Companies doing business with Iran risk U.S. sanctions unless they take heightened measures to avoid benefiting sanctioned entities like the Iranian military, according to a State Department statement provided to THE WEEKLY STANDARD. The warning contradicts remarks made by Secretary of State John Kerry, which were seen by supporters and opponents of the administration as significantly downplaying the risks businesses face.
Kerry said Monday that banks could safely do business in Iran if they applied “no extra due diligence, just normal due diligence,” weeks after Treasury Department Under Secretary for Terrorism and Financial Intelligence Adam Szubin told TWS that banks risked sanctions unless they used a higher, “enhanced level of due diligence.”
TWS reported this week that Kerry’s comments sparked criticism that he was misleading banks about sanctions in order to encourage them to do business with Iran. The State Department subsequently told TWS that it accepted Szubin’s heightened standard as the U.S. norm.
“We expect banks and other businesses to exercise due diligence in any overseas investment or transaction, tailored to the particular environment,” an official said. “For a high-risk jurisdiction like Iran, the norm is enhanced due diligence.”
The official also told TWS “there’s no daylight” between Kerry’s remarks and Szubin’s.
Top lawmakers said that Kerry was at odds with his State Department as well as the Treasury Department, and called the Secretary’s claim “absolutely wrong.”
“It’s highly irresponsible for Kerry to try and get the world to treat the Iranian regime like it’s a normal non-terrorist government when even his own State Department still describes Iran as the biggest state sponsor of terrorism in the world,” Illinois senator Mark Kirk, chairman of the Senate Banking subcommittee that oversees Iran sanctions, told TWS.
Experts on both sides of the Iran debate said that the State Department and Treasury Departments disagreed, but supported opposing agencies.
An expert who works on the Iran sanctions portfolio told TWS Kerry was wrong about sanctions law, that he was “making statements that his State Department can’t cash,” and that banks would not accept his “parallel universe where Iran is a safe place to do business.”
Proponents of the Iran nuclear deal took the State Department’s side. Reza Marashi, research director at the National Iranian American Council, compared Treasury’s sanctions enforcement agency to Iranian hardliners and said the White House should “step in and give clear marching orders” in order to resolve the “interagency tension.”
Kerry’s efforts to drum up business for Iran have reportedly long created tension between the two agencies.
Treasury has designated Iran a jurisdiction of “primary money laundering concern” under the PATRIOT Act and officials routinely advise caution in business dealings with the country.
Kerry has for months encouraged foreign companies to engage with Iran, saying that his attempts to bolster Iran’s economy go “beyond” what is required under the nuclear deal. After meeting with a number of European banks in May, the Secretary declared that banks can do “legitimate business” with Iran “as long as they do their normal due diligence.”
A former top Treasury official criticized Kerry after his visit to Europe, calling his encouragement to “do business with a state sponsor of terror” a “very difficult ask.”
