PALESTINIAN MONETARY AUTHORITY DEPUTY GOVERNOR ON

S E C R E T JERUSALEM 000151

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR
WILLIAMS/SHAMPAINE/BELGRADE; NSC FOR ABRAMS/DORAN/WATERS;
TREASURY FOR NUGENT/HIRSON/HEFFERNAN/LOEFFLER/HARRIS;
BRUSSELS FOR LERNER; PLEASE PASS TO USAID FOR
KUNDER/MCCLOUD/BORODIN

E.O. 12958: DECL: 01/22/2016
TAGS: EFIN PGOV PTER KTFN KWBG IS IZ
SUBJECT: PALESTINIAN MONETARY AUTHORITY DEPUTY GOVERNOR ON
COUNTERING MONEY LAUNDERING AND TERRORIST FINANCING

Classified By: Consul General Jake Walles for reasons 1.4 (b) and (d).


1. (S) Summary: The Palestinian Monetary Authority (PMA) is
now emphasizing actions against money laundering over
countering terrorist financing because of the current
political situation in the PA. It continues to draft
anti-money laundering legislation that will put into law many
of the same measures that are used to counter terrorist
financing, according to the PMA Deputy Governor. The
Financial Follow-up Unit (FFU) is now actively investigating
suspicious activity reports from banks. The PMA is also
undertaking the licensing of all moneychangers and has ended
commercial banks' acceptance of third party-endorsed checks,
he said. End summary.

PMA's strategy on AML/CTF legislation
--------------


2. (C) In a meeting with Econ and USAID officers, Deputy
Governor of the Palestinian Monetary Authority (PMA) Jihad
al-Wazir detailed how the PMA had adjusted its anti-money
laundering/countering terrorist financing strategy, given
Hamas' majority in the Palestinian Legislative Council and
continued governance of the Palestinian Authority (PA).
Al-Wazir said the PMA was now focusing on anti-money
laundering (AML),not countering terrorist financing (CTF)
since CTF is a non-starter given current political realities.
However, putting in place AML measures would dramatically
help with CTF, he stressed. Al-Wazir said the PMA continues
to work with International Monetary Fund (IMF) consultants
and a British-funded former AML unit head at Scotland Yard on
finalizing draft AML legislation. The law would also focus
on anti-corruption, he said, which should appeal to Hamas
lawmakers.

Update on work of Financial
Intelligence Unit-equivalent
--------------


3. (C) Al-Wazir explained that the PMA currently has an
internal financial intelligence unit, the Financial Follow-up
Unit (FFU). Al-Wazir said there are concerns within the PMA
that, if the FFU is retained within the PMA, there could be
liability issues since the PMA does not enjoy the full
sovereignty enjoyed by the central bank of an independent
country. However, he noted that, as an independent body, the
potential for abuse of the FFU by political actors could be
greater. The current draft anti-money laundering legislation
would make the FFU an independent agency. Regardless of its
eventual status, al-Wazir stressed that no one wants the FFU
to become another intelligence agency. (Note: While the FFU
currently sits in the PMA it was to have been funded by the
PA Finance Ministry, according to an MOU signed by the
previous government. Al-Wazir said that, given the current
PA government's financial difficulties, the PMA is funding
the FFU and will include it in its 2007 operating budget.
End note.)


4. (C) Al-Wazir noted that the FFU is currently focused on
responding to suspicious activity reports (SARs) filed by the
local commercial banks. If it finds abuse, the FFU will
close the account, at minimum, and forward the case to the
Attorney General. Al-Wazir said the PMA is also trying to be
proactive and not just depend on the SARs. For example, the
PMA is licensing all moneychangers in the West Bank and Gaza
and is working with the police to close those that are not
eligible for licensing. He also said the PMA has stopped
commercial banks operating in the West Bank and Gaza from
accepting checks endorsed by third parties but is still
trying to calculate how many endorsed checks are still being
processed in the system. USAID officers briefed al-Wazir on
the USAID project, SEFIR, which might assist the FFU. (Note:
SEFIR would be activated once the Section 550 waiver is
finalized. End note.)
WALLES