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Cablegate: Mena Fatf Established to Combat Money Laundering

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 001835

SIPDIS

STATE FOR EB/ESC/TFS, S/CT, INL/C, IO/PHO, NEA/ARPI, EUR/PGI
TREASURY FOR JZARATE, DGLASER, AND OFAC

E.O. 12958: N/A
TAGS: ECON EFIN ETTC PREL PTER KTFN BA
SUBJECT: MENA FATF ESTABLISHED TO COMBAT MONEY LAUNDERING
AND TERRORISM FINANCING

1. (U) SUMMARY: The inaugural meeting of the MENA FATF held
on November 29 and 30 in Manama, Bahrain was attended by
Ministers of Finance and Central Bank Governors from fourteen
countries in the Middle East and North Africa. The ministers
selected a President, Vice President and Executive Secretary,
but postponed action on the work program until the first
Plenary in March 2005. In discussing the MOU, a conflict
over decision-making was resolved by increasing the size of a
quorum to three quarters and requiring consensus of those in
attendance at a Plenary for a decision. The US delegation
led by Treasury A/S Zarate held bilateral meetings with 11
countries during the conference. Zarate also met with
Bahraini Minister of Finance and National Economy Saif who
discussed the establishment, in Bahrain, of a special court
to try financial crimes cases. END SUMMARY.

2. (U) On November 29 and 30, in Manama, Bahrain, ministerial
delegations from fourteen Middle East and North Africa
nations attended the inaugural meeting of the Middle East and
North Africa Financial Action Task Force (MENA FATF). (Note:
FATF is an international body that sets standards and
promotes best practices on anti-money laundering and
combating the financing of terrorism (AML/CFT) issues. End
note) The meeting was attended by the Minister of Finance
and/or Central Bank Governor from Algeria, Bahrain, Egypt,
Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia,
Syria, Tunisia, UAE, and Yemen. There were also observer
delegations from Iraq, France, the GCC, the UK, IMF, World
Bank, FATF, and a US delegation headed by Assistant Secretary
of the Treasury, Juan Zarate. The US Delegation had
representatives from Treasury, OFAC, FinCEN, FBI, State EB
and INL, and Embassy Baghdad.

3. (U) The first day of the conference was a technical
session during which attendees quickly agreed on the
President, Vice President, and Executive Secretariat.
However, there was intense debate on the MOU over how
decisions for the body would be made. The discussion hinged
on the word for "consensus" in the Arabic translation of the
MOU that some parties argued be interpreted as "unanimous."
The USG delegation was concerned that with this
interpretation any party could passively block an initiative
by not acting and thereby deny unanimity. After some
wrangling, the group eventually agreed to a "consensus of all
members attending the Plenary Meeting" and increased the
necessary quorum from half to three-fourths of the total
members. In later discussions, Sultan Bin Nasser Al Suwaidi,
UAE Central Bank Governor, felt that the issue was not
critical and predicted that the internal group pressure would
keep the group from deviating from FATF principles.

4. (U) On the second day of the conference, the delegation
heads from the attending member nations ratified the
memorandum of understanding (MOU) to create the new body and
establish the secretariat in Bahrain. This was followed by a
press conference announcing the new organization's first
President, Vice President and Executive Secretary. The
group chose Dr. Muhammad Baasiri of Lebanon as the first
President, and Mahmoud Abdel Latif of Egypt as the first Vice
President to serve 1-year terms. Additionally, Adel Hamad Al
Qulish of Saudi Arabia will act as the Executive Secretary
for a four-year term. They also announced that the first
plenary meeting would be held no later than the end of March
2005 in Lebanon. The only item not agreed upon, or even
discussed at the meeting was the work program for the MENA
FATF - this will be the primary discussion at the upcoming
plenary.

US/ME & NA Bilateral Meetings on AML/CFT

5. (U) During the two-day conference, the US delegation met
with representatives from Syria, Jordan, Lebanon, Oman, Iraq,
Kuwait, Egypt, Yemen, Qatar, UAE, Algeria, and Bahrain. They
also held a trilateral meeting with Syria, Iraq and the
United States. During the bilateral meetings, the US
delegation addressed implementation of money laundering and
terrorism financing regulations and inquired about the
problem of cash couriers and how the countries were
regulating this possible loophole. (Note: The meetings with
Syria, Jordan, Kuwait, and UAE, are addressed in Septels. End
note.)

Kudos to the Bahrainis

6. (U) On December 1, A/S Zarate and Charge met with Abdullah
Hassan Saif, Minister of Finance and National Economy, and
Sheikh Hamad Bin Khalifa Al Khalifa, the Governor of the
Bahrain Monetary Agency. Zarate congratulated the Minister
on the success of the MENA FATF inaugural and on his
leadership in bringing about this new regional body. Saif
felt the new organization was a vote of confidence for
Bahrain,s efforts in AML/CFT issues.

7. (U) Saif also indicated that Bahrain was working to
establish a special court to try financial crimes and that
they had already sent some judges to training courses on
financial crimes. When Zarate brought up new Section 311
authority created by the USA PATRIOT Act, Saif recommended
that instead of using this unilateral tool the USG should
provide countries with the necessary information and let them
take steps to correct any problems. Specifically Saif said
that they would take the action if there was any issue in
Bahrain.

8. (U) Comment. MENA FATF is a significant development for
the region. As a FATF styled regional body, it will promote
best practices on AML/CFT issues, do mutual evaluations of
its members against the FATF standards, and work with its
members to comply with international standards and measures.
The MENA region has been slow to loosen banking secrecy laws,
adopt proper compliance systems, and is seen as a haven for
terrorism financing. Therefore, the creation of the MENA
FATF is critical for pushing the Middle East and North
African region to improve the transparency and regulatory
frameworks of their financial sectors. However, the real
success of the MENA FATF will be if it can get its members to
implement and enforce the new laws and regulations.

MONROE

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