Cablegate: Staffdel Fischer Discusses Anti-Money

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 MANAMA 000282

SIPDIS

STATE FOR S/CT, EB/ESC/TFS, INL/C/CP, H, NEA/ARPI
TREASURY FOR ZARATE AND GLASER
NSC FOR PHEFFERNAN

E.O. 12958: N/A
TAGS: PTER KTFN EFIN ETTC BA
SUBJECT: STAFFDEL FISCHER DISCUSSES ANTI-MONEY
LAUNDERING/COMBATTING TERRORISM FINANCING WITH BAHRAINI
OFFICIALS

1. (U) SUMMARY: Senate Banking Committee Staffdel Fischer
met with the Bahrain Minister of Finance, the Ministry of the
Interior Anti-Money Laundering Unit, the Bahrain Monetary
Agency Compliance Unit and the Director of Community
Development at the Ministry of Social Affairs to discuss the
GOB,s efforts to combat money laundering and terrorism
financing on February 21. According to GOB officials there
are two laws being considered by a cabinet sub-committee to
implement the UN conventions on terrorism: one to define
terrorism and the other to criminalize its financing. The
Ministry of Finance is trying to fast track these laws to get
their passage by the parliament in the next month. The
Minister of Finance,s legal advisor stated that there is no
requirement of dual criminality to prosecute a money
laundering case in Bahrain and that under Bahraini law
banking information can be shared without formal agreements.
The Compliance Unit complained of incomplete information on
wire transfers from banks in other countries, including the
US. The Ministry of Social Affairs representative indicated
that while they audited charities, oversight of monies
leaving Bahrain through Islamic charities was the
responsibility of the BMA. End Summary.

2. (U) On February 20-21 a staff delegation led by Dr.
Walter Fischer, Senior Professional Staff Member for Chairman
Shelby, on the Committee on Banking, Housing and Urban
Affairs, visited Bahrain as part of a regional tour to learn
more about the Kingdoms efforts to combat money laundering
and terrorism financing (AML/CFT). Committee staffers Steve
Kroll and John O,Hara also accompanied Dr. Fischer. The
delegation met with the Minister of Finance, the Assistant
Under Secretary for Economic Affairs, the Ministry of the
Interior Anti-Money Laundering Unit (AMLU), the Bahrain
Monetary Agency Compliance Unit and the Director of Local
Community Development at the Ministry of Social Affairs.

Minister Of Finance

3. (U) Finance Minister Sheikh Ahmed Bin Mohammed
Al-Khalifa explained the history of AML/CFT efforts in
Bahrain and noted that there are two laws before a cabinet
subcommittee, one to define terrorism and the other to
affirmatively outlaw terrorism financing. The government is
pushing to have these laws passed by the parliament before
the Financial Sector Assessment Program (FSAP) conducted by
the IMF in April. The Ministry of Finance,s Legal Advisor
Stuart Horler explained that the laws being drafted were
necessary to fully implement the two UN Conventions
(Suppression of Terrorism Financing and Terrorist Bombings)
that Bahrain signed and ratified in 2004.

4. (U) In response to Dr. Fischer,s question about any
impediments on AML/CFT, Sheikh Ahmed said that Bahrain was
historically a cash economy and cross border movement of cash
were hard to control. However, since Bahrain is such a small
country with such a well-regulated close knit banking
community, any large scale money laundering would be
identified quickly.

Anti-Money Laundering Unit

6. (U) Colonel Adel Al Fadhel, head of the MOI Anti-Money
Laundering Unit (AMLU), gave a presentation on Bahrain,s
money laundering laws and regulations. The AMLU, Bahrain,s
financial intelligence unit (FIU), is an active member of the
Egmont group and works closely with FinCEN in the United
States. Col. Al Fadhel explained that Bahrain does not
require "dual" criminality with other jurisdictions to
prosecute money laundering crimes in Bahrain (Note: For
example, there are no taxes in Bahrain so tax evasion is not
a crime - however if a US citizen were to transfer money to
Bahrain to evade taxes, the individual could be prosecuted
for money laundering in Bahrain despite the underlying crime
not being a crime in Bahrain. Endnote.) Additionally, under
the 2001 Anti-Money Laundering law, Bahrain can share banking
information with another country without a memorandum of
understanding (MOU) or a mutual legal assistance treaty
(MLAT).

7. (U) The delegation asked what steps Bahrain could take,
short of closing a bank down, to punish violators of AML/CFT
laws, and whether they had a "cease and desist" order. Mr.
Horler, also the legal advisor for the AMLU, explained that
Bahrain did not have a "cease and desist" order but that a
threat of closure from the BMA was usually sufficient to
deter the financial institutions from illicit behavior.

BMA Compliance Unit

8. (U) The Superintendent of the Compliance Unit, Khalil
Swailim of the BMA told the delegation that their unit
performs audits of financial institutions to ensure that they
have proper AML/CFT checks in place. Bushra Al Haddad, also
of the Compliance Unit, expressed concern that banks in
Bahrain were not receiving complete information on transfers
through correspondent accounts and were forced to turn away
transactions. The BMA requires that all wire transactions to
and from Bahrain contain the full originator information
including name, account number and address. If this
information is not included the transaction will be sent
back. Often banks from other countries, including the US,
route the money through their branches in other jurisdictions
with lower standards instead of completing the required
information.

Ministry of Social Affairs

9. (U) At the Ministry of Social Affairs (MSA), Badriya Al
Jeeb, the Director of Local Community Development stated that
there are over 386 organizations, societies and charities
registered in Bahrain (82 of which are charity funds) (Note:
There are currently only five persons on the MSA,s staff to
oversee the almost 400 organizations. End note.) She said
that organizations could not open bank accounts without a
certificate from the MSA and that if their income/assets
exceeded 10,000 Bahraini Dinars (BD) (approximately 26,500
dollars), then they must hire an external auditor to review
their financial statements. Social organizations are
required to give annual reports to the Ministry and the
Ministry has the authority to carry out inspections of the
non-profit organizations.

10. (U) The staff delegation inquired how the Ministry
approached charities that might raise money for organizations
such as Hamas or Hizballah. Al Jeeb replied that there was
limited ability to raise funds in Bahrain and the majority of
the money raised by charitable organizations is spent
locally. She explained that most large transfers out of
Bahrain go through the Bahrain Red Crescent but that money
moving through Islamic charities to Bosnia, Palestine or
elsewhere was not monitored by the MSA but rather by the BMA.
The MSA had no reports on how much might be leaving the
country through some of the Islamic organizations. (Note:
According to the Al Wasat newspaper on February 13, 2005, a
large charity in Bahrain, Al Eslah Society, reported that
they sent 273,863 BD (approximately $725,000) to Palestine in
2004 for healthcare, education projects, development
projects, family support and for individual orphans. End
Note)

MONROE

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