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Cablegate: Nicaragua: New Penal Code Updates Anti Terrorism and Money

VZCZCXRO4986
RR RUEHLMC
DE RUEHMU #2609/01 3521612
ZNR UUUUU ZZH
R 181612Z DEC 07 ZDK
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 1830
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 1819
RHEHNSC/NSC WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 MANAGUA 002609

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, INL/LP, S/CT AND EEB/IFD
BOGOTA FOR FGROENE
TREASURY FOR SARA GRAY AND FINCEN
JUSTICE FOR OIA, AFMLS, NDDS
JUSTICE PASS TO OPDAT CDELUIGI
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: EFIN PTER ECON PGOV SNAR NU
SUBJECT: NICARAGUA: NEW PENAL CODE UPDATES ANTI TERRORISM AND MONEY
LAUNDERING LAWS

Ref: A) MANAGUA 1743, B) MANAGUA 2185, C) MANAGUA 2351

MANAGUA 00002609 001.2 OF 002


1. (U) Summary: In November, Nicaragua's National Assembly passed a
new Penal Code that includes new language on terrorism finance,
money laundering, and crimes against the financial system. This
language will allow Nicaragua's law enforcement to prosecute cases
of financing of terrorist entities, transportation of bulk cash
contraband, and non-drug related money laundering as independent
crimes instead of having to tie them to a central crime such as drug
smuggling. Despite these advances, Nicaragua's lack of a financial
intelligence unit continues to limit the GON's ability to seriously
investigate and prosecute specific cases at this time. End
Summary.

2. (U) On November 13, Nicaragua's National Assembly passed a new
Penal Code that, for the first time, defines terrorism financing as
a crime and uses international definitions of money laundering.
Nicaragua's police and prosecutors will now be able to prosecute
cases involving the financing of terrorist entities, transportation
of bulk cash contraband, and non-drug related money laundering as
independent crimes instead of having to tie them to a central crime
such as drug smuggling. Advocated by Nicaragua's Superintendent of
Banks and the National Association of Private Banks, these new
articles bring Nicaragua's legal protections of its financial sector
up to international standards. The new penal code will go into
effect within 60 days of being published in the official register
"La Gaceta." The GON is publishing the code in portions, so there
is no fixed date for the publication of the relevant articles.

The New Articles
----------------

3. (U) The new Penal Code brings Nicaragua in line with most
international standards for fighting money laundering. Nicaragua's
previous Penal Code, dating from 1974, did not list money laundering
as a specific crime. As a result, money laundering not tied to drug
cases was rarely investigated or prosecuted. Articles 282 and 283
of the new Penal Code define money laundering as an independent
crime that can occur beyond territorial borders. Acts that now
constitute money laundering include: illegal transportation of bulk
cash (per GAFI Special Recommendation IX), use of front companies or
straw men, willfully ignoring an illegal movement of money, and
inaction when one is in a supervisory position. Committing these
crimes while a public servant is considered an aggravating
circumstance, which increases the penalties. The greatest weakness
to these articles is that they apply the lowest international
standard for sentences (five to seven years).

4. (U) For the first time, Nicaragua's law clearly defines the
financing of terrorism as a crime. Article 395 is based on
international model language and covers generating, collecting,
funneling, depositing, transferring, or administering legal or
illegal funds that are used to commit an act of terrorism as defined
in Article 394. The sentence is 15 to 20 years. If the act is
committed through Nicaragua's financial system and/or by a public
employee, the sentence is increased by five years.

5. (U) Article 280, which defines "Crimes Against the Banking and
Financial System," provides a major step forward in the definition
of actions that can harm the financial sector. Among the crimes
specified in the article are hindering the work of the
Superintendent of Banks, spreading unfounded rumors on the financial
health of any entity, or causing damage to the assets of a financial
institution. The development of this article can be directly tied
to the failure of four major Nicaraguan banks in 2000-2001. The
first failure, caused by a massive money laundering scheme run by a
shell company through one of Nicaragua's largest banks, set off the
chain reaction of failures. (Ref B) Many of the actions which
caused the failures were not prosecutable because these crimes had
not been specified in the previous Penal Code.

Comment
-------

6. (SBU) For the National Assembly, the most controversial articles
were 282 and 283, dealing with money laundering, because of the
legal and political implications for former president Arnoldo
Aleman. In 2003, Aleman was convicted of stealing government funds
and money laundering and sentenced to 20 years. The ensuing
political machinations to keep him out of jail were the basis of the
famous "pacto" between the FSLN (Sandinista) and the PLC (liberal)
parties which still dominates Nicaraguan politics. (Ref A) Post
will report septel on recent developments in this case and how they
relate to the new Penal Code.

7. (U) Aside from the political implications, these changes are an
important advancement for Nicaragua to investigate and prosecute
financial crimes. The lack of a financial intelligence unit,
however, continues to limit the GON's ability to seriously
investigate specific cases at this time. (Ref C and Septel)

TRIVELLI

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