Iran’s Dirty Banking: How the Islamic Republic Skirts International Financial Sanctions – Published on: 21 August 2010 By Avi Jorisch
INTRODUCTION
Halting Iran’s progress toward nuclear weapons appears to be high on the agenda of leaders in the United States, Europe, and the rest of the international community. Yet few governments fully grasp how best to implement sanctions, which are one of the most powerful tools available if applied correctly.This is particularly true when it comes to stopping the flow of illicit funds through the banking sector—anarea in which sanctions can be most effective. The objective of Iran’s Dirty Bank’s: How the Islamic Republic is Skirting International Financial Sanctions is to provide several key pieces of information regarding Iran’s ability to circumvent UN and U.S. sanctions via the international financial system:
•A description of the sanctions regime currently in place against the Iranian banking sector.
•A “map” of all Iranian banks, including those designated by the UN and US. The locations of Iranian banks around the globe are indicated, along with the currencies they provide. Also included is a list of the international banks that provide correspondent services to Iranian banks, along with the currencies provided. Bank account information, Society for Worldwide Interbank Financial Telecommunication (SWIFT) data, and Bank Identification Codes (BICs) are provided in detailed charts—in other words, all of the nuts-and-bolts identifier information needed to ensure that banks cease doing business with Iran.
•A list of U.S. banks that provide services to the international banks.
UN SANCTIONS
To date, the United Nations Security Council has passed four resolutions (UNSCRs) targeting Iran’s nuclear activities: UNSCR 1737 in December 2006, UNSCR 1747 in March 2007, UNSCR 1803 in March 2008 and UNSCR 1929 passed in June 2010. All have expressed “serious concern” over International Atomic Energy Agency (IAEA) reports regarding the regime’s nuclear program. Three of the four resolutions have also made reference to Iranian financial institutions. UNSCR 1747 enacted sanctions against Bank Sepah and Bank Sepah International. UNSCR, 1803, called on all countries to “exercise vigilance” over any institutions dealing with Iranian banks and their foreign subsidiaries, in particular Bank Melli and Bank Saderat. Although the UN did not officially sanction Melli and Saderat, both banks have been implicated in illicit internationalactivity. The most recent resolution, UNSCR 1929, designated the First East Export Bank, located in Malaysia, and a subsidiary of Bank Mellat.
CURRENT STATUS OF U.S. SANCTIONS
The United States first targeted the Iranian financial sector in earnest on June 29, 2005, when President Bush signed Executive Order (EO) 13382. President Obama has used this order to target additional Iranian banks. With this measure, Washington has sought to curb the spread of weapons of mass destruction by freezing the assets of proliferators and their supporters, and by barring them from the U.S.financial and commercial systems. In addition, the Treasury Department has warned foreign banks and companies doing business with Iran that they, too, could lose access to U.S. markets if they deal withentities connected to terrorism or the nuclear industry. U.S. sanctions have had an impact on the Iranian banking system—specifically, by prohibiting American institutions from dealing with suspect Iranian banks, and by convincing internationalRed Cell Intelligence Group | www.RedCellIG.com |institutions to sever ties as well. To date, over 80 financial institutions around the globe have eithercompletely cut off or significantly reduced their relationship with Iran. Unfortunately, many banks continue to do business with the Islamic Republic, essentially undermining the overall sanctions effort.
DESIGNATED IRANIAN BANKS
To date, the Treasury Department has designated 17 Iranian banks per EO 13382, charging them with the use of deceptive financial practices to supportterrorist groups and the nuclear program:
1.Arian Bank (Afghanistan)
2.Banco Internacional de Desarrollo CA (Venezuela)
3.Bank Mellat (Iran)
4.Bank Melli (Iran)
5.Bank Melli Iran ZAO (Russia)
6.Bank Saderat (Iran)
7.Bank Sepah (Iran)
8.Export Development Bank of Iran (Iran)
9.First East Export Bank (Malaysia)
10.Futurebank BSC (Bahrain)
11.Kargoshaee Bank (Iran)
12.Melli Bank PLC (United Kingdom)
13.Mellat Bank SB CJSC (Armenia)
14.Persia International Bank PLC (United Kingdom)
15.Post Bank
16.Saderat Bank PLC (United Kingdom)
17.Sepah Bank PLC (United Kingdom)
U.S. LEGAL AUTHORITIES
The powers needed to take specific action against designated banks, their affiliates, and their assets are largely enshrined in the 2001 USA PATRIOT Act and the recently passed Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA). Particularly important powers regarding Iran’s banking network can be found in the PATRIOT Act’s “long arm provision” for asset forfeiture. The U.S.government has the legal authority to freeze any funds deposited in any foreign financial institution on behalf of designated Iranian banks, as long as the foreignbank in question has U.S. operations or maintains acorrespondent relationship with an American bank. The PATRIOT Act gives the government jurisdiction over money laundering cases in several instances, including (1) when the offense took place wholly orpartly within the United States, and (2) when the case involves a foreign bank that maintains an account at a U.S. bank. In addition, the PATRIOT Act amends the U.S. Code’s asset forfeiture statute (18 USC 981), creating a new section on “interbank accounts” (another term for correspondent accounts) that describes the government’s powers as follows: If funds are deposited into an account at a foreignbank, and that foreign bank has an interbank account in the United States…the funds shall be deemed to have been deposited into the interbank account in the United States, and any restraining order, seizure warrant, or arrest warrant in rem regarding the funds may be served on the covered financial institution,and funds in the interbank account, up to the value of the funds deposited into the account at the foreignbank, may be restrained, seized, or arrested. Finally, the PATRIOT ACT also empowers the government to seize funds in a correspondent account “up to the value of the funds deposited into the account at the foreign bank.” Authorities do not need to prove that the seized funds are directly traceable to the funds deposited into the foreign bank. The Comprehensive Iran Sanctions, Accountability, and Divestment Act forces U.S. financial institutions to declare what is commonly known as “clean hands”. US banks will now have an obligation to know not only who their customer is, but who their customer’s customer is. US BanksRed Cell Intelligence Group | www.RedCellIG.com |will have to certify to the government that they and their customers have no direct or indirect businessties to designated Iranian banks. CISADA now forces international banks to choose between the USmarket and doing business with designated Iranian banks.
INTERNATIONAL BANKS PROVIDING SERVICES TO U.S.-DESIGNATED BANKS
1.Ameriabank CJSC (Armenia)
2.Raiffeisen Zentralbank Österreich AG (Austria)
3.UniCredit Bank Austria AG (Austria)
4.Alubaf Arab International Bank BSC (Bahrain)
5.Future Bank BSC (Bahrain)
6.Sonali Bank Limited (Bangladesh)
7.Fortis Bank SA/NV (Belgium)
8.Danske Bank A/S (Denmark)
9.Société Générale (France)
10.BHF-BANK Aktiengesellschaft (Germany)
11.Commerzbank AG (Germany)
12.Deutsche Bank AG (Germany)
13.Landesbank Baden-Württemberg (Germany)
14.UniCredit Bank AG(Germany)
15.ING NV (Holland)
16.Habib Bank Limited (India)
17.State Bank of India (India)
18.United Bank Ltd (India)
19.Bank of the Middle East Iraqi Investment (Iraq)
20.Trade Bank of Iraq (Iraq)
21.Intesa Sanpaolo SpA (Italy)
22.Mizuho Corporate Bank Ltd (Japan)
23.Sumitomo Mitsui Banking Corporation (Japan)
24.The Bank of Tokyo-Mitsubishi UFJ Ltd (Japan)
25.DnB NOR Bank ASA (Norway)
26.Nordea Bank Norge ASA (Norway)
27.BankMuscat SAOG (Oman)
28.Qatar National Bank SAQ (Qatar)
29.VTB Bank (Russia)
30.Riyad Bank (Saudi Arabia)
31.Aresbank SA (Spain)
32.Banco Santander SA (Spain)
33.Banque Marocaine du Commerce Exterieur International SA (Spain)
34.Bank of Ceylon (Sri Lanka)
35.Nordea Bank AB (Sweden)
36.Skandinaviska Enskilda Banken AB (Sweden)
37.Svenska Handelsbanken AB (Sweden)
38.Banque de Commerce et de Placements SA (Switerland)
39.United Bank AG (Switzerland)
40.Zürcher Kantonalbank (Switzerland)
41.Türkiye Halk Bankasi AS (Turkey)
42.TÜRKiYE iS BANKASI AS (Turkey)
43.Dubai Islamic Bank PJSC
44.Emirates NBD Bank PJSC U.S.
BANKS CONDUCTING BUSINESS WITH INTERNATIONAL BANKS THAT SERVICE DESIGNATED IRANIAN BANKS
1.Bank of America NA
2.The Bank of New York Mellon
3.The Bank of Tokyo-Mitsubishi UFJ Ltd
4.Citibank
5.Commerzbank AG
6.Credit Suisee AG
7.Deutsche Bank Trust Company Americas
8.Habib Bank Ltd.
9.HSBC Bank USA NA
10.Intesa Sanpaolo SpA
11.JPMorgan Chase Bank NA
12.MashreqBank PSC
13.Mizuho Corporate Bank USA
14.Société Générale
15.Standard Chartered Bank
16.State Bank of India
17.Sumitomo Mitsui Banking Corporation
18.Wells Fargo Bank NA
**The information presented in this brief are based on open-source information collected from January through May 2010
