VZCZCXYZ0000
PP RUEHWEB

DE RUEHLP #3040/01 3132039
ZNR UUUUU ZZH
P 092039Z NOV 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 1244
INFO RHEHNSC/NSC WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LA PAZ 003040 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND AND INL/KLION AND ERINDLER 
TREASURY FOR SGOOCH 
 
E.O. 12958: N/A 
TAGS: ECON EFIN BL
SUBJECT: THE PUSH FOR MONEY LAUNDERING LEGISLATION 
 
------- 
Summary 
------- 
 
¶1. (SBU) Bolivia's current anti-money laundering regime fails 
to comply with international norms and is ineffective.  Based 
on INL's recommendations, post has encouraged the GOB to 
enact a comprehensive money laundering law, including 
terrorism finance provisions, has formed an informal working 
group led by President Morales' legal adviser Dr. Gironda 
which has met periodically for five months, and has 
contracted a money laundering expert to push the GOB's draft 
anti-corruption and money laundering legislation in the right 
direction.  Post has forwarded draft laws on corruption and 
money laundering, created by the working group, to DEA and to 
INL for comment by DOJ and GAFISUD (Financial Action Task 
Force of South America).  GAFISUD comments have been received 
and forwarded to the GOB.  However, in the last working group 
meeting on October 24, Dr. Gironda said that he planned to 
significantly condense the combined corruption and money 
laundering draft law and put the extracted details into two 
decrees to be issued by the GOB subsequent to passage of the 
law.  The GOB is focused on anti-corruption; it remains to be 
seen if the Morales administration has the political will to 
implement effective, comprehensive money laundering 
legislation.  End summary. 
 
---------- 
Background 
---------- 
 
¶2. (SBU) Bolivia's anti-money laundering regime is based on 
Law 1768 of 1997.  That law modified the Penal Code and 
criminalized money laundering, but only as it relates to 
narcotics trafficking, organized criminal activities, and 
public corruption.  It does not cover terrorism finance.  The 
law established Bolivia's financial investigation unit (the 
UIF), within the Office of the Superintendent of Banks and 
Financial Institutions.  Supreme Decree 24471, issued July 
31, 1997, set forth the powers and duties of the UIF.  Many 
non-bank financial institutions are not obligated to report 
to the UIF, and the system has become dysfunctional.  To 
date, there has been only one conviction under Law 1768. 
 
¶3. (SBU) On April 26, 2006, the GOB promulgated Supreme 
Decree 28695 (Organizational Structure for the Fight against 
Corruption and Illicit Enrichment).  Among a number of other 
provisions, it referenced (in Article 18) a Financial and 
Property Intelligence Unit (UIFP) that does not currently 
exist (but is presumed to mean the UIF in some reconstituted 
form), while it repealed Supreme Decree 24771 that gave the 
current UIF its powers.  After Embassy legal advisers pointed 
out to the GOB that it had effectively put the UIF out of 
business until it could assume its new mission of "fighting 
corruption and illicit enrichment," on May 13, 2006, the GOB 
issued Supreme Decree 28713, restoring the UIF's functions 
and duties for a period of 240 days (until early January), 
but moving the unit from the Banking Superintendent to the 
Ministry of Finance.  Presidential Legal Adviser Eusebio 
Gironda assured Econoff on October 24 that the GOB would 
issue another decree to extend the UIF if the Marcelo Quiroga 
Santa Cruz law and corresponding regulations to create the 
new UIFP were not in place by year-end. 
 
------------------- 
INL Recommendations 
------------------- 
 
¶4. (SBU) Based on Vice President Alvaro Garcia Linera's 
acceptance of Ambassador Anne Patterson's offer of USG 
assistance on corruption and money laundering during her 
visit, corruption and money laundering experts from INL, 
Diane Kohn and Gary Peters, visited Bolivia in June.  Peters 
met with the presidents of the senate and chamber of 
deputies, who responded positively to Peters' suggestions to 
draft comprehensive anti-money laundering legislation. 
Peters also met with the former director of the Financial 
Investigation Unit (UIF), Ramiro Rivas.  In July, Peters 
issued an assessment report with recommendations to post.  He 
recommended that NAS hire Rivas and that the GOB form a 
working group to proceed with AML legislation. 
 
---------------------- 
Informal Working Group 
---------------------- 
 
¶5. (SBU) An informal working group with Presidential Legal 
 
Adviser Dr. Eusebio Gironda, including representatives from 
NAS, USAID, Checchi (USAID contractor), and Ecopol had begun 
meeting in May to discuss the decrees concerning the UIF 
mentioned above.  The legal advisor from Checchi produced 
talking points which helped encourage the GOB to issue a 
second decree reinstating the UIF after the first decree has 
disbanded it.  Because Dr. Gironda was leading the GOB's push 
to enact anti-corruption legislation, including anti-money 
laundering components, this group has continued to meet 
periodically from June through the present, as convened by 
Dr. Gironda.  Based upon Peters' suggestions, which were made 
by Ecopol representatives to Dr. Gironda, the meetings were 
also at times attended by Senate President Santos Ramirez's 
adviser, Victor Cossio; Ramiro Rivas, whose contract was 
finalized by NAS in October; representatives from the Finance 
Ministry, and DEA officials. 
 
------------------------- 
Development of Draft Laws 
------------------------- 
 
¶6. (SBU) The working group took as its base documents various 
drafts of the Marcelo Quiroga Santa Cruz (MQSC) 
Anti-Corruption law, created by the Morales administration, 
and prior GOB draft money laundering laws from the Finance 
Ministry and the UIF.  The documents were modified by Dr. 
Gironda, with input from legal advisors from Checchi, USAID, 
Ramiro Rivas, the Finance Ministry and the UIF to create two 
draft laws -- one on anti-corruption and one on money 
laundering.  Ecopol forwarded the draft laws to DEA and INL 
for comment.  INL shared the drafts with DOJ and the regional 
FATF-style body, GAFISUD, for input.  GAFISUD comments were 
received by Ecopol in early November and shared with Dr. 
Gironda and Senate President Santos Ramirez.  Post is waiting 
to receive comments from DOJ. 
 
------------------------------------- 
Executive Branch Support for AML Weak 
------------------------------------- 
 
¶7. (SBU) Ecopol and NAS, in accordance with Peters' 
recommendations, have attempted to convince Dr. Gironda that 
the GOB should promulgate two laws -- one on anti-corruption 
and a second on money laundering -- to ensure that Bolvia's 
money laundering regime is comprehensive and includes 
terrorism finance.  Senator Santos Ramirez has demonstrated 
some support for a second money laundering law and sent a 
formal letter to the Embassy in September to request USG 
support on anti-corruption, illicit enrichment, legitimation 
of illicit earnings, related crimes, financing of organized 
crime and terrorism, and observing the recommendations of 
GAFISUD and UN conventions.  However, Dr. Gironda, who is 
close to President Morales and represents the executive 
branch's view, is adamant that the MQSC anti-corruption law 
should include money laundering provisions, but not terrorism 
finance.  He stated several times during September and 
October that the Ministry of Foreign Affairs would send a 
formal request to the Ambassador for USG assistance outlining 
the themes the GOB intends to cover; however, post has not 
received this request.  Ecopol and NAS requested this letter 
to be assured that the administration actually intended to 
enact comprehensive money laundering legislation.  The 
Embassy is concerned that the executive does not have the 
political will to back an anti-money laundering law, 
including terrorism finance provisions.  Without executive 
support, it would be difficult for an AML law to be passed 
and extremely difficult for it to be implemented. 
 
------------------------- 
Draft Law to Be Condensed 
------------------------- 
 
¶8. (SBU) During the working group's last meeting on October 
24, Dr. Gironda said that some revisions had been made to the 
MQSC draft law.  He said that he was working on condensing 
the law and would give group members a copy of the updated 
version at the next meeting, which was originally scheduled 
for October 31, but was postponed by Gironda until November 
¶14.  He explained that the details to be extracted would be 
implemented through regulations and decrees by the GOB after 
the law was passed by congress.  It is unclear what this 
condensed version will include, but post will forward the 
draft to INL once it is received.  Gironda explained that the 
congressional session had been extended until mid-December 
and that the GOB wanted to pass the MQSC law by that date. 
Ramiro Rivas met with Dr. Gironda the first week in November. 
 He told Econoff on November 6 that Gironda planned to 
condense the MQSC law and that the GOB would issue two 
decrees after passage of the law -- one on anti-corruption 
and one on money laundering.  Rivas, in collaboration with 
Checchi, planned to prepare suggestions for the condensed 
draft at the next meeting with Gironda on November 14. 
 
------- 
Comment 
------- 
 
¶9. (SBU) Political leaders and some working group members 
have expressed concern that the anti-corruption law would be 
used by the GOB to hunt political enemies.  The new UIFP, 
under the Finance Ministry, should have more teeth than the 
old UIF, under the Bank Superintendency.  This could be 
positive, because the former UIF was ineffective; however, 
the UIFP could also be more politicized if it depends on a 
ministry.  Post will continue to seek to positively influence 
the GOB's legislative process to produce money laundering 
legislation that conforms with international norms, but is 
not extremely optimistic about the ultimate outcome.  End 
comment. 
GOLDBERG