A client asked why I do not recommend settling with Iranian partners through an Iranian bank in Istanbul. A week later that bank was gone.
The situation. An exporter with contracts in Iran was looking for a way to make payments without disruption. The obvious idea: an Iranian bank with a Turkish licence, 44 years in Istanbul, three branches, everything legal. I said no, and explained why this is the most fragile structure possible.
First reason.
The licence of a foreign bank in Turkey does not live under Turkish law in a vacuum. It lives under the rules of the country whose correspondent accounts the bank needs. A bank cut off from dollar and euro infrastructure exists exactly until the moment it becomes more convenient for the local regulator to close it than to justify its existence.
Second.
Sanctions never close a bank formally. The local regulator closes it under a local provision: "continued activity threatens the stability of the financial system." That is what happened: on 18 September the BDDK revoked the licence of the Istanbul branch of Bank Mellat under Article 71 of the Banking Law. Not a word about sanctions in the decision. A week earlier, Iranian carrier Mahan Air stopped flying to Turkey.
Third.
When such a bank is closed, client money, payments and contracts do not disappear, but they freeze: the regulator decision contains no payout order, no deadlines and no route for transfers. Liquidation will decide that later. For an exporter with live contracts, that means months of money standing still.
What we proposed instead. Settlements through first-tier Turkish banks with a clean source of funds for every contract, separation of flows by counterparty, and a documentary chain for the origin of both goods and money, ready for compliance questions before the transfer rather than after it. Slower to set up, but the money moves.
The takeaway. Three doors operate in Turkey: tax, banking compliance, sanctions. The third is the quietest and the harshest: it closes by a decision under a local provision, without warning and without the word "sanctions." Building a business through an institution that stands only on a local licence under external pressure means building on a door that can be closed overnight.
Working with counterparties from countries under sanctions pressure? Get in touch and we will review your payment routes before the regulator does.