Financial Crime World

Banks Face Scrutiny Over Compliance with Iran Sanctions Reporting Requirements

A new report has highlighted the need for banks to strengthen their compliance with regulations related to reporting obligations on foreign bank relationships with Iranian-linked financial institutions.

Background

The Bank Secrecy Act (BSA), enforced by the Financial Crime Enforcement Network (FinCEN), requires banks to provide detailed information about their dealings with foreign banks, including those linked to Iran. The Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) imposes strict penalties on banks that fail to comply with reporting requirements.

Compliance Requirements

To ensure compliance, banks are required to have:

  • Policies, procedures, and processes in place for responding to FinCEN’s requests within a designated time frame
  • Requesting necessary information from foreign banks
  • Maintaining accurate records of all transactions
  • Reviewing their use of the model CISADA certification form, provided by FinCEN

Findings

The report found that many banks have failed to adequately implement these policies, procedures, and processes, leaving them vulnerable to non-compliance penalties.

Response from Banks

In response to the report, banks have vowed to increase their efforts to comply with these regulations. “We take our obligations under the Bank Secrecy Act very seriously and are committed to ensuring that we are fully compliant with all applicable regulations,” said a spokesperson for one major bank.

Increased Scrutiny

The increased scrutiny of banks’ compliance with these regulations is seen as a sign of FinCEN’s commitment to enforcing US sanctions against Iran. The agency has been working closely with other regulatory agencies, including the Office of Foreign Assets Control (OFAC), to ensure that all financial institutions are held accountable for their actions.

Recommendations

In light of this increased scrutiny, banks are advised to:

  • Review their policies and procedures to ensure compliance with FinCEN’s reporting requirements
  • Strengthen their compliance programs to avoid non-compliance penalties
  • Maintain accurate records of transactions and foreign bank relationships

Failure to comply could result in severe penalties, including fines and criminal prosecution.