Rollback of sanctions poses challenges for banks

Rollback of sanctions poses challenges for banks

Neal Dawson, head of anti-money laundering and sanctions at KPMG, comments on the roll back of nuclear-related sanctions on Iran announced at the weekend:

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Neal Dawson, head of anti-money laundering and sanctions at KPMG, comments on the roll back of nuclear-related sanctions on Iran announced at the weekend:

“Foreign investors are keen to seize the opportunities with Iran that these changes bring, and a significant number will call on London banks to help facilitate their activities and investment in the country.  However, many lenders will be understandably cautious when it comes to committing funds, and banks will be cautious in processing any payments to and from Iran. A degree of trust has been built between Iran and the West around Iran’s nuclear programme, however there is the potential for sanctions to ‘snap back’ into place if the agreement fails. If this happened it could leave investors unable to make or receive payments relating to Iran, and leave lenders with a credit exposure that cannot easily be managed.

“Banks will need to decide if they are prepared to process Iran-related payments and to finance investments in Iran. It’s an incredibly complex situation, with non-nuclear sanctions remaining in place, and different rules in place for US and non-US firms. The biggest challenge will remain the inability of banks to clear USD payments which relate to Iran (so called U-turn transactions), as these remain prohibited under the revised sanctions. A robust process is imperative to ensure any payments or lending is permitted under the revised sanctions, as the potential penalties for getting it wrong remain significant. 

“Without the support of their bank, businesses run the risk of being unable to make and receive payments that relate to their activity in Iran. Firms considering opportunities in the country should consult with their bank early to enable them to assess risk, facilitate a smooth process and above all avoid any painful surprises.”

ENDS

Notes to editors:

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KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

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