Japan & Israel Follow U.S. Actions Against Iran's Financial Network

By Andrew Cochran

On September 8, the U.S. Treasury Department announced it was effectively shutting out Bank Saderat, one of the largest Iranian-owned banks, from the U.S. financial system due to the bank's involvement in financing terrorism. Thereafter I posted comments from a senior Treasury Department official on the positive impact of U.S. terrorist designations. If you're wondering what difference the September 8 announcement makes, Iran has one answer - a lot, according to the head of the Iranian central bank: "This move may cause us to distance ourselves from (the dollar), and I'm sure other countries are looking at us. Even now we are using other currencies, and this encourages us to get away from the dollar. We also have very good relations with European banks." They wouldn't consider those measures unless the U.S. actions hurt.

You can also measure the impact by the actions of Japan and Israel, which have now openly followed up with actions of their own. Three Japanese major banks with branches in the U.S. will refrain from doing business with Bank Saderat, and other banks in Japan are expected to follow suit.

Last night, Israel raided a Jordanian-owned bank and 14 foreign exchange brokers in the West Bank to cut the transfer of Iranian funds to Palestinian militants. "The Israeli forces confiscated 5 million shekels ($1.15 million) and 170,000 Jordanian dinars ($240,000) in the operation and seized hundreds of documents." An Israeli spokeswoman said the brokers "had been transferring money from Iran and the Lebanese Hezbollah group to Hamas and Islamic Jihad to finance attacks on Israelis, purchase explosives and manufacture rockets" (quoting the article, not the spokeswoman). The targets included the single largest foreign exchange broker in the West Bank.

One response to the West Bank raids indicates how willing Palestinian brokers and bankers are to enable terrorists to transfer funds through their institutions. "I don’t ask my customers about their political background. They come and go. All I do is change money from one currency to another.” There's no Bank Secrecy Act/USA Patriot Act-like requirement to identify the customer, as there is in the U.S. and all other countries with major banking institutions.

Critics of the BSA and Patriot Act should keep that response in mind before complaining about costly regulatory requirements.

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