US embassy cable - 05ABUDHABI2113

UNCLAS ABU DHABI 002113 
 
SIPDIS 
 
SENSITIVE 
 
MANAMA FOR OFAC ATTACHE 
TREASURY FOR WILLIAM LANGFORD 
 
E.O. 12958: N/A 
TAGS: PTER, KTFN, EFIN, TC, UAE Banking and Charities Regulation 
SUBJECT: UAE MONEY EXCHANGES CONCERNED ABOUT ACCESS TO U.S. 
MARKET DUE TO PATRIOT ACT REQUIREMENTS 
 
 
1. (U) Summary.  The UAE's 110 licensed money exchange houses 
have formed a Steering Committee to ensure that the UAE's 
regulated exchange houses can continue to do business with 
banks and financial institutions overseas.  The steering 
committee will work with the UAE Central Bank and financial 
institutions in other countries in order to address some 
international banks' concerns that exchange houses are not 
regulated as stringently as other financial institutions. 
End Summary. 
 
2. (U) Khaleej Times, an English language daily, reported May 
10th that the UAE's money service businesses (MSB) formed an 
18-member steering committee -- named the Association of 
Exchange Companies in the UAE -- that will approach U.S. 
regulators as a unified body to express their concerns about 
problems they face due to the USA Patriot Act.  Ahmed Al 
Qamzi, Head of the International Division at the UAE Central 
Bank, told econoff May 10th that the article is referring to 
some U.S. banks' refusals to open accounts with UAE money 
exchanges because they are worried about the risk of having 
accounts with SMBs.  He said that some U.S. financial 
institutions believe SMB's are not regulated as stringently 
as banks.  According to the news article, the steering 
committee may hire a Washington Law firm to represent the 
SMB's and to explain the UAE regulatory regime for money 
exchange houses to the Department of Treasury's Financial 
Enforcement Network (FINCEN). 
 
3. (U) Al Qamzi said the SMBs approached Central Bank 
Governor Sultan Nasser Al Suwaidi about their concerns, and 
the Governor supported their idea of forming a steering 
committee in order for them to pool their resources and share 
the costs (some UAE exchange houses are very small and do not 
have much capital).  This steering committee will reach out 
to a number of countries and multilateral institutions - not 
just the United States.  According to Al Qamzi and the news 
article, MSBs are also facing challenges in other countries, 
due to the lack of uniform rules, and every country having 
their own reporting requirements and "Know Your Customer" 
regulations.  The steering committee hopes to establish 
compliance best practices and communicate the industry's 
proposals to international banking regulators. 
 
4. (SBU) Al Qamzi also said that the Central Bank Governor is 
considering establishing a program whereby an independent, 
external auditor (such as Ernst and Young) will issue a 
standard certificate to U.S. financial institutions 
certifying that a given exchange company is licensed in the 
UAE and complying with the UAE's anti-money laundering and 
terror finance requirements.  Al Qamzi said that such a 
program would be instituted in order to satisfy requirements 
under the USA Patriot Act and still allow UAE businesses to 
operate in the United States.  He also said that it is an 
effort to close loopholes and keep money exchangers working 
through the formal financial system.  UAE money exchangers 
have told the Central Bank that if their accounts are closed, 
their only other alternative is to work through unregistered 
operators in the U.S., and they do not want to do this. 
 
5. (U) During the Central Bank's April 2-3 International 
Hawala Conference, M.S. Shamim Rafique, a representative of 
the steering committee, described the challenges the UAE 
MSB's face.  "Some banks are hesitant to join hands with 
exchange companies in promoting formal money transfer 
channels and are beginning to deprive regulated exchange 
companies of their legitimate business needs...Indiscriminate 
risk classification does not distinguish between 'highly 
regulated, liberally regulated, and unregulated' and it 
paints all exchange companies with the same brush." 
SISON