US embassy cable - 05DAMASCUS6224

C O N F I D E N T I A L SECTION 01 OF 03 DAMASCUS 006224 
 
SIPDIS 
 
SIPDIS 
 
NEA/ELA 
NSC FOR ABRAMS/DORAN 
TREASURY FOR GLASER/SZUBIN/LEBENSON 
EB/ESC/TFS FOR SALOOM 
 
E.O. 12958: DECL: 11/28/2015 
TAGS: ECON, EINV, EFIN, PTER, KTFN, SY 
SUBJECT: REGIME INSIDERS ALREADY MOVED TO PROTECT ASSETS 
FROM SANCTIONS 
 
REF: A. SECSTATE 214622 
     B. DMS 04819 
     C. DMS 06131 
 
Classified By: CDA Stephen Seche for reasons 1.5 b/d 
 
1. (C) Summary: Contacts report that those who may be named 
in the UNIIIC report on December 15 already have protected 
their assets in anticipation of new sanctions.  Regime 
insiders have spread their assets both at home and abroad 
under the names of family members, and avoid moving money 
through banking channels by smuggling cash across borders and 
using the major Syrian moneychangers/hawaladars for most of 
their transactions.  However, the regime insiders' access to 
continued wealth depends on a cabal of businessmen who act as 
the financiers of the regime.  Contacts contend that most 
Syrians would support targeted financial sanctions against 
these businessmen as well as those implicated in Hariri's 
assassination, and that the "name and shame" effect of the 
sanctions would make it more difficult for these individuals 
to maintain their influence and hold on power. End summary. 
 
2. (C) Most of the individuals who may be implicated in 
Detlev Mehlis' December 15 report to the UNSC on the 
assassination of former Lebanese Prime Minister Hariri 
already have taken efforts to protect their assets (ref A). 
Contacts offer as evidence that there has been little to no 
visible effect on the financial activities of those eighteen 
Syrian entities already designated under U.S. Executive Order 
(EO) or UNSCR.  Contacts report that former Interior Minister 
Ghazi Kanaan, who allegedly commited suicide on October 13, 
for example, had closed correspondent accounts in U.S. banks 
and hidden assets in accounts under the names of family 
members years before he was named in EO 13338 and included on 
the Department of Treasury's Excluded Parties List (EPL). 
Kanaan's disdain for sanctions was highlighted in the local 
press, which quoted him as saying, "If they find a button 
there, let them freeze it."  However, business contacts in 
the import and banking sectors said that despite Kanaan's 
disdain, the sanctions had utility by "naming and shaming" 
Kanaan and making him appear more vulnerable. 
 
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Avoiding Sanctions: It's a Family Affair 
--------------------------------------------- -------- 
 
3. (C) As the case of Kanaan suggests, it will be difficult 
to shut down the financial activities of regime insiders 
altogether.  Contacts among the business community state that 
it is common practice for Syrians to hide their wealth under 
the names of family members to shield it from both domestic 
and international scrutiny.  According to one contact, regime 
insiders routinely place their assets under the names of 
their children over the age of 18.  They are less likely to 
place them under their wives' names, since in the Syrian 
context the wife and husband are viewed as the same entity. 
They also hide assets under the names of extended family 
members, but rarely beyond the relationship of cousin since 
the asset holder must have a high degree of trust in and 
control over the recipient of the assets.  One contact told 
Econoff that there is a legal instrument called "wariqa dud" 
(opposite paper), which allows the owner of an asset to place 
it in the name of another person and reclaim it at a future 
time.   This allegedly is a widespread practice, and 
relatives get paid a small sum to act as a front for the 
owner of the property.  The contact stated that it is easy to 
tell when this arrangement has been made because people 
without great wealth suddenly begin to live above their means. 
 
4. (C) In addition, contacts report that regime insiders 
already have transferred assets to foreign accounts in Europe 
and the Gulf, and therefore will not need to make 
transactions that can be flagged and blocked by financial 
institutions.  Contacts specifically have mentioned Cyprus, 
Turkey and Dubai as primary destinations.  While Lebanon used 
to be the financial market of choice for Syrians due to its 
proximity and strict bank secrecy laws (ref B), there is 
evidence that some Syrians have moved their assets from 
 
DAMASCUS 00006224  002 OF 003 
 
 
Lebanese banks fearing a lack of security.  Nabil Hchaime, 
General Manager of Banque BEMO Saudi Fransi, one of four 
private banks in Syria, reported recently that his bank is 
receiving a significant number of new cash accounts wired in 
from overseas, and that he began receiving 40-50 electronic 
transfers per day from Syrians who previously deposited their 
money in Lebanon after the Lebanese government waived bank 
secrecy in August on the accounts of those suspected of 
involvement in the Hariri assassination. 
 
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Avoiding Sanctions: Smuggling and Hawalas 
--------------------------------------------- ------------- 
 
5. (C) In spite of the fact that regime insiders have 
pre-positioned most of their assets, contacts state that 
future movement of money most likely will occur outside of 
formal banking channels, unimpeded by financial sanctions. 
Contacts report that regime insiders will continue to send 
money denominated in Syrian Pounds (SYP) via cash smuggling 
routes across the Lebanese and Jordanian borders to get hard 
currency, and then move it to bank accounts in Dubai, which 
one contact described as "a great washing machine" for regime 
money.  One contact described a smuggling route between 
Lattakia and Tartous overland to Tripoli, Lebanon, where he 
said that regime elements have connections among Tripoli's 
Alawite community.  The contact stated that security agents 
posing as taxi drivers often are the mules, and that the 
border guards are bribed.  Mazen Tabaa, Chairman of Western 
Union in Syria and a former moneychanger/hawaladar, stated 
that this and other smuggling routes are well established and 
serve a large market for SYP in Lebanon, Jordan and the Gulf 
among Syrian expatriates, who have been paid in foreign 
currency but need to remit their earnings in SYP, and among 
Gulf tourists who flock to Syria in the summer months. 
 
6. (C) Tabaa added that regime insiders also exchange and 
move their money overseas through domestic agents, 
specifically the large moneychangers and hawaladars that are 
well connected to the regime.  One of the biggest of the 
Syrian moneychangers, who services both the general 
population and regime insiders, goes by the name of Sahloul, 
aka Abu Shafiq.  According to Tabaa, he demonstrated his 
influence recently by providing the SARG with the names of 
his black market competitors who then were rounded up and 
imprisoned in one of the government's latest attempts to 
support the pound by choking off the black market (ref C). 
Sahloul's operation was not affected.  Contacts report that 
Sahloul maintains a global enterprise with partners and 
offices in Iraq, Dubai and throughout the Gulf.  Basel al 
Haffi, member of an influential Sunni family and 
self-proclaimed close personal friend of Sahloul, reported 
that Asad-family cousin Rami Mahklouf uses the top managers 
of his legitimate business enterprises, mentioning 
specifically Nadir Kal'i, Director General of Syriatel, to 
move $1-2 million a day- figures that Post has heard from 
other sources- through Sahloul's moneychanging house to 
accounts in Dubai. 
 
------------------- 
The Financiers 
------------------- 
 
7. (C) Contacts imply that while the regime insiders already 
have taken steps to hide their assets and avoid using formal 
financial channels to make transactions, they owe their 
continuing wealth to the actions of a small cabal of 
businessmen who act as the financiers of the regime.  It is a 
generally accepted fact in Damascus that all major business 
deals have to run through this cabal of regime businessmen, 
which includes Rami Mahklouf and Mohammad Hamsho, two of its 
most oft-mentioned members.  Highlighting the central role 
that this group plays in the economy of Syria, al Haffi 
reported that Mahklouf and Hamsho were made a part of a team 
of businessmen traveling later this week with Deputy Prime 
Minister for Economic Affairs Abdullah Dardari on an official 
delegation to Malaysia to encourage foreign direct 
investment. (Note: Despite the fact that Mahklouf has made a 
 
DAMASCUS 00006224  003 OF 003 
 
 
public show of shifting his base of operations to Dubai and 
intimating a split with the regime, Syrians in general 
beleive that Mahklouf continues to play the role of premier 
financier.  End note.) 
 
8. (C) These businessmen enjoy massive influence in most 
sectors of the Syrian economy and in turn depend on the 
regime for continued economic dominance.  Mahklouf, who is a 
maternal cousin of President Asad, manages a financial empire 
that includes Syriatel and Areeba 94- Syria's two cellular 
companies- the chain of Ramak duty free stores at Syria's 
borders and ports, powerplants and a major interest in Byblos 
Bank, one of Syria's four private banks.  Hamsho, who is a 
member of parliament and whose company, The Hamsho Group, is 
involved in construction, import/export, entertainment, 
marketing, cement, and telecommunications, is Kurdish and 
from the Midani suburb of Damascus.  Business leaders from 
among Damascus' wealthy Sunni families claim that Hamsho does 
not have extensive business experience in business and that 
he derived his wealth and influence purely from his 
connections to the regime.  According to Tabaa, Hamsho has 
provided most of the financial backing for the almost daily 
protests around the U.S. Embassy.  Another member of this 
group, Dhu al Himma as Shaleesh, who is a paternal cousin of 
the President and chief of Presidential security, owns SES 
International, which is active in the construction and 
automobile import sectors.  SES International is one of the 
Syrian entities designated under Iraqi Sanctions Regulations 
on Treasury's EPL and by UNSCR, but contacts report that it 
continues to do business unabated. 
 
9. (C) Comment: Contacts uniformly agree that most Syrians 
would support targeted financial sanctions against those who 
are implicated in the UNIIIC investigation.  They contend 
that a policy of targeted sanctions would further isolate and 
weaken culpable regime officials while demonstrating that the 
USG distinguishes between these individuals and the bulk of 
the Syrian population, who have no connection to the 
government and little sympathy for it.  Syrians also would 
support sanctions against the financiers of the regime, whom 
the vast majority identifies as obstacles to economic reform 
and development.  It is Post's understanding that the 
language of EO 13338 is sufficiently broad to extend beyond 
designated SARG officials to cover the regime's financiers 
and those who are material contributors to SARG policies 
towards Iraq, Lebanon, WMD and Palestinian rejectionist 
groups.  Post believes that designating the financiers would 
deprive the regime of critical financial support, and send a 
powerful political message of zero tolerance for the 
corruption that has fueled this regime since its inception 
and siphoned the wealth of a nation into the hands of a few. 
SECHE