By Jeffrey A. Newman Esq.
The U.S. Department of Treasury’s financial Crimes Enforcement Network (“FINCEN”) has issued a Financial Trend Analysis which has identified $9 billion of potential Iranian shadow banking activity based on reporting from U.S. financial insitutions. FINCEN’s analysis has revealed aspects of the complex financial and corporate infrastructure Iran uses to sell sanctioned oil and petrochemicals on the international market, launder the proceeds, and procure export-controlled technology for Iran’s military and nuclear program. The shadow banking networks operate, via Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and Islamic Revolutionary Guard Corps (IRGC) to gain access to the international financial system, launder billions of dollars, and engage in revenue-generating activities such as sale of oil and petrochemicals.
Significantly, the Iranian shadow banking has a prominent presence in United Arab Emirates (UAE), Hong Kong, and Singapore. The Iranian regime relies on these networks, which also include exchange houses, to gain access to the U.S. dollar and U.S. financial system through U.S. correspondence accounts.
FinCEN made several findings as part of its analysis. Here are the key takeaways:
- Foreign shell companies appear to play the largest role in Iranian shadow banking activities. Likely shell companies—exhibiting multiple indicators of shell activity like no verifiable business activity, little internet presence, or use of a shared address—transacted approximately $5 billion in 2024. These companies sent $4.2 billion, mostly from China-based non-resident accounts (NRAs) operated by Hong Kong-based entities. Likely shell companies received $4.3 billion, which was mostly received by UAE-based shell companies.
- FinCEN found dozens of oil companies to be likely Iranian front companies, which transacted $4 billion in 2024, potentially for illicit oil sales. These were primarily based on UAE and Singapore.
- Potential technology procurement companies received funds from Iran-linked entities. Companies suspected of facilitating Iran’s procurement of export-controlled technology engaged in an estimated $413 million in transactions in 2024.
- International shipping companies may have transported sanctioned Iranian oil. FinCEN found that dozens of shipping companies transacted approximately $707 million, potentially to transport sanctioned Iranian oil and petrochemicals. Most of these companies were based in Iraq, UAE, or Hong Kong.
- Foreign investment companies potentially gave Iran access to international investment markets. Based on its analysis, FinCEN determined that UK and UAE investment companies transacted about $665 million, potentially to provide Iranian entities with access to international investment trading.
- Iranian entities potentially exploited U.S. financial institutions. FinCEN found that the approximately $9 billion of shadow banking funds in 2024 passed though correspondent accounts maintained at U.S.-based financial institutions. FinCEN identified two foreign companies that transferred $534 million from U.S. bank accounts to Iran-linked entities. It also found that foreign companies, including Iran-linked entities, transacted $361 million using accounts with foreign branches of U.S.-based financial institutions and $174 million using accounts with foreign subsidiaries of U.S.-based financial institutions.
- FinCEN also found that the UK and Switzerland financial systems are potentially vulnerable to Iranian shadow banking. It found UK-based companies transacted $540 million using accounts at UK- or Switzerland-based financial institutions, and that Switzerland-based companies transacted $115 million and foreign companies transacted $503 million using accounts at Switzerland-based financial institutions and Swiss branches of foreign financial institutions.
In June, FINCEN revealed that Iran’s shadow banking networks, comprised of numerous financial facilitators like the Zarringhalam brothers, allowing sanctioned Iranian persons and military organizations to access the international financial system and facilitate Iran’s international exports, the proceeds of which fund Iran’s military and its terrorist proxies. The system operates as a parallel banking system in which settlements are brokered through Iran-based exchange houses that use front companies outside of Iran, primarily located in Hong Kong and United Arab Emirates (UAE), to make or receive payments on behalf of sanctioned persons in Iran. To justify payments for sanctioned goods, shadow banking brokers may generate fictitious invoices or transaction details. Front companies are created in jurisdictions with lower levels of regulatory supervision so that they can avoid scrutiny of their business practices or ownership.
According to FINCEN, the Zarringhalam brothers assisted sanctioned regime officials and affiliated businessmen in receiving payments from the sale of petroleum, petroleum products, and other commodities from foreign purchasers. The Zarringhalam network is used by Iran’s main oil and petrochemical exporters, as well as the Iranian military, to evade sanctions and send and receive funds related to oil and petrochemical sales.
OFAC is also designating the following 11 Hong Kong-based front companies used by both Berelian Exchange and GCM Exchange to conduct money laundering activities. These Hong Kong-based companies have engaged in hundreds of millions of dollars’ worth of clandestine financial activity in multiple currencies, including dollars and euros.
- Bstshesh HK Limited
- Fitage Limited
- Gutown Trade Limited
- Konosag Trading Limited
- Lastsix Trading Limited
- Magical Eagle Limited
- Marlena Trading Limited
- Prettandy Trading Limited
- Profu Company Limited
- Saledige Trading Limited
- Xia Trading Limited
FinCEN identified approximately $413 million that flowed through U.S. correspondent accounts—
or five percent of total funds in the dataset—that appear to have been sent to potential procurement
companies linked to Iran. Of those funds, 44 percent (approximately $182 million) went to
potential procurement companies based in Oman, 25 percent (approximately $103 million)
went to companies based in Hong Kong, and 13 percent (approximately $54 million) went to
companies based in China. These potential procurement companies sent funds almost exclusively
to electronics- and technology-related companies but received funds primarily from likely
shell companies (approximately $361 million or 87 percent of these funds) based in Hong Kong
(approximately $363 million or 87 percent of these funds).
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
