MYANMAR
Summary
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Sanctions

EU sanctions and Arms Embargo

FAFT AML Deficient

No longer on List

Higher Risk Areas

 

Non - Compliance with FATF 40 + 9 Recommendations

US Dept of State Money Laundering Assessment

Not on EU White list equivalent jurisdictions

Corruption Index (Transparency International & W.G.I.)

World Governance Indicators (Average Score)

Failed States Index (Political Issues)(Average Score)

International Narcotics Control Majors List (Cited)

Offshore Finance Centre

Medium Risk Areas

Weakness in Government Legislation to combat Money Laundering

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Myanmar is no longer on the FATF list of Countries that have been identified as having strategic AML deficiencies

 

Latest FATF Statement - 24 June 2016

The FATF welcomes Myanmar’s significant progress in improving its AML/CFT regime and notes that Myanmar has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in February 2010. Myanmar is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Myanmar will work with the APG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.

 

Compliance with FATF Recommendations

Myanmar has taken steps towards improving its AML/CFT regime. However, despite Myanmar’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Myanmar has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain. Myanmar should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing; (2) establishing and implementing adequate procedures to identify and freeze terrorist assets; (3) further strengthening the extradition framework in relation to terrorist financing; (4) ensuring a fully operational and effectively functioning financial intelligence unit; (5) enhancing financial transparency; and (6) strengthening customer due diligence measures. The FATF encourages Myanmar to address the remaining deficiencies and continue the process of implementing its action plan.

 

US Department of State Money Laundering assessment (INCSR)

Myanmar (Burma) was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

Perceived Risks:

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.

 

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SANCTIONS

There are currently EU Sanctions in place including an embargo on arms and related material, a ban on exports of equipment for internal repression and a ban on provision of certain services

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

28

World Governance Indicator – Control of Corruption

17

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

Since 2011, Burma has implemented significant reforms to spur economic development and create an attractive business climate that will generate more inward foreign investment. Promising initial steps addressing some of the core structural challenges facing Burma’s economy include: unifying the country’s multiple exchange rates, passing a new foreign investment law, reducing trade restrictions, and reforming tax policy and administration. Consequently, the international business community has renewed its interest in Burma and the unique opportunities the country presents. Burma’s rich natural resources base, its market potential, its young labor force and its strategic location between India, China and the countries that make up the Association of South East Asian Nations (ASEAN) make it even more attractive to the international community.

In response to ongoing political reform, the United States Government has eased almost all of its economic sanctions on Burma, allowing U.S. investment, the importation of Burmese products into the U.S., and the export of financial services, while the European Union and Australia have lifted their sanctions entirely (except for an arms/military embargo). Remaining U.S. sanctions prevent U.S. persons from dealing with Specially Designated Nationals and restrict the import of Burmese-origin jade and rubies into the United States. As a result of the country’s economic liberalization, reduced sanctions, and a favorable external environment, Burma’s macroeconomic outlook is largely positive. Growth, led by strong performances in the services and manufacturing sectors, rose to 7.3 percent in fiscal year (FY) 2012/13, and the International Monetary Fund forecasts that growth will further accelerate to 7.5 percent in the medium term. International trade has also increased significantly in the last few years.

Despite the Burmese government’s economic reforms and improving economic indicators, the government has more work to do in order to create the foundation for a healthy investment environment that contributes to economic development and attracts foreign interest. The government has limited capacity and is having to prioritize which among its long laundry list of desired reforms to implement first. Currently, the country has many laws and regulations that are outdated and inadequate. Property rights are not well-established and land sequestration and land-grabbing remain major issues. Investor protection and the criteria for foreign investment are not well-defined, and Burma’s weak rule of law means that it does not yet have in place the proper mechanisms and instruments for enforcing contracts and property rights and for settling disputes. A lack of reliable data and information adds to the frustration that many foreign investors experience when attempting to look up market data, consumer base information and other capital and financial indicators. Investment approval procedures are not transparent, are overly bureaucratic and complex, and exclude certain sectors, prohibiting foreign participation.

Although Burma has great commercial potential, the key to unlocking that potential is a sound and transparent investment environment through economic reforms that encourage inclusive opportunity and growth. The government’s efforts to date point to a positive trajectory in achieving this goal of a sound investment framework but investors should come in with “eyes wide open.”

 

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FURTHER REPORTS

Extracted from IMF Report:  Myanmar: 2013 Article IV Consultation and First Review Under the Staff-Monitored Program

The draft Counter Terrorism Law has been finalized and is in the process of being submitted to the Parliament. The new Control of Money Laundering Law is being redrafted with the assistance of the Fund’s technical assistance to more comprehensively address the requirements of international standards. Myanmar remained committed to implement a strong AML/CFT system and to address the remaining deficiencies in its AML/CFT regime.

Access Full Report (pdf file)