US embassy cable - 06TIRANA358

ALBANIA'S CENTRAL BANK GOVERNOR: MONEY LAUNDERING IN CONSTRUCTION

Identifier: 06TIRANA358
Wikileaks: View 06TIRANA358 at Wikileaks.org
Origin: Embassy Tirana
Created: 2006-04-07 13:29:00
Classification: CONFIDENTIAL
Tags: ECON EFIN EINV KCRM AL
Redacted: This cable was not redacted by Wikileaks.
VZCZCXYZ0020
PP RUEHWEB

DE RUEHTI #0358 0971329
ZNY CCCCC ZZH
P 071329Z APR 06
FM AMEMBASSY TIRANA
TO RUEHC/SECSTATE WASHDC PRIORITY 4092
INFO RUEHTH/AMEMBASSY ATHENS 2875
RUEHBW/AMEMBASSY BELGRADE 2685
RUEHLO/AMEMBASSY LONDON 1170
RUEHFR/AMEMBASSY PARIS 1060
RUEHRO/AMEMBASSY ROME 5226
RUEHVJ/AMEMBASSY SARAJEVO 0404
RUEHSQ/AMEMBASSY SKOPJE 4076
RUEHVB/AMEMBASSY ZAGREB 2908
RUFNPKB/COMUSNAVEUR NAPLES IT
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RHEHNSC/NSC WASHDC
RUEHBS/USEU BRUSSELS
RUEHVEN/USMISSION USOSCE 2127
RUEHPS/USOFFICE PRISTINA 3377
C O N F I D E N T I A L TIRANA 000358 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/SCE (BENEDICT,SAINZ) 
TREASURY FOR ATUKORALA 
NSC FOR BRAUN 
 
E.O. 12958: DECL: 04/07/2016 
TAGS: ECON, EFIN, EINV, KCRM, AL 
SUBJECT: ALBANIA'S CENTRAL BANK GOVERNOR: MONEY LAUNDERING 
IN CONSTRUCTION 
 
 
Classified By: Charge d'Affaires Steven Zate 
for reasons 1.4 (b) and (d). 
 
1.  (SBU)  Albania's Central Bank Governor, Ardian Fullani, 
became the first high-ranking GoA official to state what many 
analysts have assumed for years: Albania's booming 
construction industry is driven, in part, by "dirty money." 
In his annual report to Parliament's Committee on the 
Economy, Fullani noted the continuing expansion of the 
economy (5.5 percent growth in 2005), low inflation (3 
percent) and shrinking budget deficits as evidence of 
Albania's positive economic development.  He expressed 
concern, however, over perceived overheating in the real 
estate market, opining that prices were rising at a much 
faster clip than construction costs.  He said that the demand 
for developed real estate was based on remittances (nearly 
USD 1.1 billion in 2005) and illegal activities, the flows of 
which were neither easy to track nor predict.  He added that 
the share of money laundering financing construction projects 
had reached such levels that interdiction of such flows could 
endanger the entire economy. 
 
2.  (SBU) Currently, construction accounts for roughly ten 
percent of GDP, but is a growing sector and is perceived as 
an engine for the economy.  Fullani contended that more 
careful scrutiny of the sector was needed because nearly 80 
percent of collateral in private banks was based on real 
estate and construction.  Should the real estate bubble 
burst, Fullani said, the even faster growing financial sector 
would be damaged.  (Loan volume increased 74 percent last 
year). 
 
3.  (C) Several major builders we have spoken to are furious 
at Fullani's statements, claiming that it is not appropriate 
for him to comment on their sector.  They also contend that 
there is no proof of a money laundering link to the 
construction industry, and that even if there is, it is wrong 
to smear the entire industry if a few builders are 
facilitating money laundering.  Builders and construction 
material suppliers we have talked to are anxious due to what 
they contend is a liquidity crunch -- banks are unable to 
release loan proceeds because the local property registration 
offices are unable to provide information to the banks on 
land titles in a reasonable or timely manner.  This, they 
claim, combined with a delay in the construction permitting 
process -- due mainly to political squabbling -- have caused 
a slow-down in the industry. 
 
4.  (C)  COMMENT:  Fullani's comments are remarkable in that 
he explicitly linked the health of the Albanian economy at 
least partially with cash flow from money laundering.  The 
reaction of the builders, while understandable, is probably 
only correct in the sense that estimates of money laundering 
flows (as well as remittances) are very difficult to prove, 
much less attribute to one sector.  In our opinion, 
remittances probably finance the vast majority of small, 
usually unregulated, single family homes that have come to 
dominate the suburban landscape around Tirana, Durres and 
other urban centers in the last decade.  There are real 
questions, however, whether the source of funding for the 
many hotel, restaurant, cafe and service station projects -- 
many of which appear to be based on no fathomable business 
plan and are often vacant -- is hard-earned, smart money. 
Fullani is expected to address the full Parliament in a few 
days and may have more to say on this issue. 
ZATE 

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