BANK SADERAT OPENS NEW BRANCH IN QATAR

C O N F I D E N T I A L STATE 067950

SIPDIS

E.O. 12958: DECL: 06/24/2033
TAGS: KNNP MNUC IR GM PREL PARM XF ZP ZR QA ECON
SUBJECT: BANK SADERAT OPENS NEW BRANCH IN QATAR

Classified By: NEA/ARP OFFICE DIRECTOR
ANDREW STEINFELD FOR REASONS 1.4 (B) AND (D).


1. (C) This is an action request. Please see paragraph
three.

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SUMMARY
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2. (C) Recent press reports have noted that Iran is
actively working to expand its banking relationships with its
Middle Eastern neighbors. This expansion is presumably a
response to the increased sanctions put in place by the UN
and U.S. and moves by Western banks to decrease their
exposure to the risk of doing business with Iran. Per that
goal, Iran's Bank Saderat recently opened an additional
branch in Qatar as part of a planned expansion of its banking
network there and in response to pressure on Iranian banking
networks in UAE and Bahrain. Bank Saderat already has a
branch in Doha and has been active in Qatar for 37 years.
According to press reports, the new branch will help
facilitate increased trade between Iran and Qatar. The U.S.
is concerned, however, that Bank Saderat may also help Iran
facilitate terrorism or WMD proliferation via Qatar. We want
to urge the GOQ to reconsider its business relationships with
all Iranian financial institutions, close this new branch and
prevent any others fro
m opening. At a time when responsible states and banks are
decreasing their economic dealings with Iran, expanding
banking relationships with Iran is not a prudent step.

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OBJECTIVES/ACTION REQUEST
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3. (C) Washington requests Post deliver as appropriate the
talking points and non-paper in paragraph 4 to relevant host
government officials. Post should pursue the following
objectives:

-- Urge Qatar to exercise increased scrutiny over the
activities of financial institutions in its territory with
Bank Saderat Iran, as called for in UNSCR 1803, to ensure
that it is not being used by Iran or Iranian
proliferation-related entities to circumvent measures imposed
in UNSCRs 1737, 1747 and 1803 or to act on behalf of
designated entities.

-- Remind Qatar that the U.S. designated Bank Saderat under
domestic authority Executive Order 13224 in October 2007 for
its actions as a financier for terrorism. E.O. 13224 is an
authority aimed at freezing the assets of terrorists and
their supporters, and at isolating them from the U.S.
financial and commercial systems. Designations under the
E.O. prohibit all transactions between the designees and any
U.S. person, and freeze any assets the designees may have
under U.S. jurisdiction.

-- Reinforce the Financial Action Task Force's October 2007
and February 2008 warnings that Iran's lack of comprehensive
anti-money laundering / combating the financing of terrorism
(AML/CFT) regime represents a significant vulnerability
within the international financial system, and dealing with
Iran's banks poses a reputational risk to Qatar's financial
institutions.

-- Remind Qatar that as a member of the Middle East North
Africa Financial Action Task Force (MENA-FATF),it should
advise its financial institutions to consider the serious
risks of engaging in any business with Iranian entities and
individuals. It is well-known that Iran uses its state-owned
banking network to support terrorism and
proliferation-related activity.

-- Remind the GOQ that many European countries and banks
have reduced their business with Iran.

-- Remind Qatar that disreputable banks named in UN Security
Council Resolutions, such as Bank Saderat, pose a threat to
Qatar's growing role as a regional financial hub and Qatar's
perception as an attractive magnet for investment.

-- Urge the GOQ to reconsider its business relationships
with all Iranian financial institutions, close this new
branch and prevent any others from opening.

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BACKGROUND AND NONPAPER
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4. BEGIN CONFIDENTIAL NON-PAPER FOR QATAR

-- Recent press reports have noted that Iran is actively
working to expand banking relationships with its Middle
Eastern neighbors. To that end, Bank Saderat Iran recently
opened a new branch in Qatar and plans to open others in
order to handle an expected growth in business ties between
Iran and Qatar.

-- As you know, the UN Security Council unanimously adopted
UNSCR 1803 in March 2008. The resolution calls on States to
exercise vigilance over the activities of financial
institutions in their territories with all banks domiciled in
Iran, in particular with Bank Saderat Iran and Bank Melli,
and their branches and subsidiaries abroad, in order to avoid
such activities contributing to the proliferation-sensitive
nuclear activities, or to the development of nuclear weapon
delivery systems, as referred to in UNSCR 1737.

-- In October 2007, the U.S. designated Bank Saderat under
E.O. 13224 for its actions as a terrorist financier. Bank
Saderat has been used by the Government of Iran to channel
funds to terrorist organizations, including Hizballah and
EU-designated terrorist groups Hamas, PFLP-GC, and
Palestinian Islamic Jihad. Hizballah has also used Bank
Saderat to send money to other terrorist organizations,
including millions of dollars on occasion, to support the
activities of Hamas. As of early 2005, Hamas had substantial
assets deposited in Bank Saderat, and Bank Saderat has
transferred several million dollars to Hamas.

-- On October 11, 2007, the Financial Action Task Force
(FATF) issued a statement warning of the risk of doing
business with Iranian banks. The statement cautioned that
Iran's lack of comprehensive anti-money laundering /
combating the financing of terrorism (AML/CFT) regime
represents a significant vulnerability within the
international financial system. In February 2008, FATF
reinforced this message and advised that financial
institutions should take the risk arising from the
deficiencies in Iran's AML/CFT regime into account for
enhanced due diligence.

-- We are concerned that Bank Saderat could be facilitating
terrorism in Qatar.

-- As major European and Asian financial institutions
curtail or cut off Iranian business, we view the opening of
additional branches of Bank Saderat Iran as a step away from
the international consensus and may harm Qatar's image as a
growing regional hub for reputable financial activity. Now
is not the time for business as usual with Iran and expanded
financial ties with Iran could put financial institutions in
your jurisdiction at risk of facilitating proliferation- or
terrorism-related transactions.

-- The United States urges your government and financial
institutions to reconsider business relationships with all
Iranian financial institutions, close this new branch and
prevent any others from opening.

-- The United States also urges your government to exercise
increased vigilance regarding all Iranian financial and
commercial relationships that may be associated with Iran's
nuclear or missile programs, or other illicit activities,
contrary to UNSCRs 1737, 1747, or 1803.

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

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POINT OF CONTACT
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6. (U) Washington point of contact for follow-up
information is Kevin McGeehan, ISN/CPI, (202) 647-5408,
McGeehanKJ@state.sgov.gov.


7. (U) Department thanks Post for its assistance.
RICE