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Cablegate: (C) Uk's Potential New Financial Tool Against Iran

VZCZCXRO2892
PP RUEHBC RUEHDE RUEHDIR RUEHFL RUEHKUK RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHLO #2798/01 3091659
ZNY CCCCC ZZH
P 041659Z NOV 08
FM AMEMBASSY LONDON
TO RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 0330
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCNIRA/IRAN COLLECTIVE PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 1304

C O N F I D E N T I A L SECTION 01 OF 02 LONDON 002798

NOFORN
SIPDIS

STATE FOR NEA/IR, EEB, ISN, WUR/WE
TREASURY FOR U/S LEVEY, A/S O'BRIEN, DIRECTOR SZUBIN

E.O. 12958: DECL: 04/11/2018

TAGS: EFIN KTFN MNUC IR UK

SUBJECT: (C) UK'S POTENTIAL NEW FINANCIAL TOOL AGAINST IRAN Classified By: KATHLEEN DOHERTY, ECON COUNSELOR FOR REASONS 1.4 B & D

1. (C/NF) Summary. The British government amended the Counter-Terrorism Bill (CT Bill) on November 3, which would potentially give HMG stronger financial powers against Iran and other rogue nations. If approved by Parliament, HM Treasury would obtain power to impose measures on private entities doing business with jurisdictions that are: sanctioned by the Financial Action Task Force, money laundering or terrorist finance threats, or Weapons of Mass Destruction proliferators or facilitators. The Parliamentary process should be complete by late November. Due to political sensitivities, HMG will try to refrain from public discussion of these amendments, and would appreciate if the USG also deferred public comment. End Summary

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2. (C/NF) Following persistent USG pressure from Washington and Embassy London, HMG decided on November 3 to amend the long-simmering Counter-Terrorism bill, currently under consideration in teh House of Lords, which would give HM Treasury the ability to act against private sector entities involved with specific individuals or organizations in rogue countries. HMT has proposed giving itself power to take measures against private sector actors in the following situations:

- If the Financial Action Task Force (FATF) decides to apply counter-measures against a jurisdiction (this could happen if the upcoming February 2009 FATF plenary decided to sanction Iran on a country-wide basis for terrorist finance or money laundering activity, for example); or

-If HMT determines there is a risk of terrorist finance or money laundering from a jurisdiction against UK interests; or

- If a state or jurisdiction develops or facilitates Weapons of Mass Destruction (WMD) that poses a risk to the UK or its national interests.

3. (C/NF) HMG wanted to adopt both multilateral and unilateral measures that it could use against Iran or other states. The British government prefers to operate multilaterally through the FATF or UN, Patrick Guthrie, Head of Asset Freezing at HM Treasury, told us, but believes it necessary to adopt flexible legislation along the lines of what the USG has urged.

4. (C/NF) If any of the conditions are met, HMT can direct the private sector to impose measures against selected partners in the jurisdictions, similar to the targeted measures the USG uses through Executive Orders. The measures are on a sliding scale, intending to be proportional to the offensive behavior, and follow FATF proposals: i.e., enhanced due diligence against an entity; enhanced monitoring, etc., up to, but excluding, asset-freezing. Guthrie explained the UK wanted to be in step with proposed FATF sanctions, which do not include the ability to freeze funds, and said politically it would be difficult to obtain Parliamentary approval for another set of asset-freezing powers at this time. HMT, in cooperation with the Foreign Office and British intelligence agencies, will initiate reviews of jurisdictions and specific private entities.

5. (C/NF) The amendments are being put forth at the last possible stage in the CT bill's process, the Lords' Debate, which will occur on November 11. After that, the entire bill will head back to the House of Commons, where HMG believes it has gathered sufficient support from the opposition. In any event, the legislation is on track for final adoption before the current Parliamentary session finishes in late November. Guthrie warned that the language in the amendments could change in the parliamentary process.

6. (C/NF) Guthrie said the British government will be very quiet on this process until it goes through the legislative process over the course of this month. He asked that the USG not discuss these proposals in public either, as passage is hoped-for, but not guaranteed in a sensitive political climate. The current official HMG position will be to not immediately apply the new test to Iran, he said, however, that Tehran, and the language HMT used in its draft amendments, is the target. LONDON 00002798 002 OF 002 Visit London's Classified Website: XXXXXXXXXXXX
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