Iran has succeeded in smuggling vast quantities of cash into the country to get around tight sanctions imposed on it by the West. Although the smuggling efforts were known to authorities already, the extent was recently discovered to be far greater than previously thought.
In December 2014, the US Treasury acknowledged that hundreds of millions of US dollars had been obtained by Iran via front companies. Now, however, sources in both Iran and the West indicate the sum is far greater than initially assumed, reaching at least $1 billion.
According to Reuters news agency, interviews of Iranian and Western intelligence and diplomatic sources, who asked not to be identified due to the sensitivity of the matter, exposed the money smuggling revelation.
They provided previously unreported details regarding the methods and routes by which the cash was brought into the country, claiming the Iranian Central Bank played a significant role in the process.
According to the unnamed sources, Iran has been working on ways to obtain dollars since March 2014. Sanctions against Iran have shut the country out of the global banking system, making it near impossible to obtain the US dollars it needs to participate in international trade.
A 2012 Executive Order has also forbids Iran from purchasing or acquiring US dollars. To get around the banks, cash was hand-carried on courier flights through Dubai or Turkey, or across the Iran-Iraq border.
To disguise the transactions, the money was first passed through money changers or front companies set up in the United Arab Emirates or Iraq. One Western diplomat who closely watches Iranian affairs stated that Iran’s central bank gave the orders to front companies abroad to buy dollars, and coordinated with other Iranian entities under sanction to bring the money into the country.
Multiple front companies were set up to buy dollars from currency traders in order to conceal the size of the operation. These operated at arms-length from the government agencies which directed them.
According to one Iranian government official, cash was typically flown in packed in suitcases by three or four couriers who would travel first or business class. the front companies were paid for the dollars in oil or UAE currency.
The smuggling operation has been on the radar for some time. A UN report last year by the Security Council’s Panel of Experts on Iran stated, “The Panel continues to receive information from states and financial institutions that Iranian companies could operate through trading companies or shell companies in neighboring states.”
Iraq had been the primary source of Iran’s cash, providing $500 million to the Islamic Republic, but the Iraqi government has begun to restrict the sale of dollars to private banks in an effort to control the flow of dollars out of the country. Another $500 million came from two front companies in Dubai, Sima General Trading and Belfast General Trading, both of which have since come under US sanctions. The US Treasury also claims hundreds of millions more had made their way to Iran through other means.
Negotiations are currently underway to curb Iran’s nuclear program in exchange for a lifting of sanctions. Negotiation deadlines have been extended several times in the hopes of reaching an agreement.