The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) identified and sanctioned several “shadow banking” networks, multi-jurisdictional illicit financial systems that allow criminalized Iranian entities access to the international financial system.
“The shadow banking network seeks out jurisdictions that have business with developing countries that Iran wants to forge alliances with to acquire materials, metals, and technology for its strategic programs, or move money around evading sanctions,” Joseph Humire, executive director of U.S. think tank Center for a Secure Free Society (SFS), told Diálogo on April 30. “When you talk about the jurisdiction of financial control, the UAE, Singapore, and Hong Kong are the classics. They are also three jurisdictions where there is a lot of money laundering.”
One of these sanctioned networks, the Treasury Department said in its April 19 statement, facilitated the procurement of electronic components for Iran for its destabilizing military programs, including those used in unmanned aerial vehicles (UAVs). “Treasury will continue to enforce its sanctions against Iran’s military procurement efforts that contribute to regional insecurity and global instability,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said.
The U.S. is targeting Iranian national Mehdi Khoshghadam, managing director of the Iranian company Pardazan System Namad Arman (PASNA), as well as front companies and suppliers of the entity based in Iran, Malaysia, Hong Kong, and the People’s Republic of China, which facilitated PASNA’s procurement of goods and warfare technology, Argentine news site Infobae reported on April 20.
“Iran always tries to hide its exchanges, transfers, or businesses in the military field, particularly in support of its missile or weapons program and also its nuclear program,” Humire said. “They use this system to evade sanctions obviously, but also for the purpose of acquiring materials, technology, in some cases minerals, to support their strategic nuclear or military programs.”
The statement also noted that Amanallah Paidar, commercial manager for Iran Defense Ministry-affiliated Defense Technology and Scientific Research Center, procured components for UAVs, including inertial measurement units and attitude and heading reference systems. In addition, he established and used Farazan Industrial Engineering Inc. to purchase defense equipment and attempted to acquire European turbine engines for UAVs for tens of thousands of dollars and Iranian engines for air-to-ground missiles.
Iran not only uses shadow banking for its military programs; it also does so with the petrochemical industry. In this case, a vast network of front companies operating out of Hong Kong, Singapore, and the United Arab Emirates enabled the Persian Gulf Petrochemical Industries Company (PGPICC) to orchestrate the sale of petrochemical products, generating tens of billions of dollars annually for the Iranian regime.
In the statement, officials estimated that in 2022 alone, PGPICC marketed millions of dollars-worth of high-density polyethylene produced by Mehr Petrochemicals, for shipment to Turkey and Asia, to outside buyers.
“Iran cultivates complex sanctions evasion networks where foreign buyers, foreign exchange houses, and dozens of front companies cooperatively help sanctioned Iranian companies to continue to trade,” Deputy Secretary of the Treasury Wally Adeyemo said. “[This action] demonstrates the United States’ commitment to enforcing our sanctions and our ability to disrupt Iran’s foreign financial networks, which it uses to launder funds.”
“In the case of Latin America, the petrochemical industry is a focus of Iran in the region. Almost all the agreements it has with countries mention the petrochemical industry, particularity in Venezuela, but they also do so with Bolivia and Ecuador,” Humire said. “In the FSS we made a calculation based on binational agreements. Between 2006 and 2013, according to the agreements that Iran signed with Venezuela, in more or less 60 projects, we estimate that Iran was able to access $16 billion within the international financial system. Let’s remember that in this period Venezuela was not under sanctions and could trade freely around the world.”
Another network of companies based in China was sanctioned for having sent aerospace parts, including those that can be used for UAVs, to Iran’s Aircraft Manufacturing Industrial Company, the Treasury indicated. This company was involved in the production of the Shahed-136 UAV, which Iran uses to attack oil tankers and exports to Russia. Russian invading forces caused extensive damage and numerous deaths using these drones against Ukraine, especially in their initial stage when local forces did not have any specific technology to effectively stop them.