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FSA pressured to take firm stance on Iran

Hector Sants, chief executive of the Financial Services Authority, was being pressurised to take firmer action on Iranian banks in London, US embassy cables released by WikiLeaks show.

The Guardian reports that Sants was forced to defend the regulator’s record on Iran as the US encouraged the UK to “step into a leadership role” to deter a “nuclear-armed Iran” by stopping the activities of Iranian banks in London.

US Treasury assistant Patrick O’Brien told the FSA executives that Iran was using state-owned institutions – Bank Sepah, Bank Melli and Bank Saderate – to facilitate its proliferation efforts and its support for terrorism.

He expressed particular frustration about Bank Sepah, which was the subject of official international sanctions and was one of four Iranian banks in London.

The cable states: “With four Iranian banks continuing to operate in London, O’Brien said that Middle East and Asian countries are not likely to take any action on its Iranian banks unless London moves first.

“If the UK acted publicly, the US would be willing to take message to the Middle East and Asia to press for similar action in other jurisdictions.”

All Iranian banks operating in London are subject to sanctions.

Bank Sepah declined to comment, Bank Melli did not respond while Bank Saderate strongly rejected any idea that the bank was involved in facilitating terrorism or proliferation programmes.

The FSA applies a “fit and proper test” to decide whether individuals should be allowed to work at banks and O’Brien wanted the UK to look at the way this test was being applied to the London subsidiaries of Iranian operations.

Sants defended the FSA, saying it needed evidence of specific actions being taken by individuals.

The cable reports his colleague Phil Robinson saying “the FSA had ’pushed the boundaries’ of what it can do in looking at the parent entities in Tehran, and must prove the ’intent’ of the person transferring the money.”

The cable states: “All the Iranian banks are ’keeping their noses clean’ in the UK, explained Robinson, and the FSA can only address actions of the London-based subsidiaries.”

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