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Cablegate: Readout of Southeast Asia Issues Discussed at Twelfth

VZCZCXRO5075
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0779/01 2301012
ZNR UUUUU ZZH
R 181012Z AUG 09
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 7078
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 03 SINGAPORE 000779

SENSITIVE
SIPDIS

STATE PASS TREASURY FOR MNUGENT

E.O. 12958: N/A
TAGS: EFIN ECON ETRD EINV PGOV PREL ID MY SN TH VM

SUBJECT: READOUT OF SOUTHEAST ASIA ISSUES DISCUSSED AT TWELFTH
ANNUAL MEETING OF ASIA PACIFIC GROUP ON MONEY LANUDERING

1. (U) The 12th annual meetings of the Asia Pacific Group on Money
Laundering (APG) convened July 5 through 10 in Brisbane, Australia.
The APG highlighted challenges in Southeast Asia in anti-money
laundering (AML) and combating financing of terrorism (CFT) and
identified many acute training needs in those areas. The APG
discussed and adopted seven Mutual Evaluation Reports (MER),
including MERs that covered Vietnam and the Philippines. The MERs
reviewed and assessed different jurisdictions' AML-CFT regimes using
the Financial Action Task Force (FATF) "40+9 Recommendations" as a
benchmark. The report on the Philippines centered on deficiencies
in ratifying and implementing UN instruments, but acknowledged
progress made in financial sector supervision. The MER on Vietnam
described a range of deficiencies in Vietnam's AML-CFT regime and
outlined gaps that must be addressed in order to improve Vietnam's
compliance. At the ASEAN donors meeting, ASEAN members identified
the need to strengthen and build the capacity of FIUs (financial
intelligence units) and law enforcement agencies as their top
technical assistance and training (TA & T) needs. Singapore will
host the 13th annual APG meetings in 2010. End Summary.

Singapore
---------

2. (SBU) Singapore's presentation at the Asia Pacific Group (APG)
on Money Laundering meetings provided a progress report on its
AML-CFT regime since the Joint FATF-APG MER on Singapore in 2008.
Singapore reported that it is currently reviewing methods to better
regulate the real estate sector and improve professional standards.
The Assistant Director of the Commercial Affairs Department Ian Wong
said that the reported drop in Singapore's 2008 money-laundering
conviction rate was not entirely accurate, as not all convictions
were concluded in 2008 and some cases are still pending before the
courts. He asserted that Singapore maintains a 100 percent
conviction rate on money laundering charges.

3. (SBU) Outside the MER discussions, Monetary Authority of
Singapore's (MAS) Head of External Relations LEONG Sing Cheong said
that the MAS cannot enforce AML-CFT on real estate agents as they
are not under MAS jurisdiction, making it difficult to monitor
all-cash real estate transactions. The Ministry of National
Development regulates real estate agents and has initiated a review
of the real estate sector and how to apply AML-CFT standards.
However, he noted that it will take time to incorporate real estate
agents into Singapore's AML-CFT efforts and build greater
understanding of how to comply with rules on suspicious transaction
reports (STRs).

4. (U) Singapore will host the 13th APG meeting in 2010.

Indonesia
---------

5. (U) Indonesia presented its follow-up report on progress made
since its MER was reported to the 2008 plenary. In response to a
query about whether Indonesia has a timeline in mind to pass
legislation to strengthen its AML-CFT regime, Indonesia reported
that Bank Indonesia (its central bank) issued a declaration on July
1 this year to improve its rules/guidelines on correspondent banking
and shell banks, but that there is no timeline for passage of the
legislation. Indonesia noted that in a similar situation a draft
AML law was submitted to the Indonesian parliament in September 2006
but the law has yet to be passed three years later.

Thailand
--------

6. (U) Thailand provided an update on its AML-CFT work and some
specific details on the proposed legislation designed to enhance
parts of Thailand's AML-CFT regime governing financial institutions.
Thailand said that its amended AML legislation will be enacted by
August and that the legislation incorporates rules that: require
financial institutions to record and verify their customers'
identity; keep identity and other transactional records for five
years; and conduct risk studies to classify the AML-CFT risk of
banking customers. Thailand said that it monitors cross-border
foreign exchange transactions by requiring all travelers carrying
over US$20,000 to make declarations at all custom gateways.
Thailand's AML Office intends to further enhance its surveillance
ability in partnership with Thai Customs through its planned
electronic border control system, which should be operational by
year-end 2009.

Philippines
-----------


SINGAPORE 00000779 002 OF 003


7. (U) The plenary reviewed and approved the Philippines'
second-round MER, which was led by the World Bank. The on-site
evaluation took place from September 22 to October 6, 2009. The
Philippines received a rating of "Compliant (C)" or "Largely
Compliant (LC)" on fourteen of the Recommendations, and received
ratings of either "Partially Compliant (PC)" or "Non-Complaint (NC)"
on 35 of the recommendations. The assessment team highlighted the
key AML-CFT deficiencies in the Philippines, including: the omission
of several offenses from the predicate crime list; the deficient
implementation of UN Security Council (UNSC) resolutions; the
failure to make terrorism financing a stand-alone offense; the
failure to include designated non-financial businesses and
professionals (DNFBP) under the AML Act provisions; and the lack of
access to bank records by the AML Council and law enforcement
agencies.

8. (SBU) The Philippines said that it has taken significant steps
since passing the AML Act in 2001, even though draft legislation to
criminalize terrorist financing, regulate DNFBPs, and expand bank
obligations have not yet been passed. The Philippines pointed out
that its central bank and Philippines securities commission have
adopted measures and issued guidelines to fight AML-CFT. The
Philippines explained the structure and responsibilities of the AML
Council (made up of the central bank governor, head of the
securities commission and the head of the insurance commission) and
Secretariat. The Philippines AML Council sets policy as empowered
by law while the Secretariat is the operational arm that serves as
the financial intelligence unit (FIU).

9. (SBU) During the plenary session, Indonesia, Singapore and
Thailand made motions to upgrade the Philippines' rating on Special
Recommendation 1 (on ratification and implementation of UN
instruments) from NC to PC. Thailand highlighted the Philippines'
guidelines issued to banks as proof of its implementation of UN
instruments, while Singapore testified to the Philippines'
cooperation in matters relating to financing terrorism. Canada and
the United States opposed the upgrade based on the fact that the
Philippines has not criminalized terrorism finance. Japan said it
needed more substantial proof that the Philippines complied with
Special Recommendation 1 given that it has not yet criminalized
terrorism finance.

10. (SBU) The MER assessment team defended the Philippines' rating,
saying that the Philippines' actions were insufficient evidence for
an upgrade based on FATF recommendations that require terrorism
finance be explicitly criminalized under law. The Philippines has
not yet passed the law which would satisfy this requirement. The
plenary declined to upgrade the Philippines' rating, keeping it at
NC. However, in separate discussions, Philippines' delegation
confided to U.S. officials that the NC rating may be helpful in
spurring the authorities in the Philippines to do more to address
the gaps identified in the MER.

Vietnam
-------

11. (U) This plenary marked the first time that the APG evaluated
Vietnam's AML-CFT regime, and the plenary discussion showed that
Vietnam has laid the foundation for an AML-CFT regime, though
substantial work remains. Vietnam received only one C rating and
three PC ratings, with 23 PC ratings and 20 NC ratings. The
Vietnamese delegation appeared at times bewildered by the rating
process and objected vigorously to many of the ratings.
Specifically, the Vietnamese delegation attributed their low ratings
to insufficient time allowed for translating the assessment team's
report from English to Vietnamese. The officials said that
Vietnamese laws, which are based on Vietnamese Civil Code, are
comprehensive and cover most of the short-comings in the legal
system highlighted by the MER assessment team. Despite a lengthy
debate between the MER assessment team and the Vietnamese
delegation, the plenary did not support any rating upgrades.

12. (U) The MER discussion revealed several key AML-CFT deficiencies
in Vietnam, including: the lack of criminalization of terrorism
finance as an autonomous offense; no constitutional limitation of
the criminal liability of legal person; criminal liability for
individuals, which is punishable by only administrative and not
criminal sanctions; deficiencies in the laws to protect bona fide
third parties whose property is subject to seizure or frozen by the
authorities; insufficient laws governing Vietnam's ability to
respond to Mutual Legal Assistance requests. The report also
highlighted: the lack of resources for Vietnam's FIU and Vietnam's
AML Information Centre (AMLIC), which has a staff of 23; the failure
of the non-banking credit institutions in Vietnam to implement
guidelines on AML-CFT; and the lack of effective regulations

SINGAPORE 00000779 003 OF 003


covering DNFBPs. Vietnam has also yet to ratify or accede to the UN
Convention against Transnational Organized Crimes (Palermo
Convention).

13. (U) The MER on Vietnam contains 15 pages of recommended actions
to improve Vietnam's AML-CFT regime. Vietnam will now have to
develop its own action plan and report on its progress at subsequent
annual APG meetings. According to the IMF, Vietnam has requested
technical assistance on banking supervision as well as information
technology (IT) development (which the IMF cannot provide). The IMF
is currently working on the first request, which will take
approximately 18 months to provide.

ASEAN Donor Issues
------------------

14. (U) In the regional meeting of ASEAN members, the ASEAN
Secretariat's Dr. Aladdin Rillo and the APG Secretariat's Cecilia
Marian reported on the results of the TA & T survey sent out to
members in May 2009. The results identified six TA & T needs:
strengthening and enhancing FIU capacity; building capacity of AML
supervisors and law enforcement agencies; developing a supervisory
framework for DNFBP and the non-profit organization (NPO) sector;
and enhancing cross-border cash movements. For their TA & T needs,
ASEAN members decided to focus their efforts on strengthening and
building the capacity of FIUs and law enforcement agencies. The
APG/ASEAN Secretariats will work with the Donors and Providers Group
on these issues.

15. (U) Dr. Rillo told ASEAN members that the senior official
meeting on transnational crime (SOMTC) adopted a plan of action and
urged members to implement it. The plan of action addresses crimes
related to terrorism, money laundering, human trafficking and
narcotics trafficking, but needs further development on
implementation. The ASEAN Secretariat committed to work more on the
plan to ensure it corresponds to the TA & T needs of ASEAN members.

16. (SBU) Representatives from Thailand expressed concern that there
is an apparent gulf between what the political leaders in ASEAN
believe is happening on AML-CFT and what the countries are actually
doing to implement their AML-CFT action plans. Dr. Rillo said that
the ASEAN Secretariat highlights AML-CFT issues during meetings with
central bank and finance ministry officials, but agreed that more
can be done such as better coordination between member countries'
FIUs and the ASEAN Secretariat's Transnational Crime Unit. The
representative from Laos voiced concern that senior levels of the
government were not sufficiently focused on AML-CFT concerns, and
asked the APG Secretariat for support in raising this with senior
Laotian government officials whenever possible. The APG Secretariat
agreed to work with Laos to help sensitize the government to the
issues, to the extent possible within the APG's mandate.

17. (U) Various donors outlined their regional training programs.
The International Monetary Fund (IMF) reported that it will be
placing a regional resident AML-CFT expert in Singapore, who will be
responsible for coordinating IMF assistance with other donors'
regional experts. The resident expert will focus primarily on
Vietnam, Thailand, Cambodia and Laos PDR. The IMF also reported
that the IMF Training Institute in Singapore will conduct training
for would-be MER assessors and AML-CFT officials in countries that
will be assessed. The Asian Development Bank (ADB) informed the
meeting that they provide support directly to the ASEAN Secretariat
in the area of customs, immigration, quarantine and security (CIQS)
to help counter trade-based money laundering.

18. (U) Further information on the MERs discussed at the 12th annual
APG meetings can be found on the APG website www.apgml.org.

19. (U) This cable was drafted by Emboff/Singapore and cleared with
the head of the United States delegation to the APG. Any USG
official with technical questions regarding the Vietnam or
Philippines MERs or general APG matters may contact the United
States Head of Delegation Colleen Stack via email at
Colleen.Stack@do.treas.gov.

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