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Cablegate: Treasury Official On Fight Against Terrorist


DE RUEHAK #1725/01 3381140
P 041140Z DEC 09

S E C R E T ANKARA 001725



E.O. 12958: DECL: 10/30/2019

D. STATE 108151

Classified By: DCM Doug Silliman for reasons 1.4(b and d)

1. (C) Summary. During an October 19-20 visit to Ankara,
Treasury Assistant Secretary for Terrorist Financing and
Financial Crimes David Cohen cautioned government and banking
officials about doing business with Iranian banks. GOT
officials insisted they will comply with all UNSC
obligations, but are unwilling unilaterally to sever trade
with their neighbor Iran. A/S Cohen also discussed a pending
review of Turkey by the Financial Action Task Force (FATF).
Finance Minister Mehmet Simsek said he has created a task
force to consider broadening Turkey's narrow definition of
terrorism, but cautioned that the parliament would not be
able to consider new legislation until it completes budget
deliberations in December. A/S Cohen expressed appreciation
for the creation of the task force, but emphasized that only
actions completed before February 2010 would be factored into
the FATF report. GOT officials expressed appreciation for
the USG's designation of three PKK terrorist financiers.
Treasury's delegation also included Senior Advisor Elizabeth
Rosenberg and Policy Advisor Christopher Burdick. End

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First Opening on Amending the Definition of Terrorism
--------------------------------------------- --------

2. (C) On October 19, A/S Cohen met with Finance Minister
Simsek and representatives of the Financial Crimes
Investigation Board (MASAK). Simsek began the meeting by
commending the USG's decision to name three PKK terrorist
financiers to the list of significant narcotics traffickers.
A/S Cohen and Simsek discussed the FATF's decision to
undertake a "targeted review" of Turkey that will consider
Turkey's compliance with the FATF's Anti-Money Laundering and
Combating the Financing of Terrorism (AML/CFT) standards.
The G-20 Leaders have given the FATF a firm deadline of
February 2010 for reporting on this stage of the review

3. (C) A/S Cohen explained the work of the FATF's
International Cooperation Review Group (ICRG). In April
2009, G-20 Leaders tasked the FATF to assess jurisdictions'
compliance with internationally-agreed standards on AML/CFT
and name jurisdictions that do not have adequate
jurisdictions. After preliminary assessments, Turkey is
being considered for failure properly to implement an AML/CFT
regime that meets international standards. A/S Cohen
detailed the timeline for the FATF review: by mid-November
the GOT will receive a draft "targeted review" paper
describing Turkey's key strategic deficiencies written by an
unnamed member of the FATF. In December, Turkey will meet
with the ICRG's Europe and Eurasian Regional Review Group in
Strasbourg to discuss the paper and the action plan proposed
by the review group. In mid-February, the FATF plenary will
assess Turkey's key strategic AML/CFT deficiencies and any
progress on addressing them. At that time, the FATF will
decide whether Turkey's AML/CFT deficiencies represent a
threat to the international financial system and should be
publicly identified. Simsek said Turkey would cooperate
fully with the process and would continue its reform efforts,
but cautioned that the parliament will be fully occupied with
review of the Turkish budget until late December and would
not have time or manpower available until then to work
closely on terrorism financing.

4. (C) Simsek said Turkey was one of the first countries to
adopt an Anti-Terror Law and, as a long-time victim of
domestic and international terror attacks, Turkey recognizes
the importance of having the right framework in place to deal
with terror. Simsek said Turkey does not, in practice, have
a narrow view of terrorism and would not ignore terror
attacks against foreign entities or businesses in Turkey and
would treat perpetrators severely. A/S Cohen noted the need
to amend Turkey's narrow legal definition of terrorism, which
covers only attacks against the Turkish state or Turkish
national interests, in order to be compliant with
international standards. Simsek advised that he has named a
task force with representatives from the Prime Ministry,
Foreign, Finance, and Justice Ministries, chaired by MASAK to
prepare a report on Turkey's definition of terrorism and
action against terrorist financing. The report will be given
to the respective ministers, who will decide whether a change
is possible. A/S Cohen expressed appreciation for the
creation of the task force, but emphasized that only actions
completed before February 2010 would be factored in to the

FATF's decision.

5. (C) Cohen expressed concern about delays in Turkey's
compliance with the UNSC 1267 and 1373 designation process
and the low level of money laundering or terror finance
prosecutions. A/S Cohen noted Turkey's progress on reforming
its customer due diligence, but said Turkey must strengthen
its efforts to fight terrorism finance.

Turkey Must Do Business with Neighbor Iran

6. (S) A/S Cohen made Reftel D points on Iran's efforts to
circumvent UNSC and international sanctions with Turkish
financial institutions to Simsek, MASAK, xxxxxxxxxxxx, and the Banking
Regulation and Supervision Agency in separate meetings.

7. (S) A/S Cohen reminded Simsek of FATF's repeated warnings
about doing business with Iranian banks and individuals.
Simsek was aware of these warnings and said Turkey would
uphold international law and comply with all UN Security
Council Resolutions. He said Turkish financial institutions
would continue to apply extreme due diligence and special
vigilance when dealing with Iran, but noted that Turkey has
the geographic reality of a long border and trading history
with Iran. He noted this trade must be financed on an
ongoing basis and insisted the U.S. must keep this in mind.
Simsek said Turkey would welcome any specific intelligence
the USG can share about Iranian entities supporting
terrorism. In response to downgraded intelligence
information on Iranian mis-use of the Turkish financial
system that A/S Cohen passed, Simsek noted Turkey wants all
its neighbors to be free of nuclear weapons. Simsek pledged
to instruct Turkish financial institutions to increase
vigilance against Iranians who might use deceptive methods to
circumvent international sanctions.

8. (S) On October 20, xxxxxxxxxxxx also expressed
appreciation for the USG's "courageous" designation of the
three PKK terrorist financiers and the hope that Turkey's
European partners will follow the U.S. example. He said
terrorists are not using weapons or components made or sold
in Turkey; instead, they are buying 90 percent of these
products from the EU. xxxxxxxxxxxx said pressure should be
brought against the EU to stop selling arms to Iran, rather
than just asking Turkey to stop the flow after the weapons
are sold.

9. (C) xxxxxxxxxxxx noted that Turkey has been suffering from
terrorism for decades and had an Anti-Terror Law in place
before the September 11, 2001 terror attacks. He mentioned
the 2006 law criminalizing money laundering and GOT efforts
to enhance customer due diligence and suspicious transaction
reporting regimes. xxxxxxxxxxxx noted that Turkey follows
both domestic law and sanctions under its international
obligations when fighting terror finance, including the UN's
Terrorism Finance Convention, UNSCR 1267 and 1373, and the
Counter Terrorism Committee, which Turkey will chair in 2010.

10. (C) xxxxxxxxxxxx said Turkey enforces all UNSCR sanctions
against Iran, despite a shared border and an
admittedly-difficult history, but cannot do anything beyond
UNSCRs and existing law. He added his hope that Europe will
follow the USG's PKK designation example and noted that the
EU could and should do more against terrorist financing.

Aid to Gaza

11. (C) On Gaza, xxxxxxxxxxxx said Turkey's interest is in
providing humanitarian assistance to Gaza directly without
providing support to Hamas. A/S Cohen encouraged the GOT and
private Turks to use UN mechanisms to give aid in ways that
keep money out of Hamas's hands. He said "we sympathize with
the needs of people in Gaza" and will send money directly to
the people and work to "convince our Israeli friends to send
help also." xxxxxxxxxxxx noted that the Israeli Government
has prohibited the movement of aid to Gaza. A/S Cohen raised
concerns about IHH, the Turkish Humanitarian Relief
Foundation, which was a large NGO providing material
assistance to Hamas. (See Reftel C.) xxxxxxxxxxxx said he
was not familiar with the NGO but would look into the matter.

Halkbank Cautious on Trade Finance with Iran

12. (S) A/S Cohen met with xxxxxxxxxxxx

xxxxxxxxxxxx to discuss concerns about Halkbank's involvement with
Iran and possible Iranian efforts to circumvent sanctions by
disguising the real origins and sources of transactions.
xxxxxxxxxxxx said Halkbank complies with all UN sanctions and will
remain alert and extra vigilant against these efforts. He
noted that Halkbank has a representative office in Tehran,
left over from its 2004 merger with Pamuk Bank. He noted
that after the 2004 merger, Halkbank ended its correspondent
banking relationship, but not its business development,
maintaining a representative in Tehran. He acknowledged
Halkbank has a long-inactive correspondent account with Bank
Sepah, which it can close. xxxxxxxxxxxx emphasized that Halkbank
provides financial services and products for trade, but does
not undertake third party or transit transactions. All of
its trade finance is done on a documentary basis with strict
customs controls and inspections. He added that no deals are
financed on a cash-for-goods basis. xxxxxxxxxxxx said Turkey has
"many millions of Euros" in trade with Iran, but apart from
oil purchases, the total is only 10-15 million Euro. A/S
Cohen warned that the USG has evidence of Iran falsifying
documents to push through transactions. xxxxxxxxxxxx said
they would remain vigilant and would welcome any specific

13. (C) xxxxxxxxxxxx noted that 25 percent of Halkbank's equity
floats on the Istanbul Stock Exchange and 90 percent of that
total is foreign owned. He said Halkbank is careful to
consult and be alert to all names on the Office of Foreign
Assets Control list and all circulars and information from
MASAK. A/S Cohen discussed the need to broaden the Turkish
definition of terrorism and further criminalize terrorist
financing. The Halkbank officials agreed and said the AKP
has the votes needed to push this through the parliament.
xxxxxxxxxxxx asked A/S Cohen how the USG's relationship with Iran
will develop over time. A/S Cohen responded that the USG
wants to work with the international community to prevent
Iran from developing nuclear weapons. We want to keep
communication lines open but also to hold Iran to UNSC
sanctions and obligations, he added. Halkbank closed by
noting that there was a sensitive balance that Turkey had to
play, noting the large numbers of unemployed youth in Iran
and the need for Turkey to offer legitimate help to the
Iranian economy.

14. (SBU) A/S Cohen met with representatives of the Banking
Regulation and Supervision Agency (BRSA) to discuss points
mentioned above. BRSA noted Turkey's progress in complying
with FATF regulations and efforts to expand that work. They
outlined the bank examination and auditing process and the
collection of data on all banks in Turkey. The officials
made note of all A/S Cohen's points and pledged to share the
information with xxxxxxxxxxxx. In response
to specific instances of illicit Iranian activities, the BRSA
officials pledged to pass this information to the BRSA's
Enforcement Division and reply with any information that they
found. Regarding the activities of Bank Mellat, BRSA
officials noted that the bank has a negligible share of the
banking sector. Mellat conducts mainly trade transactions
through its Turkish branches, and the bank is audited four
times per year by external auditors.

15. (U) A/S Cohen has cleared on this report.


"Visit Ankara's Classified Web Site at http://www.intelink.s"

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