U.S. Treasury Officials Warn Hong Kong Banks Over Iran Oil Trade With China

Latest Developments

• Treasury Officials Meet Bank Representatives: Officials from the U.S. Treasury Department met with representatives of Hong Kong’s banking sector in early April to warn them against facilitating Iran’s illicit oil trade with China. Treasury officials warned that the banks could face secondary sanctions, which target third parties not directly involved in violating sanctions, as part of the United States’ ongoing “maximum pressure” campaign aimed at curbing Iran’s oil exports and disrupting its financial networks. The officials also held meetings in Singapore and Malaysia, which, like Hong Kong, host companies that facilitate Iran’s oil trade.
• Banks Must Stay Vigilant Regarding Iranian Front Companies: Treasury officials reportedly instructed the banks to “look beyond the front companies to uncover the ultimate beneficial owners and flag suspicious transactions conducted in non-dollar currencies.” Iran’s regime has established a vast network of proxy companies, foreign exchange houses, and intermediaries that “transact tens of billions of dollars a year in trade that is otherwise banned under U.S. sanctions.” On May 13, Treasury sanctioned nine Hong Kong-based non-bank entities that assisted an Iranian military-affiliated company in concealing shipments of Iranian oil to China using falsified documents and other schemes to obscure the oil’s origin.
• China Imports Most of Iran’s Oil: China is by far the world’s largest importer of Iranian oil, estimated to have purchased 91 percent of Iran’s oil exports in 2024. President Donald Trump has repeatedly stated that the goal of the sanctions is to bring Iran’s oil revenue to “zero” if negotiations for a new agreement on its nuclear program with the United States fail. In early May, Trump threatened that “any country or person” buying oil or petrochemicals from Iran could face secondary sanctions.

FDD Expert Response

“This isn’t the first time banks in Hong Kong have been warned about their exposure to and facilitation of transactions involving Iranian oil. Treasury should be commended for trying to grab the attention of these banks, but no action would be stronger than actually designating the banks responsible. Treasury should carry out these designations. At the same time, it should provide the necessary licenses to unwind business involving those banks and create a pathway for their eventual delisting based on clear, verifiable behavior changes and monitoring agreements.” — Max Meizlish, Senior Research Analyst

“A handful of banks — knowingly or unknowingly — are being intensively used by front companies engaged in the illicit trade between Iran and China. Treasury should issue a clear warning to these banks: continued facilitation of such transactions could result in serious consequences, ranging from hefty fines to sanctions or restrictions on their access to U.S. dollars and American financial intermediaries.” — Saeed Ghasseminejad, Senior Iran and Financial Economics Advisor

“Hong Kong’s status as an emerging hub for financial crime comes as Beijing has cracked down on the city, allowing its banks to allegedly become key middlemen in transfers between Iranian suppliers and mainland Chinese buyers. The U.S. Treasury Department should continue to meet with and, if necessary, punish neighboring financial hubs that allow Beijing to give a lifeline to Tehran and erode the effectiveness of Washington’s ‘maximum pressure’ campaign.” — Jack Burnham, Research Analyst

FDD Background and Analysis

“Treasury Imposes Sanctions on Iranian Military-Affiliated Network Smuggling Oil to China,” FDD Flash Brief

“U.S. Imposes Third Round of Sanctions on Chinese ‘Teapot’ Refineries Importing Iranian Oil,” FDD Flash Brief

“How to Disrupt the China-Iran Oil Trade,” by Saeed Ghasseminejad and Matthew Zweig

“Maximum Pressure on Tehran Regime in Motion as Trump Builds Negotiating Leverage,” by Janatan Sayeh and Behnam Ben Taleblu