On October 11, 2018, FinCEN released an advisory to help U.S. financial institutions better detect potentially illicit transactions related to Iran. The advisory describes how Iran attempts to access the international financial system and avoid U.S. sanctions and other financial controls, and it identifies certain red flags indicative of a transaction's potential ties to Iran. Financial institutions should expect regulators' increased scrutiny of certain transactions, and compliance obligations generally, with the United States' withdrawal from the JCPOA. Background
On October 11, 2018, the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) released an advisory to help U.S. financial institutions better detect potentially illicit transactions related to the Islamic Republic of Iran ("Iran"). In particular, the advisory targets banks; money services businesses (MSBs), such as virtual currency administrators and exchanges; and dealers in precious metals, stones and jewels.
Iran's Attempts to Access the International Financial System
FinCEN's advisory summarizes the ways the Iranian regime attempts to access the international financial system through covert means. It makes it clear that these efforts are used to provide funds to the Islamic Revolutionary Guard Corps (IRGC) and its Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), as well to Lebanese Hizballah, Hamas and other designated groups.
Use of SDN-listed Central Bank of Iran (CBI) officials - FinCEN highlights that CBI officials listed on the U.S. Department of the Treasury, Office of Foreign Assets Control's (OFAC) list of Specially Designated Nationals and Blocked Persons (SDN List) have historically facilitated the transfer of hard foreign currencies back to Iran and transacted for the benefit of the IRGC-QF and its beneficiaries. FinCEN advises financial institutions to exercise appropriate due diligence to avoid transacting with CBI officials, noting in particular that some counterparty financial institutions "may not be equipped to identify or address CBI officials' deceptive transactions." Use of exchange houses - As sanctions are reimposed on Iran following the lifting of the Joint Comprehensive Plan of Action (JCPOA), Iran can be expected to increase its use of third-country exchange houses or trading companies to act as money transmitters. Accordingly, FinCEN warns financial institutions to conduct proper due...