A/S WAYNE,S MEETING WITH JORDAN CENTRAL BANK

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 004391

SIPDIS

STATE FOR NEA FRONT OFFICE
STATE ALSO FOR NEA/ELA - BARON/WILLIAMS
TREASURY FOR GLASER/ZARATE/QUARLES
TREASURY ALSO FOR OASIA - LOEVINGER/MILLS/DEMOPOULOS
NSC FOR ABRAMS

E.O. 12958: DECL: 06/15/2015
TAGS: EFIN KTFN ETTC PGOV PREL JO
SUBJECT: A/S WAYNE,S MEETING WITH JORDAN CENTRAL BANK
GOVERNOR TOUQAN


Classified By: A/DCM Christopher Henzel for Reasons 1.4 (b),(d)


1. (C) SUMMARY: In meetings on the margins of the BMENA
Trade and Investment Finance Conference held in Amman May 18,
EB Assistant Secretary E. Anthony Wayne raised with Jordan
Central Bank Governor Umayya Touqan counter terrorism
financing and anti-money laundering issues, including the
Arab Bank case. At Wayne,s request, Touqan provided an
update on the CBJ,s requirements that Arab Bank improve its
procedures. Wayne then urged Touqan to set a clear deadline
for the Arab Bank,s compliance. The CBJ Governor noted the
importance that the CBJ places on AML/CFT controls and
expressed his hope that an anti-money laundering law
currently before Jordan's Parliament would give the GOJ a
powerful CT tool. He said that the GOJ is pressing for the
AML bill's passage and that it is one of the government,s
"top priorities." Touqan also gave a broad assessment of the
Jordanian economy, noting generally good progress with the
exception of a widening budget deficit. He remarked that a
more flexible foreign exchange currency basket was in
Jordan,s interest but noted it would take some preparation.
END SUMMARY.


2. (U) Accompanying A/S Wayne was Charge David Hale, Econ/C
Richard Eason and Econoffs (notetakers).

CBJ Governor: Taking the Side of OCC,
--------------


3. (C) A/S Wayne began the meeting with CBJ Gov. Touqan by
noting that he would be testifying soon on the subjects of
AML/CFT activity and specifically on the Arab Bank (AB). He
noted that he had seen CBJ's correspondence with Treasury on
AB's worldwide AML controls.


4. (C) Touqan said that he had been trying to work with
Treasury and had sent (CBJ Dep. Gov.) Faris Sharaf to
Washington twice to try to open a channel of communication to
ensure that efforts of Treasury/US regulators and CBJ were
coordinated. Touqan observed that the NBC TV report appeared
biased and riddled with errors and said that AB was planning
to sue NBC over it. He pointed out the difference between
"taking the initiative" to finance terrorist organizations
and making transfers to non-blacklisted organizations at the
request of non-blacklisted account holders (e.g., Saudi and
multilateral funds).


5. (C) A/S Wayne noted that much of the congressional
committee's criticism of AB was that it didn't meet required
standards for AML CFT compliance in the United States.


6. (C) Touqan said this was also OCC's criticism; CBJ backed
it to the hilt. "AB was complaining that we were taking the
side of the OCC against them," he said, noting that the CBJ
was after all a regulator. AB/NYC's problem was that they
were not filing enough suspicious action reports (SARs); this
was because the manager of the NYC branch had taken the
decision, on his own authority, to limit the number of SARs
filed. He shouldn't have had the authority to make a
decision like that without consulting Arab Bank HQ, Touqan
opined. CBJ advised AB to hire a firm to advise them on how
to keep all branches up to standard and AB has done so, he
noted. CBJ would give AB a period of time to upgrade and see
at the end of that period how they have done.


7. (C) A/S Wayne asked if the CBJ had given AB a deadline
to implement these changes; Touqan said that they had not but
that this was a good idea. Wayne reiterated that CBJ should
do so. He noted that the continuing civil suits against AB
would be a continuing source of bad publicity for the bank
and by extension Jordan's banking sector. The GOJ needs to
show its seriousness in cleaning up bank practices.

AML Law one of GOJ,s "Top Priorities"
--------------


8. (C) Wayne inquired about the pending anti-money
laundering (AML) law. Touqan noted that it had taken nearly
two years to convince even the Cabinet to approve it, as some
ministers paradoxically thought it would reduce investment
flows. Now the GOJ would need to lobby hard with Parliament
to get it passed. It would be tough, but it was one of the
GOJ,s "top priorities", he noted. Touqan had already heard
from Parliamentarians the same wrongheaded objections to the
law on investment grounds; Parliament also thought it would
violate human rights. Touqan added that the AML was needed,
as there was not currently any criminal liability in Jordan's
legal code for participating in money laundering - only
administrative penalties.

Economic Priorities
--------------


9. (C) A/S Wayne asked for Touqan's views on Jordan's
macroeconomic situation. Touqan noted that in general the
economy looked good except for the GOJ budget deficit. CBJ
had consulted with Minister of Finance Bassem Awadallah on
this and had come up with three priorities: (1) the GOJ
needed to reduce staffing - while this is hard to do for
political reasons, it is necessary, as the vast majority of
GOJ expenditures go to keep these people employed; (2)
increase revenues - income tax take is minimal because of
collection problems; the solution might be a flat tax at a
reasonable level such that avoidance wouldn't be worth the
trouble and risk; (3) speed up privatization - recent
privatizations have taken three years but shouldn't take more
than three months, he noted.


10. (C) In general, the economy seemed to be going well, he
noted. CBJ's priority was price stability, of which people
were now beginning to feel the benefits. The U.S. should
take credit for this, he observed.


11. (C) Charge inquired about current CBJ thinking on
exchange rate policy. Touqan replied that he thought that
going to a more flexible policy was in the interests of
Jordan, but that it would require some preparation, as the
market is very sensitive to perceived weakness in the JD.
Touqan didn't want to repeat the experience of the Egyptians
who floated their pound and saw it immediately lose 40
percent of its value.


12. (U) A/S Wayne cleared this cable.
HALE