TREASURY U/S LEVEY'S MEETING WITH RUSSIA'S FEDERAL

C O N F I D E N T I A L MOSCOW 012395

SIPDIS

SIPDIS

STATE FOR P, E
STATE FOR EB/ESC/TFS
STATE FOR FOR EUR/RUS, NEA/FO, EAP/FO
TREASURY FOR U/S LEVEY, RACHEL LOEFFLER, BAKER AND GAERTNER
NSC FOR GRAHAM AND MCKIBBEN

E.O. 12958: DECL: 11/09/2016
TAGS: KTFN EFIN ETTC ECON PTER PREL RS
SUBJECT: TREASURY U/S LEVEY'S MEETING WITH RUSSIA'S FEDERAL
FINANCIAL MONITORING SERVICE ON NORTH KOREA

Classified By: ECON M/C Pam Quanrud, Reasons 1.4 (b/d).

Summary
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1. (C) In a meeting on October 24 with Treasury Under
Secretary Stuart Levey, Federal Financial Monitoring Service

SIPDIS
(FFMS) Chief Viktor Zubkov said he shared the USG's concern
about North Korean financial flows. He recounted how the
FFMS had investigated information on North Korean entities
that USG officials had provided in the last year but found no
evidence of financial relationships with Russian banks.
Nevertheless, Russia's National Security Council was
considering the development of a legal basis to freeze
accounts associated with WMD proliferation. End Summary.

DPRK Interest in Russian Banks
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2. (C) U/S Levey described how the strong action the USG
took against one of North Korea's favored banks, Banco Delta
Asia in Macau, had persuaded countries throughout Asia to
prohibit North Korea's access to their banking sectors. He
presented information that indicated North Korean entities
were trying to use Russian banks to facilitate their illicit
activities. U/S Levey observed that fighting proliferation
financing had been a priority during the 2005 G8 Summit and
expressed hope that G8 countries would demonstrate leadership
in cutting North Korea's access to financial markets for
illicit purposes, regardless of the implementation details
for UNSC Resolution 1718.

Financial Intelligence Unit
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3. (C) Federal Financial Monitoring Service (FFMS, Russia's
FIU) Chief Zubkov said he was not aware of ongoing financial
flows going to or coming from North Korea. He had
investigated information that Treasury Assistant Secretary
Danny Glaser provided last year but had discovered no
accounts or transactions between North Korean entities and
Russian banks. Zubkov added that the FFMS receives
approximately 30,000 mandatory and suspicious transaction
reports per day. The scope of the reports is comprehensive,
covering operations by banks, credit institutions, realtors,
and foreign exchange houses.


4. (C) Zubkov said that he shared the USG's concern about
the origin and destination of North Korean money. He
indicated the broader GOR was also interested in the issue,
and that the National Security Council had been discussing
forming a legal basis for freezing accounts linked to WMD
proliferation. The FFMS could freeze accounts and
transactions generated by or destined for any of the entities
on the FFMS-proscribed entities list. The FFMS had recently
compiled the 14th edition of its proscribed entities list and
would publish the 15th edition following the Presidential
Decree on implementing UNSC Resolution 1718.


5. (C) Zubkov explained that under any of the following five
criteria individuals and organizations could be placed on the
FFMS proscribed entities list. Appearance of an individual or
organization on a recognized international organization
designation, such as the UN 1267 Sanctions Committee,
constitutes the first criteria. Second, placement on the
entities list could come as the result of a Russian court
decision. Third, the Prosecutor General can identify
individuals and organizations for inclusion. Fourth,
Ministry of Interior investigations serve as a basis for
inclusion if subsequent court decisions do not dismiss the
investigation's findings. Finally, if Russia has a bilateral
information sharing agreement, with a reciprocity clause,
then an individual's or organization's presence on the
counterpart country's FIU list could be sufficient for
inclusion on the FFMS list. Zubkov said the FFMS will freeze
an account associated with a proscribed entity while the
information is sent to the Prosecutor General for
investigation. He noted that the proscribed list stands at
approximately 4,500 companies, organizations, and individuals.

WMD Proliferators
--------------


6. (C) Zubkov commented that the FFMS has not focused on
proliferators of WMD, such as the North Korean entities

designated under E.O. 13382. Apart from the Presidential
Decree on implementation of UNSC Resolution 1718, freezing
the financial assets of such entities would most likely be
undertaken on a case-by-case basis following specific
information sharing from the U.S. The current legal
framework in Russia did not easily lend itself to systematic
action against these entities. He expressed hope that U.S.
and Russian experts could strengthen cooperation on this
issue and not wait on international decisions before
determining how to mitigate this threat.

Comment
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7. (C) Zubkov appeared genuinely interested in cooperation,
and acknowledged that information sharing with the USG has
helped shut down money laundering operations in Russia. One
challenge will be to present North Korean account and
transaction information in suffficient detail to allow the
FFMS to take action. We will also urge senior GOR officials
to make cooperation on the money laundering front a policy
priority. End Comment.


8. (U) This messgae held for Under Secretary Levey's
clearance.
BURNS