REGIME INSIDERS ALREADY MOVED TO PROTECT ASSETS

C O N F I D E N T I A L SECTION 01 OF 03 DAMASCUS 006224

SIPDIS

SIPDIS

NEA/ELA
NSC FOR ABRAMS/DORAN
TREASURY FOR GLASER/SZUBIN/LEBENSON
EB/ESC/TFS FOR SALOOM

E.O. 12958: DECL: 11/28/2015
TAGS: ECON EINV EFIN PTER KTFN SY
SUBJECT: REGIME INSIDERS ALREADY MOVED TO PROTECT ASSETS
FROM SANCTIONS

REF: A. SECSTATE 214622

B. DMS 04819

C. DMS 06131

Classified By: CDA Stephen Seche for reasons 1.5 b/d


1. (C) Summary: Contacts report that those who may be named
in the UNIIIC report on December 15 already have protected
their assets in anticipation of new sanctions. Regime
insiders have spread their assets both at home and abroad
under the names of family members, and avoid moving money
through banking channels by smuggling cash across borders and
using the major Syrian moneychangers/hawaladars for most of
their transactions. However, the regime insiders' access to
continued wealth depends on a cabal of businessmen who act as
the financiers of the regime. Contacts contend that most
Syrians would support targeted financial sanctions against
these businessmen as well as those implicated in Hariri's
assassination, and that the "name and shame" effect of the
sanctions would make it more difficult for these individuals
to maintain their influence and hold on power. End summary.


2. (C) Most of the individuals who may be implicated in
Detlev Mehlis' December 15 report to the UNSC on the
assassination of former Lebanese Prime Minister Hariri
already have taken efforts to protect their assets (ref A).
Contacts offer as evidence that there has been little to no
visible effect on the financial activities of those eighteen
Syrian entities already designated under U.S. Executive Order
(EO) or UNSCR. Contacts report that former Interior Minister
Ghazi Kanaan, who allegedly commited suicide on October 13,
for example, had closed correspondent accounts in U.S. banks
and hidden assets in accounts under the names of family
members years before he was named in EO 13338 and included on
the Department of Treasury's Excluded Parties List (EPL).
Kanaan's disdain for sanctions was highlighted in the local
press, which quoted him as saying, "If they find a button
there, let them freeze it." However, business contacts in
the import and banking sectors said that despite Kanaan's
disdain, the sanctions had utility by "naming and shaming"
Kanaan and making him appear more vulnerable.

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Avoiding Sanctions: It's a Family Affair
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3. (C) As the case of Kanaan suggests, it will be difficult
to shut down the financial activities of regime insiders
altogether. Contacts among the business community state that
it is common practice for Syrians to hide their wealth under
the names of family members to shield it from both domestic
and international scrutiny. According to one contact, regime
insiders routinely place their assets under the names of
their children over the age of 18. They are less likely to
place them under their wives' names, since in the Syrian
context the wife and husband are viewed as the same entity.
They also hide assets under the names of extended family
members, but rarely beyond the relationship of cousin since
the asset holder must have a high degree of trust in and
control over the recipient of the assets. One contact told
Econoff that there is a legal instrument called "wariqa dud"
(opposite paper),which allows the owner of an asset to place
it in the name of another person and reclaim it at a future
time. This allegedly is a widespread practice, and
relatives get paid a small sum to act as a front for the
owner of the property. The contact stated that it is easy to
tell when this arrangement has been made because people
without great wealth suddenly begin to live above their means.


4. (C) In addition, contacts report that regime insiders
already have transferred assets to foreign accounts in Europe
and the Gulf, and therefore will not need to make
transactions that can be flagged and blocked by financial
institutions. Contacts specifically have mentioned Cyprus,
Turkey and Dubai as primary destinations. While Lebanon used
to be the financial market of choice for Syrians due to its
proximity and strict bank secrecy laws (ref B),there is
evidence that some Syrians have moved their assets from

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Lebanese banks fearing a lack of security. Nabil Hchaime,
General Manager of Banque BEMO Saudi Fransi, one of four
private banks in Syria, reported recently that his bank is
receiving a significant number of new cash accounts wired in
from overseas, and that he began receiving 40-50 electronic
transfers per day from Syrians who previously deposited their
money in Lebanon after the Lebanese government waived bank
secrecy in August on the accounts of those suspected of
involvement in the Hariri assassination.

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Avoiding Sanctions: Smuggling and Hawalas
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5. (C) In spite of the fact that regime insiders have
pre-positioned most of their assets, contacts state that
future movement of money most likely will occur outside of
formal banking channels, unimpeded by financial sanctions.
Contacts report that regime insiders will continue to send
money denominated in Syrian Pounds (SYP) via cash smuggling
routes across the Lebanese and Jordanian borders to get hard
currency, and then move it to bank accounts in Dubai, which
one contact described as "a great washing machine" for regime
money. One contact described a smuggling route between
Lattakia and Tartous overland to Tripoli, Lebanon, where he
said that regime elements have connections among Tripoli's
Alawite community. The contact stated that security agents
posing as taxi drivers often are the mules, and that the
border guards are bribed. Mazen Tabaa, Chairman of Western
Union in Syria and a former moneychanger/hawaladar, stated
that this and other smuggling routes are well established and
serve a large market for SYP in Lebanon, Jordan and the Gulf
among Syrian expatriates, who have been paid in foreign
currency but need to remit their earnings in SYP, and among
Gulf tourists who flock to Syria in the summer months.


6. (C) Tabaa added that regime insiders also exchange and
move their money overseas through domestic agents,
specifically the large moneychangers and hawaladars that are
well connected to the regime. One of the biggest of the
Syrian moneychangers, who services both the general
population and regime insiders, goes by the name of Sahloul,
aka Abu Shafiq. According to Tabaa, he demonstrated his
influence recently by providing the SARG with the names of
his black market competitors who then were rounded up and
imprisoned in one of the government's latest attempts to
support the pound by choking off the black market (ref C).
Sahloul's operation was not affected. Contacts report that
Sahloul maintains a global enterprise with partners and
offices in Iraq, Dubai and throughout the Gulf. Basel al
Haffi, member of an influential Sunni family and
self-proclaimed close personal friend of Sahloul, reported
that Asad-family cousin Rami Mahklouf uses the top managers
of his legitimate business enterprises, mentioning
specifically Nadir Kal'i, Director General of Syriatel, to
move $1-2 million a day- figures that Post has heard from
other sources- through Sahloul's moneychanging house to
accounts in Dubai.

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The Financiers
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7. (C) Contacts imply that while the regime insiders already
have taken steps to hide their assets and avoid using formal
financial channels to make transactions, they owe their
continuing wealth to the actions of a small cabal of
businessmen who act as the financiers of the regime. It is a
generally accepted fact in Damascus that all major business
deals have to run through this cabal of regime businessmen,
which includes Rami Mahklouf and Mohammad Hamsho, two of its
most oft-mentioned members. Highlighting the central role
that this group plays in the economy of Syria, al Haffi
reported that Mahklouf and Hamsho were made a part of a team
of businessmen traveling later this week with Deputy Prime
Minister for Economic Affairs Abdullah Dardari on an official
delegation to Malaysia to encourage foreign direct
investment. (Note: Despite the fact that Mahklouf has made a

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public show of shifting his base of operations to Dubai and
intimating a split with the regime, Syrians in general
beleive that Mahklouf continues to play the role of premier
financier. End note.)


8. (C) These businessmen enjoy massive influence in most
sectors of the Syrian economy and in turn depend on the
regime for continued economic dominance. Mahklouf, who is a
maternal cousin of President Asad, manages a financial empire
that includes Syriatel and Areeba 94- Syria's two cellular
companies- the chain of Ramak duty free stores at Syria's
borders and ports, powerplants and a major interest in Byblos
Bank, one of Syria's four private banks. Hamsho, who is a
member of parliament and whose company, The Hamsho Group, is
involved in construction, import/export, entertainment,
marketing, cement, and telecommunications, is Kurdish and
from the Midani suburb of Damascus. Business leaders from
among Damascus' wealthy Sunni families claim that Hamsho does
not have extensive business experience in business and that
he derived his wealth and influence purely from his
connections to the regime. According to Tabaa, Hamsho has
provided most of the financial backing for the almost daily
protests around the U.S. Embassy. Another member of this
group, Dhu al Himma as Shaleesh, who is a paternal cousin of
the President and chief of Presidential security, owns SES
International, which is active in the construction and
automobile import sectors. SES International is one of the
Syrian entities designated under Iraqi Sanctions Regulations
on Treasury's EPL and by UNSCR, but contacts report that it
continues to do business unabated.


9. (C) Comment: Contacts uniformly agree that most Syrians
would support targeted financial sanctions against those who
are implicated in the UNIIIC investigation. They contend
that a policy of targeted sanctions would further isolate and
weaken culpable regime officials while demonstrating that the
USG distinguishes between these individuals and the bulk of
the Syrian population, who have no connection to the
government and little sympathy for it. Syrians also would
support sanctions against the financiers of the regime, whom
the vast majority identifies as obstacles to economic reform
and development. It is Post's understanding that the
language of EO 13338 is sufficiently broad to extend beyond
designated SARG officials to cover the regime's financiers
and those who are material contributors to SARG policies
towards Iraq, Lebanon, WMD and Palestinian rejectionist
groups. Post believes that designating the financiers would
deprive the regime of critical financial support, and send a
powerful political message of zero tolerance for the
corruption that has fueled this regime since its inception
and siphoned the wealth of a nation into the hands of a few.
SECHE