Identifier
Created
Classification
Origin
09TASHKENT467
2009-04-07 09:57:00
CONFIDENTIAL
Embassy Tashkent
Cable title:  

Uzbekistan Parliament Passes Law Reestablishing an

Tags:  PGOV PREL EFIN KCRM ECON ECIN PINR UZ 
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RR RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHNT #0467/01 0970956
ZNY CCCCC ZZH
R 070957Z APR 09
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC 0718
INFO ALL SOUTH AND CENTRAL ASIA COLLECTIVE
CIS COLLECTIVE
RHEFDIA/DIA WASHINGTON DC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAK/AMEMBASSY ANKARA 0038
RUEHHE/AMEMBASSY HELSINKI 0017
RUEHNT/AMEMBASSY TASHKENT
RUEHVEN/USMISSION USOSCE 0186
RUEKJCS/SECDEF WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 05 TASHKENT 000467 

SIPDIS
INL/AAE FOR ANDREW BUHLER
DEPT OF JUSTICE ASSET AND FORFEITURE UNIT FOR ROB STAPLETON
DEPT OF JUSTICE OPDAT FOR CATHERINE NEWCOMBE
TREASURY FOR ANNE WALLWORK AND FINCEN DAVID TEITELBAUM
ANKARA FOR DEA CHRIS MELINK
USOSCE FOR ELIZABETH KAUFMAN
AMEMBASSY HELSINKI PASS TO AMCONSUL ST PETERSBURG
AMEMBASSY MOSCOW PASS TO AMCONSUL VLADIVOSTOK
AMEMBASSY MOSCOW PASS TO AMCONSUL YEKATERINBURG
AMEMBASSY ASTANA PASS TO USOFFICE ALMATY
AMEMBASSY NEW DELHI PASS TO AMCONSUL HYDERABAD

E.O. 12958: DECL: 2018-12-22
TAGS: PGOV PREL EFIN KCRM ECON ECIN PINR UZ
SUBJECT: Uzbekistan Parliament Passes Law Reestablishing an
Anti-Money Laundering Regime

REF: 07 TASHKENT 1922

CLASSIFIED BY: Timothy P Buckley, Second Secretary; REASON: 1.4(B),
(D)

C O N F I D E N T I A L SECTION 01 OF 05 TASHKENT 000467

SIPDIS
INL/AAE FOR ANDREW BUHLER
DEPT OF JUSTICE ASSET AND FORFEITURE UNIT FOR ROB STAPLETON
DEPT OF JUSTICE OPDAT FOR CATHERINE NEWCOMBE
TREASURY FOR ANNE WALLWORK AND FINCEN DAVID TEITELBAUM
ANKARA FOR DEA CHRIS MELINK
USOSCE FOR ELIZABETH KAUFMAN
AMEMBASSY HELSINKI PASS TO AMCONSUL ST PETERSBURG
AMEMBASSY MOSCOW PASS TO AMCONSUL VLADIVOSTOK
AMEMBASSY MOSCOW PASS TO AMCONSUL YEKATERINBURG
AMEMBASSY ASTANA PASS TO USOFFICE ALMATY
AMEMBASSY NEW DELHI PASS TO AMCONSUL HYDERABAD

E.O. 12958: DECL: 2018-12-22
TAGS: PGOV PREL EFIN KCRM ECON ECIN PINR UZ
SUBJECT: Uzbekistan Parliament Passes Law Reestablishing an
Anti-Money Laundering Regime

REF: 07 TASHKENT 1922

CLASSIFIED BY: Timothy P Buckley, Second Secretary; REASON: 1.4(B),
(D)


1. (C) Summary: A Department of Justice (DOJ) expert traveled to
Tashkent March 30 - April 2 to provide technical assistance to
Uzbekistan regarding its draft anti-money laundering and countering
the finance of terrorism (AML/CTF) legislation. Surprisingly, the
Uzbek Senate passed the legislation on March 28, thereby excluding
any U.S. input into the final version of the law; however, Uzbek
officials warmly received the visitor and expressed a willingness
to incorporate U.S. recommendations into the formation of critical
by-laws that will ultimately determine the effectiveness of the
regime. A combined IMF, World Bank, and UNODC team did provide
technical assistance for the new law and conducted separate follow
up meetings during March 30 - April 2 as well. The law falls short
of international standards in some aspects, but it does represent a
step forward from a flawed earlier regime that had been suspended
by Presidential decree until 2013, for which Uzbekistan drew heavy
criticism from the Financial Action Task Force (FATF). Despite an
earlier understanding, the U.S. was clearly kept at arm's length
during the process of drafting the legislation in favor of
international organizations; however, an AML/CTF law has been put
into place and there are still significant opportunities for
continued U.S. engagement. End summary.


Senate Passes Revised AML/CTF Legislation...
-------------- --------------
--


2. (U) On Saturday, March 28, the Uzbek Senate adopted a draft
AML/CTF law, which we learned about from a television report on
March 30. The Senate approval followed swiftly on the heels of the
lower house (Oliy Majlis),which had approved the draft on March 26
with little fanfare. With parliamentary approval now complete, the
law now goes to President Karimov, who is expected to sign within a
week, at which time the law will immediately be published and enter
into force. Government officials emphasized the cascading effect
of the new legislation, as portions of 15 other laws will now have
to be amended to bring them into compliance with this law. This
will be accomplished simultaneously through a subsequent piece of
legislation which has already been drafted, according to officials
at the Office of the General Prosecutor.

...But Without Accepting U.S. Technical Assistance
-------------- --------------
--------------


3. (C) While the international community has been consistently
urging the reestablishment of a sound AML/CTF regime, the surprise
effort to push draft legislation through the parliament within a
span of just three days effectively undermined a long-planned
effort to provide U.S. technical assistance on the content of the
draft law. The Uzbeks agreed and appeared to welcome the U.S.
offer in November 2008 but then resisted our repeated efforts to
obtain an advance copy of the draft law to enable experts at the
Department of Justice to prepare comments and feedback. Numerous
excuses were proffered and by the time we ultimately received a
copy of the draft in early February, 2009, it had apparently
already been submitted to the Cabinet of Ministers and immediately
thereafter to the parliament. We did not know at the time this
meant the door was closed to incorporating U.S. technical
assistance into the draft and we duly proceeded with other
logistical details and arranged meetings for a visiting expert from
the U.S. Department of Justice Asset Forfeiture and Money
Laundering Section. (Note: One reason for the last-minute rush to

TASHKENT 00000467 002 OF 005


enact the legislation may have been that UNODC and the Government
of Uzbekistan were co-hosting a fairly high-profile workshop on
implementing the UN Convention Against Corruption and Uzbek
authorities felt under pressure to show President Karimov that the
Government of Uzbekistan was taking measures to counter corruption.
Septel. End note.)

At Least there is an AML/CTF Law in Place...
-------------- --------------


4. (C) The new law will amend an ill-fated earlier law which was
adopted in 2004 and came briefly into force in 2006 until its main
provisions were suspended by a Presidential decree in 2007
(reftel). This attracted the attention of international entities,
including FATF and the Eurasia Group (EAG),and prompted the former
to issue advisories and consider countermeasures against
Uzbekistan. This legislation means that Uzbekistan will once again
have a functioning AML/CTF law in place for the first time in
nearly two years, which the Government of Uzbekistan was clearly
motivated to accomplish before the next FATF plenary meeting in
June.

...But it Falls Short of Some International Standards
-------------- --------------
--------------


5. (C) The visiting DOJ expert and poloff met with officials from
the Office of the General Prosecutor on March 31, which is home to
the Financial Intelligence Unit (FIU) and is the lead ministry in
anti-money laundering affairs. Alimjan Tadjibayev, the Deputy Head
of the FIU, presented an updated copy of the draft legislation,
which reflected changes made by the Cabinet of Ministers and the
parliament. The DOJ expert then reviewed and compared the versions
and was able to raise concerns at subsequent meetings on April 1 -
2 with the Office of the General Prosecutor, the Central Bank of
Uzbekistan, and representatives of the anti-money laundering
working group. (Note: An English translation of the final version
of the draft law will be forwarded to SCA/CEN, DOJ, and Treasury.
End note.)


6. (C) The DOJ expert informed his Uzbek interlocutors that there
were several areas in which the new law seems to fall short of
commonly accepted international standards. In particular, the law
seems to lack proper definitions for such important terms as money
laundering, property, proceeds of crime, possession, and
direct/indirect sources of income. He noted that such definitions
are readily available from open sources such as the Vienna
Convention, the Palermo Convention, and FATF's 40 plus 9
recommendations. Another key shortcoming is that it does not
address politically exposed persons, a concept which the Uzbek
officials -- even the Deputy Chair of the Central Bank, Alisher
Akmalov -- seemed not to be aware of or understand despite it being
one of the FATF recommendations. The DOJ expert also told Uzbek
officials that provisions on confiscation are insufficient in scope
and not appropriately applied. The law's section on international
cooperation is weak, and it does not clearly explain how Uzbekistan
would or would not help international partners in different
circumstances.


7. (C) While the Uzbek representatives made it clear from the
outset that it was too late to influence the current draft law
before it was signed, they very warmly received the DOJ visitor and
welcomed the frank discussions. The head of the Fund for
Reconstruction and Development of Uzbekistan, Rustam Gulyamov, who

TASHKENT 00000467 003 OF 005


chairs the working group, noted on April 2 that "we cannot meet all
40 plus 9 recommendations at once." Tadjibayev stated that
creating an AML/CTF regime "is an ongoing process."

New Law Took Several Steps in the Right Direction
-------------- --------------
--------------


8. (C) Over the course of three consecutive days of engagement, the
DOJ expert identified several areas in which the new law represents
a step forward from previous legislation. Guiseppe Lombardo and
Klaudio Stroligo, who comprised the combined IMF/World Bank/UNODC
technical assistance team, reported that the Uzbek working group
accepted 18 of the recommendations they made during their January
visit. Of these, they noted that 11 were accepted by the Cabinet
of Ministers and parliament and incorporated into the draft law,
which Tadjibayev confirmed to poloff on April 2. Most
significantly, the provisions on customer due diligence were
improved and the two-day automatic suspension of a suspicious
transaction -- which acted as a tip-off to the party attempting to
process the transaction -- was lifted, which benefits law
enforcement investigators and legitimate commerce alike. Internal
control mechanisms are also beefed up compared to earlier
legislation. An unrealistic reporting threshold based on multiples
of the low official monthly wage was eliminated, but the DOJ expert
advised the Uzbeks to establish a mandatory reporting threshold in
addition to allowing banks to report a suspicious transaction in
any amount.

By-Laws Will be Critical in Effective Implementation
-------------- --------------
--------------


9. (C) The DOJ expert lamented that there appears to be too much
emphasis and reliance on subsequent by-laws and regulations to
properly implement the law's provisions, whereas it would have been
better to incorporate more into the main legislation itself.
Lombardo and Stroligo shared this regret but noted that this is
simply the way Uzbekistan does business. Tadjibayev defended this
by noting "it takes six or eight months to get anything through our
legislative process" and suggested it is better to develop by-laws
separately, but the DOJ expert commented that such an environment
underscores the importance of getting a proper legal framework into
the legislation from the start.


10. (C) Nonetheless, the Uzbek interlocutors noted feedback from
the U.S. would be reflected in the crucial by-laws, which are
already being developed. Akmalov reported that the Central Bank
will finalize its regulations within the next two weeks. Lombardo
told poloff on April 2 that he met with First Deputy Prime Minister
Rustam Azimov -- who sent a letter to FATF in late 2008 promising
effective action within 180 days -- and that Azimov assured him the
by-laws would be developed "within eight weeks." (Note: This
would be just in time for the FATF plenary session, suggesting that
Uzbekistan knows the law without the subsequent by-laws may not win
over enough critics in the FATF plenary meeting. End note.)
Tadjibayev assured poloff on April 2 that "none of the by-laws will
be kept secret." In a lunch on April 2, Akmalov delivered remarks
that summarized steps forward and made a pitch for U.S. support
during upcoming FATF meetings based on the progress.

International Organizations to Continue Assistance
-------------- --------------
--------------

TASHKENT 00000467 004 OF 005



11. (C) Lombardo and Stroligo were also unaware that the
legislation would be in place by the time they arrived in Tashkent
on March 30, as was the World Bank Country Representative Loup
Brefort, who said of the technical assistance process that "you can
lead a horse to water, but you cannot make it drink." Lombardo and
Stroligo were also nonplussed that Uzbekistan did not accept all of
the recommendations they brought to the table in January during
their first technical assistance mission, focusing instead on the
positive steps made and accepting the Uzbek arguments that existing
frameworks make some recommendations difficult. For instance,
Stoligo said he would typically push harder for the FIU to be
completely independent, but he said "frankly, the Office of the
General Prosecutor has better people and if the FIU was moved away
it would suffer."


12. (C) Lombardo and Stroligo noted that, in addition to technical
assistance already rendered under the auspices of IMF/World
Bank/UNODC, these organizations will provide drafting assistance
for the series of by-laws as well as general implementation
guidance over the course of the next year. Events will include an
FIU conference, which is planned for May. Killian Strauss, a
Senior Program Officer at the OSCE who also visited Tashkent last
week, added that the OSCE is also planning an AML/CTF project
through its Tashkent Project Coordination Office.

Opportunities for Further U.S. Engagement
-------------- --------------


13. (C) The members of the Uzbek AML/CTF working group expressed a
desire to continue cooperation with the U.S. on these issues. They
gradually opened up during meetings and began asking general
questions of the DOJ expert about how FINCEN works, how American
prosecutors approach investigations, and what policies such as bank
confidentiality limit their powers. Discussions spilled over into
lunches attended by Akmalov, FIU Chief Zokhid Dusanov, and the
Deputy Head of the International Relations Department, among
others. They specifically asked for a set of indicators for
suspicious activity reports to help them establish practical
guidelines that do not cripple business activities. Tadjibayev
noted that the help from the international organizations is
appreciated, "but the USA is very advanced and sets the pace on
these matters and we want direct discussions." Several key members
of the anti-money laundering working group have never visited the
United States and hope to participate in a study tour as part of
future engagement efforts. They reported that besides a 2007 visit
to France, no other nations have come forward to offer bilateral
assistance on the AML/CTF front. "It is now a blank slate,"
Gulyamov said during the April 2 meeting with the working group.


14. (C) The Office of the General Prosecutor's International
Department seemed willing to share the draft law as promised in
early January but was probably overruled at a higher level;
therefore, the expressed desire for cooperation appears genuine and
working level officials enjoyed the direct interaction with a U.S.
prosecutor. Likewise, poloff had not had three meetings at the
Office of the General Prosecutor in his two-year tour but in this
case visited on three consecutive days, which is an indication of
the importance the Government of Uzbekistan attaches to this issue.
Interestingly, the office space at the Office of the General
Prosecutor, the FIU, and the Central Bank is very modern and
impressive compared with the spartan facilities at less powerful
ministries.

TASHKENT 00000467 005 OF 005


Egmont Group
--------------


15. (C) When the DOJ expert asked about membership in the Egmont
Group (a group of 106 Financial Intelligence Units which cooperate
on money laundering issues),the officials sighed audibly before
Tadjibayev answered that Uzbekistan previously could not qualify
for membership in the Egmont group "due to the Presidential decree"
that suspended key portions of the earlier money laundering
legislation. Now that the law will be in place, Tadjibayev said
that Uzbekistan hopes to join in the near future. Thus far, no
nation is sponsoring Uzbekistan in this process.

Comment:
--------------


16. (C) Despite promises in late 2008 to accept technical
assistance from the U.S., it is impossible not to conclude that
Uzbekistan deliberately kept the U.S. at bay during the possible
window for influencing the draft law. Meanwhile, it did accept
technical assistance from the IMF/World Bank/UNODC, which it
probably concluded would hit them with kid gloves compared to the
U.S. and make it easier to be selective about the material that
ultimately made its way into the draft. The IMF/World Bank/UNODC
representatives will likely present a positive report to the FATF
about Uzbekistan's progress since the last FATF plenary, which will
fit with Uzbekistan's propensity to do "just enough, just in time."
It is frustrating in the short-term that the U.S. was shut out of
the technical assistance process, but the opportunities for
continued engagement on the development of by-laws are meaningful
and can contribute to our overall efforts to increase contact with
an important ministry.
NORLAND