Parsian Bank was incorporated in September 2001 and began its activity in January 2002 by opening four branches in Tehran. The Bank currently has 4,519 employees and 293 branches. According to statistics of the “Association of Private Banks and Credit Institutions”, in early 2016, Parsian Bank was ranked first from among Iran’s private banks and credit institutions in terms of resources available to it and the percentage of shares it owned in the Iranian stock market.
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A quick overview of the Bank’s assets shows that, as can be expected, the lion’s share of its activity is concentrated in Iran. Outside of Iran, its main activity is concentrated in China and India. Compared to 2015, it substantially increased its assets in China and slightly in the UAE; however, its activity in India has decreased substantially. (Informations from their official website)
Percentage of shared owned by Iranian banks and Credit Institutions in Early 2016
# Shareholders Analysis
An analysis of Parsian Bank’s shares shows that it is in fact owned by state-affiliated entities. Its largest shareholder is Iran Khodro that owns a little over 30% of the bank’s shares is one of those entities. However, the bank is clearly controlled by state elements that are under the authority of Iran’s supreme leader. Namely, the Executive Headquarters of the Imam’s Directive (EIKO) and the Mostazafan Foundation (aka Bonyad Mostazafan which is also highly affiliated with the IRGC). Another aspect of Parsian bank’s shareholding that is worth noting is that seven of its shareholders, all affiliated with EIKO and the Mostazafan, own a little more than 27% of Bank Karafarin shares. These seven companies, in turn, own a little over 37% of Parsian Bank’s shares.
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Moreover, the Supreme Leader controls four out of eight members of Parsian’s board of directors (i.e. these directors represent either the Mostazafan or EIKO). In a similar manner to its shareholding pattern, the same companies are also members of Karafarin Bank’s board of directors. In addition, ‘Aref Noroozi, who currently represents a subsidiary of the Mostazafan in the boards of directors, formerly represented EIKO on the bank’s board (more specifically he represented Tadbir Investment). It is worth noting that Norozi was also formerly head of EIKO multimillion real-estate division. Moreover, Kurosh Parvizian, Bank Parsian’s CEO was previously the CEO of the Mostazafan’s Bank Sina (and before that he was CEO of the Export and Development Bank of Iran).
# Hostile Takeover and Involvement in Political Rivalries
It seems that from the time of its establishment, Parsian Bank’s policies and corporate culture, made the Bank a target for the conservative camp in Iran. The bank offered interest rates that were slightly higher than other government-run banks. But, as opposed to other financial institutions that capped the size of their mortgage loans, Parsian was willing to finance 80 percent of a property’s value. Moreover, the bank had a very lenient dress code, for both men and women (for example, it allowed its male employees to wear ties and its women employees to wear makeup). If that wasn’t enough, it also got in trouble with EIKO. According to a Reuters report, in 2005, Mohammad Shariatmadari, who had served on EIKO’s board of directors, asked Abdollah Talebi, Bank Parsian’s CEO, for a $44 million loan for a foundation he managed. The latter refused since Shariatmadari had offered no collateral for such a loan.
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During his election campaign and even more so after his election as president, Ahmedinejad publicly criticized private banks of corruption and benefitting only the more affluent sectors of the Iranian society. Ahmendinejad particularly criticized the lending practices of private banks, making huge loans to favored customers. The consensus of the Iranian media was that his attack was primarily aimed at Parsian Bank.
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It seems that Ahmedinejad was convinced that the bank was owned by his political rivals, namely Ayatollah Rafsanjani, his rival in the presidential elections. After the elections, Talebi, sent the newly elected president a list of the bank’s shareholders to allay his suspicions of Rafsanjani’s involvement. It seems, however, that his efforts were to no avail, seeing Ahmedinejad’s attacks on the bank were not only motivated by personal revenge, but were also part of his political agenda. Saeed Laylaz, economic and political observer in Tehran, told IPS the following regarding this affair: ’Parsian was a good target for his populist attacks by which he meant to attract the masses and to fight capitalism within the framework of his own populist policies. On the other hand, the bank and its CEO had resisted his economic policies such as an imposed order to reduce interest rates as best as they could. The bank, with around 80 percent of the total capital of all private banks in Iran had become too big and scary for the government. It was capable of influencing the market with its every manoeuvre.
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Apparently under pressure from Ahmedinejad, Talebi was forced to resign as managing director in 2006 and later quit the bank’s board after Iran’s Central Bank disqualified him for allegedly violating its rules on loans.
It was during this point in time, that EIKO took advantage of the bank’s predicament and took over it. Although the stake of EIKO’s acquired shares was in the whereabouts of 16%, the atmosphere at the bank changed dramatically According to an ex-employee of the bank (interviewed by Reuters):. ‘Ties were banned for men. Female employees began receiving letters asking, “Why are you wearing jeans? Why are your lips red?” New managers arrived. “Even the customers of the bank changed,” the ex-employee said. “They brought their own customers and clients.1’ It was not long after the takeover that the Bank was involved in the Iranian Regime’s illicit activities.
# Involvement in Illicit Activity
- Parsian Bank is added to the Specially Designated Nationals (SDN) list maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on October 16, 2018 pursuant to Executive Order 13224, for assisting, sponsoring, or providing financial, material, or technological support for, or financial or other services to or in support of, Andisheh Mehvaran Investment Company;
Andisheh Mehvaran Investment Company is designated by OFAC pursuant to E.O. 13224 for being owned or controlled by Iran Zink and Mines Development Company, and also for assisting, sponsoring, or providing financial, material, or technological support for, or financial or other services to or in support of, IZMDC;
- According to documents revealed on WikiLeaks, in 2008, Iran paid North Korea 2.5 million dollars for weapons purchases. The payments for these transactions were made by a company in Iran called “Hong Kong Electronics”. The Company wired the 2.5 million dollars in three separate payments during November 2007 via Parsian Bank in Iran to the Bank Mellat’s branch in Seoul. According to the WikiLeaks cables, “Hong Kong Electronics” is a shell company owned by the North Korea’s “Tanchon Commercial Bank”.
- Between the years 2012 and 2013, the Parsian Bank was part of a concentrated effort meant to circumvent sanctions in what became known as “gas-for-gold” transactions. This was part of the activity of a wider network of Turkish front companies that were involved in circumventing sanctions along with Turkey’s Halkbank. The modus operandi of this network was to issue invoices for fake transactions for goods that were permissible for Iran under international sanctions. This way, the Turkish network managed to bypass sanctions, and allowed the Iranian banking system that had been cut off from Swift services to move funds through companies in Turkey and money exchange houses in Dubai.
- The Bank was designated by OFAC on December 7, 2012 (the designation was lifted after the signing of the JCPOA).
- In September 2012, Bank Parsian was refused by the Reserve Bank of India and the Indian Ministry of Finance to open a branch in the country. According to one report: ‘the Ministry of Home Affairs had denied security clearance to applications by Parsian Bank and two other Iranian banks fearing threat of money laundering and terror financing in banking transactions as cautioned by the Financial Action Task Force (FATF).
# Post JCPOA Links with Foreign Entities
- In late September 2017, Austria’s Oberbank and Denmark’s Danske Bank each entered into framework agreements with a number of Iranian banks, among them Parsian Bank. According to the agreements signed, both European banks will respectfully provide financing for Austrian and Danish companies exporting to Iran. Some reports accentuated the importance such an announcement might have on other banks since many large European banks are still reluctant to reenter into the Iranian market. Oberbank’s general manager, Helmut Edlbauer, was quoted after the deal was signed stating that ‘We worked really hard to come back to the old situation, to re-establish relations with all the partners again,’ and further stated that ‘all the compliance and all the documentation is the base for being able to do transactions with banks in Iran and this was not an easy job and it took time.
- On September 17, 2017, Parsian Bank signed an agreement of cooperation with South Korea’s Exim Bank. According to the agreement, a credit line will be established to promote various projects both in the government and private sectors with a total worth of ten Billion USD over a period of ten years.
- On May 29, 2017, Iran’s’ Ministry of Foreign Relations announced that it reached an agreement for cooperation was reached between Italy’s “Banca Popolare di Sondrio” and 20 Iranian Banks, among them Parsian Bank. According to the agreement, the Italian bank will allow its branches in Italy to receive money transfers directly from Iran which will considerably reduce both risk as well as rates for Iranian Banks.
- On February 16, 2016, it was reported that an Istanbul-based payments startup company called Iyzico, signed a deal with Bank Parsian’s electronic payments platform, Parsian E-Commerce Company (PECCO). The deal will allow the customers of the Turkish Company process transactions from some 230 million payment cards that were until recently disconnected from any financial system outside Iran.
- In August 2016 it was reported that the Bank was given approval to open a branch in Munich. This, however, seems yet to have happened.
Like Karafarin Bank, Parsian is also listed by Irans’ Central Bank as a “non-government owned bank”. However, as the shareholders analysis shows, the bank is far from being controlled by private entities. The bank is clearly under heavy influence and control of very certain elements in the Iranian regime. Elements that are controlled and aligned with the supreme leader. Both EIKO and the Mostazafan are not only entities controlled by the Iran’s Supreme Leader, Ayatollah Khamenai, they are tools of political and financial control.
Another interesting phenomena that should be noted is that the Supreme Leader’ economic empire, like that of the IRGC, is managed by professional technocrats (like the Bank’s CEO and ‘Aref Noroozi) whose recurring appearance in various companies is not only an indication of whether the Company is linked to “bad elements”, but, also of the existence of a network of trusted managers and officials that are charged with handling and developing the Supreme Leaders economic interests.
Finally, such prominent influence of “bad elements” on the bank, make it a high risk bank for foreign investors since it is highly probable that the bank will be used habitually to serve the interests of these negative elements within in the Iranian regime. In fact, it has already engaged in such activity in the past. Currently, Parsian bank poses two major threats to anyone entering into a contract with it:
1. It is controlled by “bad elements” that exposes investors to sanctions and other punitive actions.
2. Since it was embroiled in inter-political rivalries in Iran and is this identified with some political party in Iran, it is prone to fall victim to the unexpected and ruthless ebbs and flows of the Iranian political system. Thus deeming it an unsafe investment and business partner.