Cablegate: Turkish Bank Representatives Pledge Heightened

VZCZCXRO8908
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHIT #1052/01 3451455
ZNR UUUUU ZZH
P 111455Z DEC 07
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7744
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 ISTANBUL 001052

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN IR PGOV PREL PTER TU
SUBJECT: TURKISH BANK REPRESENTATIVES PLEDGE HEIGHTENED
VIGILANCE ON IRANIAN BANKS

REF: A. A) STATE 148604

B. B) STATE 149648
C. C) ANKARA 2777 (NOTAL)

1. (SBU) SUMMARY: Representatives of several Turkish banks
told Istanbul Iran Watcher on November 29 that they are
acting with "extreme vigilance" against the risks posed by
the Iranian financial sector and scrutinizing all
transactions with Iranian banks, including those designated
by the USG on October 25. END SUMMARY

2. (SBU) On November 29, Istanbul Iran Watcher met with
compliance officers from three of the largest banks operating
in Turkey -- IsBank, Fortis Bank, and TEB -- as well as from
the Banks Association of Turkey, to brief them on ref A and B
information on the recent USG designation of several Iranian
banks and the FATF statement on Iran. The three banks
visited represent a sample of the diverse ownership structure
of Turkish banks; with one majority Turkish-controlled, one
wholly foreign-owned, and one partially foreign-controlled.
Approximately 30% of IsBank shares are publicly traded, with
the remainder controlled by the IsBank employee pension fund
(42%) and the Republican People's Party (CHP) (28%). Fortis
Group (Belgium) acquired full ownership (93.3% of shares) of
DisBank in July 2005. As of February 2005, BNP Paribas
controls 42% of TEB shares, 15% of shares are publicly traded
and the remainder are privately held.

3. (SBU) The Turkish bank representatives were aware of both
developments and asserted that their banks were acting
accordingly by complying fully with "all international and
domestic laws and standards":

-- The IsBank representative claimed that his bank, Turkey's
largest private bank, was well aware of the reputational risk
of conducting business with Iran's financial sector, and with
the Iranian banks that have been accused by the U.S. and EU
of links to WMD proliferation or terrorism. He noted that
IsBank had ended its cooperation with Bank Sepah following
the UNSC's designation of Sepah in UNSCR 1747. IsBank is
following guidance from MASAK -- Turkey's financial
intelligence unit -- regarding dealings with Iranian banks
(he did not share that specific guidance, but described it as
urging extreme caution and extra vigilance in any dealings
with Iranian banks).

-- The Fortis Bank representative said Fortis has no current
deals with any Iranian banks, and applies "enhanced due
diligence" relating to any "high-risk" contacts.

-- The TEB representative said the bank had decided not to
pursue any new business with Iranian banks, was exercising
vigilance regarding any current business with Iranian banks,
and was fully complying with Turkish banking regulations
requiring that it report any suspicious requests from Iranian
banks to MASAK.

4. (SBU) The Turkish Banking Association representative said
that Turkish banks are required by regulation to "pay
attention" to the U.S. Treasury Department's OFAC list, as
well as to the EU's "black list" of banks and companies. He
said the association, working with the GOT, supports and
encourages Turkish banks to "know your customer". He added
that in late October, shortly following the FATF statement on
the risks posed by Iran's financial sector, MASAK circulated
a communique to Turkish banks underscoring the threat and
instructing banks to protect themselves against the risk of
association with anti-money-laundering or terrorism finance
activities.

5. (SBU) On the other hand: Several of the bank
representatives pointed out that Iran is Turkey's largest
neighbor, with a long and deep history of commercial ties to
Turkey, making it impossible to cut off all financial
contacts with Iran. Indeed, the presence of three Bank
Mellat branches in Turkey (incorporated as legal Turkish
banking entities) allows Bank Mellat to participate as a full
member of the Turkish Banking Association. The banking
representatives noted that Turkish banks do not have the
legal authority to freeze assets of foreign banks or
companies under their control, unless Turkey's Council of
Ministers decrees it. The GOT, they indicated, furthermore
does not currently have executive authority similar to the
USG's authorities under E.O. 13382 or 13224, but rather must
rely on the legal obligation imposed by Chapter VII UNSC
resolutions such as 1267, 1373, 1737 and 1747. Following
issuance by the UNSC of such resolutions, Turkey's Council of
Ministers circulated those decisions to all Tur
kish banks, with orders to comply. However, in at least one
case the Council of Ministers took a very long time to
circulate the decision, muting the impact of the UNSC
resolution.

ISTANBUL 00001052 002 OF 002

6. (SBU) All three bank representatives added that if the USG
has further information regarding Iranian banks in Turkey
(i.e. Bank Mellat) being involved in support for WMD
proliferation or terrorism, the USG should share that
information with the GOT, which would then advise Turkish
banks to take appropriate action. They also advised that the
USG might consider asking MASAK directly to issue a public
statement cautioning Turkish banks about the risks of doing
business with Iran's financial sector, a step that MASAK has
not yet taken.

7. (SBU) COMMENT: The bank representatives welcomed the
opportunity to meet with a USG official and to emphasize how
seriously they view the risks posed by Iran's banks and
financial sector. They were well-informed about FATF's
October 11 statement of concern on Iran and the USG's October
25 designations, but they appreciated receiving the ref A
fact sheet. Per their suggestions in para six and ref C,
should Washington develop further information regarding
Iranian banks that impact Turkey, clearing such information
for public release/release to Turkish banks would help
reinforce these banks' growing awareness of the risks posed
by Iran's financial sector. END COMMENT.
WIENER

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