UK ANNOUNCES TERRORISM FINANCE STRATEGY

S E C R E T SECTION 01 OF 02 LONDON 000794

SIPDIS

SIPDIS
NOFORN

STATE FOR EB/ESC/TF, EUR/PGI, IO/PSC, S/CT, EUR/UBI
TREASURY FOR PONCY, SERAFINI, EDDY

E.O. 12958: DECL: 02/28/2017
TAGS: ETTC KTFN PTER EFIN UK
SUBJECT: UK ANNOUNCES TERRORISM FINANCE STRATEGY


Classified By: Economic Minister Counselor Mark Tokola for reasons 1.5
(b) and (d).


1. (S/NF) Summary and Comment: The UK's new strategy to
tackle financial crime and terrorism does not represent a
dramatic point of departure, but rather confirms an
evolutionary trend towards a more aggressive approach to
countering terrorism finance. The strategy, announced by
Economic Secretary to the Treasury Ed Balls on February 27,
addresses a number of issues that have long been of concern
to the U.S., including a more rigorous approach to halting
terrorist abuse of the charitable sector and increased use of
classified materials to freeze assets. It does not address
other U.S. concerns, such as a reluctance to designate
domestic branches of global charities, the failure of the UK
to designate Hizbollah as a terrorist entity, or the creation
of legislation to combat proliferation finance. Nor does it
create new tools for the UK to act against Bank Saderat. The
announcement mixes several initiatives that are already under
way with some new measures. And as with most strategies, its
success can only be measured in time. End Summary and
Comment.


2. (SBU/NF) On February 27, Economic Secretary to the
Treasury announced HMG's new strategy on the financial
challenge to crime and terrorism (full text available at
www.hm-treasury.gov.uk). Overall, the strategy identifies
the right priorities: the creation of an asset freezing unit
within HM Treasury; the need for government agencies to
develop better mechanisms for sharing intelligence; the
introduction of a licensing system for money services
businesses; and the provision of additional resources to the
Charity Commission to identify and disrupt terrorist
exploitation of charities. The strategy also reiterates a
number of decisions previously announced by the government,
including the decision to use classified materials in cases
where there is operational urgency to act.


3. (S/NF) In our view, this strategy is not a radical
departure or turning point. Rather, it is a confirmation of
an ongoing evolution on HMG thinking towards countering
terrorism finance. The UK security services have become
proponents of using asset freezes. They have learned the
value of using the announcement of an asset freeze as a
justification for searching suspected terrorists' homes.
They have also been advocates for the use of classified
materials in designations. And politically, Chancellor
Gordon Brown gains political mileage from making the Treasury
a player in the fight against terrorism.


4. (S/NF) How does the new strategy affect U.S. interests?
Most importantly, our initial analysis suggests that it will
"do no harm." The new strategy also starts to address some
of our biggest concerns with the UK approach to fighting
terrorism finance, including a lack of rigor in investigating
charities for ties to terrorism and an inability to use
classified materials to freeze assets. More broadly, the
strategy highlights that we and the UK share some of the same
preoccupations regarding the role of money services
businesses and cash couriers, creating the opportunity to
work together with the UK internationally. This commonality
of interests is unsurprising; the strategy's authors visited
Washington during its preparation.


5. (S/NF) What doesn't change? The strategy does not signal
a change in approach on other issues that concern us. The UK
will continue to be wary of UN designations of global
charities if we cannot provide specific evidence linking the
UK branch with Al Qaeda. The new strategy does not signal a
shift in the UK approach to Hizballah. There is no mention
of domestic legislation to allow for a freeze of assets
related to proliferation finance. Nor will the strategy end
what we view as HMG timidity in risking court challenges
(noting that UK courts are less deferential to anti-terrorism
measures than our own). Finally, there is a strong signal
that classified materials will only be used in cases where UK
domestic security is at risk, and not more broadly in the way
we use it.


6. (S/NF) Regarding Bank Saderat, there is nothing in this
new strategy that would impact the way HMG is approaching
their evaluation of Bank Saderat. HMG is fully aware of the
importance that we place on UK action against Bank Saderat.
Both the Chancellor and Ed Balls are engaged and receive
regular briefings from their staff on progress towards a
decision. We have been told that ministers have agreed to
take action against Bank Saderat as long as such action meets

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UK legal requirements. Intelligence officials are currently
assessing all of the information we have provided in order to
determine whether they can link payments by Bank Saderat to
organizations designated either by the United Nations or the
European Union. We understand that intelligence officials
are under pressure from the Cabinet Office to complete this
review as soon as possible. But this strategy provides not
new tools to do the job.

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