VZCZCXRO3236
PP RUEHSK
DE RUEHSK #0020/01 0201814
ZNR UUUUU ZZH
P R 201814Z JAN 10
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC PRIORITY 0641
INFO RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHKV/AMEMBASSY KYIV 0006
RUEHFR/AMEMBASSY PARIS 0001
RUEHWR/AMEMBASSY WARSAW 0007
RUEHFT/AMCONSUL FRANKFURT 0043
RUEHSK/AMEMBASSY MINSK 0651

UNCLAS SECTION 01 OF 05 MINSK 000020 
 
SIPDIS 
 
DEPT FOR INL, EB/ESC/TFS, AND EUR/UMB 
JUSTICE FOR OIA AND AFMLS 
TREASURY FOR FINCEN 
EMBASSY KYIV FOR LEGATT (DSHEPARD) 
EMBASSY PARIS FOR USSS (JHEYN) 
CONGEN FRANKFUR FOR DHS/ICE (JMANYX) 
EMBASSY WARSAW FOR DEA (RPALM) 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM PTER SNAR BO
SUBJECT: BELARUS: 2009-2010 INCSR PART II: MONEY LAUNDERING AND 
FINANCIAL CRIMES 
 
REF: STATE 114962 
 
¶1.  Summary.  Belarus is not a regional financial center.  A 
general lack of transparency throughout the financial sector 
means that assessing the level of potential for money laundering 
and other financial crimes is difficult.  Corruption (including 
embezzlement through abuse of office, taking bribes, and general 
abuses of power) and illegal narcotics trafficking are primary 
sources of illicit proceeds.  Due to excessively high taxes, 
underground markets, the dollarization (US$) and the eurozation 
(Euro) of the economy, a significant volume of foreign-currency 
cash transactions eludes the banking system.  Shadow incomes 
from offshore companies constitute a portion of foreign 
investment.  Smuggling is widespread.  Corruption is a serious 
problem in Belarus, which hinders law enforcement and impedes 
much-needed reforms.  Economic decision-making in Belarus is 
highly concentrated within the top levels of government.  Recent 
decrees, although substantially liberating the country's 
business climate, have nevertheless left all major economic 
levers  in the hands of the president and the GOB.  End Summary. 
 
¶2. Belarus is not considered an offshore financial center, and 
offshore banks, shell companies, and trusts are not permitted. 
As of November 1, 2009, 32 banks with 264 branches comprised the 
banking sector.  Of these, 25 were banks with foreign capital, 
including 9 banks with 100 percent foreign capital.  There are 
currently eight offices of foreign banks, including those with 
headquarters in Germany, Latvia, Lithuania, Russia and Ukraine, 
and a representative office of the CIS Interstate Bank. 
Nevertheless, the assets of Belarus' three largest state-owned 
banks, Belarusbank, Belagroprombank, and Belinvestbank, account 
for 65-70% of all assets of the country's banking sector.  Banks 
and branches have separate business units such as payment 
processing centers, banking service centers, and foreign 
exchange offices.  In February 2006, the government abolished 
the 1997 identification requirements for all foreign currency 
exchange transactions at banks.  Nonbank financial credit 
institutions have gradually closed, due to money laundering 
concerns and other factors. 
 
¶3. Based on a 1996 Presidential Decree, Belarus has established 
one free economic zone (FEZ) in each of Belarus' six regions. 
The president creates FEZs upon the recommendation of the 
Council of Ministers and can dissolve or extend the existence of 
a FEZ at will.  The Presidential Administration, the State 
Control Committee (SCC), and regional authorities supervise the 
activities of companies in the FEZs.   According to the SCC, 
applying organizations are fully vetted before they are allowed 
to operate in an FEZ in an effort to prevent money laundering 
and terrorism finance.  Presidential Decree 66 has tightened FEZ 
regulations on transaction reporting and security, including 
mandatory installation of video surveillance systems.   A 2005 
National Bank resolution changed the status of banks in the 
zones by removing special provisions.  Banks in the zones are 
currently subject to all regulations that apply to banks outside 
the zones. 
 
¶4. In 2009, citing official sources, the local media reported 
several cases of attempts to smuggle undeclared cash across 
borders. Belarus uses customs declaration forms at points of 
entry and exit to fulfill cross-border currency reporting 
requirements for both inbound and outbound currency.  Upon entry 
into or departure from the country, travelers must declare in 
writing any sum over $3,000.  Travelers departing Belarus with 
sums exceeding $10,000 are required to secure permission from 
the National Bank to carry that amount of currency.  However, 
the declaration system was not designed, nor is it used to 
detect the physical cross-border movement of currency and bearer 
negotiable instruments to prevent and interdict bulk cash 
smuggling for money laundering and terrorist financing purposes. 
 Individuals may import or export securities certificates 
denominated in foreign currencies and payment instruments in 
foreign currencies without any limitations on the amount, and 
without the need to declare them in writing to the customs 
authorities.  Customs authorities do not store information on 
declarations that they consider suspicious and are unable to 
apply sanctions against persons moving funds cross-border on the 
basis of suspicion of money laundering or terrorist financing. 
New Customs regulations were reportedly drafted but were not 
adopted in 2009 to allow customs authorities to exert tighter 
 
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control over individual import and export of payment instruments 
in foreign currencies.  However, neither the details nor the 
time period for the adoption of new regulations were made public. 
 
¶5. The Eurasian Group on Combating Money Laundering and 
Financing of Terrorism (EAG), a Financial Action Task Force 
(FATF)-style regional body, evaluated the anti-money laundering 
and counterterrorist financing (AML/CTF) regime of Belarus in 
July 2008. The EAG adopted the mutual evaluation report (MER) at 
the December 2008 plenary meeting.  The major deficiencies 
outlined in the MER focused on certain issues, which Belarus' 
National Bank and the GOB partially addressed in 2009.  In an 
effort to establish adequate customer due diligence (CDD) 
requirements, the National Bank issued a resolution in June 2009 
obliging all Belarusian banks to establish an electronic client 
database and refer each client to a certain risk category. 
Electronic cash accounts in fictitious names have been allowed 
only for transactions under $1,105 per day.  Another EAG concern 
- a clear requirement to perform CDD on establishing business 
relations with a customer in the banking, insurance and 
securities sectors -  was reportedly addressed in the bill, 
which will amend the country's AML law.  The bill had a 
successful first reading in the parliament in 2009 and is 
expected to be adopted in March 2010.  The bill is not expected 
to address the requirement for CDD for legal entities below the 
($246,000) threshold.  The National Bank resolution has 
reportedly introduced an affirmative obligation to identify 
beneficial ownership in the banking sector. Beneficial ownership 
or ongoing monitoring requirements for other sectors and lack of 
effective regulation and supervision for correspondent accounts 
and designated nonfinancial businesses and professions (DNFBPs) 
were reportedly fully addressed in the bill.  Inadequate record 
keeping requirements and inadequate wire transfer identifier 
requirements were addressed in the NB's resolution. For steps 
taken to correct shortcomings in the Belarusian cross-border 
cash declaration regime see above. 
 
¶6. By law, only licensed banks and the postal service can 
conduct money transfers.  The government does not acknowledge 
alternative remittance systems and allows currency exchange only 
through licensed currency exchange kiosks.  The Department of 
Humanitarian Assistance in the Presidential Administration 
registers all charities. Presidential Decree 24, passed in 2003, 
requires all organizations and individuals receiving charity 
assistance, including assistance provided by foreign states, 
international organizations and individuals, to open charity 
accounts in a local bank. 
 
¶7. Belarus' "Law on Measures to Prevent the Laundering of 
Illegally Acquired Proceeds" (AML Law), adopted in 2000, amended 
in 2005 and to be further amended in 2010, establishes the legal 
and organizational framework to prevent money laundering and 
terrorist financing.  The AML/CTF law does not fully incorporate 
the requirements of the Vienna and Palermo Conventions (e.g., 
acquisition, possession or use are not covered, nor are indirect 
proceeds).  Belarus criminalizes self-laundering, but restricts 
the self-laundering offense to cases that involve using the 
illicit proceeds to carry out entrepreneurial or other business 
activities. Belarus also criminalizes the financing of 
terrorism.  Although Belarus has adopted an all crimes approach 
to money laundering predicates, with some exceptions for tax 
evasion crimes, it does not criminalize insider trading and 
market manipulation, and therefore does not meet FATF 
requirements for the minimum list of predicate offenses.  A 
money laundering conviction does not require conviction of the 
predicate offense.  Legal entities are not criminally liable and 
there also is no administrative liability of legal entities for 
money laundering.  However, if a legal entity aids an organized 
group or criminal organization or is created with funds of an 
organized group or criminal group, it can be liquidated by the 
Supreme Court of Belarus and its assets seized by the state. 
The criminal code provides adequate sanctions for individuals 
convicted of money laundering, including fines and incarceration 
for two to four years.  For repeated crimes, or for crimes 
involving sums equal to or above $12,280 or for crimes committed 
by an organized group the incarceration sentences are four to 
ten years.  The law defines "illegally acquired proceeds" as 
currency, securities or other assets, including real and 
intellectual property rights, obtained in violation of the law. 
 
MINSK 00000020  003 OF 005 
 
 
 
¶8. All financial institutions are obligated to report suspicious 
transactions regardless of value, and large value transactions, 
for which the reporting threshold for individual financial 
transactions is approximately $24,600 and for corporate 
transactions is approximately $246,000.  However, Belarusian 
banks were exempt from the latter requirement by the 
presidential edict 601 signed on November 4, 2008.  The same 
edict introduced a requirement for banks to identify one-time 
clients with transactions equal or exceeding $12,280.  In 
Belarus, these reporting obligations attach to transfers that 
are subject to special monitoring. Specifically, transactions 
subject to special monitoring include: transactions whose 
suspected purpose is money laundering or terrorist financing; 
cases where the person performing the transaction is a known 
terrorist or controlled by a known terrorist; cases in which the 
person performing the transaction is from a state that does not 
cooperate internationally to prevent money laundering and 
terrorist financing. Transactions exceeding the currency 
reporting threshold of $12,280 that involve cash, property, 
securities, loans or remittances presuppose identification 
requirements.  Financial institutions conducting such transfers 
are required to disclose to the FIU--the Department of Financial 
Monitoring (DFM)--within one business day the identity of the 
individuals and businesses ordering the transaction or the 
person on whose behalf the transaction is being placed, 
information about the beneficiary of a transaction, and account 
information and document details used in the transaction.   Bank 
officials who violate the law face fines, and banks may have 
their licenses suspended for up to one year. However, the AML 
Law exempts most government transactions and those sanctioned by 
the President from reporting requirements.  The government has 
used the AML Law as a pretext for preventing several 
pro-democracy NGOs from receiving foreign assistance. 
 
¶9. The AML Law authorizes the following government bodies to 
monitor financial transactions for the purpose of preventing 
money laundering: the State Control Committee (SCC); DFM; the 
Securities Committee; the Ministry of Finance; the Ministry of 
Justice; the Ministry of Communications and Information; the 
Ministry of Sports and Tourism; the Committee on Land Resources; 
the Ministry on Taxes and Duties (MTD); and other state bodies. 
The MTD also provides oversight and has released binding 
regulations on its subject institutions. Under the SCC, the 
Department of Financial Investigations, in conjunction with the 
Prosecutor General's Office, has the legal authority to 
investigate suspicious financial transactions and examine the 
internal rules and enforcement mechanisms of any financial 
institution. 
 
¶10. In January 2005, the President signed a decree on the 
regulation of the gaming sector, imposing stricter tax 
regulations on owners of gaming businesses. In addition, a 
provision intended to combat money laundering requires those 
participating in gaming activities to produce identification to 
receive winnings.  However, casinos do not need to address 
AML/CTF issues before receiving operating licenses, and the 
system for supervising and applying sanctions for noncompliance 
with AML/CTF requirements is not effective.  Belarus has 
shortcomings similar to other DNFBPs: there is little effective 
monitoring for compliance with AML/CTF measures for most of 
these sectors, and accountants lack a supervisory agency--even a 
self-regulating organization--so they completely lack 
supervision and monitoring.  Across sectors, there is no clear 
customer identification requirement for DNFBPs at the 
establishment of the business relationship, there are no 
beneficial ownership identification requirements (except for 
banks), and exceptions in the reporting requirements mean that 
there may be times that DNFBPs do not perform client 
identification measures even when they suspect the client of 
involvement in money laundering or terrorist financing.  These 
sectors also lack the legal obligation (again except for banks) 
to execute enhanced CDD measures for high-risk clients. 
Likewise, Belarus has no requirements for these sectors to 
obtain information from the customer regarding his or her source 
of funds or the expected purpose of the business relationship. 
The MER notes an overall lack of implementation across these 
sectors, in particular, the absence of effectiveness in the 
gaming sector, as well as with regard to dealers in precious 
 
MINSK 00000020  004 OF 005 
 
 
metals and stones. 
 
¶11. In 2003, Belarus established the DFM as its financial 
intelligence unit (FIU).  Although it is an autonomous unit 
within the State Control Committee of Belarus with the rights of 
a legal entity, it does not have an independent budget and 
cannot independently hire staff.  As the primary government 
agency responsible for gathering, monitoring and disseminating 
financial intelligence, the DFM analyzes financial information 
for evidence of money laundering and forwards it to law 
enforcement officials for prosecution.  The DFM also has the 
power to penalize those who violate money laundering laws and 
suspend the financial operations of any company suspected of 
money laundering or financing terrorism.  The DFM cooperates 
with counterparts in foreign states and with international 
organizations to combat money laundering, and since 2007 it is a 
member of the Egmont Group.  The DFM also has the authority to 
initiate its own investigations. 
 
¶12. The DFM has noted that there is increased interest by law 
enforcement in the FIU's work.  Belarusian legislation provides 
for broad seizure powers for law enforcement to identify and 
trace assets.  The Criminal Code provides for asset forfeiture 
for all serious offenses, including money laundering.  Seizure 
of assets from third parties appears possible but is not 
specifically codified.  The seizure of funds or assets held in a 
bank requires a court decision, a decree issued by a body of 
inquiry or pre-trial investigation, or a decision by the tax 
authorities. 
 
¶13. Belarus has focused on targets beyond money laundering. In 
June 2007 Parliament passed Criminal Code amendments to toughen 
penalties for various offenses by officials, including larceny 
through abuse of office, embezzlement, and legalization of 
assets illegally obtained.  In July 2007, President Lukashenka 
issued an edict mandating the formation of specialized 
departments within prosecutors' offices, police stations and the 
KGB to fight against corruption and organized crime. Despite 
recent legislation, corruption remains a serious obstacle to 
enforcing laws dealing with financial crimes. 
 
¶14. Belarus has made an effort to ensure cooperation and 
coordination between state bodies through the Interdepartmental 
Working Group established specifically to address AML/CTF 
issues.  This Working Group includes representatives of the 
Prosecutor's office, the National Bank, MTD, State Security 
Committee, Department of Financial Investigation, and the DFM. 
The Director of the DFM serves as the head of this Group. 
 
¶15. Terrorism is a crime in Belarus and the willful provision or 
collection of funds in support of terrorism by nationals of 
Belarus or persons in its territory constitutes participation in 
terrorism by aiding and abetting.  Article 290-1 of the Criminal 
Code explicitly criminalizes terrorist financing.  However, the 
law does not criminalize indirect provision of money for 
purposes of terrorist financing and does not criminalize 
provision of funds for a terrorist organization or an individual 
terrorist, if the funds are not intended for a specific act of 
terrorism.  The Criminal Code also does not criminalize the 
financing of theft of nuclear materials for terrorist purposes. 
Legal entities are not criminally liable for terrorist 
financing, but organizations engaged in the financing of 
terrorism may be liquidated by decision of the Supreme Court 
upon indictment by the General Prosecutor.  In December 2005, 
the Parliament amended the Criminal Code to stiffen the penalty 
for the financing of terrorism.  The amendments explicitly 
define terrorist activities and terrorism finance and carry an 
eight to twelve year prison sentence for those found guilty of 
sponsoring terrorism.  In February 2006, the Interior Ministry 
announced the establishment of a new counterterrorism department 
within its Main Office against Organized Crime and Corruption. 
 
¶16. Belarus does not have an adequate system in place to freeze 
without delay terrorist assets.  The AML/CTF (Article 5) 
requires financial institutions and DNFBPs to suspend a 
financial transaction if one of its participants is a person 
suspected of being involved in terrorist activities or 
controlled by terrorists.  The National Bank provides banks with 
the State Security Committee's lists of persons suspected of 
 
MINSK 00000020  005 OF 005 
 
 
being involved in terrorist activities or controlled by persons 
engaged in terrorism--including persons on the United Nations 
Security Council Resolution (UNSCR) 1267 Sanctions Committee's 
consolidated list--and has given banks and nonbank credit 
institutions an instruction on the procedure for freezing funds. 
 DNFBPs do not receive the terrorism lists and have little 
awareness of freezing requirements.  In addition, the AML/CTF 
law (Article 11) also authorizes the Financial Monitoring 
Department to suspend a transaction for up to five days, after 
which time it must decide either to report the information to 
law enforcement, which can attach the funds, or resume the 
transactions.  In accordance with a resolution passed in March 
2006, the Belarusian KGB compiled a list of 221 individuals 
suspected of participation in terrorism, which the National Bank 
distributed to all domestic banks.  Belarus has no procedures in 
place for reviewing requests to remove persons from the list or 
for unfreezing the funds of persons to whom the freezing 
mechanism was accidentally applied. 
 
¶17. Belarus is a party to the 1988 UN Drug Convention, the UN 
Convention for the Suppression of the Financing of Terrorism, 
the UN Convention against Transnational Organized Crime, and the 
UN Convention against Corruption.  Belarus has signed bilateral 
treaties on law enforcement cooperation with Afghanistan, 
Bulgaria, India, Latvia, Lithuania, the People's Republic of 
China, Poland, Romania, Syria, Turkey, the United Kingdom, and 
Vietnam.  In September 2006, Belarus signed an AML agreement 
with the People's Bank of China.  In 2009, Belarus' Department 
of Financial Monitoring signed an AML agreement with their 
Macedonia counterparts.  The United States and Belarus do not 
have a mutual legal assistance agreement in place.  Belarus is a 
member of the EAG.  The DFM is a member of the Egmont Group. 
Belarus is ranked number 139 (up from 151 a year ago) out of 180 
territories listed in Transparency International's 2009 
International Corruption Perception Index. 
 
¶18. The Government of Belarus (GOB) has taken steps to construct 
a legal and regulatory framework to fight money laundering and 
terrorist financing.  It should also focus on the implementation 
of the law by law enforcement, increasing the investigation and 
prosecution of money laundering and terrorist financing 
offenses.  This could be accomplished through training and 
outreach by the FIU and other regulators.  Belarus should 
increase the transparency of its business, finance, and banking 
sectors. Belarus' AML legislation should be further amended to 
comport with international standards and to provide for more 
transparency and accountability.  The GOB should, for example, 
extend the application of its current AML legislation to cover 
the governmental transactions that are currently exempted under 
the law, and ensure that the regulations and guidance provided 
by the National Bank and other regulators are legally binding. 
Similarly, the National Bank should be given the authority to 
carry out its responsibilities, and not be subject to influence 
by the Presidential Administration.  The GOB should also bring 
the nonfinancial sectors under the same AML/CTF requirements 
that it imposes on the financial sector, and ensure resources 
for supervision, monitoring and a sanctions regime for 
noncompliance.  The GOB should implement strict regulation on 
its industries operating abroad and on those operating within 
the FEZ areas.  The GOB needs to reinstate the identification 
requirement for foreign currency exchange transactions, and 
reconsider the relationships it wishes to foster with state 
sponsors of terrorism.  Belarus should continue to hone its 
guidance and enforcement of suspicious transaction reporting and 
provide adequate staff, tools, training and financial resources 
to its FIU so that it can operate effectively, especially with 
the increased attention and reporting that the DFM has generated 
of late.  The GOB must work to further improve the coordination 
between agencies responsible for enforcing AML measures.  The 
GOB also needs to take steps to ensure that the AML framework 
operates more objectively and less as a political tool.  The GOB 
should take serious steps to combat corruption in commerce and 
government. 
SCANLAN