USG ASSESSMENTS OF TERRORIST/INSURGENT FINANCE

S E C R E T SECTION 01 OF 06 RIYADH 007838

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WILLIAM DAYHOFF; AND DHS FOR MARK MIDDLETON.

E.O. 12958: DECL: 10/05/2031
TAGS: EFIN PREL PTER KTFN ETTC SA IZ
SUBJECT: USG ASSESSMENTS OF TERRORIST/INSURGENT FINANCE
OPERATING ENVIRONMENTS IN COUNTRIES NEIGHBORING IRAQ: SAUDI
ARABIA

REF: A. STATE 132693

B. RIYADH 6860

C. RIYADH 8032

D. RIYADH 8392

E. RIYADH 7058

Classified By: Acting Deputy Chief of Mission David Rundell for reasons
1.4 (b) and (d).


1. (C) INTRODUCTION: This cable provides the assessment of
Embassy Riyadh's country team of the terrorist/insurgent
financing environment in Saudi Arabia. As instructed in
reftel, post's response is divided into separate sections
providing background information on the terrorist/insurgent
operating environment in Saudi Arabia, the relevant legal
regime, implementation of the enforcement of
counter-terrorist/insurgent financing measures, and
communication on these issues between governments and the
government's public affairs approach to terrorist and
insurgent groups in Iraq. END INTRODUCTION.

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BACKGROUND INFORMATION
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2. (S/NF) The Saudi Arabian government (SAG) authorities do
not permit terrorist/insurgent travel facilitation,
recruitment, web-hosting, or training in the Kingdom of Saudi
Arabia (KSA),and take prompt action against attempts to
engage in such activities when they are uncovered. There are
no high-profile former regime figures in KSA of which we are
aware. It is a priority for SAG authorities to control
financial institutions and borders, and the SAG maintains
close liaison relationships with USG intelligence agencies
working on these and other issues. In order to implement the
SAG's authorities, the Saudi Arabia Financial Intelligence
Unit (SA FIU) was established to combat money laundering and
terrorist financing in the Kingdom. The SA FIU supplies lead
information to Mabahith investigators working terrorism
finance cases and has the capability to respond to US
Government requests for financial information associated with
intelligence and law enforcement cases through the Joint Task
Force on Terrorism Finance. Banks generate lead information
through Suspicious Activity Reports (or Suspicious
Transaction Reports),which then pass to the Saudi Arabia
Monetary Agency (SAMA) and, when warranted, the SA FIU.

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LEGAL CONTROLS ON MONEY LAUNDERING AND TERRORIST FINANCING
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3. (U/FOUO) SA FIU officially opened on September 10, 2005.
The SA FIU was originally chartered under the Saudi
Anti-Money Laundering (AML) Law enacted in 2003 and
officially established on September 10, 2005. According to
the SA FIU's Director, Dr. Saud Al-Mureishd, the SA FIU
safeguards the financial and non-financial systems from
abuses of money laundering and terrorist financing; primarily
the SA FIU receives STRs from Saudi banks and conducts
preliminary investigations of financial crime. The SAG has
planned for the SA FIU to become an independent agency
separate from Mabahith. When this plan materializes, the SA
FIU will perform investigations of all financial crimes.


4. (C) Cross-border movements of cash are monitored by the
Saudi Arabia Directorate of Customs (SADC),under the
jurisdiction of the Ministry of Finance. Regulations
concerning funds movements are issued by SAMA. SAG
regulations required individuals carrying funds in excess of
SAR 100,000 (USD $26,667) to declare the funds to Saudi
customs officials upon entering the Kingdom. According to
customs officials, Saudi Arabia currently has no active exit
declaration policy for travelers.


5. (C) In September of 2005, Assistant Deputy Minister of
Interior (MOI),Mohammed bin Naif (MbN),told visiting
Assistant to the President and Homeland Security Advisor Fran
Townsend that the SAG had decided to proceed with a law
lowering the ceiling on cash reporting requirements for

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travelers entering the Kingdom. The new law would lower the
reporting requirement from SAR 100,000 (USD $26,667) to SAR
60,000 (USD $16,000). At the same meeting, MbN reiterated
that no laws currently govern the amount of money that may
leave the country. In a subsequent meeting between US
Department of Treasury's Office of Foreign Assets Control
(OFAC) Director Robert Werner and SAMA Governor Hamad
Al-Sayari, Al-Sayari mentioned that the new law was "in
progress." To date, Post has neither seen SAMA-issued
regulations supporting the new law, nor have we heard of
changes at the border.


6. (C) Frequent visits by senior ranking USG officials, like
Ms. Townsend, have included talking points on cash couriers,
and the SAG is aware of the importance the USG places on this
topic. The recent decision to lower the inbound reporting
requirement is testimony to the SAG's engagement on the issue
and is a good starting point. (Comment. However, a
regulation is only effective if there is enforcement. In
Post's view, the lowered ceiling is good news, but better
news would be a change in customs' procedures and staffing
that enables it to enforce the regulation effectively. End
comment.)


7. (S/NF) In January 2006, the SA FIU drafted the new cash
declaration policy for KSA. The draft regulations indicate
that all STRs on cash carriers will be reported to the SA FIU
and that the new regulations set the maximum amount of cash
or precious metals brought into or out of the KSA at SAR
60,000 (USD $16,000). In line with this plan, the SA FIU
drafted a customs declaration to document cash or precious
metals taken into or out of the country. This form is
designed to establish written evidence of "intent to deceive"
if the passenger is later found to be carrying cash or
precious metals in excess of the legal ceiling. The SA FIU
is to also develop a declaration form for non-financial
institutions. To date, the new customs forms have not been
issued.

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THE DRAFT CASH DECLARATION REGULATIONS
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8. (U) Following are the draft SA FIU regulations on cash
declaration:

(U) Article 14. The regulations of this law outline the
procedures for declaring cash and precious metals allowed
into or out of Saudi Arabia and specifies the amount of cash
and weight of metals that warrant declaration.

(U) 14.1 The maximum amount of cash or precious metals
allowed into or out of Saudi Arabia is SAR 60,000 or the
equivalent of that amount in any foreign currency.

(U) 14.2 Travelers are strictly prohibited from departing
the country with cash or precious metals in excess of this
limit. Cash exceeding this amount should be transferred to
or deposited in any bank at the port of exit. Undeclared
cash or precious metals in excess of the limit will result in
customs turning the traveler into the appropriate authorities
for questioning. The Financial Investigation Unit will be
notified.

(U) 14.3 Travelers departing the country and wishing to
carry precious metals in excess of SAR 60,000 have to fill a
declaration form at the customs office at the port of exit.
The traveler should provide purchase invoices to verify the
value of the goods. If the goods are to be used for
commercial purposes, the traveler will be subject to the
provisions of the Customs Law.

(U) 14.4 Travelers departing the country with undeclared
cash or precious metals in excess of the limit will be
subject to the penalties specified in Article 20 of the
Anti-Money Laundering Law and Customs Law depending on the
findings of the investigation (Comment. See paragraph 17 for
text of Article 20. End Comment). Customs will seize the
cash and/or metals and notify the SA FIU.


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(U) 14.5 The customs officer, with the help of a SAMA
representative, will inspect for fraud any cash in excess of
SAR 60,000 declared by travelers entering Saudi Arabia. The
traveler will be asked to deposit or transfer cash in excess
of the limit to any bank at the port of entry. The
declaration form will be stamped by customs and the FIU will
be notified. The traveler will be asked to sign a written
pledge that he/she will not repeat the offense. The traveler
will also be required to produce purchase invoices for metals
in excess of the limit. If the metal is for commercial use,
the traveler will be subject to the provisions of the Customs
Law.

(U) 14.6 Travelers entering the country who fail to declare
cash or precious metals in excess of the allowed limit or
repeat the violation, will be reported by customs officials
to the appropriate authorities and subjected to the penalties
specified in Article 20 of the Anti-Money Laundering Law.
The SA FIU will be notified.

(U) 14.7 Customs will provide copies of all declaration
forms to the SA FIU as stated in Article 11 of this law
(Comment. Article 11 was not provided. End Comment.),
allowing the SA FIU to investigate possible ties between
these individuals and money laundering or other types of
crimes.

(U) 14.8 Seized cash or precious metals that are not claimed
after the specified 90-day period will be handled according
to current regulations.

(U) 14.9 While retaining the right to conduct regular
business, companies, financial and non-financial
institutions, gold stores, Hajj and Umrah travel groups, cash
courier and mail courier service companies shall be subject
to these regulations.

(U) 14.10 Customs shall create a database to include the
names and data on individuals who have and have not declared
any excess cash in the past, in order to identify repeated
violations. The SA FIU will be notified of such cases.

(U) 14.11 The SA FIU or Customs shall prepare the
declaration form referenced in this article and shall
circulate it to all ports.

(U) 14.12 The Ministry of Interior and the Ministry of
Finance shall take the necessary measures to publicize these
instructions and shall post them on notice boards in obvious
locations at every port of entry and exit. The instructions
shall outline the procedures and penalties involved in case
of violations.

(U) Article 20 of the Anti-Money Laundering Law: "Anyone
violating any provision not stated hereof shall be subject to
a jail penalty up to six months and a fine up to SAR 100,000
or to either punishment."


9. (C) Saudi customs officers have stated that, in practice,
they rarely ask inbound passengers whether they are carrying
funds in excess of the SAR 100,000 ceiling. The officers
complain that they do not have the manpower to enforce the
regulations, especially with the vast influx of passengers
making Hajj and Umrah visits. In general, customs is far
more concerned about counterfeit funds (versus legitimate
cash) entering the country. When an inbound cash smuggler is
detected, customs officials report they typically confiscate
the funds, conduct an administrative review of the case (this
is done by high ranking members of customs at the port of
entry),issue penalties of up to fifty percent of the value
of the confiscated funds, and if the guilty individual cannot
pay the penalty, send the individual to jail. Key to note is
that customs does not investigate money's origination or
destination. Contraband cases involving explosives and/or
narcotics are typically turned over to the Ministry of
Interior (MOI) for further investigation. Saudi customs
tends to regard cash couriers, and all contraband smugglers,
as one-time incidents and does not follow-up with any
additional investigation on their own or in conjunction with

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the MOI. Embassy staff have not observed any posted notices
of currency restrictions when traveling through customs.

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SA FIU ROLES AND RESPONSIBILITIES
--------------


10. (S/NF) The SA FIU falls under the authority of the
Saudi Ministry of the Interior (MOI). The SA FIU reports
directly to MbN. One of the SA FIU's responsibilities is to
receive STRs from all Saudi banks and conduct preliminary
investigations of financial crimes. Financial institutions
are required to file STRs with the SA FIU within five
business days of the incidence of suspicious activity. The
SA FIU is the only entity in the SAG with authority to
forward STRs to the Commission of Prosecution and
Investigation, the government agency that prosecutes money
laundering and terrorist finance crimes.


11. (S) Regarding suspicious transaction reports, under SAG
rules, a financial institution must file a report with the SA
FIU within five working days of the incidence. Additionally,
if the SA FIU requires more information than provided by the
bank on the initial report, the SA FIU may go directly to the
reporting bank for the information. If, however, the SA FIU
requires information from a different bank on the
transaction, then the SA FIU must make its request for
information through SAMA.


12. (S) The SA FIU shares authority with SAMA on subpoena
power. For access to financial records, the SA FIU must
subpoena the records through SAMA. For access to
non-financial records, such as security related files, the SA
FIU can issue its own subpoena directly through MOI's
National Information Center.


13. (S/NF) As of February 2006, the SA FIU was in the
process of creating an analysis division consisting of a
security analysis branch and a financial analysis branch.
Both branches would analyze STRs concurrently. The security
analysis branch would have access to the MOI's National
Information Center and would complete criminal history checks
on the initiators and beneficiaries of suspicious
transactions. The financial analysis branch would be
responsible for reviewing prior financial data and behavior.
After both sections complete their reviews, their analyses
would be compiled into a single report for the SA FIU
Director.


14. (S/NF) If evidence of a crime is found in the
preliminary investigation, the SA FIU will forward the STR to
the Commission of Prosecution and Investigation. According
to SAMA, as of January 2006, 150 STRs had been sent to the SA
FIU, but none of those had been forwarded to the Commission
of Prosecution and Investigation.


15. (S/NF) Currently the SA FIU is working with US
Treasury's FinCEN to qualify for Egmont Group membership.
FinCEN visited the KSA September 15-20 to conduct a final
on-site review. This on-site review included visits and a
comprehensive study on the various parts that make up the SA
FIU. To include but not limited to: the SA FIU, the MOI,
the Commission of Prosecution and Investigation, the General
Security Agency, and bank compliance officers at various
banks under SAMA's jurisdiction.

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USG ASSISTANCE
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16. (S/NF) U.S. members of the Joint Terrorist Finance Task
Force (JTFTF) have trained its Saudi Mabahith and SA FIU
counterparts. In 2005, FBI and IRS conducted a two-week,
two-level course on financial investigation issues and
tactics. In January 2006, the FBI plans to sponsor training
for the MOI and SA FIU in Riyadh. In general, the SAG
welcomes training opportunities and has expressed interest in
training the SA FIU in STR analysis. In December of 2006,
FinCEN is proposing specific training related to Egmont

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membership to the SA FIU in Washington, D.C. In the past,
FinCEN has offered the SA FIU training; however the SA FIU
has yet to accept FinCEN's offers.

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UNSCR 1267'S DESIGNATIONS
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17. (U) On 21 July 2006, Turkey's highest court suspended a
five-year freeze on the assets of Saudi businessman and
suspected Al-Qa'ida financier, Yassin al-Qadi, who was
designated on 12 October 2001. We have no evidence that the
SAG suspended the freeze on al-Qadi within the Kingdom. On
20 July 2006 and 3 August 2006, the United States and the
United Nations, respectively, designated the Philippines and
Indonesian branches of the Saudi Arabian-based International
Islamic Relief Organization (IIRO),as well as IIRO Eastern
Province Director, Dr. 'Abd al-Hamid Sulaiman al-Mua'jjil
(AKA Abdul Hamid Sulaiman Al-Mujil),under UN 1267
specifications. The SAG complied with UN 1267 requirements
to freeze all assets associated with the designated entities
and placed a travel ban on Dr. al-Mua'jjil (reftel).

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COMMUNICATION
--------------


18. (S/NF) The SAG does not regularly share information
regarding terrorism or insurgent finance with the Government
of Iraq. U.S. intelligence and law enforcement agencies
regularly share information with their Saudi counterparts
regarding
foreign fighters, insurgency issues, and finance associated
with Al-Qa'ida and independent extremist elements in the
Kingdom. Lead information is frequently shared, to include
financial queries on suspected insurgent and terrorism
financiers, with Saudi counterparts via established bilateral
channels and through the JTFTF. However, the Saudi
members of the JTFTF have largely not reciprocated with their
US partners regarding terrorism finance issues and are
seldom proactive in providing new lead information on
Saudi-based sources of terrorism finance. Furthermore, on
numerous occasions, the SAG has been asked to co-sponsor a
UNSCR 1267 designation; however the SAG has never agreed.

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KSA AND IRAQ'S INSURGENT FINANCE
--------------


19. (S/NF) Although Saudi Arabia remains a major source of
foreign fighters and ideological support to insurgents
in Iraq, available information indicates that Saudi Arabia is
not a major source of funding for the insurgency itself.
Foreign fighters, including Saudis, typically carry enough
cash on their persons to pay for their travel and
documentation for entry into
Iraq. However, information suggests that insurgent groups in
Iraq rely on internal funding through extortion, money
laundering, kidnappings, and other criminal activities.


20. (S/NF) Saudi Arabia remains a key source of terrorism
finance. A variety of non-public information suggests that
terrorism financiers and facilitators have quickly adapted to
new Saudi regulations on charities, banks, and financial
reporting requirements and choose to move money through
informal means (e.g., couriers, mail, hawalas, and personal
travel). Terrorist facilitators rarely use the regulated
formal banking system, which may indicate that Saudi
regulations on banks are working to deter illicit finance and
terrorism finance. The planned USD 16,000 cash courier
restriction will probably not impact low-volume funds
accompanying foreign fighters into Iraq or key facilitation
areas
to Iraq, such as Yemen or Syria. Likewise, the proposed
restriction will not prevent charities from sending funds
abroad
via couriers to finance projects or persons, who, in turn,
may continue to divert legitimate funds to extremists and
terrorist groups. Although not corroborated by a variety of

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sources, Saudi financiers of external terrorist/extremist
groups may personally carry cash outside of Saudi Arabia into
banking or hawala centers such as Manama and Dubai, where
they can easily make money transfers to Iraq, Syria, and even
Iran without encountering scrutiny.
OBERWETTER