Critical Role of FATF Reiterated

EghtesadOnline: Time is running out for Tehran to meet the deadline set by the Financial Action Task Force to comply with the standards of the global anti-money laundering watchdog or face the consequences.

News ID: ۷۴۸۸۶۶

04 November 2019

Advocates of cooperating with the intergovernmental organization appear to be more eloquent in recent weeks in their bid to persuade top legislative bodies in Tehran to pass the remaining anti-money laundering bills demanded by the FATF.

Gholamreza Ansari, deputy foreign minister for economic affairs, at the weekend warned against the ramifications of non-compliance with FATF norms, saying that it would create overwhelming challenges for Iran’s banking sector.

To make his point as clear as possible, Ansari likened compliance with FATF rules for banks to a passport for travelers, according to Financial Tribune.

“Today, FATF means having a passport. If Iranian banks really want to connect with international banking [joining] FATF is a prerequisite,” he said in reports published on Sunday.

The global watchdog issued a four-month deadline in mid-October, giving Tehran a last and final deadline to comply with international anti-money laundering rules by February 2020.

In a statement, the watchdog said should Tehran not comply before the deadline expires, it would call on all its members to apply counter-measures against the country.

"If before February 2020, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF standards, the FATF will fully lift the suspension of countermeasures and call on its members and urge all jurisdictions to apply effective countermeasures," the group said.

In Ansari’s opinion not joining the FATF will push the Iranian banking system into a complete paralysis to the extent that friendly neighboring countries too would shy away from dealing with Iranian banks already struggling due to the new US sanctions.

Friendly Warning

“Even our close friends have told us that they will not be able to conduct (financial) transactions with Iran after the deadline passes.”

In the same vein, Pedram Soltani, head of Iran-Austria Joint Chamber of Commerce said Sunday that non-compliance with global anti-money-laundering rules would deprive Iran of access to banking services in more than 190 countries.

Speaking to ILNA, Soltani said all Iranian allies and neighbors have joined the FATF, adding that only eight small countries, namely Bhutan, Democratic Republic of the Congo, Somalia, South  Sudan, Papua New Guinea have refused to do so.

Asked why the hostile Trump administration wants Iran to play by the FATF rules, Ansari said the issue has nothing to do with the United States or its stances.

“We are not sitting here to see what they prefer and not prefer and then do the opposite.”

The US Department of State announced in a statement on Wednesday that is welcomed the FATF measures to protect international financial system from what it claimed as “Iranian threats”.

“The United States welcomes the FATF’s recent re-imposition of additional countermeasures on Iran for its failure to uphold international anti-money laundering and countering the financing of terrorism (AML/CFT) standards,” the statement said.

Iran has already enacted the amendments to counter-terrorist financing and anti-money laundering acts. Bills to ratify the Palermo (convention against transnational organized crime) and terrorist financing conventions have been passed by the Majlis but not yet endorsed by higher legislative authorities.

Two remaining bills failed to win approval of the Guardian Council - a watchdog that ensures laws are in line with the Constitution and Sharia - and was sent to the Expediency Council- constitutional arbiter between the Majlis and the Guardian Council – for the final decision.

Senior authorities in Iran are not unanimous about FATF and its mandate.  Proponents say it will help ease foreign trade with Europe and Asia when the country is suffering due to the US restrictions. Opponents argue that passing legislation to join FATF could hamper Iran's support for its overseas allies.

Foreign businesses say Iran's compliance with FATF rules is crucial if it wants to attract investors, especially after the United States imposed new sanctions last year.

In June 2016, the FATF welcomed Iran’s high-level political commitment to address its strategic AML/CFT deficiencies, and its decision to seek technical assistance in the implementation of the Action Plan.

In November 2017, Iran established a cash declaration regime. In August 2018, it enacted amendments to its Counter-Terrorist Financing Act and in January 2019, Iran also enacted amendments to its Anti-Money Laundering Act.

The watchdog, however, has announced that it can only consider fully enacted legislations, asking Iran to ratify the remaining bills by the February 2020 deadline.