07ASTANA2323, KAZAKHSTAN COMPLETES PROPERTY LEGALIZATION CAMPAIGN

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Reference ID Created Released Classification Origin
07ASTANA2323 2007-08-27 08:54 2011-08-30 01:44 UNCLASSIFIED Embassy Astana

VZCZCXRO0731
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW
DE RUEHTA #2323 2390854
ZNR UUUUU ZZH
R 270854Z AUG 07
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC 0478
INFO RUEHAST/USOFFICE ALMATY
RUCNCLS/SCA COLLECTIVE
RUEATRS/DEPT OF TREASURY WASH DC

UNCLAS ASTANA 002323 
 
SIPDIS 
 
STATE FOR INL/AAE (BUHLER), INL/C (SILENSKY), SCA/CEN (O'MARA) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SNAR EFIN SOCI KCOR KCRM KZ
SUBJECT: KAZAKHSTAN COMPLETES PROPERTY LEGALIZATION CAMPAIGN 
 
Ref: A) 05 ALMATY 4353 B) 06 ASTANA 689 C) 06 ALMATY 1437 D) ASTANA 
 
1104 
 
1. Summary: The property legalization process, essentially an 
amnesty campaign, concluded on August 1 and earned approximately 
59.64 billion tenge ($488.8 million) for the Government of 
Kazakhstan.  This campaign was aimed to finally register the 
rightful owners of property that changed hands during the murky 
privatization deals of the 1990s.  The next step will be to develop 
new methods of financial monitoring.  According to the Procurator 
General's Office, these new methods are included in the anti-money 
laundering (AML) and counter-terrorism financing law which is 
currently stalled in the Mazhilis (lower house of parliament).  The 
adoption of the legislation was delayed three times because of the 
ongoing legalization, but the parliament is now free to move forward 
and the legislation could be enacted by the end of the year.  End 
summary. 
 
2.  The GOK announced on August 2 that it had concluded the property 
legalization process.  According to an official press release, the 
total amount of property legalized was worth 844 billion tenge 
(about $6.9 billion).  Of the legalized assets, cash accounted for 
63.7% or 538.4 billion tenge ($4.3 billion).  About 99% of cash was 
legalized by individuals. 
 
3.  According to the Head of the Tax Committee of the Ministry of 
Finance, 29.5 billion tenge worth of securities (about $236 
million), 11.2 billion tenge worth of agricultural equipment ($89.6 
million), 7.2 billion tenge worth of foreign real estate ($57.6 
million), and 5.1 billion tenge worth of vehicles ($40.8 million) 
were legalized. In addition, nearly 1.5 million pieces of real 
estate valued at 236.2 billion tenge (about $1.9 billion) were 
legalized, including more than 1 million residential and nearly half 
a million  non-residential buildings.  In total the treasury has 
received 59.64 billion tenge ($488.8 million) in fees during the 
process. 
 
4.  The legalization process (and the delay of AML legislation) 
began with the enactment of the Property Legalization Law in July 
2006.  Assets obtained since national independence are often assumed 
to have been acquired illegally during privatization.  The law was 
introduced to legitimize a wide range of property and assets, 
including real property, capital assets, movable property, and 
securities.  The law permitted owners to register assets and pay a 
fee of 10% of the value of the property, as determined by the owner. 
Registration was approved by the Regional Property Legalization 
Commission, which was established under the local executive 
authorities of each region.  Producers of agricultural equipment, 
owners of rural property, owners of residential real estate who paid 
property tax before January 1, 2006, and tax-exempt owners of real 
estate were exempt from the 10% fee.  The amendments also provided 
an amnesty for public officers who legalize their assets within the 
property amnesty campaign. 
 
5.  Extension of the property legalization process delayed the 
enactment of AML legislation, because, once passed, the AML law will 
make attempts to register previously unrecorded assets as prima 
facie evidence that some type of financial malfeasance took place. 
 
 
6.  The AML draft legislation was originally introduced to the 
Mazhilis (lower house) in September 2005 but was immediately 
stalled.  With conclusion of legalization campaign on August 1, 
Senior Official of the General Procurator's Office Andrey Kravchenko 
announced that the basic AML law would be adopted by the end of the 
year.  This law will introduce new methods of financial monitoring 
that comply with international standards.  The new law will also 
establish regulations to strengthen AML activities and create the 
Kazakhstani Financial Intelligence Unit (FIU). 
 
7. The draft contains requirements for financial monitoring agencies 
to submit information to the FIU. The draft lists the types of 
transactions that must be reported to the FIU.  For example, 
securities and real estate transactions of more than $100,000 and 
casino winnings of more than $3,000.  Suspicious transactions less 
than the minimum may also need to be reported to the FIU. 
 
 
8. Comment:  GOK efforts to enact AML legislation by the end of the 
year is a welcome step forward.  The law is expected to introduce 
recognized methods, which will allow the GOK to better monitor 
suspicious transactions and large cash flows.  End comment. 
 
ORDWAY

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