Jul 16, 2018

The Financial Action Task Force (FATF) on June 29 extended until October the deadline for Iran to pass and implement legal measures to address concerns regarding anti-money laundering (AML) and combating the financing of terrorism (CFT) in its financial sector. It is clear that a failure to implement what Iran included in its own action plan more than two years ago would undermine the confidence of governments and banks wanting to continue dealing with Iran despite the re-imposition of US sanctions.

According to the FATF's statement on the extension, Iran needs to address a number of deficiencies and “proceed swiftly in the reform path to ensure that it addresses all of the remaining items in its Action Plan by completing and implementing the necessary AML/CFT reforms, in particular enacting the necessary legislation. We expect Iran to enact amendments to its AML and CFT laws and ratify the Palermo and TF Conventions in full compliance with the FATF Standards by October 2018, otherwise, the FATF will decide upon appropriate and necessary actions at that time.”

Recent developments and statements inside Iran underline that FATF-related issues need to be resolved through a domestic political process, which will require bargaining. This explains why President Hassan Rouhani has written to Ahmad Jannati, the archconservative chairman of the Guardian Council, to seek his support with the approval of necessary legislation so that Iran can be removed from the FATF blacklist and the country’s banks can engage in the global financial system. In late June, it was also announced that Rouhani, along with parliament Speaker Ali Larijani, would meet with the supreme leader, Ayatollah Ali Khamenei, to discuss the fate of FATF-related legislation.

Contrary to the mainstream interpretation that in a June 20 speech Khamenei had indicated opposition to passing the necessary laws, his statement on FATF could actually pave the way for a pragmatic approach to the legislation. Khamenei said, “In the case of the issues which arose in the Majlis [parliament] in recent months, I said that the Majlis should pass laws in an independent manner. Let us take the case of combating terrorism and money laundering for instance. … They [lawmakers] should sit and pass a law on this. If the law is about combating money laundering, there is no problem, and there are not many conditions and terms. What you, yourselves, intend to do, should be specified in the law. This is what is important. There is no need to agree with things which we know are not transparent or which we know are problematic only for the sake of their positive aspects and features.”

In other words, the parliament has been called upon to produce its own version of the required laws and refrain from copying every single word of the proposed drafts by the FATF. This may explain why on June 25, Reformist Deputy Speaker Ali Pezeshkian reacted to criticism from hard-line parliamentarians by saying that Iran needs an anti-money laundering law regardless of the requirements of international conventions. Furthermore, Ahmad Amirabadi Farahani, presiding board member in parliament, stated on June 30 that the domestic version of the law on fighting terrorism financing was “more solid and more appropriate” than the draft proposed by FATF.