BMA ISSUES WARNING LETTER TO SHAMIL BANK FOR

S E C R E T MANAMA 001830 SIPDIS PASS TO EB/ESC/TFS FOR BADKINS, S/CT FOR VNICHOLS, EUR/PGI FOR LREASOR, EUR/WE FOR NFETCHKO, NEA/ARPI, IO/PSC FOR BFITZGERALD, NSC FOR JZARATE, TREASURY FOR DGLASER AND OFAC FOR RWERNER E.O. 12958: DECL: 12/06/2015 TAGS: ETTC KTFN EFIN PTER KSEP CVIS KVPR BA ECTRD CTR SUBJECT: BMA ISSUES WARNING LETTER TO SHAMIL BANK FOR OPENING IIRO ACCOUNT REF: A. MANAMA 1432 ¶B. JEDDAH 4965 Classified By: Ambassador William T. Monroe, reasons 1.4 (b) and d). ¶1. (S) Summary. Ambassador and OFAC Attache met with Bahrain Monetary Agency (BMA) Governor November 20, 2005 to discuss the International Islamic Relief Organization (IIRO) account at Shamil Bank (Ref A). The BMA Governor stated that the IIRO account was ordered closed and Shamil Bank had received a warning letter. The BMA rulebook would be clarified since Shamil Bank claimed to interpret the regulations governing charitable accounts to only apply to local charities. Ambassador stressed the need for strong public action to curtail any further violations. During subsequent conversations with a BMA legal advisor, he indicated that given this was Shamil Bank's first offense, they were given a less stringent punishment. End Summary. ¶2. (S) Ambassador and OFAC Attache met with BMA Governor Rasheed Al Maraj on November 20, 2005 to discuss the outcome of the investigation into the IIRO accounts at Shamil Bank. The BMA Governor reiterated that the IIRO account had been closed according to BMA instructions and noted that the BMA had sent a warning letter to Shamil Bank as a "measured response" to the bank's violation. (Note: Shamil Bank Bahrain opened an account for the IIRO despite the organization not being a charity registered in Bahrain. According to BMA regulations regarding Charity Organizations in Bahrain, dated May 3, 2002, "Licensed banks may not open an account for charity funds or societies until an original certificate authenticated by the Ministry of Social Affairs confirming their identities and authorizing them to open an account has been obtained." IRO reported to USG officials November 2005 that it had not sent any money overseas in the "past six months" (Ref. B),indicating it had ceased using the Shamil Bank Bahrain account not later than May 2005. End note.) Al Maraj reported that during the investigation, Shamil Bank defended opening the account of IIRO because they interpreted the rule to only apply to local charities and IIRO is not a local charity. The BMA Governor stated that Shamil Bank had been advised that this rule applied to all charities, local and international, and indicated that the rulebook was being changed to reflect this clarification. ¶3. (C) Ambassador stressed the importance of strong public action, like a public announcement, to ensure that Bahrain,s financial sector was fully aware of the clarification. He said it was important for the Bahraini marketing reputation that the BMA address any vulnerability in the regulations. The Governor said the BMA did not issue a separate circular to highlight this change, but he thought the rulebook change addressed the problem. ¶4. (C) BMA legal advisor told Econoff November 28 that neither he nor his colleagues had found the bank's excuse compelling. He told Econoff that in issuing a warning letter to Shamil Bank, the BMA was not acknowledging any ambiguity or shortcoming in the existing rulebook. However, he confirmed that, pursuant to the Governor's November 20 assurances to the Ambassador, the BMA would revise the rulebook to clarify that the regulations in question apply to all charities - domestic and international. The advisor also told Econoff that November 30 was Shamil Bank's deadline for reporting whether or not a self-audit had revealed any other violations. He said confidentiality guidelines would prevent the BMA from sharing these results or the specific findings of the BMA,s investigation of Shamil. He did say he would pursue the possibility of providing a substantive summary. MONROE