BANK MELLI ATTEMPTS TO PURCHASE A TURKISH BANK TO

S E C R E T STATE 153725

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/07/2017
TAGS: KNNP MNUC IR GM UK FR TU
SUBJECT: BANK MELLI ATTEMPTS TO PURCHASE A TURKISH BANK TO
CIRCUMVENT UNSCRS 1737 AND 1747


Classified By: EUR/PRA OD Anita Friedt for reasons 1.4 (b) and (d).


1. (U) This is an action request. Please see paragraph 3.

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SUMMARY
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2. (S) The U.S. has information that Iran's Bank Melli has
reached an agreement in principle to purchase a bank in
Turkey, which could be used as a cover for activities
prohibited by UNSCRs 1737 and 1747. On October 25, the U.S.
designated Bank Melli for its support for
proliferation-related activities under Executive Order 13382
("Blocking the Property of Weapons of Mass Destruction
Proliferators and their Supporters"). This designation was
the result of Bank Melli's provision of financial services
for Iran's defense and missile programs. Specifically, for
providing financial support to entities previously designated
under E.O. 13382, such as Iran's Aerospace Industries
Organization, Atomic Energy Organization and Defense
Industries Organization, some of which are also designated as
subject to sanctions under UNSCRs 1737 and 1747. The U.S.
urges Turkey to prevent the sale of the Turkish bank to Bank
Melli and to exercise increased vigilance regarding any
Iranian financial relationships.

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OBJECTIVES/ACTION REQUEST
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3. (S) Washington requests Posts deliver the talking points
and non-paper in paragraph 4 to appropriate host government
officials in the foreign affairs and financial ministries.
Posts should pursue the following objectives:

FOR EMBASSY ANKARA:

-- Alert Turkey that Bank Melli has reached an agreement in
principle to purchase a Turkish bank.

-- Urge Turkey to take the necessary steps to investigate
and prevent this purchase since the bank will likely be used
to circumvent UNSCR sanctions.

-- Emphasize that the Executive Order 13382 designation of
Bank Melli responds to the threat that it poses to the
international financial system.

-- Note U.S. action against Bank Melli is consistent with
obligations under paragraph 12 of UNSCR 1737 and urge Turkey
to take similar action.

FOR EMBASSIES ANKARA, BERLIN, PARIS, LONDON:

-- Reinforce the need for increased vigilance regarding any
Iranian financial relationships, as these may be engaged in
proliferation-related transactions.

FOR EMBASSIES BERLIN, PARIS, LONDON:

-- Provide additional information to the EU3 on Bank Melli's
involvement in Iranian proliferation activities.

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BACKGROUND AND NONPAPER
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4. BEGIN SECRET/REL FRANCE, GERMANY, TURKEY, UK NON-PAPER:

-- We would like to raise concerns about Iranian financial
activities in Turkey.

-- The U.S. has information that Iran's Bank Melli (National
Bank of Iran) has agreed in principle to purchase a bank in
Turkey. We do not know the name of the bank in Turkey. Bank
Melli planned to send a delegation to Turkey to carry out
preliminary negotiations, get more information, and prepare
an assessment report.

-- On October 25, the U.S. designated Bank Melli under
Executive Order 13382 ("Blocking the Property of Weapons of
Mass Destruction Proliferators and their Supporters") for
providing financial services and support to Iranian entities
designated under E.O. 13382 and for providing support for
proliferation-related activities. As a result of this
designation, all transactions involving Bank Melli and any
U.S. person are prohibited and any assets Bank Melli may have
under U.S. jurisdiction will be frozen.

-- The U.S. has information that Bank Melli is being used as
a cover for activities prohibited by UNSCRs 1737 and 1747.
In particular, Bank Melli/Hong Kong has done business with
Sanam Industrial Group and Shahid Hemmat Industries Group
(SHIG),entities designated in UNSCRs 1737 and 1747 as being
involved in Iran's missile program.

-- Following the designation of Bank Sepah under UNSCR 1747,
Bank Melli took precautions not to identify Sepah in
transactions. Through its role as a financial conduit, Bank
Melli has facilitated numerous purchases of sensitive
materials for Iran's nuclear and missile programs. In doing
so, Bank Melli has provided a range of financial services on
behalf of Iran's nuclear and missile industries, including
opening letters of credit and maintaining accounts.

-- We believe that Bank Melli is acting on behalf of Bank
Sepah and is therefore covered by paragraph 12 of UNSCR 1737,
which requires UN Member States to freeze assets not only of
designated entities, but also entities acting on their behalf.

-- Bank Melli also provides banking services to the IRGC and
its Qods Force. Entities owned or controlled by the IRGC or
the Qods Force use Bank Melli for a variety of financial
services. From 2002 to 2006, Bank Melli was used to send at
least $100 million to the Qods Force. When handling
financial transactions on behalf of the IRGC, Bank Melli has
employed deceptive banking practices to obscure its
involvement from the international banking system. For
example, Bank Melli has requested that its name be removed
from financial transactions.

-- The Defense Industries Organization (DIO)- which was
designated in the annex of UNSCR 1737-- has used Bank
Melli/Hamburg to facilitate financial transactions. As noted
in the UNSCR 1737 annex, subordinates of DIO have been
involved in Iran's centrifuge and missile programs. The DIO
also conducts research and development for Iran's defense and
military forces and produces a wide variety of
military-related weapons, technologies, and other equipment.

FOR TURKEY ONLY:

-- The United States urges your government to take the
necessary steps to investigate and prevent this purchase
given the risk that such a purchase could be used to support
relationships or facilitate transactions associated with
Iran's WMD and missile programs contrary to UNSCR 1737 or
1747, or other illicit activities. Allowing this transaction
to take place could expose your banking system to illicit
activity related to weapons proliferation.

-- In addition, we also urge you to exercise increased
vigilance regarding all Iranian financial and commercial
relationships, not just those involving Bank Melli. Should
you identify any proliferation-related activities, we would
urge you to freeze any accounts or transactions held or
conducted in support of this activity.

-- As you know, the UN Security Council unanimously adopted
UNSCRs 1737 and 1747 under Chapter VII. These resolutions
apply sanctions to entities and individuals designated in the
resolutions' annexes based on their involvement in Iran's
missile and nuclear programs in order to prevent
proliferation activities. Member States are required under
operative paragraph 6 of UNSCR 1737 to prevent the provision
of financial services related to the transfer or use of
prohibited items and are also required under operative
paragraph 12 of UNSCR 1737 to freeze the assets of designated
entities/individuals as well as those "owned or controlled"
by them or acting on their behalf. UNSCR 1747 further calls
on states to exercise "vigilance and restraint" in providing
Iran with financial resources, assistance or other services
related to the supply of certain types of heavy conventional
arms and military equipment.

-- Member States are required to ensure that entities within
their territories, including banks, do not provide funds or
other economic resources either to designated
entities/individuals or to those acting on their behalf.

-- We look forward to hearing the results of any actions you
take in this case at the earliest possible time and are
prepared to provide additional assistance as appropriate.

-- We also look forward to working with you on these and
other related security and counter-proliferation matters.

FOR UK, FRANCE, AND GERMANY ONLY:

-- In concert with the Executive Order 13382 designation,
the information on Bank Melli's activities provides an
additional example of the bank's complicity in processing
proliferation-related transactions.

END SECRET/REL FRANCE, GERMANY, TURKEY, UK NON-PAPER.

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REPORTING DEADLINE
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5. (U) Post should report results by November 16. Please
slug replies for ISN, T, TREASURY, EUR, and NEA. Please
include SIPDIS in all replies.

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POINT OF CONTACT
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6. (U) Washington point of contact for follow-up
information is Kevin McGeehan, ISN/CPI, (202) 647-5408,
RuggieroAJ@state.sgov.gov.


7. (U) Department thanks Post for its assistance.
RICE