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).

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SUMMARY
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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

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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"freedom fighters", was superseded by Bahrain's obligations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.

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NEW LAW CRIMINALIZES MONEY LAUNDERING
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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.

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JUSTICE OFFICIAL SAYS NO FREEDOM FIGHTER EXEMPTION
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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.)

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MANAMA 00001550 002 OF 002


SHOW ME THE MONEY
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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.

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OFFICIAL COUNSELS SKEPTICISM OF GOB LINE
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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.

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COMMENT
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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.


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