Understanding the FinCEN Findings
In October 2025, the U.S. Financial Crimes Enforcement Network (FinCEN) released its latest Financial Trend Analysis (FTA) on Iranian shadow banking.[1]
The report offers one of the clearest pictures to date of how Iran continues to evade international sanctions through global financial and corporate networks.
FinCEN identified roughly $9 billion in suspicious transactions during 2024 linked to potential Iranian shadow banking activity. These flows reveal a sophisticated web of front companies, shell entities, and exchange houses operating across multiple jurisdictions — with the United Arab Emirates (UAE), Hong Kong, and Singapore acting as the main transit points for illicit oil sales, money laundering, and technology procurement.
As one of the region’s leading financial and trading hubs, the UAE features within this analysis — reflecting both its global connectivity and the ongoing challenges that accompany open and diversified trade ecosystems.
UAE Regional Challenges
While the FinCEN report identified significant transaction volumes passing through UAE-linked entities, this must be viewed in the context of the country’s position as a central node for global trade and finance. The UAE’s open economy, extensive re-export market, and geographic proximity to sanctioned jurisdictions make it uniquely exposed to cross-border financial flows — both legitimate and illicit.
The report highlights how complex supply chains and multi-jurisdictional corporate structures can inadvertently provide openings for sanctions evasion. Free zones and trading hubs — such as the Dubai Multi-Commodities Centre (DMCC) — facilitate high-speed, large-volume transactions that underpin regional commerce, but they can also be exploited by illicit actors seeking to mask ownership or transaction origins.
The UAE has demonstrated a clear commitment to addressing these vulnerabilities. Over recent years, it has implemented Financial Action Tax Force (FATF)-aligned reforms, enhanced beneficial ownership disclosure, strengthened supervision of Designated Non-Financial Businesses and Professions (DNFBPs), and increased regulatory coordination across federal and free zone authorities. These measures reflect the UAE’s determination to reinforce transparency, improve enforcement, and align fully with international compliance standards. However, the FinCEN findings highlight the need for continued vigilance. The scale and sophistication of Iranian shadow banking networks show that compliance measures must remain dynamic and intelligence-led.
Why This Activity Persists
Despite notable progress, structural and regional realities continue to create opportunities for illicit financial activity. The UAE’s role as a trade and logistics hub means its institutions interact with a wide range of jurisdictions, supply chains, and counterparties. This diversity makes sanctions screening and beneficial ownership verification complex and resource-intensive.
Illicit actors increasingly use multi-layered global networks — spanning jurisdictions such as Hong Kong, Singapore, and China — to obscure their financial footprints. These patterns highlight the limitations of traditional screening tools and the need for enhanced network-based analysis capable of mapping indirect relationships and ownership links.
The UAE’s ongoing work with the FATF and other international partners demonstrates its proactive approach to strengthening compliance. The focus has shifted from reactive enforcement toward preventive intelligence-led regulation, positioning the UAE as a regional leader in evolving anti-money laundering (AML) and counter-terrorist financing (CTF) standards.
Implications for the Financial Sector
For the UAE’s financial institutions, the FinCEN report represents both a warning and an opportunity. It underscores how illicit actors exploit international correspondent relationships to gain indirect access to the U.S. dollar clearing system. This exposure raises regulatory and reputational risks, particularly given the heightened scrutiny from U.S. authorities and global correspondent banks.
Failure to identify and mitigate such risks could lead to enhanced due diligence demands or de-risking by international partners, regulatory penalties under domestic AML legislation, and reputational harm that undermines the UAE’s progress toward FATF compliance and its role as a global financial centre.
How Financial Institutions Can Strengthen Their Defences
The path forward requires UAE institutions to proactively strengthen their sanctions and evasion risk management frameworks. FinCEN’s findings offer valuable insights into where control enhancements should be prioritised.
- Reinforce Sanctions Evasion Controls: Deploy advanced network-based monitoring and artificial intelligence (AI)-driven analytics to uncover indirect relationships between sanctioned entities and third-party front companies.
- Deepen Beneficial Ownership and Customer Due Diligence (CDD) Practices: Enhanced due diligence must be mandatory for clients operating from free zones, offshore jurisdictions, or non-resident accounts.
- Strengthen Trade and Maritime Monitoring: Integrate vessel tracking (automatic identification system (AIS)) data, trade documentation verification, and dual-use goods screening into transaction monitoring.
- Enhance Governance and Culture: Ensure senior management accountability, cross-departmental escalation protocols, and frequent scenario-based training reflecting current typologies.
How Ankura Can Help
At Ankura, we support financial institutions and regulators across the Middle East in developing robust, future-ready compliance frameworks. Our multidisciplinary teams combine regulatory expertise, forensic analytics, and technology implementation to help organisations stay ahead of evolving sanctions risks.
We stand ready to help UAE institutions navigate this challenge — protecting business integrity while safeguarding the nation’s reputation as a leading global hub for commerce and finance. Our services include:
- Sanctions Evasion Threat Assessments: Conduct holistic, data-driven evaluations of an institution’s exposure to sanctions evasion risk and develop actionable risk heatmaps.
- Control Framework Reviews: Benchmark sanctions and AML frameworks against FinCEN, FATF, and UAE Central Bank expectations; assess design and effectiveness of Know Your Customer (KYC) and transaction monitoring controls.
- Model Validation and Systems Effectiveness: Independently test screening and monitoring models, evaluate workflows, and recommend improvements to enhance detection of complex layering and trade-based activity.
Please contact our experts Natalia Rabicka, Aditya Chopra, Andrew Pimlott, and James Tebbs for more information.
Sources
[1] https://www.fincen.gov/system/files/2025-10/FTA-Iranian-Shadow-Banking.pdf
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© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
