09ASTANA146, KAZAKHSTAN: MINISTER OF FINANCE PROMISES ANTI-MONEY

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Reference ID Created Released Classification Origin
09ASTANA146 2009-01-26 10:04 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO4944
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #0146/01 0261004
ZNR UUUUU ZZH
O 261004Z JAN 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4442
INFO RUCNCIS/CIS COLLECTIVE 1087
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0485
RUEHKO/AMEMBASSY TOKYO 1191
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0660
RUEKJCS/SECDEF WASHDC 0576
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1118

UNCLAS SECTION 01 OF 02 ASTANA 000146 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/IFD/OMA, EEB/EPPD, ISN, S/CT 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV PTER ECON EFIN KNNP KCRM KZ
SUBJECT:  KAZAKHSTAN:  MINISTER OF FINANCE PROMISES ANTI-MONEY 
LAUNDERING LAW IN FIRST QUARTER OF 2009 
 
REF: (A) ASTANA 68 
      (B) 08 ASTANA 2226 
 
ASTANA 00000146  001.2 OF 002 
 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  On January 23, the Ambassador met with Minister 
of Finance Bolat Zhamishev and Deputy Customs Committee Chairman 
Sofia Aisagalieva to discuss Kazakhstan's response to the global 
financial crisis, pending legislation on Anti-Money 
Laundering/Counter-Terrorism Financing (AML/CTF), and customs duties 
and value-added taxes assessed on U.S. technical assistance 
delivered under the Cooperative Threat Reduction (CTR) program. 
Minister Zhamishev said the AML/CTF legislation was passed out of 
committee in the Mazhilis -- the lower house of parliament -- on 
January 21 and he expects the law to be enacted during the first 
quarter of 2009.  In a pleasant surprise, Aisagalieva said the 
Customs Committee is willing to allow CTR assistance to enter 
Kazakhstan duty-free, even though the new CTR agreement has not yet 
been ratified by parliament.  END SUMMARY. 
 
PLEASANT FIRST IMPRESSION 
 
3.  (SBU) Minister Zhamishev was professional, polite, and extremely 
well-prepared for the meeting.  A pleasant, bald 51-year old, 
Zhamishev makes a favorable first impression with his smart 
appearance, attention to detail, and respect for others.  Aware of 
the Ambassador's extensive service throughout the region, Zhamishev 
joked, "I know that you have worked in Afghanistan, Pakistan, 
Tajikistan, Uzbekistan, and now, I am pleased to welcome you to 
Kazakhstan.  You have worked in nearly all of the 'stans.'  Even 
though our countries share the same suffix, I'm sure you are well 
aware that we are all very different."  Zhamishev and Aisagalieva 
both congratulated the Ambassador on the inauguration of President 
Obama.  Zhamishev said he was particularly impressed by the fact 
that more than two million people came to Washington "without 
official encouragement" to attend the ceremony. 
 
ANTI-MONEY LAUNDERING LEGISLATION MOVES FORWARD 
 
4.  (SBU) Zhamishev announced that a parliamentary working group 
discussed the draft Law on Anti-Money Laundering/Counter-Terrorism 
Finance (AML/CTF) this week and resolved all outstanding issues.  He 
said the legislation was passed out of committee in the lower house 
of parliament (Mazhilis) on January 21 and will be considered at a 
plenary session of the Mazhilis in the near future.  He expects 
passage of the law "in the first quarter" of 2009. 
 
FINANCIAL MONITORING COMMITTEE ESTABLISHED 
 
5.  (SBU) According to Zhamishev, his Ministry's 
recently-established Financial Monitoring Committee does not 
currently review or monitor financial data, since the relevant 
AML/CTF legislation has not yet been passed and no information is 
authorized to flow to the Committee.  Once the new law is passed, 
those entities being monitored will have up to 12 months to update 
information systems, processes, and reporting to ensure full 
compliance with the law.  During that one-year period, the Committee 
will conduct systems testing and staff training to prepare for its 
new monitoring role.  Zhamishev said that all necessary reports and 
documents for the Committee's review will be provided in electronic 
form, not hard copy. 
 
CUSTOMS COMMITTEE PROMISES ACTION ON CTR ASSISTANCE 
 
6.  (SBU) Aisagalieva said that in the view of the Customs 
Committee, assistance imported into Kazakhstan under the Cooperative 
Threat Reduction (CTR) agreement is subject to value-added tax and 
customs duties because parliament has not yet ratified the CTR 
agreement and it is therefore not in force.  (COMMENT:  We do not 
accept this view.  In fact, following President Nazarabayev's 
October 15 decision to sign-off on the CTR agreement's ratification, 
the MFA sent us an aide memoire confirming that the Kazakhstani 
 
ASTANA 00000146  002.2 OF 002 
 
 
government recognizes the clause in the agreement under which it is 
to be provisionally applied from it date of signature -- i.e., from 
December 13, 2007.  END COMMENT.)   Aisagalieva did acknowledge, 
however, the government's decision to extend the agreement for an 
additional seven years and said the Customs Committee is working
to 
expedite the parliamentary ratification process.  As a gesture of 
good will, she promised that the Customs Committee will exempt CTR 
technical assistance, provided it receives relevant supporting 
documentation from the Ministry of Economy and Budget Planning 
certifying the purpose and beneficiaries of the items. 
 
FINANCIAL CRISIS IMPACT ON KAZAKHSTAN 
 
7.  (SBU) Zhamishev said that, as a small, open, market economy, 
Kazakhstan has not been immune from the effects of the global 
financial crisis.  He specifically said that the financial/banking 
sector has come under pressure, particularly because one-half of its 
assets are debts to foreign creditors.  The non-extractive 
industries have been hardest hit, particularly the construction 
industry.   The Minister noted that the rapid decline in the price 
of oil came as a "second wave" of the crisis and will have a 
significant effect on the 2009 budget.  He expects the government to 
reduce infrastructure investments in 2009 -- including school and 
road construction -- but he doubted this would have a serious, 
negative impact on the economy.  He emphasized that the government 
will "absolutely" cover all outstanding debt obligations and fund 
all essential social programs. 
 
INTEREST IN IMPROVING INVESTMENT CLIMATE 
 
8.  (SBU) Zhamishev noted that Kazakhstan's new tax code lowers the 
corporate income tax, although it increases taxes on oil and gas 
companies.  Nevertheless, Zhamishev asserted that the overall tax 
rate on the energy sector is lower than in many oil-producing 
countries and he expressed confidence that Kazakhstan will remain an 
attractive investment destination for major oil companies.  He said 
the government is committed to improving the investment climate in 
Kazakhstan and noted, for example, that the Ministry works very 
closely with the World Bank to reduce administrative barriers to 
doing business and to implement international standards for trade 
and investment. 
 
HOAGLAND

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