IRGC Front Company Risk
Doing business in or with Iran means a high degree of exposure to the Islamic Revolutionary Guard Corps (IRGC), designated as a Foreign Terrorist Organization (FTO) by the United States in 2019. The IRGC is an organization engaging in destructive and malign activities around the world, ranging from drug-smuggling, arms-trafficking, and money-laundering to outright violent terrorism and sponsorship of the world’s worst terrorist groups. While it is flatly illegal for American and international companies to do business with the IRGC, no corporate compliance officer or country managers can be sure if their company is doing business with a reputable Iranian company or one that is secretly operated, managed, and even owned by the IRGC. As BBC Monitoring notes, “Though the IRGC’s role in the economy is widely known, the extent of this involvement remains unclear and the Guards keep key information, such as the names of shareholders and how the dividends are distributed, off the books.” Given the extent of the IRGC’s involvement in Iran’s economy, no company operating in Iran can avoid it.
Bonyad Affiliation Risk
IRGC companies have received a lot of attention in the West, but other powerful Iranian entities also present risks for international companies looking to do business in Iran. Bonyads are “opaque, quasi-official organizations generally controlled by current and former government officials and clerics that report directly to the Supreme Leader.” They are also exempt from taxes and accountable to no one except the Supreme Leader. These entities, such as the Imam Reza Foundation and Execution of Imam Khomeini’s Order (EIKO), which was sanctioned in January 2021, are financial behemoths with interests in virtually every sector of the Iranian economy. As long ago as 2013, a Reuters investigation estimated EIKO’s assets at $95 billion. These foundations have participated in illicit activities. For instance, Lebanese Hezbollah’s representative to Iran and Specially Designated Global Terrorist (SDGT) Abdullah Safieddine, told Al-Akhkbar in 2012 that “Khamenei has his own budget outside the state,” which is financed by certain “religious associations other than the awqaf/bonyads [Islamic charitable endowments].” These entities wield informal and formal influence to undercut businesses and rivals, and undertake actions like abusing the judiciary against companies that want to “stay clean” and not do business or favors for it.
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Eye on Iran is a news summary from United Against Nuclear Iran (UANI), a section 501(c)(3) organization. Eye on Iran is available to subscribers on a daily basis or weekly basis.