Mohammad-Reza Farzin, the governor of the Central Bank of Iran (CBI)

Iran’s Chief Banker Justifies Measures To Pocket People’s Cash Currency

Tuesday, 04/11/2023

The Islamic Republic's chief banker says strict measures recently introduced on the banking system are aimed at curbing capital flight, claiming they follow international norms.

Mohammad-Reza Farzin, the governor of the Central Bank of Iran (CBI), said on state TV Monday night that "all the countries of the world have regulations to prevent capital flight, and capital flight means that you give rials and receive a foreign currency, and it doesn't matter if you keep this currency at home or, for example, go to Turkey and buy a house with it.”

Farzin avoided issues of transparency, he claimed people can do whatever they want with their money if it is not illegal or considered laundering. To have control over the people’s money, the Islamic Republic has recently announced regulations that push people to open foreign currency accounts in its notoriously corrupt, if not bankrupt banks in Iran instead of getting the foreign currency in cash.

Farzin said pushing people to have long-term foreign currency accounts is a measure to control the currency market, but the owners of these accounts cannot withdraw deposits in the foreign currency and only can get the equivalent in almost worthless rials. On the other hand, Farzin has said that the CBI does not consider the exchange rate to be at the actual rate at which people are buying and selling currencies in the market, and that the government plans to have a cap on the rates. For example, the rate that Farzin had announced for the exchange of dollars is about half of the exchange rate at the market at about 280,000 rials for one dollar, while the current rate is about 510,000 rials. 

The cash-strapped regime has been unable to access a large portion of its export revenues due to international sanctions, and has been eying measures to grab money kept by the public in safety deposit boxes or at homes. In April 2022, the country’s Headquarters for Combating Smuggling of Goods and Currency announced that the maximum limit for keeping foreign currencies is $10,000 or its equivalent in other currencies. For any amount more than this limit, people should apply for special permits.

Officials and police inspect a section of safety deposit boxes at Bank Melli.

Elsewhere in his remarks, Farzin referred to a suspicious bank heist last year, the biggest in recent history and the shadiest in nature as robbers broke only into safety deposit boxes and were arrested in a matter of days. Farzin said that according to the information obtained from the robbery as well as the data from other safety deposit boxes throughout the country, about $15-16 billion dollars are kept in boxes.

In June 2022, thieves broke into at least 200 to 250 safety deposit boxes in the central Tehran branch of Iran’s largest bank – the state-owned Bank Melli (National Bank). Apparently, the robbers gained access from an adjacent building during a two-day holiday. Four days after the heist, police displayed recovered money and gold and announced the arrest of nearly 30 people allegedly involved in the large bank heist in Tehran. The surprisingly quick reaction and arrests by the police raised eyebrows with many seeing it as an ‘inside job’. In February, Iran’s judiciary said 20 people involved in the robbery have been released on bail.

A few hours before Iran’s chief banker went on state television, a large group of the victims of the burglary held a gathering in front of the bank and protested "10 months of patience is enough, return our property".

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