Japan seeks to remove Myanmar from the international blacklist of financial crimes

Japan is pushing an initiative to remove Myanmar from the blacklist of the international body responsible for combating money laundering and terrorist financing, in a move aimed at facilitating trade relations with the Asian country and aiding its economic recovery after years of international isolation.

The proposal was presented to the Financial Action Task Force (FATF), according to a senior Japanese government official and another person familiar with the discussions.

Tokyo aims for the body to eliminate the requirement to apply enhanced controls to financial transactions linked to Myanmar, a measure that currently hampers investments and international banking operations.

The initiative comes as several powers reconsider their relations with the military-backed government, which took power through a coup in February 2021. Currently, Myanmar shares the FATF blacklist only with Iran and North Korea.

Japan seeks to facilitate trade relations

The Japanese government believes that removing Myanmar from the classification of high-risk jurisdictions would allow reducing financial restrictions affecting foreign companies and contribute to the recovery of its economy.

Unlike numerous Western companies that left Myanmar after the military coup, several Japanese companies have maintained a significant commercial presence in the country. According to one of the sources consulted, at least another major Asian nation is also promoting Myanmar's exclusion from the list.

However, it is still unclear whether the body will approve the modification during its plenary meeting, which will conclude this Friday in Paris. A spokesperson for the FATF Secretariat explained that deliberations are ongoing and that their content is confidential. Any change in classification will be officially announced at the end of the meeting.

The organization, made up of 40 members, included Myanmar in its blacklist in October 2022, after authorities failed to meet deadlines to correct deficiencies in their money laundering prevention mechanisms.

Concerns about illicit activities persist

The possible easing of financial controls comes despite international concerns about the growth of fraud networks, drug trafficking, and other illegal activities in Myanmar.

Since the military coup in 2021, the country has faced a civil war that has weakened institutions and favored the expansion of criminal organizations.

Particularly concerning is the proliferation of large-scale cyber scam centers in the Golden Triangle region, some of which are run by militias linked to the military government. Myanmar authorities claim they are participating in multinational initiatives aimed at combating these fraudulent operations and that they have intensified drug seizures.

They also assert that a significant portion of the production and trafficking of narcotics is attributed to armed groups operating in various regions of the country.

In an assessment published in June, the FATF acknowledged certain progress but warned that Myanmar still needed to correct significant deficiencies, especially in the investigation and judicial processing of money laundering-related crimes. The organization also expressed concern about illicit resources stemming from cyber fraud.

These concerns were compounded by a Reuters investigation published on Monday, which stated that Myanmar imported Iranian aviation fuel subject to sanctions through covert operations with false documentation. That fuel is believed to have been used in deadly bombing campaigns carried out by military forces.

The United States also resumes diplomatic contacts

The Japanese initiative coincides with a diplomatic rapprochement by other powers towards the authorities of Myanmar.

In September, the United States held direct talks in Naypyidaw with representatives of the military-backed government, marking the highest-level contact since the coup. The meetings focused on combating scam centers, although they could also open future negotiations regarding access to the country's abundant rare earth deposits.

Subsequently, both parties held new discreet meetings in Tokyo during October.

Despite this rapprochement, the president of Myanmar and leader of the military coup, Min Aung Hlaing, remains subject to U.S. sanctions for human rights violations, including his involvement in the power takeover and the repression of subsequent protests.