A Stalled War On Terror Finance

Bank Sepah was designated by the U.S. Treasury on January 9, 2007, for providing financial services to companies involved in Iranian nuclear and ballistic missile activities. The UN and the U.S. government claim that the companies in question—the Shahid Hemmat Industries Group (SHIG) and the Shahid Bakeri Industries Group (SBIG) —are key players in Iran's ballistic missile program. Sepah also provided services to the Aerospace Industries Organization (AIO), the parent company of these two entities. All three companies were designated by the U.S. government on June 29, 2005, for their support for Iran's missile program. According to the Treasury, Bank Sepah processed and arranged financing for dozens of multimillion-dollar deals and used a range of deceptive practices to avoid detection, such as asking other institutions to remove its name from transactions.

In October 2007, the U.S. Treasury Department also designated Bank Melli, Iran's largest bank, for providing services to other banks and firms involved in the country's nuclear and ballistic missile programs, including UN-designated entities such as Bank Sepah and its missile clients. According to Treasury, after Sepah's designation under UN Security Council Resolution 1747 (which was adopted on March 24, 2007, and extended existing sanctions on Iran), Melli took special measures to avoid being identified in transactions. Treasury has also disclosed that Melli facilitated the purchase of sensitive materials for Iran's nuclear and missile programs by "opening letters of credit and maintaining accounts."[9]

In addition, according to the Treasury, from 2002 to 2006 the Iranian government used Bank Melli to send at least $100 million to Iran's Islamic Revolutionary Guard Corps–Qods Force (IRGC-QF), a special unit of Iran's IRGC whose mission is to organize, train, equip and finance Islamist movements around the globe. "When handling transactions on behalf of the IRGC, Melli employed deceptive banking practices to obscure its involvement from the international banking system," the Treasury noted, including requesting that its name be removed from financial transactions.[10]

In total, the U.S. government has designated twenty of Iran's thirty banks for their role in proliferating weapons of mass destruction or facilitating terrorism, according to the Specially Designated Nationals List of the Treasury Department's Office of Foreign Assets Control.[11] Treasury's Financial Crime Enforcement Network has blacklisted all thirty Iranian banks for engaging in money laundering and abusing the international financial sector.

The sanctions regime instituted against Iran by the international community over the course of the last decade, while not perfect, was comprehensive and punishing. Since 2005, the United States in particular instituted over a dozen pieces of legislation meant to hamper Iran's ability to march towards nuclearization.[12] Measures included: shutting the Islamic Republic out of the global financial sector—including banks and international financial organizations such as SWIFT; constraining their ability to tap the international energy sector; circumscribe movement of humans rights violators and members of the Iranian Revolutionary Guard Corp (IRGC), and; sectioning entities that provide goods and services to Iran's energy, shipbuilding, shipping, metal and port sectors.

But the sanctions regime against Iran is now in danger of unraveling. By rolling back sanctions as a result of the November 2013 interim deal (formally known as the Joint Plan of Action), Tehran has been given an opportunity to reinvigorate its economic and diplomatic ties with the rest of the world, and Western countries have eagerly exploited the opening to do business with Iran. Re-legitimizing business as usual before Iran makes any significant concessions on its nuclear program not only sends the wrong message, but impairs the West's ability to negotiate effectively.

The politicization of CTF/AML

To be sure, eradicating illicit finance and associated criminal activity completely is impossible. What is not, however, is improving the ability of the law enforcement and intelligence communities to follow the money. This effort, more than perhaps any other, is instrumental to victory in the struggle against contemporary terrorism, for a very simple reason: cutting off illicit finance deprives terrorist organizations of their lifeblood.

America's experiences since September 11th should hammer home the point that there are no easy fixes to terror financing. Quite simply, terrorists and criminals use a variety of methodologies, often commingling their illicit money with legitimate funds. The efforts expended by the United States and its partners have not been as smart or efficient as they need to be to keep up with the shifting patterns of illicit finance.

Today, however, the United States gives little indication that it understands this reality. To the contrary, over the past year, the Obama administration has unwittingly rolled back almost a decade's worth of financial measures intended to curb state sponsors of terrorism such as Iran. In return for the Islamic Republic's agreement to limit certain aspects of its nuclear activities to gain "modest" relief from crippling international sanctions, the United States is enabling Tehran to reestablish broken diplomatic ties and reinvigorate a stagnant economy. Iran, for its part, has been making a full-court press in the banking and energy sectors, conducting business in Europe, Asia and its seven direct neighbors (Afghanistan, Armenia, Azerbaijan, Iraq, Pakistan, Turkey and Turkmenistan).

Worse still, Iran's rehabilitation has bred no small measure of contagion. Today, "frenemy" countries have become increasingly emboldened to test the appetite of the United States and its allies to fight rogue finance.

One such state is Turkey. Although itself no stranger to terrorist attacks, the government of Prime Minister Recep Tayyip Edogan has become a notable supporter of terrorism financiers. One prominent example is Saudi businessman Yasin al-Qadi, who has been designated an al-Qaeda financier on the UN's 1267 list, the U.S. Treasury Department's Specially Designated Global Terrorist list and the European Union's "Consolidated list of persons, groups, and entities subject to EU financial sanctions." Mr. Erdogan has publicly defended Qadi[13]--demonstrating a disturbing laissez faire attitude toward support for radical causes that has continued to this day. (More recently, Ankara has similarly problematic attitude toward radical elements taking part in the fighting against the Assad government in neighboring Syria as well; according to an October 2013 Human Rights Watch report, "Many foreign fighters operating in northern Syria gain access to Syria via Turkey, from which they also smuggle their weapons, obtain money and other supplies, and sometimes retreat to for medical treatment."[14]) Largely as a result of these deformities, the FATF has placed Turkey on its list of jurisdictions of concern—a designation that speaks volumes about how Turkey, which has worked diligently to be seen as both a global power and a model of emulation in the Middle East, is anything but when it comes to terrorism financing.

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