FATF puts Myanmar on money-laundering blacklist

The Financial Action Task Force (FATF) has placed Myanmar on its “blacklist” of countries that do not comply with international anti-money-laundering standards.

The FATF took the decision to issue what it describes as a “call for action” at a plenary session in Paris, held on October 20 and 21. The move could severely impair Myanmar’s ability to participate in international financial transactions.

Myanmar becomes only the third country on the blacklist, after Iran and North Korea. The FATF’s condemnation adds to the pressure on Myanmar’s military government, which faces sanctions, global condemnation and internal rebellions.

The decision caused a brief but rapid depreciation of the Myanmar kyat on informal markets, according to the Associated Press. The currency fell to from 2,900 to the dollar to 4,000–5,000, but then recovered to 3,000 to the dollar.

The FATF issues calls for action when a jurisdiction exhibits “significant strategic deficiencies” in its regimes to counter money laundering or financing of terrorism or banned weapons.

In such cases, the task force calls on other authorities to apply “enhanced due diligence” regarding transactions with the black-listed jurisdiction. In practice, blacklisting can largely sever a country’s connections to the global financial system.

In its October 21 announcement, the FATF said Myanmar had ceased implementing an action plan it had agreed with the task force in February 2020. That plan carried an initial September 2021 deadline.

The FATF listed eight measures Myanmar must make progress on to remove itself from the blacklist, including pursuing “transnational [money-laundering] cases with international co-operation”. It said authorities must increase “freezing/seizing and confiscation of criminal proceeds, instrumentalities and/or property of equivalent value”.

The task force also said countries policing transactions with Myanmar “should ensure that flows of funds for humanitarian assistance, legitimate NPO [non-profit organisation] activity and remittances are not disrupted”.

The FATF told Central Banking it “has done, and continues to do, a lot of work on mitigating unintended consequences resulting from the incorrect implementation of the FATF Standards, including de-risking, financial exclusion and undue targeting of NPOs [non-profit organisations]”.

The Central Bank of Myanmar issued a response to the FATF, quoted by the Associated Press, saying it was working to rectify the shortcomings the task force had identified. “Despite the high-risk jurisdictions being subject to a call for action, it is not a risk factor for Myanmar so people need not worry about it,” the statement said.

Junta under siege

Myanmar’s isolation began in February 2021, when the armed forces overthrew the elected government. The coup launched Myanmar into a spiral of increasing impoverishment and isolation. The US froze Myanmar central bank reserves on its territory shortly after the coup.

In May, the US sanctioned Than Nyein, the military-appointed central bank governor. He has since left office, replaced by Than Than Shwe in August, four months after she survived an assassination attempt, attributed to rebel forces.

The World Bank estimated in July that Myanmar’s economy shrank by 18% in the 2020-21 fiscal year. It estimated the economy experienced a modest recovery of 3% in the year to September 2022.

Myanmar’s military regime has sought closer ties with China and Russia. In September, a government spokesperson said Myanmar intended to adopt the Mir payment card system, owned by a subsidiary of the Russian central bank.