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

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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
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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
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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
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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
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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

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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
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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