Iran is one of the most corrupt regimes in the world

Reuters, May 13, 2016 - The United States really wants European banks to lend to Iran. Secretary of State John Kerry used a London meeting with financial institutions on Thursday to stress the scope for legitimate Iranian business, following the lifting of sanctions in January. Their likely reluctance to follow his advice says more about the state of banking than the state of Tehran.
On the face of it, European banks have a huge opportunity in an economy with around $400 billion of GDP and the potential to grow 6 percent next year.
While U.S. groups are still barred from transacting with Iranian clients, others can go to Tehran, set up a branch and start lending. They just have to make sure they don’t do business in U.S. dollars, or lend to anyone on the Specially Designated Nationals (SDN) list of Iranians deemed to have undesirable or terrorist links.
This is, of course, a huge caveat. The risks are massive. Iran comes a lowly 130th out of 168 in Transparency International’s Corruption Perceptions Index. With lots of business likely to hinge on middlemen, the scope for lending to someone linked in some way to bribery or a SDN is high, and that would mean the European bank falling foul of American and British foreign bribery laws. For banks like BNP Paribas – fined $9 billion by U.S. authorities in 2014 for sanctions violations – the risks are fresh in the memory.
Any Tehran-bound bank would have ensure no American staff deal with the client. Any involvement would also run the risk of annoying Iran’s regional rival Saudi Arabia at a time when the latter is hiring banks for the initial public offering of the $2 trillion Saudi Aramco. Throw in the fact that the election of Donald Trump as president could mean a U.S. policy shift, and there’s a watertight case for steering clear.
But that’s not the point. Banks like Goldman Sachs staked a claim in China by getting in early, and won special treatment from regulators and much respect from clients for doing so. By skirting Iran, lenders risk giving the impression that they don’t have faith in their own compliance systems to ward off harm. That could be taken as a problem with Tehran, but it’s a symptom of a trust problem that runs much deeper.