London's Terror Bank
Wall Street Journal
August 21, 2008
In the war on terror, the U.S. has had no greater friend than the
United Kingdom. And as the U.S. economy continues to suffer under the
burdens of Sarbanes-Oxley, our British friends have demonstrated a more
sensible approach to financial regulation.
For both of the preceding statements, however, there is an exception.
Even as the U.K. stands with us in rallying the world against doing
business with Tehran, an Iranian bank with a history of financing
terrorism continues to operate in London.
On September 8, 2006, the U.S. Treasury announced it was cutting off
all direct and indirect ties to the U.S. financial system for Iran's
Bank Saderat, given the bank's history of financing terrorism.
Treasury's press release did not mention the United Kingdom, but an
October 2007 Treasury report connected the dots.
From 2001-2006, the London subsidiary of Bank Saderat transferred $50
million from the Central Bank of Iran via a Bank Saderat branch in
Beirut to front groups for Hezbollah. Hezbollah also has used the bank
to funnel money to other terrorist organizations such as Hamas. Almost
two years after the U.S. cut off Saderat's access to American finance,
and close to a year since the Bush Administration diagrammed the
electronic money trail from Tehran to terror via London, Bank Saderat
PLC continues to do business in the U.K.
In March, the U.N. Security Council imposed its third round of
sanctions against Iran for its refusal to halt its nuclear weapons
program. Included in the sanctions package was a warning to all
countries "to exercise vigilance" on transactions with all Iranian
banks, but especially Bank Saderat and Bank Melli, due to the risk that
such transactions could support illicit nuclear activities. A June 14
statement by the G-8 finance ministers also singled out Saderat and
Melli as rogue banks.
Better late than never, on June 23 the European Union, with support
from the U.K., imposed tough sanctions, including an asset freeze --
but only on Bank Melli. The penalty was richly deserved. Melli is
Iran's largest bank, and according to Treasury, "through its role as a
financial conduit, Bank Melli has facilitated numerous purchases of
sensitive materials for Iran's nuclear and missile programs."
Treasury further notes that Melli is the banker to Iran's Revolutionary
Guards Corps and the Qods force. During the period 2002-2006, Bank
Melli was the conduit for more than $100 million sent to the Qods
force. This is the outfit, you'll recall, that provides weapons, money
and training to insurgents trying to kill U.S. soldiers in Iraq and
Afghanistan. The U.K. has not revoked the license of Bank Melli's
London subsidiary, but the EU sanctions have left the bank largely
unable to conduct new business.
The same cannot be said for Bank Saderat. Even though the U.N. Security
Council makes no distinction between the two Iranian banks in warning
of their potential to finance Tehran's nuclear ambitions, the EU and
the U.K. have allowed Saderat a much longer leash. The bank's
subsidiary continues to operate in London, while Saderat branches exist
in France, Germany and Greece. The latter three countries aren't known
as the most helpful of our allies, although France has worked closely
with U.S. intelligence agencies.
The U.K. policy is more of a puzzle. Just this month, the Brits joined
with U.S. and French officials in sending a letter to the U.N. Security
Council warning against "Iran's continued attempts to conduct
prohibited proliferation-related activity and terrorist financing." The
letter said that Iranian banks were acting to evade financial
sanctions. Given that Bank Saderat PLC has been precisely the mechanism
to get money to terrorists, it's hard to understand why the rogue
financial institution still enjoys a home in London.
Perhaps the Brits are wary of damaging London's reputation as a global
financial center, and losing an advantage over New York. If there's
another explanation, we haven't heard it; Her Majesty's Treasury in
Britain declined comment when we called. In any case, we're told by a
senior U.S. source that other countries are beginning to ask why they
should cut Iranian banking ties if such business can still be conducted
in London. Iranian Banks Sepah and Persia International, which have
also been the target of U.S. sanctions, are also still operating in the
U.K.
British action could be particularly beneficial now, as the policy of
isolating Iran from the international banking system appears to be
putting genuine stress on Mahmoud Ahmadinejad's government. Almost all
of the world's commercial banks have ceased doing business with Iran,
making even routine trade a logistical challenge. It's not a
coincidence that Iran's economy has been struggling even amid an oil
boom, or that internal dissent against the Iranian government is
increasing.
Further help from America's best antiterror ally could be critical in forcing needed change in Tehran.
