US embassy cable - 03SANAA3002

UNCLAS SECTION 01 OF 02 SANAA 003002 
 
SIPDIS 
 
 
STATE FOR INL AND NEA/ARP HEFFERNAN AND KEARY 
JUSTICE FOR OIA AND AFMLS 
TREASURY FOR FINCEN 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EFIN, PTER, SNAR, KCRM, KSEP, YM, TERFIN 
SUBJECT: YEMEN 2003-2004 INSCR REPORT 
 
REF  A) STATE 328024 
 
 
1. (SBU) EMBASSY SANAA SUBMITS ITS UPDATE FOR THE 2003-2004 
INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT (INCSR) AT 
PARA TWO.  COMMENT:  WHILE THE ROYG MUST IMPROVE ITS 
ENFORCEMENT OF FINANCIAL CRIMES, THE PASSAGE OF ANTI-MONEY 
LAUNDERING LEGISLATION REPRESENTS A SIGNIFICANT STEP FORWARD 
IN MEETING INTERNATIONAL BANKING STANDARDS.  END COMMENT. 
 
2. (U) Begin Text: 
 
The extent of money laundering in Yemen is not known.  Yemen's 
Parliament passed anti-money laundering legislation in April 
2003.  However, the inexperience of the Central Bank of Yemen 
(CBY) in enforcing new money laundering legislation and the 
prevalence of hawala (informal money transfers) make Yemen 
vulnerable to money laundering.  The CBY supervises Yemen's 
relatively small banking sector, which consists of 14 
commercial banks, including three Islamic banks.  Domestic 
banks account for approximately 60 percent of the total 
banking activities, while foreign banks cover the other 40 
percent. 
The 2003 legislation criminalizes money laundering for a wide 
range of crimes including narcotics offenses, kidnapping, 
embezzlement, bribery, fraud, tax evasion, illegal arms 
trading, and money theft, and imposes penalties of three to 
five years imprisonment.  There is no specific legislation 
relating to counter-terrorist financing in Yemen, but 
terrorism is covered in various pieces of legislation that 
treat terrorism and its financing as serious crimes. 
The law requires banks, financial institutions, and precious 
commodity dealers to verify the identity of persons and 
entities that want to open accounts or deal with them, to keep 
records of transactions for up to ten years and to report 
suspicious transactions.  In addition, the law requires that 
reports be submitted to an information-gathering unit within 
the CBY.  The unit acts as the Financial Intelligence Unit 
(FIU), which in turn will report to the Anti-Money Laundering 
Committee (AMLC).  The AMLC is composed of representatives 
from the Ministries of Finance, Justice, Interior, and 
Industry and Commerce, the CBY, and the Board of Banks is 
authorized to issue regulations and guidelines and provide 
training workshops related to combating money laundering 
efforts.  Several training workshops have been conducted by 
the CBY in 2003 on the new legislation. 
The law grants the AMLC the right to exchange information with 
foreign entities.  The head of the committee can ask local 
judicial authorities to enforce foreign court verdicts based 
on reciprocity.  Also, the law permits the extradition of 
criminals in accordance with international treaties or 
bilateral agreements.  (Note:  The Yemeni Constitution 
prohibits the extradition of Yemeni citizens.  End note.) 
In April 2002, the CBY issued Circular 22008, informing banks 
and financial institutions that they must verify the legality 
of all proceeds deposited in or passing through the Yemeni 
banking system.  The circular stipulates that financial 
institutions must positively identify the place of residence 
of all persons and businesses that establish relationships 
with them.  The circular also requires that banks verify the 
identity of persons or entities that wish to transfer more 
than $10,000 through banks at which they have no account.  The 
same provision applies to beneficiaries of such transfers. 
Banks must also take every precaution when transactions appear 
suspicious, and report such activities to the CBY.  The 
circular was distributed to the banks along with a copy of the 
Basel Committee's "Customer Due Diligence for Banks," 
concerning "Know Your Customer" procedures. 
In response to UNSCR 1267/1390 and Yemen's Council of 
Ministers directives, CBY issued a number of circulars to all 
banks operating in Yemen directing them to freeze accounts of 
144 persons, companies, and organizations, and to report any 
finding to CBY.  As a result, one account was immediately 
frozen with a balance equal to $33. 
A LAW WAS PASSED IN 2001 GOVERNING CHARITABLE ORGANIZATIONS, 
ENTRUSTING THE MINISTRY OF PENSIONS AND SOCIAL AFFAIRS WITH 
OVERSEEING THEIR ACTIVITIES.  THE LAW IMPOSES PENALTIES OF 
FINES AND/OR IMPRISONMENT ON ANY SOCIETY OR ITS MEMBERS FOR 
CARRYING OUT ACTIVITIES OR SPENDING FUNDS FOR OTHER THAN THE 
STATED PURPOSE FOR WHICH THE SOCIETY WAS ESTABLISHED. 
Yemen is a party to the 1988 UN Drug Convention and has 
signed, but not yet ratified, the UN Convention against 
Transnational Organized Crime, which is not yet in force 
internationally.  Yemen is a member of the Arab Convention for 
the Suppression of Terrorism. 
The Government of Yemen is making progress in enforcing its 
domestic anti-money laundering program.  However, 
international cooperation with criminal investigations is 
nascent.  As of the writing of this report, the CBY is still 
organizing its enforcement mechanism; its effectiveness will 
demonstrate the ROYG's commitment to ending money laundering. 
As a next step, Yemen should also enact specific legislation 
with respect to the financing of terrorism and pass a law 
giving the ROYG executive authority to freeze assets of those 
they believe are involved in terrorism. 
 
End Text.