TREASURY U/S LEVEY MEETING WITH UAE CENTRAL BANK

S E C R E T SECTION 01 OF 02 ABU DHABI 000684

SIPDIS

TREASURY FOR U/S LEVEY
STATE FOR NEA/IRAN, NEA/ARP, EB/ESC/TFS, S/CT
NSC FOR ZARATE

E.O. 12958: DNG: CO 06/06/2032
TAGS: PTER KTFN PREL IR AE
SUBJECT: TREASURY U/S LEVEY MEETING WITH UAE CENTRAL BANK
GOVERNOR

ABU DHABI 00000684 001.2 OF 002


Classified By: Charg Martin Quinn, for reasons 1.4 b and d.


1. (S) Summary: On June 2, Treasury U/S Stuart Levey
discussed Iran and the UAE's FATF mutual evaluation with UAECentral Bank Governor Sultan Nasser Al-Suwaidi. A-Suwaidi
explained that he had not seen much groth in the portfolios
of Iranian banks in the UAE In response to U/S Levey's
question about how he UAE would implement the UNSCR 1803
requiremens of enhanced due diligence on Iranian financial
nstitutions, Al-Suwaidi said the Central Bank woul send
guidance to local financial institutions very soon,
"hopefully within a few days." Al-Suwaidi asked for U/S
Levey's help to raise the UAE's Financial Action Task Force
(FATF) assessment rating on Hawala from non-compliant by one
level to partially compliant. The Governor and Al-Awadi
also asked for U.S. training both at the bilateral level and
using the UAE as a host for multilateral events. End
Summary.


Iran
--------------


2. (S) Al-Suwaidi briefly gave his impression of the Iranian
economy, noting that inflation and unemployment were both up,
and that several Iranian businesspeople were looking to
relocate to the UAE, either as a stepping stone "west" or as
a more permanent home. He commented that, when Abu Dhabi
opened up some real estate opportunities to foreign
investment, the first Iranian question was whether the
investment guaranteed a residence permit. When the
developers were unable to reply in the affirmative, Iranian
interest receded. He wryly noted that Dubai tool a more
liberal approach to residency, attracting more investment.
Al-Suwaidi stressed that the UAE was cracking down on the
Iranians, but would continue to do so "gradually," by
canceling visas or not renewing business licenses.


3. (S) During an earlier meeting with Secretary Paulson,
Central Bank Governor Al Suwaidi stated that remittances from
Iran have gone down significantly in the last several months
and are continuing to fall. He disclosed that the Deputy
Governor of the Central Bank of Iran visited the UAE recently
to complain about the strained relations between Iran and UAE
banks. Al Suwaidi said that he refused to meet with the
Iranian official, instead sending his Deputy with the
instruction that the UAE Central Bank will not interfere on
behalf of Iran.


4. (S) U/S Levey, noting Al-Suwaidi's earlier remarks about
lower fund transfers to Iran, said he was trying to reconcile
this with other information that the Iranians viewed the UAE
as a "safe haven." He asked whether the Iranians could just
be parking their money in the UAE. Al-Suwaidi asserted that
Iranian bank assets and liabilities didn't show this. They
were actually growing slower than "normal growth." He added
that the last time the UAE looked at bank deposits by
nationality, it discovered that 73% of deposits were local,
11% were Asian, 8% Arab, and the remainder from the rest of
the world. Al-Suwaidi did say that an active Dhow trade
existed, with Iranians bringing products (carpets and
produce) to the UAE to sell, and using those funds to
purchase UAE products. Judging by the lack of impact on the
financial sector, however, the business didn't appear to be
growing.


5. (S) U/S Levey asked whether the UAE banking system treated
Iranian businesses as Iranian or Emirati. The Governor
asserted that for companies younger than 10 years, Banks
treated them as Iranians. He added that the UAE saw very
little cross-ethnic lending. Indians borrowed from Indian
banks, Iranians from Iranian banks. The only exception was
either for some of the larger international banks, such as
Standard Chartered or HSBC that could perform due diligence
in the home market or for some of the bigger more established
companies.


6. (S) Al-Suwaidi briefly discussed specific banks. With
regard to the merged Emirates Bank International/National

ABU DHABI 00000684 002.2 OF 002


Bank of Dubai (now Emirates NBD),Al-Suwaidi noted that
Emirates NBD Chairman Ahmed al-Tayer had taken U/S Levey's
warning to heart and was addressing the bank,s Iran
portfolio. Al-Suwaidi explained that most of Emirates NBD,s
Iran exposure came with the National Bank of Dubai, and that
al-Tayer was gradually taking on this issue as he
consolidates the bank. The Emirates Bank philosophy was
slowly taking over the bank and was leading to a cut in
Iranian business. Al-Suwaidi also explained that the Iranian
Central Bank did not appear to be taking on specific business
for Bank Sepah in the UAE. He added that the Iranian Central
Bank never had significant deposits in the UAE and never had
an account with the UAE Central Bank.


Financial Action Task Force
--------------


7. (SBU) Al-Suwaidi and Anti Money Laundering and
Suspicious Cases Unit head Abdulrahim Al-Awadi asked for U/S
Levey's assistance in the upcoming FATF review of the UAE's
Anti-Money Laundering system. They explained that Yemen and
Qatar, which had no Hawala registration system, were marked
as "not applicable" by the evaluators. The UAE, which had a
registration scheme and had already registered 270 hawala
dealers, was marked as "non compliant." They explained that
-- unless the rating was raised to "partially compliant" the
UAE's National Anti Money Laundering Committee had
recommended dropping the registration requirement. In their
mind, the UAE was being punished for trying to address the
problem honestly. In response to U/S Levey's question,
Al-Awadi explained that the review team's methodology noted
that there was no penalty for non-registration, but that the
Central Bank Law, the Anti-Money Laundering Law, and AML
regulations all provided for penalties. U/S Levey undertook
to check with his FATF experts on the issue.



8. (U)

UAE Delegation

Sultan Nasser Al-Suwaidi, Central Bank Governor
Saeed Al-Hamiz, Senior Executive Director for Banking
Supervision
Abdulrahim Al-Awadi, Assistant Executive Director and Head of
Anti Money Laundering and Suspicious Cases Unit
Ahmed Qamzi, International Director AMLSCU

USG Delegation

Stuart Levey, Under Secretary of Treasury for Terrorism and
Financial Intelligence
Andy Baukol, Treasury DAS
Treasury Attach
Econchief
QUINN