VZCZCXRO5444
RR RUEHCI RUEHPW
DE RUEHKA #2746/01 1360308
ZNR UUUUU ZZH
R 160308Z MAY 06
FM AMEMBASSY DHAKA
TO RUEHC/SECSTATE WASHDC 7779
INFO RUEHIL/AMEMBASSY ISLAMABAD 1123
RUEHLM/AMEMBASSY COLOMBO 7437
RUEHKT/AMEMBASSY KATHMANDU 8533
RUEHNE/AMEMBASSY NEW DELHI 9101
RUEHCI/AMCONSUL CALCUTTA
RUEHCG/AMCONSUL CHENNAI 0872
RUEHPW/AMCONSUL PESHAWAR 0203
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJB/DEPT OF JUSTICE WASHDC

UNCLAS SECTION 01 OF 02 DHAKA 002746 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
ISLAMABAD FOR TREASURY A/S O'BRIEN 
 
E.O. 12958: N/A 
TAGS: PGOV PTER EFIN BG
SUBJECT: SCENESETTER FOR VISIT TO BANGLADESH OF TREASURY 
A/S PATRICK O'BRIEN 
 
1, (SBU) Summary:  Bangladesh is at a cross-roads in its 
development of a solid AML/TF regime. Though the USG, mostly 
through DOJ, has provided training programs, Bangladesh's 
central Bank needs technical support with computer programs 
and advisors to set up the FIU.  Foreign partners have an 
opportunity to get in on the ground floor to support the 
bank's growing interest in combating money laundering and 
terrorist financing.  However, achieving new legislation and 
major policy decisions in this government's final months is 
problematic given the political leadership's narrow focus on 
a no-holds-barred, acrimonious election expected in January 
¶2007.  End Summary. 
 
¶2. (SBU) The murderous campaign of violence waged between 
August and December of 2005 by the banned Islamist extremist 
group Jamaatul Mujahhidin Bangladesh (JMB) ultimately forced 
the BDG to tackle terrorist threats with new vigor, at least 
on the law enforcement side.  The BDG has basically dropped 
its prior position that terrorism, domestic or foreign, was 
absent from Bangladesh, though it continues to blame India 
and the political opposition for facilitating or manipulating 
JMB.  It stresses that the overwhelming majority of 
Bangladeshis are moderate and tolerant, and that virtually no 
one in Bangladesh outside of JMB supported that group's 
terrorist tactics. 
 
¶3. (SBU) The Bangladesh Bank (BB), the country's central 
bank, has spearheaded the drive to combat anti-money 
laundering (AML) and Terrorist Financing (TF) since 2002 when 
the Anti-Money Laundering Act 2002 (AMLA-02) was passed. 
Despite gaping holes in the present law, such as the lack of 
a definition of money laundering, BB has succeeded in 
establishing the Anti-Money Laundering Unit (AMLU), which is 
the country's de facto Financial Intelligence Unit (FIU). 
The bank has sent members of the group to seminars around the 
world sponsored by FIUs in Asia and the U.S., the Department 
of Justice, and the Asian Pacific Group (of FIUs). The AMLU 
team have developed a "Know Your Customer" manual and has 
trained compliance officers in all of the country's banks and 
their branches.  In addition, each bank is requested to have 
an anti-money laundering compliance unit in its head office. 
 
¶4. (SBU) Unfortunately, progress on the Anti-Money Laundering 
Act 2005 (AMLA-05 and the Anti-Terrorism Act (ATA), both of 
which have undergone several cabinet-level reviews, has 
stalled in part because of the upcoming election.  The 
government is expected to give way in mid-October to a 
caretaker regime, which then has 90 days to hold a national 
election.  Bangladeshi elections are no holds barred, winner 
take all, and the ruling BNP has already reached the point 
where it is very narrowly focused on defeating its bitter 
rival, the Awami League.  Spontaneous uprisings and 
demonstrations against serious shortages of power, fuel, and 
water, resulting from bad government policies and failing 
infrastructure, have made the government extra defensive. 
While the two laws are unlikely to pass this year, the 
central bank is pressing forward with its efforts to 
establish a properly functioning FIU and an enforcement and 
prosecution office to secure convictions. 
 
¶5. (SBU) The banks are required through an administrative 
order to make suspicious transactions reports (STRs) and, 
more recently, currency transaction reports (CTRs) for 
amounts of USD 700 or more.  Compliance by the banks is 
spotty, with approximately 200 STRs filed in the last three 
years.  RLA has seen samples of the STRs and BB's analysis of 
the accounts which would pass muster for a prima facie case 
in the United States. There is no computerization of the STR 
system.  Local banks submit their reports in hard copy and 
the analysis is done by hand.  A high-ranking bank official 
said he "scrounged" two computers to start imputing the CTRs. 
 
¶6. (SBU) There have been no prosecutions, in part due to the 
former Bureau of Anti-Corruption's abrupt abrogation of duty 
to investigate the STRs.  The country's police unit, the 
Criminal Investigation Division (CID), has taken on the cases 
but difficulties in the criminal procedure code have yet to 
be worked out between the BB and CID to facilitate faster 
investigation.  Even if the investigations were quickly 
concluded, another stumbling block is the lack of skilled 
 
DHAKA 00002746  002 OF 002 
 
 
prosecutors, all of whom are underpaid political appointees 
who will lose their jobs if the ruling party loses the 
election in January. 
 
¶7. (SBU) JMB's terrorist onslaught, which killed about 30 
persons and wounded more than 100, spotlighted the role of 
STRs.  Police seizure of bank records belonging to JMB 
ringleaders led BB to several banks, including those which 
follow Sharia banking principles.  BB fined the banks for not 
filing the STRs because the patterns in the accounts of large 
deposits and withdrawals clearly indicated suspicious 
activity. Though the fines were small, the main culprit, 
Islami Bank, faced a small dip in its stock share when the 
news broke that JMB members used the bank.  (Note: Islami 
Bank is easily the most profitable Bangladeshi bank and is 
widely seen as well managed and relatively non-corrupt.) 
 
¶8. (SBU) Most every foreign consultant and BDG official 
concerned with the AML/TF world agrees that Bangladesh needs 
a stronger FIU with proper software to build its data base. 
Currently, the AMLU unit has five computers for its 24 
members and no IT capability to store or analyze the STRs. 
BB's is keen for assistance but requests to Australia, 
Malaysia, Philippines, and the United States have either been 
rebuffed or politely refused due to lack of funds, manpower 
or both. 
 
¶9. (SBU) Meanwhile, the draft AMLA-05 was effectively 
slow-tracked in December when the government announced that 
the ATA would have to be passed first to make terrorism 
financing a criminal offense. That law has serious flaws, 
such as extremely broad language mirroring the draconian 
Special Powers Act granting unbridled police power.  In 
addition, a provision calling for international cooperation 
was dropped because of fear that Dhaka would be forced to 
share its intelligence with "unfriendly" countries (read 
India). There is now discussion at the cabinet level on 
whether there even needs to be a law on terrorism, citing 
that crimes committed -- in the name of terrorism -- are 
already covered by the criminal code. 
 
¶10. (SBU) If the ATA is scuppered, the provisions for 
criminalizing terrorist financing can be restored to the 
AMLA-05 draft. The new law provides powers to the FIU to meet 
international recommendations set forth by the Financial 
Action Task Force (FATF). If the legislation were to pass 
intact, DOJ lawyers believe that the new law is roughly 85% 
compliant with FATF standards.  However, in cabinet meetings 
held throughout the autumn, certain provisions were cut, 
including a Financial Investigation and Prosecution Office 
(FIPO) which would have BB examiners, specially trained 
police investigators and prosecutors working together to 
secure convictions.  Those in favor of FIPO say it can be 
done administratively.  While an expedient alternative, the 
future of FIPO would be subject to the administration in 
charge. 
CHAMMAS