BURMA: 2006-2007 INCSR PART II

UNCLAS SECTION 01 OF 02 RANGOON 001633 SIPDIS STATE FOR EAP/MLS, INL, EB/ESC/TFS; TREASURY FOR FINCEN; JUSTICE FOR AFMLS, OIA, OPDAT SIPDIS E.O. 12958: N/A TAGS: EFIN ECON KCRM KTFN BM SUBJECT: BURMA: 2006-2007 INCSR PART II REF: A) RANGOON 1630, B) STATE 157084 Post's submission for Part II of Burma's International Narcotics Control and Strategy Report: Financial Crimes and Money Laundering follows. Ref A contains Part I. Burma State-owned entities, including the military, control most of the economy of Burma. Agriculture and extractive industries, including natural gas, mining, logging and fishing provide the major portion of national income. Heavy industry and manufacturing have minor roles. I 2005 and 2006, Burma strengthened its anti-money laundering regulator regime, particularly in the banking sector, reducing its vulnerabilit to drug money laundering. However, with an undeveloped financial sect and large volume of informal trade, Burma remains a country where the is significant risk of drug money being funneled into commercial enterprises and infrastructure investment. The government has address most key areas of concern identified by the international community b implementing some anti-money laundering measures, and in October 2006 the Financial Action Task Force (FATF) removed Burma from the FATF li of Non-Cooperative Countries and Territories (NCCT). As of November 2006, the United States maintains other sanctions on trade, investment and financial transactions with Burma under Executive Order 13047 (May 1997),Executive Order 13310 (July 2003); the Narcotics Control Trade Act, the Foreign Assistance Act, the International Financial Institutions Act, the Export-Import Bank Act, the Export Administration Act, the Customs and Trade Act, the Tariff Act (19 USC 1307),and the 2003 Burmese Freedom and Democracy Act (P. 108-61). Burma enacted a "Control of Money Laundering Law" in 2002. It also established the Central Control Board of Money Laundering in 2002 and financial intelligence unit (FIU) in 2003. It set a threshold amount for reporting cash transactions by banks and real estate firms, albei at a fairly high level of 100 million kyat (approximately $75,000). Burma adopted a "Mutual Assistance in Criminal Matters Law" in 2004, added fraud to the list of predicate offenses, and established legal penalties for leaking information about suspicious transaction report The GOB's 2004 anti-money laundering measures amended regulations instituted in 2003 that set out 11 predicate offenses, including ;narcotics activities, human trafficking, arms trafficking, cyber-crim and "offenses committed by acts of terrorism," among others. The 2003 regulations, expanded in 2006, require banks, customs officials and t legal and real estate sectors to file suspicious transaction reports (STRs) and impose severe penalties for non-compliance. The GOB established a Department Against Transnational Crime in 2004. Its mandate includes anti-money laundering activities. It is staffed police officers and support personnel from banks, customs, budget, an other relevant government departments. In response to a February 2005 FATF request, the Government of Burma submitted an anti-money laundering implementation plan and produced regular progress reports 2005 and 2006. In 2005, the government also increased the size of the FIU to 11 permanent members, plus 20 support staff. In August 2005, t Central Bank of Myanmar issued guidelines for on-site bank inspection and required reports that review banks' compliance with AML legislation. Since then, the Central Bank has sent teams to instruct bank staff on the new guidelines and to inspect banking operations fo compliance. As of November 2006, the United States maintains the separate countermeasures it adopted against Burma in 2004, which found the jurisdiction of Burma and two private Burmese banks, Myanmar Mayflowe Bank and Asia Wealth Bank, to be "of primary money laundering concern and required U.S. banks to take special measures with respect to all Burmese banks, with particular attention to Myanmar Mayflower and Asi Wealth Bank. These rules were issued by the Financial Crimes Enforcement Network within the Treasury Department, pursuant to Secti 311 of the 2001 USA Patriot Act. These rules prohibit most U.S. financial institutions from establishi or maintaining correspondent or payable-through accounts in the Unite States for or on behalf of Myanmar Mayflower and Asia Wealth Bank and with narrow exceptions, for all other Burmese banks. Myanmar Mayflowe and Asia Wealth Bank had been linked directly to narcotics-traffickin organizations in Southeast Asia. In March 2005, following GOB investigations, the Central Bank of Myanmar revoked the operating licenses of Myanmar Mayflower Bank and Asia Wealth Bank, citing RANGOON 00001633 002 OF 002 infractions of the Financial Institutions of Myanmar Law. The two banks no longer exist. In August 2005, the Government of Burma also revoked the license of Myanmar Universal Bank (MUB),and convicted th bank's chairman under both the Narcotics and Psychotropic Substances Law, and the Control of Money Laundering Law. Under the money laundering charge, the court sentenced him to one 10 year and one unlimited term in prison and seized his and his bank's assets. Burma also remains under a separate U.S. Treasury Department advisory stating that U.S. financial institutions should give enhanced scrutin to all financial transactions related to Burma. Section 311 of the US Patriot Act complements the 2003 Burmese Freedom and Democracy Act (renewed in July 2006) and Executive Order 13310 (July 2003),which impose additional economic sanctions on Burma following the regime's May 2003 attack on a peaceful convoy of the country's pro-democracy opposition led by Nobel laureate Aung San Suu Kyi. The sanctions prohibit the import of most Burmese-produced goods into the United States, ban the provision of financial services to Burma by any U.S. persons, freeze assets of the ruling junta and other Burmese institutions, and expand U.S. visa restrictions to include managers o state-owned enterprises as well as senior government officials and family members associated with the regime. In August 2005, the U.S. Treasury amended and reissued the Burmese Sanctions Regulations in their entirety to implement the 2003 Executive Order that placed thes sanctions on Burma. Burma became a member of the Asia/Pacific Group on Money Laundering i January 2006, and is a party to the 1988 UN Drug Convention. Over the past several years, the Government of Burma has expanded its counter- narcotics cooperation with other states. The GOB has bilateral drug control agreements with India, Bangladesh, Vietnam, Russia, Laos, the Philippines, China, and Thailand. These agreements include cooperati on drug-related money laundering issues. In July 2005, the Myanmar Central Control Board signed an MOU with Thailand's Anti-Money Laundering Office governing the exchange of information and financial intelligence. The government has announced plans to sign a cooperati MOU with Indonesia's FIU in November 2006. Burma is a party to the UN Convention against Transnational Organized Crime and ratified the UN Convention on Corruption in December 2005 a the UN International Convention for the Suppression of the Financing Terrorism in September 2006. Burma signed the ASEAN Multilateral Assistance in Criminal Matters Agreement in January 2006. The GOB now has in place a framework to allow mutual legal assistance and cooperation with overseas jurisdictions in the investigation and prosecution of serious crimes. To fully implement a strong anti-money laundering/counter-terrorist financing regime, Burma must provide the necessary resources to administrative and judicial authorities who supervise the financial sector, so they can apply and enforce the government's regulations to fight money laundering successfully. Burm must also continue to improve its enforcement of the new regulations and oversight of its banking system, and end all government policies that facilitate the investment of drug money into the legitimate economy. It also must monitor more carefully the widespread use of informal remittance or "hundi" networks, and should criminalize the funding of terrorism. Villarosa