The Financial Action Task Force (FATF) conducted a mutual evaluation of Portugal's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime against the FATF's 40+9 recommendations and special recommendations. The FATF published its findings in a 2006 report, in which it concludes that Portugal is compliant with 13 FATF recommendations and special recommendations; largely compliant with 23; partially compliant with 10; non compliant with 2; and one recommendation is not applicable to Portugal. The report notes that the overall AML/CFT framework in Portugal is generally comprehensive, and achieves a high degree of compliance with most of the FATF's recommendations. Nevertheless, there are some areas where Portugal's AML/CFT regime could be enhanced. For example, the FATF report points out that Portuguese authorities do not produce comprehensive statistics on money laundering and terrorist financing investigations, prosecutions and convictions. Furthermore, while all anti-money laundering obligations extended to financial institutions in Portugal also apply to Designated non-Financial Business and Professions (DNFBPs) under Article 22-31 of Law No. 11 of 2004, the FATF report observes that customer due diligence obligations for DNFBPs are less developed than for financial institutions. Money laundering is criminalized pursuant to Law No. 11, which adds Article 368-A to the Criminal Code. Terrorist financing is criminalized pursuant to the Act Defining Money Laundering and Criminalizing the Transfer of Funds Related to the Commission of Terrorist Acts through Law No. 52 of 2003.
General Overview
In Portugal, money laundering is criminalized pursuant to Law No. 11 of 2004, which adds Article 368-A to the Criminal Code and includes a list of predicate offenses for money laundering. In addition, according to the 2008 U.S. Department of State (DoS) report, Article 11 of Law No. 51 of 2007 "defines money laundering and expands the list of crimes related to money laundering, and makes legal entities criminally accountable." Furthermore, Law No. 11 of 2004 implements the European Union’s (EU) Second Money Laundering Directive, which defines the legal framework for the prevention and suppression of money laundering. According to the U.S. DoS report, Portugal is in the process of transposing into Portuguese law the European Union’s (EU) Third Money Laundering Directive (Directive 2005/60/EC), which contains the requirement that all EU member states implement the Financial Action Task Force’s (FATF) recommendations. The 2006 FATF report observes that, between 2000 and 2005, 16 people were convicted of money laundering offences.
Terrorist financing is criminalized pursuant to the Act Defining Money Laundering and Criminalizing the Transfer of Funds Related to the Commission of Terrorist Acts (Law No. 52 of 2003), which transposed into the Portuguese legal system EU requirements. Additionally, since 1982, Articles 300 and 301 of the Criminal Code have criminalized offences of terrorism and terrorism financing. Under Article 2 of Law No. 52 of 2003, prison terms for terrorism financing crimes range from eight to fifteen years. The 2006 FATF report observes that, between 2000 and 2005, 20 people were convicted of terrorism financing offences, all of which were accomplished in 2001.
The FATF report points out that Portuguese law provides for a comprehensive confiscation, seizure and freezing system. According to the 2006 FATF report, Portuguese law enforcement agencies are equipped with three main laws to aid in their tracing and seizing of criminal assets. The Criminal Code (Articles 109, 110 and 111) permits the confiscation and seizing of the proceeds of crime. Law No. 11 of 2004 (Article 9) allows the Public Prosecutor's Office to suspend or freeze funds if there is a suspicion that the transaction may be related to the commission of a laundering offence. Law No. 5 of 2002 (Article 7) provides a confiscation regime applicable to both terrorism financing and money laundering offences. Article 4 of this law specifically provides for the suspension of movements in bank accounts. Per the 2008 U.S. DoS report, Portuguese law enforcement has seized a total of 20.7 million euros (approximately $U.S. 30.2 million) in forfeited assets in connection with drug and money laundering.
Created in 2002 as an autonomous body within the Judicial Police, Portugal's financial intelligence unit (FIU) is the country’s Financial Information Unit (UIF). In addition to criminalizing money laundering, Law No. 11 of 2004 mandates that financial and non-financial institutions file suspicious transaction reports (STRs) with the UIF. The U.S. DoS report states that, in 2006, the UIF received 584 STRs. The UIF then sent 272 cases for further investigation to the Judicial Police and other police departments. The U.S. DoS report adds that, between January and September of 2007, the UIF seized or confiscated approximately 32.4 million euros (approximately U.S. $47.3 million). Portugal is a party to the 1988 United Nations (UN) Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption and the UN International Convention for the Suppression of the Financing of Terrorism. Portugal is also a party to the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime.
The Principles
1. Legal Systems and Related Institutional Measures
The 2006 FATF report finds Portugal largely compliant with Recommendation (R) 1 regarding the money laundering offence and largely compliant with R 2 on its mental element and corporate liability. Money laundering is criminalized pursuant to Law No. 11 of 2004, which adds Article 368-A to the Criminal Code and includes a list of predicate offenses for money laundering. In addition, according to the 2008 U.S. DoS report, Article 11 of Law No. 51 of 2007 "defines money laundering and expands the list of crimes related to money laundering, and makes legal entities criminally accountable."
Portugal is largely compliant with Special Recommendation (SR) II on the criminalization of terrorist financing as noted in the 2006 FATF report. Terrorist financing is criminalized pursuant to the Act Defining Money Laundering and Criminalizing the Transfer of Funds Related to the Commission of Terrorist Acts (Law No. 52 of 2003). Additionally, since 1982, Articles 300 and 301 of the Criminal Code have criminalized offences of terrorism and terrorist financing. Under Article 2 of Law No. 52 of 2003, prison terms for terrorist financing crimes range from eight to fifteen years. Furthermore, Portugal has created the Terrorist Financing Task Force, which coordinates all Portugal's efforts at tracking terrorist financing. Members include the Ministries of Finance and Justice, the Judicial Police, the Security and Intelligence Service, the Bank of Portugal, and the Portuguese Insurance Institution. The 2006 FATF report observes that, between 2000 and 2005, 20 people were convicted of terrorism financing offences.
Concerning confiscation, freezing and seizing of proceeds of crime (R 3), the FATF's mutual evaluation rates Portugal as largely compliant. The FATF report points out that Portuguese law provides for a comprehensive confiscation, seizure and freezing system, even though it also recommends that Portuguese authorities improve their collection of statistics on the number of cases and amount of assets seized in relation to criminal confiscation. According to the 2006 FATF report, Portuguese law enforcement agencies are equipped with three main laws to aid in their tracing and seizing of criminal assets. The Criminal Code (Articles 109, 110 and 111) permits the confiscation and seizing of the proceeds of crime. Law No. 11 of 2004 (Article 9) allows the Public Prosecutor's Office to suspend or freeze funds if there is a suspicion that the transaction may be related to the commission of a laundering offence. Law No. 5 of 2002 (Article 7) provides a confiscation regime applicable to both the terrorist financing and money laundering offences. Article 4 of this law specifically provides for the suspension of movements of banking accounts. Per the 2008 U.S. DoS report, Portuguese law enforcement has seized a total of 20.7 million euros (approximately $U.S. 30.2 million) in forfeited assets in connection with drug and money laundering.
With regards to SR III relating to the freezing of terrorist financing-related assets, the FATF mutual evaluation rates Portugal as partially compliant, noting as a particular weakness Portugal's "limited ability to freeze funds in accordance with UN Security Council Resolution (S/RES/1373) of designated terrorists outside the EU listing system" (p. 158). Nevertheless, the FATF report notes that measures are in place "to implement UN Security Council Resolutions 1267 of 1999 and 1373 of 2001 under EU Council Regulations" (p. 6). In addition, Law No. 5 of 2002 (Article 7) provides a confiscation regime applicable to both the terrorist financing and money laundering offences. Article 4 of this law specifically provides for the suspension of movements of banking accounts. Furthermore, Articles 109-111 of the Criminal Code apply to the seizure and confiscation of terrorism-related funds that can be confiscated. Finally, the Bank of Portugal (BdP) has circulated to all financial institutions under its supervision the list of individuals and entities on the United Nations Security Council Resolution (UNSCR) 1267 Sanctions Committee’s consolidated list of those suspected to be linked to Osama Bin Laden, Al-Qaida, and the Taliban. Nevertheless, as at the release of the U.S. DoS report in March 2008, no significant assets tied to terrorism have been identified or seized.
In terms of the financial intelligence unit (FIU) and its functions, the FATF report classifies Portugal as largely compliant with R 26; largely compliant with R 30 about resources, integrity and training; and partially compliant with R 32 on statistics keeping. Created in 2002 as an autonomous body within the Judicial Police, Portugal's FIU is the country’s UIF and its primary responsibility is to collect, analyze and disseminate all suspicious transaction reports submitted by entities subject to the anti-money laundering (AML) law to the Public Prosecutor's Office for further investigation. In addition to criminalizing money laundering, Law No. 11 of 2004 mandates that financial and non-financial institutions file STRs with the UIF. The U.S. DoS report states that, in 2006, the UIF received 584 STRs, of which 272 cases were send for further investigation to the Judicial Police and other police departments. The U.S. DoS report adds that, between January and September of 2007, the UIF seized or confiscated approximately 32.4 million euros (approximately US$47.3 million). In regards to statistics (R 32), the FATF report partly attributes its rating to a lack of "comprehensive statistics on money laundering and terrorism financing investigations, prosecutions and convictions" and that "there are insufficient statistics upon which to assess the efficiency of the measures in place" (p. 157).
The FATF's mutual evaluation observes that Portugal is largely compliant with R 27 on law enforcement authorities; and compliant with R 28 on the powers of competent authorities. The FATF report commends Portugal for availing its investigative authorities with adequate powers "to gather evidence and compel the production of financial records and files from financial institutions," adding that, as a result, "Portuguese authorities have sufficient powers to prosecute [money laundering] and [terrorist financing] offences" (p. 6). The 2008 U.S. DoS report also notes that the UIF readily facilitates cooperation and coordination with law enforcement authorities. Another form of cooperation among law enforcement agencies is the Terrorist Financing Task Force, which coordinates all Portugal's efforts at tracking terrorist financing.
The 2006 FATF report finds Portugal largely compliant with R 5 relating to customer due diligence (CDD) and non-compliant with R 6 concerning politically exposed persons. On correspondent banking (R 7), Portugal is partially compliant, and on new technologies and non face-to-face business (R 8), Portugal is rated as compliant. The FATF report highlights some key deficiencies with Portugal's CDD regime. For example: (1) there is no explicit mention of terrorist financing in relation to CDD for suspicious transactions; and (2) identification requirements for beneficial owners are not completely contained in law, but also in supervisors instructions. For R 6 regarding politically exposed persons (PEPs), the FATF report notes three major shortcomings, namely that "there is no requirement for appropriate risk management systems to determine whether a potential customer, a customer or the beneficial owner is a PEP" and that "there is no legal requirement for financial institutions to obtain senior management approval for establishing business relationships with a PEP" (p. 154). On correspondent banking (R 7), the FATF report particularly notes that "the obligation to gather information should be applicable to all respondent institution and not exempt institutions from EU members or FATF members" (p. 155).
The FATF's mutual evaluation rates Portugal compliant with R 10 on record keeping, and non-compliant with SR VII on wire transfer rules. The key shortcomings cited for the non-compliance rating for Portugal on SR VII are that: (1) there is no legal obligation to include full originator information in the payment form that accompanies a wire transfer; and (2) there is no legal requirement to verify that the originator information is accurate and meaningful.
The FATF mutual evaluation rated Portugal as largely compliant with R 13 relating to suspicious transaction reporting and compliant with R 14 about protection and no tipping-off. Pertaining to STRs (R 13), the FATF report points out that, in addition to criminalizing money laundering, Law No. 11 of 2004 (Article 7 and Article 18) mandates that financial, and non-financial institutions file suspicious transaction reports with the UIF. Law No. 11 of 2004 also defines what operations ought to be considered suspicious. The U.S. DoS report states that, in 2006, the UIF received 584 STRs. The UIF then sent 272 cases for further investigation to the Judicial Police and other police departments.
On R 19 regarding other forms of reporting, the mutual evaluation rates Portugal as compliant, and Portugal is given a partially compliant rating with R 25 on guidelines and feedback. The evaluation also rates Portugal as largely compliant with SR IV relating to suspicious transactions reporting linked with terrorism.
The 2006 mutual evaluation finds Portugal largely compliant with R 15 relating to internal controls, compliance and audit. The FATF report notes that Portugal has comprehensive obligations placed on institutions to have internal controls to prevent money laundering and terrorist financing, including Article 11 (1) of Law No. 11 of 2004, paragraphs 10 and 11 of BdP Instruction No. 26 of 2005 and Portuguese Insurance Institute (ISP) Regulatory Standard 10 of 2005 and Article 36 (2) (d) of Securities Market Commission (CMVM) Regulation No. 12 of 2000. On R 22 addressing foreign branches and subsidiaries, Portugal is rated as largely compliant. According to the FATF report, Article 11, paragraphs 1 and 2 of Law No. 11 of 2004 mandates that "financial entities are bound to create control mechanisms including in subsidiaries and branch offices abroad" (p. 8). Portugal was adjudged largely compliant with R 18 pertaining to shell banks.
According to the 2006 FATF report, Portugal is largely compliant with R 17 regarding sanctions and R 23 relating to regulation, supervision and monitoring. On R 29 about supervisors, Portugal is also rated largely compliant. The 2008 U.S. DoS report notes that the three primary regulatory agencies for supervision of the financial sector in Portugal are the BdP, the ISP, and the CMVM, all of which are obliged by Articles 19 (1) and 48 of Law No. 11 of 2004 to impose compliance duties on financial entities to prevent money laundering. Furthermore, the Economic Activities Inspectorate General, the Registries and Notaries General Directorate, the National Association for Certified Public Accountants, the Bar Association and the Chamber of Solicitors enforce the reporting requirements of obliged entities under their authority. However, the 2006 FATF report points out that Portuguese supervisors (i.e. ISP and CMVM) have not imposed any sanctions since Law No. 11 of 2004 came into effect, and this makes it impossible to assess the effectiveness of Portugal's sanctions regime. The FATF report also notes that the three supervisors' "number of AML/CFT supervisory/regulatory visits is relatively low" (p. 156).
3. Preventive Measures - Designated non-Financial Business and Professions
The 2006 FATF report found that Portugal is partially compliant with R 12 on CDD and record keeping obligations for Designated Non-Financial Business and Professions (DNFBPs), noting that "most categories of DNFBPs operate in Portugal" (i.e. casinos, real estate agents and notaries) and that "most DNFBPs have been required since 1995 to comply with AML requirements" (p. 9). The FATF report also observes that all anti-money laundering obligations extended to financial institutions in Portugal also apply to DNFBPs under Article 22-31 of Law No. 11of 2004. However, the evaluation highlights some key shortcomings in Portugal's adherence to R 12. For example, the main deficiencies noted in the anti-money laundering and combating the financing of terrorism (AML/CFT) preventative measures applicable to financial institutions (as set out in R 5, R 6 and R 11) also apply to DNFBPs. Other deficiencies include the following: (1) Portugal has yet to implement explicit AML/CFT measures regarding PEPs applicable to DNFBPs; (2) DNFBPs are not obliged to have policies in place to address the misuse of technological developments; and (3) there are few implementation measures that clarify the specific obligations of DNFBPs.
On R 16 about STRs for DNFBPs, Portugal is rated as partially compliant. As noted above according to the FATF report, all anti-money laundering obligations extended to financial institutions in Portugal, including reporting duties, also apply to DNFBPs under Article 22-31 of Law No. 11 of 2004. However, only 10 STRs were reported from 2003 to 2005. Furthermore, the FATF report notes that Portugal has "no obligation to give special attention to business relationships and transactions with persons (including legal persons) from or in countries which do not or insufficiently apply the FATF Recommendations" (p. 156). Also, despite having proportionate sanctions provided by Law No. 11 of 2004, Portugal has yet to impose any.
Concerning R 24 about DNFBP regulation, supervision and monitoring, the 2006 FATF mutual evaluation rates Portugal partially compliant. Primarily, the evaluation attributed this R 24 rating to competent authorities, who are designated to perform monitoring and ensuring compliance of DNFBPs with AML/CFT requirements, failing to carry out any inspection or monitoring activities. Furthermore, the FATF report notes that "where an oversight role exists, the [Self-Regulatory Organizations (SRO)] do not have sufficient resources to perform these functions" (p. 157).
4. Legal Person and Arrangements & Non-Profit Organizations
The 2006 FATF mutual evaluation reports that Portugal is partially compliant with R 33 relating to legal persons and access to beneficial ownership and control information, particularly noting that "the National Register of Legal Persons does not include information on the beneficial ownership and the persons who control a legal person" and that "there is not full transparency of the shareholders of companies that have issued bearer shares" (p. 158). Portugal is also partially compliant with the FATF's recommendation on legal arrangements and beneficial owners (R 34). The FATF attributes this assessment to the fact that competent authorities have limited powers to promptly access information on the beneficial ownership and control of trusts. On SR VIII relating to non-profit organizations, the mutual evaluation finds Portugal largely compliant.
The 2006 FATF report finds Portugal largely compliant with R 31 on national cooperation and partially compliant with R 32 on statistics. The report states that "procedures exist in Portugal to ensure that there is co-operation between relevant organizations at a national level" (p. 10). One of such efforts at cooperation is the Terrorist Financing Task Force, which coordinates all Portugal's efforts at tracking terrorist financing.
The 2006 mutual evaluation rates Portugal as compliant with R 35 regarding the ratification of international conventions, and partially compliant with SR I on implementing UN instruments. According to the 2008 U.S. DoS report, Portugal is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, and the UN International Convention for the Suppression of the Financing of Terrorism. Portugal is also a party to the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime. Most importantly, regarding SR I, the FATF report notes that, as of the release date of the report in October 2006, Portugal had yet to comprehensively implement S/RES/1373 of 2001. The FATF report also observes that the DNFBPs "are not adequately monitored for compliance with measures taken under the Resolutions" (p. 158).
According to the 2006 FATF report, Portugal is compliant with R 36 concerning Mutual Legal Assistance (MLA), noting that, under Law No. 144 of 1999, Portugal is "obliged to render the widest MLA in the investigations and proceedings of criminal nature and connected proceedings, in a constructive, effective and timely way" (p. 10). The 2008 U.S. DoS report notes that, in 2005, the U.S. and Portugal signed a mutual legal assistance agreement (MLAT), which, once ratified by the U.S., is expected to complement the U.S.-European Union Mutual Legal Assistance and Extradition Treaties of 2003.
Portugal is compliant with R 37 on dual criminality and compliant with R 38 pertaining to MLA on confiscation and freezing as noted in the 2006 FATF report. With regards to SR V on international cooperation, the mutual evaluation rated Portugal as largely compliant, adding that "mechanisms have been put in place to ensure that Portugal can co-operate internationally" (p. 11). As at the release of the FATF report in October 2006, the UIF had in place 22 agreements and the BdP, ISP and CMVM also had several MOUs in place or under negotiation. The evaluation also adjudged Portugal to be compliant with R 39 relating to extraditions. The 2008 U.S. DoS report notes that, in 2005, the U.S. and Portugal signed an extradition agreement, which, once ratified by the U.S., is expected to complement the U.S.-European Union Mutual Legal Assistance and Extradition Treaties of 2003. Furthermore, Portugal, as a member of the EU, is signatory to the European Arrest Warrant, which increases the speed of extradition throughout EU countries. Finally, on R 40 pertaining to other forms of international co-operation, Portugal is rated compliant.
Financial Action Task Force (FATF), "Summary of the Third Mutual Evaluation Report on Anti-Money Laundering and Combating the Financing of Terrorism: Portugal," Paris, France: FATF, October 2006. Available from Financial Action Task Force website. Accessed on November 5, 2008. (FATF 2006)
U.S. Department of State, Bureau for International Narcotics and Law Enforcement Affairs, "International Narcotics Control Strategy Report 2008,” March 2008. Available from U.S. Department of State website. Accessed on November 4, 2008. (U.S. DoS 2008)
International Monetary Fund, "Portugal: Financial System Stability Assessment including Reports on the Observance of Standards and Codes on the following topics: Banking Supervision, Securities Regulation, and Insurance Regulation," Country Report No. 06/378, Washington, D.C.: IMF, October 24, 2006. Available from International Monetary Fund website. Accessed on November 4, 2008. (IMF 2006)
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