With a financial mechanism reminiscent of the Oil For Food scam, it seems Iran is using a United Nations office headquartered in Tehran to skirt U.S. sanctions. Once again, a rogue regime appears to be abusing a U.N. body in obtaining access to hard currency. The White House and the Financial Action Task Force - set up by the G-7 to combat money laundering and terrorist financing - have so far failed to identify this threat.

The Asian Clearing Union was established in Iran in 1974 as a U.N. initiative to expand trade and forge closer banking relations among ACU members. The organization's primary goal is to "facilitate payments among member countries," which include the central banks of Iran, India, Bangladesh, Bhutan, Nepal, Pakistan, Sri Lanka, the Maldives and Burma.

Iran has used the organization to route over $13 billion overseas in 2008 and over $5.6 billion so far in 2009 to pay for many of its goods and services, according to the ACU's financial documentation.

The danger is that the ACU is potentially being used as a classic money laundering instrument. Iran might be using the U.N. body as a third party to circumvent the U.S. sanctions program, which prohibits with limited exceptions, such as for certain foodstuffs, textiles and medicine, American-Iranian business deals. The sanctions program does not only target domestic companies, however. Unless specifically allowed under the sanctions act, U.S. financial institutions are supposed to freeze all Iranian dollar transactions - including those involving Iran's non-American business partners.

The ACU mechanism is deceptively simple and described in detail on the ACU Web site (www.asianclearingunion.org). An Iranian company or government office initiates a transaction for the purchase of a foreign product or service by remitting Iranian rials via a local Iranian bank. The money is then transferred to the Central Bank of Iran, which then sends the funds to any ACU member using "Asian Monetary Units," the currency of the ACU. Each of these units is equal to either one U.S. dollar or euro, depending on the customer's preference. Once the Iranian money is in the ACU pot, it is difficult, if not impossible, for foreign banks to know whose money it is. Unlike the Iranian Central Bank, the other ACU members' central banks can transact freely with any U.S.-based correspondent bank.