TERRORIST FINANCING: CHARGE MEETS FINANCE MINISTER

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 004622

SIPDIS

TREASURY FOR OFTI - U/S LEVEY, A SZUBIN AND R LEBENSON
JUSTICE FOR SUZANNE HAYDEN

E.O. 12958: DECL: 08/05/2009
TAGS: EFIN KTFN PTER TU
SUBJECT: TERRORIST FINANCING: CHARGE MEETS FINANCE MINISTER

Classified By: Charge d'Affaires Nancy McEldowney for Reasons 1.4 (b) a
nd (d).

1.(C) Summary: In a meeting called by Finance Minister
Unakitan, the Charge urged the Minister to follow through on
the U.S. proposal for a bilateral interagency working group
on terrorist finance. The Finance Minister agreed,
immediately called the Justice Minister to get his support,
and said they would discuss it in the Council of Ministers.
The Finance Minister said the GOT would draft a letter laying
out the steps it is taking to strengthen its terrorism
finance regime. One of the Vice Presidents of Turkey's FIU
separately reviewed these steps with Econoff. End Summary.

Finance Minister Calls Meeting on Levey Letter
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2. (SBU) Finance Minister Unakitan met with Charge and
Econoff on August 4. Also present on the GOT side were the
Minister's advisor Naci Agbali and Ender Tosun, one of two
Vice-Presidents at MASAK, the anti-money laundering agency
which is Turkey's Financial Intelligence Unit (FIU). Unakitan
intended for Tosun to brief on the specific steps the GOT was
taking but there was no time (see below). Unakitan said he
was re-evaluating all the elements discussed in the letter
from U/S Levey and would send us a reply. He stressed that
the fight against terrorism was "all humanity's fight" and
that cooperation was essential.

Unakitan against the "Deep State" Finance Inspectors
-------------- --------------


3. (C) In his meeting with U/S Levey, Unakitan had asked for
a list of past cases in which cooperation had not worked
well. Though we had wanted to avoid getting into a
backward-looking exercise that could be counterproductive,
the USG had attached a description of the rather
dysfunctional cooperation on the Marwan Haddad case. In the
meeting, Unakitan reacted with some agitation to our
attachment, saying "this is very delicate for me." He
criticized Embassy officers for going directly to the Finance
Inspection Board without going through the Minister. If we
don't go through the Minister, he asked, how can he respond
appropriately as a Ministry?


4. (C) Background Note: The Minister's reaction undoubtedly
stems from the fact that some of the Haddad accounts were at
Al-Baraka Bank, on whose board Unakitan served. There have
been longstanding accusations in the press that Unakitan used
his position as a director of Al-Baraka to help his son's
business obtain fictive export rebates on VAT taxes. Indeed,
IMF officials told us that one provision in last spring's tax
administration reform law seemed narrowly targeted to
exonerate people charged with the crime Unakitan is accused
of.


5. (C) Econoffs went to the Finance Inspection Board on this
case because the inspectors were investigating the Haddad
case and we were trying to get them to release some of the
information to U.S. law enforcement. Finance Inspectors told
us that Unakitan personally was blocking the release of the
information, although Unakitan himself later provided some of
the information by going around the bureaucracy. Comment:
This was a case of a leading AK Party Minister clashing with
state bureaucracy, amid accusations of the Minister's
corruption. The head the Finance Inspectors even referred to
his organization as "the Deep State." The inspectors are an
elite organization within the state bureaucracy, modelled on
the French Inspection des Finances, with close connections to
the presidency, the judiciary and the military. The AK Party
government has cleverly used a series of IFI and EU reforms
to reduce the powers of the Finance Inspectors. All of which
explains Unakitan's sensitivity about our dealing directly
with the Finance Inspectors. End Comment and Background Note.

Charge Presses Working-level Cooperation
--------------


6. (SBU)The Charge pushed back on this point, however, saying
we should not have to go back through the Minister to
cooperate: cooperation should be automatic. Saying we want
to work closely with the GOT to shut down terrorist financing
everywhere, she emphasized the need to create a structure in
which working-level officials are able to communicate and
cooperate easily. Unakitan seemed to accept this, and added
that "we need to learn from our mistakes. The cost is very
high." In terms of which agency the USG could most
appropriately deal with, however, Unakitan emphasized that
MASAK has the lead on this issue.

Working Group
--------------

7. (SBU) The Charge raised the idea of a bilateral working
group or committee that had been floated by Justice Minister
Cicek during U/S Levey's visit and suggested in U/S Levey's
followup letter. Unakitan called Cicek on the spot, catching
the Justice Minister at a traditional Turkish wrestling
match. The two ministers agreed to discuss the idea in
Council of Ministers. The Charge urged that all relevant
Turkish agencies participate. Unakitan repeated that MASAK
should coordinate. If the Ministers agree to the concept,
all present thought it best for the first meeting to take
place in September given the many absences during August.
The Charge suggested regular meetings to follow the issues,
starting with the items in U/S Levey's letter.
Closer cooperation Against PKK Financing:
--------------


8. (C) The Charge also raised the possibility of closer
cooperation between the U.S. and Turkey in shutting down PKK
financing in Europe. She stressed the importance of
developing good evidence to get the Europeans to cooperate
effectively.

MASAK Official on GOT Actions:
--------------


9. (C) In a follow-up meeting with Econoff, MASAK V.P. Ender
Tosun briefed on what the GOT was doing on each of the points
raised in U/S Levey's letter. As GOT officials said to
Levey, many of the points raised will be resolved once the
MASAK law is passed and a second set of legal changes
proposed by an interagency working group to strengthen
Turkey's anti-terror finance laws. Both Unakitan and Tosun
asserted the MASAK law will be passed quickly once the
parliament comes back into session in September or October.
The MASAK law will explicitly criminalize the financing of
terrorism and provide safe harbor for filers of suspicious
transaction reports. The other set of legal changes will
broaden the definition of terrorism to a more international
definition. This second batch of changes is currently under
consideration at the Prime Ministry, according to both Tosun
and MFA official Togan Oral. After the Prime Ministry
approves it it can go to Council of Ministers, but neither
Tosun nor Oral predicted when that would happen. Tosun also
said that the new Turkish penal code which recently came into
effect provides a stronger legal basis for freezing assets,
giving judges explicit legal authority to freeze. He said
this should make it harder to challenge freezes as
unconstitutional.


10. (C) Likely as a result of Levey's visit and persistent
Embassy prodding, Tosun described a new effort by MASAK to
reach out to other agencies and cooperate better. He said he
had visited the police, Foreign Ministry and other agencies,
who were quite receptive. He confirmed our understanding
that the police lack expertise in "following the money,"
saying that they might seize financial records and have no
idea what to do with them. He said MASAK would like to
include police in training programs.


11. (C) Tosun also said that with the new banking law, any
institution transferring money has to have a license from the
Bank Supervisory and Regulatory Agency (BRSA). These
organizations would also be subject to "know-your-customer"
rules. He specified that informal money transfer networks
(Hawalas) are illegal in Turkey, though he admitted they
exist. Tosun said that MASAK's information technology
project would facilitate better interagency
information-sharing, as other agencies will have access to
the information.


12. (C) Post will continue to pursue the agenda in U/S
Levey's letter and the idea of a bilateral working group.
MCELDOWNEY