FINANCIAL CRIMES LAW ESTABLISHES EXEMPTION FOR

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001469 SIPDIS SIPDIS EB/ESC/TFS FOR BADKINS, S/CT FOR TKUSHNER, NEA/ARP, IO/PSC FOR BFITZGERALD TREASURY FOR DGLASER AND OFAC FOR RWERNER E.O. 12958: DECL: 08/07/2016 TAGS: KTFN EFIN PTER BA CTR ECTRD POL SUBJECT: FINANCIAL CRIMES LAW ESTABLISHES EXEMPTION FOR FUNDING "FREEDOM FIGHTERS" Classified By: CDA Susan L. Ziadeh, reasons 1.4 (b) and (d). ¶1. (C) Summary. A recently passed law on its way to the King for signature that addresses money laundering and terror financing establishes an exemption for funding "freedom fighters" and "nations struggling against foreign invasion and aggression." Bahrain Monetary Agency Advisor Ralph Ricks confided that it would be embarrassing for Bahrain to enact the law after the BMA had worked so long to develop solid terror finance legislation. However, he observed that the current political climate made it difficult to effect changes in the legislation at this point. Shura (Consultative) Council (Bahrain's appointed upper house) Finance and Economy Committee Chairman Jamal Fakhro said the "freedom fighter" amendment had been inserted by Islamist deputies in the elected lower house of parliament, the Council of Representatives (COR). Shura members felt it was totally wrong but ratified it under pressure from the GOB to pass the law as soon as possible. In a related development, the press reported that six political societies plan to send a representative to deliver funds raised to benefit the people of Lebanon, despite lacking GOB approval to do so. End Summary. ¶2. (C) Ralph Ricks, Advisor to the Bahrain Monetary Agency (BMA) Governor, told Econoff August 3 that a revised money laundering law on its way to the King for signature contained several flaws. The legislation prohibits money laundering to support terrorism, but expressly excludes from its definition of terrorism "freedom fighters" and "nations that struggle against invasion or foreign aggression, colonization, or foreign supremacy for the purpose of freedom and national liberty." ¶3. (C) Ricks confided that it would be embarrassing for Bahrain to enact the law after the BMA had worked so long to develop solid terror finance legislation. He added that it was unclear why the money laundering legislation carries a different definition of terrorism than does the recently passed anti-terrorism law, which defines terrorism as "any use of violence or threats of violence to others, for whatever reason, by an individual or group ... which will �0A;lead to the harm or threat of harm to people..." There are no "freedom fighter" exclusions. The anti-terrorism law is also currently awaiting the King's signature. Ricks said that on a technical level, it was also disturbing that a number of IMF-recommended improvements to the money laundering law, having nothing to do with terrorism, had not been incorporated into the final draft. He attributed the law's shortcomings to incompetence in the Cabinet Directorate for Legal Affairs and on the lack of an interministerial review process. ¶4. (C) Ricks said it was possible that the King could send the draft back for modifications. However, he observed that the current political climate would make it particularly difficult to effect changes to the "freedom fighter" provision. BMA officials hoped to be able to introduce revisions to fix the legislation. However, he noted that such revisions would have to be taken up by the new Parliament (following elections in Fall 2006) and doubted that this issue would take priority on the new Parliament's agenda. ¶5. (C) Shura Council Finance and Economy Committee Chairman Jamal Fakhro told Pol/Econ Chief August 7 that the amendment adopting an exclusion for "freedom fighters" had been inserted by Islamist deputies in the COR. Fakhro said the Shura felt the amendment was totally wrong but ratified it under pressure from the GOB to pass the law as soon as possible. Referring to the Islamists, he added, "It's crazy that those sitting in the back rows were able to push this through." (Note: The Shura Council's web site states that the money laundering law's definition of terrorism derives from the Organization of the Islamic Conference (OIC),which states, "People's struggle, including armed struggle against foreign occupation, aggression, colonialism, and hegemony, aimed at liberation and self-determination in accordance with the principles of international law shall not be considered a terrorist crime." End Note.) ¶6. (SBU) In a related development, the press reported August 7 that six political societies would send a representative to deliver funds raised to benefit the people of Lebanon. A spokesman said the societies did not obtain a government permit to raise or deliver the funds, a process separate from a government-sponsored drive to raise money for the Lebanese MANAMA 00001469 002 OF 002 people through the Bahrain Red Crescent Society to be delivered via the United Nations Development Program. Post will raise this issue with GOB officials and report their reactions. ********************************************* ******** Visit Embassy Manama's Classified Website: http://www.state.sgov.gov/p/nea/manama/ ********************************************* ******** ZIADEH