VZCZCXRO1255
PP RUEHDBU RUEHIK RUEHPW RUEHYG
DE RUEHBUL #1931/01 1620943
ZNR UUUUU ZZH
P 110943Z JUN 07
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8642
INFO RUEATRS/DEPT OF TREASURY WASH DC PRIORITY
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 4156

UNCLAS SECTION 01 OF 02 KABUL 001931 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA/FO, SCA/RA, AND SCA/A 
DEPT FOR EB/ESC/TFS:LCANNON, S/CT:PHILL, AND IO/PSC:JSANDAGE 
NSC FOR AHARRIMAN 
CENTCOM FOR CG CFC-A 
TREASURY PASS TO LMCDONALD, ABAUKOL, BDAHL, AND JDUVIVIER 
OSD FOR SHIVERS 
 
E.O. 12958 N/A 
TAGS: EFIN ETTC PTER SNAR KCRM ECON AF
SUBJECT: MORE HAWALA CLOSINGS; LICENSE APPLICATIONS UP 
 
(U) This cable contains SENSITIVE BUT UNCLASSIFIED information. 
Please protect accordingly. 
 
1.(SBU) SUMMARY:  The newly formed Central Bank enforcement team 
recently closed five money service provider (MSP) shops in Kabul's 
main hawaladar market.  Pressure from the Hawala Association caused 
two of the five to be released immediately.  The enforcement team 
seized the books of the three that were not released, but the books 
were not held long enough for detailed investigations.  However, the 
Central Bank received 70 applications for MSP licenses after the 
enforcement actions.  If approved, the number of licensed MSP 
operations in Kabul's main hawaladar market will approach 100 out of 
an estimated 305.  This is a strong and positive signal that the 
Central Bank is taking seriously its obligations to license and 
monitor hawaladar activity. 
END SUMMARY. 
 
 
¶2. (SBU) During the week of May 21, the Central Bank enforcement 
team initiated its first campaign against unlicensed hawaladars. 
The team consists of one representative from the Attorney General's 
Office, two from the Ministry of Interior (MOI), one from the 
Central Bank's Supervision Department, and an intermittent observer 
from the Financial Intelligence Unit (FIU).  (NOTE:  The Central 
Bank Governor has authorized the FIU to hire a law enforcement 
liaison, perhaps on detail from the MOI, who would provide more 
support in this area.  END NOTE.)  Inspections in the hawaladar 
market revealed two currency exchangers who were also providing 
MSP/hawaladar services.  Both were closed.  However, a delegation 
led by the Hawala Association President successfully pressured the 
Central Bank First Deputy Governor Ibrahimi to re-open the shops 
that same day. 
 
¶3. (SBU) Angry over the quick re-openings, representatives of the 
FIU, the Supervision Department and the enforcement team met with 
Ibrahimi to discuss a tougher strategy.  In the meeting, the 
enforcement team complained that because they had "lost face" in the 
market they could not go back to the market.  A chastened Ibrahimi 
promised to be tougher, and in the following round of inspections 
during the week of May 28, three shops were closed by the inspection 
team, again for not reporting MSP activities.  In addition, their 
books were seized on the recommendation of the FIU.  So far, they 
have remained closed, despite a repeat visit by the hawala 
delegation. 
 
¶4. (SBU) In addition to closing three shops, the FIU attempted to 
fine them, an action that the First Deputy supported. 
Unfortunately, the Central Bank General Counsel advised that the 
Central Bank did not have the authority to levy a fine in this case. 
 The best that could be done, he stated, was to send a strongly 
worded letter of reprimand, which all agreed was insufficient. 
Ibrahimi and the General Counsel agreed to draft a regulation that 
would authorize the Central Bank to levy fines against hawaladars 
that violate the licensing regulations.  The draft would be 
submitted to the Central Bank's Supreme Council, but it should not 
be expected to be implemented until the end of the summer. 
 
¶5. (SBU) During the inspections, the enforcement team counted 305 
"storefronts" in the main hawala market.  The team suspects that 
almost all are providing MSP/hawaladar services, so the inspection 
and licensing process will need to continue.  The FIU has also 
issued an internal opinion that a "storefront" (service provider) 
that does not initiate transactions, but only receives them, must 
still be considered to be an MSP/hawaladar.  The Director General of 
the FIU and the Head of the Licensing Department are working on a 
strategy to extend the inspections to MSP/hawalas in other sections 
of Kabul and eventually to other cities such as Mazar-e-Sharif, 
Kunduz and Herat. 
 
¶6. (SBU) Immediately after the closings, the Central Bank received a 
total of 70 new MSP/hawala license applications.  An application is 
only counted if the paperwork is completed and the 15,000 Afghani 
 
KABUL 00001931  002 OF 002 
 
 
(approximately USD 300) fee has been paid.  Prior to the enforcement 
actions, the Central Bank had issued a total of 28 MSP/hawala 
licenses to service providers in the main Kabul market. 
 
¶7. (SBU) COMMENT:  In the past six months, the Central Bank has made 
substantial progress in registering hawaladars.  Assuming all 70 
pending applications are approved, approximately one-third of the 
hawaladars in Kabul's main market will be registered, no mean 
achievement given the hawaladars' predilection to avoid government 
at all costs.  The Bank's initial enforcement efforts must be 
applauded for stimulating the appropriate response in the market. 
However, the enforcement process does appear to have a "catch and 
release" problem.  Seized books have been returned to hawaladars 
after being held for only two days, an insufficient amount of time 
for the FIU to analyze them for possible additional law enforcement 
actions.  Nonetheless, the Central Bank has demonstrated that it can 
and will confiscate hawala records, an important signal to the 
hawaladar community that the government is more serious. 
 
WOOD