US blocked Myanmar junta attempt to empty New York bank account

Washington: Myanmar’s military rulers attempted to move about $US1 billion ($1.3 billion) held at the Federal Reserve Bank of New York days after seizing power on February 1, prompting US officials to put a freeze on the funds, according to three people familiar with the matter, including one American government official.

The transaction on February 4 in the name of the Central Bank of Myanmar was first blocked by the bank’s safeguards. US government officials then stalled on approving the transfer until an executive order issued by President Joe Biden gave them legal authority to block it indefinitely, the sources said.

A protester holds a placard with the face of Myanmar’s commander in chief, Senior General Min Aung Hlaing during an anti-coup rally in front of the Myanmar Economic Bank in Mandalay.Credit:AP

A spokesman for the bank declined to comment on specific account holders. The US Treasury and State Departments also declined to comment.

The attempt, which has not been previously reported, came after the Myanmar military installed a new central bank governor and detained reformist officials during the coup.

It marked an apparent effort by the generals to limit exposure to international sanctions after they arrested elected officials, including leader Aung San Suu Kyi, who had won a national election in November. The army seized power alleging fraud, claims that the electoral commission has dismissed.

A spokesman for the military government did not answer repeated calls seeking comment. Reuters was unable to reach officials at the central bank.

The Federal Reserve Bank of New York. The bank flagged the attempted transaction.Credit:AP

The United States, Canada, the European Union and Britain have all issued fresh sanctions following the coup and the army’s subsequent deadly crackdown on demonstrators.

The US blocked the ministries of Defence and Home Affairs and top military conglomerates from certain types of trade. It also placed export control restrictions on the country, meaning Myanmar will not be able to import certain American goods, including technology which activists say is being used to monitor and crackdown on protesters.

The United Nations said on Thursday that at least 54 people have been killed since the coup. More than 1700 people had been arrested, including 29 journalists.

Announcing a new executive order paving the way for sanctions on the generals and their businesses, Biden said on February 10 that the US was taking steps to prevent the generals from “improperly having access” to $US1 billion in Myanmar government funds.

US officials did not explain the statement at the time, but an executive order issued the next day specifically names the Central Bank of Myanmar as part of the country’s government. The order authorises the seizure of assets of the post-coup government.

Two sources told Reuters the executive order was designed to provide the New York Fed with the legal authority to hold the $US1 billion of Myanmar reserves indefinitely.

Myanmar’s reserves would be managed by part of the New York Fed known as Central Bank and International Account Services (CBIAS), where many central banks keep US dollar reserves for purposes such as settling transactions.

One source said the initial bank block occurred because transactions involving Myanmar require extra scrutiny as the country was placed on the international Financial Action Task Force’s “grey list” for money laundering concerns last year, in part because of the risk of proceeds from drug trafficking being washed through its banks.

CBIAS’ compliance manual, made public in 2016, says New York Fed guidelines include provisions for responding to developments in account-holding nations.

“When appropriate,” it says, the bank’s legal department “will be in communication with the US Department of State in order to clarify current events and any changes that may affect the central bank and corresponding control of the FRBNY account.”

When the military took charge last month, it installed a new central bank governor and detained key economic officials, including Bo Bo Nge, the reformist deputy governor and Suu Kyi ally, according to the Assistance Association for Political Prisoners. Australian academic and economic advisor to Suu Kyi, Sean Turnell, has also been arrested. Suu Kyi, both men and a number of other aides and politicians remain in detention.

Reuters

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