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Treasury Department Takes Action to Protect US Financial System from Illicit Activities in Iran
The United States Treasury Department has issued a final rule, effective immediately, prohibiting US financial institutions from opening or maintaining correspondent accounts with Iranian financial institutions. This move aims to protect the US financial system from illicit activities and money laundering emanating from Iran.
Background
The decision was made under Section 311 of the USA PATRIOT Act, which authorizes the Financial Crimes Enforcement Network (FinCEN) to alert US financial institutions to foreign jurisdictions or financial institutions that pose a risk to the international financial system. FinCEN found that Iran is a foreign jurisdiction of primary money laundering concern due to its support for terrorism and missile proliferation.
Rationale
“We are taking this action to protect international financial institutions from the wide range of illicit finance risks emanating from this jurisdiction,” said FinCEN Director Kenneth A. Blanco.
Prohibitions
The rule prohibits US financial institutions from:
- Opening or maintaining correspondent accounts with Iranian financial institutions
- Processing transactions involving these entities
This move is intended to prevent US banks from being used to facilitate illegal activities in Iran, including the funding of terrorist groups and missile development programs.
Evidence-Based Decision
FinCEN’s decision was based on evidence that international terrorist groups, including Hizballah and Hamas, have transacted business in or with Iran and rely on Iranian financial support. The regime has also been linked to corruption and mismanagement in its economy, with estimates suggesting that the government provides hundreds of millions of dollars in funding to these groups annually.
OFAC Designations
The Treasury Department’s Office of Foreign Assets Control (OFAC) has previously designated several Iranian entities under its counterterrorism authority, including the Central Bank of Iran. The bank has been found to have facilitated the movement of funds to terrorist groups and provided billions of dollars in foreign currency and funding to these organizations.
Anti-Corruption Efforts
In addition to protecting the US financial system from illicit activities, the rule aims to address concerns over corruption and money laundering in Iran. The country has consistently been identified as one of the most corrupt countries globally, with institutionalized corruption widespread in its economy.
Consultations and Resources
The Treasury Department is encouraging interested parties to reach out for more detailed consultations on this matter. For more information, please visit OFAC’s website or review FinCEN’s final rule related to Iranian financial institutions.
Resources
- Information from OFAC on the specifics of this humanitarian mechanism
- FinCEN’s final rule related to Iranian financial institutions