KAZAKHSTAN: ANOTHER DELAY IN PASSING AML LAW

UNCLAS ASTANA 001104 SIPDIS STATE FOR INL/AAE (ALTON),INL/C, SCA/CEN (O'MARA) SIPDIS E.O. 12958: N/A TAGS: SNAR ASEC PREL KCOR KCRM PREL KZ SUBJECT: KAZAKHSTAN: ANOTHER DELAY IN PASSING AML LAW Ref: A) 05 ALMATY 4353, B) 06 ASTANA 689, C) 06 ALMATY 1437 ¶1. Summary: The extension of the property legalization period until August 1 will cause yet another delay in the enactment of the anti-money laundering and counter terrorism financing law (AML) currently under consideration in the Kazakhstani Mazhilis (lower house of parliament). The postponement of the AML legislation is the third delay in strengthening of the AML regime and the creation of the Kazakhstani Financial Intelligence Unit. End summary. -------------- THREE ROUNDS OF PROPERTY LEGALIZATION -------------- ¶2. President Nazarbayev signed amendments to the property legalization law in late March 2007 extending the property amnesty campaign until August 1 and registration of title until November 1. The extension was caused by a surge of last-minute filings for legalization and a concern that the commissions which must process the claims would have insufficient time to do so. The amendments also provide an exemption from responsibility for public officers who legalize their assets within the property amnesty campaign. ¶3. Nazarbayev is reported to have said that the term of property legalization will not be extended again and this is the last chance for Kazakhstanis to legalize their property. The value of legalized property to date is more than $2 billion, which is four times more than during first wave of legalization in 2001. A total of around 1.4 million people submitted requests for legalization. About 80 decisions of the legalization commission were annulled by the General Procurator's Office due to violations of the legalization rules. The Prime Minister directed oblast akims to relieve members of legalization commissions of their regular duties in order to allow them to clear the backlog of requests for legalization. ¶4. Legalization of property (and the first delay in AML legislation) began with the enactment of the Property Legalization Law on July 5, 2006. The law was to expire at the end of December 2006 but was extended (creating a further delay in AML law) in order to provide more time for asset owners to register their property. The assets which were obtained since independence are widely believed to have been acquired illegally during the privatization period. The law was to legalize a wide range of property and assets, including real property, capital assets, movable property, and securities. The law allows owners to register these assets without penalty; however, the subjects of legalization must pay a fee of 10% of the assessed value of the amnestied property. One of several Property Legalization Commissions must approve all requests for registration. ¶5. On November 17, 2006, the President signed legislation extending the Property Legalization act until April 1, 2007. Nazarbayev said a three-month extension of the legalization period was necessary because of confusion on how the law was being implemented and the resulting need to better inform the public (Ref B). -------------- THEN, PERHAPS, AN AML LAW -------------- ¶5. Financial Police officials told INL Officer that the extension of the property legalization law will again delay the enactment of AML legislation. This is because once the AML law is in force, attempts to register previously unrecorded assets would be considered prima facie evidence that some type of financial malfeasance took place which could put the owner of those assets at risk of prosecution. ¶6. The AML draft legislation was originally introduced to the Mazhilis in September 2005 but was immediately delayed by deputies who claimed the structure of the legislation required further review (Ref A). Subsequently, during a study tour by members of the Mazhilis AML Working Group to Copenhagen, post heard concerns about the powerful role in AML and the FIU accorded to the Procurator General's Office (Ref C). Now the draft legislation has been repeatedly delayed by the property legalization campaign. ¶7. Comment: While Post would like to see AML legislation enacted in order to create the basis for monitoring suspicious transactions and large cash flows (both concerns in a illegal drug transit country), it is also important that Kazakhstan complete the property legalization process in order to preclude a rash of lawsuits to determine the rightful owners of property that changed hands during the murky privatization deals of the 1990s. End comment. ORDWAY