FDD | Money Laundering For The Mullahs
May 6, 2016 | The Huffington Post

Money Laundering For The Mullahs

The Islamic Republic of Iran has mounted a full court press to persuade the global financial community to overlook its long rap sheet of financial crimes. In recent weeks, two of the Islamic Republic's most savvy diplomats were on the offensive to persuade the Obama administration to green light Iran's access to U.S. dollar transactions.

Last month, Secretary John Kerry and Foreign Minister Javad Zarif met in New York to discuss ways to ensure the Iranians “get the benefits that they are supposed to get,” as Secretary Kerry put it. He emphasized that Washington does “not stand in the way of foreign banks engaging with Iranian banks and companies.” These global banks hit with billions of dollars in U.S. fines for their role in processing illicit financial transactions have been hesitant to return to Iranian markets.

Meanwhile, Central Bank Governor Valiollah Seif traveled to Washington to lobby for Iran's reentry into the global economy. Seif publicly criticized the U.S. for “not honor[ing its] obligations” and explicitly called for the U.S. to change its laws to allow Iran to access the U.S. financial system. He touted Iran's new anti-money laundering laws and dismissed concerns about Iran's support for terrorism and provocative ballistic missile launches as artificial “Iran-phobia.”

Seif and Zarif deliberately sidestepped Iran's record of illicit financial activities and the central role of the Central Bank of Iran (CBI) in these efforts. Between 2006 and 2011, as the U.S. sanctioned Iranian banks, the CBI facilitated transactions for designated banks involved in proliferation and terror financing and, according to Treasury, helped them evade sanctions. As a result, Treasury took the unprecedented step in November 2011 of designating Iran and its entire financial sector – including its central bank – a “jurisdiction of primary money laundering concern.”

The following year, Congress statutorily designated the CBI for its support of nuclear and missile proliferation, terrorism, and money laundering, and banned all transactions with it beyond limited crude oil sales and humanitarian trade. In its most recent statement, in February, the Financial Action Task Force warned that Iran's “failure to address the risk of terrorist financing” poses a “serious threat … to the integrity of the international financial system.”

Meanwhile, the CBI continues to deny its role as Iran's central bank for terror finance. The bank had appealed to the U.S. Supreme Court to overturn the seizure of nearly $2 billion of its assets to settle outstanding judgments won by victims of Iranian-backed terrorism. When the Supreme Court issued its ruling last month affirming the lower court's decision to award the funds to these victims, Iran denounced it as a theft of Iranian property. Tehran still owes other terrorism victims another $40 billion in outstanding judgments.

Seif himself is no stranger to illicit finance, having served in leadership positions in Bank Mellat, Bank Saderat, Bank Sepah, Bank Melli, and Future Bank, all of which Treasury later sanctioned for proliferation or terror financing after his tenure ended. He was CEO of Bank Karafarin when Treasury listed it in July 2012 as a banned Iranian financial institution. (The bank was delisted as part of the nuclear deal.) A year later, and four months after Seif assumed the top position at the CBI, Karafarin was accused, in a Turkish prosecutor's report, of financial crimes on behalf of the Turkish-Iranian businessman Reza Zarrab, charged in a New York federal court last month with sanctions evasion for conducting hundreds of millions of dollars in transactions for the Iranian government.

Despite this record, Seif is demanding Iran receive more sanctions relief than what it was promised under last summer's nuclear deal. Under that agreement, President Obama waived statutory sanctions on the CBI to permit foreign financial institutions to transact with it under specific conditions.

But Iran wants more. Members of Congress from both parties have increasingly voiced concerns that the administration is exploring workarounds to allow Iran to “dollarize” transactions without directly accessing the U.S. financial system. These workarounds include allowing foreign financial institutions to enable Iranian dollarized transactions using offshore clearing, intra-bank book transfers and conversions, or similar dollar-enabled mechanisms.

These dollarized transactions would require a unilateral concession from Washington that Tehran forgot to negotiate explicitly in the nuclear deal. Given its post-deal record of missile activities, hostage taking, terrorism, regional aggression, and illegal arms deals, as well as a financial sector that remains rotten to the core, Tehran is hardly in a position to complain that the “spirit” of the deal now requires more American generosity.

Instead of bending to Iranian demands, Washington and its partners should be pushing Tehran to end the many illicit activities that cast doubt on whether Iran's entire financial sector, including the CBI, can ever clean up its act.

Mark Dubowitz is executive director of the Foundation for Defense of Democracies, where he focuses on Iran and directs its Center on Sanctions and Illicit Finance. Follow him on TwitterFacebook, and LinkedIn.

Annie Fixler is a policy analyst at FDD's Center on Sanctions and Illicit Finance. Find her on Twitter: @afixler


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