Financial Crime World

Iran’s Bank Secrecy Laws Under Scrutiny: Financial Institutions Warned of Money Laundering Risks

August 19, 2010

The Islamic Republic of Iran is facing criticism for its bank secrecy laws and lack of transparency in financial transactions, sparking concerns about money laundering and terrorism financing.

Financial Crimes Enforcement Network Issues Advisory

On [date], the Financial Crimes Enforcement Network (FinCEN) issued an advisory urging financial institutions to be vigilant when dealing with Iranian banks and entities. The advisory highlights the risks posed by Iran’s financial sector, including:

  • Central Bank of Iran: FinCEN warns that the central bank may be involved in facilitating illicit conduct.
  • Commercial Enterprises Owned or Controlled by the Islamic Revolutionary Guard Corps (IRGC): These enterprises are suspected of supporting proliferation-related activities.
  • Other Entities Supporting Proliferation-Related Activities: FinCEN advises financial institutions to exercise caution when dealing with these entities.

Iran’s Financial System Facilitates Illicit Conduct

Despite being subject to international sanctions, Iranian banks continue to operate globally. Many have reported significant relationships in key financial centers. The FinCEN advisory warns that Iranian banks are seeking to expand their international presence, potentially circumventing the impact of sanctions on state-owned banks.

Financial Action Task Force and United Nations Security Council Resolutions

The Financial Action Task Force has highlighted the risks posed by Iran’s financial sector, calling on countries to impose countermeasures. The United Nations Security Council has adopted several resolutions imposing sanctions on Iran, including UNSCR 1929, which aims to prevent Iran from abusing the international financial system to facilitate its illicit conduct.

The FinCEN advisory does not describe any new legal obligations for U.S. persons. Instead, it provides guidance on the financial-services-related provisions of UNSCR 1929 that may affect current or future correspondent relationships.

Conclusion

Iran’s bank secrecy laws and lack of transparency in financial transactions have raised concerns about money laundering and terrorism financing. Financial institutions are advised to exercise caution when dealing with Iranian banks and entities, and to take commensurate risk-mitigation measures to diminish threats emanating from Iran.