CENTRAL BANK DEP GOVERNOR TALKS TERROR FINANCE

C O N F I D E N T I A L SECTION 01 OF 03 KUWAIT 000088

SIPDIS

SIPDIS

NEA/ARPI SWALKER, EB/ESC/TFS DBENDANA, S/CT TKUSHNER,
EUR/PGI LREASOR, NEA/RA, IO/PSC BFITZGERALD, NSC FOR
THINNEN, TREASURY FOR DGLASER AND OFAC DIRECTOR RWERNER

E.O. 12958: DECL: 01/15/2015
TAGS: KTFN ETTC EFIN PTER PREL KU
SUBJECT: CENTRAL BANK DEP GOVERNOR TALKS TERROR FINANCE
WITH EB A/S WAYNE AND DAS SAEED

Classified By: Ambassador Richard LeBaron for reason 1.4 (b) and (d)


1. (C) Summary: A/S Wayne and Treasury DAS Ahmed Saeed met
January 7 with Central Bank of Kuwait Deputy Governor Dr.
Nabeel Al-Mannae and other Central Bank officials to discuss
coordination of terror-finance interdiction and anti-money
laundering initiatives. A/S Wayne was accompanied by the
Ambassador, NEA/ARPI Deputy Director Steve Walker, EB
Financial Economist Roland de Marcellus, and Econ Officer.
Attending the meeting from the Central Bank were Manager of
Onsite Supervision Yacoub Al-Ibrahim, Executive Director of
the Supervision Sector Ibrahim Al-Qadhi, and Head of the
Anti-Money Laundering Section Talal Al-Sayegh. A/S Wayne,
encouraged by the work done so far through MENA-FATF efforts,
asked that a draft of Kuwait's new TF/AML law be shared with
USG counterparts as soon as it was available. Al-Mannae
agreed that strong cooperation was needed, adding that the
National Committee on Anti-Money Laundering and Terror
Finance was finishing up the new draft law, and that it had
taken into account all observations and recommendations made
so far by outside parties. Al-Mannae also noted that Kuwait
has signed the UN Convention for the Suppression of the
Financing of Terrorism, and that it is currently pending
ratification by the National Assembly.


2. (C) The Central Bank officials said that Kuwait's
commercial and Islamic banks were taking very seriously their
duties to help combat terror finance and money laundering.
Observing that Kuwait was strongly regulating its charities,
they noted that host countries have the principal
responsibility for monitoring activities of branches of
Kuwaiti charities operating abroad. The officials said that
the new draft law mandated the declaration of cash currency
over 3000 KD ($10,000) coming in or going out of Kuwait, and
that any transaction with a bank or exchange company over
$1000 currently requires personal identification. Wayne
probed on oversight of charities operating overseas, and
Central Bank officials suggested checking with MFA and Social
Affairs ministries to get an update on Kuwaiti thinking.
Wayne said U/S Levey would be visiting in several weeks to
discuss these and other terrorist financing issues. End
Summary.

Draft AML/TF Law "Almost Ready" For Review
--------------


4. (C) During a January 7 meeting with Central Bank Deputy
Governor Dr. Nabeel Al-Mannae, EB A/S Wayne encouraged more
cooperation on terror finance, commenting that the papers and
other information coming out of the MENA-FATF initiative were
"excellent." Al-Mannae agreed that cooperation was
important, but added that we must "always be on alert" and
that Kuwait "must keep developing its surveillance systems
and supervision."


5. (C) Noting that the current AML law had been in effect
for a few years and that it was still "a learning process,
with challenges," Al-Mannae said that it was important that
Kuwait's FIU be able to freely share information with others,
which was proposed in Kuwait's new draft TF/AML law. The
National Committee on Anti-Money Laundering and Terror
Finance had just about finished drafting the new law and the
Chairman of the Committee would review the draft "shortly,
within the next few months." It would then be sent to
outside observers for recommendations and comment. The
Committee could then incorporate any of these observations
into the final product before sending it on to the GOK for
its approval. Al-Ibrahim added that all of the
recommendations of the past few years from the Treasury
Department, FinCen, IMF and other groups had already been
incorporated into the new draft legislation.

Banks Getting the Message
--------------


6. (C) Al-Mannae said that the attention being paid to
TF/AML "is working" and that the banks "are being diligent"
and have a "close working relationship" with the public
prosecutor. He said that, upon receipt from the Ministry of
Foreign Affairs, the Central Bank immediately circulates to
all banks any new lists and terror finance designations sent
by the UN, USG or any other entity. Al-Qadhi added that "the
banks have recognized that it is in their interest to be
diligent," and that "Know Your Customer" rules are easy to
enforce in Kuwait "because the market is small."


7. (C) Al-Qadhi noted that the Islamic bank Kuwait Finance

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House "in particular recognizes that they must be diligent"
and explained how KFH was the financial institution that had
notified the Central Bank that it was holding an account
belonging to the brother of alleged Al-Qaida spokesman "Abu
Ghaith." He said that KFH brought it to the attention of the
Central Bank, rather than the other way around.

Islamic Banks Under Same Supervision As Commercial Banks
-------------- --------------


8. (C) Al-Mannae continued discussing KFH, noting that it is
now under the same supervision as Kuwait's commercial banks,
but that it is allowed to engage in other financial
activities, such as participating in real estate holdings.
He noted that "working under Sharia (Islamic law) does not
give them any advantage that makes them less risky as a
financial institution" than the commercial banks, and that
"the supervisory policies are the same."


9. (C) Al-Mannae explained that Kuwait was a founding member
of the Islamic Financial Services Board (IFSB),which counts
as its members the Central Bank Governors or heads of the
Monetary Agencies from Islamic countries. He noted that,
within three years of its founding, the IFSB already had 120
members, counting the founding, associate and observer
members. The purpose is to make sure standards are applied
for Islamic banking worldwide, and that Kuwait "has the Chair
of the IFSB this year," he stated. (Note: See
http://www.ifsb.org for more information.)

Tightening Up On Charities
--------------


10. (C) Al-Mannae said that no charities in Kuwait are
allowed any interaction with any financial institution unless
licensed by the Ministry of Social Affairs and Labor, and
that they must have a special license to be able to transfer
money to overseas operations. He said the Central Bank makes
sure that the commercial banks do not violate this rule and
regular audits by a third party are required of the banks.


11. (C) Asked about the regulation of overseas branches of
Kuwaiti charities, Al-Mannae said the GOK assumes that the
governments of the countries in which the branches operate
would provide oversight in their own countries and that,
"practically, you can't supervise from here." Yacoub
Al-Ibrahim admitted that he was "not sure this had been
solved yet," and that "lots of questions remain on this," but
agreed with Al-Mannae that it was the "role of the host
country." He believed that, within the Ministry of Foreign
Affairs, there was a department that provided general
oversight for foreign operations of Kuwaiti charities, but
also suggested talking to the Social Affairs Ministry.


12. (C) Al-Mannae said that, as far as he knew, overseas
branches of Kuwaiti charities were supposed to "work in
cooperation with Kuwait's embassies in the host country," in
order to both facilitate their work and to ensure they are
working within the proper regulations and laws. The
Ambassador noted that Kuwait could be embarrassed by the
activities of one individual or group in an overseas branch,
to which Al-Mannae agreed that this was a concern.

Crackdown On Cash Transfers In New Legislation
-------------- -


13. (C) Asked about the status of cash currency
declarations, Al-Mannae said the new legislation would
mandate the declaration of any cash currency over 3000 KD
($10,000) coming in or going out of Kuwait at any border
point. He said the current law only called for declaration
of 3000 KD or more when coming into Kuwait, but this
procedure was not fully implemented. Al-Mannae added that
banks and exchange companies are required to ask for
identification for any transaction over $1000, an idea he
said they took from Western Union. He said the Central Bank
tracks all exchange company transactions through a database,
and that they had already applied substantial financial
penalties against five companies for not following the proper
regulations.


14. (C) Al-Mannae concluded by noting that he had recently
sent some Central Bank staff for training in the U.S. by
participating in a Department of the Treasury Office of the
Comptroller of the Currency (OCC) investigation of a U.S.
bank. He said his staff had benefited from this training and
took it very seriously, even refusing to tell him the

KUWAIT 00000088 003 OF 003


specifics of the investigation because of the non-disclosure
agreement they signed as part of the training program.


15. (C) A/S Wayne said Treasury U/S Levey would visit in
several weeks to pursue further these and other issues
related to terrorist finance.


16. (U) A/S Wayne and DAS Saeed have cleared this cable.

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