BURMA: ANOTHER TENTATIVE STEP ON MONEY LAUNDERING

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000239

SIPDIS

STATE FOR EAP/BCLTV, EB
PARIS FOR USOECD - PLEASE PASS US DELEGATION TO FATF PLENARY
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA JEFF NEIL
USPACOM FOR FPA

E.O. 12958: DECL: 02/22/2014
TAGS: EFIN SNAR ECON PGOV BM
SUBJECT: BURMA: ANOTHER TENTATIVE STEP ON MONEY LAUNDERING

REF: A. 2/23 WOHLAUER-DERGARABEDIAN EMAIL

B. RANGOON 174 AND PREVIOUS (NOTAL)

C. 03 RANGOON 1595 (NOTAL)

Classified By: DCM Ron McMullen for Reasons 1.5 (B,D)


1. (C) Summary: As is its custom, the GOB released with no
warning news of three important steps toward the
implementation of its anti-money laundering law. It
announced the setting of threshold amounts for banking and
real estate transactions, and the naming of members to its
nascent Financial Investigation Unit. However, it refused to
make public any specifics. Though these are key moves in
principle, the lack of openness and the GOB's dire lack of
capacity to fight financial crime lead us to advise caution
in giving Burma's money laundering regime a clean bill of
health. End summary.

Oh, By the Way, We Reformed


2. (C) With no prior warning, the Burmese Minister for Home
Affairs on February 19 sent a letter to the Financial Action
Task Force (FATF) secretariat informing the body of three
significant anti-money laundering directives approved by the
GOB cabinet on January 8. First, the letter indicated the
Minister, as chairman of the new money laundering Central
Control Board (CCB),had set a "specific," though
unmentioned, threshold amount for reporting requirements.
Second, the CCB had set a "specific," though again
unmentioned, threshold amounts for real estate transactions.
Finally, the CCB formally named representatives to the
Financial Investigation Unit (FIU).


3. (C) The three January directives close several gaps that
remained even after the GOB in December 2003 issued
long-awaited regulations to promulgate its June 2002 Control
of Money Laundering Law (CMLL; see ref C). It was, in part,
the lack of these regulations that led FATF last November to
officially urge its member countries to impose
countermeasures against Burma. The other half of FATF's
concern, the lack of a mutual legal assistance framework law,
has not yet been addressed.

Thresholds Set, But We're Not Telling


4. (C) According to a close Embassy source, and member of the
FIU, the specific contents of the three directives remain
highly classified. He said the CCB reported the threshold
amounts only to the banks, the FIU, and Central Bank of
Myanmar. Likewise for the real estate transaction threshold.
We learned from other sources in the GOB and at private
banks, though, that the threshold amount for banks was set at
100 million kyat (roughly US$120,000). However, private
bankers told us, they had yet to receive any written
notification on this new requirement. We have not yet been
able to verify the threshold amount set for real estate
transactions.

The FIU: Outfitted But Not Ready for Battle


5. (C) The FIU membership announcement is also classified,
however, our FIU contact was willing to tell us who was on
the list. The director of the FIU will be a police Colonel
from the Myanmar Police Force's Central Committee for Drug
Abuse Control (CCDAC). He will have two deputies, one from
the Police Force's Central Investigation Division (CID) and
one from the Ministry of Home Affairs' Bureau of Special
Investigation (BSI). (Note: The Myanmar Police Force is also
under the aegis of the Home Affairs Ministry.)


6. (C) The rest of the committee is made up of a Lt. Colonel
from CCDAC, and deputy director-level officials from BSI, the
Central Bank, the Land Record Department, the Internal
Revenue Department, the Customs Department, and the Auditor
General's office. There will also be three administrative
staff from the CCDAC, the Police Force, and the BSI. The
investigative staff will be made up of various officers from
the BSI, CID, CCDAC, and Customs.


7. (C) In the context of asking for more international
capacity building, our contact admitted that there was a real
dearth of well-trained financial investigators in the Burmese
law enforcement community. This, he said, would be the
primary barrier to enforcement of the money laundering
statute. He told us that since the FIU's formation in
mid-January, there had not been any reports from banks and no
investigations begun by the FIU. This is not a good sign.
Although private banks have been in shambles since a banking
crisis struck in February 2003, and thus will not be engaging
in major transactions (see ref B),the FIU's investigations
were supposed to be retroactive to the passage of the CMLL in
June 2002, when the private banks were at the peak of their
freewheeling ways.

Comment: Some Good, But No Credibility

8. (C) The appointment of solidly professional, vice
political, officials to the FIU is a reassuring step.
Likewise, we concur that the lack international training on
fighting money laundering and terrorist financing will be a
large obstacle to the successful enforcement of Burma's now
"complete" money laundering regime. However, we are dismayed
that once again the senior SPDC leadership is clearly having
a hard time committing fully to a policy step. This is too
bad, as it will keep Burma from getting whatever credit is
due from making important reforms, at least on paper. It
also makes us suspicious of the SPDC's motives, and leaves us
to advise caution until there is evidence of real action
taken. The result of the ongoing investigation into two of
Burma's most notorious private banks, due in early March,
will be the first test of the SPDC's earnestness to combat
money laundering. End comment.
Martinez