US embassy cable - 05MANAMA282

UNCLAS SECTION 01 OF 02 MANAMA 000282 
 
SIPDIS 
 
STATE FOR S/CT, EB/ESC/TFS, INL/C/CP, H, NEA/ARPI 
TREASURY FOR ZARATE AND GLASER 
NSC FOR PHEFFERNAN 
 
E.O. 12958: N/A 
TAGS: PTER, KTFN, EFIN, ETTC, BA 
SUBJECT: STAFFDEL FISCHER DISCUSSES ANTI-MONEY 
LAUNDERING/COMBATTING TERRORISM FINANCING WITH BAHRAINI 
OFFICIALS 
 
 1.  (U) SUMMARY: Senate Banking Committee Staffdel Fischer 
met with the Bahrain Minister of Finance, the Ministry of the 
Interior Anti-Money Laundering Unit, the Bahrain Monetary 
Agency Compliance Unit and the Director of Community 
Development at the Ministry of Social Affairs to discuss the 
GOB,s efforts to combat money laundering and terrorism 
financing on February 21.  According to GOB officials there 
are two laws being considered by a cabinet sub-committee to 
implement the UN conventions on terrorism: one to define 
terrorism and the other to criminalize its financing.  The 
Ministry of Finance is trying to fast track these laws to get 
their passage by the parliament in the next month. The 
Minister of Finance,s legal advisor stated that there is no 
requirement of dual criminality to prosecute a money 
laundering case in Bahrain and that under Bahraini law 
banking information can be shared without formal agreements. 
The Compliance Unit complained of incomplete information on 
wire transfers from banks in other countries, including the 
US.  The Ministry of Social Affairs representative indicated 
that while they audited charities, oversight of monies 
leaving Bahrain through Islamic charities was the 
responsibility of the BMA.  End Summary. 
 
2.    (U) On February 20-21 a staff delegation led by Dr. 
Walter Fischer, Senior Professional Staff Member for Chairman 
Shelby, on the Committee on Banking, Housing and Urban 
Affairs, visited Bahrain as part of a regional tour to learn 
more about the Kingdoms efforts to combat money laundering 
and terrorism financing (AML/CFT). Committee staffers Steve 
Kroll and John O,Hara also accompanied Dr. Fischer.  The 
delegation met with the Minister of Finance, the Assistant 
Under Secretary for Economic Affairs, the Ministry of the 
Interior Anti-Money Laundering Unit (AMLU), the Bahrain 
Monetary Agency Compliance Unit and the Director of Local 
Community Development at the Ministry of Social Affairs. 
 
 
Minister Of Finance 
 
3.    (U) Finance Minister Sheikh Ahmed Bin Mohammed 
Al-Khalifa explained the history of AML/CFT efforts in 
Bahrain and noted that there are two laws before a cabinet 
subcommittee, one to define terrorism and the other to 
affirmatively outlaw terrorism financing.  The government is 
pushing to have these laws passed by the parliament before 
the Financial Sector Assessment Program (FSAP) conducted by 
the IMF in April.  The Ministry of Finance,s Legal Advisor 
Stuart Horler explained that the laws being drafted were 
necessary to fully implement the two UN Conventions 
(Suppression of Terrorism Financing and Terrorist Bombings) 
that Bahrain signed and ratified in 2004. 
 
4.    (U) In response to Dr. Fischer,s question about any 
impediments on AML/CFT, Sheikh Ahmed said that Bahrain was 
historically a cash economy and cross border movement of cash 
were hard to control.  However, since Bahrain is such a small 
country with such a well-regulated close knit banking 
community, any large scale money laundering would be 
identified quickly. 
 
Anti-Money Laundering Unit 
 
6.    (U) Colonel Adel Al Fadhel, head of the MOI Anti-Money 
Laundering Unit (AMLU), gave a presentation on Bahrain,s 
money laundering laws and regulations.  The AMLU, Bahrain,s 
financial intelligence unit (FIU), is an active member of the 
Egmont group and works closely with FinCEN in the United 
States.  Col. Al Fadhel explained that Bahrain does not 
require "dual" criminality with other jurisdictions to 
prosecute money laundering crimes in Bahrain (Note: For 
example, there are no taxes in Bahrain so tax evasion is not 
a crime - however if a US citizen were to transfer money to 
Bahrain to evade taxes, the individual could be prosecuted 
for money laundering in Bahrain despite the underlying crime 
not being a crime in Bahrain. Endnote.)  Additionally, under 
the 2001 Anti-Money Laundering law, Bahrain can share banking 
information with another country without a memorandum of 
understanding (MOU) or a mutual legal assistance treaty 
(MLAT). 
 
7.    (U) The delegation asked what steps Bahrain could take, 
short of closing a bank down, to punish violators of AML/CFT 
laws, and whether they had a "cease and desist" order.  Mr. 
Horler, also the legal advisor for the AMLU, explained that 
Bahrain did not have a "cease and desist" order but that a 
threat of closure from the BMA was usually sufficient to 
deter the financial institutions from illicit behavior. 
 
BMA Compliance Unit 
 
8.    (U) The Superintendent of the Compliance Unit, Khalil 
Swailim of the BMA told the delegation that their unit 
performs audits of financial institutions to ensure that they 
have proper AML/CFT checks in place.  Bushra Al Haddad, also 
of the Compliance Unit, expressed concern that banks in 
Bahrain were not receiving complete information on transfers 
through correspondent accounts and were forced to turn away 
transactions.  The BMA requires that all wire transactions to 
and from Bahrain contain the full originator information 
including name, account number and address.  If this 
information is not included the transaction will be sent 
back.  Often banks from other countries, including the US, 
route the money through their branches in other jurisdictions 
with lower standards instead of completing the required 
information. 
 
Ministry of Social Affairs 
 
9.    (U) At the Ministry of Social Affairs (MSA), Badriya Al 
Jeeb, the Director of Local Community Development stated that 
there are over 386 organizations, societies and charities 
registered in Bahrain (82 of which are charity funds) (Note: 
There are currently only five persons on the MSA,s staff to 
oversee the almost 400 organizations. End note.)  She said 
that organizations could not open bank accounts without a 
certificate from the MSA and that if their income/assets 
exceeded 10,000 Bahraini Dinars (BD) (approximately 26,500 
dollars), then they must hire an external auditor to review 
their financial statements.  Social organizations are 
required to give annual reports to the Ministry and the 
Ministry has the authority to carry out inspections of the 
non-profit organizations. 
 
10.   (U) The staff delegation inquired how the Ministry 
approached charities that might raise money for organizations 
such as Hamas or Hizballah.  Al Jeeb replied that there was 
limited ability to raise funds in Bahrain and the majority of 
the money raised by charitable organizations is spent 
locally.  She explained that most large transfers out of 
Bahrain go through the Bahrain Red Crescent but that money 
moving through Islamic charities to Bosnia, Palestine or 
elsewhere was not monitored by the MSA but rather by the BMA. 
 The MSA had no reports on how much might be leaving the 
country through some of the Islamic organizations.  (Note: 
According to the Al Wasat newspaper on February 13, 2005, a 
large charity in Bahrain, Al Eslah Society, reported that 
they sent 273,863 BD (approximately $725,000) to Palestine in 
2004 for healthcare, education projects, development 
projects, family support and for individual orphans. End 
Note) 
 
 
MONROE