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OFAC Sanctions Shadow Banking Network for Iran Military

A Report by CYS Global Remit Legal & Compliance Team  


On June 25, 2024, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned nearly 50 entities and individuals forming an extensive "shadow banking" network utilized by Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and the Islamic Revolutionary Guard Corps (IRGC) to access the international financial system. These individuals and entities were added to OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) as Specially Designated Global Terrorists (SDGT). This network, which includes Iranian exchange houses and numerous foreign cover companies, enabled MODAFL and the IRGC to generate revenue for the procurement and development of advanced weapons systems, provide arms and funding to regional proxy groups, and transfer UAVs to Russia for use in its conflict with Ukraine. Among the nearly 50 newly sanctioned persons are 27 cover companies located in Hong Kong, the United Arab Emirates, and the Marshall Islands. 


Without an OFAC license, all U.S. individuals are prohibited from engaging with these sanctioned entities and individuals, as well as any entities in which they hold a 50% or greater ownership stake. Additionally, all individuals, whether U.S. or otherwise, are barred from exporting, reexporting, or transferring any items subject to U.S. Export Administration Regulations to these sanctioned entities. 


OFAC's recent action underscores its ongoing commitment to identifying and imposing sanctions on entities supporting Iran. This marks the second instance where OFAC has targeted groups operating as clandestine banking networks for Iran. In March 2023, OFAC sanctioned numerous entities responsible for transferring proceeds from petrochemical sales to support Hamas, Hezbollah, and the Houthis on behalf of the Iranian regime. 

 

 


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