Compliance

10:52 AM
Henry Balani, Accuity
Henry Balani, Accuity
Commentary
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What Banks Need to Know About the Iran Sanctions Deal

Even though sanctions are being eased, this week’s deal doesn’t mean banks’ compliance teams can reduce their AML and monitoring activities.

Over the weekend, deals were struck between Iran and the West to curb Iran’s nuclear program. One potential outcome of these discussions will be the easing of economic sanctions over time, reversing the current trend of restrictive sanctions over much of the Iranian economy. Provided Iran complies with the agreement, the benefits to the Iranian people will be positive as sanctions on their automobile and petrochemical exports will be eased immediately with sanctions against other sectors of the economy potentially being eased over time.

What does this mean for a financial institution’s AML economic sanctions program? Over the next six months, the sanctions continue to be in place, requiring financial institutions to screen against regulatory lists issued by OFAC, HMT, UN, EU and the like. Trading in Iran’s currency, the Rial, continues to be banned internationally. Goods shipped to and from Iranian ports are controlled and financial assets originating from Iranian accounts anywhere in the world need to be frozen and reported to the relevant authorities. Monitoring of these activities needs to continue.

However, this recent event does raise the possibility of reduced monitoring by Compliance departments. One could assume that because these long-standing sanctions are being eased that the need for vigilance is reduced. Unfortunately that is a fallacy. The goal of any AML sanctions program is to prevent money laundering caused by many risk factors, including those driven by regulatory programs. Financial crime manifests itself in many areas, including drug, arms and human trafficking; bribery and corruption; fraud and other securities risks. Tax evasion is a significant issue today. Indeed many of these financial crimes are considered predicate offenses to money laundering and carry considerable fines, damaged reputation and even jail time for offenders.

Compliance departments should not assume they can now ‘ease the throttle’ in the oversight of their firms. There continue to be many other opportunities for ‘bad guys’ to launder their money. These additional risk factors require continued monitoring. Reputation for financial institutions continues to be very important as trust is a key factor in any business relationship. Indeed, as Iranian sanctions get lifted over time, the Compliance program can refocus in other financial crime areas where a lack of oversight can damage its firm’s reputation. Regulators can take the position that Compliance Officers have no excuse not to beef up their other compliance monitoring activities. Bribery and corruption continue to occur in many parts of the world. World leaders have stressed the need to stamp out tax evaders and demand their citizens pay the required taxes. The U.S. Department of Treasury has enacted FATCA requiring financial institutions to report on U.S. account holders. It is the job of Compliance Officers to work with their tax colleagues to ensure relevant oversight in this area.

While the easing of Iranian sanctions could mean changes for certain elements of Compliance programs, there are many complications before sanctions will be fully lifted, and talks could break down. Compliance Officers will need to closely monitor the situation but in the meantime ensure their compliance programs continue to be fully in place and expand oversight of other ‘bad’ activities.

Henry Balani is the managing director of compliance at Accuity.

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1367,
User Rank: Apprentice
12/8/2013 | 10:09:06 AM
re: What Banks Need to Know About the Iran Sanctions Deal
I do believe that's a new issue which is not reliable Ivy. I do not think that this interval is because of American prisoners, there is no evidence for this. Although the deal is not ended yet, but the vestige of good ending is visible.
Ivy Schmerken
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Ivy Schmerken,
User Rank: Author
11/30/2013 | 9:35:16 PM
re: What Banks Need to Know About the Iran Sanctions Deal
I heard the deal with Iran is not finalized yet, so banks better not ease up on compliance. Several members of Congress want Iran to agree to release certain American prisoners that are being held, and also help find an FBI agent who has been missing in Iran.
Nathan Golia
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Nathan Golia,
User Rank: Author
11/27/2013 | 8:45:41 PM
re: What Banks Need to Know About the Iran Sanctions Deal
Very interesting, Henry, thank you. I wonder how many banks even thought there might be a change in their dealings with Iran as a result of the deal.
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