VZCZCXYZ0004
RR RUEHWEB

DE RUEHYN #1418/01 2050739
ZNR UUUUU ZZH
R 240739Z JUL 07
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC 7653
INFO RHEHNSC/NSC WASHINGTON DC
RHMCSUU/FBI WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEAWJA/DEPT OF JUSTICE WASHDC

UNCLAS SANAA 001418 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR S/CT (NOVIS/GALER), INL (BRANDOLINO/RINDLER), 
NEA/ARP 
 
E.O. 12958: N/A 
TAGS: KTFN KCRM PREL PTER SNAR EFIN YM
SUBJECT: PART ONE OF FOUR: RESULTS OF FINANCIAL SYSTEMS 
ASSESSMENT TEAM VISIT TO YEMEN MAR 1-7, 2007 
 
¶1.  Summary.  A multi-agency Financial Systems Assessment 
Team (FSAT) conducted a week-long, in-country evaluation of 
Yemen,s capacity to combat money laundering and terrorist 
financing, in order to determine its most critical training 
and technical assistance needs on March 1-7, 2007.  Yemen is 
in the early stages of developing its capacity to control 
money laundering.  Interlocutors noted that the 
cash-intensive nature of the economy, significant levels of 
corruption and problems in the judicial system would be 
important factors to consider when developing training and 
technical assistance programs related to terrorist financing, 
money laundering and financial crimes. 
 
¶2.  Summary continued.  The FSAT Team believes that there are 
a number of training initiatives that should be pursued, 
particularly in light of the risks and vulnerabilities 
related to the money-exchange service sector, the NGO sector, 
corruption, and increased evidence of narcotics trafficking. 
The team therefore recommends the following training 
initiatives:  (1) legal drafting assistance to ensure that 
the proposed new law meets international standards and 
addresses the vulnerabilities identified in this report; (2) 
additional training for the Central Bank,s Anti-Money 
Laundering Information Unit and field examiners in anti-money 
laundering examinations and the detection of suspicious 
transactions, and (3) basic Anti-Money Laundering Information 
Unit training and a technical assistance visit by the 
Financial Crimes Enforcement Network (FinCEN), followed by an 
exchange visit between the Central Bank,s Anti-Money 
Laundering Information Unit and FinCEN and/or the unit's 
Spanish Counterpart, SEPBLAC (the Bank of Spain's Executive 
Service of the Commission for Monitoring Exchange Control 
Offenses). 
 
¶3.  The first section of the FSAT Team's report follows. 
This section gives an overview of the FSAT Team and the 
ROYG's National Anti-Money Laundering Committee and Justice 
Sector.  End summary 
 
---------------- 
FSAT TEAM REPORT 
---------------- 
 
¶4.  A Financial System Assessment Team (FSAT), consisting of 
Gary Novis (State S/CT-Head of Delegation), Robert Stapleton 
(Department of Justice, Asset Forfeiture and Money Laundering 
Section), Patricia Handley (Federal Deposit Insurance 
Corporation), Jill Murphy (FBI- Terrorist Finance Operations 
Section), Yamam Fadl (U.S. Treasury,s Financial Crimes 
Enforcement Network-FinCEN), Daniel Harris (U.S. Treasury,s 
Office of Terrorist Finance and Financial Crimes), and 
Eugenio Garcia Jimenez (Spanish National Police- representing 
the European Union) visited Yemen to determine its most 
critical training and technical assistance needs to combat 
money laundering and terrorist financing.  The team met with 
a wide array of government and private sector entities in 
Yemen, including:  The Central Bank, the Anti-Money 
Laundering Information Unit, the Cabinet,s National 
Anti-Money Laundering Committee, the Political Security 
Organization (PSO),  the Anti-Narcotics Department at the 
Ministry of the Interior, the Attorney General,s Office, the 
Customs Authority, the Ministry of Social Affairs and Labor, 
the Yemen Parliamentarians Against Corruption (Yemen PAC), 
the Tax Authority, private financial institutions, the Yemen 
Bankers' Association, and representatives of the Foreign 
Affairs and Constitutional Committees of the Yemen Parliament. 
 
---------------------------------------- 
NATIONAL ANTI-MONEY LAUNDERING COMMITTEE 
---------------------------------------- 
 
¶5.  The ROYG Cabinet,s National Anti-Money Laundering 
Committee was established in accordance with the provision of 
Anti-Money Laundering (AML) Law No. 35.  It is charged with 
combating money laundering and has specific responsibilities 
established by Republican Decree No. 89 of 2006 regarding the 
Executive Writ for AML Law No. 35 of 2003 (AML laws).  The 
Committee meets three-to-four times a month.  The Committee 
is comprised of one representative nominated by each of the 
following: 
 
--  Ministry of Finance, who serves as Chairman 
--  Central Bank of Yemen Governor, who serves as Deputy 
Chairman 
--  Ministry of Justice 
 
--  Ministry of Interior 
--  Ministry of Foreign Affairs 
--  Central Organization for Control and Audit (COCA) 
--  Ministry of Industry and Trade 
--  Yemen Bankers Association 
--  General Union of Chambers of Commerce and Industry 
 
¶6.  Basic responsibilities of the Committee include 
developing AML-related regulations, procedures and the 
suspicious transaction report (STR) format; coordinating the 
exchange of information with the AML Information Unit, 
Central Bank of Yemen (CBY), and international parties on AML 
efforts; sponsoring training seminars and workshops for the 
financial community; and representing Yemen in international 
Anti-Money Laundering/Counter-Terrorist Financing (AML/CTF) 
fora, such as the Middle East and North African Financial 
Action Task Force (MENAFATF). 
 
¶7.  According to the Committee, sources of money laundering 
in Yemen are derived from corruption, arms smuggling, tax 
evasion, and child trafficking.  The extent of the hawala 
network or informal value transfer system was assumed to be 
limited based on the marginal number of expatriates.  (The 
FSAT, however, was not able to quantify the extent of the 
hawala network during any of our discussions.) 
 
¶8.  The Committee also has responsibility for legal drafting 
and as such has drafted a counter-terrorist financing (CTF) 
law that reportedly combines both AML and CTF elements and 
addresses all of the FATF 40 9 recommendations.  The new law 
will criminalize terrorist financing by individuals and 
organizations.  The Committee indicated that the draft, once 
approved, will supersede the existing AML laws.  The draft 
was reviewed by the Committee's legal team and 
representatives from the United Nations to ensure it complied 
with international standards.  The draft needs to be further 
vetted and is expected to be presented to Parliament for 
approval in mid-October 2007 at the earliest.  The Committee 
indicated that the UN resolution on narcotics trafficking and 
organized crime was presented to Parliament for ratification. 
 The Parliament ratified the narcotics trafficking and 
organized crime resolution on June 18, 2007. 
 
¶9.  In general, the Committee appears actively involved in 
advancing the financial sector,s ability to address 
potential risks associated with money laundering and 
terrorist financing.  However, it appears that the 
Committee,s efforts are not always effective.  Specifically, 
the STR form it developed does not appear to be effective. 
The STR form contradicts the confidentiality requirement of 
the AML laws and includes a section for the subject,s 
signature; the form does not provide a narrative section for 
describing the nature of the suspicious activity and 
pertinent information relative to suspicious activity that 
would be critical to the AML Information Unit (AMLIU) and law 
enforcement; and the form requires limited information on the 
identification of the subject be recorded.  Apparently, the 
inclusion of the subject,s signature was an oversight and 
the banks were instructed not to obtain the signature.  Based 
on discussions with the Central Bank and AMLIU staff, it 
appears that a revised STR form will be issued which will 
address the shortcomings of the current form. 
 
¶10.  In addition to its current duties and responsibilities, 
the National Anti-Money Laundering Committee is ideally 
placed to conduct a more strategic approach to developing 
Yemen,s AML/CTF regime.  In particular, it could develop a 
national strategic action plan for AML/CTF which could 
provide productive guidance for the wide variety of public 
and private sector entities that are responsible for reducing 
the vulnerabilities and risks of money laundering, as they 
develop their institutions, regulations, procedures and 
controls. 
 
-------------- 
JUSTICE SECTOR 
-------------- 
 
¶11.  The FSAT met with members of the Attorney General,s 
Office, the Public Prosecutor,s Office, Yemen 
Parliamentarians Against Corruption (Yemen PAC), and the 
Parliament,s Foreign Affairs Committee to discuss the 
justice sector,s role in Yemen,s AML/CTF regime. 
 
Basic Structure and Criminal Procedure 
 
-------------------------------------- 
 
¶12.  The Yemeni legal system represents a mixture of shari'a 
law and civil code legal structure.  There are three levels 
of courts:  the court of first instance, an appellate court 
and a supreme court. 
 
Criminal Procedure 
------------------ 
 
¶13.  A criminal case must go through a series of phases 
before it can be brought to the court of first instance. 
During the initial investigative phase of the case, law 
enforcement entities collect evidence pertaining to the 
alleged crime.  The case is then referred to the Public 
Prosecutor, who continues the investigation.  (Prosecutors 
are considered judges.  During this phase of the case, they 
act as prosecutors and investigating judges.)  If the 
prosecutor believes he needs additional evidence to continue 
the case, he can refer the case back to law enforcement 
authorities for further investigation.  If the prosecutor 
believes there is sufficient evidence to go to trial, he 
issues a charging instrument, much like an indictment. 
 
Limited Police Arrest Authorities 
--------------------------------- 
 
¶14.  Unless a crime is committed in plain view of a law 
enforcement agent, Yemeni law enforcement authorities cannot 
arrest a suspect until a prosecutor issues an arrest warrant. 
 However, this rarely happens until the Prosecutor issues the 
charging instrument, which charges a person with committing a 
criminal offense.  Once the charging instrument/indictment is 
issued, the case goes before a trial judge for a hearing. 
 
¶15.  After the trial, either the prosecution or the defense 
may appeal a judge,s ruling in a criminal case, but must do 
so within 15 days of the judge,s decision.  A party may 
appeal procedural or substantive law issues.  It is up to the 
appellant to identify issues for appeal.  If a party 
undertakes a second appeal, the Supreme Court would hear that 
case.  The Supreme Court has the ability to decline to hear a 
case only where it is permitted by law.  In some instances, 
cases are referred by law to the Supreme Court without either 
party appealing a ruling. 
 
Justice Sector,s Role 
--------------------- 
 
¶16.  The Public Prosecutor does have a few specialized units, 
such as one for terrorist crimes, public funds (corruption), 
juvenile, traffic, and jail administration; however, there is 
not a specialized unit that handles money laundering or other 
financial crimes outside of corruption. 
 
¶17.  The ROYG enacted Law Number 35 criminalizing money 
laundering in 2003.  This law, however, does not meet many 
international standards.  To date, no one has been prosecuted 
for money laundering under this law.  Currently, there is no 
law that criminalizes terrorist financing.  Yemeni officials 
told the FSAT that the ROYG is currently working on a draft 
anti-money laundering and counter-terrorist financing law 
with the help of the United Nations Office on Drugs and Crime 
(UNODC), the IMF and the World Bank.  The National Anti-Money 
Laundering Committee (NAMLC) is responsible for drafting this 
law.  Once it submits the draft to the Parliament, three 
committees will review it:  the Foreign Affairs Committee, 
the Financial Affairs Committee and the Constitutional 
Committee.  ROYG officials asked the FSAT to review the 
current drafts and stated that they are open to any 
recommendations or suggestions that may help the law meet 
international standards. 
 
¶18.  Under the current legal regime, there is no law 
enforcement agency with specialized skills or authorities to 
pursue money laundering investigations.  It appears that any 
law enforcement agency may initiate a money laundering 
investigation, although most Yemeni officials appear to think 
that such investigations will not be initiated through law 
enforcement investigations, but rather through work and 
initiatives of the AML Information Unit. 
 
¶19.  In terms of technical assistance and training needs, the 
Yemeni legal system could benefit from assistance with regard 
to ethics training for employees, enhanced administrative 
 
techniques, case development, and interagency cooperation. 
It was patently clear that, at the time of this assessment, 
money laundering was a very difficult concept for most legal 
staff to comprehend fully. 
 
¶20.  One systemic problem with respect to AML/CTF is that 
under the current legal system, Yemeni defendants can be 
charged with numerous offenses, but they can only be 
convicted of one crime.  The conviction is usually for the 
crime with the harshest penalty, whereas money laundering and 
similar offenses are most effective when they can be charged 
separately or as an additional offense.  The FSAT was not 
able to determine whether under the current AML law the 
prosecution must first obtain a conviction for a predicate 
offense before gaining a conviction for money laundering. 
This may be a moot point, however, because the defendant can 
only be convicted of one crime arising from the same set of 
facts. 
 
¶21.  Due to the lack of experience, adequate infrastructure 
and widespread corruption throughout the law enforcement and 
legal system, it does not appear the ROYG understands how to 
initiate a money laundering investigation.  Indeed, it 
appears that ROYG authorities rely heavily on received 
accusations, rather than pro-active law enforcement activity. 
 All investigators, prosecutors and judges could, therefore, 
benefit from basic (i.e. anti-money laundering) investigative 
training. 
 
¶22.  The ROYG has a forfeiture system in place, but a judge 
must order the forfeiture for the items involved in or 
proceeds from the crime for which the defendant was 
convicted.  Forfeiture is available for all crimes and 
extends to funds and property.  Authorities deposit forfeited 
funds into the general treasury, unless the funds are the 
proceeds from a drug offense, in which case the proceeds go 
to law enforcement authorities, who can use the proceeds to 
buy vehicles or other equipment.  If the court orders a 
defendant to forfeit property, the judge issues an order to 
auction off the property to the public, with the funds from 
the auction going into the general treasury.  ROYG 
authorities said they could forfeit real property because 
there are no laws prohibiting them from doing so, but 
admitted they have not yet done so.  In some instances, 
however, the courts can order real property, such as a 
dwelling, to be closed for one year before the owner may use 
it again. 
 
¶23.  The FSAT also met with Yemen PAC, a group of 
Parliamentarians working to combat corruption in Yemen.  They 
are currently working to improve the Anti-Corruption Law in 
Yemen and are in the process of creating an Anti-Corruption 
Board.  There is also a new law that will soon go into effect 
that will require ROYG officials and employees to provide 
financial disclosures, but these disclosures will not be 
available to the public.  This group is devoted to conquering 
the problem of corruption in Yemen and is quite aware of the 
problems Yemen faces with regards to corruption.  In this 
respect, an AML law that meets international standards, and 
that includes provisions for financial investigations, a 
functioning AML Information Unit, and an improved asset 
forfeiture system could help Yemen PAC and ROYG officials to 
reduce corruption. 
 
¶24.  The FSAT also met with the Parliament,s Foreign Affairs 
Committee to discuss the importance of the draft AML/CTF bill 
it will soon receive for review and approval.  The Committee 
was very keen on discussing issues related to the 
ratification of the UN Convention to Suppress Terrorist 
Financing and the number of problems they have with the 
Convention.  The FSAT relayed to the Committee the need for 
passage and implementation of an AML/CTF law that meets 
international standards and the positive effects such a law 
could have on Yemen,s economy. 
 
BRYAN