US embassy cable - 05AMMAN8031

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 008031 
 
SIPDIS 
 
E.O. 12958: DECL: 10/10/2015 
TAGS: EFIN, ECON, JO 
SUBJECT: CHARGE REVIEWS MONETARY ISSUES WITH CBJ GOVERNOR 
 
 
Classified By: CDA DAVID HALE FOR REASONS 1.4 (B), (D) AND (E). 
 
1. (C) SUMMARY: In an Oct 5 meeting with Central Bank of 
Jordan (CBJ) Governor Umayya Touqan and his two deputies, 
Faris Sharaf and Mohammed Shahin, Charge and Ecouns followed 
up on Treasury A/S Daniel Glaser's recent visit to Jordan, 
and elicited feedback on a wide range of monetary issues. 
Governor Touqan and staff indicated CBJ intent to update the 
two-year old anti-money laundering bill (AML) prior to its 
introduction in an upcoming session of Parliament, to develop 
disclosure rules for cash flowing in and out of Jordan, and 
to battle rising inflation through interest rate hikes. 
Throughout the meeting, Governor Touqan expressed concern 
about the 2006 national budget but hoped that focused 
monetary policy and continued economic growth would keep the 
country moving forward.  END SUMMARY. 
 
AML Law: Changes Needed 
----------------------- 
 
2. (C) Due to changes in the Financial Action Task Force 
(FATF) "best practices" and lessons learned from a recent 
Treasury Department Financial Intelligent Unit (FIU) seminar, 
Deputy Governor Sharaf indicated that the two-year old AML 
bill currently before Parliament needed updating.  Sharaf 
commented that Parliament members need to be educated on the 
importance of the AML for Jordan's economy.  Charge offered 
Touqan assistance from the Embassy, USAID, and Washington 
agencies if he thought it would help to educate key members 
of Parliament.  COMMENT: While Embassy Amman has promoted 
adoption of the AML in its current form with future changes 
via regulation, assurances by Sharaf that the required 
changes  were only technical in nature give us hope that the 
AML remains on track.  In any event, post will continue to 
push the government for its earliest adoption.  END COMMENT. 
 
Arab Bank:  Working Towards a Gold Standard 
------------------------------------------- 
 
3. (C) With respect to U.S. regulatory actions taken against 
the New York branch of Arab Bank, Sharaf said he had 
discussed the case with Treasury U/S Stuart Levey during 
their meeting on the margins of the IMF/World Bank meetings 
in Washington.  Sharaf said all remaining regulatory issues 
related to Arab Bank had been resolved, and assured the 
Charge that Arab Bank knows it has to upgrade its systems to 
be fully compliant with the directives of U.S. regulators. 
Arab Bank is in the process of hiring a compliance officer, 
and is working hard to have the bank meet a "gold standard" 
with its compliance systems. 
 
Cash Disclosure Regulation: CBJ Will Look Into It 
--------------------------------------------- ---- 
 
5. (C) In a follow-up to A/S Glaser's request to try to stop 
flows of terrorism financing across the Iraq-Jordan border by 
requiring cash disclosure forms at points of entry and exit, 
Governor Touqan expressed his concern that such a change 
could be perceived by some as a capital control and as a sign 
of GoJ concern about the strength of the dinar and the level 
of foreign reserves.  Deputy Governor Sharaf added that the 
Ministry of Finance views the problem to be mainly "on the 
Iraqi side of the border," and that the GoJ would be willing 
to offer Jordanian Customs and military expertise to their 
counterparts in Iraq. 
 
6. (C) When pressed, Sharaf indicated that the CBJ would be 
willing to consider cash declaration forms under the AML 
umbrella but "only declaration forms for declaration 
purposes," for an amount not yet specified.  Sharaf indicated 
that the CBJ governor could hypothetically determine cash 
limits, but that imposing a penalty would require legislative 
approval.  NOTE: Post will continue this dialog with the CBJ. 
 A paper calling for requiring cash declarations was adopted 
at the recent meeting of the Middle East North Africa 
Financial Action Task Force (MENA/FATF) in Beirut, of which 
Jordan is a member.  Jordan, in the person of Sharaf himself, 
will take over as Vice President of MENA/FATF in 2006 and 
President in 2007.  Moving forward with a cash disclosure 
requirement in Jordan would be one way of the CBJ 
demonstrating leadership.  END NOTE. 
 
CBJ: An Anchor of Stability 
--------------------------- 
 
7. (C) Thanks to "stable exchange rates" and reserves in 
"excess of $5 billion," Governor Touqan felt the GoJ and 
public perceive the CBJ to be an anchor of stability for the 
economy and the country.  In order to maintain this 
stability, Touqan's number one priority is to "contain 
inflationary prices."  Assessing the IMF's expectation of 
five to six percent inflation by year-end as too high, Touqan 
set a target of three to four percent and stated that the CBJ 
is "willing to act aggressively," as demonstrated by a recent 
interest hike of fifty basis points.  At a time when the 
"budget is in deep trouble" - and the GCC is decreasing its 
aid to Jordan - his concern that "inflation as the worst 
thing at this point" was balanced by hopes that economic 
growth fueled by increased FDI and a rise in productivity 
would counter the economic drag caused by interest rate 
hikes.  Touqan is also pinning hopes on lower debt 
projections in 2006 with ninety percent of subsidies to be 
removed, and further privatization in the telecom, mining, 
and aviation sectors upcoming.  Again, he declared that the 
CBJ will do its job, but the GoJ will need to get "its act 
together." 
 
8. (C) COMMENT.  Post will continue to lobby for swift 
passage of the AML, and try to ensure that any amendments do 
not delay its passage.  Post, with support from its USAID 
Mission, will continue to work with the CBJ to prepare its 
provisional Financial Intelligence Unit for work after 
passage of the AML.  We are working on funding a study tour 
for FIU staff to learn how an operational FIU in the region 
works.  END COMMENT. 
HALE