Iran - Banking

Banking

Iranian financial institutions are barred from directly accessing the U.S. financial system, but they are permitted to do so indirectly through banks in other countries. In September 2006, the U.S. government imposed sanctions on Bank Saderat Iran, barring it from dealing with U.S. financial institutions, even indirectly. The move was announced by Stuart Levey, the undersecretary for treasury, who accused the major state-owned bank in Iran of transferring funds for certain groups, including Hezbollah. Levey said that since 2001 a Hezbollah-controlled organization had received 50 million U.S. dollars directly from Iran through Bank Saderat. He said the U.S. government will also persuade European banks and financial institutions not to deal with Iran.^[8] As of November 2007, the following Iranian banks were prohibited from transferring money to or from United States banks:^[9]

• Bank Sepah
• Bank Saderat Iran
• Bank Melli Iran
• Bank Kargoshaee (aka Kargosa’i Bank)
• Arian Bank (aka Aryan Bank)

In other words, these banks were placed on the Office of Foreign Assets Control (OFAC) Specially Designated Nationals List (SDN List). The SDN List is a directory of entities and individuals who have been prohibited from accessing the U.S. financial system. Although difficult there are ways to carry out an OFAC SDN List removal.^[10]

As of early 2008, the targeted banks, such as Bank Mellat, had been able to replace banking relationships with a few large sanction-compliant banks with relationships with a larger number of smaller non-compliant banks.^[11] The total assets frozen in Britain under the EU (European Union) and UN sanctions against Iran are approximately 976,110,000 pounds ($1.64 billion).^[12] In 2008, the US Treasury ordered Citigroup Inc. to freeze over $2 billion held for Iran in Citigroup accounts.^[13][14]

For individuals and small businesses, these banking restrictions have created a large opportunity for the hawala market, which allows Iranians to transfer money to and from foreign countries using an underground unregulated exchange system.^[15] In June, 2010 in the case United States v. Banki, the use of the hawala method of currency transfer led to a criminal conviction against a U.S. citizen of Iranian origin. Banki was sentenced to two and a half years in federal prison, however, on the Federal Sentencing Guidelines, this type of offense could result in imprisonment of up to 20 years.