Myanmar’s military leaders attempted to move about $1B held at the New York’s Federal Reserve Bank (FRBNY) days after seizing power on February 1, prompting American officials to put a freeze on the funds, according to three sources familiar with the matter, including one American government official.
Fed safeguards first blocked the transaction on February 4 in the name of Myanmar’s Central Bank. The sources said the United States administration officials then stalled on approving the transfer until an executive order issued by President Biden gave them legal authority to block it indefinitely.
The New York Fed’s spokesman declined to give any comment on specific account holders. The United States Treasury Department also declined to provide any statement.
The attempt, which hasn’t been previously reported, came after Myanmar’s army installed a new central bank governor and detained reformist administrators during the coup. It marked an apparent attempt by Myanmar’s military generals to limit exposure to worldwide sanctions after they arrested elected officials, including de facto leader Aung San Suu Kyi, who won a national election in November. Additionally, the military seized power alleging fraud, claims that the electoral commission has dismissed.
At least 54 killed and 1700 arrested since the coup
Myanmar’s military government’s spokesman didn’t answer repeated calls seeking comments. Reuter was unable to reach executives at the central bank.
Canada, the United States, the European Union, and Britain have all issued fresh sanctions following the coup and the military’s subsequent deadly crackdown on demonstrators. On Thursday, the United Nations said that at least 54 people lost their lives since the coup. Moreover, the security officials arrested above 1700 people, including twenty-nine journalists.
Declaring a new executive order making way for sanctions on the generals and their businesses, Joe Biden said on February 10 that America was taking steps to prevent the generals from ‘improperly having access’ to $1B in Myanmar administration funds.
American officials didn’t explain the statement that time, but the next day an executive order explicitly issued names Myanmar’s Central Bank as part of Myanmar’s government. The executive order authorizes the seizure of assets of the post-coup government of Myanmar.
Moreover, two sources told Reuters the executive order was designed to provide the Federal Reserve Bank of New York with the legal authority to hold the 1B dollars of Myanmar reserves indefinitely.
U.S. Department of State to clarify Current Events
A part of the New York Fed known as CBIAS (Central Bank and International Account Services) should manage the reserves of Myanmar, where many central banks keep American dollar reserves for determinations such as settling the bank transactions.
Two of the related sources said that leaders made an effort to empty the account on 4th February but the processes automatically blocked it and put in place at the FRBNY before the coup. One source said that transactions involving Myanmar require extra scrutiny as the state in 2020 was placed on the Financial Action Task Force’s gray list for the concerns of money-laundering, in part due to the possibility 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 countries.
The compliance manual says the bank’s legal department, when appropriate, will be in communication with the U.S. State Department to clarify current events and any changes that may affect the Central Bank and corresponding control of the FRBNY account. The State Department declined to give any comment on this story.
Myanmar’s generals appeared to be firmly in control of Myanmar’s Central Bank when they attempted withdrawal.
According to the Assistance Association for Political Prisoners, when the military took charge in Myanmar on February 1, it installed a new governor of the Central Bank. Moreover, it detained key economic officials, including Bo Bo Nge, the reformist deputy governor, and Suu Kyi ally. According to the association, as of Thursday, he remains under detention.