President Trump’s reimposition of sanctions against Iran might already be facing a challenge from a key international financial entity, Republican lawmakers worry.
Treasury Department Steven Mnuchin last week called for SWIFT, a Belgian-based “global provider of secure financial messaging services,” to stop working with Iranian banks targeted by the U.S. pursuant to federal law. He did not demand the blacklisting of every Iranian bank from the SWIFT system, but designated 50 specific entities on Monday.
SWIFT released an ambiguous statement in response, saying only that they would disconnect “certain Iranian banks” from their system. But it’s not clear that the international consortium has cut off all 50 of the banks targeted by Mnuchin’s team, sparking a flurry of questions from Capitol Hill to the Treasury Department.
“Nobody will provide clarity,” a senior Senate Republican aide told the Washington Examiner, on condition of anonymity. “A bunch of people have asked them. I’m not sure they know yet, but it’s only been, like, four hours.”
It may be the case that SWIFT is disconnecting from all 50 banks in question, but left the statement ambiguous due to a competing law in the European Union. “SWIFT is barred from doing so under the European Union’s so-called blocking statute, which could subject it to European penalties for complying with U.S. law,” as Reuters explained.
On the other hand, that lack of specificity could indicate that SWIFT is only targeting some of the banks instead of all, but downplaying the lack of compliance in an effort to avoid a crisis with U.S. regulators. Iran hawks are already worried that, in that scenario, the Trump administration might fail to impose sanctions on the people who lead SWIFT — the board members of the international consortium are drawn from major banks around the world.
“If the law is that it’s sanctionable if you keep a designated Iranian bank on SWIFT, and you’ve kept a designated Iranian bank on SWIFT … it’s high noon,” the Senate Republican aide said. “If the administration blinks on allowing designated Iranian banks to stay in SWIFT, it would open the floodgates up to sanctions violations, because it would show that they’re either unable or unwilling to actually crack down.”
Trump has said in public he would crack down on Iran again as part of the U.S. withdrawal from the Iran nuclear agreement. Still, some of the president’s allies have felt the need in recent weeks to pressure the administration to take aggressive steps in renewing the sanctions, even though Secretary of State Mike Pompeo has touted their commitment to the “maximum pressure” campaign.
One source speculated that the Treasury Department may not be as enthusiastic about the sanctions as Trump.
“There may be resistance at Treasury Department to impose sanctions on a bank that’s on the board of SWIFT,” an Iran sanctions expert, who also spoke on condition of anonymity, told the Washington Examiner. “The Treasury Department may be gun-shy.”
With that in mind, Iran hawks have been working on an alternative path to punish the SWIFT board that relies on the Justice Department rather than the Treasury Department. Specifically, these hawks believe that federal prosecutors in the Southern District of New York can enforce the Iran sanctions regarding SWIFT, even if the political leadership of Trump’s Cabinet hesitates to do so.
“Any agreement between non-U.S. persons to provide these services to the CBI [Central Bank of Iran] and/or other Iranian financial institutions could implicate U.S. jurisdiction and constitute an unlawful conspiracy if any of the conspirators took any act which occurred in the United States, affected the United States, or targeted the United States or its interests,” Sean Buckley, a former senior prosecutor at the U.S. attorney’s office for the Southern District of New York, wrote in a memo solicited by the Foundation for Defense of Democracies.
That memo is being “reviewed” by Buckley’s former colleagues in the Southern District of New York, according to a source familiar with the process. It has also been distributed to the White House, the Treasury Department, and the State Department. The Senate Republican aide confirmed that the Judiciary Committee members have received a copy of the memo as well.
“Whatever actions the Treasury Department does or does not take within its jurisdiction, that does not inhibit prosecutors at the southern district from being entrepreneurial and making a case if SWIFT is still providing services to designated Iranian financial institutions,” the Iran sanctions expert said.
There may be some gamesmanship underway, as well; even if the U.S. attorney’s office in New York City never takes action, the apparent threat may be intended to influence SWIFT officials, who have also received a copy of the Buckley analysis.
“Even if Treasury balks, DOJ could prosecute,” the Iran sanctions expert stressed.
