A U-turn transaction, generally speaking, is a banned
financial transaction
A financial transaction is an Contract, agreement, or communication, between a buyer and seller to exchange goods, Service (economics), services, or assets for payment. Any transaction involves a change in the status of the finances of two or mo ...
performed by a bank in country A (e.g., the United States) for the benefit of a bank in country B (e.g., Iran) through an
offshore bank
An offshore bank is a bank that is operated and regulated under international banking license (often called offshore license), which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment. Due to ...
in a third country (e.g., Switzerland). This
loophole
A loophole is an ambiguity or inadequacy in a system, such as a law or security, which can be used to circumvent or otherwise avoid the purpose, implied or explicitly stated, of the system.
Originally, the word meant an arrowslit, a narrow vertic ...
is used especially by
Iranian banks to
avoid U.S. sanctions against their
US dollar
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
-based transactions.
The phrase "U-turn" comes from the reversal-style process of transferring funds to a U.S. bank and then instantly returning the amount of money as dollars to a European bank.
References
Banking
Offshore finance
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