Washington seeks to dry up the sources of Iran’s funding for the militias
Nelson discussed ways to protect Iraqi and international financial systems from criminal, corrupt and terrorist bodies.
Nelson meets with senior officials led by Mohammed Shia Al-Sudani
WASHINGTON – A senior official in the US Treasury Department in Iraq discussed the file of Iran’s evasion of sanctions and held the financial sector in the country to be compatible with international standards, referring to efforts to curb the smuggling of the dollar to Tehran, as this comes amid great tension in the region, especially the killing of American soldiers near the Jordanian-Syrian border as a result of attacks believed to be from militias loyal to Tehran. A Treasury Undersecretary for Terrorism and Financial Intelligence Brian Nelson, the ministry’s top sanctions official, traveled to Iraq on a visit that began on Sunday and lasted until Monday, where he met with senior Iraqi officials, including Prime Minister Mohammed Shia al-Sudani, as part of ongoing work to combat illicit financing, a U.S. State Department spokesman said. He added that during the visit, Nelson discussed with his counterparts ways to protect Iraqi and international financial systems from criminal, corrupt and terrorist actors, noting that Washington will cooperate to protect the Iraqi financial sector “from (any) abuse by Iran or any other evil party.” The Iraqi government came to power with the support of powerful Iran-backed parties and armed factions with interests in Iraq’s largely informal economy as the United States revealed that Tehran sought to evade sanctions by smuggling the dollar from Iraq through a complex financial system controlled by political forces and militias loyal to the Iranian regime. “From the perspective of the Treasury Department, I think we are really satisfied with the transparency tools put in place by the Central Bank of Iraq to identify illicit financial flows that pass through the Iraqi financial system,” Nelson said Monday. But he warned that Iraq should always put the risks of sanctions into its eyes.
Iraq must always put the risks of sanctions to its eyes
“We will continue to monitor Iraqi individuals, companies and banks that operate for or on behalf of groups designated by the United States as terrorist,” he added. The United States on Monday designated Al-Huda Bank Iraq as a foreign financial institution of major concern regarding money laundering and accused it of acting as a conduit to finance terrorism. The Treasury Department’s Financial Crime Service also proposed a decision to separate the bank from the U.S. financial system. Washington has also imposed sanctions on the bank’s owner. “Bank Al-Huda and its foreign sponsors, including Iran and its agents, are diverting funds that could have supported the legitimate business and economic aspirations of the Iraqi people,” the Treasury said in a statement. These bad actors fuel violence that threatens Iraq’s stability and the lives of Americans and Iraqis alike.” Nelson’s visit to Iraq comes as the United States seeks to crack down on a group of Iranian-backed proxies at a time when there are attacks on Israeli and U.S. targets and other interests, given the situation in Gaza, Iraq, Lebanon, Syria and Yemen. Washington asked Iraq to address the ongoing risks of the misuse of the US currency in Iraqi commercial banks, and in July it banned 14 Iraqi banks from conducting dollar transactions in a major campaign targeting the illegal use of the dollar.
With reserves of more than $100 billion in the United States, Iraq relies heavily on Washington’s goodwill to ensure that oil revenues and money are not subject to U.S. sanctions. Iraq’s central bank governor said Iraq is committed to implementing stricter financial regulations and combating dollar smuggling. Nelson is set to travel from Iraq to the UAE where Washington has also expressed concerns about sanctions evasion.
Shafaq News/ The Central Bank of Iraq revealed, on Tuesday, that the US Treasury Department had imposed sanctions on the Iraqi “Al-Huda” Bank, attributing the reason to its activities in 2022.
The Central Bank of Iraq stated in a statement today that the bank did not participate in the foreign currency buying and selling window during the year 2023, stressing that it continues to provide its banking services without dealing in the US dollar and is allowed to deal in other foreign currencies.
Yesterday, Monday, the US Treasury Department included the Iraqi Al-Huda Bank on the sanctions list, as it is a source of major concern regarding money laundering because it “acts as a channel for financing terrorism by Iran.”
A US Treasury statement, viewed by Shafaq News Agency, said, “Al-Huda Bank, an Iraqi bank that acts as a channel for financing terrorism, as a foreign financial institution raises a major concern about money laundering,” noting that “the Financial Crimes Enforcement Network (FinCEN) proposed a rule… It would separate the bank from the US financial system by prohibiting local financial institutions and agencies from opening or maintaining a correspondent account for or on behalf of Al Huda Bank, in addition to imposing sanctions on the bank’s owner by the Office of Foreign Assets Control (OFAC).
According to Treasury, Al-Huda Bank, and its foreign sponsors, including Iran and its proxy groups, are diverting funds that could support the legitimate businesses and economic aspirations of the Iraqi people, and these bad actors are fueling violence that threatens the stability of Iraq and the lives of American and Iraqi citizens alike.
According to the US Treasury statement, Al-Huda Bank has for years exploited its access to US dollars to support designated foreign terrorist organizations including the Iranian Revolutionary Guard, as well as Iraqi militia groups allied with Iran including Kataib Hezbollah and Asaib Ahl al-Haq.
The statement indicated, “The Chairman of the Board of Directors of Al-Huda Bank is complicit in Al-Huda Bank’s illicit financial activities, including money laundering through front companies that hide the true nature of the parties involved in the illicit transactions, which ultimately enables the financing of terrorism.”
BREAKING: A Hong Kong judge has ordered Evergrande to liquidate.
——
The dominoes have started to fall. Get ready for the crash everyone
——
Forwarded from Tironianae:
China Evergrande Group’s stock jumping off a cliff as Asian markets begin trading.
China Evergrande ordered to liquidate by Hong Kong court
Jan. 28 – REUTERS
A Hong Kong court on Monday ordered the liquidation of China Evergrande Group, a move likely to send RIPPLES through China’s crumbling financial markets as policymakers scramble to contain the deepening crisis.
“The market will pay close attention to what the liquidators can do after being appointed, especially whether they can achieve recognition from any of the three designated PRC courts under the 2021 Arrangement regarding Cooperation on Cross-border Insolvency Cases between the Mainland and the Hong Kong SAR. The liquidators will have very limited powers of enforcement over onshore assets in mainland China if they cannot get such recognition.
“If Evergrande is put into bankruptcy administration by a PRC court, international investors will need to see whether the PRC court-appointed administrator can work with the liquidators appointed by the Hong Kong court to achieve a transparent, cooperative and fair restructuring or liquidation of Evergrande.”
CHRIS BEDDOR, DEPUTY DIRECTOR OF CHINA RESEARCH, GAVEKAL DRAGONOMICS, HONG KONG
“Evergrande is a unique case in many respects, but it does underscore that the overall situation for property developers has not meaningfully improved in recent months. In fact, the industry continues to worsen in some ways, such as sales revenue.
“There’s also a fairly clear transmission mechanism for how this impacts the mainland market: homebuyer sentiment. Potential homebuyers are still deeply reluctant to buy presold homes from troubled developers, and we see that reflected in the data.
“This certainly won’t help the sentiment problem.”
FERN WANG, SENIOR RESEARCHER, KT CAPITAL GROUP, HONG KONG
“The ruling should only have limited short-term implications to investor sentiment as it is long in the making. Evergrande’s liquidation ruling should not preclude other troubled property developers from reaching an agreement with their creditors. Developers just need to show that they are willing to work with creditors to come up with a fair and feasible restructuring plan. Sunac, another major troubled developer, managed to reach a restructuring plan with its creditors at the end of last year, showing that it is something doable.
“Investors should look at each developer on a case-by-case basis. Evergrande’s situation is more complicated than other developers as its founder Hui Ka Yan is under arrest and its major subsidiary in China Hengda Real Estate Group is being investigated. The investigation has precluded the company from issuing new debts and limits its ability to reach an agreement with its creditors. It was also reported that Hui is likely to have divorced his wife for separation of assets, making people question his willingness to support the group.
“Recovery hopes are grim given the heavy indebtedness of the company and the often-structural subordinated position of the offshore creditors. Evergrande’s bonds are currently trading at less than 2 cents on a dollar.”
DEREK LAI, GLOBAL INSOLVENCY LEADER, DELOITTE
“Liquidator of holding companies in Hong Kong as shareholders can try to take control of onshore assets by changing legal representatives of the relevant onshore subsidiaries, but it will usually take quite some time to do so even if it is possible.
“The Evergrande case is much more complicated. Even though the group has many assets in mainland China, it is not easy for the offshore liquidators to take direct possession of them.
“In the event of liquidation, the biggest risk for creditors is they may not have high recovery percentage of their debts as compared to the total debts.”
WANG BO, CHIEF INVESTMENT OFFICER, JURUN CAPITAL, SHANGHAI
“This Evergrande thing has the potential to go either way at this point. The first is whether an offshore liquidation is equivalent to a domestic consolidated bankruptcy. Even if it is equivalent to judicial bankruptcy, I think it is difficult to say whether this workload can be replicated. On the other hand, the most nervous property developers at the moment will definitely be the least qualified ones.”
MARK DONG, CO-FOUNDER AND GENERAL MANAGER, MINORITY ASSET MANAGEMENT, HONG KONG
“The liquidation had been expected, and now it’s confirmed. It has already been priced in.”
CAI HONGFEI, PROPERTY ANALYST, CENTRAL WEALTH SECURITIES
“I think the impact is limited. Evergrande no longer has ability to operate. It cannot solve its own problem, so has no other choice but liquidation. And the boss has been arrested. Evergrande is a special case.”
NICHOLAS CHEN, ANALYST, CREDITSIGHTS, SINGAPORE
“For other troubled Chinese developers, overall market sentiment would undoubtedly be affected, though each company’s restructuring is dependent on myriad of factors…
“Nevertheless, the cases of Evergrande and Jiayuan, which also received a winding up order in May last year, highlight that defaulted developers would need to provide a concrete restructuring plan to the HK courts and they do not have a perpetual runway to do so.
“In terms of regulatory stance, we expect the increasingly supportive policy environment to provide some breathing room for the cash-strapped property sector, though the extent of the breathing room for each developer is likely to vary. We expect the regulatory support to remain bifurcated and biased towards the stronger (mostly state-linked) developers.”
REDMOND WONG, CHIEF CHINA STRATEGIST, SAXO MARKETS, HONG KONG
“For overseas creditors, focus will be on if the liquidator will succeed in its applications for assistance to mainland courts in Shanghai, Shenzhen and Xiamen under the cooperation mechanism established in 2021 and get hold of assets in the mainland. For shareholders of the listed company (of Evergrande) in Hong Kong, the likelihood of getting anything out of the winding up process is very low.”
DAMIEN BOEY, CHIEF MACRO STRATEGIST, BARRENJOEY, SYDNEY
“These issues are well known for some time. The companies that are in trouble are the ones we have known about, so I think the best thing that you can do as a policymaker with the stated policy intent is to make sure that you take control of these unwind processes and make them orderly. And I think that’s what they’re doing. And so if you can do that, then you can avoid more blow-ups and unforeseen issues in the property sector. And, you can avoid some of the collateral damage.
“So, I think we’re closer to the end of this wind-up cycle than the beginning, provided that policymakers do what the market actually wants them to do, which is obviously stimulate growth and support the property sector and it looks to me they’re doing that.”
RAYMOND CHENG, HEAD OF CHINA RESEARCH, CGS-CIMB SECURITIES, HONG KONG
“The liquidation order will be negative for Evergrande itself for sure, the assigned liquidator will offload the company assets as soon as possible, and the price may be very bad.
“It might affect sector sentiment in the short term, but Evergrande’s restructuring has its own specific problems. It is possible that other developers will be willing to compromise more in negotiations as they fear creditors will be applying for liquidation.”
GARY NG, SENIOR ECONOMIST, NATIXIS
“It is not an end but the beginning of the prolonged process of liquidation, which will make Evergrande’s daily operations even harder. As most of Evergrande’s assets are in mainland China, there are uncertainties about how the creditors can seize the assets and the repayment rank of offshore bondholders, and situation can be even worse for shareholders. Investors will be concerned about whether there will be a snowball effect on other developers as the queue to liquidation is long.”
ANDREW COLLIER, MANAGING DIRECTOR, ORIENT CAPITAL RESEARCH, HONG KONG
“Evergrande’s liquidation is a sign that China is willing to go to extreme ends to quell the property bubble. This is good for the economy in the long term, but very difficult in the short term.”
WONG KOK HOONG, HEAD OF EQUITY SALES TRADING, MAYBANK, SINGAPORE
“The Hang Seng Property index still trading marginally higher. Evergrande (has been) ongoing for some time now, think investors have moved past this.”
MATT SIMPSON, SENIOR MARKET ANALYST, CITY INDEX, BRISBANE
“I think the bigger surprise here is that it took so long for Evergrande to be liquidated. Clearing out the deadwood should be seen as a positive, but I doubt it will boost confidence in the property sector on this news alone.”
KEN CHEUNG, CHIEF ASIAN FX STRATEGIST, MIZUHO, HONG KONG
“The markets are still focused on the property sector downturn in China, so I think they will evaluate if this liquidation or the events (will) pose any impact on the progress to fix the property sector in China, and how the Chinese government will make any arrangement due to this kind of court case impact.”
KENNY NG, SECURITIES STRATEGIST, CHINA EVERBRIGHT SECURITIES INTERNATIONAL COMPANY, HONG KONG
“This may further impact the confidence of mainland creditors and increase the difficulty of Evergrande’s restructuring in mainland China. At the same time, this may also affect investors’ confidence in the mainland real estate industry and the willingness of mainland residents to purchase properties. This has the potential to have a dampening effect on the economy and the capital market.
“Whether offshore creditors can apply for the sale of Evergrande’s assets in mainland China will depend on whether the mainland courts recognise or enforce the winding-up order from Hong Kong. If recognised or enforced, offshore creditors have a chance to claim for the assets in the mainland. Otherwise, they can only apply for the liquidation of assets in Hong Kong.”
BACKGROUND
* Evergrande defaulted on offshore debt in late 2021, becoming a symbol of the debt crisis that has engulfed China’s property sector.
* The world’s most indebted developer has around $300 billion of liabilities and $240 billion of assets.
* The liquidation petition was first filed in June 2022 by Top Shine, an investor in Evergrande unit Fangchebao which said the developer had failed to honour an agreement to repurchase shares it had bought in the subsidiary.
* Evergrande had been working on a $23 billion debt revamp plan for two years.
* Its original plan was scuppered in late September when it said its billionaire founder Hui Ka Yan was under investigation for suspected crimes.
* An ad hoc bondholder group had been siding with the developer in opposing the liquidation petition until the last hearing in early December.
Reporting by Reuters Asia bureaus, compiled and edited by Subhranshu Sahu
