Germany’s Federal Financial Supervisory Authority Issues Credit Ban against Iran’s Bank Sepah

On Tuesday, Germany’s Federal Financial Supervisory Authority (BaFin) announced that a credit ban has been imposed on Iran’s Bank Sepah for violating the country’s credit law. Previously, the UN, U.S. and EU had sanctioned Bank Sepah over its role in Iran’s illicit missile procurement activities, Iran Focus reports.

On Friday, BaFin spokeswoman, Sabine Reimer, told news media that “a credit ban against Bank Sepah’s branch in Frankfurt was imposed because the institution violated the requirements of the rules of a business organization according to paragraph 25a of the lending law.” However, Reimer could not provide additional information due to her obligation to secrecy. According to BaFin, the ban on credit went into effect on October 13th.

Because of its role in Iran’s illicit missile procurement activities, the UN, U.S., and the EU had previously sanctioned Sepah, but those sanctions were lifted in 2016 as part of the Iran nuclear deal. The Iran deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), is the agreement that the P5+1, namely China, France, Russia, the United Kingdom, and the United States (the 5 permanent members of the UN Security Council) plus Germany, made with Iran. The agreement placed restrictions on Iran’s nuclear program in exchange for sanctions relief.

Stuart Levey, who was the U.S. Treasury’s former Under Secretary for Terrorism and Financial Intelligence in 2007, stated, “Bank Sepah is the financial linchpin of Iran’s missile procurement network and has actively assisted Iran’s pursuit of missiles capable of carrying weapons of mass destruction.”

State-owned Bank Sepah has European branches in Frankfurt, Paris, Rome, and London. The U.S. Treasury Department stated that it is the “bank of choice” for Iran’s Aerospace Industries Organization (AIO). According to the U.S. Treasury Department, “AIO, a subsidiary of the Iranian Ministry of Defense and Armed Forces Logistics, oversees all of Iran’s missile industries and is the overall manager and coordinator of Iran’s missile program.”

It is estimated that the bank operates some 1,700 branches within the Islamic Republic of Iran. High risks dissuade large European banks from doing business with Iran’s financial system. In June, the Financial Action Task Force (FATF), an inter-governmental body, wrote on its website that it is “concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system.”

According to FATF, along with North Korea, Iran will remain on the list of high risk countries. Meanwhile, Iran’s Bank Sepah has dismissed a report that it had been slapped with sanctions by the German government for allegedly violating the country’s credit law.

“Bank Sepah’s connection with Germany has been expanding with the consent of the country’s authorities, and more than 52 million euros of foreign currency transfers were made at the branch only yesterday. Bank Sepah has a very good interaction with the authorities of German state banks so much so that they have chosen an Iranian as the head of the branch,” Amir Hosseini, the head of the bank’s directorate general of international affairs, said on Saturday.

According to the official, the German branch of Bank Sepah is currently connected to both Europe’s TARGET2 payment system and its Single Euro Payments Area (SEPA). TARGET2 enables EU banks to transfer money between each other in real time. SEPA is a payment-integration initiative of the European Union for simplification of bank transfers denominated in euro.