Attention, terrorists, drug dealers, and corporate criminals: The Republic of Uzbekistan has legalized money laundering until 2013.
The Financial Crimes Enforcement Network (FinCen) warned American banks about the threat on March 20:
The Government of Uzbekistan has taken a series of legal actions that undermine the jurisdiction's AML/CFT regime. Uzbekistan had made progress in addressing AML/CFT deficiencies by enacting an AML/CFT law that went into effect in January, 2006. However, the Government of Uzbekistan subsequently suspended implementation of the law through a series of decrees until January 1, 2013.
Among other things, the decrees suspend the authority of Uzbekistan's financial intelligence unit to collect and analyze information on, and monitor, financial and property transactions; identify possible money laundering and terrorist financing mechanisms and channels; share information on identified crimes with law enforcement agencies for criminal prosecution; and cooperate and exchange information with foreign agencies and international organizations on AML/CFT issues based on international obligations and agreements of Uzbekistan. The decrees also suspend reporting, programmatic, and customer identification/due diligence requirements for covered entities. Moreover, the decrees subject reports to secrecy legislation and call for the General Prosecutor to strengthen bank secrecy "to prevent interference with activities of banking and other credit organizations" (Presidential Decree No. PP-565, January 12, 2007). The most recent decree (No. PP-3968, February 20, 2008) prohibits financial institutions, law enforcement, and other supervising bodies from inquiring about the sources of cash deposits in any amount, upon threat of civil or criminal penalty.
Following the latest presidential decree, which criminalizes official inquiries about the source of cash transactions, a global anti-money laundering body known as the Financial Action Task Force issued the following statement:
"The FATF is particularly concerned that a series of presidential decrees in Uzbekistan has effectively repealed the anti-money laundering/combating the financing of terrorism (AML/CFT) regime in that country and generates a money laundering/financing of terrorism (ML/FT) vulnerability in the international financial system." [FATF, February 28, 2008 (.pdf)]
These stark warnings have generated remarkably little media attention.
In the global financial system, loopholes in one jurisdiction can have repercussions worldwide. For example, if a wealthy Saudi Arabian wanted to discreetly sponsor some jihadis bound for Afghanistan, lax anti-money laundering laws in neighboring Uzbekistan might make his life easier. Or, suppose someone with suitcases of cash from the opium trade wanted to bank that money to buy some weapons. Uzbekistan might be a good place to do that.
This week, the US is sending a diplomat to Uzbekistan for talks:
But, in a possible sign of political relaxation in a country the West says tolerates little dissent, the government has pardoned six jailed human rights activists this year.
President Islam Karimov, ruling Central Asia's most populous nation since 1989, has also promised to liberalize Uzbekistan's rigid financial system and he has softened his critical stance towards the West.
Some Tashkent diplomats have linked the shift in Uzbekistan's stance to Karimov's bid to emerge from global isolation.
Uzbekistan has large gas and oil reserves and is also among the world's top 10 gold producers and the No. 2 cotton exporter.
Acting U.S. Deputy Assistant Secretary of State for Central Asia Pamela Spratlen was due to arrive in the Uzbek capital Tashkent for talks later on Thursday, an embassy statement said.
"We are convinced that the involvement of the Uzbek government in a discussion on a broad range of topics that are on our bilateral agenda," the statement quoted U.S. Ambassador to Uzbekistan Richard Norland as saying.
He listed potential topics as regional safety, trade and investment, cultural exchange and human rights. [Reuters]
It's not clear whether the timing of the US visit had anything to do with the recent changes in Uzbekistan's money laundering laws.