(S) FAYYAD ASKS U/S LEVEY FOR HELP WITH QATAR AND

"S E C R E T SECTION 01 OF 02 JERUSALEM 001719

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR SHAMPAINE/BELGRADE; NSC
FOR ABRAMS/SINGH; TREASURY FOR HECHT/GRANT/HIRSON;

E.O. 12958: DECL: 08/13/2017
TAGS: EFIN ECON KWBG PTER OVIP
SUBJECT: (S) FAYYAD ASKS U/S LEVEY FOR HELP WITH QATAR AND
TRADE-BASED MONEY LAUNDERING

Classified By: Acting Principal Officer Thomas Duffy, for reasons 1.4 b
,d.


1. (S) Summary. Palestinian Authority (PA) Prime Minister
Salam Fayyad told Under Secretary of Treasury Stuart Levey
that Qatar was ""willfully bad"" on issue related to financing
of terrorist organizations, including HAMAS. He said the PA
was ready to move on terror financing legislation, but would
begin to shift responsibility for these issues from the
Palestine Monetary Authority (PMA) with which he is
increasingly unhappy, to Government Ministries and his own
office. While committed to going after banks and charities
that provide illicit funding, Fayyad said that trade-based
money laundering was probably a much larger problem - and
much more difficult to counter. Levey promised to respond
positively to requests for assistance from the PA, and asked
Fayyad to articulate them in a way that the USG might best
assist. End Summary.

""Qatar is willfully bad""
--------------


2. (S) PA Prime Minister Fayyad, meeting with Under Secretary
of the Treasury Stuart Levey on August 10 in Jerusalem, said
that he was extremely worried about Qatar and its continued
support for HAMAS and other Islamist organizations in the
West Bank and Gaza. ""Qatar is a very lousy country, in every
possible way,"" he said, claiming that they provide ""more
support to fundamentalists than Kuwait or Saudi Arabia.""
Fayyad said that there was lots of money coming into the
region from Qatar. Qatar's support for these organizations
""on camera in the Security Council"" (a reference to Qatar's
recent sponsorship of a Council statement that Ramallah saw
as one-sided) should, he suggested, be a strong indication of
where their financial support is going. He added that Qatar
is using charitable organizations to move funds to Gaza.
""Qatar is willfully bad on money,"" Fayyad said, and he
encouraged the USG ""to make life difficult for Qatari banks
in the U.S.""

PA ready on terror financing legislation
--------------


3. (S) Fayyad told Levey that he was prepared to act quickly
to pass legislation that would empower the PA to take action
against accounts involved in illicit financing. He noted
that the PMA had produced draft anti-money laundering (AML)
legislation that he would recommend that President Abbas (Abu
Mazen) sign into law in ""the next two weeks."" Fayyad said
that the law, once on the books, would be hard to undo.
Fayyad welcomed USG feedback on the draft AML law, and said
that he would provide a copy to Post.


4. (S) Fayyad expressed concern about the performance of the
PMA on money laundering and illicit financing over the past
years, and said that he wanted to move the responsibility to
fight these issues to the Government. Fayyad said that the
PA's Financial Intelligence Unit will not be under the
leadership of the PMA, but will be representative of all PA
agencies. The PMA will be on it, he said, but he thought
that they were too close to the banks and didn't have enough
""presence in the system."" As an example, the PMA closed the
banks on August 9 for a holiday with almost no notice to the
public or other businesses. Though frustrated with the
current management, Fayyad said the problems with the PMA
were institutional, as there were problems with the previous
leadership too. Fayyad encouraged the USG and others to
continue to interact and do business with the PMA, but said
he wanted to shift the discussion with the U.S. on illicit
financing to the Government.

Focus on trade-based money laundering
--------------


5. (S) ""We continue to look at bank accounts and donations to
charities,"" Fayyad said, which provide a source of regular
but small scale transfers of illicit funds. He agreed that
while banks and charities remained an area of concern, but
suggested that the U.S. look more closely - and provide
assistance - in the area of trade-based money laundering.
While still studying the problem, Fayyad said he expected it
was a ""main channel"" for illicit financing into the West Bank
and Gaza. He said he particular concerns about Hebron and
Gaza.


6. (S) One indication of the likely scope of the problem, he
said, was the ""suspiciously large"" deposit base in the West

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Bank and Gaza. Even as the economy deteriorates, the deposit
base continues to grow, leading to a ""macro-picture that
doesn't make much sense"", and signaling the presence of a
significant informal economy. ""I worry that most of this
goes to finance bad things,"" he said. Fayyad promised the
USG the PA's diagnosis of the suspected money laundering
situation, but he warned that the trade-based operations were
highly efficient and very difficult to detect. Fayyad said
that the PA would be more aggressive in this area. ""We need
sufficiently trained people."" Levey said that Treasury would
be ready to help once Fayyad determined how the USG could
best assist the PA. . Remarking that he is ""not happy with
European aid,"" he added that he would provide more guidance
""in the next couple weeks"" on how the USG could assist with
improving transparency in and safeguarding the PA's financial
system.

Don't collapse banks in Gaza
--------------


7. (S) Fayyad said that he did not want to see the banking
system in Gaza, despite its problems, entirely collapse. He
worried that such a collapse would create long-term
difficulties in Gaza and would have serious repercussions on
the banking sector in the West Bank. Therefore, he would not
recommend that the Israeli banks cut off their relationships
with the Gaza banks. However, Fayyad said that he would
trust Israeli Central Bank Governor Stanley Fischer on this.
""I have a better relationship with the Central Bank of Israel
than with the PMA.""


8. (S) Fayyad expressed appreciation action taken by
Jordanian banks, and in particular by the Arab Bank.
""Notwithstanding U.S. litigation, Jordan's doing a good job.
I am worried more about the smaller banks,"" he said.


9. (U) U/S Levey has cleared this message.
DUFFY
"