Source: 2001

International Narcotics Control Strategy Report -- 2001

Released by the Bureau for International Narcotics and Law Enforcement Affairs

Southeast Asia and the Pacific

Burma

I. Summary

With the ban on opium production in Afghanistan imposed by the Taliban in 2001, Burma returned to its position as the world's largest producer of illicit opium. Burma is the primary source of amphetamine-type stimulants in Asia, producing an estimated 800 million tablets per year. The government of Burma has done little to stop the production of and trafficking in amphetamine-type stimulants (ATS) produced within its borders. According to the joint U.S./Burma opium yield survey, opium production in Burma totaled no more than 865 metric tons in 2001, down more than 20 percent from a year earlier, and barely one-third of the 2,560 metric tons produced in Burma in 1996. Burma's opium is grown predominantly in Shan State, in areas controlled by former insurgent groups. Since the mid-1990s, however, the Burmese government has elicited "opium-free" pledges from each group and, as these pledges have come due, has stepped up law-enforcement activities in the territories controlled by these groups. The government of Burma has not put pressure on or taken law-enforcement action against the largest drug-producing and drug-trafficking organization, the United Wa State Army, however.

Burma has taken some useful counternarcotics measures in 2001, but they are too limited in duration and scope to have had a significant impact on the overall narcotics situation thus far. Over the past year, the Burmese government has also considerably improved its counternarcotics cooperation with neighboring states. In 2001 in cooperation with the government of China and with the government of Thailand, the Burmese government launched a major law-enforcement campaign against the Kokang Chinese. The government made several drug seizures and arrested several traffickers, including an action resulting in the destruction of a trafficking group that the Chinese called one of the largest "armed drug smuggling groups in the Golden Triangle area."

Burma is a party to the 1961 UN Single Convention, the 1971 UN Convention on Psychotropic Substances and the 1988 UN Drug Convention.

II. Status of Country

Burma returned to its position as the world's largest producer of illicit opium in 2001. Even though farmers attempted to increase opium poppy cultivation levels during the 2000/2001 growing season, however, poor weather and eradication continued to depress cultivation levels. According to the joint U.S./Burma opium yield survey, the total land area under poppy cultivation in Burma was 105,000 hectares in 2001, a 3 percent decrease from the 108,700 hectares under cultivation in 2000. In 2001 potential opium production in Burma dropped below 1,000 metric tons for the first time since the surveys begun in the mid-1980s. Estimated opium production in Burma totaled approximately 865 metric tons in 2001, a decrease of more than 20 percent from 1,085 metric tons a year earlier, and barely one-third of the 2,560 metric tons produced in Burma in 1996. In 2001, yields in Burma (approximately 8.5 kilograms/hectare) were barely half the level recorded five years earlier, while the acreage under cultivation was down 35 percent.

Although the decline in opium cultivation is to be applauded, Burma remains the major source of amphetamine-type stimulants (ATS) in the region. An estimated 800 million ATS tablets are produced annually in Burma, primarily in the areas of Shan State controlled by the United Wa State Army. With the exception of seizing modest amounts of tablets and closing a few production labs, the government of Burma has not made a concerted effort to stop ATS production and trafficking. The amount of ATS tablets seized over the past three years represent only a small fraction of annual ATS production and has no real effect on the overall scope of the problem.

Opium, heroin, and ATS are produced predominantly in Shan State, in areas controlled by former insurgent groups. Starting in 1989, the Burmese government negotiated a series of cease-fire agreements with these groups, allowing each limited autonomy and a measure of development assistance in return for peace. Initially, these agreements permitted the former insurgents to continue their narcotics production and trafficking activities in relative freedom. Since the mid-1990s, however, the Burmese government has elicited "opium-free" pledges from each and, as these pledges have come due, has stepped up law-enforcement activities in the territories controlled by some of these groups. In 2001, the Burmese government cracked down hard in the Kokang region controlled by Peng Jiasheng's Myanmar National Democratic Alliance Army (MNDAA), which had pledged to be opium-free by 2000. With the assistance of the Government of China, the Burmese government staged a series of arrests of major traffickers in all areas of the Kokang, including Laukkai, the capital of Kokang State.

In other areas, the GOB moved more cautiously. In areas controlled by the United Wa State Army (UWSA), the principal drug-producing and drug-trafficking organization in Burma, the government has only slowly expanded its administrative presence, but has not yet attempted any aggressive law-enforcement operations comparable to those it has staged in the Kokang region. Apparently, there are two reasons for this: First, the Wa pledge to make their territories opium-free does not come due until 2005. Second, and more important, the government of Burma claims that cracking down on the Wa, a far more formidable militarily force than the Kokang Chinese, jeopardizes Burma's national security. Under the terms of the cease-fire agreements, the Wa and other groups involved in the drug trade are largely immune from government action. For instance, Burmese troops cannot enter Wa territory without permission from the UWSA. Although unwilling to risk confronting the Wa, a potent organization with a well-manned and well-trained military force, the GOB did take the modest steps of establishing a police presence in the Wa territories in 2001 and, in December 2001, opened its first military intelligence office in the Wa territories. The government has yet to put significant pressure on the Wa to stop illicit drug production or trafficking.

Although the ethnic groups have set dates by which to be opium free, the results have been limited. Opium production and its profitability have not been replaced by substitute crops and alternative development projects that would provide farmers economically viable alternatives to poppy cultivation. For regions to become truly drug free, the GOB must make a considerable commitment, assisted, where possible, by the international community, to undertake an extensive range of counternarcotics actions, including crop eradication, effective law enforcement, and alternative development. The GOB must foster cooperation between the government and the ethnic groups involved in drug production and trafficking, including the Wa, to eliminate poppy cultivation and opium production.

The GOB must also address the explosion of ATS that has flooded Thailand and is trafficked to other countries in the region. It must make a firm commitment and make a concerted effort to stop production of ATS by gaining support and cooperation from the ethnic groups, including the Wa, involved in ATS, as well as through closing production labs and preventing the diversion of precursor chemicals needed to produce synthetic drugs.

There is reason to believe that money laundering in Burma and the return of narcotics profits laundered elsewhere are significant factors in the overall Burmese economy, although the extent is difficult to measure accurately. Burma has an under-regulated banking system and ineffective laws to control money laundering. In 2001 the GOB drafted new anti-money-laundering legislation, but the laws will not become effective until sometime in 2002.

Drug abuse--including intravenous drug use--continues to be a growing problem in Burma. While the government maintains that there are only about 90,000 addicts in Burma, surveys conducted by UNDCP, among others, suggest that the addict population could be as high as 500,000. There is also a growing HIV/AIDS epidemic, linked in part to intravenous drug use. According to surveys, 57 percent of all intravenous drug users in Burma have tested positive for the HIV/AIDS virus.

III. Country Actions Against Drugs in 2001

Policy Initiatives. In 2001, the GOB demonstrated a new commitment, particularly in cooperation with China and Thailand, to take more aggressive law-enforcement actions against individual traffickers and some trafficking groups, notably the Kokang Chinese. The government introduced no new counternarcotics policies, however, and continued to exert little direct pressure on the UWSA and other major trafficking organizations. There was no evident attempt to seize drugs or close heroin or ATS labs in Wa-controlled territories. Drug seizures throughout Burma were roughly equal to or below the levels of previous years, and few production labs were destroyed.

Burma's official counternarcotics plan calls for the eradication of all narcotics production and trafficking over a fifteen year period, starting in 1999. The plan is to proceed by stages, with eradication efforts coupled to alternative development programs in individual townships, predominantly in Shan State. Altogether, 54 townships have been targeted, 25 of which are targeted for the first five years of the program. In its first progress report, the government stated in September 2001 that programs had been started in 22 of the 25 townships. They include Mong Ko, Laukai, Hopang, and Kyu Hkok, all of which lie within regions controlled by the Wa and the Kokang Chinese. According to the government, 1.3 billion Kyats (equivalent to approximately $1.8 million at the unofficial exchange rate of Kyat 700 per U.S. dollar, or $20 million at the official rate of 6.5 kyat per U.S. dollar) was spent on health, education, and alternative development projects in these 22 townships during the 1999-2000 fiscal year. The scope and effectiveness of this plan to date has not been independently verified.

Small alternative development and crop substitution programs supported with international assistance continue in Burma. The most significant is the Wa Alternative Development Project (WADP) implemented by the UN Drug Control Program (UNDCP) and supported by contributions to the UN by the United States and Japan. A five-year, $12.1 million program, the WADP identifies substitute, economically viable crops to replace opium cultivation in a region of the Wa territories. There is also an ongoing program funded by Japan to establish buckwheat as a cash crop in the Kokang and Mong Ko regions of northeastern Shan State. In addition, the Thai government has recently agreed to extend its own alternative development projects across the border into the Wa-controlled Southern Military Region of Shan State.

Burma improved cross-border law-enforcement cooperation with both China and Thailand in 2001 to curtail the production and trafficking activities of former insurgent groups.

The Burmese Government refused the U.S. request to expel drug lord Chang Qifu (Khun Sa), asserting that there is no valid extradition treaty between the U.S. and Burma. Burma takes the position that the 1931 U.S.-U.K. extradition treaty is not applicable and contends the treaty was never accepted by any Burmese government. The Burmese government also continued to refuse to render Chang Qifu to the U.S. on the grounds that he had not violated his 1996 surrender agreement. That agreement reportedly stipulated that if Chang Qifu ended his insurgency and retired from the drug trade, the GOB would provide him with security in Rangoon and allow him to conduct legitimate business. Burmese authorities assert that he will continue to enjoy immunity from prosecution in Burma and exemption from rendition to another country as long as he does not violate his surrender agreement. This issue remains a source of friction between Burma and the U.S. The 1988 UN Drug Convention obligates parties, including Burma, to prosecute such traffickers. GOB officials have stated they would be willing to prosecute Chang Qifu or his subordinates, if it can be proven that they have engaged in narcotics trafficking after the surrender agreement was signed.

Accomplishments. Narcotics Seizures and Arrests: Summary statistics provided by the Burmese police indicate that the Burmese police, army, and the Customs Service together seized approximately 1,629 kilograms of raw opium, 98 kilograms of heroin, and 32.4 million ATS tablets during 2001. This compares with seizures of 1,528 kilograms of raw opium, 159 kilograms of heroin, and 26.7 million methamphetamine pills during 2000. While seizures of opium in 2001 modestly exceeded the amounts seized the previous year, seizures of heroin, well below last year's level, declined for the fourth straight year. Seizures of methamphetamine tablets in 2001 were slightly above the amounts seized in 2000 and in 1999. Considering that an estimated 800 million methamphetamine tablets are produced in Burma each year, the approximately thirty million tablets seized in each of the past three years has no effect on the overall scope of the problem. Closures of heroin refineries and methamphetamine laboratories mirrored last year's level. Whereas in 1999, the GOB destroyed 13 heroin refineries and three methamphetamine laboratories, in 2000 they closed only three heroin refineries and two methamphetamine laboratories, and in 2001 they closed only three refineries and three laboratories. Seizures of precursor chemicals more than doubled in 2001 over last year's rate, however. Burmese law-enforcement officers reported seizing 174,191 liters of precursor chemicals in 2001 compared to 86,755 liters in 2000.

Major seizures in Burma in 2001 included the following: On August 4, the Monywa counternarcotics task force seized 161 kilograms of raw opium concealed beneath the floor boards of a truck in Monywa; on August 6, a joint counternarcotics team seized 3.4 million tablets of methamphetamine stored in a secret compartment of a truck in Taungyi; on August 30, an infantry column from the Burmese Army's 33rd Division destroyed a heroin refinery in the vicinity of Kutkai and seized 569 kilograms of raw opium and 9.3 kilograms of heroin; on September 6, police officials from Lashio seized 4.4 million tablets of methamphetamine after firing on and stopping a truck at the Sit-In bridge between Lashio and Hsipaw; and on October 14, in the largest seizure of methamphetamine tablets ever made in Burma, police officials in Hpa'an seized 6.9 million methamphetamine tablets from two false compartments in one vehicle. On October 27, in two related cases, police seized 2.2 million methamphetamine tablets from two caches in Tachileik township.

Burma continued its operational cooperation with the U.S. Drug Enforcement Administration (DEA), the Australian Federal Police, and other western and regional police agencies. In March, that cooperation resulted in the arrest of two Burmese citizens accused of exporting 357 kilograms of heroin to Fiji. Both have since been tried, convicted, and sentenced to death. Similarly, acting on information provided by the Thai police, Burmese police arrested Nyein Kyaw (aka Si Yon Kyin) and Kyaw Hlaing (aka Lauk San, aka Yaw Phar Li) in October in connection with a shipment of 116 kilograms of heroin and 7 million tablets of methamphetamine that the Thai police intercepted in January 2001.

The GOB has also allowed Chinese police officers to interrogate Burmese citizens, if they are apprehended for crimes in China. As a result of this cooperation, the Burmese arrested one major drug trafficker, Tan Xiao Lin, aka Tang Hsiao-lin, in April 2001 and turned him over to the Chinese in June 2001. Following the interrogation of Tan Xiao Lin, the Chinese identified four other major traffickers. One of these four (Shang Chao Mei) was arrested in Muse on September 3, and a second (Xiao Ming Yuan) narrowly escaped arrest in Laukai that same week. According to the Chinese, this group headed by Tan Xiao Lin was one of the largest "armed drug smuggling groups in the Golden Triangle area." The Chinese claim this group may have shipped as much as 15 tons of heroin per year, though the Burmese believe their annual turnover was considerably lower--perhaps no more than 1.5 tons per year.

During Secretary Khin Nyunt's September visit to Thailand, Thailand also proposed a program whereby the products of alternative-development projects in Burma would enter Thailand duty-free and offered 20 million Baht (about US$440,000) for the establishment of a new alternative-development program in the Southern Military Region of Shan State, which is now occupied by the United Wa State Army. In return, the Burmese arranged a trilateral meeting among the Wa, the GOB, and Thai officials in November 2001 that helped impress upon the Wa the counternarcotics priorities of the two governments.

Burma also participated in a series of multilateral meetings on narcotics control during the summer. They included a regional ministerial meeting in Rangoon (organized in cooperation with UNDCP) on drug control in May, a senior officials meeting with narcotics officials from Laos, China, Thailand and Burma in Rangoon in early August, and a quadrilateral ministerial meeting of the same four countries in Beijing in late August.

Eradication. According to Burmese police statistics, police and army units made two planned eradication sweeps in Shan State and destroyed 26,113 hectares of opium poppy during the 2000/2001 crop year (October to April). This compares with 10,987 hectares reportedly destroyed during the 1999/2000 crop year. According to UNDCP, there was clear evidence of two GOB eradication campaigns (one in early January and a second in late February) in all eleven townships that UNDCP surveyed during the 2000/2001 crop year. The U.S. is unable to verify eradication claims.

Law Enforcement Measures. Drug-enforcement efforts in Burma are led by the Central Committee for Drug Abuse Control (CCDAC), which is comprised of personnel from various security services, including the police, customs, military intelligence, and the army. CCDAC now has 18 drug-enforcement task forces around the country, with most located in major cities and along key transit routes near Burma's borders with China, India, and Thailand. As is the case with most Burmese government entities, CCDAC suffers badly from a lack of adequate resources to support its law-enforcement mission.

The legal framework for Burma's law-enforcement efforts is provided by its 1993 Narcotic Drugs and Psychotropic Substances Law. As demanded by the 1988 UN Drug Convention, that law contains legal tools for addressing money laundering, the seizure of drug-related assets, and the prosecution of drug conspiracy cases. Burma has taken steps to fulfill its international commitments under those conventions, but has yet to enact and enforce legislation to address some of their provisions and has not enforced its existing money-laundering law. In 2001 the GOB drafted a mutual legal assistance law. Passage and implementation of the legislation has been delayed until 2002, but it is expected to lay the groundwork for cross-border judicial and law-enforcement cooperation in the prosecution of money laundering and other cases. Similarly, a new anti-money-laundering law was drafted in 2001 and is expected be enacted in early 2002; the mutual legal assistance law should follow shortly thereafter.

In 2000 and 2001, the Burmese government launched its first serious campaigns against trafficking by former insurgent groups. In November 2000, the GOB took advantage of a mutiny within the Mong Ko Defense Army to seize Mong Ko and put that band and its leader, Mong Sa La, out of the narcotics business. It also sharply stepped up its pressure on the Kokang Chinese, who missed their 2000 target date for establishing an "opium free" zone throughout their self-administered territories. Starting in September 2001, the Burmese joined with the government of China in a series of joint operations that resulted in the destruction of heroin factories and methamphetamine labs throughout the Kokang Chinese Special Region No. 1 and the arrest of major traffickers. The Burmese government has also made clear to the Kokang Chinese that this campaign will continue. According to Burmese police sources, Secretary 1 Khin Nyunt has flatly told the Kokang leadership that they must be out of the narcotics business by 2002 or else the Burmese government would take "all necessary measures."

In the Wa Region, where the target date to be opium free is 2005, the Burmese government has moved much more cautiously. The Wa are far more formidable militarily than the Kokang Chinese and have proven to be useful allies for the Burmese government in battles with Khun Sa's Mong Tai Army and other Shan insurgent groups like the Thai-based Shan United Revolutionary Army (SURA) of Yawd Serk. Nevertheless, the Burmese government has slowly increased its administrative presence in the Wa territories. In 2001, for the first time, it established a Burmese police presence in the Wa territories, and in December 2001 the GOB established a military intelligence office in Pang Sang, the Wa capital. Its operations against the Kokang Chinese are seemingly intended to foreshadow the potential consequences for the Wa, if they remain in the narcotics business past 2005.

In 2001, the GOB also began a crackdown on the array of militias (some government-sponsored Ka Kwe Ye, i.e., village defense forces, and others the remnants of former insurgent bands) that the GOB had previously allowed to cultivate opium in the Kutkai-Lashio region of northern Shan State. According to military intelligence officials, with peace now prevailing in most of the countryside and the government no longer in need of the local security services these groups provided, steps are now being taken to slowly roll back their privileges, including the right to grow and traffic opium.

Corruption. There is no evidence that the Burmese Government, on an institutional level, is involved in the drug trade. However, there are persistent reports that officials, particularly army police personnel posted in outlying areas, are either directly involved in the drug business or are paid to allow the drug business to be conducted by others. The Burmese government is aware of this and has waged a quiet campaign against narcotics corruption in the ranks. According to police statistics, since early 2000, 32 Burmese police officers have been punished for narcotics related corruption. Punishments took the form of imprisonment, terminations, demotions, and forced retirements. Jail sentences have been imposed on 17 officers, including one police major and two police lieutenants. Four officers have been terminated, including two police lieutenants, and six officers were forced to retire, including four police lieutenants. Over the same period of time, seven Burmese army soldiers, including one major and three other officers, were charged with narcotics-related corruption. All were prosecuted in accordance with Burma's counternarcotics laws and the Burmese military code.

Agreements and Treaties. Burma is a party to the 1961 UN Single Convention, the 1971 UN Convention on Psychotropic Substances, and the 1988 UN Drug Convention. Burma also participates in UNDCP regional programs to combat illicit narcotics and related criminal activities. Burma is one of six nations (Burma, Cambodia, China, Laos, Thailand, Vietnam) that signed a Memorandum of Understanding (MOU) in 1993 with UNDCP. The "MOU states" agreed to cooperate to combat narcotics and to work jointly with UNDCP to improve sub-regional law-enforcement capabilities, including controlling precursor chemicals and reducing illicit narcotics production and trafficking in Southeast Asia. Burma is also a member of the regional action plan "ASEAN and China Cooperative Operations in Response to Dangerous Drugs (ACCORD)," which, in conjunction with UNDCP, pledges all participant countries to implement a comprehensive, regional, cooperative action plan to make the region drug-free by 2015. At the first meeting to implement the action plan, held in Bali in November, Burma agreed to chair the ACCORD Task Force on Law Enforcement.

In addition, the GOB has signed bilateral drug control agreements with India in 1993, with Bangladesh in 1994, with Vietnam in 1995, and with the Russian Federation, Laos, and The Philippines in 1997. In 2001, Burma signed additional counternarcotics MOUs with China (in January) and Thailand (in June).

The MOU with China established a framework for joint operations, which in turn led to a series of arrests of major traffickers during the spring and summer of 2001. Burmese police maintain that Burmese law forbids the extradition of any Burmese citizen. In its MOU with China, however, the GOB has agreed to return to China any Chinese citizens wanted for crimes in China.

Burma's MOU with Thailand committed both countries to closer police cooperation in narcotics control. The MOU paved the way for an August 2001 meeting of police chiefs from both sides of the Thai-Burma border who agreed to share information and establish joint "narcotics suppression coordination stations" in the Chiang Rai/Tachileik, Mae Sot/Myawaddy and Ranong/Kawthoung border areas.

Cultivation and Production. With the ban on opium production in Afghanistan imposed by the Taliban in 2001, Burma returned to its position as the world's largest producer of illicit opium. According to the U.S./Burma joint opium yield survey, opium production declined in Burma for the fifth straight year in 2001, due to a combination of poor weather conditions and eradication efforts. The survey found that the maximum potential yield for opium in Burma in 2001 totaled 865 metric tons, down 220 metric tons (or approximately 20 percent) from 2000. Over the past five years, opium production in Burma is down by approximately two-thirds, from an estimated 2,560 metric tons in 1996 to 865 metric tons in 2001. The area under cultivation has declined by approximately 35 percent, from 163,100 hectares in 1996 to approximately 105,000 hectares in 2001. Yields, meanwhile, have been cut in half, from an estimated 17 kilograms per hectare in 1996 to levels (about 8.5 kilograms per hectare in 2001) that are now comparable to those in neighboring states, such as Laos. A UNDCP-sponsored survey in 11 districts in Shan State in 2001 produced similar results. According to UNDCP, its estimate for the average potential yield in the 11 districts was approximately 10.45 kilograms per hectare.

Drug Flow/Transit. Most heroin in Burma is produced in small, mobile labs located near the borders with Thailand and China in Shan State in areas controlled by former insurgent groups. A growing amount of methamphetamine is reportedly produced in labs co-located with heroin refineries in the Wa region and the former Shan United Revolutionary Army territory in southern Shan State. Heroin and methamphetamine produced by Burma's former insurgent groups are most commonly trafficked along transit routes crossing the porous Chinese and Thai borders; to a lesser extent over the Indian, Bangladeshi, and Lao borders; and through Rangoon onward by ship to other countries in the region. Acetic anhydride, an essential chemical in the production of heroin, and ephedrine, the principal chemical ingredient of methamphetamine, are trafficked from China, India, and Thailand.

China and India are the principal sources for acetic anhydride, an essential chemical in the production of heroin, and ephedrine, the primary chemical used to manufacture methamphetamine.

Demand reduction. Drug abuse in Burma continues to increase. According to the GOB, there are only about 90,000 "officially registered" drug abusers in Burma, though UNDCP estimates that as many as 500,000 people (still less than 1 percent of the population) may abuse drugs. Opium use is most common among the older generations, but use of heroin and synthetic drugs continues to rise, particularly in urban and mining areas. Demand reduction facilities are strictly limited. There are six major drug treatment centers under the Ministry of Health and 49 detoxification programs at major hospitals throughout the country. Even when supplemented by international programs, however, those facilities fall well short of the need.

There is also a growing HIV/AIDS epidemic in Burma that has been linked in part to intravenous drug use. Fifty-seven percent of all intravenous drug users in Burma have tested positive for HIV/AIDS. Among the general population the HIV/AIDS infection rate is now approaching two percent.

IV. U.S. Policy Initiatives and Programs

Policy and Programs. Direct material counternarcotics aid by the U.S. government (USG) to Burma has remained suspended since 1988, when the Burmese military brutally suppressed the pro-democracy movement. As a result, the USG has very limited contact with the Burmese government on narcotics control. DEA, through the U.S. Embassy in Rangoon, shares drug-related intelligence with the GOB and conducts joint drug-enforcement investigations with Burmese counternarcotics authorities. Other U.S. agencies have conducted opium yield surveys in the mountainous regions of the Shan State in 1993, 1995, 1997, 1998, 1999, 2000 and 2001, with essential assistance provided by Burmese counterparts. These surveys give both governments a much more accurate understanding of the scope, magnitude, and changing geographic distribution of Burma's opium crop. The USG regularly urges the Burmese government to continue to take steps to curb narcotics production and trafficking. Specifically, we have encouraged the Burmese government to:

• Undertake counternarcotics efforts commensurate with Burma's central role in opium, heroin, and methamphetamine production and trafficking;
• Prosecute drug-trafficking organizations and their leaders, and deprive them of assets derived from the drug trade;
• Take action against drug-related corruption, including prosecution and appropriate punishment of corrupt officials and money launderers;
• Take action against fugitive drug traffickers and turn them over to third countries;
• Undertake opium poppy eradication on a wide scale in areas under its direct control or immediate influence;
• Press ethnic groups, such as the Wa, the Kokang Chinese, and the Kachin, who have pledged to create opium-free zones in their regions, to make good on their commitments;
• Develop and enforce effective counternarcotics, conspiracy, and money-laundering legislation;
• Provide strong support to multilateral drug-control projects in Shan State.

Bilateral Cooperation. USG counternarcotics cooperation with the Burmese regime is restricted to basic law-enforcement operations. The U.S. provides no bilateral material or training assistance. DEA's liaison with Burmese policymakers and military officials--conducted mainly through DEA's office in Rangoon--focuses on providing intelligence on enforcement targets and coordinating investigations of international drug-trafficking groups.

The Road Ahead. Based on experience in dealing with significant narcotics-trafficking problems elsewhere in the world, the USG recognizes that large-scale and long-term international aid, including development assistance and law-enforcement aid, will be needed to curb drug production and trafficking in Burma. Recurring human rights violations and political concerns, however, have limited international support of all kinds, including support for Burma's law-enforcement efforts. Throughout 2001, the Burmese government demonstrated a new commitment to effective counternarcotics measures. It has continued its poppy eradication program, has initiated actions against drug traffickers and some drug-trafficking organizations, has drafted new money-laundering legislation, and has begun to work more closely and cooperatively with neighboring and regional countries. The GOB is encouraged to sustain and intensify those efforts so that its counternarcotics actions are equal to the scope of the problem. The government of Burma is further encouraged to take additional steps to combat corruption, enforce its narcotics and money-laundering legislation, intensify its efforts to eradicate all forms of illicit narcotics, including methamphetamines, and address meaningfully the growing problem of drug abuse and HIV/AIDS. The USG strongly urges the GOB to continue its law-enforcement campaigns and to expand its efforts to the most prominent trafficking groups and organizations (including asset forfeiture and seizure). The USG also urges the GOB to continue cooperating closely with other countries in the region, particularly those most seriously affected by drugs trafficked from Burma. Although Burma's counternarcotics record in 2001 is noticeably improved over that of prior years, sustained, expanded, and intensified efforts will serve as proof of the GOB's full and unequivocal commitment to combating illicit narcotics production and trafficking, and associated criminal activities, within its borders.

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Chemical Controls

Burma

Money Laundering

Burma

Burma, a developing, agrarian country ruled by a military regime, has a population of approximately 41 million people. Renamed the Union of Myanmar by the ruling junta, Burma has a mixed economy with private activity dominant in agriculture, light industry, and transport, and with substantial state-controlled activity, mainly in energy, heavy industry, and the rice trade. Burma's economy continues to be vulnerable to drug money laundering due to its under-regulated financial system, weak anti-money laundering regime, and policies that facilitate the funneling of drug money into commercial enterprises and infrastructure investment. While Burma's current law contains some legal tools for addressing money laundering such as the seizure of drug-related assets and prosecution of drug conspiracy cases, the GOB has been slow to implement provisions of this law and has targeted few, if any, traffickers or their assets. There have been no reported prosecutions for drug money laundering.

In June 2001, the Financial Action Task Force (FATF) identified Burma as non-cooperative in international efforts to fight money laundering. The FATF in its report cited that Burma lacks a basic set of anti-money laundering provisions, specifically in the Central Bank Regulations for financial institutions. The report noted serious deficiencies concerning the absence of a legal requirement to maintain records and to report suspicious or unusual transactions. In addition, Burma's current system contains significant obstacles to international cooperation by judicial authorities. Further, the GOB has allocated inadequate resources for the prevention, detection, and repression of money laundering activities.

The GOB's current anti-money laundering legislation is limited at best. The Narcotics and Psychotropic Substances Law of 1993 criminalizes money laundering in connection with narcotics crimes only. The 1986 Law for the Cognizance of Possession criminalizes the purchase, sale or transfer of any property that has been acquired by illegitimate means. The central bank's regulations for financial institutions contain no anti-money laundering provisions or legal requirements to maintain records or report suspicious or unusual transactions.

Officials report that action is pending on a proposed Money Laundering Law that seeks to criminalize money laundering for a wide range of predicate offenses, including human trafficking and organized crime, provide for some international cooperation, impose record-keeping requirements and establish an agency to receive, analyze and act on suspicious or unusual transactions. This new anti-money laundering legislation would require banks to report extraordinary or suspicious transactions and high denomination transactions. Financial institutions would be required to maintain records for five years and to allow investigators full access to all financial records. Money laundering would be punishable by seven years in prison, bankers who fail to report suspicious transactions would face up to three years. This legislation would be enforced by the Central Control Board, chaired by the Home Minister and would include the Attorney General, Finance Minister, and the Governor of the central bank. This board would set policy, manage cooperation with other international money laundering groups, and organize investigation teams. The legislation proposes that this board decide whether money laundering prosecution is warranted based on the evidence collected by financial investigative teams. The legislation is expected to be enacted in 2002.

Burma is an observer jurisdiction to the Asia/Pacific Group on Money Laundering and a party to the 1988 UN Drug Convention. The GOB has bilateral drug control agreements with India, Bangladesh, Vietnam, Russia, Laos, and the Philippines. It is not known whether these agreements cover cooperation on money laundering issues. Currently, Burma does not provide significant mutual legal assistance or cooperation to overseas jurisdictions in the investigation and prosecution of serious crimes. The GOB is planning to couple the proposed anti-money laundering legislation with proposed mutual assistance legislation to facilitate judicial cooperation between Burma and other states.

Burma must increase the regulation and oversight of its banking system, and end policies that facilitate the investment of drug money into the legitimate economy. Burma also should pass and implement its proposed anti-money laundering legislation. Burma should add additional resources to improve the ability of the administrative and judicial authorities that supervise the financial sector and enforce the financial regulations to successfully fight money laundering. Lastly, the GOB should provide additional resources and training for combating money laundering to the police, banking officials and regulators.