US embassy cable - 05AMMAN7547

S E C R E T SECTION 01 OF 02 AMMAN 007547 
 
SIPDIS 
 
NOFORN 
 
E.O. 12958: DECL: 09/21/2010 
TAGS: KTFN, ETTC, EFIN, PREL, JO, IZ 
SUBJECT: SCENESETTER FOR VISIT OF TREASURY ACTING A/S 
GLASER TO AMMAN 
 
REF: A. AMMAN 01356 
 
     B. AMMAN 01150 
     C. AMMAN 07498 
 
Classified By: CHARGE D'AFFAIRES DANIEL RUBINSTEIN. REASONS: 1.4 (B, D 
& E) 
 
1.  (S/NF) SUMMARY: The USG has enjoyed improved engagement 
with the GOJ on anti-money laundering/countering terrorist 
financing issues over recent months, as Jordanian officials 
increasingly understand the importance the USG places on 
these issues and the vulnerabilities of Jordan's economy to 
an inadequate AML regime.  The difficulties of Arab Bank with 
its U.S. regulator highlighted the need for an improved 
AML/CFT regime in Jordan.  Jordan's General Intelligence 
Directorate (GID) continues to play a critical role in 
disrupting terrorist financing and money laundering.  The GOJ 
is now working to play a more systematic, overt role on these 
issues, thanks largely to U.S. pressure.  The AML law is key 
to allow the GOJ to play its proper regulatory role.  While 
the King and GOJ are strongly behind the AML law, the Cabinet 
struggled through the first half of the summer to gain a 
grudging vote of confidence from a Parliament resistant to 
the political, social and economic reforms being pushed by 
King Abdullah and his government.  The AML law has yet to be 
considered by Parliament, and will likely move slowly, 
despite strong government backing.  During your visit, the 
GOJ needs to hear the USG's strong, continuing conviction 
that passage of the AML must continue to be a top priority 
for Jordan.  END SUMMARY. 
 
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THE AML LAW 
----------- 
 
2.  (S/NF) In mid-2003, with IMF assistance, the Central Bank 
of Jordan (CBJ) drafted an Anti-Money Laundering (AML) Law 
that includes provisions for the creation of a national 
Financial Intelligence Unit (FIU) and for information sharing 
with international law enforcement agencies.  Initial lack of 
comprehension within Jordan's Cabinet about the current 
realities of international banking standards led to the draft 
being put in the equivalent of bureaucratic deep freeze for 
months.  Ironically, some of the Cabinet's leading reformers 
opposed the law because of a misplaced fear that it would 
hobble Jordan's financial sector.  Over recent months, we 
have received clear commitments from the King, Prime Minister 
Badran, and Finance Minister Kodah to present the draft to 
Parliament.  However, the long and difficult process of 
winning Parliament's confidence in the new government was the 
King's top priority over the summer.  This was finally 
achieved on July 21, partially by sacrificing Finance 
Minister-designate Bassam Awadallah, a prominent reformer and 
Jordanian-Palestinian. 
 
3.  (S/NF) The AML law is one of the government's key reform 
initiatives.  However, it will likely go before Parliament at 
the same time as the National Agenda which calls for 
ambitious political and economic reforms (ref C).  The 
opposition of the parliamentary establishment to these 
yet-to-be-detailed proposals will be strong, including among 
East Bankers who have traditionally been strong supporters of 
the King. 
 
4.  (S/NF) Despite the absence of an AML law, the Central 
Bank of Jordan has quietly urged Jordan's banks to respond to 
USG requests for information related to suspicious banking 
activity.  Jordan's current bank secrecy law prohibits banks 
from releasing account information without the approval of 
the account holder or a court order.  Nevertheless, we have 
been able on a number of occasions to obtain all account 
information requested by Washington agencies, and have 
established informal mechanisms to continue to do so in the 
future, pending the establishment of an FIU, as envisioned 
under the AML Law. 
 
5.  (S/NF) During your visit, the GOJ needs to hear the USG's 
strong, continuing conviction that passage of the AML must 
continue to be a top priority for Jordan.  A stronger AML/CFT 
regime is essential for the fight against terrorist 
financing, and an important step toward achieving Jordan's 
goal of becoming a regional financial center.  In this 
campaign,  the CBJ will be a strong ally. 
 
--------- 
ARAB BANK 
--------- 
 
6.  (S/NF) The imposition of a $24 million fine on Arab Bank 
on August 17 by the Office of the Comptroller of the Currency 
(OCC) and FINCEN brought to a close a difficult period for 
Arab Bank and the government of Jordan.  The fine was imposed 
by the OCC over the failure of Arab Bank's New York branch to 
comply with U.S. anti-money laundering laws.  Specifically, 
the bank's branch was accused of failing to adequately guard 
against the risks of money laundering and terrorist 
financing, and failing to properly report suspicious 
activities.  Earlier in the settlement process, Arab Bank 
agreed to improve its internal controls and convert its New 
York branch into a federal banking agency, ending the 
branch's wire transfer business. 
 
7.  (S/NF) Before the Arab Bank case broke in January, CBJ 
officials believed their regulation of Jordan's banking 
sector for AML/C TF would have prevented such problems from 
occurring.  Top CBJ officials took an active role in assuring 
U.S. regulators that CBJ was eager to ensure no future 
AML/CTF problems.  In a recent discussion with ECOUNS, CBJ's 
Deputy Governor said he hoped the worst of the Arab Bank 
problems were behind; he was in regular contact with Arab 
Bank's management and is pressing the Bank hard to comply 
fully and expeditiously with all U.S. regulatory 
requirements. 
 
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IRAQ 
---- 
 
8.  (S/NF) The CBJ has also shown growing concern about the 
banking sector's vulnerability as it absorbs a substantial 
influx of Iraqi cash into Jordan caused by insecurity in 
Iraq, the primitive nature of the country's financial 
infrastructure, and the loosening of Iraq's border controls. 
As Jordanian banks face up to the need to prevent Iraqi money 
laundering and insurgency finance, Jordanian banks - backed 
by CBJ pressure - appear to be heeding the lessons they have 
learned from their continuing exposure to the potential 
fall-out of the scandals surrounding sanction-busting during 
the Saddam era.  We are aware of numerous examples of 
Jordanian banks applying know-your-client principles and 
turning away Iraqis attempting to deposit large sums of cash. 
 
RUBINSTEIN