MALTA'S FINANCIAL SERVICES AUTHORITY INVESTIGATES

C O N F I D E N T I A L SECTION 01 OF 02 VALLETTA 000190 NOFORN SIPDIS DEPARTMENT FOR EUR/WE, TREASURY FOR CHRISTINE CLARK E.O. 12958: DECL: 05/07/2018 TAGS: KTFN PTER EFIN PARM PGOV ETRD MT SUBJECT: MALTA'S FINANCIAL SERVICES AUTHORITY INVESTIGATES FIM BANK'S DEALINGS WITH IRAN REF: A. VALLETTA 00132 ¶B. VALLETTA 89 Classified By: MCummings for reasons 1.4 (b) and (d) ¶1. (C) Summary. As promised in a recent meeting with Treasury U/S Levey (Ref A),Malta Financial Services Authority Director General Andre Camilleri has met with FIM Bank officials to inquire about the nature of FIM Bank,s dealings with Iran. Camilleri told Poleconoff he was reassured by the positive reaction of FIM Bank executives to MFSA,s inquiry, their candidness about their exposure to Iran, and their stated intent to reduce their exposure to Iran. Camilleri cautioned FIM Bank about pursuing Iranian business. End summary. ¶2. (C) In a recent visit to Malta, Treasury Under Secretary Stuart Levey raised with GOM officials his concerns about reports that the First International Merchant (FIM) Bank of Malta might be seeking to expand its dealings with Iran. Malta Financial Services Authority (MFSA) Director General, Andre Camilleri, told U/S Levey that this information called for further scrutiny and promised to approach to FIM Bank board to evaluate the link. (Given the small and close-knit nature of the Maltese financial community, MFSA has open channels of communication with FIM Bank,s board of directors -- in fact, FIM Bank's Chief Financial Officer, Marcel Cassar, is a former MFSA executive. MFSA REASSURED BY FIM BANK RESPONSE ¶3. (C) On May 5, PoleconOff met with Andre Camilleri to discuss the results of his inquiry into FIM Bank,s exposure to Iran. Camilleri informed EconOff that he had met with Cassar on April 17 to discuss FIM Bank,s dealings with Iran. Based on the information Levey conveyed during his visit, Camilleri expressed concern to FIM Bank,s Cassar about the risk to the reputation of Malta,s financial services community posed by FIM Bank,s dealings with Iranian entities. Camilleri told EconOff that he had been reassured by his conversation with Marcel Cassar. In the conversation, the FIM Bank CFO had provided a detailed report of the bank's exposure to Iran and shared a list of all its transactions with Iranian entities. In his meeting with MFSA, Cassar also shared the minutes of a FIM Bank Board meeting last year in which the decision was taken to &actively and consciously8 reduce the bank's exposure to Iran. At its peak in mid-2007, FIM Bank had an exposure of around 9 million USD to Iran, in April 2008 that exposure had been reduced to 5.6 million USD. FIM BANK BUSINESS MODEL ¶4. (C) Camilleri said that FIM Bank acts as an intermediary between Iranian entities and European suppliers. European suppliers are often reluctant to accept payment directly from an Iranian bank such as Bank Melli or Mellat, preferring instead to use a European Bank such as FIM Bank as an intermediary. In the transactions details FIM Bank provided MFSA, the Iranian bank ) either Melli or Mellat ) was the issuing bank for payment from an Iranian purchaser of goods to a European supplier. FIM Bank,s operating model is unique in Malta. It is the only trade finance bank that does business with jurisdictions that outside of the mainstream ) like Iran, Sudan, and other actors in the Middle East. MFSA SUPPORTS INFORMATION EXCHANGE TO PROTECT REPUTATION ¶5. (C) MFSA is very concerned about maintaining a sterling reputation for Malta,s financial services authority. Camilleri made this clear in his meetings with U/S Levey and emphasized it again to EconOff. Camilleri requested that the Embassy pass on any information that might come available regarding risky or dangerous transactions undertaken by financial institutions in Malta. Camilleri indicated if he had information on such dealings, MFSA would take action to investigate or do a targeted inspection. ¶6. (C) Comment: With Malta,s reputation at stake, Camilleri did not hesitate to warn FIM Bank to err on the side of caution. MFSA clearly understands that it is in Malta's interest to ensure careful scrutiny of Iranian financial activity in Malta. When it comes to countering Iran's abuse of the international financial system, we have a willing partner in Malta, the MFSA, in particular, is eager to exchange information about potential pitfalls in business transactions with Iran. VALLETTA 00000190 002 OF 002 BORDONARO