Identifier
Created
Classification
Origin
07LONDON52
2007-01-05 18:04:00
SECRET//NOFORN
Embassy London
Cable title:  

UK CONSIDERING BANK SADERAT OPTIONS

Tags:  EFIN KTFN PREL PTER ETTC IR UK 
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DE RUEHLO #0052/01 0051804
ZNY SSSSS ZZH
O 051804Z JAN 07
FM AMEMBASSY LONDON
TO RUEHLO/AMEMBASSY LONDON IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
INFO RUCNIRA/IRAN COLLECTIVE IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
RUCNDT/USMISSION USUN NEW YORK IMMEDIATE 0864
S E C R E T SECTION 01 OF 02 LONDON 000052 

SIPDIS

NOFORN
SIPDIS

STATE FOR EB/ESC/TFS, NEA/IR, PM/ISD, EUR/UBI, EUR/PGI,
TREASURY FOR EPSTEIN

E.O. 12958: DECL: 01/05/2017
TAGS: EFIN KTFN PREL PTER ETTC IR UK
SUBJECT: UK CONSIDERING BANK SADERAT OPTIONS


LONDON 00000052 001.3 OF 002


Classified By: Economic Minister-Counselor Mark A. Tokola for reasons 1
.4 (b) and (d)

S E C R E T SECTION 01 OF 02 LONDON 000052

SIPDIS

NOFORN
SIPDIS

STATE FOR EB/ESC/TFS, NEA/IR, PM/ISD, EUR/UBI, EUR/PGI,
TREASURY FOR EPSTEIN

E.O. 12958: DECL: 01/05/2017
TAGS: EFIN KTFN PREL PTER ETTC IR UK
SUBJECT: UK CONSIDERING BANK SADERAT OPTIONS


LONDON 00000052 001.3 OF 002


Classified By: Economic Minister-Counselor Mark A. Tokola for reasons 1
.4 (b) and (d)


1. (S/NF) Summary: An HMG intra-agency group met with U.S.
Treasury officials to review new "evidence" of illicit
activities by Bank Saderat Iran and its London-based
subsidiary, Bank Saderat PLC. HMG officials requested
further information indicating the London subsidiary is
controlled by the Iranian headquarters and not managed as a
normal commercial bank. The UK once again indicated that
they are serious about this issue and remain interested in
any further information we can provide to help them link the
London subsidiary with any UK designated terrorist entities.
End Summary.


2. (S/NF) On December 21, U.S. Treasury officials met with
an intra-agency group from the UK to discuss illicit
activities of Bank Saderat Iran and its London-based
subsidiary, Bank Saderat PLC. The Treasury officials detailed
the USG's evidentiary basis for revoking Bank Saderat's
U-turn exemption and the reasoning for implementing this
financial measure as opposed to other options, such as E.O.
13224 terrorist designation. The Treasury officials detailed
information demonstrating that the bank as a whole, including
its London subsidiary, acts as a single entity controlled by
the Government of Iran (GOI),and that the London subsidiary
allows the GOI to mobilize its European-based dollar
holdings. The Treasury officials outlined the use of Bank
Saderat's London subsidiary as a conduit for funds from the
Central Bank of Iran to the account of a Hizballah-controlled
organization at Bank Saderat -Beirut.


3. (S/NF) Hizballah is not a designated terrorist entity by
the UN, EU, or UK, although its military wing, the Islamic
Jihad Organization (IJO) or External Security Organization
(ESO) is designated by the UK. Additional information

provided to the UK suggests that Hamas, Palestinian Islamic
Jihad (PIJ) and the Popular Front for the Liberation of
Palestinian also hold accounts with Bank Saderat in Lebanon,
as well as a commercial entity controlled by Hizballah's IJO.


4. (U) In September 2006, based on the BSI's ties to
terrorist financing, U.S. Treasury took action to cut Bank
Saderat off from the U.S. financial system by revoking its
ability to participate in U-turn transactions. A U-turn is a
USD transaction involving an Iranian entity that is cleared
through a U.S. bank by a third-country bank. Generally
speaking, the transaction must originate and terminate with
the third-country bank to qualify as a U-turn.


5. (S/NF) U.S. Treasury officials had previously met with
HMG officials to discuss UK action against BSI's London
subsidiary either in the form of a terrorist designation or a
regulatory action that could suspend the Bank's license to
operate in the UK. In response to HMG questions, U.S.
Treasury officials said that they had not yet designated BSI
as a terrorist entity but were working on formalizing an E.O.
13224 terrorist designation which could be done in concert
with UK action.


6. (S/NF) HMG officials requested further information about
the links between Bank Saderat's London subsidiary and its
Iranian parent. Specifically, they requested help developing
the "single entity" concept, the idea that the London
subsidiary is controlled by the Iranian headquarters and not
managed as a normal commercial bank. HMG officials are
particularly interested in the main purpose of the
subsidiary's London operations, whether the subsidiary
operates separately or only in line with Bank Saderat Iran,
and whether the subsidiary is profitable.


7. (S/NF) HMG officials are clearly serious about this
issue and remain interested in any further information we can
provide to help them link the London subsidiary with any UK
designated terrorist entities. In the absence of a clear
link, HMG officials may pursue regulatory action if they can
show that the UK subsidiary operates as part of a "single
entity" with Bank Saderat Iran, and that their combined
activity is outside of normal banking activities. HM
Treasury's Patrick Guthrie said HMG will review the
additional information provided by U.S. Treasury over the
coming weeks and reconvene as an intra-agency group in early
January to discuss possible conclusions and next steps.
According to Guthrie, it was too early to tell if the new
"evidence" would result in HMG action either through
anti-terrorism legislation or through regulatory measures.

LONDON 00000052 002.3 OF 002




8. (SBU) UK officials were led by Head of the Financial
Crime Team at HM Treasury Paul Rankin, Financial Crime Sector
Leader for the UK Financial Services Authority Philip
Robinson, HM Treasury Legal Adviser Stephen Parker, Head of
Iran Team at FCO Ben Fender, Patrick Guthrie from HM
Treasury, and Louise Proudlove from the Cabinet Office.


9. (SBU) Matt Epstein and Kate Bauer from U.S. Treasury
cleared this cable.

Visit London's Classified Website:
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Johnson