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U.S. Treasury Warns World's Banks, Financial Systems Against Iran's Malign, Illicit Activities

US - US Treasury Department buildin
US - US Treasury Department buildin

Tehran has long used front and shell companies to exploit financial systems around the world to generate revenues and transfer funds in support of malign conduct and destabilizing actions, said an advisory issued by the Financial Crimes Enforcement Network (FinCEN), a US Treasury bureau, on Thursday October 11.

The advisory aims to help US banks and financial institutions, as well as virtual currency exchangers; and dealers in precious metals, stones, and jewels better detect potentially illicit transactions related to the Islamic Republic of Iran.

It also helps foreign financial institutions "better understand the obligations of their U.S. correspondents, avoid exposure to U.S. sanctions, and address the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) risks that Iranian activity poses to the international financial system."

The "malign conduct" referred to in the advisory "includes support to terrorist groups, ballistic missile development, human rights abuses, support to the Syrian regime, and other destabilizing actions targeted by U.S. sanctions."

According to the advisory, some of senior officials at Iran's Central Bank have been involved in covert actions aimed at accessing financial systems.

"Some of the methods used by the Iranian regime to access the financial system through covert means and to further its malign activities include misusing banks and exchange houses, operating procurement networks that utilize front or shell companies, exploiting commercial shipping, and masking illicit transactions using senior officials, including those at the Central Bank of Iran (CBI)," said the advisory.

Meanwhile, the advisory added that Iran has been using precious metals to evade sanctions and gain access to the financial system and may seek to use virtual currencies in the future. Iran reportedly used a network of people and businesses in Iran, Turkey and the United Arab Emirates during hardline President Mahmoud Ahmadinejad's presidency to circumvent US sanctions by arranging payments in gold bars rather than currencies for Iran's oil export.

"Often, these efforts serve to fund the regime’s nefarious activities, including providing funds to the Islamic Revolutionary Guard Corps (IRGC) and its Islamic Revolutionary Guard Corps-Qods Force, as well to Lebanese Hizballah, Hamas, and other terrorist groups," the advisory explained.

Major US newspapers covered the advisory in their Thursday's issues. The New York Times observed that "Trump administration warned the world’s banks on Thursday that Tehran might try to use duplicitous means to soften the sanctions’ bite and continue to fund terrorism," shortly before the United States re-imposes a second round of sanctions on Iran on November 4.

The New York Times quoted the administration as having said that banks and officials in Iran have used front companies, fraudulent documents as well as a variety of other measures to generate revenue for the country’s terrorist activities.

Meanwhile, The Wall Street Journal maintained that the advisory doesn’t impose new sanctions, nor it authorizes any new action by the government.

The WSJ quoted Daniel Tannebaum, who leads the global financial services sanctions practice at PwC, as having said that the 19-page advisory is a "greatest hits” of Iranian activity, and that it serves as a reminder to the global financial community about the return of the sanctions, adding that “It is helpful to have everything consolidated in one place, just to see if there’s anything that could have been missed,” The Wall Street Journal quoted Mr. Tannebaum as saying.

Following the US withdrawal from the nuclear deal with Iran in May, the United States re-imposed a sets of sanctions against Iran in August and a second set is to start in November as Iran refused to enter into negotiations about its nuclear and missile programs, as well as its intervention in the internal affairs of regional countries.