QATAR CONTINUES BALANCING ACT WITH IRAN'S BANK

C O N F I D E N T I A L SECTION 01 OF 04 DOHA 000505

SIPDIS

DEPARTMENT FOR ISN, T, AND NEA

E.O. 12958: DECL: 07/13/2018
TAGS: PREL KTFN KNNP INRB PARM MNUC ECON EFIN IR QA
SUBJECT: QATAR CONTINUES BALANCING ACT WITH IRAN'S BANK
SADERAT

REF: SECSTATE 67950

DOHA 00000505 001.3 OF 004


Classified By: CDA Michael A. Ratney, reasons 1.4 (b) and (d).


1. (C) SUMMARY: Qatar's Deputy Central Bank Governor Sheikh
Fahad Bin Faisal Al Thani told Charge the early June opening
of a second Bank Saderat branch in Doha was the result of
last-minute Iranian action on an old license. He asserted
that the Central Bank is watching Iranian activity closely
but expressed concern over the possibility of masked accounts
and investment activities. Sheikh Fahad provided a copy of a
confidential Central Bank circular ordering local banks to
check their records for entities sanctioned under UNSCR 1803.
Separately, Post obtained a recent letter from the Qatar
Financial Center to its registered firms warning about Iran's
lack of comprehensive anti-money laundering/combating the
financing of terrorism (AML/CFT) controls. Post believes the
GOQ sees a limited Iranian banking presence as placating its
larger neighbor's aggressive push for expanded economic ties
without undermining tougher sanctions by the United States
and international community. END SUMMARY.

--------------
Demarche on Second Bank Saderat Branch
--------------


2. (C) Deputy Central Bank Governor and Chair of the National
Anti-Money Laundering and Terrorism Financing (AML/CFT)
Committee Sheikh Fahad Bin Faisal Al Thani told Charge and
Econoff July 13 that Bank Saderat's second branch in Qatar
opened under an old license the Central Bank had issued "a
long time ago" on which the Iranians had not acted. Sheikh
Fahad explained that the Central Bank had recently informed
Bank Saderat that the license would be soon be revoked
because it had been dormant for so long; this was apparently
the impetus for Saderat's decision to open a second branch.


3. (C) In delivering reftel demarche, Charge emphasized to
the Deputy Governor that Bank Saderat is an entity of concern
due to its involvement in the financing of terrorist groups
and Iran's nuclear proliferation activities. He stressed
that the bank's continued presence would harm Qatar's
financial reputation in the eyes of United States and the
international community.


4. (C) Sheikh Fahad did not respond directly to these
concerns but noted that Bank Saderat's activities in Qatar
remain small and that Qatar's Financial Information Unit
(FIU) gives priority to scrutiny of the bank's transactions.
To illustrate his point, he showed Charge copies of internal
Central Bank spreadsheets documenting Bank Saderat's
transactions and accounts. Sheikh Fahad noted that Qatar has
not/not seen suspicious Iranian diplomatic activity as has
occurred in other countries, but he worried Iran may be
depositing state funds into individuals' personal accounts.
According to the spreadsheets Sheikh Fahad displayed, Bank
Saderat in Qatar maintains small accounts with Doha Bank,
Future Bank, and Qatar National Bank (QNB). For example, the
QNB account holds 114,000 Qatari Riyals (about USD 31,318).
Sheikh Fahad said he did not know the purpose of these
accounts but opined that they could be for facilitating trade
or investment activity. Separately, he suspects some Qataris
may be working with Iranians to conceal the true extent of
investment activity, especially in the real estate sector,
where he suspects that Shi'a families in Qatar may receive
commissions in exchange for helping Iranians invest in
building projects.

--------------
Central Bank Circular on Iran
--------------


5. (C) Sheikh Fahad provided a copy of a confidential Central
Bank circular from April, directing all banks in Qatar to
check their records for transactions involving the entities
named in UNSCR 1803 as subject to a travel ban and asset
freeze. (Note: As Sheikh Fahad provided this in confidence,
addresses should regard it as classified.) An unofficial
embassy translation of the circular and summary of the
attachments follows:

Date: April 10, 2008

Circular Number 54/2008

To all banks operating in Qatar

DOHA 00000505 002 OF 004



Subject: Financial Transactions, Accounts, and Private
Companies' and Individuals' Deposits, as attached

Under Article 79 of the decreed law number 33/2006, the Qatar
Central Bank must be urgently informed of any bank,
financial, account, or deposit transactions involving any of
the companies or individuals listed in the relevant
attachments. Because of the high importance of this issue,
you are requested to respond immediately and keep the
necessary confidentiality.

(Signed) Fahad Bin Faisal Al Thani, Deputy Governor

Attached: List of individuals and companies

Attachment 1: List of companies and agencies of Iranian
nationality (Note: Listed are the 12 names from UNSCR 1803,
Annex 3).

Attachment 2: Personal Names of Iranian Nationality (Note:
Listed are the 18 names from UNSCR 1803, Annex 1).

Attachment 3: FINCEN Advisory from March 20, 2008 -
"Guidance to Financial Institutions on the Continuing Money
Laundering Threat Involving Illicit Iranian Activity."

Attachment 4: FATF Statement from February 28, 2008 which
includes warning on Iran's lack of comprehensive AML/CFT
controls.


6. (C) Sheikh Fahad also provided a reply letter from Bank
Saderat to the Central Bank which said that the bank did
not/not find any accounts connected to the identifying
information listed in the circular. An unofficial embassy
translation of the letter follows:

April 13, 2008

Serial Number: 203/2623/41

Sheikh Fahad Bin Faisal Al Thani
Deputy Governor
Doha, Qatar

(Standard Greeting),

In reference to your circular number 54/2008 dated 4/10/2008,
please be informed that the individuals, agencies, and
organizations mentioned by name in the lists attached to the
mentioned circular do not have any accounts or bank or
financial transactions with the Bank Saderat branch in Doha.

(Standard Closing),

Bank Saderat Iran

--------------
FIU Chief on Iran, Qatar's FATF Evaluation
--------------


7. (C) In a separate meeting on July 13, Qatar's FIU Chief
Sheikh Ahmed Bin Eid Al Thani told Econoff that Bank Saderat
had invited him to the opening of the second branch in early
June, but he declined to attend. He said the bank took out
an advertisement in a local paper to announce the opening and
listed his name and other officials as guests. He speculated
that the bank merely published the guest list, not the actual
list of attendees.


8. (C) Sheikh Ahmed said that he had been working non-stop to
prepare for Qatar's MENA-FATF evaluation report. He noted
that the discussion of Qatar stretched to nine hours at the
April MENA-FATF meeting - "setting a new record" - but he was
pleased with the scrutiny because it would help Qatar focus
on the areas for improvement. The FIU Chief added that many
of the recommended changes can be accomplished at the
ministry level (i.e., without a royal decree or change in
law),and the AML/CFT Committee was working to coordinate
their implementation. He professed not to know when Qatar
would form a single financial regulator but hoped it would be
soon, as its establishment would streamline the FIU's job.
He concluded that AML/CFT Committee Chair Sheikh Fahad was
pressing him to complete a follow-up report for FATF in one
year, vice the normal two year timeframe typical for such
reports.

DOHA 00000505 003 OF 004



--------------
Qatar Financial Center Warning on Iran
--------------


9. (C) Separately, an American contact at the Qatar Financial
Center provided Econoff with a copy of a QFC letter which was
recently issued to each of the 70 registered firms in the
Center. (Note: The QFC is a parallel financial services
"free zone" with its own, generally more stringent, set of
regulations distinct from the Central Bank). The text of the
letter is as follows:

Dear (Name)

(Firm name and License number)

FATF Statement - Jurisdictions with Deficient AML/CFT Regimes

The National Anti-Money Laundering and Terrorism Financing
Committee has recommended that the Qatar Financial Centre
Regulatory Authority ("QFC Regulatory Authority") distribute
the enclosed Financial Action Task Force Statement (28
February 2008) to all Relevant Persons. In the statement
FATF expressed concern about the lack of comprehensive
AML/CFT systems in Uzbekistan, Iran, Pakistan, Turkmenistan,
Sao Tome and Principe and the northern part of Cyprus.

This step reflects the State of Qatar's serious commitment to
the fight against money laundering and terrorist financing,
particularly to ensure that financial institutions are aware
of jurisdictions with AML/CFT deficiencies.

The QFC Regulatory Authority takes this opportunity to remind
Relevant Persons of their obligation under Article 14 of the
QFC Anti Money Laundering Regulations to have arrangements in
place to obtain and ensure proper use is made of government,
regulatory and international findings, including those issued
by the Financial Action Task Force.

As you are aware, Relevant Persons must examine and pay
special attention to any Transactions or business relations
with Persons (including Beneficial Owners) located in a
country or jurisdiction identified as deficient, including
those described in the attached FATF Statement.

Further, any Relevant Person considering Transactions or
business relationships with Persons located in any
jurisdiction identified as deficient must be aware of the
background against which the assessment or specific
recommendations have been made.

The QFC Regulatory Authority expects that your firm's systems
and controls have operated in compliance with the AML
Regulations and that proper use has been made of the FATF
findings.

Any questions should be directed to your firm's case officer
in the Supervision Division or to Andrew Sealey in the Legal
and Regulatory Compliance Division (495-6831).

Yours sincerely,

Phillip Thorpe
CEO & Chairman

(End text of letter)

--------------
Bank Saderat Identifying Information
--------------


10. (U) The second Bank Saderat branch opened on June 1,

2008. At least for now, it has the same contact information
as the first branch:

Bank Saderat
P.O. Box 2256
Doha, Qatar
Tel: 974-443-0346
Fax: 974-443-0121

The first branch is located on Grand Hamad Street near the
Gold Souq. The second branch is located on Salwa Road, near
Ayn Khalid Roundabout, across from Lord's Furniture.


DOHA 00000505 004 OF 004


-------------- --------------
COMMENT: Saderat Part of a Larger Balancing Act with Iran
-------------- --------------


11. (C) The background information provided by the Deputy
Central Bank Governor and the FIU Chief suggest that Bank
Saderat's role in Qatar's financial sector remains small and
that the Iranian authorities sought the second branch as a
means to expand channels for financial activity given the
increasingly restrictive international environment for
Iranian financial entities.


12. (C) While Sheikh Fahad has an important regulatory and
monitoring role within the GOQ, and he is clearly concerned
about Iranian and Shi'a banking and investment activity in
Qatar, it is also clear that he sees the presence of Bank
Saderat as a political issue above his pay grade. Press
reports amplify what we hear privately from various Qatari
contacts: that Iranian officials are frequently pressing
their Qatari interlocutors for expanded bilateral economic
ties. The GOQ is carrying out a delicate balancing act with
its larger neighbor (with which it shares trillions of
dollars of potential natural gas wealth) - permitting
economic activity, primarily payments of remittances to Iran
which can be openly monitored, while guarding against actions
by Iranian entities that would jeopardize Qatar's
international reputation as a developing financial hub. We
expect the GOQ to keep a close watch on Bank Saderat's
activities but not to close any of the bank's Doha branches
absent a UN Security Council Resolution specifically
sanctioning the bank. END COMMENT.


13. (C) BIO NOTE: Sheikh Fahad is an unusually (by Qatari
standards) open and fluid interlocutor who enjoys
give-and-take when by himself. Unfortunately, Emboffs
usually only see him in conjunction with the Central Bank
Governor, who is friendly but tends to stick to standard
talking points. Sheikh Fahad is in his mid-40s, educated in
the U.S. (he received a Bachelor's Degree at Portland State)
and genuinely cares about protecting the financial integrity
of his country. He is also more inclined to be helpful when
separated from his boss; for instance, he provided us with a
copy of the internal circular on background, even asking us
to hide it from the secretary who sits outside his office.
RATNEY