What to do when a Central Bank is the bad actor

26 March 2008Central Bank of Iran

Hat tip-Osint

The blunt warning, delivered last week by FinCEN in a major Advisory on
Iran, of the risks to the international financial system posed by the
Iranian financial sector, including the Central Bank of Iran, adds a new
and dangerous dimension to the Iran problem. Here, we have America’s FIU
stating that Iran’s Central Bank is requesting that its name “be removed
from global transactions in order for intermediary financial
institutions to determine the true parties in the transaction. ” This
means that Iran’s current billion dollar financial relationship with
Venezuela, including the Banco Central de Venezuela, places Venezuela’s
Central Bank, and Treasury Bank, on the short list of unacceptable high
risk entities. Since Venezuela’s central banking structure is
facilitating transactions for sanctioned Iranian banks, through the
Central bank of Iran, then both the Banco Central de Venezuela and its
affiliate, Banco Tesoro, are off limits.

Let us examine at the problem:

* The Central Bank of Iran, also known as Bank Markazi
Jomhouriislamiran, is funneling massive amounts of dollars into, and
through, Venezuela, much of which is handled by Iran’s own captive
Venezuelan-based entity, Banco Internacional Desarrollo. If you
read between the lines, that means that if you transact business
with the Banco Central de Venezuela, you run the risk of showing up
in an investigation by US law enforcement, seeking to enforce OFAC
sanctions. You now have the FinCEN Advisory, which has put you on
notice about Iran’s Central Bank, and only someone practising
willful blindness could miss the connection with Venezuela. Therefore,
you now need to consider the risks involved in continuing any
financial relationship with Venezuelan financial institutions. It
is as simple as that.

* One also does not want to forget Banco Tesoro (Treasury Bank),
created by the Venezuelan government, ostensibly to take tax
payments, customs and other funds which ordinarily went to the
Central Bank. Known as a clever method by which the Venezuelan
government evades central bank control of inbound funds, it is also
known to have reportedly transacted business with Iranian entities,
and to act as a conduit for illicit transactions. Legally speaking,
its very operation may constitute a violation of Venezuelan law,
rendering all of its actions illegal, ab initio. Either central
banking entity should be regarded as off limits on a risk
management basis.

Whilst we hesitate to recommend that financial institutions decline to
deal with the central bank of any sovereign state, the OFAC and FinCEN
actions involving Iran have now made transactions with all Venezuelan
governmental financial entities forbidden, by virtue of the close
relationship between Iran and Venezuela. How do you possibly know that
you are not dealing with sanctioned Iranian funds, when you receive, or
transfer, money of Venezuelan origin? the short answer is, you do not,
and the risk of US regulatory sanctions, which can be Draconian in the
Global War on Terror, render such transactions too dangerous to accept.
http://www.world- check.com/ articles/ 2008/03/26/ what-do-when- central-bank\
-bad-actor/

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