Financial Restrictions (Iran) Order

Greg Clark Excerpts

Tuesday 20th November 2012 Written Statements

[The Financial Secretary to the Treasury (Greg Clark)]

My noble Friend the Commercial Secretary to the Treasury (Lord Sassoon) has today made the following written ministerial statement:

The Government have today laid before Parliament an order under the Counter-Terrorism Act 2008 containing a direction requiring UK credit and financial institutions to cease all business with banks incorporated in Iran and their branches and subsidiaries, wherever located, including the Central Bank of Iran.

The direction is in the same terms as that given by the Treasury on 21 November 2011, which ceases to have effect after one year. UK credit and financial institutions continue to be prohibited from entering into transactions or business relationships with banks incorporated in Iran and their branches and subsidiaries unless they are licensed to do so by the Treasury.

The Treasury is satisfied, as required by the Act, that activity in Iran that facilitates the development or production of nuclear weapons poses a significant risk to the national interests of the United Kingdom.

Reports by the director general of the International Atomic Energy Agency (the UN body charged with monitoring Iran’s activities and ensuring that no nuclear material is being diverted to non-civilian applications) highlight the reasons for the Government’s serious and ongoing concerns about Iran’s nuclear activities.

The IAEA report of 30 August 2012 sets out the agency’s concerns about,

“the possible existence in Iran of undisclosed nuclear related activities involving military related organisations, including activities related to the development of a nuclear payload for a missile.”

In particular, the information available to the agency indicates that Iran has carried out activities that are relevant to the development of a nuclear explosive device. The Government view these developments with the utmost concern.

The case for action is underlined by the recent calls from the Financial Action Task Force (FATF) for countries to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism risks emanating from Iran. The FATF (the global standard-setting body for anti-money laundering and combating the financing of terrorism) reaffirmed these calls on 19 October 2012 and stated that it remained,

“particularly and exceptionally concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system.”

In light of these risks to the UK’s national interests, I consider it a proportionate response to require the UK financial sector to cease all business relationships and transactions with Iranian banks and their branches and subsidiaries, including the Central Bank of Iran.

Iranian banks play a crucial role in providing financial services to individuals and entities within Iran’s nuclear and ballistic missile programmes as companies carrying out proliferation activities will typically require banking services. Any Iranian bank is exposed to the risk of being used by proliferators in Iran’s nuclear and ballistic missile programmes. Experience under existing UN and EU financial sanctions against Iran demonstrates that targeting individual Iranian banks is not sufficient. Once one bank is targeted, a new one can step into its place.

As they relate to an important global financial centre, UK restrictions have an impact on the options available to Iranian banks. This will continue to make it difficult for Iranian banks to utilise the international financial system in support of proliferation-sensitive activities. It will protect the UK financial sector from the risk of unwittingly being used to facilitate activities which support Iran’s nuclear and ballistic missile programmes. UK action of this nature signals to Iran and the international community that we consider this risk to be significant.