Cablegate: Yemen 2004-2005 Inscr Report

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 SANAA 003155

SIPDIS

STATE FOR INL AND NEA/ARP ROBERTS
JUSTICE FOR OIA AND AFMLS
TREASURY FOR FINCEN

SENSITIVE

E.O. 12958: N/A
TAGS: ECON SNAR PTER KSEP KCRM YM TERFIN ECON COM
SUBJECT: YEMEN 2004-2005 INSCR REPORT

REF: SECSTATE 254401

1. (SBU) SANAA'S UPDATE FOR THE 2004-2005 INTERNATIONAL NARCOTICS
CONTROL STRATEGY REPORT (INSCR) IS AT PARA TWO. COMMENT: SANAA
NOTES NO SIGNIFICANT PROGRESS IN IMPLEMENTING THE 2003 MONEY
LAUNDERING LAW, AND HAS TAKEN NO ACTION ON ENFORCING THE UNSCR
1267 SANCTIONS ON ABDUL MAJID ZINDANI. END COMMENT.

2. (U) The Yemeni financial system is not yet well developed.
Thus, the extent of money laundering is not known. The prevalence
of hawala makes Yemen vulnerable to money laundering, although
they are technically subject to limited monitoring by the Central
Bank of Yemen (CBY). The banking sector is relatively small with
17 commercial banks, including four Islamic banks. The Central
Bank of Yemen (CBY) supervises the country's banks. Local banks
account for approximately 62 percent of the total banking
activities, while foreign banks cover the other 38 percent.
Yemen is a founding member of the Middle East and North African
Financial Action Task Force MENA_FATF established this year in
Bahrain.
Yemen's parliament passed a comprehensive anti-money laundering
legislation in April 2003. The legislation criminalizes money
laundering for a wide range of crimes, including narcotics
offenses, kidnapping, embezzlement, bribery, fraud, tax evasion,
illegal arms trading, and money theft, and imposes penalties of
three to five years of imprisonment. There is no specific
legislation relating to counterterrorist financing in Yemen. But
terrorism is covered in various pieces of legislation that treat
terrorism and its financing as serious crimes. As of 2004 no
significant changes or additions have been made to the anti-money
laundering legislation and no persons have been prosecuted for
money laundering. The Anti-money Laundering Committee prepared
the draft executive bylaws, which have been forwarded to the
cabinet for approval. - The committee prepared an anti-money
laundering procedural directory, which will be distributed to all
public and private financial institutions. The directory explains
how to monitor and control laundering cases. The April 2003 law
requires banks, financial institutions, and precious commodity
dealers to verify the identity of persons and entities that
desire to open accounts or deal with them, to keep records of
transactions for up to ten years, and to report suspicious
transactions. In addition, the law requires that reports be
submitted to an information-gathering unit within the CBY. The
unit acts as the financial intelligence unit (FIU), which in turn
will report to the Anti-Money Laundering Committee (AMLC). The
AMLC is composed of representatives from the Ministries of
Finance, Justice, Interior, and Industry and Commerce, the CBY,
and the board of banks, and is authorized to issue regulations
and guidelines and provide training workshops related to
combating money laundering efforts.
The CBY conducted several training workshops on the new
legislation in 2003 and 2004. The law grants the AMLC the right
to exchange information with foreign entities. The head of the
committee can ask local judicial authorities to enforce foreign
court verdicts based on reciprocity. Also, the law permits the
extradition of non-Yemeni criminals in accordance with
international treaties or bilateral agreements.
Prior to passage of the anti-money laundering law, in April 2002,
the CBY issued Circular 22008, informing banks and financial
institutions that they must verify the legality of all proceeds
deposited in or passing through the Yemeni banking system. The
circular stipulates that financial institutions must positively
identify the place of residence of all persons and businesses
that establish relationships with them. The circular also
requires that banks verify the identity of persons or entities
that wish to transfer more than $10,000 through banks at which
they have no accounts. The same provision applies to
beneficiaries of such transfers. Banks must also take every
precaution when transactions appear suspicious, and report such
activities to the CBY. The circular was distributed to the banks
along with a copy of the Basel Committee's "Customer Due
Diligence for Banks," concerning "Know Your Customer" procedures.
In 2003, DHS/ICE agents in New York conducted an investigation of
a company suspected to be involved in the smuggling and
distribution of pseudoephedrine. The investigation disclosed
employees at the business were sending a large number of
negotiable checks to Sanaa, Yemen. Analysis of the documents
seized as a result of search warrants and bank records revealed
that the suspects had also wire transferred money to an
individual with suspected ties to the al-Qaida organization. ICE
agents also initiated an investigation pursuant to an outbound
seizure of suspected hawala generated funds seized en-route to
Yemen, concealed in jars of honey. The investigation disclosed
that the courier, and the reputed owner/broker of the funds, was
actively involved in a hawala network.
In response to UNSCR 1267/1390/1452 and Yemen's Council of
Ministers' directives, CBY issued a number of circulars to all
banks operating in Yemen, directing them to freeze accounts of
144 persons, companies, and organizations, and to report any
finding to CBY. As a result, one account was immediately frozen
with a balance equal to $33. In September 2003, the CBY issued
Circular No. 75304 containing a consolidated list of all persons
and entities belonging to al-Qaida (182) and the Taliban (153).
The ROYG did not issue the circular again in 2004.
A law was passed in 2001 governing charitable organizations. This
law entrusted the Ministry of Pensions and Social Affairs with
overseeing their activities. The law also imposes penalties of
fines and/or imprisonment on any society or its members convicted
of carrying out activities or spending funds for other than the
stated purpose for which the society in question was established.
Yemen is a party to the 1988 UN Drug Convention and has signed,
but not yet ratified, the UN Convention against Transnational
Organized Crime. Yemen is a party to the Arab Convention for the
Suppression of Terrorism.
Yemen is making progress in enforcing its domestic anti-money
laundering program While passage of the 2003 law was a first
step, development of the FIU and international cooperation with
criminal investigations are still in the development stage. Since
the February 2004 designation of Sheikh Abdul Majid Zindani by
the United Nations under UNSCR resolution 1267 the ROYG has made
no known attempt to enforce the sanctions. The CBY is still
organizing its enforcement mechanism. Its effectiveness will
demonstrate the authorities' commitment to ending money
laundering. Yemen should also examine the prevalence of
alternative remittance systems such as hawala and trade-based
money laundering. As a next step, Yemen should also enact
specific legislation with respect to terrorist financing and
forfeiture of the assets of those suspected of terrorism. Yemen
should become a party to the UN International Convention for the
Suppression of the Financing of Terrorism.

End Text.

Krajeski

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