Non-Compliance With FATF Standards Will Increase Economic Pressure

EghtesadOnline: Iran's refusal to comply with the requirements of the Financial Action Task Force will result in added economic pressure on the country that is already suffering from severe American sanctions, a top diplomat said.

News ID: ۷۴۹۲۱۱

18 December 2019

"We see the adoption of conventions that FATF has urged all countries and banks of the world [to ratify] as beneficial, not harmful," Foreign Ministry Spokesman Abbas Mousavi said in a regular press briefing in Tehran on Monday, IRNA reported.

FATF is a Paris-based watchdog for money laundering and terrorism financing worldwide. It has long urged Iran to implement legal reforms to meet its global standards, but has extended its deadlines several times.

In mid-October, it gave Iran a final deadline of February 2020 to observe international norms after which it would advise all its members to apply countermeasures, Financial Tribune reported.

Iran has already enacted amendments to its counter-terrorist financing and anti-money laundering acts. However, bills to ratify the Convention Against Transnational Organized Crime (aka Palermo) and Terrorist Financing Convention (aka CFT) have been passed by the parliament but not yet endorsed by higher legislative authorities.

The two remaining bills failed to win the approval of Guardians Council—a watchdog that ensures laws are in line with the Constitution and Sharia—and was sent to the Expediency Council, a constitutional arbiter between the Majlis and the Guardians Council, for the final decision.

Mousavi hopes the Expediency Council would rightly determine what is in the interest of the country.

Implications for Trade With Friends

The Iranian spokesman stressed that the laws affect Iran's banking relations with many countries, including friendly states that have announced they will not be able to work with the country if the reforms are not passed.

"They have ratified the conventions and based on regulations, when doing business with an Iranian bank, they check if corresponding laws exist in Iran so that they do not face charges," he said.

Maintaining trade ties with other countries is crucial for Iran at present because its economic relations have been restricted by the sanctions that the United States has imposed after withdrawing from the 2015 nuclear agreement last year.

The US has threatened to impose penalties on countries that conduct business with Iran.

Under the circumstances, non-compliance with international norms will further obstruct the countries' trade with the world.

France, Britain and Germany have tied Iran's compliance and removal from the FATF blacklist to a new mechanism for non-dollar trade with Iran to avert US sanctions. The mechanism has yet to see the light of day.

Opponents of the conventions argue that passing the legislation for complying with FATF standards could hamper Iran's support for its allies, including Lebanon's Hezbollah, which the US lists as a terrorist group.

Mousavi, however, said the government is not concerned about any adverse outcome of complying with the convention that almost all countries have signed.

"Naturally, we will act based on our domestic laws in some issues, but [adopting the conventions] will keep baseless allegations away from the country and Iranian businesspeople will be able to work with other countries," he said.