U.S. officials withheld sanctions over China ties and financial-system risks
A review by The Wall Street Journal based on former U.S. officials’ accounts and internal records found that Zhejiang Chouzhou Commercial Bank, a regional bank in eastern China, emerged as a key conduit for transactions tied to Iran and Russia. The records showed money used to purchase Chinese goods in apparent violation of Western sanctions, including some purchases with potential military applications. They did not show whether ZCCB’s management knew the funds involved sanctioned entities, whose roles were hidden behind front companies and intermediaries.
Former U.S. officials said the bank was flagged internally during both the Biden and Trump administrations for transactions that appeared designed to evade sanctions. The United States has tried for years to cut its adversaries off from the global financial system, but money from Iran and Russia has continued to flow, in large part through Chinese banks, people familiar with the activity said. ZCCB came up unusually often in U.S. monitoring of Iranian and Russian money flows. Washington stopped short of penalizing it because officials had difficulty determining whether the bank knew the funds’ origins and because they worried that targeting it could worsen relations with Beijing or disrupt China’s financial system. Current and former officials said Washington faces similar dilemmas with several other Chinese banks involved in trade with Russia and Iran.
The Treasury Department said in October 2025 that Chinese bank accounts were the main source of roughly $5 billion that Iranian shell companies moved around the world during the prior year. U.S. sanctions have largely stopped Iranian and Russian entities from trading with the West, leaving them to buy from Chinese suppliers; settling those purchases requires a bank willing to risk U.S. penalties. Experts said the pattern exposed a weak point in U.S. sanctions and highlighted how China bolsters its geopolitical rivals by buying their oil, selling them electronics and other goods and giving them access to the global financial system through Chinese banks.
ZCCB said it had always adhered to Chinese law and closely monitored international regulation. “We are committed to conducting business in compliance with applicable laws and regulations, including applicable anti-money-laundering, counterterrorist financing, and sanctions risk management requirements,” the bank said. It also said it had launched internal investigations following recent U.S. sanctions. China said it follows international law in trade with Iran and Russia but rejects what it describes as unilateral American sanctions against the two countries.
Documents showed Iranian companies attempting to route money to ZCCB through what the U.S. government calls a Tehran-backed shadow banking network. Other records showed ZCCB as a frequent destination for payments made through A7, a Russian sanctions-evasion network that the Treasury labeled a “significant transnational criminal organization” in October. Front companies and intermediaries obscured the roles of sanctioned parties in the records.
An invoice seen by The Wall Street Journal illustrates how the Russian payment network operated. In February 2025, a now-defunct company in Kyrgyzstan agreed to pay around $1.5 million to a Chinese supplier for 40,000 kilograms of molybdenum trioxide. The compound can be used to make tough, heat-resistant alloys for armored vehicles or missile engines, and the shipment was to travel by truck from China to St. Petersburg. Payment records showed the buyer, Trading Company of the Kyrgyz Republic, paid in two installments for deposit in the supplier’s ZCCB account. U.S. officials have described the buyer as one of hundreds of front companies for A7.
The A7 material became public after hackers attacked the Russian network and released chats among its employees. Researchers used the chats to find an unsecured drive where an A7 developer had left thousands of files exposed to the public internet. Out of some 3,500 transactions detailed in those files, ZCCB was the most frequently occurring bank for the receipt of payments, said Zachary Tvarozna, an independent researcher who analyzed them. “It’s a village bank that came out of nowhere and is now on the receiving end of a lot of A7’s activities,” Tvarozna said. The transactions ran from late 2024 to mid-2025 and included civilian purchases such as cars and clothing as well as items with potential military uses, including electronics used in drone warfare.
ZCCB said it had launched a new round of internal investigations after the Treasury’s early-October sanctions against A7 and could not confirm that the relevant funds originated in Russia. A7 did not respond to a request for comment. In an early-October statement posted on social media, the network said it was created “to ensure uninterrupted payments for the Russian market, which has been subjected to illegal restrictions.”
A separate set of records traced an attempted Iranian steel purchase to ZCCB. In December 2023, Iranian manufacturer Saab Steel Development agreed to pay $101,297.46 for coiled sheets of steel from a Shanghai-based supplier, with delivery to Iran’s port of Bandar Abbas over the following year. ZCCB was the supplier’s bank, and the United States had repeatedly issued sanctions targeting Iranian industry and steel imports.
Two payment orders from April 2024 showed Saab Steel Development first instructing state-owned Bank Tejarat to send $101,297.46 to the supplier’s ZCCB account. Bank Tejarat then requested that the payment be made through Sadaf Exchange, a money changer that U.S. officials say operates numerous shell companies to make and receive payments on Iran’s behalf. The documents did not establish which company was supposed to send the money or whether ZCCB ultimately received it. ZCCB said it had never received funds remitted from Sadaf Exchange and declined to answer further questions about the transactions detailed by The Wall Street Journal. The United States sanctioned Bank Tejarat in January 2012 and Sadaf Exchange in June 2024. Tejarat, Sadaf and Saab Steel Development did not respond to requests for comment; Tejarat said it complies with international law and works in the interest of the Iranian economy. Miad Maleki, a former senior Treasury official now at the Foundation for Defense of Democracies think tank, said the elaborate system makes it difficult for banks to know payments are connected to Iran. “By the time the money arrives, it has usually passed through several layers,” he said.
Founded in 1987, ZCCB grew rapidly with the export boom in Yiwu, a city in eastern China that is home to the world’s largest marketplace for wholesale goods. The bank’s filings showed that income from international payment transactions rose from 2% of total revenue in 2018 to nearly 12% in 2024.
Former U.S. officials said China has historically allowed smaller banks to handle business with risky countries such as Iran and Russia, limiting the consequences of any U.S. sanction while leaving the country’s largest banks outside the immediate target. In 2012, the Obama administration cut Bank of Kunlun off from dollar transactions for its dealings with Iran. Beijing said it was “strongly dissatisfied” with the move, and Kunlun said the U.S. sanctions violated international norms. Washington has otherwise avoided sanctioning other Chinese banks over Iran ties, despite concerns that several were involved in transactions with Iran, former officials said.
ZCCB drew attention from Treasury soon after Russia’s full-scale invasion of Ukraine, when evidence emerged that it was facilitating trade with Russia’s defense industry, former officials said. An executive order signed by Joe Biden in December 2023 threatened to sanction foreign banks involved in financing Russia’s military-industrial base. ZCCB said it cut ties with Russian clients shortly afterward. The A7 files show that links resumed in 2024, though indirectly through front companies and banks in countries such as Kyrgyzstan. ZCCB said in 2025 it had stopped establishing new correspondent banking relationships in Kyrgyzstan.
TRM Labs, a U.S.-based financial intelligence firm, separately examined thousands of documents published by WikiIran, a site that posts leaked payment instructions, invoices and transaction records from companies allegedly involved in Iranian trade. The leaks did not purport to cover all of Iran’s money flows. TRM found more than 900 accounts at Chinese banks named as destinations for Iran-linked payments between 2021 and mid-2025. Some 240 of the accounts were held at ZCCB, while another roughly 670 involved other Chinese banks, according to TRM. ZCCB disputed WikiIran’s accuracy, saying it had found references to some accounts that did not belong to the bank.
The policy tension was described by Alex Zerden, a former Treasury official during Trump’s first term and founder of Capitol Peak Strategies. “There is no policy appetite to sanction these banks, which would be perceived as an escalation by China,” Zerden said. He said, “At present, the actions do not match the rhetoric of Economic D-Day, Economic Outcast or Economic Fury,” referring to the administration’s effort to isolate Iran through tighter sanctions. Any foreign bank that facilitates Iran’s access to global money flows risks being cut off from the U.S. financial system, a Trump administration official said. “No institution is beyond the reach of U.S. sanctions,” the official said. The records leave two points unresolved: whether ZCCB’s management knew the funds involved sanctioned entities and whether the attempted Iranian payment ultimately reached the bank. They do show the bank at the center of payment channels that U.S. officials said allowed Iran and Russia to buy Chinese goods despite sanctions.