Treasury Targets Shadow Banking Network Moving Billions for Iran’s Military

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced significant sanctions against nearly 50 entities and individuals forming a vast "shadow banking" network supporting Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and the Islamic Revolutionary Guard Corps (IRGC). This network has facilitated illicit access to the international financial system, processing billions of dollars since 2020. The primary activities generating these revenues include the sale of Iranian oil and petrochemicals, vital for funding advanced weapons systems and regional proxy groups.

“The United States is taking action against a vast shadow banking system used by Iran’s military to launder billions of dollars of oil proceeds and other illicit revenue,” said Deputy Secretary of the Treasury Wally Adeyemo. “We have sanctioned hundreds of targets involved in Iran’s illicit oil and petrochemical-related activity since President Biden took office, and we will continue to pursue those who seek to finance Iran’s destabilizing terrorist activities. We continue to work with allies and partners, as well as the global financial industry, to increase vigilance against the movement of funds supporting terrorism.”

Individuals and Entities Sanctioned

One of the primary figures targeted is Seyyed Mohammad Mosanna’i Najibi, an Iranian-Turkish money-changer managing several currency exchange businesses in Iran and Türkiye. Najibi has coordinated with MODAFL to bypass U.S. and European sanctions since 2019. His network includes Sadaf Exchange and Golden Stars Kiymetli Madenler Tekstil Sanayi Ticaret Limited Sirketi, which facilitated transfers worth hundreds of millions of dollars.

Additionally, Tehran-based Omid Sepah Exchange Company and Hekmat Iranian Exchange House, both controlled by U.S.-designated Bank Sepah, were sanctioned for their involvement in transferring tens of millions of dollars on behalf of MODAFL using numerous shell companies outside Iran.

The sanctions also target 27 cover companies across Hong Kong, the United Arab Emirates (UAE), and the Marshall Islands, which have collectively moved hundreds of millions of dollars. These companies include Gainon Co., Limited, Meishur Limited, and Lyoned Trading L.L.C., among others.

Comparative Sanctions Efforts

This move aligns with other recent Treasury actions aimed at disrupting global illicit financial activities. For instance, on June 20, 2024, OFAC expanded its Specially Designated Nationals (SDN) List, targeting leaders of Mexico’s La Nueva Familia Michoacana drug cartel and several Russian nationals under Executive Orders 14059 and 14024, respectively. The actions against these entities are part of broader efforts to combat international threats such as drug trafficking and state-sponsored terrorism .

MODAFL oversees the development, production, funding, and logistics for Iran’s defense industries, including the manufacture of advanced weapons like ballistic missiles and UAVs. Iran's budget allocates significant oil revenues to its armed forces, with MODAFL subsidiaries exporting weapons to countries such as Russia and to groups like Yemen’s Houthis, which have been implicated in attacks on global shipping and providing UAVs for Russia's aggression in Ukraine.

As a result of today's action, all property and interests in property of the designated individuals and entities within U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions involving these parties without a specific OFAC license. This extends to entities owned 50% or more by the blocked persons.

New Sanctions Target Iran-Linked Shipping Companies and Vessels

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has also expanded its Specially Designated Nationals (SDN) List, adding several entities and vessels linked to Iran's illicit activities. This recent action, dated June 27, 2024, specifically targets the following:

Shipping Companies:

1. AL ANCHOR SHIP MANAGEMENT FZE (Ajman, UAE)
2. ALMANAC SHIP MANAGEMENT LLC (Dubai, UAE)
3. SEA ROUTE SHIP MANAGEMENT FZE (Sharjah, UAE)

These companies have been designated under Executive Order 13846 for their involvement in Iran-related activities.

Vessels:OFAC has also added 11 vessels to the SDN List, including:

• ARABIAN ENERGY (Panama flag)
• ASTRA (Gabon flag)
• BALTIC HORIZON (Panama flag)
• BERENICE PRIDE (Panama flag)
• EURO FORTUNE (St. Kitts and Nevis flag)
• EURO VIKING (St. Kitts and Nevis flag)
• HARMONY (Comoros flag)
• NILE (Cook Islands flag)
• PARINE (Barbados flag)
• ROAD (Barbados flag)
• YAMUNA (Cook Islands flag)

Each vessel is linked to one of the designated shipping companies and flies flags from various countries. These designations effectively block all property and interests in property of these entities and vessels within U.S. jurisdiction, prohibiting U.S. persons from engaging in transactions involving them without specific OFAC authorization.

These sanctions represent a concerted effort by the U.S. to disrupt Iran's financial networks that fund terrorism and regional destabilization. The coordinated measures by OFAC and FinCEN reflect the U.S. commitment to safeguarding national security and maintaining the integrity of the global financial system. The recent surge in sanctions against various international threats underscores the critical role of economic tools in enforcing international norms and security objectives.

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