By Emil Danielyan
Armenia has enacted a set of amendments to its liberal banking legislation aimed at preventing financing of international terrorist organizations through its territory. The country's Central Bank (CBA) will have sweeping powers to sanction those local commercial banks and their clients that are suspected of having terrorist connections.
The toughening of banking regulations is the latest Armenian contribution to the ongoing U.S. war on terror. Officials in Yerevan admit that the changes were suggested by the United States following the September 11 attacks on New York and Washington.
The amendments passed by the Armenia parliament late last month empower the CBA to block any financial transactions by legal and physical entities "financing terrorism" or using "resources acquired in a criminal way." Their bank accounts would be automatically frozen pending further decisions by the law-enforcement and judicial authorities.
The parliament bill was signed into law by President Robert Kocharian on Friday and will take effect immediately after its official publication later this month.
“This means that our banking sector has now appropriate tools to thwart activities of such organizations,” the CBA chairman, Tigran Sarkisian, said in an interview with RFE/RL. “Furthermore, we have a list of those [terrorist] organizations and have already delivered it to commercial banks.”
Sarkisian indicated that that list is identical with one issued by the U.S. State Department each year. The document will be part of special anti-terror guidelines for the Armenian banks that will soon be drawn up by the CBA -- their main regulatory authority.
Armenia’s banking legislation, one of the most liberal in the former Soviet Union, places no restrictions on operations of foreign banks. They are free to open branches, own Armenian credit institutions and move cash in and out of the country. Not surprisingly, the largest and most popular Armenia-based bank is owned by Britain’s HSBC financial services giant.
The existing legislative framework, officials say, could tempt anti-Western militant groups to use Armenia for channeling funds into various parts of the world. Until now, for example, Armenian banks were not required to check the origin of their cash deposits. But under the newly passed amendments, the CBA will issue them with detailed information which they will have to demand from Armenian and foreign nationals opening bank accounts.
Furthermore, the Central Bank can now freeze those accounts if it believes that they belong to terrorist groups. In that case, account holders will have to prove their innocence if they are to reclaim their money. Some Armenian lawmakers criticized this provision as a violation of the presumption of innocence during the recent debates in the parliament.
But Sarkisian countered that any punitive action by the CBA would be investigated by the law-enforcement agencies and could be challenged in the court. He also dismissed speculation that the anti-terror measures could make Armenia’s banking sector less attractive to foreign investors and weaken the local cash-strapped banks’ ability to attract capital from abroad.
“Armenia’s financial system remains reliable and favorable for those business entities or investors that want to engage in legal activities. In fact, this new legislative framework offers them additional incentives and protection,” he said.
Local banks have not challenged, at least publicly, this assertion. HSBC’s Armenian branch declined a comment. A secretary of its top manager explained, bizarrely, that he usually avoids contacts with “rank-and-file journalists” and suggested that he be interviewed by an RFE/RL “chief editor.”
Sarkisian and other government officials admit a direct link between the toughening of the banking legislation and the new U.S. foreign policy priorities stemming from the September 11 terrorist attacks.
The matter has been on the agenda of the U.S.-Armenia Task Force, an inter-governmental body coordinating multimillion-dollar American assistance to Armenia. According to Armenian Finance and Economy Minister Vartan Khachatrian, Yerevan assured Washington earlier this year that "if we discover that any of our banks has accounts that could be used for terrorist acts, they will be immediately frozen."
U.S. reaction to the banking amendments is not yet known. Officials at the U.S. embassy in Yerevan could not be reached for comment. They have previously praised the Armenian government’s cooperation with the U.S.-led global fight against terror. Over the past year, American warplanes have used Armenia’s air space for anti-terror missions in Central Asia.
The U.S. should be particularly attentive towards one of Armenia’s neighbors and closest partners: Iran. The Islamic Republic was accused by President George W. Bush of being part of a global “axis of evil” earlier this year. And although it has not been a target of the U.S. anti-terror drive, Tehran remains on the State Department list of governments sponsoring international terrorism.
Officials in Yerevan, meanwhile, claim that so far there have been no instances of outlawed militant groups attempting to use Armenian territory financially or otherwise. “Thank God, we have avoided such problems so far,” Vartan Yeghiazarian, chief of Interpol’s bureau in the Armenian capital, told RFE/RL.
Despite that, Yeghiazarian said, the authorities remain on their guard. “A special [anti-terror] database has been created here, and we are very closely looking at the possible entry of such individuals into Armenia,” he said. “Not just their physical presence in Armenia, but also their possible financial and economic activities, connections and so on.”