduras up to international legal standards for illicit financing, including money laundering and terrorist financing." Also, according to this report, Honduras is a party to the 1988 UN Drug Convention (the Vienna Convention) and the UN Convention against Transnational Organized Crime (the Palermo Convention).

Per the 2008 DoS report, the confiscation and seizure regime in Honduras was further strengthened by Decree No. 45 which also established the OABI. However, the report found that Decree No. 45 does not clarify seizure procedures with regard to legitimate businesses. As of December 2006, the total value of assets seized since Decree 45 came into effect was approximately U.S. $5.7 million, which was a decrease from 2007. Although the Ministry of Affairs (or Secretariat of Foreign Affairs) is empowered to issue freeze orders for organizations and individuals listed under the United Nations Security Council Resolution 1267, most of the seized assets are derived from crimes related to drug trafficking and none connected to terrorist activity.

Decree No. 45 established the UIF within the NBIC. Banks and financial institutions must report any suspicious transactions to the UIF and also maintain registry of reported transactions for five years. Other law enforcement agencies responsible for supervising AML/CFT activities in Honduras are the Public Ministry of Honduras, the Attorney General's Office, and the police. However, the DoS report found that these agencies lack resources, training and personnel. Further, there is lack of co-ordination among these various agencies which, according to the DoS, the Honduran authorities have sought to rectify. The DoS report points to the failed attempt in creating a coordinating body, the Interagency Commission for the Prevention of Money Laundering and Financing of Terrorism (CIPLAFT). Decree No. 45 also mandates that persons entering or leaving Honduras declare all cash and convertible securities in excess of US$10,000.

2. Preventive Measures - Financial Institutions

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Per the 2008 U.S. DoS report, AML requirements apply to all financial institutions that are regulated by the NBIC, including state and private banks, savings and loan associations, bonded warehouses, stock markets, currency exchange houses, securities dealers, insurance companies, and credit associations. The report further states that, in accordance with Decree No. 45, banks are required to know the identity of all clients and depositors. Furthermore, negligence or carelessness leading to money laundering is punishable for 2 to 5 years imprisonment. Decree No. 129 requires that financial institutions keep customer information confidential. However, providing information requested by supervisory or legal authorities is not regarded as an "improper divulgence." Banks and financial institutions are required to report any suspicious transactions and all transactions over US$10,000 to the UIF. Moreover, a registry of reported transactions must be maintained for five years.

With regard to wire transfers, the DoS report noted that remittance inflows comprise 25 percent of the Honduran GDP and that "remittances are increasingly sent through wire transfer or bank services." Although half the remittance money to Honduras may involve money laundering, the report observed that the UIF lacked the oversight capacity to investigate remittance companies. Apart from the above descriptive information, however, there is little information publicly available that directly addresses Honduras's compliance with the FATF's recommendations relating to this principle.

3. Preventive Measures - Designated non-Financial Business and Professions

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There is very little information publicly available regarding Honduras's compliance with the FATF's recommendations that comprise this principle. The 2008 U.S. DoS report notes that casinos are supervised and regulated for AML activities.

4. Legal Person and Arrangements & Non-Profit Organizations

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There is insufficient information publicly available as to Honduras's compliance with this principle.

5. National and International Co-operation

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According to the 2008 U.S. DoS report, Honduras is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, and the UN International Convention for the Suppression of the Financing of Terrorism. Honduras is also party to the OAS Inter-American Convention on Terrorism. Additionally, Honduras is a member of the OAS/CICAD Group of Experts to Control Money Laundering and the Caribbean Financial Action Task Force (CFATF). In 2005, the Honduran UIF became a member of the Egmont Group. The DoS report noted that Honduras cooperates with U.S. investigations and requests for information pursuant to the 1988 United Nations Drug Convention and has also signed MoUs on money laundering related investigations with Panama, El Salvador, Guatemala, Mexico, Peru, Colombia, and the Dominican Republic. However, there is little information publicly available that directly addresses Honduras's compliance with the FATF's recommendations relating to this principle.