CENTRAL BANK OF IRAN SEEKING RELATIONSHIP WITH

S E C R E T STATE 069996 SIPDIS E.O. 12958: DECL: 06/30/2018 TAGS: KNNP IR PREL PARM PINR KS EFIN SUBJECT: CENTRAL BANK OF IRAN SEEKING RELATIONSHIP WITH INDUSTRIAL BANK OF KOREA Classified By: ISN Mary Alice Hayward for reasons 1.4 (b) and (d). ¶1. (C) This is an action request. Please see paragraph 3. -------------- SUMMARY -------------- ¶2. (S) Washington has information that the Central Bank of Iran (Bank Markazi) is interested in conducting business with the Industrial Bank of Korea (IBK) in Seoul. We are concerned that financial relationships with the Central Bank of Iran, and any other Iranian banks, puts South Korea at risk of facilitating proliferation- or terrorism-related activity in its jurisdiction. We want to urge South Korea to prevent such activities and protect its financial system by preventing banks in its jurisdiction from entering into any new financial relationships with Iranian banks. -------------- OBJECTIVES/ACTION REQUEST -------------- ¶3. (S) Washington requests Post deliver the non-paper in paragraph 4 to appropriate host government officials in the foreign affairs and finance ministries. Post should pursue the following objectives: -- Inform Seoul that the U.S. believes financial transactions with all Iranian banks, including Iran's Central Bank, pose a significant risk of facilitating proliferation related to Iran's nuclear or missile programs or facilitating support for terrorist activities. -- Emphasize that the Iranian government uses deceptive practices to evade sanctions, which suggests it is prudent for jurisdictions to take a broad interpretation of the call for vigilance contained in paragraph 10 of UNSCR 1803 and statements by the FATF. -- Urge the ROK to investigate and prevent the establishment of this and any other new relationships with Iranian banks. Establishing new financial relationships with Iranian banks is contrary to the spirit of the financial-related provisions of UNSCRs 1737, 1747 and 1803. -------------- BACKGROUND AND NONPAPER -------------- ¶4. (S//REL ROK) We would like to raise serious concerns regarding Iranian financial activities in your jurisdiction. -- The United States has information that the Central Bank of Iran (Bank Markazi) is interested in conducting business with the Industrial Bank of Korea (IBK) in Seoul. -- As you know, UNSCR 1803 was adopted on March 3, 2008 and calls on all member states to exercise vigilance over activities of financial institutions in their territories with banks domiciled in Iran, and their branches and subsidiaries abroad, in particular with Bank Saderat and Bank Melli. -- As you are also aware, in UNSCRs 1737, 1747 and 1803, the UN Security Council, acting under Chapter VII, designated a number of Iranian entities and individuals as subject to targeted sanctions in order to prevent continued support for Iran's proliferation sensitive nuclear activities or development of nuclear weapon delivery systems. Member States are required to freeze the assets of designated entities/individuals as well as assets of entities "owned or controlled" by them or persons acting on their behalf (operative paragraph 12 of UNSCR 1737). In addition, paragraph 6 of UNSCR 1737 requires States to prevent the provision to Iran of any financial services related to the supply, sale, transfer, manufacture or use of items prohibited by that resolution for transfer to Iran. -- The Financial Action Task Force (FATF) has issued two public statements of concern that deficiencies in Iran's anti-money laundering and counter terrorist financing (AML/CFT) regime represent a significant vulnerability within the international financial system (on October 11, 2007, and February 28, 2008). Accordingly, FATF's members should advise their financial institutions to consider the serious risks of engaging in any business with Iranian entities and individuals, and to enhance due diligence. -- The United States Financial Crimes Enforcement Network (FinCEN) also issued a statement in March 2008 warning jurisdictions about the risks of engaging in financial relationships with Iranian banks due to Iran's lack of anti-money laundering and combating terrorist financing (AML/CFT) controls. That report specifically urged caution regarding the Central Bank of Iran, and was particularly concerned that the Central Bank of Iran may be facilitating transactions for sanctioned Iranian banks. The advisory can be found on the web at www.fincen.gov/fin-2008-a002.pdf. -- Now is not the time for business as usual with Iran. Establishing new financial relationships with Iranian banks is contrary to the spirit of the financial-related provisions in UNSCRs 1737, 1747 and 1803. We urge you to investigate and prevent this and other relationships with Iranian financial institutions, which could be used to facilitate transactions on behalf of Iranian nuclear or proliferation entities. -- 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. -------------- REPORTING DEADLINE -------------- ¶5. (U) Post should report results within seven business days of receipt of this cable. Please slug replies for ISN, T, TREASURY, EAP, INR and NEA. 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, newml@state.sgov.gov. ¶7. (U) Department thanks Post for its assistance. RICE