TREASURY OFAC DIRECTOR SZUBIN'S MEETING WITH LIBYAN MINISTRY

S E C R E T SECTION 01 OF 03 TRIPOLI 000916

SIPDIS

TREASURY FOR SZUBIN, LEV AND POLLACK; CAIRO FOR SEVERENS

E.O. 12958: DECL: 11/26/2018
TAGS: EFIN ETTC KTFN PTER PREL PGOV UNSC LY
SUBJECT: TREASURY OFAC DIRECTOR SZUBIN'S MEETING WITH LIBYAN MINISTRY
OF FINANCE OFFICIALS

CLASSIFIED BY: Chris Stevens, CDA, Embassy Tripoli, U.S. Dept of
State.
REASON: 1.4 (b),(c),(d)

1. (C) Summary: In a meeting with Libyan finance, banking and
security officials on November 12, visiting Treasury Office of
Foreign Assets Control Director Adam Szubin stressed two key
messages: 1) the U.S. stands ready to help the GOL engage more
effectively with the U.N 1267 Committee to ensure that GOL
submissions are accepted by the Committee, and; 2) the U.S.
urges Libya to exercise appropriate oversight over foreign
Libyan banks with respect to their dealings with Iran,
consistent with UNSC resolutions on Iran and the risk of dealing
with Iranian institutions.. Libyan officials stressed their
willingness to share further bio-identifying and evidentiary
information to support their UNSCR 1267 listing requests. Libya
views money laundering, corruption and counter-terrorism finance
as interrelated issues and has adopted stringent measures under
a 2005 law against money laundering. GOL officials complained
that Italian and U.S. authorities had not responded to their
requests for information in two widely publicized corruption
cases; Szubin encouraged them to submit the request through
Treasury's Financial Intelligence Unit (FIU) and offered to
assist with that exchange if needed. On Libyan banks dealing
with Iran, GOL officials took a legalistic approach, arguing
that large numbers of European banks and companies continued to
do business with Iran, and that any foreign banks in which the
GOL has a stake are subject to the oversight of the regulatory
authorities of the countries in which they are located, who bear
responsibility for issuing and implementing regulations to
ensure compliance with Iran-related strictures. Szubin pushed
back, noting that most major European banks have curtailed
dealings with Iran and underscoring the risks for Libya if its
state-owned banks sought to reap short-term commercial gains by
dealing with Iranian banks. The international consensus is that
the risks associated with dealing with Iranian banks are great,
owing to Iran's pervasive lack of transparency. In the U.S.
view, should Libya choose to ignore that consensus for the sake
of potential short-term business gains, it risks considerable
damage to its financial sector and its international reputation.
End summary.

Meeting participants:

Libya:
Ashur Treybil, Ministry of Finance Undersecretary
Nasser Ashur, Economic Security Directorate, External Security
Organization
Muhammad Najib al-Jamal, Director of Economic Affairs, National
Security Council
Dr. Hend Siala, National Security Council
Tajuri el-Sheradi Tajuri, Director of United Nations Affairs,
Ministry of Foreign Affairs
Muhammad Abu Sneina, Director of Banking Supervision & Exchange
Control, Central Bank

U.S.:
OFAC Director Adam Szubin
Charge d'Affaires Chris Stevens
OFAC Senior Advisor Ori Lev
Treasury Analyst Gregory Pollock
A/DCM John Godfrey (notetaker)


2. (C) Treasury Office of Foreign Assets Control Director Adam
Szubin and a small delegation visited Tripoli and met with
Libyan interlocutors on November 12. Szubin stressed the
effectiveness of financial sanctions tools in countering
terrorism finance and curbing funding for weapons of mass
destruction proliferators and states of particular concern, such
as Iran. The U.S. shares key strategic goals with the
Government of Libya (GOL),particularly with respect to
combating al-Qaeda and the Libyan Islamic Fighting Group (LIFG).
Szubin and his team had two main goals in visiting Libya: 1)
discussing how the U.S. and GOL can better share information
with respect to proposed listings with the UN 1267 Committee,
and how the U.S. can assist the GOL in refining its submissions
to the UN 1267 Committee, and; 2) conveying the USG's concern
about Libyan-affiliated foreign banks located in Europe dealing
with Iran, notwithstanding the emerging international consensus
regarding the risk of such dealings in light of Iran's deceptive
conduct in the financial sector.

UNSCR 1267 LISTING SUBMISSIONS


3. (C) On UN 1267 Committee modalities, Szubin highlighted the
threat of terrorist financiers, including those from Europe, and
stressed the utility of sanctions in denying such individuals
access to the international banking system and the ability to

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travel freely. The UN sanctions process can be very effective,
but successful listing requests require clear evidentiary
information and proper formatting. Praising the GOL's decision
to avail itself of the UNSCR 1267 mechanism, he noted that most
of the GOL's submissions had not been accepted for designation
to date. Despite the fact that the U.S. strongly supports the
GOL's efforts to combat terrorism through the UNSCR 1267
mechanism, it has been compelled to put holds on many of the
GOL's submissions because of shortcomings in the format of the
GOL's submissions and insufficient evidentiary information.
Previous engagement on this issue with the MFA and Libya's UN
delegation had yielded limited results.


4. (S) Szubin said the U.S. believes Libya's implementation of
UNSCR 1267 designations had been strong and wants to support
Libya's UNSCR 1267 listing submissions; however, USG standards
for biographical and evidentiary data had not been met to date.
By way of example, Libya's initial submission of 74 names in
August 2004 had been badly formatted and only three of the 12
names Libya submitted in May 2005 were ultimately added to the
Consolidated List. Stipulating that the primary burden for
generating information and properly formatting GOL listing
requests might rest with Libya's security organizations and MFA,
respectively, and not with its economic and finance ministries,
Szubin noted that he would be discussing this issue in a mtg
with the MFA later that day. (Note: Copies of draft Statements
of Case for LIFG leaders were passed in the subsequent meeting
with MFA officials. End note.) He assured his interlocutors
that OFAC stood ready to assist the GOL in its efforts to craft
submissions that secured designation of individuals who were of
concern to the GOL. The key issue from the U.S. perspective was
to facilitate good communication between the GOL's security
agencies and MFA and the USG and UN to obtain sufficient
information about terrorist financiers to support listing them
under UNSCR 1267. Ideally, we would like to see all Libyan
listing requests succeed. It appeared that, in part because of
U.S. holds on Libyan submissions, Libya had placed holds on
several U.S. submissions for listing. Here, too, the problem
was not/not a difference in the two sides' objectives, but a
lack of communication.


5. (C) Stressing that the proper channels for coordination on
UNSCR 1267 issues were the MFA and Libya's UN delegation, U/S
Treybil affirmed the GOL's interest in cooperating with the U.S.
to refine its submissions. He assured Szubin that relevant
authorities (the security organizations and MFA) would pass any
needed information to the U.S. Noting that the GOL had been
ahead of the curve in arguing for more robust counter-terrorism
(CT) efforts in the 1990's, he said Libya had adopted a number
of national measures to facilitate CT efforts, particularly with
respect to increased monitoring of bank transactions and
financial activity.


6. (C) Libyan NSC Economic Affairs Director al-Jamal highlighted
anti-money laundering laws (Law Number 2 of 2005) as an example
of Libya's efforts on CT finance, and shared that the Ministry
of Finance Auditing Department played a key role in monitoring
financial transactions and money-laundering. (Note: Our previous
understanding was that the Central Bank led those efforts and
that MinFin's role was marginal. End note.) The Central Bank's
Abu Sneina explained the GOL's mechanism for distributing
information within Libya's financial system about individuals
and entities designated under UNSCR 1267: the MFA's
International Organization Department (MFA/IO) conveys the
information to the CB's Banking Supervision and Exchange Control
Department, which then circulates the information to Libya's
state-owned and semi-private banks. Banks theoretically inform
the CB if any AQ or Taliban designees are determined to have
conducted transactions through Libyan banks; the CB then passes
that information to MFA/IO and Libya's UN Mission. The CB's
Banking Supervision and Exchange Control Department also plays a
lead role in implementing anti-money laundering guidelines
issued by a special national anti-money laundering committee
operating under the auspices of the General People's Congress
(Parliament-equivalent). The CB's Financial Crimes Unit was the
principal point of contact for banks to report suspicious
transactions. NSC Adviser Siala stressed the GOL's interest in
obtaining U.S. training in areas such as CT finance and banking
controls.


7. (C) External Security Organization (ESO) official Nasser
Ashur stressed the need for transparency and reciprocity in
sharing information. Libya's laws and regulations complied with
international standards and the GOL therefore insisted on full

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cooperation and transparency. Stressing the links between money
laundering, corruption and CT finance, he complained about the
lack of responsiveness of Italian and U.S. authorities in two
recent and widely publicized corruption cases. The first
involved an alleged plot by Libyan defense procurement officials
to obtain via Italian brokers large numbers of assault rifles
from China, ostensibly for re-export to Iraq. Complaining that
requests to Italian and Swiss authorities for further
information had gone unanswered, Ashur claimed the GOL's
investigation had demonstrated that the defense procurement
officials had acted properly and that the arms contracts were
above board. The second case involved allegations that
Norwegian StatOil officials paid bribes in the millions of
dollars to Libyan officials to secure hydrocarbon exploration
and production sharing contracts. Stressing that the GOL needed
more information to pursue its investigation of Libyan officials
implicated in the case, Ashur complained that Libya's requests
in intelligence channels for further information about the case
from the Department of Justice had gone unanswered. Noting that
law enforcement channels can sometimes move slowly, Szubin
encouraged the GOL to submit appropriate requests for
information to the Department of Treasury's Financial
Intelligence Unit (FIU),FinCEN, as well.

IRAN SANCTIONS ISSUES & CONCERNS ABOUT LIBYAN BANKS' ACTIVITIES



8. (C) On efforts to increase pressure on Iran to prompt
compliance with WMD-related UNSCR's, Szubin raised concern about
Libyan-owned or affiliated banks in third countries agreeing to
conduct transactions with Iranian banks and other entities.
Iran's established practice of moving funds for WMD development
and terrorist programs under false names and front companies had
prompted the world's responsible banks to refrain from dealing
with Iranian banks. International sanctions efforts under the
auspices of four UNSCR's had made it difficult for Iran to find
international banks to hold its accounts and issue letters of
credit for its transactions. In addition, the Financial Action
Task Force recently issued a third warning urging vigilance with
respect to dealing with Iranian banks. Szubin urged the GOL to
do all it could to ensure that foreign banks owned by, or
affiliated with, the Libyan Foreign Bank were exercising due
caution in dealing with Iranian banks. The danger for Libya was
that a small bank exposed to bad practices or corrupt dealings
by Iranian banks could lead to repercussions against
Libyan-owned financial entities and the perception that the GOL
had not taken seriously its commitments under relevant UNSCRs to
enforce sanctions against Iran.

GOL ADOPTS UNHELPFUL APPROACH


9. (C) ESO official Ashur and NSC official al-Jamal argued that
large numbers of European companies and banks continued to deal
with Iran. Adopting a legalistic approach, al-Jamal argued that
small European banks in which Libya had ownership stakes were
subject to the oversight of European central banks, which bore
responsibility for issuing and implementing regulations to
ensure compliance with Iran-related strictures. Libyan-owned
banks operated under joint directorships; their boards took
decisions based on the banks' commercial interests.
Pushing back, Szubin stressed that most major European banks had
determined that the risks of dealing with Iranian banks were too
great to bear because of Iran's pervasive lack of transparency.
The U.S. does not want to see Libyan-owned banks moving to fill
the vacuum of Iran's banking needs for commercial reasons. The
potential long-term risks for Libya's financial sector and
international reputation were considerable, outweighing (in the
U.S. view) any potential short-term business gains.


10. (U) OFAC Director Szubin's party cleared this message.
STEVENS