U.S. Should Sanction Tehran’s New Central Banker

Iran’s government appointed Mohammad Reza Farzin as the new governor of the Central Bank of Iran (CBI) in late December as the country’s national currency, the rial, plummeted against the U.S. dollar. U.S. Treasury officials have called the CBI Tehran’s “arm of terror finance,” a role it will continue to play under Farzin, who has spent much of his career working at financial institutions sanctioned by Washington.

Farzin, 57, replaces Ali Salehabadi, a younger functionary and former Export Development Bank of Iran CEO who was CBI chief from October 2021 through December 2022. Some analysts believed that Salehabadi could help steer President Ebrahim Raisi’s government through multiple economic crises. Appointed by the president, the CBI chief has comparatively less autonomy than his counterparts abroad but can influence monetary policy. Already, Farzin has reportedly injected significant sums of foreign exchange into the Iranian economy to help prop up the rial’s exchange rate across Iran’s complicated and fractured foreign currency markets.

Farzin previously served under former President Mahmoud Ahmadinejad as deputy minister of economic affairs and finance and later as president and chairman of the board of the National Development Fund of Iran (NDF). Prior to his appointment as CBI governor, Farzin served as managing director of Bank Melli. From 2013 through 2021, Farzin was the head of the board of directors of Iran’s Karafarin Bank. Farzin was its managing director for a two-year period (2019-2021).

Farzin’s resume reads as a veritable list of sanctioned Iranian financial institutions. Bank Melli was sanctioned from October 2007 through January 2016 under counterproliferation authorities and designated again in November 2018 under counterterrorism authorities. Karafarin Bank, partially owned by Supreme Leader Ali Khamenei’s business empire, was sanctioned in October 2020 using a broad executive order enabling penalties against key sectors of Iran’s economy. The NDF was sanctioned in September 2020 by the U.S. Treasury Department using counterterrorism authorities at the same time CBI was sanctioned. According to Treasury, the CBI has “facilitated the transfer of several billion of U.S. dollars and euros” to the Islamic Revolutionary Guard Corps-Quds Force and “hundreds of millions” to Iran’s Ministry of Defense and Armed Forces Logistics, both of which are sanctioned by the United States.

Prior to sanctioning the CBI as a whole in 2020, the Treasury Department targeted then CBI Governor Valiollah Seif in 2018 as well as an assistant director of the CBI’s international department, and later several international department directors. However, Treasury failed to sanction Seif’s replacement, Nasser Hemmati, despite Hemmati’s track record of working across sanctioned entities tied to support for terrorism. By sanctioning Farzin, the Biden administration can correct this error.

Authorities available for Farzin’s designation include both Executive Order 13224, which targets those providing material support for terrorism (and was used to designate Seif), and potentially Executive Order 13876, which targets both the supreme leader’s network as well as any “person appointed to a position as a state official of Iran.”

Less than a month into his tenure as CBI governor, Farzin has already raised red flags. In a recent trip to Qatar, the new CBI chief emphasized the importance of tightening monetary and banking ties between Tehran and Doha, both of which are problematic jurisdictions for terror finance.

By sanctioning Farzin, the Biden administration can send a message that rotating executives cannot mask the CBI’s role in terror finance. It would also warn any prospective CBI governors that so long as Iran remains a state sponsor of terrorism and the central bank remains an active underwriter of terror, the job will be met with tough restrictive measures from Washington.

Behnam Ben Taleblu is a senior fellow at the Foundation for Defense of Democracies (FDD), where Saeed Ghasseminejad is a senior Iran and financial economics advisor. They both contribute to FDD’s Center on Economic and Financial Power (CEFP). For more analysis from Saeed, Behnam, and CEFP, please subscribe HERE. Follow Saeed on Twitter @SGhasseminejad. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.