TREASURY DAS GLASER PRESSES ILLICIT FINANCE,

UNCLAS SECTION 01 OF 02 ULAANBAATAR 000475

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/CM, NP AND EB/ESC/ESP

E.O. 12958: N/A
TAGS: EFIN PTER KCRM PREL ETTC MG KS
SUBJECT: TREASURY DAS GLASER PRESSES ILLICIT FINANCE,
NORTH KOREAN CONCERNS WITH MONGOLIAN GOVERNMENT AND
BANKS

SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET
DISTRIBUTION.


1. (SBU) SUMMARY: During Deputy Assistant Secretary for
Terrorist Financing and Financial Crimes Daniel
Glaser's June 9 meetings with Government of Mongolia
officials and banking representatives, he discussed
U.S. concerns with respect to North Korean illicit
activities. He discussed U.S. actions against WMD
proliferation entities as well as its efforts against
Banco Delta Asia (BDA) in Macau, and how these efforts
have compelled North Korean entities to seek financial
services elsewhere, including Mongolia. Glaser
stressed the need for vigilance, and Mongolian
officials responded that they took these issues
seriously and were committed to ensuring their
financial system was not abused by North Korean
entities engaged in illicit activities. Glaser also
discussed the importance of passing effective anti-
money laundering (AML) and counter-terrorist financing
(CTF) legislation as well as building a strong
supervisory framework and regulatory systems that meet
international standards. He underscored the importance
of strengthening Mongolia's AML/CTF regime not only to
better protect itself from illicit finance more
generally, but because this would better enable
Mongolia to protect itself from being exploited by
North Korean or other entities engaged in illicit
activities, including WMD proliferation. Glaser
expressed appreciation for Mongolia's cooperation in
this regard. END SUMMARY.


2. (U) Treasury Deputy Assistant Secretary for
Terrorist Financing and Financial Crimes Daniel Glaser,
accompanied by Amit Sharma, Treasury Department Senior
Advisor, Terrorist Financing & Financial Crimes and
Anthony J.Ruggiero, Defensive Measures Action Officer,
Office of Counterproliferation Initiatives, State
Department, visited Mongolia June 9-10. In addition
to meeting with the Ambassador and country team, DAS
Glaser met June 9 with representatives of the Bank of
Mongolia, Ministry of Finance, Ministry of Justice,
Foreign Ministry, the Financial Regulatory Commission
and Mongolian law enforcement and security agencies. In
addition, he met with the representatives of Mongolian
commercial banks and non-bank financial institutions.


3. (SBU) In his meetings with GOM and banking
officials, DAS Glaser:

-- Discussed U.S. concerns with respect to North Korea,
including WMD proliferation, currency counterfeiting, drug
trafficking and associated money laundering. He described
U.S. actions to protect the international financial system
from abuse by North Korean or other entities engaged in such
activity, such as the Section 311 designation of Banco Delta
Asia (BDA) in Macau and the EO 13382 designations of North
Korean entities engaged in proliferation activities.

-- Encouraged GOM and Mongolia's financial community to
continue to be vigilant to North Korean entities looking to
them to facilitate their illicit activities. He noted that
as a result of the BDA action, DPRK entities are looking
throughout Asia for financial institutions to facilitate
their illicit activities. He thanked them for their efforts
thus far to ensure such abuse was prevented in the Mongolian
financial system, and encouraged ongoing efforts in this
area.

-- Encouraged Mongolia to pass needed Anti-Money-Laundering
(AML) legislation that met international standards as soon
as possible. Mongolia is scheduled for an Asia Pacific
Group (APG) mutual evaluation this fall and the absence of a
suitable AML law would reflect very poorly on their
assessment. Passage of AML legislation would send a strong
signal to the international finance community that Mongolia
is serious about AML, and that they are serious about
combating illicit finance of all kinds. Glaser noted that
the international financial community is increasingly aware

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of weak AML regimes and has begun declining business where
strong AML laws and systems are absent. In fact, Mongolian
banks have recently had difficulty establishing
correspondent banking relationships for lack of an AML law.

-- Encouraged Mongolia to review existing laws and pass a
counter-terrorism finance (CTF) law compliant with
international standards in addition to an AML law.

-- Stressed the need for banks to keep in mind concerns
about North Korean illicit activities including money-
laundering and weapons of mass destruction proliferation .
Glaser cited how responsible jurisdictions and financial
institutions have reacted after the U.S. designation of BDA
as a "primary money laundering concern." The absence of AML
and CFT laws and a strong supervisory regime provide an
attractive environment for DPRK entities that they may wish
to exploit - sending them the message that Mongolia is a
safe place to do illicit business. This poses a significant
reputational risk to Mongolian institutions if improper
activities are exposed.

-- Encouraged all GOM stakeholders to actively participate
in Mongolia's development of their AML/CFT regime. Also
encouraged all stakeholders (not just Central Bank
officials) to participate in the APG to ensure all relevant
sectors are aware of the international standards and
understand the importance of building a comprehensive
AML/CFT regime. The upcoming APG Plenary in July is
particularly timely in this regard as Mongolia is slated to
undergo a mutual evaluation this fall - which will be a
comprehensive assessment of its AML/CTF capabilities in all
relevant sectors.

-- Expressed appreciation for cooperation from GOM and
financial community; both are strong partners in the efforts
to clamp down on illicit financial activities, in particular
those associated with North Korea.


4. (SBU) Highlights of his meetings included:

-- Acknowledgement by Mongolian commercial bankers of
risks posed to their banks and Mongolia's financial
system by illicit activities and specifically North
Korean activities.

-- A Golomt Bank representative described the problems
it faced as a result of a recent North Korean banking
transaction (the February transfer of US$1 million and
Yen 2 million in cash). Golomt has cut its
relationships with DPRK firms and banks.

-- Virtually all contacts sought more information on
AML and CTF efforts as well as additional training in
institutional AML/CFT best practices.

-- Law enforcement and security agency officials
flagged potential legal authority and enforcement
problems in Mongolia's pending AML law.

-- Ministry of Foreign Affairs officials revealed that
the government is moving to tighten down on travel by
North Koreans by requiring visas for North Koreans
except for North Korean diplomatic or official passport
holders. MFA and MOF officials agreed that North Korean
illicit activities posed a threat to Mongolia and
requested that the U.S. share as much information
specific to North Korean activities in Mongolia.


5. (U) DAS Glaser cleared this message.

SLUTZ