Banking with the dollar: How Iran keeps $9 billion flowing through US banks despite sanctions

The United States is trying to remove Iran from the global financial system. But a Wall Street Journal investigation found that billions of dollars linked to Iran still pass through US banks each year, exposing a surprising weakness in Washington’s sanctions campaign.Iranian funds may reach US banks indirectly through foreign financial institutions that maintain correspondent banking relationships with US lenders. Front companies and exchange houses can disguise the Iranian connection before dollar transactions reach U.S. banks for settlement, the report said.The scale is significant. The US Treasury identified around $9 billion in Iranian funds that passed through US banks in 2024, according to the WSJ report.The revelation comes as President Donald Trump’s administration steps up its financial pressure on Tehran through “Operation Economic Pariah,” warning companies and countries not to do business with Iran and threatening to isolate offenders from the U.S. financial system.

Oil stored in the sea acts as a lifeline

Tehran has spent years developing alternative channels to keep money moving.The US blockade has driven Iran’s oil exports, its main source of income, to near zero. But the country still has millions of barrels of crude oil stored aboard tankers, particularly in waters near Malaysia.China remains Iran’s largest oil customer, accounting for more than 80% of its exports. Despite the blockade, China imported more than 500,000 barrels a day of Iranian oil in August, according to Kpler data cited by the WSJ.Iranian crude oil can be transported via ship-to-ship transfers in international waters, making its origin more difficult to trace. The sanctioned tankers unload oil onto other vessels, which then transport the crude to China, where it can be recorded as coming from elsewhere.Vortexa estimates that around 80 million barrels of Iranian crude oil are currently in floating storage in Asian waters, potentially representing billions of dollars in revenue for Tehran.

The yuan helps Tehran avoid the dollar

Iran has also increasingly moved away from the US dollar in its trade with China.The WSJ reported that Iranian oil transactions with China are increasingly settled in chinese yuanallowing Tehran to bypass parts of the US-controlled financial system. Iran can then use the yuan to buy Chinese goods and services or trade oil in exchange for Chinese companies building infrastructure inside Iran.That creates another channel through which Iran can continue trading even as Washington tries to restrict its access to the dollar.

Crypto and Shell open other routes

Cryptocurrencies have become another tool for Tehran as sanctions have restricted its access to conventional currencies.Researchers cited by the WSJ said that Iran has used billions of dollars in cryptocurrency to trade and acquire weapons and commodities. The IRGC has also used cryptocurrency exchanges to receive payments for oil, particularly from Chinese buyers.Washington responded by sanctioning Iranian cryptocurrency exchanges and confiscating more than $1 billion in digital currency linked to Iran.But enforcement remains difficult because much of the crypto industry operates outside traditional regulation and transactions can be difficult to trace.Despite its efforts to avoid the dollar, Iran still needs access to the US currency and other major currencies for imports, arms purchases and financing of regional allies, according to Western officials cited in the report.Tehran has therefore developed a network of shell companies and exchange houses in financial centers such as Hong Kong and Dubai.These companies are able to convert Iranian oil revenues and other export earnings into dollars, euros and UAE dirhams, while concealing their ties to Tehran.

Washington sanctions face a ‘whack-a-mole’ problem

The US Treasury has increasingly targeted banks, companies and individuals involved in the network. But closing individual entities does not necessarily dismantle the system.A recent example is Banque Misr’s operations in the United Arab Emirates. The Treasury said the bank’s branch in the United Arab Emirates had processed about $1.8 billion in transactions potentially linked to Iranian shadow banking networks and took steps to restrict its access to correspondent accounts in the United States.The same international banking infrastructure that gives the United States enormous financial leverage can also provide indirect routes for Iranian money to reach the dollar system.Correspondent banking allows foreign banks to settle dollar transactions through US banks without maintaining their own banking operations in the United States. That makes the system indispensable for global trade, but also creates potential opportunities for sanctioned money to circulate through it.

Iran’s shadow network also fuels its arms industry

The financial system is not only helping Iran keep its economy afloat. It is also helping Tehran obtain components used in its military programs.According to the report, Iranian buyers can obtain materials for drones, ballistic missiles and other weapons from Chinese companies. Some suppliers may not know the final destination of the goods, while others are small enough or disconnected enough from the global financial system to be less vulnerable to US sanctions.The WSJ cited Iran’s Shahed attack drone as an example of a weapons system containing Chinese components that has been used to threaten US allies.Experts cited by the WSJ warned that Washington faces a difficult balancing act. Tightening controls could make it harder for Tehran to move money, but aggressively restricting correspondent banking could also push countries toward alternatives like the yuan and weaken the dollar’s central role in global finance.