FinCEN Flags Iranian Abuse of Khums Donations, Citing a Texas Case

The U.S. Treasury has asked banks to identify suspected Iranian diversion of religious donations. Its alert cites two Houston men’s guilty pleas while emphasizing that legitimate charities should retain access to financial services.

One example in the October 15 FinCEN alert concerns cash carried by 25 people traveling on a religious pilgrimage. The underlying Justice Department case records an admitted scheme to collect money in the United States and arrange its transfer to Iran without the required Treasury licenses. That history gives the new banking warning a concrete precedent.

What khums means in the alert

Khums is a religious contribution of a fifth of surplus annual income, used by Shia communities to support religious and social programs. Payments may be collected through institutions or representatives associated with senior clerics. The practice itself is not an allegation of wrongdoing.

FinCEN, the Treasury bureau responsible for financial intelligence, says Iran can take control of some collection networks through institutions associated with the regime or its senior clerics. Its alert, spanning three pages, identifies informal transfer systems and cash couriers as possible channels. These are the bureau’s assessments, based on financial reporting, law enforcement information and public sources.

The Houston defendants and their pleas

Muzzamil Zaidi and Asim Mujtaba Naqvi pleaded guilty on May 1, 2024 to conspiracy and violations of the International Emergency Economic Powers Act. Their pleas were entered before U.S. District Judge Tanya Chutkan in Washington. They had been arrested in Houston in August 2020.

The Justice Department said the scheme collected tens of thousands of dollars between December 2018 and December 2019, including khums and donations presented as assistance for Yemen. The money was intended for Iran, including the office of Ali Khamenei, who was then supreme leader.

Prosecutors described associates carrying amounts below $10,000 to avoid scrutiny, including the pilgrimage group that continued from Iraq to Iran. The established case concerns unauthorized transfers and the admitted sanctions offenses. The guilty pleas do not establish that every donor knew where the money would go.

The patterns banks are asked to examine

FinCEN identifies charities soliciting money without apparent charitable services, large unexplained donations followed by transfers to other organizations, efforts to evade reporting requirements, and payments followed by cash withdrawals or onward transfers without a clear business relationship.

The bureau says no single indicator determines whether activity is suspicious. Banks should assess the customer’s history and the full circumstances. For relevant suspicious activity reports, the alert requests the identifier FIN-2026-IRANCHARITYABUSE in field 2 and the narrative. That reporting instruction is distinct from a finding that a particular transaction is illegal.

Part of a wider financial campaign

The warning forms part of Treasury’s Operation Economic Outcast. On the same day, Treasury also targeted financial networks involving the International Development Bank for Investment and Finance in Iraq, exchange houses and intermediary companies that it accused of helping Iran access and move foreign currency.

The October 15 OFAC list contains 16 individuals and ten entities designated under the Iran authority, plus a separate Cuba designation of Banco Internacional de Comercio S.A. The Cuba entry should not be added to the Iran entity count without explaining the difference.

Legitimate giving remains distinct

Treasury explicitly says legitimate charities should be able to use financial services and transparent channels. Its requested approach focuses on assessed financial risk, rather than treating a religious affiliation as evidence of misconduct.

The alert establishes a current reporting priority and points to an earlier criminal case. It does not announce a blanket ban on khums, create a new conviction, or substantiate the circulating claim that this is the first U.S. government document ever to address the practice.