The United States Financial Crimes Enforcement Network (FinCEN) issued an advisory earlier today warning financial institutions of attempts by Iran to disrupt the financial system. The statement outlines several ways in which Iran is abusing the financial system to avoid sanctions – including the use of virtual currencies.
FinCEN released the advisory “to help financial institutions better detect and report potentially illicit transactions related to the Islamic Republic of Iran.”
FinCEN takes specific issue with Iran’s attempts to exploit the US financial system as well as their “illicit and malign activities”.
Specifically, FinCEN feels that foreign financial institutions might be targeted by Iranians in order to avoid exposure to US sanctions and to get around regulations like Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).
FinCEN believes that Iran is not just targeting the United States financial system: they’re also targeting banks that have existing relationships with the United States:
“The advisory provides information on the threats the Iranian regime poses to the U.S. financial system as well as to institutions that have correspondent banking relationships with U.S. financial institutions, describes deceptive financial strategies that the Iranian regime uses to evade sanctions, and provides red flag indicators related to specific malign activities and typologies.”
FinCEN believes Iran will continue engaging in these deceptive practices moving forward. They’re advising financial institutions worldwide to take extra vigilance when enforcing KYC and AML against Iranians.
How is Iran Attempting to Disrupt the Global Financial System?
US sanctions have hit the country of Iran hard. To get around those sanctions, the Iranian regime is reportedly engaging in a number of deceptive practices. The country is targeting foreign banks and American institutions in order to avoid the costly sanctions:
“…the Iranian regime uses deceptive practices, including front companies, fraudulent documents, exchange houses, seemingly legitimate businesses and government officials, to generate illicit revenues and finance their malign activities.”
FinCEN specifically claims the government of Iran is engaging in these activities. The advisory mentions Iran’s IRGC-Qods Force, for example, as well as the Central Bank of Iran. In fact, FinCEN claims that government officials “at the highest levels” are involved in scamming the global financial system.
“Any country that allows its Central Bank to be involved in deception in support of terrorism requires the highest levels of scrutiny, particularly when the country itself is the world’s largest state sponsor of terrorism.”
Some of the specific examples given in the statement include:
- The Iranian regime has masked illicit transactions using senior officials of the Central Bank of Iran, “who used their official capacity to procure hard currency and conduct transactions for the benefit of the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxy group, Lebanese Hizballah”, alleges FinCEN
- Iranian shipping companies are reportedly engaging in illicit practices, including illegal shipments of precious metals and virtual currency
- Iran is using exchange-house related schemes and front or shell companies worldwide to access “goods and services related to currency counterfeiting, dual-use equipment, and the commercial aviation industry”
FinCEN adds that they “expect Iran to continue to attempt to engage in wide scale sanctions evasion” and that the country is expected to continue “using its resources to fund a broad array of malign activity.” Because of that, financial institutions around the world are advised to “continue to sophisticate their compliance programs to keep these actors from exploiting them.”
FinCEN Warns that Iran is Using Virtual Currency to Avoid Sanctions
One part of the FinCEN advisory specifically mentions virtual currency:
“Financial institutions should also be aware of possible Iranian abuses of virtual currency and precious metals to evade sanctions and gain access to the international financial system and to conceal their nefarious actions.”
In other words, Iranians could possibly be transferring wealth across borders using virtual currencies and precious metals, among other means. This is one way to get around US sanctions.
This is the only time virtual currency is mentioned in the advisory, and there’s no further mention of bitcoin or other digital currencies that may be used by the country of Iran.
Clearly, in the eyes of FinCEN, the Iranian government is engaging in deceptive, malicious, and illicit practices at the highest levels of government. FinCEN issued the statement today to warn financial institutions in America and around the world of the possibility of fraud from the Iranian government, with fraudulent activities expected to continue over the coming weeks.