FINANCIAL CRIMES LAW ENACTED AMID BOOM IN LEBANON

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001550 SIPDIS SIPDIS PASS TO EB/ESC/TFS FOR BADKINS, S/CT FOR GNOVIS, NEA/ARP,IO/PSC FOR BFITZGERALD, INR TREASURY FOR DGLASER AND OFAC FOR RWERNER E.O. 12958: DECL: 08/21/2016 TAGS: KTFN EFIN PTER BA REGION CTR ECTRD SUBJECT: FINANCIAL CRIMES LAW ENACTED AMID BOOM IN LEBANON FUNDRAISING REF: A. MANAMA 1513 ¶B. MANAMA 1473 ¶C. MANAMA 1469 Classified By: CDA Susan L. Ziadeh, reasons 1.4 (b) and (d). -------------- SUMMARY -------------- ¶1. (C) The King August 8 signed a financial crimes law that crimininalizes money laundering and terror finance, thus entering the law into force. Ministry of Justice Under Secretary Shaikh Khalid bin Ali Al Khalifa told EconOff that SIPDIS the law's terrorism definition, which has a cutout for "freedom fighters", was superseded by Bahrain's obligations as signatory to various international treaties and conventions, which are also mentioned in the law. In the context of press reports concerning fundraising for Lebanon, he stated that it is illegal for political societies to disburse money outside Bahrain's borders. It is the government's duty to monitor fundraising efforts and intercede to avoid any violation of law. A Ministry of Social Development official told us his assumption is that all monies being raised through informal charities -- on the street and in malls, mosques, and matams -- is going to Hizballah, but he presented no specific evidence of this. End Summary. -------------- NEW LAW CRIMINALIZES MONEY LAUNDERING -------------- ¶2. (U) The King August 8 signed a financial crimes law with amendments addressing terror finance. The law, 54 of 2006, adopts the Organization of the Islamic Conference's definition of terrorism, effectively creating a "freedom fighter" exemption (Ref. C). Law 54 criminalizes the undeclared transfer of money across international borders for the purpose of money laundering or in support of terrorism. Anyone convicted under the law of collecting or contributing funds, or otherwise providing financial support to a group or people who practice terrorist acts, whether inside or outside Bahrain, will be subject to imprisonment for a minimum ten-year sentence to a maximum of a life sentence. The crime also carries a fine of between BD 10,000 and BD 500,000 ($26,700 to $1.34 million). ¶3. (SBU) Bahrain Monetary Agency (BMA) Compliance Unit Analyst Bushra Al-Haddad told EconOff August 19 that the GOB had been eager to pursue passage of Law 54 ahead of the upcoming November 13 - 15 MENAFATF Fourth Plenary Meeting in Doha. She said Bahrain's Financial Sector Assessment Program (FSAP),along with that of Mauritania, was on the agenda to be formally reviewed at the plenary, adding that IMF auditors involved in the FSAP were expected to be in attendance. Al-Haddad noted that a country's FSAP may be made public at its government's discretion and that Bahrain had elected to do so in the interest of transparency. ¶4. (C) Al-Haddad said that in compliance with Bahrain's FSAP, the GOB was in the process of assembling a 50-person team tasked with monitoring charities fundraising. The team would use an IMF-prescribed risk-based monitoring approach and is to be stood up in time for the Doha Plenary. -------------- -------------- JUSTICE OFFICIAL SAYS NO FREEDOM FIGHTER EXEMPTION -------------- -------------- ¶5. (C) Ministry of Justice Under Secretary Shaikh Khalid bin Ali Al Khalifa told EconOff August 12 that the terrorism definition contained in Law 54 had been included to gain the acceptance of Islamists in Parliament and win passage of the law. However, he pointed out that the law's definition of terrorism ends with the modifier "...in accordance with international law." He said he was confident that Bahrain's obligations as signatory to various international treaties and conventions, which are also mentioned in the law, would effectively supersede any legal effect carried by Law 54's terrorism definition. (Comment: His optimistic assumption may not hold up in the event of a legal challenge. End Comment.) -------------- MANAMA 00001550 002 OF 002 SHOW ME THE MONEY -------------- ¶6. (C) EconOff asked Shaikh Khalid about a group of Bahraini political societies that the press had reported as intending to travel to Lebanon to meet with politicians and NGO representatives and deliver financial assistance and medicines (Refs. B and C). A spokesman for the delegation from Al Waad political society August 7 said publicly that the group would deliver funds, but this was contradicted two days later by another representative who said the group only intended to offer political support. Shaikh Khalid said he had called the Al Waad official to caution him that it would be illegal for any political society to raise funds for disbursement abroad. "I told him that regardless of who the money was collected from, whether the public at large or the members themselves, it would be illegal for the political societies to disburse the money outside Bahrain's borders. He told me the group would not donate money but would, instead, provide moral and political support to Lebanese officials." (Note: A senior Al Waad official told Pol/Econ Chief August 21 that Al Waad had raised $50,000 for Lebanon through donations from its members. Following the GOB's intervention, however, the group had decided not to talk publicly about the financial aspect of the trip. She said the group had probably carried the money to Syria and Lebanon, but noted that she had not spoken to any of her colleagues since their return. End Note.) ¶7. (C) Shaikh Khalid opined that political societies claiming to collect money for Lebanon actually planned to spend the money in funding their campaigns. "Up until now, I haven't seen any evidence that money has illegally crossed our borders." He added that he supported ongoing legitimate Lebanese relief efforts. He concluded by adding that it is the government's duty to monitor fundraising efforts and intercede to prevent any violation of law. -------------- OFFICIAL COUNSELS SKEPTICISM OF GOB LINE -------------- ¶8. (C) An official at the Ministry of Social Development, which has oversight responsibility for charities, told EconOff that, although he did not have first-hand information, he assumed that all funds being collected informally in shopping malls and on street corners was going to Hizballah. He also charged that the Al Minbar political society routinely moves funds into and out of Bahrain in contravention of government restrictions. -------------- COMMENT -------------- ¶9. (C) The bulk of fundraising activity has been channeled through the GOB's High Committee to Aid the Lebanese People, but informal mechanisms on the streets and in malls, mosques and matams, also are widely available. Although we have no specific information, some of these funds likely find their way to Hizballah. On a policy level, we are encouraged that the Ministry of Justice was pro-active in addressing Al Waad's plan to deliver funds to Lebanon. But stopping the actual flow of money is more difficult to achieve. We will continue to work with our interlocutors to tighten up enforcement of controls on financial movements. End Comment. ********************************************* ******** Visit Embassy Manama's Classified Website: http://www.state.sgov.gov/p/nea/manama/ ********************************************* ******** ZIADEH