Treasury cracks down on Iranian religious charities sanction loophole

EXCLUSIVE — The Department of the Treasury’s Financial Crimes Enforcement Network is increasing its efforts to crack down on a suspected sanctions loophole in Iran, in which authorities use religious charity networks to finance the government’s activities.FinCEN sent out an alert to financial institutions demanding they report potential Iranian government abuses of these religious charitable networks, which have long been suspected of being used to circumvent sanctions. The new effort is part of Operation Economic Outcast, referred to by President Donald Trump as “Economic D-Day.”“Under President Trump’s leadership, Treasury will not allow the Iranian regime to continue its long history of abusing religious institutions to line the pockets of its elites and fund terrorism,” Secretary of the Treasury Scott Bessent said in a statement. “By identifying and reporting this potential abuse, financial institutions can provide law enforcement with critical information to isolate the Iranian regime and its financial enablers.” Iran, as the largest Shia Muslim country and the home to many of its holy sites, serves as a central hub for many global Shia charitable networks. The theocratic government’s unique blend of politics and religion often makes it difficult to distinguish between legitimate charitable efforts and abuses intended to skirt U.S. sanctions.All Twelver Shia Muslims are required to pay 20% of their surplus yearly income to senior religious scholars, a practice called khums, that stems from the early days of Islam when Muslim soldiers were required to give 20% of war plunder to Muhammad and his family. Islamic jurists later reasoned that the tax should be extended to surplus value generally and given to Islamic authorities. Shiite Muslims are unique in believing that the tax should be given over to senior clerics who represent the Hidden Imam, who is prophesied to emerge in the end times to redeem Islam.Unfortunately for the Treasury Department, the senior clerics who receive khums are often closely tied to Iran’s Islamic government. The Treasury Department noted that Tehran “has been known” to abuse khums payments to religious authorities in Iran and neighboring countries, and other religious charitable payments.“The regime co-opts khums payments from the global Shia community to further its destabilizing activities. In some cases, organizations that collect these payments do so on behalf of prominent Iranian ayatollahs with ties to the regime,” the Treasury Department noted. “These entities may use informal financial channels like hawalas and cash couriers to remit the funds to Iran or to Iran-linked actors.”The new FinCEN alert includes “red flag indicators to aid financial institutions in detecting, preventing, and reporting this illicit activity.”One noted indicator is whether a charitable or nonprofit organization solicits donations without the provision of any noticeable charitable services or solicitations that include support for the Iranian government or its proxies.IRANIAN RIAL HITS ALL-TIME LOW AS ECONOMY CONTINUES FREE FALLThe less directly noticeable indicators often come from the donors themselves, including when ostensible charitable organizations receive large donations from an unknown source over a short period of time, then send significant wire transfers or checks to other charitable or nonprofit groups. Another notable indicator is when a charitable organization gives a substantial sum to a customer with which it has no clear business relationship, and then said customer withdraws the funds in cash or sends it along.While the main economic strain on Iran is the U.S. blockade, Operation Economic Outcast continues to inflict damage. Iranian free-market exchange rate trackers noted the beginning of a major, sustained decline in the Iranian Rial currency’s value beginning on Aug. 20, right after the announcement of the operation. The Rial now stands at 2.664 million for every one U.S. dollar, according to the tracker Pashizi. This is compared to 1.664 million per U.S. dollar on March 1, when the war began, and around 1.9 million per U.S. dollar right before the beginning of Operation Economic Outcast.