S E C R E T STATE 092723

SIPDIS

E.O. 12958: DECL: 08/28/2033
TAGS: ECON EFIN IR AS KNNP PARM PTER PINR PREL
SUBJECT: ADDITIONAL INFORMATION FOR AUSTRALIA ON BANK
MELLI, BANK MELLAT AND BANK SADERAT

Classified By: Classified by: ISN Acting Assistant Secretary
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) Australian embassy officers recently asked ISN to
provide additional information on the proliferation-related
activities of Iran's Bank Melli, Bank Mellat and Bank
Saderat. We hope the information in the attached nonpaper
will help convince Australia to designate these entities for
financial asset freeze under Australia's national
authorities, as part of its implementation of UNSCRs 1737,
1747 and 1803. Paragraph 12 of UNSCR 1737 requires states to
freeze the assets of entities and individuals designated in
the resolutions' annexes, as well as those acting for or on
behalf of them. Bank Melli and Bank Saderat have not been
designated by the UNSC, but UNSCR 1803 names these two banks
as warranting particular vigilance. The U.S. designated, on
October 25, 2007, Bank Melli and Bank Mellat under Executive
Order 13382 for their involvement in proliferation activities
and Bank Saderat under E.O. 13224 for providing support for
terrorist activities. The EU has also designated Bank Melli
for a financial a
sset freeze on June 23, 2008.

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OBJECTIVE/ACTION REQUEST
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3. (S/REL AUSTRALIA) Washington requests Post deliver the
non-paper in paragraph 4 to appropriate host government
officials in the Ministries of Foreign Affairs and Finance.
Posts should pursue the following objectives:

-- Provide the nonpaper with information about Bank Melli,
Bank Mellat and Bank Saderat, as requested by Australian
embassy officers.

-- Inform Australia that the U.S. believes financial
transactions with all Iranian banks pose a significant risk

of facilitating proliferation related to Iran's nuclear or
missile programs or facilitating support for terrorist
activities.

-- Urge Australia to consider imposing an asset freeze on
Bank Melli, Bank Mellat and Bank Saderat. Emphasize that
they are facilitating proliferation and terrorism activities
and note that such action would be consistent with paragraph
10 of UNSCR 1803 and paragraph 12 of UNSCR 1737.

-- Remind Australia that paragraph 10 of United Nations
Security Council Resolution (UNSCR) 1803 calls on Member
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. Paragraph 12 of
UNSCR 1737 requires states to freeze the assets of entities
and individuals designated in the resolutions' annexes, as
well as those acting for or on behalf of them. (Note: Bank
Melli and Bank Saderat are not designated in the annexes of
UNSCR 1737, 1747 or 1803).

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NONPAPER FOR AUSTRALIA
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4. (SECRET//REL AUSTRALIA)

IRANIAN BANKS FACILITATION OF TERRORISM AND PROLIFERATION
ACTIVITIES

-- In the spirit of our shared interest in the effective
implementation of UNSCR 1803 and collective efforts to
convince Iran to abandon its nuclear weapons ambitions, the
U.S. would like to provide additional information on how
Iran's Bank Melli and Bank Mellat have facilitated
proliferation-related transactions, and how Iran's Bank
Saderat has been used by the Government of Iran to send funds
to terrorist organizations.

-- The UN Security Council has adopted three resolutions -
UNSCRs 1737, 1747 and 1803 - imposing sanctions on Iran to
address the proliferation risks presented by its nuclear
program and for its failure to comply with UNSCRs 1737 and

1747.

-- The Financial Action Task Force has issued two statements
on Iran's lack of anti-money laundering and combating
terrorist financing (AML/CFT) controls, as well as guidance
to financial jurisdictions that identifies any customers or
transactions associated with Iran as a key risk factor to
weigh in determining whether a particular transaction may be
related to proliferation financing.

-- The international community must take action against these
banks in order to protect the international financial system
from being exploited to facilitate Iran's illegal actions.


I. Bank Melli Involvement in Iranian Proliferation

-- Information available to the U.S. Government indicates
that Bank Melli serves as an important facilitator for Iran's
proliferation financing. Through its role as a financial
conduit, Bank Melli has facilitated purchases of sensitive
materials for Iran's nuclear and missile programs. In doing
so, Bank Melli has provided a range of financial services on
behalf of Iranian nuclear and missile entities, including
opening letters of credit and/or maintaining accounts.

-- Bank Melli's complicity in transactions with Iranian
proliferation entities is indicated by the various roles it
plays in the transaction. In certain cases, Melli was listed
as a consignee, which implies that Melli was acting directly
as an agent of the buyer in these cases. For example, from
early to mid-2007, Bank Melli was listed as the consignee on
multiple purchases for a company affiliated with Iran's
missile program.

-- Bank Melli facilitated a transaction in the first half of
2007 involving a North Korean shipment to Iran; the cargo was
consigned to Bank Sepah, an entity designated in UNSCR 1747
for its involvement in Iran's nuclear and missile programs.

-- This was not an isolated case. Bank Melli has facilitated
numerous transactions involving Iranian proliferation
entities and others listed as subject to the asset freeze
provisions of UNSCRs 1737 and 1747, including transactions
that took place following the date of these entities'
designations.

-- Bank Melli has also maintained accounts or facilitated
numerous transactions for known Iranian missile and nuclear
front companies and/or their suppliers indicating complicity
and/or a lack of due diligence. These companies include
Iran's Defense Industries Organization (DIO) and subordinates
which oversee Iran's research, development and production of
missiles and rockets.

-- A company subordinate to DIO involved in the marketing of
Iranian-made chemical/biological defensive equipment
attempted to use a DIO account in early 2005 at Bank Melli's
Hamburg branch to receive payments for unidentified goods.

-- Bank Melli in mid-2007 facilitated a number of payments
from companies associated with the Aerospace Industries
Organization (AIO), which is the overall manager and
coordinator for Iran's missile program.

-- Bank Melli has assisted Bank Sepah in several different
ways, providing financial support and acting on behalf of
Sepah, subsequent to Sepah's designation in UNSCR 1747 as
well as by the U.S. government under domestic authority (E.O.
13382). The Hong Kong branch of Bank Melli PLC, a UK-based
subsidiary of Bank Melli, facilitated transactions involving
Bank Sepah after Sepah's E.O. 13382 designation.

II. Bank Mellat's Involvement in Proliferation Transfers

-- The U.S. has information indicating that Bank Mellat has
wittingly provided financial services in support of Iran's
nuclear industry, namely the Atomic Energy Organization of
Iran (AEOI), by servicing and maintaining AEOI bank accounts,
mainly through AEOI's financial conduit, the Novin Energy
Company. Both AEOI and Novin Energy Company were designated
under UNSCR 1737 and 1747 respectively, for their involvement
in Iran's nuclear program. Bank Mellat has facilitated the
movement of millions of dollars for Iran's nuclear program
since at least 2003.

-- In mid-2006, Bank Mellat was involved in a transfer
totaling over a quarter of a billion U.S. dollars into an
account it holds for Novin Energy Company. Iran's Bank
Markazi (Iran's Central Bank) effected the payment to Bank
Mellat's unspecified account at a named United Kingdom bank,
for further credit to Bank Mellat's client - Novin Energy
Company. The purpose of the payment is not known.

-- In the second half of 2006, Bank Mellat facilitated a
transfer for Novin Energy Company. The funds were credited
to Novin's account held at Bank Mellat's main branch in
Tehran.

-- In early 2007, Bank Mellat facilitated a payment from
Novin Energy Company's account to a probable Iranian nuclear
procurement company located in Tehran.

-- Bank Mellat has also had dealings with other UN-designated
WMD proliferation-related entities. In mid-2007, Bank Mellat
was involved in several transactions with Bank Sepah. Bank
Sepah facilitated payments to accounts at Bank Mellat on
behalf of entities associated with Iran's AIO.

III. Bank Saderat's Involvement in Terrorism

-- Bank Saderat is used by the Government of Iran to transfer
money to terrorist organizations such as Hizballah, Hamas,
the Popular Front for the Liberation of Palestine-General
Command, and Palestinian Islamic Jihad. Bank Saderat's
connections to these clients and transactions on behalf of
these organizations have at times exceeded the boundaries of
normal banking activities.

-- From 2001 to 2006, a Hizballah-controlled organization
received at least $50 million from Iran through Bank Saderat.

-- Bank Saderat has been a conduit for funds from Hizballah
supporters around the world to Hizballah and between
Hizballah officials in Lebanon and abroad.

-- The Government of Iran has used Bank Saderat to transfer
money to the Palestinian Islamic Jihad.

-- As of 2005, Hamas had significant financial assets
deposited in Bank Saderat. In the past year, Bank Saderat
has transferred several million dollars to Hamas.

-- Hizballah has used Bank Saderat to transfer funds,
sometimes in the millions of dollars, to support the
activities of other terrorist organizations such as Hamas in
Gaza.

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REPORTING DEADLINE
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5. (U) Post should report results by close of business
within seven days of receipt of cable. Please slug replies
for ISN, T, Treasury, INR, NEA/IR and WHA. 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 Michelle New, ISN/CPI, (202) 647-0186,
newml@state.sgov.gov.


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