Iran used two of UK's biggest banks to evade West's sanctions: Report

Iran discreetly employed two of the largest banks in the UK to clandestinely transfer funds globally, playing a crucial role in an extensive sanctions-evasion operation supported by Tehran’s intelligence services.

A report by Financial Times revealed based on documents obtained by them that Iran utilised two major UK banks – Lloyds and Santander UK – to make the transfer globally.

Petrochemical Commercial Company’s Secret Operations

The state-controlled Petrochemical Commercial Company (PCC) and its UK subsidiary, PCC UK, have been under US sanctions since November 2018. Despite the sanctions, the documents show that PCC’s UK division continued its operations through a network of front entities in Britain and other countries.

Lloyds and Santander UK Involved

Lloyds and Santander UK provided accounts to British front companies secretly owned by a sanctioned Iranian petrochemicals company near Buckingham Palace. The US accuses PCC of raising funds for the Iranian Revolutionary Guards Quds Force and collaborating with Russian intelligence agencies to support Iranian proxy militias.

Complex Network of Front Entities

The documents, emails, and accounting records reveal that PCC’s UK division used a complex web of front entities in the UK and other countries to receive funds from Iranian front entities in China. The scheme involved concealing the real ownership through “trustee agreements” and nominee directors.

Santander’s Involvement with Pisco UK

One of the companies involved, Pisco UK, registered to a house in Surrey, used a business account with Santander UK. Internal documents indicate that Pisco is fully controlled by PCC, contradicting official ownership records. The US Treasury has previously accused Iranian petrochemical companies of using multiple front entities to evade sanctions.

Lloyds Tied to Aria Associates

Another PCC front company in the UK, Aria Associates, held an account with Lloyds. Internal emails show that Aria Associates’ account was used for payment from China, with explicit instructions to avoid any indication of PCC or PCC (UK).

Banks Respond

Santander mentioned being highly focused on sanctions compliance and stated that it could not comment on specific client relationships. However, a source confirmed that the bank has closed Pisco’s account. Lloyds Banking Group revealed compliance with sanctions laws and legal restrictions regarding commenting on suspicious activity reports.

UK Authorities Urged to Take Action

Alicia Kearns, Tory chair of the Commons foreign affairs committee, expressed concerns about the need to address entities connected to the Iranian Revolutionary Guards operating in the UK. Liam Byrne, Labour chair of the Commons Business and Trade Committee, criticised the failure to align with allies in shutting down the financing of a hostile regime.

London as a Financial Center for IRGC

David Asher, a senior fellow at the Hudson Institute, highlighted the risk and inconsistency of UK banks continuing business with Islamic Revolutionary Guard Corps (IRGC) – connected entities, stating that they “continue to use London as a financial center.”

Historical Precedents

The article notes that European banks found breaching US sanctions on Iran faced significant penalties in the past, with Standard Chartered paying over $1 billion and UniCredit $1.3 billion in 2019.

PCC’s Ongoing Operations in the UK

Despite being under US sanctions, PCC continued to operate in the UK, entering contracts for equipment procurement with a Turkish company, ASB, which was also sanctioned by the US government. Audit reports for PCC UK from 2021 revealed large trading balances with PCC in Iran, allowing it to operate despite Western banks being blocked from conducting business with the company.

UK Office Linked to Iranian National Oil Company

PCC UK’s Belgravia office also serves as the registered address for NIOC International Affairs (London) Ltd, a division of Iran’s US-sanctioned national oil company, accused of directly financing the IRGC and Iranian military activity.

The revelations come amid heightened tensions, with the Royal Air Force recently joining US airstrikes against Iranian-backed Houthi rebels in Yemen, and the UK and US imposing sanctions on an “assassinations network” overseen by Iranian intelligence.