The opportunities for criminals in Myanmar’s financial industry and internet infrastructure are huge, according to a recent report.
Although violent crime is not common, a lack of government oversight, regulation and protection means that conditions are ideal for financial criminal activity, according to BMI Research.
The financial sector is underdeveloped and most transactions are in cash through unofficial channels and on the black market. This means that criminals are easily able to launder money gained from illegal activities, like smuggling drugs, gems and timber, said the report.
“The government only has a very limited ability to effectively regulate and monitor most transactions, allowing criminals to move illicit funds around the country and abroad with relative ease,” it said.
As the government does not enforce international financial standards, money-laundering through official channels is also quite easy, with a low risk of detection and punishment. “Although Myanmar requires businesses to adhere to Myanmar Financial Reporting Standards, which are identical to international standards, and the country is a member of the Asia-Pacific Group on Money Laundering, the practical application of the principles is severely lacking,” said the report.
In particular the government has not fully criminalised the financing of terrorism and there is no independent financial intelligence unit.
Only 20 suspicious transaction reports were filed by businesses to the authorities between January and October last year – comparable to countries such as Iraq and Burkina Faso which don’t have fully functioning governments, said the report.
This lack of regulation has led to a large number of criminal organisations in Myanmar involved in drugs smuggling, human trafficking, and illegal trade in gems and timber.
“The main risk to business operations from criminal gangs stems from the links between government officials and organised crime and the huge extent of the grey economy,” said the report.
“Under-funded government forces and revenue-seeking rebel groups often agree to ignore criminal activity in return for bribes or actively engage in smuggling to raise funds, with links forged between government officials, politicians and the criminal underworld, which fosters corruption and hinders the business environment.”
Another major concern is cyber attacks, according to BMI, which are rife because of a lack of basic security, making all transactions susceptible to theft.
“Although businesses will not need to provide extensive security measures to protect physical property and personnel, costs and losses due to guarding against or recovering from financial crime, cyber attacks, and the activities of criminal gangs, will be considerable,” said the report.
Myanmar is rated just 10.3 out of 100 in BMI’s Crime and Security Risk Index – ranking only above North Korea (8.9) and Afghanistan (5.8) out of 38 countries across Asia.
There is almost no government protection against cyber crime and very little knowledge of cyber security in Myanmar. “The government has also been accused of launching cyber attacks and manipulating internet content as a form of censorship, damaging business interests,” said the report.
As a result, Myanmar is ranked the second-lowest in Asia on BMI’s Financial and Cyber Crime Risk Index, at 8.0 out of 100.
The country has an extremely low number of secure internet servers available – just 0.1 per one million people – one of the lowest in the world. “This means that any online transactions which do take place are highly vulnerable to hacking and theft, as they lack the encryption protection provided by secure servers,” said the report.
“The use of other basic security measures such as password protection and antivirus software is also lacking, allowing cyber criminals to take advantage of vast gaps in cyber defence to launch attacks.”
BMI said the potential effects of cyber attacks on businesses in Myanmar were dramatically exposed in November 2010, when the country’s entire internet was taken offline by a massive Distributed Denial of Service (DDOS) assault, which uses bombardment of data to overwhelm a network.
