FROZEN IRAQI ASSETS: OFAC/STATE VISIT TO KUWAIT

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 005001

SIPDIS

STATE/EB/ESC/TFS FOR NROTHSTEIN; STATE/EB:ABORG/BFITZGERALD
AND NEA/NGA; TREASURY:WMURDEN; NSC:GPETERS FINANCING

E.O. 12958: DECL: 11/01/2013
TAGS: EFIN EAID ETTC PTER PREL KU IZ UNSC
SUBJECT: FROZEN IRAQI ASSETS: OFAC/STATE VISIT TO KUWAIT

REF: KUWAIT 4840

Classified By: AMBASSADOR RICHARD JONES FOR REASONS 1.5(B) and (D)


1. (C) SUMMARY. A delegation from Treasury's Office of
Foreign Assets Control (OFAC) and a State Department
representative met with Kuwaiti officials on October 3-5 to
discuss, among other things, some $85 million in frozen Iraqi
assets held by the Nassau, Bahamas branch of the Commercial
Bank of Kuwait which have not been transferred to the
Development Fund for Iraq (DFI),as required under UNSCR

1483. This cable is the second of two on the visit
(terrorist financing developments are reported reftel). The
Ministers of Finance and Foreign Affairs referred the
delegation to the Central Bank (CBK) as the GOK action agency
for these issues. The Deputy Governor of the Central Bank
said all Kuwaiti banks had been advised of their
responsibility to transfer to DFI all assets not under court
order or currently in litigation. The banks must notify CBK
of any assets that are not transferred, and provide
justification as to why they are being held. The CBK will
review with each bank what assets have been transferred and
what have not. Bank officials stressed that they would like
to "close the chapter" on the issue of Iraqi assets by year's
end, but that it is more complicated to do so in Kuwait than
in other GCC countries because of Iraq's sizeable debts to
Kuwaiti banks. END SUMMARY



2. (U) An OFAC delegation and State representative traveled
to Kuwait on October 3-5 to speak with Kuwaiti officials
regarding terrorist financing issues and the status of
blocked Iraqi assets held by Kuwaiti banks. This cable, the
second of two on the visit, reports on frozen Iraqi assets.
Efforts to combat terrorist financing and the issue of the
GOK's will to enforce UNSCRs are reported reftel. The
delegation, led by OFAC Director Richard Newcomb and
accompanied by the Ambassador, included Mark Roberts, Daniel
Yorks, and Jason Beal from OFAC; and Nicole Rothstein from
EB/ESC/TFS; EconOff attended as notetaker. The delegation
raised with the Ministers of Finance and Foreign Affairs and
the Deputy Governor of the Central Bank of Kuwait (CBK) the
issue of $85 million in blocked Iraqi assets that are
currently held in the Nassau, Bahamas branch of the
Commercial Bank of Kuwait, and against which two Kuwaiti
financial institutions have filed attachments in court. These
funds have not been transferred to the Development Fund for
Iraq (DFI) as required under UNSCR 1483. The funds were
previously managed by the New York branch of the Commerical
Bank. However, the New York branch in the process of closing
and the Commercial Bank has transferred management of those
funds back to its head office in Kuwait. Although it remains
unclear under whose jurisdiction these deposits fall --
Kuwait, the Bahamas, or the United States --, according to
the Treasury the USG believes it might have a claim.
Nevertheless, the delegation wanted to speak with GOK
officials to see if they would agree to transfer the funds in
accordance with UNSCR 1483. When presented with this, both
the Minister of Finance and the Minister of Foreign Affairs
referred the delegation to CBK for a response.


3. (C) The Central Bank's Deputy Governor, Dr. Nabeel Ahmed
Al-Mannae, confirmed that CBK had received a copy of UNSCR
1483 mandating the transfer of frozen Iraqi assets to DFI,
and had circulated that to all banks. However, he noted that
the resolution also stipulates that funds subject to prior
judicial action are exempted from the transfer order.
Accordingly, CBK informed all Kuwaiti banks that any assets
not currently being litigated or already subject to a court
order must be transferred to a special account at CBK for
onward transfer to DFI. In the case where Iraqi assets under
court orders were present, the banks were instructed to
specify the claim and report it to CBK. Newcomb noted that
there are no specific attachments against the funds in
Nassau, only general claims. Newcomb emphasized that Kuwait
had an obligation under UNSCR 1483 (paragraph 23) to order
the transfer of the funds to the DFI. Al-Mannae said the CBK
has asked the Ministry of Foreign Affairs to establish a
joint committee with Bank officials and CBK's legal advisor
to review all of these claims. At present, CBK has not
determined if it has the authority to force individual banks
to transfer funds that are under court orders.


4. (C) CBK Executive Director Ibrahim Alqadhi stressed that
the Kuwaitis want to "close the chapter" on Iraqi assets, and
hope to do so by year,s end. But he said that this is not
as simple in Kuwait as in other GCC countries, because of the
Government of Iraq,s liabilities to Kuwaiti banks. Newcomb
noted that many countries have claims on Iraqi funds, and
that Iraq owes US banks alone billions of dollars; he also
commented that the US arguably has jurisdiction to force
these transfers. Alqadhi clarified that he was not
necessarily defending the Kuwaiti banks' claims, but that
their position must be understood from this perspective. He
underscored that CBK is not concerned (as the claimant banks
are) with shareholders, interests but is concerned with
compliance issues, implying that it would be easier for the
CBK to compel the banks to make the transfers than it would
for the banks to do it of their own volition.


5. (C) Al-Mannae promised the delegation that the CBK would
call each bank to see what their case is for attaching those
assets; he would then inform the UN of amounts transferred
or, if not transferred, provide the banks, justifications.
At the Ambassador,s urging, the CBK officials agreed to
begin their investigation with those banks claiming the $85
million being held in the Bahamas. Newcomb asked CBK for an
answer within two weeks of the meeting date. No answer has
been received, however CBK and OFAC have remained in contact
on this issue.


6. (U) The State/OFAC delegation cleared this cable after
their return to Washington.
JONES