IRAN/FATF: FOLLOW-UP WITH GOA AND RAIFFEISEN BANK

1. (S) SUMMARY. Embassy followed up again with GOA and
Raiffeisen officials to press for strong implementation of
FATF
Iran recommendations. GOA reps say Austria already
implements
virtually all of the measures in Ref A demarche. Raiffeisen
gave
us recent data they believe support their assertion that the
bank's Iran business is modest and shrinking. Raiffeisen
also
signaled its reluctance to take any additional measures. END
SUMMARY.

GOA Follow-up


--------------------------





2. (S) Following ref B meetings, Econ Chief met with MFA
Section
Head Dr. Marcus Bergmann to review GOA implementation of FATF
recommendations and the measures advocated in Ref A demarche.

Speaking also for the Austrian MinFin, Bergmann detailed how
the
GOA has implemented each measures on its own or via EU
regulations adopted at the November 10 GAERC.

GOA REPLIES KEYED TO REF A DEMARCHE:

A) Require financial institutions (FIs) to identify
clients
and beneficial owners (...)

GOA REPLY: Already in place via Federal Banking Law article


40.

B) Require FIs to review, and if necessary, terminate
existing correspondent account relationships based upon a
risk assessment (...)

GOA REPLY: Already in place via Federal Banking Law articles
40B
and 41/1.

C) Enhance reporting requirements for financial
transactions involving Iran, including requiring systematic
reporting of transactions (...)

GOA REPLY: Now in place via EU regulations implementing that
August 2008 Common Position

D) Restrict financial transactions with Iran or persons
in
Iran (...)

GOA REPLY: Same as C)

E) Deny any requests by Iranian banks to establish a
subsidiary, branch, or representative office in the host
country (...)

GOA REPLY: There is no such presence in Austria and the FMA
exercises stringent oversight before issuing any license,
making
it "highly unlikely" that Iranian banks could establish a
presence in Austria.

F) Deny requests by Iranian FIs to enter into joint
ventures with or purchase a controlling stake in any host
country
financial institution (...)

GOA REPLY: Same as E)

G) Warn those commercial sectors with significant
business
ties with Iran that transactions with individuals or entities
from Iran have a heightened risk of money laundering or
terrorist
financing;

GOA REPLY: Austrian authorities sent written warnings to
banking
and commercial associations in March and October 2008,
instructing them to warn member firms of the risks in dealing
with Iranian customers. The FMA has also made informal

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representations as banking supervisor.

H) Place existing Iranian branches and subsidiaries in
the
UK, France, Germany and Rome under the control of relevant
competent authorities (...)

GOA REPLY: n/a



3. (S) On Raiffeisen's Iran business, Bergmann said the GOA
had
contacted RZB following ref A demarche, advising them to be
forthcoming with US authorities. Bergmann opined that a
direct
dialogue between USG and Raiffeisen continues to be the
preferred
path.

Raiffeisen: We're Small Fry / Iran Business Shrinking


--------------------------



--------------------------





4. (S) On November 14, Ambassador, DCM, and Econ Unit Chief
met
with Raiffeisen Zentralbank (RZB) General Counsel Friedrich
Sommer (a regular interlocutor) at the Embassy to reiterate
USG
concerns and seek updated data on Raiffeisen's Iran business.

The Ambassador emphasized that the USG remains very concerned
about that business, and that RZB continues to run serious
reputational risks.



5. (S) Sommer presented a data table (PROVIDED TO TREASURY/J.
BURKE) on RZB's recent business with Iran, stating that "we
want
to convince you that RZB is not a big player" with Iranian
banks,
and that recent controls are showing effects. RZB's Iran
trade
financing business has declined considerably, Sommer said.
As of
November 7 only EUR 153 million was outstanding (NOTE: in
2007,
RZB issued a total of EUR 692 million in import/export
letters of
credit/collections for Iran-related business). Its
commercial
financing is tiny: EUR 9 million as of November 7. In
October
2007, RZB handled payment transactions of about EUR 200
million;
Sommer stated that this represented a decrease from recent
months, but could not say how much. Embassy reps asked
whether
whether RZB could provide more detailed data on its
payments/correspondent business (such as a comparative time
series), as this was a key element of USG concerns. Sommer
took
the request under advisement.



6. (S) Sommer distinguished between RZB's payments business
and
its money market accounts for Iranian customers, saying that
the
latter should not elicit controversy. Like others, Iranian
banks
seek good returns on their Euro-denominated assets so their
account balances fluctuate based on market conditions.
Particularly given the financial crisis, RZB is not inclined
to
turn away legitimate depositors seeking a market rate of
return.
With respect to other lines of business, however, Sommer said
RZB
would like to hear our remaining concerns, if any.



7. (S) Sommer reviewed RZB's record of engagement with the
USG
and expressed confidence that the bank's internal measures
implemented this past summer would continue to keep its Iran
business in check. The bank had signaled to its Iranian
customers that it would not become their sole partner in
Europe
for payments and is exercising extreme scrutiny.

Raiffeisen to Lobby GOA


--------------------------





8. (S) In a follow-up conversation with DCM, Sommer indicated
that RZB is likely to stay its current course. He said that
Raiffeisen International CEO Herbert Stepic would soon engage

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the
Austrian MFA and FinMin on the recent USG demarche. In
response
to DCM's question, Sommer stated that Raiffeisen would
not/not be
providing more detailed payments data (para 5), as "this
would be
a violation of Austrian bank secrecy laws."



9. (S) COMMENT: Stepic, a heavyweight in the Austrian
financial
world, will undoubtedly convey Raiffeisen's "frustration"
over
U.S. pressure and seek GOA support in pushing back against
our
requests. END COMMENT.
GIRARD-DICARLO