Kenneth Rijock

Kenneth Rijock

Sunday, September 23, 2012


International sanctions levied against Iran have caused the government to announce that it is opening a hard currency trading centre, to facilitate the purchase of US Dollars and other major currencies. The Rial has been in free-fall against the dollar since the beginning of the year, and has lost a large portion of its value on the international market. The Central Bank of Iran, which will supervise the programme, will make access to hard currency more readily available. Dealing with the Central Bank, however, could subject foreign financial institutions, and other entities to international sanctions, and any bank that anticipates selling dollars to Iran should take a long, hard look at the possible consequences.

Central Bank logo

Additionally, there are multiple reports that shell corporations located in Ecuador, Venezuela, El Salvador and Panama are employed to conduct illicit currency transactions with Iran, to supply that government with dollars. The stripping away of information, indicating that Iran is the final beneficiary, is apparently the method being used to conceal the ultimate destination of the dollars. It is not known whether US  regulators and law enforcement agencies are aware of this activity, or whether it is under investigation, but given recent US actions against Iran sanctions violators, one must assume that they are painfully aware of it.

Bottom line, if a bank in Latin America is seeking to establish a profit centre, through sales of dollars to Iran, the potential risk could include multi-million dollar fines & penalties, loss of access to the US financial structure, loss of US branches, and loss of all correspondent relationships there. Such an action would probably bring down the bank, as it could not longer remain competitive, since its customers could no longer do business with US companies.

Additionally, terrorist financing indictments could be filed in the US, and the countries that allowed the activity to exist might be named as State Sponsors of Terrorism. This would have serious consequences for Country Risk.

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