The Nexus between Iranian Banks and International Terrorist Financing / Shimon Shapira

On December 19, 2007, a U.S.-based law firm succeeded in freezing the funds of the Central Bank of Iran (CBI) in France on behalf of American clients who, in the judgment of U.S. courts, were victims of terrorist attacks sponsored by the Islamic Republic of Iran. Four CBI accounts at Natexis Banques Populaire totaling 90 million Euros, 52 million Swiss francs, and 25 million British pounds were included the freeze. CBI accounts at Bank Melli (the National Bank of Iran) in Paris that held 231 million Euros and $52 million were also frozen.
The action taken against Iranian accounts in Europe to enforce U.S. court judgments was unprecedented. Presently, the freeze is being challenged in French courts; on February 24, 2008, a French appellate court will decide whether the freeze should be lifted or U.S. court judgments against Iran should be enforced. The recipients of Iranian funding, like Hizbullah and Hamas, have not only undermined U.S. interests, but also French national interest in the Levant. Moreover, Hamas has been designated by the European Union as an international terrorist organization.

Iran's Banking Institutions and Terrorist Financing

Iran has been using its state institutions as agents of the terror activity it perpetrates throughout the world. Iranian embassies, consulates, cultural centers, economic legations, and religious and charity institutions provide cover for Iran's terror activity and international subversion.

The funding for this terror activity is partly provided via Bank Melli and sometimes also via Bank Saderat (the Export Bank of Iran). In Lebanon, for example, most of the aid to Hizbullah arrives via Bank Melli. Hizbullah's financial activity is also conducted in the bank's framework, and the same is true for all the Iranian bodies active in Lebanon, from Iran's cultural centers to its aid organizations such as Jihad al-Bina, the private charity foundations of Lebanese Shiite religious figures such as Muhammad Hussein Fadlallah, and the private charity foundation of the supreme leader of Iran, Ali Khamenei. During the 1990s the activity of Iran's Islamic Revolutionary Guard Corps (IRGC) in Lebanon and the military assistance to Hizbullah were financed through a branch of Bank Melli in Baalbek.

Bank Melli also played a pivotal role in financing the 1994 AMIA bombing in Argentina. AMIA was the central Jewish community center in Buenos Aires; as a result of the Iranian-sponsored terrorist attack, eighty-five people were killed and more than two hundred were wounded. According to Dr. Alberto Nisman, Argentina's General Prosecutor, Mohsen Rabbani, Iran's "cultural attaché" in its embassy and one of the masterminds of the attack, received $150,812 that was deposited in his account in Deutsch Bank; these funds were originally transferred from Bank Melli to his account. Approximately $94,000 was withdrawn from Rabbani's account prior to the AMIA attack, and $45,000 was withdrawn over the following two months.1 Rabbani also received Iranian funds through the Swiss bank, USB. The data accumulated about AMIA demonstrates how instrumental Iranian diplomatic institutions and banks were in a major international terrorist attack.

Iran's Central Bank also has had a role to play in terrorist financing. In September 2006, the U.S. Treasury disclosed that the Central Bank of Iran was sending money to Hizbullah through Bank Saderat, which was also providing financial services to Palestinian Islamic Jihad (PIJ) and Hamas.2 U.S. Treasury officials also revealed that the Central Bank of Iran was in fact asking financial institutions around the world to hide any possible connection between their transactions and Iranian missile procurement, nuclear programs, and the financing of terrorism.3 The Central Bank of Iran had good reasons for exercising this caution. Bank Melli and Bank Saderat had transferred millions of dollars through their European branches to both Hizbullah and Hamas.4 All these Iranian banks are state-owned; they hence have no independence and serve the interests of the Iranian regime.

Since the Second Lebanon War

After the Second Lebanon War, Iran set up a special rehabilitation administration in Lebanon headed by an Iranian engineer named Hassan Khoshnvis who is living in Lebanon. The administration has completed rehabilitating and building 4,000 projects throughout Lebanon that include Hizbullah-linked religious, educational, and health structures as well as bridges and power stations. Iran also took upon itself to rehabilitate 375 kilometers of roads that had been damaged, of which 199 kilometers have already been renovated.

Another foundation through which Iran acts in Lebanon is the EMDAD (Assistance) foundation. At its head in Lebanon stands Ali Zreik, a Shiite Lebanese who speaks fluent Farsi and is in contact with the foundation's administration in Tehran. In 2005 the budget of the Iranian foundation in Lebanon totaled $12.6 million. In 2007 the foundation made available some $7 million for Hizbullah-linked rehabilitation activities; however, this sum has been tripled ($21 million). Overall, in the year and a half since the war, Iran has invested $381 million in Lebanon.

Bank Melli is also a principal Iranian financial pipeline for aiding Palestinian organizations like Hamas and, especially, Palestinian Islamic Jihad. Tehran transfers most of the financial aid to these two terror organizations through Bank Melli branches in Damascus and Amman. The U.S. Department of the Treasury has also established that Bank Melli provides banking services to the IRGC and its Qods Force branch, which is used for overseas operations.5 The Qods Force alone provides substantial material support to the Taliban, Shiite militants in Iraq, Lebanese Hizbullah, Hamas, Palestinian Islamic Jihad, and the Popular Front for the Liberation of Palestine - General Command. The Treasury Department has estimated that Iran moves some $100-200 million per year to Hizbullah through the Qods Force, much of which has been used for Hizbullah's re-armament in violation of UN resolutions, especially UN Security Council Resolution 1701.6

It should be stressed that over the last two decades, Iranian-supported terror has not just been a problem for the Middle East. Iranian-backed assassinations and terrorist attacks have struck Switzerland (April 24, 1990), France (August 8, 1991, and May 28, 1996), Germany (September 17, 1992), and Saudi Arabia (July 26, 1996). In other words, Iran has demonstrated its capability to reach out into Europe as well to provide support for terrorist activity. During the 1980s, Hizbullah established operational networks in Italy and France which also had been involved in attacks on the Paris Metro.7 And, as already noted, Iranian banks frequently use Western financial institutions as vehicles for transferring funds, as was the case in the AMIA attack.

It would be extremely unfortunate if French courts decide to unfreeze Iranian funds in Paris that were originally frozen because of U.S. court rulings about Iranian funding of terrorist attacks. Iranian banks have been active in supporting Iran's quest for weapons of mass destruction as well. For that reason, the U.S. slapped sanctions on Iranian state-owned banks in October 2007; those actions were pursuant to UN Security Council Resolution 1737 that requires all UN members to deny Iran any financial assistance that would facilitate its nuclear and missile programs. In short, serious international security interests are at stake in the French court decision.

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1. See "Report: Requests for Arrests, District Attorney's Unit in Charge of the Investigation of the AMIA Attack, Pursuant to the Decree Issued 8 February 2005 by Judge Rodolfo Canicoba Corral," Buenos Aires, Argentina.

2. U.S. Department of the Treasury, "Remarks by Treasury Secretary Paulson on Targeted Financial Measures to Protect Our National Security,"

3. Matthew Levitt, "Making Iran Feel the Pain," Wall Street Journal, July 2, 2007, Levitt previously served as Deputy Assistant Secretary for Intelligence and Analysis at the U.S. Treasury Department.

4. Ibid.

5. U.S. Department of the Treasury, "Fact Sheet: Designation of Iranian Entities and Individuals for Proliferation Activities and Support for Terrorism," October 25, 2007,

6. Ibid.

7. Intelligence and Terrorism Information Center at the Center for Special Studies, "Hezbollah: Profile of the Lebanese Shiite Terrorist Organization of Global Reach Sponsored by Iran and Supported by Syria," June 2003.

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Dr. Shimon Shapira is the author of Hizballah: Between Iran and Lebanon, 4th ed. (Tel Aviv: Dayan Center, Tel Aviv University, 2006). He is a senior research associate at the Jerusalem Center for Public Affairs.

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