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DE RUEHAH #1226/01 3170320
ZNR UUUUU ZZH
P 130320Z NOV 07
FM AMEMBASSY ASHGABAT
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INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
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RUCNDT/USMISSION USUN NEW YORK 0620
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
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UNCLAS SECTION 01 OF 04 ASHGABAT 001226 
 
SIPDIS 
 
 
SIPDIS 
 
 
STATE FOR SCA/CEN, INL, S/CT, EEB 
JUSTICE FOR AFMLS, OIA, OPDAT 
TREASURY FOR FINCEN 
DUSHANBE FOR DEA 
MOSCOW FOR DEA 
ISLAMABAD FOR DEA 
 
 
E.O. 12958: N/A 
TAGS: PGOV EFIN SNAR KCRM KTFN TX
SUBJECT:  TURKMENISTAN 2007-2008 INTERNATIONAL NARCOTICS CONTROL 
STRATEGY REPORT (INCSR) PART II, MONEY LAUNDERING AND FINANCIAL 
CRIMES 
 
Ref:  SECSTATE 138130 
 
¶1.  This is the 2007-2008 INCSR Part II report on Turkmenistan.  The 
text is keyed to the questions in reftel.  The Post's point of 
contact for the INCSR, Part II draft is Kristine Marsh, Economic 
Officer (MarshKA@state.gov). 
 
GENERAL 
 
¶2.  Turkmenistan is not an important regional financial center.  It 
has only one international bank and a small, underdeveloped 
financial sector.  Foreign companies operate (but do not own) four 
hotels and casinos in Turkmenistan.  These entities could be 
vulnerable to financial fraud and used for money laundering.  The 
national currency, the Turkmenistan Manat, has an unofficial, but 
generally accepted, exchange rate that is four times the official 
rate, creating an environment where money laundering is possible. 
 
OFFSHORE FINANCIAL CENTERS 
 
¶3.  Turkmenistan has no offshore companies or banks. 
 
FREE TRADE ZONES 
 
¶4.  The current Law on Free Economic Zones in Turkmenistan adopted 
in 1993, and amended in 1994, determines the legal regime for 
conducting business in these zones, guarantees the rights of both 
foreign and domestic investors, forbids nationalization of 
enterprises and discrimination against foreign investors, and 
provides guarantees to foreign investors for exporting production 
and repatriating after-tax profits.  All related enterprises are 
exempt from taxes on profits for the first three years of profitable 
operation.  All goods and properties must be declared when imported 
into or exported from free economic zones.  There are ten free 
economic zones in Turkmenistan. 
 
¶5.  In May 2007 Turkmenistan introduced a National Tourism Zone 
(NTZ) heavily promoted by President Berdimuhamedov to encourage 
tourism development at a site on the Caspian Sea shore.  Tax and 
other incentives are provided in the new legislation passed on 
October 1, but only to those willing to invest in construction of 
hotels and recreational facilities.  The amendments to the Tax Code 
passed on October 1 exempt construction and installation of tourist 
facilities in the NTZ from the Value Added Tax (VAT).  Various 
services of tourist facilities, including catering and 
accommodation, are also VAT exempt.  Income tax on accommodation and 
catering of tourist facilities will not be levied for the first 15 
years. 
 
LAWS AND REGULATIONS TO PREVENT MONEY LAUNDERING AND THE 
FINANCING OF TERRORISM 
¶6.  The Turkmen Criminal Code of June 12, 1997, Article 242 
(Legalization of illegally obtained funds or other property) 
prohibits money laundering. 
¶7.  The Government of Turkmenistan is working on new anti-money 
laundering legislation.  In 2007, the Government agreed to work with 
the World Bank to review its draft anti-money laundering legislation 
and establish a Financial Intelligence Unit (FIU). 
¶8.  Turkmenistan's Banking Law of 1993 prevents disclosure of client 
and ownership information by domestic and offshore financial 
services companies to bank supervisors and law enforcement 
authorities.  However, it permits disclosure of such information 
upon official request of courts and investigative agencies. 
 
¶9.  According to Turkmenistan's National Drug Program for 2006-2010, 
development and adoption of national money laundering legislation 
 
ASHGABAT 00001226  002 OF 004 
 
 
was to have taken place in 2006-2007.  Current laws don't provide 
for establishment and funding of an FIU.  In 2007 the Government 
agreed to work with the World Bank to establish an FIU in 
Turkmenistan. 
 
FINANCIAL SECTOR 
 
¶10.  The Banking Supervision Department of the Central Bank of 
Turkmenistan (CBT) supervises financial institutions for compliance 
with anti-money laundering/counter-terrorist laws and regulations. 
¶11.  Presidential Resolution No. 0210/02-2 of October 17, 1995, 
gives the CBT authority over all international financial 
transactions.  Under this resolution, any entity making an 
electronic transfer of funds to an account abroad must provide 
documentation establishing the source of the money.  The CBT 
regulations also permit an individual to transfer funds abroad of no 
more than $15,000 every three months.  Presidential Decree No. 5976 
of November 20, 2002, "Strengthening the Regulations of Turkmen Bank 
Operations Carried Out in Foreign Currency," orders Turkmenistan 
banks to carry out correspondent, deposit, investment and other 
operations in foreign currency outside Turkmenistan only through 
open correspondent accounts in the CBT or State Foreign Economic 
Relations Bank (Vneshekonombank). 
¶12.  There are no non-banking financial institutions other than one 
state-controlled insurance company.  The Ministry of National 
Security (MNB), the State Tax Service and Ministry of Internal 
Affairs (MVD) departments for fighting economic crimes supervise the 
insurance company. 
 
¶13.  All financial institutions are required to report suspicious 
transactions.  In addition, the CBT ultimately supervises all bank 
transactions. 
 
FINANCIAL INTELLIGENCE UNIT/INVESTIGATIONS 
 
¶14.  The country does not have an established Financial Intelligence 
Unit (FIU).  However, the MVD's Economic Crimes Department has 
criminal and investigative responsibilities comparable to an FIU. 
 
¶15.  Under the 2006-2010 National Drug Program, Turkmenistan 
foresees the establishment of special units for controlling 
financial transactions to strengthen anti-money laundering measures, 
including asset forfeiture related to illegal drug trafficking. 
 
¶16.  The MVD, MNB, and Prosecutor's Office are responsible for 
investigating financial crimes, including money laundering and 
terrorist financing. 
 
¶17.  To strengthen control over government assets, President 
Berdimuhamedov signed a decree on establishing a Supreme Auditing 
Chamber of Turkmenistan in July 2007.  The Chamber is responsible 
for overseeing financial and economical activities by government 
institutions and ensuring proper, lawful, and effective use of state 
property and funds. 
 
¶18.  The Embassy regularly provides terrorist financing information 
regarding UN and U.S.-designated individuals and organizations 
subject to asset forfeiture to the Ministry of Foreign Affairs 
(MFA).  The MFA reports that it distributes this information to the 
Ministry of Economy and Finance, MNB, MVD, and other concerned 
agencies. 
 
CROSS BORDER TRANSPORTATION OF CURRENCY AND NEGOTIABLE INSTRUMENTS 
 
¶19.  The statutory requirements for limiting or monitoring the 
cross-border transportation of currency and monetary instruments are 
 
ASHGABAT 00001226  003 OF 004 
 
 
stipulated in the Turkmenistan Customs Code.  The Customs 
declaration forms are used at the border crossings for cross-border 
currency reporting requirements for both inbound and outbound 
currency. 
 
¶20.  Post does not have specific reports on cash smuggling. However, 
gasoline and other commodities are smuggled routinely across the 
national border.  Hence, there is a possibility of smuggling other 
items, including cash. 
 
ASSET FORFEITURE AND SEIZURE LEGISLATION 
 
¶21.  Presidential Decree No. 6097 of January 24, 2003, authorizes 
the Turkmenistan Supreme Court to open a centralized deposit account 
at the CBT for receiving payments from illegal enrichment, 
compensation of material loss, or other assets obtained illegally 
and seized during inspection, investigation, and court trials for 
all crimes, including organized crime, drug-trafficking, and 
terrorist financing.  The assets will remain in the Supreme Court 
account until the announcement of the court's final verdict on the 
case or until another decision is made. 
 
¶22.  The Turkmenistan Antiterrorism Law of August 15, 2003, 
authorizes the government to freeze resources and/or other financial 
assets, deposits, economic resources, and material values of 
individuals who commit or attempt to commit terrorist acts, or 
contribute to their commitment; organizations directly or indirectly 
placed under ownership or under control of such individuals; and 
individuals and organizations acting on behalf of the above 
individuals and organizations, including any assets acquired or 
received through the use of property directly or indirectly 
belonging to or controlled by such individuals and/or 
organizations. 
 
¶23.  According to the 2006-2010 National Drug Program, Turkmenistan 
plans to establish special units in 2007 that will have the right to 
seize assets derived from illicit drug trading. 
 
INTERNATIONAL COOPERATION 
 
¶24.  Under the 2006-2010 National Drug Program, Turkmenistan plans 
to strengthen cooperation with foreign law enforcement agencies in 
the area of narcotics trafficking.  The plan includes providing 
judicial assistance to foreign competent agencies in collecting 
evidence, sharing information, and providing evidence in accordance 
with national legislation and international agreements. 
 
¶25.  Turkmenistan's counterterrorism laws require Turkmenistan to 
cooperate with foreign states and international organizations in 
terrorism matters and render assistance to other states in criminal 
investigations and prosecutions of individuals involved in financing 
or supporting terrorist activities. 
 
¶26.  The Ministry of Foreign Affairs reports that it distributes 
information provided by the United States regarding designated 
individuals and organizations subject to asset forfeiture to the 
Ministry of Finance, the Ministry of National Security, the Ministry 
of Internal Affairs, and other concerned agencies. 
 
¶27.  In September 2007, the Government of Turkmenistan signed the 
second amendment to the Department of State's International 
Narcotics and Law Enforcement program Letter of Agreement on 
Narcotics Control and Law Enforcement (ALOA). 
¶28.  The Government of Turkmenistan should enact appropriate 
legislation and take steps to implement a comprehensive anti-money 
laundering regime capable of thwarting terrorist financing that 
 
ASHGABAT 00001226  004 OF 004 
 
 
conforms to international standards.  Turkmenistan should also 
consider joining or becoming an observer to the new Eurasian Group 
on Combating Money Laundering and Financing of Terrorism, a 
Financial Action Task Force (FATF)-style Regional Body established 
in October 2004.  The Government of Turkmenistan joined Interpol in 
September 2005.  Turkmenistan is a party to the UN International 
Convention against Illicit Trafficking in Narcotics Drugs and 
Psychotropic Substances, the UN Convention against Corruption, the 
UN Convention against Transnational Organized Crime, and the UN 
Convention for the Suppression of the Financing of Terrorism. 
HOAGLAND