MOVING KUWAIT TERROR FINANCE COOPERATION FORWARD

S E C R E T SECTION 01 OF 03 KUWAIT 001021 NOFORN SIPDIS DEPARTMENT FOR NEA/ARP, NEA/RA, S/CT, EEB/ESC TREASURY FOR U/S LEVEY E.O. 12958: DECL: 10/26/2019 TAGS: PTER PINR KTFN KU SUBJECT: MOVING KUWAIT TERROR FINANCE COOPERATION FORWARD REF: A. KUWAIT 1017 ¶B. 08 KUWAIT 563 (NOTAL) ¶C. KUWAIT 951 ¶D. KUWAIT 882 ¶E. KUWAIT 431 ¶F. KUWAIT 921. Classified By: Economic Counselor Oliver John for reasons 1.4(b) and (d ) ¶1. (U) This is an action request. Please see paragraph 13. ¶2. (S/NF) Summary: (S/NF) Post believes we have an opportunity to change the terms of the engagement with the GoK by widening the scope of the terror finance conversation to include all financial crimes. A constituency exists among those ministries who currently have financial crimes oversight including Ministry of Social Affairs and Labor, Ministry of Commerce, Ministry of Justice, Customs and Borders, and the Central Bank. The strategy would focus on building upon existing efforts to expand current capacity to combat financial crimes through training workshops and seminars. In addition to building the necessary capacity for Kuwaitis to better implement the laws that they have, our intent is to use this engagement to build a constituency within the Kuwaiti law enforcement and judicial community to push for necessary financial crimes legislation which includes terror financing. End Summary ¶3. (S/NF) In May 2008, shortly after the Ambassador's arrival in country, post laid out an assessment of the GoK's CT capabilities and the tools at our disposal to press for increased CT engagement (ref b). Post recently viewed Kuwait's progress in counterterrorism and proposed ways to continue moving our cooperation forward (ref a). This "companion piece" focuses specifically on improving Kuwait's capabilities to deal with the overall financial crimes issue and terror financing specifically. ¶4. (S/NF) Our judgment is that Kuwait has made progress in improving its overall Anti-Money Laundering (AML) and counter terror finance (CTF) effort, but that it still remains at risk. While Kuwait is a member of the Middle East and North Africa Financial Action Task Force (MENA/FATF),the lack of legislation specifically outlawing funding of terrorist activities means that they are not FATF compliant, which we expect the upcoming 2010 MENA/FATF mutual evaluation will demonstrate. Until Kuwait passes FATF-compliant legislation and implements measures to update and strictly enforce its AML and CTF system, it will remain a country of concern. Although there has been some progress with regard to controlling the financial system, including investigation of and prosecution of financial crimes as well as greater effort to oversee charitable activity, our overall assessment of Kuwait's CTF system is a 'C-'. Post proposes additional engagement as a way to encourage Kuwait to address this issue and move forward. ¶5. (C) Over the past few years, Kuwaitis have made progress in: improving charitable oversight domestically and abroad (ref c),and in regulating the gold and jewelry markets (ref d). We have seen two successful terrorist finance-related prosecutions in 2009, but sentences for convicted financiers and facilitators have been light. The lack of specific legislation makes TF cases hard to prove and limits available punishment under the law. Areas for Improvement -------------- ¶6. (C) Kuwait's current anti-money laundering law is limited and does not specifically address terror financing. Although we understand that the GoK believes that a revised draft law will bring Kuwait into compliance with the FATF-40 plus 9 recommendations that legislation has been stalled within the GoK and has not yet been presented to parliament. The head of Kuwait's Financial Intelligence Unit recently told Econoffs that the law was now with the whole cabinet, and there was an intention to bring it to parliament shortly (Note: Parliament convenes October 27. End note). It is still unclear whether the government can or will pass this amendment during the upcoming legislative session. TF discussions within the parliament are often unproductive due to opposition to legislation from conservative/Salafist MPs who perceive efforts to in any way restrict, impede or require reporting on religiously-obligated charitable activity as veiled attacks by Kuwaiti liberals on Salafi Islam. KUWAIT 00001021 002 OF 003 ¶7. (C) Kuwait has conducted prosecutions for terrorist financing, but these have been pursued under a limited criminal law. Actual prosecutions are few, penalties are light, and sentencing is often reduced. Two cases in 2009 include the prosecution (and sentencing) of UNSCR 1267 designee Mubarak Al-Bathali on January 27, 2009 (ref e) and Ltc. Khalil Al-Ghaith for terrorist financing and facilitating in August 2009 (ref f). Weak laws, potentially insufficient evidence, and a great deal of judicial discretion have kept penalties light and in the case of Al-Bathali the court of appeals even reduced his sentence in April 2009. (Note: A three year sentence is the minimum sentence under the Kuwaiti Criminal Law. A chronological account of the Al-Bathali case can be accessed on Kuwait's classified Intellipedia site. End note.) ¶8. (C) The GoK has not acted against the Revival of Islamic Heritage Society (RIHS),designated domestically by the U.S. on June 13, 2008, citing a lack of actionable evidence. The USG designated RIHS branches in Afghanistan and Pakistan on January 9, 2002 and then designated all RIHS offices on June 13, 2008 based on evidence that RIHS provided financial and material support to terrorist organizations. RIHS branches in both Pakistan and Afghanistan were designated per UNSCR 1267 on January 11, 2002. From the senior most Kuwaiti officials on down, the GoK is firmly convinced that RIHS as an organization is not involved in funding terrorism, and on the contrary serves a useful moderating role by reaching out to disaffected and disadvantaged Muslims around the world who would otherwise be susceptible to recruitment by far more radical elements from Iran and elsewhere. The GoK claims that it has investigated RIHS and found no evidence of wrong-doing and that intelligence information provided by the USG has be en limited and unconvincing. Allowing RIHS to continue to serve as the centerpiece of our TF discussion with the GoK - absent compelling new information not available to post that can be shared with the GoK - is a recipe for continued gridlock on this critical issue. We need to replace what has become an unproductive dialogue of accusation and denial with a positive engagement approach that focuses on moving our agenda forward through cooperation in areas of agreed shared concern, aiming at building investigative and administrative capacity for AML and TF cases here. Next Steps: Way Forward -------------- ¶9. (C) Post proposes a series of focused measures to build both GoK capacity and a constituency for stronger legislation and enforcement. Focusing the effort, to the extent possible, on broader financial crimes as opposed to solely on TF may deflect concerns of some MPs who view our terror finance focus as an attack on Islam. By working CTF into a broader package of financial crime prevention tools that is responsive to the needs of the GoK, we can assist in building capacity through a series of engagements and training events: - Post is already working with Washington agencies to respond to a GoK request for training for members of Kuwait's interagency anti money-laundering committee and the private sector in a December AML conference(ref d); - Working with Customs to provide training and then "operational training" on dealing with cash couriers and bulk cash smuggling. There is tentative customs interest. (Note: Kuwaiti law only requires declarations for cash imports. End note); - Financial Crimes Training for prosecutors, judges, investigators to build awareness of the nature of financial crimes, complexity of putting a case together, and standards for prosecution. Again, this is a need that Kuwaiti prosecutors and investigators have -- informally -- identified. The training should focus on broader financial crime issues (including terror finance),but should not focus solely on TF; - Capacity building for banks: Post proposes continuing (and possibly expanding) existing training programs in conjunction with Kuwait's banking institute for bank compliance officers; - Move forward negotiations on the Mutual Legal Assistance Treaty (MLAT) to broaden cooperation; - Use visits of senior USG officials to stress a positive interest in cooperation; KUWAIT 00001021 003 OF 003 - Provide technical assistance prior to upcoming MENA/FATF mutual evaluation, in order to help assess the quality of the laws in advance of the MENA/FATF evaluators audit to help Kuwait get compliant; - Work with the UK Charities Commission and let them take the lead on charity cooperation and coordination to deflect current tension. ¶10. (S/NF) Action Request: Post requests Washington's guidance on our action plan for moving forward our CTF cooperation agenda with the GoK. Post also requests guidance on potential sources of funding and expertise for a proposed training program. End Action Request. ********************************************* ********* For more reporting from Embassy Kuwait, visit: visit Kuwait's Classified Website at: http://www.intelink.sgov.gov/wiki/Portal:Kuwa it ********************************************* ********* JONES