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 Banks such as HSBC are responding to tougher scrutiny over financial
dealings with some countries including Iran, even as the Islamic
Republic has won relief from some sanctions since its interim deal
with world powers last November under which it has scaled back some
aspects of its disputed nuclear program.
French bank BNP Paribas is facing a fine of as much as $9 billion
and other penalties over allegations of U.S. sanctions breaches
involving Iran and other states between 2002 and 2009.
Iran was never barred from buying food or other humanitarian goods
under sanctions first imposed in 2006 over its nuclear activity. But
measures by the European Union and the United States have made trade
generally more difficult over the past two years, hindering payments
and shipping.
"HSBC, like other banks, is increasingly worried about falling foul
of any sanctions oversights. It is just not worth the risks,
especially in this climate," a banking source, who declined to be
named due to the sensitivity of the issue, said.
European and U.S. trade sources, who also declined to be named due
to sensitivities over business with Iran, said HSBC had in recent
weeks frozen some transactions for approved goods.
"My direct experience is that they have blocked payments going into
and out of Iran," a European trade source said.
HSBC said it continued to consider humanitarian payments involving
sanctioned countries "on a case-by-case basis" to ensure they are in
accordance with applicable regulatory requirements, and otherwise
consistent with the bank's policy.
"This review process can be particularly challenging and therefore
can take time to conclude. Our policy only requires the freezing of
these payments where required under applicable laws and
regulations," HSBC said in a statement issued in response to Reuters
questions. HSBC declined to comment on whether it had received any
overtures from Iran.
A U.S.-based trade source said that payments with Iran via HSBC had
not gone through in recent weeks.
"HSBC seems to have stopped processing financial transactions for
allowable humanitarian trade," the source said, adding that this
could have wider implications.
"The (financial) ecosystem with Iran is so fragile that the loss of
even one entity, (like HSBC), can have an existential consequence."
Three Iranian government officials said HSBC had stopped processing
payments, and that Tehran was trying to resolve the issue. "We are
in talks to solve the problem,” one said.
A second Iranian government official said the West was "trying to
pressure Iran" to accept their conditions in continuing negotiations
with the six world powers on a long-term settlement under which
Tehran would cede any means of diverting its nuclear energy program
to atomic bomb-making in exchange for a removal of all sanctions
against it. Iran has long insisted it seeks only peaceful nuclear
energy, not bombs.
"These sanctions will be lifted sooner or later and we will prefer
to work with those banks that helped us under sanctions," the second
official said.
Iran’s Central Bank Governor Valiollah Seif told Reuters: "We never
had any such (humanitarian/food commodities finance) interaction
with HSBC."
In recent days, the suggestion that the United States and Iran may
have common interests on Iraq has raised hope of overcoming
stumbling blocks to a final nuclear agreement between Tehran and the
world powers.
The United States said it might launch air strikes and act jointly
with Iran to shore up the Iraqi government, after a territorial
rampage by Sunni Islamist insurgents that has scrambled alliances in
the Middle East.
Britain said separately that it would reopen its embassy in Iran
“within months” after a hiatus of more than 2 1/2 years.
TRANSPARENCY FEARS
A Western intelligence source said HSBC's trade finance was
"completely consistent with our understanding and assessment".
"It appears that HSBC is very concerned by the apparent lack of
transparency in Iranian activity," the source said.
"Large European banks are to a large extent making it a matter of
policy to manage risk and operate more cautiously than is actually
required by regulations in order to avoid prohibited activity."
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In March, trade sources and government officials told Reuters that
Tehran was pressing world powers to speed up trade finance
arrangements on humanitarian deals involving both Western and
Iranian banks.
"Parties no doubt shy away from engaging in food or humanitarian
transactions with Iran from concern about compliance with
restrictions that are not always clear," said Doug Maag, U.S.-based
senior counsel with law firm Clyde & Co.
"Banks are also reluctant to become involved in such transactions,
because if they process payments on non-compliant transactions the
banks themselves can be subject to sanctions."
In December 2012, HSBC was fined $1.92 billion by U.S. regulators
for various violations including doing business with Iran and money
laundering in Mexico. The bank has ramped up internal compliance and
in 2012 appointed Stuart Levey, former U.S. Treasury undersecretary
for terrorism and financial intelligence, as the bank's chief legal
officer.
A former U.S. Treasury official now working in the private sector,
including commercial deals with Iran, said banks were increasingly
concerned over transparency issues.
"On the policy side, Treasury wants the transactions processed but
the bank regulators want to make sure there is no money laundering
going on. It sounds like the banks are stuck between sanctions
regulations and anti-money laundering controls," the former official
said.
"The potential BNP fine is certainly eye-opening and the concern is
what may be considered common banking practice now may be determined
illicit five years from now. That is adding banks' considerations
especially with regards to Iran."
COMMERCIAL DECISIONS
William Arnall-Culliford, team leader of the Iran department at
Britain's Foreign Office, said the intention of sanctions was not to
harm ordinary Iranians or humanitarian transactions, but the
government did not offer an "interpretation service on the legal
rules in the EU".
"What we won’t do is tell people whether their proposed activities
are in line with sanctions," he told an Iran business seminar in
London earlier this month.
"(Where there are no legal obstacles), issues dealing with banks are
commercial issues. It is not the policy of government to intervene
in commercial decisions."
Arnall-Culliford said that where an activity was not prohibited
under sanctions, "we would not expect the U.S. to issue letters of
comfort" to EU companies.
"The government’s policy is not to encourage trade with Iran. There
is no support in trade disputes," he said.
A U.S. Treasury spokeswoman said Washington had worked hard with
international partners "to support and facilitate humanitarian trade
with Iran".
"Through our private sector outreach and in discussions with other
governments, we make clear that transactions related to humanitarian
trade with Iran are permissible," she said.
"In addition, as part of our commitment to implementing the Joint
Plan of Action, we helped establish financial channels to facilitate
humanitarian trade with Iran and those channels have been actively
working."
The Treasury spokeswoman said it had worked to facilitate the
establishment of two humanitarian channels - one in Asia and one in
Europe, but declined to comment on specific financial institutions.
(Additional reporting by Steve Slater in London and Louis
Charbonneau in Vienna; Editing by Alexander Smith and Mark Heinrich)
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