VZCZCXRO6918
RR RUEHLMC
DE RUEHUM #0138/01 0880450
ZNR UUUUU ZZH
R 280450Z MAR 08
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTATE WASHDC 2013
INFO RUEHBJ/AMEMBASSY BEIJING 6064
RUEHKO/AMEMBASSY TOKYO 2942
RUEHMO/AMEMBASSY MOSCOW 2160
RUEHUL/AMEMBASSY SEOUL 3257
RUEHML/AMEMBASSY MANILA 1680
RUEHPF/AMEMBASSY PHNOM PENH 0083
RUEHBY/AMEMBASSY CANBERRA 0255
RUEHDN/AMCONSUL SYDNEY 0041
RUEHLO/AMEMBASSY LONDON 0298
RUEHIN/AIT TAIPEI 0124
RUEHAK/AMEMBASSY ANKARA 0056
RUEHHK/AMCONSUL HONG KONG 0872
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 0578
RUEKJCS/SECDEF WASHINGTON DC

UNCLAS SECTION 01 OF 02 ULAANBAATAR 000138 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
BEIJING FOR LEGATT HENDERSHOT 
STATE FOR EAP/CM, INL, AND S/CT 
STATE PASS FEDERAL RESERVE, EXIM, AND OPIC 
USAID FOR ANE DEIDRA WINSTON 
LONDON AND MANILA PASS TO USEDS TO EBRD AND ADB 
TREASURY FOR TT YANG, FINCEN FOR J FRIES 
TREASURY PASS USEDS TO IMF AND WORLD BANK 
 
E.O. 12958:  N/A 
TAGS: EFIN PTER ECON PREL SCUL SNAR KPAO MG
SUBJECT: BABY STEPS FOR MONGOLIA'S FIU 
 
REF: Ulaanbaatar 105 (NOTAL) 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION 
 
¶1. (SBU) SUMMARY: The Government of Mongolia's (GOM) effort to 
establish an effective Financial Intelligence Unit (FIU), as 
required under the nation's first Anti-Money Laundering and 
Combating the Financing of Terrorism legislation (AML/CFT) passed in 
July 2006, has been slow going, but there have been notable 
achievements.  Important internal regulations have been adopted and 
banks have begun filing suspicious transaction reports (STR).  In 
February, Parliament approved amendments that specifically 
criminalize money laundering and terrorist finance, moving Mongolia 
closer to compliance with international standards, particularly 
Financial Action Task Force's (FATF) 49 recommendations.  The FIU is 
also establishing relationships with foreign counterparts and has 
applied to join the Egmont Group of FIUs.  However, finding 
qualified staff remains a challenge, and to boost the unit's 
capacity to investigate suspicious transactions, better training and 
proper tools are required. FIU Chief Tumurbat departs March 29 for a 
three-week visit to the U.S. to learn about the USG's systems and 
establish contacts. 
END SUMMARY. 
 
¶2. (SBU) On February 1, 2008, the Mongolian Parliament approved 
amendments to the Criminal Code that officially and explicitly 
outlaw money-laundering and terrorist finance.  The move marked an 
important step toward Mongolian compliance with international 
standards -- particularly the FATF's 49 recommendations as well as 
requirements set by the Asia Pacific Group (APG) mutual evaluation 
experts in July 2007. 
 
INTERNAL REGULATIONS ADOPTED 
----------------------------- 
 
¶3. (SBU) While getting Mongolia's FIU up and running has been a 
painfully slow process (reftel), there has been some notable 
progress. (Note: Mongolians refer to their FIU as the "Financial 
Information Unit" as the word "Intelligence" carries ominous 
connotations in this post-communist nation).  Internal operating 
procedures have been drafted and adopted including: "The FIU secrecy 
regulation," "The FIU Chapter," a "Regulation on collecting, 
analyzing and disseminating financial transaction reports by FIU," 
and a "Cooperation Council Regulation."  In addition, six 
regulations and procedural motions have been drafted by the FIU 
staff and submitted to the IMF's Legal Department for review. 
(Note: The IMF's Legal department is providing the FIU with 
technical assistance for the development of regulations and 
procedures, as well as the training of staff on AML/CFT issues.  End 
Note.) 
 
SUSPICIOUS TRANSACTIONS NOW BEING REPORTED 
------------------------------------------ 
 
¶4. (SBU) Two regulations on bank compliance with AML/CFT have also 
been issued: "Know your customer regulation for banks," and 
"Suspicious transaction report (STR) and cash transaction report 
(CTR) regulation for banks." Banks, which have been required to 
report CTRs and STRs since early February, have so far filed 150 
CTRs and 2 STRs originating from six banks (out of 16 banks 
currently operating in Mongolia).  However,  according to Central 
Bank Deputy Governor B. Enhhuyag, these reports have varied in 
quality and consistency.  In response, the FIU is training bank 
compliance officers on the new procedures and how to prepare STR and 
CTR reports. 
 
ULAANBAATA 00000138  002 OF 002 
 
 
 
FIU AND LAW ENFORCEMENT 
----------------------- 
 
¶5. (SBU) There have been two meetings thus far of the GOM's 
"Cooperation Council," which is composed of relevant officers from 
the FIU, Finance Ministry, Criminal Police Department, General 
Intelligence Agency, Anti-Corruption Agency, The Bank of Mongolia, 
Prosecutor General's Office, Customs Agency and Financial Regulatory 
Committee -- to discuss FIU issues, including ways to safeguard 
confidential information uncovered during investigations. 
 
SIPDIS 
 
¶6. (SBU) The FIU is incorporated within the Bank of Mongolia and is 
"administrative" in nature; it has no authority to use special 
investigative techniques, such as wiretapping and controlled 
delivery.  Under the AML/CTF law, the FIU is to collect and analyze 
information from financial institutions.  If it finds sufficient 
evidence of unlawful activity, it is to pass the information to 
prosecutors. 
 
RECRUITMENT PROBLEMATIC 
----------------------- 
 
¶7. (SBU) So far, only three of the FIU's four staff positions have 
been filled, but with the 2008 state budget funding three additional 
positions (for a total of seven), active recruitment needs to 
intensify.  However, Enhhuyag tells us that recruitment has proven 
extremely difficult and time consuming.  New recruits must possess, 
at a minimum, a bachelors or higher degree in finance or law; 
excellent command of English; and at least a year of work experience 
in a financial institution.  Of 30 or so respondents to two 
newspaper recruitment ads, only one met these requirements.  The FIU 
has thus far had no success in coaxing talented Bank of Mongolia 
officers to accept FIU jobs.  Some applicants have been put off by 
the FIU's low salaries and limited career-advancement opportunities. 
 ¶B. Tumurbat, the FIU Chief, told us recently that there was real 
concern at the FIU about recruiting people "off the street," as 
agents would be expected to properly handle confidential information 
received from banks, and leaks have already started appearing in the 
local press. 
 
FOREIGN COOPERATION 
------------------- 
 
¶8. (SBU) The FIU is strongly committed to cooperating with 
international counterparts.  The FIU has already signed an MoU with 
Turkey's FIU (MASAK) and applied for membership to the Egmont group 
of Financial Intelligence Units.  In February, 2008, FIU staff 
visited Taiwan to report on FIU developments and receive training. 
Recently, Tumurbat was nominated by the APG as an assessor of the 
Japanese AML/CFT system (within the framework of FATF/APG Mutual 
Evaluation) and visited Japan as part of an on-site examination on 
March, 2008.  Tumurbat will shortly depart on a three-week long, 
Public Affairs-funded international visitor program to the U.S. to 
learn about the USG's systems and to establish contact with relevant 
U.S. agencies. 
 
Minton