Proactive response and reaction to the crime of currency smuggling by circumventing sanctions

The exit and entry of foreign currency into the country is a vital matter that is generally subject to a lot of supervision by the government, but nevertheless, foreign currency smuggling in the country is a problem for which the legislator has set policies. However, there are still many ways to smuggle foreign currency, which are sometimes not criminalized by the legislator and legal loopholes are still felt in it. One of these ways is smuggling foreign currency through the abuse of circumventing the sanctions imposed on Iran by the League of Nations. Generally, the exit and entry of value into the country during the sanctions are carried out through non-SWIFT ways and through secret financial channels, which, if not controlled by the legislator and the government, leads to foreign currency smuggling. Therefore, in the present study, we have intended to identify and determine the active response and reaction to the crime of smuggling foreign currency through circumventing sanctions once and for all so that by properly criminalizing this issue, foreign currency smuggling can be prevented.

Introduction

The inflow and outflow of foreign currency in Iran is subject to stringent legal regulations, the violation of which triggers legal sanctions. In recent years, Iran’s entanglement with international sanctions has significantly complicated both governmental and individual transactions involving foreign currencies. This has led to the emergence of strategies for sanctions evasion—mechanisms enabling cross-border financial flows outside formal international banking systems, such as SWIFT. Such methods, often unrecorded in domestic banking systems, have created loopholes exploited for currency smuggling. The key research questions addressed in this study are: whether legal pathways can be established for controlled sanctions evasion to prevent organized currency smuggling, and whether such actions should be limited to authorized entities. Recognizing that Iran does not acknowledge the legitimacy of imposed sanctions, yet is bound by their real-world implications, this study emphasizes the necessity of formalizing legal monetary gateways to preclude abuse under the guise of sanctions evasion..
2.Theoretical Framework
To currency smuggling through sanctions circumvention. It examines the existing legislative landscape, particularly the Law on Combating the Smuggling of Goods and Currency (2013) and its 2017 amendment, which define and criminalize unauthorized currency transactions. Drawing upon economic theories of exchange rate management and international financial controls, the study assesses how differential exchange rates and the misalignment of nominal and real currency values incentivize smuggling. The framework integrates comparative insights from sanctioned economies where governments tacitly permit legal breaches for economic relief. It emphasizes that Iranian legislation, which frequently equates currency and goods smuggling, inadequately addresses the specific dynamics of currency-related offenses arising from sanctions evasion. Thus, an explicit legal criminalization and refined categorization of such acts are advocated to bridge legislative gaps and curtail systemic exploitation, particularly in import/export cover-ups and misuse of state-subsidized exchange rates.

Methodology

 This research employs a qualitative, descriptive-analytical approach grounded in library-based document analysis of Iranian legislation and economic literature..

Results & Discussion

The study reveals that current Iranian legal provisions insufficiently regulate the intersection of sanctions evasion and currency smuggling. Although the 2013 and 2017 laws define currency smuggling broadly, they fail to explicitly criminalize transactions involving circumvention of international sanctions. The lack of clarity concerning authorized entities and permissible transactions fuels market ambiguities. For example, state provision of subsidized currency to traders for essential imports often facilitates black-market resale of foreign currency, exacerbating economic instability. Furthermore, dual and multiple exchange rate regimes, especially since 2012, have incentivized arbitrage and illicit currency movements. Legislative conflation of currency and goods smuggling dilutes the targeted regulatory response needed for monetary offenses. Importantly, gaps persist regarding penalties for non-border, domestic currency smuggling, as legal provisions disproportionately focus on cross-border flows. The absence of clear criteria for penalizing unauthorized, informal domestic currency dealings complicates enforcement. Comparative evidence suggests that under sanctions, states sometimes tolerate minor breaches for economic survival, but without proper regulation, this tolerance encourages widespread abuses. The findings underscore the necessity of recognizing the adverse economic impact of currency smuggling through sanctions evasion—distortions in trade balance, capital flight, and undermining of monetary policy. A more nuanced and dedicated legislative framework addressing both organized and ad-hoc violations is essential to stabilize Iran’s currency regime and protect macroeconomic integrity.

Conclusions & Suggestions

The research concludes that currency smuggling under the pretext of sanctions evasion constitutes a significant legal and economic anomaly insufficiently addressed in current Iranian legislation. Although broad legal definitions and penalties exist under the Law on Combating the Smuggling of Goods and Currency, ambiguities—particularly in Article 7—render enforcement challenging. Key uncertainties include the legality of private currency trades outside authorized exchange offices and banks, and inconsistent articulation of supplementary and deterrent punishments. These legislative inconsistencies risk overcriminalizing minor, legitimate currency dealings while failing to deter organized smuggling networks exploiting sanctions-induced loopholes. The study recommends clear demarcation of permissible and impermissible transactions, explicit recognition of sanctions-related smuggling modalities, and proportional penal measures tailored to transaction scale and intent. Furthermore, policymakers must balance enforcement stringency with economic realities of sanctioned environments, where access to international financial systems is limited. Strengthening formal monetary gateways, enhancing transparency in subsidized currency allocations, and integrating monetary policy considerations into anti-smuggling legislation are critical steps forward. Ultimately, an adaptive, context-sensitive legal framework—grounded in empirical evidence and international best practices—would better mitigate the economic harms of currency smuggling while safeguarding legitimate economic activity. The study also calls for continual legislative revision to reflect evolving sanction landscapes and financial practices, ensuring legal robustness and practical enforceability.