US embassy cable - 04COLOMBO437

C O N F I D E N T I A L SECTION 01 OF 02 COLOMBO 000437 
 
SIPDIS 
 
FOR EB A/S E. ANTHONY WAYNE FROM AMBASSADOR LUNSTEAD 
 
E.O. 12958: DECL: 03/09/2014 
TAGS: EFIN, ETTC, PREL, PTER, MV, CE, LTTE - Peace Process 
SUBJECT: TERRORIST FINANCE FOLLOW UP: SRI LANKA AND MALDIVES 
 
REF: STATE 37211 
 
Classified By: Ambassador Jeffrey J. Lunstead, Reasons 1.5 B, D and E 
 
1. (C) Summary: Post believes the GSL and the GORM have been 
fully cooperative with counterterrorism finance initiatives, 
to the extent they are able.  While neither has frozen 
terrorist assets, we do not believe either Sri Lanka or the 
Maldives presents an attractive banking alternative for 
terrorist elements at this time.  Sri Lanka has dealt with an 
internal terrorist element for over twenty years and is fully 
cooperative with the US in the war on terror.  Maldives is a 
moderate Islamic country that is highly protective of its 
stature as a safe tourist haven and is fairly aggressive in 
combating fundamentalist tendencies.  Moreover, US Treasury 
teams are slated to arrive in both countries in late April to 
conduct AML training and to provide additional technical 
assistance to both Governments and banking sectors.  End 
Summary 
 
2. (C) In response to reftel, Post believes both Governments 
of Sri Lanka and Maldives are making their best efforts in 
the realm of combating terrorist financing, but a lack of 
capacity may hamper their success.  While both Sri Lanka and 
the Maldives have initiated efforts to track terrorist 
financing, neither have frozen any accounts based on USG or 
UN distributed information.  At this point, Post has no 
evidence to suggest there are assets to be frozen. 
Nonetheless, efforts to expand capabilities and look more 
closely at Liberation Tigers of Tamil Eelam (LTTE) financing 
could prove useful.  Sri Lanka is enjoying a two-year old 
cease-fire agreement with the LTTE, a US-designated Foreign 
Terrorist Organization.  The GSL has been the victim of 
repeated terrorist attacks, has welcomed training and 
assistance to help weaken LTTE networks and is fully 
cooperative with the US in the war on terror.  It recognizes 
the effects of terrorism as a drag on economic development. 
Maldives is a moderate Muslim nation whose economy is almost 
entirely dependent on tourism.  It values its reputation as a 
"safe" country and is not tolerant of fundamentalist brands 
of Islam operating on its soil.  Both countries welcome 
assistance from the US and other members of the international 
community, both have established new rules and procedures in 
their banking sectors since September 11, 2001 and both 
countries have a lot to lose, and very little to gain, from 
allowing terrorist elements to operate in their countries. 
 
3. (C) A US Treasury team recently conducted an assessment of 
the Sri Lankan financial sector and concluded that there are 
weaknesses in the banking sector open to possible 
exploitation.  The assessment concluded that drugs, human 
smuggling and corruption are the crimes that generate most 
money laundering problems in Sri Lanka. The assessments also 
found areas where additional assistance is warranted, 
including new anti-money laundering legislation; training for 
Central Bank and banking sector employees; training for 
judges, prosecutors and investigators; the development of a 
casino regulatory scheme and awareness training for 
legislators and other government officials. 
 
4. (C) Hawala networks are also used in Sri Lanka, though 
their informal nature makes them difficult to track.  Most 
Hawala transactions are for the repatriation of funds from 
workers abroad.  (Note: Sri Lanka has over one million 
citizens working abroad, most in the Middle East. End Note.) 
It is possible that some terrorist financing is conducted 
through Hawala networks in the North and East of the country, 
as these areas are largely controlled by the LTTE and outside 
the purview of the GSL.  To date we have little indication of 
broader LTTE cooperation with other transnational terrorist 
groups. 
 
5. (C) While recognizing the efforts the GSL has made in this 
area, it is important we continue to press the GSL to do 
more.  We should continue to press them to upgrade their 
investigative capacity, improve their legal and regulatory 
infrastructure and pass and enforce new, strengthened 
anti-money laundering and counter-terrorist finance laws. 
Maldives also should upgrade its laws and continue to seek 
training for its banking sector, in order to avoid becoming a 
sector of interest for terrorist financiers.  US Treasury 
teams will arrive in both countries in late April to conduct 
anti-money laundering training. 
 
6. (C) With regard to the questions posed in reftel para 10, 
Post has three suggestions.  First, with regard to the GSL, 
additional assistance - which could probably be tied to the 
upcoming Treasury Department training - in the area of 
developing laws and ensuring that pending legislation is 
modern and effective could be useful.  Perhaps there have 
been some insights gained in the past two and a half years, 
as countries have frozen assets and prosecuted cases, as to 
what kinds of legislation are most effective and what 
stipulations have proven problematic.  Perhaps there would be 
value in a wider information sharing exercise between law 
enforcement and judicial elements on the subject. 
 
7.  (C) Second, if it has not already been done, US terrorism 
finance experts might consider a closer examination of groups 
like the LTTE.  The LTTE is highly sophisticated and its 
financial network and supply chains are formidable.  It might 
prove interesting for experts with experience in terrorist 
financing patterns to come to Colombo and explore what is 
known about LTTE methods.  The GSL has been dealing with this 
indigenous terrorist threat for a long time and might have 
some insights worth considering. 
 
8. (C) Finally, as freezing assets and working this issue has 
demanded additional time and resources on the part of 
Governments, perhaps the US should consider developing a list 
of cooperating countries.  Criteria could be established and 
it might potentially feed into the Millennium Challenge 
Account process for developing countries or boost a 
country,s chances for additional training or assistance in 
this area.  Since this is also related to a wider UN effort, 
perhaps some kind of remunerative incentive could be given ) 
like deducting the amount of assets frozen from a country,s 
NY parking fines. 
LUNSTEAD