MOLDOVA'S NEW ANTI-MONEY LAUNDERING LAW

C O N F I D E N T I A L CHISINAU 000372 SIPDIS SIPDIS STATE FOR EUR/UMB AND EB/ESC/TFS JUSTICE FOR AFMLS AND OPDAT TREASURY PASS FINCEN E.O. 12958: DECL: 04/02/2018 TAGS: ECON EFIN PREL PGOV MD SUBJECT: MOLDOVA'S NEW ANTI-MONEY LAUNDERING LAW Classified By: Ambassador Michael D. Kirby for reasons 1.4(b) and (d). ¶1. (C) SUMMARY: In July 2007, in response to concerns from the international community about insufficient anti-money laundering (AML) safeguards in the Government of Moldova's (GOM) tax and capital amnesty law, Parliament adopted USG-drafted amendments and a new, modern AML law. The GOM and regulatory agencies moved quickly to promote implementing regulations, protecting the reputation and integrity of Moldova's financial system. Our efforts to exclude confidentiality and apply AML filters to the capital SIPDIS legalization process effectively eliminated potential avenues for money-laundering. Coordinating with other donors, we plan to provide technical assistance to increase the capacity of the financial system and law enforcement in order to identify, prevent and investigate money laundering. END SUMMARY. FOLLOW-UP ON AML IMPLEMENTATION -------------- ¶2. (C) On March 17-20, Frederick Reynolds from the Department of Justice's Office of Asset Forfeiture and Money Laundering (AFMLS) visited Chisinau to follow-up on implementation of Moldova's tax amnesty and capital legalization legislation and the new AML law. Post's Resident Legal Advisor sponsored the visit with the support of DOJ's Office for Overseas Development and Training (OPDAT). In the summer of 2007, Reynolds commented extensively on both laws, noting particular concern about provisions of the tax and capital amnesty that strictly protected confidentiality and exempted declared assets from Moldova's fiscal, customs and AML legislation. Following recommendations from the international community led by the U.S., Parliament adopted amendments which closed loopholes in the tax and capital amnesty law, eliminating the exemption of amnesty-related transactions from Moldova's AML law, and adopted a new, modern AML bill. GOM COMMITTED TO AML/TF -------------- ¶3. (C) Minister of Economy Igor Dodon, our main interlocutor throughout the summer of 2007, noted the GOM's commitment to maintaining the image and reputation of Moldova's financial system, an important factor in attracting much-needed foreign direct investment. Reynolds acknowledged the quantity and quality of reforms undertaken by Moldova's financial regulators, and thanked Dodon for his leadership in promoting politically difficult reforms. Dodon stated that legalization transactions of cash and securities had been limited, noting that most transactions involved property. The National Bank of Moldova (NBM) reported that cash legalization transactions totaled about Moldovan Lei 15 million (about USD 1.3 million),USD 240,000 and EURO 105,000. According to information provided by Dodon, non-cash transactions totaled about MDL 93 million (about USD 8.4 million). Dodon added that the GOM would soon use the capital legalization law to re-value state-owned companies, sending a signal to the private sector that the GOM was serious about economic reform. Dodon welcomed the offers of assistance from DOJ/AFMLS and FINCEN. THE FINANCIAL SECTOR RESPONDS -------------- ¶4. (C) Since the adoption of the new AML law, the National Bank of Moldova (NBM) has been active, adopting new regulations for commercial banks on the processing of amnesty-related transactions, tightening internal controls, strengthening know-your-client requirements and adopting amendments regarding additional prudent measures. The NBM has maintained a close dialogue with commercial banks, providing guidance on implementation of the new law based on the Basel Conventions on Banking Supervision. Supporting the NBM's efforts and in coordination with USG assistance, the IMF will launch an AML technical assistance project. The newly created National Commission on Financial Markets (NCFM),established in July 2007 and responsible for non-bank financial services, has also responded, adopting implementation regulations for capital legalization transactions and the new AML law. The NCFM works closely with the Council of Europe, collaborating on AML training for the securities and insurance sectors. THE CHILLING EFFECT OF PROPER AML CONTROLS -------------- ¶5. (C) Representatives of two commercial banks, Agroindbank and FinComBank, acknowledged the increased sophistication of the 2007 AML law, noting a need for more training on implementation. One commercial bank noted that interest in the GOM's capital legalization initiative fell after the confidentiality guarantees of the original legislation were SIPDIS eliminated. The banks noted an effort on the part of the NBM, but complained about a lack of clear guidance. They also highlighted their increased administrative burdens under the new AML law. Both bank representatives welcomed offers of U.S. assistance that brought together the financial sector, the financial intelligence unit, and law enforcement to discuss reporting, investigating and preventing money laundering. COMMENT -------------- ¶6. (C) The reform elements of the GOM responded o the concerns of the international community, alowing the adoption of amendments which closed ptentially dangerous loopholes in the tax amnesty nd capital legalization law, protecting the repuation of Moldova's financial system. First Deput Prime Minister Greceanii, recently nominated byPresident Voronin to be Prime Minister and confirmd by Parliament on March 31, was instrumental in aining the Executive's support for our proposed mendments. Dodon, who kept his ministry and wasalso promoted to First Deputy Prime Minister, wa also a strong supporter and, given the level ofdetails in our conversations, has maintained personl oversight of this issue. Dodon inquired aboutcurrent deficiencies in the AML system, asking wat training or additional reforms were necessary Reynolds acknowledged the need for training, bt agreed with Dodon's assessment that the "devil as in the details" of implementing current legisation. ¶7. (C) Given the IMF's lack of project eperience, we plan to work closely with the IMF'sLegal Department in Washington to coordinate andguide its technical assistance. Post will continue to coordinate with the Council of Europe throughour DOJ Resident Legal Adviser. Because of the ositive measures adopted by the GOM, post suggess that FINCEN support and, if possible, sponsor oldova's membership in the Egmont Group at the next regularly scheduled meeting. END COMMENT. KIRY