US embassy cable - 05MANAMA398

S E C R E T SECTION 01 OF 02 MANAMA 000398 
 
SIPDIS 
 
NEA/ARPI, S/CT-TKUSHNER, EB/EPPD-CTHOMPSON, 
EB/ESC/TFS-DNELSON AND IO/PSC-JSCHWEITZER 
DEPARTMENT PLEASE PASS TO TREASURY-JZARATE AND OFAC-RWERNER 
 
E.O. 12958: DECL: 03/16/2015 
TAGS: CVIS, EFIN, ETTC, KVPR, PREL, PTER, BA, KTFN 
SUBJECT: TERRORISM FINANCE: 2005 UPDATE NO. 2: BAHRAIN 
 
REF: (A) STATE 32688 (B) MANAMA 282 
 
Classified By: Ambassador William T. Monroe for reasons 1.4 (B) and (D) 
. 
 
 1. (U) Per ref A request the following are Post's answers on 
Bahrain,s counter-terrorist financing capabilities: 
 
 AMOUNT OF ASSETS FROZEN, FORFEITED OR SEIZED 
--------------------------------------------- 
 
2. (U) Bahrain has frozen $10,334,641 in five separate 
accounts - two accounts of two entities under UNSCR 1267 and 
three accounts of one entity listed under E.O. 13224. No 
other actions have been taken against the designated parties. 
 
3. (S) (Note. The five accounts the GOB has frozen are: one 
account of Yasin Al Qadi, one account of Lajnat Al Daawa Al 
Islamiya (LDI), and three accounts of Al Aqsa Islamic Bank. 
End note). 
 
4. (U) The GOB currently freezes assets through a Prime 
Ministerial Edict under the authority of the Royal 
Prerogative.  Under this blanket authority the Bahrain 
Monetary Agency (BMA) issues circulars on all names listed in 
the UN 1267 list requiring financial institutions to search 
for and if found, freeze accounts indefinitely.  Names 
submitted by the US or other countries are reviewed by a 
committee and if there is sufficient evidence the BMA will 
issue a circular or contact specific banks that are likely to 
have assets.  If these assets are found, they are frozen 
indefinitely. 
 
5. (U) While the GOB uses this legal framework, their legal 
advisors fear a court challenge may result in the restriction 
of the Royal Prerogative; therefore, the GOB is pushing to 
pass two pieces of legislation: one to define terrorism and 
the other to outlaw terrorism financing.  These laws would 
codify the power to freeze assets and explicitly fulfill the 
GOB obligations under the UN Convention on the Suppression of 
the Financing of Terrorism which they ratified in 2004 (Note: 
Bahrain is the only GCC country to ratify the terrorism 
financing convention. End note).  With the passage of these 
laws, the GOB will be current with the Financial Action Task 
Force (FATF) Eight Special Recommendations on terrorism 
financing.  The BMA is in the process of preparing 
regulations for the newest FATF Special Recommendation number 
nine on Cash Couriers. 
 
IMPEDIMENTS FOR MORE COOPERATION ON CO-SPONSORING 
DESIGNATIONS 
--------------------------------------------- -------------- 
6. (U) While there are no legal impediments for cooperation 
with the GOB on co-sponsoring a designation, the GOB may 
require a higher standard of evidence to freeze jointly than 
required under US authority.  The US requires only the 
"reasonable cause to believe" to designate under Executive 
Order 13224, while the GOB may require evidence that shows 
"probable cause" to participate in a joint designation.  At a 
conference in Abu Dhabi in February between the GCC and the 
EU on terrorism financing, the BMA,s legal advisor expressed 
concern that for designations not on the UN Security Councils 
1267 Consolidated List the GOB may require a higher standard 
of proof to maintain a freeze. 
 
GOB A POSSIBLE PROVIDER OF TRAINING AND TECHNICAL ASSISTANCE 
--------------------------------------------- ------ 
 
7. (U) The GOB is willing to accept USG training and has been 
the recipient of various training efforts in the past.  The 
GOB has received assistance from the USG on establishing its 
FIU - the Anti Money Laundering Unit - which is housed in the 
Ministry of Interior and is an active member of the Egmont 
Group.  With an established FIU and Compliance Unit in the 
BMA, the priority for training should be detailed training on 
investigation of specific terrorism financing cases and 
training of compliance officers on reviewing and auditing 
bank records for suspicious transactions.  The Compliance 
Unit at the BMA has participated in training to combating the 
financing of terrorism (CFT) at the US Treasury,s Office of 
the Comptroller of the Currency (OCC).  The Compliance Unit 
is sending another officer to the OCC for CFT training in May 
2005. The GOB has also expressed a need for additional 
training on CFT issues for judges and prosecutors. 
 
8. (U) The GOB may also be considered as a partner in 
providing technical assistance to other regional countries 
(Note. The BMA has already provided training for Iraqi 
bankers at the Bahrain Institute for Banking and Finance 
(BIBF). End note.)  The GOB established the BIBF to train 
bankers and members of the finance industry and it regularly 
holds courses on money laundering.  While post has not 
queried the BIBF, the USG could consider approaching the BIBF 
to offer expert speakers on CFT as part of existing money 
laundering courses or to assist in developing CFT training 
courses utilizing the BIBF facilities and staff. 
 
9. (U) Additionally, Bahrain is the home for the new regional 
Middle East and North Africa Financial Action Task Force 
(MENA FATF).  This organization will be reviewing its 
members, compliance with anti-money laundering and combating 
the financing of terrorism regulations.  The USG could 
approach the MENA FATF as a potential venue for providing 
technical assistance for other Middle East and North African 
countries. 
BAHRAIN'S RISK RANKING 
-------------------- 
 
10. (S) Post considers Bahrain as a low-risk country for 
terrorism financiers using banking services for significant 
fundraising.  The BMA is the sole regulator of all financial 
institutions and requires suspicious transaction reporting. 
The BMA does compliance audits of financial institutions. 
While there are about 360 financial institutions in Bahrain, 
the banking community is close knit and it would be difficult 
to keep any large money laundering or terrorism finance 
schemes secret.  However, the BMA has stated that because 
Bahrain is considered a clean financial sector, it is likely 
that Bahrain may be used as a transit point for laundered 
money or terrorism funds. 
 
11. (S//NF) Post would rate Bahrain a medium risk for raising 
funds through charitable organizations.  There is some 
concern about the regulation of the Islamic charities, 
particularly regarding their transactions overseas, and 
whether the BMA or the Ministry of Social Affairs are 
monitoring these activities (Ref B).  Additionally, according 
to interviews done by the OFAC Attache, charities in Bahrain 
are raising money for many conflict areas including 
Palestine, Iraq (Fallujah) and Chechnya. 
 
 
MONROE