2002-2003 INCSR SUBMISSION: YEMEN

UNCLAS SANAA 000173

SIPDIS

INL, NEA/ARP, JUSTICE FOR OIA, AFMLS AND NDDS, TREASURY FOR
FINCEN

E.O. 12958: N/A
TAGS: KSEP SNAR PTER KCRM YM TERFIN
SUBJECT: 2002-2003 INCSR SUBMISSION: YEMEN

REF: A. 02 SECSTATE 240035

B. SECSTATE 11620


1. (U) Summary: Per request in reftels, below is Embassy
Sanaa's response for the International Narcotics Control
Strategy Report (INCSR). End summary.

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MONEY LAUNDERING
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2. (U) Yemen has no anti-money laundering legislation.
Though the extent of money laundering is unknown, the lack of
legislation, the existence of Islamic banks and the
prevalence of Hawala make Yemen vulnerable to money
laundering. Yemen's banking sector is small and rudimentary.
It is composed of 12 commercial banks and two public sector
specialized banks. The Central Bank of Yemen supervises the
country's banks.


3. (U) In early 2001, the Central Bank presented a
preliminary draft of anti-money laundering legislation to the
Bankers Association for recommendations. It was approved by
the Central Bank's Board of Directors on May 27, 2002 and
passed to the Yemeni Government on June 25, 2002. President
Saleh submitted the proposed legislation to Parliament on
July 30, 2002, and Prime Minister Ba Jamal reiterated calls
for its timely passage in December 2002. When enacted, the
legislation will place money laundering, and related
activities, on a list of illegal actions along with
embezzlement, theft, and kidnapping. The proposed law also
forbids opening bank accounts under fictitious names.


4. (U) Yemen is a party to the 1988 UN Drug Convention and
has signed but not yet ratified the UN convention against
Transnational Organized Crime.

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TERRORIST FINANCING
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5. (U) ROYG incorporated anti-money laundering provisions
in its anti-terror campaign and added a new anti-terrorist
financing section to pending anti-money laundering
legislation. In Yemen terrorist financing is considered a
serious crime. The Yemeni government has the authority to
identify, freeze and seize terrorist assets under ROYG's
Council of Ministers Resolution of October 2, 2001. Yemen
circulated to its financial institutions the list of
individuals and entities that have been included on the UN
1267 Sanctions Committee's Consolidated List as being linked
to Usama Bin Laden, members of the Al-Qa'ida organization or
the Taliban, or that the USG or the E.U. have designated
under relevant authorities. Yemen identified, froze, and
seized those assets.


6. (U) Yemen has taken no quantifiable steps to regulate
alternative remittance systems, however such initiatives are
being considered. The ROYG asserts that a majority of hawala
now goes through banks rather than informal local agents or
moneychangers. The Central Bank of Yemen licenses and
regulates moneychangers, and they are not allowed to maintain
accounts for their customers.


7. (U) The ROYG has taken steps to thwart the misuse of
charitable and or non-profit entities that can be used as
conduits for the financing of terrorism. A 2001 law
governing charitable societies imposes penalties of
imprisonment and/or fines on any society or its members for
carrying out activities or spending funds in contravention of
the aim and purpose for which the society was set up.
However, it is unclear whether the law is strongly
implemented by the Ministry of Pensions and Social Affairs,
which oversees the activities of charitable societies.
HULL