Banks’ Responsibilities in Detecting and Preventing Financial Crime in Iran

The Financial Crimes Enforcement Network (FinCEN) has issued a recent advisory aimed at helping financial institutions better detect and report potentially illicit transactions linked to the Islamic Republic of Iran. The advisory warns banks to be vigilant against deceptive practices used by the Iranian regime to evade sanctions and fund its malign activities.

Deceptive Practices Used by the Iranian Regime

According to Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence, the Iranian regime has been using fraudulent documents, front companies, and government officials to generate illicit revenues and finance its terrorist activities. These deceptive practices include:

• Masking illicit transactions through senior officials of the Central Bank of Iran (CBI) who procure hard currency and conduct transactions for the benefit of the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxy group, Lebanese Hizballah.
• Using exchange houses that may have exposure to the Iranian regime or designated Iranian persons.

Red Flags and Typologies

To help banks identify potentially illicit Iran-linked activity, FinCEN has included red flags in its advisory. These red flags include:

• CBI officials routing transactions to personal accounts rather than central bank or government-owned accounts.
• Transactions involving exchange houses that may have exposure to the Iranian regime or designated Iranian persons.

SAR Reporting Requirements

Financial institutions are urged to file suspicious activity reports (SARs) with all pertinent available information and reference the advisory by including the key term “Iran FIN-2018-A006” in the SAR narrative and fields. FinCEN requests that banks provide information related to the Iranian regime’s efforts outlined in the advisory, as well as information on how the regime or its entities subject to sanctions evade U.S. sanctions and access the U.S. financial system.

Enhancing Industry Awareness

The advisory provides concrete red flags and typologies to help banks identify potentially illicit Iran-linked activity, increasing industry awareness and enhancing the value of related SAR reporting. FinCEN Director Kenneth A. Blanco added that suspicious activity reports (SARs) have been instrumental in identifying money laundering schemes associated with the Iranian regime.

Conclusion

In conclusion, the advisory emphasizes the importance of vigilance by financial institutions in detecting and preventing financial crime linked to the Iranian regime. By being aware of the deceptive practices used by the regime and reporting suspicious activity, banks can play a crucial role in disrupting the regime’s illegal activities and preventing the flow of illicit funds.