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Cablegate: Iran,S Attempts to Expand Banking Relationships

VZCZCXYZ0003
OO RUEHWEB

DE RUEHC #1044 0050840
ZNR UUUUU ZZH
O 041841Z JAN 08
FM SECSTATE WASHDC
TO IRAN COLLECTIVE IMMEDIATE
RUEHEG/AMEMBASSY CAIRO IMMEDIATE 3838-3839
INFO RUEHRL/AMEMBASSY BERLIN IMMEDIATE 1420-1421
RUEHLO/AMEMBASSY LONDON IMMEDIATE 4182-4183
RUEHFR/AMEMBASSY PARIS IMMEDIATE 6503-6504

UNCLAS STATE 001044

SIPDIS

SENSITIVE

SIPDIS
C O R R E C T E D C O P Y - SENSITIVE CAPTION ADDED


E.O. 12958: N/A
TAGS: KNNP MNUC IR GM
SUBJECT: IRAN,S ATTEMPTS TO EXPAND BANKING RELATIONSHIPS
IN EGYPT

1. (U) This is an action request. Please see paragraph
three.

-------
SUMMARY
-------

2. (SBU) Recent press reports have noted that Iran is
actively working to expand its banking relationships with its
Middle Eastern neighbors. This expansion is presumably a
response to the increasingly effective sanctions put in place
by the UN and U.S. and the respective moves by Western banks
to decrease their exposure to the risk of doing business with
Iran. Representatives in the Iranian government have met
with counterparts in the Egyptian government to discuss the
opening of joint banks or branches in Tehran. At a time when
responsible states and banks are decreasing their economic
dealings with Iran, expanding banking relationships with Iran
is not a prudent step. The U.S. urges Egypt to reconsider
these plans and cut off its business relationships with Iran.
According to 2007 Bankers Almanac data, the Misr (Egypt)
Iran Development Bank is the only listed Iran-related bank
operating in Egypt. The Egypt Iran Development bank is a
joint stock bank owned by the Iran Foreign Investment Company
(40.
4%), National Investment Bank, Cairo (29.93%), and the Misr
Insurance Company (29.93%).

-------------------------
OBJECTIVES/ACTION REQUEST
-------------------------

3. (SBU) Washington requests Post deliver the talking
points and non-paper in paragraph 4 to appropriate host
government officials in the foreign affairs and finance
ministries. Post should pursue the following objectives:

-- Remind the GOE that many European countries and banks
have reduced their business with Iran.

-- Urge Egypt to ensure that Egypt Iran Development Bank and
other Egyptian financial institutions do not process
transactions on behalf of any Iranian banks that are of
proliferation or terrorism-related concern, specifically
individuals and entities designated under Executive Orders
13224 and 13382 and UNSC resolutions 1737 and 1747.

-- Encourage the GOE to warn Egyptian financial institutions
about the risks of doing business with Iran, such as the
Iranian regime using its state-owned banking network to
support terrorism and proliferation-related activity. The
Iranian state-owned banks also use deceptive financial
practices to support this illicit activity.

-- Reinforce the Financial Action Task Force's October 2007
warning that Iran's lack of comprehensive anti-money
laundering / combating the financing of terrorism (AML/CFT)
regime represents a significant vulnerability within the
international financial system, and dealing with Iran's banks
endangers Egypt's banking reputation.

-----------------------
BACKGROUND AND NONPAPER
-----------------------

4. BEGIN NON-PAPER

-- (U) Recent press reports have noted that Iran is
actively working to expand its banking relationships with its
Middle Eastern neighbors. Representatives in the Iranian
government have met with counterparts in the Egyptian
government to discuss the opening of joint banks or branches.

-- (U) As major European and Asian financial institutions
cut off Iranian business your financial institutions could
acquire these Iranian business relationships and put
themselves at risk.

-- (U) Iran's Mines and Industry minister has announced
meetings of a Joint Economic Committee with Egypt to boost
commercial and industrial cooperation, including opening a
branch of the Iran-Egypt Bank in Tehran. According to these
reports, the Iran Foreign Investment Company controls 40.4
percent of the bank's shares, while Egypt's Misr Insurance
Company and National Investment Bank control a combined 59.6
percent of the bank's shares. We have concerns that Iran may
use companies of which it is a "minority" owner as another
method to circumvent current UNSC restrictions.

-- (U) The UN Security Council unanimously adopted UNSCRs
1737 and 1747 under Chapter VII. These resolutions require
UN Member States to apply targeted sanctions to entities and
individuals designated in the resolutions for their
involvement with Iran's proliferation-sensitive nuclear
activities or ballistic missile program. Member States are
required to prevent the provision of financial assets or
economic resources to designated individuals/entities, and to
freeze their assets as well as those of entities "owned or
controlled" by them or persons/entities acting on their
behalf (operative paragraph 12 of UNSCR 1737).

-- (U) In addition, UN Member States should ensure that
financial services provided to Iranian banks are not used by
designated entities/individuals to circumvent the
restrictions unanimously adopted by the UNSC in UNSCRs 1737
and 1747.

-- (U) On October 11, 2007, the Financial Action Task Force
(FATF) issued a statement warning of the risk of doing
business with Iranian banks. The statement cautioned that
Iran's lack of comprehensive anti-money laundering /
combating the financing of terrorism (AML/CFT) regime
represents a significant vulnerability within the
international financial system. FATF advised that financial
institutions should take the risk arising from the
deficiencies in Iran's AML/CFT regime into account for
enhanced due diligence.

-- (U) The United States urges your government and
institutions to exercise increased vigilance regarding
Iranian financial and commercial relationships that may be
associated with Iran's nuclear or missile programs, or other
illicit activities, contrary to UNSCRs 1737 or 1747.

------------------
REPORTING DEADLINE
------------------

5. (U) Post should report results within seven business
days of receipt of this cable. Please slug replies for ISN,
T, TREASURY, and NEA. Please include SIPDIS in all replies.

----------------
POINT OF CONTACT
----------------

6. (U) Washington point of contact for follow-up
information is Kevin McGeehan, ISN/CPI, (202) 647-5408,
McGeehanKJ@state.sgov.gov.

7. (U) Department thanks Post for its assistance.
RICE

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