United States Denies Large Iranian Bank All Access to U.S. Financial System

September 8, 2006

The United States Treasury Department announced today that Bank Saderat Iran will be denied even indirect access to the U.S. financial system, because of its efforts "to transfer money to terrorist organizations, including Hizballah, Hamas, the Popular Front for the Liberation of Palestine-General Command and Palestinian Islamic Jihad." Bank Saderat is one of the largest Iranian banks, with approximately 3,400 branch offices worldwide. 

Under the current rules, U.S. banks may process certain funds transfers involving an Iranian bank, including transfers for authorized or exempt transactions and what are known as "U-turn" transactions. U-turn transactions allow U.S. banks to process payments involving Iran that begin and end with a non-Iranian foreign bank. 

According to today’s notice, Bank Saderat will not be able to participate in any transfers involving U.S. banks, effective from the date of publication in the Federal Register early next week. This will effectively cut off Bank Saderat from the U.S. financial system, which will inhibit its ability to deal in any U.S. dollar-denominated transactions. 

This is a significant escalation in the financial pressure on Iran and will also likely cause problems for European and other non-U.S. banks that continue to maintain a relationship with Bank Saderat. 

Gibson, Dunn & Crutcher’s International Trade Regulation and Compliance Practice Group is
available to assist with any questions you may have regarding these issues.  For further information, please contact the Gibson Dunn attorney with whom you work or Judith A. Lee (202-887-3591, [email protected]), Jim Slear (202-955-8578, [email protected]), Dave Wharwood (202-887-3579, [email protected]) or Andrea Farr (202-955-8680, [email protected]) in the firm’s Washington, D.C. office. 

© 2006 Gibson, Dunn & Crutcher LLP

The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.