With specific changes impacting on financial services businesses and Iranian banking relationships, what implications does this have for the financial services world?
16 January 2016 heralded the termination of a large number of EU nuclear related financial and economic sanctions for Iran. Throughout the financial services world, this meant that the requirement to seek prior authorisation for, or give notification of, transfers of Iranian funds was removed. Specific to the banking sphere, banking activities that were previously prohibited were now permitted. This included the establishment of new correspondent banking relationships with Iranian Banks and the opening of branches, subsidiaries or representative office of Iranian Banks.
The changes to sanctions measures emanating from the nuclear deal with Iran also resulted in the delisting of certain entities, so that they were no longer ‘designated persons’. This in turn allowed for the release of funds and economic resources that had previously been ring fenced and frozen in bank/client accounts for years. A number of major Iranian banks, including the Iranian Central Bank, were among those entities delisted. In a separate action, on 23 January 2016 the EU delisted Bank Sepah and Bank Sepah International PLC (UK Subsidiary), following a successful petition by Bank Sepah to the UN Security Council. It should be noted, however, that Bank Sepah remains subject to some restrictions still by the US.
In recent weeks the Bank of England has reactivated the banking licences of Melli Bank, Persia Bank and Bank Sepah International. This will eventually mean that these banks can resume their operations in the UK. However, this will only take place once the banks have gained appropriate regulatory approval and when specified measures around risk management and corporate governance, for example, have been put in place.
Despite the changes, it remains the case at the time of publishing that there are a number of Iranian banks that are still subject to sanctions measures and listed as designated persons, such as Bank Ansar and Mehr Bank. It is also noteworthy that certain individuals linked to de-listed banks remain listed as designated persons in their own right. So it would be unwise to think it is free reign for Iranian Banks. As a consequence, local financial services businesses will need to remain on alert around Iranian banking relationships to ensure their relationships are appropriately managed.
Advocate Caroline Dutot is a specialist in sanctions matters, having authored the Jersey Financial Services Commission’s guidance on the subject. Advocate Dutot can be contacted by telephone on 01534 481809 or by email on cdutot@ardentchambers.com
