TREASURY A/S ZARATE MEETS CENTRAL BANK GOVERNOR

S E C R E T SECTION 01 OF 03 ABU DHABI 003275

SIPDIS

NOFORN

STATE FOR NEA/ARP, S/CT, INL/ENT, EB/ESC
STATE PASS FEDERAL RESERVE
TREASURY FOR ZARATE, GLASER, AND MURDEN

E.O. 12958: DECL:9/17/14
TAGS: EFIN ETTC PTER ECON TC
SUBJECT: TREASURY A/S ZARATE MEETS CENTRAL BANK GOVERNOR

Classified by Ambassador Michele Sison for reasons 1.5 (b
&d).


1. (S/NF) Summary: Treasury Assistant Secretary Juan
Zarate, accompanied by Embassy Bahrain OFAC Attache and
Embassy Abu Dhabi EconChief, met with UAE Central Bank
Governor Sultan Nasser Al-Suwaidi on September 16. The
Governor noted that the Central Bank continued to work with
the Emirati security services to freeze accounts. A/S
Zarate raised USG concerns about Al-Qaida financier Salah
Salim Al-Shamsi and suggested that the USG and the UAEG
consider jointly submitting his name to the UN. Al-Suwaidi
asked for more information, which A/S Zarate promised to
provide. The UAE has registered 119 Hawaladars (informal
money remittance dealers) and is processing a further 21
applications, but is not yet prepared to start penalizing
Hawaladars for non-compliance. The Central Bank is working
on gaining control over cash couriers and will be hosting a
training session in December, to which it would like to
invite a speaker from U.S. Customs. Al-Suwaidi also asked
for U.S. support for a follow-on conference for Arab
Financial Intelligence Units (FIUs) and for a U.S. Treasury
speaker for a November 29 conference on the U.S. Patriot
Act. He said that the UAE would participate in the
November meeting of the Middle East North Africa Financial
Action Task Force (MENA FATF) body, being hosted in
Bahrain. A/S Zarate discussed two Iraqi front companies:
Al-Wasel and Babel and Blotto International, and asked the
Governor for an update. Al-Suwaidi said that they had
frozen the assets of Al-Wasel and Babel but had not yet
acted on Blotto. He assured A/S Zarate that the UAE
circulates and updates any list coming from the UN. End
Summary.

Counter-Terrorist Financing
--------------


2. (C) A/S Zarate asked Al-Suwaidi whether he believed that
the new UAE anti-terrorism law helped the Central Bank
target and freeze the assets of suspected terrorists. Al-
Suwaidi replied that the law indeed had, in many ways
codified the Central Bank's existing practices. The
Central Bank already coordinated with the UAE's security
service (SSD) to freeze the assets of suspected terrorists.
Al-Suwaidi added that the Central Bank would always
interpret the new law in the most "positive," (i.e.
permissive) fashion in order to freeze assets. He said
that the law was important because it clearly gave the
Central Bank legal cover for actions that it would take
anyway. The law also specifically added language referring
to implementing UNSCRs on terrorist financing, which
addressed the concerns of the "legal system" about the need
to investigate and find evidence in response to UNSC
designations.


3. (S/NF) A/S Zarate asked whether Al-Suwaidi could give a
sense of how well the law was working in practice and how
many assets had been frozen in response to terrorist
financing concerns. Al-Suwaidi replied that the Central
Bank cooperated with the SSD on terrorist financing cases
and that SSD was not always comfortable sharing details. He
stated that SSD referred cases to the Central Bank for
asset freezing, but didn't provide details on specific
concerns. Al-Suwaidi said that the Central Bank froze
assets in response to SSD's instructions, but that he
couldn't say how many of these cases were terrorist finance
related and how many were related to other concerns. Al-
Suwaidi added that he had seen about the same number of
cases referred by SSD this year as last year, noting that
the Central Bank would issue freeze orders, but didn't
always find money. Al-Suwaidi noted that the UAE had
frozen between 14 and 18 accounts in response to UNSCRs,
and that it continued to respond to UNSCR designations by
circulating the information to all financial institutions
and instructing them to freeze any related assets. He
noted, however, that most of the recent designations didn't
have any relationship to the UAE. (Note: A/S Zarate met
later in the day with both Abu Dhabi and Dubai.)


4. (S/NF) A/S Zarate then said that he needed to make the
Governor aware of a case related Salah Salim Al-Shamsi. He
explained that the U.S. had very specific concerns about
this individual's activities in regards to transferring
funds to Al-Qaida and Iraqi Jihadists, and that we were
concerned about Al-Shamsi's network within the UAE. A/S
Zarate suggested that t a certain point e might want
to think about jointly submitting this individual's name to
the UN. The Governor asked for more information, stating
that the UAEG would need to investigate to be sure that a
case was there to justify a freeze. A/S Zarate promised to
send a paper to share.


5. (C) A/S Zarate provided Al-Suwaidi with an update on the
USG's most recent Patriot Act actions, whereby the
Secretary of the Treasury can designate foreign entities as

SIPDIS
primary money laundering concerns. He mentioned that the
USG had designated five foreign banks, including the
Commercial Bank of Syria. The governor took on board A/S
Zarate's remarks. Governor Al-Suwaidi used this discussion
to lead into his request to have the Treasury Department
provide a speaker for a seminar the Central Bank will be
hosting in November on the Patriot Act.

Hawala and Cash Couriers
--------------


6. (C) A/S Zarate thanked the Governor for his leadership
role in bringing educating countries about Hawala (an
informal money transfer/remittance system). The Governor
said that the UAE had registered 119 dealers and was
processing a further 21 applications. The Central Bank was
starting to discover Hawaladars (Hawala dealers) that had
not yet registered, generally via suspicious transaction
reports (STR) from banks. When the Central Bank found an
unregistered Hawaladar, it worked to coax them in. Al-
Suwaidi said that the Central Bank was not yet ready to
start imposing penalties on unregistered Hawaladars.


7. (C) Al-Suwaidi explained that it was difficult to
estimate the actual number of Hawaladars in the UAE; most
of them appear to be very small companies that operate
Hawala as a side business and have a small customer base of
around 100 people. He added that Hawala was a business
that served a specific community, and that he had seen it
serving the Egyptian, Philippine, Indian, Pakistani, and
Somali communities primarily. Al-Suwaidi admitted that no
Hawaladar had yet submitted an STR, but noted that the
Central Bank goes through their books on a regular basis.
The Central Bank had noticed that the bulk of the Hawala
transactions consisted of small sums of money for worker
remittances and, therefore, flagged large transfers as
suspicious and worthy of follow-up.


8. (C) A/S Zarate asked for help monitoring the Somali
Financial Services Associations based in the UAE. Both he
and the Governor agreed that it was important to facilitate
remittances to Somalia, but also important to prevent the
flow of funds to militias and terrorists. Al-Suwaidi
suggested that the USG and the UAEG work together to
promote legitimate financial channels and asked A/S Zarate
to share information on our concerns about specific
dealers. Twenty of the 119 registered Hawaladars are
Somali, so they make up a significant portion of the
informal money remittance business.


9. (C) Al-Suwaidi explained that the Central Bank was
taking a number of steps to deal with the problem of cash
couriers. Its ultimate goal was to prohibit all cash
shipments except to the Central Bank. It was working with
Federal Reserve Bank of New York and UK Customs with the
objective of controlling couriers. The UAE is already
seeing large sums of cash coming from India and Pakistan,
countries with currency controls and artificially fixed
exchange rates. Al-Suwaidi noted that people prefer
exchanging their dollars a market rates. He added that the
Central Bank was seeing fewer Euros coming through, since
they were still not as popular. Al-Suwaidi said that the
Central Bank would be hosting a national anti-money
laundering conference in mid-December, which would work to
educate UAE customs officials about cash couriers and cash
importing and exporting. He asked if U.S. Customs could
provide an expert to present on this topic. (Note: We have
asked Embassy Abu Dhabi DHS/ICE attachi to follow-up on
this.)

Charities
--------------


10. (C) The two briefly discussed the regulation of
charitable organizations. The UAE Ministries of Finance and
Labor were reorganizing the charitable institutions said
the Central Bank Governor, Al-Suwaidi said that he know
that the Red Crescent Authority was the umbrella
organization in Abu Dhabi, but noted that Dubai and the
other emirates still had independent charities. He
suggested that A/S Zarate meet with officials for the
Ministries of Finance and Labor on the margins of the
October 4-5 TIFA Council Meeting in Washington.

Training
--------------


11. (SBU) The Governor thanked A/S Zarate for the USG's
support for the South Asian regional FIU training program,
jointly hosted by FINCEN and the Central Bank. He asked
that FINCEN support another conference for Arab countries
sometime this year. Al-Suwaidi also said that the Central
Bank was organizing a seminar on November 28 for UAE Banks
and other Central Banks on the impact of the USA Patriot
Act on banks in the region. He noted that the Central Bank
had hired a U.S. law firm to present on the Patriot Act and
asked whether Treasury would also provide a speaker. A/S
Zarate said that he would be happy to provide a speaker for
the event. The USG was engaging in outreach to explain
exactly what the Patriot Act meant to the financial
community.

MENA FATF
--------------


12. (SBU) A/S Zarate urged the UAEG to actively participate
in the Middle East North Africa FATF body, headquartered in
Bahrain, and to attend the first meeting on November 29.
The Governor stated that someone from the Central Bank
would attend. A/S Zarate agreed that it was critical to
keep the MENA FATF organization technical, not political
and to have concrete results out of the meetings. In that
regard, Al-Suwaidi asked for A/S Zarate's views on Iranian
and Syrian participation in the body. He argued that it
would be important to try and develop a better
understanding about what was happening in those two
countries. A/S Zarate noted USG concerns about Iranian
actions such as support for terrorist entities that were
antithetical to the goals of FATF.

DIFC
--------------


13. (C) In June the Dubai International Financial Center
(DIFC) fired its top two regulators, raising international
questions about regulatory independence in Dubai's planned
offshore financial center and overwhelmingly negative
coverage in the western press. A/S Zarate asked Al-Suwaidi
for his views on the impact of the firing on DIFC. Al-
Suwaidi stated that DIFC set itself back by the way it
fired its two top regulators, but that it was appeared to
be trying to overcome this setback. He noted that the UK
had contacted him to express concern over what the firings
implied. As an aside, Al-Suwaidi said that former top
regulator Phillip Thorpe had called on him two days ago to
say good-by. At that time, Saeed Al-Hamiz, the Executive
Director of Banking Supervision had asked hopefully "is he
back?"


14. (C) Al-Suwaidi added that the DIFC seemed to be trying
to do things correctly now. David King, the acting head of
the regulatory body had visited the Central Bank a few
weeks earlier to explore signing an MOU with the Central
Bank, which Al-Suwaidi added would need to be presented to
the board of governors for approval. Regulators from the
Dubai Financial Services Authority (the regulator authority
for DIFC) also came to the Central Bank to discuss anti
money laundering regulations with the Anti Money Laundering
and Suspicious Case Unit, so it looked like they wanted to
get everything together before opening up.


15. (SBU) In response to A/S Zarate's question about other
offshore financial centers, Al-Suwaidi explained that the
Central Bank had fairly regular contact with Bahrain,
Jersey, and the Isle of Man since these offshore financial
centers did business with the UAE on a regular basis. He
added that the UAE probably had more regular contact with
Jersey, since the headquarters for HSBC Middle East was
based there.


16. (U) This cable has been cleared by A/S Zarate.

Sison