Financial Channels to Facilitate Humanitarian Trade with Iran and Related Due Diligence and Reporting Expectations

October 25, 2019

The U.S. Government has levied unprecedented economic pressure to disrupt the Iranian regime’s ability to covertly and illicitly access the international financial system to finance terrorism abroad, increase its domestic oppression, support the brutal Assad regime, procure ballistic missile technology, and broadly destabilize the Middle East. These U.S. government efforts are directed at the Iranian regime. They are not directed at the people of Iran, who themselves are victims of the regime’s oppression, corruption, and economic mismanagement.

The United States maintains broad exceptions and authorizations for the sale of agricultural commodities, food, medicine, and medical devices to Iran by U.S. and non-U.S. persons, provided such transactions do not involve persons designated in connection with Iran’s proliferation of weapons of mass destruction (WMD), or Iran’s support for international terrorism. These exceptions and authorizations are clearly outlined by Treasury’s Office of Foreign Assets Control (OFAC) in Frequently Asked Questions (FAQs) regarding Iran sanctions, Guidance on Humanitarian Assistance and Related Exports to the Iranian People (2013), and Guidance on the Sale of Food, Agricultural Commodities, Medicine, and Medical Devices by Non-U.S. Persons to Iran (2013).

Unfortunately, the U.S. government has seen the Iranian regime abuse the goodwill of the international community, including by using so-called humanitarian trade to evade sanctions and fund its malign activity. The U.S. government also knows that the regime and its proxies are looking for new ways to generate funds and launder money. In fact, we have grown increasingly concerned as we have uncovered Iranian and Iranian-proxy schemes to access illicitly the international financial system under the cover of seemingly humanitarian organizations or through shell companies or exchange houses.

Today, October 25, 2019, the U.S. Departments of the Treasury and State announced a new humanitarian mechanism to ensure unprecedented transparency into humanitarian trade with Iran. Given the Iranian regime’s history of squandering its wealth on corruption and terrorism instead of supporting the Iranian people, we have developed a framework to guard against such theft and assist foreign governments and foreign financial institutions in establishing a payment mechanism to facilitate legitimate humanitarian exports to Iran. Through this mechanism, no revenue or payment of any kind will be transferred to Iran.

Importantly, this path restricts the Central Bank of Iran’s (CBI) role in facilitating humanitarian trade, which is critical because the CBI and its senior officials have facilitated significant funds transfers to terrorist organizations. Iran’s deceptive financial practices and its deficient anti-money laundering and countering the financing of terrorism (AML/CFT) regimes can make it extremely difficult to determine who is on the other end of an Iranian transaction. Our designation of CBI under Executive Order 13224 puts governments and financial institutions on notice that engaging in transactions with the CBI may make them complicit in the CBI’s support of terrorism.