VZCZCXYZ0000
PP RUEHWEB

DE RUEHSJ #0552/01 1811254
ZNR UUUUU ZZH
P 301254Z JUN 09
FM AMEMBASSY SAN JOSE
TO SECSTATE WASHDC PRIORITY 0997

UNCLAS SAN JOSE 000552 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/CEN:CWEBSTER, CASHE, AND JVANTRUMP, WHA/EPSC:AWONG, AND 
INL/LP:KBROWN AND MAHERN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV PGOV PREL CS
SUBJECT:  EMBASSY SAN JOSE REQUESTS MERIDA SUPPORT FOR 2009 
FINANCIAL ENFORCEMENT PROGRAM 
 
REF:  A) SAN JOSE 0277 
      B) SAN JOSE 0531 (NOTAL) 
 
¶1.  (U) This is an ACTION MESSAGE.  Please see paragraph 8. 
 
¶2.  (SBU) SUMMARY. Costa Rica's unregulated and untaxed gaming 
industry, legal but unregulated prostitution, and growing 
narco-trafficking all contribute to an increase in criminal 
activity; this exposes Costa Rica to transnational cash smuggling 
and money laundering crimes.  Therefore, Embassy San Jose, 
Treasury's Office of Technical Assistance (OTA), the GOCR's Finance 
(Hacienda) Ministry and the Central Bank of Costa Rica (BCCR), seek 
to launch an OTA Financial Enforcement program for Costa Rica before 
the end of this year.  Department funding would be an essential 
element of this program, because the OTA budgeting process that 
would consider Treasury funding for Costa Rica will not occur until 
late 2009 and, if approved, those funds would not become available 
until CY2010.  However, our earlier requests to INL (for program 
funding) and to WHA and INL (to use FY2009 Merida regional funding) 
were both turned down, the latter in favor of a DHS program dealing 
with bulk cash smuggling and money laundering.  We would like to 
request reconsideration of this inexpensive (less than $150,000) and 
virtually ready-to-go OTA program (if truly not feasible) and an 
explanation as to how the DHS program will better help the GOCR 
address its financial enforcement needs.  END SUMMARY. 
 
--------------------------------------------- -- 
GOCR FINANCIAL CRIME INTEREST COALESCED IN 2008 
--------------------------------------------- -- 
 
¶3.  (SBU) In October 2008, the GOCR formally asked OTA for a 
financial enforcement program.  In April 2009, the OTA's Carlos 
Correa led a team, expert in economic crimes and gambling, on an 
assessment mission (Ref A).  Draft results of the assessment report 
indicate that OTA agrees that Costa Rica's unregulated and untaxed 
gaming industry, legal but unregulated prostitution, and growing 
narco-trafficking all contribute to the increase in criminal 
activity.  The three-way mix of vice -- gambling, sex trade, and 
drugs -- opens Costa Rica to economic crimes such as cash smuggling, 
money laundering, and terrorist financing.  Couple the three-way 
vice mix with weak inter-ministerial coordination (vital to 
thwarting financial crime) and a lax legal environment, and Costa 
Rica's growing financial crime potential exposes the country to 
sophisticated transnational crime rooted in drug cartels. 
 
----------------------- 
GOCR IS VERY INTERESTED 
----------------------- 
 
¶4.  (SBU) In April 2009, Hacienda Minister Guillermo Zuniga met with 
Treasury DAS Larry McDonald and reiterated the GOCR's interest in 
OTA assistance.  In May, Zuniga met with DAS McDonald in San Jose 
and repeated the request, underscoring the urgent need to start 
working on the gambling issue.  In response, an OTA gambling team 
visited San Jose in early June for four days of consultations 
(Ref B).  The OTA team counseled the GOCR on the weaknesses of 
proposed legislation, and suggested policy and regulation options, 
including models from other countries.  This was an important first 
step, but more action is needed. 
 
-------------------------------- 
THE TIME IS NOW -- NOT NEXT YEAR 
-------------------------------- 
 
¶5.  (SBU) The interest from the GOCR is strong and clear.  OTA has 
an excellent success record with other programs in Costa Rica and 
wants to continue to make a difference.  Now that the Arias 
Administration has entered its last year, it feels pressed about key 
issues such as security, and plans to forge ahead with related 
legislation and reforms.  We strongly endorse this approach and 
believe that certain GOCR agencies -- namely the Hacienda and the 
Costa Rican Drug Institute (the GOCR equivalent to our DEA) -- can 
institute effective reform.  Given that a receptive and eager team 
is in place, now is the time to respond. 
 
------------------------ 
FUNDING IS THE CHALLENGE 
------------------------ 
 
¶6.  (SBU) The key variable in launching an OTA Financial Enforcement 
program in CY2009 is funding.  OTA funds are committed for CY2009 
(but likely available in CY2010).  Therefore, we proposed to use 
FY2009 Merida regional money (specifically Transnational Crimes, 
i.e. Bulk Currency Smuggling and Asset Forfeiture) to launch an OTA 
Financial Enforcement program in Costa Rica in CY2009.  After 
submitting a proposal to use INL program funds (which was turned 
down), we requested the use of Merida regional funds to launch the 
OTA Financial Enforcement program.  Despite an initial positive 
response, we learned that funds for Bulk Cash Smuggling and Asset 
 
Forfeiture had already been committed by INL and CEN to DHS. 
 
¶7.  (SBU) We understand that INL program funds may be limited, but 
using FY09 Merida regional funding made eminent sense to us for the 
following reasons: 
 
-- We have a specific OTA plan ready for CY2009, which would launch 
this important and high-impact financial enforcement program for 
less than USD 150,000; 
 
-- Costa Rican counterparts are ready to work on the project; 
 
-- OTA (and we) have confirmed the acute need for assistance to 
address financial crimes; and 
 
-- an OTA financial enforcement program could be launched in very 
short order. 
 
--------------- 
ACTION REQUESTS 
--------------- 
 
¶8.  (SBU) In light of the above: 
 
-- We request reconsideration of our request to fund the new OTA 
program with FY2009 regional Merida funding.  Again, we are not 
talking about a large or long-term expenditure; $150,000 in funding 
would launch the program in CY2009, with Treasury likely picking up 
the funding in CY2010; 
 
-- Please explain why it is felt that the DHS program would better 
support Merida and our Mission Strategic Plan objectives on 
financial enforcement.  Having no information about the DHS program, 
we are at a loss to provide an informed assessment to Washington; 
 
-- Please provide additional details on the DHS program.  How will 
it address Costa Rica's immediate financial enforcement needs?  When 
would it begin?  Are GOCR counterparts identified and ready to act 
now? 
 
-- If the Merida funds in question are fully committed to DHS, 
please advise what other Merida sources may support this important 
financial enforcement program for Costa Rica; and 
 
-- In the future, we would appreciate advance notification if/when 
potentially available Merida funding is committed to other agencies 
or programs.  We are doing our best to respond to numerous official 
and informal taskings to keep the Merida information flowing to 
Washington.  However, we cannot do this adequately unless we too are 
kept informed by Washington.  We want to support this very 
important, Congressionally-backed regional initiative as best as we 
can. 
 
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COMMENT 
------- 
 
¶9.  (SBU) Though there may be priorities of which we are unaware, we 
firmly believe that Merida spending must reflect local needs. 
Although some commonalities exist throughout the Merida countries, 
local needs define local security threats.  An OTA financial 
enforcement program will help build institutional capacity in a 
reform-receptive environment.  With financial crimes and Costa Rica, 
we now see a unique confluence of events -- growing security 
problems and GOCR key players and the OTA ready to move to address 
them.  This is an ideal assistance relationship; we have the chance 
to meet a local need, instead of forcing a regional solution to meet 
that need.  This is how Merida was constructed in the first place, 
from the bottom up.  We do not want to lose this unique opportunity. 
 
 
BRENNAN