FATF TEAM INSPECTS GOB FINANCIAL SECTOR

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001472 SIPDIS SIPDIS STATE FOR EAP/MLS; PACOM FOR FPA, TREASURY FOR FINANCIAL CRIME:PDERGARBEDIAN E.O. 12958: DECL: 09/21/2016 TAGS: EFIN ECON PGOV PTER ETTC KTFN BM SUBJECT: FATF TEAM INSPECTS GOB FINANCIAL SECTOR RANGOON 00001472 001.2 OF 002 Classified By: Econoff TLManlowe for Reason 1.4 (b,d) ¶1. (SBU) Summary: USG members of a Financial Action Task Force (FATF) team visiting Burma last week confirmed FATF will recommend that Burma be dropped from the Non Compliant Countries and Territories (NCCT) list at the upcoming FATF Vancouver plenary on October 12-13. FATF inspectors said GOB officials had been cooperative and forthcoming during their latest three-day visit and had met all necessary conditions for de-listing. FATF will continue to monitor Burma closely for one year after de-listing and will require regular GOB progress reports. End Summary. ¶2. (SBU) A five-member FATF delegation of U.S. Treasury and Justice Department officials and their Japanese counterparts visited Burma on September 27-30 to inspect the financial sector's compliance with FATF anti-money laundering (AML) procedures. At an out-briefing on September 30, USG team members told emboffs that the GOB shared information freely and was forthcoming about new AML measures instituted by police and banking officials. The team inspected Burma's Financial Intelligence Unit (FIU),Central Bank, state-owned banks (Myanmar Economic Bank and Myanmar Investment and Commercial Bank),the largest privately owned bank (Kanbawza),the Land Settlements Department, and the investigation branch for Customs and Drug Control. They also met with the Minister of Home Affairs, the Minister of Finance and Revenue, the Deputy Attorney General, leaders of the Central Committee for Drug Abuse Control, officers of the Bankers' Association, and representatives from police investigation branches in Rangoon and the capital of Nay Pyi Taw. The FATF team was told that they were the first foreigners allowed to visit the Attorney General's offices in the new capital. ¶3. (C) According to FATF team members, Burma made substantive progress in AML activities over the past two years. The GOB shut down three private banks previously cited as primary money laundering concerns. The investigative skills of FIU staff and police investigators have improved, thanks to a new training and inspection regime run by the Bank Supervision Department of the Central Bank, and a solid database of suspicious transaction reports (STRs) maintained by the FIU. Burmese police and banking officials now respond cooperatively to international AML requests, and work closely with prosecutors to apply the country's new Money Laundering Act in criminal cases. The Myanmar Investment and Commercial Bank gave the FATF team a list of all its correspondent banks and its detailed responses to AML inquiries from foreign banks. The FATF team said the May 15 conviction and imprisonment of Tin Sein, former head of Myanmar Universal Bank, was a clear sign within the banking sector and government that money laundering would now be handled as a serious criminal offense. ¶4. (C) The FATF team admitted that significant weaknesses remain in Burma's AML efforts. Most banks in Burma lack automated record-keeping systems. With most bank records still kept by hand, centralized data collection and analysis is impossible. A significant amount of foreign exchange, particularly remittances, passes through informal ("hawala") networks. The FATF team felt the largest private bank, Kanbawza, was weak in promoting a culture of AML compliance. Corruption is not handled as the same level of offense as money laundering; the FATF team urged the GOB to treat both as predicate offenses. While Burma's insurance and securities sectors are too underdeveloped and underutilized to facilitate much money-laundering, team members noted that the country's large volume of trade in gold, gems and jade provided ample opportunities for abuse. RANGOON 00001472 002.2 OF 002 ¶5. (SBU) The Burma inspection team will send its final inspection report to the Review Committee, which will make a recommendation to the Vancouver FATF plenary on October 12-13, which will likely recommend de-listing Burma, but will also include recommendations for the continued strengthening of Burma's AML regime. If Burma is removed from the NCCT list, FATF will monitor the situation closely for one year and will require regular progress reports from the GOB. Unsatisfactory enforcement of AML regulations could lead FATF to place Burma back on the NCCT list. U.S. prohibitions under EO 13310 and Patriot Act Section 311 would remain in force. ¶6. (C) Comment: Burma is the only country left on the NCCT list, and Burmese officials admitted to the inspection team they are embarrassed to hold such a distinction. Accordingly, the GOB made an extra effort to please the FATF team, providing extensive information and opening sensitive institutions to a rigorous inspection. The government-controlled media will highlight Burma's progress in this area as an example of how well Burma cooperates with the international community and does not pose a threat to regional security. While other regime policies continue to constitute a regional threat, it is clear that FATF's designation of Burma as a NCCT has inspired the GOB to pass needed AML laws, close banks linked to drug dealers, and upgrade its ability to monitor and report suspicious transactions. End comment. STOLTZ