VFM PHUNG RESPONDS TO CONCERNS ABOUT NORTH KOREAN

S E C R E T SECTION 01 OF 02 HANOI 001950 SIPDIS SIPDIS E.O. 12958: DECL: 08/01/2016 TAGS: EFIN CTERR ECON IO PREL KN VM SUBJECT: VFM PHUNG RESPONDS TO CONCERNS ABOUT NORTH KOREAN BANKING IN VIETNAM REF: A. REF A) SECSTATE 105317 ¶B. REF B) HANOI 1594 ¶C. REF C) HANOI 1595 Classified By: Ambassador Michael W. Marine, Reasons 1.4 (b/d) ¶1. (S) Summary: In a July 19 meeting with Ministry of Foreign Affairs (MFA) Standing Vice Minister Le Cong Phung, Treasury Under Secretary Stuart Levey and the Ambassador raised U.S. concerns over North Korean interactions with two of Vietnam,s State-owned commercial banks. Phung made clear that U.S. priorities were more important to Vietnam than North Korean concerns and that Vietnam will do all it can to ensure that no illicit activities take place within its banks. At the end of the meeting, Phung confided that he has an early morning meeting with the State Bank of Vietnam on July 20 to discuss in greater detail how to ensure that this policy is carried out. End Summary. Banking In Vietnam -------------- ¶2. (S) Phung began the meeting by commending the progress of U.S.-Vietnam bilateral relations, which he characterized as &moving smoothly8 since then Prime Minister Phan Van Khai,s visit to the United States last June. Under Secretary Levey agreed with this assessment and added that, SIPDIS in light of the many upcoming exchanges, notably Treasury Secretary Paulson,s participation in the September APEC SIPDIS Finance Minister,s Meeting and the President,s visit in November, the United States does not want North Korean banking activities in Vietnam to negatively affect this relationship. For this reason, said Levey, we are asking Vietnam to take specific, concrete actions to ensure that North Korea,s Tanchon Commercial Bank,s accounts with Vietcombank and any other banks in Vietnam are frozen (ref A). We also request, added Levey, that the GVN block the efforts of other North Korean banks seeking to establish financial relationships here and to ensure DPRK proliferators such as KOMID are unable to do business in Vietnam. The United States is approaching Vietnam on this issue in the spirit of friendship, since trading with North Korean companies and banks that have such established links to illicit North Korean activity could be damaging to the reputation of Vietnam,s financial sector at a critical time in its development. He also said that it was not necessary for action to be taken publicly, but rather that this business be shut out of Vietnam and any relevant accounts or transactions frozen. Phung on North Korea -------------- ¶3. (S) Phung admitted that relations with North Korea have not been &good,8 and that the North Koreans have vocally criticized Vietnam,s highly successful &doi moi8 (renovation) policy. While Vietnam has a tradition of relations with North Korea, Phung emphasized that Vietnam attaches greater importance to relations with the United States. Phung also stressed that Vietnam does not cooperate on any efforts to promote the proliferation of Weapons of Mass Destruction (WMD) or terrorism, and he expressed satisfaction with the quality of Vietnam,s counterterrorist cooperation activities with the United States. (Note: While Vietnam does cooperate on a basic level with some information sharing, they are not particularly engaged in counterterrorism. End Note.) Phung also emphasized that the Government of Vietnam (GVN) is very concerned about the missile tests of July 4 and expressed puzzlement as to North Korea,s thinking. Phung promised Vietnam will be &very strict8 and will not tolerate &terrorist or WMD8 related activities in their banking system. He assured the Under Secretary that the two Vietnamese banks &had been warned.8 SIPDIS ¶4. (S) The Ambassador also encouraged Phung to look closely at the language of UN Security Council Resolutions 1540 and 1673, especially as they relate to financial transactions with North Korea. Levey also highlighted that the new resolution on North Korea ) UNSCR 1695 ) further compelled states to ensure that no financial resources are transferred in support of DPRK WMD and missile programs. Phung noted HANOI 00001950 002.2 OF 002 that Vietnam always follows international regulations and will do the same here. As the meeting was breaking up, Phung confided that he has an early morning meeting with the State Bank of Vietnam on July 20 to discuss this issue in greater detail. ¶5. (U) This message was cleared by Treasury staff. MARINE MARINE