VZCZCXRO8908
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHIT #1052/01 3451455
ZNR UUUUU ZZH
P 111455Z DEC 07
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7744
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 ISTANBUL 001052 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN IR PGOV PREL PTER TU
SUBJECT: TURKISH BANK REPRESENTATIVES PLEDGE HEIGHTENED 
VIGILANCE ON IRANIAN BANKS 
 
REF: A. A) STATE 148604 
 
     ¶B. B) STATE 149648 
     ¶C. C) ANKARA 2777 (NOTAL) 
 
¶1. (SBU) SUMMARY: Representatives of several Turkish banks 
told Istanbul Iran Watcher on November 29 that they are 
acting with "extreme vigilance" against the risks posed by 
the Iranian financial sector and scrutinizing all 
transactions with Iranian banks, including those designated 
by the USG on October 25.  END SUMMARY 
 
¶2. (SBU) On November 29, Istanbul Iran Watcher met with 
compliance officers from three of the largest banks operating 
in Turkey -- IsBank, Fortis Bank, and TEB -- as well as from 
the Banks Association of Turkey, to brief them on ref A and B 
information on the recent USG designation of several Iranian 
banks and the FATF statement on Iran.  The three banks 
visited represent a sample of the diverse ownership structure 
of Turkish banks; with one majority Turkish-controlled, one 
wholly foreign-owned, and one partially foreign-controlled. 
Approximately 30% of IsBank shares are publicly traded, with 
the remainder controlled by the IsBank employee pension fund 
(42%) and the Republican People's Party (CHP) (28%).  Fortis 
Group (Belgium) acquired full ownership (93.3% of shares) of 
DisBank in July 2005.  As of February 2005, BNP Paribas 
controls 42% of TEB shares, 15% of shares are publicly traded 
and the remainder are privately held. 
 
¶3. (SBU) The Turkish bank representatives were aware of both 
developments and asserted that their banks were acting 
accordingly by complying fully with "all international and 
domestic laws and standards": 
 
-- The IsBank representative claimed that his bank, Turkey's 
largest private bank, was well aware of the reputational risk 
of conducting business with Iran's financial sector, and with 
the Iranian banks that have been accused by the U.S. and EU 
of links to WMD proliferation or terrorism.  He noted that 
IsBank had ended its cooperation with Bank Sepah following 
the UNSC's designation of Sepah in UNSCR 1747.  IsBank is 
following guidance from MASAK -- Turkey's financial 
intelligence unit -- regarding dealings with Iranian banks 
(he did not share that specific guidance, but described it as 
urging extreme caution and extra vigilance in any dealings 
with Iranian banks). 
 
-- The Fortis Bank representative said Fortis has no current 
deals with any Iranian banks, and applies "enhanced due 
diligence" relating to any "high-risk" contacts. 
 
-- The TEB representative said the bank had decided not to 
pursue any new business with Iranian banks, was exercising 
vigilance regarding any current business with Iranian banks, 
and was fully complying with Turkish banking regulations 
requiring that it report any suspicious requests from Iranian 
banks to MASAK. 
 
¶4. (SBU) The Turkish Banking Association representative said 
that Turkish banks are required by regulation to "pay 
attention" to the U.S. Treasury Department's OFAC list, as 
well as to the EU's "black list" of banks and companies.  He 
said the association, working with the GOT, supports and 
encourages Turkish banks to "know your customer".  He added 
that in late October, shortly following the FATF statement on 
the risks posed by Iran's financial sector, MASAK circulated 
a communique to Turkish banks underscoring the threat and 
instructing banks to protect themselves against the risk of 
association with anti-money-laundering or terrorism finance 
activities. 
 
¶5. (SBU) On the other hand: Several of the bank 
representatives pointed out that Iran is Turkey's largest 
neighbor, with a long and deep history of commercial ties to 
Turkey, making it impossible to cut off all financial 
contacts with Iran.  Indeed, the presence of three Bank 
Mellat branches in Turkey (incorporated as legal Turkish 
banking entities) allows Bank Mellat to participate as a full 
member of the Turkish Banking Association.  The banking 
representatives noted that Turkish banks do not have the 
legal authority to freeze assets of foreign banks or 
companies under their control, unless Turkey's Council of 
Ministers decrees it.  The GOT, they indicated, furthermore 
does not currently have executive authority similar to the 
USG's authorities under E.O. 13382 or 13224, but rather must 
rely on the legal obligation imposed by Chapter VII UNSC 
resolutions such as 1267, 1373, 1737 and 1747.  Following 
issuance by the UNSC of such resolutions, Turkey's Council of 
Ministers circulated those decisions to all Tur 
kish banks, with orders to comply.  However, in at least one 
case the Council of Ministers took a very long time to 
circulate the decision, muting the impact of the UNSC 
resolution. 
 
ISTANBUL 00001052  002 OF 002 
 
 
 
¶6. (SBU) All three bank representatives added that if the USG 
has further information regarding Iranian banks in Turkey 
(i.e. Bank Mellat) being involved in support for WMD 
proliferation or terrorism, the USG should share that 
information with the GOT, which would then advise Turkish 
banks to take appropriate action.  They also advised that the 
USG might consider asking MASAK directly to issue a public 
statement cautioning Turkish banks about the risks of doing 
business with Iran's financial sector, a step that MASAK has 
not yet taken. 
 
¶7. (SBU) COMMENT: The bank representatives welcomed the 
opportunity to meet with a USG official and to emphasize how 
seriously they view the risks posed by Iran's banks and 
financial sector.  They were well-informed about FATF's 
October 11 statement of concern on Iran and the USG's October 
25 designations, but they appreciated receiving the ref A 
fact sheet.  Per their suggestions in para six and ref C, 
should Washington develop further information regarding 
Iranian banks that impact Turkey, clearing such information 
for public release/release to Turkish banks would help 
reinforce these banks' growing awareness of the risks posed 
by Iran's financial sector.  END COMMENT. 
WIENER