The Madagascar-flagged tanker Briont, under U.S. sanctions for links to Iran's Islamic Revolutionary Guard shipping network, near the Baniyas oil terminal, in Baniyas, Syria, on April 8.Khalil Ashawi/Reuters
U.S. President Donald Trump is stepping up economic pressure on Iran by leaning harder on domestic and foreign businesses, especially banks, to do their part in cracking down on oil smuggling by the Middle Eastern country.
The Financial Crimes Enforcement Network, or FinCEN, an arm of the U.S. Department of the Treasury, issued a new alert on Monday, urging financial institutions to detect and disrupt illicit financial flows from black-market oil sales that benefit Iran’s Islamic Revolutionary Guard Corps.
A designated terrorist group in both the U.S. and Canada, the IRGC’s modus operandi includes laundering the proceeds of energy trafficking through shell companies, falsified documents, financial facilitators and cryptocurrencies, according to FinCEN.
“Financial institutions should be on notice that they have a responsibility to detect suspicious activity and stop it in its tracks,” said Secretary of the Treasury Scott Bessent.
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Washington also warned that it is prepared to “take action against any foreign company,” including airlines and shipping companies, that support illicit energy sales by Iran. The U.S. has previously threatened to impose secondary sanctions on foreign banks that send or receive dirty money from Chinese “teapot” refineries that purchase Iranian oil – an issue that looms over Mr. Trump’s meeting with Chinese President Xi Jinping this week.
On the surface, these actions by the U.S. government are positive because they will choke off funding for Tehran’s war machine. But Washington took too long to implement them.
The reality is that energy smuggling is becoming normalized because the Trump administration has spent months undermining the integrity of the U.S. sanctions regime.
Since the start of 2026, the U.S. has sent mixed messages about the economic sanctions, such as trade restrictions, it imposes against various rogue states.
Back in January, which seems like a lifetime ago, the U.S. deposed Venezuelan president Nicolás Maduro and then selectively rolled back sanctions to facilitate the transport and sale of Venezuelan crude and oil products to global buyers.
“All proceeds from the sale of Venezuelan crude oil and oil products will first settle in U.S.-controlled accounts at globally recognized banks to guarantee the legitimacy and integrity of the ultimate distribution of proceeds,” the U.S. government said at the time.
It was a stunning development because the Trump administration was shamelessly relaxing key sanctions to profit from Venezuelan oil sales. Initially, some of that money, roughly US$500-million, was deposited in a U.S.-controlled account in Qatar before being redirected to Venezuela, according to U.S. officials.
In February, U.S. Energy Secretary Chris Wright told NBC News the U.S. had signed more agreements to sell a further US$5-billion worth of Venezuelan crude oil to foreign buyers.
“The oil is going to refineries to the United States. Some of it is actually going to Europe,” Mr. Wright said in the interview with NBC News.
The proceeds are supposed to benefit “the American people and the Venezuelan people at the discretion of the U.S. government,” according to the Department of Energy.
Trouble is, the very idea that Americans could get a cut of the profits only emboldens Venezuelan oil smugglers.
Both the U.S. and Israel, meanwhile, underestimated Tehran’s ability to seize control of the Strait of Hormuz when they launched a war against Iran. The strategic waterway, which connects the Persian Gulf to the Gulf of Oman, is used to transport 20 per cent of global shipments of oil and liquefied natural gas.
At the start of the war, the U.S. actually relaxed some sanctions on Iranian and Russian oil ostensibly to prevent a sharp spike in energy prices.
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But the Trump administration’s cherry-picking of sanctions failed, and the resulting surge in commodity prices has only served to enrich the Iranian and Russian regimes.
Last month, Massachusetts Sen. Elizabeth Warren, a Democrat on the banking committee, said the Trump administration’s decision to pivot and impose new sanctions on Iran would have little effect on Tehran because of the run-up in oil prices.
“Instead of circumstances where we can keep sanctions on Iran and constrict their economy, the blockade in the Strait of Hormuz – combined with the sharply rising price of oil – has helped Iran’s economy,” Ms. Warren said at the time, according to published reports.
She later added: “What Secretary Bessent is trying to do is mop up the mess that Donald Trump has created by initiating this war.”
Mr. Trump recently claimed on his Truth Social platform that Iran is losing US$500-million a day because of the U.S. blockade of its ports.
But FinCEN’s latest warning to the global business community suggests that oil smuggling is a persistent problem – one that risks distorting global commodity markets to the detriment of law-abiding energy producers like Canada.