Based on information in a 2005 joint report by the Financial Action Task Force (FATF) and the Financial Action Task Force of South America (GAFISUD), Peru complies with most of the legal and institutional requirements of the FATF. The major recommendation identified by the report is that the country fails to comply with Special Recommendation III, dealing with the freezing of funds used for terrorist financing. An earlier report (2004) by the FATF indicates that authorities in Peru were, at the time, making changes to Peru's anti-money laundering (AML) regime so as to incorporate international standards. The 2007 U.S. Department of State (DoS) report also arrives at the same conclusion, and indicates that Peru has made significant progress recently, in strengthening its AML regime. Law No. 27.765 of 2002 criminalizes money laundering in Peru. The 2007 U.S. DoS report indicates that the Financial Intelligence Unit of Peru is responsible for receiving and analyzing suspicious transaction reports filed by financial institutions and that the Government of Peru is a member of several international organizations. However, the 2007 U.S. DoS report did mention several deficiencies in Peru's AML and the combating the financing of terrorism (CFT) regime, the most obvious being the lack of a proper definition for terrorist financing that is in line with the United Nations Convention.

General Overview

According to a 2005 joint mutual evaluation conducted by the Financial Action Task Force (FATF) and the Financial Action Task Force of South America (Grupo de Acción Financiera de Sudamérica, or GAFISUD), Peru complies with 11, largely complies with 23, partially complies with 11, and does not comply with 3 of the FATF Recommendations (R) and Special Recommendations (SR) on Anti Money Laundering (AML) and Combating the Financing of Terrorism (CFT). The report indicated that Peru was non compliant with R 20 relating to other designated non-financial businesses and professions; R 24 relating to the regulation and supervision of designated non-financial businesses and professions; and SR 3 relating to freezing of funds used for terrorist financing.

Information in the 2005 FATF/GAFISUD report indicates that regarding recommendations R1 and R2 relating to the criminalization of money laundering Peru 'largely complies' and 'complies' respectively and Peru largely complies with SRII dealing with the criminalization of terrorist financing.

The FATF provides information on Peru's AML and CFT regime in its 2003-2004 Annual Report's Annexes. However this report is based on the 2002 FATF methodology, which was updated in 2004. Based on the FATF's 2004 report, Peru's AML regime partially complies with the 40 recommendations of the FATF. The report also mentions that Peru's AML regime is in transition, and changes are being incorporated that are in line with international standards.

A 2007 report by the U.S. Department of State (DoS) has arrived at similar conclusions, stating that the "Government of Peru has made advances in strengthening its anti-money laundering regime in recent years." However, the report also mentions areas where improvements can be made, particularly the establishment of a proper definition for terrorist financing that is in line with the United Nations Convention. According to the same U.S. DoS report, money laundering is criminalized in Peru by Law 27.765 of 2002. The report adds that there have been significant improvements to the AML regime since the enactment of the 2002 Law, such as expanding the number of crimes and the scope of penalties imposed by the authorities for these crimes.

The Financial Intelligence Unit of Peru (Unidad de Inteligencia Financiera, or UIF) was set up in June 2003 and is responsible for receiving, analyzing, and disseminating suspicious transaction reports filed by financial institutions such as banks, insurance companies, stock funds and brokers, stock and commodities exchanges, credit and debit card companies, money exchange houses, and mail and courier services. According to Law No. 29038 of June 2007, the UIF-Peru has been incorporated to the Superintendence of Banks, Insurance and AFP. The U.S. DoS report of 2007 further states that Peru is party to several international conventions and the Government of Peru is a member of GAFISUD, the Egmont Group of financial intelligence units, and the Organization of American States Inter-American Drug Abuse Control Commission Money Laundering Experts Working Group.

The Principles

1. Legal Systems and Related Institutional Measures

EN

Information in the 2005 FATF/GAFISUD report indicates that on recommendations R1 and R2 relating to the criminalization of money laundering, Peru 'largely complies' and 'complies' respectively. Money laundering is criminalized in Peru per Law 27.765 of 2002 and the 2007 U.S. DoS report states that, since the enactment of the 2002 law, there have been substantial changes to the money laundering regime in Peru. For example, the definition of money laundering has been broadened beyond crimes associated with drug trafficking and now includes crimes such as laundering of assets related to all serious crimes like narcotics trafficking, terrorism, corruption, trafficking of persons, and kidnapping. The report adds that "Peru is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime."

The 2005 FATF/GAFISUD report mentions that Peru largely complies with SRII dealing with the criminalization of terrorist financing. The 2007 U.S. DoS report notes that Executive Order 25.475 and Law 28.306 of July 2006 criminalize terrorists financing. However, the report adds that Peru does not comply with SRIII on the freezing of funds used for terrorist financing. Accordingly, freezing of funds is not regulated and there is no system available to apply the United Nations' resolutions. The 2007 U.S. DoS report comments that "terrorism has not yet been specifically and correctly established as a crime under Peruvian legislation as mandated by the United Nations (UN) Convention." Nonetheless the report notes that the authorities are working on several bills to correctly define terrorist financing.

Peru only partially complies with R3 on confiscation, freezing, and seizing of proceeds of crime, according to the 2005 FATF/GAFISUD report. The 2007 U.S. DoS report notes that Peru's asset forfeiture regime is not comprehensive and lacks clear legislation. Specifically, it states that there is no clear mechanism to distribute seized assets among government agencies. However, the report also mentions that the Peruvian authorities are aware of this shortcoming and have set a bill in motion to rectify this issue. The FATF/GAFISUD 2005 report also notes that Peru largely complies with R26 and R30, and partially complies with R32 on the Financial Intelligence Unit and its functions. The Financial Intelligence Unit of Peru, UIF, was set up in June 2003, according to the 2007 U.S. DoS report. The UIF is responsible for receiving, analyzing and disseminating suspicious transaction reports, and is empowered to conduct on-site inspections of obligated institutes. The DoS report notes that, as of October 2006, Peru has sent "47 suspected cases (totaling over $565.5 million) of money laundering stemming from STRs to the Public Ministry for investigation."

According to the 2005 FATF/GAFISUD evaluation, Peru largely complies with R27 and complies with R28, on the requirements on law enforcement, prosecution, and other competent authorities. The 2007 DoS report notes that pther law enforcement agencies in charge of anti-money laundering and terrorist financing are the SBS, the Peruvian Securities and Exchange Commission, the Ministry of Tourism, and the Public Ministry.

2. Preventive Measures - Financial Institutions

CP

According to the 2005 FATF/GAFISUD evaluation, Peru either complies or largely complies with most Recommendations and Special Recommendations relating to this principle. The report indicates that Peru 'largely complies' with R5 through R8, relating to customer due diligence (CDD) measures. The report also indicates that Peru only partially complies with R9 relating to record keeping and CDD on third parties and introduced business. The report further notes that Peru largely complies with R4, which ensures that financial institution secrecy laws do not inhibit implementation of the FATF Recommendations. The FATF/GAFISUD report also states that Peru largely complies with FATF requirements relating to record keeping and wire transfer rules, as evident from the 'complies' and 'largely complies' designations that Peru receives on R10 and SR7. The 2007 U.S. DoS report states that financial institutions are required to maintain reports on large cash transactions exceeding $10,000. The financial institutions are supervised by the Superintendence of Banks, Insurance and Pension and the Peruvian Securities and Exchange Commission.

Per the 2005 FATF/GAFISUD report, Peru largely complies with FATF requirements on monitoring complex, unusual large transactions (R11) and relationships (R21). Peru largely complies with most recommendations relating to suspicious transaction reports and other reporting, namely R13, R19 and SR4. It complies with R14 and partially complies with R25. The 2007 U.S. DoS report indicates that the UIF is responsible for receiving and analyzing suspicious transaction reports filed by financial institutions such as banks, insurance companies, stock funds and brokers, stock and commodities exchanges, credit and debit card companies, money exchange houses, mail and courier services. According to the DoS, the UIF received 209 suspicious transaction reports in 2004, 796 in 2005, and 948 during the first 10 months of 2006. The 2007 DoS report adds that these financial institutions are also required to file suspicious transaction reports for cash transactions related to terrorist financing. However, such reports are, according to the DoS report, "maintained in internal registries within the obligated entities, and reports on the international transportation of currency or monetary instruments are maintained by the customs agency."

The 2005 FATF/GAFISUD evaluation mentions that Peru complies with R15, which concerns internal controls, compliance and audit. However Peru only partially complies with R22, which requires that the principles applicable to financial institutions are also applied to branches and majority owned subsidiaries located abroad. As for recommendations relating to the supervisory and oversight system of financial institutions, Peru complies with R17, R23, R29 and R30; and partially complies with R25 and R32. Peru largely complies with R18 (on shell banks) and SR6 (on money or value transfer services).

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

NC

In regard to the recommendations relating to this principle, Peru ranges from partial compliance to non compliance, according to the 2005 FATF/GAFISUD evaluation. For example, Peru achieves partial compliance with R12, on customer due diligence and record-keeping and on R16, on suspicious transaction reporting. Peru is also partially compliant with R25, on competent authorities' ability to establish guidelines, and provide feedback. More importantly, the 2005 FATF/GAFISUD report states that Peru does not comply with R24, relating to the regulation and supervision of designated non-financial businesses and professions. The report also notes that Peru does not comply with R20, dealing with businesses and professions, other than designated non-financial businesses and professions.

The 2007 U.S. DoS report indicates that the UIF is responsible for receiving and analyzing suspicious transaction reports filed by designated non-financial Business and Professions, such as mail and courier services, travel and tourism agencies, hotels and restaurants, notaries, the customs agency, casinos, auto dealers, construction or real estate firms, notary publics, and dealers in precious stones and metals.

4. Legal Person and Arrangements & Non-Profit Organizations

NC

Peru complies with R33 and R34 on legal persons' and legal arrangements' access to beneficial ownership and control information, according to the FATF/GAFISUD report of 2005. However, Peru does not comply with SR8 on using non-profit organizations as a vehicle to finance terrorism. According to the 2007 U.S. DoS report "Peru has not yet taken any actions to thwart the misuse of charitable or nonprofit entities that can be used as conduits for the financing of terrorism."

5. National and International Co-operation

EN

Peru complies with R31 and partially complies with R32 on national co-operation and coordination, per the 2005 FATF/GAFISUD report. Peru partially complies with R35 and SRI relating to international conventions and United Nations (UN) Special Resolutions. According to the 2007 U.S. DoS report, "Peru is a party to the UN International Convention for the Suppression of the Financing of Terrorism and the Inter-American Convention on Terrorism." The report also states that "Peru is also a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption."

Per the 2005 FATF/GAFISUD report, Peru 'partially complies' with R32, R38, and SRV, 'largely complies' with R36, and 'complies' with R37 relating to mutual legal assistance. The report further states that Peru complies with R39, and the 2007 U.S. DoS report notes that Peru's Superintendent of Banks frequently updates the lists of individuals and entities included on the UNSCR 1267 Sanctions Committee's consolidated list and circulates it to financial institutions. The 2005 FATF/GAFISUD also notes that Peru complies with FATF requirements on R40, other forms of international cooperation. The 2007 U.S. DoS report notes that the government of Peru is member of GAFISUD, the Egmont Group of financial intelligence units and the Organization of American States Inter-American Drug Abuse Control Commission Money Laundering Experts Working Group.