In a congressional hearing last May, sanctions experts outlined how gaps in U.S. and EU blacklists could let designated Iranians and other designees exploit the American banking system. But the witnesses failed to point out one important, perhaps permanent, loophole in international sanctions: the misuse of interbank cover payments. The payments, which allow banks to transact with one another despite differences in time zones, require the beneficiary's financial institution to temporarily cover the payment to the intended beneficiary. Until recent years, banks relied on MT 103 and MT 202 messages sent by the originating bank to beneficiary and intermediary institutions,...
Proposals to bar Iranian financial institutions from a global interbank messaging service would impose additional costs on Iran's banks without entirely blocking them from accessing Western financial institutions.
The rejection by the EU Parliament Thursday of a data sharing agreement with the United States is likely to leave U.S. investigators without timely access to European banking data for the second month in a row.
Banks should provide more detailed information on parties involved in cover payment transactions once a new interbank messaging system is implemented in the fall, according to an international banking committee.
For all of the concern over the money laundering risks associated with cover payments and cross-border transactions, there is a simple solution: more transparency, according to an anti-money laundering compliance director.
The Bush administration suffered a setback Friday when a federal judge rejected its effort to block a civil lawsuit against an international banking consortium that provides the administration with data for terrorist investigations.