FinCEN declares Iran a Primary Money Laundering Concern

November 18, 2019

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has issued a final rule identifying Iran as a jurisdiction of primary money laundering concern. The move on October 25, 2019 under Section 311 of the USA PATRIOT ACT, seeks to further isolate Iran from the global financial network.

At the same time, the US Treasury and State Departments announced a new humanitarian mechanism to ensure that funds to support the Iranian people are not used by the Iranian regime to develop missiles or support terrorism.

These measures build upon the US Treasury Department’s Office of Foreign Assets Control’s (“OFAC”) additional sanctions against the Central Bank of Iran, according to a post by legal firm Baker McKenzie.

FinCEN says its action is based on its finding that international terrorists and entities involved in missile proliferation have transacted business in Iran, and that Iran has a high level of institutional corruption and weak AML/CFT laws.

“The Final Rule aims to apply “maximum pressure” to shut off the Iranian regime’s illicit sources of revenue,” said Baker McKenzie. “In line with these goals, the Final Rule will limit Iranian banks’ ability to maintain overseas accounts and access foreign currency.”

Expected Move

The law firm says the move was largely expected by FinCEN, although it is hard to say how much impact it will have on Iran.

“Since sanctions against Iran already largely prohibit US financial institutions from facilitating transactions by Iranian financial institutions, the practical impact of the Final Rule will be limited.”

They point out that US financial institutions have already paid special attention to foreign correspondent accounts to ensure that such accounts do not give rise to sanctions compliance risk.

“Most U.S. financial institutions who maintain accounts for foreign financial institutions require such account holders to represent or certify that they will not use the accounts to process transactions involving US sanctions targets, including Iranian financial institutions.

Humanitarian Aspect

The other part of the federal announcement was the humanitarian mechanism, although there were few details on how it would work.

Experts say the humanitarian mechanism may just add work for compliance officers.

“The initiative by the US government to work with private parties to facilitate humanitarian trade with Iran is consistent with the US government’s overall policy to punish the Iranian government through the use of economic sanctions and not the Iranian people. However, the initiative seems to have only added to the compliance burden associated with US sanctions compliance faced by those engaged in humanitarian trade with US sanctions targets.”

To ensure your company complies with the latest AML rules and ever changing sanctions, see what Alessa by CaseWare RCM can do for you. If you have specific questions about avoiding dealings with money laundering jurisdictions like Iran, please contact us.

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