A/S TREASURY PATRICK O'BRIEN MEETS BANGLADESH

1. (SBU) Summary: May 17 and 18, Department of Treasury
(Treasury) Office for Terrorist Financing and Financial
Crimes Assistant Secretary (A/S) Patrick O'Brien visited key
Bangladesh officials involved in counter-terrorist financing
(CTF) policy making and implementation. Accompanying A/S
O'Brien were Amit Sharma, Sam Polk, and embassy poloffs
(notetakers). A/S O'Brien discussed current BDG laws
regarding targeted financial sanctions and the ability to
freeze assets currently not permissible without a court
order, the status of RIHS operations and their assets, the
status of draft money laundering and terrorism (which
includes terrorist financing provisions) legislation, and the
lack of central agency in Bangladesh with clear authority to
investigate and prosecute financial crimes cases, among other
issues. End summary.

Ministry of Foreign Affairs


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2. (SBU) On May 17, A/S O'Brien, met with Director General
Shahidul Islam and Director Mahbub Hassan Saleh of Ministry
of Foreign Affairs (MFA) America and Pacific Wing. A/S
O'Brien expressed his support of efforts to strengthen
Bangladesh's capabilities in counter terrorism against a
"common threat" now very much present in Bangladesh. Islam
expressed his belief that improved bilateral
counter-terrorism (CT) cooperation can be achieved, recounted
Bangladesh's past cooperation, and noted the recent August
17, 2005 bomb blasts meant that "there is no room to
underestimate these people." Islam noted Resident Legal
Advisor's (RLA) vital assistance in strengthening
Bangladesh's abilities to meet international standards for
money laundering and terrorist financing but responded to A/S
O'Brien's request on what role MFA plays in BDG's CTF efforts
by citing other BDG agencies, CTF responsibilities and
activities.



3. (C) Islam discussed briefly the MFA,s role regarding the
implementation of obligations to UNSCRs 1267 and 1373 (the UN
office at the MFA is responsible for receiving notices from
the UN regarding terrorist financing designations and
disseminating them to the Central Bank and Ministry of
Finance for implementation) and noted that the draft
Anti-Terrorism Act (ATA) legislation will help formalize
these processes. Islam also discussed the need for ongoing
training and technical assistance, particularly in the areas
of financial investigations. A/S O,Brien responded that the
U.S. was supportive of Bangladesh's efforts, and that the
upcoming Asia Pacific Group (APG) mutual evaluation in 2007
of Bangladesh would be significant event, in which Bangladesh
would be poised to have put in place the regulatory and legal
framework necessary to comply with the international
standards and its obligations to the UN regarding terrorist
financing specifically.

Prime Minister's Office


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4. (C) A/S O'Brien discussed NGO regulation with Prime
Minister's Office Director General Mohammad Shah Alam. Alam
defended the NGO Bureau saying it is understaffed with only
one audit officer looking after 2,000 NGOs which are
"officially" registered to be receiving foreign funds. Those
that do not receive foreign funds are registered with and
regulated by the Ministry of Social Welfare (MSW). He
acknowledged that capacity issues at the MSW were also
lacking. He alleged the Saudis, their largest source of
remittances and destination for Bangladeshi workers, had a
considerable amount of influence in civil society given the
extensive support they give to building mosques and schools
and supporting other social service initiatives. He noted
that in spite of BDG requests that Saudi funds be sent
through official channels subject to oversight, large amounts
of such funds come through non-official channels including
the "Islamic Foundation" and the Saudi embassy.



5. (C) Alam said BDG has pleaded with Kuwaiti officials to
remove the Revival of Islamic Heritage Society (RIHS), even
offering bribes for their removal but to no avail. In
general, Alam called NGO regulation "a tricky thing" with
even European ambassadors attempting to influence NGO Bureau
decisions. (NOTE: The European ambassadors sought to unblock
funds for six NGOS's which the PMO suspected of supporting
activities of the opposition Awami League and not for any
suspicion of supporting terrorism. In other words, the
European diplomat's intervened due to BNP/AL partisan
politics.) He defended BDG policy that NGOs not be involved

in politics, banking and religious matters, otherwise foreign
countries - India in particular - "could dominate us." He
noted that the RIHS funds remained frozen, but they were
simply finishing up their last operations and they were
unable to receive official support in the future. That said,
he also stated that Bangladesh remained dependent on Kuwait
(and Saudi Arabia) for resources such as oil and for the
employment in those countries of Bangladeshis whose
remittances provided vital income to the Bangladesh. When it
came to stopping Bangladeshis who may have financially
supported militant Islamic groups such as Jamaat'ul Mujahedin
Bangladesh (JMB), who were responsible for a wave of bombings
in 2005, he added that the government's legal "hands were
tied," pointing out that Bangladesh was a "poor country" with
few choices.

Ministry of Home Affairs


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6. (C) A/S O'Brien met with Safar Raj Hossain, Secretary and
Akhtar Ahmed, Joint Secretary of the Ministry of Home
Affairs. A/S O'Brien commended the BDG on its capture of
senior Jamaat'ul Mujahedin Bangladesh (JMB) terrorist leaders
and encouraged swift completion of revisions to the
anti-money laundering law (AML), stressing the important role
financial information plays in investigations of terrorism
and criminal networks. He also encouraged passage of the
pending anti-terrorism legislation, especially given that key
terrorist financing provisions were moved to the ATA - noting
that terrorists do not observe election cycles (Bangladesh
expects to hold elections in January 2007, and thus will go
into an interim government structure in October for 90 days).
Recalling that UNSCR 1267 calls for freezing assets without
delay, A/S O'Brien suggested including provisions in the AML
or anti-terrorism law permitting the immediate freezing of
assets for up to 30 days without a need for court order, and
during which time such administrative and legal procedures
could be ironed out.



7. (C) Hossain reviewed the BDG's actions in response to the
rise of terrorist groups like JMB saying the government took
a two-pronged approach based on law enforcement and public
relations. BDG sought to influence public opinion though
leaflets quoting the Koran to show that Islam is a peaceful
religion and worked with religious leaders on a common mosque
sermon opposing violence in the name of Islam, which was
delivered the same day in the countries, 250,000 mosques.
This approach isolated the terrorist leaders from popular
support, facilitating their capture, he said. Citing ample
evidence in the 58 criminal charges, Hossain predicted
capital punishment for both Sheik Abdur Rahman and Bangla
Bhai, leaders of JMB.



8. (C) Hossain said the new anti-terrorism law was important
because it criminalizes membership in banned organizations
and financial support to or participation in a terrorist act.
The proposal was currently in technical review at the Law
Ministry to ensure consistency internally and with other
laws. He acknowledged the importance of completing the law
now, expressed continuing interest in training programs
provided by the U.S. to help institutionalize and maintain
expertise, and said the Home Ministry will dedicate several
officers specifically for financial crime Investigations, as
they were developing a dedicated Financial Crimes Unit (FCU)
within the Criminal Investigations Division of Home Affairs.
Hossain asked if financial investigators such as IRS-Criminal
Investigators - from Treasury could advise in specific cases,
as this would be helpful. Hossain and Ahmed acknowledged
support already received from the FBI, but said an advisor
would be extremely helpful. In addition, Hossain noted that
much value, financial transactions are made outside formal
channels, using gold, other currencies, jewels, etc. A/S
O,Brien discussed the need to put in place an effective
regulatory regime that captured alternative value transfer
systems, and that the Financial Action Task Force (TATF) also
addressed this issue through the international standards.

RIHS


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9. (C) Hossain updated A/S O'Brien on the status of RIHS in
Bangladesh. He said that the Kuwaiti nationals running the
local branch of RIHS have left Bangladesh. An investigating
committee examined the more than 230 projects funded by RIHS
and although it found no specific evidence of terrorist
financing, the BDG ordered RIHS to suspend its activities
based on its record in Afghanistan and Pakistan. At this
point they were still engaged in two unfinished projects, but
that its accounts had been and would remain frozen. A/S
O,Brien reiterated ongoing U.S. concerns with RIHS, and
noted there was indeed evidence of nefarious activity

associated with RIHS. Nonetheless, O'Brien asked that if
there had been no specific terrorism links found with RIHS,
what formed the basis for freezing accounts? Hossain replied
that international scrutiny and the activities of RIHS
operations in other countries, namely Afghanistan and
Pakistan, had caused Bangladesh authorities some concern.



10. (C) The NGO Affairs Bureau continued to hold limited RIHS
funds, and will not authorize new foreign currency transfers
at this time. Nor will RIHS be allowed to initiate new
projects. The BDG may authorize RIHS to close existing
projects and pay outstanding bills, although funds in
Bangladesh are insufficient and it is not clear from where
additional funding would come. Hossain said the BDG would
administer any funds associated with the completion of
outstanding RIHS projects completion and would exercise
oversight, probably through the local deputy commissioners.
RIHS has not challenged BDG actions either in court or in
public, he said.

Bangladesh Bank


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11. (U) A/S O'Brien met with Bangladesh Bank (BB) Governor
Salehuddin Ahmed. Deputy Governor Rumee Ali and Executive
Director Nazmul Hasan joined the meeting in progress.
Bangladesh Bank is the country's central bank.



12. (C) A/S O'Brien encouraged swift adoption of the pending
amendments to the Anti-Money Laundering Law (AML), citing a
2002 Asian Development Bank (ADB) study showing how adoption
of modern anti-money laundering laws supports economic
development and increases the attractiveness of a country's
financial system to external investment. He praised the
actions already taken by the BB to incorporate anti-money
laundering oversight into the BB's broader supervision and
compliance programs. He noted Bangladesh's constructive
participation in the Asia Pacific Group (APG) and encouraged
the BB to include officials from other relevant government
agencies in the Bangladesh delegation to the July plenary
meeting as this will help expose other elements that play a
key role in AML/CFT to the international standards and the
inter-relationships needed to implement an effective AML/CFT
regime. He noted this would be especially beneficial given
that Bangladesh is slated for review by the APG in the next
year or so.



13. (C) Ahmed supported passage of the AML amendments. The
challenge, he said, is in overcoming cabinet concerns,
including: pre-election risk aversion, the number and scope
of predicate offenses, and the scope of non-bank financial
institutions subject to the law's reporting requirements.
Ahmed recognized the need to convince policy makers that
these changes represent international best practices that, if
ignored, will undermine Bangladesh economically.



14. (C) Ahmed said a major problem facing the BB is the lack
of any agency with clear authority to investigate and
prosecute financial crimes cases. They noted that while they
have been able to receive and perform some analysis of
suspicious transaction reports, there is limited capacity
beyond the Bank to take these cases forward through
investigation and prosecution. While the AML will address
this issue, Ahmed believed steps need to be taken now. A/S
O,Brien agreed with this, commended the BB for their efforts
and underscored that other elements of the government may
need to be better exposed and educated on their
responsibilities concerning AML/CTF. He noted his meetings
thus far, and encouraged the BB, as O,Brien himself was
doing throughout the visit, to bring along other agencies to
APG meetings and AML/CTF workshops/seminars. Previously,
cases were handled by the Bureau of Anticorruption, which was
replaced by the Anticorruption Commission (ACC). The ACC,
however, declined responsibility for these cases, stating
that they were not in their remit, and the police have not
taken timely action on case referrals, including
counterfeiting cases, he said.



15. (C) Ahmed and Rumee described steps the BB has undertaken
to improve anti-money laundering oversight and compliance.
The BB has established a de facto Financial Intelligence Unit
(FIU) at the Bank, pending passage of the AML amendments,
which is cooperating with investigators at the National Board
of Revenue. They are currently seeking AML monitoring
software and will visit the FIU in Mauritius soon to examine
their system. The BB will cover hardware, software and
training costs from its own funds, independent of the World
Bank's Central Bank Strengthening Project (CBSP) - a project
for overall BB strengthening - although it expects to
integrate with the CPSP systems once these processes are in
place. The BB is also pushing automation at private

commercial banks and supports electronic filing of cash
transaction reports (CTRs) and suspicious transaction reports
(STRs). Ahmed expressed interest in assistance in these
areas and to understand and implement Basel II.



16. (C) Rumee described the proactive steps the BB has taken
to improve private sector compliance. Banks are now required
to have a central anti-money laundering compliance office at
headquarters and a designated compliance officer in each
branch. Recognizing that the banking sector lacks a proper
information technology platform for modern anti-money
laundering enforcement, especially in the country's 6,000
rural bank branches, the BB has focused on incorporating
anti-money laundering practices into general risk assessment
practices and conducts extensive rural outreach programs,
through education and training as well as through published
materials. The BB has included an anti-money laundering
chapter in its core risk practices handbook and has trained
over 1,000 bankers on its use. It has also established a
rural outreach program and uses various public relations
vehicles to increase customer understanding of and support
for such tools as know-your-customer account transaction and
customer profiles all part and parcel of comprehensive AML
programs.



17. (C) Internally, the BB has included an anti-money
laundering checklist in its examination procedures manual,
including an overall systems check and a sampling of
transactions and reports. However, Rumee acknowledged that
bank supervisors do not receive adequate anti-money
laundering training. The BB has also established a public
early warning system "watch list" for those banks not meeting
anti-money laundering standards, applies enhanced monitoring
for non/less-compliant banks and has used "reputation
pressure" to encourage voluntary compliance. The BB has
recently fined 13 banks for failing to establish proper
systems or for failure to submit required reports.


18. (C) The BB has seen increased compliance with CTR and STR
reporting requirements, after initial resistance from the
industry. CTRs are required for transactions in excess of
50,000 taka ($735). STRs typically reflect possible tax
avoidance, unexplained wealth and commercial transactions in
personal accounts where the transactions are inconsistent
with the customer profile. Ahmed noted the BB had recently
fined several banks, including Islami Bank and the
government's Sonali Bank for not following STR procedures in
some cases. The BB is seeking additional assistance in
strengthening AML monitoring through prudential regulations
as well as through the supervisory/oversight efforts on banks
themselves. He also noted that additional assistance on
further strengthening their FIU as the legislation comes on
line will be very helpful. A/S O,Brien stated that the USG
is committed to supporting Bangladesh's efforts, and will
look into how the U.S. can provide assistance.


Ministry of Finance


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19. (C) A/S O'Brien met with MOF Secretary Siddiqur Rahman
Choudhury and thanked him for his efforts in setting up
Financial Investigation Unit (FIU), for getting the Anti
Money Laundering (AML) law drafted and on the path to
enactment, and for taking serious actions against banks for
engaging in activities related to money laundering.
Choudhury reported that increased transparency in the
financial sector has resulted in increased reporting of
remittances. Choudhury said that as access to banks
increases, and their services become cheaper and more
transparent, reported remittances will continue to increase,
and that the life of a "hundi wallah" will become
increasingly miserable. He acknowledged, however, that the
size and use of the informal sector or hundi was extremely
robust.



20. (C) A/S O,Brien pressed for information on when the
cabinet would approve and the parliament would pass the
amended AML law. Choudhury replied that the Anti-Terrorism
Act (ATA) needed to be passed first, which included a
provisions for terrorist financing. When that legislation
was passed, the Finance ministry would look for any gaps in
the law, and make sure they were filled in by the AML, he
said. When asked if these laws would be ratified soon,
Choudhury responded that they both would be in place before
the caretaker government took office in October 2006.



21. (C) A/S and Choudhury discussed creating the FIU and a
Financial Crimes Unit without legislative authority. Both
agreed that it could and should be done, that legislative
backing was important so that the units would remain
independent of political pressure, but Choudhury added that

despite increasing politicization in Bangladesh, the FIU and
BB are completely apolitical. Choudhury added that the
negative image of BDG portrayed in the media is inaccurate,
and that BDG should qualify for Millennium Challenge Account
(MCA) funds citing increased economic progress, and free and
fair elections. The perception that corruption is a major
problem in BDG is wrong, he said.



22. (C) A/S O,Brien said corruption needed to be addressed
and asked what resources law enforcement needed to address
financial crimes specifically. Choudhury said technical
support, such as how to build an effective prosecutorial
office, was important.

Ministry of Law, Justice and Parliamentary Affairs


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23. (C) A/S O'Brien met with Additional Secretary Kazi
Habibul Awal and Deputy Secretary Md. Moinul Kabir, Ministry
of Law, Justice and Parliamentary Affairs and asked whether
the terrorist financing provisions in the ATA would conform
to international standards for CTF. Awal said all aspects of
counter-terrorist financing are encompassed in the ATA, that
BDG recognized the need for ATA even though of its provisions
are already present in BDG laws regarding explosives and fire
arms, and even recruitment into a terrorist organization
would be a crime.



24. (C) A/S O'Brien asked if current BDG law provides for
assets of suspected terrorist organizations to be frozen
without a court order. A/S O'Brien said that this nonjudicial
freezing of assets in an age of instantaneous funds transfer
is critical and tracks with the specific obligations as set
forth in various UN resolutions on terrorist financing. Awal
said that the Ministry of Home Affairs had the authority to
take action against assets in most cases, and worked with the
BB in implementing asset freezing provisions. He noted that
in most cases a court order was required.



25. (C) Asked about the progress of drafting the ATA, Awal
said that the cabinet had gone over the ATA line by line at
their May 17 meeting, had gotten through about a quarter of
it without suggesting any major changes and expected the next
cabinet meeting to take place after Home Minister Babar,s
expected return to Bangladesh on June 7. (Note: Babar ended
up not traveling to the U.S.)



26. (C) A/S O'Brien asked if the ATA and AML would be passed
before the caretaker government was in place. Awal and Kabir
were non committal, saying they were "hopeful" it would be.



27. (SBU) This cable has been cleared by A/S O'Brien.

BUTENIS