Money Laundering In Iran

Money laundering in Iran has developed following decades of international sanctions that have cut Iran off from the formal global financial system, forcing Tehran to develop sophisticated money laundering and sanctions-evasion networks to sustain its economy and fund its regional activities.

From early U.S. terror-finance sanctions in the 1980s to U.N. and Western nuclear sanctions in the 2000s, Iran has faced intense economic restrictions. In response, Iranian state entities and their partners resorted to "criminal money laundering techniques, moving Iran's oil and money under false names and pretenses," as a former U.S. Treasury official described.

Over time, Tehran has built a global shadow financial system, an illicit network of shell companies, proxy banks, and money exchangers, that helps it bypass banking controls and move funds worldwide.

International watchdogs have long flagged Iran's financial system for its opacity. The Financial Action Task Force (FATF) labels Iran a "high-risk" jurisdiction with "significant strategic deficiencies" in countering money laundering and terrorist financing. In fact, since 2020 the FATF has called for member states to apply enhanced due diligence and even countermeasures against Iranian illicit finance. U.S. authorities have similarly designated Iran's entire jurisdiction as a ''"''primary money laundering concern." Such designations reflect how deeply sanctions evasion tactics are embedded in Iran's domestic and international financial operations.

Key entities involved in Iran's sanctions evasion

Iran's sanctions-busting apparatus spans government organs, state-affiliated financial institutions, and proxy groups. Key players include: Islamic Revolutionary Guard Corps (IRGC): The IRGC, especially its clandestine Qods Force (IRGC-QF), is at the heart of Iran's illicit finance network. It oversees global smuggling, oil sales, and cash transfer rings to fund Iran's defense programs and allied militias. The IRGC uses front companies and exchange houses to access foreign currency and launder proceeds from oil and arms deals, often routing funds to terrorist proxies like Hezbollah and Hamas.

Ministry of defense (MODAFL)

Iran's Defense Ministry works with the IRGC to monetize sanctioned oil and funnel revenues into military projects. Under a secret budget scheme, MODAFL receives oil cargoes to sell via illicit channels, then uses the money for weapons development (e.g. missiles and drones) and to supply arms to proxies such as Yemen's Houthi militia. MODAFL and the IRGC have jointly built a shadow banking' network that has processed billions of dollars since 2020 despite sanctions.

Central Bank of Iran (CBI)

The CBI has been implicated in coordinating sanctions evasion. Iranian and U.S. investigations revealed that senior CBI officials secretly funneled hard currency to IRGC-QF operations. For example, in 2018 the U.S. exposed a scheme whereby the CBI, through middlemen, obtained U.A.E. dirhams and U.S. dollars to smuggle to IRGC-QF and even Hezbollah, bypassing the formal banking system. The CBI has also worked with sanctioned state companies (like the oil company NIOC) to quietly transfer funds via exchange houses.

State owned banks

Several Iranian banks have been sanctioned or identified as conduits for illicit transactions. Bank Saderat, for instance, was cut off from the U.S. financial system in 2006 after it was found transferring funds to Hezbollah. Bank Melli (Iran's largest bank) and Bank Mellat have been sanctioned by the U.S. and EU for facilitating nuclear-proliferation payments and IRGC business dealings. An IRGC-linked bank, Ansar Bank, ran a multi-country front company scheme to swap billions of Iranian rials for dollars and euros through layers of shell firms. Ansar Bank's currency arm leveraged free-trade zones and intermediaries in Turkey and the United Arab Emirates (UAE) to obtain hard currency, obscuring the origin of funds.

National Iranian Oil Company (NIOC) and affiliates

As the state oil producer, National Iranian Oil Company NIOC is central to sanctions evasion, it generates the oil that is sold via covert channels. NIOC's trading subsidiaries like Naftiran Intertrade Company (NICO) (based in Switzerland) have been used to market Iranian crude under false flags. NICO, identified as an IRGC affiliate, has worked with private smugglers to hide oil sales. In one instance it secretly transferred €300 million through an illicit broker network with CBI's assistance. Another major player is Persian Gulf Petrochemical Industries Co. (PGPIC) and its trading arm PGPICC. These state-linked firms used Dubai-based front companies and exchange houses to sell billions in petrochemicals while concealing that the proceeds were for Iran.

Proxy and allied groups

Iran's regional proxies both receive funding through these illicit networks and sometimes assist in the financial schemes. Hezbollah in Lebanon, Hamas in Gaza, and Ansar Allah (Houthis) in Yemen are all U.S.-designated terrorist organizations heavily bankrolled by Tehran. Iran's Quds Force employs clandestine channels to deliver cash or oil to these groups, for example, Iranian operatives led by Sa'id al-Jamal ran a complex oil-smuggling and money laundering ring that generated tens of millions of dollars to fund the Houthi insurgency. Hezbollah has long acted as an Iranian proxy financier, with its operatives laundering money from Latin American drug markets and African businesses that ultimately supports both Hezbollah and Iran's agenda. In turn, Iran counts on these groups to procure sanctioned goods (like weapons or technology) and to serve as cut-outs in financial transactions that it cannot do openly.

International sanctions evasion activities

Iran's sanctions-evasion network operates on a global scale, exploiting jurisdictions with lax oversight and leveraging complex trade schemes. Shell companies and offshore accounts hide the Iranian origin of funds, while rade-based money laundering techniques disguise proceeds as legitimate commerce. Below are the major tactics and international operations Iran uses to bypass sanctions:

Front companies and foreign shell firms

Iranian actors routinely set up overseas front companies, often registered in countries like the UAE, Turkey, Hong Kong, Singapore, or China, to serve as cut-outs for Iranian business.  These shell firms allow Iranian oil or goods to be sold under third-party names. For example, a U.S. Treasury investigation found that a shadow banking network of dozens of front companies and exchange houses, many in the UAE, was moving billions on behalf of Iran's regime. Dubai-based trading companies have processed payments for Iranian petrochemical sales while concealing the involvement of sanctioned Iranian entities. In one case, an Indian national managed a cluster of Hong Kong front companies that helped an Iranian petrochemical broker (Triliance Petrochemical Co.) launder proceeds , illustrating how Iran employs foreign nominees to get around restrictions. These fronts often transact with one another (e.g. a chain of paper companies "reselling" a commodity) before the goods reach the true end buyer, obscuring the paper trail back to Iran .  Western officials liken the process to a game of whack-a-mole, as each time one network is exposed and sanctioned, another pops up in a new guise to continue the trade.

Trade based money laundering and barter deal

Iranian networks heavily rely on trade-based laundering, using the cover of commerce to move value. This can involve fake invoices, phony contracts, and commodity swaps. A notorious example was the Iran-Turkey "gas-for-gold" scheme of 2012-2013: Iran sold natural gas to Turkey for local currency, which was then converted to gold and quietly shipped to Iran (or to Iranian accounts abroad) as payment. Turkish state bank Halkbank (with the help of gold trader Reza Zarrab) was later charged in the U.S. for facilitating this scheme, including documenting sham food shipments to mask oil revenue transfers. According to U.S. prosecutors, Halkbank helped Iran secretly transfer $20 billion in restricted funds by converting oil proceeds into gold and cash via front companies in Turkey, the UAE, and Iran. In other cases, Iranian oil is bartered for foreign goods or local currencies: For instance, during earlier sanction regimes, Iran accepted rupees for oil sold to India and used those rupees only to import Indian products (circumventing the need for dollar settlement). More   recently, Iran has turned to barter arrangements with strategic partners (like exchanging oil for essential imports or even for arms from Russia) to avoid sanctionable bank transactions. Every such deal is effectively a form of trade-based laundering, often involving mis-invoicing (to inflate or disguise the value of shipments) and shell intermediaries to handle logistics.

Oil smuggling via a "shadow" fleet"

Despite embargoes, Iran's oil exports have rebounded through clandestine shipping practices. Tehran has assembled a large ''shadow fleet'' of aging tankers, often owned through shell companies and flagged under third countries, that carry Iranian oil covertly. These tankers routinely disable tracking transponders, conduct ship-to-ship transfers at sea, change vessel names, and even repaint ship hulls to assume new identities.

A 2025 investigative report based on leaked emails from an Iranian firm ''Sahara Thunder'' detailed how this network operates: "Not to use any Iranian name… we are lifting sanctioned cargo," one exchange read, instructing that "documents be forged and vessels renamed to avoid any trace of Iran".

Tankers would clandestinely blend Iranian oil with other origin oil or falsify certificates to claim a non-Iranian source. These deceptive tactics have enabled Iran to ship oil to willing buyers, primarily in China and other Asian countries, in volumes significant enough to earn an estimated "$50+ billion annually" in 2022 and 2023.

Use of exchange houses and hawala networks

With Iranian banks severed from global networks like SWIFT, the regime leans on informal or alternative financial channels. Money exchange houses (sarrafis) in the Middle East and Central Asia play a pivotal role in swapping currencies and repatriating funds. For example, the IRGC's Ansar Bank and its affiliate Ansar Exchange built a layered currency scheme using money traders in the UAE and Turkey to convert devalued Iranian rials into hundreds of millions of dollars and euros for the IRGC and Defense Ministry.

They did so by establishing front companies in the UAE's free trade zones and in Turkey, ostensibly normal  import-export firms, that would receive payments on behalf of Iranian clients and procure hard currency. Over an 18-month span, four Dubai-based front companies (with generic names like ''Lebra Moon General Trading'') supplied the equivalent of $800 million in cash to Ansar Exchange, effectively laundering Iranian funds into usable foreign money. This hawala-style network (hawala refers to informal value transfer without moving actual money) often involves trusted brokers who settle accounts through trade or cash   deliveries. U.S. investigators have uncovered multiple such networks: in one case, a ring of Iranian and Emirati currency traders delivered hundreds of millions of U.S. banknotes to Iran, by exploiting loopholes in UAE's banking oversight. The IRGC and Quds Force rely on these currency laundromats to circumvent    the formal banking blockade, turning Iranian rials (which are sanctioned) into dollars, euros, or dirhams that can buy goods on the world market.

Cryptocurrency and digital payments

In recent years, Tehran has looked to digital currencies as a way to dodge sanctions. Iran emerged as a hub for cryptocurrency mining, leveraging its cheap electricity to generate Bitcoin that can be used in international trade. By 2021, an estimated 4.5% of all Bitcoin mining took place in Iran, potentially earning the country hundreds of millions of dollars in crypto assets outside the traditional financial system. In August 2022, Iran announced its first official import paid in cryptocurrency, worth $10 million, as a pilot for enabling sanctioned trade via digital assets. The idea is that crypto transactions, which bypass centralized banking, could allow Iran to purchase goods or services from abroad without using dollars or identifiable bank wires. Indeed, Iranian importers and trading companies are increasingly experimenting with crypto payments and ''smart contracts'' for deals with foreign partners (particularly those who are   themselves facing U.S. sanctions, like Russia).

There is also evidence that Iran's allies like the Houthis have used digital asset wallets to receive funds, eight crypto wallets tied to the Houthi network were identified by the U.S. Treasury in 2024.

While crypto provides a degree of anonymity and sanctions resistance, it is not a panacea: converting large sums of cryptocurrency into usable fiat currency or goods can be challenging and traceable. Nevertheless, Tehran has moved to regulate and promote crypto usage internally (for example, requiring  Iranian crypto miners to sell their Bitcoin to the state for use in sanctioned imports), indicating that digital currency is now part of Iran's sanctions-evasion toolkit.

Domestic money laundering operations within Iran

Inside Iran, the boundary between state finances and illicit laundering is often blurred. Many of the international schemes described above are orchestrated from Tehran by sanctioned agencies or well-connected brokers, and they rely on Iran's domestic institutions to cover their tracks. Several aspects characterize Iran's internal money laundering operations and their interface with sanctions evasion:

State-sanctioned illicit finance

Unlike in many countries where money laundering is a purely criminal enterprise, in Iran much of it is government-directed. Institutions like the IRGC and Ministry of petroleum actively direct private brokers and firms in how to clandestinely sell oil or procure funds.

The regime effectively institutionalizes money laundering as a parallel financial system to keep revenue flowing. For example, the IRGC has embedded operatives within Iran's banking and business sectors to facilitate covert transfers. One U.S. analysis noted the ''"''organized character of Iran's illicit currency operations and the role of the IRGC in their orchestration," highlighting that the Revolutionary Guard Corps mobilizes a diverse network of commercial facilitators inside and outside Iran to access foreign exchange secretly. These domestic facilitators often operate under the guise of legitimate businesses , such as import/export companies or trading houses, but their primary role is moving money for the state.

Weak anti-money laundering controls

Iran's domestic financial laws and oversight mechanisms have historically been inadequate in combating money laundering, especially when regime interests are at play. While Iran has laws against money laundering on the books, enforcement is lax and often trumped by political directives. International bodies note that Iran has "significant strategic deficiencies" in its AML/CFT (anti-money laundering and countering financing of terrorism) regime. For years, hardline elements in Tehran resisted adopting FATF standards, for fear that cracking down on illicit finance would impede funding to groups like Hezbollah or expose sanctioned projects. As a result, Iran's banks and bonyads operate with little transparency, creating a domestic haven for illicit funds. This opacity enables not only state-run sanction evasion, but also corruption and embezzlement. A large underground economy exists in Iran, involving smuggling of goods to evade tariffs and capital flight by elites, which further blurs the lines between licit and illicit monies.

Role of domestic banks and institutions

Iranian banks, even when not directly handling cross-border transactions due to sanctions, play a key role internally. They provide the liquidity and cover for illicit transactions. For instance, when oil is sold covertly abroad, the proceeds might be held in a foreign front company's bank account, but equivalent funds in local currency can be disbursed from an Iranian bank to the intended government program or beneficiary, effectively settling the transaction through an internal ledger adjustment. State banks like Bank Melli and Bank Sepah have been used in this manner historically, acting as paymasters for the regime's off-book projects. Moreover, some banks have been controlled by sanctioned entities (the IRGC owned a significant stake in Mehr Bank and Ansar Bank, for example), turning them into in-house laundering machines. The 2019 Ansar Bank case demonstrated how an IRGC-controlled bank created shell companies domestically (like Hital Exchange in Iran) that interfaced with its foreign shell companies, allowing the bank to swap funds without a traceable international wire. Additionally, Iran's centralized foreign exchange platform (NTBF, known informally as the "currency bazaar") has at times been manipulated to launder money, by matching hard-currency buyers and sellers in opaque ways that benefit sanctioned actors.

Private brokers and corruption scandals

Iran's strategy of outsourcing some sanction-evasion to private "entrepreneurs" has led to massive corruption scandals at home. A famous example is Babak Zanjani, an Iranian billionaire-businessman who became a key middleman for oil sales during the height of nuclear sanctions (around 2010-2013). Zanjani's Sorinet Group of companies helped sell Iranian oil through channels in Malaysia, the UAE, and Turkey, moving billions of dollars on behalf of the Iranian state. In return, he received commissions and benefits. However, not all the money made it back to Iran, Zanjani was accused of embezzling or hiding $2.7 billion of oil revenue. In 2013, after sanctions eased slightly, Iranian authorities turned on Zanjani: he was arrested and later sentenced to death (now commuted to a long prison term) for fraud.

Iran's money laundering and sanctions evasion: Case studies

Oil for gold sanctions evasion via Turkey (2012–2013)

In the early 2010s, a Turkey-based oil-for-gold scheme enabled Iran to monetize its oil and gas sales despite U.S. financial sanctions. A Turkish-Iranian gold trader, Reza Zarrab, and Turkey's state-owned Halkbank were central to this multibillion-dollar operation.

Actors and entities involved

Reza Zarrab, a dual national gold dealer, orchestrated the scheme on behalf of Iran, with Halkbank (Türkiye's state bank) providing the banking channel. According to U.S. court testimony, senior Turkish officials (including Prime Minister Recep Tayyip Erdoğan, according to Zarrab's claims) and Iranian authorities were complicit, as were various shell companies Zarrab controlled. The Iranian beneficiaries included the Central Bank of Iran and National Iranian Oil Company (NIOC), which received proceeds for oil and gas exports that would otherwise have been frozen by sanctions.

Methods used

The network used trade-based money laundering and false documentation to mask illicit transfers as legitimate commerce. Halkbank would hold payments owed to Iran for energy imports in escrow accounts (since Iran was cut off from SWIFT), and Zarrab's companies would purchase gold with those funds and ship the gold to Iran (often via Dubai) as a way to transfer value. When gold transactions came under scrutiny, the scheme shifted to sham trades in food and medicine (humanitarian goods exempt from sanctions) essentially fake invoices and shell companies were used to pretend that oil proceeds were payments for food/medicine imports. This "gold-for-oil" strategy and bogus trade invoicing effectively laundered Iranian oil revenue, converting trapped funds into gold and then cash usable by Tehran. Zarrab admitted to operating a web of shell companies and sham transactions in gold, food and medicine to get around U.S. sanctions. Bribery was another facet: Zarrab paid off Turkish bankers and ministers to facilitate the scheme and overlook illicit transfers (Zarrab was not the only Iranian to exploit Turkey's permissive jurisdiction).

Jurisdictions exploited

The operation centered on Turkey, leveraging its gold markets and banking system, which at the time maintained trade with Iran. The United Arab Emirates (Dubai) also figured as a transit point for gold shipments. The illicit funds transited between Turkey, the UAE, and Iran, and front companies were registered in Turkey and other jurisdictions to mask Iranian interests.

Enforcement outcomes

This scheme unraveled when U.S. prosecutors charged the participants. Reza Zarrab was arrested in 2016 in the United States and later pleaded guilty, becoming a ooperating witness. His testimony led to the 2018 conviction of Mehmet Hakan Atilla (deputy CEO of Halkbank) for sanctions evasion and fraud. Atilla was sentenced to 32 months in prison. In 2019, Halkbank itself was indicted in U.S. court on fraud, money laundering, and sanctions-evasion charges for its role in the scheme. U.S. prosecutors allege the scheme laundered over $20 billion for Iran. The exposure of this network effectively shut down Iran's gold loophole and led to tighter oversight on Turkish financial channels.

IRGC-QF's global oil smuggling network (2018–2024)

After U.S. sanctions on Iranian oil were reimposed in 2018, the IRGC's Qods Force (IRGC-QF) constructed an international oil smuggling and money laundering network to finance its operations. In 2024, U.S. authorities unsealed indictments against this network, exposing how Iran covertly sold oil to foreign buyers (in China, Syria, Russia) and laundered the proceeds through front companies.

Actors and entities involved

The scheme was directed by senior IRGC-QF officials with government backing. An indictment in the U.S. named seven defendants, including a high-ranking IRGC-Qods Force officer, the son of a former IRGC commander (ex-oil minister Rostam Ghasemi), an Iranian shipping executive, and several Turkish businessmen, as key conspirators. Notably, Sitki Ayan, a wealthy Turkish oil trader, and his associates (ASB Group of companies in Turkey) partnered with IRGC-QF to handle sales and logistics. Multiple front companies were created abroad, such as China Oil & Petroleum Company Ltd. (a Hong Kong registered company secretly controlled by IRGC-QF) and shell companies in Lebanon, Oman, the UAE, Cyprus, India, and Russia. These intermediaries obscured the involvement of NIOC (National Iranian Oil Co.) and the Qods Force in oil deals. The buyers on the other end included Chinese state-owned refiners, the Assad regime in Syria, and Russian entities, who knowingly or unknowingly purchased Iranian oil at a discount.

Methods used

The network's methods were elaborate and deceptive. After sanctions cut off Iran's direct oil sales, the IRGC-QF built what prosecutors called a "sprawling international network of front companies" to launder sanctioned oil. False documentation and forged invoices were used to conceal the oil's Iranian origin. For example, labeling cargoes as originating from Iraq or other countries. The conspirators employed ship-to-ship transfers at sea and tampered with vessel tracking data to hide the loading and unloading of Iranian oil.

A complex logistics chain was developed: one wing of the scheme used a Lebanese intermediary company and an India-based ship management firm to secretly deliver Iranian crude to Syria. Another wing (led by Ayan's ASB Group) handled sales to China, using Turkish and Omani front firms and leasing oil tankers under foreign flags. Yet another arm routed oil to Russia by blending it with other commodities, e.g. disguising transactions as Russian agricultural exports, and even moving cash via couriers and Iran's embassy in Moscow.

Jurisdictions exploited

This was a truly global enterprise. It spanned Turkey (a hub for front companies and bank accounts), China and Hong Kong (where shell companies and buyers received oil), Syria (oil deliveries to the Assad government), Russia (both as a buyer and a money-laundering venue), as well as intermediary stops in Lebanon, Oman, the UAE, India, Cyprus, and even the Marshall Islands. The conspirators took advantage of permissive jurisdictions that had less stringent enforcement or where they had local partners. For instance, Hong Kong corporate secrecy, Turkey's business ties with Iran, and Lebanon's and Oman's less transparent financial oversight, to move oil and money. They also abused the international banking system: U.S. prosecutors say the network moved "billions of dollars" through correspondent bank accounts in the United States, despite sanctions.

Enforcement outcomes

U.S. law enforcement penetrated this network in late 2023, leading to a series of actions in early 2024. In February 2024, a U.S. federal indictment ( SDNY) charged the seven ringleaders with crimes including terrorism financing, sanctions evasion, bank fraud, and money laundering. Simultaneously, authorities seized approximately $108 million traceable to the scheme, funds that a Hong Kong front company (China Oil & Petroleum Ltd.) was attempting to launder through U.S. banks. The U.S. Treasury's OFAC also designated China Oil & Petroleum Ltd. and other entities involved, freezing their assets. In a parallel case, two more operatives, a Chinese national and an Omani facilitator, were charged for selling Iranian oil to China and using the U.S. financial system, with an additional $8.5 million seized in that investigation. Furthermore, U.S. naval forces physically intercepted and confiscated illicit Iranian oil shipments; a civil forfeiture complaint unsealed in 2024 detailed the seizure of over 500,000 barrels of Iranian fuel from a tanker engaged in sanction-dodging transport. The U.S. actions also put other countries on notice. For example, Turkey has reportedly taken a closer look at Ayan's companies after OFAC sanctioned them in late 2022.

"Shadow banking" network of exchange houses (2019–2024)

Iran also employs clandestine currency exchange networks and front companies to launder revenues from oil and petrochemical sales. In 2023–2024, U.S. authorities exposed a "shadow banking" system involving Iranian money exchangers and dozens of shell companies across the Middle East and Asia that moved billions of dollars for the IRGC and Iran's Ministry of Defense. In June 2024, the U.S. Treasury sanctioned nearly 50 entities tied to this network.

Actors and entities involved

At the core of this network are Iranian money changers (sarafs) and exchange houses with international reach. One prominent figure is Seyyed Mohammad Mosanna'i Najibi, an Iranian-Turkish money exchanger who operates Sadaf exchange in Iran and Turkey.

Najibi and others manage a web of front companies registered in third countries (notably the UAE, Hong Kong, Turkey, and elsewhere) on behalf of Iran's military apparatus. These exchangers work in coordination with Iran's Ministry of Defense and Armed Forces Logistics (MODAFL) and the IRGC, effectively serving as their unofficial bankers. The U.S. Treasury noted that such networks are "multi-jurisdictional illicit finance systems" enabling sanctioned Iranian entities to access the global financial system. For example, Najibi's Sadaf Exchange controlled a Chinese bank account of a Hong Kong shell company and used it to launder Iranian oil proceeds. Other entities in the network include Sahara Thunder (a MODAFL-linked front company in Hong Kong) and Ansar Exchange in the UAE, among many others designated by OFAC.

Methods used

This shadow banking system primarily involves currency laundering and value transfer through fake trade invoices. When Iran sells oil or petrochemicals covertly, the proceeds (often in cash or in third-country bank accounts) are handed to these exchange house networks. They then deposit the funds into accounts of shell companies in countries with lax enforcement (for instance, a Hong Kong-registered trading company, or a UAE-based import-export firm).

The exchange house and the Iranian authorities generate phony invoices or contracts to make it appear as if the money is payment for legitimate goods. For example, MODAFL would request a dummy invoice from Sadaf Exchange's front company; using that, the front company transfers the "payment" abroad, and the funds emerge as ostensibly clean, unrelated revenue. Through such means, Iran's illicit oil income is converted into "clean" foreign currency in offshore accounts, skirting the formal banking sector. The laundered funds are then used to purchase sanctioned items or fund allied groups. Treasury officials noted that this revenue has financed procurement of advanced weapons (like drones) and has been funneled to Iran's regional proxies (e.g. the Houthis in Yemen).

Another technique is physical cash smuggling. Some of the money exchangers physically move cash across borders (e.g. couriers carrying dollars from Iraq or the UAE into Iran). In one U.S.-documented instance, a Hong Kong front company linked to the IRGC attempted to launder $108 million via U.S. banks, before the funds were seized in 2024. The network also employs gold smuggling: Najibi's exchange house helped sell gold in Turkey and turn it into cash for the IRGC-QF.

Jurisdictions exploited

Key jurisdictions include the United Arab Emirates (especially Dubai), a historic financial hub for Iranian exchangers; Hong Kong, where front companies can open bank accounts in Chinese banks, Turkey, given its large Iranian business community, as well as Malaysia, Singapore, and parts of Europe that have been used to register shell firms. U.S. officials specifically identified Hong Kong and the UAE as "permissive jurisdictions" whose corporate and banking systems were misused to launder Iran's earnings. Additionally, Iraq has been exploited: Iran-linked exchangers tapped Iraq's dollar auctions and financial system to pull hard currency into Iran (prompting U.S. crackdown on certain Iraqi banks in 2023). In some cases, funds transited through offshore financial centers like the Marshall Islands (where shell companies or bank accounts were set up).

Enforcement outcomes

The U.S. Treasury's Office of Foreign Assets Control (OFAC) undertook major "shadow banking" sanctions actions in 2022 and 2023, culminating in June 2024 sanctions on 39 entities and 25 individuals across Iran, Turkey, UAE, Hong Kong, and elsewhere. Those sanctions targeted multiple branches of this underground network, including Sadaf Exchange and numerous front companies. As a result, these entities are now blocked from the U.S. financial system and banks worldwide must cease dealing with them or face penalties. The U.S. Financial Crimes Enforcement Network (FinCEN) also issued an advisory in May 2024, alerting global banks to the red flags of Iranian laundering schemes. Several related law enforcement actions have taken place: In 2018, for example, the U.A.E. (in cooperation with the U.S.) arrested and dismantled a currency exchange ring that was funneling millions in dollars to the IRGC-QF via Dubai, and the U.S. froze those funds.

As these networks are often beyond full legal reach (operating in Iran or other countries), enforcement has relied on financial warfare: asset freezes, seizures, and indictments in absentia. The June 2024 designations aimed to "cut off Iran's use of critical banking networks" and to expose the role of seemingly legitimate exchange firms as arms of the IRGC.

Babak Zanjani's front companies and shell banks (2010–2013)

Perhaps the most infamous individual sanctions-buster is Babak Zanjani, an Iranian billionaire who ran an extensive money laundering empire to help Iran circumvent earlier sanctions. Through a network of companies and overseas banks, Zanjani reportedly moved billions of dollars for Iran's oil ministry and the IRGC during the height of nuclear sanctions, until his operation was shut down in 2013.

Actors and entities involved

Babak Zanjani was a private businessman but closely aligned with Iran's regime. Dubbed Iran's "economic Basij," he leveraged personal ties to the IRGC and senior officials. Zanjani's conglomerate, the Sorinet Group, comprised about 65 companies spanning Iran, Turkey, the UAE, Malaysia, and Tajikistan. Key entities included First Islamic Investment Bank (Malaysia), which he allegedly used as a private bank to launder oil proceeds, and a network of front companies in the UAE and Turkey that acted as buyers or intermediaries for Iranian oil.

The National Iranian Oil Company (NIOC) and Iran's Central Bank were effectively his clients. According to his own later admission, in 2010 the central bank enlisted him to help bring back oil revenues that Iran couldn't otherwise repatriate. Zanjani also reportedly funneled funds to the IRGC's engineering arm ( Khatam al-Anbiya Construction Base). U.S. Treasury stated that tens of millions of dollars were directed to an IRGC engineering unit via Zanjani's network.

Methods used

Zanjani's operation was quintessential offshore laundering and shell company stratagem. When Iran sold oil to buyers (often in Asia) who could not pay through normal banking channels, Zanjani's companies would step in to receive the payments under false pretenses. He set up bank accounts and even purchased a small bank in Malaysia to have a secure conduit for Iranian money. Funds were routed through layers of front companies. For example, an oil payment might be invoiced to a UAE-based trading firm in the Sorinet Group, then transferred to a Malaysian bank account controlled by Zanjani, and finally the money (minus Zanjani's hefty commission) would be made available to Iran's Central Bank or Oil Ministry. U.S. officials described these as "criminal money-laundering techniques" using false names and pretenses to disguise oil revenue. Zanjani also helped Iran barter oil for gold or other commodities when feasible, and utilized exchange houses to convert currencies. In one notable sub-scheme, he partnered with a Greek shipping magnate (Dimitris Cambis) who acquired oil tankers to transport Iranian oil covertly. The tankers were ostensibly owned by Cambis' companies, masking the Iranian origin of the oil. Zanjani's ability to blend illicit funds with legitimate business streams (he had ventures in cosmetics, aviation, and real estate) further obscured the trail.

Jurisdictions exploited

Zanjani's network was wide-ranging. Dubai and Malaysia were critical havens. Dubai for front companies and cash movements, Malaysia for its loosely regulated bank that Zanjani co-opted.

He also eportedly used Tajikistan (he claimed to own a bank in Tajikistan) as another transit jurisdiction. Turkey was both a place he resided and did business (Sorinet had a Turkish arm), benefiting from Turkey's trade with Iran. The scheme reached into Europ as well: Zanjani was sanctioned by the EU in 2012 for oil evasion, and one of his companies in Turkey had a connection to a French oil trader who was investigated for sanctions breaches. China and India (major oil importers from Iran) indirectly appear in the chain as sources of payments that Zanjani helped redirect. Essentially, any country willing to do business with his front companies became part of the circuit. Notably, the European Union and United States eventually banned all business with Zanjani and his network, labeling him a key sanctions evader.

Enforcement outcomes

Babak Zanjani's fall was dramatic. In April 2013, the U.S. Treasury blacklisted Zanjani and his companies (and his Malaysian bank) cutting off his access to the dollar system. The EU had sanctioned him earlier, and other jurisdictions followed. The U.S. action declared that Zanjani's network "moved billions of dollars on behalf of the Iranian government" and was directly helping the IRGC. By late 2013, even Iran's own government turned on Zanjani: amid a political shift in Tehran, he was arrested by Iranian authorities in December 2013 on charges of grand corruption. Iran's oil ministry accused him of withholding $2.7 billion in oil revenue that was supposed to be returned to the treasury. After a lengthy trial, an Iranian court convicted Babak Zanjani of fraud and "spreading corruption on earth", essentially economic crimes, and in March 2016 sentenced him to death.

Iran's central bank and Hezbollah's secret channel (2016–2018)

The Iranian regime has not shied away from using official institutions in money laundering schemes. For example was the secret funneling of funds through an Iraqi bank to Hezbollah orchestrated by the IRGC-Quds Force with help from Iran's Central Bank. In 2018, the U.S. Treasury exposed this conduit, sanctioning Iran's Central Bank Governor and the Iraqi bank involved.

Actors and entities involved

This case involved high-level players: Valiollah Seif, the Governor of the Central Bank of Iran (CBI), and his deputy Ali Tarzali were implicated in moving funds on behalf of the IRGC-QF. On the Iraqi side, the focus was on Al-Bilad Islamic Bank, a bank based in Baghdad, and its chairman Aras Habib. The ultimate beneficiaries of the laundered money was Hezbollah. In fact, a key Hezbollah financial operative, Muhammad Qasir, acted as a go-between for IRGC-QF and Hezbollah in this scheme.

Methods used

The operation essentially repurposed a commercial bank to serve as a covert pipeline. The Central Bank of Iran (through Seif and Tarzali) would transfer euros (originating from Iran's oil revenues, held abroad) into the vaults of Al-Bilad Islamic Bank in Iraq. This was done through layers of currency exchangers and falsified import schemes, to disguise the funds' source. Once at Al-Bilad Bank, the money was withdrawn and hand-carried as cash by couriers to Hezbollah in Lebanon, or otherwise passed through Hezbollah-controlled accounts effectively circumventing the formal banking restrictions on sending money to Hezbollah. U.S. officials described how Seif "covertly funneled millions of dollars on behalf of the IRGC-QF through Iraq-based Al-Bilad Islamic Bank" to Hezbollah. The use of an Iraqi bank was deliberate: at the time, Iraq was not fully subject to U.S. secondary sanctions and had extensive financial ties with Iran. By inserting funds into Iraq's banking system (for example, by legitimate dinar transactions or via Iraqi front companies), Iran could then extract the money as needed. In addition, this scheme exploited the currency exchange market in Baghdad, converting Iranian-owned euros or dollars into Iraqi dinars, then back to dollars accessible to Hezbollah.

Jurisdictions exploited

The primary jurisdictions were Iran and Iraq. Iran's Central Bank in Tehran was the source of funds, while Iraq's financial system was the transit zone. Within Iraq, Baghdad's financial sector, including not just Al-Bilad Bank but also currency exchange houses in the Iraqi souk was leveraged. The cash then moved to Lebanon, where Hezbollah took possession. This scheme could function due to the close Iran-Iraq banking ties and the presence of pro-Iranian figures like Aras Habib in Iraqi finance. The Terrorist Finance Tracking Center reported that even some Iraqi government budget payments to Iran were diverted in this period.

Enforcement outcomes

In May 2018, the U.S.Treasury designated Valiollah Seif and Ali Tarzali as Specially Designated Global Terrorists (SDGTs) for their role in financing the IRGC-QF and Hezbollah. This action was extraordinary since it is rare to sanction a sitting central bank governor. On the same day, Al-Bilad Islamic Bank and its chairman Aras Habib were also sanctioned under terror-finance authorities. A Hezbollah official (Qasir) was similarly blacklisted. According to Treasury, this network moved "millions of dollars" for the Qods Force to Hezbollah. Its disruption cut off a critical stream of support for Hezbollah's budget. The immediate impact was to sever Al-Bilad Bank from the international financial system. Iraq's central bank revoked Al-Bilad's license in response, and Aras Habib reportedly fled Iraq to avoid arrest. For Iran, the exposure was a blow: Seif was removed as CBI governor shortly thereafter (and later faced charges in Iran related to currency irregularities). This case also prompted tighter scrutiny of Iraqi banks handling Iranian funds. In 2018–2019, the U.S. pressured Iraq to curtail illicit transfers, leading to additional banks being banned from dollar transactions if suspected of sanction evasion. While Hezbollah undoubtedly sought alternative channels (for example, via Syria or via greater use of cash couriers), the crackdown forced Iran to recalibrate how it moved money to proxies. The designation of Iran's central bank leadership underscored that even top officials would be held accountable if they turn national institutions into money-laundering vehicles for terrorism.

References

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Economy of Iran
Iran
Banks