IMPLEMENTATION OF THE FINANCIAL PROVISIONS OF

C O N F I D E N T I A L HONG KONG 000564 SIPDIS SIPDIS STATE FOR EAP/CM, NEA, ISN, T; TREASURY FOR GLASER E.O. 12958: DECL: 03/27/2018 TAGS: ECON EFIN ETRD PARM ETTC KNNP PREL CH SUBJECT: IMPLEMENTATION OF THE FINANCIAL PROVISIONS OF UNSCR 1803: HONG KONG RESPONSE REF: A. SECSTATE 29096 ¶B. 07 HONG KONG 2741 Classified By: E/P Section Chief Laurent Charbonnet, Reasons 1.4 (b/d) ¶1. (C) Post delivered reftel A talking points to the Hong Kong Monetary Authority (HKMA) Executive Director for Banking Supervision, Arthur Yuen, on March 27. Yuen confirmed Hong Kong's commitment to supporting the requirements of all United Nations Security Council resolutions on Iran. He noted that Bank Melli (Hong Kong) operates as a branch of the United Kingdom-based Bank Melli, which in turn is a subsidiary of Bank Melli Iran. Bank Melli (Hong Kong) is the only known Iranian-linked bank in Hong Kong. It's operations are small and have consisted primarily non-Iranian entities' business with Iran. HKMA began applying closer scrutiny to Bank Melli operations many years ago and continues to do so. ¶2. (C) Yuen noted that HKMA issued circulars in October 2007 to Hong Kong-based financial institutions in response to the U.S. Designation of Iranian Entities and FATF guidance on Iran (reftel B). He promised to provide HKMA bank auditors the list of Iranian banks and ask them to pay particular attention to any transactions related to Iranian entities. HKMA cannot legally mandate that Hong Kong financial institutions enhance due diligence of suspected Iranian-linked transactions, but he offered to consult with the highest level of HKMA management on means to encourage Hong Kong banks to require senior-level scrutiny for transactions involving Iran. Yuen noted that Hong Kong already has strong AML/CFT measures in place and a banking culture that encourages due diligence and "know your customer" practices. This is backed by regulations enforced by the HKMA. HKMA will review the material provided in the reftel non-paper and consider whether to issue additional advisories to Hong Kong financial institutions regarding business with Iranian entities. Cunningham