VZCZCXRO2798
OO RUEHROV
DE RUEHJM #1719/01 2290756
ZNY SSSSS ZZH
O 170756Z AUG 07
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8723
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

"S E C R E T SECTION 01 OF 02 JERUSALEM 001719 
 
SIPDIS 
 
SIPDIS 
 
NEA FOR FRONT OFFICE; NEA/IPA FOR SHAMPAINE/BELGRADE; NSC 
FOR ABRAMS/SINGH; TREASURY FOR HECHT/GRANT/HIRSON; 
 
E.O. 12958: DECL: 08/13/2017 
TAGS: EFIN ECON KWBG PTER OVIP
SUBJECT: (S) FAYYAD ASKS U/S LEVEY FOR HELP WITH QATAR AND 
TRADE-BASED MONEY LAUNDERING 
 
Classified By: Acting Principal Officer Thomas Duffy, for reasons 1.4 b 
,d. 
 
¶1. (S) Summary.  Palestinian Authority (PA) Prime Minister 
Salam Fayyad told Under Secretary of Treasury Stuart Levey 
that Qatar was ""willfully bad"" on issue related to financing 
of terrorist organizations, including HAMAS.  He said the PA 
was ready to move on terror financing legislation, but would 
begin to shift responsibility for these issues from the 
Palestine Monetary Authority (PMA) with which he is 
increasingly unhappy, to Government Ministries and his own 
office.  While committed to going after banks and charities 
that provide illicit funding, Fayyad said that trade-based 
money laundering was probably a much larger problem - and 
much more difficult to counter.  Levey promised to respond 
positively to requests for assistance from the PA, and asked 
Fayyad to articulate them in a way that the USG might best 
assist.  End Summary. 
 
""Qatar is willfully bad"" 
------------------------ 
 
¶2. (S) PA Prime Minister Fayyad, meeting with Under Secretary 
of the Treasury Stuart Levey on August 10 in Jerusalem, said 
that he was extremely worried about Qatar and its continued 
support for HAMAS and other Islamist organizations in the 
West Bank and Gaza.  ""Qatar is a very lousy country, in every 
possible way,"" he said, claiming that they provide ""more 
support to fundamentalists than Kuwait or Saudi Arabia."" 
Fayyad said that there was lots of money coming into the 
region from Qatar.  Qatar's support for these organizations 
""on camera in the Security Council"" (a reference to Qatar's 
recent sponsorship of a Council statement that Ramallah saw 
as one-sided) should, he suggested, be a strong indication of 
where their financial support is going.  He added that Qatar 
is using charitable organizations to move funds to Gaza. 
""Qatar is willfully bad on money,"" Fayyad said, and he 
encouraged the USG ""to make life difficult for Qatari banks 
in the U.S."" 
 
PA ready on terror financing legislation 
---------------------------------------- 
 
¶3. (S) Fayyad told Levey that he was prepared to act quickly 
to pass legislation that would empower the PA to take action 
against accounts involved in illicit financing.  He noted 
that the PMA had produced draft anti-money laundering (AML) 
legislation that he would recommend that President Abbas (Abu 
Mazen) sign into law in ""the next two weeks.""  Fayyad said 
that the law, once on the books, would be hard to undo. 
Fayyad welcomed USG feedback on the draft AML law, and said 
that he would provide a copy to Post. 
 
¶4. (S) Fayyad expressed concern about the performance of the 
PMA on money laundering and illicit financing over the past 
years, and said that he wanted to move the responsibility to 
fight these issues to the Government.  Fayyad said that the 
PA's Financial Intelligence Unit will not be under the 
leadership of the PMA, but will be representative of all PA 
agencies.  The PMA will be on it, he said, but he thought 
that they were too close to the banks and didn't have enough 
""presence in the system.""  As an example, the PMA closed the 
banks on August 9 for a holiday with almost no notice to the 
public or other businesses.  Though frustrated with the 
current management, Fayyad said the problems with the PMA 
were institutional, as there were problems with the previous 
leadership too.  Fayyad encouraged the USG and others to 
continue to interact and do business with the PMA, but said 
he wanted to shift the discussion with the U.S. on illicit 
financing to the Government. 
 
Focus on trade-based money laundering 
------------------------------------- 
 
¶5. (S) ""We continue to look at bank accounts and donations to 
charities,"" Fayyad said, which provide a source of regular 
but small scale transfers of illicit funds.  He agreed that 
while banks and charities remained an area of concern, but 
suggested that the U.S. look more closely - and provide 
assistance - in the area of trade-based money laundering. 
While still studying the problem, Fayyad said he expected it 
was a ""main channel"" for illicit financing into the West Bank 
and Gaza.  He said he particular concerns about Hebron and 
Gaza. 
 
¶6. (S) One indication of the likely scope of the problem, he 
said, was the ""suspiciously large"" deposit base in the West 
 
JERUSALEM 00001719  002 OF 002 
 
 
Bank and Gaza.  Even as the economy deteriorates, the deposit 
base continues to grow, leading to a ""macro-picture that 
doesn't make much sense"", and signaling the presence of a 
significant informal economy.  ""I worry that most of this 
goes to finance bad things,"" he said.  Fayyad promised the 
USG the PA's diagnosis of the suspected money laundering 
situation, but he warned that the trade-based operations were 
highly efficient and very difficult to detect.  Fayyad said 
that the PA would be more aggressive in this area.  ""We need 
sufficiently trained people.""  Levey said that Treasury would 
be ready to help once Fayyad determined how the USG could 
best assist the PA.  .  Remarking that he is ""not happy with 
European aid,"" he added that he would provide more guidance 
""in the next couple weeks"" on how the USG could assist with 
improving transparency in and safeguarding the PA's financial 
system. 
 
Don't collapse banks in Gaza 
---------------------------- 
 
¶7. (S) Fayyad said that he did not want to see the banking 
system in Gaza, despite its problems, entirely collapse.  He 
worried that such a collapse would create long-term 
difficulties in Gaza and would have serious repercussions on 
the banking sector in the West Bank.  Therefore, he would not 
recommend that the Israeli banks cut off their relationships 
with the Gaza banks.  However, Fayyad said that he would 
trust Israeli Central Bank Governor Stanley Fischer on this. 
""I have a better relationship with the Central Bank of Israel 
than with the PMA."" 
 
¶8. (S) Fayyad expressed appreciation action taken by 
Jordanian banks, and in particular by the Arab Bank. 
""Notwithstanding U.S. litigation, Jordan's doing a good job. 
I am worried more about the smaller banks,"" he said. 
 
¶9. (U) U/S Levey has cleared this message. 
DUFFY 
"