US moves to cut Banque Misr’s UAE arm off from dollar system over alleged Iran links

The US Treasury Department is moving to restrict Banque Misr's UAE operations from the American financial system, alleging the bank helped provide Iran with access to US dollars and processed about $1.8 billion for companies potentially linked to Iranian shadow-banking networks.

The Treasury's Financial Crimes Enforcement Network (FinCEN) on Friday proposed barring US financial institutions from opening or maintaining correspondent accounts for Banque Misr UAE. US banks would also have to take steps to prevent transactions involving the UAE operation from passing through their correspondent accounts.

In practical terms, the measure could make it considerably harder for Banque Misr UAE to conduct transactions involving US dollars, much of which ultimately depends on access to the American banking system.

The restrictions aren't yet in effect. The proposal will be subject to a 30-day public-comment period after publication in the Federal Register before FinCEN decides whether to issue a final rule.

Importantly, the action applies specifically to Banque Misr UAE and doesn't extend to Banque Misr's operations elsewhere. Banque Misr is Egypt's second-largest bank.

Treasury flags $1.8 billion in transactions

At the centre of the case are transactions processed between January 2024 and June 2026.

FinCEN said Banque Misr UAE processed about $1.8 billion for 103 companies that it assessed could be part of Iranian shadow-banking networks.

The Treasury alleged that the UAE operation had become an important channel through which Iran accessed US dollars. Some customers were apparent front companies used by Iran's Ministry of Defense and the Islamic Revolutionary Guard Corps to circumvent US sanctions, according to the department.

Iran uses networks of companies and financial intermediaries across several jurisdictions to move proceeds from oil sales, obtain foreign currency and work around restrictions on its access to the international financial system, Treasury said.

Treasury Secretary Scott Bessent warned financial institutions that helping Iran circumvent those restrictions could put their own access to the dollar and the global financial system at risk.

Why access to US correspondent banks matters

The proposed action isn't the same as placing Banque Misr UAE on a conventional US sanctions list.

Instead, FinCEN is seeking a special measure under Section 311 of the USA PATRIOT Act.

Correspondent banking allows a foreign bank without a direct presence in the US to access services provided by an American bank, including processing dollar transactions.

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Restricting that access can therefore have consequences beyond transactions conducted physically in the US. Because the dollar plays a central role in international payments, losing access to US correspondent banks can make it much harder for a foreign financial institution to conduct dollar-denominated business.

The proposal would require US financial institutions not only to avoid maintaining correspondent accounts directly for Banque Misr UAE, but also to take steps to prevent other correspondent accounts from being used to process transactions involving it.

This isn't an OFAC designation

There is also an important distinction between Friday's two Treasury actions.

Banque Misr UAE hasn't been designated by the Office of Foreign Assets Control (OFAC). FinCEN is instead proposing to restrict its access to US correspondent banking.

Separately, OFAC sanctioned Reza Mohammad Taeedi, general manager of Iran's Bank Melli branch in Dubai.

It also sanctioned Hong Kong-based Kameng Trading Limited, which Treasury alleged helped sanctioned Iranian exchange house Pedram Pirouzan Exchange House, also known as Opal Exchange, launder money and gain access to the international financial system.

Taeedi was designated under a US counterterrorism authority for acting on behalf of Bank Melli, while Kameng Trading was designated under sanctions covering Iran's financial sector.

Unlike the proposed FinCEN action, those OFAC designations have an asset-blocking effect: property and interests in property belonging to the designated parties that are in the US or controlled by US persons are blocked, subject to applicable exemptions and licences.

Part of a wider squeeze on Iran's financial networks

The measures form part of Operation Economic Outcast, announced by Bessent on August 24 as an effort to target the financial networks Iran uses to move money and generate revenue despite US sanctions.

Treasury said the operation would raise the sanctions risk for banks and other entities that facilitate money laundering or sanctions evasion for Iran.

The strategy puts financial intermediaries at the centre of Washington's pressure campaign. Rather than focusing solely on Iranian entities, US authorities are seeking to raise the cost for foreign institutions that provide them access to currencies and the wider financial system.

That approach also presents Washington with a delicate balancing act.

China remains a major buyer of Iranian oil, but targeting large Chinese financial institutions could risk retaliation and broader disruption to global financial markets. Measures against institutions and intermediaries elsewhere can allow Washington to squeeze parts of Iran's financial network without immediately taking that bigger step.

For Banque Misr UAE, however, the process isn't over. FinCEN will consider responses received during the 30-day comment period before determining whether to impose the proposed restrictions.

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