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Cablegate: U/S Levey Promotes Charities Conference, Warns Bankers On Iran

VZCZCXRO2889
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHMK #0195/01 0841437
ZNY CCCCC ZZH
P 241437Z MAR 08
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 7707
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHBVAKS/COMUSNAVCENT PRIORITY
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
RUEATRS/TREASURY WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000195

SIPDIS

SIPDIS

STATE ALSO FOR DRL

E.O. 12958: DECL: 03/24/2018
TAGS: PREL PTER EFIN IR BA
SUBJECT: U/S LEVEY PROMOTES CHARITIES CONFERENCE, WARNS BANKERS ON IRAN

REF: A. MANAMA 168 B. MANAMA 138 C. MANAMA 117 D. 07 MANAMA 803 Classified By: Charge d'Affaires Christopher Henzel, reasons 1.4(b) and (d).

1. (C) Summary: Treasury U/S Levey reiterated to banks the risks of engaging in transactions with Iranian financial institutions. U/S Levey said he expected the imminent U.S. designation of Future Bank. He told the Minister of Social Development about the importance of fund-raising oversight, and supported Bahrain's efforts to host a regional conference on charities. End Summary. ----------------- BANKERS CAUTIONED -----------------

2.(C) In a meeting with Ahli United Bank's (AUB) CEO Adel El-Labban on February 26, Treasury U/S for Terrorism and Financial Intelligence Stuart Levey discussed how the international community's message on the risks of doing business with Iran were taking hold globally (Ref. D). El-Labban acknowledged that in the current climate, any savvy banker sought to minimize Iranian exposure. He pointed to himself as an example. "Since we last met, we (AUB) have implemented what we discussed (Ref. D)." He said that a large group of Iranian bonds held by AUB would mature "in two months". Other holdings were declining on track toward zero. "We tend to minimize our contact with the Iranians. Our strategy is to stay away."

3.(C) U/S Levey pointed to a recent speech by Iran's Central Bank Governor declaring that Iran was receiving assistance from Bahrain and the UAE in mitigating the effects of UN sanctions. El-Labban observed that the CBB had affirmed its adherence to UN sanctions. To his knowledge, the Iranians had not received any cooperation from Bahraini institutions. He said he would not be surprised to learn that some banks in the UAE were more accommodating. Even so, El-Labban speculated that the composition of Iranian assets in the Gulf was fairly small compared to what might be found in Russia, China, or even Serbia. U/S Levey countered that the financial environments of those countries lacked the broad Iranian relationships that exists in the Gulf. -------------------------------- FUTURE BANK DESIGNATION IMMINENT --------------------------------

4.(C) U/S Levey told El-Labban that Future Bank would be designated by the U.S. in the coming weeks. El-Labban acknowledged that the designation was imminent. He requested that AUB's name be kept out of any announcement and asked if there was any tangible evidence of wrongdoing on Ahli United Bank's part. "Our intention to act is not based on particular misconduct of Ahli United Bank," U/S Levey replied. (Note: Treasury announced March 12 the designation of Future Bank under Executive Order 13382.) ----------------------------------- ABC, GIB CLAIM TO SHUN IRANIAN RISK -----------------------------------

5.(C) In separate meetings, U/S Levey also reiterated to Arab Banking Corporation (ABC) President and CEO Ghazi Abdul Jawad and Gulf International Bank (GIB) CEO Dr. Khalid Al-Fayez the risks of engaging in financial transactions with Iranian banks. Abdul Jawad said ABC had not extended credit to Iranian institutions "for a year and a half" and that any new transactions were handled on a referral basis. "We have done spot foreign exchange, but no new credit." Abdul Jawad said ABC had previously held substantial amounts of Iranian risk, but this had "come down substantially." He elaborated that ABC no longer confirmed Iranian letters of credit, and only used outstanding accounts to extract monies owed to ABC.

6.(C) On the potential threat posed by Iranian banks, GIB's Al-Fayez noted that his bank had been jointly formed by Gulf Cooperation Council (GCC) governments. "The last thing we want to do is embarrass them." As a sign of his bank's commitment to anti-money laundering and counter-terror finance principles, he noted that in the last two years, GIB's compliance department had grown from one officer to six. MANAMA 00000195 002 OF 002 ---------------------------- FOCUS ON CHARITY FUNDRAISING ----------------------------

7.(C) Minister of Social Development Dr. Fatima Bint Mohammed Al-Belooshi told U/S Levey that her ministry remains committed to ensuring that charitable giving occur in a forthright manner and that funds are not diverted to illicit ends.

8.(C) Minister Al-Belooshi highlighted Bahrain's NGO law as a vital tool in that effort. (Note: Under Bahrain's NGO law, NGOs must submit financial accounts to the ministry. These accounts must detail any extra-territorial expenditures, e.g., the Gaza Strip. Contributions surpassing BD 10,000 (USD 26,500) must be independently verified by an external auditor. End Note.)

9.(C) However, Minister Al-Belooshi confided that her ministry's resources were stretched beyond their limits. "There are 500 NGOs operating in Bahrain. We don't have the capacity to deal with this number." She also acknowledged that it would be difficult to monitor individuals or groups determined to distribute donations outside the established legal framework. She noted that her Ministry relied on the Central Bank of Bahrain (CBB) for reports of suspicious charitable transactions.

10.(C) U/S Levey shared a concept document invoking Financial Action Task Force (FATF) guidance and noting that the MENAFATF, headquartered in Bahrain, has been active in developing a regional best practices paper on charities. The document reflects Bahrain's proposal to host a high-level regional conference on charities (Ref. B). According to Treasury's paper, the suggested outcomes of the conference could be: a) furthering the understanding of the terrorist financing risk through charities; b) discussing current approaches and best practices; and c) securing commitments to undertake specific steps as a way forward.

11.(C) Minister Al-Belooshi welcomed the paper and commented that the conference would foster improved oversight of charity fundraising. However, she suspected that NGO's would be "among the first to oppose it." Adding, "Already they are complaining that we monitor their financial transactions too closely." She said that her answer to such objections was to point out the risk of being victimized and subsequently smeared by fraudulent transactions. "You don't want anyone to put an X, on you." (Comment: Activists, complaints about the GOB's oversight of NGOs are indeed numerous. See Ref. A for an example.) ------------------ OTHER GOB MEETINGS ------------------

12.(C) While in Bahrain February 26, U/S Levey also met with Central Bank Governor Rasheed Al-Maraj, Foreign Minister Shaikh Khalid Bin Ahmed Al-Khalifa (Ref. B) and Minister of Justice Shaikh Khalid Bin Ali Bin Abdulla Al-Khalifa (Ref. C).

13.(U) Undersecretary Levey cleared this message. ********************************************* ******** Visit Embassy Manama's Classified Website: XXXXXXXXXXXX********************************************* ******** HENZEL

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