US embassy cable - 05SANTIAGO1886

C O N F I D E N T I A L SECTION 01 OF 03 SANTIAGO 001886 
 
SIPDIS 
 
DEPT OF TREASURY FOR A/S GLASER; DEPT OF HOMELAND SECURITY 
FOR THOMPSON; FINCEN FOR JENNIFER SHOWELL 
 
E.O. 12958: DECL: 09/05/2015 
TAGS: SNAR, PGOV, EFIN, PTER, CI, TERRORISM 
SUBJECT: A/S GLASER TALKS MONEY LAUNDERING AND TERRORIST 
FINANCE DURING AUGUST 25-26 VISIT TO CHILE 
 
 
Classified By: Ambassador Craig A. Kelly for reasons 1.4 (b) and (d). 
 
1. (C) Summary: Department of Treasury A/S Glaser and a 
five-member delegation met with key Chilean counterparts in 
the financial sector to discuss terrorist finance and money 
laundering.  A/S Glaser noted during his meetings that while 
Chile is a few steps ahead of its regional neighbors, Chile's 
restrained Financial Intelligence Unit, its new Public 
Ministry, and weak legislation hamper its ability to 
effectively combat terrorist finance.  The Finance Ministry 
reiterated support for counter-terrorist finance legislation. 
 However, it confirmed the GOC cannot freeze assets of 
terrorists, thereby limiting Chile's compliance with 
international standards.  Chilean interlocuters noted that 
legislation to modify stringent bank secrecy laws sits in the 
Senate after passing the lower house.  End Summary. 
 
2.  (SBU) A/S Daniel Glaser (Acting), Office of Terrorist 
Financing and Financial Crime of the Department of Treasury, 
was accompanied by Cynthia Medina, Policy Advisor, Office of 
Terrorist Financing and Financial Crime, Department of 
Treasury; Kristofer Doucette, Intelligence Analyst, Office of 
Intelligence and Analysis, Department of Treasury; Angel 
Rodriguez, Analyst, US Southcom-J2, Department of Defense; 
Jennifer Showell, Regional Country Specialist, Financial 
Crimes Enforcement Network; and David Thompson, Section 
Chief, Money Laundering Coordination Center, ICE Financial 
And Trade Investigations Division, Department of Homeland 
Security. 
 
3.  (C) During his visit, A/S Glaser reiterated the 
importance of the enforcement of international standards and 
transparency in the financial sector.  He noted the necessity 
of modifying bank secrecy laws in order to allow appropriate 
access by law enforcement officials.  UNSCR 1267 and 1373 
regulations were also emphasized, and A/S Glaser acknowledged 
the difficulty of enforcing UNSCR 1373 due to the lack of a 
uniform international list of terrorist financiers.  A/S 
Glaser pointed out that any action taken against financial 
networks by governments is positive.  He also announced an 
upcoming terrorist finance designation of 16 derivitives (12 
individuals and 4 entities) from the original Hizbollah 
designation.  While Chile is ahead of its neighbors by 
criminalizing terrorist finance, he observed that the 
inability to freeze assets hinders effective action against 
terrorism. 
 
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Financial Intelligence Unit 
--------------------------- 
 
4. (C) The delegation met with Victor Ossa, Director of 
Chile's Financial Intelligence Unit (UAF), Carmen Ovalle 
Andrade, Chief of Research, and Pablo Cruz Novoa, Chief of 
the Analysis Division.  Ossa clarified that the UAF reports 
only to the Public Ministry, which in turn informs law 
enforcement agencies.  Although the UAF preferred to label 
Chile's banking laws as "confidentiality laws" rather than 
"bank secrecy laws," Ossa noted that the Bank Superintendent 
does not review bank transactions during its regulatory 
processes.  The UAF reported receiving 10-15 STRs per month 
from the banking sector, unchanged from six months ago.  When 
asked about the risk potential of casinos, Ossa reiterated 
that the gaming industry in Chile is not susceptible to money 
laundering because proceeds are only distributed in cash. 
(Note: Ossa had conveyed the same message to the gaming 
assessment team from Treasury's Office of Technical 
Assistance in July.  Per request by the Superintendent of 
Gaming, OTA will return to Chile in September to assist with 
processing bids for about 24 casino installations.  End 
Note.)  Money exchange houses, which have submitted a few 
STRs to the UAF, are of greater concern, said Ossa.  This 
past year, the UAF declined several calls from exchange 
houses for "assistance," which entailed a request for a 
certificate authenticating the solvency of money exchange 
house operations, he noted. 
 
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Finance Ministry 
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5.  (C) Undersecretary of Finance Maria Eugenia Wagner 
expressed concern about the risk of terrorist finance in 
Chile, noting the correlation between corruption, money 
laundering and terrorist finance.  Emphasizing money 
laundering is not a big problem now, the GOC at the same time 
wants to prevent problems in the future.  She further noted 
the financial market needs to be protected from money 
laundering in order to facilitate growth and eliminate 
poverty, which will only occur with transparent fiscal 
policy.  Wagner then discussed the new legislation (which is 
currently in the Senate after passing the lower chamber), 
which she said will modify Chile's bank secrecy laws in order 
to provide some access by law enforcement entities.  She 
acknowledged Chile's history of prioritizing privacy and 
therefore stringent bank secrecy laws, but said this focus 
will waylay as the new generation matures and deepens their 
focus on transparency.  In discussing terrorist finance, 
Wagner agreed that a key problem in Chile is the lack of 
legislation to support the freezing of assets. 
 
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In-House 
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6.  (C) A/S Glaser told the Country Team that the Department 
of Treasury, in coordination with FINCEN, will forward names 
of suspected or actual terrorist financiers to the UAF, 
Chilean banks and law enforcement entities.  The Country Team 
asked the delegation that the Embassy be advised of all 
information forwarded to the GOC.  Glaser noted that any 
follow-up by Chile is considered a success. 
 
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Bankers Dinner 
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7. (C) The Delegation met with nine representatives from 
banks and the Association of Banks.  Bankers voiced differing 
opinions, including the position that banks must pro-actively 
take measures to prevent money laundering, while others 
commented that the responsibility primarily fell with the 
government.  Bankers also differed on how much money 
laundering occurs in Chile. 
 
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Investigative Police 
-------------------- 
 
8.  (SBU) Hector Soto, Chief of Economic Crimes for the 
Investigative Police (PICH), and members of his staff 
described internal relations among the 70-detective member 
staff and with the new Prosecutor's Office (MP) as positive. 
All cases are channeled through MP.  In 2004, PICH 
investigated 9000 economic crimes, up from 5600 such crimes 
in 2001.  The cybercrime unit focuses on child pornography, 
economic crimes, technology-related crimes and forensic 
analysis.  The money laundering unit has no autonomy in 
investigations, as mandated by law, and the unit actively 
advocates for updated legislation to modify bank secrecy 
laws.  Most money laundering is associated with drug 
trafficking. 
 
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Congress 
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9. (C) Congressman Jorge Burgos, joined by his Chief of 
Cabinet, Raul Oyarzun, called the bank secrecy debate 
"absurd" with no constitutional backing.  He said the reason 
behind the constitutional court rescinding bank secrecy 
legislation in early 2004 was based on some members of 
Congress believing that the agencies able to access 
information could hurt or endanger the rights of privacy of 
individuals, which is a consitutional guarantee.  Although 
this "right wing" understanding pervaded the court, Burgos 
believes no Chilean wants to protect criminal activity, and 
most are open to access of information if reasonable 
suspicion exists. 
 
10.  (C) Burgos emphasized the importance of combating 
terrorist finance and money laundering, but believes 
legislation started late.  He noted that the current bill 
that will restore some power to the UAF by easing bank 
secrecy laws has passed the lower chamber.  On August 19, 
Burgos and several congressional colleagues obtained 
agreement from the GOC to fast-track the bill, and Burgos 
believes the Senate will pass the bill shortly. 
 
11. (C) When discussing the lack of action against non-Al 
Qaeda terrorists (i.e. UNSCR 1373) by the international 
community, Burgos noted that only a few structural 
organizations exist in the Latin American region to support 
counter-terrorist measures.  Most efforts to combat terrorism 
and terrorist finance are via bilateral agreements, which 
presents challenges to a transnational problem. 
 
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Public Ministry 
--------------- 
12. (SBU) Mauricio Fernandez, Director of Money Laundering 
and Organized Crime, told the delegation that the Public 
Ministry (MP) is an independent, operational and 
constitutionally-created organization.  Overseeing 16 
regions, the National Prosecutor (equivalent to the Attorney 
General), who is appointed by the Supreme Court and approved 
by 2/3 majority of the Senate, heads MP for an eight-year 
term.  Each region has an office and regional prosecutors; 
Santiago, given its size, is divided into four sub-regions. 
MP contains specialized offices including money laundering 
and organized crime, sexual crimes, drug trafficking and 
corruption.  MP leads all investigations, and enjoys good 
relations with the FIU, police, customs, Chile's IRS (SII) 
and other agencies. 
 
13. (C) According to Fernandez, the major concern for MP and 
the Central Bank are money exchange houses.  These units are 
not subject to regulation, have no reporting requirements, 
and are not included in the new legislation, he said.  In 
addition, banks traditionally provide as little information 
as possible; the UAF and MP are dependent on them to channel 
information, but sanctioning and other means of checking 
compliance and holding banks accountable is not available. 
 
14. (C) Fernandez reiterated that terrorist finance 
legislation does not allow Chilean law enforcement to freeze 
assets.  The MP can stall an investigation, but Chile is not 
able to comply with this international standard.  An 
additional challenge for the MP is that they do not report to 
the Ministry of Justice, which can create administrative and 
coordination challenges. 
 
15. (U) A/S Glaser departed Post prior to reviewing this 
report. 
KELLY