Banks’ Obligations Under Bank Secrecy Act in Iran Revealed

Washington D.C. - Financial Institutions Alerted to Threats from Iranian Regime

In an effort to help financial institutions detect and report potentially illicit transactions related to the Islamic Republic of Iran, the Financial Crimes Enforcement Network (FinCEN) has issued an advisory. The move aims to assist foreign financial institutions in understanding the obligations of their US correspondents, avoiding exposure to US sanctions, and addressing anti-money laundering/combating the financing of terrorism (AML/CFT) risks posed by Iranian activity.

Threats from the Iranian Regime

The advisory highlights the threats posed by the Iranian regime to the US financial system as well as institutions with correspondent banking relationships with US financial institutions. It also describes deceptive financial strategies used by Iran to evade sanctions and provides red flag indicators related to specific malign activities and typologies.

Under Secretary of the Treasury Comments

“This advisory lays out in great detail the extent to which the Iranian regime uses deceptive practices, including front companies, fraudulent documents, exchange houses, seemingly legitimate businesses, and government officials, to generate illicit revenues and finance their malign activities,” said Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “Any country that allows its Central Bank to be involved in deception in support of terrorism requires the highest levels of scrutiny, particularly when the country itself is the world’s largest state sponsor of terrorism.”

Financial Institutions Warned

The advisory warns financial institutions to exercise appropriate due diligence when dealing with transactions involving exchange houses that may have exposure to the Iranian regime and/or designated Iranian persons. It also cautions against possible evasive practices involving Iranian shipping companies and abuses of virtual currency and precious metals to evade sanctions.

Red Flags for Deceptive Activity

To help financial institutions identify deceptive activity potentially linked to the Iranian regime, FinCEN has included red flags in its advisory. These include:

• CBI officials routing transactions to personal accounts rather than central bank or government-owned accounts
• Individuals or entities with no central bank or government affiliation withdrawing funds from such accounts
• Wire transfers or deposits that do not contain any information on the source of funds

Increased Efforts to Evade Sanctions Expected

Following the re-imposition of sanctions lifted under the Joint Comprehensive Plan of Action (JCPOA), FinCEN expects Iranian financial institutions, the Iranian regime, and its officials to increase efforts to evade US sanctions to fund malign activities and secure hard currency for the Government of Iran.