Mahmoud Reza Banki’s family in Iran sent family monies (his mother’s marital assets after her divorce) to him in the United States between 2006-2009. Reza accepted these family remittances through third party banks and intermediaries. In accordance to the laws of OFAC, these transactions should have been legal. Yet Reza was charged, arrested, imprisoned and convicted of multiple charges for accepting family remittances from Iran. Specifically, Reza was charged with violating IEEPA, ITR and for running an unlicensed money transmittal business.It is important to understand that there are no U.S. banks in Iran or Iranian banks in the U. S. In the absence of these options, Reza’s family used a currency exchange broker to send him funds through third party intermediaries and banks in a system the government and prosecutors call a hawala. The term hawala, means “transfer” or “wire” in Arabic banking jargon. The hawala system refers to transferring funds from one location to another through service providers—known as hawaladars or brokers. In a hawala system, money does not physically cross borders. Rather, the broker arranges for transfers by finding corresponding customers in respective countries.
In the Reza case, Reza’s family in Iran wanted to send him money in the U.S. to purchase an apartment in Manhattan. His family in Iran contacted a currency exchange broker or “saraf” in Iran. A currency brokerage or “sarafi” in Iran is an officially certified, legal business similar to a foreign exchange or Western Union in the U.S. The broker in this case would, either through his own customers or through other brokers, find customers in the U.S. who had a need to send money to their family in Iran. After finding a “match”, the broker would ask his customer in the U.S. to deposit money into Reza’s bank account. The broker would deposit the corresponding amount into his customer’s family’s account in Iran. Therefore, no money actually crosses boarders. The net effect is no money enters or leaves Iran or the U. S.By way of example, suppose the Reza’s family in Iran wants to send
Reza money in the U.S. while Mary in the U.S. wants to send money to her family in Iran. Given that there is no formal banking system between the U.S. and Iran, both the Reza family and Mary contact a broker or “saraf” to facilitate this transaction. The broker, either by working within his own network of customers or with another broker, finds this “match” and instructs Mary to deposit money into Banki’s account while taking the equivalent amount from Reza’s family in Iran and depositing it in Mary’s family’s account.
In U.S. v. Banki, the prosecutors took issue with this method of transfer charging that it violates OFAC laws, convicting Reza of violating IEEPA and ITR and as such participating in the running of an unlicensed money transmittal business.
RICHARD NEWCOMB LETTER
An expert in Reza’s defense, Richard Newcomb is the former head of OFAC for 17 years (1987 – 2004), and the person who oversaw the process leading to the presidential executive orders and their implementations. He submitted a lengthy letter in Reza’s defense. He states that the law (which he helped craft, write and put into effect as head of OFAC) clearly delineates that this type of persecution falls out of the intended purpose of the law.
“…Mr. Banki’s conduct caused little if any harm to the U.S. sanctions program objectives against Iran.”
“…these types of transactions were not intended in the prohibition nor was a specific method prescribed then or since then as to how to effectuate this category of transactions”
“…there is no dispute that family remittances are exempt from the ITR prohibitions”
Mr. Newcomb also outlined why unconventional means of transfer are used by Iranian-Americans. Richard Newcomb’s letter is available on this page in its entirety.