KAZAKHSTAN: DECISION ON ANTI-MONEY LAUNDERING LAW

UNCLAS ALMATY 004353

SIPDIS

STATE FOR INL PRAHAR, MCCOWAN, AND HOOKER; EUR/ACE (MLONGI);
EUR/CACEN (JMUDGE)

E.O. 12958: N/A
TAGS: SNAR ASEC KCOR KCRM PREL KZ
SUBJECT: KAZAKHSTAN: DECISION ON ANTI-MONEY LAUNDERING LAW
POSTPONED UNTIL MARCH 2006



1. Summary: The anti-money laundering and counter terrorism
financing law under consideration in the Mazhilis (lower
house of Parliament) will not be passed by the end of 2005
as was previously planned, and was deferred until March

2006. The draft law generated questions from legislators
about the legitimacy of the connection between money
laundering and terrorism financing. We have heard that
representatives of the Parliament's Committee on Economic
Reform and Regional Development, as well as Transparency
International, World Bank and local commercial banks, also
felt that the law had several shortcomings. This contrasts
with the positive opinion of the law held by the Procurator
General's Office (PGO). Parliamentarians decided to study
the law until March before making any decisions. End
Summary.


2. The draft law on "Combating Legalization (Laundering) of
Illegitimate Proceeds and Financing of Terrorism" was
presented to the government on August 10, 2005 and forwarded
to parliament in late September. On December 7, a
representative of the Procurator General's Office informed
post that the decision on the draft by the Mazhilis was
postponed until March 2006.


3. The draft anti-money laundering law generated many
questions among parliamentarians. According to the local
press, some parliamentarians did not see any connection
between money laundering and terrorism financing, an
integral part of the bill. In a recent newspaper article
one legislator expressed a view that terrorism financing was
included into the draft merely to push it through the
Parliament. (Note: A series of seminars and round tables
were organized by the international community, including
INL, to educate financial institutions as well as
parliamentarians on AML in general and the draft law in
particular. These events were intended to increase
awareness about international standards and requirements of
the Financial Action Task Force on Money Laundering (FATF)
among legislators and future implementers of the law. End
Note.)


4. Despite the efforts of the Procurator's Office and the
international community to draft an adequate law, we have
heard reservations from representatives of the Parliament's
Committee on Economic Reform and Regional Development, as
well as Transparency International, World Bank and local
commercial banks. The PGO did not share this viewpoint.
The Director of Transparency International, for example,
pointed out that Kazakhstani Financial Intelligence Unit
(FIU) will be a financial monitoring agency created under
the PGO. At the same time the PGO has oversight over all
state agencies, including the future FIU. In other words,
the PGO will be overseeing its own monitoring activities.
Also according to the local press, many parliamentarians
believe that the draft will not be passed without
significant changes.


5. The PGO official said that parliamentarians decided to
take more time to study the law before making any decisions.
They plan to meet once a week before March 2006 to discuss
the draft in detail. The PGO has approached INL regarding
possible training on anti-money laundering for the
parliamentarians, employees of the PGO, the National Bank
and the Agency on Regulation and Oversight of the Financial
Market and Financial Organization of Kazakhstan. We intend
to provide this in the coming months. (Note: To fill this
requirement, INL has several training sessions scheduled in
the coming months. End Note.) The PGO has told us that, as
the main drafter of the law, it intends to work closely with
the Parliament to ensure its passage in March.


ORDWAY