US to cut off Banque Misr UAE from financial system over Iran ties

The United States has said it will cut off the UAE operations of Banque Misr from the US financial system after accusing Egypt’s second-biggest bank of doing business with the Iranian government.

“ Treasury promised to sever every economic lifeline Tehran has left and finally end the threat of the Iranian regime,” US Secretary of the Treasury Scott Bessent said in a statement on Friday.

“We also warned that Iran’s enablers cannot continue to enjoy access to the US dollar and the global financial system. Banque Misr UAE decided to find out the hard way, and today, we are taking the first step in holding it accountable for its continued, egregious support of the Iranian regime,” he said.

Banque Misr said on Saturday that it was reviewing the US Treasury’s notice.

The move, announced on Friday, comes as Washington has stepped up its efforts to economically pressure Iran, dubbed Operation Economic Outcast, amid the deadlocked truce talks.

Last week, the US Treasury also imposed new sanctions on nearly 60 individuals and entities, targeting networks accused by Washington of helping Iran generate oil revenue, procure weapons and conduct cyber operations.

Iran has, however, rejected the latest US sanctions, with Economy Minister Ali Madanizadeh saying they will fail.

So, what exactly is this financial limit on Banque Misr? How will it work?

Here’s what we know:

What is the new US financial limit on Banque Misr?

On Friday, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) proposed a rule that would revoke Banque Misr UAE’s correspondent banking access to US financial institutions.

This means that only the UAE branches of Egypt’s second-largest bank will be unable to carry out transactions in dollars and will lose access to the US financial market.

In a statement on Friday, the Treasury said that Banque Misr UAE is a critical node for the Iranian regime’s access to US dollars. It added that it estimates that “between January 2024 and June 2026, Banque Misr UAE processed approximately $1.8bn for 103 companies that are potentially part of Iranian shadow banking networks”.

The treasury added that in order to generate revenue abroad, Iran relies “on multi-jurisdictional shadow banking networks that provide key access to US dollar correspondent banking relationships”.

Banque Misr UAE’s customers include “front companies used by Iran’s Ministry of Defence and the Islamic Revolutionary Guard Corps to evade US sanctions, as well as to launder money on behalf of Iranian Supreme Leader Mojtaba Khamenei,” the Treasury said.

The US government’s proposed punishment is expected to come into effect in 30 days after a public comment period, and will not impact any other branches of the bank.

What has Banque Misr said?

On Saturday, the bank said in a statement that it was reviewing the US Treasury notice.

It said the new “regulatory measures (by the US) are subject to an official period for receiving and studying comments before a final decision is made regarding them.” The bank added that it “is dealing with these measures and the data and estimates they contain with the utmost seriousness and attention, and is studying them thoroughly.”

The bank announced that it will also contact the US Treasury Department for further information and until then, said its branch in the UAE continues to provide banking services to its customers in accordance with the applicable rules and procedures.

Earlier, on Friday, the Central Bank of Egypt said that, together with Egypt’s Ministry of Foreign Affairs, it was in contact with US authorities on Banque Misr’s UAE branches.

“The CBE (Central Bank of Egypt) affirms that this measure is limited to Banque Misr UAE’s USD transactions with correspondent banks only. It does not affect any other bank within the Egyptian banking sector, including Banque Misr’s operations in Egypt or any of its other overseas branches,” it highlighted.

What has the UAE said?

The UAE’s banking authorities have said they have launched an investigation into Banque Misr’s operations there.

The UAE central bank said in a statement on Sunday that it had decided to conduct a “special and urgent examination” of Banque Misr’s branches in the country, including “a forensic/in-depth lookback covering the period referred to in the statement issued by the US authorities”.

“The Central Bank expects banks licensed in the UAE not to expose the UAE’s financial system to reputational risks, to respect the laws and regulations of the countries whose financial institutions are used in conducting transactions and not to misuse the advanced financial infrastructure of the UAE,” it added in a statement.

Who else has the US taken action against?

Besides Banque Misr, the US Treasury Department’s Office of Foreign Assets Control (OFAC) imposed sanctions on Reza Mohammad Taeedi, the general manager of the Dubai branch of Iran’s Bank Melli, under a counterterrorism authority.

“Bank Melli has facilitated billions of dollars’ worth of transactions through accounts controlled by the Islamic Revolutionary Guard Corps Qods Force (IRGC-QF). It has allowed the IRGC-QF and its parent organisation, the IRGC, to move funds inside and outside of Iran. The IRGC-QF’s accounts at Bank Melli have also been used to fund Iranian-aligned proxies and partners, including in Iraq,” the Treasury department said in a statement.

Simultaneously, another Treasury department statement said that OFAC has also sanctioned Hong Kong-based Kameng Trading Limited, which allegedly “aided sanctioned Iranian persons in accessing the international financial system.”

“Sanctioned Iranian exchange house Pedram Pirouzan Exchange House, also known as Opal Exchange, has used Kameng Trading Limited to launder money for Iran,” the Treasury Department said.

Why is the US sanctioning companies doing business with Iran?

Ahead of Friday’s sanctions, on Monday August 24 , the United States announced sanctions on Iran and various global entities doing business with the country, in what officials called an “economic D-Day” and officially dubbed “Operation Economic Outcast” in an effort to isolate Tehran.

At least 60 entities across the Middle East, Asia and Europe have been targeted in the latest sanctions as part of the economic pressure campaign that could further disrupt energy markets and rattle the global economy.

Nearly six months into its war on Iran, the US is seeing little impact from its military operations.

The long-term implications of the war, analysts say, have pushed the Trump administration to try economic sanctions, but these are unlikely to compel Iran into meeting the demands.

“The United States is returning to economic pressure because military force has failed to deliver the quick victory it expected,” Negar Mortazavi, senior fellow at the US-based Center for International Policy, told Al Jazeera last week.

“The ‘economic D-Day’ declaration underscores the war’s failure so far to force Iran’s surrender or achieve Washington’s political objectives.”

Iran has rejected the sanctions.

Last week, Iranian government spokeswoman, Fatemeh Mohajerani, said the government and President Masoud Pezeshkian will guide Iran through these developments.

“The government and the president, with wisdom and resolve, will guide the country through this phase as well. We do not deny the economic hardships; but with sound judgment and by preserving unity, as in days past, we will pass through this intense gauntlet,” she posted on X.

Sardar Mohebi, an IRGC spokesperson, said the US resorting to economic warfare against Iran is itself proof of its defeat on the battlefield.

Ali Akbar Dareini, a researcher at the Centre for Strategic Studies in Tehran, said Iran is so accustomed to sanctions that it will not be hindered too greatly by the new list the US announced.

“[Iran] has a PhD in circumventing sanctions, so Iran is absolutely sure that it will emerge victorious and the US once again will fail in its efforts to suffocate Iran,” Dareini told Al Jazeera last week.

“The goal of the sanctions is to bring about an economic collapse and cause riots in Iran, but this is based on a big, massive miscalculation like America’s military war of aggression against Iran on February 28 that failed.”