VZCZCXRO9874
PP RUEHDE
DE RUEHAD #0440/01 0391300
ZNY CCCCC ZZH
P 081300Z FEB 06
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC PRIORITY 3480
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNFB/FBI WASHINGTON DC
RUEAIIA/CIA WASHDC

C O N F I D E N T I A L SECTION 01 OF 03 ABU DHABI 000440 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB (A/S WAYNE), EB/ESC/TFS (JSALOOM), NEA/ARPI 
(RSMYTH) 
TREASURY FOR U/S LEVEY, PHEFFERNAN, RLEBENSON 
FBI FOR FWAIKART, MMOREHART, JHERRING 
CIA FOR CTC/FINO 
 
E.O. 12958: DECL: 08/13/2015 
TAGS: PTER KTFN AE
SUBJECT: U/S LEVEY DISCUSSES DUBAI CHARITY REGULATIONS, DIFC 
 
REF: A. ABU DHABI 409 
     ¶B. 05 ABU DHABI 2741 
 
Classified By: AMBASSADOR MICHELE J. SISON FOR REASONS 1.4 B & D. 
 
¶1. (C) Summary.  During Undersecretary Stuart Levey's trip to 
the UAE, Levey and his delegation met with the Dubai 
Department of Islamic Affairs and Charitable Organizations 
(DDIA) to discuss charity oversight in Dubai.  DDIA explained 
that charities can be licensed to operate in an individual 
emirate without receiving a license from the federal Ministry 
of Labor and Social Affairs.  The DDIA officials also 
explained that they work with Dubai's security services to 
vet employees and board members of charities in Dubai.  They 
explained that they are most concerned about ensuring that 
Dubai-based charities' international contributions do not go 
to illegitimate purposes, and they indicated that it is 
possible for charities to transfer funds abroad without going 
through one of the three "government approved charities" as 
long as the charities secure the permission of the DDIA.  U/S 
Levey also met with officials from the Dubai Financial 
Services Authority to discuss the regulation of the Dubai 
International Financial Center.  Noting that the reputation 
of the DIFC is vulnerable to what happens in the UAE banking 
system, DFSA officials stressed their desire to cooperate 
with the United States and international financial 
institutions.  The JTFCC meeting is reported in Ref A. End 
summary. 
 
Dubai Charity Regulator - What It Does, What It Doesn't Do 
--------------------------------------------- ------------- 
 
¶2. (SBU) On January 25, U/S Levey and his delegation met with 
Chairman of the Dubai Department of Islamic Affairs and 
Charitable Organizations (DDIA), Hamad Al Shibani, and Deputy 
Director General Sami al Gargash to discuss the way charities 
in Dubai are regulated.  In addition to the Treasury 
Delegation, FBI TFOS Chief Michael Morehart and FBI Special 
Advisor to the NSC Frank Waikurt, were in attendance. 
 
¶3. (C) The DDIA licenses, audits, and develops charities in 
Dubai.  Currently, there are 10 charities licensed by DDIA, 
and they must renew their licenses annually.  Al Gargash 
noted that one of the 10 charities is the combined Dubai Aid 
City/Dubai Humanitarian City, and he explained that DDIA is 
in the process of determining how to monitor the charities 
operating in Dubai's charity free zone.  He explained that, 
since international charities operate in the free zones, 
there is no easy way to regulate their activities.  "We worry 
about where the money goes, but we do not know how to address 
it yet." 
 
¶4. (C) Al Gargash provided an overview of the intersection 
between UAE federal law governing charitable organizations 
and emirate-level laws.  He said that Federal Law #6 of 1974 
governs all NGOs, but each emirate can create its own laws 
for local charities.  Charities established and licensed by 
the individual emirate do not fall under the guidelines of 
the federal law.  Only charities licensed by the MLSA fall 
under the requirements of the federal law (ref B).  A charity 
licensed federally by the UAE Ministry of Labor and Social 
Affairs (MLSA) must also get a license from the DDIA in order 
to operate in the emirate of Dubai.  Likewise, a charity 
licensed by DDIA must have an MLSA license to operate in any 
emirate outside of Dubai.  Al Gargash also said that social 
organizations (for example, an NGO for the handicapped) are 
licensed by the Ministry of Labor.  He said that if they want 
to raise money in Dubai, then they must first get a license 
from DDIA for that specific fundraising activity. 
 
¶5. (C) Al Gargash noted that DDIA's main concern is working 
to be sure that charities, activities abroad are legitimate. 
 He explained that the UAEG's oft-touted requirement that 
charities funnel international donations through one of three 
government approved charities is not strictly applied.  He 
said that DDIA asks charities to tell them which charities 
they are working with abroad but that as long as they consult 
with DDIA in advance, Dubai charities may work (and send 
money) internationally. Al Gargash was open that monitoring a 
charity's books cannot ensure that funds are not committed to 
illegitimate causes, and as such, DDIA relies on the security 
services to help confirm the legitimacy of a given foreign 
charity.  He also said that the SSO checks the names of all 
 
ABU DHABI 00000440  002 OF 003 
 
 
charity employees and board members to be sure that none have 
objectionable connections.  In the last 3 years, the security 
services have reported only 1 case to the DDIA of 
objectionable activity.  Al Gargash said that the charities 
provide the DDIA with minutes from the board meetings and 
reports that document how the charity's money is disbursed. 
The Dubai Ruler's Office conducts an annual audit of each of 
the charities and submits the report to the DDIA. 
Additionally, charities must renew their licenses annually. 
 
¶6. (C) In response to a question from U/S Levey about Islamic 
Law, Al Gargash said that it is perfectly acceptable for the 
DDIA to know the identity of the donor (even if the recipient 
does not know).  Al Gargash also said that the DDIA is 
working with Dubai e-Government to create a database that 
will electronically track all charitable programs and 
donations in Dubai.  In addition to serving as an oversight 
and auditing tool for DDIA, charities will have the ability 
to search the database to see if a donor has contributed to 
other charities. 
 
¶7. (C) Al Gargash and Al Shibhani were very responsive to the 
questions and comments of U/S Levey's team, and they 
indicated they would be more than willing to check the OFAC 
list of designated individuals and entities when charities 
contribute to international charities.  OFAC Attache Jason 
Beal will provide the DDIA with a copy of the OFAC list.  U/S 
Levey also passed Al Gargash a Treasury document on voluntary 
best practices for U.S.-based charities. 
 
Dubai Financial Services Authority - DIFC's Regulator 
--------------------------------------------- -------- 
 
¶8. (C) U/S Levey and the Treasury team met with 
representatives from the Dubai Financial Services Authority 
(DFSA), which regulates the Dubai International Financial 
Center (DIFC) (Dubai's Financial Free Zone).  In attendance 
were Nial Coburn, Director of Enforcement, Jane Coakley, 
Managing Director of Authorization, Marc Hambach, Associate 
Director of Supervision, and Joyce Maykut, General Council. 
DFSA officials stressed their desire to cooperate with the 
United States and international financial institutions, and 
they explained that the DFSA has provided information to the 
UK's Financial Services Authority and the U.S. Department of 
Homeland Security. 
 
¶9. (SBU) Hambach gave a background of the DFSA's regulatory 
regime, as it relates to AML/CTF procedures for the 14 firms 
that are presently authorized to operate in the DIFC.  With 
respect to federal law, all UAE criminal laws apply to the 
DIFC, but it is exempt from commercial and civil UAE law. 
Hambach stated that the DFSA examined the FATF's Special 
Recommendations, the Patriot Act, and other international 
regulatory frameworks to select the best guidelines for the 
DFSA's AML/CTF compliance regime.  In response to Policy 
Advisor Rachel Lebenson's question about how DFSA interprets 
the applicability of the FATF recommendations in its free 
zone, Hambach said he would be more than willing to consult 
with the U.S. Department of Treasury as to how the 
recommendations fit into the environment of the DIFC. 
 
¶10. (C) Clients must have $1 million liquid assets in order 
to operate in the DIFC.  Coburn reported that only one firm 
in the DIFC has filed a suspicious transaction report (STR) 
with the UAE's Anti Money Laundering and Suspicious Cases 
Unit (AMLSCU).  Out of concern that only one STR had been 
filed, he said that the DFSA recently conducted an STR review 
to be sure that the firms were appropriately applying the 
AML/CFT procedures.  As a part of this review, the DFSA 
provided additional AML education to the firms.  Hambach 
noted that if DFSA comes across suspicious activity, it can 
ask the firm to file an STR.  If the firm does not comply, 
DFSA has the authority to file it themselves.  He told the 
delegation that firms submit the STRs to the AMLSU, and that 
they are required to copy the DFSA.  Coburn also stressed 
that if DFSA discovers that an account is being investigated, 
the DFSA would notify the Central Bank that it intends to 
freeze the account.  Under its law, the DFSA has the 
authority to freeze accounts as long as the investigation is 
underway, or as long as the judge authorizes the freeze. 
 
¶11. (C) The DFSA regulators are aware that the reputation of 
the DIFC is vulnerable to any problems in the UAE banking 
 
ABU DHABI 00000440  003 OF 003 
 
 
system.  The DFSA representatives reported their concern that 
the Emiratis conducting AML/CFT investigations simply do not 
have the requisite skill sets to carry out their duties, 
which was a matter, ultimately, of political will.  "We face 
reputational risks, because if money laundering occurs across 
the street at the Bank of Dubai, no one internationally will 
know the difference between them and DIFC."  For this reason, 
the DFSA believes it is in their interest that the UAE 
authorities (including the Central Bank) do all they can to 
protect the UAE's system against money laundering and terror 
finance.  In this vein, the DFSA wanted to participate in the 
MENA/FATF, but Hambach said that UAE Central Bank prevented 
them from doing so.  Coburn observed that fixing the problems 
will require instructions coming from the top.  "The 
leadership needs to give the authority for interagency 
cooperation."  U/S Levey suggested that the DFSA use its 
channels within the government to raise its concerns about 
the importance of the UAE,s AML reputation. 
SISON