Document Type : Research Paper

Authors

• Roya Safari ¹
• Behrooz Javanmard ²
• Mohammad Rouhollahi ³

¹ MA, Department of Economics, Law Faculty of Law & Political Sciences, Allameh Tabatabai University, Tehran, Iran.

² Assistant Professor, Faculty of Humanities, Islamic Azad University: Safadasht Branch, Tehran, Iran.

³ MA., Department of Criminal Law and Criminology, Faculty of Law & Political Sciences, University of Tehran, Tehran, Iran.

Abstract

Introduction
Iran’s banking system plays a decisive and structurally dominant role in the country’s economic framework. In the absence of a fully developed and efficient capital market capable of independently financing large-scale productive and commercial activities, banks shoulder the principal responsibility for funding both public and private sectors. Through the allocation of credit facilities, they effectively determine the circulation of liquidity, shape patterns of investment, and influence the distribution of national resources. Their decisions directly affect economic growth, financial stability, and public confidence in the monetary system. This central position makes their conduct in granting loans not merely a contractual or managerial matter, but an issue with broader social, economic, and legal implications. Against this background, the present study examines whether banks can incur criminal liability when they grant credit facilities without obtaining adequate guarantees, and whether such liability is legally and normatively defensible under Iranian law.
Methodology
The research adopts a descriptive–analytical approach grounded in documentary sources, including statutory provisions, doctrinal analyses, and scholarly writings on banks criminal liability. It first outlines the transformation of criminal law from a strictly individualistic system to a modern framework that recognizes the criminal liability of legal persons. Particular attention is given to Article 143 of the Islamic Penal Code of 2013, which establishes that legal entities may be held criminally liable where their legal representatives commit crimes in the name of, or in furtherance of the interests of, the entity. This provision reflects a significant normative shift and provides the legal foundation for assessing the responsibility of banks as corporate actors within the criminal justice system.
The study then considers the principal theories that justify attributing criminal responsibility to legal persons. The identification theory treats the actions and intent of senior managers and high-ranking officials as the actions and intent of the corporation itself. Under this approach, when individuals who represent the “directing mind” of the institution engage in unlawful conduct, their mental state and behavior are attributed directly to the legal entity. The theory of superior responsibility, by contrast, emphasizes failures of oversight and control, suggesting that inadequate supervision may ground liability. Organizational liability moves further by focusing on structural and systemic deficiencies within institutions, recognizing that wrongdoing in complex organizations often arises not from isolated acts but from embedded practices, flawed incentive systems, or compliance failures. These theoretical models are applied to the specific context of banking operations, particularly the process of approving and granting credit facilities.
Granting loans without adequate guarantees is not a minor procedural lapse or a simple administrative irregularity. In the banking sector, guarantees—whether personal, such as suretyship, or real, such as mortgages and pledged assets—constitute a fundamental safeguard against credit risk. Credit risk is widely recognized as one of the most significant risks faced by financial institutions. Sound banking practice requires thorough assessment of borrowers’ financial capacity, evaluation of collateral sufficiency, and adherence to regulatory standards governing credit allocation. When banks neglect these standards, they expose not only themselves but also depositors, shareholders, and the broader economy to substantial harm.
Findings
The findings of this study indicate that, under certain conditions, granting facilities without sufficient guarantees may give rise to criminal liability for banks as legal persons. Not every instance of poor judgment or economic loss qualifies as criminal conduct. The threshold of criminal responsibility is crossed where the granting of unsecured or inadequately secured facilities is accompanied by legally relevant fault—such as intentional misconduct, abuse of authority, collusion, or gross negligence that seriously endangers protected economic interests. Where authorized representatives—such as board members or senior managers—approve such facilities in the name of the bank or for its perceived benefit, and where this conduct constitutes a criminal offense under applicable law, the conditions set forth in Article 143 may be satisfied. In such cases, liability is not confined to individual decision-makers; the bank itself may be held accountable as an independent subject of criminal law.
Moreover, even in situations where individual intent is difficult to establish with precision, organizational failures may provide a separate basis for responsibility. Systemic weaknesses in internal controls, ineffective compliance mechanisms, deficient credit assessment procedures, or deliberate tolerance of risky and unlawful lending practices may reflect a broader institutional fault. Modern approaches to corporate criminal liability recognize that misconduct within complex organizations frequently stems from structural incentives, managerial culture, or persistent supervisory deficiencies. In this sense, the absence of adequate guarantees may signal deeper shortcomings in governance and risk management rather than an isolated managerial error.
 
Beyond its legal feasibility, the recognition of criminal liability in such cases is supported by strong policy considerations. Deterrence plays a crucial role in financial regulation. Banks operate on the foundation of public trust; their stability and credibility are essential to economic order and social confidence. The prospect of criminal sanctions—whether monetary penalties, activity restrictions, or other measures—creates a powerful incentive for institutions to strengthen compliance systems, improve risk assessment procedures, and adhere strictly to professional and legal standards. Furthermore, effective enforcement requires holding entities accountable where individual liability alone would be insufficient. Given the complexity and hierarchical nature of banking structures, identifying a single responsible individual may be difficult, and limiting prosecution to natural persons could weaken the preventive and compensatory functions of criminal law.
Irresponsible lending practices may also facilitate broader economic crimes, including embezzlement, corruption, favoritism, or misappropriation of public resources. In an economy where banks dominate financial intermediation, the consequences of such conduct extend far beyond private contractual disputes and may undermine economic justice. Recognizing corporate criminal liability, therefore, aligns with preventive criminal policy and anti-corruption objectives, reinforcing accountability within key economic institutions and safeguarding the integrity of financial governance.
Conclusion
In conclusion, the study demonstrates that the criminal liability of banks for granting credit facilities without adequate guarantees is both legally grounded and practically justified within the Iranian legal framework. The Islamic Penal Code provides a clear doctrinal basis for attributing responsibility to legal persons when crimes are committed in their name or interest.

Keywords

• Criminal liability
• Bank
• Granting facilities
• Obtaining guarantees
• Criminal justification

Main Subjects

• Criminal law and criminology