07ASTANA1104, KAZAKHSTAN: ANOTHER DELAY IN PASSING AML LAW

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Reference ID Created Released Classification Origin
07ASTANA1104 2007-04-26 09:21 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO7839
RR RUEHAST
DE RUEHTA #1104 1160921
ZNR UUUUU ZZH
R 260921Z APR 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 9251
INFO RUEHAST/USOFFICE ALMATY
RUEATRS/DEPT OF TREASURY WASH DC//IET//

UNCLAS ASTANA 001104 
 
SIPDIS 
 
STATE FOR INL/AAE (ALTON), INL/C, SCA/CEN (O'MARA) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SNAR ASEC PREL KCOR KCRM PREL KZ
SUBJECT: KAZAKHSTAN: ANOTHER DELAY IN PASSING AML LAW 
 
Ref: A) 05 ALMATY 4353, B) 06 ASTANA 689, C) 06 ALMATY 1437 
 
1. Summary: The extension of the property legalization period until 
August 1 will cause yet another delay in the enactment of the 
anti-money laundering and counter terrorism financing law (AML) 
currently under consideration in the Kazakhstani Mazhilis (lower 
house of parliament).  The postponement of the AML legislation is 
the third delay in strengthening of the AML regime and the creation 
of the Kazakhstani Financial Intelligence Unit.  End summary. 
 
------------------------------------- 
THREE ROUNDS OF PROPERTY LEGALIZATION 
------------------------------------- 
 
2.  President Nazarbayev signed amendments to the property 
legalization law in late March 2007 extending the property amnesty 
campaign until August 1 and registration of title until November 1. 
The extension was caused by a surge of last-minute filings for 
legalization and a concern that the commissions which must process 
the claims would have insufficient time to do so.  The amendments 
also provide an exemption from responsibility for public officers 
who legalize their assets within the property amnesty campaign. 
 
3.  Nazarbayev is reported to have said that the term of property 
legalization will not be extended again and this is the last chance 
for Kazakhstanis to legalize their property.  The value of legalized 
property to date is more than $2 billion, which is four times more 
than during first wave of legalization in 2001.  A total of around 
1.4 million people submitted requests for legalization.  About 80 
decisions of the legalization commission were annulled by the 
General Procurator's Office due to violations of the legalization 
rules.  The Prime Minister directed oblast akims to relieve members 
of legalization commissions of their regular duties in order to 
allow them to clear the backlog of requests for legalization. 
 
4.  Legalization of property (and the first delay in AML 
legislation) began with the enactment of the Property Legalization 
Law on July 5, 2006.  The law was to expire at the end of December 
2006 but was extended (creating a further delay in AML law) in order 
to provide more time for asset owners to register their property. 
The assets which were obtained since independence are widely 
believed to have been acquired illegally during the privatization 
period.  The law was to legalize a wide range of property and 
assets, including real property, capital assets, movable property, 
and securities.  The law allows owners to register these assets 
without penalty; however, the subjects of legalization must pay a 
fee of 10% of the assessed value of the amnestied property. One of 
several Property Legalization Commissions must approve all requests 
for registration. 
 
5.  On November 17, 2006, the President signed legislation extending 
the Property Legalization act until April 1, 2007.  Nazarbayev said 
a three-month extension of the legalization period was necessary 
because of confusion on how the law was being implemented and the 
resulting need to better inform the public (Ref B). 
 
------------------------- 
THEN, PERHAPS, AN AML LAW 
------------------------- 
 
5.  Financial Police officials told INL Officer that the extension 
of the property legalization law will again delay the enactment of 
AML legislation.  This is because once the AML law is in force, 
attempts to register previously unrecorded assets would be 
considered prima facie evidence that some type of financial 
malfeasance took place which could put the owner of those assets at 
risk of prosecution. 
 
6.  The AML draft legislation was originally introduced to the 
Mazhilis in September 2005 but was immediately delayed by deputies 
who claimed the structure of the legislation required further review 
(Ref A).  Subsequently, during a study tour by members of the 
Mazhilis AML Working Group to Copenhagen, post heard concerns about 
the powerful role in AML and the FIU accorded to the Procurator 
General's Office (Ref C).  Now the draft legislation has been 
repeatedly delayed by the property legalization campaign. 
 
7. Comment:  While Post would like to see AML legislation enacted in 
order to create the basis for monitoring suspicious transactions and 
large cash flows (both concerns in a illegal drug transit country), 
it is also important that Kazakhstan complete the property 
legalization process in order to preclude a rash of lawsuits to 
determine the rightful owners of property that changed hands during 
the murky privatization deals of the 1990s.  End comment. 
 
ORDWAY

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