Malta warned over Iran's 'abuse' of international financial system

Stuart Levey, the US Under Secretary of the Treasury for Terrorism and Financial Intelligence, met senior Maltese officials in his role as top US government official in the fight against illicit finance, with a particular focus on the implementation of UN financial sanctions against Iran.

Speaking to The Times at the offices of the Malta Stock Exchange, Mr Levey praised the cooperation he received from the local authorities.

"This is a relationship we value greatly. We have excellent cooperation with Malta not only on this issue but also on a whole range of topics.

There is sensitivity in Malta to the issues discussed.

The authorities responsible for the financial services here are very sensitive about their reputation and are keen to protect the sector from illicit conduct, so I've had a good reaction," he said.

Mr Levey said the world is well aware that Iran is pursuing a nuclear programme in defiance of the UN Security Council. "They are developing missiles capable of delivering nuclear warheads and they are funding terrorists all over the world.

What is less obvious to the average person around the world is that Iran is abusing the international financial system in order to achieve those goals and it's that message that I have discussed with counterparts here and elsewhere," he explained.

Iran uses its state-owned banks primarily as a way to finance its nuclear programme, its ballistic missile programme and to finance terrorist organisations.

"It does so in a way intended to deceive other banks in the international financial system. Those banks are at risk of being involved in illicit financial transactions if they are not especially vigilant to ensure that they are not getting involved in this business."

Mr Levey explained that the UN Security Council designated one of Iran's banks, Sepah, for its involvement in the nuclear programme and even in the most recent Security Council (1803) resolution passed in March, the UN called for vigilance on all Iranian financial institutions, precisely because of the risk that they pose in being involved in proliferation transactions.

"Over the last year and a half I have spent a lot of time going around speaking to both governments and banks around the world sharing information about the risks Iran poses. The reaction to that has been that many of the world's financial institutions have voluntarily decided to cut off business with Iran, especially with the state-owned banks.

"This has in turn led to the Iranians trying to seek partners to help them carry out their financial transactions."

Asked about the effectiveness of the UN sanctions against Iran, Mr Levey said the types of measures imposed on Iran "have been quite effective".

He explains: "We focused on the conduct Iran has been engaged in. These are not sanctions aimed at crushing Iran's economy. We focused on proliferation, terrorism, illicit financial transactions and the possibility of other countries being drawn into illicit conduct.

Because the sanctions are conduct-based and targeted at specific actors, the private sector has voluntarily imposed measures and cut off business beyond what they are required to do.

That has put a great deal of pressure in Iran, not on the whole country but on that part of Iranian society that has come to rely on its relationships in the international financial system and this is due to the conduct of the Iranian regime.

"Some people in Iran have highlighted the impact of the sanctions. We want to keep up the momentum and achieve the result we all want - which is a peaceful diplomatic solution to this problem."

Asked if Iran's intransigence will create a trend towards further sanctions, Mr Levey says the task ahead is to fully implement the sanctions adopted by the UN Security Council in March.

"It is our hope that there will not be a need for additional sanctions because we hope there will be a decision in Iran to change course over their nuclear programme," he said.