In an unprecedented statement, the Islamic Republic's Assembly of Experts (AE) has warned against Iran joining international financial transparency agreements aimed at curbing money laundering and terrorism funding.
Ending its annual meeting March 13, the AE issued a statement saying that joining the Financial Action Task Force (FATF), a step proposed by President Hassan Rouhani’s government, would be a “strategic mistake.”
Rouhani presented the proposal to meet FATF requirements to parliament in November 2017. Backers of the legislation, known collectively as the Palermo Bills, say joining the FATF and other international agreements on financial transparency would reduce international pressure on Iran’s deteriorating economy.
The bills would also pave the way for Iran to join the United Nations Convention Against Transnational Organized Crime (UNTOC), Combatting the Financing of Terrorism (CFT), and the United Nations Office of Drugs and Crimes.
So far, two of the four bills have been ratified, but the fate of the other two is still in limbo.
Opponents of the bills, mainly Friday prayer leaders, top commanders of the Islamic Revolutionary Guards Corps (IRGC), and other conservative allies of Supreme Leader Ayatollah Ali Khamenei, argue that passing the bills will threaten Iran’s security. However, analysts say the real fear in circles loyal to Khamenei is that adhering to rules for financial transparency would prevent Tehran from funding the Lebanese Hezbollah and Palestinian Hamas militant groups.
Khamenei has said the international conventions were “cooked up” by foreign enemies. The bills have triggered a series of heated debates between parliament and the Guardian Council (GC), as well as the Expediency Discernment Council (EDC), which acts as the referee if a dispute occurs between parliament and the GC.
The AE’s statement joining the chorus of voices against the legislation is unprecedented, as the body’s constitutional mandate is only to supervise the Supreme Leader, not to comment on the particulars of government policy.
Now the fate of the bills is in the hand of the EDC, which has postponed the final decision until its next session in April. Two EDC members told local media March 1 that Khamenei had instructed them they could only pass the bills with a two-thirds majority, a condition that has no precedence.
Without directly naming the EDC, the AE’s statement cautioned the powerful council, “For the Islamic Republic to join such international conventions is a strategic mistake if they are intended to neutralize the enemy's excuses (to harm Iran).”
The AE further warned that joining the agreements could allow "aliens infiltrating into the Islamic Republic's strategic financial and non-financial transactions with its allies."
Iran’s participation in the agreements has long been demanded by the FATF, which has asked Iran to strengthen its legal framework to guard against money laundering and financing terrorism. If Iran fails to comply with FATF demands, the watchdog can extend a blacklist on Iran, severely restricting its ability to have banking relations with the rest of the world.
Iran and North Korea are the only countries on the FATF blacklist.
Last month the FATF extended a February deadline it had given Iran to June.
The Paris-based FATF concluded its February meeting, saying that it “expects Iran to proceed swiftly in the reform path,” according to Reuters.
If the shortcomings are not remedied by June, currently suspended countermeasures would automatically kick in, said Marshall Billingslea, the U.S. assistant Treasury Secretary for terrorist financing, after chairing the FATF meeting.
“That is a significant indication from the FATF that time has expired, the action plan is overdue, and we expect it to be implemented without delay,” Billingslea told journalists.
If countermeasures are reimposed, FATF members worldwide would be required to step up supervision of Iranian bank branches on their territory, including on-site inspections, Billinglsea said.
In the absence of compliance, the FATF called on its members to advise their banks to scrutinize all business with Iran, including obtaining information on reasons for proposed transactions, stepping up controls on sales and identifying patterns of operations for further scrutiny.