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Cablegate: Implementation of the Financial Provisions of Unscr 1803

O P 201442Z MAR 08
FM SECSTATE WASHDC
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S E C R E T STATE 029096

SIPDIS


SIPDIS

E.O. 12958: DECL: 03/13/2033
TAGS: AS AU BA BR CA CH ECON EFIN EG ETRD EUN FR GM GR
HK, ID, IN, IR, IS, IT, IZ, JA, JO, KNNP, KS, LY, MNUC, MT, MU, NL,
NZ, PARM, PGOV, PK, PREL, QA, RS, SA, SF, SN, SP, TC, TU, UK, VE, VM,
YM, EINV, SW

SUBJECT: IMPLEMENTATION OF THE FINANCIAL PROVISIONS OF UNSCR 1803

Classified By: ISN PDAS Patricia A. McNerney
for reasons 1.4 (b) and (d).

1. (U) This is an action request. Please see paragraph 4.

----------------------
SUMMARY AND BACKGROUND
----------------------

2. (U) On March 3, 2008, the U.N. Security Council adopted
Resolution 1803, imposing further Chapter VII sanctions on
Iran in response to its failure to comply with its
obligations in UN Security Council resolutions (UNSCRs) 1737
and 1747, including the obligation to suspend its uranium
enrichment-related, reprocessing, and heavy water-related
activities. Paragraph 10 of the resolution calls upon all
States to exercise vigilance over the activities of financial
institutions in their territories with all banks domiciled in
Iran, in particular with Bank Melli and Bank Saderat, and
their branches and subsidiaries abroad, in order to avoid
such activities contributing to proliferation sensitive
nuclear activities, or to the development of nuclear weapon
delivery systems, as referred to in resolution 1737 (2006).

3. (U) On October 25, 2007 the U.S. designated Iranian
state-owned Bank Melli and Bank Mellat for their support for
proliferation-related activities under Executive Order (E.O.)
13382 ("Blocking the Property of Weapons of Mass Destruction
Proliferators and their Supporters"). (Note: The U.S.
designated Iran's state-owned Bank Sepah under E.O. 13382 in
January 2007 for providing support and services to designated
Iranian proliferation firms. End Note.) The U.S. also
designated Bank Saderat under E.O. 13224 for providing
support for terrorism. These U.S. designations of Bank
Melli, Bank Mellat and Bank Saderat are consistent with the
provisions of UNSCRs 1737, 1747, and 1803 and FATF guidance
on Iran. On March 5, 2008, Treasury Secretary Paulson
stressed that Iran uses "Iranian, state-owned banks to engage
in their weapons proliferation, (and) acquisition of missile
systems...We see all kinds of deceptive practices by Iranian
banks, so (the U.S. has) been quite aggressive in... singling
out different Iranian banks for sanctions. We are continuing
to work in every country where there are banks that have
business (with Iran)."

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

4. (S) Washington requests Posts deliver the non-papers in
paragraphs 5 and 6 to appropriate host government officials
in the foreign affairs and finance ministries. Posts should
pursue the following objectives:

FOR ALL ADDRESSEES:

-- Emphasize UNSCR 1803's call for member states to exercise
vigilance over the activities of financial institutions in
their territories with all/all banks domiciled in Iran, in
particular with Bank Melli and Bank Saderat, and their
branches and subsidiaries abroad.

-- Urge host governments to issue advisories to financial
institutions in their jurisdiction, informing them of the
calls for increased vigilance in the UNSCR 1803 and FATF
statements and emphasizing the growing international
consensus on the risks of engaging in Iran-related business.

-- Encourage host governments to remind their financial
institutions that Iran uses a wide variety of deceptive
practices that make it impossible for financial institutions
to "know your customer" when dealing with Iran.

-- Request host governments and banking regulators to require
that banks take measures to ensure enhanced due diligence
called for by the FATF and the UNSC. In our view, such
measures should include senior-level scrutiny of every
transaction involving Iran, special examination of all
Iranian accounts, and an executive-level reevaluation of each
bank's corporate policy toward Iran.

-- Alert governments that Iranian proliferators may
increasingly use non-designated Iranian banks, including Bank
Mellat, to facilitate proliferation-related transactions,
particularly given designation of Bank Sepah in UNSCR 1747
and the Council's note of caution with respect to Bank Melli
and Bank Saderat in UNSCR 1803.

-- Recommend that financial regulators consider more thorough
audits for any regulated financial institution in their
jurisdiction that continues to do business with Iranian
related banks and financial entities.

-- Remind governments that the U.S. designated domestically
Bank Melli and Bank Mellat for their involvement in
activities contributing to proliferation sensitive nuclear
activities, including facilitating circumvention of the UNSC
sanctions on Bank Sepah.

----------------------- ----------------------------
------------------- ---------------
UNCLASSIFIED NONPAPER ON IRANIAN BANKS' DECEPTIVE FINANCIAL

SIPDIS
PRACTICES FOR ALL ADDRESSEES
----------------------- ----------------------------
------------------- ---------------

5. (U) BEGIN UNCLASSIFIED NONPAPER:

-- We would like to share with you several deceptive
financial tactics we have seen used by Iranian proliferators.
These tactics pose a risk to the security of the
international banking system and help Iran to circumvent UNSC
sanctions.

-- Iranian procurement agents for its programs of
proliferation concern have used front companies and altered
shipping documents in an effort to support Iran's nuclear and
missile programs. These are the most common deceptive
tactics and ones they have been using to evade export
controls for years.

-- In addition, when it comes to financial transactions,
while removing the originator bank's name from financial
transfers is allowed in some jurisdictions and some
international banks often bundle transactions for several
banks together, this method can be used to evade sanctions.

-- Iran appears to be positioning its six private banks to
replace lost banking operations overseas and to circumvent
recent U.S. and UN sanctions, partly because Tehran may judge
that U.S. and foreign actors are less likely to scrutinize
banks not directly owned by the Iranian government.

-- At least one bank has used a multicurrency account to
evade payment restrictions and protect assets against
seizure. Specifically, in April 2007, a private Iranian bank
requested a multicurrency account with a foreign bank to
process international payments in US Dollars (USD), Euros,
and other currencies. Multicurrency accounts allow holders
to deposit funds and make payments in multiple currencies
from one account, making it easier to evade payment
restrictions associated with a particular currency and
therefore protect assets against seizure.

-- Procurement agents' personal bank accounts are being used
by some UN-designated Iranian defense entities inside Iran to
finance international purchases, insulating payments from
international scrutiny. Many of these agents previously
received payments into their corporate accounts and may now
judge that foreign banks will not suspect that transfers from
personal accounts facilitate UN-sanctioned activity. Foreign
banks may not be aware that they are receiving payments from
Iran's defense industry.

-- Entities tied to the Iranian missile program and Iran's
Defense Industries Organization (DIO) in 2007 sent millions
in Euros to a number of different personal accounts in Iran,
many of which belong to known procurements agents.

-- Iran's Aerospace Industries Organization (AIO) and
UN-sanctioned Sanam Industrial Group (SIG), the Shahid Hemmat
Industrial Group (SHIG), and Ya Mahdi Industrial Group (YMIG)
transferred funds to the Iranian bank accounts of individuals
affiliated with two missile-procurements companies. (Note:
SHIG, SIG, and YMIG were designated in UNSCRs 1737 and 1747
for their involvement in nuclear or ballistic missile-related
activities. End Note). The procurement agents, who maintain
offices both in and outside Iran, subsequently transferred
over half of the funds to banks worldwide, presumably to pay
for purchases on behalf of Iranian missile entities.

-- In some cases, Iranian entities have combined evasion
tactics. For example, Iran's missile program has both
layered transactions to hide Bank Sepah's role when routing
funds internationally and used a broker's account inside of
Iran most likely to make missile-related payments.

-- We urge you to issue advisories to financial institutions
in your jurisdiction, informing them of the calls for
increased vigilance in the UNSCR and FATF statements and
emphasizing the growing international consensus on the risks
of doing Iran-related business.

-- We encourage you to remind financial institutions in your
jurisdiction that Iran uses a wide variety of deceptive
practices that make it impossible for financial institutions
to "know your customer" when dealing with Iran.

-- We request your government and banking regulators to
require that banks take measures to ensure enhanced due
diligence called for by the FATF and the UNSC, including
senior-level scrutiny of every transaction involving Iran,
special examination of all Iranian accounts, and an
executive-level reevaluation of each bank's corporate policy
toward Iran.

END UNCLASSIFIED NONPAPER.

------------------------- ---------------------------
---------------------- -----------------
LIST OF ALL IRANIAN BANKS DOMICILED IN IRAN, INCLUDING THEIR
FOREIGN BRANCHES AND SUBSIDIARIES
------------------------- ---------------------------
---------------------- -----------------

6. (U) BEGIN UNCLASSIFIED LIST OF BANKS:

UNSCR 1803 calls upon all States to exercise vigilance over
the activities of financial institutions in their territories
with all banks domiciled in Iran and their branches and
subsidiaries abroad.

The U.S. encourages host governments to share the following
comprehensive list of Iranian banks with financial
institutions to assist their efforts to apply enhanced due
diligence to Iranian-related financial activity.

The U.S. Financial Crimes Enforcement Network (FinCEN) issued
an advisory on March 20, 2008 the text of that advisory can
be found at: www.fincen.gov/
fin-2008-a002.pdf.

This list includes banks owned or controlled by the
Government of Iran, their branches abroad and private banks
domiciled in Iran.

-- Agricultural Bank (a.k.a. Bank Keshavarzi) - Tehran, Iran

-- Agricultural Cooperative Bank of Iran (a.k.a. Bank Taavon
Keshavarzi Iran) - Tehran, Iran

-- Agricultural Development Bank of Iran (a.k.a. Bank
Josiaiyi Keshahvarzi) - Tehran, Iran

-- Arian Bank (a.k.a. Aryan Bank) - Kabul, Afghanistan

-- Banco Internacional de Desarrollo SA - Caracas, Venezuela

-- Bank Josiaiyi Keshahvarzi (a.k.a. Agricultural Development
Bank of Iran) - Tehran, Iran

-- Bank Kargoshaee - Tehran, Iran

-- Bank Keshavarzi (a.k.a. Agricultural Bank) - Tehran, Iran

-- Bank Markazi Jomhouri Islami Iran (a.k.a. The Central Bank
of Iran) - Tehran, Iran

-- Bank Maskan (a.k.a. Housing Bank (of Iran)) - Tehran, Iran

-- Bank Mellat - Tehran, Iran

-- Bank Mellat - Seoul, South Korea

-- Bank Mellat - Ankara, Istanbul, Izmir, Turkey

-- Bank Melli Iran - Tehran, Iran

-- Bank Melli Iran - Paris, France

-- Bank Melli Iran - Hamburg, Germany

-- Bank Melli Iran - Central, Hong Kong

-- Bank Melli Iran - Baghdad, Iraq

-- Bank Melli Iran - Muscat, Oman

-- Bank Melli Iran - Al Ain, Deira, Dubai City, Fujairah, Ras
al-Khaimah, Sharjah, United Arab Emirates

-- Bank Melli Iran Zao - Moscow, Russia

-- Bank of Industry and Mine (of Iran) (a.k.a. Bank Sanad Va
Madan) - Tehran, Iran

-- Bank Refah (f.k.a. Workers Welfare Bank, f.k.a. Bank
Refah Kargaran) - Tehran, Iran

-- Bank Saderat Iran - Tehran, Iran

-- Bank Saderat - Paris, France

-- Bank Saderat - Frankfurt, Hamburg, Germany

-- Bank Saderat - Athens, Greece

-- Bank Saderat - Baalbak, Beirut, Saida, Lebanon

-- Bank Saderat - Muscat, Oman

-- Bank Saderat - Doha, Qatar

-- Bank Saderat - Ashgabat, Turkmenistan

-- Bank Saderat - Abu Dhabi, Ajman, Al Ain, Dubai City,
Sharjah, United Arab Emirates

-- Bank Saderat PLC - London, United Kingdom

-- Bank Saderat Tashkent - Tashkent, Uzbekistan

-- Bank Sanad Va Madan (a.k.a. Bank of Industry and Mine (of
Iran)) - Tehran, Iran

-- Bank Sepah - Tehran, Iran

-- Bank Sepah - Paris, France

-- Bank Sepah - Frankfurt, Germany

-- Bank Sepah - Rome, Italy

-- Bank Sepah International PLC - London, United Kingdom

-- Bank Taavon Keshavarzi Iran (a.k.a. Agricultural
Cooperative Bank of Iran) - Tehran, Iran

-- Bank Tejarat - Tehran, Iran

-- Bank Towseh Saderat Iran (a.k.a. Export Development Bank
of Iran) - Tehran, Iran

-- The Central Bank of Iran (a.k.a. Bank Markazi Jomhouri
Islami Iran) - Tehran, Iran

-- Europaeisch-Iranische Handelsbank AG (f.k.a.
Deutsch-Iranische Handelsbank AG) - Hamburg, Germany

-- Export Development Bank of Iran (a.k.a. Bank Towseh
Saderat Iran) - Tehran, Iran

-- Future Bank B.S.C - Manama, Bahrain

-- Housing Bank (of Iran) (a.k.a. Bank Maskan)- Tehran, Iran

-- Iran Overseas Investment Bank PLC (f.k.a. Iran Overseas
Investment Corporation Limited) - London, United Kingdom

-- Kargozari Bank Tejarat - Tehran, Iran

-- Mellat Bank DB Aozt (a.k.a. Mellat Bank S/B CJSC) -
Yerevan, Armenia

-- Mellat Bank S/B CJSC (a.k.a. Mellat Bank DB Aozt) -
Yerevan, Armenia

-- Melli Bank PLC. - London, United Kingdom

-- Persia International Bank PLC. - London, United Kingdom

Privately Owned Iranian Financial Institutions

-- Amin - Tehran, Iran

-- Bank Pasargad - Tehran, Iran

-- En Bank PJSC - Tehran, Iran

-- Karafarin Bank - Tehran, Iran

-- Novin - Tehran, Iran

-- Parsian Bank - Tehran, Iran

-- Post Bank of Iran - Tehran, Iran

-- Saman Bank Corporation - Tehran, Iran

-- Sarmaye Va Danesh Bank - Tehran, Iran

END UNCLASSIFIED NONPAPER.

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

7. (U) Post should report results within one week of
receipt of this cable. Please slug replies for ISN, T,
TREASURY, and NEA. Please include SIPDIS in all replies.

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

8. (U) Washington point of contact for follow-up
information is Michelle New, ISN/CPI, (202) 647-0186,
newml@state.sgov.gov, or Jennifer Chalmers, ISN/CPI, (202)
647-9715, chalmersja@state.sgov.gov.

9. (U) Department thanks Posts for their assistance.

10. (U) Tripoli minimize considered.
RICE


NNNN


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