World financial bodies, tools for imposing US policies

TEHRAN, Apr. 27 (MNA) – America’s monetary ammunition refers to the coordinated collection of US secondary banking sanction laws, the FATF recommendations and Swift Services for imposing sanctions, which Iran has been one of its most important targets in recent years.

The US monetary ammunition refers to the coordinated collection of US secondary banking sanction laws, the FATF recommendations and Swift Services for imposing sanctions relying on power of the dollar and its domination over global transactions seeking materialization of American domination over the world. Iran has been one of the main targets of this ammunition in recent years.

A look at the mentality and practical framework behind the designing of the sanctions against Iran shows that there has been a turning point in how US imposed sanctions around 2010.

Triangle of the US monetary ammunition

US secondary sanctions, the standards of the Financial Action Task Force (FATF) and Swift Services, are three sides of the monetary triangle that contain the global financial system or the global banking system that can be called "monetary ammunition triangle".

Secondary bank sanctions at the top of monetary ammunition triangle

The US secondary bank sanctions are at the top of monetary ammunition triangle. The implementation of US banking secondary sanctions is divided into two generations based on the way they were enforced. The first generation, which were created and implemented before 2010 on the basis of the executive orders of the President.These sanctions enjoy a posteriori approach and targets the end of the banking service chain.

All of the financial institutions of the Islamic Republic of Iran were affected by this kind of sanctions, including the Bank Melli Iran, Export Development Bank of Iran and Bank Saderat Iran.

This generation of banking sanctions defines a series of individuals, transactions and institutions and then slaps sanctions against them and stipulates that anyone who offers financial services to sanctioned institutions or individuals; it will be sanctioned or placed on the America’s Specially Designated Nationals (SDN's) list.

But the second generation of banking sanctions imposed by US after 2010 aimed to force the world's largest banks  to be coordinated with US in imposing sanction. It means that it will force these banks not to provide banking services to individuals and entities that are sanctioned.

Therefore, the focus was on the beginning of the banking services chain, i.e. the big international banks, and the access to dollar payment system is the main leverage. The approach of this generation of sanctions is a priori (deterrent) and aims to isolate sanctions targets in the global banking system.

This sanction strategy was followed by the laws of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), Iran's Freedom of Law Act and the Coping with Iran's (IFCA) activities. The rules stipulated that banks either knowingly or unknowingly provide sanctioned targets with services, will encounter restrictions on their brokerage accounts in US.

FATF’s position in imposing US secondary sanctions

If the the second-generation of secondary banking sanctions is going to be successful, the banks should be able to track transactions that are being made by sanctioned targets. This requires that the actual beneficiaries of each transaction be identified.

According to David Cohen, the US Treasury’s undersecretary for terrorism and financial intelligence in the years 2011 to 2015, there must be enough infrastructures in order to create financial transparency so that it can be found out whom the sanction targeted countries are working. so they can be prevented from continuing their activities. This transparency is essential for both generations of secondary banking sanctions.

The FATF or the Financial Action Task Force plays a role in this regard. The FATF's 40 recommendations, which have been developed with US engagement, all seek to enhance global financial transparency. Providing credible information to identify customers and validating this information, and then sharing this information with banks and foreign entities, are examples of recommendations from this group that can lead to the distinguishing of sanction targets from non-sanctioned ones.

The FATF’s standards have focused on two dimensions of producing accurate information about economic relations and their sharing. These two dimensions are very effective in completing the sanctions puzzle.

Swift role in monetary ammunition triangle

There is a need for a series of simplifications and fluctuations as imposing sanctions and subsequently implementing FATF standards, create barriers in the process of global business, cause difficulties for economic and global interactions, and ultimately make no attractiveness and cost to the world's banks.

In this case, SWIFT is engaged in facilitating and simplifying the enforcement of sanctions standards and trying to reduce costs for sanctions by providing services including sanction screening, know your customer (KYC REGISTERY), and know your customer's customer.

SWIFT’s new service is being developed in this regard and It can no longer be considered as a simple messenger. In fact it is becoming a tool for projecting power in line with US administration policies.

Dollar domination on global exchanges, an effective factor for US monetary ammunition

What has made the US sanctions to be implemented through FATF and SWIFT standards is size of the US economy which is bigger that the size of the world economy and also US dollar's domination on global exchanges.

According to statistics, US owns about 25 percent of the world's gross domestic product (GDP) and about 65 percent of SWIFT exchanges are traded at US dollar. This issue has led the world's largest banks to obey US sanctions, due to their urgent need for the dollar.

It should be noted that the countries will not have problem wit dollar domination issue over the next few years, but they will face the US monetary ammunition triangle that they have to look for ways to get rid of it.

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