US embassy cable - 05KUWAIT4214

C O N F I D E N T I A L SECTION 01 OF 05 KUWAIT 004214 
 
SIPDIS 
 
STATE FOR EB/ESC/TFS LLAMBERT, S/CT TKUSHNER, NEA/ARPI 
SWALKER, NEA/ARPI RSMYTH, NEA/RA LLEE, IO/PSC BFITZGERALD, 
TREASURY FOR TFFC DGLASER AND OFAC FOR RWERNER, NSC FOR 
JZARATE AND THINNEN, LONDON FOR LTSOU, MANAMA FOR JBEAL 
 
E.O. 12958: DECL: 09/21/2015 
TAGS: EFIN, ETTC, KTFN, PTER, CVIS, KVPR, KU 
SUBJECT: TERRORIST FINANCE: SUMMARY OF OFAC DIRECTOR 
WERNER'S MEETINGS WITH GOK OFFICIALS 
 
REF: KUWAIT 4111 
 
Classified By: Ambassador Richard LeBaron.  Reasons 1.4 (b) and (d) 
 
1. (C) Summary. On September 21, OFAC Director Robert Werner 
met separately with GOK officials from the Central Bank and 
Ministries of Finance, Foreign Affairs, Social Affairs and 
with Kuwait Customs to discuss continued bilateral 
cooperation on combating terrorist finance and money 
laundering (CTF/AML).  Werner underscored the importance of 
legal reform to criminalize terror finance and urged improved 
internal GOK coordination.  He welcomed GOK feedback on OFAC 
policies and regulations to help overcome any procedural 
challenges.  GOK officials reaffirmed the government's 
commitment to legal reform to further strengthen the 
country's CTF/AML regime.  They welcomed USG technical 
assistance and cited concerns with certain designation 
modalities, including the inherent errors in English listings 
of Arabic names.  Werner offered to explore other 
alternatives, including possibly listing names in the 
original Arabic.  End Summary. 
 
2. (C)  On September 21, OFAC Director Robert Werner, 
accompanied by other Embassy and Treasury officers, met with 
the following GOK officials to discuss ongoing USG-GOK 
efforts to combat terrorist finance and money laundering: 
 
--Riad Al-Hajri, Attorney General for Public Monies 
Prosecution, Public Prosecutor's Office 
--Sheikh Salem Abdulaziz Al-Sabah, Central Bank Governor 
--Faisal Al-Hajji, Minister of Social Affairs and Labor 
--Khaled Al-Muqames, Director for Coordination and Follow-up, 
Ministry of Foreign Affairs 
--Mustafa Al-Shamali, Under Secretary, Ministry of Finance 
--Ameen Al-Mudarres, Assistant Director General, Kuwait 
Customs. 
 
Meeting with Attorney General 
----------------------------- 
 
3. (C) In his meeting with Riad Al-Hajri, the Attorney 
General for Public Monies Prosecution at the Public 
Prosecutor's Office (PPO), Werner reaffirmed the 
long-standing ties between both countries, calling for 
continued bilateral cooperation on CTF/AML.  Werner solicited 
Al-Hajri's input on the GOK's Financial Intelligence Unit 
(FIU), including Egmont Group membership; the PPO's access to 
suspicious transaction reports (STRs); the status of the 
pending revision of the 2002 AML law; and the status of 
foreign contract judges in Kuwait. 
 
4. (C) Al-Hajri noted that the 2002 law on AML failed to 
clearly define the FIU's role, resulting in the Council of 
Minister's (cabinet) decision to incorporate the FIU in the 
Central Bank of Kuwait.  He commented that unlike the PPO, 
the FIU was merely an administrative entity that lacked any 
legal powers. Al-Hajri complained that lack of Egmont Group 
membership eroded the FIU's ability to access timely 
information from abroad, ultimately impacting his own 
office's ability to prosecute.  (Note: Egmont membership 
requires FIUs to share information freely.  Current GOK law 
prohibits Kuwait's FIU from doing so without Public 
Prosecutor approval. End note.)  He lamented that "Egmont 
doesn't talk to us" and also alleged that FIU cooperation 
with his office was lacking and that the PPO did not have 
direct access to STRs, claims later refuted by the Central 
Bank Governor. 
 
5. (C) Werner stressed that without legal reform, the GOK's 
ability to access timely and relevant information from Egmont 
and other entities would be limited.  He underscored that 
information sharing and access to such organizations were 
critical to OFAC's own CTF/AML efforts.  Al-Hajri concurred 
and reaffirmed the GOK's commitment to enacting legal reform, 
pointing to the ongoing drafting efforts of the National 
Committee to Combat Money Laundering and Terrorist Finance 
(NC).  Al-Hajri explained that the new law was needed to 
expand the PPO's legal powers, along the lines of OFAC's own 
broad authorities, as described by Werner.  Al-Hajri 
explained that the new law would incorporate GCC and 
international CTF/AML requirements, including Kuwaiti 
membership in Egmont.  However, he commented that there were 
"some" elements who were keen on stifling reform.  Al-Hajri 
agreed to take up Werner's offer of technical assistance on 
the new legislation once a draft is completed. 
 
6. (C) Regarding foreign judges in Kuwait, Al-Hajri explained 
that the majority were Egyptian, resulting from Kuwait's 
continued shortage of judges and long-standing reliance on 
Egyptian legal expertise.  He welcomed any U.S. assistance, 
including possible legal workshops to help strengthen the 
Kuwaiti legal sector. 
 
Meeting with Central Bank Governor 
---------------------------------- 
 
7. (C) In his meeting with Sheikh Salem AbdulAziz Al-Sabah, 
Governor of the Central Bank of Kuwait (CBK), and other CBK 
officials (Deputy Governor, Heads of On-Site Supervision and 
AML Units) Werner reiterated his call for continued bilateral 
dialogue and cooperation on CTF/AML and solicited the 
governor's input on the pending AML legislation, coordination 
between the CBK and PPO, CBK actions in support of terror 
finance designations, and CBK monitoring of exchange houses. 
 
8. (C) Al-Sabah began by noting the long-standing ties 
between CBK and OFAC pre-dating September 11, 2001.  The 
governor noted that both institutions were pursuing the same 
CTF/AML objectives and the CBK would not hesitate to seek 
assistance from OFAC or other USG entities to further 
strengthen its efforts.  Echoing Al-Hajri's frustration with 
current AML legislation; Al-Sabah noted that the new draft 
legislation would address the FIU's role and help eliminate 
procedural redundancies and streamline intra-governmental 
coordination and information sharing on CTF/AML. 
 
9. (C) Al-Sabah refuted Al-Hajri's claims about the lack of 
cooperation between the FIU and PPO and that the PPO did not 
have access to STRs, noting that by law, the STRs were 
required to be sent by banks to the PPO and CBK separately. 
He clarified that only the PPO can raise a legal case against 
an individual or entity but that the CBK had full 
authorization from the PPO to follow-up with any financial 
institution under question.  He noted that the CBK had the 
authority to freeze both monetary and materiel assets upon 
receipt of Foreign Ministry authorization. 
 
10. (C) Al-Sabah explained that the CBK maintains a 
categorized database of all STRs sorted by banks, exchange 
houses, investment firms or transaction type and that 
priority is given to TF/AML regulations, with samples of 
transactions taken at random to ensure compliance.  All banks 
are instructed to report STRs to the CBK or face "very severe 
penalties" of no less than 6000 Kuwaiti dinars (approximately 
$20,600). 
 
11. (C) With regard to terror finance designations, Al-Sabah 
said that the CBK and other Kuwaiti financial institutions 
rely on MFA notifications, UN and OFAC lists for the latest 
updates.  Al-Sabah voiced concerns with designations in 
English of Arabic names, citing the probability of mistaken 
identity and error resulting from incorrect translation or 
limited information (Note: this issue came up repeatedly in 
OFAC's meetings with other GOK and banking officials. End 
Note.)  As an added precaution, Al-Sabah noted that CBK name 
searches are also cross-checked with local civilian 
identification numbers issued to all Kuwaiti and non-Kuwaiti 
residents.  Werner voiced similar concern with the current 
practice of listing Arabic names in English.  He encouraged 
the CBK to provide OFAC with additional identifier 
information as it becomes available and offered to explore 
the possibility of listing names in Arabic. 
 
12. (C) On charity oversight, Al-Sabah referred to a 2001 
Council of Ministers (cabinet) decision allowing only those 
charities with GOK authorization to transfer funds abroad. 
He added that no charities can open bank accounts without the 
requisite approval and licenses from the Ministry of Social 
Affairs and Labor, explaining that banks recognize the 
importance of compliance and cooperation on this issue.  As 
an example, the governor cited the initiative on the part of 
a local Kuwaiti bank to report to the Central Bank an attempt 
by the brother of an Al-Qaeda affiliate to open an account. 
 
13. (C) Werner noted that exchange houses and unofficial 
"hawalas" posed a potential problem given the challenges of 
effective oversight and accountability.  Al-Sabah pointed out 
that the CBK maintains a monthly exchange house transaction 
database and that individual transactions greater than 3000 
Kuwait Dinar (approx. $10,300) must be reported to the CBK. 
He stressed that the opaque and unreliable nature of hawala 
networks discouraged the GOK from authorizing the practice in 
Kuwait.  He explained that financial institutions are only 
authorized to transfer funds to other licensed institutions 
and not individuals.  Al-Sabah commented that both Kuwait and 
the United States were confronting the same terrorist threats 
and that success would be guaranteed only through continued 
cooperation and vigilance. 
 
Meeting with Minister of Social Affairs and Labor 
--------------------------------------------- ---- 
 
14. (C) Ambassador accompanied Werner to the meeting with 
Faisal Al-Hajji, Minister of Social Affairs and Labor, to 
discuss the ministry's role as the primary GOK oversight 
authority of local charities.  Werner acknowledged the 
important role played by charities in every society and 
called for vigilance to ensure that their good work was not 
undermined by nefarious elements seeking to exploit 
institutional weaknesses.  He encouraged close dialogue and 
cooperation and welcomed Al-Hajji's input on the GOK's 
charity oversight measures. 
 
15. (C) Al-Hajji praised the GOK's ongoing close ties with 
the U.S. and welcomed the opportunity to exchange suggestions 
and ideas with USG counterparts.  He asserted that his 
ministry had taken all appropriate measures to control and 
supervise charities, including the removal of approximately 
95 charity donation kiosks.  He explained that as an added 
measure, authorized charities would only be allowed to 
collect zakat (alms) during the month of Ramadan through the 
sale of government-issued coupons (see reftel for details). 
Al-Hajji said that authorized charities were on board and 
that a public relations campaign was underway to officially 
announce the new program.  He was less enthusiastic about 
Werner's proposal to have payments for coupons made directly 
to the ministry, noting that such an alternative would prove 
too confusing for the average zakat donor. 
 
16. (C) He also explained that an external auditing firm 
would be hired soon to provide monthly reports on charities' 
income and outflow statements to ensure compliance and 
accountability.  According to the minister, all financial 
transactions conducted by authorized charities require 
ministry approval and that any suspicious activities or 
unauthorized transfers would be reported to the CBK.  He said 
that during the past three years, the ministry had seen no 
indication of violations by charities (Note: only six Kuwaiti 
charities and the GOK itself are authorized to transfer funds 
abroad. End note.) 
 
17. (C) Al-Hajji clarified that charities were only allowed 
to transfer funds to other authorized organizations abroad, 
not individuals, and that the ministry relied on host country 
governments, working in coordination with the Kuwaiti MFA, to 
ensure compliance on the part of its local entities.  Both 
the Ambassador and Werner expressed concern with the GOK's 
seeming reliance on recipient (and usually poorer) countries 
to reconcile and regulate their own institutions, pointing 
out that this was a weak link in the process. 
 
18. (C) Ambassador stressed that the burden was on Kuwait to 
ensure that its charitable contributions were being spent 
properly and offered USG follow-up on any suspicious 
transactions.  Al-Hajji welcomed U.S. assistance in general 
but noted, in the GOK's defense that fund transfers for 
specific aid projects abroad were easier to control and that 
visiting delegations from the ministry's charity oversight 
office traveled abroad periodically to monitor progress for 
such projects. 
 
19. (C) Al-Hajji said that charities were under intense 
scrutiny by the government and that he remained committed 
despite the charities' widespread complaints of excessive 
regulations.  He said that the ministry's goal was to have 
100% oversight of charities and that the large charities had 
"put all their cards on the table."  He expressed general 
satisfaction with their cooperation and noted that he has 
urged charities to focus more of their donations domestically 
in support of Kuwait's own poor and needy. 
 
20. (C) Werner praised the minister for his "clear and 
admirable commitment," echoing his views on the challenges 
posed by stringent charity oversight.   Werner suggested that 
charities would find the OFAC list a useful screening 
mechanism for potential donors and recipients (Note: The 
Minister did not understand the suggestion on the use by the 
charities of the OFAC lists.  Embassy will follow-up with his 
staff.) 
 
Meeting with Foreign Affairs Ministry 
------------------------------------- 
 
21.  (C)  In his meeting with Khaled Mohammed Al-Muqames, 
Director of the MFA's Coordination and Follow-up Office, 
Werner provided an overview of OFAC responsibilities and the 
USG terror finance designation process.  He solicited 
Al-Muqames's feedback on the MFA's notification process for 
designations, encouraged MFA feedback on procedural issues 
arising from designations problems, voiced concern about the 
vulnerabilities of charities abroad, and urged continued 
cooperation on information sharing. 
 
22. (C)  Al-Muqames explained that his office received 
terrorist designation notifications from both the UN and the 
U.S. Embassy and that such notifications were forwarded in 
writing to the CBK the same day as received.  Echoing similar 
concerns raised by the Central Bank Governor, Al-Muqames 
requested additional identifiers for Arabic designees, 
including, e.g., the names of mothers or other relatives, to 
allow for more accurate identification by government and 
banking authorities. 
 
23. (C) With regard to charities, Al-Muqames said although 
the GOK had not received any evidence linking Kuwaiti 
charities to terrorism, Kuwaiti embassies had been instructed 
to track the activities of Kuwaiti charities abroad in order 
to protect Kuwait's international reputation and prevent 
exploitation by extremists.  He expressed the GOK's interest 
in "widening our cooperation" on charity oversight. 
Al-Muqames echoed USG concerns in the war against terrorism, 
stating that Kuwait itself was a target.  He reaffirmed the 
need for close cooperation, and observed that when it comes 
to defeating terrorism "we speak the same language." 
 
 
Meeting with Finance Ministry 
----------------------------- 
 
24. (C) In his meeting with Mustafa Jassem Al-Shamali, Under 
Secretary at the Ministry of Finance, Werner solicited 
 
SIPDIS 
Al-Shamali's views on the pending revision to the draft AML 
legislation, stressing the importance of Egmont membership; 
encouraged closer GOK inter-governmental coordination on 
CTF/AML efforts and provided an overview of OFAC activities, 
including efforts to target counternarcotics and weapons of 
mass destruction financial networks. 
 
25. (C) Al-Shamali reaffirmed the GOK's commitment to 
cooperation on CTF/AML measures and praised the efforts of 
the National Committee and the Central Bank in the revision 
of the pending draft legislation.  He said that the new draft 
would take into account the recommendations of all relevant 
GOK ministries and that legal reform would help address any 
coordination problems between GOK entities. 
 
26. (C) He explained that the FIU, currently housed in the 
Central Bank, was originally an entity of the Finance 
Ministry.  He said internal regulations, issued by the 
Finance Ministry in July, articulated the procedures for 
supporting the National Committee's drafting efforts and the 
subsequent implementation of the revised AML law. Al-Shamali 
pointed to close cooperation between U.S. and Kuwaiti 
Customs. (Note: Kuwait Customs falls under the authority of 
the Finance Ministry.) 
 
 
Meeting with Kuwait Customs 
--------------------------- 
 
27. (C)  In his meeting with Ameen Al-Mudarres, Assistant 
Director General for Kuwait Customs (KC), Werner underscored 
the important role played by customs agencies in the broader 
CTF/AML effort, pointing to OFAC's own fruitful relations 
with U.S. Customs in successfully targeting terror finance 
and money laundering networks.  Al-Mudarres called for 
continued bilateral cooperation and praised his agency's 
close cooperation with U.S. Customs, pointing to the valuable 
support being provided to Kuwait Customs by two embedded U.S. 
advisors.  He explained that KC's new Money Investigative 
Unit (guided by a U.S. Customs Advisor) was already having a 
positive impact against money laundering. Al-Mudarres noted 
that KC's membership on the National Committee to Combat 
Money Laundering and Terror Finance allowed the agency to 
play a central role in the broader CTF/AML effort.  He was 
appreciative of ongoing U.S. training opportunities afforded 
by the International Visitors Program and reaffirmed KC's 
commitment to making headway against money laundering. 
 
 
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