US embassy cable - 04SANAA3155

UNCLAS SECTION 01 OF 02 SANAA 003155 
 
SIPDIS 
 
STATE FOR INL AND NEA/ARP ROBERTS 
JUSTICE FOR OIA AND AFMLS 
TREASURY FOR FINCEN 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, SNAR, PTER, KSEP, KCRM, YM, TERFIN, ECON/COM 
SUBJECT: YEMEN 2004-2005 INSCR REPORT 
 
REF: SECSTATE 254401 
 
1. (SBU) SANAA'S UPDATE FOR THE 2004-2005 INTERNATIONAL NARCOTICS 
CONTROL STRATEGY REPORT (INSCR) IS AT PARA TWO.  COMMENT: SANAA 
NOTES NO SIGNIFICANT PROGRESS IN IMPLEMENTING THE 2003 MONEY 
LAUNDERING LAW, AND HAS TAKEN NO ACTION ON ENFORCING THE UNSCR 
1267 SANCTIONS ON ABDUL MAJID ZINDANI. END COMMENT. 
 
2. (U) The Yemeni financial system is not yet well developed. 
Thus, the extent of money laundering is not known. The prevalence 
of hawala makes Yemen vulnerable to money laundering, although 
they are technically subject to limited monitoring by the Central 
Bank of Yemen (CBY). The banking sector is relatively small with 
17 commercial banks, including four Islamic banks. The Central 
Bank of Yemen (CBY) supervises the country's banks. Local banks 
account for approximately 62 percent of the total banking 
activities, while foreign banks cover the other 38 percent. 
Yemen is a founding member of the Middle East and North African 
Financial Action Task Force MENA_FATF established this year in 
Bahrain. 
Yemen's parliament passed a comprehensive anti-money laundering 
legislation in April 2003. The 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 of imprisonment. There is no specific 
legislation relating to counterterrorist financing in Yemen. But 
terrorism is covered in various pieces of legislation that treat 
terrorism and its financing as serious crimes.  As of 2004 no 
significant changes or additions have been made to the anti-money 
laundering legislation and no persons have been prosecuted for 
money laundering.  The Anti-money Laundering Committee prepared 
the draft executive bylaws, which have been forwarded to the 
cabinet for approval. - The committee prepared an anti-money 
laundering procedural directory, which will be distributed to all 
public and private financial institutions. The directory explains 
how to monitor and control laundering cases. The April 2003 law 
requires banks, financial institutions, and precious commodity 
dealers to verify the identity of persons and entities that 
desire 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, and is authorized to issue regulations 
and guidelines and provide training workshops related to 
combating money laundering efforts. 
The CBY conducted several training workshops on the new 
legislation in 2003 and 2004.  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 non-Yemeni criminals in accordance with 
international treaties or bilateral agreements. 
Prior to passage of the anti-money laundering law, 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 accounts. 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 2003, DHS/ICE agents in New York conducted an investigation of 
a company suspected to be involved in the smuggling and 
distribution of pseudoephedrine. The investigation disclosed 
employees at the business were sending a large number of 
negotiable checks to Sanaa, Yemen. Analysis of the documents 
seized as a result of search warrants and bank records revealed 
that the suspects had also wire transferred money to an 
individual with suspected ties to the al-Qaida organization. ICE 
agents also initiated an investigation pursuant to an outbound 
seizure of suspected hawala generated funds seized en-route to 
Yemen, concealed in jars of honey. The investigation disclosed 
that the courier, and the reputed owner/broker of the funds, was 
actively involved in a hawala network. 
In response to UNSCR 1267/1390/1452 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. In September 2003, the CBY issued 
Circular No. 75304 containing a consolidated list of all persons 
and entities belonging to al-Qaida (182) and the Taliban (153). 
The ROYG did not issue the circular again in 2004. 
A law was passed in 2001 governing charitable organizations. This 
law entrusted the Ministry of Pensions and Social Affairs with 
overseeing their activities. The law also imposes penalties of 
fines and/or imprisonment on any society or its members convicted 
of carrying out activities or spending funds for other than the 
stated purpose for which the society in question 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. Yemen is a party to the Arab Convention for the 
Suppression of Terrorism. 
Yemen is making progress in enforcing its domestic anti-money 
laundering program While passage of the 2003 law was a first 
step, development of the FIU and international cooperation with 
criminal investigations are still in the development stage. Since 
the February 2004 designation of Sheikh Abdul Majid Zindani by 
the United Nations under UNSCR resolution 1267 the ROYG has made 
no known attempt to enforce the sanctions.  The CBY is still 
organizing its enforcement mechanism. Its effectiveness will 
demonstrate the authorities' commitment to ending money 
laundering. Yemen should also examine the prevalence of 
alternative remittance systems such as hawala and trade-based 
money laundering. As a next step, Yemen should also enact 
specific legislation with respect to terrorist financing and 
forfeiture of the assets of those suspected of terrorism. Yemen 
should become a party to the UN International Convention for the 
Suppression of the Financing of Terrorism. 
 
End Text. 
 
Krajeski