Not All Advice Created Equal – at times foolhardy to the point of recklessness…
Response to Bloomberg Opinion: “Europe’s Trade with Iran is worth saving”. Some still pretend that doing business with Iran constitutes a viable commercial and industrial strategy, yet the evidence suggests that this is foolhardy to the point of recklessness.
Naturally, the rest of the world would like to see Iran returned to the fold so that its young and lower, middle classes can benefit from the opportunities afforded by globalisation.
But simply advocating that major companies trade with Iran in breach of US, globally-applicable Sanctions policy is a road to nowhere. After the re-imposition of full US Sanctions on Iran after the US pulled out of the Iran Nuclear Deal (JCPOA) in 2018, trade with Iran is far more precarious and hazardous than it was prior to the 2015 Deal being signed.
But this is not a one-way street. To make matters worse, rather than coalescing and seeking common ground with US policy which has been pretty unaltered since the days of Carter, Iran, understandably aghast at the poor outcome of the JCPOA, has begun escalating uranium enrichment in contravention of the Iran Nuclear Deal, much to the ire of France’s President Macron, a long-time supporter of the JCPOA.
The EU is massively compromised – with Iran a major trading venue for German, French and Italian commercial and industrial interests, and major source of energy – it would prefer to continue to trade with Iran. But in the face of the major ramifications of breaching the US integrated Sanctions & AML regime, and no viable defence in the event of a US Sanctions breach – advising globalised EU firms to risk US dollar, US market access is extraordinarily short-sighted.
The US sanctions breaches made today – will be lining the front pages of media coverage going forward once the breaches have been established and penalties issued by the US. For those who think this is some sort of geo-political game to be played out on the front pages of media and social media sound bites, consider the following.
The US has the power to cut off profit, non-profit entities, individuals, transaction types and even jurisdictions from US dollar access, US market access. For any commercial entity of any global ambition, with the US dollar a pre-eminent and prerequisite transactional means, this represents an existential threat.
In terms of penalties, which directly affect stakeholders, pension funds and so on, the facts are pretty stark. 91% of all KYC (due diligence), Sanctions and AML (money laundering, terror financing etc) related fines were issued by the US from 2008-2018, or $23.52bn. That is a staggering number.
The largest criminal penalty issued by the US for Sanctions and AML offences (let us not forget that the US Sanctions regime integrates AML offences) was France’s BNP Paribas, at $8.9bn in 2014 (or some $9.3bn if all costs are included). At the time, Paribas was the 5th largest bank in the world, with 2013 net income at some $11.3bn – so the fine (based on an alleged $190bn of illicit transactions) was huge.
So – for those advisors who are advocating that commercial entities should risk their balance sheets by embarking on continued trade with Iran in contravention of US Sanctions, consider this. You will not be the ones picking up for the multi-million/billion fines – or worse – which ensue. But you could end up being banned from operating for a few years in some jurisdictions, such as some recent Big Four examples.
Moreover, post the 9/11 “War on Terror” notional coalition against terrorism, with the US having designated Iran a “state sponsor of terror”, the EU – full of US NATO partners – needs to consider its strategic responsibilities very carefully. After all, it was the US who instigated the JCPOA – not the EU – and the US who decided to walk away.
The bottom line: if the advice received is to trade with Iran or any jurisdiction in potential breach of US Sanctions, one needs to reassess the risk/reward parameters very carefully indeed. As this is highly unlikely to be a risk worth taking, as exemplified by the numerous companies who pulled out of Iran after the US reimposed full sanctions in 2018.
Worse still – there is currently no viable defence to US Sanctions breaches, and there are plenty of ways that US authorities can find fault, even for “apparent violations”. Deliberately setting out to breach US Sanctions by applying EU Blocking Statutes which try to ignore the power of US Extra-Territoriality could be dangerous commercially. This suggests foolhardiness to the point of recklessness, and stakeholder patience will wear very thin when firms breaching US Sanctions end up with major penalties when US Sanctions breaches were readily avoidable.
To Board Members who feel the need to try to circumvent US Sanctions (on Iran) – check out the multiple disclaimer entries from so-called “expert advisors” when such a disastrous policy ends up in massive penalties. They will be happy to pocket the fees and deny responsibility for your losses. And do not bother going to the EU for help – there is no available, workable remedy to protect entities – as multiple US penalties over the past decade – with European banks fined five times more than their US equivalents – would attest.
Worth noting we predicted in October 2015 that snapback would occur and that the US would pull out of the JCPOA in an article published to clients, which can also be found reproduced in in ‘CROSS-CORDER SANCTIONS & AML’ on pp. 36-49. Available on Amazon and www.SanctionsAML.com
Original Bloomberg Opinion piece by Esfandyar Batmanghelidj HERE