Guidance to Financial Institutions on the Continuing Money Laundering Threat Involving Illicit Iranian Activity (FinCEN Advisory – FIN-2008-A002)

Advisory
FIN-2008-A002
Issued: March 20, 2008
Subject: Guidance to Financial Institutions on the Continuing Money Laundering Threat Involving Illicit Iranian Activity The Financial Crimes Enforcement Network (FinCEN) is issuing this advisory to supplement information previously provided1 on serious deficiencies present in the anti-money laundering systems of the Islamic Republic of Iran. The Financial Action Task Force (FATF) stated in October 2007 that Iran’s lack of a comprehensive anti-money laundering and combating the financing of terrorism (AML/CFT) regime represents a significant vulnerability in the international financial system. In response to the FATF statement, Iran passed its first AML law in February 2008. The FATF, however, reiterated its concern about continuing deficiencies in Iran’s AML/CFT system in a statement on February 28, 2008. Further, on March 3, 2008, the United Nations Security Council passed Resolution 1803 (UNSCR 1803), calling on all states to exercise vigilance over activities of financial institutions in their territories with all banks domiciled in Iran and their branches and subsidiaries abroad. The FATF statement, combined with the UN’s specific call for vigilance, illustrates the increasing risk to the international financial system posed by the Iranian financial sector, including the Central Bank of Iran. Iran’s AML/CFT deficiencies are exacerbated by the Government of Iran’s continued attempts to conduct prohibited proliferation related activity and terrorist financing. Through state-owned banks, the Government of Iran disguises its involvement in proliferation and terrorism activities through an array of deceptive practices specifically designed to evade detection. The Central Bank of Iran and Iranian commercial banks have requested that their names be removed from global transactions in order to make it more difficult for intermediary financial institutions to determine the true parties in the transaction. They have also continued to provide financial services to Iranian entities designated by the UN Security Council in its Resolutions 1737 and 1747 as entities involved in nuclear proliferation activities. The U.S. Department of the Treasury is particularly concerned that the Central Bank of Iran may be facilitating transactions for sanctioned Iranian banks. UNSCR 1803 calls on member states to exercise vigilance over the activities of financial institutions in their territories with all banks domiciled in Iran, and their branches and subsidiaries abroad. While Bank Melli and Bank Saderat were specifically noted, the United States urges all financial institutions to take into account the risk arising from the deficiencies in Iran’s AML/CFT regime, as well as all applicable U.S. and international sanctions programs, with regard to any possible transactions with the following Iranian institutions:
1 See “Guidance to Financial Institutions on the Increasing Money Laundering Threat Involving Illicit Iranian Activity,” FIN-2007-A001, October 16, 2007.