U.S. Markets

U.S. pushes EU, SWIFT to eject Iran banks

WASHINGTON (Reuters) - The United States is pressuring the European Union and a global electronic banking system to expel Iranian banks from a network used to transfer money, another step in Western efforts to deprive Tehran of funds needed to develop nuclear weapons.

Kicking Iranian banks out of the Belgium-based SWIFT, or Society for Worldwide Interbank Financial Telecommunication, would cut off one of the only remaining avenues for Iran to transact business with the rest of the world.

European banking regulators may meet with SWIFT’s board as early as Thursday to discuss expelling designated Iranian bank users, according to two sources familiar with the matter.

SWIFT facilitates the bulk of the world’s cross-border payments, exchanging 18 million payment messages per day between banks and other financial institutions in 210 countries.

The United States and Europe have already slapped sanctions on Iran’s central bank, the main clearinghouse for its oil revenues, which would punish Tehran’s trading partners unless they significantly curb their purchases of Iranian oil.

The U.S. Congress is considering new legislation that would give the United States authority to sanction SWIFT, but President Barack Obama’s administration indicated it was already ramping up the pressure.

The U.S. Treasury’s undersecretary for Terrorism and Financial Crimes, David Cohen, traveled to Brussels this month to discuss the sanctions.

“He discussed the issue of SWIFT providing services to designated Iranian banks and urged the EU to take action on the issue,” said a Treasury official.


The two regions have been trying to move in lockstep on policies and implementation, giving countries such as India and their institutions until mid-year to significantly reduce their Iranian oil purchases.

Now their discussions with SWIFT have intensified after the U.S. Senate Banking Committee ratcheted up public pressure with a bill that would require Washington to press the Belgian group to get rid of Iranian banks.

“I think there’s no question that the EU intends to act,” said an aide to Senator Robert Menendez, a New Jersey Democrat who led the push to include SWIFT in the legislation.

The chairman of the House of Representatives Foreign Affairs Committee, Ileana Ros-Lehtinen, has introduced a companion bill targeting SWIFT for sanctions.

A spokeswoman for SWIFT declined to comment on whether the banking system would take action. The organization is working with U.S. and EU authorities as well as the central banks that oversee its operations to address the issues, the spokeswoman said.


The EU’s sanctions laws give it a stronger case that SWIFT must act to stay in compliance with EU laws, a U.S. congressional source said. Most members of SWIFT’s board are from European banks and the Belgian central bank has a lead oversight role.

It’s not clear that SWIFT will be ordered to eject Iran’s central bank from the system, the Menendez aide said.

Regulators and government officials are working with SWIFT to determine how it might handle transactions allowed under U.S. and EU sanctions laws, such as sales of food, medicine, and certain quantities of oil.

SWIFT has said it cannot distinguish between different types of transactions. “All SWIFT does is provide the pipe for secure communication,” a congressional source said.

U.S. lawmakers like Menendez want to discuss whether there is a way to crimp the Iranian central bank’s use of SWIFT for all but legal transactions, his aide said. “For us, it’s clearly on the table.”

The U.S. Congress is working on legislation that would force the administration to consider further isolating Iran by denying Iran’s leaders visas needed to enter the country, along with fresh sanctions on Iran’s national oil and shipping companies. The Senate has yet to set a date to vote on the new package of sanctions that include the SWIFT measure.

“I think this is going to get resolved more quickly,” said another congressional aide, well before the United States could take action on the proposed new sanctions.

The general counsel for SWIFT is expected to meet with key U.S. lawmakers before the end of the month, sources said.

Reporting by Rachelle Younglai and Roberta Rampton; Editing by Sandra Maler and Christopher Wilson