Iranian Regime's Misuse of 'khums' (Shia religious donation): U.S. Department of the Treasury's FinCEN Alerts Banks to Report Suspicious Transactions

WASHINGTON

The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) has alerted financial institutions to report instances where the Iranian regime is diverting Shia religious donations, or 'khums,' to fund regime activities. The Treasury Department announced on October 15 that FinCEN issued an alert (FIN-2026-Alert008) as part of Operation Economic Outcast. In the alert, FinCEN provided four red flags for banks to identify in transactions.

FinCEN Asked Banks to Report Transactions Involving Iran-Linked Religious Organizations via SARs

FinCEN requested that financial institutions reference the alert by including the key term 'FIN-2026-IRANCHARITYABUSE' in SAR Field 2 (Filer for FinCEN's note) and the narrative section of Suspicious Activity Reports (SARs). FinCEN stated that the alert supports Operation Economic Outcast targeting Iran and its financial facilitators, including the Islamic Revolutionary Guard Corps (IRGC). FinCEN stated that the alert was developed based on Bank Secrecy Act (BSA) data analysis, open-source reporting, and law enforcement information.

Secretary of the Treasury Scott Bessent stated, "Under President Trump's leadership, the Treasury Department will not allow the Iranian regime to continue its long-standing practice of abusing religious institutions to line the pockets of its elites and fund terrorism." Secretary Bessent said that when financial institutions identify and report such potential abuse, law enforcement receives critical information needed to isolate the Iranian regime and its financial facilitators.

The U.S. Department of the Treasury stated that the Iranian regime has been known to abuse ostensibly religious organizations in Iran and neighboring countries to enrich elites, fund the repression of the Iranian people, and support terrorism abroad. The Treasury Department stated that the regime even diverts khums contributions from Shia communities worldwide to fund destabilizing activities. FinCEN also noted in the alert that legitimate charities should have access to financial services and can transmit funds through transparent channels.

The Iranian Regime Has Rewarded Insiders Under the Guise of Charitable Foundations

FinCEN stated in the alert that the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated the Bonyad Mostazafan (Foundation of the Oppressed) in 2020. At the time, Treasury stated that while the foundation is ostensibly a charitable organization helping the poor and oppressed, its assets were expropriated from the Iranian people and used by the Supreme Leader to enrich his office, reward political allies, and persecute enemies of the regime. FinCEN also cited Treasury's explanation that such "bonyad" foundations answer directly to the Supreme Leader and enjoy tax exemptions without being required to submit their budgets for public approval. Treasury estimated that Bonyad Mostazafan alone accounts for more than 1% of Iran's gross domestic product (GDP).

FinCEN stated that OFAC also designated the Reconstruction Organization of the Holy Shrines in Iraq (ROHSI) in 2020. FinCEN noted that while ROHSI was an ostensibly religious organization based in Iran and Iraq, it was actually controlled by the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). ROHSI transferred millions of dollars to an IRGC-controlled company in Iraq. FinCEN stated that this company served as a base of operations for Iranian intelligence in Iraq and a hub for shipping weapons and ammunition to Iran-backed terrorist militias.

The Iranian Regime Even Seeks to Divert Khums, the Tithes of Shia Believers

FinCEN defined khums as a practice involving the donation of one-fifth of annual surplus income to religious institutions for use in social and religious causes. FinCEN noted that khums plays an important role in Shia communities. FinCEN stated that in some cases, organizations receiving these donations collect money on behalf of prominent regime-linked Iranian ayatollahs or the Supreme Leader himself.

FinCEN stated that such organizations may transfer funds to Iran or Iran-linked actors through hawala-style informal value transfer systems and cash couriers. FinCEN described hawala as a system where money remitters linked to specific regional or ethnic communities move funds, settling through trade, cash, and long-term netting. FinCEN stated that the alert's red flags were designed to be usable even when Iran's direct involvement is not readily apparent in transaction records.

Two Houston Residents Pleaded Guilty to Diverting Khums Cash from the U.S. to Iran

FinCEN cited a case announced by the U.S. Department of Justice in 2024 as an example in the alert. According to the U.S. Attorney's Office for the District of Columbia, Houston residents Muzammil Zaidi and Asim Muzteba Naqvi pleaded guilty on May 1, 2024, to conspiring to violate Iranian sanctions and the International Emergency Economic Powers Act (IEEPA). The two men sent tens of thousands of dollars collected in the United States to Iran, including funds transmitted in the name of then-Supreme Leader Ali Hosseini Khamenei. The Department of Justice stated that they attempted to export these funds to Iran without a license from the Office of Foreign Assets Control (OFAC).

According to court documents, Zaidi received authorization in December 2018 to collect khums on behalf of various imams. From December 2018 to December 2019, the two individuals collected khums and donations ostensibly intended to assist victims of the Yemeni civil war from U.S. residents. The Department of Justice stated that they caused these funds to be delivered to the Office of the Supreme Leader of Iran. To evade law enforcement scrutiny, they mobilized acquaintances, family members, and others to transport cash out of the United States in amounts under $10,000. In one instance, 25 people on a religious pilgrimage to Iraq hand-carried cash, according to the Department of Justice.

Special Agent in Charge Douglas Williams of the FBI Houston Field Office said Iran has funded terrorist organizations exporting fear and violence around the world for more than 40 years. The Department of Justice stated that the United States has imposed economic sanctions on Iran since 1995, and the U.S. Department of State has designated Iran as a State Sponsor of Terrorism annually since 1984. The two men were arrested in Houston on August 18, 2020.

FinCEN Provided Four Red Flags, Including Circumstances of CTR Evasion

FinCEN identified the first red flag as a charity or non-profit organization (NPO) receiving donations while showing no evidence of charitable activity, or publicly supporting the Iranian regime or its terrorist proxies. FinCEN cited examples where such support was evident in fundraising appeals or on social media. The second red flag involves receiving large donations of unknown origin over a short period, followed by sending large wire transfers or checks to other charities or NPOs.

The third red flag is when a charity or NPO, or its employees, officers, or contractors, repeatedly engage in behavior intended to evade Currency Transaction Reports (CTRs). FinCEN cited altering or canceling transactions upon being informed that a CTR would be filed, structuring cash transactions under $10,000, and behavior attempting to avoid recordkeeping requirements. The fourth red flag involves customers receiving wire transfers from charities or NPOs with no apparent transactional relationship, followed by cash withdrawals or transfers to other destinations.

FinCEN noted that a single red flag is not determinative of illicit or suspicious activity. FinCEN stated that financial institutions should evaluate the totality of circumstances, including the customer's historical financial activity, whether transactions align with industry practices, and the presence of multiple overlapping red flags. FinCEN reminded banks to apply risk-based customer due diligence when determining the risk profiles of charities and non-profit customers. FinCEN advised financial institutions that identify potential sanctions violations to notify the OFAC reporting portal while continuing to file SARs.

The Alert Is Part of Operation Economic Outcast Launched on August 24

The U.S. Department of the Treasury announced on August 24 that, at the direction of President Donald Trump, it launched Operation Economic Outcast, an all-of-government economic campaign targeting Iran and its facilitators. Secretary Bessent stated at the time, "Our goal is to sever every economic lifeline sustaining this tyrannical regime until Tehran stands alone." On that day, Treasury announced sanctions determinations covering five sectors—digital assets, technology, gold, aviation, and maritime shipping—and sanctioned nearly 60 entities, individuals, and vessels.

On the same day, the Treasury Department also suspended several OFAC general licenses that had authorized certain remittances to Iran. Treasury stated that teams from the Department of the Treasury, the U.S. Department of State, and the Department of War are demanding immediate action from foreign governments and will give nations deadlines to wind down Iran-related activities. Treasury warned that institutions facilitating money laundering or sanctions evasion for Iran could be cut off from the U.S. financial system.

The Operation Led to Shadow Fleet Sanctions and FinCEN's First Subpoena on October 21

On October 21, six days after the alert, the U.S. Department of the Treasury sanctioned Panama- and Greece-based law firm Karnakis and Karnakis as part of Operation Economic Outcast. Treasury stated that the law firm had supported Iranian shipping activities for years, indirectly aiding Iran's ability to generate revenue for its military, weapons, and nuclear programs. On the same day, two shipping agents based in Singapore and the United Arab Emirates and a fleet of cargo vessels were also sanctioned pursuant to Executive Order 13902, which targets Iran's petroleum and petrochemical sectors. Alongside these actions, OFAC issued General Licenses GG and HH authorizing the wind-down of transactions.

Treasury stated that FinCEN, coordinating closely with European partners including Greece, issued its first administrative subpoena pursuant to Section 5318(k) of the Bank Secrecy Act (BSA) to investigate Greek banks potentially linked to Iran and its proxies. FinCEN also sent multiple requests for information regarding the banks' relationships with OFAC-designated Iranian financial institutions, Treasury stated.

Secretary of the Treasury Scott Bessent stated, "Whether you are conducting illicit ship-to-ship oil transfers or sitting in a law firm's office, if you support the Iranian regime, we will find you and sanction you." Secretary Bessent said that Iranian facilitators must choose whether they are "with us or against us." The Treasury Department also posted news of the sanctions on X.

Sources (KST)

• U.S. Department of the Treasury Press Release, "Operation Economic Outcast Targets Iranian Regime's Abuse of Religious Charity Networks" (October 15, 2026): https://home.treasury.gov/news/press-releases/sb0661
• U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN), "FinCEN Alert to Counter Iranian Abuse of Religious Charity Networks" (FIN-2026-Alert008, October 15, 2026): https://www.fincen.gov/system/files/2026-10/FinCEN-Alert-Iranian-Charity-Network-Abuse.pdf
• U.S. Department of the Treasury Press Release, "Treasury Launches Unprecedented Campaign Against Iranian Regime on Economic D-Day" (August 24, 2026): https://home.treasury.gov/news/press-releases/sb0613
• U.S. Department of the Treasury Press Release, "Operation Economic Outcast Targets Iran’s Shadow Fleet Networks" (October 21, 2026): https://home.treasury.gov/news/press-releases/sb0664
• U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) Recent Actions, "Iran-related Designations; … Issuance of Iran-related and Russia-related General Licenses and Amended Frequently Asked Questions" (October 21, 2026): https://ofac.treasury.gov/recent-actions/20261021
• U.S. Department of the Treasury (USTreasury) X Post (October 21, 2026): https://x.com/USTreasury/status/2112956889004679566
• U.S. Attorney's Office for the District of Columbia, U.S. Department of Justice Press Release, "Scheme to Transfer Money to Iran Results in Guilty Pleas" (May 1, 2024): https://www.justice.gov/usao-dc/pr/scheme-transfer-money-iran-results-guilty-pleas