US Financial Institutions Face Tightened Restrictions on Iranian and North Korean Transactions
Ongoing Illicit Financing Risks Prompt Warning from US Treasury’s Office of Foreign Assets Control
Washington D.C. - The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued a warning to financial institutions, cautioning them against transactions with Iran and North Korea due to ongoing illicit financing risks.
Sanctions in Effect
The sanctions prohibit dealings with Iranian government-owned banks and entities linked to terrorist activity or weapons of mass destruction proliferation. The US Treasury has also identified North Korea as a jurisdiction of “primary money laundering concern” under Section 311 of the USA PATRIOT Act.
- Iran: Sanctions prohibit dealings with Iranian government-owned banks and entities linked to terrorist activity or weapons of mass destruction proliferation.
- North Korea: Identified as a jurisdiction of “primary money laundering concern” under Section 311 of the USA PATRIOT Act.
UN Security Council Resolutions
United Nations Security Council Resolutions (UNSCRs) against Iran and North Korea impose financial provisions and prohibitions on all states, including the exercise of vigilance over activities of financial institutions in their territories with banks domiciled in these countries and their branches abroad.
Guidance for US Financial Institutions
US financial institutions are advised to familiarize themselves with existing US sanctions under the North Korea Sanctions Regulations and Executive Orders 13570 and 13551, which limit direct exposure to North Korean financial or commercial transactions contributing to proliferation activities.
- Financial Crimes Enforcement Network (FinCEN): Issued guidance to assist financial institutions in implementing their obligations for targeted financial sanctions and activity-based prohibitions pursuant to UNSCRs to address proliferation finance risks associated with Iran and North Korea.
Jurisdictions Subject to Enhanced Due Diligence
FinCEN is advising US financial institutions of their increased obligations under Section 312 of the USA PATRIOT ACT, 31 USC § 5318(i), for correspondent accounts maintained for foreign banks operating in:
- Algeria
- Ecuador
- Indonesia
- Myanmar
These jurisdictions have strategic Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) deficiencies. Financial institutions are required to conduct enhanced scrutiny of correspondent accounts, determine whether the foreign bank maintains correspondent accounts for other foreign banks, and identify the owners of shares in non-publicly traded banks.
FinCEN Guidance
US financial institutions should also consider the risks associated with AML/CFT deficiencies in countries such as:
- Afghanistan
- Albania
- Angola
- Cambodia
- Guyana
- Iraq
- Kuwait
- Lao PDR
- Namibia
- Nicaragua
- Pakistan
- Panama
- Papua New Guinea
- Sudan
- Syria
- Uganda
- Yemen
- Zimbabwe
They are reminded of their obligations to comply with general due diligence requirements under 31 CFR § 1010.610(a).
Reporting Suspicious Transactions
The Treasury’s FinCEN advises financial institutions to report any suspicious transactions that may relate to terrorist activity or other violations of federal law or regulation.
For Further Information
Additional questions or comments regarding the contents of this Advisory should be addressed to the FinCEN Resource Center at 703-905-3591. Financial institutions wanting to report suspicious transactions can call the Financial Institutions Toll-Free Hotline at (866) 556-3974.