NORTHERN CYPRUS AML UPDATE

UNCLAS NICOSIA 000114 SENSITIVE SIPDIS STATE FOR EB USEU FOR MATTHEW HAARSAGER TREASURY FOR FINCEN AND HANS HUBER E.O. 12958: N/A TAGS: ECON EFIN ETER CY SUBJECT: NORTHERN CYPRUS AML UPDATE REF: A. 08 NICOSIA 460 ¶B. 08 NICOSIA 77 ¶1. (SBU) A European Commission-sponsored group of six experts visited northern Cyprus February 2-6 to assess the jurisdiction's progress against its anti-money laundering (AML) action plan. The report's key findings are: -All but one of the key laws identified in the Action Plan have been legislated and implemented. -The Action Plan is on track and the "AML Board convenes regularly and is fulfilling the duties clearly set out for it in law." This has "led to the creation of a tight institutional framework, which withstands international comparison." -"However, in assessing progress and looking at issues on the basis of risk, the development of AML activity cannot proceed at the same rate in all sectors." -The Action Plan will be updated to take into account identified areas of need and a rescheduling of a new risk assessment. ¶2. (SBU) The AML Board has submitted an updated training and equipment needs plan to the EU and other donors. The key need is for additional police training on conducting financial transaction investigations. Public prosecutors also require instruction on how to prosecute under the new AML laws. We understand that the UK intends to provide the bulk of this education. USAID has already been involved in helping with compliance officer training and drafting of laws relating to non-bank financial services (e.g. insurance companies, foreign exchange dealers, and real estate brokers.) ¶3. (SBU) The key immediate issue is passage of the "Games of Chance Law." The "Prime Minister" promised the visiting experts, as well as our Ambassador, that this law would be passed in time for the next FATF plenary beginning on February 23. The problem has been that, with "parliamentary" elections recently called and scheduled for April 19, the law has become caught-up in political jockeying, despite general agreement among the major parties that casinos need to be better-regulated. The law has passed through committee and is scheduled to be debated on February 16, with a final vote on that day or the next. The AML Board and the "government" are well aware of the difficulties they may face at the FATF plenary if the law is not passed, contrary to promises the Turkish Cypriots made at the last plenary in October. ¶4. (SBU) Comment. The Turkish Cypriot AML process has come a long way in a year. The number of suspicious activity reports has reportedly increased from a few per week to several dozen per month. And the AML Board seems to be diligent in investigating these suspicious transactions, reaching out to advisors to help them determine how best to approach various cases. The problem remains, however, that the AML Board remains small, undertrained and with a police and judiciary that have no background in these matters. The revised Action Plan and training program that are being prepared by the Turkish Cypriots will hopefully address some of these shortcomings. Urbancic