NEW ANTI-MONEY LAUNDERING LAW MOVING FORWARD

UNCLAS YEREVAN 002604

SIPDIS

SENSITIVE

DEPT FOR INL/JCAMPBELL;INL/CMESHESKE;
JUSTICE FOR OIA AND AFMLS, TREASURY FOR FINCEN, OTA

E.O. 12958: N/A
TAGS: EFIN KCRM KSEP PTER SNAR AM
SUBJECT: NEW ANTI-MONEY LAUNDERING LAW MOVING FORWARD

SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY.

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SUMMARY
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1. (SBU) On November 24, 2004 the Armenian parliament
adopted the first reading of the Law Against Money
Laundering and Terrorist Finance, which is intended to
implement recommendations that MoneyVal (the Council of
Europe's committee on anti-money laundering) made during its
review of Armenia earlier this year. The law will
significantly improve Armenia's regime for the control of
money laundering by establishing a single Financial
Intelligence Unit (FIU),consolidating reporting
requirements for large money transfers and all suspicious
transactions, and bringing banks, non-banking financial
institutions and casinos under the same legal framework. In
addition, the law specifically criminalizes the financing of
terrorism. While the law may face some minor changes during
its second and third readings, the parliament has committed
to it in principle by adopting the first reading. The
Central Bank has told us that it expects parliament to pass
the law substantially unchanged before the New Year. End
summary.

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FINANCIAL INTELLIGENCE UNIT TO BE CREATED IN CENTRAL BANK
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2. (SBU) Following the passage of the first reading of the
new anti-money laundering law, the Central Bank has the
mandate to proceed with the establishment of a Financial
Intelligence Unit (FIU). Nerses Yeritsyan, Advisor to the
Central Bank Chairman, is charged to form the FIU and create
banking procedures and by-laws to implement the FIU's
reporting regime. Yeritsyan told us that he would be the
head of the FIU, "at least in the beginning." The FIU will
be an independent body that reports to the chairman of the
Central Bank. Its mandate will be limited to gathering
intelligence and analyzing it. The FIU will transfer cases
to the Procurator General for enforcement. Yeritsyan said
that he expects the FIU to be fully operational by mid-2005.
The draft


3. According to Yeritsyan, the new anti-money laundering
law and the creation of a new FIU are steps towards meeting
MoneyVal's recommendations by the February 2005 deadline.
When asked about joining the Egmont group, Yeritsyan said
that he intends to work toward it but that the FIU as
envisaged by the new legislation lacks legal competency to
deal directly with FIU's of other countries.

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DRAFT LAW CRIMINALIZES TERRORIST FINANCE
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4. The new draft anti-money laundering law also contains
provisions to strengthen Armenia's legislation to combat
terrorist finance by specifically criminalizing acts that
assist the financing of terrorism. We will report this
septel, once the law has passed its final reading.

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COMMENT
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4. (SBU) While the new money-laundering law is a step
forward, there are still some gaps. Only some institutions
covered by the new law will report directly to the FIU.
Casinos and insurance companies will still report to their
regulators in the Ministry of Finance, who will then forward
suspicious cases to the FIU. It is not clear what
competence the FIU will have to investigate on its own
initiative institutions that do not report directly to it.
Additionally, the new law lacks clear procedures for
freezing or confiscating assets, although Yeritsyan tells us
that by-laws will put measures in place. Yeritsyan told us
that he intends to approach international donors for
assistance in three areas, technical assistance in the
creation of procedures, by-laws and reporting systems, the
set-up and maintenance of databases, and training for the
officials at banks and exchange offices who are required to
report suspicious transactions.
EVANS