SBI branches stop Iran cos’ dollar transactions

Foreign Assets Control) regulations of the US Treasury department. For any bank,such violations can expose their US operations to ‘punitive’ action from the banking regulator.

“As violations of regulatory compliance are viewed very seriously by the overseas regulators,including the OFAC authority,we reiterate that branches are not to process transactions in US dollar involving Iranian entities,” the SBI circular said.

“Branches are advised to be extremely careful,while processing USD transactions as repeated violations of OFAC regulations on account of transactions emanating from India may expose our US operations to possible punitive action from the regulators,” it added.

The SBI action is likely to have been cleared by the government and is expected to be part of a general advice issued to all public sector banks regarding their overseas operations vis-a-vis Iran. In early October,India’s largest oil refiner Reliance Industries Ltd (RIL) is understood to have assured the US that it will not sell refined petroleum products to Iran. A message sent to SBI chairman OP Bhatt remained unanswered on Wednesday.

SBI’s New York branch observed three cases of violations of OFAC regulations concerning Iranian entities in June and July 2010. In the first case,a Mumbai branch of the SBI initiated a transaction involving an Iranian entity mentioning an acronym IOEC. This entity turned out to be Iranian Offshore Engineering Corporation. SBI has instructed branches to stop processing transactions involving acronyms.

The second incident occurred when a wire transfer was processed in which the underlying cargo was being shipped from the port of Bander Bushire in Iran. SBI’s local branch or the New York branch,however,could not detect this port. SBI’s New York branch has now added a list of all Iranian ports in its internal filter system to prevent future violations,the circular said.

In the third instance,during a transaction monitoring at SBI’s New York branch,it was found that the primary originator in the transaction was an Iranian entity. The related transactions were camouflaged and received at the New York branch through another US-based bank,in which the originator of the fund transfer message was shown as a trading firm from the UAE.

SBI’s New York branch was caught in a regulatory tangle with the US government till 2008 over accusations of suspected terrorist funding. This was denied by the bank and its stand was subsequently vindicated.

The SBI stock price on Wednesday closed 0.14% up at Rs 3,193.45 on the BSE over its previous close.

India-Iran trade in 2009-10 was $13.3 billion compared to $14.9 billion 2008-09,accounting for 2.8% of India’s total trade. While India’s exports to Iran were $1.8 billion in 2009-10,the country imported goods worth $11.5 from Iran in the same year.

In order to mount pressure on Iran to discontinue its alleged nuclear weapons programme,the US has been urging countries across the world to avoid commercial activity in Iran’s energy sector. It recently claimed that four major international oil companies – Total of France,Statoil of Norway,Eni of Italy and Royal Dutch Shell of the UK and the Netherlands had pledged to end their investments in Iran’s energy sector.

“Our goal…is to make clear to Iran that there are costs for the path that they’re pursuing… I think we have pretty good indications,not just in the energy sector,but across the board,that whether it’s in the financial sector or whether it’s in shipping and transportation,that these measures (sanctions) are increasingly having a significant impact on Iran,” US deputy secretary of state James B Steinberg had said on September 30.