UK banks scrutinize partners for Iran ties

LONDON - Reuters

AFP photo

Banks in Britain are poring over relationships with financial partners in fear of falling foul of fresh international sanctions against Iran.

As part of a dispute between Western powers over Iran’s nuclear program, Britain has ordered
its lenders to cut all ties with the country.

Though UK banks largely ended their direct business with Iran in the last decade, their so-called “correspondent banking” relationships with banks who do still deal with Iran could cause headaches for risk managers looking to save their employers a visit from regulators.

Correspondent banks provide services for an overseas bank, such as establishing accounts or clearing,
giving the overseas bank’s customers access to an international network they might not otherwise
have.

Transactions involving banks in Eastern Europe, Turkey and Germany have tended to attract more
attention from regulators looking for links to Iran, said Michael Zolandz, an attorney with law firm
SNR Denton in Washington who advises banks on political and regulatory issues.

British banks will face scrutiny from regulators not only for their own behavior but for the behavior of
foreign banks that they deal with.

“Most of the Iranian risk is really an interwoven or interlocked risk,” Zolandz said. “It’s not like major financial institutions are sitting on the other side of the table from [Iranian banks].”

On November 21, in a coordinated action with the United States and Canada, Britain ordered all financial institutions to stop doing business with their Iranian counterparts, including the Iranian central bank.
 
Until financial sanctions against Iran came into force, London was seen as a convenient transfer point
for Iranian money seeking to enter the United States, proving a lucrative business for several major British banks.