US embassy cable - 04MANAMA376

C O N F I D E N T I A L SECTION 01 OF 03 MANAMA 000376 
 
SIPDIS 
 
DEPT FOR EB/ESC/TFS:GLASS, S/CT:TNAVRATIL, IO/PHO:PEREZ, 
NSC:GPETERS, AND NEA/ARP 
TREASURY FOR JZARATE, OFAC:RNEWCOMB, AND TERRORIST 
FINANCING TASK FORCE 
CAIRO FOR STEVE BONDY 
 
E.O. 12958: DECL: 03/14/2014 
TAGS: ETTC, EFIN, SOCI, KISL, BA 
SUBJECT: LABOR MINISTRY ISSUES FINANCIAL REGULATIONS FOR 
CHARITIES 
 
 
Classified By: CDA Robert S. Ford for reason 1.4(d). 
 
1. (C) SUMMARY:  In early March, Bahrain's Ministry of Labor 
and Social Affairs issued more stringent regulations for 
charities' financial activities.  The rules require charities 
to maintain accounts and share them with ministry inspectors 
on a quarterly basis.  Charities' accounts must be audited 
annually if revenues and expenditures exceed USD 26,500.  The 
new rules also require charities to obtain a permit from the 
Labor Ministry to solicit donations and to transfer money 
outside Bahrain.  Charities must use a monetary institution 
to conduct financial transactions greater than USD 2650. 
Although lacking criminal penalties, the new regulations 
appear likely to deter terrorists' use of local charities to 
move money.  Notably, the GOB found a way to issue these 
rules without submitting them to the Islamist-dominated House 
of Representatives for approval.  END SUMMARY. 
 
2.(U)  On March 6 al-Wasat newspaper published a Labor 
Ministry order establishing new financial reporting rules for 
charity organizations.  All charity organizations in Bahrain 
must register with the Ministry of Labor and Social Affairs. 
According to a knowledgeable MOLSA source, religious 
charities like religious charities like Jamiyat al-Islaah, 
Jamiyat al-Tarbiya al-Islamiya, and Jamiyat al-Tawiya 
al-Islamiya are also registered with MOLSA and covered by 
this order.  The Embassy's unofficial translation of the text 
of the ministerial order follows: 
 
3.(U) Begin text: 
 
Decree number 3 for the Year 16-03-2004 
Oversight of Private Institutions' Financial Activities 
 
Ministry of Labor and Social Affairs: 
 
After reviewing Articles, the Social and Cultural Societies 
and Clubs and private organizations active in the field of 
youth and sports and private institutions' law issued by 
Decree Number (21) for the year 1989 and amended by Decree 
for Law number (44) for the year 2002. 
 
According to Edict Number (19) for the year 1994 regarding 
licensing regulations concerning social and cultural 
societies and clubs and charity organizations subject to the 
MOLSA oversight's regarding donations. 
 
The Following has been decided: 
 
Article (1) 
 
In the implementation of this decree the following words and 
phrases are defined by the words adjoined to them: 
 
Ministry: Ministry of Labor and Social Affairs 
Minister: Minister of Labor and Social Affairs 
Concerned Directorate: Directorate of Local Societies' 
Development at the Ministry. 
Private Institutions: Institutions subject to the regulations 
of the Social and Cultural Societies and Clubs and Private 
Organizations Active in the Field of Youth and Sports and 
Private Organizations' Law issued by Decree (21) for the year 
1989. 
Financial Institutions: Commercial Banks, including banks, 
which adhere to the Sharia law, exchange companies licensed 
by the Bahrain Monetary Agency to operate in the Kingdom. 
Collection of Funds: Every activity practices by the private 
institution with the intention of acquiring money in cash or 
in kind, from any person either directly or by holding 
events, fund-raisers, sports matches, competitions, or other 
such means of collecting funds. 
Person: Any ordinary or legal personality. 
 
Article (2) 
 
a.The private institution must maintain at its main center 
the following: 
 
1. A book in which revenues and expenditures are recorded, 
including the name of every donor and  beneficiary of any 
monetary payment or donation. 
2. A book for the bank accounts. 
 
b. Private institution is required to register details of its 
accounts every three months on the electronic information 
webpage launched by the Ministry to facilitate the viewing of 
these accounts and inspecting of the actuality of the 
financial situation of the institution at any given time. 
 
Article (3) 
 
All private institutions must prepare a closing budget and 
account in accordance with the criterion set by the Ministry, 
which must be presented to the authorized directorate 
supplemented with supporting documents and any other 
information, reports, or documents the Directorate may 
request. 
 
Article (4) 
 
All private institutions are required to appoint a certified 
account auditor, one that is qualified and experienced to 
review the accounts if the revenues and expenditures exceed 
BD 10,000 annually. 
 
Article (5) 
 
Concerned directorate is required to inspect the financial 
activities of private institutions to insure their compliance 
with the law and statute and to thereafter forward a report 
to the Minister within 15 days from the day the inspection is 
conducted.  Every institution chairman or board of trustees, 
are required to provide any information, reports, or 
documents requested by the Ministers' delegates pertaining to 
the institutions' activities. 
 
Article (6) 
 
Collecting contributions from any person inside or outside 
the country's territory in any way before obtaining 
authorization from the Ministry is prohibited.  Private 
institutions are not permitted to collect money inside 
worship homes, Matams (Shia, religious center), or any 
religious institutions or other party before presenting the 
people in charge of these institutions an exact copy of the 
mentioned authorization. 
 
Article (7) 
 
Private institutions are not permitted to pay or to donate an 
amount exceeding BD 1,000 (USD 2650) to any person, unless 
through a monetary establishment. 
 
Article (8) 
 
Private institutions are prohibited from transferring any 
amounts to persons outside the country without permission 
from the Ministry, excluding amounts pertaining to the cost 
of books, publications, scientific and technical journals. 
For such authorization to be granted, the beneficiaries must 
be legitimate, and if they are juristic personalities, they 
must be established and licensed by their country of origin. 
Institutions, which seek to transfer amounts outside the 
country, must provide the monetary establishment, which will 
expedite the transfer, verification that the mentioned 
authorization specified with amounts and the name of the 
recipient has been granted. 
 
Article (9) 
 
In regards to licensing for private institutions' collection 
of money, the laws instituted regarding the licensing system 
for social and cultural societies and clubs subject to the 
supervision of the Ministry of Labor and Social Affairs are 
applicable in this regard. 
 
Article (10) 
 
Decree to be issued in the official gazette and become 
effective on the day of its publication. 
Minister of Labor and Social Affairs 
Dr, Majeed bin Mohsin Al Alawi 
 
Thu al Hijja 19, 1424 
February 10, 2004 
End text 
 
4. (C) COMMENT:  Almost two years to the day from the Finance 
Minister's announcement of this initiative to former Treasury 
Secretary O'Neal, the Labor Ministry finally promulgated 
 
SIPDIS 
financial regulations that should constrain the ability of 
terrorists to move money through Bahrain.  Notably, the GOB 
found a way to issue the regulations without submitting them 
to the Islamist-dominated House of Representatives. 
Interestingly, an earlier draft of the regulations, which we 
obtained from a MOLSA source contained administrative 
penalties, including revocation of license, for breaking the 
regulations.  The lack of a penalty clause clearly weakens 
the regulations.  Post will seek GOB expanation for its 
deletion.  END COMMENT. 
FORD