Rachel Ehrenfeld is quite correct to ask here in her last article "Warning Iran’s Bank Saderat" why the US Treasury Department made an announcement in advance of the decision to cut off Saderat’s connections with the US banking system.
If the Administration were really serious about boycotting Saderat because of its direct involvement in passing Iranian funds to Hizbollah and other terrorist organisations, one would think that it would have sent an order by fax or e-mail to all US financial insititutions saying, in effect "from this moment on, you may not do business with Bank Saderat, and if you have any transactions pipelined right now, you must freeze them and report their details to us so that we can decide how you should act." Only after that should Stuart Levey, the Under Secretary for Terrorism and Financial Intelligence, have taken the opportunity to announce that Saderat has been blocked for its past complicity in terror finance.
So why didn’t it happen that way? The more charitable interpretation is that the Treasury is just about as bureaucratic as any other part of the federal government, and that it couldn’t move as fast as Levey’s enthusiasm to make the announcement to a leading right-wing think tank, the American Enterprise Institute. Banks are closed over the weekend in any case, so it shouldn’t matter if the banks get the freeze orders on Monday. Besides, as the cynical Israeli expression puts it, "if you reported it, it’s as if you actually did it; if you didn’t report it, it’s as if you didn’t do it." And if the issue was that the regulations couldn’t take force until they were published in the Federal Register, Levey should just have held his tongue.
A less charitable interpretation is that Levey and his Treasury colleagues understand the difficult situation to which I referred in my own article last week "Iran is the central banker of terror. So whaddyougonnadoaboudit?," that American intentions to surround Iran by a sort of international banking boycott just won’t work without broad international support. Simply put, it won’t really affect Saderat very much if it can’t do business with any financial institution within US jurisdiction, so long as it can carry out its transactions through correspondent banks located elsewhere. But the Administration has to be seen to be doing something about the problem, perhaps even more than to actually do anything significant. And if some dirty transactions get completed in the few days before the banks actually start complying, then the officials can console themselves with the knowledge that Saderat would have simply channelled the transactions through other banks (and will continue to do so).
Herein lies one of the fundamental problems of fighting terror finance, and indeed money laundering too. For all the brave declarations and policy statements by the United Nations, there is really no internationally binding counter-terror regime. All counter-terror financing regulations are made and enforced by national governments, in accordance with their own interests and definitions of who is a terrorist. The USA can define that Hizbollah is a terrorist organisation, and that Iran should face sanctions for financing its operations, but -- as we’ve seen -- the European Union can stick two fingers up at Washington and go its own merry way. Russia and China, which have their own strategic interests in Iran, will clearly do the same. The result is that Austrian, or Italian, or Russian banks can provide correspondent banking services for Saderat, knowing that their governments will back them against Levey. If, therefore, Iran wants to send money to, say, the Islamic Jihad in Damascus or Gaza, the USA can do little about it.
What is worse, of course, is that Iran can send as much money as it likes to finance Hizbollah activities in Lebanon without having to worry about American sanctions. Although the Lebanese banks’ compliance officers are certainly aware of the new Treasury restrictions, and they’re just as professional as their counterparts elsewhere, it’s not too likely that they are going to block Iranian funds to Hizbollah while Hizbollah has two ministers in the government; and besides, there’s nothing to stop Iranian banks operating in Lebanon. The result, as Brent Sadler is reporting on CNN today, is that Hizbollah is free to pay compensation, in cash, to hundreds and thousands of Lebanese civilians whose property was damaged or destroyed during the recent war with Israel. And the more ’hearts and minds’ that Hizbollah and its Iranian patron succeed in buying in this way in Lebanon, the more difficult it will be for the USA (and Israel) to isolate Hizbollah as a political force. In fact, even if the bulk of financial aid to rehabilitate Lebanon comes from completely legitimate donor states, Hizbollah will do its best to take the credit for this generosity.
Can the United States do anything about this? Not really. In theory, it could threaten to block business in the USA for any bank in other countries that acts as a correspondent for boycotted Iranian institutions -- what is called a secondary boycott. In practice, this has no chance of working, both because some of these international banks are too important to the US economy and because such a threat would create a strong backlash of counter-threats, perhaps against US institutions, from European and other governments that already feel uncomfortable about US unilateralism. Boycotts, still less secondary ones, are not very effective in any case: look at the degree to which Israel has succeeded in doing business with Arab states, even ones that are still officially at war with it.
Stuart Levey, as a lawyer, should understand better than most that law is only useful to the extent that it can be enforced, which, in this context, means that American law will be impotent unless it can be backed by international consensus. And that consensus is already being shaken by another context in which Washington is trying to force its own legal regime on other countries, extradition. The British public was outraged by the recent extradition of three investment bankers to face trial in the USA for something that wasn’t a criminal offence in Britain; it will probably rebel over a new extradition request against British residents accused of fraud in the USA; and a scandal is brewing over an extradition request made to Israel to hand over a rape victim accused of trying to extort her American rapist. Being seen as a bully isn’t a good way to make friends and influence people.
If the United States wants to lead the international war against terrorism -- and there is no other possible leader in today’s world -- it must above all work to ensure that it has enough allies, and that they are all pulling in the same direction. That doesn’t mean that it should stop blocking Iranian banks; but it must ensure that its actions are effective and sustainable, not just symbolic and open to being side-stepped; and it must also ensure that it can show the world that its actions are actually providing protection to the international community.
At a time, when all of America is in danger, it is shame that so many Justice Department resources are used to settle private scores. In one case, they are trying not just to bring the husband to justice but also his wife, a seventy year old grandmother. In other case, a girl who grow up thinking she was actor Bill Cosby's daughter was put in jail for extorting him. Later Bill Cosby was accused of rape.
My emails sent from 10,000 miles away are classified in the same way as if Osama Bin Laden sent them to his militia. The Justice Department needs some balance.
Posted by: Laura Goldman | September 10, 2006 at 01:35