US embassy cable - 03RANGOON1595

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001595 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV, EB 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 12/10/2013 
TAGS: SNAR, PGOV, EFIN, BM 
SUBJECT: BURMA FLOATS MONEY LAUNDERING RULES AND 
INVESTIGATIONS 
 
REF: A. WOHLAUER-GLAZEROFF 12/5 EMAIL 
 
     B. RANGOON 1572 
     C. RANGOON 1253 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.5 (B,D) 
 
1. (SBU) Summary: As if from thin air, the Burmese government 
has issued long-awaited regulations to accompany a money 
laundering law passed in June 2002.  Simultaneously, the 
government launched an investigation into two banks 
pinpointed by the United States as linked to 
narcotraffickers.  While we are cautiously optimistic, some 
omissions and obstacles remain and it is uncertain whether 
these new rules can and will be enforced effectively. End 
summary. 
 
Regulations from Heaven 
 
2. (U) Much to everyone's surprise, the Burmese government on 
December 5 released long-awaited regulations to accompany its 
June 2002 anti-money laundering statute.  It was the absence 
of these regulations, and the GOB's refusal to make any 
comment on their likely appearance, that in part led the 
Financial Action Task Force's (FATF) on November 3rd to ask 
member states to impose countermeasures on Burma. 
 
3. (U) The new regulations seem pretty good on paper.  They 
track the 2002 law very closely, requiring banks, land 
management agencies, and Customs to report on any suspicious 
or large transaction.  They also require Burma's Central 
Control Board (CCB) to form a Financial Investigation Unit 
(FIU) and oversee an elaborate administrative process for 
investigating and judging money laundering cases.  The 
regulations allow for temporary and permanent seizures of 
assets and lay out stiff penalties for money laundering 
associated with eleven criminal offenses, and for corruption 
of government and private agencies responsible for enforcing 
the law.  According to the Home Ministry, whose minister will 
chair the CCB, the regulations will be applied retroactively, 
and investigations of suspicious transactions dating back to 
June 2002 will begin once a FIU is up and running. 
 
4. (SBU) Though the regulations are a good start, there are a 
few things lacking and some potential problems.  For one, the 
regulations do not include a threshold amount for reporting 
transactions.  A Home Ministry official said this is 
"expected," but without it the law will remain hobbled. 
Second, some crimes that are major arenas for money 
laundering, such as corruption and illegal gambling, are not 
included in the list of predicate offenses.  Third, the Home 
Ministry admits that Burma does not currently have the 
capacity to carry out effective investigations outside of 
narcotics-related money laundering.  For this last problem, 
the GOB blames a lack of resources and the international 
community's reluctance to offer significant assistance. 
 
On the Case 
 
5. (SBU) Notwithstanding the limited knowledge and experience 
of investigators, the GOB announced its first money 
laundering investigations will target Myanmar Mayflower and 
Asia Wealth banks.  Both of these private banks, with alleged 
ties to narcotraffickers, had been identified by the U.S. 
Treasury Department as being of particular money laundering 
concern.  Though it initially disputed the Treasury claims as 
"spurious," in a later press conference the GOB cited the 
Treasury findings as the impetus for these inquiries (ref B). 
 The CCB has established an investigative body headed up by a 
well-educated, but firmly pro-SPDC, accountant.  Most of the 
rest of the team hails from various ministries. 
 
Comment: Wait and See 
 
6. (SBU) We don't know for sure why these regulations came 
out when they did and with no warning.  The Home Ministry 
claims it was just the natural course of events, but we doubt 
it.  None of the overt barriers to completing the regulations 
-- especially moribund private banks and the lack of capacity 
-- has been overcome since FATF made its final request for 
action to the Burmese government in October (ref C).  We 
think it more likely that the regulations were issued in 
their current state as a political gesture, to address FATF 
and U.S. pressure or perhaps to shine up the SPDC's 
reputation on the eve of Burma's two December summit meetings 
-- the Japan-ASEAN meetings and the Thai-hosted summit. 
 
7. (SBU) It is too early to know whether the regulations will 
be an effective deterrent to money laundering.  The capacity 
and will to enforce the rules properly is one question mark, 
and an area in which the United States and the UNODC could 
assist.  Another important unknown is whether the government 
can convince private bankers, currently decimated by an 
unresolved nearly year-old banking crisis, to systematically 
report on their dwindling customer base.  In a land where 
people go to extremes to avoid being noticed by the 
government, a vigilant banker may see his depositors flee to 
more lenient banks or into the large informal financial 
sector -- where monitoring and regulation will be nearly 
impossible.  Finally, corruption, as always, may take hold 
and erode effectiveness of the law.  End comment. 
Martinez