US embassy cable - 05MADRID1786

C O N F I D E N T I A L SECTION 01 OF 05 MADRID 001786 
 
SIPDIS 
 
STATE FOR EB/ESC/TFS (DAVE NELSON, LYNNE LAMBERT), S/CT 
(TODD KUSHNER), INL/C, EUR/PGI, EUR/ERA, IO/PSC (JOLEEN 
SCHWEITZER), EB/EPPD (CAROL THOMPSON), EUR/WE 
TREASURY PASS JUAN ZARATE, TFFC, OFAC (GLASER), FINCEN 
 
E.O. 12958: DECL: 04/10/2015 
TAGS: EFIN, ECON, ETTC, KTFN, PTER, PGOV, PREL, EU, SP, EUN, Counterterrorism 
SUBJECT: UPDATE ON TERRORISM FINANCE IN SPAIN 
 
REF: A. (A) MADRID FEBRUARY 4 2005 EMAIL TO DAVID NELSON 
     B. (B) 2004 MADRID 00995 
 
Classified By: Economic Counselor Whitney Baird for reasons 1.4 (b) and 
 (d) 
 
1. (U) Summary.  Meetings with Spanish contacts suggest that 
Spain remains serious about fighting terrorism finance.  The 
GOS conducts searches for funds from all individuals and 
organizations listed in prenotifications and notifications 
from the U.S.; no such funds have been found in Spanish 
accounts in 2004 or 2005.  The agencies involved are 
professional, dedicated to their work, and maintain active 
international contacts at the multilateral and bilateral 
level.  Spain is a leader in international fora on Terrorist 
Finance, holding seats in the G8's Counter-Terrorism Action 
Group and continuing to co-chair with the U.S. the OECD's 
Financial Action Task Force Terrorist Finance Working Group. 
Spain also provides terrorism finance technical assistance 
and training to developing countries.  In 2004, Spain's 
Financial Intelligence Unit (SEPBLAC) trained or shared views 
on asset freezing systems with terrorist finance personnel 
from 40 countries and international institutions.  We 
continue to believe Spanish authorities should make greater 
efforts to monitor charities.  We will have an opportunity to 
use a planned November seminar on terrorism finance to work 
on charity and other terrorism finance-related issues 
relevant to Spain.  End Summary. 
 
Background 
---------- 
 
2. (C) Terrorism finance contacts in Spain have told us 
anecdotally that following the money trail has been important 
in the struggle against ETA terrorists.  This may explain why 
Spanish officials do take terrorism finance issues seriously. 
 However, Islamic terrorists may not use formal financial 
mechanisms, complicating the effort to use terrorism finance 
investigations to help roll up Islamic terrorist networks. 
At this stage, we do not know what the parliamentary 
commission charged with drafting a report on the March 11 
bombings will say about the financing of that event. 
Interior Secretary of State Security Antonio Camacho told 
Econoff in connection with a May 9 dinner for visiting FBI 
Director Mueller that he believed the March 11, 2004 bombings 
were financed, in part, with drug money.  One of our SEPBLAC 
contacts has told us that, in is opinion, the bombings may 
have been financed through unregulated charities in Spain. 
He emphasized though that he had no more specific 
information.  A contact at the MFA mentioned that public 
information on the March 11 bombings indicates that funds 
were moved through informal immigrant networks that include 
small businesses and petty crime organizations. 
 
Key Terrorist Finance Contacts 
------------------------------ 
 
3. (U) The key organizations and contacts currently involved 
in terrorist financing in Spain are: 
 
Ministry of Economy 
Directorate General of the Treasury 
Role: Oversight of asset freezing process; attend OECD 
Financial Action Task Force meetings and G8 Counter-Terrorism 
Action Group meetings 
Contact: Subdirector General for Capital Movements Juan 
Antonio Aliaga Mendez 
 
Bank of Spain 
Executive Service of the Commission for the Prevention of 
Money Laundering and Financial Crimes (SEPBLAC) 
Role: SEPBLAC is Spain's Financial Intelligence Unit (FIU). 
SEPBLAC performs asset checks, and provides technical 
training for third countries. 
Contacts: Director Gabriel Panizzo, Assistant Director 
Ignacio Palicio, International Relations Officer and 
Inspector of Credit Agencies Alvaro Panilla, and Investigator 
Juan Carlos Calleja Lopez (working level contact who often 
leads asset check and bank investigation teams) 
 
Ministry of Foreign Affairs 
Directorate General of International Affairs of Terrorism, 
the United Nations and Multilateral Institutions 
Role: Represent Spain in international meetings dealing with 
terrorist financing, especially the UN 1267 committee and the 
EU clearinghouse 
Contacts: Technical Advisor for UN issues Carmen Bujan and 
Area Director for European Issues Miguel Garcia-Herraiz 
 
Ministry of Justice 
Directorate General of International Judicial Cooperation 
Role: Represent Spain at international meetings on terrorist 
designations.  Brings requests for terrorist designation to 
the Spanish Court System. 
Contact: Rosalia Serrano 
 
National Prosecutors Office 
Role: Prosecute terrorist financiers 
Contacts: Pedro Perez Enciso--Drug and Money Laundering 
Prosecutors Office 
 
Terrorist Finance Commission (Meets Informally Until New Law 
Enacted) 
Headed by the Ministry of Interior's Secretary of State for 
Security Antonio Camacho Vizcaino.  Will also include 
representatives of SEPBLAC, the MFA, the Ministry of Economy, 
the National Prosecutor's Office and law enforcement agencies. 
Role: In the future, the Commission will be the main 
coordinating body for all terrorism finance issues.  The 
Commission will have statutory authority to freeze suspected 
terrorist assets preventively and administratively. 
 
Terrorist Finance Prenotifications and Notifications 
--------------------------------------------- ------- 
 
4. (U) Econoffs deliver all terrorist finance 
prenotifications and notifications to the Ministry of Economy 
and Finance and to the Ministry of Foreign Affairs.  In the 
Ministry of Economy, we deliver notifications directly to the 
Secretary of State for Economy (Vice Minister) David Vegara 
 
SIPDIS 
who then passes them to Subdirector General of Inspection and 
Control of Capital Movements Juan Antonio Aliaga Mendez in 
the Directorate General of the Treasury.  Subdirector General 
Aliaga's unit is responsible for ensuring that searches are 
conducted and any assets found are frozen.  In the Ministry 
of Foreign Affairs, notifications are delivered to the 
Directorate General of International Terrorism, the United 
Nations and Multilateral Organizations, which works with 
terrorism finance issues in the UN and the EU Clearinghouse. 
 
5. (U) Our Ministry of Economy contacts and our MFA contacts 
pass on the notifications to SEPBLAC.  SEPBLAC notifies 
Spain's major banks individually by fax and email and 
notifies Spain's Saving Exchange Organization (similar to 
Savings and Loans), which is required to notify its members. 
Bank and saving exchange compliance officers are then 
required by law to check their accounts and report back to 
SEPBLAC if assets of the listed organization are found. 
 
6. (C) Spain's asset checking process currently requires from 
3 to 5 days to complete.  Spain begins searches for terrorist 
finance assets after receiving prenotifications.  Subdirector 
General Aliaga asked Econoff in January if Spain's process 
meets U.S. goals of confidentiality, as their system 
necessarily requires that bank compliance officers know of 
the coming designation.  After consulting with EB and 
Treasury (ref email), we informed Aliaga that the 
prenotifications serve to allow governments to prepare their 
asset search and freeze processes without actually conducting 
the check, and should not be shared with non-government 
persons.  We added that the U.S. concern is that an earlier 
asset check could notify terrorist organizations of an 
impending listing and cause them to liquidate their accounts. 
 Aliaga expressed dismay at our suggestion that they not 
begin their search at prenotification, noting that if Spain 
waits until designation, that their 3 to 5 day process would 
allow groups to pull their funds before SEPBLAC can complete 
their inquiry.  He further argued that prior to actual 
designation, Spain does not permit a freeze, but simply runs 
an asset check that requires the knowledge of the compliance 
officers.  Aliaga emphasized that under Spanish law, bank 
compliance officers must maintain secrecy regarding all 
requests in discussions with Spain's bank regulators and 
SEPBLAC.  If a pre-listing search found assets, the freeze 
would then occur the day of the actual designation.  This 
issue should become moot in June once SEPBLAC completes an 
automatic electronic messaging system to transmit search 
orders to banks.  However, until the electronic system is 
established, Spain's checks will remain slow and begin with 
prenotification. 
 
7. (U) So far this year, Embassy has delivered 16 
prenotifications and notifications to the GOS.  No assets 
related to these prenotifications and notifications have been 
located after searches in Spain to date.  However, after 
repeated engagement with SEPBLAC on their asset checking 
processes, we are confident that Spanish authorities are 
performing searches. 
Asset Freezing 
-------------- 
8. (U) If assets were discovered under UNSC 1267 or UNSC 
1341, SEPBLAC and the Directorate General of the Treasury 
have the immediate ability to freeze the assets.  Spanish law 
requires freezing of all designated terrorist groups' 
financial assets.  Any group's assets designated by the EU 
Clearinghouse process are also automatically frozen under EU 
and Spanish law.  To freeze assets of other suspected, but 
un-designated terrorist organizations, two possibilities 
exist.  The first is to take the case to a judge and request 
judicial freezing.  SEPBLAC believes this could be achieved 
within a day, and allow the assets to be frozen for six 
months during which time an investigation would take place to 
prepare for legal proceedings at the end of the period.  The 
second option was offered by the Directorate General of the 
Treasury, which suggested that a decree could be issued by 
the Spanish Council of Ministers ordering a bank to freeze 
the assets pending an investigation. 
 
9. (U) In the near future, preventive and administrative 
freezing will become a possibility under the Terrorist 
Finance Law of May 2003.  When the implementing regulations 
for this law are published, a statutory commission will be 
empowered to investigate and freeze terrorist assets without 
a judicial or executive order.  Once fully functioning the 
Terrorist Finance Commission will provide the GOS with 
preventive and administrative ability to freeze terrorist 
assets.  This should prove a useful new tool in combating 
terrorism finance. 
 
The New Terrorist Finance Commission 
------------------------------------ 
 
10. (C) The Commission will be headed by the Ministry of 
Interior's Secretary of State for Security Antonio Camacho 
Vizcaino.  We understand from various sources that the 
Commission will also include as its acting secretary the 
SEPBLAC Director Gabriel Panizzo.  A representative from the 
National Prosecutor's Office, the Ministry of Economy, the 
Spanish National Police, the Guardia Civil, and the National 
Intelligence Center will also hold seats on the Commission. 
 
11. (C) A concern we have identified in the proposed law is 
lack of MFA representation.  Our MFA contact, Miguel 
Garcia-Herraiz, said that this problem will be solved in the 
implementing regulations.  To date, we have not received a 
confirmation.  Our MFA contacts have been productive 
interlocutors willing to discuss terrorism finance in Spain. 
The MFA represents Spain in the EU Clearinghouse and the UN 
Sanctions Committee and thus plays an important role on 
terrorism finance issues even if Spanish diplomats express 
occasional skepticism regarding how the terrorist finance 
listing regime functions.  One MFA contact noted that the EU 
Clearinghouse process does not function well as a designating 
body.  Another recounted the concern of many EU governments 
that the UN Sanctions Committee process does not offer legal 
recourse to listed persons and entities, and that delisting 
was a common concern.  Moreover, Spanish diplomats believe 
that the information attached to listed entities/individuals 
is sometimes not accurate; they believe that occasionally the 
wrong entities/individuals' assets are being targeted, and 
that in some cases the information supplied is not sufficient 
to target the assets of a particular individual or group. 
Even with their skepticism however, we find Spain's diplomats 
to be dedicated to fighting terrorist financing in Spain and 
internationally. 
 
12. (C) In our last meeting, February 15, with SEPBLAC 
Director Panizzo and International Relations Director Alvaro 
Panilla, we were informed that Secretary of State for 
Security Camacho intends to delegate all terrorist finance 
fighting authority to SEPBLAC.  At an April 1 meeting with 
Secretary of State Camacho, he suggested that we direct all 
 
SIPDIS 
questions regarding the Commission and terrorism finance to 
SEPBLAC's Director, which seems to support Panizzo's 
contention.  From the Embassy's perspective, this seems 
positive in that as Spain's Financial Intelligence Unit, 
SEPBLAC is fully knowledgeable in financial crimes and fully 
understands Spain's banking system.  SEPBLAC's Director 
claims that in the future all terrorist finance 
prenotifications and notifications will go directly to 
SEPBLAC, and that SEPBLAC will represent Spain in all 
international organizations including the EU Clearinghouse, 
FATF and the G8.  Contacts at the MFA and the Directorate 
General of the Treasury believe they will continue to play a 
role.  The Economic Section will maintain contacts with all 
parties to ensure that our close communication continues 
during the transition to the Commission led terrorism finance 
regime. 
 
13. (C) Econoff attempted at an April 13 meeting with a 
SEPBLAC contact to clarify the question of the New Commission 
and SEPBLAC's responsibilities further.  When asked about the 
Ministry of Economy's future role, he predicted that the 
Direction General of the Treasury might still maintain a role 
for prenotifications and notifications for designated 
terrorists and organizations.  He told us, however, that the 
Commission will be the sole responsible organization for 
preventive and administrative investigations and freezing 
that does not involve the official terrorist list. 
Conversations with our contact indicate that SEPBLAC is 
preparing to hire more officers for investigations and 
freezing actions. 
 
International Cooperation 
------------------------- 
 
14. (U) Spain is very active internationally in multilateral 
organizations that work on terrorist finance.  Spain is a 
member of the OECD Financial Action Task Force (FATF), the G8 
Counter-Terrorism Action Group (CTAG), and the Egmont Group 
for bank supervision.  Most Spanish delegations to these 
bodies include Subdirector General of Capital Inspection 
Aliaga, an MFA representative and Alvaro Panilla from 
SEPBLAC. 
 
15. (U) Spanish terrorist finance contacts value highly 
cooperation with the U.S.  Spain co-chairs with the U.S. the 
Terrorist Finance Committee in FATF.  All of our contacts 
mention that they communicate regularly with State and 
Treasury officials working on terrorist finance.  SEPBLAC 
sent two officers to Washington in the summer of 2004 to meet 
with the Financial Crimes Enforcement Network (FinCEN) for a 
few days.  Both the Ministry of Foreign Affairs and the 
Ministry of Justice sent representatives to the April 28-29, 
2005 terrorist finance workshop in Luxembourg. 
 
16. (U) Spain regularly receives delegations from foreign 
countries to improve coordination with other advanced 
economies and offers technical assistance in terrorist 
finance and money laundering to less developed countries. 
SEPBLAC contacts told us that in 2004, financial regulators 
from 40 countries and institutions met with or received 
training at SEPBLAC.  These countries included Peru, 
Bosnia-Herzegovina, The Netherlands, Mexico, The United 
Kingdom, Latvia, Australia, Chile, Ukraine, South Korea, 
Austria, Ireland, the Czech Republic, Germany, The United 
States, Italy, Poland, Romania, Hungary, Bolivia, Honduras, 
Bulgaria, Guernsey, Slovakia, Luxembourg, Belgium, France, 
Japan, Portugal, Lithuania, Andorra, Canada, Monaco, Denmark, 
Indonesia, and Finland.  The following international 
institutions also visited SEPBLAC in 2004: the World Bank, 
the International Monetary Fund and the European Commission. 
SEPBLAC also meets regularly and gives assistance to 
FATF-like regional bodies, especially in Latin America and 
the Caribbean. 
 
Charities - A Possible Hole in the System 
----------------------------------------- 
17. (C) One area where we believe more action could take 
place in Spain, and probably the entire European Union in 
fighting terrorist finance is charities.  Charities and 
foundations are not regulated at the national level in Spain. 
 Each autonomous regional government sets its own standards. 
One of our MFA contacts said that one of the main challenges 
in regulating charities in Europe is that each country has 
separate rules for charities, and the EU has been unable to 
agree on a common definition for charitable organizations, 
much less regulate them. 
 
Comment 
------- 
 
18. (C) The effort to fight terrorist financiers remains an 
area of productive cooperation in the U.S. - Spain bilateral 
relationship.  Spain's year-old government remains engaged in 
terrorism finance issues, and supports the work of Spain's 
highly professional and hard-working team of regulatory 
officials.  The tenor and frequency of our conversations with 
terrorism finance officials suggest that Spain is checking 
seriously for TF assets in connection with pre-notifications 
and notifications.  That no assets have been found may 
indicate that Spain's efforts have limited the effectiveness 
of the commercial banking sector as a conduit to move 
terrorist funds in Spain, or that informal methods are being 
used to move terrorist funds.  We will continue to engage the 
GOS in combatting the financing of terrorism.  In November, 
the Embassy, the Spanish Interior Ministry, and the Ortega y 
Gasset Foundation will collaborate on a third terrorism 
conference (successful terrorism conferences were arranged in 
2002, 2003 and 2004), which this year will focus on terrorism 
finance.  The Interior Minister's terrorism advisor is 
enthusiastic about the topic.  We will use this venue to 
press for discussion on topics of interest to us such as 
charities.  We will also work to bring appropriate USG, 
academic, and NGO speakers to this event. 
MANZANARES