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.
© 2006 Gibson, Dunn & Crutcher LLP
The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.