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.

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For more reporting from Embassy Kuwait, visit:
visit Kuwait's Classified Website at:

http://www.intelink.sgov.gov/wiki/Portal:Kuwa it
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JONES