Barclays shuts Iranian accounts

By Stephen Fidler in London and Daniel Dombey in Washington

Published: June 6 2008 20:37 | Last updated: June 6 2008 20:37

Source: FT

One of Britain’s biggest banks has shed customers linked to Iranian entities in the UK in an apparent effort to avoid falling foul of US financial sanctions.

The decision by Barclays to close accounts of Saderat and Melli, two Iranian-owned banks, along with those of bank directors and staff, follows a decision last year by the US Treasury’s Office of Foreign Assets Control (Ofac) to place the two on its list of specially designated nationals (SDN).

The sanctions against the two, along with Bank Mellat and other Iranian entities, were announced last October by Condoleezza Rice, US secretary of state, and Hank Paulson, Treasury secretary. Neither bank is subject to separate European Union or British sanctions.

The move was first reported by the Times newspaper of London. It quoted a letter from a Barclays lawyer, Deborah Cooper, to lawyers representing bank employees, as saying: “Barclays ... has a policy of not conducting business with people or entities which are publicly designated SDNs.”

The bank would not comment.

Lisa Osofsky, of the independent risk consultancy Control Risks, said: “The US has a very expansive view of its jurisdictional reach, and Barclays does a lot of business in the US and wants to keep easy access to US markets.”

Underlining the costs of falling foul of US authorities, Lloyds Bank said this week that it had made provision to put aside funds to cover £180m ($355m) related to historical payments being investigated by Ofac, the US Department of Justice and the New York county district attorney.

Though the Ofac sanctions make it more difficult for targeted organisations to obtain dollar financing, a key purpose has been to encourage governments – and individual banks and companies – to follow suit.

The policy is part of the US push to heighten financial pressure on Iran, and so increase the incentives for Tehran to rein in its nuclear programme and curb its support for radical groups such as the Hizbollah movement in Lebanon.

A United Nations Security Council resolution, championed by Washington and approved in March, also called for UN member states to exercise “vigilance” over Saderat and Melli.

So far, the EU has not fully implemented the measure. Some US officials hope that individual banks, such as Barclays, can act where their governments have not yet moved.

The EU is in the process of deciding on restrictions on Melli’s activities in Europe, but is unlikely to make a final decision for several weeks. Bank Saderat is more problematic for the bloc to act against, since one of the main grounds for the US action against the bank is its alleged ties to Hizbollah, which is formally classified as a terrorist organisation by the US but not by the EU.