The Financial Action Task Force (FATF) announced on October 19 its decision to continue the suspension of counter-measures against Iran. However, it expressed disappointment that the majority of Tehran's commitments to combat money-laundering and funding terrorism (known as AML/CFT) have not been fulfilled.
While suspending Iran from its blacklist temporarily for another four months, the FATF said it expects Iran to proceed swiftly in reforming its financial regulations and ensure all of the remaining items are addressed by completing and implementing the necessary AML/CFT reforms.
In the meantime, Iran will remain on the FATF Public Statement until the full Action Plan has been completed. According to the FATF, "Until Iran implements the measures required to address the deficiencies identified 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 further warned members and urged jurisdictions "to continue to advise their financial institutions to apply enhanced due diligence, including obtaining information on the reasons for intended transactions, to business relationships and transactions with natural and legal persons from Iran."
The FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money-laundering and terrorism financing.
The Iranian Parliament has been working on the ratification of four bills that would ensure Iran's compliance with FATF requirements, including the AML/CFT reforms, since December 2017. However, many hardliners -- concerned that joining the FATF might prevent Iran from sending money to groups such as Hizballah in Lebanon and Houthi rebels in Yemen -- have strongly opposed the bills.
As a result, the bills have been sent back and forth between the parliament and other Iranian legislative bodies such as the Guardian Council and Expediency Council. The laws passed by the parliament must be endorsed by the hard-line Guardian Council, and if a dispute between the two drags on, the Expediency Council would step in as a second line of defense against compromising the regime's ideology and interests.
One of the bills, which is about joining the CFT convention, was passed in the parliament two weeks ago, but the Guardian Council has yet to endorse it.
According to the FATF, "In December 2017, Iran established a cash declaration regime. Since June 2018, Iran has enacted amendments to its Counter-Terrorist Financing Act and Parliament has passed amendments to its AML law and bills to ratify the Palermo and TF Conventions. The FATF notes the progress of the legislative efforts. As with any country, the FATF can only consider fully enacted legislation. Once the remaining legislation is fully in force, the FATF will review this alongside existing enacted legislation to determine whether the measures contained therein address Iran’s Action Plan, in line with the FATF standards."
In October 2018, the FATF noted that nine items are still not completed and that Iran should fully address the remaining items, including:
- adequately criminalizing terrorist financing, including by removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism”
- identifying and freezing terrorist assets in line with the relevant United Nations Security Council resolutions
- ensuring an adequate and enforceable customer due diligence regime
- ensuring the full independence of the Financial Intelligence Unit and requiring the submission of STRs for attempted transactions
- demonstrating how authorities are identifying and sanctioning unlicensed money/value transfer service providers
- ratifying and implementing the Palermo and TF Conventions and clarifying the capability to provide mutual legal assistance
- ensuring that financial institutions verify that wire transfers contain complete originator and beneficiary information
- establishing a broader range of penalties for violations of the ML offense
- ensuring adequate legislation and procedures to provide for confiscation of property of corresponding value
Official news agency IRNA quoted Iranian Vice President Laya Jonaidi on October 20 as saying the continued suspension of Iran from FATF's blacklist was "a success for Iran's diplomacy," and "another success in an intelligent legal battle."
She added that the suspension would be helpful while Europe is preparing a special initiative to help Iran as the second round of U.S. sanction starts in November.
Earlier, the spokesperson for Iran's Foreign Ministry had criticized the FATF's statement for some of its "negative points.”