Countries/Jurisdictions of Primary Concern - Burma

Bureau of International Narcotics and Law Enforcement Affairs
Report

Burma is not a regional or offshore financial center. Its economy is underdeveloped, as is its financial sector, and most currency is still held outside the formal banking system, although bank deposits have increased over the past several years. The lack of financial transparency, the low risk of enforcement and prosecution, and the large illicit economy 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. Global Witness estimates the amount of jade extracted and exported to China through porous borders are annually in the tens of billions of dollars. Yet annual tax receipts from jade stand at approximately $374 million - representing not even 2 percent of production. Both the smuggling and customs fraud involved are predicate offenses for trade-based money laundering. Most of the companies involved are either directly owned by the army, or operated by cronies with close ties to military and government officials.

Many Burmese, particularly emigrants remitting money from Thailand or Malaysia to family in Burma, have relied on informal money transfer mechanisms, such as hundi, a type of alternative remittance system that has been abused by criminal networks. Many business deals and real estate transactions are done in cash. Less than 15 percent of adults have a bank account. As a result of the cash-based economy and informal money transfer systems, it is very difficult for authorities to follow the money trail.

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 2015 joint Burma-UN Office of Drugs and Crime illicit crop survey reported that opium poppy cultivation decreased this year after having risen for eight consecutive years. 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. Although recent economic reforms have significantly increased competition and transparency, State-owned enterprises and military holding companies retain 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 a significant risk of narcotics proceeds being laundered through commercial ventures.

There have been at least five operating casinos, including one in the Kokang special region near China (an area the Burmese government does not control), that primarily have targeted 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.

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.

In November 2003, the United States identified Burma as a jurisdiction of “primary money laundering concern,” pursuant to Section 311 of the USA PATRIOT Act, and issued a proposed rulemaking generally prohibiting U.S. financial institutions from establishing or maintaining correspondent accounts with Burmese financial institutions. This proposed rule was finalized on April 12, 2004. The U.S. took this action against Burma because of major deficiencies in its AML system.

Since 2011, Burma has been on the FATF Public Statement, the most recent of which is dated October 23, 2015, although the FATF no longer calls for countermeasures against Burma. To be removed from the blacklist, Burma must first complete all of the items in its action plan, agreed with the FATF in 2010. The FATF notes that Burma has made progress in implementing its action plan, including issuing new AML and CFT rules in 2015 and strengthening customer due diligence (CDD) requirements for the financial sector. Nevertheless, Burma still needs to address certain strategic AML/CFT deficiencies, including adequately criminalizing terrorist financing and implementing asset freezes pursuant to UNSCRs 1267 and 1373.

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

REPORTING REQUIREMENTS:

Number of STRs received and time frame: Not available

Number of CTRs received and time frame: Not available

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 2014 AML law criminalizes money laundering and defines predicate offenses. It also includes CDD requirements for all reporting entities. Regulations to implement the AML law were issued in September 2015. At the same time, regulations were issued to implement the counterterrorism law, also enacted in 2014. These regulations include provisions addressing the freezing of terrorist assets.

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. In 2014, the government awarded limited banking licenses to nine foreign banks. They have subsequently opened branches but are restricted to providing loans in foreign currency and are 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.

In 2013, Burma enacted a law that grants the Central Bank both independence and exclusive jurisdiction over monetary policy. However, the Central Bank will require substantial assistance and additional resources to develop its capacity to adequately regulate and supervise the financial sector, which remains very limited.

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 focus on implementation of its requirements on KYC and CDD. The FIU should become an agency that functions without interference from other government offices on its core mission to receive and conduct analysis of suspicious financial information, and Burma should supply adequate resources to administrative and judicial authorities for their enforcement of government regulations. Burma should end all policies that facilitate corrupt practices and money laundering, and strengthen regulatory oversight of the formal financial sector, including by strengthening the independence of the Central Bank.