Last February, the U.S. Department of Treasury offered proof of that when it a network run by three Iranian nationals, which operated mainly from Tbilisi, Georgia and Dubai, in the UAE. Treasury explained that three Iranian nationals, Hossein Farsoudeh, Houshang Hosseinpour, and Pourya Nayebi, “established companies and financial institutions in multiple countries, and have used these companies to facilitate deceptive transactions for or on behalf of persons subject to U.S. sanctions concerning Iran.”
Treasury designations hit some, but not all their businesses. One target was Orchidea Gulf Trading, which, at one point, specialized in the sale of prepaid Visa cards. Another target was European Oil Traders SA (previously known as Merchant Savings and Loans SA), which advertised card-to-card money transfers on its website.
Treasury also designated New York Money Exchange LLC and New York General Trading LLC. Unlike prepaid cards, these money transfer platforms operated like (but are less transparent than) their larger counterparts such as Western Union, and offer the advantage of transferring funds without the need for a personal bank account.
Prepaid cards and money transfer agents are increasingly popular financial tools in the global economy. They are used by many for legitimate reasons, but also exploited by the underworld because they are less regulated than traditional financial channels and as a consequence can be abused for illicit purposes. The notes that “the cards are barely distinguishable from credit or debit cards and the most versatile let users reload them remotely without having to reveal their identity, using cash, moneygrams, PayPal and other online payment services.”
The authorities took notice. The Financial Action Task Force — an inter-governmental body dedicated to the fight against illicit financial practices — last year issued on potential money laundering loopholes in new payment mechanisms such as prepaid cards and other electronic money transfer systems. FINCEN, Treasury’s office in charge of combating illicit financial transactions, recently also weighed in on prepaid cards.
In November 2013, FINCEN Director Jennifer Shasky Calvery to Congress on the misuse by illicit actors of virtual currency tools like prepaid cards for money laundering purposes. Virtual currency mechanisms, Calvery noted, are an ideal money laundering method because they offer anonymity and they usually elude custom controls. And because unlike banking transactions, they leave almost no digital footprint, especially with those that allow cash withdrawals at ATM’s globally.
It’s also easier to smuggle plastic across international lines than it is to smuggle cash. Cards weigh an average 0.2 ounces, which means that one could fit over 4,000 cards inside a suitcase and still be within international flights’ weight limits of 70 pounds. At $30,000 USD per card, that’s $120 million per suitcase.
As it turns out, the Iran sanctions-busters recently targeted by Treasury provided similar services through companies that have so far eluded U.S. punitive measures.
of their prepaid card companies, which has , still offers cards that can carry . And this is by no means an isolated case. Several London-based companies linked to Iranian businessmen formerly employed by sanctioned companies offer similar services. Whether they are working to help Iran evade sanctions remains to be seen.
Admittedly, these tools are still only good for relatively small money transfers: millions, not billions. They will not save Iran’s financial system from financial sanctions. But the leeway they offer to move hard currency is enough to enable the regime’s proliferation activities.