CENTRAL BANK GOVERNOR ON IMPLICATIONS FOR JORDAN'S

C O N F I D E N T I A L AMMAN 001599 SIPDIS SIPDIS E.O. 12958: DECL: 03/01/2016 TAGS: EFIN ECON KWBG KPAL KTFN JO SUBJECT: CENTRAL BANK GOVERNOR ON IMPLICATIONS FOR JORDAN'S BANKS IF HAMAS FORMS A GOVERNMENT REF: AMMAN 1405 Classified By: Ambassador David Hale for reasons 1.4 (b,d). ¶1. (C) SUMMARY: In the wake of Hamas' victory in the Palestinian elections, the Central Bank of Jordan (CBJ) will continue to require Jordanian banks to apply terrorism-financing sanctions against all accounts held by Hamas individuals. According to CBJ Governor Umayya Toukan, deciding what to do with PA "government accounts" in the event of a Hamas-led PA presents a thornier challenge. If Hamas forms a Palestinian government, Jordanian banks will need coordinated guidance from the GoJ and the USG. The CBJ released new anti-money laundering regulations on March 1 said to be more in line with international best practices. END SUMMARY. ¶2. (C) CBJ Governor Umayya Toukan discussed Arab Bank's recent request for USG guidance on how to handle financial transactions for a Palestinian Authority (PA) potentially led by Hamas (reftel). In a February 26 meeting with the Ambassador, Toukan's team began by describing the difficult predicament all Jordanian banks find themselves in. In monetary terms, while Jordanian banks do not have large stakes in the Palestinian territories compared with their overall holdings, they do handle most banking transactions in the West Bank. Requests to shut down all operations would be politically very difficult, explained Deputy Governor Faris Sharaf. For Arab Bank - the largest bank in Jordan - while the capital risk in its eight branches in the West Bank is limited to approximately $60 million (mostly held in PA accounts),the bank was "born" in Jerusalem and handles nearly 60% of all banking transactions in the Palestinian territories. Sharaf said requiring Arab Bank to stop operations in the West Bank would be a major blow to the bank. ¶3. (C) Sharaf described the three types of accounts in Jordanian banks which could be affected: 1) those held by public institutions which receive funds from the PA (e.g., power plants); 2) municipality-based accounts which receive funds from the PA to manage local government activities; and 3) PA government accounts which include direct deposits from aid organizations like the UN and USAID. ¶4. (C) CBJ officials had numerous questions on how the USG would categorize a Hamas-led PA: What, if any, action would be mandated against these various types of accounts if the new PA is ultimately deemed to be a "terrorist organization?" What if the new PA government is a coalition between Hamas and Fatah? What benchmarks would be used to define control of the PA and its subordinate entities? Without guidance on how to handle these possible scenarios, Toukan's team explained, the CBJ will be hard-pressed to formulate regulatory policy for Jordanian banks. In the end, "the CBJ will take whatever position the Jordanian government takes," Toukan emphasized. Clear and pro-active USG input will be important, Toukan added. New Anti-Money Laundering Controls -------------- ¶5. (C) CBJ Deputy Governor Sharaf said that, in the absence of an established Anti-Money Laundering law, the CBJ plans to release new AML regulations which he said would be more in line with international best practices. Released on March 1, the regulations should "raise your confidence level," explained Sharaf. NOTE: The Embassy will obtain these regulations and relay them to Washington. COMMENT: On March 5, the Deputy Prime Minister confirmed to Ambassador that the Prime Minister has informed Parliament that the AML law is a priority. END NOTE AND COMMENT. ¶6. (U) Read all of Amman's Classified cable traffic at http://cables.state.sgov.gov/ncddos/cable/cou ntry/ JOR/home.html. HALE