Cablegate: Burma: 2008-2009 Incsr Ii Money Laundering and Financial

Published: Mon 17 Nov 2008 08:43 AM
DE RUEHGO #0890/01 3220843
R 170843Z NOV 08
E.O. 12958:N/A
REF: STATE 103810
1. This report responds to reftel request for the INCSR II Money
Laundering and Financial Crimes Report update.
2. Burma, a major drug-producing country, has taken steps to
strengthen its anti-money laundering regulatory regime in 2008. The
country's economy remains dominated by state-owned entities,
including the military. Agriculture and extractive industries,
including natural gas, mining, logging and fishing provide the major
portion of national income, with heavy industry and manufacturing
playing minor roles. The steps Burma has taken over the past
several years have reduced vulnerability to drug money laundering in
the banking sector. However, with an underdeveloped financial
sector and large volume of informal trade, Burma remains a country
where there is significant risk of drug money being funneled into
commercial enterprises and infrastructure investment. Traffic in
persons, narcotics, wildlife, gems, timber, and other contraband
flows through Burma. Regionally, value transfer via trade is of
concern and hawala/hundi networks frequently use trade goods to
provide counter-valuation. Burma's border regions are difficult to
control and poorly patrolled. In some remote regions active in
smuggling, there are continuing ethnic tensions with armed rebel
groups that hamper government control. Collusion between
traffickers and Burma's ruling military junta, the State Peace and
Development Council (SPDC), allows organized crime groups to
function with virtual impunity. Although progress was made in 2008,
the criminal underground faces little risk of enforcement and
prosecution. Corruption in business and government is a major
problem. Burma is ranked 178 out of 179 countries in Transparency
International's 2008 Corruption Perception Index.
3. The Government of Burma (GOB) has addressed some key areas of
concern identified by the international community by implementing
some anti-money laundering measures. In October 2006, the Financial
Action Task Force (FATF) removed Burma from the FATF list of
Non-Cooperative Countries and Territories (NCCT). To ensure
continued effective implementation of reforms in Burma, the FATF, in
consultation with the relevant FATF-style regional body (FSRB), will
continue to monitor developments there for a period of time after
de-listing. In 2008, the FATF advised the GOB to enhance regulation
of the financial sector, including the securities industry, and to
ensure that the GOB responds adequately to any foreign requests for
cooperation. Burma underwent a mutual evaluation by the FSRB
Asia-Pacific Group on Money Laundering in July 2008. The FSRB
Asia-Pacific Group continues to work with and monitor the GOB to
strengthen is anti-money laundering measures.
4. Burma enacted a "Control of Money Laundering Law" in 2002. It
also established the Central Control Board of Money Laundering in
2002 and a financial intelligence unit (FIU) in 2004. The law
created reporting requirements to detect suspicious transactions.
It set a threshold amount for reporting cash transactions by banks
and real estate firms, albeit at a high level of 100 million kyat
(approximately U.S. $75,000). Between 2004 and August 2008, more
than 86,000 cash transaction reports were filed. The GOB's 2004
anti-money laundering measures amended regulations instituted in
2002-2003 that set out 11 predicate offenses, including narcotics
activities, human trafficking, arms trafficking, cyber-crime, and
"offenses committed by acts of terrorism," among others. In 2004
the GOB added fraud to the list of predicate offenses, established
legal penalties for leaking information about suspicious transaction
reports, and adopted a "Mutual Assistance in Criminal Matters Law."
The 2003 regulations, further expanded in 2006, require banks,
customs officials and the legal and real estate sectors to file
suspicious transaction reports (STRs) and impose severe penalties
for noncompliance.
5. The GOB established a Department against Transnational Crime in
2004. Its mandate includes anti-money laundering activities. It is
staffed by police officers and support personnel from banks,
customs, budget, and other relevant government departments. In
response to a February 2005 FATF request, the GOB submitted an
anti-money laundering implementation plan and produced regular
progress reports in 2006, 2007, and 2008. In 2005, the government
also increased the size of the FIU to 11 permanent members, plus 20
support staff. In August 2005, the Central Bank of Myanmar issued
guidelines for on-site bank inspections and required reports that
review banks' compliance with anti-money laundering (AML)
legislation. Since then, the Central Bank has sent teams to
instruct bank staff on the new guidelines and to inspect banking
operations for compliance.
6. In 2007, the Burmese Government amended its "Control of Money
Laundering Law" to expand the list of predicate offences to all
serious crimes to comport with FATF's recommendations. In July
2007, the Central Control Board issued five directives to bring more
RANGOON 00000890 002 OF 003
non-bank financial institutions, including dealers in precious
metals and stones, under the AML/CTF compliance regime. In March
2008, the CCB brought additional non-bank financial institutions,
including the Andaman Club Resort Hotel and jems and jade trading
companies (both wholesale and retail) under the AML/CTF compliance
regime. The Central Bank also required banks and financial
institutions to maintain all records and documents related to
customer accounts and transactions for a minimum of five years. As
of August 2008, a total of 1,495 STRs had been received. In 2007,
nine cases were identified as potential money laundering
investigations. As of August 2008, the FIU received 444 STRs, of
which seven cases were identified as potential money laundering
investigations. The FIU has investigated four cases to date, two of
which were sent to the courts for prosecution. Since 2006, the FIU
has investigated 20 money laundering cases and submitted eight cases
for prosecution. Fifty-four people have been convicted under the
"Control of Money Laundering Law."
7. The United States maintains the separate countermeasures it
adopted against Burma in 2004, identifying the jurisdiction of Burma
and two private Burmese banks, Myanmar Mayflower Bank and Asia
Wealth Bank, to be "of primary money laundering concern" pursuant to
Section 311 of the 2001 USA PATRIOT Act. These countermeasures
prohibit U.S. banks from establishing or maintaining correspondent
or payable-through accounts in the United States for or on behalf of
Myanmar Mayflower and Asia Wealth Bank and, with narrow exceptions,
for all other Burmese banks. Myanmar Mayflower and Asia Wealth Bank
had been linked directly to narcotics trafficking organizations in
Southeast Asia. In March 2005, following GOB investigations, the
Central Bank of Myanmar revoked the operating licenses of Myanmar
Mayflower Bank and Asia Wealth Bank, citing infractions of the
Financial Institutions of Myanmar Law. The two banks no longer
exist. In August 2005, the Government of Burma also revoked the
license of Myanmar Universal Bank (MUB), and convicted the bank's
chairman under both the Narcotics and Psychotropic Substances Law
and the Control of Money Laundering Law. Under the money laundering
charge, the court sentenced him to one 10-year and one unlimited
term in prison and seized his and his bank's assets.
8. The United States also maintains sanctions on Burma, which
include bans on trade, investment, and financial transactions, as
well as a visa ban on selected individuals. Under the Junta
Anti-Democratic Efforts (JADE) Act, the Burmese Freedom and
Democracy Act , and several Executive Orders, the United States bans
the provision of financial services to Burma by any U.S. persons,
freezes assets of the ruling junta and other Burmese institutions,
and prohibits the import of Burmese-produced goods into the United
States (particularly jade and gems). Additionally, other U.S.
legislation, such as the Narcotics Control Trade Act, the Foreign
Assistance Act, the International Financial Institutions Act, the
Export-Import Bank Act, the Export Administration Act, and the
Customs and Trade Act, the Tariff Act (19 USC 1307), place further
restrictions on financial transactions to Burma. Other U.S.
sanctions, such as visa bans on certain individuals affiliated with
the military regime, also apply to Burma.
9. In September 2008, the United States Government identified Burma
as one of three countries in the world that had "failed
demonstrably" to meet its international counternarcotics
10. Burma became a member of the Asia/Pacific Group on Money
Laundering in March 2006. The GOB is a party to the 1988 UN Drug
Convention. Over the past several years, Burma has expanded its
counter narcotics cooperation with other states. The GOB has
bilateral drug control agreements with India, Bangladesh, Vietnam,
Russia, Laos, the Philippines, China, and Thailand. These
agreements include cooperation on drug-related money laundering
issues. In July 2005, the Myanmar Central Control Board signed an
MOU with Thailand's Anti-Money Laundering Office governing the
exchange of information and financial intelligence. The government
signed a cooperative MOU with Indonesia's FIU in November 2006.
11. Burma is a party to the UN Convention against Transnational
Organized Crime and ratified the UN International Convention for the
Suppression of the Financing of Terrorism in August 2006. Burma
signed the UN Convention on Corruption in December 2005, but has yet
to deposit an instrument of ratification with the UN Secretary
General. Likewise, Burma signed the Treaty on Mutual Legal
Assistance in Criminal Matters among Like-Minded ASEAN Member
Countries in January 2006, but has yet to deposit its instrument of
ratification with the Attorney General of Malaysia.
12. The Government of Burma has in place a framework to allow
mutual legal assistance and cooperation with overseas jurisdictions
in the investigation and prosecution of serious crimes. To fully
implement a strong anti-money laundering/counter-terrorist financing
regime, Burma must provide the necessary resources to administrative
RANGOON 00000890 003 OF 003
and judicial authorities who supervise the financial sector so they
can apply and enforce the government's regulations to fight money
laundering successfully. Burma must also continue to improve its
enforcement of the new regulations and oversight of its banking
system, and end all government policies that facilitate the
investment of drug money and proceeds from other crimes into the
legitimate economy. The reporting threshold for cash transactions
should be lowered to a realistic threshold that fits the Burmese
context. Customs should be strengthened and authorities should
monitor more carefully the misuse of trade and its role in informal
remittance or hawala/hundi networks. The GOB should ratify the UN
Convention against Corruption, as well as the Treaty On Mutual Legal
Assistance In Criminal Matters Among Like-Minded ASEAN Member
Countries. The GOB should take serious steps to combat smuggling of
contraband and its link to the pervasive corruption that permeates
all levels of business and government. The GOB should criminalize
the financing of terrorism.
View as: DESKTOP | MOBILE © Scoop Media