Global Banks Wrestle with Iran’s Return

The Bank of England, according to a report from the Financial Times last week, reactivated the licenses of three Iranian banks: Melli Bank, Persia International Bank, and Bank Sepah International – each of which has a history of financing Tehran’s nuclear program and other illegal activities.

The U.S. Treasury sanctioned Bank Melli in October 2007 for providing financial services to Tehran’s nuclear and ballistic missile programs. Treasury noted that the bank had also provided services to the Islamic Revolutionary Guard Corps and its external arm the Quds Force – entities that remain under U.S. and EU sanctions for terrorism, human rights abuses, and their role in the Syrian civil war.

During the same round of sanctions, Treasury designated Persia International Bank and its parent company Bank Mellat, and three years later, the EU designated both for facilitating Tehran’s nuclear and ballistic missile programs. A 2008 U.S. government cable revealed that Mellat had also processed millions of dollars for a North Korea bank financing missile proliferation.

When the U.S. and EU sanctioned Sepah International Bank, Treasury called its parent bank, Bank Sepah, the “financial linchpin of Iran’s missile procurement network,” and then-Under Secretary for Terrorism and Financial Intelligence Stuart Levey accused it of providing services to entities developing nuclear-capable missiles.

For its part, the United Nations has also sanctioned Sepah International and Bank Sepah – two of only three banks that the world body has designated for financing Iran’s nuclear program. Pursuant to last summer’s nuclear agreement, the UN and EU were not slated to lift sanctions from these banks for another eight years. However, both removed sanctions last month in what U.S. officials described as a “goodwill gesture.”

Despite all of this, major European banks are keeping Iranian financial institutions at arm’s length, as the Islamic Republic remains a hub of corruption and illicit finance. Germany’s Deutsche Bank, France’s BNP Paribas and Societe Generale, and Britain’s Standard Charter are all reportedly holding back from re-engaging with their Iranian counterparts.

These institutions appear to understand that Iran remains a jurisdiction of primary money laundering concern, according to Treasury, and poses a “serious threat” to the integrity of the global financial system, according to the October 2015 report of the Financial Action Task Force, the inter-governmental financial standards organization. Even Secretary of State John Kerry, a principal negotiator of the Iran deal, ceded that Iran’s new windfall will benefit the Revolutionary Guards and other entities that remain under U.S. sanctions.

Thus, even though the nuclear deal allows European banks to reengage with Iran, these institutions have been slow to do so. The end of sanctions does not necessarily mean the end of risk.

Annie Fixler is a policy analyst at the Foundation for Defense of Democracies’ Center on Sanctions and Illicit Finance (CSIF). Find her on Twitter: @afixler