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.

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