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Burma AML Report
Burma is no longer on the FATF shortlist of countries with FATFs. FATF acknowledges Myanmar's significant advances in the improvement of its AML/CFT system and recognises that Myanmar has put in place the legislative and regulative frameworks to address its obligations under the FATF Blueprint for Action on the policy shortcomings noted by the FATF in February 2010.
As a result, Myanmar is no longer under the FATF surveillance processes as part of its ongoing overall AML/CFT compliant work. Burma will work with APG to tackle the full spectrum of AML/CFT topics highlighted in its peer-review. Burma has taken action to improve its AML/CFT system.
Despite Myanmar's high-level policy undertaking to work with the FATF and APG to remedy its AML/CFT policy shortcomings, Myanmar has not made enough headway in the implementation of its Blueprint for action, and certain AML/CFT policy shortcomings persist. Burma should keep working on the implementation of its Blueprint to remedy these shortcomings, which include::
Ensure (1) appropriate criminalisation of terrorism funding; (2) establish and implement appropriate methods to identification and freezing of terrorism funds; (3) further strengthen the delivery facility for terrorism funding; (4) ensure a fully functional and effective FIU; (5) improve the level of FIU; and (6) strengthen the due diligence obligations of customers.
FATF is encouraging Myanmar to remedy the outstanding shortcomings and to pursue the implementation of the FATF AAP. Burma's economic and finance sectors are underperforming and most currencies are still kept outside the official bank system. Myanmar has expansive boundaries and significant indigenous nature reserves, many of which are in parts of the country that are not fully controlled by the state.
Myanmar is also one of the biggest sources of methamphetamine. Failure to achieve fiscal openness, low risks of implementation and persecution and a large illegal business environment lead to crimewalk. While Burma remains the "primary place of jurisdictional venue for monetary laundering" under Section 311 of the US PATRIOT Act, the US Treasury began to waive the regulatory consequences in 2012 and in 2016 granted an administration exemption that allows US finance institutes to render correspondent banking service to Myanmari.
In addition, OFAC lifted the US imposed on Burma in 2016 by an order of the US government. Myanmar is the world's second biggest producer of marijuana and a leading producer and exporting Heroine. Myanmar has also become an important resource for ATS. Drugs are cultivated and produced in areas monitored by non-state gunmen, particularly along Burma's border to the east, making it difficult to monitor it.
In 2014, Burma submitted an application to the Extractive Industries Transparency Initiative (EITI) and is taking measures to implement the standards. In Burma, many are dependent on non-traditional cash transfers, such as dogs, because the country's official finance system is undeveloped and has poor connections with global banking institutions. Myanmar's central bank is working with global investors to regulate these MSPs.
Whilst the use of banks has grown significantly in recent years, from an estimate of 14 per cent of adult banks in 2012 to 25 per cent in 2016, Burma is still largely a cash-based country, making it hard for the government to identify illegal funding influx. In 2014 Burma adopted its Anti-Money Laundering Act (AML Act).
Myanmar has made constant strides in the improvement of its legislative and regulative frameworks in line with global AMLs. Myanmar is a member of APG, a FATF-styled local organization. Burma's AML shortcomings mainly relate to logistic issues such as inadequate technology and finite state capacities and co-ordination. Banks are relying on paper-based accounting and, if there is a computer available, manually entering them.
In collaboration with the donor community, the federal administration is strengthening the automatization and computerization of reporting and discontinuing paper-based accounting. Supervision of unconventional investment banking in Burma, such as monetary transfers, micro-finance and investment companies, is in its infancy and the CB provides finite AML supervision of state lending bodies.
In March 2017, Burma requested membership of the Egmont Group and indentified sponsors. Myanmar has no contractual agreement on judicial aid with the United States, but senior prosecuting officers have declared their willingness to participate in an agreement. The Burmese Attorney General (AG) designated the Deputy Director General of the AG as the single point of jurisdiction for letters of requesting judicial cooperation in December 2016, although this conduit between the United States and Burma remained unchecked.
Despite Burma's accession to the 1988 UN Convention on Drugs in 1991, the process of implementing it has not yet been completed. Burma's judicial system has examined 36 cases and pursued eight cases of moneylaundering since the entry into force of the AML Act. Burma's leaders, especially the FIU, continue to develop capacities. FIU and donors have conducted a number of workshops in Yangon, Nay Pyi Taw and Mandalay to educate the public administration and criminal justice agencies about the organisation and organisation of the FIU, Burma's AML Act and its legal obligations.
Myanmar has embarked on an economical review to attract and reintegrate into the world market since the shift to a civil regime in 2011. Among the country's recent macroeconomic reform efforts are the introduction of a Burma Khat management floating in 2012, the revision of the FDI Act in 2012, the grant of the Central Bank's operating autonomy in July 2013, the enactment of a new anti-corruption law in September 2013 and the licensing of nine international financial institutions in 2014 and four additional international financial institutions in 2016.
Proposals for reforms by the federal administration and the ensuing relaxation of most West German penalties resulted in an acceleration of economic expansion in 2013 and 2014. Myanmar's rich abundance of physical assets, young workforce and close ties to Asia's vibrant economy have been attracting FDI in the areas of power, apparel, information technologies and more.
Promised FDI rose from $4.1 billion in 2013 to $8.1 billion in 2014. Burma continues to be one of the impoverished nations in Asia - around 26% of the 51 million population lives in extreme poverty. 12% of the population lives in this area. Myanmar's former government's isolist policy and maladministration have lagged behind with bad infrastructures, indigenous bribery, undeveloped personnel and insufficient availability of funds, requiring a great obligation to turn back.
Burma's authorities have been sluggish in tackling obstacles to the country's economy, such as uncertain property laws, a tight trading license system, an obscure system of collecting revenues and an outdated bank system. Under AUNG SAN SUU KYI's leadership, the new administration is expected to concentrate on speeding up farm production and soil reform, modernising and opening up the finance industry and enhancing finance governance.
After years of isolating itself from the world in 2011, Burma took a new course and began to implement significant reform to boost the country's overall performance and build an appealing working environment that will attract more domestic investments from abroad. As the nationwide general election in November 2015 was a resounding coup, followed by the first ever move to democracy in over 50 years in April 2016, the outlook for further focusing on integrated macroeconomic expansion is high.
In recent years, the Burmese authorities have tackled some of the economic issues that Burma faces, such as the elimination of several foreign currency parities, the reduction of trading barriers, the reform of fiscal policies and management, the adoption of new mediation, labour and labour legislation and the alleviation of some of Burma's bureaucratic obstacles to doing businesses. In 2016, a revision of the capital expenditure act is to be adopted.
The World Bank's Doing in 2016 World Bank survey rated 167 out of 189 Burmese nations in terms of lightness of operations, a leap from 177 in 2015. Burma's World Bank league table has progressed partly through regulatory, cost and procedural improvement in connection with the establishment of a new company and the establishment of a one-stop office for the registration of new companies.
Aung San Suu Kyi's new National League for Democracy (NLD) has already focused on fighting bribery throughout the state. Burma's move towards liberalisation has enhanced its overall prospects in terms of the macro economy. Preliminary projections by multi-lateral finance agencies suggest that Burma's actual gross domestic product (GDP) grew 7 per cent for the year ending March 31, 2016, a decrease of 8.3 per cent in 2014/15, mainly due to flooding damages following tropical storm Comen and postponements related to the insecurity surrounding the 2015 election and the change of state.
In the 2016/17 financial year, growth is anticipated to recover to 7.8 to 9 per cent following the start of the new democratic administration due to the improvement in the agricultural industry and higher investments. Increasing headline price increases affected Burma's 2015/16 fiscal year output, fuelled by the country-wide floods in the middle of the year, increasing deficits, high cash flow and increasing consumption goods requirements.
1% in January 2016. The Burmese have recently censored 9 million fewer than before. The United Nations Programme for International Cooperation states that the country is well on its way to meeting the per capita earning criterion for the Least Deprived Country by 2024. In spite of the implemented reform and improvement of business performance measures, the authorities must do more to lay the foundations for a sound business climate that will contribute to the economy and arouse interest abroad.
Governments have few resources and must put themselves on the long wish lists of reform. There are currently many obsolete and insufficient legislation and rules in the country. There is no clear definition of investors' rights and rules of procedure for attracting and retaining them. Some of the retiring government's capital expenditure approvals processes were ambiguous and ruled out the possibility of attracting investments from abroad in certain industries.
Burma's FDI attracting capacity is still largely unexploited, according to the OECD's 2014 OECD Assessment of Investments-Policies. Most of the investments Burma has seen in recent years have been in the area of the country's resources, with only a small proportion going to either processing or the service sector.
For the future, monitors predict that the production and tourist sector will grow and attract more FDI as a democratic regime is established, Burma re-enters the world economic system and most overseas penalties are lifted. FDI is beginning to look at investments in energy, aviation lease, security service, educational, healthcare, bank, finance and telecommunications.
But as the World Bank's Enterprise Services Report 2014 states, reform is needed as a matter of urgency to enhance Burma's investing environment in a number of areas, notably in terms of financial support, rural areas, power and skill. There is growing interest from the global corporate world in Burma and the country's unparalleled opportunity - which includes a wealth of raw materials, a large supply of markets, a young workforce and a key position between India, China and the ASEAN.
While the US government has relaxed many of its anti-Burma restrictions and allowed US investments to allow imports of Myanmar goods into the US and exports of finance service offerings, the US's residual restrictions are preventing US people from trading with so-called designed nationals (SDNs) and banning imports of Myanmarese jade and rubies into the US.
US businesses have voiced their concerns about the difficulties caused by the residual US sanction, in particular the SDN listing, in attempting to do operations in Burma. In view of the penalties that remain, some have also argued that Burma poses a risk to its reputation. Aiming at certain persons who are undermining the reforms while fostering widespread and integrated levels of social inclusion, the US administration has conceived the sanction system to provide opportunity for both US investment and the Burmese nation, and is continuing to monitor the sanction system to make sure it is supporting the country's reforms.
After the nationwide election in November 2015 and the establishment of a democracy-electing administration in 2016, the United States is promoting US commitment to the economy in Burma during this crucial period in the country's development. The U.S. Treasury Department published changes in May 2016 to assist U.S. trading and investments in Burma.
Whilst the government's previous endeavours point to hesitant steps towards a solid level of investments, traders should be prepared for comprehensive due-diligence and market research. A bill to combat terrorism has been finalised and is currently before Parliament. Burma has also pledged to introduce a powerful AML/CFT system and to remedy the outstanding shortcomings in its AML/CFTs.