Iran’s Bank Secrecy Laws Under Scrutiny as US Issues Advisory on Deceptive Financial Strategies

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The Financial Crimes Enforcement Network (FinCEN) has issued an advisory to help financial institutions detect and report potentially illicit transactions related to Iran, highlighting the country’s bank secrecy laws as a major concern.

Deceptive Practices Used by Iranian Regime

The advisory warns of deceptive practices used by the Iranian regime to evade US sanctions and finance its “malign activities”, including:

• Front companies
• Fraudulent documents
• Exchange houses
• Seemingly legitimate businesses

These practices have enabled the regime to generate illicit revenues and finance its activities, according to Sigal Mandelker, Under Secretary of the Treasury for Terrorism and Financial Intelligence.

Central Bank of Iran’s Role in Supporting Terrorism

The advisory also highlights the role of the Central Bank of Iran (CBI) in supporting terrorism, citing instances where officials were involved in deceptive practices to evade sanctions. It advises financial institutions to exercise due diligence when dealing with transactions involving exchange houses that may have exposure to the Iranian regime and/or designated Iranian persons.

Suspicious Activity Reports and Increased Industry Awareness

FinCEN Director Kenneth A. Blanco added that Suspicious Activity Reports (SARs) and other valuable information from the financial sector have been instrumental in identifying money laundering and other financial schemes associated with Iran. The advisory aims to increase industry awareness and enhance the future value of related SAR reporting, ultimately strengthening the safety and security of the US financial system.

Red Flag Indicators

The advisory warns of potential red flag indicators, including:

• Iranian shipping companies involved in suspicious transactions
• Use of virtual currency for illicit activities
• Precious metals being used to evade sanctions
• CBI officials routing transactions to personal accounts rather than central bank or government-owned accounts

Expectations and Requests

In light of the full re-imposition of sanctions lifted under the Joint Comprehensive Plan of Action (JCPOA) in November 2018, FinCEN expects Iran’s financial institutions and regime officials will increase efforts to evade US sanctions and fund malign activities. The Treasury Department is seeking information related to these efforts and requests that financial institutions reference this advisory when filing a Suspicious Activity Report (SAR).