Iran reportedly used two of Great Britain’s largest banks to get around sanctions.
Santander UK and Lloyds provided accounts to front companies owned by sanctioned Iranian petrochemical companies, the Financial Times reported Sunday (Feb. 4), citing documents seen by the paper’s journalists.
According to the report, the state-run Petrochemical Commercial Company (PCC) was part of a network accused by the U.S. of raising hundreds of millions of dollars for the Iranian Revolutionary Guards Quds Force and of working with Russian intelligence agencies to raise funds for Iranian proxy militias.
Both PCC and its British subsidiary PCC UK have been subject to sanctions by the American government since November 2018.
PYMNTS has reached out to PCC for comment but hasn’t yet gotten a reply.
Lloyds said not believe it has breached any sanctions laws, and that its business is conducted to ensure compliance with financial crime laws.
“We are not permitted to comment on individual customers,” a spokesperson said. In addition, due to legal restrictions, we cannot comment on the submission of suspicious activity reports to relevant authorities when and if they occur.”
The company later issued another statement: “We believe we have met all legal and regulatory obligations and, based on our own investigation, we do not believe we have breached any sanction requirements.”
A Santander UK spokesperson provided this statement:
“We are unable to comment on specific client relationships. Santander abides by its legal and regulatory obligations, and we are highly focused on sanctions compliance. Where we identify sanctions risks, we will investigate and take appropriate action.”
In its own follow-up message, Santander said its investigation showed it was not in breach of U.S. sanctions.
“We have policies and procedures in place to ensure we comply with sanctions requirements and will continue to engage proactively with relevant UK and US authorities,” the bank said.
According to the FT report, emails, documents and accounting records show that since 2018, PCC’s British unit has continued to operate from an office in London’s Belgravia section through a complicated web of front companies in the U.K. and other countries.
Documents examined by the news outlet say that since the sanctions were imposed, PCC has used British companies to receive funds from Iranian front operations in China while masking their real ownership via “trustee agreements” and nominee directors.
Meanwhile, PYMNTS looked at the importance of robust fraud and financial crime defense programs for banks last week in a conversation with Michael Shearer, chief solutions officer at Hawk AI.
“While financial fraud and financial crime are two different things, what they have in common is that they’re both ongoing challenges,” he told PYMNTS.
Shearer quoted figures shared by Nasdaq CEO and President Adena Friedman recently at the World Economic Forum in Davos: There was $3 trillion worth of money derived from financial crimes flowing through the system in 2023, and $500 billion from financial fraud.
“You can debate the figures,” he said, “but there’s no doubt that the problem isn’t going away.”
Financial fraud involves a criminal seeking personal gain via deception, misrepresentation or false information, while financial crime is a broader term that covers activities like money laundering, bribery, corruption and sanctions evasion. Both require banks and other financial organizations to institute effective countermeasures.
“It is essentially an adversarial game; criminals are out to make money, and the financial community needs to curtail that activity. What’s different now is that both sides are armed with some really impressive technology,” Shearer said.