U.S. Financial Regulator Warns of Iran's Efforts to Break Through Sanctions

By Andrew Cochran

The Financial Crimes Enforcement Network of the U.S. Treasury (FinCEN) has issued an advisory to financial institutions, warning them of "threats of illicit Iranian activity related to money laundering, terrorist financing and weapons of mass destruction proliferation financing. The advisory puts financial institutions on notice that Iran is attempting to use such devices as shell companies, free trade zone activity, and entities controlled by Iran but based elsewhere, to attempt to access the international financial system.  FinCEN made a special mention of the potential for attempts to originate from Kish Island, an Iranian-owned resort island in the Persian Gulf, which can be interpreted to mean that Iran has already exploited the island for such attempts.

The advisory is not just a finger-wagging exercise. The advisory quotes a statement by the Financial Action Task Force: "FATF members are advising their financial institutions to take the risk arising from deficiencies in Iran's AML/CFT regime into account for enhanced due diligence."  U.S. financial institutions will have to increase the measures within their anti-money laundering and anti-terrorist financing systems - their software and human resources dedicated to Patriot Act and Bank Secrecy Act compliance - to identify and halt questionable transactions more diligently.  Banks might face special examination of their accounts and systems by bank examiners at the FDIC and the Fed to ensure the invulnerability of their systems.  This is a serious, costly step designed to once again ratchet up the pressure on Iran and keep it from obtaining financing for terrorism and weapons proliferation.

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