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FM AMEMBASSY RIGA
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RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

S E C R E T SECTION 01 OF 02 RIGA 000041 
 
SIPDIS 
 
DEPARTMENT FOR NEA 
TREASURY FOR GRANT 
 
E.O. 12958: DECL: 01/24/2020 
TAGS: EFIN PREL PGOV IR LG
SUBJECT: LATVIAN BANK ASSISTED IRANIAN PROCUREMENT; LATVIA 
WILL INVESTIGATE 
 
Classified By: Ambassador Judith Garber for reasons 1.4 (b) & (d) 
 
¶1. (S) Summary: A Treasury Department delegation met with a 
variety of Latvian Government officials to discuss Iran and 
its abuse of the international financial system and shared 
information concerning an Iranian transaction that passed 
through a Latvian bank in 2008.  In response, Latvian 
officials speculated that Iran may have been testing the 
Latvian anti-money laundering system to determine if they can 
use it to circumvent sanctions.  Latvian officials pledged to 
investigate the transaction and determine the appropriate 
response.  Latvian banks have few financial connections to 
Iranian entities and there is no reason to believe that Iran 
is frequently abusing the Latvian financial system.  The U.S. 
Treasury delegation consisted of Brian Grant and Christopher 
Burdick. End Summary. 
 
LATVIAN BANK ASSISTED IRANIAN PROCUREMENT 
 
¶2. (S) The Director of Global Affairs for the Treasury 
Department's Office of Terrorist Financing and Financial 
Crimes, Brian Grant, met with Latvian officials on November 3 
and 4 to discuss Iran and share relevant intelligence on how 
JSC Latvijas Krajbanka facilitated payments related to 
Iranian defense procurement efforts in 2008.  Mr. Grant 
passed this statement to the Latvian MFA, Financial Capital 
Markets Commission, and the Financial Intelligence Unit. 
 
¶3. (S) In response to the information shared, Latvian 
officials at the MFA said that they would examine the problem 
and then determine what action to take in response to it. 
Officials at the FCMC said that they are scheduled to conduct 
an on-site inspection of JSC Latvijas Krajbanka and they 
would look into this matter and determine what do about it. 
FCMC said that the minimum precaution Latvian banks should 
take when dealing with Iranian entities is enhanced due 
diligence.  Both organizations requested more detailed 
information regarding the suspect transaction, if possible. 
The FCMC suggested that the USG approach the Lithuanian 
government with the same information because Latvia's 
Krajbanka is the subsidiary of a Lithuanian bank, Snoras. 
 
IRAN TESTED LATVIAN BANKING CONTROLS 
 
¶4. (SBU) Mr. Grant explained that as major financial 
institutions have terminated business relationships with 
Iran, Iran has increasingly turned to emerging market 
financial institutions for access to the global financial 
system.  Although there are minimal historical, cultural, or 
geographic reasons that Iran would attempt to utilize Latvia 
to circumvent sanctions, Latvia has a sophisticated banking 
system that is well-integrated into the global economy- the 
type of system Iran is targeting.  In addition, the Latvian 
banking system has a high percentage of non-resident 
accounts, around 30%, which creates a systemic 
money-laundering risk. 
 
¶5. (SBU) It appears that Iran has indeed taken preliminary 
steps aimed at abusing the Latvian financial system. After 
sharing the information, FCMC officials then shared 
supplementary information on two additional transactions, 
which they believe Iran used to test the Latvian financial 
controls system. First, in 2008 Bank Melli made several 
transactions, which were detected, stopped and frozen.  Parex 
Bank, one of the largest Latvian banks, reported that Bank 
Melli, an Iranian bank that the USG, EU and UN sanctioned as 
a known financer of Iran's proliferation efforts, attempted 
to complete two transactions with Parex Bank.  One 
transaction was routed through a German bank and one was 
routed through a Bank Melli subsidiary in Moscow, most likely 
Bank Melli Iran ZAO. Both transactions were small.  The FCMC 
froze both transactions and the money remains frozen today. 
 
¶6.  (SBU) Latvian banks' relationships with Iran remain 
small.  The FCMC also said that they routinely circulate the 
Financial Action Task Force's guidance regarding Iran to 
Latvian banks and tell them to review their Iranian banking 
relationships, if any.  In response, the banks said they were 
conducting little business with Iranian entities and most 
Latvian banks indicated that they would not do business with 
Iranian entities because of the FATF guidance.  A few banks 
said they would do business with Iranian interests, but only 
after enhanced due diligence. 
 
¶7. (SBU) The FCMC also noted that an Iranian-American living 
in London that owns the Royal Bank of Baku in Azerbaijan 
applied to purchase Parex Bank, a large Latvian bank.  The 
FCMC denied this application.  The FCMC provided Treasury 
 
RIGA 00000041  002 OF 002 
 
 
with a letter from Ali Ram, owner of the Royal Bank of 
Azerbaijan that describes his interest in acquiring Parex 
bank.  In a follow-up communication, the FCMC provided 
information about three suspect transactions involving Iran's 
Aseman Airlines where Iran attempted to pass $900,000 Euros 
through Latvia, which it described as payment for 
re-upholstering aircraft. 
 
MEETING WITH LATVIAN FIU 
 
¶8. 7. (SBU) The head of Latvia's financial intelligence unit, 
Viesturs Burkans, said that his office has the authority to 
freeze transactions that violate Latvia's money laundering 
laws or involve entities on the terrorist watch list. 
However, dealing with an Iranian entity that is not on the 
terrorist watch list is not a predicate crime to money 
laundering under Latvian law and thus does not trigger 
freezing.  Such transactions do trigger suspicious 
transaction reports to Mr. Burkans' office because they are 
high-risk transactions.  Mr. Burkans did not know how many 
reports of transactions with Iranian entities his office has 
received. 
 
COMMENT 
 
¶9. (S) Comment:  There is no reason to believe that Iran is 
frequently using the Latvian financial system.  It is not 
even clear if JSC Latvijas Krajbanka knowingly assisted 
Iranian procurement.  However, despite the strong steps 
Latvia has taken to address money-laundering in the last few 
years it remains a problem in Latvia and various nefarious 
persons abuse its financial system.  Fortunately, Latvian 
regulators appear to have stopped two potential Iranian 
attempts to test their financial regulatory system. 
Hopefully, this deters future Iranian abuses of the system. 
End comment. 
GARBER