IRANIAN DECEPTIVE FINANCIAL PRACTICES

S E C R E T STATE 063929 SIPDIS E.O. 12958: DECL: 06/09/2033 TAGS: ECON EFIN KNNP PARM PTER IR UK CH SK HK SUBJECT: IRANIAN DECEPTIVE FINANCIAL PRACTICES Classified By: ISN DAS Ken Staley for reasons 1.4 (b) and (d). ¶1. (U) This is an action request. Please see paragraph 3. -------------- SUMMARY/BACKGROUND -------------- ¶2. (S) We have information about Iranian deceptive financial practices that may be occurring in addressees' jurisdictions. We want to alert host governments and urge them to investigate and take steps to protect their jurisdictions from being exploited by Iran to facilitate proliferation- or terrorism-related financial transactions. -------------- OBJECTIVE/ACTION REQUEST -------------- ¶3. (S/REL ROK, CHINA, HONG KONG, UK) Washington requests Posts deliver the non-paper in paragraph 4 to appropriate host government officials in the ministries of foreign affairs and finance. Post should pursue the following objectives: -- Inform jurisdictions that the U.S. believes financial transactions with Iranian banks and entities pose a significant risk of facilitating proliferation related to Iran's nuclear or missile programs. -- Note that jurisdictions should, consistent with UNSCR 1803, prohibit all transactions involving any dual-use technology on the NSG control list to or for the benefit of Iran and establish reporting and/or licensing requirements for all transactions executed by Iranian banks. -- The nature of Iranian activities suggests that jurisdictions should take a broad interpretation of the call for vigilance contained in UNSCR 1803 and statements by the FATF. FOR THE UK: -- (S//REL UK) Note that Melli Bank PLC Hong Kong is a branch of the London-based Melli Bank PLC and is subject to UK jurisdiction. We would be interested in learning what measures the UK has taken or will take to ensure Melli Bank PLC Hong Kong does not support Iran's procurement of proliferation sensitive technology. -------------- NONPAPER FOR ROK, CHINA, HONG KONG, UK -------------- ¶4. (SECRET//REL ROK, CHINA, HONG KONG, UK) BEGIN POINTS FOR ROK, CHINA, HONG KONG, UK: -- We would like to raise serious concerns regarding Iranian financial activities in your jurisdiction. -- The United States has information that Iran Aircraft Manufacturing Industries (HESA) may have altered the details on a letter of credit (L/C) for an order of items from Hong Kong Company Jetpower Industrial in April 2008. -- Specifically, HESA may have simplified the description of the goods to "Raw materials"; and changed the corresponding bank from Bank Mellat, Seoul Branch, Korea, to Melli Bank PLC, Hong Kong Branch. -- Simplifying the description of the goods could be efforts by HESA to avoid additional scrutiny of the items being transferred, and could indicate that this transaction was intended to circumvent controls jurisdictions have put in place to implement UN sanctions. -- The United States designated Bank Melli under domestic authority (Executive Order 13382) for providing banking services to entities involved in Iran's nuclear and ballistic missile programs, including entities designated by the UN Security Council for their involvement in those activities: Bank Sepah, DIO and SHIG. The U.S. designated Bank Mellat under E.O. 13382 for providing banking services to entities involved in Iran's nuclear program, including the Atomic Energy Organization of Iran (AEOI) and Novin Energy. -- We urge you to investigate and take steps to prevent your companies from engaging in deceptive financial practices. We encourage Hong Kong and Korean regulators to take concrete action to prevent Bank Melli Hong Kong and Bank Mellat, Seoul from absorbing proliferation-related business that may have been diverted from other jurisdictions to the Asian financial sector. -- We look forward to working with you on this and other related security and counter-proliferation matters, and are prepared to provide additional assistance as appropriate. END POINTS FOR ROK, CHINA, HONG KONG, UK. -------------- REPORTING DEADLINE -------------- ¶5. (U) Posts should report results within seven days of receipt of cable. Please slug replies for ISN, T, Treasury, NEA, EUR and EAP. Please include SIPDIS in all replies. -------------- POINT OF CONTACT -------------- ¶6. (U) Washington point of contact for follow-up information is Michelle New, ISN/CPI, (202) 647-0186, or newml@state.sgov.gov. ¶7. (U) Department thanks Posts for their assistance. RICE