The U.S. Treasury Department on Tuesday designated 35 entities and individuals it said help run Iran’s shadow-banking system, focusing on private companies known as “rahbars” that move money for sanctioned Iranian banks through foreign shell companies and front-company accounts.

Treasury’s Office of Foreign Assets Control (OFAC) said rahbars manage thousands of overseas shell companies used to execute payments for Iranian imports and exports, allowing Iranian banks cut off from the international financial system to access foreign banks in key jurisdictions. The companies coordinate with Iranian exchange houses and front companies to facilitate payments tied to sanctioned trade, OFAC said in a statement.

This “shadow banking” system serves the Islamic Revolutionary Guard Corps, Iran’s Armed Forces General Staff and the National Iranian Oil Company, Treasury said. The networks allow Iran’s armed forces to receive payment for illicit oil sales, buy sensitive components for missiles and other weapons systems, and transfer funds to Iran-backed proxies.

A central target was Farab Soroush Afagh Qeshm Company, or FSAQ, which Treasury identified as the rahbar company for Shahr Bank. OFAC said FSAQ moves funds for Shahr Bank clients through a network of foreign front companies, including HMS Trading FZE, which Treasury said has facilitated Iranian oil shipments on behalf of Iranian state oil companies and security services. 

Treasury said FSAQ, through HMS Trading, also used front companies in multiple jurisdictions, including the United Kingdom-based Shuqun LTD, which it said transferred more than $70 million in payments for Iranian crude oil and oil distillates on behalf of NIOC through 2024. 

OFAC also designated rahbar companies affiliated with several sanctioned Iranian banks, including Bank Sina, Bank Sepah, Bank Mellat, Parsian Bank, Tourism Bank, and Eghtesad Novin Bank. 

In a related warning, OFAC alerted financial institutions to sanctions risks involving China-based independent “teapot” oil refineries, primarily in Shandong Province, because of their role in importing and refining Iranian crude. Treasury said China buys about 90 percent of Iran’s oil exports, with teapot refineries accounting for most of those imports. 

The alert urged banks to implement risk-based controls to avoid facilitating transactions involving designated teapot refineries or other such refineries that may import Iranian oil, conduct enhanced due diligence on transactions involving China-based refineries, and communicate sanctions-compliance expectations to correspondent banks.