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Congress Supports Financial Transparency for Iranian Transactions

Congress Supports Financial Transparency for Iranian Transactions

Annie Fixler , Tyler Stapleton
22nd November 2017 - FDD's Center on Sanctions and Illicit Finance Policy Brief

The House Financial Services Committee approved last week the Strengthening Oversight of Iran’s Access to Finance Act, which codifies in law a set of conditions that the U.S. Treasury must use to evaluate licenses for the sale of commercial aircraft to Iran.

The bill requires the secretary of the Treasury to report within 30 days whether transactions related to the export and re-export of aircraft to Iran pose a “significant money laundering or terrorism financing risk to the United States financial system.” The secretary must also determine whether the transactions benefit any Iranian person that has knowingly transported or otherwise supported the proliferation of weapons of mass destruction or provided material support to persons included on Treasury’s sanctions lists. If the secretary cannot certify that the transaction meets these conditions, he must explain whether the licenses authorizing the transaction will be revoked, modified, or remain valid despite the potential for illicit transactions or benefits going to sanctioned persons.

Under the July 2015 nuclear agreement known as the Joint Comprehensive Plan of Action, or JCPOA, the United States committed to allowing the sale of commercial aircraft to Iran provided the planes are used “exclusively for commercial passenger aviation.” The JCPOA specifically states that if aircraft are either used for a prohibited purpose or transferred or re-sold to individuals or entities on Washington’s sanctions lists, the U.S. would view this as grounds to cease its approval of aircraft sales – but, by implication, not abrogate the nuclear deal in full.

Upon the implementation of the JCPOA in January 2016, Treasury issued a Statement of Licensing Policy (SLP) and additional guidance reiterating and expanding on the relevant language from the nuclear deal. The SLP and related guidance indicate that Treasury would view license applications favorably but would review applications on a case-by-case basis and “include appropriate conditions to ensure” that no sanctioned persons were involved in the transaction.

The SLP and related guidance are clearly consistent with the JCPOA, which does not require the United States to issue licenses for aircraft sales without conditions. Accordingly, the SLP does not guarantee that all applications will be approved. If Washington determines that certain criteria are necessary in order to ensure that commercial aircraft are used appropriately, it is permitted to reject an application that does not meet those criteria.

The proposed bill supports Treasury’s robust licensing approval process by codifying steps that are likely already central to the department’s evaluation process. First, for more than two decades, Treasury has been at the forefront of efforts to implement global anti-money laundering and counter-terrorism financing standards. The bill emphasizes that these standards should be a critical component in the evaluation of licenses vis-à-vis Iranian aircraft transactions. Second, the bill’s requirement that no persons knowingly supporting proliferation benefit from the deal mirrors Treasury’s statement that no persons on sanctions lists be involved in the transactions.

While not imposing any new standards for the approval of sales to Iran, codifying the existing standards in law through this bill makes the licensing process more transparent and gives the American people – through their elected representatives – a clearer picture of a significant component of the sanctions relief provided to Iran under the nuclear agreement.

The most novel component of the bill is that it requires the secretary of the Treasury to issue a report listing all U.S. or foreign financial institutions that have conducted authorized transactions in connection with the export or re-export of commercial aircraft to Iran. While not classified, this information is not currently part of the public record. Objections to the publication of a list of companies and banks involved in aircraft sales revolve around exposing businesses to reputational risks for transacting with Iran. Yet it is unavoidable for there to be reputational risk for doing business – even legal business – with the world’s leading state sponsor of terrorism.

Annie Fixler is a policy analyst at the Center on Sanctions and Illicit Finance at the Foundation for Defense of Democracies, where Tyler Stapleton is deputy director of congressional relations. Follow them on Twitter @afixler and @Ty_D_Stapleton.

Follow the Foundation for Defense of Democracies on Twitter @FDD.

Tags

csif, illicit-finance, iran