As details of the Iranian plot to blow up the Saudi Embassy in Washington, DC,
becomes clearer, the US and other Western allies will look to punish Iran. One
of the most powerful ways to influence Iran is through the banking sector.
Through an interesting turn of events, Canada is in a position to exert
significant financial leverage through one individual in particular.
of the world’s most important international bankers currently resides in
Toronto. After fleeing his country of birth Mahmoud Reza Khavari served until
recently as head of Iran’s Bank Melli, an institution notorious for assisting in
Iran’s proliferation of weapons of mass destruction and financing of
terrorism. Canadian authorities have yet to take action against
Mr. Khavari, who represents a potential gold mine of information about
how Iranian banks raise and move money around the globe.
Iran’s semiofficial Mehr
news agency, Khavari flew to Canada on September 28
after Iran issued arrest warrants for 22 top-level bankers in what appears to be
the largest embezzlement scheme in the country’s history.
accused of facilitating fraudulent payments – totaling over $2.6 billion – on
behalf of Bank Melli. Many of Iran’s political elite, including President
Mahmoud Ahmadinejad himself, have been linked to the scandal. Khavari’s
banking career has been nothing short of brilliant.
international press reports and Khavari’s own resume, available online at Bank
Melli’s website, he has been with the bank since 2009.
Before that, he
held a variety of positions, including that of chairman of Bank Sepah’s board of
directors from December 2003 until at least March 2005. He has also worked at
Iran’s Bank of Industry and Mine and served as a member on the Teheran Stock
Exchange’s board of directors.
Many of the companies and financial
institutions Khavari has been affiliated with have been blacklisted by the
United Nations and members of the international community.
2007, the UN ordered member states to cease doing business with Bank Sepah and
its affiliates under any circumstances. It later placed restrictions on two
other banks, Melli and Saderat.
The EU and countries around the world
followed suit, including Canada, Australia and the United States, and they have
published their own list of blacklisted Iranian banks. For example, Canada has
blacklisted four Iranian financial institutions, including the Melli, Mellat and
Saderat banks, as well as the Export Development Bank of Iran (but not Bank
Sepah, in seeming contradiction of international law).
Banks Sepah and
Melli – two financial institutions where Khavari held senior posts – are
particularly guilty of involvement in illicit international activity. The UN
Security Council blacklisted Sepah and its subsidiaries under resolution 1747
and placed restrictions on Melli under resolution 1803.
institutions were implicated in contributing to the proliferation of sensitive
nuclear activities or to the development of Iranian nuclear-weapon delivery
These banks have also reportedly been involved in providing
banking services in support of Iran’s nuclear drive and its elite Revolutionary
Khavari’s connections to Canada are noteworthy. To begin with, he
and his immediate family are reportedly Canadian citizens. As recently as 2007,
he purchased a CAD 2.93 million home in one of Toronto’s most exclusive
neighborhoods, Bridle Path. In 2001, he bought a home with his wife in Toronto’s
North York neighborhood, taking out a mortgage of CAD 615,000. At a certain
point, Khavari also owned a Toronto-based company called Soaring Properties (it
is unclear if he still owns it).
There are a number of steps Canadian
authorities can take immediately. First, Khavari is apparently in violation of
the Special Economic Measures (Iran) Regulations for having worked and provided
financial services on behalf of a designated Canadian entity. In all likelihood,
Khavari is also in violation of Canada’s Anti-Terrorism Act, along with Part
II.1 of the Criminal Code (Section 83.05). This section has provisions that
prohibit the financing of terrorism. It also lists individuals or entities
which, there are reasonable grounds to believe, have participated in or
facilitated terrorist activity, or knowingly acted on behalf of, or associated
with, an entity involved in terrorism.
Under Section 83.05, Canadian
authorities may even have the right to freeze Khavari’s assets.
should make a legal determination regarding whether to freeze his assets in the
country. Once they have done this, authorities might be able to uncover the full
extent of Bank Melli’s involvement in Iran’s proliferation of nuclear weapons
and terrorism financing.
Khavari possesses critical information on Iran’s
banking network and the extent to which Iran abuses the international financial
sector for illicit purposes. The intelligence gathered from Khavari should be
shared with international partners both on a bilateral basis and at the UN
While Canada has certainly been a staunch ally of
members of the international community that have tried to implement sanctions
against Iran to stop its nuclearization, it does appear that Canada is out of
compliance with international law in this case. According to Chapter VII of the
Charter of the United Nations, all member states are obligated to blacklist Bank
Sepah. Canadian lawmakers, and in particular, the governor in council, should
rectify this loophole as quickly as possible; Bank Sepah was blacklisted by the
UN as far back as March 2007.
Through existing legislation, the Canadian
government has made it clear that there is a cost for doing business with
Going forward, Canadian policymakers should move expeditiously in
regard to Khavari. As one of Iran’s top bankers, he could be of great use to any
nation that is intent on stopping Iran from getting the bomb.The writer
is a former US Treasury official and on the Advisory Board of United Against a
Nuclear Iran (UANI). He is also the author of
Iran’s Dirty Banking: How the
Islamic Republic Skirts International Financial Sanctions (2010).
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