VISIT TO EGYPT OF TREASURY ACTING A/S FOR

C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 008134

SIPDIS

NSC STAFF FOR POUNDS

E.O. 12958: DECL: 10/23/2015
TAGS: ECON EFIN PTER EG
SUBJECT: VISIT TO EGYPT OF TREASURY ACTING A/S FOR
TERRORIST FINANCE AND FINANCIAL CRIME DANIEL GLASER

Classified by Economic and Political Counselor John Desrocher
for reasons 1.4 (b) and (d).

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Summary
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1. (C) Treasury Acting Assistant Secretary for Terrorist
Financing and Financial Crimes Daniel Glaser met on October 1
with officials of the Egyptian Ministries of Social Affairs
(MSA),Finance (MOF),Justice and the Central Bank of Egypt
(CBE). At MSA, officials reviewed the Egyptian law
regulating charities, which are considered NGOs, and
responded to questions about possible connections between
charities in Egypt and the Palestinian territories. At MOF,
officials reviewed Customs regulations for cash currency
import/export and the means by which funds are transferred
into and out of Egypt. At CBE, officials in the Money
Laundering Combating Unit (MLCU) explained the process for
handling Suspicious Transactions Reports (STRs),reviewed
procedures for monitoring charity finances and discussed
assistance to the Palestinian Central Bank's Financial
Intelligence Unit (FIU). MLCU officials also discussed the
GOE's procedures for handling information from the UN's 1267
Committee. End summary.

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Ministry of Social Affairs
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2. (C) Ambassador Ahmed Abulkheir, Advisor to the Minister
of Social Affairs, claimed that no Egyptian charities were
linked to terrorism and no terrorist financing was carried
out through charities in Egypt. Under Egyptian law all
charities were considered NGOs. The NGO law required that:
1) all NGOs register with MSA and obtain a registry number;
2) all NGOs specify their objectives, which MSA reviewed to
ensure that all funds received and spent were in line with
the NGOs' stated objectives; 3) NGOs refrain from sending
money aboard, unless MSA granted permission to do so, as it
often did for the Red Crescent. NGOs that transferred funds
out of Egypt without MSA permission would, in theory, be
dissolved. In practice, however, no NGO had ever been
dissolved. Abulkheir noted that Egypt was often criticized
for its restrictive NGO law, but he contended that Egypt's
security situation required restrictive measures. Despite
these restrictions, Abulkheir admitted that a branch of the
International Islamic Relief Organization (IIRO) was thought
to be illegally operating in Egypt.


3. (C) Glaser asked about possible connections between
charities in Egypt and groups in the Palestinian territories.
He noted that in a recent meeting in Saudi Arabia, the USG
raised the issue of a Saudi TV station airing ads soliciting
donations for families of Palestinian "martyrs." The Saudis
explained that the broadcasts came from Egypt and Italy.
Abulkheir referred Glaser to the Ministry of Information, but
suggested that these stations were broadcast via satellite
and not from Egypt. He added that all funds going to
Palestine from Egypt went through MSA and the Red Crescent
and stressed that charity funds were urgently needed in the
Palestinian territories. Glaser responded that the USG
encouraged charitable giving, including through Muslim
charities. However, if a charity devoted even 1% of its
funds to terrorism, it must be shut down. Glaser also
mentioned that Egypt was co-author of a Charities Working
Paper adopted by the MENAFATF at its September 2005 plenary
and encouraged MSA to implement the paper's recommendations.

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Ministry of Finance
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4. (C) MOF First Undersecretary Momtaz El Said told Glaser
that MOF supervised currency imported/exported to Egypt. MOF
recently issued a decree requiring disclosure of domestic or
foreign currency over LE 10,000 carried in and out of the
country ) a reduction from the previous LE 20,000. El Said
insisted that most cash transfers into and out of Egypt went
through the "formal" banking system, and only a small
proportion went through "informal" means, despite large
communities of Egyptian workers living abroad. Glaser noted
that the U.S. now required money transfer organizations to
register with the USG. El Said replied that the Ministry of
Interior and the Customs Authority had established a joint
committee to investigate suspicious imports/exports of cash
currency, which were also reported to CBE's MLCU. El Said
also claimed that no weapons were crossing Egypt's borders
illegally, asking Glaser not to "be influenced by the stories
you hear." Such transfers would be an issue of national
security and would not be permitted.

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Central Bank of Egypt
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5. (C) At the MLCU, Executive Director Samir El Shahed noted
that Egypt's economy was still cash-based, so monitoring all
financial transactions was not easy. CBE was studying what
could be done to move Egypt's economy to a non-cash basis.
CBE did regular audits of all banks in Egypt and shared the
information with MLCU. Banks were broken down into high,
medium and low risk levels for money laundering operation and
terrorist financing, based on volume of transactions. Since
its inception in 2002, the MLCU had received over 1,000 STRs.
Three money laundering cases had been prosecuted
successfully, and 5-6 other potential cases were pending in
the prosecutor's office. Egyptian law also required
prosecution of predicate crimes related to the money
laundering cases.


6. (C) On the issue of charity financing, El Shahed pointed
out that in addition to the provisions of the NGO law
mentioned above, the law also specified that: 1) all NGOs
operate for one year on a trial basis; 2) penalties be
implemented for non-compliance with the law; 3) NGO funds be
placed in a bank account, so transactions could be monitored.
No STRs on charities, such as the IIRO, had been received.
The MLCU did not handle issues related to funding of the
Muslim Brotherhood (MB),as all MB issues were handled by
other GOE agencies. Deputy Minister of Justice Serry Seyam
noted that President Mubarak had made a campaign promise to
replace the Emergency Law with an anti-terrorism law. The
GOE had also established a committee to write a terrorist
financing law, and the MLCU was playing a prominent role on
the committee. El Shahed pointed out that it would be
helpful if FinCEN, as the leading international FIU,
developed a list of terrorist finance indicators, which would
assist other FIUs in identifying terrorist financing.


7. (C) Glaser noted that the USG was concerned about getting
the Palestinian FIU up and running, and asked if Egypt could
help. Treasury was considering putting a person in the U.S.
Embassy in Amman to work on this. El Shahed replied that the
MLCU had already met with Palestinian Central Bank officials
to assist them in operationalizing their FIU, which had
already received some STRs. Shahed agreed to send
information on this meeting to the embassy. He also noted
that MLCU was working with the Egyptian Banking Institute,
the UN and the World Bank to develop a money laundering
training certificate that would be offered on a regional
basis.


8. (C) Glaser thanked El Shahed for the submission of 22
names to the UN 1267 Sanctions Committee. Egypt's submission
affirmed the UN 1267 process. Glaser inquired about the
process of freezing assets in Egypt. El Shahed responded
that MLCU had the authority to freeze assets, but a public
prosecutor's order was required. The Ministry of Foreign
Affairs monitored the UN 1267 list and reported names on the
list to CBE. CBE then sent a letter to all Egyptian banks
requiring them to freeze any assets immediately. El Shahed
claimed that no assets of entities on the 1267 list had been
frozen in Egypt. He was not sure if CBE had frozen the
accounts of the 22 names the GOE sent to the UN 1267
Committee. Glaser asked that the MLCU encourage banks to
report to CBE on any frozen assets and that CBE in turn share
this information with the USG. Glaser also suggested a
meeting to follow up on USG/GOE issues. El Shahed agreed and
suggested sometime after the upcoming MENA-FATF meeting in
Cairo in March 2006.


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