U.S. Moves to Isolate Iranian Banks
Saturday, September 9, 2006
The Bush administration has stepped up a broad effort to choke off Iran's ability to finance militant groups and acquire weapons technology by cutting off suspect banks and firms from the international banking system, U.S. officials said yesterday.
The initiative has gathered steam in recent weeks, even as the U.S.-led effort to bring sanctions against Iran for its nuclear activities has slowed at the U.N. Security Council. Officials have especially focused on Iran's financing of the radical Shiite militant group Hezbollah in the aftermath of Israel's war with Hezbollah in southern Lebanon this summer.
The Treasury Department said yesterday it had cut off one of Iran's largest state-owned banks from the U.S. financial system, accusing Bank Saderat of funneling $50 million to a Hezbollah-controlled firm since 2001. The bank -- which has about 3,400 branch offices across the Middle East and elsewhere -- has also been used by Iran to transfer money to Hamas, the Popular Front for the Liberation of Palestine-General Command and Palestinian Islamic Jihad, the Treasury Department said.
Iranian banks are already barred from doing business directly with U.S. banks, but U.S. banks are permitted to process payments involving Iran that begin and end with a non-Iranian foreign bank, in what are called "U-turn" transactions. Treasury's action will end such indirect access for Bank Saderat.
On Thursday, Treasury separately targeted two Lebanon-based financial institutions that officials said acted as Hezbollah's unofficial treasury, helping secure loans and finance business deals for the organization, among other things.
Stuart Levey, the Treasury undersecretary for terrorism and financial intelligence, said he will go to Europe next week to enlist support from governments and financial institutions for severing Iran from the international financial system. Other Treasury and State Department officials are traveling across Asia and the Middle East to make similar pitches.
"This is certainly an example of the variety of different levers that are available not only to the United States, but other countries as well about how to bring about a change in behavior in the Iranian regime," said State Department spokesman Sean McCormack, referring to the action against Bank Saderat.
"Our actions this week are a sign of the costs that Iran's leaders will impose on the Iranian people if the leadership chooses to remain on its current path of defiance," Levey said yesterday in a speech to the American Enterprise Institute. "The regime will end up isolating Iran from the world community, with reputable financial institutions becoming increasingly unwilling to handle Iran's business."
Levey noted that earlier this year the Swiss bank UBS ended its dealings with Iran, while two other banks, HSBC and Credit Suisse, sharply curtailed their business.
"The next steps may involve sacrifice, but I think that people are beginning to recognize that the costs we face now pale in comparison to those we might face in the future if Iran does not change course," he said.
Levey said Treasury has had tremendous success against North Korea, which has suffered since Treasury a year ago accused a bank in Macao of being a conduit for North Korean counterfeiting and money laundering. A number of financial institutions around the world immediately stopped doing business with North Korea, Levey said, warning that all financial institutions should consider abandoning dealings with North Korean companies. "The line between North Korea's licit and illicit money is nearly invisible," he said.
North Korea has refused to return to multilateral disarmament talks, citing the Treasury action.