VZCZCXRO4986
RR RUEHLMC
DE RUEHMU #2609/01 3521612
ZNR UUUUU ZZH
R 181612Z DEC 07 ZDK
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 1830
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 1819
RHEHNSC/NSC WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 MANAGUA 002609 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, INL/LP, S/CT AND EEB/IFD 
BOGOTA FOR FGROENE 
TREASURY FOR SARA GRAY AND FINCEN 
JUSTICE FOR OIA, AFMLS, NDDS 
JUSTICE PASS TO OPDAT CDELUIGI 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR 
 
E.O. 12958: N/A 
TAGS: EFIN PTER ECON PGOV SNAR NU
SUBJECT: NICARAGUA: NEW PENAL CODE UPDATES ANTI TERRORISM AND MONEY 
LAUNDERING LAWS 
 
Ref: A) MANAGUA 1743, B) MANAGUA 2185, C) MANAGUA 2351 
 
MANAGUA 00002609  001.2 OF 002 
 
 
¶1. (U) Summary: In November, Nicaragua's National Assembly passed a 
new Penal Code that includes new language on terrorism finance, 
money laundering, and crimes against the financial system.  This 
language will allow Nicaragua's law enforcement to prosecute cases 
of financing of terrorist entities, transportation of bulk cash 
contraband, and non-drug related money laundering as independent 
crimes instead of having to tie them to a central crime such as drug 
smuggling.  Despite these advances, Nicaragua's lack of a financial 
intelligence unit continues to limit the GON's ability to seriously 
investigate and prosecute specific cases at this time.  End 
Summary. 
 
¶2. (U) On November 13, Nicaragua's National Assembly passed a new 
Penal Code that, for the first time, defines terrorism financing as 
a crime and uses international definitions of money laundering. 
Nicaragua's police and prosecutors will now be able to prosecute 
cases involving the financing of terrorist entities, transportation 
of bulk cash contraband, and non-drug related money laundering as 
independent crimes instead of having to tie them to a central crime 
such as drug smuggling.  Advocated by Nicaragua's Superintendent of 
Banks and the National Association of Private Banks, these new 
articles bring Nicaragua's legal protections of its financial sector 
up to international standards.  The new penal code will go into 
effect within 60 days of being published in the official register 
"La Gaceta."  The GON is publishing the code in portions, so there 
is no fixed date for the publication of the relevant articles. 
 
The New Articles 
---------------- 

¶3. (U) The new Penal Code brings Nicaragua in line with most 
international standards for fighting money laundering.  Nicaragua's 
previous Penal Code, dating from 1974, did not list money laundering 
as a specific crime.  As a result, money laundering not tied to drug 
cases was rarely investigated or prosecuted.  Articles 282 and 283 
of the new Penal Code define money laundering as an independent 
crime that can occur beyond territorial borders.  Acts that now 
constitute money laundering include: illegal transportation of bulk 
cash (per GAFI Special Recommendation IX), use of front companies or 
straw men, willfully ignoring an illegal movement of money, and 
inaction when one is in a supervisory position.  Committing these 
crimes while a public servant is considered an aggravating 
circumstance, which increases the penalties.  The greatest weakness 
to these articles is that they apply the lowest international 
standard for sentences (five to seven years). 
 
¶4. (U) For the first time, Nicaragua's law clearly defines the 
financing of terrorism as a crime.  Article 395 is based on 
international model language and covers generating, collecting, 
funneling, depositing, transferring, or administering legal or 
illegal funds that are used to commit an act of terrorism as defined 
in Article 394.  The sentence is 15 to 20 years.  If the act is 
committed through Nicaragua's financial system and/or by a public 
employee, the sentence is increased by five years. 
 
¶5. (U) Article 280, which defines "Crimes Against the Banking and 
Financial System," provides a major step forward in the definition 
of actions that can harm the financial sector.  Among the crimes 
specified in the article are hindering the work of the 
Superintendent of Banks, spreading unfounded rumors on the financial 
health of any entity, or causing damage to the assets of a financial 
institution.  The development of this article can be directly tied 
to the failure of four major Nicaraguan banks in 2000-2001.  The 
first failure, caused by a massive money laundering scheme run by a 
shell company through one of Nicaragua's largest banks, set off the 
chain reaction of failures. (Ref B)  Many of the actions which 
caused the failures were not prosecutable because these crimes had 
not been specified in the previous Penal Code. 
 
Comment 
------- 

¶6. (SBU) For the National Assembly, the most controversial articles 
were 282 and 283, dealing with money laundering, because of the 
legal and political implications for former president Arnoldo 
Aleman.  In 2003, Aleman was convicted of stealing government funds 
and money laundering and sentenced to 20 years.  The ensuing 
political machinations to keep him out of jail were the basis of the 
famous "pacto" between the FSLN (Sandinista) and the PLC (liberal) 
parties which still dominates Nicaraguan politics. (Ref A)  Post 
will report septel on recent developments in this case and how they 
relate to the new Penal Code. 
 
¶7. (U) Aside from the political implications, these changes are an 
important advancement for Nicaragua to investigate and prosecute 
financial crimes.  The lack of a financial intelligence unit, 
however, continues to limit the GON's ability to seriously 
investigate specific cases at this time. (Ref C and Septel) 
 
TRIVELLI