TERRORISM FINANCE: MONTREUX INITIATIVE ON ISLAMIC

C O N F I D E N T I A L LONDON 005503 SIPDIS SIPDIS STATE FOR EB/ESC/TFS YORKS, EUR/PGI REASOR, EUR/UBI ROY, S/CT KUSHNER, TREASURY FOR PONCY, HEFFERNAN, SERAFINI TREASURY FOR OFAC LUIRE NSC FOR HINNEN E.O. 12958: DECL: 07/26/2016 TAGS: ETTC KTFN PTER PREL EU UK SUBJECT: TERRORISM FINANCE: MONTREUX INITIATIVE ON ISLAMIC CHARITIES REF: 7/19 HAAS EMAIL Classified By: Economic Minister Counselor Mark Tokola for reasons 1.5 (b) and (d) ¶1. (U) This is an action request. Please see paragraph 2. ¶2. (C) Summary and Action Request: The Montreux Initiative is a non-governmental project designed to promote cooperation in removing unjustified obstacles to the effective operation of legitimate Islamic charities. The initiative, which is being partially financed by the UK and Swiss governments, seeks to develop a rigorous, voluntary code of conduct for Islamic charities. The code of conduct will be buttressed by independent assessments of charities' financial and management controls. The Montreux Initiative is still in the process of identifying a "Group of Friends" -- countries which support the initiative. While they have a number of Western government interested, they are seeking representatives from the Gulf States. Representatives of the initiative would like to present their project to Washington agencies this fall. Our assessment is that they will not ask the U.S. to join the Group of Friends; and there are a couple of problems with the overall initiative which may preclude our participation. But they would be interested in our honest appraisal of the project, and possibly a quiet word from us to Gulf States that we support the overall objectives of the initiative to encourage Muslim states to join the intitiave. Action requested: We would appreciate Washington guidance regarding a fall visit by representatives of the Montreux Initiative. End Summary. ¶3. (U) Embassy representatives met with members of the Montreux Initiative's core group on July 21 and separately with core group member and England Charity Commission head of international programs James Shaw-Hamilton on July 24 to discuss the Montreux Initiative. Core group members provided a detailed briefing of the initiative (FAQ sheet and other documentation emailed to Washington - ref A). The basic objective of the initiative is to remove obstacles -- many put into place to combat terrorism -- to the operations of legitimate Islamic charities worldwide. Members of the core group acknowledged that cases exist where charities have been used to support terrorism, but they argue that many legitimate charities are being unfairly caught up in counter-terrorism finance measures. ¶4. (U) The initiative is working to develop a voluntary, rigorous code of conduct for Islamic charities to adopt. Core group members stressed that this code of conduct will be fully consistent with the Financial Action Task Force's Special Recommendation VIII on combating the abuse of non-profit organizations and the associated best practice papers and interpretive notes. Islamic charities who adopt this code of conduct will subsequently be reviewed by an independent assessment team to make sure that the charity has the proper financial and operational controls in place. It is hoped that this assessment process will give banks, aid agencies, and donors confidence that the charity with which they are dealing is serious and legitimate. Once a charity has been assessed, members of the initiative's core group will lobby any banks, institutions, or governments which still have restrictions on the charities to eliminate those obstacles. ¶5. (U) The initiative is in the process of establishing a "Group of Friends," or countries willing to provide financial and political support to the initiative. Switzerland, the United Kingdom, and Spain have already provided funding, and there are talks underway with several other European nations. The initiative is also trying to recruit Muslim countries -- especially in the Gulf region -- to join the Group of Friends. The core group views the participation of Muslim countries as vital to the success of the initiative. They admitted that they have encountered some reluctance from these countries; most do not want to embrace the initiative until they know what the U.S thinks of it. ¶6. (C) Members of the core group would be interested in traveling to Washington this fall in order to present their project to interested Washington agencies. Our assessment is that they would not ask the U.S. to join the "Group of Friends" of the initiative. And there are some aspects of the initiative that we would be unwilling to accept. For example, the UK charity Interpal, which has been designated in the U.S. for its funding of Hamas, is a member of the initiative's core group. In addition, the initiative calls on governments to require evidence in the case of designations on par with criminal law. It also calls on governments to transfer frozen assets to other legitimate charities. ¶7. (C) The core group would likely seek two things: expert input and tacit support. Members of the core group are aware of the expertise of the U.S. government in terrorism finance. We believe that they would welcome detailed comment on their initiative and how it might be tightened both to improve the governance of Islamic charities and to boost the credibility of the entire initiative. We also believe that they will seek our tacit support of the initiative, as well as a quiet word to key Muslim countries that we do not oppose it, so that they can convince Muslim countries to join their Group of Friends. Visit London's Classified Website: http://www.state.sgov.gov/p/eur/london/index. cfm Tuttle