By Jeffrey A. Newman Esq.
The Financial Crimes Enforcement Network (FINCEN) of the U.S. Treasury, has conducted an investigation that has unveiled over $9 billion of potential Iranian shadow banking activity that occurred through U.S. correspondent accounts in 2024, according to the agency analysis from U.S. financial institutions.
The investigation revealed a web of complex and dispersed money laundering operations that is currently active. Iranian exchange houses, offshore shells, and front companies using layers of legitimate-looking corporate structures linked to oil exports, technology procurement, and sanctions-evasion programs provide the basis for moving funds.
Iran relies on the revenue from oil sales to fund destabilizing activities. According to the FINCEN Advisory, it uses a shadow fleet of vessels to move oil around the globe and a “shadow banking” network of financial intermediaries, trading companies and others to procure weapons and other materials. Exchange houses also use these front companies to launder the revenue and use it at thedirection of sanctioned Iranian entities. In addition, third-country exchange houses and trading companies use their regional banks, which have correspondent banking relationships with U.S. financial institutions, to access the U.S. financial system.
Red Flags Associated with Illicit Oil Smuggling and Sales:
Documentation associated with a customer’s oil shipping-related transactions is inconsistent
with information contained in maritime database entries used for conducting due diligence.
For example, a maritime database may indicate that a vessel called in an Iranian port, even
though this information is not included in the shipping documents submitted to financial
institutions for payment processing.
Documentation associated with a customer’s oil-related transactions makes reference to
vessels that, according to maritime databases, have undergone recent or multiple name or
flag changes, or transfer of ownership or operation to another person following OFAC’s
designation of its owner or operator, but the designated owner or operator appears to
maintain an interest in the vessel.
Documentation associated with a customer’s oil-related transactions makes reference to
“Malaysian blend” oil, particularly if the vessel is bound for China by way of Southeast Asia
and if maritime databases indicate that the vessel displayed AIS irregularities during its
voyage or reveal evidence of a ship-to-ship transfer in proximity to Southeast Asia.
Transactions involving a petroleum or shipping company reveal that it does business with
counterparties that have ties to Iran or transports goods using vessels that have ties to Iran or
that maritime databases indicate have made stops at Iranian ports.
A customer makes oil-related transactions and wire transfers involving vessels that have been
previously linked to suspicious financial activities or that include documentation, such as bills
of lading or shipping invoices, with no consignees, that appear to be falsified, or that omit key
information, in an attempt to hide the Iranian nexus.
Red Flags Associated with Iranian Shadow Banking Networks
A customer makes transactions that move through multiple exchange houses and/or trading
companies, adding additional fees and costs as the transactions progress, where the fees,
number of transactions, and pattern of transactions do not reflect standard and customary
commercial practices.
An exchange house or trading company in a jurisdiction in close geographical proximity
to Iran uses forged or falsified documents to conceal the identity of parties involved in
transactions that will utilize regional banks’ correspondent banking relationships with U.S.
financial institutions to access U.S. dollars.
A customer receives wire transfers or deposits that do not contain any information about the
source of funds, contain incomplete information about the source of funds, or do not match
the customer’s line of business, especially if they involve entities in a high-risk jurisdiction for
Iranian illicit finance-related activity.
A general trading company registered in a commercial free trade zone in the UAE with
opaque ownership and whose trading counterparties are companies mostly located in
Singapore and Hong Kong has bank accounts at multiple UAE financial institutions.
A company based in Hong Kong, that banks using a Chinese non-resident account, has little
to no web presence, is co-located with numerous other similar companies, or is recently
incorporated yet transmitting large payments with no adequate explanation for the source of
funds, makes numerous payments in large figures to UAE general trading companies with no
clear business purpose.
U.S. banks are prohibited from knowingly conducting business tied to sanctioned Iranian entities, and they must monitor and report suspicious transactions, including those routed via high-risk offshore hubs or shells
Jeffrey Newman is a whistleblower lawyer, whose law firm represents whistleblowers revealing violations of export controls, tariff evasions, money laundering, healthcare fraud and other kinds of WB cases. The firm represents individuals both in the United States and other countries. Mr. Newman and his firm also represent physicians and other healthcare providers who become whistleblowers in healthcare fraud cases. Whistleblower laws in the U.S. allow individuals anywhere with information about export control violations or tariff fraud to reveal the information under The False Claims act or through the Securities and Exchange Commission’s Whistleblower Program. The Firm’s website is at www.JeffNewmanLaw.com . Attorney Newman can be reached at Jeff@Jeffnewmanlaw.com or at 978-880-4758
