The Forum for Partners in Iran's Marketplace

October 2019, No. 92


Ambiguities of FATF’s 4-Month Deadline to Iran

Iran will remain on the FATF Public Statement until the full Action Plan has been completed.

The story of Iran joining or not joining the Financial Action Task Force (FATF) is still ongoing and efforts to persuade the members of (Expediency) Council have reached nowhere.

FATF was founded about 30 years ago to prevent money laundering and to prevent financial support for terrorist groups and according to the Joint Comprehensive Plan of Action (Iran Nuclear Agreement), it is one of the agencies that oversee Iran’s financial activities.

In late February, the FATF working group decided to extend suspension of anti-Iran counter-measures. Meantime, FATF had urged Iran to complete and implement the CFT (Combating Financing of Terrorism) and Palermo Convention reforms. However, the FATF, whose mission is to combat money laundering and terrorist financing has called for the intensification of overseas supervision over Iran’s financial institutions due to lack of approval of two bills over the past four months.

The bills on terrorist financing and Palermo Convention have been approved by the Islamic Consultative Assembly (Parliament) but have not yet been implemented. The group again gave Iran four months on June 21, and extended suspension of punitive measures against Iran so that Tehran could approve the laws on combating money laundering and terrorist financing. According to the statement, the FATF decided at its meeting to extend the suspension of counter-measures and, of course, urged all its members and jurisdictions to intensify their oversight of the Iran-based branches and financial institutions.

Part of the statement reads: “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 terrorist 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.”

In fact, these two bills are two final steps by Iran to join the FATF and an important step in dropping Iran from the FATF ‘black list.’ The government has repeatedly requested the Expediency Council to accelerate examination of the bill on Iran’s accession bill to Palermo Convention. Now, the Vice-President for Legal Affairs Laya Joneydi has expressed concern over procrastination of the Expediency Council in endorsing FATF, saying that we are moving backward.

Three Anti-Iran Measures Restored or Being Restored

Commenting on extending the suspension of FATF countermeasures, Joneydi said: “Announcement of applying more countermeasures in the future concurrent with the decision to extend the suspension by the FATF is alarming. Unfortunately, we are going back to square one step by step: That is to say re-imposing countermeasures and ineffectiveness of the suspension, which we should not let this happen.”

She said: “The Expediency Council is expected to finalize the two bills sooner in order to prevent further countermeasures. It would have been better if we had already solved this problem to avoid this situation and what is left from our international banking relationships and capacities would not be harmed further.”

She added: “We only call this four-month period suspension, while three acts against Iran are either back in place or on their way back. They may set another deadline again but if other laws and treaties are not adopted again some other countermeasures will be restored. Obviously, in the event of a further delay suspension of some of the items will not be of any use to us due to imposing more counter-measures and this will bring the behavior of the banks closer to assuming that the name of the country is blacklisted (non-cooperative) and there will be no suspension.”

Commitment to Intense Oversight Will Increase Risk and
Prompt Extreme Discretion of Foreign Banks

The VP said everyone should note that this is a matter of national interest and concerns part of the rights of the people and the rights of citizens. Ensuring the realization and facilitating of economic relations and banking transactions exchanges is the right of the people so that their minimum welfare is provided.

Joneydi said that out of the nine countermeasures one has been restored in mid-June and two more including increased reporting, even systematic and continuous reporting as well as external auditing, will be restored at the end of the four-month deadline if the bills are not endorsed.

She added: “The drawbacks are that the level of inspections compared to Iran related banking operations will go much higher. In fact, it should be said that the inspections will cause high and extensive oversight over transactions.

“Another worrying issue is that the banks that deal with Iran’s banks and financial institutions may actually stop financial transactions with Iran due to growing risk of money laundering and alleged terrorist financing in the transactions and increased risk and the need for high level inspections.”

She said: “external inspection means that anyone working with Iran may go as far as assigning inspectors and the auditors at the workplace. This possibility may threaten the financial groups who want to work with our country. That is another concern!”

In response to a question whether she had attended a meeting of the Joint Commission of the Expediency Council in the New Year (started March 21), she said: “I was present at a meeting on the two remaining bills but after that a meeting of the Joint Commission was held.” The vice-president for legal affairs said: “These topics are very important and cannot be ignored simply. This can seriously harm our remaining international financial relations.”

She added: “We have to see what happens at the next meeting of the council. I cannot guess what their decision would be. The council is currently discussing another topic and the two bills will be next on the agenda. In my opinion, the council should have a serious reflection on this issue and strive to serve our national interests which demand maintaining banking exchanges.”


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  October 2019
No. 92