US cuts Banque Misr UAE branches over $1.8 billion Iran flows

The Treasury Department on Friday proposed cutting five UAE-based branches of Egypt's state-owned Banque Misr from the US financial system, accusing the lender of processing $1.8 billion for 103 suspected Iranian shadow-banking fronts since 2024.

"Banque Misr UAE decided to find out the hard way, and today we are taking the first step in holding it accountable for its continued, egregious support of the Iranian regime," Scott Bessent, Treasury secretary, said.

The proposed rule, issued under Section 311 of the Patriot Act by the Financial Crimes Enforcement Network, would designate the branches a primary money-laundering concern and bar US institutions from opening or maintaining correspondent accounts with them. The action follows Bessent's "economic D-Day" campaign announced this week and lands as the US war against Iran reaches its six-month mark. The Office of Foreign Assets Control simultaneously sanctioned Reza Mohammad Taeedi, general manager of Bank Melli's Dubai branch, and Hong Kong-based Kameng Trading Limited, which Washington accuses of laundering funds for Tehran.

The measure stops short of full blocking sanctions, giving Banque Misr and regulators in Egypt and the UAE a 30-day window to address the misconduct before the rule takes effect. Bessent is set to press counterparts at Group of 20 finance ministers meetings next week to join the economic isolation of Iran.

China and Hong Kong in the crosshairs

The action against Banque Misr UAE is the opening move of a broader enforcement campaign. FinCEN identifies Hong Kong as another major hub harboring Iran's shadow-banking fronts, and Treasury has signaled it may pursue similar measures against banks there. Washington cut China's Bank of Kunlun, controlled by state-owned China National Petroleum Corp., from US correspondent banking in 2012, but the bank has continued facilitating Iranian business because it does little dollar trade. A full blocking designation would force CNPC to weigh the bank against its far larger commercial interests.

China purchases roughly 90 percent of Iran's exported oil, much of it rebranded as Malaysian and sold to Chinese buyers. Reported Chinese imports from Malaysia vastly exceed what Malaysia itself reports exporting — a discrepancy FinCEN could target by requiring heightened scrutiny of oil and petrochemical transactions bearing the hallmarks of Iranian sanctions evasion.

Shipping fallout mounts

The economic campaign runs alongside a maritime crisis. The International Maritime Organization reported Friday that 19 seafarers have been killed and at least 6,000 remain stranded on hundreds of ships unable to leave the region since the war began Feb. 28. At least 70 attacks on international shipping have occurred in the Persian Gulf, and about 20 percent of the world's traded oil and natural gas passed through the Strait of Hormuz before the conflict.

Iran's Foreign Ministry condemned the new measures as "economic terrorism," saying Tehran would use all available means to counter them and accusing Washington of weaponizing the dollar. The UAE halted all trade and financial transactions with Iran on Aug. 18 — a suspension that shows the enforcement challenge, given UAE-based firms received 62 percent of the $9 billion in suspected Iranian illicit financial flows that passed through US correspondent accounts in 2024, according to the Wall Street Journal.

The last time Washington moved against a foreign bank over Iran ties — the 2012 cutoff of Bank of Kunlun — the action proved largely symbolic because the bank did little dollar business. By threatening correspondent access for a lender that processes billions in dollar flows, Treasury is applying pressure that past administrations avoided. Whether the campaign succeeds depends on whether it reaches China.

This article is for informational purposes only and does not constitute investment advice.