US says Chinese banks may have flouted sanctions on Iran transfers

Officials say they have unearthed evidence that branches in New York may have flouted sanctions by funnelling money to Tehran

PUBLISHED : Friday, 31 August, 2012, 12:00am
UPDATED : Friday, 31 August, 2012, 3:18am

Prosecutors say they have unearthed evidence in recent international money-transfer investigations that Chinese banks may have flouted United States sanctions against Iran.

Now, as they investigate global banks suspected of funnelling billions of dollars through their US branches to Iran and other sanctioned nations, the prosecutors are looking for transactions that could offer more information on the banks' dealings with Iran.

Information on how Chinese banks may have routed money on behalf of Iranian banks and corporations was more valuable than any monetary settlement the authorities could win from the global banks, law enforcement officials said.

This was because the US could use the information to strengthen its efforts to choke-off economic dealings with Iran.

The US has been ratcheting-up its sanctions as Iran's nuclear ambitions raise the risk of military action from Israel and shocks to the global economy.

The investigations of two London-based banks, HSBC and Standard Chartered, could prove especially fruitful, the law enforcement officials said.

As part of their broader investigations, prosecutors are examining whether any money transfers originated from Chinese banks and moved through the British banks before being routed through their US branches.

Prosecutors hope the banks' executives will shed more light on Chinese banks' independent relationships with Iran. The officials said the Justice Department and the Manhattan district attorney's office had not yet accumulated enough evidence to open a formal investigation into the Chinese banks.

The prosecutors are in the early stages of examining a handful of Chinese banks with operations in New York. They are concerned that the banks may allow clients suspected of financing weapons development to open accounts in China, and then get access to dollars through money transfers from a foreign bank by way of its subsidiary.

The investigations are playing out as US officials work to staunch the flow of money to Iran, part of an effort to hobble its ability to develop a nuclear programme. China has openly supplied it with nuclear materials and was a major economic partner from 1985 to 1997, when pressure from the Clinton administration hampered the business.

Last month the White House announced sanctions against Bank of Kunlun, part of China National Petroleum Corp, saying the bank had "facilitated transactions worth millions of dollars on behalf of Iranian banks".