DEPUTY SECRETARY OF THE TREASURY KIMMITT'S JANUARY

C O N F I D E N T I A L SECTION 01 OF 03 BRUSSELS 000306

SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 01/21/2011
TAGS: PREL BE IR
SUBJECT: DEPUTY SECRETARY OF THE TREASURY KIMMITT'S JANUARY
22, 2007 MEETING WITH BELGIAN FM DE GUCHT

Classified By: Ambassador Tom C. Korologos, Reasons 1.4 (B) and (D)


1. (C) Summary: Belgium will do all possible to insure the
vigorous implementation of UNSCR 1737, Belgian FM De Gucht
assured Treasury Deputy Secretary Kimmitt during a one hour
meeting in Brussels on January 23, 2007. De Gucht indicated
that he personally was engaged on the issue, and
that all levels of Belgium's complicated and cumbersome
governmental machinery were working together closely. On
SWIFT, De Gucht expressed strong support for a U.S.-Europe
compromise that recognized the equities of all concerned.
Deputy Secretary Kimmitt thanked De Gucht for Belgium's
stance on UNSCR 1737, and urged the Belgians to keep close
tabs on Iran's state-owned banks. The Deputy Secretary also
agreed on the urgent need for an agreement on SWIFT, adding
that he would be meeting later that day to talk about SWIFT
with EU officials. Septel covers the Deputy Secretary's
meeting, also on January 23, with Belgian Finance Minister
Reynders. End summary.

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Implementation of UNSCR 1737
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2. (C) FM De Gucht opened the meeting by indicating
repeatedly that the Belgian government remained committed to
going beyond the requirements of UNSCR 1737. In that
connection, he cited Belgium (and the EU's) recent decision
to impose a visa ban, and to enlarge the list of people
subject to an asset freeze. The Minister said he was
personally engaged in the effort to galvanize Belgium's
government machinery on the Iranian sanctions issue.
Although Belgium's regions had the authority to issue export
licenses for many dual-use items, they generally defer to the
policy advice provided them by the Foreign Ministry. As an
indication of the seriousness with which he took the issue,
De Gucht said it was his policy to make sure that he
personally signed the licenses of any nuclear-related item.
None of the regional leaders dared to put their name
personally on a license application.


3. (C) The Deputy Secretary expressed appreciation for the
leadership of Belgium and Europe at the regional (EU) and
global (United Nations) levels on this issue. He added that
effective implementation of the UN decisions was critically
important. He noted that the European Council's action on 22
January was a good start in the right direction, focusing in
particular on the Council's agreement to ban transactions
with and freeze the assets of individuals and entities
covered by the criteria in UNSCR 1737. He asked the Foreign
Minister for his views on how the EU process would work going
forward.


4. (C) In response, De Gucht asserted that EU Member States
have two parallel responsibilities regarding any actions
demanded by the UN Security Council. First, Member States
have a direct obligation under international law to implement
Security Council resolutions. Second, Member States have an
obligation to implement EU-passed sanctions. Kimmitt
observed that not all Member States take the same position,
and that some assert they cannot implement Security Council
resolutions without additional action from the EU. De Gucht
said this was incorrect. He noted that Belgium is a "monist"
state that automatically incorporates automatically into
domestic law Security Council resolutions and other
international law. He observed that other states are
"dualist" and transpose Security Council resolutions into
domestic law. While the form of implementation may differ,
each United Nations member is bound by international law to
implement Security Council resolutions; this includes EU
Member States. In Belgium, the banking regulator immediately
implements Security Council asset freezes as well as EU
anti-money laundering directives. Moreover, bank directors
are personally liable for failures to implement the law.
(EMBASSY COMMENT: Article 60(2) of the Treaty of the
European Union additionally empowers EU Member States to
implement Security Council resolutions immediately without
waiting for EU action).


5. (C) The Deputy Secretary welcomed De Gucht's detailed
description of Belgian law and policy. He expressed the
opinion that UNSCR 1737 should be a rallying point for states
to act. He added that strong implementation by the EU would
send an important signal to the global community generally
and to Iran in particular. He noted that targeted sanctions
are already having an impact in Iran, with the leadership
increasingly under pressure from the top (the Supreme Leader)
and the bottom (legitimate businesses) that are feeling the
strain of targeted sanctions on illicit conduct.

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6. (C) Kimmitt noted that the U.S. Treasury Department
played a key role in the U.S. effort to carry out both the
1737 sanctions regime and those imposed by other resolutions.
The Deputy Secretary said the U.S. was particularly
concerned about the actions taken in Europe and elsewhere by
Iran's state-owned banks, several of which seemed to have an
instrumental part in promoting Tehran's nuclear ambitions.
Kimmitt emphasized that the financial sanctions agreed by the
United Nations were targeted to avoid touching legitimate
trade and legitimate business unrelated to terrorism or
proliferation activities. Nonetheless, he also observed that
it would be almost impossible for banks to "know their
customer" given the complex web of state-ownership for banks
and companies in Iran. He added that efforts to hide
transactions have become extremely sophisticated in Iran.
For example, in the case of ABN AMRO, the bank's Dubai branch
became a primary financing node for Bank Melli and, through
Bank Melli, supported a range of sanctioned activities.
Although no one in the Amsterdam head office was aware of
these activities, enforcement actions were taken against the
bank in both the U.S. and Europe. Other European banks seem
to be ahead of European governments and are voluntarily
deciding that doing business with Iranian state-owned
counterparties is not worth the risk, including the risk to
their US-based business.


7. (C) De Gucht responded with a comment on the details of
European banking law, a subject he said he had taught in his
law course for two decades. He noted that the key issue
within the EU would be who had the responsibility to exercise
oversight regarding a bank branch. According to him, the
home country regulator would be responsible for oversight of
bank branch activities anywhere in the world. Therefore, any
Belgian bank doing business with an Iranian counterpart would
have to follow Belgian law, he claimed. As such, they would
be bound to follow a strict sanctions regime. Kimmitt
responded that other EU Member States were not as willing to
act as Belgium. He noted that another EU Member State
clearly had authority to act over a subsidiary of an Iranian
state-owned bank and refused to act, claiming it needed first
a common position and a regulation from the EU. De Gucht
said this was an incorrect reading of the legal obligations
of Member States who are members of both the U.N. and the EU.
Kimmitt agreed.

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SWIFT
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8. (C/NF) The Foreign Minister asked the Deputy Secretary
about the status of the SWIFT negotiations. He noted that
the Belgian government supported efforts to reach a
Europe-wide consensus on how to deal with SWIFT "so it can
continue working." He noted that "until now, no criminal
investigation" had been undertaken on the matter and that the
Prime Minister wanted an agreement between the United States
and the Commission. While making clear that he personally
had not been deeply involved on the issue, he noted that
political leaders were responding to public fears about the
"indiscriminate" use of any data collected during
transactions through the SWIFT mechanism. He asked "what
happens to the information after it has been transferred" and
urged the USG to make a maximum effort for progress on the
issue.


9. (C/NF) The Deputy Secretary expressed appreciation for the
Belgian government's actions in this situation. He agreed
that it would be important to balance the need to protect
citizens from terrorism with the need to protect their
privacy. He noted that the Terrorism Finance Tracking
Program (TFTP) incorporated significant safeguards precisely
to protect individual privacy. He noted that Treasury
experts had met with Commission experts the previous week and
that it seemed both sides seemed close to substantive
conclusions, although it was unclear how that agreement would
or should be memorialized. He noted that Treasury had
accelerated its efforts to reach an agreement, recognizing
the Prime Minister,s concerns. He noted that Treasury was
working cooperatively with the Commission, and indicated that
since the summer six meetings had occurred between Treasury
and the Commission. He would meet with Frattini the
following day as well.


10. (C/NF) Kimmitt also challenged De Gucht's use of the
word "indiscriminate," noting that a number of safeguards had
been incorporated into the TFTP to ensure a narrow focus of
data collection efforts and access to the data. In
particular, specific objective factual information was

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required before the database is accessed. Second, an
independent contractor reviews the request to ensure access
is properly granted.


11. (C/NF) Regarding data retention, Kimmitt noted that
hard drives can be difficult to erase and asked what the
standard for data retention might be in Belgium. He also
asked whether the length of the data retention period was a
concern. The Foreign Minister replied that banks are
required to hold data for five years and then destroy it.
Kimmitt indicated that the period in the United States was
diferent.

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BELGIAN TAX ISSUE
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12. (C) The Foreign Minster at the end raised a question
regarding te taxation of Belgian embassy employees in the
United States, noting that the first bilateral discussion of
the issue was scheduled for ater in the weekQn Brussels.
Kimmitt responde that the issue had been raised to him in
Wasington by the new Belgian Ambassador as well. He observed
his understanding that this was a technical tax
administration issue, perhaps limited to U.S. green card
holders. He noted that holding a green card is a step
towards U.S. citizenship and so individuals that hold a green
card normally are taxed on U.S. earned income. The technical
question for consideration was how to address this issue
under a double taxation treaty. The Foreign Minister noted
that the issue did not involve diplomatic personnel but
locally engaged staff. The Deputy Secretary promised to look
into the issue.


13. (U) Ambassador Kimmitt cleared this cable. Korologos
.