S E C R E T STATE 051207

SIPDIS

E.O. 12958: DECL: 05/14/2018
TAGS: ECON EFIN ETTC GM GR IR KNNP MNUC XG XT ZL ZS
SUBJECT: REQUEST FOR VIGILANCE REGARDING BANK MELLI BRANCH
IN PAKISTAN

Classified By: ISN PDAS PATRICIA A. MCNERNEY FOR
REASONS 1.4(B) AND (D)


1. (U) This is an action request. Please see paragraph 3.

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SUMMARY/BACKGROUND
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2. (S) The United States has information that Bank Melli may
be seeking to establish a branch in Pakistan. UNSCR 1803
named Bank Melli as a bank of particular concern and called
upon all states to exercise vigilance over the activities of
financial institutions in their territories with all banks
domiciled in Iran in order to prevent such activities from
contributing to proliferation sensitive nuclear activities or
to the development of nuclear weapon delivery systems. In
October 2007, the U.S. designated Bank Melli, pursuant to
Executive Order 13382, for providing support to entities
designated by the UNSC for their involvement in Iran,s
nuclear and ballistic missile programs, including Bank Sepah,
Defense Industries Organization, and Shahid Hemmat Industrial
Group. Bank Melli has been complicit in efforts by Iranian
proliferators to circumvent international sanctions,
including removing the name of Bank Sepah from financial
transactions. One method Iran is exploring to circumvent
sanctions is to establish new banks or bank branches in
jurisdictions it perceives as having less restrictive
financial controls. Bank Melli may regard Pakistan as a
jurisdiction where it can set up new and relatively
unrestricted business relationships. The Financial Action
Task Force (FATF) on February 28, 2008, issued a statement on
Pakistan, noting its recent progress toward adopting
anti-money laundering (AML) legislation, but warning
financial institutions to be aware that the remaining
deficiencies in Pakistan,s anti-money laundering/combating
the financing of terrorism (AML/CFT) system constitute a

vulnerability in the international financial system.
Pakistan is urged to continue its efforts to improve its
AML/CFT standards.


3. (S) On May 2, 2008, Treasury,s Assistant Secretary for
Terrorist Financing and Financial Crimes Pat O,Brien met
with Pakistani Deputy Chief of Mission Muhammad Aslam Khan
and Pakistani Economic Officer Abdul Wajid Rana to discuss
among other issues, the risks Pakistan faces in engaging in
business with Iran. A/S O,Brien encouraged Pakistan to
enforce Iran-related UNSCRs and to exercise vigilance over
its financial transactions with Iranian banks and to prevent
the establishment of new financial ties. A/S O,Brien shared
information with DCM Khan on recent attempts by Bank Melli to
open a branch in Pakistan. Rana indicated that Iran has
previously attempted to open Iranian bank branches two years
ago and the Pakistani government denied these requests. The
Pakistani Embassy officials indicated that they would share
the information and points made by Treasury with authorities
in Islamabad.

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OBJECTIVES/ACTION REQUEST
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4. (S) Washington requests Posts deliver the non-paper in
paragraph 4 to appropriate host government officials in the
foreign affairs and finance ministries. Posts should pursue
the following objectives:

FOR ISLAMABAD:

-- Inform Pakistan of Bank Melli,s interest in establishing
a branch in Pakistan.

-- Urge Pakistan to not allow Bank Melli to establish a
branch in Pakistan.

-- Urge Pakistan to continue its efforts to enact and
implement an anti-money laundering/combating terrorist
financing (AML/CFT) regime consistent with international
standards to reduce the chance of proliferation-sensitive, or
otherwise illicit, transactions.

FOR BERLIN, PARIS, LONDON:

-- Inform Germany, France and the UK of Bank Melli,s
interest in establishing a branch in Pakistan.

FOR ALL POSTS:

-- Underscore UNSC 1803,s call to 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.

-- Highlight the deficiencies in Iran,s AML/CTF regime, as
described in FATF statements. Emphasize the growing
international consensus on the risks of engaging in
Iran-related financial transactions.

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BACKGROUND AND NONPAPER
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5. BEGIN NON-PAPER S//REL PAKISTAN, UK, FRANCE, GERMANY:

-- We would like to share with you information about Iranian
financial activities of potential concern in Pakistan.

-- In early 2008, a senior Iranian Ministry of Foreign
Affairs official was seeking information on the formation of
a Bank Melli Iran branch in Karachi, Pakistan.

-- The official,s interest was supposed to have stemmed from
queries regarding this issue that had come from both Bank
Markazi Iran (Central Bank of Iran) and the Iranian Supreme
Council for National Security (SCNS).

-- As you know, UNSCR 1803 was adopted on March 3, 2008, and
calls on 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 activities contributing to proliferation sensitive
nuclear activities or to the development of nuclear weapon
delivery systems. UNSCR 1803 identified Bank Melli as a bank
of particular concern, by naming it in the resolution.

-- The U.S. designated Bank Melli on October 25, 2007, under
U.S. Executive Order 13382, an authority aimed at freezing
the assets of proliferators of weapons of mass destruction
and their supporters. Bank Melli was designated for
providing banking services to entities involved in Iran,s
nuclear and missile programs, including Bank Sepah, Defense
Industries Organization, and Shahid Hemmat Industrial Group,
which are all designated in UNSCRs 1737 and 1747.

-- We are concerned that Iran,s interest in information on
the formation of a Bank Melli Iran Branch in Karachi,
Pakistan could be an effort by Iran to circumvent applicable
UNSC resolutions.

FOR PAKISTAN:

-- We urge you to not allow Bank Melli, identified in UNSCR
1803 as a bank of particular concern, to establish a branch
in Pakistan.

FOR THE UK, FRANCE AND GERMANY:

-- We are providing this information in the context of our
shared interest in combating WMD-related proliferation and to
underscore the UNSC,s call for 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. We hope that this
vigilance will help to prevent activities contributing to
proliferation sensitive nuclear activities or to the
development of nuclear weapon delivery systems.

-- We continue to urge you to ensure that your domestic
banks and Iranian banks domiciled in your country are not
allowing Bank Melli to facilitate proliferation activities in
circumvention of UNSCRs 1737, 1747, and 1803.

FOR ALL RECIPIENTS:

-- We look forward to working with you on this and other
related security, counterterrorism or counterproliferation
matters, and are prepared to provide additional assistance as
appropriate.

END NON-PAPER S/REL PAKISTAN, UK, FRANCE, GERMANY

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REPORTING DEADLINE
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6. (U) Post should report results within seven (7) business
days of receipt of this cable. Please slug replies for ISN,
T, TREASURY, EUR, IO, and NEA. Please include SIPDIS in all
replies.

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POINT OF CONTACT
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7. (U) Washington point of contact for follow-up information
is John G. Pinto, ISN/CPI, (202) 736-7939,
Pintojg2@state.sgov.gov.


8. (U) Department thanks Post for its assistance.

Y
RICE