Powerful finance monitoring group gives Iran until October to adopt reforms

An international group that monitors money laundering worldwide said on Friday Iran had until October to complete reforms that would bring it into line with global norms or face consequences that could further deter investors from the country.

Tehran has tried to attract foreign investors after completing a landmark 2015 agreement with the United States, Russia, China, France, Germany and Britain under which a number of sanctions were lifted in exchange for Iran agreeing to curbs on its nuclear program.

Iran has been trying to implement standards set by the Financial Action Task Force (FATF), a Paris-based global intergovernmental organization focusing on anti-money-laundering (AML) and counter financing of terrorism (CFT), in the hope it will be removed from a blacklist that makes some foreign investors reluctant to deal with it.

"The FATF is disappointed with Iran's failure to implement its action plan to address its significant AML/CFT deficiencies," the organisation said in a statement after a week of deliberations in Paris.

"The FATF urgently expects Iran to proceed swiftly in the reform path to ensure that it addresses all of the remaining items in its action plan ... we expect Iran to enact amendments to its AML and CFT laws ... in full compliance with the FATF standards by October 2018, otherwise, the FATF will decide upon appropriate and necessary actions at that time."

The FATF was founded in 1989 by G7 countries to develop policies, and push countries to adopt AML and CFT standards. 

A financial crime expert told Middle East Eye last month that the FAFT is "the most powerful organisation most people will have never heard of".

“A lot of aggravation that people suffer with their banking is FATF-related but they don’t realise it," Tom Keatinge, the director of the Centre for Financial Crime and Security Studies at the RUSI think-tank in London, told MEE.

The FATF cannot impose sanctions, but individual states that are members can - for example, the US, as well as bodies such as the EU or the United Nations. The targets of such sanctions have included Iran and Syria.

While the efficacy of sanctions as a means to bring about policy change is frequently debated, countries with less global power have little choice but to adopt the FATF’s requirements or risk financial exclusion, according to the MEE report.

The decision buys time for Tehran, knowing that punitive measures by the group may worsen it's financial sector, which has begun to suffer from the US decision in May to withdraw from the nuclear accord and the Trump administration's push to implement new sanctions that are scaring businesses away.

Iran's supreme leader said on 20 June that parliament should pass legislation to combat money laundering according to its own criteria. Ayatollah Ali Khamenei's advice makes it less likely that parliament will use FATF criteria. Foreign businesses say a bill that includes FATF guidelines is essential if they are to increase investment.

Hardliners in Iran's parliament have opposed passing legislation towards compliance with FATF standards, arguing it could hamper Iranian financial support for allies such as Lebanon's Hezbollah, which the United States has classified as a terrorist organisation.

Still, until Iran carries out measures to address deficiencies, FATF said it would remain concerned and "urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence to business relationships and transactions with natural and legal persons from Iran."