PM FAYYAD DESCRIBES PA EFFORTS TO COMBAT MONEY

C O N F I D E N T I A L SECTION 01 OF 02 JERUSALEM 001994

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR
WILLIAMS/SHAMPAINE/BELGRADE; NSC FOR ABRAMS/WATERS;
TREASURY FOR SZUBIN/GRANT/HARRIS/HIRSON

E.O. 12958: DECL: 09/24/17
TAGS: ECON EFIN KFTN EAID PREL PGOV KWBG IS
SUBJECT: PM FAYYAD DESCRIBES PA EFFORTS TO COMBAT MONEY
LAUNDERING AND TERROR FINANCING; WELCOMES USG SUPPORT

REF: A. JERUSALEM 1910

B. JERUSALEM 1719

C. JERUSALEM 1820

JERUSALEM 00001994 001.2 OF 002


Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).


1. (C) Summary: Prime Minister and Finance Minster Salam
Fayyad recently told a Treasury Department delegation that
the Palestinian Authority (PA) is committed to taking
aggressive action against groups and individuals involved in
terrorism financing. Fayyad urged the USG to pass him
relevant information on individuals and groups of concern,
particularly those affiliated with Hamas. He noted recent PA
actions taken against 140 charities and the imminent
enactment, by presidential decree, of anti-money laundering
(AML) legislation as evidence of the PA's commitment to
enforcement action. Fayyad insisted that the new AML law and
existing regulations provide the tools necessary to take
action against terrorism financing. He stressed the need for
the PA to implement the AML decree and complete the process
of building a Palestinian financial intelligence unit (FIU),
rather than creating a mechanism for Israeli and Palestinian
information sharing on AML and TF issues. Fayyad welcomed
Treasury's offer to assist on combating trade-based money
laundering (TBML). End summary.

--------------
PA Making Progress
--------------


2. (C) In a September 11 meeting, Prime Minister Fayyad told
a Treasury Department delegation led by Deputy Assistant
Secretary Daniel Glaser that he eagerly welcomes any

SIPDIS
information the USG can provide on individuals and groups in
the West Bank and Gaza involved in money laundering and/or
terrorism financing. Fayyad did not specify how such
information should be passed, but insisted that, once it is
received, he will ensure that the PA takes immediate action,
to include the freezing of assets. Fayyad highlighted the
imminent enactment - by presidential decree -- of AML
legislation. He added that a final review of the law is
being conducted, after which it will be sent to PA President
Abbas. He also noted the recent PA actions against 140
suspected charities, including the freezing of assets (ref
A),and added that the PA had identified additional charities
for potential future action.

--------------
Deeds, Not Words
--------------


3. (C) Glaser stated that the draft of the AML law was
professionally done, but did not adequately address terrorism
financing. Fayyad said that he had directed the PA to make
changes to reflect this, but added, "It's not what th law
says; it's what we produce after this." Heexplained that,
while the PA may not have the sae "body of law," it uses
what it has "to accomplih the same result." Fayyad stated
that the recet actions against the suspect charities were
caried out based on financial and administrative violtions
of a 2000 law governing NGOs (reftels A an C).

--------------
Trade-based oney Laundering
--------------

. (C) Fayyad reiterated his concern, previously epressed
in his August 10 meeting with Treasury US Levey (ref B),
that trade-based money launderig (TBML) is a serious problem
that continues to bnefit Hamas. Glaser stated that Treasury
is preared to provide assistance on TBML. He also noted
that the ICE attace in Rome would be in the region in
October and asked Fayyad to suggest an appropriate
intermediary in the PA on TBML issues. Fayyad suggested the
Minister of Justice. In addition, Glaser mentioned that the
incoming Treasury financial enforcement advisor at Embassy
Ammn has considerable experience in this area. Fayya
welcomed Treasury's support, adding that immedite action is
needed, particularly in cutting off amas's access to funds.
He opined that, as the P strengthens AML measures, the
perpetrators are ursuing other options, including TBML and
money exchanges.

--------------
Special Mechanism Rejected

JERUSALEM 00001994 002.2 OF 002


--------------


5. (C) Responding to a Treasury proposal to create a special
mechanism for Israeli and Palestinian information sharing on
money laundering and terrorism financing, Fayyad said the
PA's priority is to implement the AML law, establish a strong
Palestinian financial intelligence unit (FIU),and "then work
to build bridges to the relevant authorities." Fayyad said
he would welcome any USG assistance in building the FIU.
(Note: First proposed in 2004 after IDF raids on banks in
the West Bank, the mechanism was intended to facilitate
information exchanges in response to Israeli allegations
about banking activities in the West Bank and Gaza. End
note.) Fayyad said the proposed mechanism was a response to
a specific situation, and the PA, in strengthening its own
laws and regulations, has demonstrated its progress on AML
and terror financing issues and is now in a position to take
aggressive enforcement action.


6. (U) Deputy Assistant Secretary Glaser cleared this
message.
WALLES