VZCZCXYZ0000
PP RUEHWEB

DE RUEHSM #0464/01 2081244
ZNY CCCCC ZZH
P 271244Z JUL 09
FM AMEMBASSY STOCKHOLM
TO RUEHC/SECSTATE WASHDC PRIORITY 4566
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

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