US embassy cable - 03ABUDHABI5380

UNCLAS SECTION 01 OF 11 ABU DHABI 005380 
 
SIPDIS 
 
DEPT FOR INL AND NEA/ARP 
ISLAMABAD FOR DEA 
JUSTICE FOR OIA, AFMLS, AND NDDS 
TREASURY FOR FINCEN 
DEA FOR OILS AND OFFICE OF DIVERSION CONTROL 
 
E.O. 12958: N/A 
TAGS: SNAR, EFIN, TC 
SUBJECT:  UAE: 2003-2004 INTERNATIONAL NARCOTICS 
CONTROL STRATEGY REPORT 
 
REFS:  A) STATE 324347 B) STATE 328024 
 
 
PART I.  Summary: 
 
Although not a narcotics producing nation, the UAE is 
believed to be a transshipment point for traffickers 
moving illegal drugs from the major drug-producing 
countries, including Afghanistan, Iran, Pakistan, and 
India, westward.  Frequent reports of seizures of 
illegal drugs in the UAE during the past year 
underscore this conclusion, although most seizures have 
been of "soft" drugs like hashish, not "hard" drugs 
like heroin.  News stories about drug smuggling, 
dealing, and usage were reported in the local press in 
2003.  Besides the country's general laissez-faire 
attitude toward trade -- although not drugs -- there 
are several other factors that lend the UAE to this 
role of way-station, including its proximity to major 
drug cultivation regions in South Asia; a long (700 
kilometers) coastline; and relative affluence among the 
local population. 
 
Published statistics on narcotics seizures and domestic 
addiction reveal a growing drug problem among UAE and 
third-country nationals, which while not significant by 
American standards, is notable given the country's 
harsh drug laws.  A Ministry of Health report in late 
1998 asserts that there were approximately 12,500 drug 
addicts in the country of 3.1 million people. 
 
All seven emirates that comprise the UAE sponsored a 
variety of public activities with an anti-drugs theme 
during International Drug Awareness Day in June.  The 
Ministry of Interior's Federal Higher Anti-Drugs 
Committee is tasked with coordinating drug enforcement 
efforts for the seven emirates, as well as executing 
the country's anti-drug strategy.  The UAEG Government 
(UAEG) is committed to the fight against international 
narcotics trafficking and narcotics abuse and is a 
signatory to the 1988 UN Drug Convention. 
 
The UAEG has sought to crackdown on potential 
vulnerabilities in the financial markets and has 
provided outstanding cooperation in the international 
effort to prevent money laundering, particularly by 
terrorists.  The UAEG implemented a law to criminalize 
money laundering, to include terrorist financing, in 
January 2002.  End summary. 
 
 
PART II.  Status Of Country: 
 
A major regional financial center and hub for 
commercial shipping and trade, the UAE is a 
transshipment point for illegal narcotics from the 
drug-cultivating regions of south and southwest Asia, 
to Europe and the United States.  Illicit narcotics 
originating from these points have reached the United 
States, although Western Europe is the principal market 
for these drugs. 
 
Statistics on drug-related cases released by the UAEG 
indicate that the majority of arrests for illegal 
trafficking occur in the northern emirates.  Factors 
that contribute to the prominence of the northern 
emirates are the emergence of Dubai and Sharjah as 
regional centers in the transportation of passengers 
and cargo, a porous land border with Oman, and the fact 
that a number of ports in the UAE are de facto "free 
ports" -- transshipped cargo are not subject to 
inspection, as are other goods that enter the country. 
 
To mark the occasion of International Anti-Narcotics 
Day on June 26, the UAEG released a report outlining 
the drug problem in the UAE.  The report noted that the 
majority of UAE drug users take their first dose 
abroad, primarily because of peer pressure.  Statistics 
reveal that 75 percent of drug users in the UAE prefer 
hashish, 13 percent use heroin, while 6 percent use 
morphine.  The report illustrates a clear relationship 
between drug abuse and level of education -- 75 percent 
of arrested drug users in 2002 were high school 
graduates, but only 2 percent were university 
graduates. 
 
The UAE's Federal Supreme Court made an important 
ruling in 2003 regarding proof that drug-offenders 
actually consume drugs in the UAE before they can be 
prosecuted.  The Supreme Court decided that UAE courts 
could not prosecute drug-users if the consumption took 
place in another country.  A positive blood test for 
drugs is considered evidence of consumption, but does 
not determine whether the drug-taking occurred in the 
UAE or abroad.  The Supreme Court affirmed the legal 
principle in September after a GCC citizen arrested in 
a hotel room in Ajman tested positive for drugs, but 
argued that he had consumed the drugs abroad and was 
not liable under UAE law. 
 
The United Nations selected the UAE in 2003 to sit on 
the Economic and Social Council's Anti-Narcotics Panel 
for a four-year term.  The 53-member panel is 
responsible for drafting international anti-drug 
agreements, assisting the Council with the 
implementation of these agreements, and providing 
recommendations on international narcotic control rules 
and regulations.  The United Nations also acknowledged 
the Emirate of Dubai's outstanding achievements in 
combating the flow of drugs through its territory in 
2003. 
 
The UAE increased cooperation with neighboring 
countries in 2003, and focused on expanding law 
enforcement agreements with South Asian drug-producing 
countries -- including Pakistan, Iran and India.  The 
UAE signed a landmark anti-narcotics agreement with 
Iran in 2003 providing for cooperation against 
production, distribution and smuggling of illicit drugs 
across the UAE-Iran sea border.  Press reports note 
that UAE and Iranian border forces will work together 
to identify smuggling routes, and jointly conduct some 
counter-narcotics training in 2004.  UAE police 
attended a series of UN-sponsored anti-narcotics 
training in Iran in 2003. 
 
UAE authorities continue to participate in 
international anti-drug fora.  The UAEG has been 
receptive to State Department, DEA, U.S. Coast Guard, 
and other agency-sponsored training on money 
laundering, drug education, treatment, and prevention 
programs. 
 
Organized crime is not a major security threat in the 
UAE, but the very public assassination of an infamous 
Indian gangster and suspected drug-runner in Dubai in 
January forced the UAE authorities to acknowledge the 
existence of Mafioso in the UAE.  Further anecdotal 
evidence suggests that a Russian mafia is growing 
increasingly influential in prostitution and the 
narcotics trade.  In 2003, UAE authorities worked to 
dismantle the activities of Indian and Russian gangs, 
and extradited a number of henchmen back to their 
native countries to stand trial. 
 
 
PART III.  Country Actions Against Drugs: 
 
------------------------ 
23.1. Policy Initiatives 
------------------------ 
 
The UAE continued in 2003 to advance its national drug 
strategy based on intensifying security at the 
country's air and sea ports and patrols along the 
coastline, reducing demand of illegal drugs through 
educational campaigns, enforcing harsh penalties, and 
rehabilitating drug addicts.  The UAEG is studying a 
proposal to establish a federal General Directorate to 
replace the existing federal committee for fighting 
drugs.  This reorganization, if approved, would mean 
additional manpower and a larger budget to wage the war 
on drugs. 
 
Other initiatives that remain in place include the 
continued training of the UAE's anti-narcotics units 
and the formation of special units for maritime anti- 
drug operations; the establishment of laws to better 
monitor precursor chemicals; and the enhancement of 
cooperation with UNDCP and countries expert in anti- 
drug efforts. 
 
Ongoing efforts include public statements by senior UAE 
officials, including the Commandant General of Dubai 
Police Dhahi Khalfan Tamim, who urged the UAEG to fight 
drug traffickers with the same intensity the USG is 
fighting terrorism.  He has described narcotics in the 
UAE as "our deadliest foe."  The UAEG has focused on 
designing programs to ensure that the unemployed and 
those released from prison are provided jobs and 
receive incentives through the Marriage Fund to lead 
stable family-oriented lives. 
 
The emirate-level customs authorities in the UAE have 
worked during the last year to improve their abilities 
to identify and apprehend drug smugglers at the UAE 
borders.  Fujairah Customs Department and Abu Dhabi 
Customs Department sponsored a five-day training course 
in March on the evaluation and inspection of prohibited 
items, including drugs. 
 
Punishment for drug offenses is severe; a 1995 law 
stipulates capital punishment as the penalty for drug 
trafficking.  No executions, however, have ever taken 
place, and sentences usually are commuted to life 
imprisonment.  In November, the Dubai Supreme Court 
handed a death sentence to two of six drug smugglers 
who set fire to a boat containing cannabis, as the 
Anti-Narcotics Squad approached them off the Dubai 
coast.  The rest of the gang received life sentences. 
According to police, the six smugglers were carrying 
more than 800 kilos of cannabis on board their boat. 
 
--------------------- 
23.2. Accomplishments 
--------------------- 
 
A.  Illicit cultivation -- No local cultivation. 
 
B.  Production -- No local production. 
 
C.  Distribution -- Several high-profile seizures in 
2003 indicate that UAE authorities continue to take 
seriously their responsibility to interdict drug 
smuggling and distribution.  In June, Dubai authorities 
seized a shipment of 350 kilos of opium from a dhow 
belonging to an Iranian trader.  International news 
wire services reported the event as "the largest ever" 
seizure of opium in the UAE.  (See 03 Dubai 4220 for 
more information on this seizure.)  As of mid-2003, 525 
people had been arrested in the UAE on drug-related 
charges. 
 
D.  Sale, transport, and financing -- Local press 
reports the street value of one kilogram of Pakistani 
hashish to be an approximate 5,000 dirhams (USD 1,362) 
in Abu Dhabi and about 4,500 dirhams (USD 1,226) in 
Dubai.  The price is said to be highest in Abu Dhabi 
and Dubai because the customer base in these two 
emirates tends to be more affluent. 
 
E.  Money laundering -- See section VI. 
 
F.  Asset seizure -- See section VI. 
 
G.  Extradition -- The United States does not and is 
unlikely to have in the foreseeable future an 
extradition treaty with the UAE.  Renditions however 
are possible and are handled on a case-by-case basis. 
 
H.  Mutual Legal Assistance -- The United States and 
the UAE continue to share information on exchanging 
records in connection with terrorist financing and 
other money-laundering cases on an ad hoc basis; we 
currently are negotiating, and the UAE has commented 
on, a draft MLAT treaty that would codify such 
cooperation. 
I.  Law enforcement and drug-transit cooperation -- The 
UAEG cooperates extensively with U.S. law enforcement 
on a case-by-case basis.  In light of UAE connections 
to the terrorist attacks on Washington, New York and 
Pennsylvania on 9/11 (two of the 9/11 hijackers were 
UAE nationals, and terrorist funding for the 9/11 
attacks moved through financial institutions based in 
the Emirates), this cooperation has intensified 
significantly and become much broader and deeper. 
 
In 2002, the FBI partnered with the Dubai police in the 
Middle East Law Enforcement Training Center to offer 
training to UAE and Gulf Cooperation Council (GCC) law 
enforcement agencies alike as part of an ongoing five- 
year effort.  The FBI sponsored continuing training in 
drug investigations, money laundering, and other 
coursework that assists in the combating of illicit 
drugs in 2003. 
 
J.  Precursor chemical control -- In 2003, the UAEG 
began registration and inspection of chemical firms in 
preparation for implementation of the Chemical Weapons 
Convention (CWC).  The National Chemical Weapons 
Committee (established last year under the aegis of the 
Ministry of Foreign Affairs) tasked the UAE military to 
register all chemical companies and establish a base 
line of firms that legitimately use certain controlled 
chemicals.  Firms are required to indicate whether they 
import, export, or manufacture any of the chemicals on 
a set list of controlled substances.  The military also 
inspects firms to ensure the veracity of these reports. 
Formal domestic legislation on chemical controls is 
still pending, and it is not clear whether firms that 
transship chemicals (or re-export them via the free 
zones) would be subject to the registration 
requirements. 
 
K.  Demand reduction -- The focus of the UAEG's 
domestic program is to reduce demand through public 
awareness campaigns directed at young people and the 
establishment of rehabilitation centers.  UAE officials 
believe that adherence to Muslim religious mores as 
well as imposing severe prison sentences for 
individuals convicted of drug offenses are an effective 
deterrent to narcotics abuse. 
 
----------------------------- 
23.3. Law Enforcement Efforts 
----------------------------- 
 
In 2003, the UAE Ministry of Interior established a 
countrywide database that is accessible to emirate- 
level police departments.  This is a major step forward 
in coordinating narcotics-related information 
throughout the UAE. 
 
UAE authorities acknowledge that narcotics consumption 
is an increasing problem among the local population. 
Government statistics reveal that the number of arrests 
in drugs-related cases surged from 1,210 in 2001 to 1, 
603 in 2002.  In Dubai alone, 976 narcotics cases were 
recorded last year.  Five hundred and sixty people were 
arrested for distributing drugs.  Of the 416 people 
arrested for drug use, 244 were UAE citizens -- the 
majority of whom were youths. 
 
An affluent country, the UAE has established an 
extensive treatment and rehabilitation program for its 
citizens.  There is a rehab center in Abu Dhabi, two in 
Dubai, and one each in Ajman and Sharjah for those 
identified as addicts.  In accordance with federal law 
no. 1511995, UAE nationals who are addicted can present 
themselves to the police or a rehabilitation center and 
be exempted from criminal prosecution.  Those nationals 
who do not turn themselves into local authorities are 
referred to the courts for prosecution.  Third-country 
nationals or "guest workers," who make up approximately 
80 percent of the UAE's population, generally receive 
prison sentences upon conviction of narcotics offenses 
and are deported upon completing their sentences. 
 
---------------- 
23.4. Corruption 
---------------- 
UAE officials aggressively pursue and arrest 
individuals involved in illegal narcotics trafficking 
and/or abuse.  There is no evidence that corruption of 
public officials is a systemic problem; however, a UAE 
Central Bank official was arrested in November for 
embezzling 4.1 million dirhams (USD 1.1 million) and 
sentenced to seven years in prison.  Press reports 
indicate that the defendant used the stolen funds to 
buy cars, land, buildings, and restaurants in the GCC. 
 
There is no evidence that the UAE Government or any UAE 
official engages in, encourages, or facilitates the 
illicit production and distribution of illegal drugs or 
the laundering of proceeds from illegal drug 
transactions. 
 
--------------------------------------------- ---------- 
- 
23.5. Agreements And Treaties (With The U.S. And 
Others) 
--------------------------------------------- ---------- 
- 
 
A.  No extradition or Mutual Legal Assistance treaties 
(MLAT) exist between the United States and the UAE, 
although the two countries are in the process of 
negotiating an MLAT. 
 
B.  The UAE is party to the 1988 UN Drug Convention and 
all other UN agreements aimed at fighting drug 
trafficking. 
 
C.  The UAE is party to other multilateral or bilateral 
counter-narcotics conventions, including agreements 
with Iran, Pakistan, and India.  The UAEG has also 
signed a number of memoranda of understanding with 
other governments, including the United States and the 
United Kingdom. 
 
---------------------------- 
23.6. Cultivation/Production 
---------------------------- 
 
There is no evidence of drug cultivation and/or 
production in the UAE. 
 
----------------------- 
23.7. Drug Flow/Transit 
----------------------- 
 
Press reports of several seizures of large quantities 
of illegal drugs by UAE authorities during the past 
year indicate that narcotics smuggling from south and 
southwest Asia continues to Europe and -- to a 
significantly lesser degree -- the United States via 
the UAE.  Hashish, heroin, and opium shipments 
originate in Pakistan, Afghanistan, and Iran and are 
smuggled in cargo containers, via small vessels and 
powerboats, and/or sent overland via Oman. 
 
The UAE, and Dubai in particular, is a major regional 
transportation and shipping hub.  High volumes render 
the UAE vulnerable to exploitation by narcotics 
traffickers.  UAE authorities recognize that the number 
of human carriers of illicit narcotics transiting local 
airports is also on the rise.  Dubai police foiled 83 
attempts to smuggle drugs through Dubai International 
Airport in 2002.  The police also caught a number of 
traffickers trying to smuggle drugs over the UAE land 
border by truck and horseback. 
 
Recognizing the need for increased monitoring at its 
commercial shipping ports, airports, and borders, the 
UAEG is making an effort to tighten inspections of 
cargo containers as well as passengers transiting the 
UAE.  Customs officials and inspectors received 
specialized training on ferreting out prohibited items 
from DHS and Commerce's Bureau of Industrial Security 
in December 2003.  Customs officials randomly search 
containers and follow-up leads of suspicious cargo. 
Dubai Ports Authority purchased state-of-the-art 
equipment for rapid, thorough searches of shipping 
containers and vehicles. 
 
------------------------------------------ 
23.8. Domestic Programs (Demand Reduction) 
------------------------------------------ 
 
The focus of the UAEG's domestic program is to reduce 
demand through public awareness campaigns directed at 
young people and rehabilitation centers.  Most 
recently, senior government officials in Al-Ain, a 
number of hospitals, and the local police sponsored a 
10-day festival called "Decision is Yours," to inform 
local school children of the dangers of drugs and AIDS. 
 
In August, Abu Dhabi Police launched a two-week 
intensive campaign to curb the use and distribution of 
illicit drugs.  The roving exhibition of slogans, 
posters, and pamphlets visited police stations and 
schools to raise awareness of the penalties for using 
drugs, and encourage youngsters to report any cases of 
drug abuse to the authorities. 
 
Most UAE nationals arrested on drug charges are placed 
in one of the UAE's drug treatment programs.  They 
undergo a two-year drug rehabilitation program, which 
includes family counseling/therapy.  The Emirate of Ras 
Al-Khaimah announced in June that it would require 
former addicts to undergo a weekly blood test for an 
additional two years upon completing the drug treatment 
program.  Ras Al-Khaimah authorities discovered that 
some resume taking drugs, even after completing the 
rehabilitation program.  The police issue a search 
warrant for the drug addict if he or she misses a 
scheduled blood test. 
 
 
PART IV.  U.S. Policy Initiatives And Programs 
 
--------------------------------------------- --- 
24.1. U.S. Policy Initiatives (Strategies, Etc.) 
--------------------------------------------- --- 
 
The U.S. Mission to the UAE seeks continued and 
enhanced participation by the UAEG in programs dealing 
with narcotics trafficking, precursor chemicals 
diversion, border/export control, and money laundering. 
The U.S. Embassy in Abu Dhabi and the Consulate in 
Dubai in 2003 organized, in conjunction with 
Washington-based agencies, additional training 
initiatives related to money laundering, border/export 
control, and the investigation and prosecution of 
related crimes. 
 
Among these initiatives is the FBI-Dubai police 
partnership in the Middle East Law Enforcement Training 
Center, which provides training to UAE as well as GCC 
law enforcement agencies.  The Center's training 
schedule for 2003 included segments on drug 
investigations and transnational crimes, both of which 
aid the UAE in combating illegal drugs.  Additional 
USG-sponsored training and exchange programs on export 
controls, money laundering, prosecutorial assistance, 
banking examination, and drug interdiction are 
scheduled for 2004. 
 
--------------------------------------------- 
24.2. Bilateral Cooperation (Accomplishments) 
--------------------------------------------- 
 
Although the UAE has no bilateral narcotics agreement 
with the United States, the UAE authorities cooperate 
with U.S. investigative efforts to the full extent 
possible in accordance with UAE law.  UAE officials 
have actively engaged with DEA and FBI personnel in 
exchanging information during this past year. 
 
---------------- 
24.3. Road Ahead 
---------------- 
The U.S. Mission in the UAE will continue to support 
the UAEG's efforts to devise and employ bilateral/ 
multilateral strategies against illicit narcotics 
trafficking and money laundering.  Embassy Abu Dhabi is 
actively negotiating an MLAT treaty, which would 
facilitate the exchange of information related to drug 
and financial crimes.  The USG will encourage the UAEG 
to focus enforcement efforts on dismantling major 
trafficking organizations and prosecuting their 
leaders, and to enact export control and border 
security legislation. 
 
 
PART V.  Statistical Tables: 
 
The following are publicly released UAE Ministry of 
Interior statistics. 
 
------------- 
Drug Seizures 
------------- 
 
              Mid 
              2003        2002        2001        2000 
 
Hashish   2064.8 kg      3127.6 kg  6115.9 kg   945.4 
kg 
Heroin      30.3 kg       115.4 kg    40.1 kg    82.2 
kg 
Opium        7.5 kg        21.7 kg     8.9 kg    27.2 
kg 
Cannabis     1.2 kg         1.5 kg     360 g     431.0 
g 
Capsules    29,201         29,201    1,457,792 
23,246 
 
Illicit labs destroyed by type? not reported 
 
Domestic consumption of illegal drugs? not reported 
 
------------------------------- 
Arrests For Drug-Related Crimes 
------------------------------- 
 
Mid-2003:       1055 persons 
2002:           1603 persons 
2001:           1558 persons 
2000:           1210 persons 
 
-------------------------- 
Number of addicts arrested 
-------------------------- 
 
2003:            Not Reported 
2002:            726 persons 
2001:             Not Reported 
2000:            415 persons 
 
How many are nationals?  Not Reported 
 
 
PART VI.  Money Laundering 
 
A.  General -- The UAE, which remains a cash-based 
society, is considered an important regional financial 
center for the Gulf region.  Dubai, in particular, is a 
major banking center.  Because of the UAE's role as the 
primary transportation and trading hub for the Gulf 
states, East Africa and South Asia, and expanding trade 
ties with the countries of the former Soviet Union, the 
UAE has the potential to be a major center for money 
laundering.  That potential is exacerbated by the large 
number of resident expatriates from these areas, many 
of whom are engaged in legitimate trade with their 
homelands.  Following the 9/11 terrorist attacks in the 
United States, and revelations that terrorists had 
moved funds through the UAE, the Emirati authorities 
acted swiftly to address potential vulnerabilities and, 
in close concert with the United States, to freeze the 
funds of groups with terrorist links, including the Al- 
Barakat organization, which was headquartered in Dubai. 
Both federal and emirate-level officials have gone on 
record as recognizing the threat money laundering 
activities in the UAE pose to the nation's security and 
have taken significant steps in 2003 to better monitor 
cash flows through the UAE financial system. 
 
While the laundering of narcotics funds may take place 
in the UAE given the country's close proximity to 
Afghanistan -- where 70 percent of the world's opium is 
produced -- the potential exploitation of the UAE 
financial system by foreign terrorists and terrorist 
financing groups is the primary concern. 
 
Money laundering may take place within the formal 
banking system, including the numerous money exchange 
houses, but is believed to be largely confined to the 
informal and largely undocumented "hawala" remittance 
system.  New regulations to improve oversight of the 
hawala system were implemented in 2002. 
 
The UAE government has sought to crackdown on potential 
vulnerabilities in the financial markets and has 
provided outstanding cooperation in the international 
effort to prevent money laundering, particularly by 
terrorists. 
 
There is no evidence that the UAE Government or any UAE 
official engages in, encourages, or facilitates the 
laundering of proceeds from illegal drug transactions, 
from other serious crimes, or from terrorist financing. 
Although a UAE Central Bank official was arrested in 
November for embezzling 4.1 million dirhams (USD 1.1 
million) and sentenced to seven years in prison, there 
is no indication that the official attempted to launder 
the money or use it for any illicit activity other than 
personal gain. 
 
The Central Bank conducted 58 workshops on money 
laundering and terrorist finance for banks and other 
financial institutions in 2003. 
 
B.  Law and regulations to prevent money laundering -- 
The UAEG implemented legislation in January 2002 
criminalizing money laundering, to include terrorist 
financing, and included stringent reporting 
requirements for wire transfers exceeding USD 545 and 
currency importation/exportation limits set roughly at 
USD 11,700.  The law imposes stiff criminal penalties 
(up to seven years in prison, a fine of up to 300,000 
dirhams (USD 81,700) as well as seizure of assets if 
found guilty) for money laundering and also provides 
safe harbor provisions for those who report such 
crimes.  Banks and other financial institutions 
supervised by the Central Bank (exchange houses, 
investment companies, and brokerages) are required to 
follow strict "know your customer" guidelines; all 
financial transactions over USD 54,000, regardless of 
their nature, must be reported to the UAE Central Bank. 
Financial institutions also are required to maintain 
records on transactions for five years. 
 
The Central Bank announced that it received 633 
suspicious transaction reports from August 2001 to 
August 2003, of which 497 were from banks, 49 from 
money changers, and 87 from customs departments. 
Thirteen accounts have been frozen as a result of these 
STRs. 
 
A suspicious transactions and cases unit was 
established in 1998 within the Central Bank to perform 
the functions of a financial intelligence unit (FIU). 
The UAE FIU, renamed the Anti-Money Laundering and 
Suspicious Cases Unit (AMLSCU) in 2002, joined the 
prestigious Egmont Group of FIUs  -- the first Arab 
country to do so -- in 2002.  This membership was the 
basis of a number of memoranda of understanding the 
AMLSCU signed with other countries' FIUs to facilitate 
information sharing and case processing.  Banks, 
customs officials, and other relevant personnel are 
required to file suspicious transaction reports with 
the unit. 
The UAEG formally established the National Anti-Money 
Laundering Committee in 2002 to develop and steer the 
country's overall anti-money laundering strategy.  The 
Central Bank Governor is the Chairman of the committee 
and each of the following organizations are represented 
in its membership: the AMLSCU, Ministry of Interior, 
Ministry of Justice, Ministry of Finance, Ministry of 
Economy, National Customs Board, Secretary General of 
the Municipalities, Federation of the Chambers of 
Commerce, and five major banks and money exchange 
houses (as observers). 
 
The UAE authorities demonstrated their commitment to 
enforcing the money laundering legislation in 2003 by 
arresting two men on suspicion of money laundering. 
This is the first time that the UAE has arrested 
suspected money launderers since the legislation went 
into effect, however, the UAEG has frozen financial 
assets under the law.  Post will report the outcome of 
the court proceedings septel.  Likewise, 23 other 
suspected money laundering cases have been referred to 
the public prosecutors office for further review. 
 
C.  Terrorist Finance Section -- The UAEG implemented a 
law to criminalize money laundering, to include 
terrorist financing, in January 2002.  The Central Bank 
has circulated to all financial institutions under its 
supervision the lists of individuals and entities 
suspected of terrorism and terrorist financing included 
in UN Security Council resolutions.  To date, the 
Central Bank has frozen a total of USD 3.13 million in 
18 bank accounts in the UAE since 9/11.  Additionally, 
the AMLSCU has provided international organizations and 
its counterpart FIUs data on 172 cases related to 
terrorist financing. 
 
In 2002, the UAEG worked in partnership with the United 
States to block terrorist financing and froze the 
assets of more than 150 named terrorist entities -- 
including significant assets in the UAE belonging to 
the Al-Barakat terrorist financing group. 
 
There is no accurate estimate of the number of UAE- 
based hawala brokers.  The UAEG sponsored a conference 
on the "hawala" system and other alternate remittance 
systems in May 2002.  More than 300 representatives -- 
experts from international and regional law enforcement 
agencies, as well as bankers and moneychangers -- 
attended the conference in Abu Dhabi.  The Central Bank 
Governor has told the Ambassador that he intends to 
sponsor a follow-up conference on hawala in April 2004 
to assess the effectiveness of hawala registration and 
documentation requirements that went into effect in 
November 2002. 
 
The Central Bank now supervises 61 hawala brokers, 
which -- like other financial institutions in the UAE - 
- are now required to submit sheets containing names 
and addresses of transferors and beneficiaries to the 
Central Bank and complete suspicious transaction 
reports.  The new attention on hawala is encouraging 
more people to use regulated exchange houses in the 
UAE.  Traders in Dubai's Central Souk said hawala 
exchange rates are now only 3 percent cheaper than 
formal exchange houses, persuading many to use the 
formal, and more secure, banking network. 
 
The UAEG also has admitted the need to better regulate 
the burgeoning gold and diamond markets in Dubai and 
items considered to be "near-cash" -- including gold, 
jewelry, and gemstones.  The UAE acceded to the 
Kimberley Process (KP) in November 2002 and began 
certifying rough diamonds exported from the UAE on 
January 1, 2003 -- the UAE is the only Middle Eastern 
country to have implemented the KP to date, according 
to press reports.  The Dubai Metals And Commodities 
Center (DMCC) is the quasi-governmental organization 
charged with issuing KP certificates in the UAE, and 
employs four individuals full-time to administer the KP 
program.  Prior to January 1, 2003, the DMCC circulated 
a sample UAE certificate to all KP member states and 
embarked on a public relations campaign to educate the 
estimated 50 diamond traders operating in Dubai of the 
new KP requirements.  It is not unusual for UAE customs 
officials to delay or even confiscate diamonds entering 
the UAE from a KP member country without the proper KP 
certificate. 
 
The UAEG carefully monitors registered charities in the 
country and requires the organizations to keep records 
of donations and beneficiaries.  The Ministry of Labor 
and Social Affairs regulates charities and charitable 
organizations in the UAE.  The UAEG is much more 
sensitive post-9/11 to the oversight of charities and 
accounting of transfers aboard.  In 2002, the UAEG 
mandated that all licensed charities here interested in 
transferring funds overseas must do so via one of three 
umbrella organizations:  the Red Crescent Authority, 
the Zayed Charitable Foundation, or the Muhammad Bin 
Rashid Charitable Trust.  These three quasi- 
governmental bodies are properly managed, and in a 
position to ensure that overseas financial transfers go 
to legitimate parties.  As an additional step, the UAEG 
has contacted the governments in numerous aid receiving 
countries to compile a list of recognized, acceptable 
recipients for UAE charitable assistance. 
 
D.  Offshore Financial Centers -- The UAE is not an 
offshore financial center; non-residents are not 
permitted to open bank accounts here and offshore 
banking is prohibited.  However, more than 80 percent 
of the UAE's population is comprised of expatriates, 
mostly from South Asia, and these residents are allowed 
to open bank accounts.  Shell companies and trusts are 
prohibited by law. 
 
E.  International Cooperation -- The United States and 
the UAE continue to share information on exchanging 
records in connection with terrorist financing and 
other money laundering cases on an ad hoc basis; a 
Mutual Legal Assistance Treaty, which will codify that 
cooperation, is in the process of being negotiated. 
 
Although the U.S. Mission perceives that our 
relationship with the UAEG on money laundering and 
terrorist finance is close and cooperative -- indeed, 
the U.S. Customs Department intends to open offices in 
Abu Dhabi and Dubai in 2004 to assist the UAE in 
identifying trade-based money laundering -- the UAE 
Central Bank Governor publicly criticized the United 
States at the IMF/World Bank meetings in September 
about failing to provide data, documents, and evidence 
on cases of suspected money laundering to the UAEG. 
 
The UAE has been an active participant in the Financial 
Action Task Force (FATF) process and agreed to a mutual 
evaluation in 2001 and a self-assessment in 2002.  The 
country is committed to full implementation of the 
FATF's 40 recommendations, as well as the additional 
eight recommendations on terrorist financing 
established post-9/11. 
 
The UAE has strongly endorsed the Basel Committee's 
core principles for effective banking supervision.  The 
Central Bank Governor announced in March that the UAE 
would be the first Arab state to implement the new 
Basel II bank supervision guidelines (which go into 
effect in 2006) requiring self-assessments by banks on 
their market, credit, and operational risk areas 
followed by a Central Bank review. 
 
F.  Asset forfeiture and seizure legislation  art and 
parcel of the UAE's 2002 money laundering and terrorist 
finance legislation is the provision that the Central 
Bank may freeze bank accounts in the UAE of suspected 
money launderers for up to seven days.  After seven 
days, the Central Bank's AMLSCU must provide enough 
evidence to the public prosecutor's office to warrant 
the further freezing of those accounts.  That said, the 
UAEG in 2003 froze bank accounts related to suspected 
terrorists or terrorist entities for an indefinite 
period of time without warrant because the government 
believed that it was in the "national security 
interests" of the UAE to do so.  Prior to the passage 
of this legislation, there were no laws in the UAE 
providing for the forfeiture or seizure of assets. 
Wahba