SARG ORDERS SYRIAN BANKS TO FREEZE KHADDAM'S ASSETS

C O N F I D E N T I A L DAMASCUS 000069 SIPDIS SIPDIS NEA/ELA NSC FOR ABRAMS/DORAN/SINGH TREASURY FOR GLASER/SZUBIN/LEBENSON EB/ESC/TFS FOR SALOOM E.O. 12958: DECL: 01/04/2015 TAGS: ECON EFIN SY SANC SUBJECT: SARG ORDERS SYRIAN BANKS TO FREEZE KHADDAM'S ASSETS REF: A. DMS 00019 ¶B. DMS 06544 Classified By: Charge d'Affaires Stephen Seche, reasons 1.4 b/d ¶1. (C) On January 2, the SARG ordered all Syrian banks, as well as those subsidiaries of foreign banks operating in the Syrian free zones, to freeze immediately the assets of former Vice President Abdul-Halim Khaddam and his family. A faxed letter from the Central Bank's Combating Money Laundering and Terrorism Financing Commission, signed by Governor of the Central Bank Adeeb Meyala, in his capacity as President of the Commission, specifically designated five individuals for asset freezing: former Vice President Khaddam, his two sons Jemal and Jihad, Khaddam's wife Nijlah, and his son-in-law Arfan Tarabishi. The letter also ordered the banks to freeze the assets of the members of each individual's family. ¶2. (C) Nabil Hchaime, General Manager of Bank BEMO Saudi Fransi, one of five private banks operating in Syria, stated that he responded to the order on January 3. He did not say whether the Khaddam family maintained accounts with his bank, although Post has heard from others that the Khaddam family liquidated all of its financial holdings in Syria- including one of the most popular Damascene restaurants- over the past three months. According to Hchaime, the Commission's action will resonate loudest among current and potential customers of the new private banks, who now will fear that their own money is less safe because the SARG is capable of capricuously lifting bank secrecy protections on the accounts of its critics. (Note: Bassel Hamwi, the General Manager of another private bank, Bank Audi Syria, stated that under Syrian law, banks are required to comply with an order from the Commission. Further, banks are not allowed to perform due dilligence in assessing the legal basis or legitimacy of the order. End note.) ¶3. (C) Comment: It is unlikely that the SARG action will have any financial effect on Khaddam or his family. The order to freeze assets counts simply as one more front in the SARG's vitriolic attacks against the former regime insider following his December 30 interview on Al-Arabiyya (ref A). The immediate outcomes of the SARG's order are the politicization of the Combating Money Laundering and Terrorism Financing Commission and the erosion of confidence in Syria's nascent banking system. This in turn will undermine the SARG's recent efforts to stabilize the Syrian pound (SYP) (ref B),which showed new volatility in the days following the Khaddam interview as it dropped from 55.5 SYP to 58 SYP per USD on the blackmarket. SECHE