Iran’s sanctions evasion went East after Europe action

Bloomberg

The US effort to put Iran in a financial vice was working. European banks were paying big fines and closing off its money flows, and severe sanctions on the country’s banking and energy sectors were forcing it to the table on a nuclear deal. But as US enforcement officials would soon discover, Iran had found a new channel for its illicit transactions: Asia.
Lenders in South Korea, Taiwan and elsewhere in the region may have played a part, knowingly or otherwise, in helping Iran evade trade sanctions before the nuclear deal and turn some of its oil proceeds into US dollars, according to court testimony, legal filings and people familiar
with the matter.
“The regulatory gaze and enforcement attention is facing east,” said Juan Zarate, a former Treasury Department and White House official who co-founded the Financial Integrity Network, a consulting group that specializes in preventing illicit financial activities.
Many Asian banks “haven’t been leading the pack in terms of financial risk management,” he said.
The shift underscores how difficult it can be to enforce international sanctions and keep bad actors out of the US financial system.
When one door is closed, another one inevitably opens.
A window on these Asian banks’ transactions comes from court documents and testimony in recent Iran-related cases in Alaska and New York, which included references to how Iran siphoned $1 billion of its funds from escrow accounts at Woori Bank and Industrial Bank of Korea, state-owned South Korean lenders that are among the largest in the country. Under terms of the US sanctions, those funds were supposed to be off limits for all but a handful of purposes.

NUCLEAR DEAL
The scrutiny of Asian banks’ Iran ties is coming from across the US law enforcement and regulatory spectrum. Over the last year, the Treasury Department has blacklisted 20 people and entities in Asia. They all had ties to Iran’s Islamic Revolutionary Guard Corps and the country’s support for terrorism, human rights abuses and other criminal activity, Sigal Mandelker, the Treasury’s undersecretary for terrorism and financial intelligence, said in a speech in New York last week.
The transactions under examination occurred before a 2015 multilateral agreement that let Iran resume some normal trade and collect revenue from oil sales while placing limits on Tehran’s nuclear activities. But the newly disclosed Iranian efforts to sidestep international sanctions may feed into President Donald Trump’s claims that Iran can’t be trusted — and his threats to scrap the agreement.
For years the US has scrutinized European banks for facilitating Iranian access to the US financial system. After nearly a dozen enforcement cases resulting in more than $16 billion in fines, those banks have been largely closed off as a conduit for Iran, former US officials say.

TRADING PARTNERS
Iran’s access to Asian financial institutions has been made possible, in part, by continued close ties with several Asian countries that remain robust trading partners — and consumers of Iranian oil exports — despite Iran’s years in the international doghouse.
“Oil revenue is big business for a resource economy such as Iran, so they have a balance of trade with all these countries,” said Elizabeth Rosenberg, a former Treasury official who is a senior fellow at the Center for a New American Security.