Identifier
Created
Classification
Origin
07BISHKEK1371
2007-11-16 06:57:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Bishkek
Cable title:  

KYRGYZSTAN: 2007-2008 INSCR, PART II, FINANCIAL CRIMES AND

Tags:  KCRM EFIN KTFN SNAR PGOV KG 
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VZCZCXYZ0000
RR RUEHWEB

DE RUEHEK #1371/01 3200657
ZNR UUUUU ZZH
R 160657Z NOV 07
FM AMEMBASSY BISHKEK
TO RUEHC/SECSTATE WASHDC 0366
INFO RUEAWJA/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS BISHKEK 001371 

SIPDIS

SENSITIVE

SIPDIS

STATE FOR INL, SCT, AND EEB
STATE FOR SCA/CEN
JUSTICE FOR AFMLS, OIA, AND OPDAT
TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: KCRM EFIN KTFN SNAR PGOV KG
SUBJECT: KYRGYZSTAN: 2007-2008 INSCR, PART II, FINANCIAL CRIMES AND
MONEY LAUNDERING

Ref: STATE 157000

UNCLAS BISHKEK 001371

SIPDIS

SENSITIVE

SIPDIS

STATE FOR INL, SCT, AND EEB
STATE FOR SCA/CEN
JUSTICE FOR AFMLS, OIA, AND OPDAT
TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: KCRM EFIN KTFN SNAR PGOV KG
SUBJECT: KYRGYZSTAN: 2007-2008 INSCR, PART II, FINANCIAL CRIMES AND
MONEY LAUNDERING

Ref: STATE 157000


1. (U) No report was published for the Kyrgyz Republic in the
2006-2007 International Narcotics Control Strategy Report, Part II,
Financial Crimes and Money Laundering. Embassy point of contact for
this report is Resident Legal Advisor Irfan Saeed, e-mail:
SaeedIA@state.gov.


2. (SBU) Follow is Embassy Bishkek's submission for the 2007-2008
INSCR, Part II.

Begin Text:

The Kyrgyz Republic is not a regional financial center. Although
Kyrgyzstan adopted a new anti-money laundering statute in 2006, gaps
still exist in enforcement and implementation. The law enforcement
authorities are completing necessary resource and structural
modifications and are actively pursuing anti-money laundering and
terrorist financing priorities. However, due to the fact that the
system is only beginning to function, there are no significant
results of financial investigations, or criminal prosecutions. The
Kyrgyz banking system remains comparatively underdeveloped. Like
other countries in the region, the Kyrgyz Republic's alternative
remittance systems are susceptible to money laundering activity or
trade-based fraud. The main sources of criminal proceeds in
Kyrgyzstan are crimes connected with narcotics trafficking, as
Kyrgyzstan is a drug trafficking transit route from Afghanistan. In
addition, the smuggling of consumer goods, tax and tariff evasion,
and official corruption continue as major sources of illegal
proceeds within the Kyrgyz Republic. The lack of political will,
resource constraints, inefficient financial systems, and, of course,
corruption, all serve to stifle efforts to effectively combat money
laundering and terrorist financing.

Money Laundering/Terrorist Financing primarily occurs in the banking
system. Oversight of the banking sector is generally weak, and
Kyrgyz law enforcement agencies lack the expertise and resources
necessary to effectively monitor and investigate financial
irregularities. Kyrgyzstan is not considered an offshore financial
center, nor does it have a free trade zone.


In June 2006, the Kyrgyz Republic adopted a fairly comprehensive law
on "Counteracting Terrorist Financing and Legalization (Money
Laundering) of Proceeds from Crime". The law defines predicate
offenses as crimes under the Kyrgyz Criminal Code, and criminalizes
income obtained as a result of a criminal action. The statutory
threshold amount that triggers mandatory reporting is US$25,000.
The money laundering law also includes secrecy provisions that
mandate civil and criminal liability for disclosure of client and
ownership information, as well as for abuse of official position,
which safeguards effective reporting. It also requires mandatory
reporting of suspicious transactions, in addition to a five-year
record retention by all Kyrgyz financial institutions. The law has
been in effect since November 8, 2006, but, to date, there have been
no criminal convictions for money laundering or terrorist financing
cases.

The money laundering controls are applied equally to all banking and
non-banking financial institutions, to include banks, credit
institutions, stock brokerages, foreign exchange offices, casinos,
insurance companies, etc., and to intermediaries, such as lawyers
and accountants. The new law mandates that all such entities report
threshold amount transactions as well as all suspicious
transactions. The one exception appears to be automobile dealers.
At this point, automobile dealers are not required to report any
high dollar transactions.

Chapter III of the money laundering law establishes a financial
intelligence service, a state body authorized to collect and analyze
financial intelligence. The Kyrgyz Financial Intelligence Service
collects and analyzes information related to financial transactions;
develops and implements measures on improving systems of prevention,
detection, and suppression of suspicious transactions; and submits
instituted cases to law enforcement, the prosecutor's office, and to
the court for investigation and prosecution. The financial
intelligence service is an administrative entity with no powers of
criminal investigative or regulatory responsibilities.

Implementation of the financial intelligence service has been slow.
Resources are inadequate, and the unit does not yet have the
expertise, knowledge, or resources to become a functioning and
effective entity to combat money laundering and terrorist financing.
Criticism of the new law is focused in two areas. First, experts
claim the law does not actually criminalize money laundering, only

the actions surrounding illegal proceeds of a crime. Thus, the new
law is not FATF (Financial Action Task Force) compliant. Second,
experts also claim the threshold amount is set too high, US$25,000,
which is extraordinarily high compared to the income standards of
the average Kyrgyz. These deficiencies have been discussed in
working group form, but have not been addressed in amendment form to
date.

Current laws, as well as pending legislation, do not address the
issue of asset forfeiture. In this respect, Kyrgyz law does not
address avenues for seizing and forfeiting assets derived from
criminal activity. Existing criminal laws do provide for fines and
levies against property, but do not address mechanisms to actually
seize assets or property. Kyrgyz law enforcement and other
competent bodies including the Financial Intelligence Service are
not adequately empowered to identify and find property subject to
confiscation or property suspected of being the proceeds of a crime.
Money Laundering is mainly investigated by the Financial Police of
Kyrgyzstan; however it may also be investigated by other law
enforcement entities, such as the Ministry of the Interior (MVD) and
the Prosecutor General's Office. There is no provision under Kyrgyz
law to allow for civil forfeiture.

Regarding international cooperation, chapter IV of the new money
laundering law does provide for an international exchange of
information and legal assistance. The law mandates that the new
financial intelligence service, in compliance with international
treaty obligations, collaborate with foreign counterparts in
financial intelligence and terrorist financing matters.

The Kyrgyz Republic, along with Russia, China, Belarus, Tajikistan,
and Kazakhstan, formed the Eurasian Group (EAG) for Counteraction to
the Legalization of Illegal Incomes and Terrorism Financing, a
FATF-style regional body designed to coordinate technical assistance
and analyze trends in money laundering techniques. The EAG has
conducted a mutual evaluation and provided a detailed assessment on
anti-money laundering and combating terrorist financing in the
Kyrgyz Republic.

The Kyrgyz Republic acceded to the United Nations Vienna Convention
in 1994, ratified the United Nations Palermo Convention in 2003, and
acceded to the United Nations Convention on the Suppression of the
Financing of Terrorism of 1999 in 2003. The Kyrgyz Republic is a
party to the 1988 United Nations Convention of Narcotics and
Psychotropic Substances, the United Nations Convention against
Transnational Organized Crime and the United Nations Convention
against Corruption.

The Government of the Kyrgyz Republic should continue to strengthen
legislation as it relates to money laundering and financial crimes
that support terrorist organizations, both within financial
institutions and with those activities that circumvent financial
institutions. In addition, the Kyrgyz Republic should increase and
enhance training in money laundering and terrorist financing
investigative techniques.

End text.

YOVANOVITCH