Myanmar’s ethnic conflicts will frustrate progress on money laundering

Myanmar kyatPhoto: Alpari Org

The current spotlight on Burmese corruption is welcome, but instability in the country’s border regions makes it difficult to make headway on reducing money laundering.

By Zachary Frye, edited by Skylar Lindsay

Late last month, the Financial Action Task Force (FATF), a global money laundering watchdog, put Myanmar on its ‘grey list’ of countries that need to do more to combat illegal finance operations.

As the FATF is an intergovernmental organization that sets standards and works with authorities to reduce crime across the globe, its designations are important tools to incentivise government action.

Specifically, a ‘grey list’ designation means that a county has acknowledged its problems and made a commitment to the FATF to “reduce deficiencies within agreed timeframes” that are “subject to increased monitoring.”

While the designation is an important step to tackle financial crime in Myanmar, real progress on the issue will be difficult in the context of a fractured nation.

Although the post-junta Myanmese government has consolidated power in its central region, large ethnic areas in the borderlands continue to witness armed uprisings.

An illicit drug trade continues to bankroll many of these militia groups, increasing their power and fuelling further conflict. If Myanmar plans on making any real progress on the issue of money laundering within its borders, it is crucial that these conflicts are ended.

The government is responsive but enforcement is weak

In response to the FATF’s designation, a Myanmar government representative noted that the country had a “detailed strategic implementation plan” to counter money-laundering.

Last year, the government’s National Intelligence Unit published its National Strategy on Anti-Money Laundering and Countering the Financing of Terrorism. In the strategy, the unit called for strengthening the country’s legal framework and crime reduction capabilities.

While the policy prescription is sound, it won’t be easy in practice. According to Richard Horsey, an expert on crime in Myanmar affiliated with the International Crisis Group, the government’s enforcement efforts hardly make a dent in the overall drug trade.

“It is estimated that about 15% of heroin is intercepted by the police, but for methamphetamine it is probably lower than that, 5 to 10%,” he said.

“These criminal organizations that are involved in the production of these drugs choose locations for production which are difficult to reach, which are protected in some way by [a] militia, non-state army group, or by a general climate of impunity by paying people off so that they are not disturbed,” he said. “[It] is a problem of the armed conflict in Myanmar [and] it is also a problem of corruption,” he added.

Without a new approach, conflicts will persist  

Ethnic conflicts are nothing new in Myanmar. Many of them, including those in Shan, Karen and Rakhine States are products of ongoing disagreements with the central government going back decades.

Too often, if violence in one area calms down, it flares up in another region, adding to a cycle of seemingly never-ending conflict.

After Daw Aung San Suu Kyi, who won a Nobel Peace Prize for her democratisation efforts in Myanmar, came to power in 2016, there were renewed hopes that ethnic conflicts could be mitigated.

State Councillor Aung San Suu Kyi at the European Parliament in 2013
Myanmar’s State Counsellor Aung San Suu Kyi.
Photo:Claude Truong-Ngoc

However, in the years following her rise, she has received harsh criticism for not doing enough to curb ethnic violence. Nearly four years after becoming the country’s de-facto leader, violent conflicts are on the rise.

“[State Counsellor] Daw Aung San Suu Kyi has not focused enough on the peace process and she is only perusing a path to amend the 2008 Constitution through parliament. I’m inclined to assume that she doesn’t really know what a peace process means, and doesn’t have a sense that national reconciliation can be achieved through it,” said Karen National Union (KNU) Secretary-General Saw Ta Doh Moo in an interview earlier this month. The KNU is an ethnic political organization pushing for a decentralized government in Myanmar.

Only a unified Myanmar will end money laundering within its borders

With the prospect of peace in the borderlands still out of reach, there is little chance that substantial money laundering improvements can be implemented throughout the country. Although the central government is making progress in fighting corruption and illicit finance, too much of the country is still awash in illegal trade and plagued with lawlessness.

For this reason, reaching a sustainable resolution to the ethnic conflicts throughout the country should be one of the Myanmar government’s highest priorities if it wants to make a sincere effort at getting off the FATF’s grey list.

In order to make this happen, however, the government should drop heavy-handed attempts to force unity in favour of policy that respects local communities’ calls for a bigger say in local governance. While that doesn’t mean Naypyitaw should stand idle while fringe groups push for armed independence, it does mean giving reasonable voices of dissent room to operate in line with local customs and viewpoints.

If the country’s myriad conflicts can be reduced, it will significantly strengthen the ability of Myanmar’s authorities to stop money laundering and financial corruption. Without legitimacy in certain border areas, the government has little chance to make headway on the issue in the places where these crimes impact citizens the most. As such, the Myanmar government would do well to look at ethnic reconciliation not as an end in and of itself, but as a goal with far-reaching benefits for the country as a whole.