UNDER SECRETARY LEVEY DISCUSSES TERRORIST FINANCE

S E C R E T CAIRO 000868


TREASURY FOR STACK, CLARK, MOGER
STATE FOR NEA/ELA

E.O. 12958: DECL: 05/19/2019
TAGS: EFIN EG IR IS KDEM KPAL NP PGOV PREL PTER
SUBJECT: UNDER SECRETARY LEVEY DISCUSSES TERRORIST FINANCE
ISSUES IN EGYPT

Classified By: Acting DCM William R. Stewart for reasons 1.4 (b)
and (d).


1. Key Points

-- (S) Egyptian interlocutors confirmed to U/S Levey their
concern about Iran and their desire to keep financial
pressure on Iran.

-- (S) Central Bank Deputy Governor indicated that he would
discuss with the Governor and others the possibility of a
formal policy directive prohibiting Egyptian banks from
opening any accounts for Iraqi banks.

-- (S) The Central Bank and EGIS confirmed to U/S Levey that
they are watching the Misr-Iran Development Bank very
closely.

-- (S) In response to U/S Levey's question about whether the
U.S. should continue to publicly list Hezbollah leaders as
designated entities for whom their assets would be frozen,
EGIS Chief General Suleiman confirmed that isolating Iran in
any way was helpful, and Foreign Minster Aboul Gheit said
that anything that "dirtied the name of Hezbollah was
welcomed."

--------------
Central Bank Governor Hisham Ramez
--------------


2. (S) Under Secretary (U/S) Levey explained that the main
purpose of his visit was to alert governments and banks about
the threats presented by the Iranian banking system. He
highlighted the recent FATF guidance on countermeasures that
all jurisdictions should take against Iran. Acknowledging
that Egyptian banks do very few transactions with Iranian
businesses, he suggested that, in support of the FATF
recommendations, the Central Bank of Egypt (CBE) should
consider enacting a formal policy prohibiting Egyptian banks
from opening an account for Iranian banks. U/S Levey noted
that there are no Iranian banks with accounts in Egypt, so
the policy would be painless and largely symbolic, but could
help other Arab states with larger business relationships
with Iran to feel comfortable taking such a step.


3. (S) Ramez concurred that there is nearly zero
transactional activity between Egypt and Iran and that there
were no Iranian banks with accounts in any Egyptian banks. He
underlined that the CBE shared the GOE's general view of
Iran, which was one of suspicion. In response to the request
to issue a policy prohibiting opening Iranian banks from
opening accounts in Egyptian banks, he said he had to check
with the Governor and "his team", but that "it should not be
a problem." He assured U/S Levey that the CBE has concerns
from a regulatory perspective of Iranian banks and Iranian
businesses. He also noted that the transactional volume in
Egypt is low enough that the CBE can watch all transactions
for any signs of impropriety. Ramez also noted that no
Iranian bank would be allowed to buy ownership of any banks
in Egypt.


4. (S) U/S Levey specifically inquired about the existence of
the Misr-Iran Development Bank (MIDB),noting that it does
considerable portion of its transactions with companies which
have been designated by the United States. Ramez did not
reply directly to the point that MIDB does transactions with
U.S.-designated entities, but indicated that the CBE is
closely watching that bank and knows exactly what it is
doing. He also noted that the Chairman of the MIDB, Ismail
Hassan Mohamed, a former Central Bank Governor, knows the
rules well and knows that the CBE is watching his bank
closely. When asked why the MIDB was allowed to operate,
Ramez indicated that it had been in existence for some time,
so it would be hard to shut down now. U/S Levey urged the
CBE to look more closely at the MIDB and its transactions
with the designated entities, and as part of a proper
response to the FATF guidance, the CBE may wish to consider
some countermeasures specific to that bank, such as banning
transactions with Iranian customers.


5. (C) Regarding money of Hamas members seized when they
crossed into Egypt from Gaza, Ramez noted that the Central
Bank was not involved, but that the Prosecutor General
controlled the access to this money until it was determined
what to do with it, at which point he expected the money
would go into the Government coffers.


6. (C) When asked about the new UNSC sanctions on North Korea
which include three new North Korean entities which should
have their assets frozen by all jurisdictions, Ramez assured
U/S Levey that every single UN list is implemented as soon as
the Ministry of Foreign Affairs obtains the information.

--------------
Foreign Minister Ahmed Aboul Gheit
--------------


7. (S) U/S Levey described the pressure that the U.S. has put
on Iran through the targeted sanction regime, and noted that
the FATF guidance urges all jurisdictions to be vigilant in
assessing transactions with Iranian banks and to take
necessary countermeasures. He noted that the international
community had largely shut off the formal financial system to
Iran, making it harder for Iran to finance terror. U/S Levey
explained that he hoped that Egypt would take some formal
steps to show its support of this effort, even though Iran
and Iran do very little business together. U/S Levey said
that if Egypt would take some of the countermeasures against
Iran which he had described to the CBE, Egypt could play the
important role of helping to move other Arab states to do the
same.


8. (S) The Foreign Minister reaffirmed Egypt's concern about
Iran, but made no commitment on the proposal to prohibit
Egyptian banks from accepting accounts from Iranian banks.
The Foreign Minister expressed some frustration that the U.S.
policy to "financially strangle" Iran, as Secretary Rice had
told him would be done, had not yet been fully successful.
He bemoaned that Iran will always have money and it will be
hard for the financial strangulation to be fully successful.


9. (S) The Foreign Minister urged U/S Levey to work with the
UAE if it wants to stop the flow of money to Iran, and U/S
Levey assured the Minister he was doing that (his next stop
on this trip is to the UAE),but noted that the UAE may want
to see Arab states such as Egypt taking similar steps so no
one is seen as acting alone. The Foreign Minister noted that
he hoped the 6 2 1 group states could meet soon to discuss
the Iranian threat, as they were supposed to do recently. He
was angry that the recent meeting on this subject had been
canceled after some attendees refused to participate. He
further noted that the Qataris and Omanis are not trustworthy
when it comes to discussing Iran.


10. (S) In response to U/S Levey's query about the best way
to handle Hezbollah, the Foreign Minister noted that he hoped
a UN statement could be made against them, as he wanted to do
whatever he could to "dirty the name" of Hezbollah. The
Foreign Minister and his staff were interested in U/S Levey's
view of the piracy problem, and they offered various
solutions, including complete blockades of Somalia, limited
military action to save the lives of hostages, and larger
scale military operations on land to weaken the pirate's
ability to operate. U/S Levey noted that the paying of
ransom was a real problem, as that money is funding
terrorists. Aboul Gheit replied, "then how am I supposed to
get my boys back?"

--------------
EGIS Chief, General Suleiman
--------------


1. (S) General Suleiman described how the GOE has een
attacking the terrorist problem, going afterterrorist
leaders, the money flow, and the terroist soldiers. He
noted that stopping the money low was an important part of
the strategy, and tht they have been successful at
strangling severa terrorist groups. However, he noted that
smugging was a huge problem now and that Iran was largely
behind it as they were funding Hezbollah and Hamas. He noted
that money was getting to Hamas in various ways, but noted
that it mostly came via Damascus, and was then smuggled by
land or sea to Gaza. He noted that smuggling was a big
business, particularly given that Israel keeps the borders
closed. He highlighted the efforts taken by the GOE to make
the border more secure, including destroying tunnels and
erecting underground metal barricades, but acknowledged that
the smuggling could never be fully stopped. He added that
Gaza is still suffering and needs the reconstruction money
that the world has committed.


12. (S) U/S Levey summarized the U.S. strategy of keeping
pressure on Iran through making the international financial
system increasingly inhospitable to Iran. He explained that
the efforts have been largely successful, and that nearly all
reputable financial institutions will not do business with
Iran. He explained that he had not previously visited Egypt
because of the minuscule amount of trade and commerce between
the two, but that he now wanted to urge Egypt to take some
small, painless steps, as a means to keep the pressure on
Iran and to give strength to other Arab states for whom such
steps are more difficult. U/S Levey presented the proposal
which he had made to the CBE of enacting a policy which
forbids Egyptian banks from opening accounts for any Iranian
banks. U/S Levey also explained the concerns about MIDB.
General Suleiman did not react to the proposal to forbid
Egyptian banks to open accounts for Iranian banks, but
regarding MIDB, he said "I am watching every check, every
transaction."


13. (S) U/S Levey queried General Suleiman if he thought the
U.S. should be publicly seen as continuing to target
Hezbollah through Treasury's financial designation process.
Suleiman said that isolation of Iran was the way to go. This
weakens them, but avoids a war, something Egypt does not
want. Suleiman said that President Obama needs to test the
Iranians, but at the end will see that the Iranians will lie
to him and waste his time. He said that the U.S. had very
successfully isolated Cuba and rendered it weak, so we had
experience in successful isolation policies.


14. (SBU) U/S Levey's delegation cleared this cable.


SCOBEY