US embassy cable - 05BRASILIA788

C O N F I D E N T I A L SECTION 01 OF 02 BRASILIA 000788 
 
SIPDIS 
 
TREASURY FOR ZARATE 
TREASURY FOR OFAC (WERNER) 
NSC FOR BREIER, RENIGAR 
STATE FOR EB/ESC/TFS (NELSON) 
STATE FOR S/CT (KUSHNER) 
STATE FOR IO/PSC (SCHWEITZER) 
STATE FOR EB/EPPD (THOMPSON) 
 
E.O. 12958: DECL: 03/16/2024 
TAGS: KTFN, EFIN, PTER, KVPR, CVIS, PREL, BR, Terrorist Finance 
SUBJECT: TERROR FINANCE: 2005 UPDATE NUMBER 2 - BRAZIL 
RESPONSE 
 
REF: A. STATE 32688 
 
     B. 04 BRASILIA 560 
     C. BRASILIA 123 
 
Classified By: Deputy Chief of Mission Phillip Chicola, Reasons 
1.5 (b) 
 and (d). 
 
1. (U) This cable responds to ref A request for an evaluation 
of the GoB's ability to cooperate in disrupting terrorism 
financing.  The answers below are keyed to questions in ref A 
paragraph 10. 
 
Question A - Amounts Frozen and Authorities 
------------------------------------------- 
 
2. (U) We enjoy productive relationships with the responsible 
GoB technical agencies, such as the Financial Intelligence 
Unit (COAF) and the Central Bank, which enable us to quickly 
dispatch routine name checks for persons or entities on the 
UNSCR 1267 and 1373 terror finance lists.  During these 
checks, the GoB has not found, and therefore not frozen, any 
assets, accounts or property in the names of persons or 
entities on the UN terror-finance lists. 
 
3. (U) Under current Brazilian law the GoB would require a 
judicial order to freeze terrorist assets, should such be 
found.  That may change before long, as the GoB is working on 
legislation that would make terrorism finance a crime on its 
own merits, as opposed to being one of the predicate offenses 
to money laundering.  The legislation also would provide the 
GoB the authority to freeze accounts administratively, 
without recourse to judicial order. 
 
Question B - Obstacles to Deeper Cooperation 
-------------------------------------------- 
 
4. (C) If given evidence (or at least credible intelligence) 
of terror financing by Al-Qaida or its associated groups in 
Brazil, we suspect the GoB would support UN designations of 
those implicated.  Indeed, given the multilateral nature of 
the exercise, and to emphasize what the Gob would like to be 
seen as its "responsible role" in the multilateral arena, the 
GoB may insist on taking the lead in designations of such 
terror financiers, instead of merely co-sponsoring with the 
USG.  That said, the natural sluggishness of the Brazilian 
interagency system would likely be an impediment to the quick 
action the USG might seek. 
 
5. (C) The GoB does not share the level of USG concern about 
Hizballah activities.  GoB contacts note that Hizballah is a 
legitimate Lebanese political party, with parliamentary 
representation, as well as a recognized charitable 
organization.  While not dismissing U.S. concerns outright, 
they ask for evidence that remittances to Hizballah from 
Brazil go to finance terrorist acts.  This view, along with 
the absence of a UN Security Council designation of 
Hizballah, under USCRs 1267 or 1373, will remain an obstacle 
to cooperation with the GoB against that group. 
 
Question C - Openness to Training and Assistance 
--------------------------------------------- --- 
 
6. (U) The GoB has accepted USG training and technical 
assistance and remains interested in participating in 
additional programs.  FinCen conducted a November 2003 needs 
assessment of COAF, which led to the provision of computers 
and analytical software, funded from an FY02 Triborder 
supplemental.  This allocation also has been used to send 
three analysts from each of the tri-border countries' 
financial intelligence units for a week's training/exchange 
at FinCen. 
 
7. (U) In addition, Embassy's Legal Attache facilitated the 
provision of a NAS-funded anti-money laundering course with 
an anti-terror finance component to Brazilian Federal Police 
in Recife in September 2004.  Both DOJ's OPDAT and an IRS 
team have conducted needs assessments within the last year 
for potential anti-money laundering training; those training 
programs have not yet been implemented. 
 
Question D - Risk Level 
----------------------- 
 
8. (U) The GoB has an adequate legal framework for dealing 
with terrorism finance.  Its institutions also are relatively 
strong, leading the IDB to conclude in a recent study that 
the incidence of money laundering in Brazil's banking system 
was lower than average in Latin America (ref C).  We believe 
these favorable factors extend to Brazil's ability to 
minimize the exploitation of its banking sector by terrorist 
financiers. 
 
9. (U) The GoB has a fair capacity to track transactions that 
take place through the formal banking system.  COAF has 
access to databases of suspicious transactions, currency 
transaction reports (CTRs) on transactions over Reals 10,000 
(about $3,700) and has access to government tax data, among 
other databases.  The remnants of previous exchange controls, 
which require most foreign exchange purchases to be licensed 
(albeit automatically) by the Central Bank, enhance the GoB's 
ability to track international transactions.  The GoB relies 
on banks and other financial institutions to comply with 
know-your-client rules to ensure reporting of assets 
belonging to anyone or the UN terror finance lists.  Banks 
also are required to report suspicious transactions.  Within 
the year, however, the Central Bank expects to complete a 
computerized registry of basic identifying information on 
current accounts in the country.  While the aim of the 
registry is to tackle money-laundering, the registry will 
allow real-time searches for accounts belonging to any entity 
on the UN lists. 
 
10. (SBU) Balancing the relative strength of safeguards in 
the formal banking system are several holes that remain in 
the GoB's ability to stop potential remittances to terror 
groups.  For example, while many large Brazilian (and 
foreign) banks have active compliance officers that enforce 
know-your-customer rules and report suspicious transactions, 
we have less confidence that smaller and regional banks 
actively do so.  As is the case elsewhere in the world, the 
GoB has no ability to track transactions of terrorists or 
their cutouts whose names do not appear on the UN lists. 
Finally, the GoB is incapable of tracking remittances 
overseas through informal networks, be they through local 
money-changers (known as "Doleiros") or Hawalla networks. 
 
11. (C) Given the size of the Muslim/Middle-Eastern origin 
population in Brazil (9 to 12 million people of Lebanese and 
Syrian descent), its tradition of remitting money home to 
support family and charitable organizations and the balance 
of strengths and weaknesses of anti-money laundering controls 
in the Brazilian banking system, we would argue Brazil is at 
high risk for raising or banking money for terrorists at the 
tens of thousands of dollars threshold.  In Brazil's case, we 
believe it useful to distinguish between the risks associated 
with different terror groups:  at present, the risk of fund 
raising for Hizbollah and Hamas is high, while the risk of 
fund-raising for Al-Qaida and its network is likely low. 
 
DANILOVICH