TURKEY FOLLOW UP ON TERROR FINANCE

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 005037

SIPDIS

TREASURY FOR U/S LEVEY, RACHEL LEBENSON
TREASURY FOR FINCEN - MARY JO MELACON
DOJ FOR SUZANNE HAYDEN

E.O. 12958: DECL: 08/26/2010
TAGS: EFIN KTFN PTER TU
SUBJECT: TURKEY FOLLOW UP ON TERROR FINANCE

REF: A. ANKARA 3863

B. ANKARA 4622

C. ANKARA 3194

Classified By: Charge d'Affairs Nancy McEldowney. Reasons 1.4, b and d
.


1. (SBU) Summary. Taking up Treasury U/S Levey's offer to
help in Turkey's preparation for its upcoming FATF review,
Turkey's financial intelligence unit, MASAK, is organizing an
interagency GOT group to meet with Embassy on September 15.
The goal of the meeting is to identify areas for focused
bilateral cooperation to address the deficiencies identified
by U/S Levey, as well as to exchange actionable information
lead to designations of PKK financiers and fronts in Europe
and Iraq. This is an unprecedented opportunity to engage
deeply with the Turks on terrorism finance; to take advantage
of it, the U.S. will need to be ready to share concrete
information on PKK financing networks, as well as be prepared
to work closely with the Turks at the expert level on
specific steps needed to reach FATF standards. End Summary.

Please note action requests in paras 8-9.

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September 15 Interagency Meeting
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2. (SBU) In an August 24 meeting with Economic Counselor,
MASAK President Genc Osman Yarasli confirmed that the GOT had
agreed to the follow-up proposed in Treasury U/S Levey's June
letters to Finance Minister Unakitan and Justice Minister
Cicek (ref A). Specifically, we set September 15 for a
meeting between embassy representatives and an interagency
group of Turkish officials and experts responsible for
terrorism finance issues. The agenda for the meeting will be
two-fold: 1) discussing Turkey's preparation for its FATF
review next year with the aim of identifying opportunities
for cooperation with the United States, and 2) sharing
information with a view to joint action to designate PKK
financial fronts and organizations.

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FATF Preparation
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3. (SBU) In the September 15 meeting, discussion of
Turkey's preparedness for the FATF review will focus on the
six points identified in Levey's letter. Turkish officials
will brief on Turkish progress in addressing the issues
identified in those points with a goal of identifying areas
requiring additional work where USG assistance and expertise
could be of use.


4. (SBU) Although Yarasli agreed that U.S. experience in
the FATF could help Turkey prepare for the FATF review, he
cautioned that on a technical level Turkish experts well
understand Turkey's shortcomings in meeting the FATF
recommendations. The challenge in meeting those standards
was in pushing new legislation and regulation through an
overburdened government and parliament that had multiple
high-priority legal and regulatory reforms on its agenda.
Furthermore, MASAK and other agencies responsible for
financial crime were already unable to cope with and absorb
the amount of technical assistance currently on offer from
the EU. Thus, to be effective, any U.S. assistance would
have to be highly targeted and focused.

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PKK Financial Targeting
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5. (C) The second objective of the meeting is to discuss
specific plans for joint USG/GOT action against the PKK's
financial support network. Yarasli proposed an exchange of
actionable information about PKK financing networks in Europe
and Iraq that could be used by the U.S. and Turkey -- and
eventually EU members -- to designate PKK front groups,
financiers and sub-organizations so as to block and freeze
their assets.


6. (C) Yarasli emphasized an interest in learning more
about the PKK's financing network in Iraq. He mentioned the
cigarette factory in northern Iraq that Turkish officials
claim is producing counterfeit cigarettes for sale in Turkey
and elsewhere as an example of how Kurdish separatists fund
themselves. (Note Finance Minister Unakitan raised this
specific concern with Codel Shelby and Ambassador Edelman in
June - see ref C. Yarasli said this was an example of the
type of information he would like to exchange with the United
States; he was disappointed we had not yet responded to
Unakitan's concerns.)

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Comment and Action Requests
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7. (C) Building on U/S Levey's visit in June and Codel
Shelby's discussions three weeks earlier, we have generated
both an unprecedented focus by the GOT on their terrorism
finance deficiencies and a readiness to engage with us for
the first time on the meat of the issues. Yarasli was,
however, frankly skeptical of our commitment to this effort.
He advised that if the initial September 15 meeting did not
lead to concrete steps both on FATF cooperation and
countering PKK financing, Turkish agencies would lose
interest.


8. (C) Action requests: Yarasli's deputy Ender Tosun
suggested that participation of U.S. terror finance experts
in the September 15 meeting would be a signal of the
seriousness of our engagement. Post would also note that
participation by a Washington-based official could facilitate
the concrete follow-up measures needed to help prepare Turkey
for a favorable FATF review. Post would appreciate serious
consideration of sending the right person to Ankara to help
facilitate this dialogue.


9. (C) The PKK dimension of this engagement is critical:
it is an area where we can show our commitment to helping
Turkey fight PKK terrorism short of kinetic military action
in northern Iraq, and it creates incentives for the Turks to
work better with us and the international community on broad
terrorism financing issues. Being in a position to share
concrete information at this meeting that could be used to
substantiate designation of PKK financiers and fronts is an
absolute requirement for the success of this endeavor.
MCELDOWNEY