RUSSIA MAY NOT HELP UZBEKS ON MONEY LAUNDERING

C O N F I D E N T I A L TASHKENT 002122

SIPDIS

SIPDIS

DEPARTMENT FOR SCA/CEN, INL FOR ANDREW BUHLER
UNOSCE FOR ELIZABETH KAUFMAN
MOSCOW FOR TREASURY EAG KEVIN WHELAN
DEPT OF TREASURY FINCEN FOR DAVID TEITELBAUM

E.O. 12958: DECL: 12/14/2017
TAGS: PREL PGOV KCRM ECON UZ
SUBJECT: RUSSIA MAY NOT HELP UZBEKS ON MONEY LAUNDERING
REGRESSION

REF: TASHKENT 1922

Classified By: Poloff Tim Buckley for reasons 1.4 (B) and (D)


1. (C) Summary: The World Bank and UNODC, with INL funding
support, co-sponsored an anti-money laundering (AML) training
session in Tashkent on November 29. A USG official from the
Department of Treasury Financial Crimes Enforcement Network
(FinCen) was the main presenter to an engaged audience of GOU
officials. The Treasury official informed Charge in a
courtesy call that the GOU's stated reasons for suspending
the key provisions of its anti-money laundering law are not
valid. He also noted that Russia, which has worked hard in
recent years to establish an exemplary anti-money laundering
record, may not help Uzbekistan avoid international scrutiny
and AML sanctions related to this issue. The prospect of
greater isolation as an international financial pariah may
spur the GOU into rethinking its policies, but only once the
threat of targeted and effective international action seems
more imminent. End summary.

AML Training Session
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2. (C) On November 29 the World Bank and UNODC co-sponsored
the latest in a series of regional anti-money laundering
training sessions. The event in Tashkent included GOU
officials from the Office of the State Prosecutor, the
National Security Service (NSS),representatives of the
Ministries of Internal Affairs, Justice, and Finance, the
State Customs Committee, a Supreme Court judge, and officials
from the Central Bank. World Bank officials working on the
project reported that this session included "the highest
level of engagement we've seen thus far" from the Uzbeks.
During the Treasury official's four-hour long presentation
(delivered in the Russian language),members of the Uzbek
Financial Intelligence Unit (FIU),under the Office of the
State Prosecutor, asked many sophisticated professional
questions.

A Flimsy Excuse
--------------


3. (C) As reported in reftel, in April 2007 Uzbekistan
suspended the key provisions of its anti-money laundering law
which had gone into force the previous year. In a November
14 meeting with poloff, Head of the FIU's International
Relations Section Caidabror Gulyamov explained that under the
money laundering law the government was receiving too many
suspicious transaction reports, which inefficiently wasted
the FIU's resources and burdened banks with "unnecessary"
reporting requirements. However, the visiting Treasury
official noted that this "is a lot of hot air", and even
countries with a much larger volume of transactions have
managed to successfully filter and balance the amount of
suspicious transactions sent to the FIU for analysis.
Another excuse offered by the GOU about suspending the money
laundering law was to promote consumer confidence in the
banks; however the Treasury official noted that an effective
anti-money laundering law is not viewed as a deterrent to
depositors.

Consequences?
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4. (C) In addition to the threat of sanctions by the
Financial Action Task Force (reftel),the Treasury official

noted that FinCen could issue an advisory to the world
financial sector stating that Uzbekistan is a country of
prime concern for money laundering due to inadequate
regulations. This would mean greater scrutiny for
transactions involving Uzbekistan's financial institutions
and would likely scare potential investors from doing
business with or through Uzbekistan.

Russia May Not Shield Uzbeks
--------------


5. (C) The visiting Treasury official noted that Russia,
which was previously included on FinCen's lists of
non-compliant countries and territories as recently as 2002,
has substantially improved its anti-money laundering record
and is now highly regarded in the international community.
The treasury official learned during his visit that a Russian
member of the Eurasian Group (EAG),which recently conducted
a needs assessment in Uzbekistan, passed a warning to GOU
officials that Russia may not be able to -- or want to --
help deflect international criticism on this issue. This is
consistent with the impressions of a different Treasury
official who participated in the EAG needs assessment trip
(reftel).

Comment
--------------


6. (C) While the GOU previously seemed indifferent to the
risk of anti-money laundering sanctions from the UN or the
FATF, it may change its tune as the threat of such sanctions
looms larger in 2008, when the EAG will conduct an official
assessment of Uzbekistan. The GOU is sensitive about the
symbolic impact of sanctions but is even more focused on
their actual impact and will not want to face systemic
international financial isolation, which would be especially
sharp if Russia joins western countries in pressuring for AML
reform. (Note: In contrast, the Andijan-related sanctions
currently being discussed in Congress would have very little
actual impact on the human rights objectives they are
intended to advance. End note.) The active interest shown
by GOU professionals in the AML training session is
encouraging, and we believe continued international attention
is desirable.

NORLAND