Risky Business: Banking Industry Should Resist Pressure To Accept Exposure In Iran

(New York, N.Y.) – In an investigative report published today, the Wall Street Journal detailed how “Iran established a clandestine banking and finance system to handle tens of billions of dollars in annual trade banned under U.S.-led sanctions…. [which] Iranian authorities aim to make [] a permanent part of the economy…” This was occurring from the very start of the Joint Comprehensive Plan of Action (JCPOA) signed in 2015, even as then-Secretary of State John Kerry conducted a European tour to campaign for the continent’s major financial institutions to back the JCPOA and seek entry to the Iranian market. 

The banks rejected Kerry’s pleas, expressing in clear terms an unwillingness to chance their reputations and legal standing by doing business in a market controlled by the world’s leading state-sponsor of terrorism. 

In written correspondences with major European banks throughout 2016, United Against Nuclear Iran (UANI) warned against any business relationship with Tehran and detailed the ongoing serious commercial, financial, legal, and reputational risks associated with doing business in or with Iran. These included remaining banking-related and money laundering issues, doing business with the Islamic Revolutionary Guard Corps (IRGC), economic sanctions outside of JCPOA parameters, impairment of corporate reputation, personal risk exposure to employees, and cyber security, among others. 

Today, with a new Iran deal in sight, the industry should prepare to face a new wave of pressure from U.S. and European politicians to enter the Iranian market. 

In the nearly seven years since Kerry made his pitch to bankers, Iran has failed to end its tenure on the Financial Action Task Force’s (FATF) “blacklist” dating back to 2000. Even today, only Iran and North Korea are on this list of “high-risk jurisdictions.” Iran is explicitly judged to be “non-cooperative in the global fight against money laundering and terrorist financing.” This is not surprising given that Iran continues to be the world’s premier state-sponsor of terrorism, funding Hezbollah, Hamas, and the Houthis, among others, to the tune of billions every single year. 

“As Russia, China, the U.S., and Europe near agreement with the Iranian regime on an updated nuclear agreement that would re-open the Iranian market, the global banking industry must consider the ramifications of providing financial support for a regime notorious for money laundering and support for terrorism. The act of removing sanctions and authorizing trade and investment does not mean that engagement with Tehran is now reasonable, ethical, or wise,” stated UANI Research Director Daniel Roth. “There are far greater obstacles than sanctions to entering the Iranian market, which has become more ill-suited to law abiding and respectable businesses in recent years.” 

Roth concluded, “Iran’s well-deserved reputation as a center of terror financing has not and will not change until Iran fundamentally transforms into a normal country, rather than its current configuration: as a cause that simply sees terrorism as a legitimate way to advance its radical goals. If the Biden Administration wants to avoid the rejection handed to Secretary Kerry, it should demand that any agreement with Iran address legitimate industry concerns. These aren’t gamblers; they’re bankers, and we can expect and anticipate that they will balk once again at the requests of political leaders responsible for another bad deal.”