IslamicFinance.de

Iran's Chief Auditor Nasser Seraj announced that there is no truth to rumours that a death sentence issued in the so-called $3-billion fraud case will be withdrawn. Seraj indicated that the authorities are continuing to trace the assets of Amir Khosravi, adding that the investigation is proceeding well. The case came to light in 2011, and 39 defendants were accused of using forced documents to obtain credit from banks to buy state-owned companies. Four people were sentenced to death for the charge of "corruption on earth" including Amir Khosravi, and others were sentenced to prison terms of up to 25 years. Mohammad Reza Khavari was the CEO of the country's largest bank, Melli Bank, and he remains a major suspect in this case, having fled to Canada as soon as the investigation became public.

Islamic Development Bank’s top officials have traveled to Tehran to sign the contract with the Iranian officials for the first part of the 3 billion-dollar loan they had agreed before. The first part of the loan will be paid to a few cities in the Southern Iranian province of Fars for implementing sewage projects. But there are other areas for which the 3-billion-dollar loan will be used. So far, the IDB has allocated loans to Iran in railway, water sources, environment, automotive and other sectors. With almost ten percent of the shares, Iran is the third major shareholder of the bank. The ratification of Iran's parliament to increase the countrie's share in IDB is pending.

The Islamic Development Bank (IDB) will allocate a 144 million euro loan for wastewater projects in the Iranian southern Fars province. For that purpose, the IDB and the Fars province's Water and Wastewater Company have signed a memorandum of understanding on the issue. The company will implement wastewater projects in the Darab, Fasa, Sepidan, Abadeh, Neiriz and Firouzabad cities of the province using the IDB`s loan. The IDB has already allocated some 800 million euros of loans in total for Iran's water and wastewater projects, in Mashhad city, Qom and Kashan, and Tehran among others. The IDB has paid more than 3 billion euros to Iran for implementing its projects so far, of which 70 percent were spent on dam building and water and wastewater projects of the energy ministry.

Iran's Bank Mellat seeks to file a claim of at least 500 million pounds (USD 820 million) in compensation against the British government for loss of business caused by illegal sanctions on Tehran over its nuclear energy program. It is the first time that an Iranian lawsuit over sanctions has reached the stage of claiming compensation. On June 19, 2013, Britain’s Supreme Court overturned a ruling against Bank Mellat over its alleged links to Tehran's nuclear energy program. The European Union General Court decided in January to quash sanctions imposed against Bank Mellat in July 2010.

A special group of police officers will be assembled and sent to Canada for searching and arresting the former head of Bank Melli Iran, Mahmoud Reza Khavari. Since Canadian officials haven't found Khavari yet, Iranian police are asking for one week in order to search for him in Canada. The fraud case originally started in 2007 and involved the use of fraudulent documents to obtain credit for an investment company. Khavari, as the head of Bank Melli Iran, was reportedly involved in the fraud case. However, Khavari escaped to Canada. Iran requested Interpol to announce an international search for him. In June of 2012, Fars news agency reported that Interpol placed Khavari on its Red Notice Wanted list.

Under an interim deal between world powers and Iran last month, the Islamic republic agreed to freeze part of its nuclear programme in return for modest relief from sanctions. The unwinding of sanctions in the Iranian context will prove quite challenging and difficult in part because as the sanctions have grown over time, they’ve been layered with elements of sanctions building on themselves. The issue of sanctions with Iran have not just been about nuclear issues but also about human rights, support to president Bashar Al Assad in Syria, support to Hizbollah, support to Iraqi militias. Under the interim sanctions deal, the Obama administration has estimated that the sanctions relief will be worth US$6 billion to $7bn. Banking and oil sanctions will remain in place while negotiators attempt to reach a permanent deal over the next six months.

The European Union will maintain sanctions against all but two Iranian firms that won challenges to the bloc's sanctions regime in EU courts in September. The EU will on Wednesday formally announce it is maintaining sanctions against almost all the firms by "re-listing" them for new sanctions breaches. The EU hopes that by re-listing companies and providing additional evidence, it can secure its Iran sanctions regimefor the foreseeable future.

The European Union has lifted sanctions against Iran Insurance Company following defense presented by the corporation, its Managing Director Javad Sahamian said. The sanctions caused that letters of credit guaranteed by the company were refused by others, but after ease of sanctions the company can work actively in insuring LCs in areas such as freight. Sahamian said the corporation has managed to control sanctions considerably to prevent any great loss and pave the way for more growth.

Bankers in Iran are hoping that new President Hasan Rouhani will reform the banking industry, which is saddled with dangerous levels of bad debts. A veteran of the Iranian banking sector said that at least 50 per cent of the financial institutions do not deserve to be saved. Over the past eight years both public and private banks have run up huge amounts of bad debt. These are now putting a heavy strain on the government's shrinking financial resources as it protects the most indebted players from bankruptcy. Bad debts in the banking system are estimated to average about 20 per cent, with big institutions Bank Saderat and Bank Melli in the worst positions. Interest rates on deposits will need to rise in order to combat inflation and absorb excess liquidity in the economy. Rates were raised in 2012 to 21 per cent for the same reason, but to little effect, and the cost of funding for banks is high.

Abdonnaser Hemmati has been elected by the board of directors of Bank Melli Iran as the bank’s new governor, replacing Farshad Heidari. Heidari had been appointed as the governor of the bank after Mahmoud Reza Khavari, its former governor, fled to Canada after a $2.6 billion financial fraud case was uncovered in 2011. Economy minister Ali Tayyebnia is scheduled to officially install Hemmati at the post by Friday. Hemmati has served as the managing director of Sina Bank and the chairman of Iran’s Central Insurance Company.

Managing director of the Iran's Melli Bank, Farshad Heydari has been removed from his position by the Bank's Association. The embezzlement case originally started back in 2007 by Amir Mansour Arya Investment Company and progressed in 2010, after some Iranian major banks, including Bank Saderat and Bank Melli, issued loans for the company.

In a setback for the United States’ attempts to isolate Iran, the General Court in Brussels threw out sanctions Friday on seven Iranian companies, including four banks, rejecting arguments that they were acting as front companies to bypass the punitive measures. The United States Treasury took the opposite tack on Friday, imposing restrictions on a network of six individuals and four businesses for links to oil sales. These actions represent a renewed crackdown to curb the use of front companies, financial institutions and businesspeople to conceal the direct involvement of the Iranian government and entities like the National Iranian Oil Company and the Naftiran Intertrade Company. European officials are expected to hold initial discussions on whether to appeal on Tuesday.

Iran's president Hasan Rouhani has reportedly appointed Valiollah Seif, a private banker, as the head of the country's central bank. Seif will replace outgoing central bank head Mahmoud Bahmani. Seif ran the private Karafarin bank in Iran. He also supports independence for the central bank and a floating rate for Iran's currency, the rial, against foreign currencies. Seif takes over the central bank as sanctions over Iran's disputed nuclear program have been putting heavy pressure on the country's economy for the past two years. Oil exports have been slashed in half and the rial has lost two-thirds of its value since late 2011. Inflation also has shot up in the country.

The British government is seeking to renew sanctions against Iran's Bank Mellat regardless of a court ruling branding the ban as unlawful. Britain's Treasury is now attempting to intervene in the European Union Council's appeal against a decision by the EU General Court in January to quash sanctions imposed against the Iranian bank. This comes after reports that Bank Mellat intends to make a legal claim of 500 million pounds against the UK government for loss of business caused by US-engineered illegal sanctions on Tehran between 2009 and 2013. Earlier on June, Britain’s Supreme Court also overturned a ruling against Bank Mellat over its alleged links to Tehran's nuclear energy program, saying the British government was wrong to have imposed sanctions on the bank.

Iran's Bank Mellat is claiming GBP500 million ($782 million) from the U.K. Treasury after a London court ruled against a British decision to sanction the bank. In June, the U.K.'s highest court ruled against sanctions that had been imposed on Bank Mellat as a result of its alleged links to Tehran's nuclear program. The London ruling follows a similar decision in favor of Bank Mellat at a European Union court. But it won't lead to an end to restrictions against the bank for now because EU sanctions remain in place on Mellat. The U.K. sanctioned Mellat in 2009, banning its operations in the country and freezing its assets after it was accused of facilitating Iran's nuclear program. The measure was expanded to the rest of the European Union the following year.

Cooperative Insurance Company is the first firm established in the form of a public joint stock cooperative in line with the general policies of Article 44 of Iran's Constitution, which seeks large-scale privatization, and promotion of cooperative sector. A majority of the shares of Cooperative Insurance Company belong to companies and associations affiliated to the cooperatives sector. Cooperative Insurance Company is to conduct insurance activities in the fields of life insurance and other types of insurance services under the supervision of the Central Insurance of Iran. The managing director of the company, Akbar Najafi, explained that the major goal of Cooperative Insurance Company is to address insurance needs and render services in the cooperatives sector. Since the cooperatives have been established with public assets, they need more financial and legal support compared to other sectors in order to materialize their goals.

Iranian Bank Mellat appealed against a decision upholding measures taken by the Treasury to restrict its access to the UK financial market. The Treasury had directed that all persons operating in the UK financial sector were prohibited from having any commercial dealings with the Appellant or its UK subsidiaries. The Appellant argued the Treasury had failed to give adequate reasons for its decision. The High Court and Court of Appeal both dismissed the appeal, however the Supreme Court allowed it. One of the central issues raised was that the lower courts found that the justification for the order was not a problem specific to the Appellant, but a problem with Iranian banks in general. However, the order made no attempt to impose restrictions on other Iranian banks. In that regard, the measure was arbitrary, irrational and disproportionate. The order was also found to be invalid on various procedural grounds.

A memo of Iran's Supreme National Security Council marked as “secret”, was obtained and distributed by the Iranian opposition movement “Green Wave”. The memo said Iran’s financial institutions are on the verge of bankruptcy and the country could lose control over the banking system. Moreover, it stated the collapse of the banking system will lead to a steep rise in unemployment and inflation. The letter, addressed to the Central Bank of Iran (CBI), provided a bullet-point description of the economic crisis. It called for significant restrictions on the public's withdrawal of deposits from Banks. It also urged additional restrictions on taking foreign currency out of the country. The council also issued operational measures to combat the country's economic crisis. These measures include the deployment of security forces around banks, money-changing agencies, and ATM's and the drafting of an emergency plan to combat any potential storming of the banks by the public.

Parviz Aghili earlier this year opened what is in effect the Iran's only privately owned bank, the Middle East Bank. It focuses on domestic corporate clients and wealthy individuals within Iran’s private sector. Since it opened its doors in January, the Middle East bank – the smallest Iranian bank with only three branches so far – has attracted 1.4tn rials ($114m) in deposits and granted 3tn rials in loans. But the greater challenge for the western-educated veteran banker will be avoiding to become state-owned. Aghili said the bank has no interest in attracting state-owned or quasi-state-owned companies as shareholders or as clients. For now the Middle East bank plans to remain small. Moreover, it plans to open representative offices in countries such as India and Oman.

After the European Union imposed sanctions on Iran-based Bank Mellat and removed them in January, the EU Council has now launched an appeal against the decision of the court. However, Bank Mellat is at present considering applying to the EU Court to strike out the EU Council’s appeal on the grounds that the appeal was filed too late. According to Sarosh Zaiwalla, senior partner at Zaiwalla & Co, the EU Council appealed the decision due to political pressure from the United States government to reinstate sanctions. He stressed the importance of an independent court system in order to deal with businesses who have disputes criss-crossing legal borders.