TREASURY DAS PRESSES TERROR FINANCE COOPERATION IN

S E C R E T RIYADH 000828


NOFORN

U.S. DEPARTMENT OF THE TREASURY FOR JANICE GARDNER AND
DANIEL GLASER

E.O. 12958: DECL: 06/14/2019
TAGS: ECON EINV EFIN KTFN SA
SUBJECT: TREASURY DAS PRESSES TERROR FINANCE COOPERATION IN
RIYADH

Classified By: A/DCM Eric Madison for reasons 1.4 (B) and (D)



1. (S) Summary: On 16-17 May 2009, Treasury Deputy
Assistant Secretary Daniel Glaser visited Riyadh to advance
counter terror finance cooperation with Saudi government and
private sector officials. DAS Glaser explored developments
pertaining to the Saudi charities commission, encouraged an
active partnership between the Saudi FIU and the Treasury
Department, challenged Saudi officials on Taliban fundraising
in the Kingdom and sought support for international measures
to financially isolate Iran. Glaser met with Deputy Finance
Minister Hamad al Bazai, Deputy Islamic Affairs Minister for
Mosques Dr. Tawfiq al Sudairi, Brigadier General Ahmad al
Issa from the Ministry of Interior (MOI),Saudi Arabia
Financial Investigative Unit (Unit) Director Brigadier
General Fahad al Maghlooth, Saudi Arabia Monetary Authority
(SAMA) Deputy Governor Abdulrahman al Humaidy, Al Rajhi Bank
CEO Abdullah bin Sulieman al Rajhi, and Riyad Bank Chairman
Rashed al Rashed. End Summary.

SAFIU BUILDING CAPACITY, REPEATS REQUEST FOR TRAINING
-------------- --------------


2. (S) SAFIU Director Maghlooth confirmed his agency's
commitment to combating terror finance in the Kingdom and
expressed appreciation for Treasury's support for the SAFIU
joining the Egmont Group. Glaser noted the three FIU
requests submitted by FinCEN to the SAFIU and commended
Maghlooth for generating prompt and substantive responses.
Glaser urged Maghlooth to build an active partnership with
the Treasury Attaches based in Riyadh. Glaser and Maghlooth
agreed the SAFIU and the Treasury Attaches would meet weekly
to exchange information and otherwise strengthen counter
terror finance cooperation.


3. (C) Maghlooth called Glaser's attention to the SAFIU's
request for training from Treasury and asked about a response
from the USG. Glaser stated the request for training is
impressive, affirmed the USG's commitment to assist, and
promised a response would be forthcoming soon. He explained
the USG is still figuring out how it would be done, what
agency would lead the training, and other relevant details.
Maghlooth highlighted the SAFIU's interest in gaining more
analytic expertise in particular.


4. (C) ACTION REQUEST: Post requests that Treasury deliver a
response to the SAFIU's Training Request document and offer
dates for assessment visits as soon as possible.

SAG PROCEEDS WITH CAUTION ON LIFTING CHARITY RESTRICTIONS
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5. (S) When asked about charities regulation in the Kingdom,
Maghlooth and MOI's General Issa separately explained that
since 2005, the Saudi Government (SAG) has prohibited
charities in Saudi Arabia from transferring money outside the
country. Maghlooth highlighted it was also made illegal to
gather money in mosques for charitable purposes, but noted
the difficulty in controlling fundraising during the Hajj
season. SAMA Deputy Governor Humaidy also confirmed that
charities in the KSA are prohibited from transferring money
overseas and noted the Ministry of Social Affairs gave these
charities ATM cards so that all cash retrieved can be
monitored.


6. (S) Maghlooth explained the ban on transferring money
overseas was intended to be short term, until the SAG could
establish an effective regulatory structure (a 'Charities
Commission') to ensure that charitable funds from the Kingdom
were not supporting terrorism overseas. Several years later,
some charities have evaded the restriction, according to
Maghlooth, by using cash couriers. Given that many Saudi
charities have previously supported legitimate humanitarian
work overseas, some in the media decry a 'USG / SAG alliance
working against Islamic charities.'


7. (S) Issa explained the Iranians have stepped up support
and are filling the gap created by the termination of Saudi
charitable support, thereby increasing Iranian influence in
countries such as Lebanon, Pakistan, Syria, Yemen, and
Nigeria. He described Iran as a major threat that is 'taking
over the region,' and gave the example of Iran giving
scholarships for individuals to adopt the extreme Shiite
ideology. He also stressed the SAG would like to restore
legitimate charitable flows as charitable giving is deeply
rooted in Saudi culture. DAS Glaser asked how to strike the
right balance.


8. (S) Maghlooth offered the World Assembly of Muslim Youth
(WAMY) as an example of a problematic organization for the
SAG. Although WAMY is international in reach, the SAG only
deals with it on a local level. Among other options, the SAG
is currently studying the idea of issuing checks directly to
external recipients to reduce the risk of funds being
misappropriated to terrorism. With regard to branches of
Saudi charities outside the KSA, he added the SAG is
considering a variety of options for oversight, including
host country and/or SAG involvement.


9. (S) Issa stated that while most donors and charities are
good, the 'bad guys' infiltrate all of them and so the
Ministry of Interior is working on due diligence processes,
screening individuals that work in charities, and conducting
on-site visits, among other oversight practices. Issa noted,
however, the SAG was not planning to monitor Saudi charity
branches abroad and suggested host countries overseas should
monitor them instead. DAS Glaser responded that while the
host country has a responsibility to regulate charities
operating within its borders, the SAG must also take
responsibility for the activities of Saudi-based charities
overseas. Issa agreed and stated the SAG could stop the flow
of money to a Saudi branch or remove the Saudi individual in
charge of an overseas branch if the charity was found to be
providing money to terrorists.


10. (S) Deputy Minister for Mosques Dr. Tawfiq al Sudairi
suggested Saudi Arabia could benefit from U.S. experience
with charities oversight and regulation. He stated he had
just been in the UK and had visited various UK charities and
the UK Charities Commission to better understand how
oversight is conducted, the procedures in place, and other
monitoring mechanisms. He stressed that charity is deeply
rooted in Saudi culture, and that setting up an oversight
mechanism remains a work in progress, but that the KSA is
committed to put a system in place to prevent abuse. DAS
Glaser responded by noting that Saudi Arabia could play a
very important role in an upcoming regional charities
conference, tentatively scheduled for October 2009.

THE HAJJ, HAMAS, AND TALIBAN FINANCE
--------------


11. (S/NF) When asked what the biggest problem is with regard
to terrorism finance in the KSA, Issa pointed to Mecca and
Medina and the SAG obligation to host religious pilgrims. He
bluntly acknowledged that "we are sure terrorists use it as a
meeting point...they tend to use the pilgrimage as an
opportunity to raise funds." It is not done in public and
these individuals already have contacts. Issa explained that
the MOI can arrest or monitor such individuals when it has
pertinent information and a point of observation, such as a
phone number, or the individual is in contact with a subject
the MOI is monitoring, but it can be difficult. He stated
that "those we know about, we monitor" and encouraged the USG
to pass as much information as possible to aid MOI efforts.


12. (S/NF) Issa pointed to MOI arrests of HAMAS fundraisers
in the Kingdom spurred by information provided by the USG
through intelligence channels. He said the MOI will act on
any terror finance leads that contain sufficient detail,
including on HAMAS, as it is illegal to finance HAMAS in the
KSA. When asked if SAG efforts to mediate between
Palestinian factions interfered with MOI's ability to target
HAMAS, Issa said no. Any SAG contact with, or support of,
HAMAS was a separate issue from MOI's ability to take action
against HAMAS fundraisers.


13. (S/NF) When asked how money is usually moved for
terrorists, Issa explained that most money comes through cash
couriers and not much through the formal banking system. He
noted there have been many arrests in the KSA of Saudi
individuals trying to go to Pakistan and Iraq for jihad. The
MOI has found most are self-financed. When they are
arrested, their cash is seized. Issa also noted he sees al
Qaida currently fighting over resources, a sign of their
financial straits.


14. (S/NF) Issa believes the majority of Taliban funding is
derived from the sale of opium and hashish, although he also
pointed to Afghanis in the KSA as a source of support. DAS
Glaser acknowledged proceeds from drugs also financed the
Taliban, but noted he had been hearing that much of its
funding comes from the Gulf region. Issa explained that the
sale of drugs from Afghanistan into Europe, Russia, and Iran
generates large profits for the Taliban and are definitely
used for terrorism finance. The Taliban taxes the drug lords
in Afghanistan as the Afghan government does not really
control the country. He stated that many Saudi arrests are
also related to drugs, with the SAG confiscating about 400
kilos of heroin per week.


15. (S) NOTE. During the initial meeting, Issa made reference
to the formerly strained relationship between Treasury and
the SAG on terror finance issues, and in particular the
'outspokenness' of Under Secretary Levey. During a more
informal evening gathering, Issa sought out DAS Glaser to
apologize for his earlier intemperate comments regarding
Levey. He shared 'had Levey not pushed us, we would not have
made the progress we have today on terror finance in the
Kingdom.' Issa welcomed future Treasury and Levey cooperation
with Saudi Arabia on CTF. END NOTE.

SAMA ON TERROR FINANCE & FATF COUNTERMEASURES ON IRAN
-------------- --------------


16. (S/NF) SAMA Deputy Governor Humaidy stated that all
illicit finance issues are important to SAMA as the KSA does
not want its system to be used for money laundering or
terrorism finance. He noted the Central Bank has taken
measures to monitor wire transfers and ensure the KSA's
financial institutions are not being abused. He confirmed
charities cannot transfer money outside the KSA without
approval. Humaidy explained that Saudi banks are required to
screen accounts and transactions against the UN 1267 list.
He highlighted that the KSA participates in the FATF, is a
founding member of MENAFATF, and that FATF statements are
communicated to banks. He also said the KSA has criminalized
money laundering and terrorist financing and the KSA
underwent a 'full scope examination' in 2007. He stated SAMA
has a section dedicated to AML/CFT, SAMA inspectors ensure
legislation is being implemented effectively, and that banks,
moneychangers, and insurance companies are not being abused.


17. (S/NF) Humaidy stated that the first AML training in the
KSA was on Know Your Customer (KYC) - and that because of the
banks' implementation of KYC measures, clients became aware
of their responsibilities with regards to conducting
financial transactions. He noted the overseas branches of
Saudi banks are also likely implementing the same compliance
measures, regardless of local requirements. He stated that
from a supervisory standpoint, SAMA needs to ensure banks
implement the rules, which is why a full scope examination
was conducted. He added SAMA also conducts annual
supervisory visits, each bank has an internal audit committee
and compliance unit, and SAMA meets annually with the
chairman of each Saudi bank to ensure there are no gaps
between SAMA regulations and the banks' implementation.


18. (S/NF) DAS Glaser raised the FATF's call for
countermeasures targeting Iran and encouraged Humaidy to
consider several possible steps, to include mandating that
all Saudi financial institutions cut off correspondent
banking ties with Iran. Glaser noted that because there is
little financial activity linking KSA and Iran, the move
would have little cost for KSA, and may embolden the UAE to
take a similar step -- Iran's primary trading partner in the
Gulf. Humaidy identified such a step as a political decision
and promised to raise it with the SAMA Governor, although he
expressed uneasiness about publicly 'picking on' the
Emiratis.

RIYAD BANK EXPLAINS IRAN BANKING TIES
--------------


19. (S) DAS Glaser pressed Riyad Bank Chairman Rashed al
Rashed on his bank's correspondent relationships with Iranian
financial institutions. Rashed explained that most of the
financial activity with respect to Iran was in facilitation
of Hajj travel by Iranians. Senior Vice President of Risk
Management David Letts stated that all transactions related
to Iran are automatically flagged by filtering software, and
require special approval by his compliance department. He
reiterated that most all activity is related to religious
pilgrims, as there is very little trade or investment
activity between Iran and Saudi Arabia. He stated that Iran
is on an extremely high risk screening system as the value of
the relationship is insignificant compared to reputational
risk to Riyad Bank. Chairman Rashed stated that he would
gladly terminate the related correspondent relationships, but
would need instruction from SAMA as the decision has
political and religious implications.


20. (S) Rashed welcomed a close and regular dialogue with
U.S. officials as the most successful way to make progress on
complex issues of mutual concern. He noted that while Saudi
is largely a cash-based economy, in recent years it has made
progress transitioning to a non-cash-based system, with
electronic transaction up 8-9 fold. He pointed to
international business and creating links to the U.S.
financial sector as the most effective approaches to
harmonizing standards and transferring best practices.

AL RAJHI BANK DISCUSSES AML/CTF, CHARITIES
--------------


21. (S) Al Rajhi Bank CEO Abdullah bin Sulieman al Rajhi
stated that over the past few years, 'there has been quite an
investment in (compliance) programs.' He explained that in
recent years the bank has built up its staff and systems to
improve compliance and ensure the bank is providing the
authorities with the right information in order to adhere to
SAMA requirements. Abdullah stated that 'things are better
now as the KSA had suffered from terrorism so institutions
know these systems are for the good.' He added his bank
reports more frequently, has more training, and sends more
reminders to risk teams to look for suspicious activity than
in the past.


22. (S) Regarding charities, Abdullah al Rajhi confirmed
Saudi banks are under instruction to not transfer funds
overseas on behalf of Saudi-based charities without a
specific government license. He said the funds transfer ban
met stiff resistance from the charitable sector and he
received many phone calls from NGO heads who tried to push Al
Rajhi to send money abroad, but he refused. When originally
implemented, several charities tried to evade the
restrictions, but al Rajhi and SAMA were able to detect the
activity and adapt. DAS Glaser asked if the restrictions
applied to organizations that the Saudi Government considers
to be 'international,' such as WAMY and IIRO. Abdullah said
'yes, WAMY and IIRO are treated as charities.


23. (S) COMMENT: Brigadier Ahmed al-Issa's conciliatory
remarks regarding relations with Treasury are very
encouraging. The ultimate test of an improvement in
relations, however, will be broader cooperation from the
Saudi side. END COMMENT.

ERDMAN