US embassy cable - 05AMMAN1356

S E C R E T SECTION 01 OF 04 AMMAN 001356 
 
SIPDIS 
 
NOFORN 
 
E.O. 12958: DECL: 02/16/2015 
TAGS: ECON, EFIN, PREL, ETTC, KTFN, PINR, JO, IZ 
SUBJECT: U/S LEVEY BILATS ADDRESS ARAB BANK AND AML LAW 
 
REF: 02 AMMAN 6852 
 
Classified By: Charge d'Affaires David Hale for reasons 1.4 (b) and (d) 
 
1. (C) SUMMARY: In bilateral meetings held in Amman February 
16, a multi-agency delegation led by Under Secretary of 
Treasury for the Office of Terrorism and Financial 
Intelligence Stuart Levey heard GOJ and Arab Bank concerns 
about the impending regulatory action against Arab Bank.  In 
response Levey acknowledged the important role played by Arab 
bank in Jordan and the region, but communicated that the Bank 
had real systemic problems - at least in its Ney York City 
branch - that required resolution.  While unable to intervene 
directly in the pending action, Levey underscored that Arab 
Bank's following through on its stated intent to reform its 
worldwide anti-money laundering compliance would be the best 
course for the Bank in the long term and also for USG-GOJ 
relations.  In his meetings with GOJ officials, he also noted 
the importance of swift passage of the pending draft 
anti-money laundering legislation.  END SUMMARY. 
 
2. (U) U/S Levey's delegation, which also included Office of 
Terrorism and Financial Crime Director Daniel Glaser and 
Financial Crimes Enforcement Network (FinCEN) Director 
William Fox, met on February 16 with Central Bank of Jordan 
(CBJ) Governor Umayya Touqan, Finance Minister Mohammed Abu 
Hammour, and Minister of Royal Court Samir Rifai in 
successive meetings.  He also met on that day with Arab Bank 
CEO Abdulhameed Shoman, Arab Bank Director of Banking Shukri 
Bishara, and several other top officials from the bank's 
operations, compliance, and legal departments.  On February 
17, the delegation met with Minister of Justice Salah 
al-Bashir, Foreign Minister Hani al-Mulqi, and Prime Minister 
Faisal al-Fayez.  Charge joined all meetings. 
 
---------------------- 
CENTRAL BANK OF JORDAN 
---------------------- 
 
3. (S) Governor Touqan, accompanied by CBJ Deputy Governors 
Mohammed Said Shahin and Faris Sharaf, laid out the current 
CBJ position on the Arab Bank case.  According to the CBJ, 
the OCC had notified it in late January of problems at the 
New York City branch of the Arab Bank.  While the CBJ 
appreciated the OCC's courtesy in informing the CBJ of these 
problems; this was the first that the CBJ had heard of a 
problem after nine years of receiving "top marks" from the 
OCC.  Touqan said that the apparent lack of due process was 
particularly disturbing to the CBJ.  Deputy Governor Sharaf 
would travel to DC, he said, with senior Arab Bank staff to 
discuss the case in more detail and to find out what the 
particular alleged problems had been in order to ensure that 
such problems were not being duplicated elsewhere in the Arab 
Bank's network, over which the CBJ has supervisory authority. 
 The CBJ officials once again noted that the bank is the base 
of the largest financial network in the Arab world, as well 
as being by far the most important bank in Jordan, and said 
that as a healthy bank, Arab Bank would be an irreplaceable 
partner in anti-money laundering and counter-terrorist 
finance (AML/CFT) cooperation - after all, no one knew the 
clientele better.  Nonetheless, if the OCC felt the need to 
take any regulatory action, the CBJ would support it as long 
as Arab Bank received due process. 
 
4. (S/NF) Levey responded by praising Jordan for its 
counter-terrorist cooperation with the U.S., but noted his 
concern over what seemed to be "significant systemic 
problems" in the AML/CFT procedures in place in Arab Bank 
branches.  He drew special attention to the West Bank Arab 
Bank branches, whose director had previously admitted to the 
delegation that none of the branches for which he was 
responsible had ever filed a suspicious activity report on a 
transaction.  Touqan responded by noting the obstacles to the 
filing of such reports - the lack of any regulators under the 
Palestinian Authority and the difficulties for the CBJ 
regulators to gain entrance to the West Bank since the 
beginning of the intifada.  Touqan also complained of 
unhelpful behavior on the part of the Palestinian Authority - 
Palestinian Monetary Authority Governor Amin Haddad, he 
insinuated, had not been fully forthcoming when he had 
earlier told the delegation that the CBJ regulators were free 
to inspect West Bank Arab Bank branches.  Levey, Fox, and 
Glaser reiterated that Arab Bank was not being singled out, 
drawing attention to the recent Riggs Bank and AmSouth cases. 
 Touqan revealed that Arab Bank had earlier in the week 
requested a statement of support from the CBJ, but that the 
CBJ had refused to give such a statement (significant, given 
the long history of CBJ statements of support subsequent to 
each of the three civil suits that have been filed against 
the bank over the past year).  He also revealed that Arab 
Bank was considering firing the manager of its New York City 
branch, a step which the CBJ had advised the bank's 
management not to take at this time. 
 
5. (C) On other areas of regulatory activity, Touqan noted 
that the passing of the draft AML law was at this point out 
the CBJ's hands, but said that the CBJ is moving forward even 
in the absence of an AML law to improve its AML/CFT 
infrastructure. Sharaf stated that the FIU in Jordan, which 
under the AML law would have expansive powers, would be under 
the authority of the CBJ and that the CBJ was already 
prospectively looking for sponsorship from Lebanon or Cyprus 
for membership in the Egmont Group for its FIU.  In the 
absence of the bill, a proto-FIU had already been set up. 
Fox said that FinCEN is ready to offer support, and Sharaf 
responded that he would take FinCEN up on this offer.  Touqan 
addressed concerns about cash flowing in from Iraq, saying 
that CBJ guidelines required that any bank receiving deposits 
of over $10,000 from previously unknown customers was 
required to report such deposits and that the CBJ had just 
finished drafting new guidelines on requiring reporting of 
cash over $10,000 when it crossed a Jordanian border, though 
the Jordan Tourism Board would present the guidelines in 
order not to raise fears that the measure was a sign of 
currency weakness. 
 
--------- 
ARAB BANK 
--------- 
 
6. (S/NF) Shoman and Bishara, in their meetings with U/S 
Levey, forcefully expressed arguments by now familiar to 
post.  Bishara noted once again the clean record that Arab 
Bank's New York City branch had enjoyed prior to January, 
noting that had the OCC given Arab Bank's head office any 
notice at all of the problems with the branch's AML/CFT 
compliance, "we would have descended upon (the branch) with 
the wrath of God."  He added that he felt that the tone of 
the OCC's "overreaction" might be driven in part by what he 
felt was its previous failure to adequately supervise the 
bank.  Bishara complained that Arab Bank was not being given 
adequate time to respond to the OCC's charges and had been 
coerced into signing an interim consent agreement "that 
paralyzes our branches."  He reiterated the importance of the 
Arab Bank to Jordan's economy and society, adding that the 
GOJ, through its quasi-governmental entities such as the 
Social Security Corporation, had a large (20%) financial 
stake in the Arab Bank as well.  Fox noted that for its part, 
FinCEN was aware that Arab Bank might have "mitigating or 
negating information" to answer some of the charges against 
its NYC branch, and that FinCEN is genuinely interested in 
evaluating the case on its merits and had by no means 
prejudged the outcome of its enforcement action. Bishara 
replied that Arab Bank did not expect favorable treatment; 
only due process.  However, "we have not been treated fairly 
by the OCC." 
 
7. (S/NF) Bishara said, however, that the OCC's action had 
been a "wake-up call" for the Arab Bank, and that it was 
planning to revamp its AML/CFT systems and controls 
accordingly.  Bishara also felt that Arab Bank was trying to 
make changes at the NYC branch that would make a closure 
unnecessary.  According to Bishara, the Arab Bank had closed 
its wire transfer room and was doing its best to outsource 
the wiring of money to another bank.  The Arab Bank would 
wind up the individual accounts at the NYC branch and 
henceforth only handle corporate finance and credit, an area 
in which Arab Bank would be a perhaps irreplaceable asset to 
blue-chip U.S. companies wishing to do business in the Middle 
East.  Though the shift in the NYC's business model would 
eliminate the vast majority of the AML/CFT risk, according to 
Bishara, Arab Bank would still invest in AML/CFT expertise to 
assure that its branch followed all current best practices. 
Arab Bank was, however, facing obstacles in moving forward 
constructively to address its problems.  It had come to an 
agreement with the Bank of New York (BONY), but now that 
bank, frightened by press leaks on the OCC's action against 
Arab Bank, was threatening to cut off the Arab Bank unless 
they heard from either Treasury, the OCC or the Federal 
Reserve that one of these bodies had no objection to BONY's 
continuing to handle Arab Bank's money-wiring operations. 
Bishara asked specifically that Treasury send this signal to 
BONY, and Levey declined to give any assurances. 
 
------------------- 
MINISTRY OF FINANCE 
------------------- 
 
8. (C) Finance Minister Abu Hammour told the delegation that 
the GOJ is moving against terrorism through a variety of 
financial means.  He primarily mentioned the AML draft 
legislation, which he said had been debated in the previous 
day's Cabinet meeting and would be approved in the following 
week's meeting.  (Abu Hammour later reiterated this statement 
at a joint press conference that he held with Levey following 
his meeting.)  Abu Hammour also noted other ways in which the 
GOJ was moving against terrorism through its financial 
sector.  He stated that he had used part of last year's 
increase in the general sales tax rate to provide free health 
insurance for the poor, alluding to the GOJ's fear that had 
they not done so, the Muslim Brotherhood's charity network 
would have filled the void.  He also noted that at the same 
time that the GOJ had put stricter restrictions on the 
content of mosque sermons, it had doubled the salaries of 
imams to give them an incentive to comply.  It was by 
measures like these, he said, that the "root causes of 
terrorism" could be fought.  Levey agreed that such measures 
were useful against terrorism and good things even if 
terrorism was not considered; however, the AML law was a 
critical keystone both to US-Jordanian bilateral law 
enforcement cooperation and to King Abdullah's vision of 
Jordan as a regional center for trade and finance, and the 
law should be passed as soon as possible. 
 
 
----------- 
ROYAL COURT 
----------- 
 
9. (C) Royal Court Minister Rifai reiterated the concerns 
already expressed by other GOJ officials about the action 
against Arab Bank, including its importance to the Jordanian 
economy.  Rifai expressed serious concern about possible 
repercussions to the Bank from the negative publicity 
emerging from an OCC action and the private lawsuits.  Levey 
acknowledged that negative public attention was likely, but 
affirmed that he would "stick to the facts" in his handling 
and public discussion of this case and would not gratuitously 
"fan the flames."  Rifai replied that the GOJ understood the 
need to take corrective action if there were real violations. 
 Levey clarified, however, that he had no influence over 
either the OCC or the private plaintiffs in the civil suits 
against the Arab Bank, and that the GOJ and the Arab 
bankshould brace themselves for a lot of negative publicity 
regarding Arab Bank over the next several months.  Levey 
again stated that the passage of the AML draft law would be a 
strong step in the right direction for Jordan. 
 
------------------- 
MINISTRY OF JUSTICE 
------------------- 
 
10. (C) Justice Minister Bashir told the delegation that the 
AML bill could be sent to Parliament next week or the 
following week, but that given the long time required for the 
bill to undergo all required readings in both the upper and 
lower houses, he was not optimistic that it could be fully 
passed before the end of the session. Levey stressed the 
importance of the law, a "missing piece" in Jordan's 
otherwise modernizing legal and financial systems.  Bashir 
reiterated the GOJ's solid commitment to the law's passage. 
He noted, however, that in his previous position (as Minister 
of Industry and Trade), he had opposed the AML law, and that 
he still had concerns about the Ministry of Justice's ability 
to enforce it.  Both Fox and Charge assured Bashir that 
FinCEN and USAID (respectively) stood ready to offer any 
technical assistance that the Ministry might require in 
implementing the law.  Bashir thanked them for this 
assurance, but said that any such assistance should come from 
new money - he didn't want his ministry's current aid budget 
diverted to AML/CFT assistance.  Bashir also closely 
questioned the delegation on the USG experience with its AML 
laws, particularly flagging his concerns that other 
countries' governments might use the law to capture tax 
evaders, that the AML procedures might generally slow down 
the flow of commerce, and that the inherently political 
nature of much money laundering and terrorist finance would 
draw the Ministry of Justice, charged with enforcing the law, 
into political battles.  Glaser noted that other Middle 
Eastern countries had had similar concerns prior to passing 
their AML laws, but that these had proved to be unfounded; he 
suggested that Bashir talk to his Egyptian counterpart about 
Egypt's experience.  The delegation also implied that in 
terms of AML legal infrastructure, Jordan was superior only 
to Syria among Middle Eastern countries. 
 
---------------- 
FOREIGN MINISTRY 
---------------- 
 
11. (C) Levey congratulated Foreign Minister Mulqi on the 
positive messages that he had previously received on AML/CFT 
cooperation from other GOJ ministers and reiterated the 
importance of passage of the AML draft law.  Mulqi replied 
that the Cabinet would approve the law prior to King 
Abdullah's visit to the United States.  He cautioned, 
however, that appearing to "shove the bill down Parliament's 
throat" would backfire.  He proposed instead that the 
government submit the bill quietly and then propose it as a 
temporary law if Parliament did not pass it while it was in 
session.  Hale thanked Mulqi for the Foreign Ministry's 
leadership in putting together an interministerial committee 
to facilitate judicial requests. 
 
12. (C/NF) Mulqi also expressed his fears about the political 
repercussions of an OCC action against the Arab Bank, 
singling out two primary fears.  First, such a step would at 
very least greatly increase the cost of sending remittances 
to the West Bank, increasing the discontent of people living 
primarily off of remittances at a critical time in the peace 
process.  Second, the death of Hariri had further 
destabilized the bank's internal situation, leaving the 
future handling of Hariri's large (13%) stake in the bank 
uncertain.  The conjunction of the two events might well 
create a crisis of confidence in the bank.  Levey reassured 
Mulqi that he was sensitive to the importance and role of the 
Bank, but reiterated that he had no control over the actions 
of the OCC. 
 
-------------- 
PRIME MINISTRY 
-------------- 
 
13. (C) Levey once again underscored to Prime Minister Fayez 
the importance and urgency of passing the draft AML law. 
Fayez agreed, reiterating the full commitment of the GOJ to 
move for passage and implementation of the law at the 
earliest possible time; if not by the end of the current 
Parliamentary session, then certainly during the 
extraordinary session.  Fayez also voiced many of the 
concerns mentioned earlier by other ministers about the 
potential effects of an OCC action against the Arab Bank, 
reiterating the GOJ's concerns about the publicity that such 
an action might be given.  Levey warned that the coming 
months would be difficult for the Arab Bank, but that with 
cooperation between the USG and GOJ - and ifthe Arab bank 
followed through with promised improvements, our relationship 
could be strengthened by the experience.  Fayez expressed his 
gratitude for the close relationship between the U.S. and 
Jordan and for all of the aid that Jordan had received from 
the USG. 
 
14. (U) This cable was cleared by Under Secretary Levey. 
HALE