The Iranian Central Bank has made it mandatory for all banks in Iran to establish an anti-money laundering unit. The initiative appears to be an effort by the Rouhani administration to circumvent the legislative deadlock over meeting the requirements of the Financial Action Task Force (FATF).
The latest deadline set by FATF gives Iran less than four months to join international conventions against money laundering and funding terrorism. In the meantime, debate over compliance with FATF requirements appears to have been used as a pawn in the dynamics between the country's leading political factions.
FATF, as an international financial watchdog, has put North Korea on its blacklist and Iran is under probation for its deficient banking system, threatened to be moved to the black list. But already, Iran’s foreign banking relations are impacted, independent of U.S. sanctions.
The Iranian Parliament has passed four bills required by FATF, but two which will join Iran to the Palermo Convention against transnational crimes and the CFT or the convention against funding terrorism, have been held by hardliners at the Guardian Council and Expediency Council after the initial approval by the parliament.
Iranian Central Bank's new executive by-law is based on a directive issued by the Rouhani administration in late September as a resolution made by the cabinet.
Based on a 30 October report by the proreform newspaper Etemad, the Central Bank has made a long justification full of jargons such as, "The Central Bank reviewed and approved the Anti-Money Laundering Law to address the new situation."
The "new situation" can be translated in plain English as the FATF requiring Iran to pass laws against money laundering and funding terrorism, and the government not being able to do that because of disagreements between the administration and hardliners.
But how can the Central bank "approve" a law, while the Guardian Council and the Expediency Council are the constitutional authority to do that and they have refused to act.
The administration and its Central Bank are so concerned about possible attacks by the Guardian Council and Expediency Council that in order to avoid naming FATF, they say "international authorities active in the area of confronting money laundering."
The Central Bank's new executive bylaw against money laundering calls for the "assessment and classification of the risks involved in the banking system's interaction with real and legal entities." It also sets regulations about the way the banking system works with banks outside Iran.
"Banks and financial institutions should have a proper assessment of the risks of money laundering and financing terrorism in their banking activities and carry out necessary measures to identify the customer and the bank that has requested the service," the by-law calls for.
Etemad opines that in the first glance it appears that the Central Bank's executive bylaw is not convincing enough to offer assurance to foreign companies to start or expand economic relations with Iran.
The Rouhani administration is frustrated over the stonewalling of hardliners, who have refused to ratify the FATF conventions. On Sunday, Foreign Minister Zarif lost his temper while trying to prove that he and the Rouhani administration were seeking the country's best interest in their arguments in support of compliance with FATF requirements. The State TV showed an utterly angry Zarif who hurriedly ran out of the Parliament apparently to go to another meeting. However, reformist MP Mostafa Kavakebian said "I wish Zarif had finished his speech."
While Rouhani and his critics disagree about whether Supreme Leader Ali Khamenei supports the administration's views on FATF, Khamenei has remained silent, either because he agrees with Rouhani and does not want to annoy his hardline allies, or because he really is against complying with FATF standards.
In the meantime, Iranian conservatives are happy about the deadlock that has kept Rouhani and the reform camp at bay and deprived them of using a possible political gain in electioneering ahead of the February Majles election.
