Iran lobbies HSBC to clear humanitarian transactions

Bank has blocked transfers for humanitarian goods, over worries about breaching sanctions

PUBLISHED : Tuesday, 24 June, 2014, 9:45pm
UPDATED : Wednesday, 25 June, 2014, 3:02am

Iran is lobbying to get HSBC to process humanitarian trade transactions that Europe's biggest bank has frozen because of concerns about breaching international sanctions.

French bank BNP Paribas is facing a fine of as much as US$9 billion and other penalties over allegations of US sanctions breaches involving Iran and other states between 2002 and 2009.

Iran was never barred from buying food or other humanitarian goods under sanctions first imposed in 2006 over its nuclear activity. But measures by the European Union and the United States have made trade generally more difficult over the past two years, hindering payments and shipping.

"HSBC, like other banks, is increasingly worried about falling foul of any sanctions oversights. It is just not worth the risks, especially in this climate," a banking source said.

European and US trade sources, who also declined to be named, said HSBC had in recent weeks frozen some transactions for approved goods.

"My direct experience is that they have blocked payments going into and out of Iran," a European trade source said.

HSBC said it continued to consider humanitarian payments involving sanctioned countries "on a case-by-case basis" to ensure accordance with regulatory requirements.

A US-based trade source said that payments to and from Iran via HSBC had not gone through in recent weeks.

"HSBC seems to have stopped processing financial transactions for allowable humanitarian trade," the source said, adding that this could have wider implications given that "the [financial] ecosystem with Iran is so fragile".

Three Iranian government officials said HSBC had stopped processing payments, and that Tehran was trying to resolve the issue. "We are in talks to solve the problem," one said.

A Western intelligence source said HSBC's trade finance was "completely consistent with our understanding and assessment".

"It appears that HSBC is very concerned by the apparent lack of transparency in Iranian activity," the source said.

"Banks are also reluctant to become involved in such transactions, because if they process payments on non-compliant transactions the banks themselves can be subject to sanctions," said Doug Maag, a US-based lawyer.

In December 2012, HSBC was fined US$1.92 billion by US regulators for violations including doing business with Iran and money laundering in Mexico.

The bank has ramped up internal compliance and in 2012 appointed Stuart Levey, a former US Treasury undersecretary, as chief legal officer.

A former US Treasury official now working in the private sector, including commercial deals with Iran, said banks were increasingly concerned over transparency issues.

"The potential BNP fine is certainly eye-opening, and the concern is what may be considered common banking practice now may be determined illicit five years from now. That is adding to banks' considerations, especially with regards to Iran."