U.S. TREASURY DISCUSSES WITH GOI ESTABLISHMENT OF

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 006626

SIPDIS

E.O. 12958: DECL: 11/23/2015
TAGS: PREL PTER EFIN ISRAELI PALESTINIAN AFFAIRS ECONOMY AND FINANCE COUNTERTERRORISM
SUBJECT: U.S. TREASURY DISCUSSES WITH GOI ESTABLISHMENT OF
PALESTINIAN FIU

Classified By: Economic Counselor William Weinstein for reasons 1.4 (b)
and (d).


1. (C) SUMMARY: Israeli military intelligence officials
headed by Brigidier-General Kuperwasser met with Treasury
policy advisor Lebenson, Post's Defense Attach and econoff
to discuss a U.S. Treasury initiative to establish a
Financial Intelligence Unit (FIU) or Financial Follow-up Unit
(FFU),as suggested by the Palestinians, in order to combat
money laundering and terrorism financing in the Palestinian
territories. These officials told Lebenson that the GOI is
not optimistic about the Palestinians' commitment in fighting
terrorism financing because terror money still flows into the
territories every month from neighboring countries. They
cited historic instances where the Palestinians failed to
cooperate to fight terrorism financing and cannot see why
things would be different now. Despite the Israeli
officials' skepticism, they expressed support for the concept
and said that they would be willing to support the FIU and
engage in information exchange with the Palestinians.
Lebenson also met with Yehuda Shaffer, director of the
Israeli Money Laundering and Terror Financing Prohibition
Authority (IMPA) who said that the Palestinians need to take
considerable steps in order to establish an FIU that is
credible and legitimate. He said the global network of FIUs
could provide framework where the Palestinians could network
and take steps to formulate a plan that will allow them to
develop an FIU that is functional.

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Ministry of Defense
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2. (C) On November 17, Rachel Lebenson, policy advisor in the
Office of Terrorist Financing and Financial Crimes in the
Department of Treasury, accompanied by the Post Defense
Attach Colonel William Clark and econoff, met with MoD
officials Brigadier-General Joseph Kuperwasser, Head of the
Production Division in the Military Intelligence Department;
Lieutenant (Lt) Nir Lasri, Palestinian Authority Analyst;
Major Ilan Lukof, Terrorism Finance Analyst; GOI-NSC official
Lt. Eyal Pascovich, Terrorist Finance Coordinator in the
Counterterrorism Bureau; and Amiram Vardi, Middle East
Economic Advisor to discuss the MoD's perspective on the
possible establishment of a Financial Intelligence Unit (FIU)
in the Palestinian territories.


3. (C) Kuperwasser said the PA is not serious about combating
terrorism financing. He indicated that an FIU in the
territories under the purview of the PA, or Palestinian
Monetary Authority (PMA) would need to carry out its mission
in order to be considered a serious player. He characterized
the PA's response to terrorism financing as "less than
adequate."


4. (C) He claimed that every month millions of dollars enter
the territories from countries like Lebanon, Syria, Iran, and
Saudi Arabia and end up in terrorist hands. He said that
some U.S. financial institutions like Western Union are also
involved in facilitating financial transactions between
different terror groups. He said the GOI has expressed
concern to U.S. authorities, but nothing has been done.


5. (C) Kuperwasser cited previous instances when the GOI
acted alone because the PA failed to take action to curb
terrorist activity. He said Operation Defensive Shield,
which uncovered documents disclosing terrorism financing
links, and a bank raid by the GOI in Ramallah in February
2004, both resulted from the PA's inability to control terror
elements, forcing the GOI to act alone. He said Salam Fayyad
contacted the GOI expressing concern that Israeli officials
did not contact him before raiding the bank, but he added
that Fayyad would not have acted even if Israeli officials
had informed him of this operation.


6. (C) Although Kuperwasser and other Israeli officials
expressed skepticism as to whether the Palestinians would be
able to create a functioning FIU, they agreed that they would
be interested in supporting it. Kuperwasser indicated that
it was up to the Palestinians to decide which channels of
communication the FIU would use to fulfill its duties,
agreeing that discrete communication through the FIUs
probably made more sense.

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Ministry of Justice
--------------


7. (C) Lebenson and econoff met with Yehuda Shaffer, Director
of the Israel Money Laundering and Terror Financing
Prohibition Authority (IMPA) in the Ministry of Justice.
Note: IMPA provides case support information to requesting
customers. It receives data from banks, insurance companies,
portfolio managers, stock brokers, currency service
providers, customs, internal revenue service and others
dealing with financial transactions. It processes this
information and provides intelligence to the Israel tax
authorities, the Israel National Police (INP),and other
foreign FIUs. End Note.


8. (C) Shaffer said the Palestinians could consider
participating in the Egmont Group's annual meetings, such as
the FIU directors' and professionals' meetings, which he said
the PA financial officials could use to link up with key
financial investigators from other countries. (Note: The
Egmont Group is an umbrella organization for FIUs from around
the world who exchange information, conduct financial
intelligence training, and work towards combating money
laundering and terrorism financing. It is not clear in what
capacity the PA could attend these meetings, as an observer
or otherwise. End Note.) He said the Palestinians have a
long way to go before establishing a legitimate FIU that is
willing to fight terrorism financing, but he said it is
doable.


9. (U) This cable was cleared by Treasury Policy Advisor
Lebenson.

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