Spanish law enforcement officers have arrested a group people suspected of trafficking sanctioned materials through Spain to Iran. The group moved dual-use goods, so-called as they can be used for civilian or military purposes and which in this case could have been used for Iran’s banned nuclear programme.
Officers received information on the purchase of two metal working machines from a British defence company in 2013. The Guardia Civil police force believes the machines were first sent from the UK to Spain to throw investigators off the scent and until they could be safely sent onto their final destination in Iran. Sending dual-use goods to Iran is in breach of international sanctions in connection with the development of the country’s nuclear and missile programs.
The suspects – three Spaniards and one Iranian – have been charged with belonging to a criminal organisation, smuggling dual-use materials and money laundering. Investigators raided four homes and business premises in Tarragona, northern Spain and in Palma de Mallorca in the Canary Islands. The industrial metal working machines were made by LEIFELD. Officers seized the equivalent of EUR10,000 in Iranian Rials and Euros which they suspect was earned through trafficking. The police also issued an order to freeze the assets of companies suspected of being part of the network.
Although not mentioned in the Guardia Civil’s press release, the cash to pay for the machinery must have been channelled through the financial system somehow. Transactions to defence companies and for duel-use materials should be in a high-risk category and subject to enhanced scrutiny, including enhanced due-diligence for entities involved in the transactions.
Identifying dual-use materials from a transaction sheet, however, can be challenging for bank analysts who are not necessarily aware of the range of uses a gas centrifuge, for example, can be put to. Transaction monitoring software can be tuned to identify suspicious transfers within certain parameters, but where does the bank get the information from to set the parameters? Entity based parameters which include geography, type of business, beneficial owners, locations of subsidiaries, are easier to follow than new technological developments.
The Financial Action Task Force stepped up its work on ‘proliferation financing’ in 2012 when it made implementing targeted financial sanctions to comply with the United Nations Security Council Resolutions (UNSCRs) relating to the prevention, suppression and disruption of proliferation of weapons of mass destruction (WMD) and its financing one of its 40 Recommendations. A 2010 report on the subject examines, among other areas, how practitioners can apply a risk-based approach to proliferation financing, managing transaction monitoring and analyses the pros and cons of ‘goods based screening.’ The report notes that financial institutions are not necessarily in possession of the technical knowledge available to experts and exporters and that a list of controlled goods can be a challenge for export enforcement authorities and real time screening.
‘Goods lists, in themselves, should not be used as a basis for transaction screening by FIs, as they are difficult for those without a degree of technical expertise to interpret correctly which thus make them an inefficient safeguard.’
Reports produced on this subject by the International Chamber of Commerce provide useful information for financial institutions working on international trade transactions and examples of sanctions clauses which could appear in transactions.
Source: Guardia Civil