On October 11, 2018, the Financial Crimes Enforcement Network (“FinCEN”) issued official guidance entitled “Advisory on the Iranian Regime’s Illicit and Malign Activities and Attempts to Exploit the Financial System” (the “Advisory”). The Advisory intends to help US financial institutions to “better detect potentially illicit transactions related to the Islamic Republic of Iran.” The Advisory also aims to help foreign financial institutions understand the obligations of their US affiliates and avoid the breach of US sanctions laws.
According to the Advisory, the Iranian regime accesses, and abuses, the international financial system using a variety of methods. These methods include:
- Using senior officials of the Central Bank of Iran to help procure hard currency and conduct transactions for the benefit of the Islamic Revolutionary Guard Corps-Qods Force (“IRGC-QF”) and the Lebanese Hizballah.
- Using exchange houses to hide the origin of funds and to procure foreign currency for the IRGC-QF, through the use of front companies and complex currency exchange networks. Exchange houses and trading companies have also been used to process funds transfers to evade sanctions laws.
- Using front and shell companies in order to help procure various goods and technologies that enable malign actors to further their illicit activities. Such goods and technologies include printing equipment, dual-use equipment (in support of Iran’s ballistic missile programs), and aviation-related materials.
- Using deceptive shipping practices to hide the connection between certain business activities and Iran and thus evade US sanctions.
- Using gold and other precious metals to help facilitate the sale of Iranian oil and other goods, and to further evade the imposition of US sanctions.
- Using virtual currencies to evade US sanctions.
The Advisory stresses repeatedly that US financial institutions should be particularly cautious at this time, in light of the fact that all sanctions on Iran previously lifted under the Joint Comprehensive Plan of Action (JCPOA) are to be reimposed (or already have been reimposed) following 90- and 180-day wind-down periods. Because of this, FinCEN expects that the evasive, deceptive, and illicit activities described above will increase in frequency. In order to better assist with the detection of deceptive activities, FinCEN provides a set of “red flags” that financial institutions should review and keep in mind when analyzing specific transactions.
Finally, the Advisory reminds US financial institutions of their various obligations under US sanctions laws, the USA Patriot Act, the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), and other related regulations.