U.S. seeks financial scrutiny of Iran

Bankers cautioned on front companies

September 17, 2006|By New York Times News Service

SINGAPORE --The United States pressed the top finance officials of the world's leading industrial nations yesterday to crack down on what Treasury Secretary Henry M. Paulson Jr. said was the exploitation of their banking systems by at least 30 Iranian front companies involved in illicit activities.

Paulson said he told the finance and economic ministers that the front companies had been identified by American intelligence agencies as conducting international financial transactions using banks in Europe and elsewhere, many of them "blue chip banks."

"Iran is a country that has broad, deep and commercial relationships with much of the world that have gone on for some time," Paulson told reporters. "This was nothing more than an educational briefing to prepare financial institutions for dealing with some of the risks that are out there."

The Treasury chief's comments came after he met with his counterparts from Britain, France, Germany, Italy, Canada, Japan and the European Union, who had come for the annual gathering of the World Bank and the International Monetary Fund.

They appeared to reflect the emerging Bush administration strategy on Iran as efforts to get sanctions against Iran by the U.N. Security Council have faltered.

The administration alleges that Iran has a secret nuclear weapons program, a charge that Iran denies. Iran is also accused of transferring funds to Hezbollah and other Islamic militant organizations through regular commercial banks.

What administration officials call a major escalation in the effort to squeeze Iran economically occurred Sept. 8 when the Treasury Department announced that Bank Saderat, a major bank in Iran, would no longer have even indirect access to the U.S. financial system.

The new decree means that Iran will have difficulty selling anything, including oil, for dollars through Bank Saderat, according to banking experts, because any commercial exchange that uses dollars normally obtains the dollars from an American bank. Many banking experts say the administration may name other foreign banks as off-limits soon.

After the announcement on Bank Saderat, two senior Treasury officials visited Europe to try to persuade regulators and banks to stop doing business with Bank Saderat and any other banks that are alleged to be involved in illicit activities.

Some European banks have curtailed their activities with Iran, but many leading banks have refused.

Stuart Levey, Treasury undersecretary for terrorism and financial intelligence, visited Britain, France, Switzerland, Italy and Germany, and the deputy treasury secretary, Robert Kimmitt, went to Germany. France, Italy, and Germany have extensive commercial relations with Iran and its trading companies.

The Treasury Department has declined to name the banks they met with.

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