Countries/Jurisdictions of Primary Concern - Burma
Burma is not a regional or offshore financial center. Its economy is underdeveloped and its historically isolated banking sector is just beginning to reconnect to the international financial system. Burma’s prolific drug production and lack of financial transparency make it attractive for money laundering. While its underdeveloped economy remains unattractive as a destination to place funds, the low risk of enforcement and prosecution makes it potentially appealing to the criminal underground. Besides narcotics, trafficking in persons; the illegal trade in wildlife, gems, and timber; and public corruption are major sources of illicit proceeds. Many Burmese, particularly emigrants remitting money from Thailand or Malaysia to family in Burma, have relied on informal money transfer mechanisms, such as hundi. Alternative remittance systems are abused by criminal networks.
Burma continues to be a major source of opium and exporter of heroin, second only to Afghanistan. Since the mid-1990s, Burma has also been a regional source for amphetamine-type stimulants. The 2014 joint Burma-UN Office of Drugs and Crime illicit crop survey reported that for the eighth straight year, opium poppy cultivation increased. The government faces the additional challenge of having vast swaths of its territory, particularly in drug producing areas along Burma’s eastern borders, controlled by non-state armed groups. In some areas, continued conflict between ethnic armed groups and Burma’s government allow organized crime groups to function with minimal risk of interdiction. Burma’s long, porous borders are poorly patrolled.
Corruption is endemic in both business and government. State-owned enterprises and military holding companies retain significant influence over the economy, including control of a substantial portion of Burma’s natural resources. There is a continued push to privatize more government assets. The privatization process provides potential opportunities for graft and money laundering, including by business associates of the former regime and politicians in the current civilian government, some of whom are allegedly connected to drug trafficking. Rising trade and investment flows, involving a wider range of countries and business agents, also provide opportunities for increased corruption and illicit activities. The rule of law remains weak and Burma continues to face significant risk of narcotics proceeds being laundered through commercial ventures.
There are at least five operating casinos, including one in the Kokang special region near China, that primarily target foreign customers. Little information is available about the regulation or scale of these enterprises. They continue to operate despite the fact casino gambling is officially illegal in Burma.
The FATF includes Burma in its October 24, 2014 Public Statement. The FATF does note that Burma has made some progress in implementing its action plan, including the passage of new AML and CT laws in 2014. Nevertheless, Burma still needs to address certain strategic AML/CFT deficiencies, including adequately criminalizing terrorist financing; establishing and implementing adequate procedures to identify and freeze terrorist assets; further strengthening the extradition framework in relation to terrorist financing; ensuring a fully operational and effectively functioning financial intelligence unit (FIU); enhancing financial transparency; and strengthening customer due diligence (CDD) measures.
In November 2003, the United States identified Burma as a jurisdiction of “primary money laundering concern” under Section 311 of the USA PATRIOT Act, a finding that remains in place. The United States continues to issue advisories to financial institutions, alerting them to the risk posed by Burma’s AML/CFT deficiencies and of the need to conduct enhanced due diligence with respect to financial transactions involving Burma.
In July 2012, the United States eased economic sanctions related to new U.S. investments in Burma and the exportation of financial services to Burma. In July 2013, the U.S. ban on Burmese imports imposed in 2003 under the Burmese Freedom and Democracy Act and Executive Order 13310 ended, with the exception of restrictions on imports of jadeite and rubies. U.S. legislation and Executive Orders that block the assets of members of the former military government and three designated Burmese foreign trade financial institutions, freeze the assets of additional designated individuals responsible for human rights abuses and public corruption, and impose travel restrictions on certain categories of individuals and entities remain in force. On February 22, 2013, the U.S. Treasury issued General License No. 19 to authorize U.S. persons to conduct most transactions, including opening and maintaining accounts and conducting a range of other financial services, with four of Burma’s major financial institutions that remain on Treasury’s Specially Designated National (SDN) list: Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank, and Myanma Investment and Commercial Bank. U.S. persons are also permitted to conduct transactions with Burmese banks not included on the SDN list.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: List approach
Are legal persons covered: criminally: YES civilly: NO
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, insurance companies, credit societies, finance companies, microfinance institutions, casinos, real estate agents, dealers in precious metals, trust and company service providers, lawyers, notaries, car dealerships and accountants
Number of STRs received and time frame: 20: January 1 - October 31, 2014
Number of CTRs received and time frame: 211,311: January 1 - October 31, 2014
STR covered entities: Banks (including bank-operated money changing counters); the Customs Department, Internal Revenue Department, Trade Administration Department, Marine Administration Department, and Ministry of Mines; state-owned insurance company and small loan enterprise; securities exchange; accountants, auditors, legal and real estate firms and professionals; and dealers of precious metals and stones
money laundering criminal Prosecutions/convictions:
Prosecutions: Not available
Convictions: Not available
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: NO
With other governments/jurisdictions: YES
Burma is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.apgml.org/members-and-observers/members/member-documents.aspx?m=e0e77e5e-c50f-4cac-a24f-7fe1ce72ec62
Enforcement and implementation issues and comments:
Burma’s financial sector is extremely underdeveloped and most currency is still held outside the formal banking system, although bank deposits have increased over the past several years. The informal economy generates few reliable records, and Burma makes no meaningful efforts to ascertain the amount or source of income or value transfers. Regulation of financial institutions is weak. On October 1, 2014, the government awarded limited banking licenses to nine foreign banks. The banks will be restricted to providing loans in foreign currency and be required to partner with local banks in order to lend to local companies. This is likely to significantly increase the volume and frequency of cross-border currency transfers over the next few years. While some Burmese financial institutions may engage in currency transactions related to international narcotics trafficking that include significant amounts of U.S. currency, the absence of publicly available information precludes confirmation of such conduct.
Burma enacted the Anti-Money Laundering Law in March 2014. Government order No. 56/2014 established the Central Committee for Anti Money Laundering on August 4, 2014. The Central Committee is chaired by the Minister of Home Affairs and includes the Governor of the Central Bank (CB), deputy ministers from Home Affairs and Finance Ministries, the Deputy Attorney General, and additional board members. Mr. Win Aung, President of the Union of Myanmar Federation of Chambers of Commerce and Industry, who sits on this board, is on Treasury’s SDN list.
The new AML law criminalizes money laundering and defines predicate offenses. The new AML law includes CDD requirements for all reporting entities. These requirements include identifying the customer and verifying the customer’s identity; collecting and understanding information regarding the purpose and the intended nature of the business relationship; and identifying the beneficial owner.
In July 2013, Burma took a major step forward by enacting a new law that grants the CB both independence and exclusive jurisdiction over monetary policy. However, the CB will require substantial assistance and additional resources to develop its capacity to adequately regulate and supervise the financial sector, which remains very limited.
In June 2014, Burma enacted its first counterterrorism law, which criminalizes terrorism financing.
Efforts to address widespread corruption are impeded by an ingrained culture of bribe seeking within the civil service, including police. Low salaries create an incentive for civil servants to seek to supplement their incomes. The military has an untoward influence over civilian authorities, especially at the local level. A new anti-corruption law went into effect on September 17, 2013, but has not yet had a discernible impact.
Burma still needs to take a number of steps to improve its AML/CFT regime. The government should expand the number of organizations required to have KYC/CDD procedures. The FIU should become a fully funded agency that functions without interference, and Burma should supply adequate resources to administrative and judicial authorities for their enforcement of government regulations. The government should further strengthen the extradition framework for terrorism financing and address issues in the counterterrorism law’s implementation, including the reporting of suspected terrorist financing and the ability to identify and freeze terrorist assets. Burma should end all policies that facilitate corrupt practices and money laundering, and strengthen regulatory oversight of the formal financial sector.