The Trump administration is shifting Iran sanctions strategy by targeting foreign banks that facilitate Tehran’s evasion, moving beyond shell companies to cut off UAE-based branches of Egypt’s state-owned Banque Misr from the U.S. financial system. Treasury announced the measure on Aug. 28, following Scott Bessent’s 'economic D-Day' declaration, with a 30-day comment period allowing coordination with Egyptian and UAE regulators. The targeted branches processed approximately $1.8 billion for 103 suspected Iranian shadow banking fronts since 2024, including entities tied to Iran’s Defense Ministry and IRGC.

Officials argue the action is a meaningful sanction, aiming to change behavior rather than merely punish, and view Banque Misr UAE as a starting point. Treasury should extend similar actions to Hong Kong banks and impose full blocking sanctions on China’s Bank of Kunlun, ultimately controlled by CNPC, which has continued facilitating Iranian business despite a 2012 U.S. correspondent banking cutoff. The administration could also use Patriot Act Section 311 to mandate heightened scrutiny on oil and petrochemical transactions showing sanctions evasion hallmarks, such as large round-dollar payments and discrepancies in trade re-routing, particularly Iranian oil sold via Malaysia to Chinese buyers.