US embassy cable - 05MANAMA680

S E C R E T SECTION 01 OF 02 MANAMA 000680 
 
SIPDIS 
 
STATE FOR S/CT, EB/ESC/TFS, INL/C/CP, H, NEA/ARPI 
TREASURY FOR ZARATE, GLASER, OFAC RWERNER 
NSC FOR PHEFFERNAN 
 
E.O. 12958: DECL: 05/03/2015 
TAGS: PTER, KTFN, EFIN, ETTC, BA 
SUBJECT: TREASURY DAS GLASER CONGRATULATES BAHRAINI 
OFFICIALS ON MENA FATF 
 
 
Classified By: Ambassador William T. Monroe for reasons 1.4 (b) and (d) 
 
1.  (S) Summary.   Treasury DAS Daniel Glaser and a US 
delegation congratulated the Minister of Finance, Sheikh 
Ahmed bin Mohammed al Khalifa, the Governor of the Bahrain 
Monetary Agency (BMA), Rasheed Mohammed al Maraj, and the 
Finance Ministry Undersecretary, Sheikh Ebrahim Bin Khalifa 
al Khalifa, on the success of the Middle East and North 
African Financial Action Task Force (MENA FATF) plenary April 
11-14 and inquired about Bahrain,s efforts to combat money 
laundering and terrorism financing.  The Minister and BMA 
Governor noted that they were pushing the anti-terrorism law 
in Parliament and another law to define terrorism financing 
which will be submitted to Parliament soon.  Additionally, 
the GOB reinstated the Policy Committee, headed by the 
Finance Ministry, which covers terrorism financing.  The BMA 
Governor said that conventional and Islamic banks are 
regulated by the BMA and that the primary difference is the 
accounting procedures required from Islamic banking.  The 
Minister and BMA Governor also asked Glaser about the status 
of the Al Aqsa Islamic Bank (AAIB), which has assets frozen 
in Bahrain. End Summary. 
 
2.   (U) Treasury Deputy Assistant Secretary for Terrorist 
Financing and Financial Crimes, Daniel Glaser, attended the 
first plenary of the MENA FATF April 11-14, 2005 in Bahrain, 
and along with the Ambassador conducted meetings with GOB 
officials. Glaser was accompanied by a US delegation, which 
included Gary Peters, State INL, Jason Herring, FBI, Ahmed 
Elbashari, FinCEN, and Rachel Lebenson, Treasury. 
 
Minister of Finance 
 
3.  (U) Glaser and a US delegation met April 13 with the 
Finance Minister, Sheikh Ahmed, and congratulated the 
minister on the success of the MENA FATF plenary and thanked 
Bahrain for its leadership in setting up the organization, 
and funding its budget for five years.  (Note. The MENA FATF 
is a FATF styled regional body (FSRB) made up of 14 countries 
from Morocco to Oman that promotes international anti-money 
laundering and combating terrorism financing (AML/CFT) 
standards.  MENA FATF also conducts mutual evaluations of its 
members.  End note).  Glaser noted that MENA FATF,s progress 
in just a few months has been exceptional compared to other 
FSRBs and encouraged the Minister to continue to support the 
MENA FATF. 
 
4.  (U) Glaser inquired about the status of the 
anti-terrorism law in Parliament and the draft law 
criminalizing terrorism financing.  The GOB is trying to pass 
two laws to bring Bahrain into compliance with international 
standards.  Sheikh Ahmed explained that the passage of these 
laws was critical to marketing Bahrain as a regional 
financial sector.  The anti-terrorism law is facing stiff 
opposition in Parliament because different political blocs 
want to avoid anything resembling the State Security Laws, 
which were repealed in the late 1990s.  The second law, which 
criminalizes terrorism financing, is still being reviewed by 
the government but the GOB plans to fast track the law once 
it reaches Parliament.   (Note. The International Monetary 
Fund was in Bahrain April 17-May 2 doing a financial sector 
assessment and the lack of a law criminalizing terrorism 
financing will be noted negatively in their report.  The GOB 
has been trying to push these laws forward to avoid this 
negative reporting.  End note).    Currently, Bahrain carries 
out its international obligations to freeze terrorist assets 
by issuing prime ministerial edicts, equivalent to U.S. 
presidential executive orders. 
 
5.  (S) The GOB also noted that the Policy Committee on money 
laundering and terrorism financing, headed by the Finance 
Ministry, was recently reinstated by a new ministerial order. 
 The committee,s three-year term recently ended and the new 
order extends the committee for another three years, until 
April 2008, increasing the size of the committee to include 
more ministries (including the Bahrain National Security 
Agency (BNSA)).  Sheikh Ebrahim Bin Khalifa al Khalifa, 
Undersecretary at the Ministry of Finance, heads the Policy 
Committee. 
 
BMA Governor 
 
6.  (U) The delegation met April 14 with the BMA Governor Al 
Maraj.  Glaser inquired whether there was a different 
regulatory framework for Islamic banking.  Al Maraj replied 
that the BMA is the regulator for both Islamic and 
conventional banking, and has issued rulebooks for both 
sectors, requiring they follow the same reporting and record 
keeping standards.  The primary difference, from a regulatory 
standpoint, is the different accounting procedures required 
for Islamic banking which also must comply with Islamic 
Shari,a law. 
 
7.  (U) In an earlier meeting, Sheikh Ebrahim noted that the 
Accounting and Auditing Organization for Islamic Financial 
Institutions (AAOIFI) established in Bahrain in 1990 is the 
leading organization in the world for setting Islamic banking 
accounting standards.  Glaser extended an invitation through 
Sheikh Ebrahim to the head of AAIOIFI to meet with US 
Treasury officials in Washington. 
 
8.  (C)  When the BMA Governor was asked about the status of 
the anti-terrorism law and the law criminalizing terrorism 
financing, he replied that he hoped they would be passed in 
time for the IMF review.  However, he doubted that they would 
be.  He noted that the two laws were interconnected and that 
the terrorism financing law, if it is passed, still needs the 
anti-terrorism law to define terrorism in order to be 
effective.  In response to Glaser,s question whether the GOB 
had any plans to proactively propose any names to the UN 1267 
Committee, the Governor stated that such people did not live 
in Bahrain. 
 
9.  (S) Glaser also raised the issue of the assets of Al Aqsa 
Islamic Bank (AAIB), which have been frozen in Bahrain. 
Glaser noted that the USG is working with George Abed, the 
new head of the Palestinian Monetary Authority, to resolve 
the issue.  (Note. The BMA has required the freezing of 
approximately $10 million dollars of AAIB assets in Bahrain. 
The Bahrainis are eager to have this issue resolved. Endnote.) 
 
Charities and Hawalas 
 
10.  (U) The BMA Governor noted that the BMA does not have a 
direct role in overseeing charities, unless there is a 
suspicious transaction or the charity transfers over 20,000 
Bahraini Dinar (about 53,000 dollars) in which case the 
charity is required to file a report with the BMA. The 
Governor also ruled out the possibility of Bahrain having 
significant non-banked communities.  When Glaser responded 
that a sizable Filipino community in Bahrain would suggest 
the potential for such a non-banked community, the Governor 
conceded that it was possible but believed it was unlikely 
due to easy access to inexpensive formal banking and 
remittance services. 
MONROE