I'm reposting this article, which was originally posted on July 9, 2010, in Money Laundering Alert:
A Web site that purports to list the foreign correspondent relationships of many of Iran’s financial institutions could cause U.S. institutions to rethink their ties to well-known international banks.
The site for the Export Guarantee Fund of Iran – a state-owned export credit insurance company – lists hundreds of international banks with ties to 10 Iranian financial institutions subject to U.S. economic sanctions. Under a measure signed into law July 1, U.S. banks must audit their correspondent financial institutions to be sure they have no relationship with blacklisted Iranians.
The European banks listed on the site are household names, both in the United States and Europe, including ING Bank, Deutsche Bank, HSBC Holdings, PLC, Bank of Tokyo Mitsubishi, Banco Santander, Royal Bank of Canada, Dresdner Bank and National Bank of Canada. The insurance company links the banks to Bank Melli, Bank Mellat and Bank Tejarat, among other Iranian companies blacklisted by the U.S. Treasury Department.
Neither U.S. banks nor the international banks listed “can ignore this,” according to John Wood, vice president of anti-money laundering intelligence for New York-based consulting firm Iddex Inc.
While it’s unclear whether the Iranian site list is current, it will be “virtually impossible” that the list won’t raise suspicions at U.S. banks, said Wood. Even in cases when foreign banks certify under the new law that they don’t have ties to blacklisted Iranian banks, the claims could ring hollow as long as the Iran site seems to contradict those assertions, he said.
Foreign institutions will need to not only show documentation proving that they don’t process correspondent transactions for certain Iranian institutions, but also contact the Iranian government to be removed from the list, he said. U.S. banks are required to implement the new sanctions checks as soon as next year, after the Treasury Department finalizes regulations.
Calls and e-mails to Banco Santander, Deutsche Bank, HSBC, National Bank of Canada, Nordea Bank and others seeking comment were not immediately returned.
The site is “totally legitimate” said Muhammad Sahimi, an Iranian-born professor of chemical and petroleum engineering at the Los Angeles-based University of Southern California who regularly writes on Iran. The Web site is likely intended to help Iranian exporters determine which banks they can use to settle international transactions or to promote Iran’s ties for propagandic purposes.
Documents posted to the site that were created in mid-2007, according to document data, state that Bank Tejarat has correspondent relationships with BNP Paribas, Deutsche Bank and National Bank of Canada, among other banks.
Bank Melli, a financial institution sanctioned by the United States in October 2007, maintains correspondent ties with Banco Santander, Nordea Bank and Bank of Tokyo Mitsubishi, among others, according to the site. Bank Mellat, also sanctioned by the Treasury in October 2007, purportedly has correspondent ties to BNP Paribas, HSBC, Commerz Bank and others, according to the company.
Depending on how the Treasury Department regulates under the new sanctions law, U.S. banks may find that they have to audit their foreign correspondents for ties to any Iranian banks, even those not formally blacklisted by the United States, said Wood.
Non-U.S. banks will “not be very happy” if their American correspondents find out about the potential Iranian ties through the company’s Web site, said Clif Burns, a Washington, D.C.-based lawyer at Bryan Cave LLP who maintains the Export Law Blog.
Plotting out so many of the relationships between Iranian and international banks was “not the smartest thing to do” by the Iranian agency, he said. Banks on both sides of the correspondent relationships may consider the information proprietary, he said, adding that, whether it’s true or not, some foreign banks will argue that the data is old and no longer accurate.
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