TREASURY COHEN TALKS SANCTIONS WITH THE SWEDES

C O N F I D E N T I A L STOCKHOLM 000464 SIPDIS E.O. 12958: DECL: 07/27/2019 TAGS: ECON TERR PREL PGOV IR NK SW SUBJECT: TREASURY COHEN TALKS SANCTIONS WITH THE SWEDES Classified By: A/DCM Laura Kirkconnell for reasons 1.4 (b) and (d). ¶1. (U) Summary: On June 18, Treasury's Assistant Secretary (A/S) for Terrorist Financing David Cohen, along with Treasury and Embassy Stockholm officials, met with Swedish officials involved with banking and sanctions policy. The Swedish interlocutors included Deputy Minister of Finance Mats Odell, MFA Department for International Security Policy's Sanctions Coordinator Amb. Per Saland, and Members of Parliament from the Moderate Party, including Ulrika Karlsson. The key issues of the discussions focused on sanctions on Iran and North Korea, improving legislation, combating money laundering and counter terrorist financing. End Summary. UNSC Terrorist Listings -------------- ¶2. (C) The MFA Department for International Security Policy's Sanctions Coordinator, Amb. Per Saland, told the delegation that Sweden would like a "window of dialogue" as legal challenges to UN Security COUNCIL counterterrorism sanctions designations are addressed by European courts. According to Saland, not all initial UNSC designation decisions were "well thought-out," making the "mega-review" of existing UNSC listings very important. Saland said the EU will accept the UNSC's decisions, but if the EU receives information countering the basis of listing, then there must be a mechanism to revisit the UNSC decision. Sweden would like the renewal resolution for the UN counterterrorism sanctions regime, set for December, to add an independent review mechanism for de-listing requests. Saland said if there is an independent review, it would also be easier for the UNSC to defend its decisions. ¶3. (C) Currently, the EU Court of Justice reviews cases on procedural grounds, not substance, said Saland. But it is possible that in the future the Court will decide cases on substance and therefore could reverse a listing decision. To avoid this, Sweden, along with Germany, the Netherlands, Denmark, Switzerland, Belgium and others, wants a remedy at the UN level to reduce the possibility of the EU Court of Justice ruling on substance. He said the EU nonetheless lacks a common position on the issue. A/S Cohen expressed concern that the UNSC would be unwilling to cede decision-making authority to a secondary body. ¶4. (C) In a separate lunch meeting, MP Ulrika Karlsson, Moderate Party senior member of the Justice Committee, asked about U.S. procedures for listing terrorist entities and individuals, and related transparency issues. Karlsson echoed Saland, saying Sweden does not maintain a listing capability separate from the EU, and lacks the means to provisionally freeze assets awaiting an EU designation. A/S Cohen encouraged the Swedes to create a provisional freezing authority and bring themselves "in-line with other EU members." Karlsson said this was a good point. Iran Sanctions: We Must Consider Our Dual-Nationals -------------- ¶5. (C) In his meeting with Amb. Saland, A/S Cohen said the U.S. believes dialogue with Iran would be beneficial, but there must be consequences if Iran refuses sincere offers to engage. If Iran perceives a loss of international will to maintain pressure, the regime will not want to engage in negotiations. Saland told A/S Cohen that EU sanctions against Iran are aimed at stopping the nuclear program, not at stopping HUMAN RIGHTS abuses or terrorism. ¶6. (C) Saland discussed the domestic procedural aspects of handling sanctions against Iran and listed reasons why Sweden cannot do much more than it currently is doing. He said Sweden cannot take action unless the EU does, following the UN's lead. Regarding general engagement, the Swedish government lacks a legal process to pressure its banks and companies to disengage with Iranian entities. Sweden does not support the attempt to place exactly the same measure of vigilance/restrictions on every transaction with Iran. This is "unacceptable" because legitimate trade exists between Sweden and Iran. Saland said the Swedish mindset on this "will not change." He added that Sweden has over 100,000 dual national Iranians (the majority came to Sweden as refugees) and the government refuses to take any action that "restricts their liberties." Anything the EU does outside of the UN, according to Saland, could make things more costly for the Iranians, but Iranian entities would simply move business to the UAE or South Asia. ¶7. (C) In a meeting later that day, Deputy Minister of Finance, Mats Odell, said that ey to understanding the Swedish government actions on sanctions was realizing that in Sweden, the government had to be "absolutely unanimous on everything" before proceeding the Foreign Ministry and Justice Ministry must reach consensus before proceeding on any decision regarding implementation of UN and EU sanctions. If a given sanctions issue requires legislation, Odell explained, additional ministries, including the Finance Ministry, must be brought into the consensus. ¶8. (C) Odell continued that the Swedish government is currently trying to find ways to implement the FATF call for countermeasures against Iran, and asked A/S Cohen to describe the current U.S. policy on Iran. A/S Cohen explained how the FATF's call for countermeasures is consistent with U.S. policy to hold Iran responsible for its behavior. He noted that U.S. objectives toward Iran remain to prevent Iran from acquiring nuclear weapons, and to stop Iran from supporting international terrorism. What has changed is the new emphasis on engagement to try to open a dialogue, while still pursuing sanctions policies to hold Iran responsible for its international obligations. Odell thanked A/S Cohen for a "very useful clarification." He explained that Sweden views the FATF's call in an EU context, and will be discussing how to respond with its EU counterparts to develop a common position. He said the EU had met twice on the FATF call without reaching a decision. North Korea Sanctions Are Easier -------------- ¶9. (C) Regarding North Korea, Odell said the Foreign Ministry had responsibility for responding to UNSC Resolution 1874 calling for members to prevent financial transactions tied to North Korea's nuclear weapons and missiles programs. With respect to concrete details on what banks have to do, the Finance Ministry will get involved. Earlier, Saland told A/S Cohen that deciding whether or not to enact sanctions against North Korea was easy compared to other rogue states, as Sweden has nearly zero trade with North Korea and lacks an expat community. "North Korea is on another planet, so to speak." However, it is unlikely the EU will prohibit every transaction with North Korea. ¶10. (C) A/S Cohen noted that the Treasury Department is already advising U.S. banks of what they need to do to comply with UNSCR 1874. Odell responded that the Swedish Finance Ministry cannot take preventative measures without a legal basis, such as an EU position. He said he did not know how long it would take for the EU to issue relevant legislation, but promised that Sweden would do its utmost to prevent Swedish counterparts from taking part in activity related to North Korea's nuclear program. Dealing with Internal EU Terrorists -------------- ¶11. (C) Saland said it is "embarrassing" that the EU lacks instruments to combat domestic terrorist groups, such as ETA and IRA. The anti-terrorist funding components of the Common Foreign and Security Policy (CFSP) are aimed only at terrorist groups with origins outside the EU. As part of its EU Presidency agenda, Sweden wants to "fill in this gap" in late 2009, but is still figuring out how. If implemented, the Lisbon Treaty will provide a new legal ground (Article 75),outside of the CFSP, for the EU to impose restrictions on domestic organized crime and terrorism financing. Meanwhile, the Government of Sweden has no intention of creating a parallel national system, like that of France, to go after domestic terrorists. The topic is "politically dead" due to political rifts. Moderate Party MPs also indicated that a domestic designation authority was "not an option." Sweden's Important Legislative Changes -------------- ¶12. (C) Sweden's head of delegation to the FATF, Jens Granlund, reviewed a legislative/regulatory change the Swedish government is pursuing within Sweden based on the anti-money laundering and counterterrorist financing legislation the government passed in March. Normally, she explained, the supervisory authority would have merely posted new requirements for financial institutions on a website that the institutions are required to monitor. In the case of Iran, in May the authority issued a new directive to all 4,000 banking institutions and business firms calling for increased vigilance if a company is identified as posing an increased risk for money laundering ¶13. (C) The legislation, Granlund continued, incorporates a new risk-based approach, where the supervisory authority instructs banks to undertake stricter vigilance. The supervisory authority doesn't generally enforce the legislation because "banks usually comply." Perhaps, she said, the government could do random controls to check compliance, but the government has not told the banks that it may do so. ¶14. (C) A/S Cohen pressed Odell on Sweden's lack of authority to provisionally freeze assets. Odell responded that the Finance Ministry views the situation similarly and that the problem was with the Ministry of Justice. He explained why it is politically sensitive in Sweden given the risk of discriminating against ethnic groups and the long-standing Swedish tradition of transparency in matters related to actions by the government. He said the Foreign and Justice Ministries were negotiating "until we have a solution." He said the Finance Ministry wants to signal that Sweden does not welcome money laundering and terrorist financing, and that the government would find a "balanced way" to address the serious concerns of the Justice and Finance Ministry regarding personal privacy. ¶15. (C) One solution, Odell said, would be to improve EU routine, to reduce the time to achieve an EU designation, eliminating the need for a national mechanism to fill the gap. He said the Foreign Ministry would "probably" work on that during Sweden's EU Presidency, and that the Finance and Foreign Ministries had the "same good constructive viewpoint on how sanctions procedures should be improved." Combating Child Pornography -------------- ¶16. (SBU) Remarking about the Swedish private sector's willingness to protect the financial system from illicit activity, Odell's political advisor, Sigfrid Leijonhufvud, concluded by reviewing a successful initiative to get private sector compliance in stopping the payments system from being used for internet child pornography. Key, he said, was that the effort targeted the companies selling child pornography, rather than individuals using those sites. Every day, he said, the private sector banking system is given account numbers for which they must stop payments and block the customer from the website. He said the Swedish banking sector has great pride in stopping these payments and Sweden was talking with the European Commission about the importance of this effort. SILVERMAN