Iran hires financial arsonist to fight its financial fires

By Tyler Stapleton and Saeed Ghasseminejad 

Source: The Hill

 

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With its economy reeling and its currency in free fall, Iran hired a new central banker in August to restore public confidence. President Hasan Rouhani appointed Abdolnaser Hemmati to replace Valiollah Seif as the governor of the Central Bank of Iran (CBI). Hemmati has a long history of laundering money and violating U.S. sanctions, just as Seif did. Neither the United States nor European governments should be fooled into believingthat Hemmati is any sort of reformer.

The CBI has a Herculean task before it, with decades of corruption and mismanagement weighing down the economy. But the bank itself is reeling, too. The Treasury Department in May sanctioned both Seif, the outgoing CBI chief, and his staff for their roles in laundering money through an Iraqi bank to Tehran’s Lebanese proxy Hezbollah and the IRGC Quds Force. Washington has previously designated both Hezbollah and the Quds Force as terrorist organizations.

There is a long history of criminal behavior at the central bank. The Obama administration sanctioned the CBI itself in 2012 for facilitating transactions with smaller banks to circumvent previous global sanctions. An executive order by President Obama justified the move by noting “the deceptive practices of the Central Bank of Iran and other Iranian banks to conceal transactions of sanctioned parties, the deficiencies in Iran’s anti-money laundering regime and the weaknesses in its implementation, and the continuing and unacceptable risk posed to the international financial system.”

Not surprisingly, the rot at the CBI has infected the rest of the Iranian financial system. In 2011, the United States labeled Iran a jurisdiction of primary money laundering concern, which led the global financial messaging service known as SWIFT to expel Iranian banks. The U.S. Treasury Department “identified the entire Iranian financial sector, including Iran’s Central Bank, private Iranian banks, and branches, and subsidiaries of Iranian banks operating outside of Iran as posing illicit finance risks for the global financial system.”

The regime has now tapped Hemmati to restore public confidence, but he is an integral part of this corrupt system. From 2006 to 2016, Hemmati served as CEO of Sina Bank and Bank Melli, both of which the United States and the EU sanctioned for facilitating weapons proliferation, providing services to the Quds Force, and acting at the behest of the regime in Tehran. According to the U.S. Treasury, Bank Melli in particular was sanctioned in 2007 for facilitating numerous purchases of materials for Iran’s nuclear and missile programs.

Hemmati also currently serves as chairman of the board at the Future Bank, which the United States sanctioned in 2008 for acting at the behest of Bank Melli. While the United States removed Sina Bank, Bank Melli, and Future Bank from its sanctions list in order to reach a nuclear accord with Iran, that was purely a political concession, not an exoneration of these banks for their illicit activity while Hemmati was at the helm. 

As if that were not bad enough, in 2011, the EU sanctioned Hemmati for his role as the head of Sina Bank, which was working on behalf of Bank Melli to evade U.S. sanctions and proliferate weapons for Iran. Why the United States did not follow suit with its own designation is unclear. But such a measure could be on the way. Now that America has exited the nuclear accord, it is free to re-impose sanctions on institutions engaged in illicit finance. 

Earlier this month, the Trump administration took such action by issuing a new executive order and official guidance outlining new targeted measures to combat the full range of threats posed by Iran, including threats to the international finance sector. The executive order imposes sanctions on entities attempting to finance individuals or entities on the U.S. sanctions list, along with institutions providing financing to Iran’s energy, shipping, and automotive sectors.

The administration has stated that Washington on November 5 will begin sanctioning transactions made through the Central Bank of Iran. As governor, Hemmati will be a central figure in attempting to circumvent those sanctions. At least in that regard, he is extremely qualified. With the bank’s practices under scrutiny, the Treasury Department should determine whether Hemmati himself meets the criteria for sanctions. If he does, designating him would send the message that Iran’s banking sector is poisonous for foreign investment and would ensure that other central banks could not interact with Hemmati without facing potential U.S. sanctions. 

Tyler Stapleton is deputy director of congressional relations at the Foundation for Defense of Democracies, a nonpartisan research institute focusing on national security and foreign policy where Saeed Ghasseminejad is a research fellow focusing on Iran. Follow them on Twitter @Ty_d_Stapleton and @SGhasseminejad.