Monday, January 08, 2018

Made in Egypt? The quiet garment scheme making Israel millions

Middle East Eye 

CAIRO – Activists are targeting Disney and other brands over links to a contentious scheme that allows Egyptian manufacturers to export garments to the US tax-free so long as Israeli materials are used.
The quietly promoted programme, known as Qualifying Industrial Zones (QIZ), was enacted by the US Congress in 1996 in an effort to "normalise" relations between Israel, Egypt and Jordan, through economic cooperation.
Through QIZs, Israeli manufacturers supply at least 10.5 percent of products used in a garment. Then Egyptian factory workers in 705 QIZ-certified factories sew the final product which is exported to the US and exempted from taxes of between 5 and 40 percent, but typically at a 15 percent average.

To read more go to Middle East Eye

To read in French

Photograph by Paul Cochrane

'Factory of tomorrow’: Egypt aims to replace Far East as cheap clothing king

Middle East Eye

Egyptians earn a monthly average of between $100 and $113 in the garment sector 
(MEE/Paul Cochrane)

CAIRO - After nearly seven years in the economic doldrums, Egypt is keen to bolster its clothing exports, worth some $1.4bn a year, and employ over one million Egyptians.
Egypt - and Africa more generally - is well positioned to become the next destination for sourcing clothing: salaries in the up-and-coming manufacturing hubs of Ethiopia, Uganda and Kenya are as low as $60 a month, rising to $100 in Egypt.
What is more, there are no other low-cost destinations left on the planet. Asian manufacturers are at full capacity and South America has also become too expensive to source from.
Garment workers earn on average $100 a month in India, and around $70 in Bangladesh, while the lowest in China is $208. Bangladesh, the second-largest producer, still has a certain stigma from buyers in the wake of the 2013 Rana Plaza disaster that killed 1,135 people.
That was the message at a major trade conference recently organised by the Egyptian government, export councils and the UN’s International Labour Organisation aimed at promoting Africa as a "new frontier" for garment and textile manufacturing.

 To read more go to Middle East Eye

Money Laundering Bulletin: Egypt - In Transition (Video)

20 minute video I made on Egypt's AML and CTF regime for Money Laundering Bulletin -

Wednesday, November 15, 2017

Qatar stand-off raises wider Gulf terrorist financing questions

Money Laundering Bulletin

The five month-long diplomatic and commercial dispute between Qatar and the so-called ‘anti-terror quartet - ATQ’ of Saudi Arabia, the Saudi Arabia, Bahrain, the United Arab Emirates (UAE) and Egypt - revolves around Doha’s alleged financial support for terrorist groups. Evidence of such financing has been drawn up by both sides, with Qatar claiming its opponents have pushed money into the hands of terror groups. But as the Gulf impasse persists, it is Qatar that’s under the spotlight reports Paul Cochrane from Beirut.

The ATQ cut diplomatic, transport and trade ties with Qatar in June (2017), accusing the small, yet incredibly wealthy, Gulf state of financing terrorism. While Doha denies the accusations, there are strong grounds for the Q uartet’s claims, say analysts.

The ATQ has assembled many files and other evidence of Qatari support for terror groups, ranging from the Muslim Brotherhood and affiliates to Al Qaeda, as well as Iran as a state sponsor of terror,” said Dr Theodore Karasik, a senior advisor to Gulf State Analytics, a Washington DC-based consultancy. (1)

The ATQ has also complained that Qatar hosts the Afghanistan Taliban, which operates an office in Doha, although Qatari’s special envoy on counterterrorism Mutlaq Al Qahtani has said this had been requested by the US government to promote dialogue and hopefully peace with the government in Kabul. Qatar has also been criticised by the quartet for hosting senior officials from Palestinian organisation Hamas, which runs the Gaza Strip. The four governments also level serious accusations at Qatar that it has helped finance the Islamic State (ISIS) and Syrian rebel groups, such as the Al Nusra Front (now rebranded as Jabhat Fateh al-Sham), a jihadist group likened to Al Qaeda.

In July (2017), Egyptian intelligence said it had prepared a ‘black book’ that compiled evidence from the four ATQ allies to be provided to US, German, French and British intelligence to substantiate these claims, noted Jonathan Schanzer, senior vice president at the Foundation for the Defence of Democracies (FDD) in Washington DC, and a former terrorism analyst at the US treasury department. This was also noted in a report by intelligence sector journal Intelligence Online released in July. (2). However, the black book has not been released. Meanwhile there has not been any new or fresh information published over the past five months, according to Schanzer: I’ve seen a bit of what Egypt has. It’s what you’d expect: what we know. I think Qatar’s record speaks for itself, and the radicals that live within the country have remained consistent give or take an expulsion here or there to ease some pressure,” he said. Schanzer added that the only new evidence from Egypt that has surfaced concerns Qatar’s support for Islamic extremists in Libya such as the Rafallah al-Sahati Companies, Benghazi Defense Brigades and the Libyan Islamic Fighting Group.

According to Karasik, there is a lot more material that can be brought to light. But there is speculation that because of accusations that ATQ members, specifically Saudi Arabia and the UAE, are themselves conduits for terrorist financing, the material has not been publicised over fears that their dirty laundry would be exposed. The response of the Qataris and their supporters will probably feature more dirt on ATQ members, so this ‘infowar’ is set to escalate,” said Karasik.

The stand-off between the ATQ and Qatar has led to a split in the Middle East, with the ATQ blacklisting some 30 groups such as the Qatar Volunteer Centre, Qatar Charity, Hizbullah Bahrain and Saraya Defend Benghazi in Libya. Qatar, fot its part, has sided with Turkey in supporting the Muslim Brotherhood, the now outlawed former governing party in Egypt.

Over the last two or three years the Quartet has a new commonly found belief about which groups should or not be supported, and are trying to draw a line. Qatar has found itself on the other side of that line,” said Dr David Roberts, a Qatar specialist and lecturer in the defence studies department of King’s College London.
He added that Qatar has been lax in cracking down on terrorist financing over the past decade. “A nagging question is why have they been so slow? It is not necessarily nefarious, but if you don’t crack down you open yourself up to criticism.” 
For instance, Qatar has not updated its anti-terrorism law since 2004. This changed in July 2017, with Qatar amending the law to include setting clearer rules for defining acts of terrorism, and the freezing of funding and terrorism financing.

Qatar has responded to the ATQ’s accusations by denying them and refusing to capitulate to the Quartet’s initial 13-point demands to curb terrorism, later reduced to six principles (3).

These are a commitment to combat extremism and terrorism in all its forms and to prevent their financing or the provision of safe havens; prohibiting all acts of incitement and all forms of expression which spread, incite, promote or justify hatred and violence; full commitment to the Riyadh Agreement 2013 and the supplementary agreement and its executive mechanism for 2014 within the framework of the GCC (3); a commitment to all the outcomes of the Arab-Islamic-US Summit held in Riyadh in May 2017 (4); to refrain from interfering in the internal affairs of States and from supporting illegal entities; and abiding by a responsibility to confront all forms of extremism and terrorism as a threat to international peace and security. 
The ATQ has also requested that the UN Security Council issues a new resolution to impose sanctions on Qatar for being in violation of Resolutions 1373 and 2133, on countering the financing of terrorism. The resolution has not been forthcoming, nor have additional measures the ATQ announced against Qatar for not acting against the ATQ-blacklisted organisations, such as the Muslim Brotherhood and Hamas.

In response, Qatar signed a memorandum of understanding with the US in July to improve its combating the financing of terrorism (CFT) regime and work more closely with Washington. “Qatar is playing catch-up to limit damage. It has been quietly working with the US Treasury for quite a while, and is now belatedly speaking out about it,” said Roberts.

According to Karasik, the US Treasury has sent additional personnel to Doha to improve its oversight, while Qatar has hired the US-based Financial Integrity Network (FIN), which is staffed by former senior US Treasury officials like Daniel Glaser, Juan Zarate and Chip Poncy. (The state-run Rule of Law and Anti Corruption Centre in Doha, and FIN did not reply to interview requests on this subject from MLB).

The Quartet has also bolstered its CFT efforts by increasing law enforcement efforts to crack down on terrorist financing, aware of accusations of hypocrisy for targeting Qatar over terrorist financing while having their own shortcomings.

This US-Qatari move is being done simultaneously from Washington’s perspective with all the Gulf states because there are citizens who still support terrorist groups. The ATQ has done a very good job at shutting down and closing financial flows to such groups. The ATQ wants Qatar to follow their lead, so the US is desperately working to bring Qatar in-line,” said Karasik.
The US, however, has been inconsistent on Qatar. (5) The State Department has tried to reconcile the opposing camps while the White House has backed Saudi Arabia, noted Schanzer. As a result, it is unlikely that the US’s Office of Foreign Assets Control (OFAC), the Financial Crimes Enforcement Network (FinCEN), or the OECD’s Financial Action Task Force (FATF) will alter its approach to Qatar, he added.

The lack of consensus within the US government is a de facto greenlight for the ATQ to continue its blockade. Every day this continues, it doesn’t necessarily reflect wonderfully on the UAE and Saudi Arabia, but it certainly does reflect poorly on Qatar, and maintains the spotlight on them more than anyone else,” said Schanzer.


         1) Detailed lists of terrorist groups and financiers have been published by the Counter Extremism Project and Intelligence Online. 

3) Indicative of the inconsistent US approach is that in June (2017), US Ambassador to the United Nations, Nikki Haley said Qatar was funding Hamas. In October, she stated otherwise. "While the Qatari government does not fund Hamas, it does allow Hamas political representatives to be based in Qatar... Qatar has committed to take action against terrorist financing, including shutting down Hamas bank accounts," Haley wrote in a memo to the USA House of Representatives Committee on Foreign Affairs.

Monday, November 13, 2017

After the war: Who’s going to pay for Syria’s reconstruction?

Russia and the US, Turkey and Iran, China and the EU: all have played a part in the Syrian conflict. But will they help it rebuild?
The seven-year conflict in Syria is still unresolved. Millions of Syrians now live outside its borders, often in refugee camps. Fighting continues across the country. The infrastructure has been wrecked, with an estimated cumulative cost to Syria of $226bn.
But there is widespread international belief that at some point the government of President Bashar al-Assad and its allies will claim victory – and begin rebuilding.

To read more go to Middle East Eye

To read in French 

Behind the Saudi Troublemaking

Saudi Arabia’s monarchy is bombing Yemen, locking up domestic rivals and stirring up trouble in Lebanon, while a slow-burning confrontation continues against Qatar which could split the Gulf Cooperation Council, says Paul Cochrane.

To read the rest go to Consortium News

Thursday, November 09, 2017

ANALYSIS: This is just the start of the Saudi crackdown's financial ripple effect

After sweeping arrests, investments inside - and outside - the kingdom are in question. Will the events draw investors - or scare them away?

Less than a week old, Saudi Arabia’s anti-corruption drive has snared dozens of princes, including three of the country’s wealthiest people.
The arrests are being portrayed as a clean up of the kingdom’s investment environment to realise economic reforms. Even those fiercely critical of the way it’s been conducted acknowledge the need for a system overhaul.
The sweep is also clearly a move by Crown Prince Mohammed bin Salman to consolidate power, leaving some skeptical that corruption is the sole motivator – if at all.

Yet for investors trying to read the signs from the outside, whatever the machinations and motivations behind the arrests, it brings reforms that have been needed for ages.
“Clearly, the clamp down on corruption is a good thing as the Saudi economy has been hindered by corruption for many decades,” said Jason Tuvey, a Middle East economist at London-based Capital Economics.
“For one, small firms have struggled to compete with large firms that previously had a close relationship with the royal family, but also individuals and businesses had to rely on an army of brokers to cut through bureaucracy.”
Still the detention of 11 princes, four ministers and dozens of others on Saturday, including Prince Alwaleed bin Talal, may have a chilling effect on investment – both inside and outside the kingdom - in the near term until there is more clarity over whether the drag net will widen.

After all, just days after it served as the site of the kingdom’s "Davos in the Desert", a foreign investment conference, the six-year-old Ritz Carlton essentially became a prison, an overnight conversion that has to have rattled onlooking investors.
Likewise, from Twitter to Citigroup to Apple, many of those thought to be detained inside the hotel hold significant stakes in multinational corporations. Questions have even been raised about whether London’s Savoy Hotel, owned by bin Talal, could become Saudi government property.
While the ramifications have not yet been significant and have yet to fully unfold, one clear epicentre is Lebanon, which is on edge after Prime Minister Saad Hariri’s resignation from Riyadh on the same day as the arrests, and given the close economic ties between the two countries.

Click on the link to read the article in Middle East Eye 

To read in French

Tuesday, October 31, 2017

Yemen - Combating Financial Crime in a War Zone

The Central Bank of Yemen (CBY) is struggling to operate amid the conflict that has been wracking the country for the past seven years. The institution’s base, but not all its the staff, were moved from the capital Sana’a - currently not under the control of the internationally-recognised government - to Aden, while much of the country is off-limits to regulators. Paul Cochrane managed to talk with a senior CBY official, who offered rare insight on combating financial crime in a war zone.

To read more go to Money Laundering Bulletin

Tuesday, October 03, 2017

Accounting for NGOs in conflict areas

This article was first published in the October 2017 international edition of Accounting and Business magazine.

Vetting of local staff and suppliers is a further complication. Vetting is required by donors, particularly government bodies such as USAID.

Non-governmental organisations (NGOs), international aid agencies and charities are under increased pressure to abide by international and domestic regulations to demonstrate their financial probity. But while there is often effective oversight in their home countries, in the field, NGOs can struggle to adapt and navigate local rules to ensure appropriate procedures are in place.

To read more go to: