The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed economic sanctions on nearly 50 entities and individuals in Hong Kong, the United Arab Emirates, and the Marshall Islands on Tuesday, June 25, for their involvement in Iran’s military’s “vast shadow banking network.”
According to a press release from the U.S. Treasury Department, these entities and individuals have been engaged in the sale of Iranian oil and petrochemical products since 2020, facilitating Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and the Islamic Revolutionary Guard Corps (IRGC) in accessing the international financial system and conducting illicit transactions totaling billions of dollars.
Among those sanctioned is Seyyed Mohammad Mosanna’i Najibi, an Iran-Turkey currency exchange merchant, and his 27 branch offices located in Hong Kong, the UAE, and the Marshall Islands, as well as a currency exchange company based in Tehran.
MODAFL is responsible for the development, production, financing, and logistical support of all Iranian defense industries. Its subsidiaries produce advanced conventional weapons, including ballistic missiles and drones, for use by the Iranian military, including the Islamic Revolutionary Guard Corps, or for export to countries like Russia or partner organizations like the Houthi rebels.
The supply division of MODAFL uses numerous shell companies registered in lax jurisdictions like Hong Kong or the UAE to launder the proceeds from illegal sales of oil and petrochemical products in Iran. Subsequently, the Iranian military directs these shell companies, through the exchange office managers, to use the laundered foreign currency to purchase weapons components and other supplies in the international market.
Through this shadow banking network, Iran is able to conceal its overseas earnings, which are used for various military activities, including the acquisition and development of advanced weapon systems like drones. These funds also support and arm Iran-backed terrorist organizations such as the Houthi rebels in Yemen to continue their attacks on global shipping without impunity. Iran also provides drones to Russia for use in invading Ukraine.
Last March, the U.S. Treasury Department imposed economic sanctions on 39 companies linked to the Iranian shadow banking system, which facilitated the concealment of transactions between the Iranian military and its foreign buyers, transferring billions of dollars in revenue from petrochemical sales for the Iranian regime.
According to the U.S. Treasury Department, all sanctioned entities and individuals’ assets and property rights in the U.S. have been frozen, and Americans are prohibited from engaging in transactions with them unless authorized or exempted by the OFAC. Entities with direct or indirect ownership of 50% or more by sanctioned individuals will also be frozen.
Deputy Secretary of the U.S. Treasury Department, Wally Adeyemo, stated, “Since President Biden took office, we have sanctioned hundreds of targets involved in Iran’s illegal oil and petrochemical activities. We will continue to track those who seek to fund Iran’s destabilizing terrorist activities. We will continue to work with allies, partners, and the global financial industry to enhance vigilance against the flow of funds supporting terrorism.”