APRIL 2008 MENAFATF PLENARY SUMMARY

UNCLAS SECTION 01 OF 06 ABU DHABI 000543

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SENSITIVE
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TAGS: ECON EFIN KTFN PREL PTER AE QA YM
SUBJECT: APRIL 2008 MENAFATF PLENARY SUMMARY

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INTRODUCTION & SUMMARY
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Sensitve but unclassified, please protect accordingly.


1. (SBU) The Middle East and North Africa Financial Action
Task Force (MENAFATF) held a plenary session (MENAFATF VII),
and working group meetings from April 6-9, 2008 at the Hilton
Hotel in Abu Dhabi, United Arab Emirates (UAE). Treasury
Deputy Assistant Secretary for Terrorist Financing and
Financial Crimes Daniel Glaser headed the U.S. interagency
delegation. The delegation included representatives of the
Departments of the Treasury and State, and the Federal Bureau
of Investigation.


2. (SBU) During this Plenary, the MENAFATF adopted the mutual
evaluation reports (MERs) on the UAE, Qatar and Yemen; voted
for Adel Al-Qulish to serve a second term as MENAFATF
Executive Secretary from the period 2009 - 2012; discussed
the budget for 2009; adopted the Report of the Designated
Non-Financial Business & Professions Committee; discussed the
Report of Politically Exposed Persons (PEPs) Committee;
adopted the Mutual Evaluation Working Group Chairman,s
Report, the timeline of MENAFATF member countries, mutual
evaluations, and the proposal for following up on the
assessed member countries; discussed conferences, training
seminars and workshops to include a conference on enhancing
cooperation between FATF and FSRBs, a charities conference, a
seminar on financial intelligence units (FIUs),and a variety
of other member country proposals. (End introduction and
summary.)

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MUTUAL EVALUATION REPORTS
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3. (SBU) Mutual Evaluation of the UAE:


A. (SBU) The Plenary adopted the IMF-drafted MER of the UAE.
The evaluation was conducted using the FATF 2004 Methodology
and summarizes the AML/CFT measures in place in the UAE at
the time of the on-site visit (February 28- March 15, 2007).
The UAE did not receive a very favorable assessment overall.
The UAE received a rating of either compliant "C" or largely
compliant "LC" on 20 out of 49 Recommendations and received
ratings of either partially compliant "PC" or non-compliant
"NC" on 29 of the Recommendations.


B. (SBU) During the Plenary discussions, the UAE argued for
upgrades on:

i. (SBU) Recommendations 5 (NC): While the UAE acknowledged
that it has not taken action regarding customer due diligence
(CDD) for Correspondent Banking, the country noted that it
has drafted a law covering the issue. The UAE also argued
that their circulars, which address both issues, have been
appreciated and that on the whole, their performance has been
good. The UAE also argued that it is the first country in
the region to implement CDD measures. The IMF team disagreed
and argued that the UAE,s CDD measures are not obligatory
for financial institutions and are therfore insufficient to
meet FATF standards. The MENAFATF Plenary supported the
assessment team and the UAE did not receive an upgrade on
this recommendation.

ii. (SBU) Recommendation 6 (NC): While the UAE agreed that it
hasn,t defined PEPs or established a specific law concerning
PEPs, it has received suspicious activity reports (SARs) on
PEPs and are in the process of issuing a law regarding the
matter. The UAE also argued that their laws are so general,
that there is no need to identify PEPs in particular. The
IMF team argued that the UAE has not issued any regulations
or circulars regarding PEPs and therefore falls short of
meeting the FATF standards. The MENAFATF Plenary supported
the assessment team and the UAE did not receive an upgrade on
this recommendation.

iii. (SBU) Recommendation 13 (NC): The UAE argued for an
upgrade on Recommendation 13, stating that Article 23 of its
CFT law provides the legal obligation on all financial
institutions to file SARs regarding terrorist financing. The
UAE supported this statement by stating that failure to
report SARs on terrorist financing and other crimes will
result in imprisonment. The IMF team noted that Article 23
of the UAE,s CFT law only requires financial institutions to

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report suspicious activity based on knowledge of the act, not
the suspicion. The threshold is too high and falls short of
the FATF standard requiring financial institutions to report
based on suspicion of an activity, not knowledge. The
MENAFATF Plenary supported the assessment team and the UAE
did not receive an upgrade on this recommendation.

iv. (SBU) Recommendation 16 (NC): The UAE argued that
although the UAE,s AML law does not explicitly cover
professionals (lawyers, accountants, etc.),other commercial
laws cover them with regards to AML/CFT controls. The IMF
team noted that the FATF standard requires professionals to
be fully covered under laws that require SAR reporting and
general CFT procedures and controls, neither of which are
imposed on professionals by UAE law. The MENAFATF Plenary
supported the assessment team and the UAE did not receive an
upgrade on this recommendation.

v. (SBU) Recommendation 19 (NC -> C): The UAE agreed with the
IMF team,s assessment in that the UAE does not have a law
requiring cash transaction reporting. However, the UAE
argued that it once considered such a system and concluded
that such a system would not work in the jurisdiction.
Instead of a cash reporting system, the UAE implemented a
cash recording system and demonstrated the evidence of its
consideration. The FATF standard only requires consideration
of such a system and so the MENAFATF Plenary supported the
UAE for an upgrade from NC to C on this recommendation.

vi. (SBU) Recommendation 32 (NC -> PC): The UAE argued that
all authorities and agencies have comprehensive statistics.
The IMF team replied that it has asked for statistics at the
time of the on-site visit and were unable to find
comprehensive statistics testing the efficiency of the UAE,s
AML/CFT systems and controls. The IMF team did agree,
however, that some agencies and in particular the Dubai
Police, provided meaningful statistics. The MENAFATF Plenary
supported the UAE for an upgrade from NC to PC on this
recommendation.

vii. (SBU) Special Recommendation VI (NC): This
recommendation was a particularly sensitive one to the UAE.
The UAE argued that it is the only jurisdiction in the region
to have created a system to license hawaladars (registered
and controlled by the Central Bank of the UAE). The UAE
argued for the benefits of the system by explaining a case in
which the Central Bank received a SAR from a hawaladar, found
elements of fraud and was able to consequently prosecute the
criminals. While the IMF team was sympathetic to the UAE,s
efforts, it noted that there are significant shortfalls in
UAE,s system compared to the requirements of the FATF
standard. The UAE has implemented a voluntary system with
informal oversight and no legal underpinnings or abilities to
sanction. The FATF standard requires more legal monitoring,
oversight and sanctioning capabilities regarding hawala. The
MENAFATF Plenary supported the assessment team and the UAE
did not receive an upgrade on this recommendation.

viii. (SBU) Special Recommendation VII (NC): The UAE argued
that banks do have systems that require sender and originator
information for wire transfers. The IMF team, however,
argued that there are no specific obligations imposed on
financial institutions for customer verification procedures
concerning wire transfers and that the 40,000 drh threshold
is much higher than the USD 1,000 stipulated by the FATF
standard. The MENAFATF Plenary supported the assessment team
and the UAE did not receive an upgrade on this recommendation.


4. (SBU) Mutual Evaluation of Qatar:


A. (SBU) The Plenary discussed and adopted the IMF-drafted
MER of Qatar. The evaluation was conducted using the FATF
2004 Methodology and summarizes the AML/CFT measures in place
in Qatar at the time of the on-site visit (February 4-20,
2007). Qatar did not receive a favorable assessment overall.
Qatar received a rating of either compliant or largely
compliant on just 12 out of 49 Recommendations and received
ratings of either partially compliant or non-compliant on 37
of the Recommendations.


B. (SBU) A large part of the Plenary discussion debated the
difference between primary and secondary legislation and
other enforceable means. The debate will continue at the
June FATF Plenary during the discussion of the Qatar MER as
well as in the Working Group on Evaluations and
Implementation (WGEI).

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C. (SBU) During the Plenary discussions, Qatar argued for
upgrades on:

i. (SBU) Recommendation 5 (NC): Qatar argued that its laws
and authorities regarding anonymous accounts and customer
identification measures are imposed by secondary legislation
and not other enforceable means, as assessed by the team.
Qatar,s argument supporting this statement is that its AML
law gives authority to the Central Bank of Qatar to pass
provisions and regulations related to AML/CFT controls and
procedures. FATF,s standard for Recommendation 5 requires
that regulations regarding anonymous accounts and customer
identification measures be mandated by secondary legislation.
While the IMF team agreed that the Qatar Central Bank is
fully authorized to create measures, supervise institutions
and sanction them, the regulations are neither mandatory nor
enforceable, making them other enforceable means rather than
secondary legislation. The IMF team also noted that
regardless of the regulations falling under secondary
legislation or other enforceable means, there are significant
shortcomings. The FATF representative explained that the
methodology does define the distinction between
primary/secondary legislation and other enforceable means.

ii. (SBU) Both the FATF and the United States recommended
that for the time being, the procedure for obtaining the
grades must follow the current methodology. The debate on
secondary legislation versus other enforceable means endured
for a few hours. The conclusion agreed to by the Plenary
included several factors: 1) a footnote would be placed at
paragraph 301 noting that the interpretation of other
enforceable means and secondary legislation is not clear and
that the issue would be raised at the FATF June Plenary; 2)
the issue would be raised and discussed at the FATF June
Plenary during the discussion of the Qatar evaluation; 3)
Qatar should raise the issue at the WGEI since it is
currently examining this issue, and 4) The MENAFATF Plenary
supported the assessment team and Qatar did not receive an
upgrade on this recommendation or any that fall under the
same debate (In addition to Recommendation 5, Recommendations
10 and 13, and Special Recommendation IV are also subject to
the distinction between primary/secondary legislation and
other enforceable means).

iii. (SBU) Recommendation 22 (PC): Qatar argued for a C grade
for Recommendation 22, stating that the Qatar Central Bank
obligates foreign branches and subsidiaries to adhere to
Qatari laws. The IMF team argued that the Qatar Central Bank
has indeed implemented everything, except for obligating
institutions to apply the higher standard. The MENAFATF
Plenary supported the assessment team and Qatar did not
receive an upgrade on this recommendation.

iv. (SBU) Recommendation 17 (NC): Qatar argued that it does
have a sanctions system within its AML regime, including the
imposition of imprisonment or fines. The IMF team argued
that there are no sanctions imposed for failure to report
SARs and that there is an inadequate sanction regime with
respect to tipping-off. The IMF team also noted that there
is no sanctioning framework related to AML/CFT, in general.
There are some sanctions in place but there are major
shortcomings and no individual or entity has yet been
sanctioned. The MENAFATF Plenary supported the assessment
team and Qatar did not receive an upgrade on this
recommendation.

v. (SBU) Recommendation 26 (PC -> LC): Qatar argued that as a
member of Egmont, it must have a well-qualified FIU. The IMF
team argued first, that Egmont membership does not mean an
FIU complies with all the standards in Recommendation 26 and
second, that there are major shortcomings with Qatar,s in
general. In particular, there are discrepancies in the law
regarding informing the coordinator and not the FIU about
suspicious activity, which poses vulnerabilities. At the
time of the on-site visit, the FIU only had one analyst on
staff and there was no guidance to financial institutions at
the time. Additionally, there are obstacles to the FIU
obtaining all the information it needs as requests are based
on an urgent basis and can only be made to financial
institutions and not other related companies. The MENAFATF
Plenary supported Qatar for an upgrade from PC to LC on this
recommendation.


5. (SBU) Mutual Evaluation of Yemen:


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A. (SBU) The Plenary discussed and adopted the
MENAFATF-drafted MER of Yemen. The evaluation was conducted
using the FATF 2004 Methodology and summarizes the AML/CFT
measures in place in Yemen at the time of the on-site visit
(July 21 - August 1, 2007). Yemen received a negative
assessment overall. Yemen received a rating of either
compliant or largely compliant on just 4 out of 49
Recommendations and received ratings of either partially
compliant or non-compliant on 43 of the Recommendations (two
recommendations were graded NA). Yemen stated that it felt
the grades on its MER were severe and unfair.


B. (SBU) During the Plenary discussions, Yemen argued for
upgrades on:

i. (SBU) Recommendation 8 (NC): Yemen disagreed with the
MENAFATF team,s assessment that Yemen imposes no obligation
to take special measures to the transactions carried out by
using advanced technologies. Yemen argued that financial
institutions are required to report suspicious activity and
to prevent the misuse of new technologies through proper
measures and controls. Yemen also noted that its financial
institutions have software to identify individuals and keep
records of their transactions. The MENAFATF team noted that
there are too few controls, highlighted by the fact that
transactions can be done over the phone and forms are sent
over fax. The MENAFATF Plenary supported the assessment team
and Yemen did not receive an upgrade on this recommendation.

ii. (SBU) Recommendation 32 (NC): Yemen claimed that it does
create statistics and should receive an upgrade. The
MENAFATF team noted that Yemen,s statistics do not deal with
a review of or the effectiveness of its AML/CFT system. The
MENAFATF Plenary supported the assessment team and Yemen did
not receive an upgrade on this recommendation.

iii. (SBU) Recommendation 19 (NC): Yemen argued that it
established a committee regarding cash reporting and offered
to submit documents that demonstrate its consideration of a
cash reporting system. The MENAFATF team argued that the
committee does not have anything to do with a cash reporting
system or AML/CFT. The MENAFATF Plenary supported the
assessment team and Yemen did not receive an upgrade on this
recommendation.

iv. (SBU) Recommendation 25 (NC): Yemen claims that its AML
law of 2003 provides guidelines in assisting financial
institutions in applying AML/CFT controls. The MENAFATF team
explained that no forms, rules or procedures were given to
the team, though they were asked for repeatedly. The
MENAFATF Plenary supported the assessment team and Yemen did
not receive an upgrade on this recommendation.

v. (SBU) Special Recommendation I (NC): Yemen argued that it
has implemented UNSCR 1267 and circulates the 1267 lists.
The MENAFATF team argued that regardless, Yemen is not a
party to the Terrorist Financing Convention and has
significant shortcomings in implementing the UNSCRs. The
MENAFATF Plenary supported the assessment team and Yemen did
not receive an upgrade on this recommendation.

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MISCELLANEOUS ITEMS
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6. (SBU) Budget for 2009: The budget was agreed to, although
several member countries expressed concern in the raising of
member dues.


7. (SBU) Report of the Designated Non-Financial Businesses &
Professions (DNFPBs) Committee: The Report of the Working
Group on DNFBPs was accepted by the Plenary.


8. (SBU) Report of the Politically Exposed Persons (PEPs)
Committee: The Report of the Working Group on PEPs was not
accepted by the Plenary. Members felt they did not have the
chance to participate in the working group or read the
report, and would like to prepare comments and raise the
issue again at the next Plenary.


9. (SBU) Technical Assistance & Typologies Working Group: The
Working Group Chairman,s Report and the Technical Assistance
Report were accepted by the Plenary. During this discussion,
the United States asked whether it would also be able to join
the MENAFATF Technical Assistance & Typologies Working Group
(TATWG),as it had not in the past. The Plenary agreed that

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the United States could attend the MENAFATF TATWG.


10. (SBU) Mutual Evaluation Working Group: The Plenary
adopted the Working Group Chairman,s report, the timeline or
schedule for member countries, MERs and the schedule for
following up on member countries that have previously been
assessed. Jordan, Egypt, and Lebanon are scheduled to
undergo a mutual evaluation this year and Bahrain, Mauritania
and Syria are scheduled for a follow-up assessment this year.


11. (SBU) First Annual Conference of Licensing & Supervisory
Authorities on Charities/NPOs: It was agreed that Bahrain
would be working jointly with the MENAFATF to launch the
first regional charities conference as part of a series.
This conference was scheduled to take place May 15-16, 2008.
Through subsequent discussion between the United States and
Bahrain, it was agreed that more time was necessary in order
to plan a successful conference. Bahrain now plans to host
the conference in September 2008.


12. (SBU) Application of Libya for MENAFATF membership: The
Plenary was unable to vote on Libya,s application for
membership on procedural grounds, as the application was
submitted and distributed late. The issue will be raised and
voted on at the next Plenary.


13. (SBU) Approaching and Encouraging Djibouti and Comoros to
apply for MENAFATF membership: It was decided that although
new members would be welcome, the MENAFATF members did not
want to solicit applications from countries outside the
region.


14. (SBU) UAE proposal to host a joint Plenary with the FATF
in 2009: Most member countries supported the UAE,s proposal
to host the FATF Plenary and working groups in 2009. The
United States expressed support for the proposal, though
noted that other FSRBs were also seeking to host joint
plenaries, so 2009 might not be possible. The United States
advised the MENAFATF to contact the FATF Secretariat promptly
to discuss the proposal.


15. (SBU) Organization of Joint Workshops between FATF and
MENAFATF for training assessors: There was general support
among the members for joint workshops between FATF and
MENAFATF for training assessors. Syria suggested this
proposal be turned to the typologies working group.


16. (SBU) Joint assessment reports between MENAFATF and APG
and conducting joint workshops: There was general support for
this proposal.


17. (SBU) Coordination Committee with donor agencies to
determine the technical assistance needs of member states:
There was a great amount of support for this initiative, in
which a MENAFATF Committee would work with agencies, and the
UN Office on Drugs and Crime (UNODC),in particular, to
identify the technical assistance and training needs of
member states. Member states were encouraged to approach the
Secretariat with their specific needs.

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18. (SBU) MENAFATF Solidarity Fund to support training
programs: There was general support among the members for a
solidarity fund to support training programs in jurisdictions
that do not already receive it. However, before agreeing to
the idea, the members requested a draft proposal and agreed
to raise the issue and vote on it in the next Plenary.


19. (SBU) Qatar proposal to study the Arab Strategy Project
on AML/CFT: All members supported Qatar,s proposal to study
the Arab Strategy Project on AML/CFT, which would be prepared
by the General Secretariat of the Council of Arab Interior
Ministers.


20. (SBU) Lebanon proposal for the MENAFATF PSD: Lebanon
proposed that the MENAFATF launch a private sector dialogue,
in the form of an additional day attached to each or every
other Plenary to discuss challenges in implementing AML/CFT
controls. The proposal would build on the current US-Middle
East and North Africa Private Sector Dialogue (US-MENA PSD).
Most MENAFATF members were supportive of the concept.
However, several members expressed concern that the
underlying paper in support of the proposal had not yet been
circulated, so it was agreed to defer the discussion until
the next Plenary. Saudi Arabia, in particular, expressed
concern that the initiative would involve direct foreign
government outreach to Saudi banks. Such a concern

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represents a misunderstanding of the PSD concept that will
hopefully be resolved once the concept paper is circulated by
the MENAFATF Secretariat.


21. (SBU) The next MENAFATF Plenary meeting will be held the
week of November 9-13, 2008 in Abu Dhabi, UAE.
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