US Again Warns About Iran’s Financial Activities

EghtesadOnline: As part of its continued pressure campaign on Iran, the US government has issued an advisory to help US financial institutions (particularly banks; money services businesses (MSBs), such as virtual currency administrators and exchangers; and dealers in precious metals, stones, and jewels) better detect "potentially illicit transactions" related to the Islamic Republic.

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13 October 2018

The Financial Crimes Enforcement Network (FinCEN), affiliated to the US Treasury Department published an advisory Friday, which it said highlights Iran's exploitation of financial institutions worldwide, and describes a number of typologies used by the country to illicitly access the international financialsystem and obscure and further its "malign activity."

It also added that Iran's use of cryptocurrency to "exploit" the financial system includes at least $3.8 million-worth of bitcoin-denominated transactions every year, according to Financial Tribune.

"While the use of virtual currency in Iran is comparatively small, virtual currency is an emerging payment system that may provide potential avenues for individuals and entities to evade sanctions," the advisory said.

As such, the regulator urges that "institutions should consider reviewing blockchain ledgers for activity that may originate or terminate in Iran." These activities, it added, have been highly dynamic and could thrive in Iran with "little notice or footprint."

The Trump administration announced in May this year it would withdraw from a 2015 nuclear agreement with Iran alongside the reimposing of economic sanctions that restrict Iran's access to US dollars. The executive order went into effect on Aug. 6, Coin Desk reported.

Regulatory Obligations

The FinCEN continued that despite recent reports the Central Bank of Iran is seeking to ban domestic banks from supporting crypto trading, it found that individuals and businesses in Iran could still access trading platforms either in Iran or the US, as well as via peer-to-peer exchanges.

The agency reminded domestic crypto exchanges of their regulatory obligations as registered financial institutions under the Bank Secrecy Act, which requires them to deploy "appropriate systems to comply with all relevant sanctions requirements."

After the US government had announced the reinstatement of the economic sanctions, government bodies in Iran indicated they were working on introducing a state cryptocurrency as a countermeasure – similar to efforts made by Venezuela, which launched its oil-backed petro cryptocurrency in February of this year.

Iranian officials were previously pessimistic about cryptocurrencies and have on many occasions warned the general public of the risks involved. In fact, cryptocurrencies are currently under a blanket ban that prohibits their use in the country's financial institutions following a mandate by the High Council of Anti-Money Laundering, which was implemented by the Central Bank of Iran in April.

However, economic hardship has prompted officials, including the president himself, to seriously consider and pursue tapping into blockchain and cryptocurrency potentials. That's while the country's monetary regulator is expected to divulge its new regulatory framework for cryptocurrencies as early as next week and legalize them.