IMPLEMENTATION OF THE FINANCIAL PROVISIONS OF UNSCR 1803

S E C R E T STATE 029096 SIPDIS SIPDIS E.O. 12958: DECL: 03/13/2033 TAGS: AS AU BA BR CA CH ECON EFIN EG ETRD EUN FR GM GR HK, ID, IN, IR, IS, IT, IZ, JA, JO, KNNP, KS, LY, MNUC, MT, MU, NL, NZ, PARM, PGOV, PK, PREL, QA, RS, SA, SF, SN, SP, TC, TU, UK, VE, VM, YM, EINV, SW SUBJECT: IMPLEMENTATION OF THE FINANCIAL PROVISIONS OF UNSCR 1803 Classified By: ISN PDAS Patricia A. McNerney for reasons 1.4 (b) and (d). ¶1. (U) This is an action request. Please see paragraph 4. -------------- SUMMARY AND BACKGROUND -------------- ¶2. (U) On March 3, 2008, the U.N. Security Council adopted Resolution 1803, imposing further Chapter VII sanctions on Iran in response to its failure to comply with its obligations in UN Security Council resolutions (UNSCRs) 1737 and 1747, including the obligation to suspend its uranium enrichment-related, reprocessing, and heavy water-related activities. Paragraph 10 of the resolution calls upon all States to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran, in particular with Bank Melli and Bank Saderat, and their branches and subsidiaries abroad, in order to avoid such activities contributing to proliferation sensitive nuclear activities, or to the development of nuclear weapon delivery systems, as referred to in resolution 1737 (2006). ¶3. (U) On October 25, 2007 the U.S. designated Iranian state-owned Bank Melli and Bank Mellat for their support for proliferation-related activities under Executive Order (E.O.) 13382 ("Blocking the Property of Weapons of Mass Destruction Proliferators and their Supporters"). (Note: The U.S. designated Iran's state-owned Bank Sepah under E.O. 13382 in January 2007 for providing support and services to designated Iranian proliferation firms. End Note.) The U.S. also designated Bank Saderat under E.O. 13224 for providing support for terrorism. These U.S. designations of Bank Melli, Bank Mellat and Bank Saderat are consistent with the provisions of UNSCRs 1737, 1747, and 1803 and FATF guidance on Iran. On March 5, 2008, Treasury Secretary Paulson stressed that Iran uses "Iranian, state-owned banks to engage in their weapons proliferation, (and) acquisition of missile systems...We see all kinds of deceptive practices by Iranian banks, so (the U.S. has) been quite aggressive in... singling out different Iranian banks for sanctions. We are continuing to work in every country where there are banks that have business (with Iran)." 
 -------------- OBJECTIVES/ACTION REQUEST -------------- ¶4. (S) Washington requests Posts deliver the non-papers in paragraphs 5 and 6 to appropriate host government officials in the foreign affairs and finance ministries. Posts should pursue the following objectives: FOR ALL ADDRESSEES: -- Emphasize UNSCR 1803's call for member states to exercise vigilance over the activities of financial institutions in their territories with all/all banks domiciled in Iran, in particular with Bank Melli and Bank Saderat, and their branches and subsidiaries abroad. -- Urge host governments to issue advisories to financial institutions in their jurisdiction, informing them of the calls for increased vigilance in the UNSCR 1803 and FATF statements and emphasizing the growing international consensus on the risks of engaging in Iran-related business. -- Encourage host governments to remind their financial institutions that Iran uses a wide variety of deceptive practices that make it impossible for financial institutions to "know your customer" when dealing with Iran. -- Request host governments and banking regulators to require that banks take measures to ensure enhanced due diligence called for by the FATF and the UNSC. In our view, such measures should include senior-level scrutiny of every transaction involving Iran, special examination of all Iranian accounts, and an executive-level reevaluation of each bank's corporate policy toward Iran. -- Alert governments that Iranian proliferators may increasingly use non-designated Iranian banks, including Bank Mellat, to facilitate proliferation-related transactions, particularly given designation of Bank Sepah in UNSCR 1747 and the Council's note of caution with respect to Bank Melli and Bank Saderat in UNSCR 1803. -- Recommend that financial regulators consider more thorough audits for any regulated financial institution in their jurisdiction that continues to do business with Iranian related banks and financial entities. -- Remind governments that the U.S. designated domestically Bank Melli and Bank Mellat for their involvement in activities contributing to proliferation sensitive nuclear activities, including facilitating circumvention of the UNSC sanctions on Bank Sepah. -------------- -------------- -------------- -------------- UNCLASSIFIED NONPAPER ON IRANIAN BANKS' DECEPTIVE FINANCIAL SIPDIS PRACTICES FOR ALL ADDRESSEES -------------- -------------- -------------- -------------- ¶5. (U) BEGIN UNCLASSIFIED NONPAPER: -- We would like to share with you several deceptive financial tactics we have seen used by Iranian proliferators. These tactics pose a risk to the security of the international banking system and help Iran to circumvent UNSC sanctions. -- Iranian procurement agents for its programs of proliferation concern have used front companies and altered shipping documents in an effort to support Iran's nuclear and missile programs. These are the most common deceptive tactics and ones they have been using to evade export controls for years. -- In addition, when it comes to financial transactions, while removing the originator bank's name from financial transfers is allowed in some jurisdictions and some international banks often bundle transactions for several banks together, this method can be used to evade sanctions. -- Iran appears to be positioning its six private banks to replace lost banking operations overseas and to circumvent recent U.S. and UN sanctions, partly because Tehran may judge that U.S. and foreign actors are less likely to scrutinize banks not directly owned by the Iranian government. -- At least one bank has used a multicurrency account to evade payment restrictions and protect assets against seizure. Specifically, in April 2007, a private Iranian bank requested a multicurrency account with a foreign bank to process international payments in US Dollars (USD),Euros, and other currencies. Multicurrency accounts allow holders to deposit funds and make payments in multiple currencies from one account, making it easier to evade payment restrictions associated with a particular currency and therefore protect assets against seizure. -- Procurement agents' personal bank accounts are being used by some UN-designated Iranian defense entities inside Iran to finance international purchases, insulating payments from international scrutiny. Many of these agents previously received payments into their corporate accounts and may now judge that foreign banks will not suspect that transfers from personal accounts facilitate UN-sanctioned activity. Foreign banks may not be aware that they are receiving payments from Iran's defense industry. -- Entities tied to the Iranian missile program and Iran's Defense Industries Organization (DIO) in 2007 sent millions in Euros to a number of different personal accounts in Iran, many of which belong to known procurements agents. -- Iran's Aerospace Industries Organization (AIO) and UN-sanctioned Sanam Industrial Group (SIG),the Shahid Hemmat Industrial Group (SHIG),and Ya Mahdi Industrial Group (YMIG) transferred funds to the Iranian bank accounts of individuals affiliated with two missile-procurements companies. (Note: SHIG, SIG, and YMIG were designated in UNSCRs 1737 and 1747 for their involvement in nuclear or ballistic missile-related activities. End Note). The procurement agents, who maintain offices both in and outside Iran, subsequently transferred over half of the funds to banks worldwide, presumably to pay for purchases on behalf of Iranian missile entities. -- In some cases, Iranian entities have combined evasion tactics. For example, Iran's missile program has both layered transactions to hide Bank Sepah's role when routing funds internationally and used a broker's account inside of Iran most likely to make missile-related payments. -- We urge you to issue advisories to financial institutions in your jurisdiction, informing them of the calls for increased vigilance in the UNSCR and FATF statements and emphasizing the growing international consensus on the risks of doing Iran-related business. -- We encourage you to remind financial institutions in your jurisdiction that Iran uses a wide variety of deceptive practices that make it impossible for financial institutions to "know your customer" when dealing with Iran. -- We request your government and banking regulators to require that banks take measures to ensure enhanced due diligence called for by the FATF and the UNSC, including senior-level scrutiny of every transaction involving Iran, special examination of all Iranian accounts, and an executive-level reevaluation of each bank's corporate policy toward Iran. END UNCLASSIFIED NONPAPER. -------------- -------------- -------------- -------------- LIST OF ALL IRANIAN BANKS DOMICILED IN IRAN, INCLUDING THEIR FOREIGN BRANCHES AND SUBSIDIARIES -------------- -------------- -------------- -------------- ¶6. (U) BEGIN UNCLASSIFIED LIST OF BANKS: UNSCR 1803 calls upon all States to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran and their branches and subsidiaries abroad. The U.S. encourages host governments to share the following comprehensive list of Iranian banks with financial institutions to assist their efforts to apply enhanced due diligence to Iranian-related financial activity. The U.S. Financial Crimes Enforcement Network (FinCEN) issued an advisory on March 20, 2008 the text of that advisory can be found at: www.fincen.gov/ fin-2008-a002.pdf. This list includes banks owned or controlled by the Government of Iran, their branches abroad and private banks domiciled in Iran. -- Agricultural Bank (a.k.a. Bank Keshavarzi) - Tehran, Iran -- Agricultural Cooperative Bank of Iran (a.k.a. Bank Taavon Keshavarzi Iran) - Tehran, Iran -- Agricultural Development Bank of Iran (a.k.a. Bank Josiaiyi Keshahvarzi) - Tehran, Iran -- Arian Bank (a.k.a. Aryan Bank) - Kabul, Afghanistan -- Banco Internacional de Desarrollo SA - Caracas, Venezuela -- Bank Josiaiyi Keshahvarzi (a.k.a. Agricultural Development Bank of Iran) - Tehran, Iran -- Bank Kargoshaee - Tehran, Iran -- Bank Keshavarzi (a.k.a. Agricultural Bank) - Tehran, Iran -- Bank Markazi Jomhouri Islami Iran (a.k.a. The Central Bank of Iran) - Tehran, Iran -- Bank Maskan (a.k.a. Housing Bank (of Iran)) - Tehran, Iran -- Bank Mellat - Tehran, Iran -- Bank Mellat - Seoul, South Korea -- Bank Mellat - Ankara, Istanbul, Izmir, Turkey -- Bank Melli Iran - Tehran, Iran -- Bank Melli Iran - Paris, France -- Bank Melli Iran - Hamburg, Germany -- Bank Melli Iran - Central, Hong Kong -- Bank Melli Iran - Baghdad, Iraq -- Bank Melli Iran - Muscat, Oman -- Bank Melli Iran - Al Ain, Deira, Dubai City, Fujairah, Ras al-Khaimah, Sharjah, United Arab Emirates -- Bank Melli Iran Zao - Moscow, Russia -- Bank of Industry and Mine (of Iran) (a.k.a. Bank Sanad Va Madan) - Tehran, Iran -- Bank Refah (f.k.a. Workers Welfare Bank, f.k.a. Bank Refah Kargaran) - Tehran, Iran -- Bank Saderat Iran - Tehran, Iran -- Bank Saderat - Paris, France -- Bank Saderat - Frankfurt, Hamburg, Germany -- Bank Saderat - Athens, Greece -- Bank Saderat - Baalbak, Beirut, Saida, Lebanon -- Bank Saderat - Muscat, Oman -- Bank Saderat - Doha, Qatar -- Bank Saderat - Ashgabat, Turkmenistan -- Bank Saderat - Abu Dhabi, Ajman, Al Ain, Dubai City, Sharjah, United Arab Emirates -- Bank Saderat PLC - London, United Kingdom -- Bank Saderat Tashkent - Tashkent, Uzbekistan -- Bank Sanad Va Madan (a.k.a. Bank of Industry and Mine (of Iran)) - Tehran, Iran -- Bank Sepah - Tehran, Iran -- Bank Sepah - Paris, France -- Bank Sepah - Frankfurt, Germany -- Bank Sepah - Rome, Italy -- Bank Sepah International PLC - London, United Kingdom -- Bank Taavon Keshavarzi Iran (a.k.a. Agricultural Cooperative Bank of Iran) - Tehran, Iran -- Bank Tejarat - Tehran, Iran -- Bank Towseh Saderat Iran (a.k.a. Export Development Bank of Iran) - Tehran, Iran -- The Central Bank of Iran (a.k.a. Bank Markazi Jomhouri Islami Iran) - Tehran, Iran -- Europaeisch-Iranische Handelsbank AG (f.k.a. Deutsch-Iranische Handelsbank AG) - Hamburg, Germany -- Export Development Bank of Iran (a.k.a. Bank Towseh Saderat Iran) - Tehran, Iran -- Future Bank B.S.C - Manama, Bahrain -- Housing Bank (of Iran) (a.k.a. Bank Maskan)- Tehran, Iran -- Iran Overseas Investment Bank PLC (f.k.a. Iran Overseas Investment Corporation Limited) - London, United Kingdom -- Kargozari Bank Tejarat - Tehran, Iran -- Mellat Bank DB Aozt (a.k.a. Mellat Bank S/B CJSC) - Yerevan, Armenia -- Mellat Bank S/B CJSC (a.k.a. Mellat Bank DB Aozt) - Yerevan, Armenia -- Melli Bank PLC. - London, United Kingdom -- Persia International Bank PLC. - London, United Kingdom Privately Owned Iranian Financial Institutions -- Amin - Tehran, Iran -- Bank Pasargad - Tehran, Iran -- En Bank PJSC - Tehran, Iran -- Karafarin Bank - Tehran, Iran -- Novin - Tehran, Iran -- Parsian Bank - Tehran, Iran -- Post Bank of Iran - Tehran, Iran -- Saman Bank Corporation - Tehran, Iran -- Sarmaye Va Danesh Bank - Tehran, Iran END UNCLASSIFIED NONPAPER. -------------- REPORTING DEADLINE -------------- ¶7. (U) Post should report results within one week of receipt of this cable. Please slug replies for ISN, T, TREASURY, and NEA. Please include SIPDIS in all replies. -------------- POINT OF CONTACT -------------- ¶8. (U) Washington point of contact for follow-up information is Michelle New, ISN/CPI, (202) 647-0186, newml@state.sgov.gov, or Jennifer Chalmers, ISN/CPI, (202) 647-9715, chalmersja@state.sgov.gov. ¶9. (U) Department thanks Posts for their assistance. ¶10. (U) Tripoli minimize considered. RICE NNNN End Cable Text