AMBASSADOR DISCUSSES AML, SME LENDING WITH THREE

C O N F I D E N T I A L CASABLANCA 000523

SIPDIS

SIPDIS

DEPARTMENT FOR NEA/MAG, EB/IFD, S/CT AND NEA/OFI
PASS USAID FOR ANESA - J. RAGLAND
TREASURY FOR OASIA - D PETERS

E.O. 12958: DECL: 04/27/2016
TAGS: ECON EFIN KTFN MO
SUBJECT: AMBASSADOR DISCUSSES AML, SME LENDING WITH THREE
CASABLANCA BANKERS

REF: RABAT 00730

Classified By:
Principal Officer Douglas Greene for reasons 1.4 (b) and (d)

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SUMMARY:
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1. (C) SUMMARY AND INTRODUCTION: Ambassador Riley met with
the Chairmen of three of Casablanca's largest banks --
Moroccan-owned BMCE Bank Group, government controlled Banque
Centrale Populaire and French-owned Soci,t, Generale -- on
April 26th to discuss compliance with pending Government of
Morocco (GOM) Anti-Money Laundering (AML) legislation (Ref A)
and bank lending to Small and Medium sized Enterprises
(SMEs). The Chairmen contrasted in style, but all three
offered almost identical arguments for why Moroccan banks
find it difficult to lend to SMEs. The Chairmen criticized
the accounting practices, and spending priorities, of small
enterprises, although they expressed willingness to boost
lending in response to increased SME transparency. When
asked about GOM pending AML legislation, both BMCE and SG
expressed confidence that their banks are already compliant
with pending AML standards. SG questioned the substance of
the bill itself, suggesting strict enforcement could
adversely impact Morocco's economy. Meanwhile, BP subtly
indicated that conformity to AML standards remains an
institutional challenge. END SUMMARY AND INTRODUCTION.

BMCE BANK GROUP


2. (C) Ambassador Riley first met with Othman Benjelloun,
Chairman and Chief Executive Officer of BMCE Bank Group.
Benjelloun's office bears all the trademarks of a Wall Street
"Master of the Universe", including custom made leather
furniture, a large flat-screen television broadcasting the
latest financial news from Bloomberg and expensive art bought
at auction from Christies in London. Benjelloun carries
himself with the gravitas and bearing of an elder statesman,
befitting his stature as Chairman of BMCE and President of
the Moroccan Banking Association. Photos on the wall show
him (and his much younger wife) in the presence of Former
King Hassan II, King Juan Carlos of Spain and King Mohammed
VI, among others. During his conversation with the
Ambassador, Benjelloun casually mentioned regular meetings
with the Prime Minister, as well as having met with China's
President Hu during his recent visit to Morocco. Clearly
comfortable in his role, Benjelloun would not hesitate to
call senior managers on speaker phone, asking them to provide
precise information on the spot, in response to the the
Ambassador's questions.


3. (C) The Ambassador and Benjelloun discussed the growing
economic role of China extensively. Benjelloun noted that
BMCE is the only Arab bank with a branch in Beijing. He
praised the "discipline" of the Chinese people saying "much
could be learned" from them and discussed his recent meeting
with Chinese President Hu. He reminded the Ambassador that
Morocco and China share a long-standing, close relationship
and that China is showing increased interest in developing a
presence in Africa. Ambassador and econoff believe that
Benjelloun clearly sees China as more of an opportunity than
a threat; BMCE's strategy reflects that appraisal.


4. (C) Benjelloun also praised Morocco's potential for
offshoring and shared that GOM Prime Minister Driss Jettou is
planning to announce a package of offshoring initiatives,
including tax breaks, in the coming weeks. Benjelloun
claimed companies including Dell Computers and French-owned
Cap Gemini are expected to make immediate investments,
creating 3,200 and 2,700 jobs respectively. Benjelloun was
critical of SMEs complaining that they are often
non-transparent and the money lent is often not invested in
the business. "We lend money to someone and the first thing
they do is buy a car or an apartment," Benjelloun accused.
He explained that BMCE has Dh 3.2 billion (about $350
million) in SME loans currently in default. "We want to
lend," he explained, "That's what we do."


5. (C) Turning to the pending AML law, Benjelloun was
unimpressed. "We are already compliant," he boasted, and
claimed the law would have "no impact" on his business.

"Other banks have to worry," he stated, and, surprisingly,
even named BMCE rivals Banque Centrale Populaire and
Attijariwafa (Morocco's largest bank),alleging both banks
have had recent problems with money laundering, both in
Morocco and in overseas offices.

SOCIETE GENERALE


6. (C) The modern, stylish residence of Mr. Abdelaziz Tazi,
President and Chairman of Soci,t, Generale (SG) could easily
have been found in the pages of Architectural Digest,
complete with a private art collection and grand piano.
Rather than meet at his office, Tazi invited the Ambassador
to a sumptuous lunch at his home with two of SG's senior
managers. Tazi appeared relaxed and confident, and
encouraged his managers to weigh in often on their areas of
expertise, including presenting almost identical arguments on
bank lending to SMEs as BMCE and BP.


7. (C) Tazi echoed Benjelloun's attitude toward pending AML
legislation. As a French bank, he explained, SG is already
complaint with EU banking laws, even at branches in non-EU
countries. "There are other banks that will have problems,"
one of his mangers explained, without naming any
specifically. Tazi did, however, express some practical
concerns with the legislation itself. He explained that if
the provisions as currently written are strictly enforced,
the bill could have negative impacts on many of the people
who operate in Morocco's informal sector, including those not
involved in terrorism or narcotics. His managers added that
determining the origin of money is the challenge for bank
compliance with AML standards and that monitoring for
suspicious transaction is the easier part. Tazi then
broadened the discussion into a larger criticism of financial
sector regulations, complaining that in general Moroccan
financial rules are not precise enough and are open to too
much interpretation.

BANQUE CENTRALE POPULAIRE


8. (C) The Ambassador next met with Noureddine Omary,
President of Banque Centrale Populaire (BP). With
furnishings significantly more modest than BMCE ,s, Omary's
office could easily pass for the that of a mid to senior
level Moroccan government official (for example, the walls
displayed framed official posters of King Mohammed VI and
Hassan II as opposed to personal photographs). The "off the
rack" furnishings and lack of expensive art is perhaps not
unexpected, as BP is still a partially (less than 20%)
government-owned and controlled institution. Omary, who
began his career as a government official, appeared young.
He sat on the edge of seat, speaking rapidly and asking few
questions. He also included a senior manager with him in the
meeting, but never invited him to speak.


9. (C) Omary's position on lending to SMEs was consistent
with BMCE, and echoed the same difficulties with transparency
on the part of small enterprises. Interestingly, he even
used the same turn of phrase as Benjelloun, remarking that
"Lending is what we do, we want to lend more." Ambassador
and Omary also discussed BP's philanthropic efforts and
Ambassador explained how they may correspond to projects
under consideration by the GOM as part of its Millennium
Challenge Account (MCA) proposal.


10. (C) Omary's response to the Ambassador's inquiry on
the pending AML bill was revealing. He began by joking,
awkwardly, about the need to "launder money," asking "is (the
money) soiled?" After this attempt at humor fell flat, Omary
expressed his concerns that the law be "manageable" and that
the regulations be clear detailing what his bank is expected
to do. "I need to sleep well at night," Omary complained,
explaining he fears spending all his time worrying about
ensuring compliance to the requirements of the new law.

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COMMENT:
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11. (C) Comment: While the Chairmen's responses to
questions on SME lending are familiar and unsurprising, their
differing responses when asked about AML legislation are much

more revealing. BMCE ,s Benjelloun and Tazi of SG show no
concern; more troubling is to know what exactly keeps BP
Chairman Omary "up at night" and how many other bank Chairmen
in Morocco share his sleeplessness. Concerns by influential
persons or groups regarding AML legislation ,s potential
negative impact on Morocco's large informal sector (estimated
by the World Bank to represent almost 40% of the economy)
could delay parliamentary consideration of the bill. The GOM
claims it wishes to absorb the informal sector (and its
unreported, unsupervised financial transactions) into the
formal economy, but many observers say, and Omary ,s reaction
confirms, that there are players who will oppose this effort.
GREENE