US embassy cable - 03KUWAIT5001

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 005001 
 
SIPDIS 
 
STATE/EB/ESC/TFS FOR NROTHSTEIN; STATE/EB:ABORG/BFITZGERALD 
AND NEA/NGA; TREASURY:WMURDEN; NSC:GPETERS FINANCING 
 
E.O. 12958: DECL: 11/01/2013 
TAGS: EFIN, EAID, ETTC, PTER, PREL, KU, IZ, UNSC 
SUBJECT: FROZEN IRAQI ASSETS: OFAC/STATE VISIT TO KUWAIT 
 
REF: KUWAIT 4840 
 
Classified By: AMBASSADOR RICHARD JONES FOR REASONS 1.5(B) and (D) 
 
1. (C) SUMMARY.  A delegation from Treasury's Office of 
Foreign Assets Control (OFAC) and a State Department 
representative met with Kuwaiti officials on October 3-5 to 
discuss, among other things, some $85 million in frozen Iraqi 
assets held by the Nassau, Bahamas branch of the Commercial 
Bank of Kuwait which have not been transferred to the 
Development Fund for Iraq (DFI), as required under UNSCR 
1483.  This cable is the second of two on the visit 
(terrorist financing developments are reported reftel).  The 
Ministers of Finance and Foreign Affairs referred the 
delegation to the Central Bank (CBK) as the GOK action agency 
for these issues.  The Deputy Governor of the Central Bank 
said all Kuwaiti banks had been advised of their 
responsibility to transfer to DFI all assets not under court 
order or currently in litigation.  The banks must notify CBK 
of any assets that are not transferred, and provide 
justification as to why they are being held.  The CBK will 
review with each bank what assets have been transferred and 
what have not.  Bank officials stressed that they would like 
to "close the chapter" on the issue of Iraqi assets by year's 
end, but that it is more complicated to do so in Kuwait than 
in other GCC countries because of Iraq's sizeable debts to 
Kuwaiti banks.  END SUMMARY 
 
 
2.  (U) An OFAC delegation and State representative traveled 
to Kuwait on October 3-5 to speak with Kuwaiti officials 
regarding terrorist financing issues and the status of 
blocked Iraqi assets held by Kuwaiti banks.  This cable, the 
second of two on the visit, reports on frozen Iraqi assets. 
Efforts to combat terrorist financing and the issue of the 
GOK's will to enforce UNSCRs are reported reftel.  The 
delegation, led by OFAC Director Richard Newcomb and 
accompanied by the Ambassador, included Mark Roberts, Daniel 
Yorks, and Jason Beal from OFAC; and Nicole Rothstein from 
EB/ESC/TFS; EconOff attended as notetaker.  The delegation 
raised with the Ministers of Finance and Foreign Affairs and 
the Deputy Governor of the Central Bank of Kuwait (CBK) the 
issue of $85 million in blocked Iraqi assets that are 
currently held in the Nassau, Bahamas branch of the 
Commercial Bank of Kuwait, and against which two Kuwaiti 
financial institutions have filed attachments in court. These 
funds have not been transferred to the Development Fund for 
Iraq (DFI) as required under UNSCR 1483.   The funds were 
previously managed by the New York branch of the Commerical 
Bank.  However, the New York branch in the process of closing 
and the Commercial Bank has transferred management of those 
funds back to its head office in Kuwait.  Although it remains 
unclear under whose jurisdiction these deposits fall -- 
Kuwait, the Bahamas, or the United States --, according to 
the Treasury the USG believes it might have a claim. 
Nevertheless, the delegation wanted to speak with GOK 
officials to see if they would agree to transfer the funds in 
accordance with UNSCR 1483.  When presented with this, both 
the Minister of Finance and the Minister of Foreign Affairs 
referred the delegation to CBK for a response. 
 
3.  (C) The Central Bank's Deputy Governor, Dr. Nabeel Ahmed 
Al-Mannae, confirmed that CBK had received a copy of UNSCR 
1483 mandating the transfer of frozen Iraqi assets to DFI, 
and had circulated that to all banks.  However, he noted that 
the resolution also stipulates that funds subject to prior 
judicial action are exempted from the transfer order. 
Accordingly, CBK informed all Kuwaiti banks that any assets 
not currently being litigated or already subject to a court 
order must be transferred to a special account at CBK for 
onward transfer to DFI.  In the case where Iraqi assets under 
court orders were present, the banks were instructed to 
specify the claim and report it to CBK.  Newcomb noted that 
there are no specific attachments against the funds in 
Nassau, only general claims.  Newcomb emphasized that Kuwait 
had an obligation under UNSCR 1483 (paragraph 23) to order 
the transfer of the funds to the DFI.  Al-Mannae said the CBK 
has asked the Ministry of Foreign Affairs to establish a 
joint committee with Bank officials and CBK's legal advisor 
to review all of these claims.  At present, CBK has not 
determined if it has the authority to force individual banks 
to transfer funds that are under court orders. 
 
4.  (C) CBK Executive Director Ibrahim Alqadhi stressed that 
the Kuwaitis want to "close the chapter" on Iraqi assets, and 
hope to do so by year,s end.  But he said that this is not 
as simple in Kuwait as in other GCC countries, because of the 
Government of Iraq,s liabilities to Kuwaiti banks.  Newcomb 
noted that many countries have claims on Iraqi funds, and 
that Iraq owes US banks alone billions of dollars; he also 
commented that the US arguably has jurisdiction to force 
these transfers.  Alqadhi clarified that he was not 
necessarily defending the Kuwaiti banks' claims, but that 
their position must be understood from this perspective.  He 
underscored that CBK is not concerned (as the claimant banks 
are) with shareholders, interests but is concerned with 
compliance issues, implying that it would be easier for the 
CBK to compel the banks to make the transfers than it would 
for the banks to do it of their own volition. 
 
5. (C) Al-Mannae promised the delegation that the CBK would 
call each bank to see what their case is for attaching those 
assets; he would then inform the UN of amounts transferred 
or, if not transferred, provide the banks, justifications. 
At the Ambassador,s urging, the CBK officials agreed to 
begin their investigation with those banks claiming the $85 
million being held in the Bahamas.  Newcomb asked CBK for an 
answer within two weeks of the meeting date.  No answer has 
been received, however CBK and OFAC have remained in contact 
on this issue. 
 
6.  (U)  The State/OFAC delegation cleared this cable after 
their return to Washington. 
JONES