BABY STEPS FOR MONGOLIA'S FIU

UNCLAS SECTION 01 OF 02 ULAANBAATAR 000138

SIPDIS

SENSITIVE
SIPDIS

BEIJING FOR LEGATT HENDERSHOT
STATE FOR EAP/CM, INL, AND S/CT
STATE PASS FEDERAL RESERVE, EXIM, AND OPIC
USAID FOR ANE DEIDRA WINSTON
LONDON AND MANILA PASS TO USEDS TO EBRD AND ADB
TREASURY FOR TT YANG, FINCEN FOR J FRIES
TREASURY PASS USEDS TO IMF AND WORLD BANK

E.O. 12958: N/A
TAGS: EFIN PTER ECON PREL SCUL SNAR KPAO MG
SUBJECT: BABY STEPS FOR MONGOLIA'S FIU

REF: Ulaanbaatar 105 (NOTAL)

SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION


1. (SBU) SUMMARY: The Government of Mongolia's (GOM) effort to
establish an effective Financial Intelligence Unit (FIU),as
required under the nation's first Anti-Money Laundering and
Combating the Financing of Terrorism legislation (AML/CFT) passed in
July 2006, has been slow going, but there have been notable
achievements. Important internal regulations have been adopted and
banks have begun filing suspicious transaction reports (STR). In
February, Parliament approved amendments that specifically
criminalize money laundering and terrorist finance, moving Mongolia
closer to compliance with international standards, particularly
Financial Action Task Force's (FATF) 49 recommendations. The FIU is
also establishing relationships with foreign counterparts and has
applied to join the Egmont Group of FIUs. However, finding
qualified staff remains a challenge, and to boost the unit's
capacity to investigate suspicious transactions, better training and
proper tools are required. FIU Chief Tumurbat departs March 29 for a
three-week visit to the U.S. to learn about the USG's systems and
establish contacts.
END SUMMARY.


2. (SBU) On February 1, 2008, the Mongolian Parliament approved
amendments to the Criminal Code that officially and explicitly
outlaw money-laundering and terrorist finance. The move marked an
important step toward Mongolian compliance with international
standards -- particularly the FATF's 49 recommendations as well as
requirements set by the Asia Pacific Group (APG) mutual evaluation
experts in July 2007.

INTERNAL REGULATIONS ADOPTED
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3. (SBU) While getting Mongolia's FIU up and running has been a
painfully slow process (reftel),there has been some notable
progress. (Note: Mongolians refer to their FIU as the "Financial
Information Unit" as the word "Intelligence" carries ominous
connotations in this post-communist nation). Internal operating
procedures have been drafted and adopted including: "The FIU secrecy
regulation," "The FIU Chapter," a "Regulation on collecting,
analyzing and disseminating financial transaction reports by FIU,"
and a "Cooperation Council Regulation." In addition, six
regulations and procedural motions have been drafted by the FIU
staff and submitted to the IMF's Legal Department for review.
(Note: The IMF's Legal department is providing the FIU with
technical assistance for the development of regulations and
procedures, as well as the training of staff on AML/CFT issues. End
Note.)

SUSPICIOUS TRANSACTIONS NOW BEING REPORTED
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4. (SBU) Two regulations on bank compliance with AML/CFT have also
been issued: "Know your customer regulation for banks," and
"Suspicious transaction report (STR) and cash transaction report
(CTR) regulation for banks." Banks, which have been required to
report CTRs and STRs since early February, have so far filed 150
CTRs and 2 STRs originating from six banks (out of 16 banks
currently operating in Mongolia). However, according to Central
Bank Deputy Governor B. Enhhuyag, these reports have varied in
quality and consistency. In response, the FIU is training bank
compliance officers on the new procedures and how to prepare STR and
CTR reports.

ULAANBAATA 00000138 002 OF 002



FIU AND LAW ENFORCEMENT
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5. (SBU) There have been two meetings thus far of the GOM's
"Cooperation Council," which is composed of relevant officers from
the FIU, Finance Ministry, Criminal Police Department, General
Intelligence Agency, Anti-Corruption Agency, The Bank of Mongolia,
Prosecutor General's Office, Customs Agency and Financial Regulatory
Committee -- to discuss FIU issues, including ways to safeguard
confidential information uncovered during investigations.

SIPDIS


6. (SBU) The FIU is incorporated within the Bank of Mongolia and is
"administrative" in nature; it has no authority to use special
investigative techniques, such as wiretapping and controlled
delivery. Under the AML/CTF law, the FIU is to collect and analyze
information from financial institutions. If it finds sufficient
evidence of unlawful activity, it is to pass the information to
prosecutors.

RECRUITMENT PROBLEMATIC
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7. (SBU) So far, only three of the FIU's four staff positions have
been filled, but with the 2008 state budget funding three additional
positions (for a total of seven),active recruitment needs to
intensify. However, Enhhuyag tells us that recruitment has proven
extremely difficult and time consuming. New recruits must possess,
at a minimum, a bachelors or higher degree in finance or law;
excellent command of English; and at least a year of work experience
in a financial institution. Of 30 or so respondents to two
newspaper recruitment ads, only one met these requirements. The FIU
has thus far had no success in coaxing talented Bank of Mongolia
officers to accept FIU jobs. Some applicants have been put off by
the FIU's low salaries and limited career-advancement opportunities.

B. Tumurbat, the FIU Chief, told us recently that there was real
concern at the FIU about recruiting people "off the street," as
agents would be expected to properly handle confidential information
received from banks, and leaks have already started appearing in the
local press.

FOREIGN COOPERATION
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8. (SBU) The FIU is strongly committed to cooperating with
international counterparts. The FIU has already signed an MoU with
Turkey's FIU (MASAK) and applied for membership to the Egmont group
of Financial Intelligence Units. In February, 2008, FIU staff
visited Taiwan to report on FIU developments and receive training.
Recently, Tumurbat was nominated by the APG as an assessor of the
Japanese AML/CFT system (within the framework of FATF/APG Mutual
Evaluation) and visited Japan as part of an on-site examination on
March, 2008. Tumurbat will shortly depart on a three-week long,
Public Affairs-funded international visitor program to the U.S. to
learn about the USG's systems and to establish contact with relevant
U.S. agencies.

Minton