Iran War Puts New Pressure on Banks to Police Transactions

American banks are reportedly facing increased pressure to halt financial activity tied to Iran.

But as The Wall Street Journal (WSJ) reported Saturday (Sept. 5), uncovering those transactions can be tricky, as Tehran uses a network of front companies and other methods to hide them.

According to the report, this is happening amid the Trump administration’s new “Operation Economic Outcast,” a campaign designed to put financial pressure on Iran and end the ongoing war with that country. The White House is warning world leaders to cut ties with Iran or face sanctions, the report added.

However, financial experts told WSJ that the impact of Washington’s efforts could be limited unless it puts greater pressure on banks to place closer scrutiny on their correspondent banking relationships. The Treasury last year said it had identified roughly $9 billion in Iranian funds that passed through American banks in 2024, a figure that some Iran researchers say could be reduced if U.S. banks got more aggressive.

“Shadow banking networks are extremely difficult to detect, but by no means is it impossible to track Iran’s financial flows,” said Elaine Dezenski, a former senior Department of Homeland Security official now at the think tank Foundation for Defense of Democracies. “U.S. and correspondent banks are squarely on the hook, and that pressure is only increasing.”

American banks say they work closely with the Treasury on sanctions, including by filing the legally required reports on suspicious activity that could be related to Iran, WSJ said. The report added that U.S. officials will usually penalize banks in cases of significant failure to establish a sanctions-compliance program and monitor transactions.

Sanctions experts say that placing more pressure on domestic and potentially foreign banks could have drawbacks, such as giving Washington less insight on Iran’s finances. However, the  Trump administration has encouraged U.S. institutions in private meetings with bank compliance officials to pay closer attention to funds flowing from Iran.

PYMNTS looked at the challenges of policing suspicious transactions last month in an interview with Ari Tuchman, co-founder of Quantifind.

Tuchman is a former Stanford researcher whose work involved quantum sensors designed to identify minute traces of explosives related to land mines, separating tiny chemical signals from the ordinary molecules in the atmosphere.

Similarly, Quantifind combs through the relationships moving with the money, including counterparties, executives, corporate ties, news reports and other connections, to identify the person or entity that doesn’t belong.

That way of describing Quantifind also demonstrates what is broken in financial-crime screening, the report added. While banks have become very good at collecting possible signals, they still aren’t as good at determining which ones matter.

“You have to remember that the industry has an expectation of 99% false positives,” Tuchman told PYMNTS CEO Karen Webster. “What other industries tolerate that level of mistake?”

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