Guidelines published last month by the Obama administration protect banks doing business with Iran from U.S. sanctions even if their transactions end up benefiting sanctioned entities, according to Secretary of State John Kerry. That stance, experts and congressional sources tell THE WEEKLY STANDARD, is part of an ongoing battle inside the Obama administration over efforts being spearheaded by Kerry to bolster Iran’s economy.
Kerry, who was speaking Monday at an event in London honoring both the secretary and Iranian foreign minister Javad Zarif for cementing the nuclear deal last summer that lifted many Iranian sanctions, said that the guidelines told banks they could safely do business in Iran with “no extra due diligence, just normal due diligence… [and] not be held accountable” if their transactions involved organizations like sanctioned parts of Iran’s military.
The Obama administration had “come out and made it very, very clear” that U.S. sanctions would be governed by that standard, he added.
Kerry’s statement came just a few weeks after Adam Szubin, who leads the Treasury Department’s sanctions enforcement division, told TWS that banks working with Iran would be expected to perform “an enhanced level of due diligence” to avoid transactions that benefit sanctioned entities. Szubin added that some violations would bring “the most draconian sanctions in our toolkit.”
Lawmakers have repeatedly condemned Kerry’s attempts to persuade businesses to engage with Iran. Florida senator Marco Rubio criticized Kerry’s latest remarks and told TWS that the secretary was “acting as Iran’s de facto trade representative.”
“Secretary Kerry appears to be more concerned with acting as Iran’s de facto trade representative than criticizing the regime for taking hostages, not coming clean on Bob Levinson’s case, and supporting terrorists attacking the United States,” Rubio said.
The senator also warned about the financial risks of engaging with Iran, including engagement with Iran’s hardline Revolutionary Guard Corps, whose “tentacles are pervasive throughout the Iranian economy.”
“Banks that engage in trade with Iran do so at their own peril, risking exposure to what a senior Treasury official recently described as ‘the most draconian sanctions’ available,” Rubio said.
The Treasury and State Departments have reportedly been at odds for months over Kerry’s campaign to drum up foreign business for Iran. Treasury has designated Iran a jurisdiction of “primary money laundering concern” under the PATRIOT Act and regularly urges companies to remain vigilant about working there. Kerry has repeatedly said his efforts go beyond what is strictly required under the nuclear deal.
Experts who spoke to TWS said that the State Department ultimately remained limited in its ability to reassure firms that they can safely do business in Iran.
“Kerry’s mouth is making statements that his State Department can’t cash,” said a senior official at a Washington-based organization who works on the Iran sanctions portfolio. “Illicit finance sanctions are Treasury [Department] equities, and everyone knows that, and Kerry can’t just invent a parallel universe where Iran is a safe place to do business. Or rather, he can invent it, but he’s not going to convince anyone to live there with him.”
In May, a former top Treasury official publicly criticized Kerry for a State Department campaign that included the secretary traveling to Europe and encouraging foreign companies and banks to conduct business in Iran. During the visit, Kerry said that banks would be safe “as long as they do their normal due diligence.”
In June Treasury Department officials were reportedly angered after the State Department suggested that the United States may ease Iran’s ability to access the dollar, according to the Washington Free Beacon. A congressional advisor told the outlet that Kerry was “endangering corporations and banks” by urging them to relax their oversight in business with Iran and that the secretary “doesn’t quite understand how U.S. sanctions or financial crime risks work.”
In a letter to Rubio sent the same month, the Treasury Department said it had informed domestic and foreign companies that Iran continued to struggle with “transparency issues, corruption, and regulatory obstacles” that complicated the possibility of safe transactions there.
In October TWS reported that banks continue to resist the Obama administration’s encouragement to do business with Iran.
Kerry said during his London remarks that banks are “still remaining somewhat risk averse for various reasons.”
“I wish that some of the larger banks were… ready to make loans and engage in opening accounts,” he said.
The Treasury Department declined multiple requests for comment on Kerry or Szubin’s remarks for this story. The State Department did not return a comment by publication time.
