All in a Name

Posted by at 4:54 pm on January 9, 2007
Category: OFAC

Bank SepahThe Treasury Department announced today the imposition of sanctions on Iran’s fifth-largest state-owned bank, Bank Sepah, because of its financial support of Iranian firms engaged in nuclear and missile proliferation. According to Treasury, Bank Sepah has been involved, among other things, in assisting Iran’s Aerospace Industries Organization (AIO) in arranging payments to North Korea for transfer of missile technology to Iran and in financing a sale of missile components from a Chinese firm to Iran.

Bank Sepah’s participation in these transactions shouldn’t be that surprising given its name. “Sepah” means “army” in Farsi making Bank Sepah, literally, the Army Bank.

Treasury’s action here against Bank Sepah is more saber-rattling than anything else. As a state-owned bank, Bank Sepah and its branches and subsidiaries are already subject to comprehensive restrictions on their dealings with U.S. persons and firms. The effect of the designation will be to restrict Bank Sepah from involvement in the few activities otherwise permissible to Iranian banks, e.g., involvement in non-commercial monetary remissions or the financing of licensed transactions.

In addition to designating Bank Sepah, the Treasury action also designated Ahmad Derakhshandeh, the bank’s managing director and chairman of the board. Why Mr. Derakshandeh was singled out for designation among the many officers and directors of the bank is not clear. Again the designation may be more symbolic than anything else, meaning simply that Mr. Derakshandeh will have to avoid staying in the Prince de Galles, the Intercontinental or any other American-owned hotel on his next trip Paris.


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Copyright © 2007 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)


The designation is actually quite significant. There are no blocking priveleges under the Iranian Transactions Regulations, so at the most US financial institutions could only “reject” or bounce back transactions involving Bank Sepah. Furthermore, US financial institutions were previously authorized to process commercial U-Turn transactions involving Bank Sepah. Now such transactions would be blocked.

Comment by anonymous on January 11th, 2007 @ 9:57 am

My list of activities otherwise available to Iranian banks was not meant to be exclusive, so anonymous is quite right when he points out that U-turn transactions would be prohibited by this designation, just as they were prohibited not long ago for Iran’s Bank Sederat.

Anonymous is also right that the designation could result in blocked funds, whereas they previously would have been rejected. However, since rejection effectively deterred the transactions, I’m not sure that blocking will bring much more to the table, hence my question about the significance of the designation.

If, however, the result of the designation is a significant amount of blocking of Bank Sepah funds, then I prepare to stand corrected.

Comment by Clif Burns on January 11th, 2007 @ 10:56 am