TREASURY UNDERSECRETARY STUART LEVEY VISITS

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000245

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E.O. 12958: DECL: 02/15/2016
TAGS: ETTC KTFN EFIN PTER PREL CVIS KVPR BA KSEP REGION OFFICIALS ECTRD
SUBJECT: TREASURY UNDERSECRETARY STUART LEVEY VISITS
BAHRAIN TO DISCUSS AML/CFT EFFORTS

REF: MANAMA 1830

Classified By: Ambassador William T. Monroe, reasons 1.4 (b) and d).


1. (C) Summary. On January 23, 2006 Treasury
Undersecretary Stuart Levey visited Bahrain and met with
Rasheed Al-Maraj, Governor of the Bahrain Monetary Agency
(BMA),Sheikh Ebrahim Al Khalifah, Undersecretary for the
Ministry of Finance, Adel Qulish, Middle East and North
African Financial Action Task Force (MENA FATF) Executive
Secretary and Sheikh Khalid Al Khalifah Undersecretary for

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the Ministry of Justice. Governor Maraj indicated that the
anti terrorism financing law was stalled in parliament, a
point echoed by Sheikh Ebrahim, but that the BMA was
upgrading the Compliance Unit to a directorate and the AML
Policy Committee would soon be chaired by the Deputy Governor
of the BMA. Levey stressed the importance of isolating
proliferators of weapons of mass destruction (WMD) and
thanked the Governor for closing the accounts of
International Islamic Relief Organization (IIRO) in September
2005 (Reftel). Levey discussed USG assistance in exchanging
information between the Bahrainis and Saudis on the
investigation of IIRO.


2. (C) U/S Levey visited the Secretariat of the MENA FATF
to show support for the organization,s ongoing work. Sheikh
Khalid explained that the GOB needed legislative cover to
prosecute illegal in- and out-flows of cash. He noted that
there are a few money laundering cases being tried but they
have no verdicts yet and they are struggling to develop the
precedent to show what level of proof is necessary to
determine that money is illegally acquired. He also stressed
the need for implementation of existing rules and said that
the current cash collection regulations lack the teeth
necessary to enforce them. End Summary.


3. (U) Undersecretary Levey was accompanied by Senior
Advisor Adam Szubin, Policy Advisor Rachel Lebenson,
Financial Analyst Matt Epstein and Ahmed El-Bashari,
FinCEN,s Regional Middle East and North African Specialist.
OFAC Middle East Regional Attache attended all meetings and
served as note taker.

Meeting with the BMA Governor


4. (U) Levey, accompanied by Ambassador Monroe, met with
Governor Al Maraj and discussed general AML/CFT issues in
Bahrain and inquired about the delay in passing Bahrain,s
terrorism financing law. Governor Al Maraj noted that
Bahrain is doing all it can to keep its financial sector
clean and in line with international standards but that
trying to get a law through the Parliament takes time. Al
Maraj also explained that the GOB is making some structural
changes including raising the Compliance Unit within the BMA
from a unit to a directorate and bringing the National Anti
Money Laundering Policy Committee under the BMA Deputy
Governor (taking it away from Finance Ministry Undersecretary
Sheikh Ebrahim). Al Maraj said this reorganization will give
the BMA significantly more power to control AML issues.


5. (U) Levey stressed the importance of looking at
entities designated as WMD proliferators (EO 13382) as "high
risk" customers that could stain a bank or financial
institution,s reputation. He explained that, while Bahrain
was obviously not subject to US law, international
obligations exist under UNSCR 1540 to isolate WMD
proliferators. Al Maraj agreed that the BMA could play a
role in advising banks against doing business with customers
they think could fall into that category. He noted that the
GOB will likely follow the international consensus and said
that an issue like this should be looked at via a regional
system, like the MENA FATF.

IIRO information sharing


6. (C) Levey thanked Governor Al Maraj for acting to close
the account of IIRO, which is not registered as a charity in
Bahrain but had opened an account illegally and was using the
account to circumvent Saudi restrictions on sending money
abroad. Levey noted that while IIRO is not a designated
entity on a watch list, there have been concerns that it has
been involved in supporting violence. Levey explained that
he had just come from Saudi Arabia and in his meetings there,
the government expressed interest in obtaining account and
transactional information from Bahrain. Levey offered to
help facilitate the exchange of information. Al Maraj
committed to provide this information. Al Maraj also
indicated that if the Saudis wanted information in the
future, the Saudi Arabian Monetary Agency (SAMA) could work
directly with the BMA. (Comment: In a subsequent meeting,
an advisor to the BMA governor told OFAC Attache and Econoff
that this information request should more appropriately go
from the Saudi FIU to the Bahrain FIU in light of legal
restrictions. He was optimistic that this request would be
successful. Embassy Manama will work with Embassy Riyadh to
relay this information to the Saudi FIU. End Comment).

Meeting with Ministry of Finance Undersecretary Sheikh Ebrahim


7. (U) Sheikh Ebrahim reiterated the importance of keeping
the financial sector clean and explained that there was a
backlog of bills under consideration in Parliament (currently
45 laws in the backlog) that was preventing the terrorism
financing bill from being considered for passage. Sheikh
Ebrahim noted that because of the influx of US dollars
carried by US service members, he estimated there was
approximately USD 10 million a day in cash that was coming
from Iraq. He said that financial centers in Bahrain, Dubai
and Amman were interested in accepting this cash but wanted
to be sure they were not involved in money laundering. He
was interested in finding the appropriate way for regional
financial institutions to accept large amounts of US dollars
coming out of Iraq.

Meeting with Undersecretary from the Ministry of Justice


8. (C) Sheikh Khalid expressed that the main problems with
regard to terrorism financing in Bahrain are the ability of
the GOB to control transfers of money outside Bahrain, cash
coming into Bahrain, and the collection of money within
Bahrain. Sheikh Khalid, clearly an advocate of taking
appropriate enforcement action, felt he did not have the
"legislative cover" to prosecute these kinds of transactions.
He said that Bahrain needed technical support in helping
control cash coming in and out of the country and was looking
at the regulations and laws regarding collecting money and
trying to identify models to follow.


9. (C) When asked about the status of existing money
laundering cases and the strength of Bahraini law in this
area, Sheikh Khalid said that, since there are no precedents
for these cases, the court is trying to determine what is
required to "prove" that money is illegally obtained. He
said that Bahrain does have an asset forfeiture law and the
Ministry of Social Development has responsibilities regarding
collection boxes but they aren,t implemented and there needs
to be "teeth" in the cash collection regulations. Currently
the Ministry of Social Development can only regulate the
charities themselves, and any violations of the restrictions
by individuals would be a criminal issue that would have to
be handled by the Ministry of the Interior.
MONROE