Imposition of Fifth Special Measure Against the Islamic Republic of Iran as a Jurisdiction of Primary Money Laundering Concern, 59302-59313 [2019-23697]
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Federal Register / Vol. 84, No. 213 / Monday, November 4, 2019 / Rules and Regulations
(c) * * * For additional definitions
that apply for purposes of their
respective sections, see §§ 1.385–3(g)
and 1.385–4T(e).
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(4) * * *
(iv) * * * For purposes of the section
385 regulations, a corporation is a
member of an expanded group if it is
described in this paragraph (c)(4)(iv)
immediately before the relevant time for
determining membership (for example,
immediately before the issuance of a
debt instrument (as defined in § 1.385–
3(g)(4)) or immediately before a
distribution or acquisition that may be
subject to § 1.385–3(b)(2) or (3)).
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(d) * * *
(1) * * *
(i) In general. If a debt instrument (as
defined in § 1.385–3(g)(4)) is deemed to
be exchanged under the section 385
regulations, in whole or in part, for
stock, the holder is treated for all
Federal tax purposes as having realized
an amount equal to the holder’s
adjusted basis in that portion of the debt
instrument as of the date of the deemed
exchange (and as having basis in the
stock deemed to be received equal to
that amount), and, except as provided in
paragraph (d)(1)(iv)(B) of this section,
the issuer is treated for all Federal tax
purposes as having retired that portion
of the debt instrument for an amount
equal to its adjusted issue price as of the
date of the deemed exchange. In
addition, neither party accounts for any
accrued but unpaid qualified stated
interest on the debt instrument or any
foreign exchange gain or loss with
respect to that accrued but unpaid
qualified stated interest (if any) as of the
deemed exchange. This paragraph
(d)(1)(i) does not affect any rules in Title
26 of the United States Code that
otherwise apply to the debt instrument
prior to the date of the deemed
exchange (for example, this paragraph
(d)(1)(i) does not affect the issuer’s
deduction of accrued but unpaid
qualified stated interest otherwise
deductible prior to the date of the
deemed exchange). Moreover, the stock
issued in the deemed exchange is not
treated as a payment of accrued but
unpaid original issue discount or
qualified stated interest on the debt
instrument for Federal tax purposes.
(ii) * * * Notwithstanding the first
sentence of paragraph (d)(1)(i) of this
section, the rules of § 1.988–2(b)(13)
apply to require the holder and the
issuer of a debt instrument that is
deemed to be exchanged under the
section 385 regulations, in whole or in
part, for stock to recognize any exchange
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gain or loss, other than any exchange
gain or loss with respect to accrued but
unpaid qualified stated interest that is
not taken into account under paragraph
(d)(1)(i) of this section at the time of the
deemed exchange. * * *
(iii) Section 108(e)(8). For purposes of
section 108(e)(8), if the issuer of a debt
instrument is treated as having retired
all or a portion of the debt instrument
in exchange for stock under paragraph
(d)(1)(i) of this section, the stock is
treated as having a fair market value
equal to the adjusted issue price of that
portion of the debt instrument as of the
date of the deemed exchange.
(iv) * * *
(A) A debt instrument that is issued
by a disregarded entity is deemed to be
exchanged for stock of the regarded
owner under § 1.385–3T(d)(4);
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506–AB42
Imposition of Fifth Special Measure
Against the Islamic Republic of Iran as
a Jurisdiction of Primary Money
Laundering Concern
Financial Crimes Enforcement
Network, (‘‘FinCEN’’), Treasury.
ACTION: Final rule.
AGENCY:
§ 1.385–3 Transactions in which debt
proceeds are distributed or that have a
similar effect.
FinCEN is issuing this final
rule, pursuant to Section 311 of the USA
PATRIOT Act, to prohibit the opening
or maintaining of correspondent
accounts in the United States for, or on
behalf of, Iranian financial institutions,
and the use of foreign financial
institutions’ correspondent accounts at
covered U.S. financial institutions to
process transactions involving Iranian
financial institutions.
DATES: This final rule is effective
November 14, 2019.
FOR FURTHER INFORMATION CONTACT: The
FinCEN Resource Center, (800) 949–
2732, refer to FDMS Docket No.
FinCEN–2019–0002.
SUPPLEMENTARY INFORMATION:
*
I. Statutory Provisions
§ 1.385–2
■
[Removed]
Par. 3. Section 1.385–2 is removed.
Par. 4. Section 1.385–3 is amended by
revising paragraph (g)(4) to read as
follows:
■
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(g) * * *
(4) Debt instrument. The term debt
instrument means an interest that
would, but for the application of this
section, be treated as a debt instrument
as defined in section 1275(a) and
§ 1.1275–1(d).
*
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*
Par. 5. Section 1.1275–1 is amended
by revising the last sentence of
paragraph (d) to read as follows:
■
§ 1.1275–1
Definitions.
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(d) * * * See § 1.385–3 for rules that
treat certain instruments that otherwise
would be treated as indebtedness as
stock for Federal tax purposes.
*
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*
Sunita Lough,
Deputy Commissioner for Services and
Enforcement.
Approved: September 30, 2019.
David J. Kautter,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2019–23817 Filed 10–31–19; 4:15 pm]
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SUMMARY:
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,
Public Law 107–56 (USA PATRIOT
Act). Title III of the USA PATRIOT Act
amended the anti-money laundering
(AML) 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, 5316–5332, to promote the
prevention, detection, and prosecution
of international money laundering and
the financing of terrorism. Regulations
implementing the BSA appear at 31 CFR
chapter X. The authority of the
Secretary of the Treasury (Secretary) to
administer the BSA and its
implementing regulations has been
delegated to FinCEN.
Section 311 of the USA PATRIOT Act
(Section 311), codified at 31 U.S.C.
5318A, grants FinCEN the authority,
upon finding that reasonable grounds
exist for concluding that a jurisdiction
outside of the United States, one or
more financial institutions operating
outside of the United States, one or
more classes of transactions within or
involving a jurisdiction outside of the
United States, or one or more types of
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accounts is of primary money
laundering concern, to require domestic
financial institutions and domestic
financial agencies to take certain
‘‘special measures.’’ The five special
measures enumerated in Section 311 are
preventative safeguards that defend the
U.S. financial system from money
laundering and terrorist financing.
FinCEN may impose one or more of
these special measures in order to
protect the U.S. financial system from
these threats. Special measures one
through four, codified at 31 U.S.C.
5318A(b)(1)–(b)(4), impose additional
recordkeeping, information collection,
and reporting requirements on covered
U.S. financial institutions. The fifth
special measure, codified at 31 U.S.C.
5318A(b)(5), allows FinCEN to prohibit,
or impose conditions on, the opening or
maintaining in the U.S. of
correspondent or payable-through
accounts for, or on behalf of, a foreign
bank, if such correspondent account or
payable-through account involves the
foreign jurisdiction, financial
institution, class of transaction, or type
of account found to be of primary
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.1 The Secretary must also
consider such information as the
Secretary determines to be relevant,
including the following potentially
relevant factors:
• 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;
• 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.
Upon finding that a jurisdiction is of
primary money laundering concern, the
Secretary may require covered financial
institutions to take one or more special
measures. In selecting which special
measure(s) to take, the Secretary ‘‘shall
consult with the Chairman of the Board
of Governors of the Federal Reserve
System, any other appropriate federal
banking agency (as defined in Section 3
of the Federal Deposit Insurance Act),
the Secretary of State, the Securities and
Exchange Commission, the Commodity
Futures Trading Commission, the
National Credit Union Administration
Board, and at the sole discretion of the
Secretary, such other agencies and
interested parties as the Secretary may
find appropriate.’’ 2 In imposing the fifth
special measure, the Secretary must do
so ‘‘in consultation with the Secretary of
State, the Attorney General, and the
Chairman of the Board of Governors of
the Federal Reserve System.’’ 3
In addition, in selecting which special
measure(s) to take, the Secretary shall
consider the following factors:
• Whether similar action has been or
is being taken by other nations or
multilateral groups;
• whether the imposition of any
particular special measure 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, institution, class
of transactions, or type of account; and
• the effect of the action on U.S.
national security and foreign policy.4
II. Public Participation
FinCEN’s decision to take this action
as a final rule is consistent with the
Administrative Procedure Act (APA)
and in the interest of U.S. foreign
policy. Section 311’s fifth special
measure ‘‘may be imposed only by
2 31
U.S.C. 5318A(a)(4)(A).
U.S.C. 5318A(b)(5).
4 31 U.S.C. 5318A(a)(4)(B).
3 31
1 31
U.S.C. 5318A(c)(1).
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regulation.’’ 5 The APA exempts
regulations involving ‘‘a military or
foreign affairs function of the United
States’’ from its requirements for notice
of proposed rulemaking, the
opportunity for public participation,
and a 30 day delay in effective date.6 As
set forth in more detail below, this rule
imposes a special measure with regard
to the jurisdiction of the Islamic
Republic of Iran (Iran). Iran is the
subject of a national emergency
declaration identifying it as an unusual
and extraordinary threat to the national
security, foreign policy, and economy of
the United States and is the subject of
multiple Executive Orders identifying it
as a supporter of terrorism as well as
other malign activities.7 The special
measure described herein relates to
important foreign policy goals of the
U.S. Government, namely to deny the
Iranian regime resources to support
terrorism, develop nuclear weapons
and/or the proliferation of weapons of
mass destruction, advance its ballistic
missile program, oppress the Iranian
people, and fuel conflicts in Syria,
Afghanistan, Yemen and elsewhere.
Rapid imposition of the fifth special
measure pursuant to Section 311,
without any procedural delays caused
by soliciting public comments
concerning U.S. foreign policy, will
further protect the U.S. financial system
from Iran by ensuring that U.S. financial
institutions are not exposed to Iran’s
ongoing illicit finance activities,
including its support for international
terrorism. Because this rule involves a
foreign affairs function, it is exempt
from the provisions of the APA
requiring notice of proposed
rulemaking, the opportunity for public
participation, and a 30 day delay in
effective date. Because no notice of
proposed rulemaking is required for this
rule, the Regulatory Flexibility Act
(RFA) (5 U.S.C. 601–612) does not
apply. To ensure orderly
implementation, FinCEN will delay its
effective date until November 14, 2019.
III. Summary of the Final Rule
This final rule sets forth (i) FinCEN’s
finding that Iran is a jurisdiction of
primary money laundering concern
pursuant to Section 311, and (ii)
FinCEN’s imposition of a prohibition
under the fifth special measure on the
opening or maintaining of
5 31
U.S.C. 5318A(a)(2)(C).
U.S.C. 553(a)(1).
7 See, e.g., E.O. 12957, ‘‘Prohibiting Certain
Transactions With Respect to the Development of
Iranian Petroleum Resources’’ (1995); E.O. 13848,
‘‘Reimposing Certain Sanctions With Respect to
Iran’’ (2018); E.O. 13876, ‘‘Imposing Sanctions With
Respect to Iran’’ (2019).
65
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correspondent accounts in the United
States for, or on behalf of, Iranian
financial institutions, and the use of
foreign financial institutions’
correspondent accounts at covered U.S.
financial institutions to process
transactions involving Iranian financial
institutions.
IV. Treasury Actions Involving Iran
The U.S. Department of the Treasury
(Treasury) has taken numerous actions
to publicly highlight and counter Iran’s
malign activities, including
implementation of a multitude of
sanctions programs and issuance of
several advisories. On November 5,
2018, the United States fully re-imposed
the sanctions on Iran that had been
lifted or waived under the Joint
Comprehensive Plan of Action
(JCPOA).8 However, Iran has continued
to evade these sanctions, fund terror and
destabilizing activities, and advance its
ballistic missile development. As a
result, Treasury and the U.S.
Department of State (State Department)
have continued imposing sanctions on
Iranian persons, as well as persons in
third countries who have continued to
transact with Iran, or who have acted for
or on behalf of designated Iranian
persons.
On November 28, 2011, FinCEN
issued an NPRM proposing the
implementation of the fifth special
measure against Iran as a jurisdiction of
primary money laundering concern
pursuant to Section 311.9 10
V. Finding Iran To Be a Jurisdiction of
Primary Money Laundering Concern
Based on information available to
FinCEN, including both public and nonpublic reporting,11 and after considering
the factors listed in the 311 statute and
performing the requisite interagency
consultations with the Secretary of State
and Attorney General as required by 31
U.S.C. 5318A(c)(1), FinCEN finds that
reasonable grounds exist for concluding
8 The JCPOA was finalized on July 14, 2015,
between the U.S., China, France, Germany, Russia,
the United Kingdom, the European Union, and Iran
to ensure that Iran’s nuclear program would be
exclusively peaceful. The U.S. announced it would
cease its participation in the JCPOA on May 8,
2018.
9 See 76 FR 72878 (November 28, 2011),
Imposition of Special Measure Against the Islamic
Republic of Iran as a Jurisdiction of Primary Money
Laundering Concern.
10 FinCEN intends to issue a separate document
withdrawing the 2011 NPRM.
11 FinCEN may submit classified information
used in support of a Section 311 finding and special
measure(s) determination to a reviewing court ex
parte and in camera. See Section 376 of the
Intelligence Authorization Act for fiscal year 2004,
Public Law 108–177 (amending U.S.C. 5318A by
adding new paragraph (f)).
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that Iran is a jurisdiction of primary
money laundering concern. While
FinCEN has considered all factors set
forth in Section 5318A(c)(2)(A), a
discussion of those factors most relevant
to this finding follows.
Iran’s Abuse of the International
Financial System
Iran has developed covert methods for
accessing the international financial
system and pursuing its malign
activities, including misusing banks and
exchange houses, operating
procurement networks that utilize front
or shell companies, exploiting
commercial shipping, and masking
illicit transactions using senior officials,
including those at the Central Bank of
Iran (CBI). Iran has also used precious
metals to evade sanctions and gain
access to the financial system, and may
in the future seek to exploit virtual
currencies. These efforts often serve to
fund the Islamic Revolutionary Guard
Corps (IRGC), its Islamic Revolutionary
Guard Corps Qods Force (IRGC–QF),
Lebanese Hizballah (Hizballah), Hamas,
the Taliban and other terrorist groups.12
Factor 1: 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 13
a. Role of CBI Officials in Facilitating
Terrorist Financing
Senior CBI officials have played a
critical role in enabling illicit networks,
using their official capacity to procure
hard currency and conduct transactions
for the benefit of the IRGC–QF and its
terrorist proxy groups. The CBI has been
complicit in these activities, including
providing billions of U.S. dollars (USD)
and euros to the IRGC–QF, Hizballah
and other terrorist organizations. Since
at least 2016, the CBI has provided the
IRGC–QF with the vast majority of its
foreign currency. During 2018 and early
2019, the CBI transferred several billion
USD and euros from the Iranian
National Development Fund (NDF) to
the IRGC–QF.
12 Advisory on the Iranian Regime’s Illicit and
Malign Activities and Attempts to Exploit the
Financial System, FinCEN, October 11, 2018.
13 31 U.S.C. 5318A(c)(2) states that in making a
finding that a jurisdiction is of primary money
laundering concern, the Secretary shall consider in
addition to such information as the Secretary
determines to be relevant, the potentially relevant
factors enumerated in section 5318A(c)(2)(A). Due
to Iran’s role as a state sponsor of terrorism and the
extraterritorial nature of its malign conduct,
FinCEN determined it was relevant to consider
terrorism and weapons proliferation transactions
with the government of Iran in addition to such
transactions in the jurisdiction of Iran, as discussed
in this section.
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In September 2019, Treasury
designated the CBI and NDF under its
counterterrorism authority, Executive
Order (E.O.) 13224, as amended by E.O.
13886. The Iranian government
established the NDF to serve the welfare
of the Iranian people by allocating
revenues from oil and gas sales to
economic investments, but has instead
used the NDF as a slush fund for the
IRGC–QF, for years disbursing hundreds
of millions of USD in cash to the IRGC–
QF. In coordination with the CBI, the
NDF provided the IRGC–QF with half a
billion USD in 2017 and hundreds of
millions of USD in 2018.
In November 2018, Treasury
designated nine persons—including two
CBI officials—involved in an
international network through which
Iran provided millions of barrels of oil
to Syria via Russian companies, in
exchange for Syria’s facilitation of the
movement of hundreds of millions of
USD to the IRGC–QF, for onward
transfer to Hizballah and Hamas.14 The
designations highlighted, as the
Secretary stated, that ‘‘[CBI] officials
continue to exploit the international
financial system, and in this case even
used a company whose name suggests a
trade in humanitarian goods as a tool to
facilitate financial transfers supporting
this oil scheme.’’ 15
The scheme was centered on Syrian
national Mohammad Amer Alchwiki
and his Russia-based company, Global
Vision Group. Global Vision worked
with Russian state-owned company
Promsyrioimport to facilitate shipments
of Iranian oil to Syria. To assist the
Bashar Al-Assad regime in paying
Russia for this service, Iran sent funds
to Russia through Alchwiki and Global
Vision. To conceal its involvement, the
CBI made payments to Mir Business
Bank 16 using Iran-based Tadbir Kish
Medical and Pharmaceutical Company.
Following the CBI’s transfer of funds
from Tadbir Kish to Global Vision,
Global Vision transferred payments to
Promsyrioimport.
CBI senior officials were crucial to the
scheme’s success. CBI International
Department Director Rasul Sajjad and
CBI Vice Governor for International
Affairs Hossein Yaghoobi both assisted
in facilitating Alchwiki’s transfers. First
Deputy Director of Promsyrioimport
Andrey Dogaev worked closely to
14 Treasury Designates Illicit Russia-Iran Oil
Network Supporting the Assad Regime, Hizballah,
and Hamas, November 20, 2018, https://
home.treasury.gov/news/press-release/sm553.
15 Id.
16 Treasury designated Mir Business Bank on
November 5, 2018. It is a wholly-owned subsidiary
of Iran’s Bank Melli, which was designated for
acting as a conduit for payments to the IRGC–QF.
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coordinate the sale of Iranian crude oil
to Syria with Yaghoobi, who has a
history of working with Hizballah in
Lebanon and has coordinated financial
transfers to Hizballah with IRGC–QF
and Hizballah personnel. Using this
scheme, the network exported millions
of barrels of Iranian oil into Syria, and
funneled millions of USD between the
CBI and Alchwiki’s Mir Bank account in
Russia.17
Separately, in May 2018, in
connection with a scheme to move
millions of USD for the IRGC–QF,
Treasury designated the then-governor
of the CBI, Valiollah Seif, the assistant
director of CBI’s international
department, Ali Tarzali, Iraq-based alBilad Islamic Bank, Aras Habib, AlBilad’s Chairman and Chief Executive,
and Muhammad Qasir, a Hizballah
official. Treasury designated them as
Specially Designated Global Terrorists
(SDGTs) pursuant to E.O. 13224.
Treasury stated that Seif had covertly
funneled millions of USD on behalf of
the IRGC–QF through al-Bilad Bank to
support Hizballah’s radical agenda, an
action that undermined the credibility
of his commitment to protecting CBI’s
integrity.18
Also in May 2018, Treasury, in a joint
action with the United Arab Emirates
(UAE), designated nine Iranian
individuals and entities involved in an
extensive currency exchange network
that was procuring and transferring
millions in USD-denominated bulk cash
to the IRGC–QF to fund its malign
activities and regional proxy groups.
The CBI was complicit in the IRGC–
QF’s scheme, actively supported the
network’s currency conversion, and
enabled it to access funds that it held in
its foreign bank accounts.19
The CBI and senior CBI officials have
a history of using exchange houses to
conceal the origin of funds and procure
foreign currency for the IRGC–QF.
During periods of heightened sanctions
pressures, Iran has relied heavily on
third-country exchange houses and
trading companies to move funds to
evade sanctions. Iran uses them to act as
money transmitters in processing funds
transfers through the United States to
third-country beneficiaries, in support
17 Treasury Designates Illicit Russia-Iran Oil
Network Supporting the Assad Regime, Hizballah,
and Hamas, November 20, 2018, https://
home.treasury.gov/news/press-release/sm553.
18 Treasury Targets Iran’s Central Bank Governor
and an Iraqi Bank Moving Millions of Dollars for
IRGC-Qods Force, May 15, 2018, https://
home.treasury.gov/news/press-release/sm0385.
19 United States and United Arab Emirates
Disrupt Large Scale Currency Exchange Network
Transferring Millions of Dollars to the IRGC–QF,
May 10, 2018, https://home.treasury.gov/news/
press-releases/sm0383.
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of business with Iran that is in violation
of U.S. sanctions targeting Iran. These
third-country exchange houses or
trading companies frequently lack their
own U.S. Dollar accounts and instead
rely on the correspondent accounts of
their regional banks to access the U.S.
financial system.20
Additionally, according to
information provided to FinCEN, in
2017, the CBI coordinated with
Hizballah to arrange a single EUR funds
transfer to a Turkish bank worth over
$50 million USD.
b. IRGC’s Abuse of the International
Financial System
Iran is the world’s leading state
sponsor of terrorism, providing material
support to numerous Treasurydesignated terrorist groups, including
Hizballah, Hamas, and the Taliban,
often via its IRGC–QF. The IRGC–QF is
an elite unit within the IRGC, the
military and internal security force
created after the Islamic Revolution.
IRGC–QF personnel advise and support
pro-Iranian regime factions worldwide,
including several which, like Hizballah,
Hamas, and the Taliban, the United
States has similarly designated as
terrorists.
Treasury has designated the IRGC
pursuant to several E.O.s: E.O. 13382 in
connection with its support to Iran’s
ballistic missile and nuclear programs;
E.O. 13553 for serious human rights
abuses by the Iranian government; E.O.
13606 in connection with grave human
rights abuses; E.O. 13224 for global
terrorism, and consistent with the
Countering America’s Adversaries
Through Sanctions Act, for its support
of the IRGC–QF. Treasury has
designated the IRGC–QF pursuant to
E.O. 13224 for providing material
support to terrorist groups, including
the Taliban, E.O. 13572 for support to
the Syrian General Intelligence
Directorate, the Assad regime’s civilian
intelligence service, and E.O. 13553 for
serious human rights abuses by the
Iranian government.
In April 2019, the State Department
designated the IRGC, including the
IRGC–QF, as a Foreign Terrorist
Organization (FTO).21 It was the first
time that the United States designated a
part of another government as an FTO—
an action that highlighted Iran’s use of
terrorism as a central tool of its
statecraft and an essential element of its
20 Advisory on the Iranian Regime’s Illicit and
Malign Activities and Attempts to Exploit the
Financial System, FinCEN, October 11, 2018.
21 Designation of the Islamic Republic
Revolutionary Guard Corps, April 8, 2019, https://
www.state.gov/designation-of-the-islamicrevolutionary-guard-corp/.
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foreign policy. The IRGC is integrally
woven into the Iranian economy,
operating institutions and front
companies worldwide, so that the
profits from seemingly legitimate
business deals may actually fund
Iranian terrorism.22
The IRGC–QF’s misuse of the
international financial system to enable
its nefarious activities include
numerous examples that have occurred
in the United States. In May 2018, the
United States and the UAE took joint
action to disrupt an extensive currency
exchange network that was procuring
and transferring millions in USDdenominated bulk cash to the IRGC–QF
to fund its malign activities and regional
proxy groups. Treasury designated nine
Iranian individuals and entities, and
noted that key CBI officials supported
the transfer of funds.23
On November 5, 2018, in connection
with the re-imposition of U.S. nuclearrelated sanctions that had been lifted or
waived under the JCPOA, Treasury
sanctioned over 700 individuals,
entities, aircraft, and vessels in its
largest ever single-day action targeting
Iran. The action included the
designations of more than 70 Iran-linked
financial institutions and their foreign
and domestic subsidiaries. Bank Melli
was among those banks designated
pursuant to E.O. 13224 for assisting in,
sponsoring, or providing financial,
material, or technological support for, or
other services to or in support of, the
IRGC–QF. As of 2018, the equivalent of
billions of USD in funds had transited
IRGC–QF controlled accounts at Bank
Melli. Moreover, Bank Melli had
enabled the IRGC and its affiliates to
move funds into and out of Iran, while
the IRGC–QF, using Bank Melli’s
presence in Iraq, had used Bank Melli
to pay Iraqi Shia militant groups.24
On November 20, 2018, Treasury
designated nine individuals and entities
in an international network through
which the Iranian regime worked with
Russian companies to provide millions
of barrels of oil to the Assad regime in
Syria. The Assad regime, in turn,
facilitated the movement of hundreds of
22 Intent to Designate the Islamic Revolutionary
Guard Corps as a Foreign Terrorist Organization,
April 8, 2019, https://www.state.gov/intent-todesignate-the-islamic-revolutionary-guard-corps-asa-foreign-terrorist-organization/.
23 United States and United Arab Emirates
Disrupt Large Scale Currency Exchange Network
Transferring Millions of Dollars to the IRGC–QF,
May 10, 2018, https://home.treasury.gov/news/
press-releases/sm0383.
24 U.S. Government Fully Re-Imposes Sanctions
on the Iranian Regime As Part of Unprecedented
U.S. Economic Pressure Campaign, November 5,
2018, https://home.treasury.gov/news/pressreleases/sm541.
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millions of USD to the IRGC–QF for
onward transfer to Hamas and
Hizballah.25
In March 2019, Treasury took action
against 25 individuals and entities,
including a network of Iran, UAE, and
Turkey-based front companies that
transferred over a billion USD and euros
to the IRGC, IRGC–QF and Iran’s
Ministry of Defense and Armed Forces
Logistics (MODAFL). The action
included a designation of Ansar Bank,
an Iranian bank controlled by the IRGC,
and its currency exchange arm, Ansar
Exchange, for providing banking
services to the IRGC–QF.26
In June 2019, Treasury designated an
Iraq-based IRGC–QF financial conduit,
South Wealth Resources Company
(SWRC), which trafficked hundreds of
millions of U.S. dollars’ worth of
weapons to IRGC–QF-backed militias.
SWRC and its two Iraqi associates
covertly facilitated the IRGC–QF’s
access to the Iraqi financial system to
evade sanctions, while also generating
profits in the form of commission
payments for a Treasury-designated
advisor to the IRGC–QF’s commander,
Qasem Soleimani. Soleimani has run
weapons smuggling networks,
participated in bombings of Western
embassies, and attempted assassinations
in the region.27
Iran’s activities include acts of
attempted violence in the United States.
In October 2011, pursuant to E.O.
13224, Treasury designated four senior
IRGC–QF officers and Mansoor
Arbabsiar, a naturalized U.S. citizen, for
plotting to assassinate the Saudi
Arabian Ambassador to the United
States. In an example that laid bare the
risks financial institutions take when
transacting with Iran, payment for the
assassination reached Arbabsiar from
Tehran via two wire transfers totaling
approximately $100,000 USD, sent from
a non-Iranian foreign bank to a U.S.
bank.28
25 Treasury Designates Illicit Russia-Iran Oil
Network Supporting the Assad Regime, Hizballah,
and Hamas, November 20, 2018, https://
home.treasury.gov/news/press-release/sm553.
26 United States Disrupts Large Scale Front
Company Network Transferring Hundreds of
Millions of Dollars and Euros to the IRGC and Iran’s
Ministry of Defense, March 26, 2019, https://
home.treasury.gov/news/press-release/sm639.
27 Treasury Targets IRGC-Qods Force Financial
Conduit in Iraq for Trafficking Weapons Worth
Hundreds of Millions of Dollars, June 12, 2019,
https://home.treasury.gov/news/press-release/
sm706.
28 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.
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c. Iranian Support to Terrorists
Hizballah
Despite its attempts to portray itself as
a legitimate political entity, Hizballah is
first and foremost a terrorist
organization, responsible for the most
American deaths by terrorism prior to
the September 11, 2001 terrorist attacks.
A Lebanon-based Shia militant group
formed in Lebanon in 1982, Hizballah
was responsible for the suicide truck
bombings of the U.S. Embassy in Beirut,
Lebanon in April 1983, the U.S. Marine
barracks in Beirut in October 1983, the
U.S. Embassy annex in Beirut in 1984,
the hijacking of TWA 847 in 1985, and
the Khobar Towers attack in Saudi
Arabia in 1996.29 Iran provides upwards
of $700 million USD annually toward
Hizballah’s estimated $1 billion USD
budget.
Hizballah is listed in the annex to
E.O. 12947 from January 1995,
‘‘Prohibiting Transactions With
Terrorists Who Threaten to Disrupt The
Middle East Peace Process.’’ The State
Department designated Hizballah in
October 1997 as an FTO and in October
2001 as an SDGT pursuant to E.O.
13224. Treasury issued additional
sanctions against Hizballah in August
2012 pursuant to E.O. 13582 (which
targets the government of Syria and its
supporters) specifically in connection
with Hizballah’s efforts to coordinate
with the IRGC–QF in support of the
Assad regime.30 At the request of the
IRGC–QF, Hizballah has deployed
thousands of fighters into Syria in
support of the Assad regime.
As recently as September 2019,
Treasury took action against a large
shipping network directed by and
financially supporting both the IRGC–
QF and Hizballah. In the past year, the
IRGC–QF has moved Iranian oil worth
at least hundreds of millions of USD
through the network for the benefit of
the Assad regime and other illicit actors.
The sprawling network uses dozens of
ship managers, vessels, and other
facilitators and intermediaries to enable
the IRGC–QF to obfuscate its
involvement; to broker associated
contracts, it also relies heavily on front
companies and Hizballah officials
(including Muhammad Qasir,
designated by Treasury in November
2018 in connection with the illicit
Russia-Iran oil network supporting
Assad, Hizballah, and Hamas). Pursuant
29 Hizballah, Counterterrorism Guide, Office of
the Director of National Intelligence, https://
www.dni.gov/nctc/groups/hizballah.html.
30 Treasury Targets Hizballah for Supporting the
Assad Regime, August 10, 2012, https://
www.treasury.gov/press-center/press-releases/
Pages/tg1676.aspx.
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to E.O. 13224, Treasury identified
several vessels as property in which
blocked persons have an interest, and
pursuant to E.O. 13224, designated 16
entities and 10 individuals, including
senior IRGC–QF official and former
Iranian Minister of Petroleum Rostam
Qasemi, who oversees the network.
Treasury Under Secretary for Terrorism
and Financial Intelligence Sigal
Mandelker noted that the designations
demonstrated Iran’s economic reliance
on the terrorist groups IRGC–QF and
Hizballah as financial lifelines.31
In July 2019, Treasury designated key
Hizballah political and security
figures—two members of Lebanon’s
Parliament and one Hizballah security
official—who were leveraging their
positions to facilitate Hizballah’s agenda
and do Iran’s bidding. Noting that one
of the Parliament members, Amin
Sherri, has been photographed with
IRGC–QF Commander Soleimani,
Treasury stated that Hizballah uses its
operatives in Lebanon’s Parliament to
bolster Iran’s malign activities.32 Also in
July 2019, Treasury designated Salman
Raouf Salman pursuant to E.O. 13224.
Salman, a senior member of an
Hizballah organization dedicated to
carrying out attacks outside Lebanon,
coordinated the devastating attack in
1994 against the AMIA Jewish
community center in Buenos Aires,
Argentina, and has been directing
terrorist operations in the Western
Hemisphere ever since. The designation
of Salman marked over 50 Hizballahlinked designations by Treasury since
2017.33
Hizballah is a global terrorist
organization, active in Syria, Iraq, and
Yemen, and Hizballah plots have been
thwarted in South America, Asia,
Europe, and the United States. In June
2017 in New York, Ali Kourani and
Samer El Debek were arrested and
charged for alleged activities on behalf
of Hizballah. Kourani conducted
surveillance of potential U.S. targets,
including military and law enforcement
facilities in New York City, and was
subsequently convicted on all eight
counts, which included terrorism,
sanctions, and immigration-related
offenses. El Debek allegedly conducted
missions in Panama to locate U.S. and
31 Treasury Targets Wide Range of Terrorists and
Their Supporters Using Enhanced Counterterrorism
Sanctions Authorities, September 10, 2019, https://
home.treasury.gov/news/press-release/sm772.
32 Treasury Targets Iranian-Backed Hizballah
Officials for Exploiting Lebanon’s Political and
Financial System, July 9, 2019, https://
home.treasury.gov/news/press-release/sm724.
33 Treasury Targets Senior Hizballah Operative
for Perpetrating and Plotting Terrorist Attacks in
the Western Hemisphere, July 19, 2019, https://
home.treasury.gov/news/press-release/sm737.
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Israeli Embassies and assess the
vulnerabilities of the Panama Canal and
the ships that transit it.34 35
According to information available to
FinCEN, in early 2015, the IRGC–QF
provided approximately $20 million
USD to Hizballah, over half of which
was to be used for ballistic missile
expenses. In 2017, the CBI coordinated
with Hizballah to arrange a single EUR
funds transfer to a Turkish bank worth
over $50 million USD.
More recently, and as noted in the
previous section, in November 2018,
Treasury designated nine persons
involved in an international network
through which Iran provided millions of
barrels of oil to Syria via Russian
companies, in exchange for Syria’s
facilitation of the movement of
hundreds of millions of USD banknotes
to the IRGC–QF for onward transfer to
Hizballah and Hamas. Treasury noted at
the time of the designations that
Mohammad Amer Alchwiki, a central
player in this scheme, was acting as a
critical conduit for the transfer of the
USD banknotes. Alchwiki worked with
the Central Bank of Syria to coordinate
transfers to Hizballah official
Muhammad Qasir, in charge of the
Hizballah unit responsible for weapons,
technology, and other support transfers.
In its press release, Treasury included a
photo of a letter dated April 17, 2018,
from Alchwiki and Qasir to a CBI
official, confirming receipt of $63
million USD.36
Also as noted previously, in May
2018, in connection with a scheme to
move millions of USD for the IRGC–QF,
Treasury designated a network that
included Valiollah Seif, Iran’s thengovernor of the CBI, Iraq-based al-Bilad
Islamic Bank, and Muhammad Qasir, a
Hizballah official. Treasury designated
them as SDGTs pursuant to E.O. 13224
after finding that Seif had covertly
funneled millions of USD on behalf of
the IRGC–QF through al-Bilad Bank to
support Hizballah’s radical agenda.37
34 Bronx Man and Michigan Man Arrested for
Terrorist Activities On Behalf Of Hizballah’s Islamic
Jihad Organization, June 8, 2017, https://
www.justice.gov/usao-sdny/pr/bronx-man-andmichigan-man-arrested-terrorist-activities-behalfhizballah-s-islamic.
35 Ali Kourani Convicted in Manhattan Federal
Court for Covert Terrorist Activities on Behalf of
Hizballah’s Islamic Jihad Organization, May 17,
2019, https://www.justice.gov/opa/pr/ali-kouraniconvicted-manhattan-federal-court-terroristactivities-behalf-hizballah-s.
36 Treasury Designates Illicit Russia-Iran Oil
Network Supporting the Assad Regime, Hizballah,
and Hamas, November 20, 2018, https://
home.treasury.gov/news/press-release/sm553.
37 Treasury Targets Iran’s Central Bank Governor
and an Iraqi Bank Moving Millions of Dollars for
IRGC-Qods Force, May 15, 2018, https://
home.treasury.gov/news/press-release/sm0385.
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Hamas
Iran also has a history of supporting
Hamas. Hamas was established in 1987
at the onset of the first Palestinian
intifada. Prior to 2005, Hamas’
numerous attacks on Israel included
U.S. citizens as casualties. The State
Department designated Hamas as an
FTO in October 1997, and Treasury
designated it as an SDGT pursuant to
E.O. 13224 in October 2001.38
Iran provides Hamas with funds,
weapons, and training. During periods
of substantial Iran-Hamas collaboration,
Iran’s support to Hamas has been
estimated to be as high as $300 million
USD per year, but at a baseline amount,
is widely assessed to be in the tens of
millions per year. The Iran-Hamas
relationship was forged in the 1990s as
part of an attempt to disrupt the IsraeliPalestinian peace process, but in 2012,
their divergent positions on Syria
caused a rift. Subsequently, Iran sought
to rebuild the relationship, and in
October 2017, Hamas leaders restored
the group’s relations with Iran during a
visit to Tehran.39
According to information available to
FinCEN, in March 2015, Hamas
expressed gratitude for Iran’s previous
financial support, and requested that
Iran resume providing aid. In January
2016, Hamas officials in Gaza were
awaiting monetary payments from the
IRGC–QF. The Hamas officials expected
the Iranian government to transfer
money to the IRGC–QF in Beirut, who
would then transfer it onward to them.
Additionally, in 2016, Hamas had
received a significant sum of IRGC–QF
funding via financiers in Turkey.
In August 2019, Treasury, in
partnership with the Sultanate of Oman,
designated financial facilitators who
funneled tens of millions of USD
between the IRGC–QF and Hamas’s
operational arm, the Izz-Al-Din AlQassam Brigades, for terrorist attacks
originating from Gaza. The Izz-Al-Din
Al-Qassam Brigades is a designated FTO
and SDGT. At the center of the scheme
uncovered by Treasury and Oman was
Mohammad Sarur, a Lebanon-based
financial operative in charge of all
financial transfers between the IRGC–
QF and the Izz-Al-Din Al-Qassam
Brigades. Sarur was a middle-man
between the IRGC–QF and Hamas and
worked with Hizballah operatives to
ensure the Izz-Al-Din Al-Qassam
38 Country Reports on Terrorism 2016, U.S.
Department of State, Chapter 3: State Sponsors of
Terrorism, Iran, Chapter 6, Foreign Terrorist
Organizations, Hamas.
39 Iran’s Foreign and Defense Policies,
Congressional Research Service, R44017, Version
56, Updated October 9, 2018.
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59307
Brigades received funds. The IRGC–QF
transferred over $200 million USD to
the Izz-Al-Din Al-Qassam Brigades in
the past four years.40
In September 2019, in an action
targeting a wide range of terrorists and
their supporters using enhanced
counterterrorism sanctions authorities,
Treasury designated two Iran-linked
Hamas officials. Pursuant to the
amended counterterrorism E.O., E.O.
13224, Treasury designated Turkeybased Redin Exchange and its Deputy
Head, Ismael Tash. Since at least 2017,
Tash has had contact with a money
transfer channel managed by
Mohammad Sarur that transferred
IRGC–QF money to Hamas; as of
January 2019, Tash was a key player in
many Iran-Hamas financial transfers.
Treasury also designated Zaher Jabarin,
the Turkey-based head of Hamas’
Finance Office. Jabarin has overseen the
transfer of hundreds of thousands of
USD in the West Bank to finance
Hamas’ terrorist activities; he has also
served as a primary interlocutor
between Hamas and the IRGC–QF.41
Taliban
Iran seeks influence in Afghanistan in
a number of ways, including by offering
economic assistance and engaging the
central government—but also by arming
Taliban fighters and supporting proIranian groups. In October 2010, thenPresident Hamid Karzai admitted that
Iran was providing about $2 million
USD annually in cash payments to his
government.42 Treasury designated the
Taliban as an SDGT in 2002.
In October 2018, the seven member
nations of the Terrorist Financing
Targeting Center (TFTC),43 designated
nine Taliban-associated individuals,
including those facilitating Iranian
support to bolster the Taliban. The
Secretary described Iran’s provision of
support to the Taliban as yet another
example of its support for terrorism, and
its utter disregard for United Nations
Security Council Resolutions (UNSCRs)
and other international norms. Treasury
noted that the action’s inclusion of
IRGC–QF members supporting Taliban
elements highlighted the scope of Iran’s
regionally destabilizing behavior.
40 Treasury Targets Facilitators Moving Millions
to HAMAS in Gaza, August 29, 2019, https://
home.treasury.gov/news/press-release/sm761.
41 Treasury Targets Wide Range of Terrorists and
Their Supporters Using Enhanced Counterterrorism
Sanctions Authorities, September 10, 2019, https://
home.treasury.gov/news/press-release/sm772.
42 Iran’s Foreign and Defense Policies,
Congressional Research Service, R44017, Version
70, Updated July 23, 2019.
43 The seven TFTC member states are the U.S.,
Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and
the UAE.
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Among those designated were
Mohammad Ebrahim Owhadi, an IRGC–
QF officer, and Abdullah Samad
Faroqui, the Taliban Deputy Shadow
Governor for Herat Province. In 2017,
Owhadi and Faroqui reached an
agreement for the IRGC–QF’s provision
of military and financial assistance to
Faroqui, in exchange for Faroqui’s
forces attacking the Afghan government
in Herat. Also designated were Esma’il
Razavi, who was in charge of the
training center at the IRGC–QF base in
Birjand, Iran, which as of 2014,
provided training, intelligence, and
weapons to Taliban forces in Farah,
Ghor, Badhis, and Helmand Provinces,
Afghanistan. In 2008, as the senior
IRGC–QF official in Birjand, Razavi’s
base supported anti-coalition militants
in Farah and Herat. Also designated by
the TFTC were Naim Barich, previously
Treasury- and UN-sanctioned, who as of
late 2017 was the Taliban Shadow
Minister of Foreign Affairs managing
Taliban relations with Iran, and Sadr
Ibrahim, the leader of the Taliban’s
Military Commission, whom Iranian
officials agreed to provide with financial
and training support in order to build
the Taliban’s tactical and combat
capabilities.44
d. Entities Involved in the Proliferation
of WMD or Missiles
Under UNSCR 2231 (2015), which
endorsed the JCPOA, the sale, supply, or
transfer to Iran of Nuclear Suppliers
Group (NSG) 45-controlled items
requires advance approval by the UNSC.
Despite this, in July 2019, Treasury
identified and acted against a network
of front companies and agents involved
in procuring sensitive materials—
including NSG-controlled materials—
without UNSC approval for sanctioned
elements of Iran’s nuclear program.
Treasury designated seven entities and
five individuals in Iran, China, and
Belgium, for acting as a procurement
network for Iran’s Centrifuge
Technology Company, which plays a
crucial role in Iran’s uranium
enrichment through the production of
centrifuges for Atomic Energy
Organization of Iran facilities.46
Additionally, in August 2019,
Treasury designated two Iranian regime44 Treasury and the Terrorist Financing Targeting
Center Partners Sanction Taliban Facilitators and
their Iranian Supporters, October 23, 2018, https://
home.treasury.gov/news/press-release/sm532.
45 The NSG is a multinational export control
regime that seeks to prevent nuclear proliferation by
controlling the export of materials, equipment, and
technology that can be used to manufacture nuclear
weapons.
46 Treasury Sanctions Global Iranian Nuclear
Enrichment Network, July 18, 2019, https://
home.treasury.gov/news/press-release/sm736.
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linked networks pursuant to E.O. 13382
for engaging in covert procurement
activities benefiting multiple Iranian
military organizations. One network has
used a Hong Kong-based front company
to evade U.S. and international
sanctions and procure tens of millions
of dollars’ worth of U.S. technology and
electronic components on behalf of the
IRGC and Iran’s missile program. The
other network has procured NSGcontrolled aluminum alloy products on
behalf of MODAFL subsidiaries.47
Iran’s ongoing pursuit of ballistic
missile technology is well known. In
2018, Iran conducted nine ballistic
missile tests in defiance of UNSCR 2231
(2015), including the launch of short
range ballistic missiles in September
and October 2018, which were
inconsistent with paragraph 3 of Annex
B of UNSCR 2231.48 The U.S. Secretary
of State described Iran’s test-firing of a
medium-range ballistic missile capable
of carrying multiple warheads in
December 2018 as another violation of
UNSCR 2231.49 In July 2017, Iran tested
a Simorgh space launch vehicle, which
the United States, France, Germany, and
the United Kingdom all assessed to have
used technology similar to that of
intercontinental ballistic missiles.50 In
January 2017, Iran launched a mediumrange missile able to carry a payload
greater than 500 kilograms in excess of
300 kilometers, making it inherently
capable of delivering a nuclear
explosive device. In 2016, Iran unveiled
two short-range ballistic missiles and
announced that it was pursuing longrange precision-guided missiles.51
In January 2018, two Iranian nationals
tried to buy Kh-31 missile components
in Kiev, Ukraine, which would have
been a violation of the UN arms
embargo on Iran. Ukraine’s security
service detained the men while they
were in possession of the missile parts
and technical documents on their use.
Ukraine subsequently deported the men,
47 Treasury Targets Procurement Networks
Supporting Iran’s Missile Proliferation Programs,
August 28, 2019, https://home.treasury.gov/news/
press-release/sm759.
48 Letter from the Permanent Representative of
Israel to the UN, November 23, 2018.
49 Pompeo Condemns Iran Missile Test, Reuters,
December 1, 2018.
50 Letter from the Permanent Mission of the
Federal Republic of Germany to the UN, United
Kingdom Mission to the UN, and the Mission
Permanente De La France Aupres Des Nations
Unies to H.E. Mr. Ma Zhaoxu, Ambassador,
Permanent Representative of the People’s Republic
of China to the UN, November 20, 2018.
51 Iran’s Missile Proliferation: A Conversation
with Special Envoy Brian Hook, Hudson Institute,
September 19, 2018.
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one of whom was a military attache´ at
Iran’s Embassy in Kiev.52
According to information available to
FinCEN, Iran’s Shahid Bakeri Industrial
Group (SBIG) and Shahid Hemmat
Industrial Group (SHIG), respectively its
solid and liquid propellant ballistic
missile producers, utilize foreign
entities and networks to procure
missile-related materials and technology
and disguise their involvement in the
process. SBIG and SHIG are listed in the
annex to E.O. 13382, which targets
proliferators of WMD and their
supporters. Among the targets in
Treasury’s August 2019 designation
action was the Iranian firm Ebtekar
Sanat Ilya, which helped procure more
than one million dollars’ worth of
export-controlled, military-grade
electronic components for Iranian
military clients—including both SBIG
and SHIG.
In February 2017, Treasury designated
entities and individuals that were part
of the Abdollah Asgharzadeh network in
connection with their procurement of
dual-use and other goods on behalf of
organizations involved in Iran’s ballistic
missile program. The network
coordinated procurement through
intermediary companies that obfuscated
the true end-user of the goods, and
relied on the assistance of trusted
brokers based in China.53
Factor 2: The Extent to Which That
Jurisdiction Is Characterized by High
Levels of Official or Institutional
Corruption
The endemic corruption of Iran’s
government is well-known. According
to information available to FinCEN, in
late 2017, IRGC officials were aware of
corruption and mismanagement at an
IRGC economic development firm. The
officials estimated the cost of the
corruption to be approximately $5.5
billion USD—a figure which
represented losses, debts, and funds
required for a capital injection to
facilitate the firm’s dissolution.
Also according to information
available to FinCEN, as of mid-January
2018, after hearing complaints about
corruption in the armed forces’ financial
institutions, Iranian Supreme Leader Ali
Hoseini Khamenei issued a directive
requiring Iran’s armed forces to sell the
private companies they owned.
However, because Khamenei permitted
52 Busted: Ukraine Catches Iranian Military
Attache´ Trying to Smuggle KH–31 Parts out of Kiev,
The National Interest, July 2, 2019.
53 Treasury Sanctions Supporters of Iran’s
Ballistic Missile Program and Iran’s Islamic
Revolutionary Guard Corps-Qods Force, February
23, 2017, https://www.treasury.gov/press-center/
press-releases/Pages/as0004.aspx.
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the armed forces to use revenue from
the sales to then purchase shares in the
same companies, the directive appeared
to be a mere symbolic gesture to placate
public pressure, not a genuine effort to
lessen the IRGC’s role in the economy
or curb corruption.
In October 2018, Treasury designated
an Iran-based network comprised of
businesses providing financial support
to the Basij Resistance Force, a
paramilitary force subordinate to the
IRGC. As noted at the time of the
designation, among other malign
activities, the IRGC Basij militia
recruits, trains, and deploys child
soldiers to fight in IRGC-fueled conflicts
across the region. The Basij also
employs shell companies and other
measures to mask its ownership and
control over a variety of multibilliondollar business interests in Iran’s
automotive, mining, metals, and
banking industries.54
In June 2019, Treasury designated
Iran’s largest and most profitable
petrochemical holding group, Persian
Gulf Petrochemical Industries Company,
for providing financial support to
Khatam al-Anbiya Construction
Headquarters, the engineering arm of
the IRGC. Treasury noted that the IRGC
and its major holdings have a dominant
presence in Iran’s commercial and
financial sectors, maintaining extensive
economic interests in the defense,
construction, aviation, oil, banking,
metal, automobile, and mining
industries.55
Factor 3: The Substance and Quality of
Administration of the Bank Supervisory
and Counter-Money Laundering Laws of
That Jurisdiction
For more than a decade, the
international community has been
concerned about the deficiencies in
Iran’s anti-money laundering/countering
the financing of terrorism (AML/CFT)
program. As far back as October 11,
2007, the Financial Action Task Force
(FATF) issued a statement on Iran’s lack
of a comprehensive AML/CFT regime,
noting it represented a significant
vulnerability in the international
financial system. The FATF called upon
Iran to urgently address its AML/CFT
deficiencies, and advised financial
institutions to apply enhanced due
54 Treasury Designates Vast Financial Network
Supporting Iranian Paramilitary Force That
Recruits and Trains Child Soldiers, October 16,
2018, https://home.treasury.gov/news/press-release/
sm524.
55 Treasury Sanctions Iran’s Largest
Petrochemical Holding Group and Vast Network of
Subsidiaries and Sales Agents, June 7, 2019, https://
home.treasury.gov/news/press-release/sm703.
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diligence.56 In February 2009, the FATF
elevated its call for enhanced due
diligence by calling upon its members
and urging all jurisdictions to apply
effective counter-measures to protect
their financial sectors from money
laundering and terrorist financing risks
emanating from Iran.
In June 2016, due to Iran’s adoption
of, and high-level political commitment
to, an Action Plan to address its
strategic AML/CFT deficiencies, the
FATF agreed to suspend countermeasures for 12 months in order to
monitor Iran’s progress in implementing
its Action Plan. At the same time
however, the FATF expressed its
continuing concern with the terrorist
financing risk emanating from Iran and
the threat this posed to the international
financial system, and called for
financial institutions to continue
applying enhanced due diligence with
respect to Iran-related business
relationships and transactions.57 The
FATF issued similar statements between
October 2016 and June 2017, and in
October 2018 and February 2019
identified specific types of enhanced
due diligence measures to be applied
against Iran-related business
relationships and transactions.58
In its June 2019 and October 2019
Public Statements, the FATF noted that
Iran’s Action Plan had expired in
January 2018 and that major items
remained outstanding, including (1)
adequately criminalizing terrorist
financing, including by removing the
exemption for designated groups
‘‘attempting to end foreign occupation,
colonialism, and racism;’’ (2) identifying
and freezing terrorist assets in line with
the relevant UNSCRs; (3) ensuring an
adequate and enforceable customer due
diligence regime; (4) clarifying that the
submission of suspicious transaction
reports for attempted terrorist financingrelated transactions is covered under
Iran’s legal framework; (5)
demonstrating how authorities are
identifying and sanctioning unlicensed
money/value transfer service providers;
(6) ratifying and implementing the
Palermo and Terrorist Financing
Conventions and clarifying the
capability to provide mutual legal
assistance; and (7) ensuring that
financial institutions verify that wire
56 FATF Statement on Iran, 11 October 2007,
https://www.fincen.gov/sites/default/files/shared/
FATFOct2007.pdf.
57 Public Statement—24 June 2016, https://
www.fatf-gafi.org/publications/high-riskandnoncooperativejurisdictions/documents/publicstatement-june-2016.html.
58 Public Statement—23 June 2017, https://
www.fatf-gafi.org/publications/high-riskandnoncooperativejurisdictions/documents/publicstatement-june-2017.html.
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transfers contain complete originator
and beneficiary information.59 60
Due to these critical deficiencies, in
June 2019, the FATF decided to call
upon its members and urge all
jurisdictions to increase supervisory
examination for branches and
subsidiaries of financial institutions
based in Iran.61 In October 2019, the
FATF decided to call upon its members
and urge all jurisdictions to introduce
enhanced relevant reporting
mechanisms or systematic reporting of
financial transactions; and require
increased external audit requirements
for financial groups with respect to any
of their branches and subsidiaries
located in Iran.62 The FATF followed
this new requirement with a warning
stating that if before February 2020, Iran
does not enact the Palermo and Terrorist
Financing Conventions in line with the
FATF Standards, then the FATF will
fully lift the suspension of countermeasures and call on its members and
urge all jurisdictions to apply effective
counter-measures.63
A number of public statements from
senior Iranian government officials
suggest that Iran has no real intention of
adhering to international norms,
including the FATF standards. On
March 8, 2019, Gholamreza Mesbahi
Moghaddam, senior member of Iran’s
Expediency Council, the highest-level
political institution after the office of
the Supreme Leader, said ‘‘Passing CFT
and Palermo means giving away our
only remaining mechanism to bypass
U.S. sanctions which is to register shell
corporations in Iran and other countries
to do international trade deals.’’ 64 On
February 1, 2019, former Iranian
Defense Minister Brigadier General
Ahmad Vahidi, also an Expediency
Council member, said, the [FATF]
recommendations threaten Iran’s
economy and it is a framework adopted
by the global arrogance to impose
restrictions on Iran and pursue the
59 Public Statement—June 2019, https://www.fatfgafi.org/publications/high-risk-and-othermonitored-jurisdictions/documents/publicstatement-june-2019.html.
60 Public Statement—October 2019, https://
www.fatf-gafi.org/publications/high-risk-and-othermonitored-jurisdictions/documents/publicstatement-october-2019.html.
61 Public Statement—June 2019, https://www.fatfgafi.org/publications/high-risk-and-othermonitored-jurisdictions/documents/publicstatement-june-2019.html.
62 Public Statement—October 2019, https://
www.fatf-gafi.org/publications/high-risk-and-othermonitored-jurisdictions/documents/publicstatement-october-2019.html.
63 Id.
64 Mesbahi Moghaddam: We Will Not Stop
Evading Sanctions, Iran International, March 9,
2019, https://iranintl.com/en/iran/mesbahimoghaddam-we-will-not-stop-evading-sanctions.
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sanctions re-imposed against Tehran in
smarter ways.’’ 65 On September 9, 2018,
Ayatollah Ahmad Jannati, secretary of
Iran’s powerful Guardian Council, said,
‘‘I’ve studied both the Persian and
English versions and I soon came to the
conclusion that they want to give our
financial and banking information to the
enemy. They want us to sanction
ourselves. They want us to sanction the
individuals and institutions that the
enemy disagrees with. They want us to
sanction the [IRGC], revolutionary
institutions, and individuals.’’ 66
Factor 4: Whether the United States Has
a Mutual Legal Assistance Treaty
(MLAT) 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 Such Jurisdiction
The United States and Iran have not
had a substantive relationship since the
hostage-taking of U.S. Embassy
personnel by Iranians in November
1979, and subsequent severing of
diplomatic relations in April 1980.
MLATs facilitate the exchange of
information and financial records with
treaty partners in criminal and related
matters. The State Department
negotiates MLATs in cooperation with
the U.S. Department of Justice. As of the
date of this document, no MLAT is in
force with Iran. Additionally, the
Egmont Group is an international
organization through which many
countries’ financial intelligence units
(FIUs) share invaluable financial and
other information useful in law
enforcement and regulatory
investigations. As the U.S. FIU, FinCEN
is the U.S. representative to the Egmont
Group. No Iranian government entity is,
nor ever has been, a member of the
Egmont Group.
Given the lack of any cooperative
relationship generally, as well as Iran’s
inability to share information with the
United States via an MLAT or the
Egmont Group, the level of U.S.-Iran
cooperation on AML/CFT matters is
nonexistent. As a result, U.S. law
enforcement and regulatory officials
have an extremely limited ability to
obtain information about transactions
originating in or routed through Iran.
65 Iran Warns Europe to Avoid Tying Up INSTEX
to FATF, February 5, 2019, https://
en.farsnews.com/
newstext.aspx?nn=13971116000195.
66 Iran Faces Challenges in Implementing Its
FATF Action Plan, October 26, 2016, https://
www.washingtoninstitute.org/policy-analysis/view/
iran-faces-challenges-in-implementing-its-fatfaction-plan; https://www.aryanews.com/news/
20160909150648732 (original Farsi-language
article)
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VI. Considerations in Selecting the Fifth
Special Measure
Below is a discussion of the relevant
criteria FinCEN considered in selecting
a prohibition under the fifth special
measure with respect to Iran, after
having completed the required
interagency consultations with
Chairman of the Board of Governors of
the Federal Reserve System, the
Secretary of State, the Securities and
Exchange Commission, the Commodity
Futures Trading Commission, and the
National Credit Union Administration
Board in accordance with 31 U.S.C.
5318A(a)(4)(A) and the Secretary of
State, the Attorney General, and the
Chairman of the Board of Governors of
the Federal Reserve System in
accordance with 31 U.S.C. 5318A(b)(5).
Whether Similar Action Has Been or
Will Be Taken by Other Nations or
Multilateral Groups Against Iran
FinCEN notes that two Iranian banks
are currently designated by the
European Union as entities subject to an
asset freeze and prohibition to make
funds available: Ansar Bank and Mehr
Bank. FinCEN is unaware of any other
nation or multilateral group that has
prohibited or placed conditions on
Iranian banks’ correspondent banking
relationships, or has plans to do so.
However, as noted previously, in
October 2019, the FATF decided to call
upon its members and urge all
jurisdictions to introduce enhanced
relevant reporting mechanisms or
systematic reporting of financial
transactions; and require increased
external audit requirements for financial
groups with respect to any of their
branches and subsidiaries located in
Iran. The FATF followed this new
requirement with a warning stating that
if before February 2020, Iran does not
enact the Palermo and Terrorist
Financing Conventions in line with the
FATF Standards, then the FATF will
fully lift the suspension of countermeasures and call on its members and
urge all jurisdictions to apply effective
counter-measures.67 Regardless of the
FATF’s future actions, FinCEN assesses
that the correspondent account
prohibition under the fifth special
measure is necessary to ensure the
security of the U.S. financial system and
combat Iran’s malign and illicit
activities, including its support for
international terrorism.
67 Public Statement—June 2019, https://www.fatfgafi.org/publications/high-risk-and-othermonitored-jurisdictions/documents/publicstatement-june-2019.html.
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Whether the Imposition of the Fifth
Special Measure 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
Existing sanctions programs on Iran
administered by OFAC generally
prohibit the exportation, reexportation,
sale, or supply, directly or indirectly,
from the United States, or by a U.S.
person, wherever located, of any goods,
technology, or services to Iran. As a
result, U.S. financial institutions are
already broadly prohibited under
existing OFAC sanctions from opening
or maintaining correspondent accounts
for, or on behalf of, Iranian financial
institutions, or conducting any financial
transactions involving Iranian financial
institutions unless exempt from U.S.
sanctions or authorized by OFAC. In
addition, as of late September 2019, 24
Iranian financial institutions had been
designated under E.O. 13224, ten
Iranian financial institutions under E.O.
13382, one Iranian financial institution
under E.O. 13846, and one Iranian
financial institution under E.O. 13553.
Secondary sanctions apply to certain
transactions with each of these Iranian
banks.68 FinCEN assesses that
secondary sanctions already deter most
foreign financial institutions from doing
business with targeted Iranian financial
institutions, and the correspondent
account prohibition under the fifth
special measure will create no
competitive disadvantage for U.S.
financial institutions.
The Extent to Which the Action or
Timing of the Action Will Have a
Significant Adverse Systemic Impact on
the International Payment, Clearance,
and Settlement System, or on Legitimate
Business Activities of Iranian Financial
Institutions
FinCEN has no information indicating
that Iranian financial institutions are
major participants in the international
payment system or that they are relied
upon by the international banking
community for clearance or settlement
services. Further, as of mid-November
2018, the Society for Worldwide
Interbank Financial Telecommunication
(SWIFT) had disconnected designated
Iranian financial institutions, including
the CBI, from its financial messaging
service. Lastly, FinCEN assesses that
most Iranian payments are made using
currencies other than USD due to a long
68 Secondary sanctions generally are directed
toward non-U.S. persons for specified conduct
involving Iran that occurs entirely outside of U.S.
jurisdiction, according to OFAC’s website.
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history of U.S. sanctions and actions
targeting Iran. Thus, there is no reason
to conclude that the imposition of a
prohibition under the fifth special
measure against the jurisdiction of Iran
will have an adverse systemic impact on
the international payment, clearance,
and settlement system. FinCEN also
considered the extent to which this
action could have an impact on the
legitimate business activities of Iranian
financial institutions, and has
concluded that the need to protect the
U.S. financial system from Iran strongly
outweighs any such impact.
The Effect of the Action on U.S.
National Security and Foreign Policy
FinCEN assesses that prohibiting
covered financial institutions from
maintaining correspondent accounts for
Iranian financial institutions, and
preventing Iranian financial institutions’
indirect access to U.S. correspondent
accounts, will enhance national
security. The action serves as a measure
to further prevent illicit Iranian actors
from accessing the U.S. financial
system. It will further the U.S. national
security and foreign policy goals of
thwarting and exposing illicit Iranian
financial activity. Further, to the extent
that other nations, particularly those
that are strong U.S. trading partners,
choose to transact with Iran, there is a
greater risk of indirect activity occurring
between U.S. financial institutions and
Iran. Imposition of the fifth special
measure will impose a higher standard
of due diligence on U.S. financial
institutions in their engagement with
non-U.S. financial institutions.
Consideration of Alternative Special
Measures
As an alternative to a prohibition
under the fifth special measure on the
opening or maintenance of
correspondent accounts in the United
States for or on behalf of Iranian
financial institutions, and the use of
foreign financial institutions’
correspondent accounts at covered U.S.
financial institutions to process
transactions involving Iranian financial
institutions, FinCEN considered special
measures one through four, which
impose additional recordkeeping,
information collection, and reporting
requirements on covered U.S. financial
institutions. Under special measure five,
FinCEN also considered imposing
conditions on the opening or
maintaining of correspondent accounts
as an alternative to a prohibition on the
opening or maintaining of
correspondent accounts.
Given the nature of the illicit finance
threat, including the terrorist-finance
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threat, that the jurisdiction of Iran poses
to the United States and the U.S.
financial system, Iran’s welldocumented history of obscuring the
true nature of its illicit finance
activities, and Iran’s apparent disregard
of regulatory reform and enforcement
measures, as evidenced by the FATF’s
longstanding criticisms of its inadequate
AML/CFT program, FinCEN assesses
that any condition, additional
recordkeeping, information collection,
or reporting requirement would be
insufficient to guard against the risks
posed by covered financial institutions
that process Iran-related transactions
designed to obscure the transactions’
true purpose, and that are ultimately for
the benefit of illicit Iranian actors or
activities. Special measures one through
four and the imposition of conditions
under special measure five would
therefore fail to prevent Iran from
accessing the U.S. financial system,
either directly or indirectly, through the
correspondent accounts at U.S. financial
institutions. FinCEN assesses that a
prohibition under the fifth special
measure is the only special measure that
can adequately protect the U.S. financial
system from the illicit financial risk
posed by Iran.
VII. Section-by-Section Analysis for the
Imposition of a Prohibition Under the
Fifth Special Measure
Section 1010.661(a)—Definitions
1. Iranian Financial Institution
The final rule defines ‘‘Iranian
financial institution’’ as any foreign
financial institution, as defined at 31
CFR 1010.605(f), organized under
Iranian law wherever located, including
any agency, branch, office, or subsidiary
of such a financial institution operating
in any jurisdiction, and any branch or
office within Iran of any foreign
financial institution.
2. Correspondent Account
The final rule defines ‘‘correspondent
account’’ to have the same meaning as
the definition contained in 31 CFR
1010.605(c). In the case of a U.S.
depository institution, this broad
definition includes most types of
banking relationships between a U.S.
depository institution and a foreign
bank that are established to provide
regular services, dealings, and other
financial transactions, including a
demand deposit, savings deposit, or
other transaction or asset account, and
a credit account or other extension of
credit. FinCEN is using the same
definition of ‘‘account’’ for purposes of
this final rule as was established for
depository institutions in the final rule
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59311
implementing the provisions of Section
312 of the USA PATRIOT Act requiring
enhanced due diligence for
correspondent accounts maintained for
certain foreign banks.69 Under this
definition, ‘‘payable-through accounts’’
are a type of correspondent account. In
the case of securities broker-dealers,
futures commission merchants,
introducing brokers-commodities, and
investment companies that are open-end
companies (‘‘mutual funds’’), FinCEN is
also using the same definition of
‘‘account’’ for purposes of this final rule
as was established for these entities in
the final rule implementing the
provisions of Section 312 of the USA
PATRIOT Act requiring enhanced due
diligence for correspondent accounts
maintained for certain foreign banks.70
3. Covered Financial Institution
The final rule defines ‘‘covered
financial institution’’ with the same
definition used in the final rule
implementing the provisions of Section
312 of the USA PATRIOT Act, which in
general includes the following:
• An insured bank (as defined in
section 3(h) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(h)));
• a commercial bank;
• an agency or branch of a foreign
bank in the United States;
• a Federally-insured credit union;
• a savings association;
• a corporation acting under section
25A of the Federal Reserve Act (12
U.S.C. 611);
• a trust bank or trust company;
• a broker or dealer in securities;
• a futures commission merchant or
an introducing broker-commodities; and
• a mutual fund.
4. Foreign bank
The final rule defines ‘‘foreign bank’’
to mean a bank organized under foreign
law, or an agency, branch, or office
located outside the United States of a
bank. The term does not include an
agent, agency, branch, or office within
the United States of a bank organized
under foreign law. This is consistent
with the definition of ‘‘foreign bank’’
under 31 CFR 1010.100.
5. Subsidiary
The final rule defines ‘‘subsidiary’’ to
mean a company of which more than 50
percent of the voting stock or analogous
equity interest is owned by another
company.
69 See
70 See
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31 CFR 1010.605(c)(2)(i).
31 CFR 1010.605(c)(2)(ii)–(iv).
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Section 1010.661(b)—Prohibition on
Accounts and Due Diligence
Requirements for Covered Financial
Institutions
1. Prohibitions on Opening or
Maintaining Correspondent Accounts
Section 1010.661(b)(1) and (2) of this
final rule prohibits covered financial
institutions from opening or
maintaining in the United States
correspondent accounts for, or on behalf
of, Iranian financial institutions, unless
such account is authorized by OFAC. In
addition, under § 1010.661(b)(2) of this
final rule, a covered financial institution
shall take reasonable steps to not
process a transaction for the
correspondent account of a foreign bank
in the United States if such a transaction
involves an Iranian financial institution,
unless such transactions or payments
are authorized by OFAC.
Section 1010.661(b)(2) requires
covered financial institutions to take
reasonable steps to not process
transactions for the correspondent
accounts of foreign banks in the United
States involving Iranian financial
institutions that are prohibited
transactions.
The general licenses (i.e., those of
general applicability) issued pursuant to
the Iranian Transactions Sanctions
Regulations (ITSR) 31 CFR part 560 are
either published in the ITSR or available
on OFAC’s website: http://
www.treasury.gov/resource-center/
sanctions/programs/pages/iran.aspx. To
ensure that those permitted activities
are available as a practical matter,
correspondent accounts covered by the
exception may continue to be used to
conduct those permitted transactions.
Such reasonable steps are described in
§ 1010.661(b)(3), which sets forth the
special due diligence requirements a
covered financial institution will be
required to take when it knows or has
reason to believe that a transaction
involves an Iranian financial institution.
2. Special Due Diligence for
Correspondent Accounts
As a corollary to the prohibition set
forth in § 1010.661(b)(1) and (2),
§ 1010.661(b)(3) of the final rule will
require covered financial institutions to
apply to all of their foreign
correspondent accounts special due
diligence that is reasonably designed to
guard against such accounts being used
to process prohibited transactions
involving Iranian financial institutions.
As part of that special due diligence,
covered financial institutions are
required to notify those foreign
correspondent account holders that the
covered financial institutions know, or
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have reason to believe, provide services
to Iranian financial institutions, that
such correspondent institutions may not
provide the Iranian financial
institutions with access to the
correspondent accounts maintained at
the covered financial institutions to
process prohibited transactions. A
covered financial institution may satisfy
this notification requirement using the
following notice:
Notice: Pursuant to U.S. regulations issued
under Section 311 of the USA PATRIOT Act,
see 31 CFR 1010.661, we are prohibited from
opening or maintaining in the United States
a correspondent account for, or on behalf of,
any Iranian financial institution. The
regulations also require us to notify you that
you may not provide an Iranian financial
institution, including any of its agencies,
branches, offices, or subsidiaries, with access
to the correspondent account you hold at our
financial institution to process transactions
that are prohibited, and not authorized or
exempt, pursuant to the International
Emergency Economic Powers Act (50 U.S.C.
1701 et seq.) (IEEPA), any regulation, order
directive or license issued pursuant thereto,
or any other sanctions program administered
by the Department of the Treasury’s Office of
Foreign Asset Control (‘‘prohibited
transactions’’). If we become aware that the
correspondent account you hold at our
financial institution has processed any
prohibited transactions involving Iranian
financial institutions, including any agencies,
branches, offices, or subsidiaries thereof, we
will be required to take appropriate steps to
prevent such access, including terminating
your account.
The purpose of the notice requirement
is to aid cooperation with correspondent
account holders in preventing
transactions involving Iranian financial
institutions from accessing the U.S.
financial system. FinCEN does not
require or expect a covered financial
institution to obtain a certification from
any of its correspondent account
holders that access will not be provided
to comply with this notice requirement.
Methods of compliance with the notice
requirement could include, for example,
transmitting a notice by mail, fax, or
email. The notice should be transmitted
whenever a covered financial institution
knows or has reason to believe that a
foreign correspondent account holder
provides services to an Iranian financial
institution.
Special due diligence also includes
implementing risk-based procedures
designed to identify any use of
correspondent accounts to process
transactions involving Iranian financial
institutions. A covered financial
institution is expected to apply an
appropriate screening mechanism to
identify a funds transfer order that on its
face listed an Iranian financial
institution as originator or beneficiary,
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or otherwise referenced an Iranian
financial institution in a manner
detectable under the financial
institution’s normal screening
mechanisms. An appropriate screening
mechanism could be the mechanisms
used by a covered financial institution
to comply with various legal
requirements, such as the commercially
available software programs used to
comply with the economic sanctions
programs administered by OFAC.
3. Recordkeeping and Reporting
Section 1010.661(b)(4) of this rule
clarifies that paragraph (b) of the rule
does not impose any reporting
requirement upon any covered financial
institution that is not otherwise required
by applicable law or regulation. A
covered financial institution must,
however, document its compliance with
the notification requirement under
§ 1010.661(b)(3)(i)(A).
VIII. Paperwork Reduction Act
The collection of information
contained in this final rule is being
submitted to the Office of Management
and Budget for review in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)), and has been
assigned OMB Control Number 1506–
0074. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid OMB control
number.
Description of Affected Financial
Institutions: Banks, broker-dealers in
securities, futures commission
merchants, introducing brokerscommodities, and mutual funds.
Estimated Number of Affected
Financial Institutions: 23,615.71
Estimated Average Annual Burden in
Hours per Affected Financial
Institution: The estimated average
burden associated with the collection of
information in this final rule is two
71 This number is a total of: (1) The institutions
represented in the most recent reports of the
following regulators: the NCUA, who reported 5,375
institutions as of December 31, 2018 in its Quarterly
Credit Union Data Summary: 2018 Q4, and the
FDIC, who reported 5,358 FDIC-insured institutions
in its Key Statistics as of April 25, 2019; (2) a March
2017 Government Accountability Office Report
PRIVATE DEPOSIT INSURANCE: Credit Unions
Largely Complied with Disclosure Rules, but Rules
Should Be Clarified, that indicated that
approximately 125 credit unions were insured
privately; (3) 1,130 introducing brokers and 64
futures commodities merchants reported by the
National Futures Association on its website as of
March 31, 2019; (4) 3,607 securities firms as of
December 31, 2018 as reported by FINRA on its
website; and, (5) 7,956 U.S. mutual funds,
according to the 2018 Investment Company Fact
Book published by the Investment Company
Institute.
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Treasury’s Office of Foreign Assets
Control (OFAC).
hours per affected financial
institution.72
Estimated Total Annual Burden:
47,230 hours.
List of Subjects in 31 CFR Part 1010
Administrative practice and
procedure, Banks and banking, Brokers,
Counter-money laundering, Counterterrorism, Foreign banking.
Authority and Issuance
For the reasons set forth in the
preamble, Part 1010, chapter X of title
31 of the Code of Federal Regulations,
is amended as follows:
PART 1010—GENERAL PROVISIONS
1. The authority citation for Part 1010
continues to read as follows:
■
Authority: 12 U.S.C. 1829b and 1951–
1959; 31 U.S.C. 5311–5314, 5316–5332; Title
III, sec. 314, Pub. L. 107–56, 115 Stat. 307;
sec. 701, Pub. L. 114–74, 129 Stat. 599.
■
2. Add § 1010.661 to read as follows:
§ 1010.661
Special measures against Iran.
(a) Definitions. For purposes of this
section:
(1) Iranian financial institution means
any foreign financial institution, as
defined at § 1010.605(f), organized
under Iranian law wherever located,
including any agency, branch, office, or
subsidiary of such a financial institution
operating in any jurisdiction, and any
branch or office within Iran of any
foreign financial institution.
(2) Correspondent account has the
same meaning as provided in
§ 1010.605(c).
(3) Covered financial institution has
the same meaning as provided in
§ 1010.605(e)(1).
(4) Foreign bank has the same
meaning as provided in § 1010.100.
(5) Subsidiary means a company of
which more than 50 percent of the
voting stock or analogous equity interest
is owned by another company.
(b) Prohibition on accounts and due
diligence requirements for covered
financial institutions—(1) Opening or
maintaining correspondent accounts for
Iranian financial institutions. A covered
financial institution shall not open or
maintain in the United States a
correspondent account for, or on behalf
of, an Iranian financial institution,
unless such account is authorized by
United States Department of the
72 The estimated burden is two hours per
financial institution—one hour for a senior
executive of the financial institution to review and
approve the notice to be provided to correspondent
account holders, and one hour for a compliance
officer to provide notice to correspondent account
holders.
VerDate Sep<11>2014
16:10 Nov 01, 2019
Jkt 250001
Note 1 to paragraph (b)(1): Note that
covered financial institutions should block
and report to OFAC any accounts that are
blocked pursuant to any OFAC sanctions
authority and therefore should continue to
maintain such accounts in accordance with
the Reporting Procedures and Penalties
Regulations, 31 CFR part 501.
(2) Prohibition on use of
correspondent accounts. A covered
financial institution shall take
reasonable steps to not process a
transaction for the correspondent
account of a foreign bank in the United
States if such a transaction involves an
Iranian financial institution, unless the
transaction is authorized by, exempt
from, or not prohibited under the
International Emergency Economic
Powers Act (IEEPA) (50 U.S.C. 1701 et
seq.), any regulation, order, directive, or
license issued pursuant thereto, or any
other sanctions program administered
by the Department of the Treasury’s
Office of Foreign Asset Control.
(3) Special due diligence of
correspondent accounts to prohibit use.
(i) A covered financial institution shall
apply special due diligence to the
correspondent accounts of a foreign
bank that is reasonably designed to
guard against their use to process
transactions involving Iranian financial
institutions that are prohibited, and not
authorized or exempt, pursuant to the
IEEPA, any regulation, order, directive,
or license issued pursuant thereto, or
any other sanctions program
administered by the Department of the
Treasury’s Office of Foreign Asset
Control (‘‘prohibited transactions’’). At a
minimum, that special due diligence
must include:
(A) Notifying those foreign
correspondent account holders that the
covered financial institution knows or
has reason to believe the correspondent
account is being used to process
transactions involving Iranian financial
institutions that such prohibited
transactions may not take place; and
(B) Taking reasonable steps to identify
any use of its foreign correspondent
accounts for prohibited transactions
involving Iranian financial institutions,
to the extent that such use can be
determined from transactional records
maintained in the covered financial
institution’s normal course of business.
(ii) A covered financial institution
shall take a risk-based approach when
deciding what, if any, other due
diligence measures it reasonably must
adopt to guard against the use of its
foreign correspondent accounts to
process prohibited transactions
involving Iranian financial institutions.
PO 00000
Frm 00025
Fmt 4700
Sfmt 4700
59313
(iii) A covered financial institution
that knows or has reason to believe that
a foreign bank’s correspondent account
has been or is being used to process
prohibited transactions involving
Iranian financial institutions shall take
all appropriate steps to further
investigate and prevent such access,
including the notification of its
correspondent account holder under
paragraph (b)(3)(i)(A) of this section
and, where necessary, termination of the
correspondent account.
(4) Recordkeeping and reporting. (i) A
covered financial institution is required
to document its compliance with the
notice requirement set forth in this
section.
(ii) Nothing in this section shall
require a covered financial institution to
report any information not otherwise
required to be reported by law or
regulation.
Kenneth A. Blanco,
Director, Financial Crimes Enforcement
Network.
[FR Doc. 2019–23697 Filed 11–1–19; 8:45 am]
BILLING CODE 4810–02–P
NATIONAL FOUNDATION ON THE
ARTS AND THE HUMANITIES
National Endowment for the
Humanities
45 CFR Part 1169
RIN 3136–AA18
Implementation of the Privacy Act of
1974
National Endowment for the
Humanities, National Foundation on the
Arts and the Humanities.
ACTION: Final rule; technical correction.
AGENCY:
On July 19, 2019, the National
Endowment for the Humanities (NEH)
published in a final rule implementing
its agency-specific Privacy Act
regulation. This document makes
technical corrections to that rule.
DATES: Effective November 4, 2019.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Voyatzis, Deputy General
Counsel, Office of the General Counsel,
National Endowment for the
Humanities, 400 Seventh Street SW,
Room 4060, Washington, DC 20506;
(202) 606–8322; gencounsel@neh.gov.
SUPPLEMENTARY INFORMATION: On July
19, 2019, NEH published a final rule at
84 FR 34788 implementing its agencyspecific Privacy Act regulation. That
rule amended 45 CFR chapter XI,
subchapter D, by adding part 1169.
SUMMARY:
E:\FR\FM\04NOR1.SGM
04NOR1
]]>Agencies
[Federal Register Volume 84, Number 213 (Monday, November 4, 2019)]
[Rules and Regulations]
[Pages 59302-59313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23697]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506-AB42
Imposition of Fifth Special Measure Against the Islamic Republic
of Iran as a Jurisdiction of Primary Money Laundering Concern
AGENCY: Financial Crimes Enforcement Network, (``FinCEN''), Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: FinCEN is issuing this final rule, pursuant to Section 311 of
the USA PATRIOT Act, to prohibit the opening or maintaining of
correspondent accounts in the United States for, or on behalf of,
Iranian financial institutions, and the use of foreign financial
institutions' correspondent accounts at covered U.S. financial
institutions to process transactions involving Iranian financial
institutions.
DATES: This final rule is effective November 14, 2019.
FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center, (800) 949-
2732, refer to FDMS Docket No. FinCEN-2019-0002.
SUPPLEMENTARY INFORMATION:
I. 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, Public Law 107-56 (USA
PATRIOT Act). Title III of the USA PATRIOT Act amended the anti-money
laundering (AML) 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, 5316-
5332, to promote the prevention, detection, and prosecution of
international money laundering and the financing of terrorism.
Regulations implementing the BSA appear at 31 CFR chapter X. The
authority of the Secretary of the Treasury (Secretary) to administer
the BSA and its implementing regulations has been delegated to FinCEN.
Section 311 of the USA PATRIOT Act (Section 311), codified at 31
U.S.C. 5318A, grants FinCEN the authority, upon finding that reasonable
grounds exist for concluding that a jurisdiction outside of the United
States, one or more financial institutions operating outside of the
United States, one or more classes of transactions within or involving
a jurisdiction outside of the United States, or one or more types of
[[Page 59303]]
accounts is of primary money laundering concern, to require domestic
financial institutions and domestic financial agencies to take certain
``special measures.'' The five special measures enumerated in Section
311 are preventative safeguards that defend the U.S. financial system
from money laundering and terrorist financing. FinCEN may impose one or
more of these special measures in order to protect the U.S. financial
system from these threats. Special measures one through four, codified
at 31 U.S.C. 5318A(b)(1)-(b)(4), impose additional recordkeeping,
information collection, and reporting requirements on covered U.S.
financial institutions. The fifth special measure, codified at 31
U.S.C. 5318A(b)(5), allows FinCEN to prohibit, or impose conditions on,
the opening or maintaining in the U.S. of correspondent or payable-
through accounts for, or on behalf of, a foreign bank, if such
correspondent account or payable-through account involves the foreign
jurisdiction, financial institution, class of transaction, or type of
account found to be of primary 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.\1\ The Secretary must also consider such
information as the Secretary determines to be relevant, including the
following potentially relevant factors:
---------------------------------------------------------------------------
\1\ 31 U.S.C. 5318A(c)(1).
---------------------------------------------------------------------------
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;
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.
Upon finding that a jurisdiction is of primary money laundering
concern, the Secretary may require covered financial institutions to
take one or more special measures. In selecting which special
measure(s) to take, the Secretary ``shall consult with the Chairman of
the Board of Governors of the Federal Reserve System, any other
appropriate federal banking agency (as defined in Section 3 of the
Federal Deposit Insurance Act), the Secretary of State, the Securities
and Exchange Commission, the Commodity Futures Trading Commission, the
National Credit Union Administration Board, and at the sole discretion
of the Secretary, such other agencies and interested parties as the
Secretary may find appropriate.'' \2\ In imposing the fifth special
measure, the Secretary must do so ``in consultation with the Secretary
of State, the Attorney General, and the Chairman of the Board of
Governors of the Federal Reserve System.'' \3\
---------------------------------------------------------------------------
\2\ 31 U.S.C. 5318A(a)(4)(A).
\3\ 31 U.S.C. 5318A(b)(5).
---------------------------------------------------------------------------
In addition, in selecting which special measure(s) to take, the
Secretary shall consider the following factors:
Whether similar action has been or is being taken by other
nations or multilateral groups;
whether the imposition of any particular special measure
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, institution, class of
transactions, or type of account; and
the effect of the action on U.S. national security and
foreign policy.\4\
---------------------------------------------------------------------------
\4\ 31 U.S.C. 5318A(a)(4)(B).
---------------------------------------------------------------------------
II. Public Participation
FinCEN's decision to take this action as a final rule is consistent
with the Administrative Procedure Act (APA) and in the interest of U.S.
foreign policy. Section 311's fifth special measure ``may be imposed
only by regulation.'' \5\ The APA exempts regulations involving ``a
military or foreign affairs function of the United States'' from its
requirements for notice of proposed rulemaking, the opportunity for
public participation, and a 30 day delay in effective date.\6\ As set
forth in more detail below, this rule imposes a special measure with
regard to the jurisdiction of the Islamic Republic of Iran (Iran). Iran
is the subject of a national emergency declaration identifying it as an
unusual and extraordinary threat to the national security, foreign
policy, and economy of the United States and is the subject of multiple
Executive Orders identifying it as a supporter of terrorism as well as
other malign activities.\7\ The special measure described herein
relates to important foreign policy goals of the U.S. Government,
namely to deny the Iranian regime resources to support terrorism,
develop nuclear weapons and/or the proliferation of weapons of mass
destruction, advance its ballistic missile program, oppress the Iranian
people, and fuel conflicts in Syria, Afghanistan, Yemen and elsewhere.
Rapid imposition of the fifth special measure pursuant to Section 311,
without any procedural delays caused by soliciting public comments
concerning U.S. foreign policy, will further protect the U.S. financial
system from Iran by ensuring that U.S. financial institutions are not
exposed to Iran's ongoing illicit finance activities, including its
support for international terrorism. Because this rule involves a
foreign affairs function, it is exempt from the provisions of the APA
requiring notice of proposed rulemaking, the opportunity for public
participation, and a 30 day delay in effective date. Because no notice
of proposed rulemaking is required for this rule, the Regulatory
Flexibility Act (RFA) (5 U.S.C. 601-612) does not apply. To ensure
orderly implementation, FinCEN will delay its effective date until
November 14, 2019.
---------------------------------------------------------------------------
\5\ 31 U.S.C. 5318A(a)(2)(C).
\6\ 5 U.S.C. 553(a)(1).
\7\ See, e.g., E.O. 12957, ``Prohibiting Certain Transactions
With Respect to the Development of Iranian Petroleum Resources''
(1995); E.O. 13848, ``Reimposing Certain Sanctions With Respect to
Iran'' (2018); E.O. 13876, ``Imposing Sanctions With Respect to
Iran'' (2019).
---------------------------------------------------------------------------
III. Summary of the Final Rule
This final rule sets forth (i) FinCEN's finding that Iran is a
jurisdiction of primary money laundering concern pursuant to Section
311, and (ii) FinCEN's imposition of a prohibition under the fifth
special measure on the opening or maintaining of
[[Page 59304]]
correspondent accounts in the United States for, or on behalf of,
Iranian financial institutions, and the use of foreign financial
institutions' correspondent accounts at covered U.S. financial
institutions to process transactions involving Iranian financial
institutions.
IV. Treasury Actions Involving Iran
The U.S. Department of the Treasury (Treasury) has taken numerous
actions to publicly highlight and counter Iran's malign activities,
including implementation of a multitude of sanctions programs and
issuance of several advisories. On November 5, 2018, the United States
fully re-imposed the sanctions on Iran that had been lifted or waived
under the Joint Comprehensive Plan of Action (JCPOA).\8\ However, Iran
has continued to evade these sanctions, fund terror and destabilizing
activities, and advance its ballistic missile development. As a result,
Treasury and the U.S. Department of State (State Department) have
continued imposing sanctions on Iranian persons, as well as persons in
third countries who have continued to transact with Iran, or who have
acted for or on behalf of designated Iranian persons.
---------------------------------------------------------------------------
\8\ The JCPOA was finalized on July 14, 2015, between the U.S.,
China, France, Germany, Russia, the United Kingdom, the European
Union, and Iran to ensure that Iran's nuclear program would be
exclusively peaceful. The U.S. announced it would cease its
participation in the JCPOA on May 8, 2018.
---------------------------------------------------------------------------
On November 28, 2011, FinCEN issued an NPRM proposing the
implementation of the fifth special measure against Iran as a
jurisdiction of primary money laundering concern pursuant to Section
311.\9\ \10\
---------------------------------------------------------------------------
\9\ See 76 FR 72878 (November 28, 2011), Imposition of Special
Measure Against the Islamic Republic of Iran as a Jurisdiction of
Primary Money Laundering Concern.
\10\ FinCEN intends to issue a separate document withdrawing the
2011 NPRM.
---------------------------------------------------------------------------
V. Finding Iran To Be a Jurisdiction of Primary Money Laundering
Concern
Based on information available to FinCEN, including both public and
non-public reporting,\11\ and after considering the factors listed in
the 311 statute and performing the requisite interagency consultations
with the Secretary of State and Attorney General as required by 31
U.S.C. 5318A(c)(1), FinCEN finds that reasonable grounds exist for
concluding that Iran is a jurisdiction of primary money laundering
concern. While FinCEN has considered all factors set forth in Section
5318A(c)(2)(A), a discussion of those factors most relevant to this
finding follows.
---------------------------------------------------------------------------
\11\ FinCEN may submit classified information used in support of
a Section 311 finding and special measure(s) determination to a
reviewing court ex parte and in camera. See Section 376 of the
Intelligence Authorization Act for fiscal year 2004, Public Law 108-
177 (amending U.S.C. 5318A by adding new paragraph (f)).
---------------------------------------------------------------------------
Iran's Abuse of the International Financial System
Iran has developed covert methods for accessing the international
financial system and pursuing its malign activities, including misusing
banks and exchange houses, operating procurement networks that utilize
front or shell companies, exploiting commercial shipping, and masking
illicit transactions using senior officials, including those at the
Central Bank of Iran (CBI). Iran has also used precious metals to evade
sanctions and gain access to the financial system, and may in the
future seek to exploit virtual currencies. These efforts often serve to
fund the Islamic Revolutionary Guard Corps (IRGC), its Islamic
Revolutionary Guard Corps Qods Force (IRGC-QF), Lebanese Hizballah
(Hizballah), Hamas, the Taliban and other terrorist groups.\12\
---------------------------------------------------------------------------
\12\ Advisory on the Iranian Regime's Illicit and Malign
Activities and Attempts to Exploit the Financial System, FinCEN,
October 11, 2018.
---------------------------------------------------------------------------
Factor 1: 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 \13\
---------------------------------------------------------------------------
\13\ 31 U.S.C. 5318A(c)(2) states that in making a finding that
a jurisdiction is of primary money laundering concern, the Secretary
shall consider in addition to such information as the Secretary
determines to be relevant, the potentially relevant factors
enumerated in section 5318A(c)(2)(A). Due to Iran's role as a state
sponsor of terrorism and the extraterritorial nature of its malign
conduct, FinCEN determined it was relevant to consider terrorism and
weapons proliferation transactions with the government of Iran in
addition to such transactions in the jurisdiction of Iran, as
discussed in this section.
---------------------------------------------------------------------------
a. Role of CBI Officials in Facilitating Terrorist Financing
Senior CBI officials have played a critical role in enabling
illicit networks, using their official capacity to procure hard
currency and conduct transactions for the benefit of the IRGC-QF and
its terrorist proxy groups. The CBI has been complicit in these
activities, including providing billions of U.S. dollars (USD) and
euros to the IRGC-QF, Hizballah and other terrorist organizations.
Since at least 2016, the CBI has provided the IRGC-QF with the vast
majority of its foreign currency. During 2018 and early 2019, the CBI
transferred several billion USD and euros from the Iranian National
Development Fund (NDF) to the IRGC-QF.
In September 2019, Treasury designated the CBI and NDF under its
counterterrorism authority, Executive Order (E.O.) 13224, as amended by
E.O. 13886. The Iranian government established the NDF to serve the
welfare of the Iranian people by allocating revenues from oil and gas
sales to economic investments, but has instead used the NDF as a slush
fund for the IRGC-QF, for years disbursing hundreds of millions of USD
in cash to the IRGC-QF. In coordination with the CBI, the NDF provided
the IRGC-QF with half a billion USD in 2017 and hundreds of millions of
USD in 2018.
In November 2018, Treasury designated nine persons--including two
CBI officials--involved in an international network through which Iran
provided millions of barrels of oil to Syria via Russian companies, in
exchange for Syria's facilitation of the movement of hundreds of
millions of USD to the IRGC-QF, for onward transfer to Hizballah and
Hamas.\14\ The designations highlighted, as the Secretary stated, that
``[CBI] officials continue to exploit the international financial
system, and in this case even used a company whose name suggests a
trade in humanitarian goods as a tool to facilitate financial transfers
supporting this oil scheme.'' \15\
---------------------------------------------------------------------------
\14\ Treasury Designates Illicit Russia-Iran Oil Network
Supporting the Assad Regime, Hizballah, and Hamas, November 20,
2018, https://home.treasury.gov/news/press-release/sm553.
\15\ Id.
---------------------------------------------------------------------------
The scheme was centered on Syrian national Mohammad Amer Alchwiki
and his Russia-based company, Global Vision Group. Global Vision worked
with Russian state-owned company Promsyrioimport to facilitate
shipments of Iranian oil to Syria. To assist the Bashar Al-Assad regime
in paying Russia for this service, Iran sent funds to Russia through
Alchwiki and Global Vision. To conceal its involvement, the CBI made
payments to Mir Business Bank \16\ using Iran-based Tadbir Kish Medical
and Pharmaceutical Company. Following the CBI's transfer of funds from
Tadbir Kish to Global Vision, Global Vision transferred payments to
Promsyrioimport.
---------------------------------------------------------------------------
\16\ Treasury designated Mir Business Bank on November 5, 2018.
It is a wholly-owned subsidiary of Iran's Bank Melli, which was
designated for acting as a conduit for payments to the IRGC-QF.
---------------------------------------------------------------------------
CBI senior officials were crucial to the scheme's success. CBI
International Department Director Rasul Sajjad and CBI Vice Governor
for International Affairs Hossein Yaghoobi both assisted in
facilitating Alchwiki's transfers. First Deputy Director of
Promsyrioimport Andrey Dogaev worked closely to
[[Page 59305]]
coordinate the sale of Iranian crude oil to Syria with Yaghoobi, who
has a history of working with Hizballah in Lebanon and has coordinated
financial transfers to Hizballah with IRGC-QF and Hizballah personnel.
Using this scheme, the network exported millions of barrels of Iranian
oil into Syria, and funneled millions of USD between the CBI and
Alchwiki's Mir Bank account in Russia.\17\
---------------------------------------------------------------------------
\17\ Treasury Designates Illicit Russia-Iran Oil Network
Supporting the Assad Regime, Hizballah, and Hamas, November 20,
2018, https://home.treasury.gov/news/press-release/sm553.
---------------------------------------------------------------------------
Separately, in May 2018, in connection with a scheme to move
millions of USD for the IRGC-QF, Treasury designated the then-governor
of the CBI, Valiollah Seif, the assistant director of CBI's
international department, Ali Tarzali, Iraq-based al-Bilad Islamic
Bank, Aras Habib, Al-Bilad's Chairman and Chief Executive, and Muhammad
Qasir, a Hizballah official. Treasury designated them as Specially
Designated Global Terrorists (SDGTs) pursuant to E.O. 13224. Treasury
stated that Seif had covertly funneled millions of USD on behalf of the
IRGC-QF through al-Bilad Bank to support Hizballah's radical agenda, an
action that undermined the credibility of his commitment to protecting
CBI's integrity.\18\
---------------------------------------------------------------------------
\18\ Treasury Targets Iran's Central Bank Governor and an Iraqi
Bank Moving Millions of Dollars for IRGC-Qods Force, May 15, 2018,
https://home.treasury.gov/news/press-release/sm0385.
---------------------------------------------------------------------------
Also in May 2018, Treasury, in a joint action with the United Arab
Emirates (UAE), designated nine Iranian individuals and entities
involved in an extensive currency exchange network that was procuring
and transferring millions in USD-denominated bulk cash to the IRGC-QF
to fund its malign activities and regional proxy groups. The CBI was
complicit in the IRGC-QF's scheme, actively supported the network's
currency conversion, and enabled it to access funds that it held in its
foreign bank accounts.\19\
---------------------------------------------------------------------------
\19\ United States and United Arab Emirates Disrupt Large Scale
Currency Exchange Network Transferring Millions of Dollars to the
IRGC-QF, May 10, 2018, https://home.treasury.gov/news/press-releases/sm0383.
---------------------------------------------------------------------------
The CBI and senior CBI officials have a history of using exchange
houses to conceal the origin of funds and procure foreign currency for
the IRGC-QF. During periods of heightened sanctions pressures, Iran has
relied heavily on third-country exchange houses and trading companies
to move funds to evade sanctions. Iran uses them to act as money
transmitters in processing funds transfers through the United States to
third-country beneficiaries, in support of business with Iran that is
in violation of U.S. sanctions targeting Iran. These third-country
exchange houses or trading companies frequently lack their own U.S.
Dollar accounts and instead rely on the correspondent accounts of their
regional banks to access the U.S. financial system.\20\
---------------------------------------------------------------------------
\20\ Advisory on the Iranian Regime's Illicit and Malign
Activities and Attempts to Exploit the Financial System, FinCEN,
October 11, 2018.
---------------------------------------------------------------------------
Additionally, according to information provided to FinCEN, in 2017,
the CBI coordinated with Hizballah to arrange a single EUR funds
transfer to a Turkish bank worth over $50 million USD.
b. IRGC's Abuse of the International Financial System
Iran is the world's leading state sponsor of terrorism, providing
material support to numerous Treasury-designated terrorist groups,
including Hizballah, Hamas, and the Taliban, often via its IRGC-QF. The
IRGC-QF is an elite unit within the IRGC, the military and internal
security force created after the Islamic Revolution. IRGC-QF personnel
advise and support pro-Iranian regime factions worldwide, including
several which, like Hizballah, Hamas, and the Taliban, the United
States has similarly designated as terrorists.
Treasury has designated the IRGC pursuant to several E.O.s: E.O.
13382 in connection with its support to Iran's ballistic missile and
nuclear programs; E.O. 13553 for serious human rights abuses by the
Iranian government; E.O. 13606 in connection with grave human rights
abuses; E.O. 13224 for global terrorism, and consistent with the
Countering America's Adversaries Through Sanctions Act, for its support
of the IRGC-QF. Treasury has designated the IRGC-QF pursuant to E.O.
13224 for providing material support to terrorist groups, including the
Taliban, E.O. 13572 for support to the Syrian General Intelligence
Directorate, the Assad regime's civilian intelligence service, and E.O.
13553 for serious human rights abuses by the Iranian government.
In April 2019, the State Department designated the IRGC, including
the IRGC-QF, as a Foreign Terrorist Organization (FTO).\21\ It was the
first time that the United States designated a part of another
government as an FTO--an action that highlighted Iran's use of
terrorism as a central tool of its statecraft and an essential element
of its foreign policy. The IRGC is integrally woven into the Iranian
economy, operating institutions and front companies worldwide, so that
the profits from seemingly legitimate business deals may actually fund
Iranian terrorism.\22\
---------------------------------------------------------------------------
\21\ Designation of the Islamic Republic Revolutionary Guard
Corps, April 8, 2019, https://www.state.gov/designation-of-the-islamic-revolutionary-guard-corp/.
\22\ Intent to Designate the Islamic Revolutionary Guard Corps
as a Foreign Terrorist Organization, April 8, 2019, https://www.state.gov/intent-to-designate-the-islamic-revolutionary-guard-corps-as-a-foreign-terrorist-organization/.
---------------------------------------------------------------------------
The IRGC-QF's misuse of the international financial system to
enable its nefarious activities include numerous examples that have
occurred in the United States. In May 2018, the United States and the
UAE took joint action to disrupt an extensive currency exchange network
that was procuring and transferring millions in USD-denominated bulk
cash to the IRGC-QF to fund its malign activities and regional proxy
groups. Treasury designated nine Iranian individuals and entities, and
noted that key CBI officials supported the transfer of funds.\23\
---------------------------------------------------------------------------
\23\ United States and United Arab Emirates Disrupt Large Scale
Currency Exchange Network Transferring Millions of Dollars to the
IRGC-QF, May 10, 2018, https://home.treasury.gov/news/press-releases/sm0383.
---------------------------------------------------------------------------
On November 5, 2018, in connection with the re-imposition of U.S.
nuclear-related sanctions that had been lifted or waived under the
JCPOA, Treasury sanctioned over 700 individuals, entities, aircraft,
and vessels in its largest ever single-day action targeting Iran. The
action included the designations of more than 70 Iran-linked financial
institutions and their foreign and domestic subsidiaries. Bank Melli
was among those banks designated pursuant to E.O. 13224 for assisting
in, sponsoring, or providing financial, material, or technological
support for, or other services to or in support of, the IRGC-QF. As of
2018, the equivalent of billions of USD in funds had transited IRGC-QF
controlled accounts at Bank Melli. Moreover, Bank Melli had enabled the
IRGC and its affiliates to move funds into and out of Iran, while the
IRGC-QF, using Bank Melli's presence in Iraq, had used Bank Melli to
pay Iraqi Shia militant groups.\24\
---------------------------------------------------------------------------
\24\ U.S. Government Fully Re-Imposes Sanctions on the Iranian
Regime As Part of Unprecedented U.S. Economic Pressure Campaign,
November 5, 2018, https://home.treasury.gov/news/press-releases/sm541.
---------------------------------------------------------------------------
On November 20, 2018, Treasury designated nine individuals and
entities in an international network through which the Iranian regime
worked with Russian companies to provide millions of barrels of oil to
the Assad regime in Syria. The Assad regime, in turn, facilitated the
movement of hundreds of
[[Page 59306]]
millions of USD to the IRGC-QF for onward transfer to Hamas and
Hizballah.\25\
---------------------------------------------------------------------------
\25\ Treasury Designates Illicit Russia-Iran Oil Network
Supporting the Assad Regime, Hizballah, and Hamas, November 20,
2018, https://home.treasury.gov/news/press-release/sm553.
---------------------------------------------------------------------------
In March 2019, Treasury took action against 25 individuals and
entities, including a network of Iran, UAE, and Turkey-based front
companies that transferred over a billion USD and euros to the IRGC,
IRGC-QF and Iran's Ministry of Defense and Armed Forces Logistics
(MODAFL). The action included a designation of Ansar Bank, an Iranian
bank controlled by the IRGC, and its currency exchange arm, Ansar
Exchange, for providing banking services to the IRGC-QF.\26\
---------------------------------------------------------------------------
\26\ United States Disrupts Large Scale Front Company Network
Transferring Hundreds of Millions of Dollars and Euros to the IRGC
and Iran's Ministry of Defense, March 26, 2019, https://home.treasury.gov/news/press-release/sm639.
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In June 2019, Treasury designated an Iraq-based IRGC-QF financial
conduit, South Wealth Resources Company (SWRC), which trafficked
hundreds of millions of U.S. dollars' worth of weapons to IRGC-QF-
backed militias. SWRC and its two Iraqi associates covertly facilitated
the IRGC-QF's access to the Iraqi financial system to evade sanctions,
while also generating profits in the form of commission payments for a
Treasury-designated advisor to the IRGC-QF's commander, Qasem
Soleimani. Soleimani has run weapons smuggling networks, participated
in bombings of Western embassies, and attempted assassinations in the
region.\27\
---------------------------------------------------------------------------
\27\ Treasury Targets IRGC-Qods Force Financial Conduit in Iraq
for Trafficking Weapons Worth Hundreds of Millions of Dollars, June
12, 2019, https://home.treasury.gov/news/press-release/sm706.
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Iran's activities include acts of attempted violence in the United
States. In October 2011, pursuant to E.O. 13224, Treasury designated
four senior IRGC-QF officers and Mansoor Arbabsiar, a naturalized U.S.
citizen, for plotting to assassinate the Saudi Arabian Ambassador to
the United States. In an example that laid bare the risks financial
institutions take when transacting with Iran, payment for the
assassination reached Arbabsiar from Tehran via two wire transfers
totaling approximately $100,000 USD, sent from a non-Iranian foreign
bank to a U.S. bank.\28\
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\28\ 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.
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c. Iranian Support to Terrorists
Hizballah
Despite its attempts to portray itself as a legitimate political
entity, Hizballah is first and foremost a terrorist organization,
responsible for the most American deaths by terrorism prior to the
September 11, 2001 terrorist attacks. A Lebanon-based Shia militant
group formed in Lebanon in 1982, Hizballah was responsible for the
suicide truck bombings of the U.S. Embassy in Beirut, Lebanon in April
1983, the U.S. Marine barracks in Beirut in October 1983, the U.S.
Embassy annex in Beirut in 1984, the hijacking of TWA 847 in 1985, and
the Khobar Towers attack in Saudi Arabia in 1996.\29\ Iran provides
upwards of $700 million USD annually toward Hizballah's estimated $1
billion USD budget.
---------------------------------------------------------------------------
\29\ Hizballah, Counterterrorism Guide, Office of the Director
of National Intelligence, https://www.dni.gov/nctc/groups/hizballah.html.
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Hizballah is listed in the annex to E.O. 12947 from January 1995,
``Prohibiting Transactions With Terrorists Who Threaten to Disrupt The
Middle East Peace Process.'' The State Department designated Hizballah
in October 1997 as an FTO and in October 2001 as an SDGT pursuant to
E.O. 13224. Treasury issued additional sanctions against Hizballah in
August 2012 pursuant to E.O. 13582 (which targets the government of
Syria and its supporters) specifically in connection with Hizballah's
efforts to coordinate with the IRGC-QF in support of the Assad
regime.\30\ At the request of the IRGC-QF, Hizballah has deployed
thousands of fighters into Syria in support of the Assad regime.
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\30\ Treasury Targets Hizballah for Supporting the Assad Regime,
August 10, 2012, https://www.treasury.gov/press-center/press-releases/Pages/tg1676.aspx.
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As recently as September 2019, Treasury took action against a large
shipping network directed by and financially supporting both the IRGC-
QF and Hizballah. In the past year, the IRGC-QF has moved Iranian oil
worth at least hundreds of millions of USD through the network for the
benefit of the Assad regime and other illicit actors. The sprawling
network uses dozens of ship managers, vessels, and other facilitators
and intermediaries to enable the IRGC-QF to obfuscate its involvement;
to broker associated contracts, it also relies heavily on front
companies and Hizballah officials (including Muhammad Qasir, designated
by Treasury in November 2018 in connection with the illicit Russia-Iran
oil network supporting Assad, Hizballah, and Hamas). Pursuant to E.O.
13224, Treasury identified several vessels as property in which blocked
persons have an interest, and pursuant to E.O. 13224, designated 16
entities and 10 individuals, including senior IRGC-QF official and
former Iranian Minister of Petroleum Rostam Qasemi, who oversees the
network. Treasury Under Secretary for Terrorism and Financial
Intelligence Sigal Mandelker noted that the designations demonstrated
Iran's economic reliance on the terrorist groups IRGC-QF and Hizballah
as financial lifelines.\31\
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\31\ Treasury Targets Wide Range of Terrorists and Their
Supporters Using Enhanced Counterterrorism Sanctions Authorities,
September 10, 2019, https://home.treasury.gov/news/press-release/sm772.
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In July 2019, Treasury designated key Hizballah political and
security figures--two members of Lebanon's Parliament and one Hizballah
security official--who were leveraging their positions to facilitate
Hizballah's agenda and do Iran's bidding. Noting that one of the
Parliament members, Amin Sherri, has been photographed with IRGC-QF
Commander Soleimani, Treasury stated that Hizballah uses its operatives
in Lebanon's Parliament to bolster Iran's malign activities.\32\ Also
in July 2019, Treasury designated Salman Raouf Salman pursuant to E.O.
13224. Salman, a senior member of an Hizballah organization dedicated
to carrying out attacks outside Lebanon, coordinated the devastating
attack in 1994 against the AMIA Jewish community center in Buenos
Aires, Argentina, and has been directing terrorist operations in the
Western Hemisphere ever since. The designation of Salman marked over 50
Hizballah-linked designations by Treasury since 2017.\33\
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\32\ Treasury Targets Iranian-Backed Hizballah Officials for
Exploiting Lebanon's Political and Financial System, July 9, 2019,
https://home.treasury.gov/news/press-release/sm724.
\33\ Treasury Targets Senior Hizballah Operative for
Perpetrating and Plotting Terrorist Attacks in the Western
Hemisphere, July 19, 2019, https://home.treasury.gov/news/press-release/sm737.
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Hizballah is a global terrorist organization, active in Syria,
Iraq, and Yemen, and Hizballah plots have been thwarted in South
America, Asia, Europe, and the United States. In June 2017 in New York,
Ali Kourani and Samer El Debek were arrested and charged for alleged
activities on behalf of Hizballah. Kourani conducted surveillance of
potential U.S. targets, including military and law enforcement
facilities in New York City, and was subsequently convicted on all
eight counts, which included terrorism, sanctions, and immigration-
related offenses. El Debek allegedly conducted missions in Panama to
locate U.S. and
[[Page 59307]]
Israeli Embassies and assess the vulnerabilities of the Panama Canal
and the ships that transit it.34 35
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\34\ Bronx Man and Michigan Man Arrested for Terrorist
Activities On Behalf Of Hizballah's Islamic Jihad Organization, June
8, 2017, https://www.justice.gov/usao-sdny/pr/bronx-man-and-michigan-man-arrested-terrorist-activities-behalf-hizballah-s-islamic.
\35\ Ali Kourani Convicted in Manhattan Federal Court for Covert
Terrorist Activities on Behalf of Hizballah's Islamic Jihad
Organization, May 17, 2019, https://www.justice.gov/opa/pr/ali-kourani-convicted-manhattan-federal-court-terrorist-activities-behalf-hizballah-s.
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According to information available to FinCEN, in early 2015, the
IRGC-QF provided approximately $20 million USD to Hizballah, over half
of which was to be used for ballistic missile expenses. In 2017, the
CBI coordinated with Hizballah to arrange a single EUR funds transfer
to a Turkish bank worth over $50 million USD.
More recently, and as noted in the previous section, in November
2018, Treasury designated nine persons involved in an international
network through which Iran provided millions of barrels of oil to Syria
via Russian companies, in exchange for Syria's facilitation of the
movement of hundreds of millions of USD banknotes to the IRGC-QF for
onward transfer to Hizballah and Hamas. Treasury noted at the time of
the designations that Mohammad Amer Alchwiki, a central player in this
scheme, was acting as a critical conduit for the transfer of the USD
banknotes. Alchwiki worked with the Central Bank of Syria to coordinate
transfers to Hizballah official Muhammad Qasir, in charge of the
Hizballah unit responsible for weapons, technology, and other support
transfers. In its press release, Treasury included a photo of a letter
dated April 17, 2018, from Alchwiki and Qasir to a CBI official,
confirming receipt of $63 million USD.\36\
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\36\ Treasury Designates Illicit Russia-Iran Oil Network
Supporting the Assad Regime, Hizballah, and Hamas, November 20,
2018, https://home.treasury.gov/news/press-release/sm553.
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Also as noted previously, in May 2018, in connection with a scheme
to move millions of USD for the IRGC-QF, Treasury designated a network
that included Valiollah Seif, Iran's then-governor of the CBI, Iraq-
based al-Bilad Islamic Bank, and Muhammad Qasir, a Hizballah official.
Treasury designated them as SDGTs pursuant to E.O. 13224 after finding
that Seif had covertly funneled millions of USD on behalf of the IRGC-
QF through al-Bilad Bank to support Hizballah's radical agenda.\37\
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\37\ Treasury Targets Iran's Central Bank Governor and an Iraqi
Bank Moving Millions of Dollars for IRGC-Qods Force, May 15, 2018,
https://home.treasury.gov/news/press-release/sm0385.
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Hamas
Iran also has a history of supporting Hamas. Hamas was established
in 1987 at the onset of the first Palestinian intifada. Prior to 2005,
Hamas' numerous attacks on Israel included U.S. citizens as casualties.
The State Department designated Hamas as an FTO in October 1997, and
Treasury designated it as an SDGT pursuant to E.O. 13224 in October
2001.\38\
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\38\ Country Reports on Terrorism 2016, U.S. Department of
State, Chapter 3: State Sponsors of Terrorism, Iran, Chapter 6,
Foreign Terrorist Organizations, Hamas.
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Iran provides Hamas with funds, weapons, and training. During
periods of substantial Iran-Hamas collaboration, Iran's support to
Hamas has been estimated to be as high as $300 million USD per year,
but at a baseline amount, is widely assessed to be in the tens of
millions per year. The Iran-Hamas relationship was forged in the 1990s
as part of an attempt to disrupt the Israeli-Palestinian peace process,
but in 2012, their divergent positions on Syria caused a rift.
Subsequently, Iran sought to rebuild the relationship, and in October
2017, Hamas leaders restored the group's relations with Iran during a
visit to Tehran.\39\
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\39\ Iran's Foreign and Defense Policies, Congressional Research
Service, R44017, Version 56, Updated October 9, 2018.
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According to information available to FinCEN, in March 2015, Hamas
expressed gratitude for Iran's previous financial support, and
requested that Iran resume providing aid. In January 2016, Hamas
officials in Gaza were awaiting monetary payments from the IRGC-QF. The
Hamas officials expected the Iranian government to transfer money to
the IRGC-QF in Beirut, who would then transfer it onward to them.
Additionally, in 2016, Hamas had received a significant sum of IRGC-QF
funding via financiers in Turkey.
In August 2019, Treasury, in partnership with the Sultanate of
Oman, designated financial facilitators who funneled tens of millions
of USD between the IRGC-QF and Hamas's operational arm, the Izz-Al-Din
Al-Qassam Brigades, for terrorist attacks originating from Gaza. The
Izz-Al-Din Al-Qassam Brigades is a designated FTO and SDGT. At the
center of the scheme uncovered by Treasury and Oman was Mohammad Sarur,
a Lebanon-based financial operative in charge of all financial
transfers between the IRGC-QF and the Izz-Al-Din Al-Qassam Brigades.
Sarur was a middle-man between the IRGC-QF and Hamas and worked with
Hizballah operatives to ensure the Izz-Al-Din Al-Qassam Brigades
received funds. The IRGC-QF transferred over $200 million USD to the
Izz-Al-Din Al-Qassam Brigades in the past four years.\40\
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\40\ Treasury Targets Facilitators Moving Millions to HAMAS in
Gaza, August 29, 2019, https://home.treasury.gov/news/press-release/sm761.
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In September 2019, in an action targeting a wide range of
terrorists and their supporters using enhanced counterterrorism
sanctions authorities, Treasury designated two Iran-linked Hamas
officials. Pursuant to the amended counterterrorism E.O., E.O. 13224,
Treasury designated Turkey-based Redin Exchange and its Deputy Head,
Ismael Tash. Since at least 2017, Tash has had contact with a money
transfer channel managed by Mohammad Sarur that transferred IRGC-QF
money to Hamas; as of January 2019, Tash was a key player in many Iran-
Hamas financial transfers. Treasury also designated Zaher Jabarin, the
Turkey-based head of Hamas' Finance Office. Jabarin has overseen the
transfer of hundreds of thousands of USD in the West Bank to finance
Hamas' terrorist activities; he has also served as a primary
interlocutor between Hamas and the IRGC-QF.\41\
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\41\ Treasury Targets Wide Range of Terrorists and Their
Supporters Using Enhanced Counterterrorism Sanctions Authorities,
September 10, 2019, https://home.treasury.gov/news/press-release/sm772.
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Taliban
Iran seeks influence in Afghanistan in a number of ways, including
by offering economic assistance and engaging the central government--
but also by arming Taliban fighters and supporting pro-Iranian groups.
In October 2010, then-President Hamid Karzai admitted that Iran was
providing about $2 million USD annually in cash payments to his
government.\42\ Treasury designated the Taliban as an SDGT in 2002.
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\42\ Iran's Foreign and Defense Policies, Congressional Research
Service, R44017, Version 70, Updated July 23, 2019.
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In October 2018, the seven member nations of the Terrorist
Financing Targeting Center (TFTC),\43\ designated nine Taliban-
associated individuals, including those facilitating Iranian support to
bolster the Taliban. The Secretary described Iran's provision of
support to the Taliban as yet another example of its support for
terrorism, and its utter disregard for United Nations Security Council
Resolutions (UNSCRs) and other international norms. Treasury noted that
the action's inclusion of IRGC-QF members supporting Taliban elements
highlighted the scope of Iran's regionally destabilizing behavior.
[[Page 59308]]
Among those designated were Mohammad Ebrahim Owhadi, an IRGC-QF
officer, and Abdullah Samad Faroqui, the Taliban Deputy Shadow Governor
for Herat Province. In 2017, Owhadi and Faroqui reached an agreement
for the IRGC-QF's provision of military and financial assistance to
Faroqui, in exchange for Faroqui's forces attacking the Afghan
government in Herat. Also designated were Esma'il Razavi, who was in
charge of the training center at the IRGC-QF base in Birjand, Iran,
which as of 2014, provided training, intelligence, and weapons to
Taliban forces in Farah, Ghor, Badhis, and Helmand Provinces,
Afghanistan. In 2008, as the senior IRGC-QF official in Birjand,
Razavi's base supported anti-coalition militants in Farah and Herat.
Also designated by the TFTC were Naim Barich, previously Treasury- and
UN-sanctioned, who as of late 2017 was the Taliban Shadow Minister of
Foreign Affairs managing Taliban relations with Iran, and Sadr Ibrahim,
the leader of the Taliban's Military Commission, whom Iranian officials
agreed to provide with financial and training support in order to build
the Taliban's tactical and combat capabilities.\44\
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\43\ The seven TFTC member states are the U.S., Saudi Arabia,
Bahrain, Kuwait, Oman, Qatar, and the UAE.
\44\ Treasury and the Terrorist Financing Targeting Center
Partners Sanction Taliban Facilitators and their Iranian Supporters,
October 23, 2018, https://home.treasury.gov/news/press-release/sm532.
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d. Entities Involved in the Proliferation of WMD or Missiles
Under UNSCR 2231 (2015), which endorsed the JCPOA, the sale,
supply, or transfer to Iran of Nuclear Suppliers Group (NSG) \45\-
controlled items requires advance approval by the UNSC. Despite this,
in July 2019, Treasury identified and acted against a network of front
companies and agents involved in procuring sensitive materials--
including NSG-controlled materials--without UNSC approval for
sanctioned elements of Iran's nuclear program. Treasury designated
seven entities and five individuals in Iran, China, and Belgium, for
acting as a procurement network for Iran's Centrifuge Technology
Company, which plays a crucial role in Iran's uranium enrichment
through the production of centrifuges for Atomic Energy Organization of
Iran facilities.\46\
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\45\ The NSG is a multinational export control regime that seeks
to prevent nuclear proliferation by controlling the export of
materials, equipment, and technology that can be used to manufacture
nuclear weapons.
\46\ Treasury Sanctions Global Iranian Nuclear Enrichment
Network, July 18, 2019, https://home.treasury.gov/news/press-release/sm736.
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Additionally, in August 2019, Treasury designated two Iranian
regime-linked networks pursuant to E.O. 13382 for engaging in covert
procurement activities benefiting multiple Iranian military
organizations. One network has used a Hong Kong-based front company to
evade U.S. and international sanctions and procure tens of millions of
dollars' worth of U.S. technology and electronic components on behalf
of the IRGC and Iran's missile program. The other network has procured
NSG-controlled aluminum alloy products on behalf of MODAFL
subsidiaries.\47\
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\47\ Treasury Targets Procurement Networks Supporting Iran's
Missile Proliferation Programs, August 28, 2019, https://home.treasury.gov/news/press-release/sm759.
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Iran's ongoing pursuit of ballistic missile technology is well
known. In 2018, Iran conducted nine ballistic missile tests in defiance
of UNSCR 2231 (2015), including the launch of short range ballistic
missiles in September and October 2018, which were inconsistent with
paragraph 3 of Annex B of UNSCR 2231.\48\ The U.S. Secretary of State
described Iran's test-firing of a medium-range ballistic missile
capable of carrying multiple warheads in December 2018 as another
violation of UNSCR 2231.\49\ In July 2017, Iran tested a Simorgh space
launch vehicle, which the United States, France, Germany, and the
United Kingdom all assessed to have used technology similar to that of
intercontinental ballistic missiles.\50\ In January 2017, Iran launched
a medium-range missile able to carry a payload greater than 500
kilograms in excess of 300 kilometers, making it inherently capable of
delivering a nuclear explosive device. In 2016, Iran unveiled two
short-range ballistic missiles and announced that it was pursuing long-
range precision-guided missiles.\51\
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\48\ Letter from the Permanent Representative of Israel to the
UN, November 23, 2018.
\49\ Pompeo Condemns Iran Missile Test, Reuters, December 1,
2018.
\50\ Letter from the Permanent Mission of the Federal Republic
of Germany to the UN, United Kingdom Mission to the UN, and the
Mission Permanente De La France Aupres Des Nations Unies to H.E. Mr.
Ma Zhaoxu, Ambassador, Permanent Representative of the People's
Republic of China to the UN, November 20, 2018.
\51\ Iran's Missile Proliferation: A Conversation with Special
Envoy Brian Hook, Hudson Institute, September 19, 2018.
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In January 2018, two Iranian nationals tried to buy Kh-31 missile
components in Kiev, Ukraine, which would have been a violation of the
UN arms embargo on Iran. Ukraine's security service detained the men
while they were in possession of the missile parts and technical
documents on their use. Ukraine subsequently deported the men, one of
whom was a military attach[eacute] at Iran's Embassy in Kiev.\52\
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\52\ Busted: Ukraine Catches Iranian Military Attach[eacute]
Trying to Smuggle KH-31 Parts out of Kiev, The National Interest,
July 2, 2019.
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According to information available to FinCEN, Iran's Shahid Bakeri
Industrial Group (SBIG) and Shahid Hemmat Industrial Group (SHIG),
respectively its solid and liquid propellant ballistic missile
producers, utilize foreign entities and networks to procure missile-
related materials and technology and disguise their involvement in the
process. SBIG and SHIG are listed in the annex to E.O. 13382, which
targets proliferators of WMD and their supporters. Among the targets in
Treasury's August 2019 designation action was the Iranian firm Ebtekar
Sanat Ilya, which helped procure more than one million dollars' worth
of export-controlled, military-grade electronic components for Iranian
military clients--including both SBIG and SHIG.
In February 2017, Treasury designated entities and individuals that
were part of the Abdollah Asgharzadeh network in connection with their
procurement of dual-use and other goods on behalf of organizations
involved in Iran's ballistic missile program. The network coordinated
procurement through intermediary companies that obfuscated the true
end-user of the goods, and relied on the assistance of trusted brokers
based in China.\53\
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\53\ Treasury Sanctions Supporters of Iran's Ballistic Missile
Program and Iran's Islamic Revolutionary Guard Corps-Qods Force,
February 23, 2017, https://www.treasury.gov/press-center/press-releases/Pages/as0004.aspx.
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Factor 2: The Extent to Which That Jurisdiction Is Characterized by
High Levels of Official or Institutional Corruption
The endemic corruption of Iran's government is well-known.
According to information available to FinCEN, in late 2017, IRGC
officials were aware of corruption and mismanagement at an IRGC
economic development firm. The officials estimated the cost of the
corruption to be approximately $5.5 billion USD--a figure which
represented losses, debts, and funds required for a capital injection
to facilitate the firm's dissolution.
Also according to information available to FinCEN, as of mid-
January 2018, after hearing complaints about corruption in the armed
forces' financial institutions, Iranian Supreme Leader Ali Hoseini
Khamenei issued a directive requiring Iran's armed forces to sell the
private companies they owned. However, because Khamenei permitted
[[Page 59309]]
the armed forces to use revenue from the sales to then purchase shares
in the same companies, the directive appeared to be a mere symbolic
gesture to placate public pressure, not a genuine effort to lessen the
IRGC's role in the economy or curb corruption.
In October 2018, Treasury designated an Iran-based network
comprised of businesses providing financial support to the Basij
Resistance Force, a paramilitary force subordinate to the IRGC. As
noted at the time of the designation, among other malign activities,
the IRGC Basij militia recruits, trains, and deploys child soldiers to
fight in IRGC-fueled conflicts across the region. The Basij also
employs shell companies and other measures to mask its ownership and
control over a variety of multibillion-dollar business interests in
Iran's automotive, mining, metals, and banking industries.\54\
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\54\ Treasury Designates Vast Financial Network Supporting
Iranian Paramilitary Force That Recruits and Trains Child Soldiers,
October 16, 2018, https://home.treasury.gov/news/press-release/sm524.
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In June 2019, Treasury designated Iran's largest and most
profitable petrochemical holding group, Persian Gulf Petrochemical
Industries Company, for providing financial support to Khatam al-Anbiya
Construction Headquarters, the engineering arm of the IRGC. Treasury
noted that the IRGC and its major holdings have a dominant presence in
Iran's commercial and financial sectors, maintaining extensive economic
interests in the defense, construction, aviation, oil, banking, metal,
automobile, and mining industries.\55\
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\55\ Treasury Sanctions Iran's Largest Petrochemical Holding
Group and Vast Network of Subsidiaries and Sales Agents, June 7,
2019, https://home.treasury.gov/news/press-release/sm703.
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Factor 3: The Substance and Quality of Administration of the Bank
Supervisory and Counter-Money Laundering Laws of That Jurisdiction
For more than a decade, the international community has been
concerned about the deficiencies in Iran's anti-money laundering/
countering the financing of terrorism (AML/CFT) program. As far back as
October 11, 2007, the Financial Action Task Force (FATF) issued a
statement on Iran's lack of a comprehensive AML/CFT regime, noting it
represented a significant vulnerability in the international financial
system. The FATF called upon Iran to urgently address its AML/CFT
deficiencies, and advised financial institutions to apply enhanced due
diligence.\56\ In February 2009, the FATF elevated its call for
enhanced due diligence by calling upon its members and urging all
jurisdictions to apply effective counter-measures to protect their
financial sectors from money laundering and terrorist financing risks
emanating from Iran.
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\56\ FATF Statement on Iran, 11 October 2007, https://www.fincen.gov/sites/default/files/shared/FATFOct2007.pdf.
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In June 2016, due to Iran's adoption of, and high-level political
commitment to, an Action Plan to address its strategic AML/CFT
deficiencies, the FATF agreed to suspend counter-measures for 12 months
in order to monitor Iran's progress in implementing its Action Plan. At
the same time however, the FATF expressed its continuing concern with
the terrorist financing risk emanating from Iran and the threat this
posed to the international financial system, and called for financial
institutions to continue applying enhanced due diligence with respect
to Iran-related business relationships and transactions.\57\ The FATF
issued similar statements between October 2016 and June 2017, and in
October 2018 and February 2019 identified specific types of enhanced
due diligence measures to be applied against Iran-related business
relationships and transactions.\58\
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\57\ Public Statement--24 June 2016, https://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-june-2016.html.
\58\ Public Statement--23 June 2017, https://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-june-2017.html.
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In its June 2019 and October 2019 Public Statements, the FATF noted
that Iran's Action Plan had expired in January 2018 and that major
items remained outstanding, including (1) adequately criminalizing
terrorist financing, including by removing the exemption for designated
groups ``attempting to end foreign occupation, colonialism, and
racism;'' (2) identifying and freezing terrorist assets in line with
the relevant UNSCRs; (3) ensuring an adequate and enforceable customer
due diligence regime; (4) clarifying that the submission of suspicious
transaction reports for attempted terrorist financing-related
transactions is covered under Iran's legal framework; (5) demonstrating
how authorities are identifying and sanctioning unlicensed money/value
transfer service providers; (6) ratifying and implementing the Palermo
and Terrorist Financing Conventions and clarifying the capability to
provide mutual legal assistance; and (7) ensuring that financial
institutions verify that wire transfers contain complete originator and
beneficiary information.59 60
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\59\ Public Statement--June 2019, https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/public-statement-june-2019.html.
\60\ Public Statement--October 2019, https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/public-statement-october-2019.html.
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Due to these critical deficiencies, in June 2019, the FATF decided
to call upon its members and urge all jurisdictions to increase
supervisory examination for branches and subsidiaries of financial
institutions based in Iran.\61\ In October 2019, the FATF decided to
call upon its members and urge all jurisdictions to introduce enhanced
relevant reporting mechanisms or systematic reporting of financial
transactions; and require increased external audit requirements for
financial groups with respect to any of their branches and subsidiaries
located in Iran.\62\ The FATF followed this new requirement with a
warning stating that if before February 2020, Iran does not enact the
Palermo and Terrorist Financing Conventions in line with the FATF
Standards, then the FATF will fully lift the suspension of counter-
measures and call on its members and urge all jurisdictions to apply
effective counter-measures.\63\
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\61\ Public Statement--June 2019, https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/public-statement-june-2019.html.
\62\ Public Statement--October 2019, https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/public-statement-october-2019.html.
\63\ Id.
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A number of public statements from senior Iranian government
officials suggest that Iran has no real intention of adhering to
international norms, including the FATF standards. On March 8, 2019,
Gholamreza Mesbahi Moghaddam, senior member of Iran's Expediency
Council, the highest-level political institution after the office of
the Supreme Leader, said ``Passing CFT and Palermo means giving away
our only remaining mechanism to bypass U.S. sanctions which is to
register shell corporations in Iran and other countries to do
international trade deals.'' \64\ On February 1, 2019, former Iranian
Defense Minister Brigadier General Ahmad Vahidi, also an Expediency
Council member, said, the [FATF] recommendations threaten Iran's
economy and it is a framework adopted by the global arrogance to impose
restrictions on Iran and pursue the
[[Page 59310]]
sanctions re-imposed against Tehran in smarter ways.'' \65\ On
September 9, 2018, Ayatollah Ahmad Jannati, secretary of Iran's
powerful Guardian Council, said, ``I've studied both the Persian and
English versions and I soon came to the conclusion that they want to
give our financial and banking information to the enemy. They want us
to sanction ourselves. They want us to sanction the individuals and
institutions that the enemy disagrees with. They want us to sanction
the [IRGC], revolutionary institutions, and individuals.'' \66\
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\64\ Mesbahi Moghaddam: We Will Not Stop Evading Sanctions, Iran
International, March 9, 2019, https://iranintl.com/en/iran/mesbahi-moghaddam-we-will-not-stop-evading-sanctions.
\65\ Iran Warns Europe to Avoid Tying Up INSTEX to FATF,
February 5, 2019, https://en.farsnews.com/newstext.aspx?nn=13971116000195.
\66\ Iran Faces Challenges in Implementing Its FATF Action Plan,
October 26, 2016, https://www.washingtoninstitute.org/policy-analysis/view/iran-faces-challenges-in-implementing-its-fatf-action-plan; https://www.aryanews.com/news/20160909150648732 (original
Farsi-language article)
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Factor 4: Whether the United States Has a Mutual Legal Assistance
Treaty (MLAT) 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 Such Jurisdiction
The United States and Iran have not had a substantive relationship
since the hostage-taking of U.S. Embassy personnel by Iranians in
November 1979, and subsequent severing of diplomatic relations in April
1980.
MLATs facilitate the exchange of information and financial records
with treaty partners in criminal and related matters. The State
Department negotiates MLATs in cooperation with the U.S. Department of
Justice. As of the date of this document, no MLAT is in force with
Iran. Additionally, the Egmont Group is an international organization
through which many countries' financial intelligence units (FIUs) share
invaluable financial and other information useful in law enforcement
and regulatory investigations. As the U.S. FIU, FinCEN is the U.S.
representative to the Egmont Group. No Iranian government entity is,
nor ever has been, a member of the Egmont Group.
Given the lack of any cooperative relationship generally, as well
as Iran's inability to share information with the United States via an
MLAT or the Egmont Group, the level of U.S.-Iran cooperation on AML/CFT
matters is nonexistent. As a result, U.S. law enforcement and
regulatory officials have an extremely limited ability to obtain
information about transactions originating in or routed through Iran.
VI. Considerations in Selecting the Fifth Special Measure
Below is a discussion of the relevant criteria FinCEN considered in
selecting a prohibition under the fifth special measure with respect to
Iran, after having completed the required interagency consultations
with Chairman of the Board of Governors of the Federal Reserve System,
the Secretary of State, the Securities and Exchange Commission, the
Commodity Futures Trading Commission, and the National Credit Union
Administration Board in accordance with 31 U.S.C. 5318A(a)(4)(A) and
the Secretary of State, the Attorney General, and the Chairman of the
Board of Governors of the Federal Reserve System in accordance with 31
U.S.C. 5318A(b)(5).
Whether Similar Action Has Been or Will Be Taken by Other Nations or
Multilateral Groups Against Iran
FinCEN notes that two Iranian banks are currently designated by the
European Union as entities subject to an asset freeze and prohibition
to make funds available: Ansar Bank and Mehr Bank. FinCEN is unaware of
any other nation or multilateral group that has prohibited or placed
conditions on Iranian banks' correspondent banking relationships, or
has plans to do so. However, as noted previously, in October 2019, the
FATF decided to call upon its members and urge all jurisdictions to
introduce enhanced relevant reporting mechanisms or systematic
reporting of financial transactions; and require increased external
audit requirements for financial groups with respect to any of their
branches and subsidiaries located in Iran. The FATF followed this new
requirement with a warning stating that if before February 2020, Iran
does not enact the Palermo and Terrorist Financing Conventions in line
with the FATF Standards, then the FATF will fully lift the suspension
of counter-measures and call on its members and urge all jurisdictions
to apply effective counter-measures.\67\ Regardless of the FATF's
future actions, FinCEN assesses that the correspondent account
prohibition under the fifth special measure is necessary to ensure the
security of the U.S. financial system and combat Iran's malign and
illicit activities, including its support for international terrorism.
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\67\ Public Statement--June 2019, https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/public-statement-june-2019.html.
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Whether the Imposition of the Fifth Special Measure 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
Existing sanctions programs on Iran administered by OFAC generally
prohibit the exportation, reexportation, sale, or supply, directly or
indirectly, from the United States, or by a U.S. person, wherever
located, of any goods, technology, or services to Iran. As a result,
U.S. financial institutions are already broadly prohibited under
existing OFAC sanctions from opening or maintaining correspondent
accounts for, or on behalf of, Iranian financial institutions, or
conducting any financial transactions involving Iranian financial
institutions unless exempt from U.S. sanctions or authorized by OFAC.
In addition, as of late September 2019, 24 Iranian financial
institutions had been designated under E.O. 13224, ten Iranian
financial institutions under E.O. 13382, one Iranian financial
institution under E.O. 13846, and one Iranian financial institution
under E.O. 13553. Secondary sanctions apply to certain transactions
with each of these Iranian banks.\68\ FinCEN assesses that secondary
sanctions already deter most foreign financial institutions from doing
business with targeted Iranian financial institutions, and the
correspondent account prohibition under the fifth special measure will
create no competitive disadvantage for U.S. financial institutions.
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\68\ Secondary sanctions generally are directed toward non-U.S.
persons for specified conduct involving Iran that occurs entirely
outside of U.S. jurisdiction, according to OFAC's website.
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The Extent to Which the Action or Timing of the Action Will Have a
Significant Adverse Systemic Impact on the International Payment,
Clearance, and Settlement System, or on Legitimate Business Activities
of Iranian Financial Institutions
FinCEN has no information indicating that Iranian financial
institutions are major participants in the international payment system
or that they are relied upon by the international banking community for
clearance or settlement services. Further, as of mid-November 2018, the
Society for Worldwide Interbank Financial Telecommunication (SWIFT) had
disconnected designated Iranian financial institutions, including the
CBI, from its financial messaging service. Lastly, FinCEN assesses that
most Iranian payments are made using currencies other than USD due to a
long
[[Page 59311]]
history of U.S. sanctions and actions targeting Iran. Thus, there is no
reason to conclude that the imposition of a prohibition under the fifth
special measure against the jurisdiction of Iran will have an adverse
systemic impact on the international payment, clearance, and settlement
system. FinCEN also considered the extent to which this action could
have an impact on the legitimate business activities of Iranian
financial institutions, and has concluded that the need to protect the
U.S. financial system from Iran strongly outweighs any such impact.
The Effect of the Action on U.S. National Security and Foreign Policy
FinCEN assesses that prohibiting covered financial institutions
from maintaining correspondent accounts for Iranian financial
institutions, and preventing Iranian financial institutions' indirect
access to U.S. correspondent accounts, will enhance national security.
The action serves as a measure to further prevent illicit Iranian
actors from accessing the U.S. financial system. It will further the
U.S. national security and foreign policy goals of thwarting and
exposing illicit Iranian financial activity. Further, to the extent
that other nations, particularly those that are strong U.S. trading
partners, choose to transact with Iran, there is a greater risk of
indirect activity occurring between U.S. financial institutions and
Iran. Imposition of the fifth special measure will impose a higher
standard of due diligence on U.S. financial institutions in their
engagement with non-U.S. financial institutions.
Consideration of Alternative Special Measures
As an alternative to a prohibition under the fifth special measure
on the opening or maintenance of correspondent accounts in the United
States for or on behalf of Iranian financial institutions, and the use
of foreign financial institutions' correspondent accounts at covered
U.S. financial institutions to process transactions involving Iranian
financial institutions, FinCEN considered special measures one through
four, which impose additional recordkeeping, information collection,
and reporting requirements on covered U.S. financial institutions.
Under special measure five, FinCEN also considered imposing conditions
on the opening or maintaining of correspondent accounts as an
alternative to a prohibition on the opening or maintaining of
correspondent accounts.
Given the nature of the illicit finance threat, including the
terrorist-finance threat, that the jurisdiction of Iran poses to the
United States and the U.S. financial system, Iran's well-documented
history of obscuring the true nature of its illicit finance activities,
and Iran's apparent disregard of regulatory reform and enforcement
measures, as evidenced by the FATF's longstanding criticisms of its
inadequate AML/CFT program, FinCEN assesses that any condition,
additional recordkeeping, information collection, or reporting
requirement would be insufficient to guard against the risks posed by
covered financial institutions that process Iran-related transactions
designed to obscure the transactions' true purpose, and that are
ultimately for the benefit of illicit Iranian actors or activities.
Special measures one through four and the imposition of conditions
under special measure five would therefore fail to prevent Iran from
accessing the U.S. financial system, either directly or indirectly,
through the correspondent accounts at U.S. financial institutions.
FinCEN assesses that a prohibition under the fifth special measure is
the only special measure that can adequately protect the U.S. financial
system from the illicit financial risk posed by Iran.
VII. Section-by-Section Analysis for the Imposition of a Prohibition
Under the Fifth Special Measure
Section 1010.661(a)--Definitions
1. Iranian Financial Institution
The final rule defines ``Iranian financial institution'' as any
foreign financial institution, as defined at 31 CFR 1010.605(f),
organized under Iranian law wherever located, including any agency,
branch, office, or subsidiary of such a financial institution operating
in any jurisdiction, and any branch or office within Iran of any
foreign financial institution.
2. Correspondent Account
The final rule defines ``correspondent account'' to have the same
meaning as the definition contained in 31 CFR 1010.605(c). In the case
of a U.S. depository institution, this broad definition includes most
types of banking relationships between a U.S. depository institution
and a foreign bank that are established to provide regular services,
dealings, and other financial transactions, including a demand deposit,
savings deposit, or other transaction or asset account, and a credit
account or other extension of credit. FinCEN is using the same
definition of ``account'' for purposes of this final rule as was
established for depository institutions in the final rule implementing
the provisions of Section 312 of the USA PATRIOT Act requiring enhanced
due diligence for correspondent accounts maintained for certain foreign
banks.\69\ Under this definition, ``payable-through accounts'' are a
type of correspondent account. In the case of securities broker-
dealers, futures commission merchants, introducing brokers-commodities,
and investment companies that are open-end companies (``mutual
funds''), FinCEN is also using the same definition of ``account'' for
purposes of this final rule as was established for these entities in
the final rule implementing the provisions of Section 312 of the USA
PATRIOT Act requiring enhanced due diligence for correspondent accounts
maintained for certain foreign banks.\70\
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\69\ See 31 CFR 1010.605(c)(2)(i).
\70\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
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3. Covered Financial Institution
The final rule defines ``covered financial institution'' with the
same definition used in the final rule implementing the provisions of
Section 312 of the USA PATRIOT Act, which in general includes the
following:
An insured bank (as defined in section 3(h) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(h)));
a commercial bank;
an agency or branch of a foreign bank in the United
States;
a Federally-insured credit union;
a savings association;
a corporation acting under section 25A of the Federal
Reserve Act (12 U.S.C. 611);
a trust bank or trust company;
a broker or dealer in securities;
a futures commission merchant or an introducing broker-
commodities; and
a mutual fund.
4. Foreign bank
The final rule defines ``foreign bank'' to mean a bank organized
under foreign law, or an agency, branch, or office located outside the
United States of a bank. The term does not include an agent, agency,
branch, or office within the United States of a bank organized under
foreign law. This is consistent with the definition of ``foreign bank''
under 31 CFR 1010.100.
5. Subsidiary
The final rule defines ``subsidiary'' to mean a company of which
more than 50 percent of the voting stock or analogous equity interest
is owned by another company.
[[Page 59312]]
Section 1010.661(b)--Prohibition on Accounts and Due Diligence
Requirements for Covered Financial Institutions
1. Prohibitions on Opening or Maintaining Correspondent Accounts
Section 1010.661(b)(1) and (2) of this final rule prohibits covered
financial institutions from opening or maintaining in the United States
correspondent accounts for, or on behalf of, Iranian financial
institutions, unless such account is authorized by OFAC. In addition,
under Sec. 1010.661(b)(2) of this final rule, a covered financial
institution shall take reasonable steps to not process a transaction
for the correspondent account of a foreign bank in the United States if
such a transaction involves an Iranian financial institution, unless
such transactions or payments are authorized by OFAC.
Section 1010.661(b)(2) requires covered financial institutions to
take reasonable steps to not process transactions for the correspondent
accounts of foreign banks in the United States involving Iranian
financial institutions that are prohibited transactions.
The general licenses (i.e., those of general applicability) issued
pursuant to the Iranian Transactions Sanctions Regulations (ITSR) 31
CFR part 560 are either published in the ITSR or available on OFAC's
website: http://www.treasury.gov/resource-center/sanctions/programs/pages/iran.aspx. To ensure that those permitted activities are
available as a practical matter, correspondent accounts covered by the
exception may continue to be used to conduct those permitted
transactions. Such reasonable steps are described in Sec.
1010.661(b)(3), which sets forth the special due diligence requirements
a covered financial institution will be required to take when it knows
or has reason to believe that a transaction involves an Iranian
financial institution.
2. Special Due Diligence for Correspondent Accounts
As a corollary to the prohibition set forth in Sec. 1010.661(b)(1)
and (2), Sec. 1010.661(b)(3) of the final rule will require covered
financial institutions to apply to all of their foreign correspondent
accounts special due diligence that is reasonably designed to guard
against such accounts being used to process prohibited transactions
involving Iranian financial institutions. As part of that special due
diligence, covered financial institutions are required to notify those
foreign correspondent account holders that the covered financial
institutions know, or have reason to believe, provide services to
Iranian financial institutions, that such correspondent institutions
may not provide the Iranian financial institutions with access to the
correspondent accounts maintained at the covered financial institutions
to process prohibited transactions. A covered financial institution may
satisfy this notification requirement using the following notice:
Notice: Pursuant to U.S. regulations issued under Section 311 of
the USA PATRIOT Act, see 31 CFR 1010.661, we are prohibited from
opening or maintaining in the United States a correspondent account
for, or on behalf of, any Iranian financial institution. The
regulations also require us to notify you that you may not provide
an Iranian financial institution, including any of its agencies,
branches, offices, or subsidiaries, with access to the correspondent
account you hold at our financial institution to process
transactions that are prohibited, and not authorized or exempt,
pursuant to the International Emergency Economic Powers Act (50
U.S.C. 1701 et seq.) (IEEPA), any regulation, order directive or
license issued pursuant thereto, or any other sanctions program
administered by the Department of the Treasury's Office of Foreign
Asset Control (``prohibited transactions''). If we become aware that
the correspondent account you hold at our financial institution has
processed any prohibited transactions involving Iranian financial
institutions, including any agencies, branches, offices, or
subsidiaries thereof, we will be required to take appropriate steps
to prevent such access, including terminating your account.
The purpose of the notice requirement is to aid cooperation with
correspondent account holders in preventing transactions involving
Iranian financial institutions from accessing the U.S. financial
system. FinCEN does not require or expect a covered financial
institution to obtain a certification from any of its correspondent
account holders that access will not be provided to comply with this
notice requirement. Methods of compliance with the notice requirement
could include, for example, transmitting a notice by mail, fax, or
email. The notice should be transmitted whenever a covered financial
institution knows or has reason to believe that a foreign correspondent
account holder provides services to an Iranian financial institution.
Special due diligence also includes implementing risk-based
procedures designed to identify any use of correspondent accounts to
process transactions involving Iranian financial institutions. A
covered financial institution is expected to apply an appropriate
screening mechanism to identify a funds transfer order that on its face
listed an Iranian financial institution as originator or beneficiary,
or otherwise referenced an Iranian financial institution in a manner
detectable under the financial institution's normal screening
mechanisms. An appropriate screening mechanism could be the mechanisms
used by a covered financial institution to comply with various legal
requirements, such as the commercially available software programs used
to comply with the economic sanctions programs administered by OFAC.
3. Recordkeeping and Reporting
Section 1010.661(b)(4) of this rule clarifies that paragraph (b) of
the rule does not impose any reporting requirement upon any covered
financial institution that is not otherwise required by applicable law
or regulation. A covered financial institution must, however, document
its compliance with the notification requirement under Sec.
1010.661(b)(3)(i)(A).
VIII. Paperwork Reduction Act
The collection of information contained in this final rule is being
submitted to the Office of Management and Budget for review in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)), and has been assigned OMB Control Number 1506-0074. An agency
may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless it displays a valid OMB control
number.
Description of Affected Financial Institutions: Banks, broker-
dealers in securities, futures commission merchants, introducing
brokers-commodities, and mutual funds.
Estimated Number of Affected Financial Institutions: 23,615.\71\
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\71\ This number is a total of: (1) The institutions represented
in the most recent reports of the following regulators: the NCUA,
who reported 5,375 institutions as of December 31, 2018 in its
Quarterly Credit Union Data Summary: 2018 Q4, and the FDIC, who
reported 5,358 FDIC-insured institutions in its Key Statistics as of
April 25, 2019; (2) a March 2017 Government Accountability Office
Report PRIVATE DEPOSIT INSURANCE: Credit Unions Largely Complied
with Disclosure Rules, but Rules Should Be Clarified, that indicated
that approximately 125 credit unions were insured privately; (3)
1,130 introducing brokers and 64 futures commodities merchants
reported by the National Futures Association on its website as of
March 31, 2019; (4) 3,607 securities firms as of December 31, 2018
as reported by FINRA on its website; and, (5) 7,956 U.S. mutual
funds, according to the 2018 Investment Company Fact Book published
by the Investment Company Institute.
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Estimated Average Annual Burden in Hours per Affected Financial
Institution: The estimated average burden associated with the
collection of information in this final rule is two
[[Page 59313]]
hours per affected financial institution.\72\
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\72\ The estimated burden is two hours per financial
institution--one hour for a senior executive of the financial
institution to review and approve the notice to be provided to
correspondent account holders, and one hour for a compliance officer
to provide notice to correspondent account holders.
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Estimated Total Annual Burden: 47,230 hours.
List of Subjects in 31 CFR Part 1010
Administrative practice and procedure, Banks and banking, Brokers,
Counter-money laundering, Counter-terrorism, Foreign banking.
Authority and Issuance
For the reasons set forth in the preamble, Part 1010, chapter X of
title 31 of the Code of Federal Regulations, is amended as follows:
PART 1010--GENERAL PROVISIONS
0
1. The authority citation for Part 1010 continues to read as follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314,
5316-5332; Title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec.
701, Pub. L. 114-74, 129 Stat. 599.
0
2. Add Sec. 1010.661 to read as follows:
Sec. 1010.661 Special measures against Iran.
(a) Definitions. For purposes of this section:
(1) Iranian financial institution means any foreign financial
institution, as defined at Sec. 1010.605(f), organized under Iranian
law wherever located, including any agency, branch, office, or
subsidiary of such a financial institution operating in any
jurisdiction, and any branch or office within Iran of any foreign
financial institution.
(2) Correspondent account has the same meaning as provided in Sec.
1010.605(c).
(3) Covered financial institution has the same meaning as provided
in Sec. 1010.605(e)(1).
(4) Foreign bank has the same meaning as provided in Sec.
1010.100.
(5) Subsidiary means a company of which more than 50 percent of the
voting stock or analogous equity interest is owned by another company.
(b) Prohibition on accounts and due diligence requirements for
covered financial institutions--(1) Opening or maintaining
correspondent accounts for Iranian financial institutions. A covered
financial institution shall not open or maintain in the United States a
correspondent account for, or on behalf of, an Iranian financial
institution, unless such account is authorized by United States
Department of the Treasury's Office of Foreign Assets Control (OFAC).
Note 1 to paragraph (b)(1): Note that covered financial
institutions should block and report to OFAC any accounts that are
blocked pursuant to any OFAC sanctions authority and therefore
should continue to maintain such accounts in accordance with the
Reporting Procedures and Penalties Regulations, 31 CFR part 501.
(2) Prohibition on use of correspondent accounts. A covered
financial institution shall take reasonable steps to not process a
transaction for the correspondent account of a foreign bank in the
United States if such a transaction involves an Iranian financial
institution, unless the transaction is authorized by, exempt from, or
not prohibited under the International Emergency Economic Powers Act
(IEEPA) (50 U.S.C. 1701 et seq.), any regulation, order, directive, or
license issued pursuant thereto, or any other sanctions program
administered by the Department of the Treasury's Office of Foreign
Asset Control.
(3) Special due diligence of correspondent accounts to prohibit
use. (i) A covered financial institution shall apply special due
diligence to the correspondent accounts of a foreign bank that is
reasonably designed to guard against their use to process transactions
involving Iranian financial institutions that are prohibited, and not
authorized or exempt, pursuant to the IEEPA, any regulation, order,
directive, or license issued pursuant thereto, or any other sanctions
program administered by the Department of the Treasury's Office of
Foreign Asset Control (``prohibited transactions''). At a minimum, that
special due diligence must include:
(A) Notifying those foreign correspondent account holders that the
covered financial institution knows or has reason to believe the
correspondent account is being used to process transactions involving
Iranian financial institutions that such prohibited transactions may
not take place; and
(B) Taking reasonable steps to identify any use of its foreign
correspondent accounts for prohibited transactions involving Iranian
financial institutions, to the extent that such use can be determined
from transactional records maintained in the covered financial
institution's normal course of business.
(ii) A covered financial institution shall take a risk-based
approach when deciding what, if any, other due diligence measures it
reasonably must adopt to guard against the use of its foreign
correspondent accounts to process prohibited transactions involving
Iranian financial institutions.
(iii) A covered financial institution that knows or has reason to
believe that a foreign bank's correspondent account has been or is
being used to process prohibited transactions involving Iranian
financial institutions shall take all appropriate steps to further
investigate and prevent such access, including the notification of its
correspondent account holder under paragraph (b)(3)(i)(A) of this
section and, where necessary, termination of the correspondent account.
(4) Recordkeeping and reporting. (i) A covered financial
institution is required to document its compliance with the notice
requirement set forth in this section.
(ii) Nothing in this section shall require a covered financial
institution to report any information not otherwise required to be
reported by law or regulation.
Kenneth A. Blanco,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2019-23697 Filed 11-1-19; 8:45 am]
BILLING CODE 4810-02-P
