DEMARCHE DELIVERED REGARDING PREVENTING

S E C R E T JAKARTA 001711

SIPDIS

DEPARTMENT FOR ISN, T, NEA/IR, EAP, EAP/MTS, EEB/ESC
TREASURY FOR IA - M. NUGENT AND T. RAND
SINGAPORE FOR S. BAKER

E.O. 12958: DECL: 09/09/2033
TAGS: ECON EFIN KNNP PARM PTER PINR IR ID
SUBJECT: DEMARCHE DELIVERED REGARDING PREVENTING
ESTABLISHMENT OF IRANIAN JOINT BANK IN INDONESIA

REF: STATE 93583

Classified By: Economic Counselor Peter Haas for reasons
1.4 (b) and (d).


1. (S) Summary: Indonesian government interlocutors
confirmed that Bank Melli had inquired about the rules
for establishing operations in Indonesia, but had not
submitted any application to open a branch, subsidiary
or to form a joint bank with Bank Panin or any other
Indonesian financial institution. A Ministry of
Foreign Affairs (Deplu) official advised that Deplu
had recently convened an interagency meeting and a
meeting with banks and the business community to
brief them on implications of recent UNSCRs.
Embassy met with government of Indonesia officials
at Bank Indonesia, Ministry of Finance, Ministry
of Foreign Affairs and at PPATK (Indonesian Financial
Transaction Reports and Analysis Centre, Indonesia's
Financial Intelligence Unit) and delivered the non-paper
contained in reftel. End summary.


2. (S) On September 8, Embassy met with Dr. Raden Pardede,
Chairman of Indonesia's Financial Stability Forum and
close advisor to the Minister of Finance and Coordinating
Minister of Economic Affairs Sri Mulyani Indrawati.
Pardede, who works closely with both Sri Mulyani and BI
Governor Boediono, expressed appreciation to Embassy for
sharing the non-paper. He also confirmed that the
Ministry of Finance no longer plays any direct role
in banking regulation, which BI controls.


3. (S) On September 9, Embassy met with Boedi Armanto,
Bank Indonesia's Director of Bank Licensing and Banking
Information, and Detty Agustono, Head of Bureau for
International Study and Relationship Bureau in the
International Directorate, and staff. Armanto advised
that BI had not received any application from Bank Melli
to establish any banking presence in Indonesia or from
Bank Panin regarding a possible joint bank with
Bank Melli. Armanto said he had not spoken with officials
from Bank Melli or Bank Panin regarding a possible joint
bank, though he advised that Bank Melli had requested
information about Indonesian regulations regarding
establishment of a financial presence in Indonesia.


4. (S) Armanto said he did not believe Bank Melli
was large enough to qualify to establish a
representative office (limited to world's largest
300 banks, per Indonesian regulation) or a branch
(limited to world's largest 200 banks, per local
regulation),though it could apply to establish
a subsidiary. He noted that applications for joint
banks required review of the last three years'
financial reports and the capability to provide
capital. He also noted that BI had a fair amount
of discretion in approving such applications.
Given BI's current efforts to consolidate an
already crowded banking sector, applicants would
also have to overcome a presumption against
authorization of additional banks.


5. (S) Armanto also advised that the Foreign
Ministry (Deplu) had held a meeting several weeks
ago regarding possible links between Indonesia
and Iran and had convened a meeting with commercial
banks regarding the impact of recent UNSCRs on
banking operations. Armanto said he believed
most commercial banks in Indonesia were aware
both of the relevant UNSCRs and of the importance of
"Knowing Your Customer."


6. (S) BI officials appeared quite knowledgeable about
relevant UNSCRs, the various FATF expressions of
concern, and OFAC guidance regarding Iranian sanctions.
Both Armanto and Agustono noted the difficulty
Indonesia has in processing USD transactions with
Iranian entities and asked for additional information
about the permissible use of U-turn transactions
and how U.S. financial institutions continue to
facilitate legitimate commercial transactions with
Iran. Agustono complained that U.S. exports to
Iran were growing and that the U.S. appeared to
be employing a double standard in warning other
governments about the hazards of engaging in
financial transactions with Iran. Embassy
underscored the targeted nature of Iran sanctions

and the rigorous system of licensing which the
U.S. employs to ensure that such transactions
do not contribute to proliferation or financing
of terrorism.


7. (S) On September 9, Embassy met with Ministry
of Foreign Affairs (Deplu) Andy Rachmianto,
Deputy Director of Non-proliferation Directorate.
Rachmianto advised that he had not received any
information regarding any efforts of Bank Melli
to establish a joint bank with Bank Panin or any
other Indonesian bank. He confirmed that Deplu
had called an interagency meeting in the wake of
the passage of UNSCR 1803 to inform agencies about
the details of the Security Council resolution
and to make them aware of its implications,
including regarding transactions with institutions
such as Bank Saderat and Bank Melli. Rachmianto
added that Deplu had convened another meeting
in June with representatives of commercial banks,
Bank Indonesia, the Indonesian Chamber of Commerce
and Industry (Kadin) and the Indonesian
ambassador to Iran to provide a briefing of
do's and don'ts in transactions with Iranian
institutions. He noted that some Indonesian
businesses remained keen to do business with Iran,
but Deplu had briefed the business community
on implications posed by the various UNSCRs.
Rachmianto said many Indonesian banks had simply
stopped doing business with Iran, but some
Iranian banks appeared to be trying to find
other mechanisms to facilitate commercial trade.


8. (S) Embassy met Yunus Husein, Head of PPATK,
Indonesia's FIU, and staff on September 10.
Husein thanked Embassy for sharing the information
in the non-paper. Husein and his staff appeared
to be knowledgeable about recent UNSCRs regarding
Iranian activities, but did not indicate any
knowledge regarding any activities of Bank Melli
to establish a joint bank with Bank Panin or any
other Indonesian financial institutions. PPATK
officials advised that they were standing by
to receive additional information from Deplu
regarding this matter.

HUME