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Viewing cable 08MADRID308, IRANIAN TIES OF SPANISH BANKS SANTANDER AND

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Reference ID Created Released Classification Origin
08MADRID308 2008-03-12 17:05 2010-12-12 12:12 SECRET//NOFORN Embassy Madrid
VZCZCXRO4720
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHMD #0308/01 0721736
ZNY SSSSS ZZH
P 121736Z MAR 08 ZDK
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 4472
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCNIRA/IRAN COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 3358
S E C R E T SECTION 01 OF 04 MADRID 000308

SIPDIS

C O R R E C T E D C O P Y - TAG

NOFORN
SIPDIS

STATE FOR EEB/ESC

E.O. 12958: DNG: CO 03/09/2018
TAGS: ECON EFIN PTER PREL IR SP
SUBJECT: IRANIAN TIES OF SPANISH BANKS SANTANDER AND
SABADELL

REF: A. MADRID 286
B. MADRID 285
C. MADRID 289
D. MADRID 294
E. TD-314/40895-07
F. TD-314/57798-07

MADRID 00000000 001.2 OF 004


Classified By: Ambassador Eduardo Aguirre for reasons 1.4 (b) and (d)

1. (S/NF) Summary. The Bank of Spain, Spain's central bank,
provided to post on March 7 a document summarizing activities
that Bank Santander and Bank Sabadell have had or still have
with Iran. The document is based on information the Bank of
Spain received from the two banks on March 6 in response to
concerns raised by Treasury Deputy Secretary Kimmitt March 5.
The document provides the most up-to-date information that
any of post's sections has on these banks' relationships with
Iranian banks. Bank Santander says it has taken steps to
eliminate almost all of its activities in Iran, while
Sabadell says it maintains its Tehran representative office
in support of Spanish businesses but employs extremely
stringent controls to guard against association with
sanctioned entities. Para 6 contains the full text of the
document. Post is seeking clarification on various points.
End Summary.

2. (C/NF) Treasury Deputy Secretary Kimmitt raised in several
of his meetings and public appearances in Madrid March 5-7
(reftels) the danger to Spanish banks of maintaining links
with Iranian banks. According to the February edition of
Bankers Almanac, two Spanish banks, Santander and Sabadell,
maintained correspondent relationships with Iranian banks:
Santander with the Export Development Bank of Iran, Bank
Melli (cited in UNSCR 1803), and Bank Sepah; and Sabadell
with the Export Development Bank of Iran and Bank Refah.

3. (C/NF) In Deputy Secretary Kimmitt's March 5 meeting with
Bank of Spain (central bank) Deputy Governor Jose Vinals (ref
a), Vinals promised to have the Bank's banking supervision
office discuss with Santander and Sabadell their
relationships with Iranian banks. At a March 6 lunch, the
President of Sabadell confirmed to the Deputy Secretary that
the central bank had spoken with his bank that morning. On
March 7, the Bank of Spain provided post with a document
summarizing information that Sabadell and Santander conveyed
to the Bank of Spain concerning their ties with Iranian
banks.

4. (S/NF) This document contains information that is more
recent than information post has from other sources, and is
fully or almost fully consistent with the earlier information
in refs e-f. Santander says it has almost entirely closed
down its operations in Iran, save for an account with Iran's
central bank (Markazi) and other residual activities. Post
is pursuing clarification on these residual activities.

5. (S/NF) Bank Sabadell provided the Bank of Spain extensive
detail on its controls and its interactions with Iranian
banks, including correspondent relationships with more banks
than those named in Bankers Almanac, one of which (Melli) was
cited in UNSCR 1803. Bank Sabadell continues to operate a
representative office in Iran to assist its Spanish clients
in their export/import activities, but with what it says are
very stringent controls to guard against interaction with
prohibited entities. Post is following up to further clarify
Sabadell's relationships with Iranian banks.

6. (SBU) The informal translation of the Bank of Spain
document follows:

INFORMATION COMMUNICATED BY BANK SANTANDER (TO BANK OF SPAIN)

1) For 25 years, Bank Santander has maintained a small
Representative Office in Tehran with three or four
employees. Currently, the work of the said office is
practically null based on the Santander Group's decision
in the fall of 2007 to sever business relations with
Iranian banks. However, the office has not yet been
closed, among other reasons because the representative is
still helping them (note: it is not clear who "them" is)
to end the activity in an orderly manner.

2) All the accounts with Iranian banks, except Markazi
(the central bank of Iran) have been closed. The
accounts with Banks Sepah and Saderat were closed down in
April, 2007, and the rest of the accounts were closed
before the end of 2007. In the case of Bank Sepah,

MADRID 00000000 002.2 OF 004


Sepah's funds were frozen, based on EC Rules 423/2007 of
April 19 and 441/2007 of April 20. SEPBLAC (Spain's FIU)
and the Ministry of Economy and Finance,s Directorate
General of the Treasury were promptly notified of these
actions.

3) In the past, (Santander) operations were always
entirely commercial in nature and practically all covered
by CESCE (Spain's official export credit guarantee
company). Additionally, there were interbank deposits
primarily from bank Markazi with Santander's treasury in
Madrid. Santander's decision taken the last quarter of
2007 was to reduce to zero commercial activity with Iran,
including deposits and any other services. The deposits,
including those from bank Markazi, have not been renewed
past their expiration dates. Operations were always
subject to money laundering and terrorism finance
prevention procedures. Currently, supervision of
residual banking activities is being undertaken with
extreme care.

4) There are some long-term operations that still
exist that were initiated before the decision to cut ties
with Iranian banks were made and that cannot be
cancelled.

5) Between August 2006 and April 2007, Santander
exchanged numerous letters with the SEC (Division of
Corporate Finance - Office of Global Security Risk) in
which Santander gave detailed information about its
representative office and about its activities in Iran.
The SEC initially requested that Santander's 20-F include
a warning notice about its relationship with certain
(Iranian) banks. Finally, when Santander decided to cut
relations and shut down the accounts of Sepah and
Saderat, the SEC appeared satisfied with this action and
it was deemed unnecessary that Santander include a notice
in its 20-F.


INFORMATION COMMUNICATED BY BANK SABADELL

Representative Office in Iran

Banco Sabadell has a representative office in Iran,
located at Ahmad Ghasir, Bucarest Ave, Tehran. On
October 2, 1998, Bank Sabadell applied to Bank Markazi
Jomhouri Islami Iran to open the office, and it was
approved on November 2, 1998. The office was officially
inaugurated on November 1, 1999.

The mission of the branch is to assist solvent and well-
known Spanish businesses - businesses that are clients
from (Bank Sabadell's) domestic network in Spain - in
their efforts to develop foreign trade with Iran.
(following sentence underlined) A representative office
does not undertake any type of banking operations.

The office develops commercial activities with:

- Spanish businesses with affiliates in Iran
- Spanish businesses exporting products and/or
services to Iran
- Spanish businesses importing Iranian products or
services
- Spanish businesses without a permanent physical
presence in Iran during their business trips to Iran

The services offered are:

- Advising clients on their official credit projects
- Assistance with commercial financing
- Banking advice related to foreign investment
- Local support to Spanish businesses participating in
sectoral or multi-sectoral commercial missions
- Monitoring and coordination of business of clients
in Iran

Type of Operations Conducted by Bank Sabadell

Based on a very restrictive framework of the operations
that any relationship with Iran can have, Bank Sabadell
has limited its operations to those transactions (following
phrase underlined) in which at least one of the parties
involved is a direct and known client of Bank Sabadell
itself. In other words, Sabadell does not carry out any
kind of operation between persons or entities if none of

MADRID 00000000 003.2 OF 004


them are its clients. The funds movements the Bank can
carry out consist solely of debiting or crediting the
account of a client. (following sentence underlined)This
restriction is applied rigorously to the correspondence
regime,
and Sabadell rejects payment orders to non-client third
parties.
Of those client activities centered on export and import,
the majority (about 92 percent during 2007) (following phrase
underlined) are import payments for petroleum from a large
Spanish petroleum company.

Controls

The following controls are applied to all operations:

1) Comparison of the parties involved in a given operation
with the lists of blocked persons and entities. The
lists used for this purpose are the OFAC, UN, and EU
lists, which are periodically updated. Sabadell's
Compliance Office monitors on a daily basis new measures
and legislative actions relating to Iran at both the
national and international (United States, EU, and UN)
levels.

Any type of relationship with entities on the
abovementioned lists were cancelled whenever they occurred.

2) For each documented operation, a certification is
required from the client of the Bank that is the importer
or exporter, in which it is expressly stated that the
said merchandise is not subject to any restrictions or
limitations, nor on the list of merchandise prohibited by
regulations published by the European Union and other
international organizations.

3) Additionally, a new control was recently added and
is already in the execution phase: for clients that
maintain relationships with Iran, Bank Sabadell applies
heightened scrutiny and attention with regards to the
following areas: (i) knowledge about the Banco Sabadell
client (ii) knowledge about its Iranian counterpart,
(iii) knowledge about the commercial relationship and the
destination of any goods that may be exported; and (iv)
knowledge by our client is aware of the applicable norms
related to commercial operations with Iran.

Periodically, Bank Sabadell conducts a follow-up on
clients that have had operations with Iran for an amount
greater than 15,000 euros (annually) and ensures that
these clients have been subjected to the rigorous
scrutiny discussed in the paragraph above.

4) The SIOPEIA anti-money laundering system of
investigating suspicious operations also provides a
greater penalty for all those operations in which an
Iranian person or entity (national or resident) may be
involved.

All these measures are subjected to constant review to
update them in compliance with new developments or new
legislative measures.

Chart Received From Bank Sabadell On Correspondent
Relationships

Correspondent Relationships with Iranian Banks as of
March 6, 2008

VOSTRO Accounts (Also implies exchange of SWIFT codes)

-Bank Markazi Jomhouri Islami Iran
Currency: USD/EUR
Blocked: operative block* since 1995

-Export Development Bank of Iran
Currency: USD/EUR
Blocked: operative block since 1995

-Bank Refah Kargaran
Currency: EUR
Blocked: operative block since 1995

-Bank Melli Iran
Currency: EUR
Blocked: operative block since 1995, total block for new
operations since mid-2007

MADRID 00000000 004.2 OF 004



-Bank Mellat
Currency: EUR
Blocked: operative block since 1995, total block for new
operations since mid-2007

*Note: Under an operative block, operations can not occur
automatically. A special authorization is required for any
operation to occur.
AGUIRRE