Iran Sanctions: The AML Policy Implications of the Deal


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There are going to be some interesting grey areas for financial institutions regarding Iranian sanctions in the near future. The differences in scope between the regulators (in particular the US regulators compared to all the other regulators) could present certain dilemmas for banks – such as whether or not to trade with an Iranian related entity that is permitted on one list but banned on another.

Because of these inconsistencies and grey areas, financial institutions will have to determine their willingness to deal with Iranian related entities based on their anti-money laundering (AML) policies. They will have to look very closely at their current AML policies to see how they will fare in the new Iranian sanctions landscape, with particular regards to the potential conflicts of interest caused by the different regulatory demands.

What is clear is that US persons and US companies will still largely be prohibited from engaging in transactions with Iran, with Iranian individuals and entities as many US sanctions against Iran will remain in place. US export controls will continue to apply to controlled goods of US origin and technology anywhere in the world.

This is not the same for individuals and organisations from elsewhere in the world. Where EU, UN and HMT sanctions have been lifted, they will be able to deal directly with Iranian related entities – such as with the previously sanctioned Iranian Bank Saderat, for example.

However, this is where the grey areas emerge. What does a US-based bank do when it has a correspondent relationship with an EU-based bank that in turn now has a correspondent relationship with an Iran-based bank? Will the US bank be willing to continue its relationship with its EU partner and allow transactions that it knows originate from Iran?

Similarly, this situation throws up dilemmas for EU banks. Will they want to accept Iranian transactions that are permissible under EU regulations but contravene US regulations? Will EU banks want to risk damaging their relations with US banks by forming partnerships with Iranian banks? They also need to consider the likelihood of US banks rejecting Iranian-related transactions for US dollar clearing.

These are very real dilemmas that financial institutions will soon face so they need to determine whether their existing AML policies need updating.

Looking back:

Post 1. Why banks still need a comprehensive sanctions programme

Post 2. Which sanctions will be lifted

Post 3. The differences in scope between the regulators

Looking ahead:

Post 5. What happens when Iranian banks reconnect to SWIFT?

 

DOWNLOAD ACCUITY’S IRAN SANCTIONS INFOGRAPHIC

At this stage, nobody knows exactly what changes will take place when Iranian sanctions are lifted. The definitive list will come from the regulators, including the big four (OFAC, EU, UN, HMT) as well as the other agencies which are involved. While the circumstances evolve and the world awaits clarification, Accuity’s infographic aims to break down the sanctions lists and make some predictions based on Accuity’s extensive risk data.