Ranking Member Tim Scott and Senator Mike Rounds are seeking explanations after reports emerged that the Federal Reserve Bank of New York did not implement essential anti-money laundering controls. This oversight allegedly allowed billions of dollars to flow to Iran and its associated terror groups. The senators have criticized the NY Fed and the Federal Reserve System for not applying their own Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) standards.
In a letter addressed to leaders of both the Federal Reserve Bank of New York and the Board of Governors of the Federal Reserve System, Scott and Rounds stated, “According to the report and U.S. officials, ‘as much as 80% of the more than $250 million in dollar wire transfers flowing through them [the Iraqi banks] on some days were untraceable and some portion of that amount went secretly to Iran’s Islamic Revolutionary Guard Corps and the anti-U.S. militias it supports.’ If accurate, this would represent one of the single greatest failures of the U.S. financial regulatory regime.”
The letter further claims that for over twenty years, transactions from private banks in Iraq were processed by the NY Fed without necessary compliance checks. These transactions reportedly lacked transparency regarding fund origins or recipients. The senators noted, “As you know, if these actions were carried out by a commercial bank, the bank and its executives would likely be subject to severe civil and criminal penalties, including permanent closure.”
Scott and Rounds have requested detailed responses about these reported failures and measures being taken to rectify them.
Ranking Member Scott has been actively overseeing fund flows to Iran, especially following an attack on Israel by Hamas on October 7, 2023.