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 DJIBOUTI 001238 
 
SIPDIS 
 
STATE FOR AF/E AND INL 
 
JUSTICE FOR OIA AND AFMLS 
 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM KSEP PTER SNAR KTFN DJ
SUBJECT: DJIBOUTI - 2005-2006 
INTERNATIONAL NARCOTICS CONTROL STRATEGY 
REPORT INSTRUCTIONS PART II, FINANCIAL 
CRIMES AND MONEY LAUNDERING 
 
REF: STATE 210691 
 
Introduction 
------------ 
¶1.  Much of the information included in Post's 
2004-2005 report remains the same with the 
exception that Djibouti intends to have an 
operational Financial Intelligence Unit by February 
¶2006.  Djibouti is still the most stable country in 
the Horn of Africa.  It is a financial hub in the 
sub-region, thanks to its US dollar-pegged currency 
and its unrestricted foreign exchange.  Officials 
from the Central Bank indicate that there were no 
recent instances of money laundering.  The informal 
market remains important, and smuggled goods 
consist primarily of highly taxed cigarettes and 
alcohol.  The Djibouti Free Zone (DFZ), managed by 
Dubai's Jebel Ali Free Zone, has approved and 
delivered several licenses to companies mainly from 
Gulf Countries.  Djibouti is not considered an 
offshore financial center but offshore institutions 
are permitted, and even encouraged, to settle at 
the DFZ but Post is not aware of any existing 
offshore bank at the DFZ.  Two existing commercial 
banks handle the bulk of financial transactions. 
The remainder of the demand is met by a growing 
number of "hawalas."  The Central Bank makes 
efforts to monitor closely the activities of both 
the commercial banks and "hawalas." 
 
Anti-Money Laundering Legislation 
--------------------------------- 
¶2.  On February 22nd, 2001, Djibouti signed the 
United Nations International Convention against 
Illicit Traffic in Narcotic Drugs and Psychotropic 
Substances, which went into force on May 23rd, 
¶2001.  Legislation criminalizing the financing of 
terrorism, as requested by UN Security Council 
Resolution 1373, is included in the Anti-Money 
Laundering Law passed in December 2002 as Law No. 
196/AN/02/4emeL.  Drafted by the three-year-old 
National Committee on Terrorism, this document 
contains provisions for prevention of, and 
punishment for, money laundering. 
 
¶3.  The Anti-Money Laundering Law applies to 
financial institutions of all forms as well as 
professionals involved in financial matters. 
Regulated activities include money deposits, 
insurance, investment, real estate, casinos and 
entertainment.  The legislation also addresses 
international cooperation and allows for the 
freezing or seizing of assets in suspected 
terrorist finance cases.  The government regularly 
circulates the names of individuals and entities 
included on the UN 1267 sanctions committee's 
consolidated list.  The law also requires financial 
institutions to verify customer information, 
including current residence.  This verification 
process promotes rigorous transparency and strict 
control of transactions.  Furthermore, it imposes 
criteria for the following:  customer 
identification; communication of information; 
documentation related to international cooperation; 
surveillance procedures for suspect accounts; and 
legal protection of professional secrecy for 
individuals reporting suspect transactions. 
 
¶4.  Professionals convicted of facilitating money 
laundering or terrorist financing can face five to 
ten years in jail and a fine of DF 25 to 50 million 
($141,283 to 282,566).  A finance professional that 
fails to report suspect transactions is liable for 
fines ranging from DF 10 to 25 million ($56,513 to 
$141,283).  The Department of Treasury receives the 
proceeds of any assets seized or forfeited in 
terrorist financing cases. 
 
International Cooperation 
------------------------- 
¶5.  Djibouti has not officially reached an 
agreement with the United States government on 
money laundering, but Central Bank officials have 
repeatedly indicated they would fully cooperate if 
requested.  Djibouti has a formal, bilateral 
agreement with Ethiopia for exchange of information 
and extradition in money-laundering cases. 
Furthermore, the anti-money laundering legislation 
stipulates that Djibouti will cooperate with other 
countries by exchanging information, assisting in 
investigations, providing mutual technical 
assistance and facilitating the extradition process 
in money laundering cases.  In addition, the 
Central Bank plans to set up a small financial 
intelligence unit (FIU) in February 2006. 
 
Financial Intelligence Unit 
--------------------------- 
¶6.  The FIU will be housed within the Central Bank 
compound and staffed with the Central Bank senior 
employees who will come under the Governor's direct 
supervision.  The purpose of the FIU is to collect 
information on potential clandestine or criminal 
financial networks and to become the expert office 
on identifying money laundering.  The FIU may 
obtain any record or databank upon request from 
government entities or financial institutions.  It 
will perform analytical duties and assist the 
Ministry of Interior (Police) and the Ministry of 
Justice in any financial criminal investigation. 
The FIU may enter into agreement with foreign FIUs 
to share information if the foreign FIUs are bound 
by similar rules of confidentiality and secrecy. 
Finally, the FIU will provide guidance to the 
banking community in the fight against counterfeit 
money, including US bills. 
 
Comment 
------- 
¶7. Djibouti's money laundering and terrorist 
financing strategy took a positive step with the 
approval of the anti-money laundering legislation; 
however enforcement of this law remains a major 
challenge.  Though the government makes an effort 
to control all formal transaction points, a large 
number of informal "hawalas" escape central bank 
regulation but the FIU is expected to impose more 
control on "hawalas."  In addition, corrupt customs 
agents can be easily tempted to permit large 
amounts of money to come through the borders 
without any declaration.  Finally, there is a 
history of powerful, "untouchable" individuals 
protecting suspicious financial institutions.  As 
for the DFZ, post will monitor and report on any 
money laundering activities.  End Comment. 
 
RAGSDALE