US embassy cable - 04ABUDHABI3275

S E C R E T SECTION 01 OF 03 ABU DHABI 003275 
 
SIPDIS 
 
NOFORN 
 
STATE FOR NEA/ARP, S/CT, INL/ENT, EB/ESC 
STATE PASS FEDERAL RESERVE 
TREASURY FOR ZARATE, GLASER, AND MURDEN 
 
E.O. 12958: DECL:9/17/14 
TAGS: EFIN, ETTC, PTER, ECON, TC 
SUBJECT:  TREASURY A/S ZARATE MEETS CENTRAL BANK GOVERNOR 
 
Classified by Ambassador Michele Sison for reasons 1.5 (b 
&d). 
 
1. (S/NF) Summary: Treasury Assistant Secretary Juan 
Zarate, accompanied by Embassy Bahrain OFAC Attache and 
Embassy Abu Dhabi EconChief, met with UAE Central Bank 
Governor Sultan Nasser Al-Suwaidi on September 16.  The 
Governor noted that the Central Bank continued to work with 
the Emirati security services to freeze accounts.  A/S 
Zarate raised USG concerns about Al-Qaida financier Salah 
Salim Al-Shamsi and suggested that the USG and the UAEG 
consider jointly submitting his name to the UN.  Al-Suwaidi 
asked for more information, which A/S Zarate promised to 
provide.  The UAE has registered 119 Hawaladars (informal 
money remittance dealers) and is processing a further 21 
applications, but is not yet prepared to start penalizing 
Hawaladars for non-compliance.  The Central Bank is working 
on gaining control over cash couriers and will be hosting a 
training session in December, to which it would like to 
invite a speaker from U.S. Customs.  Al-Suwaidi also asked 
for U.S. support for a follow-on conference for Arab 
Financial Intelligence Units (FIUs) and for a U.S. Treasury 
speaker for a November 29 conference on the U.S. Patriot 
Act.  He said that the UAE would participate in the 
November meeting of the Middle East North Africa Financial 
Action Task Force (MENA FATF) body, being hosted in 
Bahrain.  A/S Zarate discussed two Iraqi front companies: 
Al-Wasel and Babel and Blotto International, and asked the 
Governor for an update.  Al-Suwaidi said that they had 
frozen the assets of Al-Wasel and Babel but had not yet 
acted on Blotto.  He assured A/S Zarate that the UAE 
circulates and updates any list coming from the UN. End 
Summary. 
 
Counter-Terrorist Financing 
--------------------------- 
 
2. (C) A/S Zarate asked Al-Suwaidi whether he believed that 
the new UAE anti-terrorism law helped the Central Bank 
target and freeze the assets of suspected terrorists.  Al- 
Suwaidi replied that the law indeed had, in many ways 
codified the Central Bank's existing practices.  The 
Central Bank already coordinated with the UAE's security 
service (SSD) to freeze the assets of suspected terrorists. 
Al-Suwaidi added that the Central Bank would always 
interpret the new law in the most "positive," (i.e. 
permissive) fashion in order to freeze assets.  He said 
that the law was important because it clearly gave the 
Central Bank legal cover for actions that it would take 
anyway.  The law also specifically added language referring 
to implementing UNSCRs on terrorist financing, which 
addressed the concerns of the "legal system" about the need 
to investigate and find evidence in response to UNSC 
designations. 
 
3. (S/NF) A/S Zarate asked whether Al-Suwaidi could give a 
sense of how well the law was working in practice and how 
many assets had been frozen in response to terrorist 
financing concerns.  Al-Suwaidi replied that the Central 
Bank cooperated with the SSD on terrorist financing cases 
and that SSD was not always comfortable sharing details. He 
stated that SSD referred cases to the Central Bank for 
asset freezing, but didn't provide details on specific 
concerns.  Al-Suwaidi said that the Central Bank froze 
assets in response to SSD's instructions, but that he 
couldn't say how many of these cases were terrorist finance 
related and how many were related to other concerns.  Al- 
Suwaidi added that he had seen about the same number of 
cases referred by SSD this year as last year, noting that 
the Central Bank would issue freeze orders, but didn't 
always find money.  Al-Suwaidi noted that the UAE had 
frozen between 14 and 18 accounts in response to UNSCRs, 
and that it continued to respond to UNSCR designations by 
circulating the information to all financial institutions 
and instructing them to freeze any related assets.  He 
noted, however, that most of the recent designations didn't 
have any relationship to the UAE.  (Note: A/S Zarate met 
later in the day with both Abu Dhabi and Dubai.) 
 
4. (S/NF) A/S Zarate then said that he needed to make the 
Governor aware of a case related Salah Salim Al-Shamsi.  He 
explained that the U.S. had very specific concerns about 
this individual's activities in regards to transferring 
funds to Al-Qaida and Iraqi Jihadists, and that we were 
concerned about Al-Shamsi's network within the UAE.  A/S 
Zarate suggested that  t a certain point  e might want 
to think about jointly submitting this individual's name to 
the UN.  The Governor asked for more information, stating 
that the UAEG would need to investigate to be sure that a 
case was there to justify a freeze.  A/S Zarate promised to 
send a paper to share. 
 
5. (C) A/S Zarate provided Al-Suwaidi with an update on the 
USG's most recent Patriot Act actions, whereby the 
Secretary of the Treasury can designate foreign entities as 
 
SIPDIS 
primary money laundering concerns.  He mentioned that the 
USG had designated five foreign banks, including the 
Commercial Bank of Syria.  The governor took on board A/S 
Zarate's remarks.  Governor Al-Suwaidi used this discussion 
to lead into his request to have the Treasury Department 
provide a speaker for a seminar the Central Bank will be 
hosting in November on the Patriot Act. 
 
Hawala and Cash Couriers 
------------------------ 
 
6. (C) A/S Zarate thanked the Governor for his leadership 
role in bringing educating countries about Hawala (an 
informal money transfer/remittance system).  The Governor 
said that the UAE had registered 119 dealers and was 
processing a further 21 applications.  The Central Bank was 
starting to discover Hawaladars (Hawala dealers) that had 
not yet registered, generally via suspicious transaction 
reports (STR) from banks.  When the Central Bank found an 
unregistered Hawaladar, it worked to coax them in.  Al- 
Suwaidi said that the Central Bank was not yet ready to 
start imposing penalties on unregistered Hawaladars. 
 
7. (C) Al-Suwaidi explained that it was difficult to 
estimate the actual number of Hawaladars in the UAE; most 
of them appear to be very small companies that operate 
Hawala as a side business and have a small customer base of 
around 100 people.  He added that Hawala was a business 
that served a specific community, and that he had seen it 
serving the Egyptian, Philippine, Indian, Pakistani, and 
Somali communities primarily.  Al-Suwaidi admitted that no 
Hawaladar had yet submitted an STR, but noted that the 
Central Bank goes through their books on a regular basis. 
The Central Bank had noticed that the bulk of the Hawala 
transactions consisted of small sums of money for worker 
remittances and, therefore, flagged large transfers as 
suspicious and worthy of follow-up. 
 
8. (C) A/S Zarate asked for help monitoring the Somali 
Financial Services Associations based in the UAE.  Both he 
and the Governor agreed that it was important to facilitate 
remittances to Somalia, but also important to prevent the 
flow of funds to militias and terrorists.  Al-Suwaidi 
suggested that the USG and the UAEG work together to 
promote legitimate financial channels and asked A/S Zarate 
to share information on our concerns about specific 
dealers.  Twenty of the 119 registered Hawaladars are 
Somali, so they make up a significant portion of the 
informal money remittance business. 
 
9. (C) Al-Suwaidi explained that the Central Bank was 
taking a number of steps to deal with the problem of cash 
couriers.  Its ultimate goal was to prohibit all cash 
shipments except to the Central Bank.  It was working with 
Federal Reserve Bank of New York and UK Customs with the 
objective of controlling couriers.  The UAE is already 
seeing large sums of cash coming from India and Pakistan, 
countries with currency controls and artificially fixed 
exchange rates.  Al-Suwaidi noted that people prefer 
exchanging their dollars a market rates.  He added that the 
Central Bank was seeing fewer Euros coming through, since 
they were still not as popular.  Al-Suwaidi said that the 
Central Bank would be hosting a national anti-money 
laundering conference in mid-December, which would work to 
educate UAE customs officials about cash couriers and cash 
importing and exporting.  He asked if U.S. Customs could 
provide an expert to present on this topic.  (Note: We have 
asked Embassy Abu Dhabi DHS/ICE attachi to follow-up on 
this.) 
 
Charities 
--------- 
 
10. (C) The two briefly discussed the regulation of 
charitable organizations. The UAE Ministries of Finance and 
Labor were reorganizing the charitable institutions said 
the Central Bank Governor, Al-Suwaidi said that he know 
that the Red Crescent Authority was the umbrella 
organization in Abu Dhabi, but noted that Dubai and the 
other emirates still had independent charities.  He 
suggested that A/S Zarate meet with officials for the 
Ministries of Finance and Labor on the margins of the 
October 4-5 TIFA Council Meeting in Washington. 
 
Training 
-------- 
 
11. (SBU) The Governor thanked A/S Zarate for the USG's 
support for the South Asian regional FIU training program, 
jointly hosted by FINCEN and the Central Bank.  He asked 
that FINCEN support another conference for Arab countries 
sometime this year.  Al-Suwaidi also said that the Central 
Bank was organizing a seminar on November 28 for UAE Banks 
and other Central Banks on the impact of the USA Patriot 
Act on banks in the region. He noted that the Central Bank 
had hired a U.S. law firm to present on the Patriot Act and 
asked whether Treasury would also provide a speaker.  A/S 
Zarate said that he would be happy to provide a speaker for 
the event.  The USG was engaging in outreach to explain 
exactly what the Patriot Act meant to the financial 
community. 
 
MENA FATF 
--------- 
 
12. (SBU) A/S Zarate urged the UAEG to actively participate 
in the Middle East North Africa FATF body, headquartered in 
Bahrain, and to attend the first meeting on November 29. 
The Governor stated that someone from the Central Bank 
would attend.  A/S Zarate agreed that it was critical to 
keep the MENA FATF organization technical, not political 
and to have concrete results out of the meetings.  In that 
regard, Al-Suwaidi asked for A/S Zarate's views on Iranian 
and Syrian participation in the body.  He argued that it 
would be important to try and develop a better 
understanding about what was happening in those two 
countries.  A/S Zarate noted USG concerns about Iranian 
actions such as support for terrorist entities that were 
antithetical to the goals of FATF. 
 
DIFC 
---- 
 
13. (C) In June the Dubai International Financial Center 
(DIFC) fired its top two regulators, raising international 
questions about regulatory independence in Dubai's planned 
offshore financial center and overwhelmingly negative 
coverage in the western press.  A/S Zarate asked Al-Suwaidi 
for his views on the impact of the firing on DIFC.  Al- 
Suwaidi stated that DIFC set itself back by the way it 
fired its two top regulators, but that it was appeared to 
be trying to overcome this setback.  He noted that the UK 
had contacted him to express concern over what the firings 
implied.  As an aside, Al-Suwaidi said that former top 
regulator Phillip Thorpe had called on him two days ago to 
say good-by.  At that time, Saeed Al-Hamiz, the Executive 
Director of Banking Supervision had asked hopefully "is he 
back?" 
 
14. (C) Al-Suwaidi added that the DIFC seemed to be trying 
to do things correctly now.  David King, the acting head of 
the regulatory body had visited the Central Bank a few 
weeks earlier to explore signing an MOU with the Central 
Bank, which Al-Suwaidi added would need to be presented to 
the board of governors for approval.  Regulators from the 
Dubai Financial Services Authority (the regulator authority 
for DIFC) also came to the Central Bank to discuss anti 
money laundering regulations with the Anti Money Laundering 
and Suspicious Case Unit, so it looked like they wanted to 
get everything together before opening up. 
 
15. (SBU) In response to A/S Zarate's question about other 
offshore financial centers, Al-Suwaidi explained that the 
Central Bank had fairly regular contact with Bahrain, 
Jersey, and the Isle of Man since these offshore financial 
centers did business with the UAE on a regular basis.  He 
added that the UAE probably had more regular contact with 
Jersey, since the headquarters for HSBC Middle East was 
based there. 
 
16. (U) This cable has been cleared by A/S Zarate. 
 
Sison