Iranian banks have been disconnected from the global platform that enables banks to settle cross border transactions since 2012. This platform, SWIFT (the Society for Worldwide Interbank Financial Telecommunications), is under the jurisdiction of the EU and it was because of sanctions that Iran entities were disconnected.
When EU sanctions against Iran are lifted, it effectively means that Iranian banks will regain access to payment messaging services, other EU banks and correspondent relationships.
There are some attendant risks that need to be considered however. If Iran reconnects to SWIFT, there is the possibility that it will become easier to fund terrorist activities through the international banking network. This possibility means that compliance teams must follow even more stringent and comprehensive due diligence to ensure they fully understand the source of any transactions.
One interesting consequence of Iranian banks reconnecting to SWIFT will be the flow of frozen funds that were previously sanctioned. Estimates are that these funds are anywhere between $60 billion to $120 billion. There will probably be other transactions originating in Iran that will also flow through the SWIFT network. As discussed previously, there will be differing standards and due diligence required by EU versus US banks. It is not yet clear which banks will be responsible for facilitating these flows.
While the sanctions agreement – the Joint Comprehensive Plan of Action (JCPOA) – is yet to be fully implemented, financial institutions need to consider and understand the implications so that they are prepared when the changes come into place.
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.