Offshore Islamic bank accused of contravening US government OFAC sanctions (By IFN)

Offshore Islamic bank accused of contravening US government OFAC sanctions

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GLOBAL: A Labuan-based Islamic bank, the First Islamic Investment Bank (FIIB), has been placed under sanctions of the Office of Foreign Assets Control (OFAC) of the US Treasury Department, which administers and enforces economic and trade sanctions based on US foreign policy and national security goals. The sanctions, which are placed against “targeted foreign countries and regimes, terrorists, international narcotics traffickers and those engaged in activities related to the proliferation of weapons of mass destruction and other threats to national security”, were imposed on the Islamic bank and another Swiss-based company which were said to be part of a money laundering network involving the trade of Iranian crude oil worth billions of dollars. However, in an interview with the BBC last month, Babak Zanjani, the Iranian tycoon and CEO of FIIB who was accused of exporting Iranian crude oil, told the news network that he was merely “buying low-quality fuel to sell to Malaysia” and was not engaged in trading Iranian oil, in contravention of current global sanctions on Iran. The Labuan-registered FIIB is a subsidiary of a Tajikistan-based bank, Azrish Bank. Upon further inquiry, it was found that FIIB's SWIFT account in the EU has been cancelled. When contacted by Islamic Finance news, a spokesperson from the bank confirmed: “Our CEO, Babak Zanjani has been sanctioned as an individual by the US Treasury department, and therefore our bank at present is a dormant bank.” All Labuan-based banks and financial institutions are regulated by the Labuan Financial Services Authority (Labuan FSA), which is the statutory body responsible for the development and administration of the Labuan International Business and Financial Centre. It was established on the 15th February 1996 under the Labuan Financial Services Authority Act 1996. Speaking to Islamic Finance news, a representative from Labuan FSA confirmed that the Authority has conducted the necessary due diligence and supervision earlier this year, before such allegations came to light. However, he said: “We had found no evidence to substantiate the claims. The bank is currently still in existence, but due to the sanctions, it is hard for them to conduct any business, especially with other banks.” According to the source, Labuan FSA has full access to any bank or institution registered in Labuan and is able to monitor all incoming and outgoing financial transactions. “All companies are obligated to comply in terms of disclosure.” He also added that Malaysian regulators are generally only concerned with sanctions imposed by the Malaysian government and have no direct obligation to comply with the US and EU sanctions lists. However, he said that Labuan FSA regularly refers to and checks these lists, including OFAC. “We generally do not approve any players on these lists. And if the case is taken to the United Nations, we will most definitely take the necessary action.”