U.S. Sanctions Iran’s Financial Sector

On October 8, the Treasury sanctioned 18 major Iranian banks to cut Iran off from the global banking system and deny the regime access to foreign funds and institutions. The new sanctions are the latest step in the Trump administration’s “maximum pressure campaign” to squeeze Iran into renegotiating the 2015 nuclear deal so it would also include ballistic missiles, support for extremist groups, and threats against its neighbors and U.S. allies.

Most Iranian banks, including the Central Bank that facilitates trade and regulates currency, were already sanctioned. The latest U.S. move could make it harder for Iran to finance imports. Treasury Secretary Steven Mnuchin said that the measures would still allow humanitarian transactions, which are exempt from sanctions under U.S. law. “Today’s action targets the Iranian regime and is not directed at the people of Iran,” he assured. But European officials were reportedly concerned that the new sanctions would cripple Iran’s ability to import even humanitarian goods--such as food, pharmaceuticals and medical supplies – amid the coronavirus pandemic. 

Mnunchin vowed that U.S. sanctions “will continue until Iran stops its support of terrorist activities and ends its nuclear programs.” The new sanctions were imposed under an executive order that Trump issued in January allowing the State Department and the Treasury to penalize key sectors of Iran’s economy. 

Foreign companies and banks had already reluctant to do business with Iran for fear of U.S. financial penalties since President Trump withdrew from the 2015 nuclear deal and reimposed sanctions in 2018. Any company or country that does business Iran could face third-party sanctions too. Sanctions have curtailed Iran’s oil exports, a key source of foreign exchange, and contributed to the devaluation of the rial, which hit a record low against the dollar – 300,000 rials for each dollar – on October 1.

Iranian Foreign Minister Mohammad Javad Zarif accused the United States of "conspiring to starve" Iran's population. 

 

On October 9, Secretary of State Mike Pompeo said that U.S. sanctions had denied Iran "tens and tens of billions of dollars" that could have been used to challenge the United States. “We recognize the Islamic Republic of Iran as the greatest threat to that peace – the greatest threat, frankly, to Americans all across this great country. And so we have put enormous costs on the regime itself.” The following is the Treasury’s press release and remarks by Secretary of State Mike Pompeo.

 

Treasury Sanctions Eighteen Major Iranian Banks

Today, the Secretary of the Treasury, in consultation with the Secretary of State, identified the financial sector of the Iranian economy pursuant to section 1(a)(I) of Executive Order (E.O.) 13902, which authorizes Treasury to sanction any Iranian financial institution. Subsequently, the Office of Foreign Assets Control (OFAC) sanctioned eighteen major Iranian banks. As part of this action, OFAC sanctioned sixteen Iranian banks for operating in Iran’s financial sector and one bank for being owned or controlled by a sanctioned Iranian bank. Additionally, today’s action includes the designation of an Iranian military-affiliated bank under Treasury’s counter-proliferation authority. 

“Today’s action to identify the financial sector and sanction eighteen major Iranian banks reflects our commitment to stop illicit access to U.S. dollars,” said Secretary Steven T. Mnuchin. “Our sanctions programs will continue until Iran stops its support of terrorist activities and ends its nuclear programs. Today’s actions will continue to allow for humanitarian transactions to support the Iranian people.”

Treasury’s action was taken pursuant to E.O. 13902, which provides authority to identify and impose sanctions on key sectors of Iran’s economy in order to deny the Iranian government financial resources that may be used to fund and support its nuclear program, missile development, terrorism and terrorist proxy networks, and malign regional influence. Treasury also sanctioned one bank pursuant to E.O. 13382, which provides authority to impose sanctions on proliferators of weapons of mass destruction (WMD) and their supporters.

The action under E.O. 13902 does not affect existing authorizations and exceptions for humanitarian trade, which remain in full force and effect for these seventeen banks. This action also does not affect activities subject to a State Department-issued waiver or exception, or activities subject to an OFAC general or specific license.  

SANCTIONS ON INSTITUTIONS OPERATING IN IRAN’S FINANCIAL SECTOR

Under the provisions of E.O. 13902, the Secretary of the Treasury identified the financial sector of Iran’s economy as an additional avenue that funds the Iranian government’s malign activities. Today’s sanctions targeted major banks operating in Iran’s financial sector.

Amin Investment BankBank Keshavarzi IranBank MaskanBank Refah KargaranBank-e ShahrEghtesad Novin BankGharzolhasaneh Resalat BankHekmat Iranian BankIran Zamin BankKarafarin BankKhavarmianeh Bank (also known as Middle East Bank), Mehr Iran Credit Union BankPasargad BankSaman BankSarmayeh BankTosee Taavon Bank (also known as Cooperative Development Bank), and Tourism Bank were previously identified as Iranian financial institutions pursuant to E.O. 13599. Today, they were sanctioned as entities operating in Iran’s financial sector.

Additionally, Islamic Regional Cooperation Bank, also previously identified as an Iranian financial institution under E.O. 13599, was sanctioned pursuant to E.O. 13902 for being owned or controlled by Eghtesad Novin Bank.

In May 2020, Hekmat Iranian Bank, a bank servicing Iran’s armed forces, merged with Bank Sepah, which has served as a financial platform for Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) to pay its agents abroad. Bank Sepah was designated on November 5, 2018 pursuant to E.O. 13382 for having provided support to MODAFL. Today, Hekmat Iranian Bank was also designated pursuant to E.O. 13382, as an entity owned or controlled by Bank Sepah.

The banks sanctioned today are subject to the supervision and regulation by the Central Bank of Iran (CBI), which was previously designated under E.O. 13224 for providing support to the Islamic Revolutionary Guards Corps (IRGC), its Qods Force (IRGC-QF), and its terrorist proxy, Hizballah.

SANCTIONS IMPLICATIONS

All property and interests in property of designated targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC’s regulations generally prohibit all dealings by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of blocked or designated persons.

In addition, financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities after a 45-day wind-down period may expose themselves to secondary sanctions or be subject to an enforcement action.

Today’s action targets the Iranian regime and is not directed at the people of Iran. The U.S. government recognizes and understands the necessity for both commercial humanitarian exports and humanitarian transactions to access Iran’s banking system, and this action does not interfere with that ability. Concurrent with this action, OFAC is issuing a general license pursuant to E.O. 13902, authorizing transactions and activities involving Iranian financial institutions sanctioned under E.O. 13902 that are authorized, exempt, or otherwise not prohibited under the Iranian Transactions and Sanctions Regulations. For details, see General License L. In addition, OFAC is providing a 45-day period for non-U.S. persons to wind down non-humanitarian transactions that may become subject to sanctions as a result of sanctions under E.O. 13902.

OFAC is also issuing guidance in the form of FAQs, which set forth the 45-day wind down, provide further guidance on the scope of General License L, and outline the effects of sanctions under E.O. 13902 on U.S. and non-U.S. persons engaged in humanitarian trade and certain other transactions involving Iran, including non-U.S. persons’ secondary sanctions exposure. For specific information on humanitarian trade with Iran, reference OFAC’s FAQs and important advisories.

 

Statement by Secretary Michael Pompeo

Sanctions on Iran’s Financial Institutions

Today, the United States is identifying the Iranian financial sector as subject to the terms of Executive Order (E.O.) 13902 and sanctioning 18 major Iranian banks, further depriving the Islamic Republic of Iran of funds to carry out its support for terrorist activities and nuclear extortion that threatens the world. These sanctions will take effect following a 45-day wind down period. This action includes imposing sanctions on 17 Iranian banks pursuant to E.O. 13902 for operating in Iran’s financial sector, or for being owned or controlled by sanctioned Iranian banks, and the designation of an additional Iranian military-affiliated bank pursuant to E.O. 13382, a counter-proliferation authority. Our maximum economic pressure campaign will continue until Iran is willing to conclude a comprehensive negotiation that addresses the regime’s malign behavior.

In March, while COVID-19 was spreading through Iran, regime officials asked Supreme Leader Khamenei to urgently release funds to respond to the outbreak. Despite Khamenei’s assurances to do so, Iran’s Health Minister revealed last week that the Health Ministry had received only a small fraction of those funds. The Health Minister asked “What are they using it for that could be more important?” We know the answer. In 2018 and 2019, Khamenei raided $4 billion from the Iranian National Development Fund for military expenses. And while the Health Ministry was pleading for resources to protect the Iranian people from the outbreak, Khamenei instead increased funding for the Islamic Revolutionary Guard Corps, a designated Foreign Terrorist Organization, by a third, and doubled the funding for the regime’s Basij forces that terrorize the Iranian people every single day.

Our sanctions are directed at the regime and its corrupt officials that have used the wealth of the Iranian people to fuel a radical, revolutionary cause that has brought untold suffering across the Middle East and beyond. The United States continues to stand with the Iranian people, the longest-suffering victims of the regime’s predations. Today’s actions pursuant to E.O. 13902 do not affect existing authorizations and exceptions for humanitarian exports to Iran, which remain in full force and effect. This action also does not affect activities authorized by the Iran Transactions and Sanctions Regulations (ITSR). For additional information, please see the Department of the Treasury and OFAC websites. We are committed to continuing the Iranian people’s access to humanitarian goods and other essential goods and services, and we reaffirm the United States’ offer to assist Iran in its response efforts to the COVID-19 outbreak.

Our sanctions are directed at the regime and its corrupt officials that have used the wealth of the Iranian people to fuel a radical, revolutionary cause that has brought untold suffering across the Middle East and beyond. The United States continues to stand with the Iranian people, the longest-suffering victims of the regime’s predations. Today’s actions pursuant to E.O. 13902 do not affect existing authorizations and exceptions for humanitarian exports to Iran, which remain in full force and effect. This action also does not affect activities authorized by the Iran Transactions and Sanctions Regulations (ITSR). For additional information, please see the Department of the Treasury and OFAC websites. We are committed to continuing the Iranian people’s access to humanitarian goods and other essential goods and services, and we reaffirm the United States’ offer to assist Iran in its response efforts to the COVID-19 outbreak.

 

Pompeo in an interview with Greg Kelly on Oct. 9, 2020: “We recognize the Islamic Republic of Iran as the greatest threat to that peace – the greatest threat, frankly, to Americans all across this great country. And so we have put enormous costs on the regime itself.”

“So the sanctions you saw yesterday were just the latest in scores of sanctions we have put on them. We have denied tens and tens of billions of dollars that the Iranians frankly would have had if we just kept doing what the previous administration did: fund, fuel, and feed the Iranian regime. President Trump said we’re not going to do that. And so they’ve had less money – less money to foment terror, less money to build up their nuclear program, and fewer resources to challenge the United States all across the world.”

 

Pompeo in an interview with Larry O’Connor on Oct. 9, 2020: “The previous administration was allowing businesses across Europe to invest.  They transferred big piles of cash to the Islamic Republic of Iran.  That money ended up conducting terror campaigns, and as I think Secretary Kerry said, there’s no way to guarantee that it wasn’t used to harm citizens of the United States of America.

“We took the exact opposite approach.  We built out a coalition all across the world that understands the threat from the Islamic Republic of Iran.  And just yesterday, Secretary Mnuchin announced another series of cost-imposing measures against the regime inside of Iran to try to change their behavior, and at the very least, deny them the wealth and the resources that they need to foment their terror campaigns. 

Some of the information in this article was originally published on October 8, 2020.