Cablegate: Burma: Incsr Ii Money Laundering and Financial Crimes

DE RUEHGO #1109/01 3190837
R 150837Z NOV 07





E.O. 12958:N/A

REF: STATE 137250

RANGOON 00001109 001.2 OF 002

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 2006 and
2007. 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. The
government has addressed most 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), but advised the Burmese Government to enhance
regulation of the financial sector, including the securities
industry. FATF will continue to monitor Burma's progress on
anti-money laundering in 2007-2008.
3. The United States maintains other sanctions on trade, investment
and financial transactions with Burma under Executive Order 13047
(May 1997), Executive Order 13310 (July 2003); the Narcotics Control
Trade Act, the Foreign Assistance Act, the International Financial
Institutions Act, the Export-Import Bank Act, the Export
Administration Act, the Customs and Trade Act, the Tariff Act (19
USC 1307), and the 2003 Burmese Freedom and Democracy Act (P.L.
108-61). In September and October 2007, under Executive Order
13310, the United States imposed additional sanctions on leaders of
the Burmese regime, as well as key businessmen.
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 2003. It set a
threshold amount for reporting cash transactions by banks and real
estate firms, albeit at a fairly high level of 100 million kyat
(approximately $75,000). Burma adopted a "Mutual Assistance in
Criminal Matters Law" in 2004, added fraud to the list of predicate
offenses, and established legal penalties for leaking information
about suspicious transaction reports. The GOB's 2004 anti-money
laundering measures amended regulations instituted in 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. The 2003 regulations, 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 Government of Burma
submitted an anti-money laundering implementation plan and produced
regular progress reports in 2006 and 2007. 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 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 2006-2007, the Burmese Government amended its "Control of
Money Laundering Law" to expand the list of predicate offences. In
July 2007, the Central Control Board issued five directives to bring
more non-bank financial institutions under the AML/CFT compliance
regime. As of August 2007, 823 STRs had been received. One case
related to trafficking in persons was filed for prosecution,
resulting in the convictions of 20 individuals under the "Control of
Money Laundering Law" and the Trafficking in Persons Law. In the
first eight months of 2007, seven cases have been identified as
potential money laundering investigations.

7. Burma is scheduled to undergo a mutual evaluation by the FATF's
Asia-Pacific Group on Money Laundering, with the on-site visit to
take place in November 2007.
8. The United States maintains the separate countermeasures it
adopted against Burma in 2004, which found the jurisdiction of Burma
and two private Burmese banks, Myanmar Mayflower Bank and Asia
Wealth Bank, to be "of primary money laundering concern." These
countermeasures prohibited U.S. banks from establishing or
maintaining correspondent or payable-through accounts in the United

RANGOON 00001109 002.2 OF 002

States for or on behalf of Myanmar Mayflower and Asia Wealth Bank
and, with narrow exceptions, for all other Burmese banks. These
rules were issued by the Financial Crimes Enforcement Network within
the Treasury Department, pursuant to Section 311 of the 2001 USA
9. 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.
10. Burma also remains under a separate 2002 U.S. Treasury
Department advisory stating that U.S. financial institutions should
give enhanced scrutiny to all financial transactions related to
Burma. The Section 311 rules complement the 2003 Burmese Freedom
and Democracy Act (renewed in July 2006) and Executive Order 13310
(July 2003), which impose additional economic sanctions on Burma
following the regime's May 2003 attack on a peaceful convoy of the
country's pro-democracy opposition led by Nobel laureate Aung San
Suu Kyi. The sanctions prohibit the import of most Burmese-produced
goods into the United States, ban the provision of financial
services to Burma by any U.S. persons, freeze assets of the ruling
junta and other Burmese institutions, and expand U.S. visa
restrictions to include managers of state-owned enterprises as well
as senior government officials and family members associated with
the regime. In August 2007, the U.S. Treasury amended and reissued
the Burmese Sanctions Regulations in their entirety to implement the
2003 Executive Order that placed these sanctions on Burma.
11. Burma became a member of the Asia/Pacific Group on Money
Laundering in January 2006, and is a party to the 1988 UN Drug
Convention. Over the past several years, the Government of 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.
12. Burma is a party to the UN Convention against Transnational
Organized Crime and ratified the UN Convention on Corruption in
December 2005 and the UN International Convention for the
Suppression of the Financing of Terrorism in August 2006. Burma
signed the ASEAN Multilateral Assistance in Criminal Matters
Agreement in January 2006.
13. The GOB now 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/counterterrorist financing regime,
Burma must provide the necessary resources to administrative 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 into the legitimate economy. It also must
monitor more carefully the widespread use of informal remittance or
"hundi" networks, and should criminalize the funding of terrorism.
14. Embassy Rangoon's POC for Money Laundering and Financial Crimes
issues is Economic/Commercial Officer Samantha Carl-Yoder; email:; phone: 95-1-650-006.


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