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Cablegate: Burma: 2005 Incsr Part Ii

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A

REF: STATE 210351

1. Following is the 2005-2006 revision of the International
Narcotics Strategy Report, Part II: Financial Crimes and
Money Laundering for Burma.

2. Burma, a major drug producing and trafficking country,
has a mixed economy with substantial state-controlled
companies, mainly in energy and heavy industry, and with
private business primarily in agriculture and light
industry. Burma's economy continues to be vulnerable to
drug money laundering due to its under-regulated financial
system, inadequate implementation of its anti-money
laundering regime, and policies that facilitate the
funneling of drug money into commercial enterprises and
infrastructure investment. The government has addressed key
areas of concern identified by the international community
by implementing some anti-money laundering measures, but
Burma remains on the Financial Action Task Force (FATF) list
of Non-Cooperative Countries and Territories (NCCT).

3. 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
high level of 100 million kyat (approximately $100,000).
Since adopting a "Mutual Assistance in Criminal Matters Law"
in 2004, Burma has taken additional steps to address money
laundering and to combat terrorist financing, including
adding fraud to the list of predicate offenses and defining
penalties for "tipping off" suspicious transaction reports.
As a result, FATF lifted its countermeasures in October
2004. The GOB's recent anti-money laundering measures
amended regulations originally instituted in 2003, which had
set out 11 predicate offenses, including narcotics
activities, human and arms trafficking, cyber crime, and
"offenses committed by acts of terrorism," among others. The
2003 regulations also called for suspicious transaction
reports (STRs) by banks, the real estate sector, and customs
officials, and imposed severe penalties for non-compliance.

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4. The GOB established a Department Against Transnational
Crime in 2004 with a mandate that included 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 progress reports.
In 2005, the government also increased the size of the FIU
from 10 to 40 members. In August 2005, the Central Bank of
Myanmar issued guidelines for on-sight bank inspections and
required reports reviewing banks' compliance with AML
legislation. Since then, the Central Bank has disbursed
teams to instruct on the new guidelines and to inspect
banking operations for compliance.

5. Despite the lifting of countermeasures, Burma remains on
the FATF's list of non-cooperative countries and territories
because it has not yet implemented all the required reforms
in its anti-money laundering regime. As of December 2005,
the United States maintains the countermeasures it adopted
against Burma in 2004. At that time, the United States
issued final rules finding the jurisdiction of Burma and two
private Burmese banks, Myanmar Mayflower Bank and Asia
Wealth Bank, to be "of primary money laundering concern,"
and requiring U.S. banks to take certain special measures
with respect to all Burmese banks, but with respect to
Myanmar Mayflower and Asia Wealth Bank in particular. These
rules were issued by FinCEN of the Treasury Department
pursuant to Section 311 of the 2001 USA PATRIOT Act.

6. The rules prohibit most U.S. financial institutions 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 have been directly linked to narcotics-
trafficking organizations in Southeast Asia. In March 2005,
following a GOB investigation, the Central Bank of Myanmar
revoked Myanmar Mayflower Bank's and Asia Wealth Bank's
licenses to operate, citing infractions of the Financial
Institutions of Myanmar Law. As of December 2005,
Government of Burma investigations into these two cases
continue. In August 2005, the Government of Burma seized
the assets of another private institution, the Myanmar
Universal Bank (MUB), and arrested the Bank's Chairman under
the Narcotics and Psychotropic Substances Law, charging him
with drug-related money laundering crimes. As of December
2005, the case was still in court.

7. Burma remains under a separate U.S. Treasury Department
advisory stating that U.S. financial institutions should
give enhanced scrutiny to all financial transactions
relating to Burma. The Section 311 rules complement the 2003
Burmese Freedom and Democracy Act (renewed in July 2005) and
an accompanying executive order. These laws imposed
additional economic sanctions on Burma following the
regime's May 2003 attack on pro-democracy leader Aung San
Suu Kyi and her convoy. The sanctions prohibit the import of
Burmese-produced goods into the United States, ban the
provision of financial services to Burma by U.S. persons,
freeze the assets of identified Burmese institutions,
including those of the ruling junta, and expand visa
restrictions to include managers of state-owned enterprises,
in addition to senior government officials and family
members associated with the regime. In August 2005, U.S.
Treasury amended and reissued the Burmese Sanctions
Regulations in their entirety to implement the 2003
Executive Order which placed new sanctions on Burma.

8. Burma holds observer status in the Asia/Pacific Group on
Money Laundering and is a party to the 1988 UN Drug
Convention. Over the past several years, the Government of
Burma (GOB) has extended 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 that address
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. In
2005, Australia funded workshops in Burma on monitoring and
investigating money laundering.

9. Burma has signed, but not yet ratified, the UN
International Convention for the Suppression of the
Financing of Terrorism. In 2004, Burma ratified the UN
Convention against Transnational Organized Crime. Burma
plans to sign the ASEAN Multilateral Assistance in Criminal
Matters Agreement in early 2006.

10. 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.
Burma must improve enforcement of regulation and oversight
of its banking system, and end all policies that facilitate
the investment of drug money into the legitimate economy.
It also must discourage the widespread use of informal
remittance or "hundi" networks. Burma should continue to
work toward full implementation of a viable anti-money
laundering regime, and should provide the necessary
resources to administrative and judicial authorities that
supervise the financial sector so they can successfully
implement and enforce the government's latest regulations to
fight money laundering. Burma should also become a party to
the UN International Convention for the Suppression of the
Financing of Terrorism and criminalize the funding of

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