"Blind Spot Under the Lamp"... Billions in Sanctioned Iranian Funds Moved Annually Through U.S. Banks

$9 Billion in Iranian Funds Moved in 2024 Alone
U.S. Government Weighs Sanctions Measures
Concerns Over Ripple Effects on the International Financial System

While the United States has imposed sanctions aimed at blocking Iran's movement of funds and isolating it from the international financial system, it has emerged that billions of dollars of Iranian funds move through U.S. banks every year.

The Wall Street Journal (WSJ) reported on the 5th (local time), citing Western officials and experts, that Iran utilizes shell companies and foreign financial institutions to make use of the U.S. dollar payment network.

This suggests that Iran establishes shell companies in places such as Hong Kong or the United Arab Emirates (UAE), forms correspondent banking relationships with the United States, and moves funds using local financial institutions.

According to the WSJ, if these shell companies conceal the actual transaction parties through complicated links with currency exchange brokers and others, even the U.S. banks that ultimately handle correspondent bank settlements may not notice and thus approve the transactions.

The U.S. Department of the Treasury has estimated that, over the course of 2024, approximately 9 billion dollars (about 12 trillion won) in Iran-related funds have moved through American banks.

Recently, the UAE branch of Banque Misr, a state-owned Egyptian bank, has been identified as having facilitated Iran's access to the U.S. financial network. According to the U.S. Treasury Department, Banque Misr’s UAE branch processed transactions involving 103 entities potentially linked to Iran, amounting to 1.8 billion dollars (about 2.4 trillion won) between January and June 2024.

The U.S. government has begun procedures to prevent Banque Misr’s UAE branch from opening or maintaining correspondent accounts with American financial institutions.

The Trump Administration has recently called on financial institutions in the United States and other countries to strengthen oversight of Iran-related transactions in order to cut off Iran’s sources of funding.

However, the U.S. government is also weighing the level of sanctions to impose on financial institutions involved in Iran’s dollar transactions. The fact that the Department of the Treasury opted to restrict access of Banque Misr’s UAE branch to U.S. correspondent accounts, rather than impose secondary sanctions, is seen as evidence of such deliberation.

If foreign banks are entirely cut off from the U.S. financial system, it could threaten their very survival and cause a domino effect on the international financial system as a whole.

From the perspective of U.S. banks, correspondent banking services generate revenue through commissions, deposits, and other sources of funding. Therefore, penalizing American banks providing such services could negatively impact the broader U.S. financial industry.

Experts further point out that if enforcement becomes too strict, countries may turn to alternatives such as the Chinese yuan, which could undermine the dominance of the U.S. dollar.

Jason Prince, partner at law firm Akin Gump, said, "If the U.S. government tries to take all measures at once, it could trigger a chain reaction that runs contrary to its goals."

Photo by The Asia Business Daily DB

This content was produced with the assistance of AI translation services.