OFAC hits Iran's shadow banking: an Iraqi dollar channel, offshore banks, exchange houses

What happened

On 15 October 2026, the US Office of Foreign Assets Control (OFAC) designated banks, exchange houses, and facilitators that Treasury describes as Iran’s shadow banking architecture. The action was taken under Executive Order 13902 as part of Treasury’s Operation Economic Outcast. OFAC’s recent actions page shows 16 individuals and 11 entities added to the Specially Designated Nationals (SDN) List that day.

The central target is Iraq-based International Development Bank for Investment and Finance (IDB). According to Treasury, IDB was set up by Iranian companies to supply Iran with US dollars, abused its access to the now-dissolved US dollar wire auction, and sends its profits back to Iran in dollars each month. Treasury says designated Bank Melli, located next to IDB in Iraq, transferred its capital to IDB when it closed. OFAC issued General License FF to authorize the wind down of transactions involving IDB.

OFAC also designated two Iranian “offshore” banks that operate in free trade zones, Jazireh International Bank Company and Chabahar International Bank Overseas Company. It listed Dubai-based oil intermediary Sayyed Ruhollah Razavi, seven foreign exchange staff of Farab Sorough Qeshm Company, Hong Kong-based Elitesphere Trading Co., Limited, and four Iran-based exchange houses. The State Department concurrently designated Cuba’s Banco Internacional de Comercio S.A. (BICSA), which Treasury says has provided services to designated Iran-based Karafarin Bank since at least 2022.

Why it matters

Treasury describes oil revenue moving through Hong Kong to the UAE and Türkiye, where it is converted to gold and cash. The “rahbar” networks named in the release route payments for sanctioned Iranian banks through brokers and front companies. In practice, the counterparty a bank sees in a payment is unlikely to be the Iranian party behind it.

A Cuban bank was designated. Treasury links it to Iran through its relationship with Karafarin Bank. The release reminds foreign financial institutions that OFAC can prohibit or strictly condition their US correspondent accounts if they knowingly facilitate significant transactions for designated persons. A bank with no Iranian customers can still be exposed through its correspondents.

For trade finance teams, Treasury says previously designated Bavi General Trading used Hosseini Parsa Exchange’s official documents and letterhead to carry out its own business. A check on the letterhead alone would have pointed to the wrong party.

Practitioner angle

• Load the new SDN entries, then rescreen customers, counterparties, and recent payment history against every listed bank, exchange house, company, and individual.
• If you have any relationship with IDB, read General License FF in full before relying on it, and plan the exit within its terms.
• Review correspondent and nested relationships touching Iraq, the UAE, Türkiye, and Hong Kong. Flag exchange house payments linked to oil and petrochemical sales, and Hong Kong or UAE shell companies settling for Iranian banks.
• BICSA sits under a different program than the Iran listings (Executive Order 14404), so confirm your screening covers both.

Then find out which of your respondent banks clear payments for exchange houses. Exchange houses carry much of the activity Treasury describes, which makes them the likeliest point where these networks reach your books.