[Federal Register Volume 76, Number 227 (Friday, November 25, 2011)]
[Notices]
[Pages 72756-72763]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30332]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY


Finding That the Islamic Republic of Iran Is a Jurisdiction of 
Primary Money Laundering Concern

AGENCY: The Financial Crimes Enforcement Network (``FinCEN''), 
Treasury.

ACTION: Notice of finding.

-----------------------------------------------------------------------

SUMMARY: Pursuant to the authority contained in 31 U.S.C. 5318A, the 
Secretary of the Treasury, through his delegate, the Director of 
FinCEN, finds that reasonable grounds exist for concluding that the 
Islamic Republic of Iran is a jurisdiction of primary money laundering 
concern.

DATES: The finding made in this notice is effective as of November 25, 
2011.

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division, FinCEN, (800) 949-2732.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory Provisions

    On October 26, 2001, the President signed into law the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''), 
Public Law 107-56. Title III of the USA PATRIOT Act amends the anti-
money laundering provisions of the Bank Secrecy Act (``BSA''), codified 
at 12 U.S.C. 1829b, 12 U.S.C 1951-1959, and 31 U.S.C. 5311-5314 and 
5316-5332, to promote prevention, detection, and prosecution of 
international money laundering and the financing of terrorism. 
Regulations implementing the BSA appear at 31 CFR Chapter X.
    Section 311 of the USA PATRIOT Act (``section 311'') added 31 
U.S.C. section 5318A to the BSA, granting the Secretary of the Treasury 
(the ``Secretary'') the authority, upon finding that reasonable grounds 
exist for concluding that a foreign jurisdiction, institution, class of 
transactions, or type of account is of ``primary money laundering 
concern,'' to require domestic financial institutions and financial 
agencies to take certain ``special measures'' against the primary money 
laundering concern. Section 311 identifies factors for the Secretary to 
consider and requires Federal agencies to consult before the Secretary 
may conclude that a jurisdiction, institution, class of transaction, or 
type of account is of primary money laundering concern. The statute 
also provides similar procedures, i.e., factors and consultation 
requirements, for selecting the specific special measures to be imposed 
against the primary money laundering concern. For purposes of the 
finding contained in this notice, the Secretary has delegated his 
authority under section 311 to the Director of FinCEN.\1\
---------------------------------------------------------------------------

    \1\ Therefore, references to the authority and findings of the 
Secretary in this document apply equally to the Director of FinCEN.
---------------------------------------------------------------------------

    Taken as a whole, section 311 provides the Secretary with a range 
of options that can be adapted to target specific money laundering and 
terrorist financing concerns most effectively. Through the imposition 
of various special measures, the Secretary can gain more information 
about the jurisdictions, institutions, transactions, or accounts of 
concern; can more effectively monitor the respective jurisdictions, 
institutions, transactions, or accounts; or can prohibit U.S. financial 
institutions from involvement with jurisdictions, institutions, 
transactions, or accounts that pose a money laundering concern.
    Before making a finding that reasonable grounds exist for 
concluding that a jurisdiction is of primary money laundering concern, 
the Secretary is required to consult with both the Secretary of State 
and the Attorney General. The Secretary is also required by section 
311, as amended,\2\ to consider ``such information as the Secretary 
determines to be relevant, including the following potentially relevant 
factors,'' which extend the Secretary's consideration beyond 
traditional money laundering concerns to issues involving, inter alia, 
terrorist financing and weapons proliferation:
---------------------------------------------------------------------------

    \2\ 31 U.S.C. 5318A was amended by section 501 of the Iran 
Freedom Support Act of 2006, Public Law 109-293.
---------------------------------------------------------------------------

     Evidence that organized criminal groups, international 
terrorists, or entities involved in the proliferation of weapons of 
mass destruction (``WMD'') or missiles, have transacted business in 
that jurisdiction;

[[Page 72757]]

     The extent to which that jurisdiction or financial 
institutions operating in that jurisdiction offer bank secrecy or 
special regulatory advantages to nonresidents or nondomiciliaries of 
that jurisdiction;
     The substance and quality of administration of the bank 
supervisory and counter-money laundering laws of that jurisdiction;
     The relationship between the volume of financial 
transactions occurring in that jurisdiction and the size of the economy 
of the jurisdiction;
     The extent to which that jurisdiction is characterized as 
an offshore banking or secrecy haven by credible international 
organizations or multilateral expert groups;
     Whether the United States has a mutual legal assistance 
treaty with that jurisdiction, and the experience of U.S. law 
enforcement officials and regulatory officials in obtaining information 
about transactions originating in or routed through or to such 
jurisdiction; and
     The extent to which that jurisdiction is characterized by 
high levels of official or institutional corruption.
    If the Secretary determines that reasonable grounds exist for 
concluding that a jurisdiction is of primary money laundering concern, 
the Secretary is authorized to impose one or more of the special 
measures in section 311 to address the specific money laundering risks. 
Section 311 provides a range of special measures that can be imposed 
individually, jointly, in any combination, and in any sequence.\3\ 
Before imposing special measures, the statute requires the Secretary to 
consult with appropriate federal agencies and other interested parties 
\4\ and to consider the following specific factors:
---------------------------------------------------------------------------

    \3\ Available special measures include requiring: (1) 
Recordkeeping and reporting of certain financial transactions; (2) 
collection of information relating to beneficial ownership; (3) 
collection of information relating to certain payable-through 
accounts; (4) collection of information relating to certain 
correspondent accounts; and (5) prohibition or conditions on the 
opening or maintaining of correspondent or payable-through accounts. 
31 U.S.C. 5318A(b)(1)-(5). For a complete discussion of the range of 
possible countermeasures, See 68 FR 18917 (April 17, 2003) 
(proposing special measures against Nauru).
    \4\ Section 5318A(a)(4)(A) requires the Secretary to consult 
with the Chairman of the Board of Governors of the Federal Reserve 
System, any other appropriate Federal banking agency, the Secretary 
of State, the Securities and Exchange Commission (``SEC''), the 
Commodity Futures Trading Commission (``CFTC''), the National Credit 
Union Administration (``NCUA''), and, in the sole discretion of the 
Secretary, ``such other agencies and interested parties as the 
Secretary may find to be appropriate.'' The consultation process 
must also include the Attorney General if the Secretary is 
considering prohibiting or imposing conditions on domestic financial 
institutions opening or maintaining correspondent account 
relationships with the targeted entity.
---------------------------------------------------------------------------

     Whether similar action has been or is being taken by other 
nations or multilateral groups;
     Whether the imposition of any particular special measures 
would create a significant competitive disadvantage, including any 
undue cost or burden associated with compliance, for financial 
institutions organized or licensed in the United States;
     The extent to which the action or the timing of the action 
would have a significant adverse systemic impact on the international 
payment, clearance, and settlement system, or on legitimate business 
activities involving the particular jurisdiction; and
     The effect of the action on U.S. national security and 
foreign policy.

B. Iran

    Iran's banking sector comprises Iranian state-owned commercial 
banks, specialized Iranian government banks, and privately owned 
Iranian financial institutions.\5\ Some of these Iranian financial 
institutions \6\ operate multiple overseas branches and subsidiaries in 
Asia, Europe, and the Middle East \7\ and maintain relationships in key 
global financial centers.\8\
---------------------------------------------------------------------------

    \5\ Central Bank of the Islamic Republic of Iran. (http://www.cbi.ir/simplelist/1462.aspx). At various points in this finding, 
FinCEN references public media sources to support statements of 
fact. FinCEN has utilized both public and non-public sources in 
reaching such conclusions.
    \6\ Id.
    \7\ The Bankers Almanac, September 2011.
    \8\ Id.
---------------------------------------------------------------------------

    In recent years, many international financial institutions have 
severed ties with Iranian banks and entities because of a growing body 
of public information about their illicit and deceptive conduct 
designed to facilitate the Iranian government's support for terrorism 
and its pursuit of nuclear and ballistic missile capabilities. This 
illicit conduct by Iranian banks and companies has been highlighted in 
a series of United Nations Security Council (``UN Security Council'') 
resolutions related to Iranian proliferation sensitive activities. The 
Financial Action Task Force \9\ (``FATF'') has also warned publicly of 
the risks that Iran's deficiencies in countering money laundering and, 
particularly, terrorism finance, pose to the international financial 
system, and has called on FATF members and all jurisdictions to 
implement counter measures to protect against these risks. Despite the 
resulting reduction in Iranian financial institutions' access to 
correspondent and other financial relationships with major financial 
institutions,\10\ both designated and non-designated Iranian banks 
continue to maintain a presence in the international financial system.
---------------------------------------------------------------------------

    \9\ The Financial Action Task Force is an inter-governmental 
body whose purpose is the development and promotion of national and 
international policies to combat money laundering and terrorist 
financing. The FATF is therefore a ``policy-making body'' that works 
to generate the necessary political will to bring about legislative 
and regulatory reforms in these areas. (http://www.fatf-gafi.org).
    \10\ ``Sanctions Against Iran: A Promising Struggle,'' The 
Washington Quarterly, Summer 2008.
---------------------------------------------------------------------------

II. Analysis of Factors

    Based upon a review and analysis of the administrative record in 
this matter, consultations with relevant Federal agencies and 
departments, and after consideration of the factors enumerated in 
section 311, the Director of FinCEN has determined that reasonable 
grounds exist for concluding that Iran is a jurisdiction of primary 
money laundering concern. While FinCEN has considered all potentially 
relevant factors set forth in Section 5318A, a discussion of those most 
pertinent to this finding follows. FinCEN has reason to believe that 
Iran directly supports terrorism and is pursuing nuclear/ballistic 
missile capabilities, relies on state agencies or state-owned or 
controlled financial institutions to facilitate WMD proliferation and 
financing, and uses deceptive financial practices to facilitate illicit 
conduct and evade sanctions. All of these factors, when taken together, 
make the international financial system increasingly vulnerable to the 
risk that otherwise responsible financial institutions will unwittingly 
participate in Iran's illicit activities.

A. Evidence That Organized Criminal Groups, International Terrorists, 
or Entities Involved in the Proliferation of Weapons of Mass 
Destruction or Missiles, Have Transacted Business in That Jurisdiction

1. Iran's Support for Terrorism and Pursuit of Nuclear and Ballistic 
Missile Capabilities
    Support for Terrorism: The Department of State designated Iran as a 
state sponsor of international terrorism in 1984,\11\ and has 
reiterated this designation every year since 2000 in its annual Country 
Reports on Terrorism.\12\ Iran remains the most active of the listed 
state sponsors of terrorism, routinely providing substantial

[[Page 72758]]

resources and guidance to multiple terrorist organizations.\13\ Iran 
has provided extensive funding, training, and weaponry to Palestinian 
terrorist groups, including Hamas and the Palestinian Islamic Jihad 
(``PIJ'').\14\ In fact, Hamas,\15\ PIJ,\16\ and Hizballah\17\ have 
maintained offices in Tehran to help coordinate Iranian financing and 
training of these groups.
---------------------------------------------------------------------------

    \11\ See ``State Sponsors of Terrorism,'' U.S. Department of 
State, August 18, 2011 (http://www.state.gov/s/ct/rls/crt/2010/170260.htm).
    \12\ Id.
    \13\ Id.
    \14\ Id.
    \15\ ``Ex-Iranian President Offers Mediation Between Hamas, 
Fatah, Kuwait KUNA,'' KUNA, June 30, 2007.
    \16\ See ``Palestine Islamic Jihad envoy to Tehran says moderate 
Arabs hamper victory,'' Tehran Jomhouri-ye Eslami. December 10, 
2007.
    \17\ See ``Hezbollah's hate, made in Iran,'' National Post, July 
28, 2006.
---------------------------------------------------------------------------

    Iran's Islamic Revolutionary Guard Corps (``IRGC'') was founded in 
the aftermath of the 1979 Islamic Revolution to defend the government 
against internal and external threats.\18\ Since then, it has expanded 
far beyond its original mandate and evolved into a social, military, 
political, and economic force with strong influence on Iran's power 
structure.\19\ In addition, elements of the IRGC have been directly 
involved in the planning and support of terrorist acts throughout the 
Middle East region.\20\
---------------------------------------------------------------------------

    \18\ See ``Iran's Revolutionary Guards,'' Council on Foreign 
Relations, June 22, 2009 (http://www.cfr.org/publication/14324/irans_revolutionary_guards.html).
    \19\ Id.
    \20\ See ``Country Reports on Terrorism 2010,'' U.S. Department 
of State, August 18, 2011 (http://www.state.gov/s/ct/rls/crt/2010/170260.htm).
---------------------------------------------------------------------------

    In particular, Iran has used the IRGC-Qods Force \21\ (``Qods 
Force'') to cultivate and support terrorists and militant groups 
abroad. The Qods Force reportedly has been active in the Levant, where 
it has a long history of supporting Hizballah's military, paramilitary, 
and terrorist activities, and provides Hizballah with as much as $200 
million in funding per year.\22\ Additionally, the Qods Force provides 
the Taliban in Afghanistan with weapons, funding, logistics, and 
training in support of anti-U.S. and anti-coalition activity.\23\ 
Information dating from at least 2006 indicates that Iran has arranged 
frequent shipments to the Taliban of small arms and associated 
ammunition, rocket propelled grenades, mortar rounds, 107 mm rockets, 
and plastic explosives.\24\ Iran also has helped train Taliban fighters 
within Iran and Afghanistan.\25\ Taliban commanders have stated that 
they were paid by Iran to attend three month training courses within 
Iran.\26\ In August 2011, a Taliban commander claimed to have trained 
in Iran and been offered $50,000 by Iranian officials in return for 
destroying a dam in Afghanistan.\27\ Most recently, on October 11, 
2011, the Department of Justice charged two individuals for their 
alleged participation in a plot directed by the Qods Force to murder 
the Saudi ambassador to the United States with explosives while the 
Ambassador was in the United States.\28\ On the same day, the Treasury 
Department announced the designation of five individuals, including the 
commander of the Qods Force and three other senior Qods Force officers 
connected to the assassination plot, as well as the individual 
responsible for arranging the assassination plot on behalf of the Qods 
Force.\29\
---------------------------------------------------------------------------

    \21\ IRGC-Qods Force was designated under E.O. 13224 for 
providing material support for the Taliban and other terrorist 
groups. See ``Fact Sheet: Designation of Iranian Entities and 
Individuals for Proliferation Activities and Support for 
Terrorism,'' U.S. Treasury, October 25, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
    \22\ See ``Islamic Revolutionary Guards Corps,'' Anti-Defamation 
League, May 26, 2010.
    \23\ See ``Country Reports on Terrorism 2010,'' U.S. Department 
of State, August 18, 2011 (http://www.state.gov/s/ct/rls/crt/2010/170260.htm).
    \24\ Id.
    \25\ ``Taliban Fighters Training in Iran, U.S. Officials Say,'' 
CNN, March 23, 2010 (http://articles.cnn.com/2010-03-23/world/iran.taliban_1_taliban-fighters-afghan-taliban-iranian-official?_s=PM:WORLD).
    \26\ ``Iranians Train Taliban to Use Roadside Bombs,'' The 
Sunday Times, March 21, 2010.
    \27\ See ``Captured Taliban Commander: `I Received Iranian 
Training','' Radio Free Europe, August 23, 2011.
    \28\ See ``Attorney General Holder Holds National Security 
Enforcement Press Conference,'' October 11, 2011 (http://www.justice.gov/iso/opa/ag/speeches/2011/ag-speech-111011.html).
    \29\ See ``Treasury Sanctions Five Individuals Tied to Iranian 
Plot to Assassinate the Saudi Arabian Ambassador to the United 
States,'' October 11, 2011 (http://www.treasury.gov/press-center/press-releases/pages/tg1320.aspx).
---------------------------------------------------------------------------

    Iran has also permitted al-Qaida to funnel funds and operatives 
through its territory. In July 2011, the U.S. Department of the 
Treasury (``Treasury'') designated an al-Qa'ida network headed by an 
individual living and operating in Iran under an agreement between al-
Qa'ida and the Iranian government.\30\ The designation of six members 
of this network illustrated Iran's role as a critical transit point for 
funding to support al-Qa'ida's activities in Afghanistan and Pakistan 
as this network serves as a pipeline through which al-Qa'ida moves 
money, facilitators, and operatives from across the Middle East to 
South Asia.\31\
---------------------------------------------------------------------------

    \30\ See ``Treasury Targets Key Al-Qa'ida Funding and Support 
Network Using Iran as a Critical Transit Point,'' Press Release, 
July 28, 2011 (http://www.treasury.gov/press-center/press-releases/Pages/tg1261.aspx).
    \31\ Id.
---------------------------------------------------------------------------

    Finally, Iran is known to have used state-owned banks to facilitate 
terrorist financing. In 2007, the Treasury designated Bank Saderat 
under E.O. 13224 for its financial support of terrorist organizations, 
noting that from 2001 to 2006 Bank Saderat transferred $50 million from 
the Central Bank of Iran through its subsidiary in London to its branch 
in Beirut for the benefit of Hizballah fronts in Lebanon that support 
acts of violence.\32\
---------------------------------------------------------------------------

    \32\ See Treasury's ``Fact Sheet: Treasury Designation of 
Iranian Entities and Individuals for Proliferation Activities and 
Support for Terrorism,'' October 25, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
---------------------------------------------------------------------------

    Pursuit of nuclear/ballistic missile capabilities: Iran also 
continues to defy the international community by pursuing nuclear 
capabilities and developing ballistic missiles in violation of seven 
UNSCRs.\33\ Iran's failure to comply with these resolutions has 
resulted in the UN Security Council's imposition of sanctions against 
Iran. These have included specific provisions aimed at preventing Iran 
from accessing the international financial system in order to pursue 
nuclear capabilities and to develop ballistic missiles.\34\ To date, 
Iran has not complied with the UN Security Council resolutions 
regarding its nuclear and missile activities,\35\ and continues to 
assert that it will not abandon its program to create nuclear fuel and 
enrich uranium.\36\ This summer, Iran announced that it would triple 
production of its most concentrated uranium fuel, which is enriched to 
near 20% purity, and that some of this production would be transferred 
to Iran's facility near Qom.\37\ This is a significant development 
because the technical work required to produce 20% enriched uranium 
from 3.5% is more difficult than that required to advance from 20% to 
the 90% weapons-grade level.\38\
---------------------------------------------------------------------------

    \33\ See UNSCRs 1696, 1737, 1747, 1803, 1835, 1887, and 1929 
(http://www.un.org/documents/scres.htm).
    \34\ Id.
    \35\ ''Iran's Nuclear Program,'' New York Times, June 8, 2011 
(http://topics.nytimes.com/top/news/international/countriesandterritories/iran/nuclear_program/index.html?scp=1-spot&sq=iran%20nuclear%20program&st=cse).
    \36\ ``Iran Claims Progress Speeding Nuclear Program'' Wall 
Street Journal, August 4, 2011 (http://online.wsj.com/article/SB10001424053111903454504576486663881270144.html?mod=googlenews_wsj).
    \37\ ``Iran's Uranium Enrichment Will Increase, It Says,'' New 
York Times, June 8, 2011. (http://www.nytimes.com/2011/06/09/world/middleeast/09iran.html).
    \38\ Iran Claims Progress Speeding Nuclear Program'' Wall Street 
Journal, August 4, 2011 (http://online.wsj.com/article/SB10001424053111903454504576486663881270144.html?mod=googlenews_wsj).

---------------------------------------------------------------------------

[[Page 72759]]

2. Use of government agencies and state-owned or controlled financial 
institutions to facilitate WMD proliferation and financing
    Iran uses government agencies and state-owned or controlled 
financial institutions to advance its nuclear and ballistic missile 
ambitions. Specifically, the government agencies rely on state-owned 
Iranian financial institutions to help finance illicit procurement 
activities related to WMD proliferation.
    Government Agencies: Iran has used the Atomic Energy Organization 
of Iran (``AEOI''), which was designated by Treasury as the main 
Iranian organization for research and development activities in the 
field of nuclear technology, including Iran's uranium enrichment 
program, to manage the country's overall nuclear program.\39\ 
Additionally, Iran has relied on the Ministry of Defense and Armed 
Forces Logistics (``MODAFL''), which was designated by the State 
Department under Executive Order (``E.O.'') 13382 for proliferation 
activities.\40\ Iran also controls the Defense Industries Organization 
(``DIO''), which has been designated by the UN \41\ and the United 
States,\42\ and the Aerospace Industries Organization (``AIO''), which 
is identified in the Annex to E.O. 13382 for its role in overseeing 
Iran's missile industries.\43\ AIO, the parent entity to Shahid Hemat 
Industrial Group (SHIG),\44\ which is also listed in the Annex to E.O. 
13382, was identified for its ballistic missile research, development, 
and production activities, in addition to overseeing all of Iran's 
missile industries.\45\
---------------------------------------------------------------------------

    \39\ ``Treasury Designates Iranian Nuclear and Missile 
Entities,'' August 12, 2008 (http://www.treasury.gov/press-center/press-releases/Pages/hp1113.aspx).
    \40\ ``Fact Sheet: Designation of Iranian Entities and 
Individuals for Proliferation Activities and Support for 
Terrorism,'' U.S. Treasury, October 25, 2007 (http://www.treas.gov/press/releases/hp644.htm).
    \41\ United Nations Security Council Resolution 1737, December 
23, 2006 (http://www.un.org/News/Press/docs/2006/sc8928.doc.htm).
    \42\ ``Iran's Defense Industries Organization Designated by 
State,'' U.S. Department of State, March 30, 2007 (http://2001-2009.state.gov/r/pa/prs/ps/2007/mar/82487.htm).
    \43\ Executive Order 13382 of June 28, 2005. (http://www.fas.org/irp/offdocs/eo/eo-13382.htm).
    \44\ Id.
    \45\ Fact Sheet: Designation of Iranian Entities and Individuals 
for Proliferation Activities and Support for Terrorism,'' U.S. 
Treasury, October 25, 2007 (http://www.treas.gov/press/releases/hp644.htm).
---------------------------------------------------------------------------

    State-owned or controlled banks: Multiple Iranian financial 
institutions have been directly implicated in facilitating Iran's 
nuclear and ballistic missile activities. For example, Iranian state-
owned Bank Sepah was designated by the Treasury Department under E.O. 
13382 and designated in UNSCR 1747 for providing direct and extensive 
financial services to Iranian entities responsible for developing 
ballistic missiles, including AIO and SHIG.\46\
---------------------------------------------------------------------------

    \46\ See ``Testimony of Stuart Levey, Under Secretary for 
Terrorism and Financial Intelligence, Before the Senate Committee on 
Banking, Housing and Urban Affairs,'' Treasury Press Release, March 
21, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp325.aspx); and U.S. Treasury, ``Iran's Bank Sepah Designated by 
Treasury Sepah Facilitating Iran's Weapons Program,'' January 9, 
2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp219.aspx).
---------------------------------------------------------------------------

    Iran's state-owned Bank Melli, which was identified in UNSCR 
1803,\47\ has also facilitated numerous purchases of sensitive 
materials for Iran's nuclear and missile programs on behalf of UN-
designated entities.\48\ Treasury found that Bank Melli has provided a 
range of financial services to known proliferators, including opening 
letters of credit and maintaining accounts.\49\ Additionally, Treasury 
found, following the designation of Bank Sepah under UNSCR 1747 for its 
support for AIO and AIO's subordinates, Bank Melli took precautions not 
to identify Bank Sepah in transactions.\50\ Treasury designated Bank 
Melli and associated subsidiaries and front companies under E.O. 13382 
for its financial support to entities involved in the proliferation of 
weapons of mass destruction.\51\ Multiple jurisdictions also have 
designated Bank Melli under their respective legal authorities.\52\
---------------------------------------------------------------------------

    \47\ See UNSCR 1803. (http://www.un.org/Docs/sc/unsc_resolutions08.htm).
    \48\ ``Fact Sheet: Designation of Iranian Entities and 
Individuals for Proliferation Activities and Support for 
Terrorism,'' U.S. Treasury, October 25, 2007 (http://www.treas.gov/press/releases/hp644.htm).
    \49\ Id.
    \50\ Id.
    \51\ See ``Fact Sheet: Designation of Iranian Entities and 
Individuals for Proliferation Activities and Support for 
Terrorism,'' U.S. Treasury, October 25, 2007 (http://www.treas.gov/press/releases/hp644.htm); ``Treasury Designates Iran-Controlled 
Bank for Proliferation Future Bank Controlled by Iran's Bank 
Melli,'' U.S. Treasury, March 12, 2008 (http://www.treasury.gov/press-center/press-releases/Pages/hp869.aspx); and ``Treasury 
Designates Companies Tied to Iran's Bank Melli as Proliferators,'' 
U.S. Treasury, March 3, 2009 (http://www.treasury.gov/press-center/press-releases/Pages/tg46.aspx).
    \52\ See e.g., ``Media Release: Australia Imposes New Broad-
Ranging Sanctions Against Iran,'' Australian Minister for Foreign 
Affairs and Trade, July 29, 2010 (http://foreignminister.gov.au/releases/2010/fa-s100729.html).
---------------------------------------------------------------------------

    Treasury has also designated under E.O. 13382 Bank Mellat, another 
Iranian state-owned bank, for financially facilitating Iran's nuclear 
and proliferation activities by supporting AEOI and its main financial 
conduit, Novin Energy Company (``Novin'').\53\ Specifically, the 
designation noted that as of October 2007, Bank Mellat had facilitated 
the movement of millions of dollars for Iran's nuclear program since at 
least 2003.\54\ In November 2009, First East Export Bank was designated 
pursuant to E.O. 13382 as a subsidiary and for its support of Bank 
Mellat.\55\ Furthermore, the international community has raised 
concerns and taken action against Bank Mellat. In October 2009, the 
United Kingdom's (``UK'') HM Treasury issued an order to all of its 
financial and credit institutions to cease all business with Bank 
Mellat, based on its connection to Iran's proliferation activities and 
for being involved in transactions related to financing Iran's nuclear 
and ballistic missile program.\56\ Noting that Bank Mellat itself has 
facilitated hundreds of millions of dollars in transactions for Iranian 
nuclear, missile, and defense entities, UNSCR 1929 designated First 
East Export Bank, a Bank Mellat subsidiary in Malaysia.\57\ Since the 
adoption of UNSCR 1929, the European Union (``EU''), Japan, South 
Korea, Australia, Canada, Norway, and Switzerland have implemented 
measures against Bank Mellat.\58\
---------------------------------------------------------------------------

    \53\ See ``Fact Sheet: Designation of Iranian Entities and 
Individuals for Proliferation Activities and Support for 
Terrorism,'' U.S. Treasury, October 25, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
    \54\ Id.
    \55\ See '' Treasury Designates Bank Mellat Subsidiary and 
Chairman Under Proliferation Authority,'' U.S. Treasury; November 5, 
2009 (http://www.treasury.gov/press-center/press-releases/Pages/tg355.aspx).
    \56\ Id.
    \57\ See UNSCR 1929 (http://www.un.org/Docs/sc/unsc_resolutions10.htm).
    \58\ See ``Council Implementing Regulation (EU) No 668/2010,'' 
European Union, July 26, 2010 (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:195:0025:0036:EN:PDF); ``Accompanying 
Measures Pursuant to United Nations Security Council Resolution 
1929,'' Ministry of Foreign Affairs of Japan, September 3, 2010 
(http://www.mofa.go.jp/region/middle_e/iran/measures_unsc_1009.html); ``Government Regarding the Implementation of UNSCR 
1929,'' Republic of Korea, September 8, 2010; ``Charter of the 
United Nations (Sanctions--Iran) (Specified Entities) List 2010, 
Government of Australia, August 4, 2010 (http://www.comlaw.gov.au/Details/F2010L02236); Special Economic Measures (Iran) Regulations, 
Government of Canada, August 4, 2010 (http://canadagazette.gc.ca/rp-pr/p2/2010/2010-08-04/html/sor-dors165-eng.html); ``Press Release,'' 
Government of Norway, Ministry of Foreign Affairs, January 14, 2011 
(http://www.regjeringen.no/mobil/en/dep/ud/press/news/2011/sanctions_iran_adopted.html?id=630820); ``Iran: Federal Council 
Takes Steps to Improve Legal Certainty and Prevent Possible 
Evasion,'' January 19, 2011, The Federal Authorities of the Swiss 
Federation (http://www.admin.ch/aktuell/00089/index.html?lang=en&msg-id=37283).
---------------------------------------------------------------------------

    In October 2008, Treasury designated the Export Development Bank of 
Iran

[[Page 72760]]

(``EDBI'') under E.O. 13382 for providing or attempting to provide 
financial services to MODAFL.\59\ The designation further asserted that 
EDBI provides financial services to multiple MODAFL-subordinate 
entities and facilitated the ongoing procurement activities of various 
front companies associated with MODAFL-subordinate entities.\60\ 
Treasury's designation also noted that, since Bank Sepah's designation 
by the United States and identification by the UN Security Council, 
EDBI has served as one of the leading intermediaries handling Bank 
Sepah's financing, including WMD-related payments, and has facilitated 
transactions for other sanctioned proliferation-related entities.\61\
---------------------------------------------------------------------------

    \59\ ``Export Development Bank of Iran Designated as a 
Proliferator,'' U.S. Treasury, October 22, 2008 (http://www.treasury.gov/press-center/press-releases/Pages/hp1231.aspx).
    \60\ Id.
    \61\ Id.
---------------------------------------------------------------------------

    As the Iranian banks described above have become increasingly 
isolated from the international financial system due to international 
sanctions, other Iranian banks have begun to play a larger role in 
Iran's illicit activities and efforts to circumvent sanctions.\62\ The 
Treasury Department has continued to target Iranian banks that engage 
in illicit behavior and act on behalf of U.S.-designated, Iranian-
linked banks. Treasury designated Post Bank for operating on behalf of 
Bank Sepah; \63\ the Iranian-owned German bank EIH for providing 
financial services to Bank Mellat, Persia International Bank, EDBI, and 
Post Bank; \64\ Bank Refah for providing financial services to MODAFL; 
\65\ Bank of Industry and Mine for providing financial services to Bank 
Mellat and EIH; \66\ and Ansar Bank and Mehr Bank for providing 
financial services to the IRGC.\67\ The EU and other jurisdictions have 
recognized the risks posed by the vast majority of these financial 
institutions and have imposed similar measures to prohibit banks in 
their jurisdictions from doing business with these entities.\68\ As 
recently as May 2011, the EU designated EIH for playing a ``key role in 
assisting a number of Iranian banks with alternative options for 
completing transactions disrupted by EU sanctions targeting Iran.'' 
\69\
---------------------------------------------------------------------------

    \62\ See ``Testimony of Stuart Levey, Under Secretary of 
Terrorism and Financial Intelligence, before the Senate Foreign 
Relations Committee,'' June 22, 2010. (http://foreign.senate.gov/imo/media/doc/Levey,%20Stuart.pdf).
    \63\ See ``Fact Sheet: U.S. Treasury Department Targets Iran's 
Nuclear and Missile Programs,'' U.S. Treasury, June 16, 2010 (http://www.treasury.gov/press-center/press-releases/Pages/tg747.aspx).
    \64\ See ``Treasury Department Targets Iranian-Owned Bank in 
Germany Facilitating Iran's Proliferation Activities,'' U.S. 
Treasury, September 7, 2010 (http://www.treasury.gov/press-center/press-releases/Pages/tg847.aspx).
    \65\ See ``Treasury Targets Iranian Bank for Providing Financial 
Services to Designated Entities Connected to Iran's Proliferation 
Activities,'' U.S. Treasury, February 17, 2011 (http://www.treasury.gov/press-center/press-releases/Pages/tg1067.aspx).
    \66\ See ``Treasury Designates Iranian State-Owned Bank for 
Facilitating Iran's Proliferation Activities,'' U.S. Treasury, May 
17, 2011 (http://www.treasury.gov/press-center/press-releases/Pages/tg1178.aspx).
    \67\ See ``Fact Sheet: Treasury Designated Iranian Entities Tied 
to the IRGC and IRISL,'' U.S. Treasury, December 21, 2010 (http://www.treasury.gov/press-center/press-releases/pages/tg/1010.aspx).
    \68\ See ``Council Implementing Regulation (EU) No 668/2010,'' 
European Union, July 26, 2010 (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:195:0025:0036:EN:PDF); ``Council 
Implementing Regulation (EU) No. 2011/301/CFSP,'' European Union, 
May 23, 2011 (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:136:0087:0090:EN:PDF); ``Charter of the 
United Nations (Sanctions--Iran) (Specified Entities) List 2010, 
Government of Australia, August 4, 2010 (http://www.comlaw.gov.au/Details/F2010L02236).
    \69\ See ``Council Implementing Regulation (EU) No. 2011/299/
CFSP,'' European Union, May 23, 2011 (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:136:0087:0090:EN:PDF).
---------------------------------------------------------------------------

3. The Iranian Government's Use of Deceptive Financial Practices
    Since 1979, Iran long has been subject to a variety of U.S. 
sanctions that have significantly expanded over time, including 
prohibition of the importation of Iranian-origin goods and services, 
prohibitions on certain transactions with respect to the development of 
Iranian petroleum resources, and prohibitions on exports and re-exports 
to Iran. Today, most trade-related transactions with Iran are 
prohibited, and U.S. financial institutions are generally prohibited, 
with only limited exceptions, from doing business with Iranian 
financial institutions.\70\
---------------------------------------------------------------------------

    \70\ On November 14, 1979, the President issued E.O. 12170 
blocking Iranian government property. See (http://www.archives.gov/federal-register/codification/executive-order/12170.html). The 
Iranian Transactions Regulations (``ITR''), 31 CFT part 560, 
implement a series of Executive Orders that began with E.O. 12613 
issued in 1987, which prohibit the importation of Iranian-origin 
goods and services. In response to Iran's continued support of 
international terrorism and active pursuit of weapons of mass 
destruction, U.S. sanctions have expanded to include E.O. 12957 
(March 1997), which imposed prohibition on certain transactions with 
respect to the development of petroleum resources, and in May 1995, 
E.O. 12959, which imposed comprehensive trade and financial 
sanctions on Iran. In August 1997, E.O. 13059 was issued 
consolidating and clarifying the previous orders. See (http://treasury.gov/resource-center/sanctions/Programs/Documents/iran.pdf).
---------------------------------------------------------------------------

    To further amplify financial pressure on Iranian financial 
institutions involved in Iran's support for terrorism and weapons 
proliferation, President Obama signed into law the Comprehensive Iran 
Sanctions, Accountability, and Divestment Act of 2010 (``CISADA'') on 
July 1, 2010, which includes a provision that authorizes the Secretary 
of the Treasury to impose sanctions on foreign financial institutions 
that knowingly facilitate certain activities related to Iran.\71\ On 
August 16, 2010, Treasury's Office of Foreign Assets Control (``OFAC'') 
published a final rule implementing certain aspects of CISADA, \72\ and 
on October 5, 2011, FinCEN published a final rule to implement section 
104(e) of CISADA to complement Treasury's ongoing efforts to protect 
the international financial system from abuse by Iran.\73\
---------------------------------------------------------------------------

    \71\ For a full discussion of CISADA and its provisions, See the 
U.S. Department of the Treasury Web site (http://www.treasury.gov/resource-center/sanctions/Documents/hr2194.pdf).
    \72\ See OFAC CISADA regulations at 75 FR 49836 (August 16, 
2010) or 31 CFR part 561 (http://edocket.access.gpo.gov/2010/pdf/2010-20238.pdf).
    \73\ See Fact Sheet ``FinCEN Implements Provision of the 
Comprehensive Iran Sanctions, Accountability, and Divestment Act of 
2010,'' October 5, 2011 (http://www.fincen.gov/news_room/nr/html/20111005.html).
---------------------------------------------------------------------------

    As a result of the strengthened U.S. sanctions and similar measures 
taken by the United Nations and other members of the global community, 
Iran now faces significant barriers to conducting international 
transactions. In response, Iran has used deceptive financial practices 
to disguise both the nature of transactions and its involvement in them 
in an effort to circumvent sanctions. This conduct puts any financial 
institution involved with Iranian entities at risk of unwittingly 
facilitating transactions related to terrorism, proliferation, or the 
evasion of U.S. and multilateral sanctions. Iranian financial 
institutions, including the Central Bank of Iran (``CBI''), and other 
state-controlled entities, willingly engage in deceptive practices to 
disguise illicit conduct, evade international sanctions, and undermine 
the efforts of responsible regulatory agencies around the world.
    Iranian financial institutions: Iran employs numerous deceptive 
practices to disguise the Iranian origin of transactions in order to 
avoid scrutiny and evade international sanctions. These practices 
include the transfer of funds from Iran to exchange houses outside Iran 
and the use of back-to-back letters of credit. Iranian foreign bank 
branches transfer funds to local banks in the same jurisdiction for 
onward payments that may conceal the Iranian origin of funds.
    In other examples, Bank Sepah has requested that its name be 
removed from transactions in order to make it

[[Page 72761]]

more difficult for intermediary financial institutions to determine the 
true parties to a transaction.\74\ As noted in Treasury's designation, 
Bank Melli took precautions not to identify Bank Sepah in transactions 
following Bank Sepah's designation under UNSCR 1747 and employed 
similar deceptive banking practices to obscure its involvement from 
non-Iranian financial institutions when handling financial transactions 
on behalf of the IRGC.\75\
---------------------------------------------------------------------------

    \74\ ``Testimony of Stuart Levey, Under Secretary for Terrorism 
and Financial Intelligence, Before the Senate Committee on Banking, 
Housing and Urban Affairs,'' March 21, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp325.aspx).
    \75\ ``Fact Sheet: Designation of Iranian Entities and 
Individuals for Proliferation Activities and Support for 
Terrorism,'' U.S. Treasury, October 25, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
---------------------------------------------------------------------------

    In June 2010, Post Bank of Iran was designated by the Treasury 
Department under E.O. 13382 \76\ for facilitating transactions on 
behalf of Bank Sepah after Bank Sepah was designated by the UN and 
United States.\77\ The designation further notes that, in 2009, Post 
Bank facilitated business on behalf of Bank Sepah between Iran's 
defense industries and overseas beneficiaries and transacted millions 
of dollars worth of business between U.S.-designated Hong Kong 
Electronics and other overseas beneficiaries.\78\
---------------------------------------------------------------------------

    \76\ ``Fact Sheet: U.S. Treasury Department Targets Iran's 
Nuclear and Missile Programs,'' U.S. Treasury, June 16, 2010 (http://www.treasury.gov/press-center/press-releases/Pages/tg747.aspx).
    \77\ Id.
    \78\ Id.
---------------------------------------------------------------------------

    The Central Bank of Iran, which regulates Iranian banks, has 
assisted designated Iranian banks by transferring billions of dollars 
to these banks in 2011. In mid-2011, the CBI transferred several 
billion dollars to designated banks, including Saderat, Mellat, EDBI 
and Melli, through a variety of payment schemes. In making these 
transfers, the CBI attempted to evade sanctions by minimizing the 
direct involvement of large international banks with both CBI and 
designated Iranian banks. Additionally, the CBI transfers funds to 
designated Iranian bank branches outside Iran via non-Iranian foreign 
banks, often involving deliberate attempts on its part to conceal that 
the recipient is a designated Iranian bank. In some cases, this 
activity involves book-to-book transfers and the use of accounts at 
intermediary banks that hold accounts for the CBI and designated banks. 
Further, the CBI was believed to have provided financing to the UN-
sanctioned Khatem al-Anbiya Constructions Headquarters for defense-
related projects.
    Front companies: Iran has a well-established history of using front 
companies and complex corporate ownership structures to disguise the 
involvement of government entities known to be involved in Iranian 
proliferation activity when conducting commercial transactions. These 
companies transact substantial business in Iran and elsewhere around 
the world. For example, Novin, an AEOI front company that operates as 
the financial arm of AEOI, has transferred millions of dollars on 
behalf of AEOI to entities associated with Iran's nuclear program.\79\ 
Additionally, Mesbah Energy Company (``Mesbah''), was designated under 
EO 13382 for being controlled by, or acting or purporting to act for or 
on behalf of AEOI, and was cited in UNSCR 1737.\80\ Mesbah has been 
used to procure products for Iran's heavy water project.\81\ Heavy 
water is essential for Iran's heavy-water-moderated reactor, which will 
provide Iran with a potential source of plutonium that could be used 
for nuclear weapons.\82\
---------------------------------------------------------------------------

    \79\ See UNSCR 1747 (http://www.un.org/Docs/sc/unsc_resolutions07.htm); and ``Treasury Employs Financial Sanctions 
Against WMD Proliferation Supporters in Iran,'' U.S. Treasury, 
January 4, 2006 (http://www.treasury.gov/press-center/press-releases/Pages/js3069.aspx).
    \80\ See UNSCR 1737 (http://www.un.org/Docs/sc/unsc_resolutions06.htm) and ``Treasury Employs Financial Sanctions 
Against WMD Proliferation Supporters in Iran,'' U.S. Treasury, 
January 4, 2006 (http://www.treasury.gov/press-center/press-releases/Pages/js3069.aspx).
    \81\ ``Testimony of Robert W. Werner, Director Office of Foreign 
Assets Control,'' U.S. Treasury, February 16, 2006 (http://www.treasury.gov/press-center/press-releases/Pages/js4053.aspx).
    \82\ Id.
---------------------------------------------------------------------------

    In some cases, the connection to Iran is not readily apparent, as 
Iranian entities have formed front companies outside of Iran in an 
attempt to obtain dual-use items for Iran that could be used in Iran's 
nuclear or missile programs and that otherwise could not legally be 
exported directly to Iran.\83\ For example, Iranian companies and their 
fronts have also falsified end-user information on export forms to 
allow prohibited items to be exported into the country.\84\ Iran has 
colluded with some exporters to enter fictitious end-user names in the 
importer section of export forms in order to evade international and 
national controls on shipments to Iran.\85\ For example, in May 2010, 
Balli Aviation Ltd., a UK subsidiary of Balli Group PLC, pled guilty in 
the U.S. District Court for the District of Columbia to exporting three 
Boeing 747 aircraft to Iran without obtaining the proper authorization 
from the United States.\86\
---------------------------------------------------------------------------

    \83\ ``Testimony of Stuart Levey, Under Secretary for Terrorism 
and Financial Intelligence, Before the Senate Committee on Banking, 
Housing and Urban Affairs,'' March 21, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp325.aspx).
    \84\ ``German Report Details Smuggling of Nuclear Bomb, Missile 
Components to Iran,'' Hamburg Stem, July 16, 2009.
    \85\ ``Kyodo: Mitutoyo Falsifies Iranian Recipient's Name to Get 
Export Permission,'' Tokyo Kyodo World Service, August 26, 2006 
(http://www.freerepublic.com/focus/f-news/1690388/posts).
    \86\ See ``U.K. Firm Fined $2 Million After Pleading Guilty to 
Illegally Exporting Boeing 747 Aircraft to Iran,'' U.S. Department 
of Justice, May 11, 2010 (http://www.justice.gov/opa/pr/2010/May/10-nsd-551.html).
---------------------------------------------------------------------------

    Iranian commercial entities deploy the above mentioned practices 
specifically to evade those controls put in place by the United States, 
international community, and responsible financial institutions, 
controls that are designed to enforce international sanctions, prevent 
the proliferation of nuclear weapons and their delivery systems, and 
protect the international financial sector from abuse by illicit 
actors. These practices by Iranian entities have allowed Iran to engage 
in illicit activities and operate undetected in the international 
economy.\87\
---------------------------------------------------------------------------

    \87\ ``Testimony of Stuart Levey, Under Secretary for Terrorism 
and Financial Intelligence, Before the Senate Committee on Banking, 
Housing and Urban Affairs,'' March 21, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp325.aspx).
---------------------------------------------------------------------------

    The IRGC: The IRGC, which was designated by the Department of State 
as a primary proliferator under E.O. 13382 in October 2007,\88\ owns 
and/or controls multiple commercial entities across a wide range of 
sectors within the Iranian economy. For example, the IRGC established 
Khatam al-Anbiya,\89\ the largest major Iranian construction 
conglomerate, to generate income and fund IRGC operations while 
presenting the company as a legitimate company

[[Page 72762]]

working on civilian projects.\90\ Khatam al-Anbiya was designated by 
Treasury in 2007 pursuant to E.O. 13382.\91\ U.S.-designated, Iranian-
linked financial institutions have served as an important lifeline for 
Khatam al-Anbiya. The U.S. and EU-designated Iranian banks Melli, 
Mellat, and state-owned Iranian Bank Tejarat have provided financial 
support to Khatam al-Anbiya-related business before and after the UN 
designation of Khatam al-Anbiya and fourteen of its subsidiaries.
---------------------------------------------------------------------------

    \88\ See ``Fact Sheet: Designation of Iranian Entities and 
Individuals for Proliferation Activities and Support for 
Terrorism,'' U.S. Treasury, October 25, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
    \89\ In October 2007, the Treasury Department designated nine 
IRGC-affiliated companies and five IRGC-affiliated individuals for 
proliferation activity under E.O. 13382 as derivatives of the IRGC, 
including Khatam al-Anbiya Construction Headquarters, which secured 
deals worth at least $7 billion in the oil, gas and transportation 
sectors, among others, in 2006. See Id. The European Union also 
designated Khatam al-Anbiya for supporting the Iranian ballistic 
missile and nuclear programs. See ``European Council Common Position 
2008/479/CFSP,'' Official Journal of the European Union, June 23, 
2008 (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:163:0043:0049:en:PDF).
    \90\ ``Ex-Iranian Official Tells UK Daily About Likely IRGC 
Earnings, Activities,'' The Financial Times, March 16, 2007.
    \91\ ``Fact Sheet: Designation of Iranian Entities and 
Individuals for Proliferation Activities and Support for 
Terrorism,'' U.S. Treasury, October 25, 2007 (http://www.treasury.gov/press-center/press-releases/Pages/hp644.aspx).
---------------------------------------------------------------------------

    The IRGC has continued to expand its control over commercial 
enterprises within Iran. For example, Tidewater Middle East Company 
(``Tidewater''), a port operating company, was designated by Treasury 
under E.O. 13382 in June 2011 as a company that is owned by the IRGC. 
Tidewater has operations at seven Iranian ports,\92\ some of which the 
Iranian government has repeatedly used to export arms or related 
material in violation of UNSCRs.\93\ Treasury also designated Iran Air 
under E.O. 13382 for providing material support to the IRGC and MODAFL, 
both of which used the commercial airline carrier to transport 
military-related equipment on passenger aircraft.\94\ Similarly, as 
noted in Treasury's designation of the leadership within the IRGC-Qods 
Force (``IRGC-QF''), the IRGC and the IRGC-QF engage in seemingly 
legitimate activities that provide cover for intelligence operations 
and support terrorist groups such as Hizballah, Hamas and the 
Taliban.\95\
---------------------------------------------------------------------------

    \92\ ``See U.S. Treasury ``Fact Sheet: Treasury Sanctions Major 
Iranian Commercial Entities,'' June 23, 2011. (http://www.treasury.gov/press-center/press-releases/Pages/tg1217.aspx).
    \93\ Id.
    \94\ Id.
    \95\ ``Fact Sheet: U.S. Treasury Department Targets Iran's 
Support for Terrorism,'' U.S. Treasury Department, August 3, 2010 
(http://www.treasury.gov/press-center/press-releases/Pages/tg810.aspx).
---------------------------------------------------------------------------

    Islamic Republic of Iran Shipping Lines (``IRISL''): Treasury 
designated IRISL, Iran's national maritime carrier, and affiliated 
entities pursuant to E.O. 13382 for providing logistical services to 
MODAFL.\96\ The concern over IRISL's role in Iran's illicit activities 
has grown significantly within the international community. In October 
2009, the UK and Bermuda also designated IRISL.\97\ Three IRISL-related 
entities, Irano Hind Shipping Company, IRISL Benelux NV, and South 
Shipping Line Iran (SSL), were sanctioned by the UN in June 2010.\98\ 
Subsequently, the EU, Australia, Canada, Japan, Norway, South Korea, 
and Switzerland adopted measures against IRISL.\99\ Additionally, as 
IRISL became increasingly unable to maintain adequate hull and 
protection-and-indemnity (P&I) insurance because of international 
sanctions, IRISL was forced to turn to Tehran-based Moallem Insurance 
Company, which was not in the business of providing maritime insurance. 
Treasury designated Moallem in December 2010 for providing marine 
insurance to IRISL vessels.\100\
---------------------------------------------------------------------------

    \96\ ``Major Iranian Shipping Company Designated for 
Proliferation Activity,'' U.S. Treasury, September 10, 2008 (http://www.treasury.gov/press-center/press-releases/Pages/tg1067.aspx).
    \97\ See ``The Financial Restrictions (Iran) Order 2009,'' HM 
Treasury, October 12, 2009 (http://www.hm-treasury.gov.uk/d/fin_crime_iran_order.pdf) and ``Anti-Terrorism (Financial Restrictions 
Iran) Order 2010,'' The Minister of Justice, January 15, 2010 
(http://www.bermudalaws.bm/Laws/Consolidated%20Laws/Anti-Terrorism%20(Financial%20Restrictions%20Iran)%20Order%202010.pdf).
    \98\ See UN Security Resolution 1929 (http://daccess-dds-ny.un.org/doc/UNDOC/GEN/N10/396/79/PDF/N1039679.pdf?OpenElement).
    \99\ See ``Council Implementing Regulation (EU) No 668/2010,'' 
European Union, July 26, 2010 (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:195:0025:0036:EN:PDF); ``Accompanying 
Measures Pursuant to United Nations Security Council Resolution 
1929,'' Ministry of Foreign Affairs of Japan, September 3, 2010 
(http://www.mofa.go.jp/region/middle_e/iran/measures_unsc_1009.html); ``Government Regarding the Implementation of UNSCR 
1929,'' Republic of Korea, September 8, 2010; ``Charter of the 
United Nations (Sanctions--Iran) (Specified Entities) List 2010, 
Government of Australia, August 4, 2010 (http://www.comlaw.gov.au/Details/F2010L02236); Special Economic Measures (Iran) Regulations, 
Government of Canada, August 4, 2010 (http://canadagazette.gc.ca/rp-pr/p2/2010/2010-08-04/html/sor-dors165-eng.html); ``Press Release,'' 
Government of Norway, Ministry of Foreign Affairs, January 14, 2011 
(http://www.regjeringen.no/mobil/en/dep/ud/press/news/2011/sanctions_iran_adopted.html?id=630820); ``Iran: Federal Council 
Takes Steps to Improve Legal Certainty and Prevent Possible 
Evasion,'' January 19, 2011, The Federal Authorities of the Swiss 
Federation (http://www.admin.ch/aktuell/00089/index.html?lang=en&msg-id=37283).
    \100\ See ``Fact Sheet: Treasury Designates Iranian Entities 
Tied to the IRGC and IRISL,'' December 21, 2010. (http://www.treasury.gov/press-center/press-releases/Pages/tg1010.aspx).
---------------------------------------------------------------------------

    Iran's main shipping line has long relied upon deceptive techniques 
to conceal its behavior and to avoid international and U.S. 
sanctions.\101\ IRISL is increasingly employing deceptive practices to 
disguise its involvement in shipping operations and the designation of 
its cargo. Since being subjected to U.S. and international sanctions, 
IRISL has renamed as many as 80 of the ships in its fleet and changed 
ownership information and flag registries to evade sanctions.\102\ 
IRISL also has renamed its offices in China, Singapore, Germany, and 
South Korea, has tried to mask its operations in the UAE by using a 
network of front companies,\103\ and has moved its container operations 
to a subsidiary, HDS Lines.\104\ Moreover, IRISL has also since stopped 
referring to HDS Lines in bills of lading from its shipping agent.\105\
---------------------------------------------------------------------------

    \101\ For example, on June 20, 2011, the District Attorney of 
New York announced a 317-count indictment of eleven corporations and 
five individuals for their roles in a conspiracy involving IRISL, 
its regional offices, and its agents. The indictment alleged that 
the defendants evaded U.S. economic sanctions tied to bans on trade 
with countries that harbor foreign terrorist and proliferators of 
weapons of mass destruction. In doing so, the defendants repeatedly 
falsified the records of banks located in New York County to access 
illegally the U.S. financial system. The defendants deceived 
Manhattan banks into processing more than $60 million worth of 
payments using aliases or corporate alter egos to hide their 
conduct. See ``Iranian Company Charged With Tricking U.S. Banks,'' 
New York Times, June 20, 2011 (http://www.nytimes.com/2011/06/20/nyregion/iranian-shipper-accused-of-sneaking-money-through-ny-banks.html).
    \102\ ``Iran Shipper Evades US Blacklist,'' Wall Street Journal, 
April 10, 2010.
    \103\ See (http://www.treasury.gov/press-center/press-releases/Pages/tg1212.aspx).
    \104\ ``U.S. Keeps Watch on Iranian Shipping,'' Wall Street 
Journal, May 28, 2010.
    \105\ Id.
---------------------------------------------------------------------------

    These deceptive practices are designed to avoid scrutiny in 
financial transactions. As the U.S and other jurisdictions have 
prohibited financial institutions from processing transactions 
involving sanctioned entities, IRISL's deceptive practices seek to 
disguise IRISL's involvement in order to permit the financial 
transaction. In an advisory to U.S. financial institutions, FinCEN 
noted IRISL's efforts to rename vessels and adjust information 
associated with financial transactions and suggested that the 
International Maritime Organization (``IMO'') registration number, 
which is a unique identifier assigned to each vessel, could provide a 
useful indication of whether an IRISL vessel is involved in a 
transaction.\106\ In addition, OFAC issued an advisory to alert 
shippers, importers, exporters, and freight forwarders of IRISL's 
efforts to hide its involvement in transactions by using container 
prefixes registered to another carrier, omitting or listing invalid, 
incomplete or false container prefixes in shipping container numbers, 
and naming non-existent ocean vessels in shipping documents.\107\
---------------------------------------------------------------------------

    \106\ See ``Update on the Continuing Illicit Finance Threat 
Emanating from Iran,'' FIN-2010-A008, June 22, 2010 (http://www.fincen.gov/statutes_regs/guidance/html/fin-2010-a008.html).
    \107\ See OFAC Nonproliferation and Weapons of Mass Destruction 
Advisory, ``Presentation of Fraudulent Shipping Documents,'' March 
31, 2011. (http://www.treasury.gov/resource-center/sanctions/Programs/Documents/20110331_advisory.pdf).

---------------------------------------------------------------------------

[[Page 72763]]

B. The Substance and Quality of Administration of the Bank Supervisory 
and Counter-Money Laundering Laws of That Jurisdiction

    Iran's serious deficiencies with respect to anti-money laundering/
countering the financing of terrorism (``AML/CFT'') controls has long 
been highlighted by numerous international bodies and government 
agencies. Starting in October 2007, the FATF has issued a series of 
public statements expressing its concern that Iran's lack of a 
comprehensive AML/CFT regime represents a significant vulnerability 
within the international financial system. The statements further 
called upon Iran to address those deficiencies with urgency, and called 
upon FATF-member countries to advise their institutions to conduct 
enhanced due diligence with respect to the risks associated with Iran's 
deficiencies.\108\
---------------------------------------------------------------------------

    \108\ In response to concerns raised by these FATF and IMF 
reports, FinCEN issued an advisory on October 16, 2007 to financial 
institutions regarding the heightened risk of Iranian ``money 
laundering, terrorist financing, and weapons of mass destruction 
proliferation financing.'' The advisory further cautioned 
institutions that there may be an increased effort by Iranian 
entities to circumvent international sanctions and related financial 
community scrutiny through the use of deceptive practices. See 
``Guidance to Financial Institutions on the Increasing Money 
Laundering Threat Involving Illicit Iranian Activity,'' FinCEN, 
October 16, 2007 (http://www.fincen.gov/statutes_regs/guidance/pdf/guidance_fi_increasing_mlt_iranian.pdf). The FATF simultaneously 
published guidance to assist countries with implementation of UNSCRs 
1737 and 1747. See ``Guidance Regarding the Implementation of 
Activity-Based Financial Prohibitions of United Nations Security 
Council Resolution 1737,'' October 12, 2007 (http://www.fatf-gafi.org/dataoecd/43/17/39494050.pdf) and ``Guidance Regarding the 
Implementation of Financial Provisions of the United Nations 
Security Council Resolutions to Counter the Proliferation of Weapons 
of Mass Destruction,'' September 5, 2007 (http://www.fatf-gafi.org/dataoecd/23/16/39318680.pdf).
---------------------------------------------------------------------------

    The FATF has been particularly concerned with Iran's failure to 
address the risk of terrorist financing, and starting in February 2009, 
the FATF called upon its members and urged all jurisdictions to apply 
effective counter-measures to protect their financial sectors from the 
terrorist financing risks emanating from Iran.\109\ In addition, the 
FATF advised jurisdictions to protect correspondent relationships from 
being used to bypass or evade counter-measures and risk mitigation 
practices, and to take into account money laundering and financing of 
terrorism risks when considering requests by Iranian financial 
institutions to open branches and subsidiaries in their 
jurisdictions.\110\ The FATF also called on its members and other 
jurisdictions to advise their financial institutions to give special 
attention to business relationships and transactions with Iran, 
including Iranian companies and financial institutions.\111\ Over the 
past three years, the FATF has repeatedly reiterated these concerns and 
reaffirmed its call for FATF-member countries and all jurisdictions to 
implement countermeasures to protect the international financial system 
from the terrorist financing risk emanating from Iran. In response, 
numerous countries, including all G7 countries, have issued advisories 
to their financial institutions.\112\
---------------------------------------------------------------------------

    \109\ See ``FATF Statement on Iran,'' The Financial Action Task 
Force, February 25, 2009 (http://www.fatf-gafi.org/dataoecd/18/28/42242615.pdf).
    \110\ Id.
    \111\ Id.
    \112\ See ``Circular 13/2008 (GW)--Statement of the FATF of 16 
October 2008,'' November 7, 2008 (http://www.bafin.de/cln_171/nn_721228/SharedDocs/Veroeffentlichungen/EN/Service/Circulars/rs__0813__gw.html?__nnn=true); ``February 27, 2009 FINTRAC 
Advisory,'' February 27, 2009 (http://www.fintrac-canafe.gc.ca/publications/avs/2009-02-27-eng.asp); ``HM Treasury warns businesses 
of serious threats posed to the international financial system,'' 
March 11, 2009 (http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/press_26_09.htm); ``Letter from French 
Minister of Economy,'' (http://www2.economie.gouv.fr/directions_services/dgtpe/sanctions/sanctionsiran.php); and ``Bank of Italy 
Circular,'' (http://www.dt.tesoro.it/it/prevenzione_reati_finanziari/).
---------------------------------------------------------------------------

    The FATF's most recent statement in October 2011 reiterated, with a 
renewed urgency, its concern regarding Iran's failure to address the 
risk of terrorist financing and the serious threat this poses to the 
integrity to the international financial system.\113\ The FATF 
reaffirmed its February 2009 call to apply effective countermeasures to 
protect their financial sectors from ML/FT risks emanating from Iran, 
and further called upon its members to consider the steps already taken 
and possible additional safeguards or strengthen existing ones.\114\ In 
addition, the FATF stated that, if Iran fails to take concrete steps to 
improve its AML/CFT regime, the FATF will consider calling on its 
members and urging all jurisdictions to strengthen countermeasures in 
February 2012.\115\ The numerous calls by FATF for Iran to urgently 
address its terrorist financing vulnerability, coupled with the 
extensive record of Iranian entities using the financial system to 
finance terrorism, proliferation activities, and other illicit 
activity,\116\ raises significant concern over the willingness or 
ability of Iran to establish adequate controls to counter terrorist 
financing.
---------------------------------------------------------------------------

    \113\ See ``FATF Public Statement,'' The Financial Action Task 
Force, October 28, 2011 (http://www.fatf-gafi.org/document/55/0,3746,en_32250379_32236992_48966519_1_1_1_1,00.html).
    \114\ Id.
    \115\ Id.
    \116\ ``Update on the Continuing Illicit Finance Threat 
Emanating From Iran,'' FinCEN, June 22, 2010 (http://www.fincen.gov/statutes_regs/guidance/html/fin-2010-a008.html).
---------------------------------------------------------------------------

C. Whether the United States Has a Mutual Legal Assistance Treaty With 
That Jurisdiction, and the Experience of U.S. Law Enforcement Officials 
and Regulatory Officials in Obtaining Information About Transactions 
Originating in or Routed Through or to Such Jurisdiction

    Iran has not entered into any mutual legal assistance treaties. 
Additionally, U.S. law enforcement and regulatory officials have found 
Iran to be uncooperative regarding access to information about 
financial transactions. Accordingly, Iran remains a safe haven for 
those who would commit financial crimes against the United States.

III. Finding

    Based on the foregoing factors, the Director of FinCEN hereby finds 
that the Islamic Republic of Iran is a jurisdiction of primary money 
laundering concern.

    Dated: November 18, 2011
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2011-30332 Filed 11-23-11; 8:45 am]
BILLING CODE 4810-02-P