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Back-to-Back Letters of Credit Facilitate Trade with Sanctioned Nations
By Colby Adams
printBusinesses and individuals seeking to evade sanctions that target Iran and other nations may be utilizing back-to-back letters of credit to disguise their roles in transactions, say trade analysts. The letters, which are issued by banks to facilitate international trade, differ from standard letters of credit in that they make use of two bank vouchers, with one letter from a bank serving as collateral for another financial institution in the transaction chain. Deal brokers use the letters to keep the identities of buyers and sellers secret from each other so as to demand larger fees for brokering sales. Because the...
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Lawmakers passed a tough new sanctions measure against Iran Thursday that would require U.S. banks to determine whether the foreign financial institutions they have correspondent relationships with bank certain Iranians.
The U.S. Treasury Department Wednesday added another Iranian bank to its list of 16 Iran-controlled financial institutions that U.S. companies are prohibited from doing business with.
The U.S. government Wednesday blacklisted a fifth Iranian bank for allegedly helping the country build nuclear weapons, the latest move in escalating efforts to hem in Iran and convince Europe to follow suit.
The Paris-based Financial Action Task Force (FATF) said Thursday that the global financial community should regard transactions involving Iran, Uzbekistan, Pakistan, Turkmenistan, Northern Cyprus and São Tomé and Príncipe as high risks for money laundering.
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The sanctions put pressure on U.S. banks to conduct greater due diligence on correspondent accounts to determine if they are linked to the Middle Eastern nation. That will likely continue a trend of foreign institutions dropping business dealings with the country.