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EMBASSY OF THE UNITED STATES OF AMERICA

 

 

International Narcotics Control Strategy Report -2003 released by the Bureau for International Narcotics and Law Enforcement Affairs

Summaries of narcotics and money laundering in Uruguay

March 2004

 

South America
Uruguay

I. Summary
Uruguay is not a major narcotics producing or transit country. Efforts to fight drug trafficking and domestic consumption are effective, although law enforcement agencies and counternarcotics programs have limited resources. Current areas of concern include increasing drug consumption, limited inspection of containers at ports, limited border controls, lack of radar coverage over most of the territory, and the possible use of free trade zones for the movement of drugs and precursors. Uruguay is a party to the 1988 UN Drug Convention.

II. Status of Country
Uruguay is not a major narcotics producing or transit country, but a five-year recession, which is just ending, and its strategic location, could lead to increased trafficking. Domestic drug consumption consists mainly of marijuana that arrives in small planes from Paraguay. However, Bolivian cocaine, smuggled through Argentina and Brazil, is increasingly in evidence, as are small quantities of heroin brought in through the airports by Uruguayan, Colombian, Argentine, and Brazilian traffickers. The tri-border area of Paraguay, Argentina and Brazil, which has long been a haven for narcotics traffickers, affects Uruguay, and the long porous border with Brazil lends itself to infiltration. Limited inspection of airport and port cargo is a problem, with Uruguay serving as a transit point for contraband to Paraguay and elsewhere. Although chemical precursor controls exist, they are not effectively enforced.

III. Country Actions Against Drugs in 2003
Policy Initiatives. Despite President Jorge Batlle's occasional public statements supporting the legalization of drugs, the Government of Uruguay (GOU) continues to make counternarcotics a priority. Batlle has increased military involvement in antitrafficking efforts and got personally engaged to improve anti-money laundering regulations. The GOU remains committed to education and prevention, although funding for this is low. Uruguay is an active member of the Southern Cone Working Group of the International Conference for Drug Control, as well as other international mechanisms that fight narcotics, money laundering and corruption.

Accomplishments. Uruguay continued to cooperate fully with U.S. and regional counter narcotics efforts. In April 2003, working with Brazilian authorities, the police arrested Brazilian narcotics trafficker Joao Arcanjo Ribeiro who purchased a residence in Montevideo. Four of the 23 companies he owns are located in Uruguay and were allegedly used for money laundering. Arcanjo remains in prison pending extradition to Brazil. Uruguayan law enforcement authorities increased drug seizures in 2003, demonstrated cooperation with their regional counterparts, and fractured urban distribution rings. In addition, the GOU has mounted a concerted campaign on demand reduction.

Law Enforcement Efforts. The expertise of the different groups responsible for narcotics-related law enforcement has improved, and they are generally effective. However, difficulties remain in coordination among the Directorate General for the Repression of Illicit Drug Trafficking (DGRTID), the police, the National Directorate for Intelligence and Information (DNII), and the Military Intelligence Agency (DGID). The DNII is now under the direct supervision of the Minister of the Interior and has expanded its assignment to include combating organized crime, contraband, terrorism, and financial crimes.
According to Uruguay’s General Direction of the Repression of Illicit Drug Trafficking, drug seizures amounted to 1,110 kilos of marijuana, 41 kilos of cocaine, 12 kilos of heroin and some ecstasy in 2003. Also in 2003, 1,690 suspects were arrested (188 were minors), and 269 were convicted. Major achievements included the dismantling of the smuggling ring around the Uruguayan trafficker Omar Clavijo (who was murdered in Paraguay), the seizure of 12 kilos of heroin at Carrasco International Airport in June 2003, and the dismantling of urban distribution centers.

Corruption. There are no indications that senior GOU officials have engaged in drug production, trafficking, or money laundering, and the GOU does not condone narcotics production, trafficking and money laundering. Public officials who do not act on knowledge of a drug-related crime may be charged with a “crime of omission” under the Citizen Security Law. In addition, the Transparency Law of 1998 criminalizes various abuses of power by government officials and requires high-ranking officials to comply with financial disclosure regulations.

Uruguay has an active commission that investigates public sector corruption, whose head is in his second year as President of the Experts Group of the OAS Inter-American Convention Against Corruption. In April 2003, Public Prosecutor Carlos Garcia Altolaguirre was convicted on bribery charges for receiving money from drug traffickers and suspected money launderers in exchange for early release from jail. One of his colleagues, Pedro Miguel Milano, was also imprisoned.
Agreements and Treaties. Uruguay is a party to the 1988 UN Drug Convention, the 1971 UN Convention on Psychotropic Substances, the 1961 UN Single Convention on Narcotic Drugs, the 1972 Protocol amending the Single Convention, and has signed, but not yet ratified, the UN Convention against Transnational Organized Crime. It is also a member of the OAS’s Inter-American Drug Abuse Control Commission (CICAD). The United States and Uruguay have signed an Extradition Treaty (1984), a Mutual Legal Assistance Treaty (1994), and annual Letters of Agreement under which the U.S. funds International Narcotics and Law Enforcement (INL) programs. Uruguay has signed drug-related bilateral agreements with Brazil, Paraguay, Bolivia, Chile, Mexico, Panama, Peru, Venezuela and Romania. Uruguay is a member of the regional financial action taskforce, Grupo de Acción Financiera de Sudamérica (GAFISUD), of which it held the presidency in 2003.

Cultivation/Production. There is no known cultivation or production of drugs in Uruguay, and it is not a major drug-transit country.

Drug Flow/Transit. Limited law enforcement presence along the Brazilian border and increased U.S. pressure on traffickers in Colombia, Bolivia and Peru could increase transit through Uruguay. Drug seizures are increasing, but would be even greater if the GOU had more funding for law enforcement equipment. To deal with this, the GOU is tendering for companies to operate container scanners at the main port, and the private consortium that won the contract to operate the main airport agreed to build new passenger and cargo terminals that meet international security and safety standards.

Demand Reduction Programs. The GOU does not maintain statistics on domestic drug consumption, but indications are that drug use within Uruguay is moderate but increasing, with marijuana dominating. GOU efforts focus on prevention, rehabilitation and treatment, based on a strategy developed by the National Drug Council, the Ministries of Education, Interior, Public Health, and Sports and Youth Affairs, and including INJU (The National Institute of Youth), INAME (The National Institute of Minors), the municipalities and NGOs. Specific demand reduction projects include: 1) the “Adventure of Life” program for teaching values and healthy habits to school children; 2) the “Espacio de Encuentro” web page chat forum of the National Drug Council; and 3) the “Centro de Referencia de Drogas,” an NGO program that works with addicted children and young adults. The National Drug Council has sponsored teacher training, public outreach, and programs in community centers, and published several brochures on demand reduction.

IV. U.S. Policy Initiatives and Programs

Policy Initiatives. U.S. strategy is to prevent Uruguay from becoming a major narcotics transit or consumption country. In addition, given Uruguay's success as a regional financial center before the recession, the U.S. provides assistance to combat money laundering. U.S. support complements GOU counternarcotics efforts. In 2003 and 2004, funds from the State Department's INL Bureau will be used for travel, training, and conferences for GOU officials in counternarcotics, crime, corruption and money laundering. Additionally, funds will purchase computer equipment for the Central Bank and the prosecutors office, brochures on demand reduction, and a feasibility study on installing radar over northern Uruguay.
In recent years, the U.S. provided computers, software, passport scanners, vehicles and other equipment to the GOU to enhance its counternarcotics and anti-money laundering efforts. The U.S. funded conferences, seminars, and training on canine handling, community policing, and money laundering. In 2003, INL also sponsored a training session for policemen in patrol techniques and a seminar on investigating money laundering.

The Road Ahead. The U.S. will continue to work closely with the GOU and law enforcement agencies to strengthen Uruguayan counternarcotics and anti-money laundering efforts. The focus will be on stronger sea, air, and land border controls. In addition, regional cooperation will continue to play an important role, especially since MERCOSUR holds its administrative headquarters in Montevideo. Despite the current government's strong political will to fight drug trafficking, additional resources are needed to strengthen Uruguay’s borders.

International Narcotics Control Strategy Report
Volume II: Money Laundering and Financial Crimes
Uruguay


In the past, Uruguay’s strict bank secrecy laws, liberal currency exchange regulations, and overall economic stability made it vulnerable to money laundering, although its extent and exact nature were unknown. In 2002, however, banking scandals and mismanagement, along with massive withdrawals of Argentine deposits led to a near collapse of the Uruguayan banking system, and an end to Uruguay’s role as a regional financial center. The near collapse likely explains the diminished attractiveness of Uruguayan financial institutions to money launderers in the region.

Over the last five years, the Government of Uruguay (GOU) has instituted several legislative and regulatory reforms in connection with the further consolidation of its anti-money laundering program. In May 2001, it enacted Law 17,343, which extended the predicate offenses for money laundering beyond narcotics trafficking and corruption to include terrorism, smuggling (above the threshold of $20,000); illegal trafficking in weapons, explosives and ammunition; trafficking in human organs, tissues or medications; trafficking in human beings; extortion; kidnapping; bribery; trafficking in nuclear and toxic substances; and illegal trafficking in animals or antiques. The courts have the power to seize and later confiscate property, products or financial instruments linked to money laundering activities. In December 2003, the Uruguayan Chamber of Representatives approved a bill designed to limit bank secrecy and confidentiality. The bill is specifically intended to increase credit transparency by eliminating bank secrecy for information pertaining to personal loans, financial credits, mortgages, or similar obligations. The bill does not, however, lift bank secrecy for law enforcement investigations regarding money laundering or terrorist finance.

Several government bodies seek to combat money laundering. The President’s Vice-Minister of the Presidency heads the National Drug Board, which is the senior authority directing anti-money laundering policy. The Center for Training on Money Laundering serves as a forum for discussion and advice on policy as well as allowing private sector input. In 2000, the Financial Information and Analysis Unit (UIAF), was created within the Superintendence of Financial Intermediation Institutions that has the responsibility of coordinating all anti-money laundering efforts. The UIAF is Uruguay’s’ Financial Intelligence Unit (FIU). It receives, analyzes, and remits to judicial authorities suspicious transaction reports for possible investigation. Central Bank Circular 1722 enables the UIAF to respond to requests from foreign analogs.

The Ministry of Finance and Economics, the Ministry of the Interior (via the police force), and the Ministry of Defense (via the Naval Prefecture) also participate in anti-money laundering efforts. The private sector has also developed self-regulatory measures against money laundering such as the Codes of Conduct approved by the Association of Banks and the Chamber of Financial Entities (in 1997), the Association of Exchange Houses (2001), and the Securities Market (2002).

Money laundering is considered a crime separate from underlying crimes such as narcotics trafficking, administrative corruption, terrorism or smuggling, which are formally listed in the legal statutes. The court can confiscate or preventively impound assets; proceeds or instruments used or intended to be used in money laundering crimes. Real estate ownership is registered in the name of the titleholder. However, ownership of a specific property cannot not be traced unless the “pardon”-the identification number of the property in the registry-is known. This system makes tracking money laundering in this important sector extremely difficult, particularly in the partially foreign-owned tourist industry around Punta del Este.

Safeguarding the financial sector from money laundering activities is a priority for the GOU. A series of Central Bank regulations require banks (including offshore), currency exchange houses, and stockbrokers to implement anti-money laundering policies, including the recording in internal databases transactions over $10,000, and the reporting of suspicious transactions to the UIAF. In addition, the insurance and reinsurance sector, stock market, and currency exchange houses must know and thoroughly identify their customers, and report suspicious financial transactions to UIAF. The insurance sectors are further required to maintain a registry of “relevant” transactions, such as payments of insurance premiums of $10,000 or more, while stock and investment fund administrators must maintain a registry of individuals and entities exchanging currency or other valuables in amount greater than $10,000. There are twelve offshore banks and six offshore mutual fund companies.

The offshore banks are subject to the same laws and regulations as local banks, and are required to be licensed by the GOU-a process involving background checks on license applicants. There are no records of the number of Uruguayan offshore firms or shell companies, although, a large number are believed to exist. Offshore trusts are not allowed. Bearer shares may not be used in banks and institutions under the authority of the Central Bank, and any share transactions must be authorized by the Central Bank.Uruguay has been a member of the Financial Action task force for South America (GAFISUD) since its inception in December 2000 and served as its President in 2003. GAFISUD Mutual evaluation report stated that Uruguay’s anti-money laundering regime meets the FATF 40 recommendations. The report also recognized Uruguay’s efforts to train public and private sector players in money laundering-related issues. While Uruguay’s past role as a financial center put it at risk of becoming a money laundering center, the mutual evaluation team did not find any major money laundering criminal activity producing economic profits The report included several suggestions to expand the scope of Uruguayan money laundering legislation as it relates to gambling, real estate, certain professions (primarily in the legal and financial services sectors), and the smuggling of cash and securities. It also suggested the Government of Uruguay.

Uruguay remains active in international anti-money laundering efforts. In addition to its membership in GAFISUD, Uruguay is also a member of the OAS Inter-American Drug Abuse Control Commission Experts Group to Control Money Laundering. The USG and the GOU are parties to an extradition treaty and a mutual legal assistance treaty that entered into force in 1984 and 1994, respectively. It is a party to the 1988 UN Drug Convention. Uruguay has signed, but not yet ratified, the UN Convention against Transnational Organized Crime and became a party to the UN International Convention for the Suppression of the Financing of Terrorism on January 8,2004. In addition, for 2004 Uruguay holds the presidency of the Interamerican Committee against Terrorism (CICTE).

The GOU should take steps necessary to bring it into compliance with the FATF Special Eight Recommendations on Terrorist Financing including the criminalizing of terrorist financing. The GOU should enact legislation that requires the identification and registration of real estate-a sector particularly vulnerable to money laundering. Effective implementation and enforcement of anti-money laundering measures must remain a priority for the GOU in order to eliminate the potential for money laundering and terrorist financing activities throughout its financial sector. Uruguay should become a party to the UN Convention against Transnational Organized Crime.

Complete report


 

 

 

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