The Islamic Republic's use of the international banking network to circumvent sanctions
New documents show that the Islamic Republic has used the services of Chinese, Middle Eastern, and Western banks in the energy industry as part of its policy of reducing pressure from US sanctions. According to the Wall Street Journal, intelligence officials say Iran conducts tens of billions of dollars in trade annually through a network of proxy companies, foreign exchange institutions, and intermediaries.
“This network was set up directly by Iran’s political leadership since 2011, with a focus on creating a sanctions-evading financial system to resist international pressure aimed at limiting Iran’s nuclear program,” the officials say.
Bank statements and corporate documents reviewed by The Wall Street Journal show that HSBC Holdings and Standard Chartered, the world's two largest banks by assets, were among the institutions that provided services to major Iranian exporters and conducted prohibited trade with Iran on their behalf.
US sanctions, imposed under the Trump administration to force Iran into a nuclear and security deal, prohibit international banks from handling the accounts of Iranian companies.
Violators of these sanctions face billions of dollars in fines in accordance with U.S. law and international anti-money laundering regulations.
The Biden administration recently took a step toward escalating pressure on Iran by imposing additional sanctions on several companies in the United Arab Emirates and China that the Treasury Department says are the main companies of Iran's state-owned energy giants.
But how does this network work?
According to documents and intelligence officials, Iranian-controlled foreign exchange firms set up proxy companies and bank accounts for the Islamic Republic abroad. Through those companies and bank accounts, sanctioned Iranian companies sell their oil and other goods to foreign buyers in exchange for dollars, euros and other foreign currencies.
Iranian importers then use this money to pay for goods the country needs to keep the economy afloat. An electronic clearing house, run by the Central Bank of Iran, settles these foreign exchange transactions between Iranian exporters and importers.
For example, according to the documents obtained, HSBC Bank opened an account in one of its branches in Hong Kong for a company called Scofield, which was registered in Hong Kong in 2019. In July 2020, Scofield sold 188 tons of a petrochemical product to a buyer in India for $170,000 under a contract. The money was then deposited into Scofield's account at HSBC Bank in Hong Kong. At the same time, an identical invoice with the same date, containing the same invoice number and buyer information, product code, quantity, and sales price was also on hand, identifying the seller as Persian Gulf Petrochemical Industry Trading Company.
Western intelligence officials have no evidence that banks are complicit in allowing transactions by sanctioned Iranian companies. But senior bank compliance officers have said that “companies registered outside Iran that secretly hold bank accounts for Iranian companies can evade controls designed to prevent money laundering.”
Source: Voice of America
