Iran Banks Urged to Enforce AML/CFT Measures

EghtesadOnline: The Central Bank of Iran has called on the banking system to enforce anti-money laundering and combating the financing of terrorism measures by establishing strong compliance departments.

News ID: ۷۸۲۰۰۹

13 March 2018

CBI Governor Valiollah Seif on Wednesday met with the chief executives of banks at the CBI headquarters and urged them to implement AML/CFT standards in their operations, especially by screening their customers.

"Combating money laundering and financing of terrorism are a national necessity that has been emphasized both by the law and Sharia, and have an important role in stopping corruption," Seif was quoted as saying by CBI's website.

Ever since agreeing to implement an action plan devised by the Financial Action Task Force–the international group in charge of fighting money laundering–in 2016, Iran has been keen to observe AML/CFT rules in banks, insurance and listed companies, Financial Tribune reported.

In June of that year, FATF welcomed Iran’s high-level political commitment to address its strategic AML/CFT deficiencies and its decision to seek technical assistance for implementing its action plan.

FATF decided in November 2017 to continue the suspension of counter-measures and in late February this year, the body once again decided to extend its countermeasures against Iran but stopped short of permanently removing Iran from the list of high-risk jurisdictions.

"According to global standards, indentifying the activity level of customers according to their occupation, age, region, account turnover, etc. should be identified and accordingly, any transaction that runs against the activity level of the customer should be reported," Seif said.

The CBI chief noted that these measures would help identify suspicious activity and lead to banking transparency.

Seif noted that compliance departments in banks are not yet fully in place, which is a serious barrier for adapting to international regulations.

"CBI is ready to help banks in this regard so that we witness reforms and the strengthening of compliance departments of banks," he said.

In its recent public statement regarding Iran, FATF has also urged the country to "ensure an adequate and enforceable customer due diligence regime, ensure the full independence of the Financial Intelligence Unit and lead to submission of STRs (suspicious transaction reports)".

It also called for establishing a broader range of penalties for the violation of AML standards and for ensuring adequate legislation and procedures to provide for confiscation of property of corresponding value.

In response to the recent volatility in the forex market, Seif announced that anti-money laundering rules such as know your customer controls are being implemented in the foreign exchange market.

He also pledged to continue the crackdown on unregulated forex trade, which he regarded as a form of underground economic activities.

At Wednesday's meeting, Seif recalled the chaos created by the unlicensed financial and credit institutions, saying that those entities had wreaked havoc on the country's financial system.

"Now that this phenomenon has come to an end, we should not allow the banking system to become the ground for money-laundering, suspicious transactions and underground operations," Seif said.

Illegal credit institutions or shadow banks, which sprung up especially during the 1990s gradually grew into powerful institutions that held almost 25% of the country's liquidity.

However, during the tenure of President Hassan Rouhani, a consensus was formed among the central bank and the judiciary to crack down on these companies. As a result, many were dissolved and some others were merged into commercial banks.

The government also bailed out many banks that had gone bankrupt.