VZCZCXRO2625
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0890/01 3220843
ZNR UUUUU ZZH
R 170843Z NOV 08
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 8404
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 03 RANGOON 000890 
 
SIPDIS 
 
DEPT FOR EAP/MLS, INL, SCT, EEB 
DEPT OF JUSTICE FOR AFMLS, OIA, OPDAT 
TREASURY FOR FINCEN 
 
E.O. 12958:N/A 
TAGS: EFIN KCRM KTFN SNAR BM
SUBJECT: BURMA: 2008-2009 INCSR II MONEY LAUNDERING AND FINANCIAL 
CRIMES 
 
REF:  STATE 103810 
 
¶1.  This report responds to reftel request for the INCSR II Money 
Laundering and Financial Crimes Report update. 
¶2.  Burma, a major drug-producing country, has taken steps to 
strengthen its anti-money laundering regulatory regime in 2008.  The 
country's economy remains dominated by state-owned entities, 
including the military.  Agriculture and extractive industries, 
including natural gas, mining, logging and fishing provide the major 
portion of national income, with heavy industry and manufacturing 
playing minor roles.  The steps Burma has taken over the past 
several years have reduced vulnerability to drug money laundering in 
the banking sector.  However, with an underdeveloped financial 
sector and large volume of informal trade, Burma remains a country 
where there is significant risk of drug money being funneled into 
commercial enterprises and infrastructure investment.  Traffic in 
persons, narcotics, wildlife, gems, timber, and other contraband 
flows through Burma.  Regionally, value transfer via trade is of 
concern and hawala/hundi networks frequently use trade goods to 
provide counter-valuation.  Burma's border regions are difficult to 
control and poorly patrolled.  In some remote regions active in 
smuggling, there are continuing ethnic tensions with armed rebel 
groups that hamper government control.  Collusion between 
traffickers and Burma's ruling military junta, the State Peace and 
Development Council (SPDC), allows organized crime groups to 
function with virtual impunity.  Although progress was made in 2008, 
the criminal underground faces little risk of enforcement and 
prosecution.  Corruption in business and government is a major 
problem.  Burma is ranked 178 out of 179 countries in Transparency 
International's 2008 Corruption Perception Index. 
¶3.  The Government of Burma (GOB) has addressed some key areas of 
concern identified by the international community by implementing 
some anti-money laundering measures.  In October 2006, the Financial 
Action Task Force (FATF) removed Burma from the FATF list of 
Non-Cooperative Countries and Territories (NCCT).  To ensure 
continued effective implementation of reforms in Burma, the FATF, in 
consultation with the relevant FATF-style regional body (FSRB), will 
continue to monitor developments there for a period of time after 
de-listing.  In 2008, the FATF advised the GOB to enhance regulation 
of the financial sector, including the securities industry, and to 
ensure that the GOB responds adequately to any foreign requests for 
cooperation.  Burma underwent a mutual evaluation by the FSRB 
Asia-Pacific Group on Money Laundering in July 2008.  The FSRB 
Asia-Pacific Group continues to work with and monitor the GOB to 
strengthen is anti-money laundering measures. 
¶4.  Burma enacted a "Control of Money Laundering Law" in 2002.  It 
also established the Central Control Board of Money Laundering in 
2002 and a financial intelligence unit (FIU) in 2004.  The law 
created reporting requirements to detect suspicious transactions. 
It set a threshold amount for reporting cash transactions by banks 
and real estate firms, albeit at a high level of 100 million kyat 
(approximately U.S. $75,000).  Between 2004 and August 2008, more 
than 86,000 cash transaction reports were filed.  The GOB's 2004 
anti-money laundering measures amended regulations instituted in 
2002-2003 that set out 11 predicate offenses, including narcotics 
activities, human trafficking, arms trafficking, cyber-crime, and 
"offenses committed by acts of terrorism," among others.  In 2004 
the GOB added fraud to the list of predicate offenses, established 
legal penalties for leaking information about suspicious transaction 
reports, and adopted a "Mutual Assistance in Criminal Matters Law." 
The 2003 regulations, further expanded in 2006, require banks, 
customs officials and the legal and real estate sectors to file 
suspicious transaction reports (STRs) and impose severe penalties 
for noncompliance. 
¶5.  The GOB established a Department against Transnational Crime in 
¶2004.  Its mandate includes anti-money laundering activities.  It is 
staffed by police officers and support personnel from banks, 
customs, budget, and other relevant government departments.  In 
response to a February 2005 FATF request, the GOB submitted an 
anti-money laundering implementation plan and produced regular 
progress reports in 2006,  2007, and 2008.  In 2005, the government 
also increased the size of the FIU to 11 permanent members, plus 20 
support staff.  In August 2005, the Central Bank of Myanmar issued 
guidelines for on-site bank inspections and required reports that 
review banks' compliance with anti-money laundering (AML) 
legislation.  Since then, the Central Bank has sent teams to 
instruct bank staff on the new guidelines and to inspect banking 
operations for compliance. 
¶6.  In 2007, the Burmese Government amended its "Control of Money 
Laundering Law" to expand the list of predicate offences to all 
serious crimes to comport with FATF's recommendations.  In July 
2007, the Central Control Board issued five directives to bring more 
 
RANGOON 00000890  002 OF 003 
 
 
non-bank financial institutions, including dealers in precious 
metals and stones, under the AML/CTF compliance regime.  In March 
2008, the CCB brought additional  non-bank financial institutions, 
including the Andaman Club Resort Hotel and jems and jade trading 
companies (both wholesale and retail) under the AML/CTF compliance 
regime.  The Central Bank also required banks and financial 
institutions to maintain all records and documents related to 
customer accounts and transactions for a minimum of five years.  As 
of August 2008, a total of 1,495 STRs had been received.  In 2007, 
nine cases were identified as potential money laundering 
investigations.  As of August 2008, the FIU received 444 STRs, of 
which seven cases were identified as potential money laundering 
investigations.  The FIU has investigated four cases to date, two of 
which were sent to the courts for prosecution.  Since 2006, the FIU 
has investigated 20 money laundering cases and submitted eight cases 
for prosecution.  Fifty-four people have been convicted under the 
"Control of Money Laundering Law." 
¶7.  The United States maintains the separate countermeasures it 
adopted against Burma in 2004, identifying the jurisdiction of Burma 
and two private Burmese banks, Myanmar Mayflower Bank and Asia 
Wealth Bank, to be "of primary money laundering concern" pursuant to 
Section 311 of the 2001 USA PATRIOT Act.  These countermeasures 
prohibit U.S. banks from establishing or maintaining correspondent 
or payable-through accounts in the United States for or on behalf of 
Myanmar Mayflower and Asia Wealth Bank and, with narrow exceptions, 
for all other Burmese banks.  Myanmar Mayflower and Asia Wealth Bank 
had been linked directly to narcotics trafficking organizations in 
Southeast Asia.  In March 2005, following GOB investigations, the 
Central Bank of Myanmar revoked the operating licenses of Myanmar 
Mayflower Bank and Asia Wealth Bank, citing infractions of the 
Financial Institutions of Myanmar Law.  The two banks no longer 
exist.  In August 2005, the Government of Burma also revoked the 
license of Myanmar Universal Bank (MUB), and convicted the bank's 
chairman under both the Narcotics and Psychotropic Substances Law 
and the Control of Money Laundering Law.  Under the money laundering 
charge, the court sentenced him to one 10-year and one unlimited 
term in prison and seized his and his bank's assets. 
¶8.  The United States also maintains sanctions on Burma, which 
include bans on trade, investment, and financial transactions, as 
well as a visa ban on selected individuals.  Under the Junta 
Anti-Democratic Efforts (JADE) Act, the Burmese Freedom and 
Democracy Act , and several Executive Orders, the United States bans 
the provision of financial services to Burma by any U.S. persons, 
freezes assets of the ruling junta and other Burmese institutions, 
and prohibits the import of Burmese-produced goods into the United 
States (particularly jade and gems).  Additionally, other U.S. 
legislation, such as  the Narcotics Control Trade Act, the Foreign 
Assistance Act, the International Financial Institutions Act, the 
Export-Import Bank Act, the Export Administration Act, and the 
Customs and Trade Act, the Tariff Act (19 USC 1307), place further 
restrictions on financial transactions to Burma.  Other U.S. 
sanctions, such as visa bans on certain individuals affiliated with 
the military regime, also apply to Burma. 
¶9.  In September 2008, the United States Government identified Burma 
as one of three countries in the world that had "failed 
demonstrably" to meet its international counternarcotics 
obligations. 
¶10.  Burma became a member of the Asia/Pacific Group on Money 
Laundering in March 2006.  The GOB is a party to the 1988 UN Drug 
Convention.  Over the past several years, Burma has expanded its 
counter narcotics cooperation with other states.  The GOB has 
bilateral drug control agreements with India, Bangladesh, Vietnam, 
Russia, Laos, the Philippines, China, and Thailand.  These 
agreements include cooperation on drug-related money laundering 
issues.  In July 2005, the Myanmar Central Control Board signed an 
MOU with Thailand's Anti-Money Laundering Office governing the 
exchange of information and financial intelligence.  The government 
signed a cooperative MOU with Indonesia's FIU in November 2006. 
¶11.  Burma is a party to the UN Convention against Transnational 
Organized Crime and ratified the UN International Convention for the 
Suppression of the Financing of Terrorism in August 2006.  Burma 
signed the UN Convention on Corruption in December 2005, but has yet 
to deposit an instrument of ratification with the UN Secretary 
General.  Likewise, Burma signed the Treaty on Mutual Legal 
Assistance in Criminal Matters among Like-Minded ASEAN Member 
Countries in January 2006, but has yet to deposit its instrument of 
ratification with the Attorney General of Malaysia. 
¶12.  The Government of Burma has in place a framework to allow 
mutual legal assistance and cooperation with overseas jurisdictions 
in the investigation and prosecution of serious crimes.  To fully 
implement a strong anti-money laundering/counter-terrorist financing 
regime, Burma must provide the necessary resources to administrative 
 
RANGOON 00000890  003 OF 003 
 
 
and judicial authorities who supervise the financial sector so they 
can apply and enforce the government's regulations to fight money 
laundering successfully.  Burma must also continue to improve its 
enforcement of the new regulations and oversight of its banking 
system, and end all government policies that facilitate the 
investment of drug money and proceeds from other crimes into the 
legitimate economy.  The reporting threshold for cash transactions 
should be lowered to a realistic threshold that fits the Burmese 
context.  Customs should be strengthened and authorities should 
monitor more carefully the misuse of trade and its role in informal 
remittance or hawala/hundi networks.  The GOB should ratify the UN 
Convention against Corruption, as well as the Treaty On Mutual Legal 
Assistance In Criminal Matters Among Like-Minded ASEAN Member 
Countries.  The GOB should take serious steps to combat smuggling of 
contraband and its link to the pervasive corruption that permeates 
all levels of business and government.  The GOB should criminalize 
the financing of terrorism. 
 
VAJDA