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OO RUEHGA RUEHHA RUEHQU RUEHRN RUEHVC
DE RUEHOT #0105/01 0192329
ZNR UUUUU ZZH
O 192329Z JAN 07
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4805
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHSS/OECD POSTS COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 0063
RUEHKH/AMEMBASSY KHARTOUM
RUEHGO/AMEMBASSY RANGOON 0442
RUEHUB/USINT HAVANA 0014
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASH DC

UNCLAS SECTION 01 OF 02 OTTAWA 000105 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/ESC/TFS; WHA/CAN; L/EB (HEINEMANN) 
TREASURY FOR OFAC SEAN THORNTON 
 
E.O. 12958: N/A 
TAGS: CA EFIN KTFN PINS PTER
SUBJECT: MEETING WITH FINANCE CANADA OFFICIALS RAISES 
QUESTIONS 
 
REF: A. OTTAWA 0085 
 
     ¶B. TORONTO 0021 (NOTAL) 
 
Sensitive but Unclassified.  Please protect accordingly. 
 
¶1. (SBU) Summary and action request:  A meeting with the 
Director General, Financial Sector Policy Branch of Finance 
Canada allowed ECON Minister-Counselor to raise USG concerns 
about mischaracterizations of USG policy that have recently 
appeared in the Canadian press after disclosure that the 
Royal Bank of Canada (RBC) has closed U.S. dollar checking 
accounts of Canadians who are also nationals of Iran, Iraq, 
Cuba, Sudan, North Korea or Burma (Ref A).  The Embassy also 
reviewed the USG regulatory stance on dollar-denominated 
accounts in Canadian banks and received a key question from 
the Canadians.  They asked for clarification of the 
definition of &operating8 in the Embassy statement which 
will appear in Toronto,s Globe and Mail newspaper &that 
Foreign Financial institutions operating in the United States 
are required to abide by U.S. law, including restrictions 
based on U.S. economic sanctions.8  Post requests response 
to the action request ASAP as we understand that other 
Canadian banks could soon feel U.S. regulatory heat, which 
may serve to generate another media firestorm on this issue. 
End summary and action request. 
 
¶2. (SBU) On January 18, ECON Minister-Counselor and ECON 
staff met with Jeremy Rudin, Director General of the 
Financial Sector Policy Branch of Finance Canada.  The 
meeting was precipitated by Embassy concerns about 
mischaracterizations of USG policy that have recently 
appeared in Canadian press (Ref A) and allowed the 
Minister-Counselor to clarify the USG regulatory stance on 
dollar-denominated accounts in Canadian banks.  He explained 
that the United States has no sanctions laws that prohibit 
residents of Canada from opening a U.S. dollar-denominated 
account in a Canadian owned or controlled bank in Canada 
simply on the basis of their citizenship.  He added that U.S. 
regulations against terrorist financing and money laundering 
are very specific and focused. 
 
¶3.  (SBU) Rudin asked whether RBC,s difficulties with U.S. 
regulators stemmed solely from how RBC structures its U.S 
dollar accounts, essentially as &pass-through8 accounts at 
its subsidiary New York City Branch, and whether a bank that 
uses another arrangement for clearing and settlement of USD 
accounts would incur similar obligations/scrutiny from US 
regulators.  Essentially, Rudin asked for a definition of 
what &operating8 in the United States means for a foreign 
financial institution since our position is that &Foreign 
Financial institutions operating in the United States are 
required to abide by U.S. law, including restrictions based 
on U.S. economic sanctions8.  Rudin noted that the Canadian 
Finance Attache in Washington met with U.S. Treasury 
officials on January 18 to discuss RBC and raised the same 
question.  Rudin also told us that U.S. Treasury officials 
plan to conduct outreach activities soon with the Canadian 
Bankers Association to further clarify USG rules as they 
could affect Canadian banks. 
 
¶4. (SBU) With specific reference to the RBC case, Rudin said 
that the GoC had not been aware of the bank,s actions to 
close U.S. dollar accounts until this was made public in the 
Qpress, but he added that the bank could take such actions on 
its own and these would not have to be notified to Canadian 
authorities. 
 
¶5. (U) Other Finance Canada staff who attended were: Lynn 
Hemmings, Chief, Financial Sector Division; Dan Colof, Senior 
Chief, Financial Sector Division; Beth Woloski, Chief, 
Consumer Issues. 
 
¶6. (U) Text of Embassy letter (cleared by Treasury and State): 
 
Editor 
The Globe and Mail 
Toronto, Ontario 
 
With regard to your story of January 18, 2007 (&RBC moves to 
quell fury over U.S.-dollar accounts8), there is no U.S. 
 
OTTAWA 00000105  002 OF 002 
 
 
sanctions law that bars foreign citizens who permanently 
reside in the United States from opening a U.S. bank account, 
simply because they are from a certain country.  There is 
also no U.S. sanctions law that prohibits residents of Canada 
from opening a U.S. dollar-denominated account in a Canadian 
owned or controlled bank in Canada simply on the basis of 
their citizenship. 
 
The United States does have laws to protect the integrity of 
its financial institutions from illicit activities.  Canada 
and many other democratic countries have similar laws.  We 
want to ensure that U.S. banks are not used to support 
terrorist activities, organized crime or drug trafficking. 
Some of our laws and regulations, for example, restrict the 
flow of money from the United States to countries that the 
U.S. deems to be engaged in terrorism or supporting 
terrorism.  That seems only sensible. 
 
Foreign financial institutions operating in the United States 
are required to abide by U.S. law, including restrictions 
based on U.S. economic sanctions.   Absent a U.S. connection, 
however, we would expect foreign financial institutions to 
make an appropriate risk assessment to decide which business 
relationships they are willing to take on.  But that is their 
choice, not ours.  The U.S. Treasury,s Office of Foreign 
Assets Control (&OFAC8) publishes a great deal of 
information and guidance for the financial sector on its 
website. 
 
 
Sincerely, 
 
Brian J. Mohler 
Minister-Counselor for Economic Affairs 
Embassy of the United States of America 
Ottawa. 
 
End text. 
 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
WILKINS