There's been a whole lot of head-scratching since it emerged -- smack in the middle of the London Olympics -- that Standard Chartered, one of the crown jewels of the British financial industry, may have been violating U.S. sanctions against Iran for the better part of a decade. The U.S. accounting firm Deloitte, which was hired to do an "independent" review of the bank's transactions, claimed to be in the dark, as did Standard Chartered executives. Even the U.S. Department of Justice and the Federal Reserve were caught off guard by the allegations, apparently unable to come to a consensus about the extent of the misconduct.
So just how easy is it to dupe the authorities? Are sanctions really just a game of cat-and-mouse where the devious mice can simply hide bank routing information from the slow-witted cat and make off with billions of dollars worth of cheese? Or have sanctions against Iran become sufficiently airtight so that even the most creative of evasion techniques won't immunize you if you're abetting a rogue regime in the crosshairs of U.S. government officials?
It turns out that Britain's once venerable Standard Chartered Bank, which stands accused of moving $250 billion in illicit funds and netting hundreds of millions in banking fees in the process, is not the only bank to run afoul of regulators recently. In recent years, U.S. authorities have imposed more than $2 billion in penalties on other sanctions evaders, including ING, Barclays, Credit Suisse, Lloyds Bank, and ABN Amro for similar activities also having to do with Iran. Just two weeks ago, the Treasury Department also sanctioned China's Bank of Kunlun and the Elaf Islamic Bank of Iraq for transacting with designated Iranian banks.
Standard Chartered's approach to sanctions busting was a simple process known as "stripping" -- the term for removing identification information from wire transfers (in this case, to hide the involvement of Iranian entities). But that's just one example of the many ways in which companies and their Iranian business partners evade sanctions.
Would-be sanctions busters beware: Any and all profits derived from Iran's lucrative energy sector are now officially illegal unless you have received a waiver from the Obama administration. Congress and the White House recently closed significant loopholes in Iran's energy, finance, shipping, insurance, and nonproliferation-related sanctions. The bottom line: Anyone doing business with Iran is putting themselves and their businesses at risk.