South Korea’s Industrial Bank of Korea submits to United States to pay $86 million in fine over Iran transactions

This file photo shows Industrial Bank of Korea's headquarters building in central Seoul.

South Korea’s Industrial Bank of Korea (IBK) says it has submitted to the US demand to pay $86 million in fine for processing Iranian transactions.

The compromise includes paying $51 million to US prosecutors and $35 million to the New York State Department of Financial Services, the lender said Tuesday.

South Korea’s Yonhap news agency cited Geoffrey S. Berman, the US attorney for the Southern District of New York, as saying that IBK's branch in New York had failed to detect and report $10 million in US dollar payments from South Korean entities to Iranian banks.

Authorities said IBK entered a two-year deferred prosecution agreement with the US Department of Justice and a nonprosecution agreement with New York Attorney General Letitia James.

South Korea was among Iran’s major trade partners before falling in line with US guidelines after Washington withdrew from an international nuclear deal with Tehran in 2015 and imposed unilateral sanctions on the Islamic Republic.

Iran was South Korea's third biggest export market in the Middle East and companies such as Samsung and LG Electronics were among popular brands for TV sets, air conditioners, telecommunications equipment and washing machines.

Samsung’s sales also notably covered about half of Iran’s lucrative android phone market, with almost 18 million Iranians having Samsung devices as of February 2018, according to a report published by Iran’s largest app market Café Bazaar.

In February, Iran’s Foreign Ministry warned that foreign companies leaving the country due to the US sanctions would not be able to return to the country’s market easily after Samsung and LG Electronics pulled down their last advertisement banners in Iran.
According to a statement by the Ministry of Trade, Industry and Energy in Seoul, Iran was once the sixth largest market in terms of orders won by South Korean builders before the 2011 sanctions.

South Korea was also the biggest client of Iranian condensate with 300,000 barrels per day (bpd) on top of 100,000 bpd of crude oil, but it stopped shipments two months before the sanctions kicked in.

South Korean companies have mostly even refused to fulfill Iran’s orders for medicine and medical equipment which is supposedly not subject to the US sanctions.

According to Iranian companies, South Korean banks are refusing to process payments related to Iran’s imports of pharmaceuticals for fear of falling foul of the sanctions.

Iran’s Health Ministry said Saturday South Korea had rejected a SWIFT payment request by Tehran for purchase of coronavirus testing kits.

Ministry spokesman Kianoush Jahanpour disclosed an international financial message recently sent by South Korea's Woori Bank to Iran's Keshavarzi Bank, noting that it could not take over an import letter of credit for 5.3 billion won issued by the Iranian bank.

As a result Iran was unable to import the kits because the Korean exporter could not receive payment after Woori Bank’s refusal to take over the import letter of credit.

"This shows claims of medicine and medical equipment not being subject to sanctions are lies. The bank has officially stated that the purchase is not possible due to the sanctions," Jahanpour said.

The US government has intensified its sanctions on Iran despite international calls on Washington to suspend them to allow the Islamic Republic to secure necessary medicine and equipment in the midst of the coronavirus fight.
Washington claims the sanctions do not target medicine for Iran, but they make it all but impossible for importers to obtain letters of credit or conduct international transfers of funds through banks.

Last week, Iran's Permanent Mission to the United Nations in New York dismissed the Swiss Humanitarian Trade Arrangement (SHTA) which the Europeans belatedly announced with much fanfare to have made operational in coordination with the US to barter medicine and food with Iran.

The mission said the United States has forced SHTA to pursue a very tight and tough procedure, making it practically very difficult for companies to trade with Iran.

According to the mission, several companies that supply the medical equipment required to fight the coronavirus have recently stopped shipping to Iran because the current US sanctions regime makes the shipping of such items to Iran almost impossible.

The only message the US is sending with intensifying its sanctions amid the coronavirus is that companies must avoid doing any business with Iran, even if their work is humanitarian in nature, it said.