OFAC Issues Advisory on Use of Exchange Houses and Trading Companies to Evade Iran Sanctions
As the international community increasingly bars or restricts Iranian financial institutions from accessing the international financial system, Iran is relying more heavily on third-country exchange houses and trading companies to move funds, the Treasury Department Office of Foreign Assets Control said in a Jan. 10 advisory. Those entities often lack their own U.S. correspondent accounts, relying on their banks' correspondent accounts to access the U.S. financial system. They're often located in jurisdictions considered high-risk for transactions implicating OFAC sanctions, and they appear to process primarily commercial transactions rather than personal ones, it said.
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Evasive practices identified by OFAC involve transactions that: (1) Omit references to Iranian addresses. (2) Omit the names of Iranian individuals or entities in the originator or beneficiary fields. (3) Transmit funds from an exchange house or trading company in a third country to or through the U.S. on behalf of an individual or company located in Iran or on behalf of a U.S.-designated person without referencing the involvement of Iran or the designated persons.
OFAC urged U.S. financial institutions to mitigate the risk of processing such transactions by monitoring payments involving third-country exchange houses or trading companies that, given their risk profile, may be processing commercial transactions related to Iran or Iranians. Banks and other institutions should also review accounts and/or transactions for individual exchange houses or trading companies that have repeatedly violated or tried to breach Iran sanctions; and contact their correspondents that maintain accounts for or facilitate transactions on behalf of third-country exchange houses or trading companies that engage in one of the referenced examples in order to get additional information or alert them to these practices.
OFAC said its advisory is meant to alert U.S. financial institutions to practices being used to evade U.S. sanctions so they'll be more diligent. However, it said, it's not suggesting that U.S. financial institutions close accounts they have for third-country exchange houses and/or trading companies, or that such businesses are necessarily involved in illicit finance.