Central Bank of Iran Makes Case for Joining FATF

EghtesadOnline: The central bank governor says Iran’s key trading partners have sent notice to the effect that Iran’s inclusion in the Financial Action Task Force’s blacklist would have dire consequences.

News ID: ۷۴۹۳۰۸

28 December 2019

Speaking on the sidelines of a Cabinet meeting in Tehran on Wednesday, Abdolnasser Hemmati said countries like China and Russia, with which Iran has close political and economic ties, have said “if Iran is put on the FATF blacklist, it would have a negative impact on two-way  banking relations.”

Cognizant of their concerns, Hemmati said banks in FATF member countries have accepted requirements mandated by the task force. “If they observe the rules (and we do not), it would be natural that we (would) have problems interacting with them”.

One reporter asked the senior banker if there is any guarantee that Iran’s economic conditions would not be undermined by embracing FATF protocols, according to Financial Tribune.

Hemmati responded by posing a counter question.

“It would be better to ask if there is any guarantee that the people’s living conditions would not deteriorate by an FATF blacklisting.”

The Paris-based global anti-money laundering watchdog issued a four-month deadline in mid-October, giving Tehran a last and final chance to comply with international anti-money laundering rules by February 2020. The failure to uphold the FATF warning would place Iran on the international black list.

There are differences among senior officials in Tehran on whether or not to join the FATF. To impartial observers and supports of transparency the stance of pro-FATF camps is more logical and sensible.

Courting Trouble

They insist that noncompliance with FATF rules means the whole financial system would be in trouble, traders wouldn’t be able to settle payments with their overseas partners, bank offices abroad will be boycotted and bank accounts of Iranians working or studying overseas would be shut down.

Put simply, proponents say not joining FATF will add to the people’s tribulations and be tantamount to a sort of “self-embargo”.

On the flip side, there are some minority groups, particularly in the legislature, who argue that joining FATF will expose sensitive economic and financial data to hostile powers, like the United States, which are infamous for their policy of sanctions and ingrained animosity towards Iran.

Some are seemingly concerned compliance could also hamper Iran’s support to its close foreign allies, while others claim that they have lost faith in any and all accords and conventions coming out of western countries, especially after the US last year unilaterally abandoned the landmark nuclear agreement Iran had signed and the six world powers in 2015.

Addressing these concerns, Hemmati said” there is no reason to worry as we already comply with the money laundering rules”.

Governor of the Central Bank of Iran reiterated that accepting FATF norms is in the interest of Iran’s banking system and would render “banking transactions smoother and more transparent.”

FATF and INSTEX

Non-compliance with FATF regulations may also jeopardize the much anticipated trade channel designed to facilitate Iran-EU trade.

Chief of British-Iranian Chamber of Commerce Norman Lamont said Wednesday that joining the FATF blacklist would make it more difficult for the Instrument in Support of Trade Exchanges (INSTEX) to work with Iran.

“As someone who is very eager to expand trade between Iran and EU, I strongly hope that the Majlis and the Iranian government will ratify all the required provisions of FATF,” IRNA quoted him as saying.

Iran will not help itself if it cuts itself off from the world's banking system, he noted. “There can’t be trade without banking, and the vast majority of the world's banks will refuse to do business with Iran if it is blacklisted by FATF."

INSTEX is a mechanism set up in January by France, Germany and the UK (E3) with the aim to enable companies in Iran and Europe to conduct trade in defiance of US sanctions, by offering a payment channel that would not be subject to US penalties.

Lord Lamont said that he appreciates Iranian feelings  "about how they have been treated by the US and I sympathize with them."

He, however, went on to add that referring to the US sanctions as an excuse not to ratify FATF would be a mistake and make it even more difficult for INSTEX to develop trade with Iran.

Iran has already enacted 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 bodies.

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 Guardians – for the final decision.