Adopting Enhanced Due Diligence, KYCC Compliance Standards Would Protect Businesses & Help U.S. Sanctions Succeed

The re-imposition of U.S. sanctions and recent action by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to disconnect Iranian banks from its financial messaging system are increasing the pressure on the regime. However, more must be done if we are to change Iran’s behavior through a “maximum pressure” campaign.

Today, no reputable company will risk violating U.S. and international sanctions, and every company is certain to apply the best practices of Due Diligence (DD) and Know-Your-Customer (KYC). However, in order for a maximum pressure campaign to succeed, a broader conceptual shift in how the business community thinks about Iran is needed, one that deploys at a minimum Enhanced Due Diligence (EDD) and Know-Your-Customer’s-Customer (KYCC) practices.

Existing KYC standards are currently used to protect businesses from engaging directly with sanctioned individuals and entities. But ties to Iranian sanctioned entities may still occur indirectly. In particular, customers’ customers may be engaging in questionable or unlawful behavior, including money laundering, terror financing and sanctions evasion. This leaves a dangerous sanctions gap that needs to be plugged so sanctions can have their full intended effect and puts businesses at significant risk of reputational damage.

“Right now, a U.S. company can conduct business with any company in the world as long as it’s not sanctioned. However, sometimes European and Asian firms have partners or suppliers who have done business with Iran. Applying a higher standard of due diligence known as Know-Your-Customer’s-Customer would reduce the number of companies undermining U.S. sanctions and provide greater protection from materials or money ending up in Iranian hands,” said UANI Chairman Joseph I. Lieberman.

For example, American industrial manufacturer Ingersoll Rand, which responsibly confirmed to UANI in November 2016 that it had no Iran business, supplies products to the German machine tools maker DWT GmbH. Ingersoll Rand may be unaware that DWT participated in the 2017 Iran Oil Show in Tehran, which featured numerous sanctioned entities subject to asset freezes, and now exposed to tougher U.S. “secondary” sanctions.

UANI previously contacted DWT concerning its participation in that conference, to which DWT replied: “[A]s we get many spam mails from the country of US which recently just sold a big number of Boeing planes again to Iran … we consider this mail as well as spam.” Ingersoll Rand would certainly be alarmed by DWT’s flippant and irresponsible attitude when faced with the prospect of serious Iran business risks – particularly the prospect of inadvertently transacting with sanctioned Iranian entities or terrorist proxies.

Similarly, General Motors, which also previously informed UANI of its commitment to keep out of Iran, does business with the Italian steel firm Coproget. However, GM may be unaware that Coproget participated in an Iranian manufacturing and metals conference in June of this year in Tehran – two months after the U.S. decision to withdraw from the JCPOA and re-impose sanctions. One of the conference’s main partners was the Industrial Development & Renovation Organization of Iran (IDRO), an Iranian regime entity also now subject to U.S. secondary sanctions.

Now is the time for a conceptual shift in how global companies think of Iran as a trading and investment opportunity. Iran is the world’s leading state sponsor of terrorism and the facilitator of slaughter in Syria. Business and trade with this regime should be as unthinkable as doing business with other murderous regimes and transnational terror organizations, including North Korea, al-Qaeda and ISIS.

“A broad shift in how the business world frames Iran as a market, together with enhanced due diligence and Know-Your-Customer’s-Customer, will enable American firms to help plug the gaps in Iranian sanctions enforcement,” said UANI CEO Mark D. Wallace. “For all of us, keeping an eye on the margins of Iran’s ties to the business community is crucial because every violation of U.S. sanctions chips away at their strength, encourages more bad behavior and supports the regime in Tehran.”