US embassy cables | Malta blocked Iranian banks on US request

US embassy cables by the former ambassador Molly Bordonaro had urged finance minister Tonio Fenech on April 1, 2008 and urged Malta not to allow Iranian banks to use Malta’s euro payment system.

Iranina bank Melli had been ‘singled out’ in a United Nations Resolution as an “entity of particular concern” Bordonaro pointed out.

Fenech – the cable explains – “said the Central Bank and the MFSA were unhappy about the Iranian attempt, and had immediately looked for ways to block it, but there appeared to be no clear legal mechanism for doing so since there seemed to be no EU sanctions on the banks in question.”

The cable goes on to quote Tonio Fenech telling the US ambassador: “we are definitely blocking it, and will continue to do so,” he said.

According to the cable published by Wikileaks, the US ambassador was informed that Malta’s Financial Intelligence Unit (FIU) was currently “investigating” the Iranian request, and various other interim measures would be employed to make certain that the transactions did not occur.

Alan Caruana, the permanent secretary at the finance ministry who also attended the meeting, informed the embassy earlier that Malta had issued two Legal Notices that provided for the ‘freezing’ of any funds, other financial assets and economic resources which are in Malta that are owned or controlled directly or indirectly by the persons or entities designated  by the UN sanctions.”

Back in March 2008, deputy chief of mission Jason Davis was contacted by the finance minister’s chief of staff Alan Caruana, expressing concern at attempts by Iranian banks in London and Germany to use Malta’s payment system, via London.

“These were banks that did not have a branch license in Malta, he said, but were attempting to access the payment system of our Central Bank.”

These were the London-based subsidiaries of Persian International and Melli banks attempting to access the Euro Payment System of Malta’s Central Bank.

Davis reported that Maltese banking authorities were not comfortable with this, and were studying whether it was possible to just say “no thank you”, but were concerned that being fellow EU members of the UK and in the Eurozone would “make it difficult for us” especially since the banks were apparently sanctioned by the U.S., but not by the UN or the EU.

Davis recommended that Caruana urges the Central Bank to continue to hold off on allowing the Iranian banks to access Malta’s euro payment system.

The cables show how the Maltese government was bought on board an effort to undermine the Iranian presence in Malta through the blacklisted Islamic Republic of Iran Shipping Lines (Irisl) – which used Maltese front companies to circumvent US and UK bans.

In a cable to Treasury Department undersecretary Stuart Levey, the Maltese government was described as having “clearly understood the dangers and downsides of financial transactions involving Iran, and we anticipate that they will be receptive to your message. While you may hear some references to the importance of ‘international legitimacy’ and the desirability of U.N. or E.U. legal cover for steps taken against Iran (this theme is particularly popular at the MFA), we do not anticipate significant push-back on this front from decision makers."