U.S. Treasury Intensifies Sanctions on Iran’s Shadow Banking Network
In a significant escalation of its already high-pressure campaign against Iran, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on June 6, 2025 announced the imposition of new sanctions on over 30 individuals and entities linked to a major Iranian shadow banking network. Concurrently, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an updated advisory to better guide financial institutions in detecting and reporting illicit financial activities tied to the embattled Middle Eastern country, including oil smuggling, shadow banking, and weapons procurement. These actions underscore the U.S. government’s ongoing commitment to disrupting Iran’s ability to fund its nuclear and missile programs and support terrorist proxies through sanctions evasion exploits that continue to run rampant throughout Western Asia and beyond. To date, Iran remains the world’s leading state sponsor of terror and has aided organizations such as Hezbollah, Hamas, the Houthis, the Taliban, al-Qa’ida, and other terrorist networks in promoting destabilizing activity across the globe.
The new sanctions target Iranian brothers Mansour, Nasser, and Fazlolah Zarringhalam, who together have orchestrated the laundering of billions of dollars’ worth of illicit funds through the international financial system using a complex network of Iranian exchange houses and front companies based in Hong Kong and the United Arab Emirates (UAE). Operating under entities like Mansour Zarrin Ghalam and Partners Company (GCM Exchange), Nasser Zarrin Ghalam and Partners Company (Berelian Exchange), and Zarrin Ghalam and Partners Company, the brothers reportedly facilitated payments for key players in Iran’s heavily-sanctioned oil and petrochemical sector, allowing these sanctioned entities to gain unwarranted access to the global financial system while facilitating Iran’s international exports. The proceeds of these criminal activities were found to have directly funded Iran’s military and its terrorist proxies such as the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), National Iranian Oil Company (NIOC), and Persian Gulf Petrochemical Industry Company (PGPIC).2
Given the cash-based nature of foreign exchange services and the ability to receive cash transfers through connected remittance services, exchange houses (also known as foreign currency exchange service providers) are often primary targets for money launderers seeking to exploit their AML weaknesses. Given that these entities lack the high-level identity verification requirements seen at other financial service providers internationally, the identities of the individuals behind these transactions are better able to remain shrouded as they convert their illicit funds to clean cash. Money mules are also prominent in these processes, and are often used as intermediaries to carry out transactions on behalf of the sanctioned parties, further reducing their risk of detection. In many cases, the exchange houses used to facilitate these illicit laundering activities will also use front companies to obscure the nature of the transactions being made, often generating false invoices to justify payments for sanctioned goods, enabling Iran to access international financial systems covertly. These front companies (generally located outside of the country where the illicit activity originates, in this case Hong Kong and UAE) allow for greater obscurement of the nature of the transactions being made, with shadow banking brokers often generating false invoices and/or transaction details to justify payments for sanctioned goods, enabling Iran to access international financial systems covertly. The front companies used in these schemes are also often created in jurisdictions with lower levels of regulatory supervision so that they can avoid scrutiny of their business practices or ownership.2
“Iran’s shadow banking system is a critical lifeline for the regime through which it accesses the proceeds from its oil sales, moves money, and funds its destabilizing activities,” said Secretary of the Treasury Scott Bessent following announcement of the latest efforts. “Treasury will continue to leverage all available tools to target the critical nodes in this network and disrupt its operations, which enrich the regime’s elite and encourage corruption at the expense of the people of Iran.”
The OFAC designations, enacted under Executive Orders 13902 and 13846, target not only the Zarringhalam brothers and their exchange houses, but also 16 Hong Kong-based and five UAE-based front companies, such as Hero Companion Limited and Wide Vision General Trading L.L.C., which have facilitated millions in payments for Iranian petroleum and petrochemical sales. Additionally, family members and associates, including Mitra Zarringhalam and Parvis Soltanizadeh, along with entities like Zarrin Tehran Investment Company, face their own respective sanctions for their roles in supporting this network. These designations effectively block all U.S.-based assets held by the targeted parties and prohibit U.S. persons from engaging in transactions with them at risk of potential civil and criminal penalties for violations.
FinCEN’s novel advisory provides an update on its 2018 predecessor and moves to further align domestic financial institutions with National Security Presidential Memorandum 2 that was released in February. The primary subject of this memorandum was the imposition of “maximum pressure” on the government of the Islamic Republic of Iran, denying Iran all paths to nuclear weapons development and procurement and countering their malign regional influence. All told, this guidance aims to strengthen compliance programs of American FI’s to create a stronger first line of defense against dirty money entering the U.S. financial system, while urging financial service providers to enhance their due diligence to prevent the facilitation of Iran’s widespread sanctions evasion efforts – especially with regards to Iran’s oil and petroleum exports which remains arguably the largest source of revenue for their regime in spite of the reimposition of heavy U.S. sanctions on the sector in 2018. In the time since these sanctions were reimplemented, the Iranian government has established large-scale global oil smuggling and money laundering networks, allowing them to remain under the radar while accessing international markets and financial systems to sell crude oil and petroleum products, while ultimately using the proceeds to finance weapons development and terrorist activity.1 As discussed previously, these criminal networks establish and use offshore front companies to obscure Iranian involvement and layer their transactions while often exploiting free trade zones that offer favorable conditions for company formation.1
The new advisory, which is consistent with FinCEN’s current National Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) priorities, provides covered financial institutions – a group ranging from banks to casinos to precious metals dealers – with critical red flags to identify Iranian illicit activities. It also highlights typologies to identify when dealing with foreign entities, such as the use of front companies in jurisdictions with lax oversight, like Hong Kong and the UAE, to obscure the origins of funds from oil smuggling and weapons sales. The advisory also discusses the importance of the continuation of relevant BSA obligations, including suspicious activity report filing, to FinCEN to mitigate the effects of these illicit activities once identified. Altogether these developments signal a robust U.S. strategy to dismantle Iran’s shadow banking infrastructure, which not only funds destabilizing activities locally and abroad, but also fosters corruption – depriving the Iranian people of economic benefits and predisposing them to further abuse. Financial institutions worldwide are now on notice to better scrutinize transactions potentially linked to this growing network, reinforcing global compliance with U.S. sanctions and protecting the integrity of the international financial system.
Citations
- “FinCEN Advisory on the Iranian Regime’s Illicit Oil …” FinCEN Advisory, U.S. Department of the Treasury, 6 June 2025.
- “Treasury Sanctions Iranian Network Laundering Billions for Regime through Shadow Banking Scheme.” S. Department of the Treasury, 6 June 2025.