At the end of its October plenary on Friday, the FATF gave Iran until February 2020 to comply with international norms after which it would urge all its members to apply counter-measures.
“If before February 2020, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, then the FATF will fully lift the suspension of counter-measures and call on its members and urge all jurisdictions to apply effective counter-measures,” the global watchdog said in a statement published on its website.
While acknowledging that Iran has recently adopted the AML-CFT bylaw, which the FATF has not yet reviewed, the FATF expresses its disappointment that the Action Plan remains outstanding, Financial Tribune reported.
The global watchdog expects Iran to proceed swiftly in the reform path to ensure that it addresses all of the remaining items by completing and implementing the necessary AML/CFT reforms.
Verifiable Progress
The FATF said in the statement that it has recognized the progress of Iran’s legislative efforts to implement anti-money laundering and countering financing terrorism polices.
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, Iran enacted amendments to its Counter-Terrorist Financing Act and in January 2019, Iran also enacted amendments to its Anti-Money Laundering Act.
The bills to ratify the Palermo and Terrorist Financing Conventions have passed parliament, but are not yet in force.
The FATF said it can only consider fully enacted legislation.
“Once the remaining legislation comes fully into force, the FATF will review this alongside the enacted legislation to determine whether the measures contained therein address Iran’s Action Plan, in line with the FATF standards.”
Tehran has already signed into law two of the relevant anti-money laundering bills that update and amend existing legislation on terror financing and money laundering.
Pending Issues
Iran’s action plan expired in January 2018. In October 2019, the FATF noted that there are still items not completed and Iran should fully address, including:
(1) adequately criminalizing terrorist financing, including by removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism”;
(2) identifying and freezing terrorist assets in line with the relevant United Nations Security Council resolutions;
(3) ensuring an adequate and enforceable customer due diligence regime;
(4) clarifying that the submission of suspicious transactions reports (STRs) for attempted TF-related transactions are covered under Iran’s legal framework;
(5) demonstrating how authorities are identifying and sanctioning unlicensed money/value transfer service providers;
(6) ratifying and implementing the Palermo and Terrorist Financing Conventions and clarifying the capability to provide mutual legal assistance; and
(7) ensuring that financial institutions verify that wire transfers contain complete originator and beneficiary information.
The FATF decided in June 2019 to call upon its members and urge all jurisdictions to require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran.
Enhanced Reporting
In line with the June 2019 Public Statement, the FATF decided at its plenary meeting this week in Paris to call upon its members and urge all jurisdictions to introduce enhanced relevant reporting mechanisms or systematic reporting of financial transactions.
The members are required to increase external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran.
Iran will remain on the FATF Public Statement until the full Action Plan has been completed.
Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism-financing in the Action Plan, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system.
The FATF, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence with respect to business relationships and transactions with natural and legal persons from Iran, consistent with FATF Recommendation 19, including: (1) obtaining information on the reasons for intended transactions; and (2) conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.