ISRAELIS BRIEF U/S LEVEY ON TERROR FINANCE STEPS

C O N F I D E N T I A L SECTION 01 OF 03 TEL AVIV 001013

SIPDIS

E.O. 12958: DECL: 02/15/2015
TAGS: PTER EFIN KPAL KWBG IS COUNTERTERRORISM ISRAELI PALESTINIAN AFFAIRS
SUBJECT: ISRAELIS BRIEF U/S LEVEY ON TERROR FINANCE STEPS
AGAINST HAMAS AND HIZBALLAH AND VIEWS ON PA WELFARE REFORM

Classified By: Political Counselor Norm Olsen; Reasons: 1.4 (B) and (D)
.


1. (C) SUMMARY: Israeli National Security Council
Counterterrorism Director General Danny Arditi met with
Treasury U/S Stuart Levey and his delegation on February 14
in Ramat Hasharon, near Tel Aviv. Arditi said that the GOI
has recently switched the focus of its terrorism finance
efforts from Hamas to Hizballah. He suggested that
heightening the international community's awareness of
Hizballah's criminal activities could help convince other
governments to avoid ideological debates and focus on
combating the group's illegal activities. His staff provided
information on a number of financial institutions and
charities that they said provide funding to Hamas and
Hizballah. The Israelis described their goals of weakening
support for Hamas among the Palestinian population and
strengthening the PA's welfare infrastructure through the
creation of a mechanism to transfer charity money to the
territories and provide basic welfare for the poor. The NSC
Legal Advisor briefed the group on Israel's new terrorism
finance law. END SUMMARY.


2. (SBU) During his briefing for the USDEL, Brigadier General
Danny Arditi was joined by his Deputy for International
Coordination Amnon Zehavi, Advisor for Terrorism Finance Lt.
Col. Udi Levi, Advisor for Intelligence Uzi Shaya, NSA Legal
Advisor Roy Dick, Israeli Embassy officer Eynat Shlien,
Advisor for Intelligence Lt. Col. Amon Prodik, and a military
staffer. Treasury U/S for Enforcement and Head of the Office
of Terrorism and Financial Intelligence Stuart Levey was
accompanied by Senior Advisor Adam Szubin, DAS Daniel Glaser,
Senior Advisor Anne Wallwork, Public Affairs Specialist Molly
Millerwise, IRS Senior Analyst Mark Weber, USSS Agent
Jacqueline Marengo, USSS Agent Scott Salo, and Embassy
notetaker.

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Terrorism Finance: Shifting Focus from Hamas to Hizballah
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3. (C) Arditi listed the Counterterrorism Financing Bureau's
(CTFB) top four targets as Palestinian extremists (primarily
Hamas and Palestinian Islamic Jihad),Palestinian Authority
factions supporting terrorism, Hizballah, and global
"jihadist" groups. He noted that until recently the GOI's
focus had been on Hamas. Now that Israel has a better grasp
of Hamas activities, he said, the GOI has shifted its sights
to Hizballah. U/S Levey noted that Hizballah is a high
priority for the USG and asked if the PA is cooperating with
efforts to curb the group. Arditi replied that such
cooperation is "possible," but that it is "a little too
early" to expect PA assistance. Levi expressed his view that
the EU would designate Hizballah as a terrorist organization
if Abu Mazen would quietly support the move.


4. (C) Addressing the Hamas problem, Levi claimed that more
than half of the group's funding had formerly come from Saudi
Arabia, but Riyadh's decision to cut the flow of unregulated
NGO funds to the territories has "caused real damage" to
Hamas finances. Arditi added that international efforts have
"weakened the Hamas grip on the Palestinian public." Levi
said that Hamas still receives USD 2-3 million a year from
Iran through Damascus or the Sederat Bank in Lebanon, as well
as additional funding from charities in the west, commercial
activities, and individuals in the Gulf states, primarily
Kuwaitis and Qataris channeling money through the UAE. He
claimed that this funding enters the West Bank and Gaza
through money changers and couriers. He said that Hamas
formerly used the banking system as well, but this channel
had been cut after U.S. lawyers filed suit against the Arab
Bank.


5. (C) Levi estimated that Iran provides USD 70-90 million of
Hizballah's annual budget, mostly through the Sederat Bank,
while the rest of the funding stems largely from criminal
activities such as counterfeiting and drugs. Arditi
suggested that increasing the international community's
awareness of Hizballah's criminal activities could help to
convince other governments to avoid ideological debates and
focus on combating the group's illegal activities. U/S Levey
and Glaser replied that Saudi Arabia is using a similar
tactic to gain domestic support for its fight against
Al-Qaeda.


6. (C) Levi charged that at least two banks (the
Lebanese-Canadian Bank and the Societe Generale de Banque au
Liban) are "connected directly to the financial
infrastructure of Hizballah." In addition, he said, a Bank
of America branch in the tri-border area of South America is
handling Hizballah funds. Shaya added that the Chavez
government is allowing Hizballah to operate in Venezuela.
Levi claimed that several NGOs in the United States are also
supporting Hizballah and asked for them to be included on the
USG lists of organizations that finance terrorism. He agreed
to provide further details on the banks and NGOs during the
next terrorism finance meeting in Washington.


7. (C) Levi called INTERPAL and other European groups that
channel funds to Hamas "a problem we do not know how to
solve," but added that lawsuits similar to the ones filed
against the Arab Bank might help. He suggested that another
option to restrict funding would be to prevent INTERPAL from
clearing dollar donations through New York. U/S Levey
requested additional information on INTERPAL to share with
London and details of the bank transfers in the United
States.


8. (C) U/S Levey queried the Israelis about specifics of the
Arab Bank's involvement with terrorism finance. Levi said
the bank had stopped all transactions to the territories
after it was sued in U.S. court. He cautioned, however, that
the bank is "playing with evidence, cleaning the records, and
deleting accounts" to cover its tracks. Shaya said that the
GOI has unspecified proof that the Arab Bank is still dealing
with Hizballah in Lebanon. Arditi noted the need for caution
in dealing with the Arab Bank, reiterating the importance of
its continued operation to the economies of Jordan and the
territories.

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Social Security: Beating Hamas at its Own Game
-------------- -


9. (C) Prodik said Israel aims to weaken support for Hamas
among the Palestinian population, strengthening the PA's
welfare infrastructure, and increase support for Abu Mazen
and Finance Minister Salam Fayyad. Cautioning that the PA
welfare system is "currently not working," he advocated the
creation of a mechanism to supplant Hamas as a means of
transferring charity money to the territories, with PA
oversight through the Religious Affairs Committee, or Waqf.


10. (C) Prodik also addressed the need for the PA to
strengthen its role vis-a-vis Hamas by establishing a
national insurance system and assisting the poor. He asked
that the international community finance "at least part" of
the PA's welfare projects in order to justify external
monitoring and auditing. Using data from the Palestinian
Central Bureau of Statistics, Prodik claimed that total
direct humanitarian assistance equals approximately 51
million USD per year.


11. (C) Noting that current welfare recipients include
families of imprisoned and deceased terrorists, U/S Levey
requested GOI views on how destitute individuals would be
chosen. Levi replied that the PA could pay all "needy"
families, regardless of what caused their situation. He
stressed, however, that Israel would strongly oppose adding
new families of "martyrs" to the welfare rolls once the
program is underway.


12. (C) U/S Levey asked what steps the USG could take to
support these goals. He noted that the USG is considering
similar ideas, as well as alternative channels for private
donations, but wants to adapt USG thinking to the situation
on the ground. Arditi commented "we won't be able to do it
without American involvement -- neither us nor the
Palestinians." Prodik said that coordinating donors and
ensuring external auditing/monitoring would be the most
helpful roles for the USG. U/S Levey asked if the GOI had
shared its thoughts with the PA. Levi replied that only the
welfare idea had been raised; Arditi added that it is
"premature" to share other thoughts at this time.

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New Israeli Terrorism Finance Law Closes Gaps
--------------


13. (C) Dick briefed the group on Israel's new terrorism
finance law. He said that the law supplements existing
legislation by closing two important gaps: it allows the GOI
to designate individuals, not just groups, as "terrorist
activists," and permits designation of individuals and groups
even if not specifically linked to terrorism in Israel. He
said the legislation's safeguards allow for judicial review,
reconsideration of designees after four years, and the
ability of the oversight committee to remove names from the
list. Dick urged the USG to submit names for inclusion on
the designation list once the new law enters into force in
June 2005.


14. (U) Undersecretary Levey has cleared this message.

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