In its latest bid to avoid international banking sanctions, Iran has reached an agreement with the Central Bank of Ecuador to allow the Export Development Bank of Iran to operate in this Andean nation.
The move came even though Ecuador is fully aware that EDBI is under U.S. Treasury Department sanction for illicitly providing or attempting to provide financial services to Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL).
According to the Treasury Department’s designation statement:
“In response to international sanctions and the refusal of many responsible banks to do business with Iranian banks, Iran has adopted a strategy of using less prominent institutions, such as the Export Development Bank of Iran, to handle its illicit transactions.” said Under Secretary for Terrorism and Financial Intelligence Stuart Levey. “Today’s action exposes EDBI’s role in helping Iran violate UN sanctions so that financial institutions around the world can take appropriate steps to protect themselves.”
Established in 1991, the EDBI is an Iranian state-owned financial institution whose primary purpose is to serve Iran’s import and export communities. In addition, the EDBI operates as the Iranian representative for the Islamic Development Bank, a multinational institution that cultivates economic and social improvements in member nations, in accordance with Islamic law.
However, the EDBI provides financial services to multiple MODAFL-subordinate entities that permit these entities to advance Iran’s WMD programs. Furthermore, the EDBI has facilitated the ongoing procurement activities of various front companies associated with MODAFL-subordinate entities.
At the same it designated EDBI, Treasury also designated the “Venezuelan” Banco Internacional de Desarrollo (BID), a wholly-owned Iranian bank that was constituted in 2007.
Its founding documents show the BID (not to be confused with the multi-national lending agency, Banco Interamericano de Desarrollo, also known as BID) is wholly owned (all 40,000 shares) by Bank Saderat, an Iranian bank under U.S. and UN sanction. The BID (Venezuela) was also granted an operating license, along with EDBI, in Ecuador.
According to the U.S. Treasury designation:
Bank Saderat has been a significant facilitator of Hizballah’s financial activities and has served as a conduit between the Government of Iran and Hizballah, Hamas, the Popular Front for the Liberation of Palestine-General Command, and the Palestinian Islamic Jihad.
District Attorney in Manhattan, Robert Morgenthau, in a speech yesterday at the Brookings Institution warned that the proliferation of Iranian banks through Venezuelan auspices was a danger to the region.
“Generally speaking, nobody is focused sufficiently on the threat of the Iran-Venezuela connection,” said Morgenthau, whose New York jurisdiction includes the offices of numerous U.S. financial institutions.
Venezuela is not under U.S. or international economic sanctions. That means U.S. banks processing wire transfers from Venezuelan banks rely on their Venezuelan counterparts to ensure the exchanges are for legitimate purposes, Morgenthau said.
“I have little faith that this is being effectively done, and the Iranians, aware of this vulnerability, appear to be taking advantage of it,” he said.
Now, with an Ecuadoran branch set to open, the vulnerabilities have grown and diversified.