The U.S. Department of the Treasury's (Treasury) Financial Crimes Enforcement Network (FinCEN), published the FinCEN Advisory on the Iranian Regime's Illicit Oil Smuggling Activities, Shadow Banking Networks, and Weapons Procurement Efforts on June 6, 2025 (2025 Advisory), rescinding and replacing a prior advisory, published on Oct. 11, 2018 (2018 Advisory). The 2025 Advisory, which was issued to assist U.S. financial institutions in identifying and reporting potential sanctions evasion and other suspicious activity related to the Islamic Republic of Iran, underscores the focus U.S. sanctions authorities are putting on the broader maritime shipping and related financial ecosystem.
The 2025 Advisory provides detailed information, based on Bank Secrecy Act (BSA) data, open-source reporting and information provided by law enforcement partners, on current trends in Iran's sanctions evasion efforts. It also includes updated red flags to assist U.S. financial institutions in identifying and reporting potential sanctions evasion and other suspicious activity related to Iran.
The 2025 Advisory, which comes amid continuous rounds of designations targeting vessels, particularly crude oil tankers and entities allegedly involved in shipping Iranian oil or providing services to sanctioned evaders, signals the U.S. government's continued compliance expectations for and scrutiny of the shipping, maritime and financial industries.
Background
The 2025 Advisory follows a number of actions by the Trump Administration and executive branch agencies involved in enforcing sanctions with respect to Iran, including:
- President Donald Trump issuing the National Security Presidential Memorandum (NSPM-2) announcing a "maximum pressure" campaign against Iran to disrupt its nuclear and ballistic missile programs and stop its support for terrorist groups. NSPM-2 explicitly called on the U.S. Attorney General to, among other things, "investigate, disrupt, and prosecute financial and logistical networks, operatives, or front groups inside the United States that are sponsored by Iran or an Iranian terror proxy."
- The Office of Foreign Assets Control's (OFAC) publishing an updated sanctions advisory in connection with NSPM-2 on April 16, 2025, titled "Guidance for Shipping and Maritime Stakeholders on Detecting and Mitigating Iranian Oil Sanctions Evasion" (Maritime Advisory), which aimed to assist the global shipping and maritime industry in identifying and implementing compliance practices against sanctions evasion through the shipment of Iranian-origin petroleum and other related petrochemical products.
- OFAC announcing more than a dozen rounds of sanctions designations targeting alleged members of "sanctions evasion networks," including "shadow fleet" oil tankers, oil brokers, vessel brokers, front companies (including so-called "trading houses"), so-called "shadow banking" networks, "teapot" refineries, technical service providers, vessel management companies, chartering companies, and other entities and individuals involved in facilitating purchases, payments, shipments and deliveries of Iranian oil and gas products, as well as the processing of related payments (e.g., 6, 2025, Feb. 24, 2025, March 13, 2025, March 20, 2025, April 10, 2025, April 17, 2025, April 22, 2025, April 28, 2025, April 30, 2025, May 8, 2025, May 13, 2025, May 15, 2025, and June 6, 2025).
Sanctions Evasion Tactics
FinCEN's 2025 Advisory highlights how Iran relies on revenue from oil sales to fund the Iranian Revolutionary Guard Corps (IRGC) and various destabilizing activities in the region, including procuring weapons for itself and terrorist proxies and developing its domestic nuclear weapon capabilities. It also provides detailed descriptions of common evasion tactics used by Iran-linked parties, including vessels transporting Iranian-origin oil and gas products, trading houses and companies seeking to procure military-related items. Many of these echo those highlighted in OFAC's Maritime Advisory. These include:
- reliance on "dark fleet" vessels, which typically are old and poorly maintained vessels owned and managed by operating or shipping companies in countries outside Iran, often in the United Arab Emirates (UAE) and Southeast Asia, and often undergo frequent name changes, nominal ownership and frequent reflagging in different third-country jurisdictions or by registries not authorized to provide flagging services for a particular jurisdiction
- use of falsified cargo and vessel documents
- disabling or manipulating automatic identification systems (AIS) on vessel, voyage irregularities
- ship-to-ship transfers to mask the origin and ultimate destination of sanctioned cargo
- blending oil from third countries and/or relabeling the oil as originating in other jurisdictions (e.g., "Malaysia Crude Oil Blend")
The 2025 Advisory notes that the vast majority of Iranian oil is sold to small independent oil refineries in China, or "teapot" refineries, which may have touchpoints with the U.S. financial system. This reflects the U.S. government's continued focus on the role that Chinese refineries have in driving demand for Iranian oil, which was noted in the NSPM-2 and OFAC's Maritime Advisory.
The 2025 Advisory focuses particularly on how sanctions evaders use "shadow banking" networks, including exchange houses, trading companies and foreign front companies in third-country jurisdictions such as Hong Kong or the UAE, allowing Iranian parties to conduct international transactions without repatriating funds to Iran. FinCEN also notes that Iranian actors use third-party exchange houses and trading companies with regional banks having correspondent relationships with U.S. financial institutions, using forged documents to falsify the source of funds.
According to FinCEN, laundered funds are then used to procure weapons components, dual-use goods and chemicals from the international market through procurement agents, front companies, intermediaries and suppliers commonly operating out of China, Hong Kong, Türkiye and Southeast Asia to circumvent U.S. export controls. Techniques to obfuscate Iranian involvement include the use of transaction layering, falsified documents, transshipment and corporate vehicles such as front companies.
Red Flags for Financial Institutions
FinCEN's 2025 Advisory lists "red flags" associated with 1) illicit oil smuggling and sales, 2) shadow banking networks and 3) Iranian weapons procurement networks, reflecting the evasion tactics more recently observed by U.S. sanctions authorities, and the objectives of NSPM-2.
Though many red flags included in the 2018 Advisory remain, the 2025 Advisory focuses more explicitly on oil and shipping-related transactions, as well as transactions with ties to Hong Kong, China and the UAE. These include, among other things:
- References to "Malaysian Blend" oil in documentation associated with an oil-related transaction, particularly if the vessel is bound for China by way of Southeast Asia.
- Indicators of a possible front company, such as:
- where a company has little to no web presence or is transacting in large, recurring amounts.
- where multiple companies with the aforementioned characteristics were incorporated at roughly the same time and share counterparties, addresses or owners or have similar names or transaction profiles.
- where a company is based in Hong Kong, uses a Chinese nonresident account, is co-located with numerous other similar companies and makes numerous large payments to UAE general trading companies with no clear business purpose.
- where a company based in the Middle East receives payments primarily from petroleum companies and makes payments primarily to electronic companies based in Hong Kong.
- Suspicious vessel documentation, such as documentation that:
- references vessels that have undergone recent or multiple name or flag changes or claim an International Maritime Organization (IMO) number that belongs to a different vessel or vessels that have previously been scrapped
- includes information that is inconsistent with available information about the nature of a customer's business
- Involvement of UAE general trading companies, which are commonly registered in a commercial-free trade zone in the UAE with opaque ownership and whose trading counterparties are companies mostly located in Singapore and Hong Kong and have bank accounts at multiple UAE financial institutions.
FinCEN Recommendations and Obligations
The 2025 Advisory recommendations to financial institutions include flagging documentation with inconsistent information, falsified documents, vessels previously owned or operated by designated individuals, certain irregular transactions and other transactions with a possible nexus with Iran or suspicious financial activity.
It also reiterates the obligations that U.S. financial institutions have to file a suspicious activity report (SAR) where a financial institution knows, suspects or has reason to suspect that a transaction it is handling involves illegal activities or funds derived and encourages voluntary information sharing among financial institutions regarding individuals, entities, organizations and countries suspected of possible terrorist financing or money laundering, particularly in connection with foreign terrorist organizations and specially designated global terrorists.
Conclusion
In response to the heightened scrutiny and enforcement risk, both financial institutions and maritime industry stakeholders should familiarize themselves with the relevant "red flags," evaluate their risk exposure and, where necessary, consider updating their compliance policies and procedures appropriately.
