Gov’t Notifies CFT Law

EghtesadOnline: The Iranian Cabinet has notified the Law on Combating Financing of Terrorism for implementation 20 months after the measure received the parliamentary approval.

News ID: ۷۴۴۳۶۶

07 November 2017

The announcement would be a step forward for Iran, as it is determined to meet the demands made by the Financial Action Task Force– an international group that monitors money laundering worldwide–in order for its banks to become eligible for working with major global lenders.

The international group on Friday updated its document on engagement with Iran and urged the country to fulfill its commitments by the deadline of Jan. 31, 2018.

The executive directive signed by First Vice President Es’haq Jahangiri was published on Monday, but had been originally approved by the Cabinet a week earlier, Financial Tribune reported.

According to the directive, “involved persons” i.e. all natural and legal entities, including non-governmental and charity organizations subject to the Law on Combating Financing of Terrorism, are obligated to identify their clients and register their information in their systems while refraining from offering services to those on sanctions lists.

They are obligated to evaluate the risk status of their clientele, namely their background, occupation, income and asset source, original birthplace and current place of residence, services they wish to use and a variety of other criteria, and should refuse to offer them services if they are unable to screen them through reliable independent data sources.

“In case of identifying risky individuals, the people in charge must make enhanced efforts based on guidelines provided by the High Council of Anti-Money Laundering,” the directive states, adding that if there is evidence of another beneficiary, they must move to fully identify that beneficiary.

As required by the Cabinet-approved directive, the involved entities must exercise constant supervision over their services and the “suspicious operations and transactions” of their clientele. The level of oversight must be proportionate to the risk previously designated to the client.

Further Guidelines

The directive also calls for designing and establishing systems to detect financial or transactional operations or “any unreasonable or suspicious operational pattern” of their clientele vis-a-vis terrorism financing.

While they are obligated to adequately deal with any suspicious clients, they must also update the clientele list if any changes are made to the sanctions list.

With regard to safeguarding archives and information, the law requires the entities involved to “maintain records related to financial operations and transactions both local and international for at least five years” so they can report them to related parties on demand, if necessary.

According to the directive, the aforementioned records must include sufficient information on funds and assets, as well as the kind of currencies used in each transaction so that legal prosecution for criminal activity would be possible by reconstructing the processes of all transactions.

The entities involved are required by law to introduce an official unit in charge of combating money laundering and financing of terrorism to the Financial Intelligence Unit of the Ministry of Economic and Finance Affairs.

They are also obligated to immediately contact judicial officials to block the funds and seize the resources and assets of any client on the sanctions list. The directive separately addresses correspondent banking relations, directing Iranian financial institutions to undertake all measures to prevent financing of terrorism when developing banking ties with other institutions.

“Financial institutions are obligated to refrain from establishing correspondent ties with shell banks to prevent the risk of terrorism financing,” while “having correspondent ties with banks that work with shell banks is strictly prohibited”.

With regard to non-government and charity organizations, the Cabinet directs the High Council of Anti-Money Laundering to undertake measures to prevent any violations by these organizations to finance terrorism.

It also orders the entities involved to hold regular educational programs for their personnel, set detailed measures, especially for Iranian financial institutions, and devise further guidelines for the Financial Intelligence Unit.