Iran's sanctions-avoiding efforts involve two UK banks

The Financial Times has obtained documents that showcase Iran’s efforts to evade sanctions by using accounts at two of the UK’s largest banks.

The same source reveals that Lloyds and Santander UK have been implicated in facilitating a covert money movement operation orchestrated by Iran's state-controlled Petrochemical Commercial Company (PCC). The PCC, along with its UK subsidiary PCC UK, has been under US sanctions since November 2018. Despite the sanctions, evidence reveals that PCC's UK division continued its operations in London through a network of front entities, with UK banks such as Lloyds and Santander unwittingly providing accounts to British front companies linked to the sanctioned Iranian entity. 

The documents, comprising emails, and accounting records, suggest that PCC used UK-based companies to receive funds from Iranian front entities in China, concealing ownership through 'trustee agreements' and nominee directors. One such company, Pisco UK, held an account with Santander UK, while another, Aria Associates, had an account with Lloyds. Internal documents indicate that these front companies were controlled by PCC, raising concerns about the banks' inadvertent involvement in sanctions evasion. 

Santander responded by stating its inability to comment on specific client relationships but emphasised a strong focus on sanctions compliance. It was revealed that Santander has since closed Pisco's account according to the Financial Times. Lloyds Banking Group, while unable to comment on individual customers, also asserted compliance with sanctions laws. Experts, including former US State Department official David Asher, criticised the situation, highlighting the risks and inconsistencies with the stated policy towards the Iranian regime. 

The UK's Royal Air Force's recent involvement in air strikes against Iranian-backed Houthi rebels in Yemen and the imposition of sanctions on an 'assassinations network' overseen by Iranian intelligence underscore the broader geopolitical implications of such financial activities in London. The investigation brings into the spotlight the challenges of enforcing sanctions and the need for increased vigilance in monitoring financial transactions with entities linked to sanctioned regimes.

Iran’s banking ties with Russia 

In January 2023, the central banks of Russian and Iran signed a deal to connect national interbank communication and transfer systems to spur trade and facilitate transactions. 

According to the deal, 52 branches of Iranian banks and four unnamed foreign banks used Iran's local interbank telecom system, known as SEPAM, to connect with 106 banks using Russia's System for Transfer of Financial Messages or SPFS, according to The Central Bank of Iran. Iran's Shahr Bank and Russia's VTB Bank were involved in the related pilot programme and other lenders were expected join gradually.