IDENTIFYING TOOLS FOR POSSIBLE USE AGAINST IRANIAN

S E C R E T MADRID 002047

SIPDIS

SIPDIS

DEPT FOR EEB/ESC/TFS (COULTER),ISN, NEA

E.O. 12958: DECL: 10/29/2012
TAGS: KNNP IR PREL PARM EFIN ETTC SP
SUBJECT: IDENTIFYING TOOLS FOR POSSIBLE USE AGAINST IRANIAN
FINANCIAL INSTITUTIONS - SPAIN

REF: (A) STATE 149523 (B) MADRID 02040

Classified By: Deputy Chief of Mission, Hugo Llorens, for reasons 1.5 b
and d.


1. (S/NF) This message is keyed to reftel A's para. 5.


2. (S/NF) The Bank of Spain regulates banks. The Executive
Service of the Commission for the Prevention of Money
Laundering and Monetary Offenses (SEPBLAC) is the Spanish
government entity that focuses on preventing and
investigating money laundering. Stemming the flow of
terrorism finance is one of SEPBLAC's front burner
priorities. The Secretary of State for Economy, David
Vergara, heads up the Commission for the Prevention of Money
Laundering and Monetary Offenses. The Bank of Spain focuses
on ensuring that banks have adequate anti-money laundering
procedures. If the Bank of Spain considers an institution to
be deficient in this regard, it can levy a fine. Even if the
fine is low compared with the regulated entity's turnover,
the public nature of the fine is important because fines
connote reputational risk. SEPBLAC is Spain's Financial
Intelligence Unit (FIU) and represents Spain at Financial
Action Task Force (FATF) meetings. As a practical matter,
the Bank of Spain and SEPBLAC work closely together.


3. (S/NF) The Bank of Spain has the authority to revoke
operating licenses for foreign financial institutions. In
practice, however, it rarely exercises this authority.


4. (S/NF) Both the Bank of Spain and SEPBLAC have the
responsibility to ensure that Spain complies with United
Nations Security Council Resolutions. To the extent a
resolution mandates closing correspondent accounts with
Iranian banks, the Bank of Spain and SEPBLAC would
communicate to financial institutions to close correpondent
accounts. This would apply on proliferation or terrorism
grounds. Specifically with respect to terrorism, our reading
of SEPBLAC's aims from its internet page indicates that
SEPBLAC could act to close correspondent relationships with
Iran if it suspected that such relationships were being used
to further terrorism, i.e. a UNSCR would not be needed.


5. (S/NF) Spain uses the euro so we are not aware of a
mechanism available to the Spanish government that would
allow it to prevent Iranian banks from using the euro unless
the European Central Bank mandated such a step.


6. (S/NF) The Ministry of Industry, Tourism and Trade
Secretary of State for Trade, Pedro Mejia, chairs an

SIPDIS
inter-agency working group that reviews transactions with
Iran. Mejia has told DCM that Spain has a restrictive
approach. Ministry of Foreign Affairs (MFA) Secretary of
State Bernadino Leon told DCM on 10/25/07 (ref B) that
several business deals had not been approved even though it
was not clear that the transactions in question contravened
UNSCRs 1737 or 1747. The Bank of Spain issues Circulars that
appear in the Boletin de Estado (Spain's equivalent of the
Federal Register) that provide information on regulatory
requirements. SEPBLAC communicates with regulated entities
through a form of registered e-mail.


7. (S/NF) Our sense is that Spain's financial authorities
will be vigilant in ensuring that Spanish financial
institutions are protected from Iranian money laundering. We
are also confident that the regulatory authorities will
insist that UNSCRs on Iranian financial sanctions be
scrupulously implemented. The bottom line is that Spain has
the regulatory tools that are required to limit exposure to
Iran. In some cases, Spain may go beyond its international
legal obligations with respect to Iran, but the country will
guard its right to determine when it is in its national
interest to do so. But again, the tools are available to the
government should it choose to use them.
AGUIRRE