Remarks by Under Secretary for Terrorism and Financial Intelligence Stuart Levey On the Revocation of Iran's U-Turn License

November 6, 2008

Washington, DC--In September 2006, the Treasury announced that it was cutting off Iran's Bank Saderat from the U.S. financial system because the bank was facilitating the transfer of millions of dollars every year to terrorist groups. Along with that move, we launched a campaign to warn the world about how Iran's threat to our security also posed a threat to the integrity of the international financial system.

Since that time, we have shared information with foreign governments and financial institutions about how Iran is using its banks to finance its nuclear and missile programs and terrorist groups. We have provided reliable information to back up our words, demonstrating that even seemingly benign business with Iran should be cause for concern.

Combined with this outreach, the United States and a broad multilateral coalition have taken action against individuals and entities that support Iran's illicit activities. The United Nations Security Council has now adopted five resolutions against Iran, requiring sanctions on those involved in the regime's nuclear and missile programs and calling for vigilance when dealing with all Iranian banks because of the risks they pose. Many allies, including the European Union and Australia, have taken especially strong action to implement those resolutions - for example, by designating Iran's Bank Melli.

At the same time, many private financial institutions and companies worldwide have voluntarily shunned business with Iran. Banks see Iran's behavior as posing an unacceptable risk to their reputations, and they would rather forgo the business and preserve their integrity. Back in September 2006, I could count on one hand the major banks that had cut off or dramatically reduced their business with Iran. Now, there are only a few that have not done so.

There is now a global consensus that Iran poses an unacceptable threat to the international financial system. The Financial Action Task Force (FATF), which has members representing 32 jurisdictions and is the world's premier standard-setting body on combating money laundering and terrorist financing, issued its fourth warning on Iran last month, calling for countries worldwide to strengthen measures to protect their financial sectors from this threat.

In the face of all of this, Iran has chosen to continue its pursuit of a nuclear capability and ballistic missiles and to engage in the deceptive financial conduct necessary to do so. This conduct includes stripping Iranian names from transactions to hide Iran's involvement. Iran also uses front companies and non-designated Iranian banks to conduct business for designated proliferation entities, and it misuses bank accounts it holds in non-Iranian banks. The fact sheet we are providing today gives an overview of Iran's wide-ranging deceptive financial conduct.

As members of the FATF, we are fulfilling our obligation to strengthen measures to protect our financial sector from those risks. Therefore, today we are revoking the "U-turn" license for Iran, thus terminating the last general entry point for Iranian banks - both state-owned and private - to the U.S. financial system. U-turn transactions allowed U.S. banks to indirectly process payments involving Iran if they began and ended with a non-Iranian foreign bank. Given Iran's conduct, it is necessary to close even this indirect access.

In recent months, many U.S. institutions have refused to host these U-turn transactions for Iran. Still, the exemption was used by Iran as a hook to solicit foreign banks to process transactions through the United States on its behalf, sometimes with requests to substitute another bank or code word for the Iranian institution. With today's action, Iran's potential to manipulate U.S. financial institutions has been significantly curtailed.

We encourage all countries, both FATF members and others, to take action to protect the integrity of their financial systems from Iran.

Today's action is not aimed at the innocent people of Iran. The Iranian people are already struggling under the regime's gross economic mismanagement, which has led to spiraling inflation that is now at 30 percent and an unemployment rate that many experts believe to be well over 20 percent.

To ensure that we can continue to help the Iranian people, today's action does not affect otherwise permissible payments such as for shipments of food and medicine, family remittances, and the export of informational materials to Iran, among others.

The Iranian regime's policies have ensured Iran's political, economic and financial isolation. Iran is still faced with two clear paths: to continue as a financial pariah, isolated from the world, or to seize the benefit and opportunity that reintegration into the global community would bring. The choice is Iran's to make.