LEVERAGING FATF STATEMENT ON IRAN INTO NATIONAL

S E C R E T STATE 115523

SIPDIS

E.O. 12958: DECL: 10/29/2033
TAGS: PARM PREL EFIN KNNP
SUBJECT: LEVERAGING FATF STATEMENT ON IRAN INTO NATIONAL
ACTIONS

Classified By: U/S for Political Affairs Bill Burns
for reasons 1.4 (b) and (d)


1. (U) This is an action request. Please see paragraph 4.

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SUMMARY/BACKGROUND
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2. (SBU) On October 16, the Financial Action Task Force
(FATF) issued its fourth warning of the serious threat posed
by Iran's lack of a sufficient anti-money laundering and
counterterrorist financing regime. In contrast with prior
FATF actions on Iran, this statement marked a significant
escalation in concern about the terrorism finance threat
emanating from Iran and ratcheted up the call for preventive
measures that should be implemented by FATF members and other
jurisdictions to protect their financial sectors from this
risk. (See paragraph 12 for full text of the statement.)
During the same plenary meeting, FATF also separately issued
guidance on the steps that countries should take to implement
UNSCR 1803's call for vigilance over the activities of
financial institutions in their territories with all banks
domiciled in Iran, in order to avoid such activities
contributing to proliferation sensitive nuclear activities or
to the development of nuclear weapon delivery systems. These
two actions by the FAT
F, combined with the already widely held view that Iranian
financial institutions play a key role in Iran's
proliferation efforts, merit immediate action by countries to
mitigate these illicit finance risks.


3. (SBU) Given the borderless nature of the international
financial system, a concerted and coordinated action by
Iran's key financial partners is critical to preventing Iran
from evading sanctions and abusing the international
financial system. The U.S. proposes that action addressees
seek support from host governments to implement a set of
suggested preventive measures designed to protect financial
institutions from specific techniques employed by Iran to
evade the controls of responsible countries and institutions.
In particular, the U.S. is concerned about the continued
provision of payment services to Iranian financial
institutions via correspondent banking relationships, and
asks countries to review and re-assess their financial
institutions' correspondent relationships with Iranian
financial institutions.

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OBJECTIVES/ACTION REQUEST
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4. (SBU) Washington requests Ambassadors approach appropriate
high-level government officials in the foreign and finance
ministries to achieve the following objectives:

-- Inform host governments about the two key actions that
were taken by the FATF the week of October 13 (i.e., the
October 16 FATF statement on the risk of terrorism finance
emanating from Iran, and FATF guidance related to UN Security
Council Resolution 1803's call for vigilance over the
activities of financial institutions in their territories
with all banks domiciled in Iran),in order to avoid such
activities contributing to proliferation sensitive nuclear
activities or to the development of nuclear weapon delivery
systems.

-- Highlight the importance of an effective response in order
to maintain the integrity of this FATF guidance, and to
continue robust implementation of UN Security Council
Resolutions, in light of Iran's continued failure to cease
its nuclear enrichment and reprocessing activities as
mandated by the UN Security Council.

-- Ask host governments what specific steps they plan to take
or have already taken to implement both the call for
preventive measures as well as the guidance regarding
implementation of UNSCR 1803;

-- Inform host governments that the U.S. plans to impose
preventive measures in the coming weeks to further protect
itself from the illicit finance risk emanating from Iran;

-- Highlight the provision of payment services via
correspondent relationships with Iranian banks as a
particular concern; ask countries to review and reassess
their banks' correspondent relationships with Iranian
financial institutions (NOTE: See specific points below in
paragraph 6 for Berlin, Vienna, Brussels, and the Hague); and

-- Urge host governments to take at least one of the
following preventive measures to address the specific risks
posed by Iran:

A) Require financial institutions (FIs) to identify clients
and beneficial owners before establishing business
relationships with individuals or companies from Iran;

B) Require FIs to review, and if necessary, terminate
existing correspondent account relationships based upon a
risk assessment to determine if the respondent Iranian
financial institutions are complying with relevant
requirements (NOTE: Posts should refer host governments to
the FATF guidance issued on October 17 regarding the
implementation of the financial provisions of UNSCR 1803 for
specifics.);

C) Enhance reporting requirements for financial transactions
involving Iran, including requiring systematic reporting of
transactions, on the basis that financial transactions with
Iran are likely to be more suspicious;

D) Restrict financial transactions with Iran or persons in
Iran;

E) Deny any requests by Iranian banks to establish a
subsidiary, branch, or representative office in the host
country;

F) Deny requests by Iranian FIs to enter into joint ventures
with or purchase a controlling stake in any host country
financial institution;

G) Warn those commercial sectors with significant business
ties with Iran that transactions with individuals or entities
from Iran have a heightened risk of money laundering or
terrorist financing;

H) Place existing Iranian branches and subsidiaries in the
UK, France, Germany and Rome under the control of relevant
competent authorities, including by requiring authorities to
maintain a physical presence within these banks.


5. (SBU) FOR EMBASSIES LONDON, PARIS, BERLIN, ROME, TOKYO,
OTTAWA

-- Emphasize the need for G-7 members in particular to
implement concrete preventive measures as a response to the
FATF statement to demonstrate the consensus view of the
world's leading economies regarding the threat posed by Iran;
and

-- Convey the U.S. expectation that G-7 countries will
implement one or all of the measures proposed above; ask host
countries for details on their implementation plans.

-- Convey the U.S. proposal for a coordinated statement
within the next two weeks on steps taken by G7 countries to
implement the preventive measures in response to the FATF
statement, and press for a quick response to this proposal.


6. (SBU) FOR EMBASSIES BERLIN, BRUSSELS, THE HAGUE, VIENNA

-- Convey U.S. concern that banks in their countries are
among the few in Europe that continue to provide large
volumes of correspondent banking services to Iranian banks
and thus, are vulnerable to involvement in potentially
illicit transactions; and

-- Ask host government authorities to approach these banks to
warn them of the risk and urge them to suspend - or restrict
- their correspondent relationships with Iranian banks on the
basis of the higher risks these relationships pose.


7. (SBU) FOR BERLIN ONLY

-- Note that the USG has consulted with both the German
government and the German bank, BHF Bank, regarding the
volume of its business with Iran; ask the Government of
Germany to approach BHF Bank directly to warn it of the
specific risk posed by its correspondent relationships with
Iranian banks.


8. (SBU) FOR BRUSSELS ONLY

-- Note that the USG has consulted with both the Belgian
government and the Belgian bank, KBC Bank, regarding the
volume of its business with Iran; ask the Government of
Belgium to approach KBC Bank directly to warn it of the
specific risk posed by its correspondent relationships with
Iranian banks.


9. (S/REL TO USA, NLD) FOR THE HAGUE ONLY

-- Note that the USG has consulted with the Dutch government
regarding the Dutch bank, Credit Europe Bank, and the volume
of its business with Iran; ask the Government of the
Netherlands to approach Credit Europe Bank directly to warn
it of the specific risk posed by its correspondent
relationships with Iranian banks.


10. (S/REL TO USA, AUT) FOR VIENNA ONLY

-- The USG has consulted with both the Austrian government
and the Austrian bank, Raiffeisen Zentralbank (RZB),
regarding the volume of its business with Iran;

-- RZB is an outlier among European financial institutions in
making a concerted business decision to maintain or even
increase its relationships with Iran at this time, despite
the risks; and

-- Ask the Government of Austria to approach RZB directly to
caution it about the serious reputational risk of doing
business with Iran, particularly as major banks in Europe are
abandoning Iran.


11. (SBU) FOR CANBERRA ONLY

-- Thank the GOA for their October 15 announcement of
expanded financial and travel sanctions.

-- Note that we are encouraging Japan and Korea to take
similar measures.


12. (SBU) FOR TOKYO, SEOUL

-- Share text of October 15 Australian action on Iran. (The
text of Australia's action can be downloaded from the
following link:
http://www.dfat.gov.au/un/unsc sanctions/iran 081015.html)

-- Encourage Tokyo and Seoul to implement similar measures
against Banks Melli, Mellat, and Saderat.

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TEXT OF FATF STATEMENT ON IRAN, GUIDANCE ON UNSCR 1803
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13. (U) Posts should share the following text of the October
16 statement on Iran issued by the FATF with host government
officials. The full text can also be downloaded from the
following link:
http://www.fatf-gafi.org/dataoecd/25/17/41508 956.pdf. Posts
may also want to refer host governments to the FATF's
guidance on UNSCR 1803 implementation, which can be
downloaded from
http://www.fatf-gafi.org/dataoecd/47/41/41529 339.pdf
.

BEGIN TEXT OF STATEMENT

The FATF welcomes Iran's recent engagement with the
international community on anti-money laundering, notes the
initial steps taken towards remedying the deficiencies in
this area, and urges Iran to address the remaining weaknesses.

The FATF is particularly concerned that the lack of
corresponding effort by Iran to address the risk of terrorist
financing continues to pose a serious threat to the integrity
of the international financial system. Urgent action to
address this vulnerability is necessary.

The FATF calls on its members, and urges all jurisdictions,
to strengthen preventive measures to protect their financial
sectors from this risk.

The FATF is prepared to engage directly in assisting Iran in
decisively addressing the weaknesses in its AML/CFT regime.

End text of statement.

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REPORTING DEADLINE
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14. (U) Post should report results by close of business
within seven days of receipt of cable. Please slug replies
for ISN, T, Treasury, NEA, INR, EEB, S/CT, and INL. Please
caption all replies SIPDIS.

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POINT OF CONTACT
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15. (U) (U) Washington point of contact for follow-up
information is Jennifer Chalmers, ISN/CPI, (202)
647-9715, CHALMERSJA@STATE.SGOV.GOV.


16. (U) Department thanks Posts for their assistance.
RICE