Cablegate: Menafatf November 2009 Beirut Lebanon Plenary

DE RUEHLB #1353/01 3621520
R 281520Z DEC 09



E.O. 12958: N/A

1. (SBU) Summary: The Middle East and North Africa Financial
Action Task Force (MENAFATF) held a plenary session (MENAFATF
X) and working group meetings from November 8-12 at the
Riviera Hotel in Beirut. Treasury Terrorist Financing and
Financial Crimes Director for Global Affairs Brian Grant
headed the U.S. delegation, and the terror finance reporting
officer from US Embassy Beirut attended. During this
Plenary, the MENAFATF adopted the mutual evaluation (ME)
report of Lebanon and the follow-up reports of Tunisia,
Mauritania, Syria, and Morocco; adopted the second MENAFATF
strategic plan for 2010-2012 and the 2010 work plan;
discussed concerns related to member countries that are late
in paying their contributions and appropriate mechanisms to
address this issue; discussed details for a second
ministerial meeting; discussed the MENAFATF,s review of the
Arab Interior Ministers Council,s draft indicative
anti-money laundering/countering the financing of terrorism
(AML/CFT) law; adopted the Mutual Evaluation Working Group,s
(MEWG) revised follow-up process, the updated schedule for
MENAFATF country mutual evaluations and the revised mutual
evaluation procedures; adopted the Technical Assistance and
Typologies Working Group (TATWG) reports and approved the
proposal to form a MENAFATF Financial Intelligence Unit (FIU)
Forum; and, discussed the joint MENAFATF-FATF Plenary
scheduled for February 2010. End summary.


2. (SBU) The Plenary discussed and adopted the
MENAFATF-drafted ME of Lebanon. The evaluation was conducted
using the FATF 2004 Methodology and summarizes the AML/CFT
measures in place in Lebanon at the time of the on-site visit
(February 2009). Lebanon received a rating of either
compliant (C) or largely compliant (LC) on 23 out of 49
Recommendations and received ratings of either partially
compliant (PC) or non-compliant (NC) on 26 of the
Recommendations. During the face-to-face meetings the day
before the Plenary, Lebanon received upgrades on
Recommendations 25 (from PC to LC) and 26 (from PC to LC).

3. (SBU) During the Plenary discussions, Lebanon argued
for upgrades on:

Recommendation 23: Lebanon received a PC on Recommendation 23
(adequate supervision and regulation of financial
institutions and ensuring that they implement the FATF
recommendations) because of the failure to adequately monitor
the insurance sector with regard to money laundering (ML) and
terrorist financing (TF). Lebanon explained that the
insurance sector is subject to AML/CFT supervision by the
Special Investigation Commission's (SIC (Lebanon's FIU))
Compliance Unit; however, there have been no on-site visits
because the sector is low-risk, constituting less than one
percent of financial operations in Lebanon. Though Lebanon
was unable to provide an official assessment, it noted that
only 11 out of the 54 insurance firms in Lebanon provide life
insurance. The assessment team had not received any
information related to either the prudential or ML/TF-related
monitoring of the insurance sector before the Plenary.
Regardless of the additional information, the team noted that
given the SIC,s lack of explicit legal authority to
investigate TF in the financial sector (including insurance),
the PC grade should remain. The MENAFATF Plenary agreed,
however, to support an upgrade from PC to LC on
Recommendation 23.

Special Recommendation VI: Lebanon received a PC on SR VI
(licensing and registering alternative remittance providers,
and subjecting them to the FATF recommendations). Lebanon
argued against the assessment team's observation that Lebanon
lacks effectiveness in implementing SR VI by noting that the
reason sanctions have not been imposed on this sector is
because there have been no violations and because the money
service business sector in Lebanon is very small (9
authorized companies). The team explained that the rating
for SR VI is also related to cross-referencing the ratings on
the recommendations for preventive measures (4-LC; 5-PC;
6-NC; 7-NC; 8-NC; 9-PC; 13-PC; 15-PC; 21-NC; 22-PC), which
affected Lebanon,s PC rating for SR VI. The Plenary agreed
to support the assessment team, but to also include a note in
the margins of the report explaining how the ratings of the
other recommendations affected the rating for SR VI. Lebanon
did not receive an upgrade on this recommendation.


4. (SBU) Follow-up Report of Tunisia: The Secretariat

BEIRUT 00001353 002 OF 004

explained that Tunisia has addressed many of the deficiencies
highlighted in its 2007 ME through new and amended
legislation and relevant circulars and resolutions.
Tunisia,s recently amended AML/CFT law accomplishes the
following: 1) extends the scope of persons subject to the
law; 2) imposes specific obligations on non-banking
institutions related to updating data and obtaining
information on the purpose and nature of a business
relationship; 3) imposes explicit obligations with regards to
politically exposed persons (PEP); 4) imposes obligations on
all institutions regarding the application of customer due
diligence (CDD) measures; 5) extends the definition and
identifies obligations related to verifying the identity of
beneficial owners; 6) distinguishes between unusual and
suspicious transactions and creates a new obligation to
report attempts to perform suspicious transactions; 7)
ensures that CTAF employees (Tunisia,s FIU) work
independently from their original departments/agencies; and,
8) establishes measures and procedures to freeze funds in
implementation of relevant United Nations Security Council
Resolutions (UNSCR).

5. (SBU) The Secretariat highlighted that there continue
to be some deficiencies in Tunisia,s AML/CFT regime.
Namely, Tunisia has not yet established a system for mutual
legal assistance related to confiscating and freezing funds
of criminals, Tunisia has not fully ensured the independence
and autonomy of the CTAF, and it has not regulated financial
institutions with regards to identifying the source of funds
that are electronically transferred. Given the Plenary,s
interest in a detailed analysis of the recently amended
AML/CFT law and subsequent implementation, it was decided
that Tunisia would submit a second follow-up report in two
years. The report was adopted.

6. (SBU) Second Follow-up Report of Mauritania: Mauritania
had submitted its first follow-up report in May 2009, which
had indicated that major gaps remained in Mauritania,s
AML/CFT regime since its 2005 ME, including: 1) failure to
criminalize TF attempts; 2) no guidance with regards to
transactions with residents of countries that do not
implement the FATF recommendations; 3) no obligation for
designated non-financial businesses and professions (DNFBP)
to implement CDD measures or keep records; 4) no system to
freeze and confiscate assets of individuals and entities
listed under relevant UNSCRs; 5) no instructions to the
moneychanger and insurance sectors on how to implement
AML/CFT controls; 6) no instructions related to using third
parties; 7) no requirement for CDD procedures for PEPs; 8) no
guidance related to obtaining information for wire transfers;
9) no monitoring of alternative remittance providers or the
non-profit sector in the context of AML/CFT.

The Secretariat noted that these deficiencies remain.
Mauritania explained that it is currently working on issuing
guidance/rules and relevant legislation related to enhanced
CDD, PEPs, correspondent banking and unusual transactions,
alternative remittance providers, and wire transfers. Given
the remaining deficiencies and Maurtania,s ongoing progress,
the Plenary decided that Mauritania would submit another
report to the May 2010 Plenary. The Plenary also urged
Mauritania to expedite the issuance of relevant legislation
and regulations. The report was adopted.

7. (SBU) Follow-up report of Syria: Syria had submitted
its first follow-up report in May 2009, which had indicated
that major gaps remained in Syria,s AML/CFT regime since its
2006 ME, including: 1) deficiencies regarding the ML and TF
offenses; 2) deficiencies regarding suspicious transaction
reporting related to ML and TF; 3) no legislation obligating
financial institutions to apply CDD; 4) failure to obligate
DNFBPs to implement AML/CFT controls; and, 5) no official
declaration/disclosure system for cross-border currency and
the movement of negotiable instruments.

The Secretariat noted that since its last follow-up report,
Syria has established a declaration system for liquid funds
and bearer financial instruments as well as an oversight
mechanism for money exchangers. Additionally, Syria issued
guidance related to brokers and clients and placed AML/CFT
controls on securities transactions. Syria also noted that
it has worked with the IMF and World Bank to draft a new
decree that would amend the current AML/CFT law and that
would remedy many of the deficiencies highlighted in Syria,s
2006 ME. This law should be passed soon and before the May
2010 Plenary. Given the Plenary,s interest in an analysis
of this law, it was decided that Syria would submit another
follow-up report to the May 2010 Plenary. The Plenary also
urged Syria to expedite the issuance of the draft decree.
The report was adopted.

BEIRUT 00001353 003 OF 004

8. (SBU) Follow-up report of Morocco: In its presentation,
the Secretariat noted that Morocco has addressed some of the
deficiencies identified in its 2007 ME. Notably, Morocco
established an FIU (the UTRF), which began operating in April
2009 and has issued several decisions/materials. In
addition, the Central Bank of Morocco issued a circular
detailing CDD obligations for credit institutions and
established cooperative agreements with the Central Bank of
Tunisia and the Central Bank for Western African Countries.
The Secretariat noted that Morocco is in the process of
revising its penal code and has prepared draft legislation
related to the supervision of capital markets and the
insurance sector, as well as a draft law amending the current
AML law.

The Secretariat explained that major deficiencies remain, in
particular with regard to: 1) obligating financial
institutions to report ML attempts; 2) establishing
obligations related to due diligence measures when verifying
the customers, identity, revoking the limitation of unusual
and complex transactions to a minimum threshold and doing
business with PEPs; 3) extending the scope of entities
subject to the AML law and requiring those entities to
establish internal AML/CFT controls; 4) forbidding financial
institutions to establish or continue correspondent
relationships with shell banks; 5) providing feedback to
financial and non-financial institutions; 6) reporting
suspicious transactions; 7) lack of a legal system to freeze
funds and properties of persons listed in relevant UNSCRs; 8)
not including DNFBPs in AML/CFT legislation; and, 9) no
declaration or disclosure system for cross-border currency
and the movement of financial instruments. Morocco noted
that the draft law that would amend the current AML law would
correct these deficiencies. Given these deficiencies and
Morocco,s ongoing work to pass relevant legislation, the
Plenary decided that Morocco would submit another follow-up
report to the May 2010 Plenary. The report was adopted.


9. (SBU) Contributions of Member Countries: The Plenary urged
MENAFATF member countries that are late in paying their dues
to immediately do so. With regards to establishing a system
to address member countries that are late in paying their
dues, the Plenary approved the formation of a strategic
reserve out of the MENAFATF,s budget surplus. If the
reserve is not able to accumulate enough funds, the Plenary
will consider asking member states to add an additional five
percent of their dues to their annual contributions. Given
the number of comments and concerns raised by member
countries, the Plenary decided to raise this issue again at
the next Plenary meeting.

10. (U) Second Strategic Plan for 2010-2012 and the MENAFATF
2010 Work Plan: The Plenary decided to adopt the second
strategic plan for 2010-2012 as well as the MENAFATF 2010
work plan. Member countries voiced their concerns about the
amount of resources the two plans may commit given the
MENAFATF,s limited budget.

11. (SBU) Proposal to hold a Ministerial Meeting: It was
agreed that the Secretariat would propose a tentative date
and prepare a draft agenda for the Ministerial meeting for
discussion at the Plenary meeting in Tunisia in May 2010.
The Plenary also decided that each member country would
confirm the potential participation of its Ministers, Central
Bank Governors, and Presidents of National AML/CFT Committees.

12. (U) MENAFATF Remarks on the Indicative Arab AML/CFT Law:
The Plenary decided to send the Plenary,s concerns and the
Secretariat,s comments on the Arab Justice Ministers
Council,s &Indicative Arab AML/CFT Law8 to the Arab Center
for Legal and Judicial Research (affiliated with the Arab
Justice Ministers Council). This law is meant to serve as
guidance to MENA countries when establishing or implementing
their own AML/CFT laws. The Secretariat,s suggested edits
to the indicative law help place it in compliance with
international standards.

13. (U) Mutual Evaluation Working Group Items: The Plenary
adopted and agreed to immediately implement a revised
follow-up process. It was also decided that an
intercessional meeting would be held to finalize the review
of mutual evaluation procedures for discussion and approval
at the next Plenary.

14. (U) Timeline of the Mutual Evaluation Process: The
updated schedule of MENAFATF country mutual evaluations was

BEIRUT 00001353 004 OF 004

approved. The ME of Oman will be postponed (date of on-site
visit to be determined) and will be presented at the May 2011
Plenary. The ME of Kuwait will now be led by the IMF (date
of on-site visit to be determined) and will also be presented
at the May 2011 Plenary. The ME of Saudi Arabia will be
discussed at the May 2010 Plenary. Upcoming on-site visits
include Algeria (December 2009 ) to be presented in October
2010) and Sudan (June 2010 ) to be presented in May 2011).
The FATF expressed concern with the new timeline for mutual
evaluations, given the number of postponed MEs and with the
timing for discussion of the Saudi ME. FATF urged the
Secretariat/Plenary to schedule the discussion for the
MENAFATF-FATF Joint Plenary in February 2010. FATF also
explained to the MENAFATF that should it decide to discuss
the Saudi ME later than the joint Plenary, formal
notification to the FATF Secretariat would be required.

15. (SBU) Technical Assistance & Typologies Working Group
(TATWG): With regards to the development of a MENAFATF
"technical assistance provision mechanism," the Plenary
agreed that each member country would indicate its TA needs
for the 2010-2012 period on a matrix. Member countries will
receive this matrix from the Secretariat shortly and will
have three months to send their information. Once the matrix
is filled in, the Secretariat will coordinate bilateral
meetings between member countries and TA providers to discuss
TA and training opportunities.

16. (SBU) Report on the Law Enforcement Agencies (LEA)
Seminar: The Plenary adopted the TATWG,s report on the LEAs
Seminar held in Manama, Bahrain, on May 21, 2009, and decided
that the MENAFATF should hold regular LEA seminars in order
to help monitor member countries, improvements in the LEA
sector and to provide opportunities for member countries to
discuss their experiences and best practices.

17. (U) World Bank/MENAFATF Workshop on "risk-based AML/CFT
supervision": The Plenary agreed to hold a World
Bank/MENAFATF workshop on the risk-based approach on the
margins of the MENAFATF Plenary in Tunisia in May 2010.
Member countries and observers will be sent an agenda and an
invitation to attend and to nominate speakers for the
workshop shortly.

18. (U) Typologies: The Plenary agreed to nominate
individuals to participate in a typologies workshop to be
held in Qatar from January 10-11 on "ML/TF Trends and
Indicators." The Plenary also agreed to have the Secretariat
organize a second assessors training (date and location to be

19. (U) Proposal on Forming a MENAFATF FIUs Forum: The
Plenary agreed to establish a forum in which the FIUs of the
MENA region could discuss current ML/TF trends, concerns, and
experiences and how to enhance their roles in their
respective jurisdictions. The first of these forums will
take place on the margins of the MENAFATF Plenary in Tunisia
in May 2010.

20. (SBU) First Private Sector Dialogue (PSD): The MENAFATF
President and Executive Secretary held the first MENAFATF PSD
with private sector representatives from MENAFATF Member
countries the day after the Plenary meeting (November 12).
Unlike the previous US-MENA PSD, MENAFATF members and
observers are not invited to participate in this dialogue,
the goals of which are to raise awareness and exchange ideas
regarding AML/CFT issues of concern and implementation of
AML/CFT controls.

21. (SBU) Joint MENAFATF-FATF Plenary: It was confirmed that
there would be a joint MENAFATF-FATF Plenary ("Meeting") in
Abu Dhabi, UAE, from February 15-19, 2010. The FATF
expressed its concerns about the joint Plenary and reminded
the MENAFATF that it needed to be a joint Plenary and not a
joint Meeting (the MENAFATF Secretariat continued to use this
term). After much deliberation, the MENAFATF agreed that the
first day would be a joint MENAFATF-FATF Plenary and that the
remainder of the week would only be a FATF Plenary (based on
the format for the APG-FATF joint Plenary). The MENAFATF
Secretariat will continue to discuss details of the Plenary
with the FATF Secretariat.

22. (U) The next MENAFATF Plenary meeting will be held the
week of May 2-6, 2010, in Tunisia.

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