IMF Highlights Iran’s AML/CFT Progress

IMF believes this would help facilitate the country's broader connections to the global banking system, the world body's website reported. 

Noting that Iranian authorities are conscious of the risks and potential implications emanating from financial crimes, IMF acknowledges the fact that they have initiated reforms to strengthen the anti-corruption and AML/CFT frameworks.

After listing Iran's accomplishments in AML/CFT areas, IMF makes several recommendations to further improve Iran's status with the Financial Action Task Force and accelerate Iran’s reintegration into the international financial and trade systems, according to Financial Tribune.

The first pillars of the framework were established with the adoption of the AML law (2008) and its bylaw (from 2010) that criminalized money laundering, set up the AML coordination body—the AML High Council composed of several ministries—and the Financial Intelligence Unit, and put in place preventive measures for financial institutions and certain non-financial businesses and professions. 

In 2010, the FIU was operationalized and the Central Bank of Iran initiated its AML supervision of financial institutions. 

According to IMF, Iran made significant improvements to the AML/CFT legal and institutional frameworks since June 2016.

Iran adopted a CFT law in 2016. Given that Iran provided a high-level political commitment to reform the framework by agreeing on an action plan with the FATF, the latter decided to suspend the counter-measures in June 2016. 

Since then, Iran has established a cash declaration regime at the border and also introduced to parliament draft amendments to its AML and CFT laws to bring them in line with international standards.

In recent months, Iran ratified the United Nations Convention against Transnational Organized Crime (UNTOC) and CBI approved preventive measures such as customer due diligence and beneficial ownership to be implemented by financial institutions,

In its recent February 2018 statement, FATF gave the authorities until June 2018 to fully complete the action plan that was due on Jan. 31, 2018.

Further Recommendations 

The IMF report emphasized that it is critical that Iran swiftly adopt and publish—before the FATF's June 2018 plenary meeting—a comprehensive legislative and regulatory framework in line with the FATF Action Plan that was agreed with the Iranian authorities.

It also adds that improving the effectiveness of the AML/CFT framework should continue. It maintains that conducting a National Risk Assessment on ML/TF will improve the authorities' understanding of risks, enhance risk-based policy design and implementation, and improve the allocation of resources. 

Other priorities include enhancing the AML/CFT risk-based supervision of banks and other financial institutions and imposing corrective actions when relevant.  Effective supervision will reduce the risk of financial abuse in the financial sector and enhance the detection and prevention of money laundering, proceeds of fraud and corruption, and terrorism financing activities.

Improving the compliance of financial institutions—particularly banks—in identifying beneficial owners and domestic politically exposed persons (PEPs) is another point raised by IMF.  Financial institutions should be required to adequately apply preventive measures commensurate with their risks. 

This will require—among others—issuing CBI guidance to assist banks in implementing these requirements, focusing CBI inspections on these areas and improving the capacity of banks’ internal controls and compliance systems. 

The report recommends developing mechanisms to ensure the transparency and timely availability of accurate beneficial ownership information of legal entities established in Iran. A public registry for beneficial ownership is an approach that would enhance transparency about the ownership of corporations. 

Timely access—including by correspondent banks—to adequate, accurate and current information of all types of entities established in Iran—could enhance access to the global financial system.

Other priority reforms include enhancing the system of declaration of assets of senior public officials in line with international best practices. Financial declaration (or disclosure) systems are a recognized tool in the fight against corruption and in promoting transparency. 

Establishing an independent anti-corruption agency with law enforcement powers to focus on implementing a holistic strategy to fight corruption and prioritize the pursuit of corruption cases is another strategy pitched by IMF. Prosecution and adjudication of corruption cases should be autonomous and protected from interference.

Building synergies between AML and anti-corruption frameworks is another fact highlighted by the report.  Domestic coordination should allow the two systems to operate in tandem. Concerned agencies should coordinate and cooperate to tackle corruption and its proceeds. 

For instance, the FIU, which receives suspicious reports related to PEPs, could enhance its money laundering disseminations to anti-corruption agencies investigating the proceeds of corrupt officials. And vice versa, agencies in charge of an anti-corruption agency could share information with FIU to trigger money laundering analysis by “following the money” generated from corruption, identifying perpetrators of corruption (and their associates) and tracing their assets domestically and abroad.