Identifier
Created
Classification
Origin
08BRUSSELS1059
2008-07-14 15:49:00
CONFIDENTIAL
USEU Brussels
Cable title:  

U.S.-EU TROIKA ON TERRORIST FINANCING, MAY 23, 2008

Tags:  CE EAID EFIN ETTC EUN FR KCRM KTFN PINR PREL 
pdf how-to read a cable
VZCZCXRO6530
OO RUEHAG RUEHROV
DE RUEHBS #1059/01 1961549
ZNY CCCCC ZZH
O 141549Z JUL 08
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC IMMEDIATE
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEAIIA/CIA WASHINGTON DC
RUEKJCS/DOD WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHMFISS/HOMELAND SECURITY CENTER WASHINGTON DC
RHMFISS/FBI WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHUNV/USMISSION UNVIE VIENNA
RUCPDOC/USDOC WASHDC
RUCNDT/USMISSION USUN NEW YORK
C O N F I D E N T I A L SECTION 01 OF 06 BRUSSELS 001059 

SIPDIS

STATE FOR EUR/ERA, EEB/ESC/TFS, S/CT, IO
TREASURY FOR TFFC, TFI

E.O. 12958: DECL: 07/13/2018
TAGS: CE EAID EFIN ETTC EUN FR KCRM KTFN PINR PREL
PTER, SI, SNAR, UNSC
SUBJECT: U.S.-EU TROIKA ON TERRORIST FINANCING, MAY 23, 2008

REF: A. USEU BRUSSELS 986

Classified By: USEU EconMinCouns Peter Chase for reasons 1.4 (b),(d),
(e).

C O N F I D E N T I A L SECTION 01 OF 06 BRUSSELS 001059

SIPDIS

STATE FOR EUR/ERA, EEB/ESC/TFS, S/CT, IO
TREASURY FOR TFFC, TFI

E.O. 12958: DECL: 07/13/2018
TAGS: CE EAID EFIN ETTC EUN FR KCRM KTFN PINR PREL
PTER, SI, SNAR, UNSC
SUBJECT: U.S.-EU TROIKA ON TERRORIST FINANCING, MAY 23, 2008

REF: A. USEU BRUSSELS 986

Classified By: USEU EconMinCouns Peter Chase for reasons 1.4 (b),(d),
(e).


1. (SBU) SUMMARY: Charities, cash couriers, and UN
sanctions reform were the focus of the May 23 bi-annual
U.S.-EU Troika meeting on Terrorist Financing in Brussels.
The EU will consider the U.S. proposal for a financial
sanctions workshop program to address combating terrorist
abuse of the non-profit sector. Participants agreed that the
mandate renewal for the UNSCR 1267 Committee on Al Qaida and
Taliban sanctions provides an opportunity to address due
process concerns which are being raised at EU and EU Member
State courts. The Commission welcomed U.S. proposals for
possible follow up on cash couriers. EU participants
requested further U.S. information about emerging anti-money
laundering/counterterrorism finance problems connected with
the stored-value card industry, and suggested that updated
FATF typologies may prove useful. Both sides expressed
interest in exploring mechanisms to share terrorist financing
sanctions information via the Egmont group network,
leveraging EU platforms being developed t
o link Financial Intelligence Units. END SUMMARY.

--------------
Recent Developments:
Self-Financing for Terrorist Attacks
--------------


2. (C) A representative from the EU's Situation Center
(SitCen),summarized SitCen's analysis that attacks can be
self-financed, and external financing may be unnecessary.
The 2004 Madrid attacks used proceeds from domestic illicit
drug sales to fund explosives. The 2005 attack and 2007
foiled plots in the UK were financed via credit cards and
personal loans. Western countries are attractive places to

raise money given the possibility of multiple credit cards
and bank accounts, with default often identified as normal
bad debt. Costs increase with spectacular plots,
radicalization and recruitment, propaganda, travel, family
subsistence, bribes, safe havens, forgery workshops, and
other activities. Terrorists avoid money transfer controls
by transferring amounts below reporting thresholds and using
reliable cash couriers, hawala, and moneygrams. Emerging
trends include mobile banking, pre-paid cards, and internet
banking.

--------------
Charities: Exchange of Views on
Non-Profit Organizations (NPO)
--------------


3. (SBU) Terrorist exploitation of non-profits was the most
extensively debated subject. In response to the U.S. push
for a work program in the financial sanctions workshop,
Andrej Slapnicar of the Slovenian EU Presidency agreed to
report the Troika discussion to the EU Member States (EUMS).
He recommended that NPOs remain on the Troika agenda and
noted that EUMS had seen non-profits as a possibility for a
future workshop discussion.


4. (U) EEB Deputy Assistant Secretary for Energy, Sanctions,
and Commodities Doug Hengel, in his opening remarks, flagged
the unfinished business of the 2004 U.S.-EU Summit
(reinforced in the June 10, 2008 Summit),where we committed
to review regulation of the non-profit sector to ensure it is
not misused. Few countries fully implement the Financial
Action Task Force (FATF) four-prong approach, and the
existing U.S.-EU workshop is an appropriate forum to
undertake a work program on non-profits.


5. (U) Chip Poncy (Treasury) called for greater awareness of
how terrorists exploit NPOs. FATF has developed elementary
typologies for charities, but we need a broader view
examining terrorist organizations' life-cycles and the
funding needed to sustain them, radicalization and

BRUSSELS 00001059 002 OF 006


recruitment, travel, and training. U.S. experts all flag
charities as the primary cause for concern. Poncy urged that
the financial sanctions workshop develop a broad approach
encompassing all of FATF's four pillars (regulatory,
enforcement, outreach, international engagement) and
including terrorist finance, counterterrorism and enforcement
experts.


6. (SBU) Dora Balazs, Terrorist Financing Officer,
Commission Directorate-General for Justice, Freedom and
Security (DG JLS),reported on the EU's two commissioned
studies. The first addressed transparency in the EU NPO
sector and assessed all types of financial crime, including
terrorist financing. An April 25 meeting convened EU law
enforcement and NPO experts, discussed the report's findings,
and demonstrated more scope for dialogue than at past
meetings. EU law enforcement experts saw fund transfers as
the greatest vulnerability. The Commission plans to hold a
further meeting in late 2008 to present the results of the
second study, now underway, that analyzes NPO transparency
initiatives and the sector's response to addressing the
threat of terrorist financing.


7. (SBU) In the ensuing discussion, Poncy said the USG has
placed voluntary good governance and risk-based guidelines on
websites that charities can implement to guard against abuse
(including accounting and auditing, programmatic checks to
ensure projects complete milestones identified by donors,
hiring guidance, and referral to government lists of
designated terrorists). Hengel explained that the recently
announced USAID partner vetting system is being implemented
government wide, and offered to provide more information. EU
Counterterrorism Coordinator (EU CTC) Gilles de Kerchove
requested U.S. views on the Swiss Montreaux Initiative.
Poncy agreed that the objectives are sound, but explained
that the initiative lacks the comprehensive FATF approach.
Furthermore, participants include U.S.-designated terrorists
with whom USG is prohibited from engaging.

--------------
U.S.-EU Financial Sanctions Workshop Report
--------------


8. (U) The Financial Sanctions workshop will issue a "final
report" of its work on implementing FATF Special
Recommendation (SR) III on asset freezing and confiscation.
The new work program will be decided at a later date. The
incoming French Presidency probably will propose wire
transfers, while the United States continued to press for a
charities work program or, at a minimum, an
information/organizing discussion at the October 30-31
workshop.


9. (U) Slapnicar summarized the stocktaking discussion at
the May 21-22 U.S.-EU financial sanctions workshop and the
workshop's decision to issue a final report. He highlighted
the discussion on due process in the UN (see also paras
12-13),where some EU countries are promoting an experts'
panel to review designations.


10. (SBU) Bertrand Pous, Foreign Ministry representative
from the incoming French EU Presidency, outlined France's
priorities on combating the financing of terrorism (CFT):
(1) ensuring the EU list reflects the reality of the threat,
and that EU procedures are effective and respect both the
rule of law and confidentiality of sources; (2) adding CFT to
the agendas of the EU's counterterrorism working groups, in
part to develop a better understanding of new techniques,
such as cash couriers, organized crime, etc.; and (3)
integrating effective implementation of FATF Special
Recommendations into law and continuing the dialogue with the
United States, including the planned October 30-31 workshop
and November 20 troika. Stephanie Talbot from the Finance
Ministry said that, although not a final proposal, the French
would probably propose wire transfers as the workshop theme
and would like to keep the meeting to one day.


BRUSSELS 00001059 003 OF 006



11. (U) Lynne Lambert (EEB/ESC/TFS) noted the workshop
series had yielded numerous accomplishments: public
commitment by the U.S. and EU on fair and transparent
designation procedures; outreach to the private sector;
establishment of central points of contact for banks;
improved criteria for designations; and a private sector
advisory group for the UN Monitoring Team. She underlined
that the United States would be disappointed if the U.S. and
EU did not expand the prior discussions on FATF SR III to
address charities, at least for part of the next financial
sanctions workshop.

-------------- ---
UN Sanctions Reform: Recent Developments, Ideas
-------------- ---


12. (SBU) The UN Sanctions reform discussion centered on
fairness and transparency, and the upcoming mandate renewal.
DAS Hengel noted fairness and transparency is a high priority
for the United States. Recent reforms should be better
implemented. The United States does not support the creation
of an independent UN review panel, which would undermine the
authority of the UN Security Council. Short of this, changes
could be made in the course of renewing the UNSCR 1267
Sanctions Committee and Monitoring Team mandate. Preliminary
ideas include: regularly reviewing all eligible names, which
carries resource implications; publishing releasable
statements of case; requiring Member States to take positions
on listing or de-listing; and notifying designees upon
listing. Reforms must preserve UNSC authority and must not
impair the functioning of targeted economic sanctions, a
valuable alternative to force or country-wide sanctions.


13. (SBU) Slapnicar noted that the EU has no common position
on UN sanctions reform. The EU plans to organize a seminar
for EU External Relations Counselors on improving the
sanctions regime in New York this fall, which will deal
primarily with country sanctions. Slapnicar indicated the
French EU Presidency would follow up with more concrete
ideas, including whether to hold U.S.-EU discussions on the
margins of this seminar.

--------------
Cash Couriers
--------------


14. (U) In another substantive discussion, the EU Commission
welcomed continued dialogue, including in the TAXUD working
group. The U.S. offered preliminary but specific ideas for
follow-up, which the Commission generally welcomed, and which
the U.S. will need to develop further.


15. (C) Elsner (Commission) summarized discussions at the
April 1-2, 2008 U.S.-EU cash controls expert meeting
(reftel). In the EU system for external border cash control,
methodologies vary, but all EU external cash movements must
be reported to Financial Intelligence Units (FIUs). Third
countries can exchange information with Commission-managed
data bases if they assure the same level of data. The United
States has such permission. The EU cash controls regulation
has been in place for a year and can be improved, although
initial statistics show good results.


16. (SBU) S/CT Deputy Coordinator Virginia Palmer suggested
that the Troika mandate the continued cooperation between
U.S. and EU cash control experts. Future areas of
cooperation could include: cash couriers and bulk cash
smuggling; intelligence, which provides valuable information
about terrorist networks and attack planning; continued
progress on G8 projects; and working through INTERPOL. To
follow up on the April 1-2 U.S.-EU meeting, we could explore
further specific areas for law enforcement and investigaion
methods, prosecutors, exchanging FIU inforation, or conduct
joint training sessions in hird countries (e.g., in North
Africa). EU experts could meet their U.S. counterparts via
an exchange program, for example, visiting U.. ports to
observe U.S. practices and build informal regional contact

BRUSSELS 00001059 004 OF 006


networks.


17. (C) Elsner agreed that the U.S. and EU should continue
expert exchanges similar to the April 1-2 meeting, perhaps
concentrating next time on more specific items. Legal
competency questions must provide the basis for such
discussions. TAXUD's internal EU cash controls working group
has a legal basis to discuss administrative elements of the
rules but are limited in the extent to which they can discuss
cooperation in the judicial or criminal area. Members of
TAXUD's expert group are responsible for administrative
Customs tasks; some EU Customs authorities must pass cases to
another national competent authorities for investigation
should there be any links to money laundering or terrorist
financing. EU cash control rules are binding for
administrative purposes, but national law enforcement agents
are involved in cases of suspected criminal activity.


18. (C) Elsner continued that TAXUD would continue inviting
FIUs and investigators to their expert group meetings. The
largest question relates to air travelers, how to handle
different types of baggage, where the declarations must be
made if travelers are transiting multiple EU countries, etc.
The expert group addresses these technical questions. He
affirmed the importance of training and welcomed the idea of
conducting an exchange with the United States. He
recommended that the U.S. and EU elaborate on risk indicators
in future working visits, as World Customs Organization (WCO)
recommendations seem too elementary. He also recommended
that experts compare the types of technical equipment used
for cash controls and detection.

--------------
Pre-Paid Cards
--------------


19. (U) U.S. and EU participants noted the potential misuse
of stored-value cards and the lack of means to deal with
them. They agreed to share information.


20. (SBU) John Tobon, DHS/ICE, presented on the U.S.
pre-paid card industry, which is increasingly exploited for
money laundering and organized crime. He noted recent
studies predicting industry growth to USD 257 billion by
2009, and U.S. concerns over vulnerabilities unique to this
growth industry. The United States does not classify
pre-paid cards as a monetary instrument for border crossing
reports. Proposed legislation may address this. He outlined
law enforcement and Treasury concerns over the lack of
required controls, reporting, or accompanying fines for
abuses in issuing and using these cards. ICE is
investigating fifty cases involving pre-paid cards, mostly
dealing with fraud and drug trafficking.


21. (SBU) Luis Nunez, FBI, explained the law enforcement
perspective of pre-paid cards and other currency transfer
mechanisms, including mobile payments, wire transfers, and
virtual and electronic or e-currency, used by U.S.-based
Hamas charities and Hizballah.


22. (C) Philippe Pelle, Commission DG Internal Market, noted
that the international community relies on U.S. typologies,
and the EU is looking to the U.S. on how to address the
pre-paid card issue. The EU is reviewing an e-Money
Directive which may increase thresholds. FATF typologies
developed three years ago may need to be revisited.


23. (C) Elsner (Commission) noted that the April 1-2, 2008
U.S.-EU cash controls expert working group meeting had
discussed possible Customs activities on pre-paid cards. He
was interested to learn that the United States may be
developing a card reader to enable Customs officials to
identify (1) whether a traveler is in possession of such a
card, and (2) the card's value. INTERPOL and WCO are looking
into the problems Customs officers face in this respect, and
he would be interested in learning developments in the United
States. FATF SR XI does not seem to cover these cards.

BRUSSELS 00001059 005 OF 006



--------------
FIU Cooperation
--------------


24. (C) The discussion focused on EU efforts to establish a
secure computer network among EU Financial Intelligence Units
(FIUs) and how this network would interface with Egmont.
Balazs (Commission) noted a 2007 report which concluded that
legal tools are in place to enable FIUs to cooperate, but
more work is needed to make them operational. The "FIU-Net"
project, led by the Dutch Justice Ministry, promotes the
operational exchange of EU information. The objective is a
secure computer network to exchange AML/CFT information.
Eighteen EU FIUs are physically connected to the FIU-Net
system, but the FIU-Net is not yet an efficient tool to
exchange information or to add value on suspicious
transaction reports and cash declarations. The EU is
discussing with U.S. FinCEN how to establish a secure
connection and email between FIU-Net and the Egmont Secure
Web.


25. (SBU) Poncy responded that as long as FinCEN, Egmont,
and EU FIUs continue to cooperate, there is no conflict of
interest. EU efforts could help take Egmont to the next
generation, to include terrorist financing sanctions
information, not just money laundering. This idea was raised
at the U.S.-EU workshop. It is difficult to trace assets and
identify who has frozen funds. Since FIUs have a network and
Egmont exchanges AML information, perhaps they should
exchange sanctions information too. Balazs responded that
FIU-Net is a computer network; FIU cooperation mandates is
another question. The EU can reflect on this possibility.


26. (SBU) Tobon highlighted recent major operations stemming
from international cooperation on cash controls (Firewall and
Hands Across the World) and invited the EU to participate.
Nunez flagged the importance of working overseas with the EU.


--------------
Participants
--------------


28. (U) UNITED STATES

Douglas Hengel, Deputy Assistant Secretary for Energy,
Sanctions and Commodities (EEB/ESC),State (chair)
Peter Chase, Minister Counselor for Economic Affairs, U.S.
Mission to the EU (USEU)
DeAnna Fernandez, Treasury
Suzanne Hayden, Justice
Lynne Lambert, EEB/ESC/TFS, State
Alessandro Nardi, EUR/ERA, State
Luis Nunez, FBI
Virginia Palmer, Deputy Coordinator for Counterterrorism
(S/CT),State
Chip Poncy, Treasury
Lorelei Snyder, USEU
John Tobon, Department of Homeland Security / Immigration and
Customs Enforcement (DHS/ICE)


29. (U) EUROPEAN UNION

PRESIDENCY (Slovenia):
Andrej Slapnicar, MFA Slovenia (chair)
Andrej Groselj, Slovenian Permanent Representation to the EU
Natasa Sremac, Finance Ministry
Irena Gustin, Office for Money Laundering Protection
Darko Muzenic, Office for Money Laundering Protection
Ales Bobic, MFA Slovenia

EUROPEAN COMMISSION
Albertus Straver, DG External Relations (RELEX)
Nora Rolle, RELEX
Karl Elsner, DG Taxation and Customs Union (TAXUD)
Philippe Pelle, DG Internal Market and Services (MARKT)

BRUSSELS 00001059 006 OF 006


Dora Balazs, JLS

EU COUNCIL SECRETARIAT
Gilles de Kerchove, EU Counter-Terrorism Coordinator (EU CTC)
Mieneke de Ruiter, DG Justice and Home Affairs
Massimo Bianchi, DG External Relations
A representative from the EU Situation Center (name protected)

INCOMING PRESIDENCY (French)
Bertrand Pous, MFA, France
Stephanie Talbot, Anti-Money Laundering and Counter-Terrorist
Financing, Finance Ministry, France


30. (U) The U.S. delegation has cleared this message.


WOHLERS
.