Finding That the Islamic Republic of Iran Is a Jurisdiction of Primary Money Laundering Concern, 72756-72763 [2011-30332]
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Federal Register / Vol. 76, No. 227 / Friday, November 25, 2011 / Notices
Interest in Electing Investment
Partnership (EIP).
Abstract: The American Jobs Creation
Act of 2004, Public Law 108–357, 118
Stat. 1418 (the Act), was enacted on
October 22, 2004. The Treasury
Department and the Internal Revenue
Service intend to issue regulations
implementing §§ 833 and 834 of the Act,
which amended 704, 734, 743, and 6031
of the Internal Revenue Code. This
notice provides interim procedures for
partnerships and their partners to
comply with the mandatory basis
provisions of 734 and 743, as amended
by the Act. This notice also provides
interim procedures for electing
investment partnerships (EIPs) and their
partners to comply with §§ 743(e) and
6031(f), as provided in § 833(b) of the
Act.
Respondents: Private Sector:
Businesses or other for-profits.
Estimated Total Burden Hours:
552,100.
OMB Number: 1545–1940.
Type of Review: Extension without
change of a currently approved
collection.
Title: RP–2005–26—Revenue
Procedure Regarding Extended Period of
Limitations for Listed Transaction
Situations.
Abstract: This revenue procedure
provides procedures that taxpayers and
material advisors may use to disclose a
listed transaction that the taxpayer
previously failed to disclose.
Respondents: Individuals and
Households.
Estimated Total Burden Hours: 430.
OMB Number: 1545–2129.
Type of Review: Extension without
change of a currently approved
collection.
Title: Exercise of an Incentive Stock
Option Under * * *; Transfer of Stock
Acquired Through an * * *; REG–
103146–08—Information Reporting
Requirements Under Code Sec. 6039.
Forms: 3922, 3921.
Abstract: Form 3921 is a copy of the
information return filed with the IRS
which transferred shares of stock to a
recipient through exercise of an
incentive stock option under section
422(b). Form 3922 is used to record a
transfer of the legal title of a share of
stock acquired by the employee where
the stock was acquired pursuant to the
exercise of an option described in
section 423(c). REG–103146–08—
reflects the changes to section 6039 of
the Internal Revenue Code made by
section 403 of the Tax Relief and Health
Care Act of 2006.
Respondents: Private Sector:
Businesses or other for-profits.
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Estimated Total Burden Hours:
25,205.
Bureau Clearance Officer: Yvette
Lawrence, Internal Revenue Service,
1111 Constitution Avenue NW.,
Washington, DC 20224; (202) 927–4374.
OMB Reviewer: Shagufta Ahmed,
Office of Management and Budget, New
Executive Office Building, Room 10235,
Washington, DC 20503; (202) 395–7873.
Dawn D. Wolfgang,
Treasury PRA Clearance Officer.
[FR Doc. 2011–30353 Filed 11–23–11; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Finding That the Islamic Republic of
Iran Is a Jurisdiction of Primary Money
Laundering Concern
The Financial Crimes
Enforcement Network (‘‘FinCEN’’),
Treasury.
ACTION: Notice of finding.
AGENCY:
Pursuant to the authority
contained in 31 U.S.C. 5318A, the
Secretary of the Treasury, through his
delegate, the Director of FinCEN, finds
that reasonable grounds exist for
concluding that the Islamic Republic of
Iran is a jurisdiction of primary money
laundering concern.
DATES: The finding made in this notice
is effective as of November 25, 2011.
FOR FURTHER INFORMATION CONTACT:
Regulatory Policy and Programs
Division, FinCEN, (800) 949–2732.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
A. Statutory Provisions
On October 26, 2001, the President
signed into law the Uniting and
Strengthening America by Providing
Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001 (the
‘‘USA PATRIOT Act’’), Public Law 107–
56. Title III of the USA PATRIOT Act
amends the anti-money laundering
provisions of the Bank Secrecy Act
(‘‘BSA’’), codified at 12 U.S.C. 1829b, 12
U.S.C 1951–1959, and 31 U.S.C. 5311–
5314 and 5316–5332, to promote
prevention, detection, and prosecution
of international money laundering and
the financing of terrorism. Regulations
implementing the BSA appear at 31 CFR
Chapter X.
Section 311 of the USA PATRIOT Act
(‘‘section 311’’) added 31 U.S.C. section
5318A to the BSA, granting the
Secretary of the Treasury (the
‘‘Secretary’’) the authority, upon finding
that reasonable grounds exist for
concluding that a foreign jurisdiction,
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institution, class of transactions, or type
of account is of ‘‘primary money
laundering concern,’’ to require
domestic financial institutions and
financial agencies to take certain
‘‘special measures’’ against the primary
money laundering concern. Section 311
identifies factors for the Secretary to
consider and requires Federal agencies
to consult before the Secretary may
conclude that a jurisdiction, institution,
class of transaction, or type of account
is of primary money laundering
concern. The statute also provides
similar procedures, i.e., factors and
consultation requirements, for selecting
the specific special measures to be
imposed against the primary money
laundering concern. For purposes of the
finding contained in this notice, the
Secretary has delegated his authority
under section 311 to the Director of
FinCEN.1
Taken as a whole, section 311
provides the Secretary with a range of
options that can be adapted to target
specific money laundering and terrorist
financing concerns most effectively.
Through the imposition of various
special measures, the Secretary can gain
more information about the
jurisdictions, institutions, transactions,
or accounts of concern; can more
effectively monitor the respective
jurisdictions, institutions, transactions,
or accounts; or can prohibit U.S.
financial institutions from involvement
with jurisdictions, institutions,
transactions, or accounts that pose a
money laundering concern.
Before making a finding that
reasonable grounds exist for concluding
that a jurisdiction is of primary money
laundering concern, the Secretary is
required to consult with both the
Secretary of State and the Attorney
General. The Secretary is also required
by section 311, as amended,2 to
consider ‘‘such information as the
Secretary determines to be relevant,
including the following potentially
relevant factors,’’ which extend the
Secretary’s consideration beyond
traditional money laundering concerns
to issues involving, inter alia, terrorist
financing and weapons proliferation:
• Evidence that organized criminal
groups, international terrorists, or
entities involved in the proliferation of
weapons of mass destruction (‘‘WMD’’)
or missiles, have transacted business in
that jurisdiction;
1 Therefore, references to the authority and
findings of the Secretary in this document apply
equally to the Director of FinCEN.
2 31 U.S.C. 5318A was amended by section 501
of the Iran Freedom Support Act of 2006, Public
Law 109–293.
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• The extent to which that
jurisdiction or financial institutions
operating in that jurisdiction offer bank
secrecy or special regulatory advantages
to nonresidents or nondomiciliaries of
that jurisdiction;
• The substance and quality of
administration of the bank supervisory
and counter-money laundering laws of
that jurisdiction;
• The relationship between the
volume of financial transactions
occurring in that jurisdiction and the
size of the economy of the jurisdiction;
• The extent to which that
jurisdiction is characterized as an
offshore banking or secrecy haven by
credible international organizations or
multilateral expert groups;
• Whether the United States has a
mutual legal assistance treaty with that
jurisdiction, and the experience of U.S.
law enforcement officials and regulatory
officials in obtaining information about
transactions originating in or routed
through or to such jurisdiction; and
• The extent to which that
jurisdiction is characterized by high
levels of official or institutional
corruption.
If the Secretary determines that
reasonable grounds exist for concluding
that a jurisdiction is of primary money
laundering concern, the Secretary is
authorized to impose one or more of the
special measures in section 311 to
address the specific money laundering
risks. Section 311 provides a range of
special measures that can be imposed
individually, jointly, in any
combination, and in any sequence.3
Before imposing special measures, the
statute requires the Secretary to consult
with appropriate federal agencies and
other interested parties 4 and to consider
the following specific factors:
3 Available special measures include requiring:
(1) Recordkeeping and reporting of certain financial
transactions; (2) collection of information relating to
beneficial ownership; (3) collection of information
relating to certain payable-through accounts; (4)
collection of information relating to certain
correspondent accounts; and (5) prohibition or
conditions on the opening or maintaining of
correspondent or payable-through accounts. 31
U.S.C. 5318A(b)(1)–(5). For a complete discussion
of the range of possible countermeasures, See 68 FR
18917 (April 17, 2003) (proposing special measures
against Nauru).
4 Section 5318A(a)(4)(A) requires the Secretary to
consult with the Chairman of the Board of
Governors of the Federal Reserve System, any other
appropriate Federal banking agency, the Secretary
of State, the Securities and Exchange Commission
(‘‘SEC’’), the Commodity Futures Trading
Commission (‘‘CFTC’’), the National Credit Union
Administration (‘‘NCUA’’), and, in the sole
discretion of the Secretary, ‘‘such other agencies
and interested parties as the Secretary may find to
be appropriate.’’ The consultation process must also
include the Attorney General if the Secretary is
considering prohibiting or imposing conditions on
domestic financial institutions opening or
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• Whether similar action has been or
is being taken by other nations or
multilateral groups;
• Whether the imposition of any
particular special measures would
create a significant competitive
disadvantage, including any undue cost
or burden associated with compliance,
for financial institutions organized or
licensed in the United States;
• The extent to which the action or
the timing of the action would have a
significant adverse systemic impact on
the international payment, clearance,
and settlement system, or on legitimate
business activities involving the
particular jurisdiction; and
• The effect of the action on U.S.
national security and foreign policy.
B. Iran
Iran’s banking sector comprises
Iranian state-owned commercial banks,
specialized Iranian government banks,
and privately owned Iranian financial
institutions.5 Some of these Iranian
financial institutions 6 operate multiple
overseas branches and subsidiaries in
Asia, Europe, and the Middle East 7 and
maintain relationships in key global
financial centers.8
In recent years, many international
financial institutions have severed ties
with Iranian banks and entities because
of a growing body of public information
about their illicit and deceptive conduct
designed to facilitate the Iranian
government’s support for terrorism and
its pursuit of nuclear and ballistic
missile capabilities. This illicit conduct
by Iranian banks and companies has
been highlighted in a series of United
Nations Security Council (‘‘UN Security
Council’’) resolutions related to Iranian
proliferation sensitive activities. The
Financial Action Task Force 9 (‘‘FATF’’)
has also warned publicly of the risks
that Iran’s deficiencies in countering
money laundering and, particularly,
terrorism finance, pose to the
international financial system, and has
maintaining correspondent account relationships
with the targeted entity.
5 Central Bank of the Islamic Republic of Iran.
(https://www.cbi.ir/simplelist/1462.aspx). At various
points in this finding, FinCEN references public
media sources to support statements of fact. FinCEN
has utilized both public and non-public sources in
reaching such conclusions.
6 Id.
7 The Bankers Almanac, September 2011.
8 Id.
9 The Financial Action Task Force is an intergovernmental body whose purpose is the
development and promotion of national and
international policies to combat money laundering
and terrorist financing. The FATF is therefore a
‘‘policy-making body’’ that works to generate the
necessary political will to bring about legislative
and regulatory reforms in these areas. (https://
www.fatf-gafi.org).
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called on FATF members and all
jurisdictions to implement counter
measures to protect against these risks.
Despite the resulting reduction in
Iranian financial institutions’ access to
correspondent and other financial
relationships with major financial
institutions,10 both designated and nondesignated Iranian banks continue to
maintain a presence in the international
financial system.
II. Analysis of Factors
Based upon a review and analysis of
the administrative record in this matter,
consultations with relevant Federal
agencies and departments, and after
consideration of the factors enumerated
in section 311, the Director of FinCEN
has determined that reasonable grounds
exist for concluding that Iran is a
jurisdiction of primary money
laundering concern. While FinCEN has
considered all potentially relevant
factors set forth in Section 5318A, a
discussion of those most pertinent to
this finding follows. FinCEN has reason
to believe that Iran directly supports
terrorism and is pursuing nuclear/
ballistic missile capabilities, relies on
state agencies or state-owned or
controlled financial institutions to
facilitate WMD proliferation and
financing, and uses deceptive financial
practices to facilitate illicit conduct and
evade sanctions. All of these factors,
when taken together, make the
international financial system
increasingly vulnerable to the risk that
otherwise responsible financial
institutions will unwittingly participate
in Iran’s illicit activities.
A. Evidence That Organized Criminal
Groups, International Terrorists, or
Entities Involved in the Proliferation of
Weapons of Mass Destruction or
Missiles, Have Transacted Business in
That Jurisdiction
1. Iran’s Support for Terrorism and
Pursuit of Nuclear and Ballistic Missile
Capabilities
Support for Terrorism: The
Department of State designated Iran as
a state sponsor of international terrorism
in 1984,11 and has reiterated this
designation every year since 2000 in its
annual Country Reports on Terrorism.12
Iran remains the most active of the
listed state sponsors of terrorism,
routinely providing substantial
10 ‘‘Sanctions Against Iran: A Promising
Struggle,’’ The Washington Quarterly, Summer
2008.
11 See ‘‘State Sponsors of Terrorism,’’ U.S.
Department of State, August 18, 2011 (https://
www.state.gov/s/ct/rls/crt/2010/170260.htm).
12 Id.
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Federal Register / Vol. 76, No. 227 / Friday, November 25, 2011 / Notices
resources and guidance to multiple
terrorist organizations.13 Iran has
provided extensive funding, training,
and weaponry to Palestinian terrorist
groups, including Hamas and the
Palestinian Islamic Jihad (‘‘PIJ’’).14 In
fact, Hamas,15 PIJ,16 and Hizballah17
have maintained offices in Tehran to
help coordinate Iranian financing and
training of these groups.
Iran’s Islamic Revolutionary Guard
Corps (‘‘IRGC’’) was founded in the
aftermath of the 1979 Islamic
Revolution to defend the government
against internal and external threats.18
Since then, it has expanded far beyond
its original mandate and evolved into a
social, military, political, and economic
force with strong influence on Iran’s
power structure.19 In addition, elements
of the IRGC have been directly involved
in the planning and support of terrorist
acts throughout the Middle East
region.20
In particular, Iran has used the IRGC–
Qods Force 21 (‘‘Qods Force’’) to
cultivate and support terrorists and
militant groups abroad. The Qods Force
reportedly has been active in the Levant,
where it has a long history of supporting
Hizballah’s military, paramilitary, and
terrorist activities, and provides
Hizballah with as much as $200 million
in funding per year.22 Additionally, the
Qods Force provides the Taliban in
Afghanistan with weapons, funding,
logistics, and training in support of antiU.S. and anti-coalition activity.23
Information dating from at least 2006
indicates that Iran has arranged frequent
shipments to the Taliban of small arms
and associated ammunition, rocket
13 Id.
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14 Id.
15 ‘‘Ex-Iranian President Offers Mediation
Between Hamas, Fatah, Kuwait KUNA,’’ KUNA,
June 30, 2007.
16 See ‘‘Palestine Islamic Jihad envoy to Tehran
says moderate Arabs hamper victory,’’ Tehran
Jomhouri-ye Eslami. December 10, 2007.
17 See ‘‘Hezbollah’s hate, made in Iran,’’ National
Post, July 28, 2006.
18 See ‘‘Iran’s Revolutionary Guards,’’ Council on
Foreign Relations, June 22, 2009 (https://
www.cfr.org/publication/14324/
irans_revolutionary_guards.html).
19 Id.
20 See ‘‘Country Reports on Terrorism 2010,’’ U.S.
Department of State, August 18, 2011 (https://
www.state.gov/s/ct/rls/crt/2010/170260.htm).
21 IRGC–Qods Force was designated under E.O.
13224 for providing material support for the
Taliban and other terrorist groups. See ‘‘Fact Sheet:
Designation of Iranian Entities and Individuals for
Proliferation Activities and Support for Terrorism,’’
U.S. Treasury, October 25, 2007 (https://
www.treasury.gov/press-center/press-releases/
Pages/hp644.aspx).
22 See ‘‘Islamic Revolutionary Guards Corps,’’
Anti-Defamation League, May 26, 2010.
23 See ‘‘Country Reports on Terrorism 2010,’’ U.S.
Department of State, August 18, 2011 (https://
www.state.gov/s/ct/rls/crt/2010/170260.htm).
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propelled grenades, mortar rounds, 107
mm rockets, and plastic explosives.24
Iran also has helped train Taliban
fighters within Iran and Afghanistan.25
Taliban commanders have stated that
they were paid by Iran to attend three
month training courses within Iran.26 In
August 2011, a Taliban commander
claimed to have trained in Iran and been
offered $50,000 by Iranian officials in
return for destroying a dam in
Afghanistan.27 Most recently, on
October 11, 2011, the Department of
Justice charged two individuals for their
alleged participation in a plot directed
by the Qods Force to murder the Saudi
ambassador to the United States with
explosives while the Ambassador was in
the United States.28 On the same day,
the Treasury Department announced the
designation of five individuals,
including the commander of the Qods
Force and three other senior Qods Force
officers connected to the assassination
plot, as well as the individual
responsible for arranging the
assassination plot on behalf of the Qods
Force.29
Iran has also permitted al-Qaida to
funnel funds and operatives through its
territory. In July 2011, the U.S.
Department of the Treasury
(‘‘Treasury’’) designated an al-Qa’ida
network headed by an individual living
and operating in Iran under an
agreement between al-Qa’ida and the
Iranian government.30 The designation
of six members of this network
illustrated Iran’s role as a critical transit
point for funding to support al-Qa’ida’s
activities in Afghanistan and Pakistan as
this network serves as a pipeline
through which al-Qa’ida moves money,
facilitators, and operatives from across
the Middle East to South Asia.31
24 Id.
25 ‘‘Taliban Fighters Training in Iran, U.S.
Officials Say,’’ CNN, March 23, 2010 (https://
articles.cnn.com/2010–03–23/world/
iran.taliban_1_taliban-fighters-afghan-talibaniranian-official?_s=PM:WORLD).
26 ‘‘Iranians Train Taliban to Use Roadside
Bombs,’’ The Sunday Times, March 21, 2010.
27 See ‘‘Captured Taliban Commander: ‘I Received
Iranian Training’,’’ Radio Free Europe, August 23,
2011.
28 See ‘‘Attorney General Holder Holds National
Security Enforcement Press Conference,’’ October
11, 2011 (https://www.justice.gov/iso/opa/ag/
speeches/2011/ag-speech-111011.html).
29 See ‘‘Treasury Sanctions Five Individuals Tied
to Iranian Plot to Assassinate the Saudi Arabian
Ambassador to the United States,’’ October 11, 2011
(https://www.treasury.gov/press-center/pressreleases/pages/tg1320.aspx).
30 See ‘‘Treasury Targets Key Al-Qa’ida Funding
and Support Network Using Iran as a Critical
Transit Point,’’ Press Release, July 28, 2011 (https://
www.treasury.gov/press-center/press-releases/
Pages/tg1261.aspx).
31 Id.
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Finally, Iran is known to have used
state-owned banks to facilitate terrorist
financing. In 2007, the Treasury
designated Bank Saderat under E.O.
13224 for its financial support of
terrorist organizations, noting that from
2001 to 2006 Bank Saderat transferred
$50 million from the Central Bank of
Iran through its subsidiary in London to
its branch in Beirut for the benefit of
Hizballah fronts in Lebanon that
support acts of violence.32
Pursuit of nuclear/ballistic missile
capabilities: Iran also continues to defy
the international community by
pursuing nuclear capabilities and
developing ballistic missiles in violation
of seven UNSCRs.33 Iran’s failure to
comply with these resolutions has
resulted in the UN Security Council’s
imposition of sanctions against Iran.
These have included specific provisions
aimed at preventing Iran from accessing
the international financial system in
order to pursue nuclear capabilities and
to develop ballistic missiles.34 To date,
Iran has not complied with the UN
Security Council resolutions regarding
its nuclear and missile activities,35 and
continues to assert that it will not
abandon its program to create nuclear
fuel and enrich uranium.36 This
summer, Iran announced that it would
triple production of its most
concentrated uranium fuel, which is
enriched to near 20% purity, and that
some of this production would be
transferred to Iran’s facility near Qom.37
This is a significant development
because the technical work required to
produce 20% enriched uranium from
3.5% is more difficult than that required
to advance from 20% to the 90%
weapons-grade level.38
32 See Treasury’s ‘‘Fact Sheet: Treasury
Designation of Iranian Entities and Individuals for
Proliferation Activities and Support for Terrorism,’’
October 25, 2007 (https://www.treasury.gov/presscenter/press-releases/Pages/hp644.aspx).
33 See UNSCRs 1696, 1737, 1747, 1803, 1835,
1887, and 1929 (https://www.un.org/documents/
scres.htm).
34 Id.
35 ’’Iran’s Nuclear Program,’’ New York Times,
June 8, 2011 (https://topics.nytimes.com/top/news/
international/countriesandterritories/iran/nuclear
_program/?scp=1-spot&sq=iran%
20nuclear%20program&st=cse).
36 ‘‘Iran Claims Progress Speeding Nuclear
Program’’ Wall Street Journal, August 4, 2011
(https://online.wsj.com/article/SB100014240531
1190345450457
6486663881270144.html?mod=googlenews_wsj).
37 ‘‘Iran’s Uranium Enrichment Will Increase, It
Says,’’ New York Times, June 8, 2011. (https://
www.nytimes.com/2011/06/09/world/middleeast/
09iran.html).
38 Iran Claims Progress Speeding Nuclear
Program’’ Wall Street Journal, August 4, 2011
(https://online.wsj.com/article/SB100014240531
119034545045
76486663881270144.html?mod=googlenews_wsj).
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2. Use of government agencies and stateowned or controlled financial
institutions to facilitate WMD
proliferation and financing
Iran uses government agencies and
state-owned or controlled financial
institutions to advance its nuclear and
ballistic missile ambitions. Specifically,
the government agencies rely on stateowned Iranian financial institutions to
help finance illicit procurement
activities related to WMD proliferation.
Government Agencies: Iran has used
the Atomic Energy Organization of Iran
(‘‘AEOI’’), which was designated by
Treasury as the main Iranian
organization for research and
development activities in the field of
nuclear technology, including Iran’s
uranium enrichment program, to
manage the country’s overall nuclear
program.39 Additionally, Iran has relied
on the Ministry of Defense and Armed
Forces Logistics (‘‘MODAFL’’), which
was designated by the State Department
under Executive Order (‘‘E.O.’’) 13382
for proliferation activities.40 Iran also
controls the Defense Industries
Organization (‘‘DIO’’), which has been
designated by the UN 41 and the United
States,42 and the Aerospace Industries
Organization (‘‘AIO’’), which is
identified in the Annex to E.O. 13382
for its role in overseeing Iran’s missile
industries.43 AIO, the parent entity to
Shahid Hemat Industrial Group
(SHIG),44 which is also listed in the
Annex to E.O. 13382, was identified for
its ballistic missile research,
development, and production activities,
in addition to overseeing all of Iran’s
missile industries.45
State-owned or controlled banks:
Multiple Iranian financial institutions
have been directly implicated in
facilitating Iran’s nuclear and ballistic
missile activities. For example, Iranian
state-owned Bank Sepah was designated
by the Treasury Department under E.O.
39 ‘‘Treasury Designates Iranian Nuclear and
Missile Entities,’’ August 12, 2008 (https://
www.treasury.gov/press-center/press-releases/
Pages/hp1113.aspx).
40 ‘‘Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support
for Terrorism,’’ U.S. Treasury, October 25, 2007
(https://www.treas.gov/press/releases/hp644.htm).
41 United Nations Security Council Resolution
1737, December 23, 2006 (https://www.un.org/News/
Press/docs/2006/sc8928.doc.htm).
42 ‘‘Iran’s Defense Industries Organization
Designated by State,’’ U.S. Department of State,
March 30, 2007 (https://2001–2009.state.gov/r/pa/
prs/ps/2007/mar/82487.htm).
43 Executive Order 13382 of June 28, 2005.
(https://www.fas.org/irp/offdocs/eo/eo-13382.htm).
44 Id.
45 Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support
for Terrorism,’’ U.S. Treasury, October 25, 2007
(https://www.treas.gov/press/releases/hp644.htm).
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13382 and designated in UNSCR 1747
for providing direct and extensive
financial services to Iranian entities
responsible for developing ballistic
missiles, including AIO and SHIG.46
Iran’s state-owned Bank Melli, which
was identified in UNSCR 1803,47 has
also facilitated numerous purchases of
sensitive materials for Iran’s nuclear and
missile programs on behalf of UNdesignated entities.48 Treasury found
that Bank Melli has provided a range of
financial services to known
proliferators, including opening letters
of credit and maintaining accounts.49
Additionally, Treasury found, following
the designation of Bank Sepah under
UNSCR 1747 for its support for AIO and
AIO’s subordinates, Bank Melli took
precautions not to identify Bank Sepah
in transactions.50 Treasury designated
Bank Melli and associated subsidiaries
and front companies under E.O. 13382
for its financial support to entities
involved in the proliferation of weapons
of mass destruction.51 Multiple
jurisdictions also have designated Bank
Melli under their respective legal
authorities.52
Treasury has also designated under
E.O. 13382 Bank Mellat, another Iranian
state-owned bank, for financially
facilitating Iran’s nuclear and
proliferation activities by supporting
AEOI and its main financial conduit,
46 See ‘‘Testimony of Stuart Levey, Under
Secretary for Terrorism and Financial Intelligence,
Before the Senate Committee on Banking, Housing
and Urban Affairs,’’ Treasury Press Release, March
21, 2007 (https://www.treasury.gov/press-center/
press-releases/Pages/hp325.aspx); and U.S.
Treasury, ‘‘Iran’s Bank Sepah Designated by
Treasury Sepah Facilitating Iran’s Weapons
Program,’’ January 9, 2007 (https://
www.treasury.gov/press-center/press-releases/
Pages/hp219.aspx).
47 See UNSCR 1803. (https://www.un.org/Docs/sc/
unsc_resolutions08.htm).
48 ‘‘Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support
for Terrorism,’’ U.S. Treasury, October 25, 2007
(https://www.treas.gov/press/releases/hp644.htm).
49 Id.
50 Id.
51 See ‘‘Fact Sheet: Designation of Iranian Entities
and Individuals for Proliferation Activities and
Support for Terrorism,’’ U.S. Treasury, October 25,
2007
(https://www.treas.gov/press/releases/hp644.htm);
‘‘Treasury Designates Iran-Controlled Bank for
Proliferation Future Bank Controlled by Iran’s Bank
Melli,’’ U.S. Treasury, March 12, 2008 (https://
www.treasury.gov/press-center/press-releases/
Pages/hp869.aspx); and ‘‘Treasury Designates
Companies Tied to Iran’s Bank Melli as
Proliferators,’’ U.S. Treasury, March 3, 2009 (http:
//www.treasury.gov/press-center/press-releases/
Pages/tg46.aspx).
52 See e.g., ‘‘Media Release: Australia Imposes
New Broad-Ranging Sanctions Against Iran,’’
Australian Minister for Foreign Affairs and Trade,
July 29, 2010 (https://foreignminister.gov.au/
releases/2010/fa-s100729.html).
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Novin Energy Company (‘‘Novin’’).53
Specifically, the designation noted that
as of October 2007, Bank Mellat had
facilitated the movement of millions of
dollars for Iran’s nuclear program since
at least 2003.54 In November 2009, First
East Export Bank was designated
pursuant to E.O. 13382 as a subsidiary
and for its support of Bank Mellat.55
Furthermore, the international
community has raised concerns and
taken action against Bank Mellat. In
October 2009, the United Kingdom’s
(‘‘UK’’) HM Treasury issued an order to
all of its financial and credit institutions
to cease all business with Bank Mellat,
based on its connection to Iran’s
proliferation activities and for being
involved in transactions related to
financing Iran’s nuclear and ballistic
missile program.56 Noting that Bank
Mellat itself has facilitated hundreds of
millions of dollars in transactions for
Iranian nuclear, missile, and defense
entities, UNSCR 1929 designated First
East Export Bank, a Bank Mellat
subsidiary in Malaysia.57 Since the
adoption of UNSCR 1929, the European
Union (‘‘EU’’), Japan, South Korea,
Australia, Canada, Norway, and
Switzerland have implemented
measures against Bank Mellat.58
In October 2008, Treasury designated
the Export Development Bank of Iran
53 See ‘‘Fact Sheet: Designation of Iranian Entities
and Individuals for Proliferation Activities and
Support for Terrorism,’’ U.S. Treasury, October 25,
2007 (https://www.treasury.gov/press-center/pressreleases/Pages/hp644.aspx).
54 Id.
55 See ’’ Treasury Designates Bank Mellat
Subsidiary and Chairman Under Proliferation
Authority,’’ U.S. Treasury; November 5, 2009
(https://www.treasury.gov/press-center/pressreleases/Pages/tg355.aspx).
56 Id.
57 See UNSCR 1929 (https://www.un.org/Docs/sc/
unsc_resolutions10.htm).
58 See ‘‘Council Implementing Regulation (EU) No
668/2010,’’ European Union, July 26, 2010 (https://
eur-lex.europa.eu/LexUriServ/
LexUriServ.do?uri=OJ:L:2010:195:
0025:0036:EN:PDF); ‘‘Accompanying Measures
Pursuant to United Nations Security Council
Resolution 1929,’’ Ministry of Foreign Affairs of
Japan, September 3, 2010 (https://www.mofa.go.jp/
region/middle_e/iran/measures_unsc_1009.html);
‘‘Government Regarding the Implementation of
UNSCR 1929,’’ Republic of Korea, September 8,
2010; ‘‘Charter of the United Nations (Sanctions—
Iran) (Specified Entities) List 2010, Government of
Australia, August 4, 2010 (https://
www.comlaw.gov.au/Details/F2010L02236); Special
Economic Measures (Iran) Regulations, Government
of Canada, August 4, 2010 (https://
canadagazette.gc.ca/rp-pr/p2/2010/2010–08–04/
html/sor-dors165-eng.html); ‘‘Press Release,’’
Government of Norway, Ministry of Foreign Affairs,
January 14, 2011 (https://www.regjeringen.no/mobil/
en/dep/ud/press/news/2011/sanctions
_iran_adopted.html?id=630820); ‘‘Iran: Federal
Council Takes Steps to Improve Legal Certainty and
Prevent Possible Evasion,’’ January 19, 2011, The
Federal Authorities of the Swiss Federation
(https://www.admin.ch/aktuell/00089/
index.html?lang=en&msg-id=37283).
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(‘‘EDBI’’) under E.O. 13382 for
providing or attempting to provide
financial services to MODAFL.59 The
designation further asserted that EDBI
provides financial services to multiple
MODAFL-subordinate entities and
facilitated the ongoing procurement
activities of various front companies
associated with MODAFL-subordinate
entities.60 Treasury’s designation also
noted that, since Bank Sepah’s
designation by the United States and
identification by the UN Security
Council, EDBI has served as one of the
leading intermediaries handling Bank
Sepah’s financing, including WMDrelated payments, and has facilitated
transactions for other sanctioned
proliferation-related entities.61
As the Iranian banks described above
have become increasingly isolated from
the international financial system due to
international sanctions, other Iranian
banks have begun to play a larger role
in Iran’s illicit activities and efforts to
circumvent sanctions.62 The Treasury
Department has continued to target
Iranian banks that engage in illicit
behavior and act on behalf of U.S.designated, Iranian-linked banks.
Treasury designated Post Bank for
operating on behalf of Bank Sepah; 63
the Iranian-owned German bank EIH for
providing financial services to Bank
Mellat, Persia International Bank, EDBI,
and Post Bank; 64 Bank Refah for
providing financial services to
MODAFL; 65 Bank of Industry and Mine
for providing financial services to Bank
Mellat and EIH; 66 and Ansar Bank and
Mehr Bank for providing financial
59 ‘‘Export Development Bank of Iran Designated
as a Proliferator,’’ U.S. Treasury, October 22, 2008
(https://www.treasury.gov/press-center/pressreleases/Pages/hp1231.aspx).
60 Id.
61 Id.
62 See ‘‘Testimony of Stuart Levey, Under
Secretary of Terrorism and Financial Intelligence,
before the Senate Foreign Relations Committee,’’
June 22, 2010. (https://foreign.senate.gov/imo/
media/doc/Levey,%20Stuart.pdf).
63 See ‘‘Fact Sheet: U.S. Treasury Department
Targets Iran’s Nuclear and Missile Programs,’’ U.S.
Treasury, June 16, 2010 (https://www.treasury.gov/
press-center/press-releases/Pages/tg747.aspx).
64 See ‘‘Treasury Department Targets IranianOwned Bank in Germany Facilitating Iran’s
Proliferation Activities,’’ U.S. Treasury, September
7, 2010 (https://www.treasury.gov/press-center/
press-releases/Pages/tg847.aspx).
65 See ‘‘Treasury Targets Iranian Bank for
Providing Financial Services to Designated Entities
Connected to Iran’s Proliferation Activities,’’ U.S.
Treasury, February 17, 2011 (https://
www.treasury.gov/press-center/press-releases/
Pages/tg1067.aspx).
66 See ‘‘Treasury Designates Iranian State-Owned
Bank for Facilitating Iran’s Proliferation Activities,’’
U.S. Treasury, May 17, 2011 (https://
www.treasury.gov/press-center/press-releases/
Pages/tg1178.aspx).
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services to the IRGC.67 The EU and
other jurisdictions have recognized the
risks posed by the vast majority of these
financial institutions and have imposed
similar measures to prohibit banks in
their jurisdictions from doing business
with these entities.68 As recently as May
2011, the EU designated EIH for playing
a ‘‘key role in assisting a number of
Iranian banks with alternative options
for completing transactions disrupted by
EU sanctions targeting Iran.’’ 69
3. The Iranian Government’s Use of
Deceptive Financial Practices
Since 1979, Iran long has been subject
to a variety of U.S. sanctions that have
significantly expanded over time,
including prohibition of the importation
of Iranian-origin goods and services,
prohibitions on certain transactions
with respect to the development of
Iranian petroleum resources, and
prohibitions on exports and re-exports
to Iran. Today, most trade-related
transactions with Iran are prohibited,
and U.S. financial institutions are
generally prohibited, with only limited
exceptions, from doing business with
Iranian financial institutions.70
To further amplify financial pressure
on Iranian financial institutions
involved in Iran’s support for terrorism
and weapons proliferation, President
Obama signed into law the
67 See ‘‘Fact Sheet: Treasury Designated Iranian
Entities Tied to the IRGC and IRISL,’’ U.S. Treasury,
December 21, 2010 (https://www.treasury.gov/presscenter/press-releases/pages/tg/1010.aspx).
68 See ‘‘Council Implementing Regulation (EU) No
668/2010,’’ European Union, July 26, 2010 (https://
eur-lex.europa.eu/LexUriServ/LexUriServ.
do?uri=OJ:L:2010:195:0025:0036:EN:PDF); ‘‘Council
Implementing Regulation (EU) No. 2011/301/
CFSP,’’ European Union, May 23, 2011 (https://eurlex.europa.eu/LexUriServ/
LexUriServ.do?uri=OJ:L:2011:136
:0087:0090:EN:PDF); ‘‘Charter of the United Nations
(Sanctions—Iran) (Specified Entities) List 2010,
Government of Australia, August 4, 2010 (https://
www.comlaw.gov.au/Details/F2010L02236).
69 See ‘‘Council Implementing Regulation (EU)
No. 2011/299/CFSP,’’ European Union, May 23,
2011 (https://eur-lex.europa.eu/LexUriServ/
LexUriServ.do?uri=OJ:L:2011:136:
0087:0090:EN:PDF).
70 On November 14, 1979, the President issued
E.O. 12170 blocking Iranian government property.
See (https://www.archives.gov/federal-register/
codification/executive-order/12170.html). The
Iranian Transactions Regulations (‘‘ITR’’), 31 CFT
part 560, implement a series of Executive Orders
that began with E.O. 12613 issued in 1987, which
prohibit the importation of Iranian-origin goods and
services. In response to Iran’s continued support of
international terrorism and active pursuit of
weapons of mass destruction, U.S. sanctions have
expanded to include E.O. 12957 (March 1997),
which imposed prohibition on certain transactions
with respect to the development of petroleum
resources, and in May 1995, E.O. 12959, which
imposed comprehensive trade and financial
sanctions on Iran. In August 1997, E.O. 13059 was
issued consolidating and clarifying the previous
orders. See (https://treasury.gov/resource-center/
sanctions/Programs/Documents/iran.pdf).
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Comprehensive Iran Sanctions,
Accountability, and Divestment Act of
2010 (‘‘CISADA’’) on July 1, 2010,
which includes a provision that
authorizes the Secretary of the Treasury
to impose sanctions on foreign financial
institutions that knowingly facilitate
certain activities related to Iran.71 On
August 16, 2010, Treasury’s Office of
Foreign Assets Control (‘‘OFAC’’)
published a final rule implementing
certain aspects of CISADA, 72 and on
October 5, 2011, FinCEN published a
final rule to implement section 104(e) of
CISADA to complement Treasury’s
ongoing efforts to protect the
international financial system from
abuse by Iran.73
As a result of the strengthened U.S.
sanctions and similar measures taken by
the United Nations and other members
of the global community, Iran now faces
significant barriers to conducting
international transactions. In response,
Iran has used deceptive financial
practices to disguise both the nature of
transactions and its involvement in
them in an effort to circumvent
sanctions. This conduct puts any
financial institution involved with
Iranian entities at risk of unwittingly
facilitating transactions related to
terrorism, proliferation, or the evasion
of U.S. and multilateral sanctions.
Iranian financial institutions, including
the Central Bank of Iran (‘‘CBI’’), and
other state-controlled entities, willingly
engage in deceptive practices to disguise
illicit conduct, evade international
sanctions, and undermine the efforts of
responsible regulatory agencies around
the world.
Iranian financial institutions: Iran
employs numerous deceptive practices
to disguise the Iranian origin of
transactions in order to avoid scrutiny
and evade international sanctions.
These practices include the transfer of
funds from Iran to exchange houses
outside Iran and the use of back-to-back
letters of credit. Iranian foreign bank
branches transfer funds to local banks in
the same jurisdiction for onward
payments that may conceal the Iranian
origin of funds.
In other examples, Bank Sepah has
requested that its name be removed
from transactions in order to make it
71 For a full discussion of CISADA and its
provisions, See the U.S. Department of the Treasury
Web site (https://www.treasury.gov/resource-center/
sanctions/Documents/hr2194.pdf).
72 See OFAC CISADA regulations at 75 FR 49836
(August 16, 2010) or 31 CFR part 561 (https://
edocket.access.gpo.gov/2010/pdf/2010–20238.pdf).
73 See Fact Sheet ‘‘FinCEN Implements Provision
of the Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010,’’
October 5, 2011 (https://www.fincen.gov/
news_room/nr/html/20111005.html).
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more difficult for intermediary financial
institutions to determine the true parties
to a transaction.74 As noted in
Treasury’s designation, Bank Melli took
precautions not to identify Bank Sepah
in transactions following Bank Sepah’s
designation under UNSCR 1747 and
employed similar deceptive banking
practices to obscure its involvement
from non-Iranian financial institutions
when handling financial transactions on
behalf of the IRGC.75
In June 2010, Post Bank of Iran was
designated by the Treasury Department
under E.O. 13382 76 for facilitating
transactions on behalf of Bank Sepah
after Bank Sepah was designated by the
UN and United States.77 The
designation further notes that, in 2009,
Post Bank facilitated business on behalf
of Bank Sepah between Iran’s defense
industries and overseas beneficiaries
and transacted millions of dollars worth
of business between U.S.-designated
Hong Kong Electronics and other
overseas beneficiaries.78
The Central Bank of Iran, which
regulates Iranian banks, has assisted
designated Iranian banks by transferring
billions of dollars to these banks in
2011. In mid-2011, the CBI transferred
several billion dollars to designated
banks, including Saderat, Mellat, EDBI
and Melli, through a variety of payment
schemes. In making these transfers, the
CBI attempted to evade sanctions by
minimizing the direct involvement of
large international banks with both CBI
and designated Iranian banks.
Additionally, the CBI transfers funds to
designated Iranian bank branches
outside Iran via non-Iranian foreign
banks, often involving deliberate
attempts on its part to conceal that the
recipient is a designated Iranian bank.
In some cases, this activity involves
book-to-book transfers and the use of
accounts at intermediary banks that
hold accounts for the CBI and
designated banks. Further, the CBI was
believed to have provided financing to
the UN-sanctioned Khatem al-Anbiya
Constructions Headquarters for defenserelated projects.
74 ‘‘Testimony of Stuart Levey, Under Secretary
for Terrorism and Financial Intelligence, Before the
Senate Committee on Banking, Housing and Urban
Affairs,’’ March 21, 2007 (https://www.treasury.gov/
press-center/press-releases/Pages/hp325.aspx).
75 ‘‘Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support
for Terrorism,’’ U.S. Treasury, October 25, 2007
(https://www.treasury.gov/press-center/pressreleases/Pages/hp644.aspx).
76 ‘‘Fact Sheet: U.S. Treasury Department Targets
Iran’s Nuclear and Missile Programs,’’ U.S.
Treasury, June 16, 2010 (https://www.treasury.gov/
press-center/press-releases/Pages/tg747.aspx).
77 Id.
78 Id.
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Front companies: Iran has a wellestablished history of using front
companies and complex corporate
ownership structures to disguise the
involvement of government entities
known to be involved in Iranian
proliferation activity when conducting
commercial transactions. These
companies transact substantial business
in Iran and elsewhere around the world.
For example, Novin, an AEOI front
company that operates as the financial
arm of AEOI, has transferred millions of
dollars on behalf of AEOI to entities
associated with Iran’s nuclear
program.79 Additionally, Mesbah
Energy Company (‘‘Mesbah’’), was
designated under EO 13382 for being
controlled by, or acting or purporting to
act for or on behalf of AEOI, and was
cited in UNSCR 1737.80 Mesbah has
been used to procure products for Iran’s
heavy water project.81 Heavy water is
essential for Iran’s heavy-watermoderated reactor, which will provide
Iran with a potential source of
plutonium that could be used for
nuclear weapons.82
In some cases, the connection to Iran
is not readily apparent, as Iranian
entities have formed front companies
outside of Iran in an attempt to obtain
dual-use items for Iran that could be
used in Iran’s nuclear or missile
programs and that otherwise could not
legally be exported directly to Iran.83
For example, Iranian companies and
their fronts have also falsified end-user
information on export forms to allow
prohibited items to be exported into the
country.84 Iran has colluded with some
exporters to enter fictitious end-user
names in the importer section of export
forms in order to evade international
and national controls on shipments to
79 See UNSCR 1747 (https://www.un.org/Docs/sc/
unsc_resolutions07.htm); and ‘‘Treasury Employs
Financial Sanctions Against WMD Proliferation
Supporters in Iran,’’ U.S. Treasury, January 4, 2006
(https://www.treasury.gov/press-center/pressreleases/Pages/js3069.aspx).
80 See UNSCR 1737 (https://www.un.org/Docs/sc/
unsc_resolutions06.htm) and ‘‘Treasury Employs
Financial Sanctions Against WMD Proliferation
Supporters in Iran,’’ U.S. Treasury, January 4, 2006
(https://www.treasury.gov/press-center/pressreleases/Pages/js3069.aspx).
81 ‘‘Testimony of Robert W. Werner, Director
Office of Foreign Assets Control,’’ U.S. Treasury,
February 16, 2006 (https://www.treasury.gov/presscenter/press-releases/Pages/js4053.aspx).
82 Id.
83 ‘‘Testimony of Stuart Levey, Under Secretary
for Terrorism and Financial Intelligence, Before the
Senate Committee on Banking, Housing and Urban
Affairs,’’ March 21, 2007 (https://www.treasury.gov/
press-center/press-releases/Pages/hp325.aspx).
84 ‘‘German Report Details Smuggling of Nuclear
Bomb, Missile Components to Iran,’’ Hamburg
Stem, July 16, 2009.
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Iran.85 For example, in May 2010, Balli
Aviation Ltd., a UK subsidiary of Balli
Group PLC, pled guilty in the U.S.
District Court for the District of
Columbia to exporting three Boeing 747
aircraft to Iran without obtaining the
proper authorization from the United
States.86
Iranian commercial entities deploy
the above mentioned practices
specifically to evade those controls put
in place by the United States,
international community, and
responsible financial institutions,
controls that are designed to enforce
international sanctions, prevent the
proliferation of nuclear weapons and
their delivery systems, and protect the
international financial sector from abuse
by illicit actors. These practices by
Iranian entities have allowed Iran to
engage in illicit activities and operate
undetected in the international
economy.87
The IRGC: The IRGC, which was
designated by the Department of State as
a primary proliferator under E.O. 13382
in October 2007,88 owns and/or controls
multiple commercial entities across a
wide range of sectors within the Iranian
economy. For example, the IRGC
established Khatam al-Anbiya,89 the
largest major Iranian construction
conglomerate, to generate income and
fund IRGC operations while presenting
the company as a legitimate company
85 ‘‘Kyodo: Mitutoyo Falsifies Iranian Recipient’s
Name to Get Export Permission,’’ Tokyo Kyodo
World Service, August 26, 2006 (https://
www.freerepublic.com/focus/f-news/1690388/
posts).
86 See ‘‘U.K. Firm Fined $2 Million After Pleading
Guilty to Illegally Exporting Boeing 747 Aircraft to
Iran,’’ U.S. Department of Justice, May 11, 2010
(https://www.justice.gov/opa/pr/2010/May/10-nsd551.html).
87 ‘‘Testimony of Stuart Levey, Under Secretary
for Terrorism and Financial Intelligence, Before the
Senate Committee on Banking, Housing and Urban
Affairs,’’ March 21, 2007 (https://www.treasury.gov/
press-center/press-releases/Pages/hp325.aspx).
88 See ‘‘Fact Sheet: Designation of Iranian Entities
and Individuals for Proliferation Activities and
Support for Terrorism,’’ U.S. Treasury, October 25,
2007 (https://www.treasury.gov/press-center/pressreleases/Pages/hp644.aspx).
89 In October 2007, the Treasury Department
designated nine IRGC-affiliated companies and five
IRGC-affiliated individuals for proliferation activity
under E.O. 13382 as derivatives of the IRGC,
including Khatam al-Anbiya Construction
Headquarters, which secured deals worth at least $7
billion in the oil, gas and transportation sectors,
among others, in 2006. See Id. The European Union
also designated Khatam al-Anbiya for supporting
the Iranian ballistic missile and nuclear programs.
See ‘‘European Council Common Position 2008/
479/CFSP,’’ Official Journal of the European Union,
June 23, 2008 (https://eur-lex.europa.eu/LexUriServ/
LexUriServ
.do?uri=OJ:L:2008:163:0043:0049:en:PDF).
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working on civilian projects.90 Khatam
al-Anbiya was designated by Treasury
in 2007 pursuant to E.O. 13382.91 U.S.designated, Iranian-linked financial
institutions have served as an important
lifeline for Khatam al-Anbiya. The U.S.
and EU-designated Iranian banks Melli,
Mellat, and state-owned Iranian Bank
Tejarat have provided financial support
to Khatam al-Anbiya-related business
before and after the UN designation of
Khatam al-Anbiya and fourteen of its
subsidiaries.
The IRGC has continued to expand its
control over commercial enterprises
within Iran. For example, Tidewater
Middle East Company (‘‘Tidewater’’), a
port operating company, was designated
by Treasury under E.O. 13382 in June
2011 as a company that is owned by the
IRGC. Tidewater has operations at seven
Iranian ports,92 some of which the
Iranian government has repeatedly used
to export arms or related material in
violation of UNSCRs.93 Treasury also
designated Iran Air under E.O. 13382 for
providing material support to the IRGC
and MODAFL, both of which used the
commercial airline carrier to transport
military-related equipment on passenger
aircraft.94 Similarly, as noted in
Treasury’s designation of the leadership
within the IRGC–Qods Force (‘‘IRGC–
QF’’), the IRGC and the IRGC–QF engage
in seemingly legitimate activities that
provide cover for intelligence operations
and support terrorist groups such as
Hizballah, Hamas and the Taliban.95
Islamic Republic of Iran Shipping
Lines (‘‘IRISL’’): Treasury designated
IRISL, Iran’s national maritime carrier,
and affiliated entities pursuant to E.O.
13382 for providing logistical services to
MODAFL.96 The concern over IRISL’s
role in Iran’s illicit activities has grown
significantly within the international
community. In October 2009, the UK
90 ‘‘Ex-Iranian Official Tells UK Daily About
Likely IRGC Earnings, Activities,’’ The Financial
Times, March 16, 2007.
91 ‘‘Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support
for Terrorism,’’ U.S. Treasury, October 25, 2007
(https://www.treasury.gov/press-center/pressreleases/Pages/hp644.aspx).
92 ‘‘See U.S. Treasury ‘‘Fact Sheet: Treasury
Sanctions Major Iranian Commercial Entities,’’ June
23, 2011. (https://www.treasury.gov/press-center/
press-releases/Pages/tg1217.aspx).
93 Id.
94 Id.
95 ‘‘Fact Sheet: U.S. Treasury Department Targets
Iran’s Support for Terrorism,’’ U.S. Treasury
Department, August 3, 2010 (https://
www.treasury.gov/press-center/press-releases/
Pages/tg810.aspx).
96 ‘‘Major Iranian Shipping Company Designated
for Proliferation Activity,’’ U.S. Treasury,
September 10, 2008 (https://www.treasury.gov/presscenter/press-releases/Pages/tg1067.aspx).
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and Bermuda also designated IRISL.97
Three IRISL-related entities, Irano Hind
Shipping Company, IRISL Benelux NV,
and South Shipping Line Iran (SSL),
were sanctioned by the UN in June
2010.98 Subsequently, the EU, Australia,
Canada, Japan, Norway, South Korea,
and Switzerland adopted measures
against IRISL.99 Additionally, as IRISL
became increasingly unable to maintain
adequate hull and protection-andindemnity (P&I) insurance because of
international sanctions, IRISL was
forced to turn to Tehran-based Moallem
Insurance Company, which was not in
the business of providing maritime
insurance. Treasury designated Moallem
in December 2010 for providing marine
insurance to IRISL vessels.100
Iran’s main shipping line has long
relied upon deceptive techniques to
conceal its behavior and to avoid
international and U.S. sanctions.101
97 See ‘‘The Financial Restrictions (Iran) Order
2009,’’ HM Treasury, October 12, 2009 (https://
www.hm-treasury.gov.uk/d/
fin_crime_iran_order.pdf) and ‘‘Anti-Terrorism
(Financial Restrictions Iran) Order 2010,’’ The
Minister of Justice, January 15, 2010 (https://
www.bermudalaws.bm/Laws/Consolidated%
20Laws/Anti-Terrorism%20(Financial%
20Restrictions%20Iran)%20Order%202010.pdf).
98 See UN Security Resolution 1929 (https://
daccess-dds-ny.un.org/doc/UNDOC/GEN/N10/396/
79/PDF/N1039679.pdf?OpenElement).
99 See ‘‘Council Implementing Regulation (EU) No
668/2010,’’ European Union, July 26, 2010 (https://
eur-lex.europa.eu/LexUriServ/LexUriServ
.do?uri=OJ:L:2010:195:0025:0036:EN:PDF);
‘‘Accompanying Measures Pursuant to United
Nations Security Council Resolution 1929,’’
Ministry of Foreign Affairs of Japan, September 3,
2010 (https://www.mofa.go.jp/region/middle_e/iran/
measures_unsc_1009.html); ‘‘Government
Regarding the Implementation of UNSCR 1929,’’
Republic of Korea, September 8, 2010; ‘‘Charter of
the United Nations (Sanctions—Iran) (Specified
Entities) List 2010, Government of Australia,
August 4, 2010 (https://www.comlaw.gov.au/Details/
F2010L02236); Special Economic Measures (Iran)
Regulations, Government of Canada, August 4, 2010
(https://canadagazette.gc.ca/rp-pr/p2/2010/2010–
08–04/html/sor-dors165-eng.html); ‘‘Press Release,’’
Government of Norway, Ministry of Foreign Affairs,
January 14, 2011 (https://www.regjeringen.no/mobil/
en/dep/ud/press/news/2011/
sanctions_iran_adopted.html?id=630820); ‘‘Iran:
Federal Council Takes Steps to Improve Legal
Certainty and Prevent Possible Evasion,’’ January
19, 2011, The Federal Authorities of the Swiss
Federation (https://www.admin.ch/aktuell/00089/
index.html?lang=en&msg-id=37283).
100 See ‘‘Fact Sheet: Treasury Designates Iranian
Entities Tied to the IRGC and IRISL,’’ December 21,
2010. (https://www.treasury.gov/press-center/pressreleases/Pages/tg1010.aspx).
101 For example, on June 20, 2011, the District
Attorney of New York announced a 317-count
indictment of eleven corporations and five
individuals for their roles in a conspiracy involving
IRISL, its regional offices, and its agents. The
indictment alleged that the defendants evaded U.S.
economic sanctions tied to bans on trade with
countries that harbor foreign terrorist and
proliferators of weapons of mass destruction. In
doing so, the defendants repeatedly falsified the
records of banks located in New York County to
access illegally the U.S. financial system. The
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
IRISL is increasingly employing
deceptive practices to disguise its
involvement in shipping operations and
the designation of its cargo. Since being
subjected to U.S. and international
sanctions, IRISL has renamed as many
as 80 of the ships in its fleet and
changed ownership information and flag
registries to evade sanctions.102 IRISL
also has renamed its offices in China,
Singapore, Germany, and South Korea,
has tried to mask its operations in the
UAE by using a network of front
companies,103 and has moved its
container operations to a subsidiary,
HDS Lines.104 Moreover, IRISL has also
since stopped referring to HDS Lines in
bills of lading from its shipping
agent.105
These deceptive practices are
designed to avoid scrutiny in financial
transactions. As the U.S and other
jurisdictions have prohibited financial
institutions from processing
transactions involving sanctioned
entities, IRISL’s deceptive practices seek
to disguise IRISL’s involvement in order
to permit the financial transaction. In an
advisory to U.S. financial institutions,
FinCEN noted IRISL’s efforts to rename
vessels and adjust information
associated with financial transactions
and suggested that the International
Maritime Organization (‘‘IMO’’)
registration number, which is a unique
identifier assigned to each vessel, could
provide a useful indication of whether
an IRISL vessel is involved in a
transaction.106 In addition, OFAC issued
an advisory to alert shippers, importers,
exporters, and freight forwarders of
IRISL’s efforts to hide its involvement in
transactions by using container prefixes
registered to another carrier, omitting or
listing invalid, incomplete or false
container prefixes in shipping container
numbers, and naming non-existent
ocean vessels in shipping documents.107
defendants deceived Manhattan banks into
processing more than $60 million worth of
payments using aliases or corporate alter egos to
hide their conduct. See ‘‘Iranian Company Charged
With Tricking U.S. Banks,’’ New York Times, June
20, 2011 (https://www.nytimes.com/2011/06/20/
nyregion/iranian-shipper-accused-of-sneakingmoney-through-ny-banks.html).
102 ‘‘Iran Shipper Evades US Blacklist,’’ Wall
Street Journal, April 10, 2010.
103 See (https://www.treasury.gov/press-center/
press-releases/Pages/tg1212.aspx).
104 ‘‘U.S. Keeps Watch on Iranian Shipping,’’ Wall
Street Journal, May 28, 2010.
105 Id.
106 See ‘‘Update on the Continuing Illicit Finance
Threat Emanating from Iran,’’ FIN–2010–A008, June
22, 2010 (https://www.fincen.gov/statutes_regs/
guidance/html/fin-2010-a008.html).
107 See OFAC Nonproliferation and Weapons of
Mass Destruction Advisory, ‘‘Presentation of
Fraudulent Shipping Documents,’’ March 31, 2011.
(https://www.treasury.gov/resource-center/
E:\FR\FM\25NON1.SGM
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Federal Register / Vol. 76, No. 227 / Friday, November 25, 2011 / Notices
wreier-aviles on DSK7SPTVN1PROD with NOTICES
B. The Substance and Quality of
Administration of the Bank Supervisory
and Counter-Money Laundering Laws of
That Jurisdiction
Iran’s serious deficiencies with
respect to anti-money laundering/
countering the financing of terrorism
(‘‘AML/CFT’’) controls has long been
highlighted by numerous international
bodies and government agencies.
Starting in October 2007, the FATF has
issued a series of public statements
expressing its concern that Iran’s lack of
a comprehensive AML/CFT regime
represents a significant vulnerability
within the international financial
system. The statements further called
upon Iran to address those deficiencies
with urgency, and called upon FATFmember countries to advise their
institutions to conduct enhanced due
diligence with respect to the risks
associated with Iran’s deficiencies.108
The FATF has been particularly
concerned with Iran’s failure to address
the risk of terrorist financing, and
starting in February 2009, the FATF
called upon its members and urged all
jurisdictions to apply effective countermeasures to protect their financial
sectors from the terrorist financing risks
emanating from Iran.109 In addition, the
FATF advised jurisdictions to protect
correspondent relationships from being
used to bypass or evade countermeasures and risk mitigation practices,
and to take into account money
laundering and financing of terrorism
risks when considering requests by
Iranian financial institutions to open
sanctions/Programs/Documents/
20110331_advisory.pdf).
108 In response to concerns raised by these FATF
and IMF reports, FinCEN issued an advisory on
October 16, 2007 to financial institutions regarding
the heightened risk of Iranian ‘‘money laundering,
terrorist financing, and weapons of mass
destruction proliferation financing.’’ The advisory
further cautioned institutions that there may be an
increased effort by Iranian entities to circumvent
international sanctions and related financial
community scrutiny through the use of deceptive
practices. See ‘‘Guidance to Financial Institutions
on the Increasing Money Laundering Threat
Involving Illicit Iranian Activity,’’ FinCEN, October
16, 2007 (https://www.fincen.gov/statutes_regs/
guidance/pdf/
guidance_fi_increasing_mlt_iranian.pdf). The FATF
simultaneously published guidance to assist
countries with implementation of UNSCRs 1737
and 1747. See ‘‘Guidance Regarding the
Implementation of Activity-Based Financial
Prohibitions of United Nations Security Council
Resolution 1737,’’ October 12, 2007 (https://
www.fatf-gafi.org/dataoecd/43/17/39494050.pdf)
and ‘‘Guidance Regarding the Implementation of
Financial Provisions of the United Nations Security
Council Resolutions to Counter the Proliferation of
Weapons of Mass Destruction,’’ September 5, 2007
(https://www.fatf-gafi.org/dataoecd/23/16/
39318680.pdf).
109 See ‘‘FATF Statement on Iran,’’ The Financial
Action Task Force, February 25, 2009 (https://
www.fatf-gafi.org/dataoecd/18/28/42242615.pdf).
VerDate Mar<15>2010
14:31 Nov 23, 2011
Jkt 226001
branches and subsidiaries in their
jurisdictions.110 The FATF also called
on its members and other jurisdictions
to advise their financial institutions to
give special attention to business
relationships and transactions with Iran,
including Iranian companies and
financial institutions.111 Over the past
three years, the FATF has repeatedly
reiterated these concerns and reaffirmed
its call for FATF-member countries and
all jurisdictions to implement
countermeasures to protect the
international financial system from the
terrorist financing risk emanating from
Iran. In response, numerous countries,
including all G7 countries, have issued
advisories to their financial
institutions.112
The FATF’s most recent statement in
October 2011 reiterated, with a renewed
urgency, its concern regarding Iran’s
failure to address the risk of terrorist
financing and the serious threat this
poses to the integrity to the
international financial system.113 The
FATF reaffirmed its February 2009 call
to apply effective countermeasures to
protect their financial sectors from ML/
FT risks emanating from Iran, and
further called upon its members to
consider the steps already taken and
possible additional safeguards or
strengthen existing ones.114 In addition,
the FATF stated that, if Iran fails to take
concrete steps to improve its AML/CFT
regime, the FATF will consider calling
on its members and urging all
jurisdictions to strengthen
countermeasures in February 2012.115
The numerous calls by FATF for Iran to
urgently address its terrorist financing
vulnerability, coupled with the
extensive record of Iranian entities
using the financial system to finance
terrorism, proliferation activities, and
110 Id.
72763
other illicit activity,116 raises significant
concern over the willingness or ability
of Iran to establish adequate controls to
counter terrorist financing.
C. Whether the United States Has a
Mutual Legal Assistance Treaty With
That Jurisdiction, and the Experience of
U.S. Law Enforcement Officials and
Regulatory Officials in Obtaining
Information About Transactions
Originating in or Routed Through or to
Such Jurisdiction
Iran has not entered into any mutual
legal assistance treaties. Additionally,
U.S. law enforcement and regulatory
officials have found Iran to be
uncooperative regarding access to
information about financial
transactions. Accordingly, Iran remains
a safe haven for those who would
commit financial crimes against the
United States.
III. Finding
Based on the foregoing factors, the
Director of FinCEN hereby finds that the
Islamic Republic of Iran is a jurisdiction
of primary money laundering concern.
Dated: November 18, 2011
James H. Freis, Jr.,
Director, Financial Crimes Enforcement
Network.
[FR Doc. 2011–30332 Filed 11–23–11; 8:45 am]
BILLING CODE 4810–02–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
Proposed Information Collection;
Comment Request
Office of the Comptroller of the
Currency (OCC), Treasury.
ACTION: Notice and request for comment.
AGENCY:
111 Id.
112 See ‘‘Circular 13/2008 (GW)—Statement of the
FATF of 16 October 2008,’’ November 7, 2008
(https://www.bafin.de/cln_171/nn_721228/
SharedDocs/Veroeffentlichungen/EN/Service/
Circulars/rs__0813__gw.html?__nnn=true);
‘‘February 27, 2009 FINTRAC Advisory,’’ February
27, 2009 (https://www.fintrac-canafe.gc.ca/
publications/avs/2009–02–27-eng.asp); ‘‘HM
Treasury warns businesses of serious threats posed
to the international financial system,’’ March 11,
2009 (https://webarchive.nationalarchives.gov.uk/+/
https://www.hm-treasury.gov.uk/press_26_09.htm);
‘‘Letter from French Minister of Economy,’’ (https://
www2.economie.gouv.fr/directions_services/dgtpe/
sanctions/sanctionsiran.php); and ‘‘Bank of Italy
Circular,’’ (https://www.dt.tesoro.it/it/prevenzione
_reati_finanziari/).
113 See ‘‘FATF Public Statement,’’ The Financial
Action Task Force, October 28, 2011 (https://
www.fatf-gafi.org/document/55/
0,3746,en_32250379_32236992_48966519_1_
1_1_1,00.html).
114 Id.
115 Id.
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
The OCC, as part of its
continuing effort to reduce paperwork
and respondent burden, invites the
general public and other Federal
agencies to take this opportunity to
comment on a continuing information
collection, as required by the Paperwork
Reduction Act of 1995. Currently, the
OCC is soliciting comment concerning
its extension, without change, of an
information collection titled, ‘‘Release
of Non-Public Information—12 CFR 4,
Subpart C.’’
DATES: You should submit written
comments by January 24, 2012.
SUMMARY:
116 ‘‘Update on the Continuing Illicit Finance
Threat Emanating From Iran,’’ FinCEN, June 22,
2010 (https://www.fincen.gov/statutes_regs/
guidance/html/fin-2010-a008.html).
E:\FR\FM\25NON1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 227 (Friday, November 25, 2011)]
[Notices]
[Pages 72756-72763]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30332]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Finding That the Islamic Republic of Iran Is a Jurisdiction of
Primary Money Laundering Concern
AGENCY: The Financial Crimes Enforcement Network (``FinCEN''),
Treasury.
ACTION: Notice of finding.
-----------------------------------------------------------------------
SUMMARY: Pursuant to the authority contained in 31 U.S.C. 5318A, the
Secretary of the Treasury, through his delegate, the Director of
FinCEN, finds that reasonable grounds exist for concluding that the
Islamic Republic of Iran is a jurisdiction of primary money laundering
concern.
DATES: The finding made in this notice is effective as of November 25,
2011.
FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs
Division, FinCEN, (800) 949-2732.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Provisions
On October 26, 2001, the President signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''),
Public Law 107-56. Title III of the USA PATRIOT Act amends the anti-
money laundering provisions of the Bank Secrecy Act (``BSA''), codified
at 12 U.S.C. 1829b, 12 U.S.C 1951-1959, and 31 U.S.C. 5311-5314 and
5316-5332, to promote prevention, detection, and prosecution of
international money laundering and the financing of terrorism.
Regulations implementing the BSA appear at 31 CFR Chapter X.
Section 311 of the USA PATRIOT Act (``section 311'') added 31
U.S.C. section 5318A to the BSA, granting the Secretary of the Treasury
(the ``Secretary'') the authority, upon finding that reasonable grounds
exist for concluding that a foreign jurisdiction, institution, class of
transactions, or type of account is of ``primary money laundering
concern,'' to require domestic financial institutions and financial
agencies to take certain ``special measures'' against the primary money
laundering concern. Section 311 identifies factors for the Secretary to
consider and requires Federal agencies to consult before the Secretary
may conclude that a jurisdiction, institution, class of transaction, or
type of account is of primary money laundering concern. The statute
also provides similar procedures, i.e., factors and consultation
requirements, for selecting the specific special measures to be imposed
against the primary money laundering concern. For purposes of the
finding contained in this notice, the Secretary has delegated his
authority under section 311 to the Director of FinCEN.\1\
---------------------------------------------------------------------------
\1\ Therefore, references to the authority and findings of the
Secretary in this document apply equally to the Director of FinCEN.
---------------------------------------------------------------------------
Taken as a whole, section 311 provides the Secretary with a range
of options that can be adapted to target specific money laundering and
terrorist financing concerns most effectively. Through the imposition
of various special measures, the Secretary can gain more information
about the jurisdictions, institutions, transactions, or accounts of
concern; can more effectively monitor the respective jurisdictions,
institutions, transactions, or accounts; or can prohibit U.S. financial
institutions from involvement with jurisdictions, institutions,
transactions, or accounts that pose a money laundering concern.
Before making a finding that reasonable grounds exist for
concluding that a jurisdiction is of primary money laundering concern,
the Secretary is required to consult with both the Secretary of State
and the Attorney General. The Secretary is also required by section
311, as amended,\2\ to consider ``such information as the Secretary
determines to be relevant, including the following potentially relevant
factors,'' which extend the Secretary's consideration beyond
traditional money laundering concerns to issues involving, inter alia,
terrorist financing and weapons proliferation:
---------------------------------------------------------------------------
\2\ 31 U.S.C. 5318A was amended by section 501 of the Iran
Freedom Support Act of 2006, Public Law 109-293.
---------------------------------------------------------------------------
Evidence that organized criminal groups, international
terrorists, or entities involved in the proliferation of weapons of
mass destruction (``WMD'') or missiles, have transacted business in
that jurisdiction;
[[Page 72757]]
The extent to which that jurisdiction or financial
institutions operating in that jurisdiction offer bank secrecy or
special regulatory advantages to nonresidents or nondomiciliaries of
that jurisdiction;
The substance and quality of administration of the bank
supervisory and counter-money laundering laws of that jurisdiction;
The relationship between the volume of financial
transactions occurring in that jurisdiction and the size of the economy
of the jurisdiction;
The extent to which that jurisdiction is characterized as
an offshore banking or secrecy haven by credible international
organizations or multilateral expert groups;
Whether the United States has a mutual legal assistance
treaty with that jurisdiction, and the experience of U.S. law
enforcement officials and regulatory officials in obtaining information
about transactions originating in or routed through or to such
jurisdiction; and
The extent to which that jurisdiction is characterized by
high levels of official or institutional corruption.
If the Secretary determines that reasonable grounds exist for
concluding that a jurisdiction is of primary money laundering concern,
the Secretary is authorized to impose one or more of the special
measures in section 311 to address the specific money laundering risks.
Section 311 provides a range of special measures that can be imposed
individually, jointly, in any combination, and in any sequence.\3\
Before imposing special measures, the statute requires the Secretary to
consult with appropriate federal agencies and other interested parties
\4\ and to consider the following specific factors:
---------------------------------------------------------------------------
\3\ Available special measures include requiring: (1)
Recordkeeping and reporting of certain financial transactions; (2)
collection of information relating to beneficial ownership; (3)
collection of information relating to certain payable-through
accounts; (4) collection of information relating to certain
correspondent accounts; and (5) prohibition or conditions on the
opening or maintaining of correspondent or payable-through accounts.
31 U.S.C. 5318A(b)(1)-(5). For a complete discussion of the range of
possible countermeasures, See 68 FR 18917 (April 17, 2003)
(proposing special measures against Nauru).
\4\ Section 5318A(a)(4)(A) requires the Secretary to consult
with the Chairman of the Board of Governors of the Federal Reserve
System, any other appropriate Federal banking agency, the Secretary
of State, the Securities and Exchange Commission (``SEC''), the
Commodity Futures Trading Commission (``CFTC''), the National Credit
Union Administration (``NCUA''), and, in the sole discretion of the
Secretary, ``such other agencies and interested parties as the
Secretary may find to be appropriate.'' The consultation process
must also include the Attorney General if the Secretary is
considering prohibiting or imposing conditions on domestic financial
institutions opening or maintaining correspondent account
relationships with the targeted entity.
---------------------------------------------------------------------------
Whether similar action has been or is being taken by other
nations or multilateral groups;
Whether the imposition of any particular special measures
would create a significant competitive disadvantage, including any
undue cost or burden associated with compliance, for financial
institutions organized or licensed in the United States;
The extent to which the action or the timing of the action
would have a significant adverse systemic impact on the international
payment, clearance, and settlement system, or on legitimate business
activities involving the particular jurisdiction; and
The effect of the action on U.S. national security and
foreign policy.
B. Iran
Iran's banking sector comprises Iranian state-owned commercial
banks, specialized Iranian government banks, and privately owned
Iranian financial institutions.\5\ Some of these Iranian financial
institutions \6\ operate multiple overseas branches and subsidiaries in
Asia, Europe, and the Middle East \7\ and maintain relationships in key
global financial centers.\8\
---------------------------------------------------------------------------
\5\ Central Bank of the Islamic Republic of Iran. (https://www.cbi.ir/simplelist/1462.aspx). At various points in this finding,
FinCEN references public media sources to support statements of
fact. FinCEN has utilized both public and non-public sources in
reaching such conclusions.
\6\ Id.
\7\ The Bankers Almanac, September 2011.
\8\ Id.
---------------------------------------------------------------------------
In recent years, many international financial institutions have
severed ties with Iranian banks and entities because of a growing body
of public information about their illicit and deceptive conduct
designed to facilitate the Iranian government's support for terrorism
and its pursuit of nuclear and ballistic missile capabilities. This
illicit conduct by Iranian banks and companies has been highlighted in
a series of United Nations Security Council (``UN Security Council'')
resolutions related to Iranian proliferation sensitive activities. The
Financial Action Task Force \9\ (``FATF'') has also warned publicly of
the risks that Iran's deficiencies in countering money laundering and,
particularly, terrorism finance, pose to the international financial
system, and has called on FATF members and all jurisdictions to
implement counter measures to protect against these risks. Despite the
resulting reduction in Iranian financial institutions' access to
correspondent and other financial relationships with major financial
institutions,\10\ both designated and non-designated Iranian banks
continue to maintain a presence in the international financial system.
---------------------------------------------------------------------------
\9\ The Financial Action Task Force is an inter-governmental
body whose purpose is the development and promotion of national and
international policies to combat money laundering and terrorist
financing. The FATF is therefore a ``policy-making body'' that works
to generate the necessary political will to bring about legislative
and regulatory reforms in these areas. (https://www.fatf-gafi.org).
\10\ ``Sanctions Against Iran: A Promising Struggle,'' The
Washington Quarterly, Summer 2008.
---------------------------------------------------------------------------
II. Analysis of Factors
Based upon a review and analysis of the administrative record in
this matter, consultations with relevant Federal agencies and
departments, and after consideration of the factors enumerated in
section 311, the Director of FinCEN has determined that reasonable
grounds exist for concluding that Iran is a jurisdiction of primary
money laundering concern. While FinCEN has considered all potentially
relevant factors set forth in Section 5318A, a discussion of those most
pertinent to this finding follows. FinCEN has reason to believe that
Iran directly supports terrorism and is pursuing nuclear/ballistic
missile capabilities, relies on state agencies or state-owned or
controlled financial institutions to facilitate WMD proliferation and
financing, and uses deceptive financial practices to facilitate illicit
conduct and evade sanctions. All of these factors, when taken together,
make the international financial system increasingly vulnerable to the
risk that otherwise responsible financial institutions will unwittingly
participate in Iran's illicit activities.
A. Evidence That Organized Criminal Groups, International Terrorists,
or Entities Involved in the Proliferation of Weapons of Mass
Destruction or Missiles, Have Transacted Business in That Jurisdiction
1. Iran's Support for Terrorism and Pursuit of Nuclear and Ballistic
Missile Capabilities
Support for Terrorism: The Department of State designated Iran as a
state sponsor of international terrorism in 1984,\11\ and has
reiterated this designation every year since 2000 in its annual Country
Reports on Terrorism.\12\ Iran remains the most active of the listed
state sponsors of terrorism, routinely providing substantial
[[Page 72758]]
resources and guidance to multiple terrorist organizations.\13\ Iran
has provided extensive funding, training, and weaponry to Palestinian
terrorist groups, including Hamas and the Palestinian Islamic Jihad
(``PIJ'').\14\ In fact, Hamas,\15\ PIJ,\16\ and Hizballah\17\ have
maintained offices in Tehran to help coordinate Iranian financing and
training of these groups.
---------------------------------------------------------------------------
\11\ See ``State Sponsors of Terrorism,'' U.S. Department of
State, August 18, 2011 (https://www.state.gov/s/ct/rls/crt/2010/170260.htm).
\12\ Id.
\13\ Id.
\14\ Id.
\15\ ``Ex-Iranian President Offers Mediation Between Hamas,
Fatah, Kuwait KUNA,'' KUNA, June 30, 2007.
\16\ See ``Palestine Islamic Jihad envoy to Tehran says moderate
Arabs hamper victory,'' Tehran Jomhouri-ye Eslami. December 10,
2007.
\17\ See ``Hezbollah's hate, made in Iran,'' National Post, July
28, 2006.
---------------------------------------------------------------------------
Iran's Islamic Revolutionary Guard Corps (``IRGC'') was founded in
the aftermath of the 1979 Islamic Revolution to defend the government
against internal and external threats.\18\ Since then, it has expanded
far beyond its original mandate and evolved into a social, military,
political, and economic force with strong influence on Iran's power
structure.\19\ In addition, elements of the IRGC have been directly
involved in the planning and support of terrorist acts throughout the
Middle East region.\20\
---------------------------------------------------------------------------
\18\ See ``Iran's Revolutionary Guards,'' Council on Foreign
Relations, June 22, 2009 (https://www.cfr.org/publication/14324/irans_revolutionary_guards.html).
\19\ Id.
\20\ See ``Country Reports on Terrorism 2010,'' U.S. Department
of State, August 18, 2011 (https://www.state.gov/s/ct/rls/crt/2010/170260.htm).
---------------------------------------------------------------------------
In particular, Iran has used the IRGC-Qods Force \21\ (``Qods
Force'') to cultivate and support terrorists and militant groups
abroad. The Qods Force reportedly has been active in the Levant, where
it has a long history of supporting Hizballah's military, paramilitary,
and terrorist activities, and provides Hizballah with as much as $200
million in funding per year.\22\ Additionally, the Qods Force provides
the Taliban in Afghanistan with weapons, funding, logistics, and
training in support of anti-U.S. and anti-coalition activity.\23\
Information dating from at least 2006 indicates that Iran has arranged
frequent shipments to the Taliban of small arms and associated
ammunition, rocket propelled grenades, mortar rounds, 107 mm rockets,
and plastic explosives.\24\ Iran also has helped train Taliban fighters
within Iran and Afghanistan.\25\ Taliban commanders have stated that
they were paid by Iran to attend three month training courses within
Iran.\26\ In August 2011, a Taliban commander claimed to have trained
in Iran and been offered $50,000 by Iranian officials in return for
destroying a dam in Afghanistan.\27\ Most recently, on October 11,
2011, the Department of Justice charged two individuals for their
alleged participation in a plot directed by the Qods Force to murder
the Saudi ambassador to the United States with explosives while the
Ambassador was in the United States.\28\ On the same day, the Treasury
Department announced the designation of five individuals, including the
commander of the Qods Force and three other senior Qods Force officers
connected to the assassination plot, as well as the individual
responsible for arranging the assassination plot on behalf of the Qods
Force.\29\
---------------------------------------------------------------------------
\21\ IRGC-Qods Force was designated under E.O. 13224 for
providing material support for the Taliban and other terrorist
groups. See ``Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support for
Terrorism,'' U.S. Treasury, October 25, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
\22\ See ``Islamic Revolutionary Guards Corps,'' Anti-Defamation
League, May 26, 2010.
\23\ See ``Country Reports on Terrorism 2010,'' U.S. Department
of State, August 18, 2011 (https://www.state.gov/s/ct/rls/crt/2010/170260.htm).
\24\ Id.
\25\ ``Taliban Fighters Training in Iran, U.S. Officials Say,''
CNN, March 23, 2010 (https://articles.cnn.com/2010-03-23/world/iran.taliban_1_taliban-fighters-afghan-taliban-iranian-official?_s=PM:WORLD).
\26\ ``Iranians Train Taliban to Use Roadside Bombs,'' The
Sunday Times, March 21, 2010.
\27\ See ``Captured Taliban Commander: `I Received Iranian
Training','' Radio Free Europe, August 23, 2011.
\28\ See ``Attorney General Holder Holds National Security
Enforcement Press Conference,'' October 11, 2011 (https://www.justice.gov/iso/opa/ag/speeches/2011/ag-speech-111011.html).
\29\ See ``Treasury Sanctions Five Individuals Tied to Iranian
Plot to Assassinate the Saudi Arabian Ambassador to the United
States,'' October 11, 2011 (https://www.treasury.gov/press-center/press-releases/pages/tg1320.aspx).
---------------------------------------------------------------------------
Iran has also permitted al-Qaida to funnel funds and operatives
through its territory. In July 2011, the U.S. Department of the
Treasury (``Treasury'') designated an al-Qa'ida network headed by an
individual living and operating in Iran under an agreement between al-
Qa'ida and the Iranian government.\30\ The designation of six members
of this network illustrated Iran's role as a critical transit point for
funding to support al-Qa'ida's activities in Afghanistan and Pakistan
as this network serves as a pipeline through which al-Qa'ida moves
money, facilitators, and operatives from across the Middle East to
South Asia.\31\
---------------------------------------------------------------------------
\30\ See ``Treasury Targets Key Al-Qa'ida Funding and Support
Network Using Iran as a Critical Transit Point,'' Press Release,
July 28, 2011 (https://www.treasury.gov/press-center/press-releases/Pages/tg1261.aspx).
\31\ Id.
---------------------------------------------------------------------------
Finally, Iran is known to have used state-owned banks to facilitate
terrorist financing. In 2007, the Treasury designated Bank Saderat
under E.O. 13224 for its financial support of terrorist organizations,
noting that from 2001 to 2006 Bank Saderat transferred $50 million from
the Central Bank of Iran through its subsidiary in London to its branch
in Beirut for the benefit of Hizballah fronts in Lebanon that support
acts of violence.\32\
---------------------------------------------------------------------------
\32\ See Treasury's ``Fact Sheet: Treasury Designation of
Iranian Entities and Individuals for Proliferation Activities and
Support for Terrorism,'' October 25, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
---------------------------------------------------------------------------
Pursuit of nuclear/ballistic missile capabilities: Iran also
continues to defy the international community by pursuing nuclear
capabilities and developing ballistic missiles in violation of seven
UNSCRs.\33\ Iran's failure to comply with these resolutions has
resulted in the UN Security Council's imposition of sanctions against
Iran. These have included specific provisions aimed at preventing Iran
from accessing the international financial system in order to pursue
nuclear capabilities and to develop ballistic missiles.\34\ To date,
Iran has not complied with the UN Security Council resolutions
regarding its nuclear and missile activities,\35\ and continues to
assert that it will not abandon its program to create nuclear fuel and
enrich uranium.\36\ This summer, Iran announced that it would triple
production of its most concentrated uranium fuel, which is enriched to
near 20% purity, and that some of this production would be transferred
to Iran's facility near Qom.\37\ This is a significant development
because the technical work required to produce 20% enriched uranium
from 3.5% is more difficult than that required to advance from 20% to
the 90% weapons-grade level.\38\
---------------------------------------------------------------------------
\33\ See UNSCRs 1696, 1737, 1747, 1803, 1835, 1887, and 1929
(https://www.un.org/documents/scres.htm).
\34\ Id.
\35\ ''Iran's Nuclear Program,'' New York Times, June 8, 2011
(https://topics.nytimes.com/top/news/international/countriesandterritories/iran/nuclear_program/?scp=1-spot&sq=iran%20nuclear%20program&st=cse).
\36\ ``Iran Claims Progress Speeding Nuclear Program'' Wall
Street Journal, August 4, 2011 (https://online.wsj.com/article/SB10001424053111903454504576486663881270144.html?mod=googlenews_wsj).
\37\ ``Iran's Uranium Enrichment Will Increase, It Says,'' New
York Times, June 8, 2011. (https://www.nytimes.com/2011/06/09/world/middleeast/09iran.html).
\38\ Iran Claims Progress Speeding Nuclear Program'' Wall Street
Journal, August 4, 2011 (https://online.wsj.com/article/SB10001424053111903454504576486663881270144.html?mod=googlenews_wsj).
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[[Page 72759]]
2. Use of government agencies and state-owned or controlled financial
institutions to facilitate WMD proliferation and financing
Iran uses government agencies and state-owned or controlled
financial institutions to advance its nuclear and ballistic missile
ambitions. Specifically, the government agencies rely on state-owned
Iranian financial institutions to help finance illicit procurement
activities related to WMD proliferation.
Government Agencies: Iran has used the Atomic Energy Organization
of Iran (``AEOI''), which was designated by Treasury as the main
Iranian organization for research and development activities in the
field of nuclear technology, including Iran's uranium enrichment
program, to manage the country's overall nuclear program.\39\
Additionally, Iran has relied on the Ministry of Defense and Armed
Forces Logistics (``MODAFL''), which was designated by the State
Department under Executive Order (``E.O.'') 13382 for proliferation
activities.\40\ Iran also controls the Defense Industries Organization
(``DIO''), which has been designated by the UN \41\ and the United
States,\42\ and the Aerospace Industries Organization (``AIO''), which
is identified in the Annex to E.O. 13382 for its role in overseeing
Iran's missile industries.\43\ AIO, the parent entity to Shahid Hemat
Industrial Group (SHIG),\44\ which is also listed in the Annex to E.O.
13382, was identified for its ballistic missile research, development,
and production activities, in addition to overseeing all of Iran's
missile industries.\45\
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\39\ ``Treasury Designates Iranian Nuclear and Missile
Entities,'' August 12, 2008 (https://www.treasury.gov/press-center/press-releases/Pages/hp1113.aspx).
\40\ ``Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support for
Terrorism,'' U.S. Treasury, October 25, 2007 (https://www.treas.gov/press/releases/hp644.htm).
\41\ United Nations Security Council Resolution 1737, December
23, 2006 (https://www.un.org/News/Press/docs/2006/sc8928.doc.htm).
\42\ ``Iran's Defense Industries Organization Designated by
State,'' U.S. Department of State, March 30, 2007 (https://2001-2009.state.gov/r/pa/prs/ps/2007/mar/82487.htm).
\43\ Executive Order 13382 of June 28, 2005. (https://www.fas.org/irp/offdocs/eo/eo-13382.htm).
\44\ Id.
\45\ Fact Sheet: Designation of Iranian Entities and Individuals
for Proliferation Activities and Support for Terrorism,'' U.S.
Treasury, October 25, 2007 (https://www.treas.gov/press/releases/hp644.htm).
---------------------------------------------------------------------------
State-owned or controlled banks: Multiple Iranian financial
institutions have been directly implicated in facilitating Iran's
nuclear and ballistic missile activities. For example, Iranian state-
owned Bank Sepah was designated by the Treasury Department under E.O.
13382 and designated in UNSCR 1747 for providing direct and extensive
financial services to Iranian entities responsible for developing
ballistic missiles, including AIO and SHIG.\46\
---------------------------------------------------------------------------
\46\ See ``Testimony of Stuart Levey, Under Secretary for
Terrorism and Financial Intelligence, Before the Senate Committee on
Banking, Housing and Urban Affairs,'' Treasury Press Release, March
21, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp325.aspx); and U.S. Treasury, ``Iran's Bank Sepah Designated by
Treasury Sepah Facilitating Iran's Weapons Program,'' January 9,
2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp219.aspx).
---------------------------------------------------------------------------
Iran's state-owned Bank Melli, which was identified in UNSCR
1803,\47\ has also facilitated numerous purchases of sensitive
materials for Iran's nuclear and missile programs on behalf of UN-
designated entities.\48\ Treasury found that Bank Melli has provided a
range of financial services to known proliferators, including opening
letters of credit and maintaining accounts.\49\ Additionally, Treasury
found, following the designation of Bank Sepah under UNSCR 1747 for its
support for AIO and AIO's subordinates, Bank Melli took precautions not
to identify Bank Sepah in transactions.\50\ Treasury designated Bank
Melli and associated subsidiaries and front companies under E.O. 13382
for its financial support to entities involved in the proliferation of
weapons of mass destruction.\51\ Multiple jurisdictions also have
designated Bank Melli under their respective legal authorities.\52\
---------------------------------------------------------------------------
\47\ See UNSCR 1803. (https://www.un.org/Docs/sc/unsc_resolutions08.htm).
\48\ ``Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support for
Terrorism,'' U.S. Treasury, October 25, 2007 (https://www.treas.gov/press/releases/hp644.htm).
\49\ Id.
\50\ Id.
\51\ See ``Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support for
Terrorism,'' U.S. Treasury, October 25, 2007 (https://www.treas.gov/press/releases/hp644.htm); ``Treasury Designates Iran-Controlled
Bank for Proliferation Future Bank Controlled by Iran's Bank
Melli,'' U.S. Treasury, March 12, 2008 (https://www.treasury.gov/press-center/press-releases/Pages/hp869.aspx); and ``Treasury
Designates Companies Tied to Iran's Bank Melli as Proliferators,''
U.S. Treasury, March 3, 2009 (https://www.treasury.gov/press-center/press-releases/Pages/tg46.aspx).
\52\ See e.g., ``Media Release: Australia Imposes New Broad-
Ranging Sanctions Against Iran,'' Australian Minister for Foreign
Affairs and Trade, July 29, 2010 (https://foreignminister.gov.au/releases/2010/fa-s100729.html).
---------------------------------------------------------------------------
Treasury has also designated under E.O. 13382 Bank Mellat, another
Iranian state-owned bank, for financially facilitating Iran's nuclear
and proliferation activities by supporting AEOI and its main financial
conduit, Novin Energy Company (``Novin'').\53\ Specifically, the
designation noted that as of October 2007, Bank Mellat had facilitated
the movement of millions of dollars for Iran's nuclear program since at
least 2003.\54\ In November 2009, First East Export Bank was designated
pursuant to E.O. 13382 as a subsidiary and for its support of Bank
Mellat.\55\ Furthermore, the international community has raised
concerns and taken action against Bank Mellat. In October 2009, the
United Kingdom's (``UK'') HM Treasury issued an order to all of its
financial and credit institutions to cease all business with Bank
Mellat, based on its connection to Iran's proliferation activities and
for being involved in transactions related to financing Iran's nuclear
and ballistic missile program.\56\ Noting that Bank Mellat itself has
facilitated hundreds of millions of dollars in transactions for Iranian
nuclear, missile, and defense entities, UNSCR 1929 designated First
East Export Bank, a Bank Mellat subsidiary in Malaysia.\57\ Since the
adoption of UNSCR 1929, the European Union (``EU''), Japan, South
Korea, Australia, Canada, Norway, and Switzerland have implemented
measures against Bank Mellat.\58\
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\53\ See ``Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support for
Terrorism,'' U.S. Treasury, October 25, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
\54\ Id.
\55\ See '' Treasury Designates Bank Mellat Subsidiary and
Chairman Under Proliferation Authority,'' U.S. Treasury; November 5,
2009 (https://www.treasury.gov/press-center/press-releases/Pages/tg355.aspx).
\56\ Id.
\57\ See UNSCR 1929 (https://www.un.org/Docs/sc/unsc_resolutions10.htm).
\58\ See ``Council Implementing Regulation (EU) No 668/2010,''
European Union, July 26, 2010 (https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:195:0025:0036:EN:PDF); ``Accompanying
Measures Pursuant to United Nations Security Council Resolution
1929,'' Ministry of Foreign Affairs of Japan, September 3, 2010
(https://www.mofa.go.jp/region/middle_e/iran/measures_unsc_1009.html); ``Government Regarding the Implementation of UNSCR
1929,'' Republic of Korea, September 8, 2010; ``Charter of the
United Nations (Sanctions--Iran) (Specified Entities) List 2010,
Government of Australia, August 4, 2010 (https://www.comlaw.gov.au/Details/F2010L02236); Special Economic Measures (Iran) Regulations,
Government of Canada, August 4, 2010 (https://canadagazette.gc.ca/rp-pr/p2/2010/2010-08-04/html/sor-dors165-eng.html); ``Press Release,''
Government of Norway, Ministry of Foreign Affairs, January 14, 2011
(https://www.regjeringen.no/mobil/en/dep/ud/press/news/2011/sanctions_iran_adopted.html?id=630820); ``Iran: Federal Council
Takes Steps to Improve Legal Certainty and Prevent Possible
Evasion,'' January 19, 2011, The Federal Authorities of the Swiss
Federation (https://www.admin.ch/aktuell/00089/?lang=en&msg-id=37283).
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In October 2008, Treasury designated the Export Development Bank of
Iran
[[Page 72760]]
(``EDBI'') under E.O. 13382 for providing or attempting to provide
financial services to MODAFL.\59\ The designation further asserted that
EDBI provides financial services to multiple MODAFL-subordinate
entities and facilitated the ongoing procurement activities of various
front companies associated with MODAFL-subordinate entities.\60\
Treasury's designation also noted that, since Bank Sepah's designation
by the United States and identification by the UN Security Council,
EDBI has served as one of the leading intermediaries handling Bank
Sepah's financing, including WMD-related payments, and has facilitated
transactions for other sanctioned proliferation-related entities.\61\
---------------------------------------------------------------------------
\59\ ``Export Development Bank of Iran Designated as a
Proliferator,'' U.S. Treasury, October 22, 2008 (https://www.treasury.gov/press-center/press-releases/Pages/hp1231.aspx).
\60\ Id.
\61\ Id.
---------------------------------------------------------------------------
As the Iranian banks described above have become increasingly
isolated from the international financial system due to international
sanctions, other Iranian banks have begun to play a larger role in
Iran's illicit activities and efforts to circumvent sanctions.\62\ The
Treasury Department has continued to target Iranian banks that engage
in illicit behavior and act on behalf of U.S.-designated, Iranian-
linked banks. Treasury designated Post Bank for operating on behalf of
Bank Sepah; \63\ the Iranian-owned German bank EIH for providing
financial services to Bank Mellat, Persia International Bank, EDBI, and
Post Bank; \64\ Bank Refah for providing financial services to MODAFL;
\65\ Bank of Industry and Mine for providing financial services to Bank
Mellat and EIH; \66\ and Ansar Bank and Mehr Bank for providing
financial services to the IRGC.\67\ The EU and other jurisdictions have
recognized the risks posed by the vast majority of these financial
institutions and have imposed similar measures to prohibit banks in
their jurisdictions from doing business with these entities.\68\ As
recently as May 2011, the EU designated EIH for playing a ``key role in
assisting a number of Iranian banks with alternative options for
completing transactions disrupted by EU sanctions targeting Iran.''
\69\
---------------------------------------------------------------------------
\62\ See ``Testimony of Stuart Levey, Under Secretary of
Terrorism and Financial Intelligence, before the Senate Foreign
Relations Committee,'' June 22, 2010. (https://foreign.senate.gov/imo/media/doc/Levey,%20Stuart.pdf).
\63\ See ``Fact Sheet: U.S. Treasury Department Targets Iran's
Nuclear and Missile Programs,'' U.S. Treasury, June 16, 2010 (https://www.treasury.gov/press-center/press-releases/Pages/tg747.aspx).
\64\ See ``Treasury Department Targets Iranian-Owned Bank in
Germany Facilitating Iran's Proliferation Activities,'' U.S.
Treasury, September 7, 2010 (https://www.treasury.gov/press-center/press-releases/Pages/tg847.aspx).
\65\ See ``Treasury Targets Iranian Bank for Providing Financial
Services to Designated Entities Connected to Iran's Proliferation
Activities,'' U.S. Treasury, February 17, 2011 (https://www.treasury.gov/press-center/press-releases/Pages/tg1067.aspx).
\66\ See ``Treasury Designates Iranian State-Owned Bank for
Facilitating Iran's Proliferation Activities,'' U.S. Treasury, May
17, 2011 (https://www.treasury.gov/press-center/press-releases/Pages/tg1178.aspx).
\67\ See ``Fact Sheet: Treasury Designated Iranian Entities Tied
to the IRGC and IRISL,'' U.S. Treasury, December 21, 2010 (https://www.treasury.gov/press-center/press-releases/pages/tg/1010.aspx).
\68\ See ``Council Implementing Regulation (EU) No 668/2010,''
European Union, July 26, 2010 (https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:195:0025:0036:EN:PDF); ``Council
Implementing Regulation (EU) No. 2011/301/CFSP,'' European Union,
May 23, 2011 (https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:136:0087:0090:EN:PDF); ``Charter of the
United Nations (Sanctions--Iran) (Specified Entities) List 2010,
Government of Australia, August 4, 2010 (https://www.comlaw.gov.au/Details/F2010L02236).
\69\ See ``Council Implementing Regulation (EU) No. 2011/299/
CFSP,'' European Union, May 23, 2011 (https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:136:0087:0090:EN:PDF).
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3. The Iranian Government's Use of Deceptive Financial Practices
Since 1979, Iran long has been subject to a variety of U.S.
sanctions that have significantly expanded over time, including
prohibition of the importation of Iranian-origin goods and services,
prohibitions on certain transactions with respect to the development of
Iranian petroleum resources, and prohibitions on exports and re-exports
to Iran. Today, most trade-related transactions with Iran are
prohibited, and U.S. financial institutions are generally prohibited,
with only limited exceptions, from doing business with Iranian
financial institutions.\70\
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\70\ On November 14, 1979, the President issued E.O. 12170
blocking Iranian government property. See (https://www.archives.gov/federal-register/codification/executive-order/12170.html). The
Iranian Transactions Regulations (``ITR''), 31 CFT part 560,
implement a series of Executive Orders that began with E.O. 12613
issued in 1987, which prohibit the importation of Iranian-origin
goods and services. In response to Iran's continued support of
international terrorism and active pursuit of weapons of mass
destruction, U.S. sanctions have expanded to include E.O. 12957
(March 1997), which imposed prohibition on certain transactions with
respect to the development of petroleum resources, and in May 1995,
E.O. 12959, which imposed comprehensive trade and financial
sanctions on Iran. In August 1997, E.O. 13059 was issued
consolidating and clarifying the previous orders. See (https://treasury.gov/resource-center/sanctions/Programs/Documents/iran.pdf).
---------------------------------------------------------------------------
To further amplify financial pressure on Iranian financial
institutions involved in Iran's support for terrorism and weapons
proliferation, President Obama signed into law the Comprehensive Iran
Sanctions, Accountability, and Divestment Act of 2010 (``CISADA'') on
July 1, 2010, which includes a provision that authorizes the Secretary
of the Treasury to impose sanctions on foreign financial institutions
that knowingly facilitate certain activities related to Iran.\71\ On
August 16, 2010, Treasury's Office of Foreign Assets Control (``OFAC'')
published a final rule implementing certain aspects of CISADA, \72\ and
on October 5, 2011, FinCEN published a final rule to implement section
104(e) of CISADA to complement Treasury's ongoing efforts to protect
the international financial system from abuse by Iran.\73\
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\71\ For a full discussion of CISADA and its provisions, See the
U.S. Department of the Treasury Web site (https://www.treasury.gov/resource-center/sanctions/Documents/hr2194.pdf).
\72\ See OFAC CISADA regulations at 75 FR 49836 (August 16,
2010) or 31 CFR part 561 (https://edocket.access.gpo.gov/2010/pdf/2010-20238.pdf).
\73\ See Fact Sheet ``FinCEN Implements Provision of the
Comprehensive Iran Sanctions, Accountability, and Divestment Act of
2010,'' October 5, 2011 (https://www.fincen.gov/news_room/nr/html/20111005.html).
---------------------------------------------------------------------------
As a result of the strengthened U.S. sanctions and similar measures
taken by the United Nations and other members of the global community,
Iran now faces significant barriers to conducting international
transactions. In response, Iran has used deceptive financial practices
to disguise both the nature of transactions and its involvement in them
in an effort to circumvent sanctions. This conduct puts any financial
institution involved with Iranian entities at risk of unwittingly
facilitating transactions related to terrorism, proliferation, or the
evasion of U.S. and multilateral sanctions. Iranian financial
institutions, including the Central Bank of Iran (``CBI''), and other
state-controlled entities, willingly engage in deceptive practices to
disguise illicit conduct, evade international sanctions, and undermine
the efforts of responsible regulatory agencies around the world.
Iranian financial institutions: Iran employs numerous deceptive
practices to disguise the Iranian origin of transactions in order to
avoid scrutiny and evade international sanctions. These practices
include the transfer of funds from Iran to exchange houses outside Iran
and the use of back-to-back letters of credit. Iranian foreign bank
branches transfer funds to local banks in the same jurisdiction for
onward payments that may conceal the Iranian origin of funds.
In other examples, Bank Sepah has requested that its name be
removed from transactions in order to make it
[[Page 72761]]
more difficult for intermediary financial institutions to determine the
true parties to a transaction.\74\ As noted in Treasury's designation,
Bank Melli took precautions not to identify Bank Sepah in transactions
following Bank Sepah's designation under UNSCR 1747 and employed
similar deceptive banking practices to obscure its involvement from
non-Iranian financial institutions when handling financial transactions
on behalf of the IRGC.\75\
---------------------------------------------------------------------------
\74\ ``Testimony of Stuart Levey, Under Secretary for Terrorism
and Financial Intelligence, Before the Senate Committee on Banking,
Housing and Urban Affairs,'' March 21, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp325.aspx).
\75\ ``Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support for
Terrorism,'' U.S. Treasury, October 25, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
---------------------------------------------------------------------------
In June 2010, Post Bank of Iran was designated by the Treasury
Department under E.O. 13382 \76\ for facilitating transactions on
behalf of Bank Sepah after Bank Sepah was designated by the UN and
United States.\77\ The designation further notes that, in 2009, Post
Bank facilitated business on behalf of Bank Sepah between Iran's
defense industries and overseas beneficiaries and transacted millions
of dollars worth of business between U.S.-designated Hong Kong
Electronics and other overseas beneficiaries.\78\
---------------------------------------------------------------------------
\76\ ``Fact Sheet: U.S. Treasury Department Targets Iran's
Nuclear and Missile Programs,'' U.S. Treasury, June 16, 2010 (https://www.treasury.gov/press-center/press-releases/Pages/tg747.aspx).
\77\ Id.
\78\ Id.
---------------------------------------------------------------------------
The Central Bank of Iran, which regulates Iranian banks, has
assisted designated Iranian banks by transferring billions of dollars
to these banks in 2011. In mid-2011, the CBI transferred several
billion dollars to designated banks, including Saderat, Mellat, EDBI
and Melli, through a variety of payment schemes. In making these
transfers, the CBI attempted to evade sanctions by minimizing the
direct involvement of large international banks with both CBI and
designated Iranian banks. Additionally, the CBI transfers funds to
designated Iranian bank branches outside Iran via non-Iranian foreign
banks, often involving deliberate attempts on its part to conceal that
the recipient is a designated Iranian bank. In some cases, this
activity involves book-to-book transfers and the use of accounts at
intermediary banks that hold accounts for the CBI and designated banks.
Further, the CBI was believed to have provided financing to the UN-
sanctioned Khatem al-Anbiya Constructions Headquarters for defense-
related projects.
Front companies: Iran has a well-established history of using front
companies and complex corporate ownership structures to disguise the
involvement of government entities known to be involved in Iranian
proliferation activity when conducting commercial transactions. These
companies transact substantial business in Iran and elsewhere around
the world. For example, Novin, an AEOI front company that operates as
the financial arm of AEOI, has transferred millions of dollars on
behalf of AEOI to entities associated with Iran's nuclear program.\79\
Additionally, Mesbah Energy Company (``Mesbah''), was designated under
EO 13382 for being controlled by, or acting or purporting to act for or
on behalf of AEOI, and was cited in UNSCR 1737.\80\ Mesbah has been
used to procure products for Iran's heavy water project.\81\ Heavy
water is essential for Iran's heavy-water-moderated reactor, which will
provide Iran with a potential source of plutonium that could be used
for nuclear weapons.\82\
---------------------------------------------------------------------------
\79\ See UNSCR 1747 (https://www.un.org/Docs/sc/unsc_resolutions07.htm); and ``Treasury Employs Financial Sanctions
Against WMD Proliferation Supporters in Iran,'' U.S. Treasury,
January 4, 2006 (https://www.treasury.gov/press-center/press-releases/Pages/js3069.aspx).
\80\ See UNSCR 1737 (https://www.un.org/Docs/sc/unsc_resolutions06.htm) and ``Treasury Employs Financial Sanctions
Against WMD Proliferation Supporters in Iran,'' U.S. Treasury,
January 4, 2006 (https://www.treasury.gov/press-center/press-releases/Pages/js3069.aspx).
\81\ ``Testimony of Robert W. Werner, Director Office of Foreign
Assets Control,'' U.S. Treasury, February 16, 2006 (https://www.treasury.gov/press-center/press-releases/Pages/js4053.aspx).
\82\ Id.
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In some cases, the connection to Iran is not readily apparent, as
Iranian entities have formed front companies outside of Iran in an
attempt to obtain dual-use items for Iran that could be used in Iran's
nuclear or missile programs and that otherwise could not legally be
exported directly to Iran.\83\ For example, Iranian companies and their
fronts have also falsified end-user information on export forms to
allow prohibited items to be exported into the country.\84\ Iran has
colluded with some exporters to enter fictitious end-user names in the
importer section of export forms in order to evade international and
national controls on shipments to Iran.\85\ For example, in May 2010,
Balli Aviation Ltd., a UK subsidiary of Balli Group PLC, pled guilty in
the U.S. District Court for the District of Columbia to exporting three
Boeing 747 aircraft to Iran without obtaining the proper authorization
from the United States.\86\
---------------------------------------------------------------------------
\83\ ``Testimony of Stuart Levey, Under Secretary for Terrorism
and Financial Intelligence, Before the Senate Committee on Banking,
Housing and Urban Affairs,'' March 21, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp325.aspx).
\84\ ``German Report Details Smuggling of Nuclear Bomb, Missile
Components to Iran,'' Hamburg Stem, July 16, 2009.
\85\ ``Kyodo: Mitutoyo Falsifies Iranian Recipient's Name to Get
Export Permission,'' Tokyo Kyodo World Service, August 26, 2006
(https://www.freerepublic.com/focus/f-news/1690388/posts).
\86\ See ``U.K. Firm Fined $2 Million After Pleading Guilty to
Illegally Exporting Boeing 747 Aircraft to Iran,'' U.S. Department
of Justice, May 11, 2010 (https://www.justice.gov/opa/pr/2010/May/10-nsd-551.html).
---------------------------------------------------------------------------
Iranian commercial entities deploy the above mentioned practices
specifically to evade those controls put in place by the United States,
international community, and responsible financial institutions,
controls that are designed to enforce international sanctions, prevent
the proliferation of nuclear weapons and their delivery systems, and
protect the international financial sector from abuse by illicit
actors. These practices by Iranian entities have allowed Iran to engage
in illicit activities and operate undetected in the international
economy.\87\
---------------------------------------------------------------------------
\87\ ``Testimony of Stuart Levey, Under Secretary for Terrorism
and Financial Intelligence, Before the Senate Committee on Banking,
Housing and Urban Affairs,'' March 21, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp325.aspx).
---------------------------------------------------------------------------
The IRGC: The IRGC, which was designated by the Department of State
as a primary proliferator under E.O. 13382 in October 2007,\88\ owns
and/or controls multiple commercial entities across a wide range of
sectors within the Iranian economy. For example, the IRGC established
Khatam al-Anbiya,\89\ the largest major Iranian construction
conglomerate, to generate income and fund IRGC operations while
presenting the company as a legitimate company
[[Page 72762]]
working on civilian projects.\90\ Khatam al-Anbiya was designated by
Treasury in 2007 pursuant to E.O. 13382.\91\ U.S.-designated, Iranian-
linked financial institutions have served as an important lifeline for
Khatam al-Anbiya. The U.S. and EU-designated Iranian banks Melli,
Mellat, and state-owned Iranian Bank Tejarat have provided financial
support to Khatam al-Anbiya-related business before and after the UN
designation of Khatam al-Anbiya and fourteen of its subsidiaries.
---------------------------------------------------------------------------
\88\ See ``Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support for
Terrorism,'' U.S. Treasury, October 25, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
\89\ In October 2007, the Treasury Department designated nine
IRGC-affiliated companies and five IRGC-affiliated individuals for
proliferation activity under E.O. 13382 as derivatives of the IRGC,
including Khatam al-Anbiya Construction Headquarters, which secured
deals worth at least $7 billion in the oil, gas and transportation
sectors, among others, in 2006. See Id. The European Union also
designated Khatam al-Anbiya for supporting the Iranian ballistic
missile and nuclear programs. See ``European Council Common Position
2008/479/CFSP,'' Official Journal of the European Union, June 23,
2008 (https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:163:0043:0049:en:PDF).
\90\ ``Ex-Iranian Official Tells UK Daily About Likely IRGC
Earnings, Activities,'' The Financial Times, March 16, 2007.
\91\ ``Fact Sheet: Designation of Iranian Entities and
Individuals for Proliferation Activities and Support for
Terrorism,'' U.S. Treasury, October 25, 2007 (https://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
---------------------------------------------------------------------------
The IRGC has continued to expand its control over commercial
enterprises within Iran. For example, Tidewater Middle East Company
(``Tidewater''), a port operating company, was designated by Treasury
under E.O. 13382 in June 2011 as a company that is owned by the IRGC.
Tidewater has operations at seven Iranian ports,\92\ some of which the
Iranian government has repeatedly used to export arms or related
material in violation of UNSCRs.\93\ Treasury also designated Iran Air
under E.O. 13382 for providing material support to the IRGC and MODAFL,
both of which used the commercial airline carrier to transport
military-related equipment on passenger aircraft.\94\ Similarly, as
noted in Treasury's designation of the leadership within the IRGC-Qods
Force (``IRGC-QF''), the IRGC and the IRGC-QF engage in seemingly
legitimate activities that provide cover for intelligence operations
and support terrorist groups such as Hizballah, Hamas and the
Taliban.\95\
---------------------------------------------------------------------------
\92\ ``See U.S. Treasury ``Fact Sheet: Treasury Sanctions Major
Iranian Commercial Entities,'' June 23, 2011. (https://www.treasury.gov/press-center/press-releases/Pages/tg1217.aspx).
\93\ Id.
\94\ Id.
\95\ ``Fact Sheet: U.S. Treasury Department Targets Iran's
Support for Terrorism,'' U.S. Treasury Department, August 3, 2010
(https://www.treasury.gov/press-center/press-releases/Pages/tg810.aspx).
---------------------------------------------------------------------------
Islamic Republic of Iran Shipping Lines (``IRISL''): Treasury
designated IRISL, Iran's national maritime carrier, and affiliated
entities pursuant to E.O. 13382 for providing logistical services to
MODAFL.\96\ The concern over IRISL's role in Iran's illicit activities
has grown significantly within the international community. In October
2009, the UK and Bermuda also designated IRISL.\97\ Three IRISL-related
entities, Irano Hind Shipping Company, IRISL Benelux NV, and South
Shipping Line Iran (SSL), were sanctioned by the UN in June 2010.\98\
Subsequently, the EU, Australia, Canada, Japan, Norway, South Korea,
and Switzerland adopted measures against IRISL.\99\ Additionally, as
IRISL became increasingly unable to maintain adequate hull and
protection-and-indemnity (P&I) insurance because of international
sanctions, IRISL was forced to turn to Tehran-based Moallem Insurance
Company, which was not in the business of providing maritime insurance.
Treasury designated Moallem in December 2010 for providing marine
insurance to IRISL vessels.\100\
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\96\ ``Major Iranian Shipping Company Designated for
Proliferation Activity,'' U.S. Treasury, September 10, 2008 (https://www.treasury.gov/press-center/press-releases/Pages/tg1067.aspx).
\97\ See ``The Financial Restrictions (Iran) Order 2009,'' HM
Treasury, October 12, 2009 (https://www.hm-treasury.gov.uk/d/fin_crime_iran_order.pdf) and ``Anti-Terrorism (Financial Restrictions
Iran) Order 2010,'' The Minister of Justice, January 15, 2010
(https://www.bermudalaws.bm/Laws/Consolidated%20Laws/Anti-Terrorism%20(Financial%20Restrictions%20Iran)%20Order%202010.pdf).
\98\ See UN Security Resolution 1929 (https://daccess-dds-ny.un.org/doc/UNDOC/GEN/N10/396/79/PDF/N1039679.pdf?OpenElement).
\99\ See ``Council Implementing Regulation (EU) No 668/2010,''
European Union, July 26, 2010 (https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:195:0025:0036:EN:PDF); ``Accompanying
Measures Pursuant to United Nations Security Council Resolution
1929,'' Ministry of Foreign Affairs of Japan, September 3, 2010
(https://www.mofa.go.jp/region/middle_e/iran/measures_unsc_1009.html); ``Government Regarding the Implementation of UNSCR
1929,'' Republic of Korea, September 8, 2010; ``Charter of the
United Nations (Sanctions--Iran) (Specified Entities) List 2010,
Government of Australia, August 4, 2010 (https://www.comlaw.gov.au/Details/F2010L02236); Special Economic Measures (Iran) Regulations,
Government of Canada, August 4, 2010 (https://canadagazette.gc.ca/rp-pr/p2/2010/2010-08-04/html/sor-dors165-eng.html); ``Press Release,''
Government of Norway, Ministry of Foreign Affairs, January 14, 2011
(https://www.regjeringen.no/mobil/en/dep/ud/press/news/2011/sanctions_iran_adopted.html?id=630820); ``Iran: Federal Council
Takes Steps to Improve Legal Certainty and Prevent Possible
Evasion,'' January 19, 2011, The Federal Authorities of the Swiss
Federation (https://www.admin.ch/aktuell/00089/?lang=en&msg-id=37283).
\100\ See ``Fact Sheet: Treasury Designates Iranian Entities
Tied to the IRGC and IRISL,'' December 21, 2010. (https://www.treasury.gov/press-center/press-releases/Pages/tg1010.aspx).
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Iran's main shipping line has long relied upon deceptive techniques
to conceal its behavior and to avoid international and U.S.
sanctions.\101\ IRISL is increasingly employing deceptive practices to
disguise its involvement in shipping operations and the designation of
its cargo. Since being subjected to U.S. and international sanctions,
IRISL has renamed as many as 80 of the ships in its fleet and changed
ownership information and flag registries to evade sanctions.\102\
IRISL also has renamed its offices in China, Singapore, Germany, and
South Korea, has tried to mask its operations in the UAE by using a
network of front companies,\103\ and has moved its container operations
to a subsidiary, HDS Lines.\104\ Moreover, IRISL has also since stopped
referring to HDS Lines in bills of lading from its shipping agent.\105\
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\101\ For example, on June 20, 2011, the District Attorney of
New York announced a 317-count indictment of eleven corporations and
five individuals for their roles in a conspiracy involving IRISL,
its regional offices, and its agents. The indictment alleged that
the defendants evaded U.S. economic sanctions tied to bans on trade
with countries that harbor foreign terrorist and proliferators of
weapons of mass destruction. In doing so, the defendants repeatedly
falsified the records of banks located in New York County to access
illegally the U.S. financial system. The defendants deceived
Manhattan banks into pr
