REQUEST FOR VIGILANCE REGARDING BANK MELLI BRANCH

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. -------------- SUMMARY/BACKGROUND -------------- ¶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. -------------- OBJECTIVES/ACTION REQUEST -------------- ¶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. -------------- BACKGROUND AND NONPAPER -------------- ¶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 -------------- REPORTING DEADLINE -------------- ¶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. -------------- POINT OF CONTACT -------------- ¶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