Hezbollah’s Lifeline to the Islamic Republic: Bank Saderat

It’s no secret that the Islamic Republic of Iran’s support is critical in facilitating the activities of Hezbollah, one of its most powerful proxies. According to the terrorist organization’s general secretary, Hassan Nasrallah, “everything it eats and drinks, its weapons and rockets, comes from the Islamic Republic of Iran.” Along with arms and supplies, the Islamic Republic also provides hundreds of millions of dollars each year to fund Hezbollah’s global operations – which span Europe, Latin America, and the Middle East. Much of this funding is transferred through illicit means, including smuggling gold, trafficking drugs and arms, or via third-party donors.

However, a significant amount of Hezbollah’s funding is funneled through ostensibly commercial banks that are affiliated with the Islamic Republic and operate in Lebanon. The most important of these is Bank Saderat, one of Iran’s largest banks. Bank Saderat alone has transferred tens of millions of dollars per year to Hezbollah since 2001, acting as an important lifeline through the organization’s war against Israel and Lebanon’s economic collapse. Since that time, such transfers have occurred through clearing funds through Bank Saderat to Hezbollah’s financial arm, al-Qard al-Hasan, or through wire transfers through third parties. Despite coming under heavy scrutiny in the past for involvement in the Islamic Republic’s malign activities, Bank Saderat’s continued connections to Hezbollah have gone largely unabated in recent years. Further action is clearly required from both the United States and its allies.

The United States first recognized Bank Saderat’s role in terror financing in 2006, in a public statement by then-Undersecretary of the Treasury Stuart Levey. This statement was accompanied by a comprehensive ban on the bank’s activities in the U.S. financial market. In 2007, this ban was followed by additional measures, as executive orders designated the bank as an entity tied to the Islamic Republic. Soon thereafter, Bank Saderat came under international restrictions. A resolution adopted by the United Nations Security Council in 2008 imposed travel bans and asset freezes on Bank Saderat executives due to its involvement in violating anti-proliferation statutes. The European Union similarly listed the bank as an entity involved in the Iranian nuclear program in 2010, which was upheld following legal opposition.

Despite these efforts to identify Bank Saderat’s involvement in malign activities and impose punitive measures, these U.S., UN, and EU restrictions either expired or were otherwise removed following the implementation of the Joint Comprehensive Plan of Action in 2015. These moves were partly enabled by Greece’s efforts to block attempts at renewing sanctions against the bank. After restrictions were removed, Bank Saderat returned to western financial hubs, including London, Frankfurt, and Paris. Rather than inhibiting the Islamic Republic’s malign activities, the JCPOA allowed entities like Bank Saderat to expand their operations and increase their revenue – to the benefit of Hezbollah and other terrorist organizations.

Since the U.S. withdrawal from the JCPOA in 2018, moves to draw attention to and restrict Bank Saderat’s terrorist financing activities have resumed. A few months after the withdrawal took place, the U.S. reimposed sanctions on banks connected to the Islamic Republic, including Bank Saderat. Due to its involvement in facilitating Hezbollah’s terrorist operations, the U.S. Department of Justice has also opened the door for Americans to seek legal action against the bank. In addition to actions taken by the U.S., the G7 Financial Action Task Force has issued guidance for state authorities to exercise vigilance over Bank Saderat, monitoring its clients and transactions. Additionally, the Canadian Security Intelligence Service has exposed that Bank Saderat illegally wired money through third-party entities in Canada, with the funds channeled to terrorist organizations like Hezbollah.

Ultimately, all these actions are inadequate in preventing Bank Saderat from financing Hezbollah. The organization continues to plot terror operations around the world and conducts military strikes on civilian targets strikes civilian targets. Western states like France, Canada, Germany, Italy, Greece, and the United Kingdom should follow the U.S. and sanction Bank Saderat after immediately suspending its operations as a key first step. Lebanon should also be pressed to ban the bank, following the precedent set after the Iraqi government suspended the operating licenses of other Iranian banks. Members of the Lebanese government have called for such action since 2017. In response, other officials have claimed to be monitoring Bank Saderat’s activities – but this approach has clearly been unsuccessful. Finally, the U.S. must continue to target Hezbollah’s international funding network, particularly in the western hemisphere. Failure to act on each of these fronts will further enable Hezbollah and only embolden the Islamic Republic.

Jack Roush is a research associate at United Against Nuclear Iran (UANI) and a PhD candidate in International History at the London School of Economics and Political Science. He is on Twitter @RoushJackW.