Iranian Parliament Approves Terror Finance Bill with Loopholes for Hamas and Hezbollah

Iranian Parliament Approves Terror Finance Bill with Loopholes for Hamas and Hezbollah

Saeed Ghasseminejad, Toby Dershowitz
8th October 2018 - FDD's CSIF Policy Brief

The Iranian parliament passed a bill this week that authorizes the country to join the International Convention for the Suppression of the Financing of Terrorism (CFT), one of several prerequisites for Iran’s removal from the Financial Action Task Force’s (FATF) blacklist of states that engage in systemic money laundering and terror finance. FATF will be reviewing Iran's case next week.

Inclusion on the blacklist, formally known as the “public statement,” results in intense financial pressure on the designated country and requires other countries to apply enhanced due diligence when considering financial transactions with it. FATF temporarily suspended these countermeasures on Iran, pending its passage of reforms that would prevent future violations. 

In Iran’s parliament, or majles, opponents of the CFT accession bill feared it would prevent Iran from funding Hezbollah and Hamas, to which it provides an estimated $700 million and $100 million per year, respectively. 

Both opponents of the bill and foreign media reports failed to recognize that the bill carves out exemptions for the specific purpose of facilitating funds to support Hamas, Hezbollah, and other groups designated abroad as terrorist organizations. To that end, the bill excludes “struggles against colonial dominance and foreign occupation” from its definition of terrorism. The bill even acknowledges it will not fully comply with clause 1.b in Article 2 of the CFT, which prohibits any act “intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict.” The bill says Iran’s commitment to Article 2 “is limited” even if other parties are fully committed to it. FATF says Iran must criminalize terror financing, “including by removing the exemption for designated groups ‘attempting to end foreign occupation, colonialism and racism.’” 

The bill carves out a further exemption to Article 6 of the CFT by asserting it does not apply to the right of “legitimate struggle.” Article 6 requires members to adopt measures “to ensure that criminal acts within the scope of this Convention are under no circumstances justifiable by considerations of a political, philosophical, ideological, racial, ethnic, religious or other similar nature.” 

The majles’ bill also says that Iran will not abide by any part of the CFT that conflicts with its constitution, a major loophole that Iran could employ whenever it seeks further exemptions. Finally, the bill says Iran will not file its acceptance of the CFT until FATF removes Iran from its blacklist, raising questions about the sincerity of Iran’s commitment to both FATF principles and the CFT.

Despite approval by the majles, the CFT bill must now pass the Guardian Council, a body of 12 clerics and jurists loyal to the supreme leader, which can veto any and all legislation.

The credibility of FATF would suffer greatly if it allowed Iran’s deceptive legislation to satisfy the requirements laid out for removal from its blacklist. It should hold Iran to the same high standard as all other nations, regardless of demands within Iran for exemptions to protect Hamas, Hezbollah, and their ilk.

Furthermore, as underscored by the U.S. Treasury’s recent designations of Iranian officials and financial institutions, Tehran still uses banks and other intermediaries to conduct illicit transfers of financial assets in support of terrorism. Regardless of any laws it may pass, Iran has shown that its conduct has not changed.

FATF’s 37 members should also bear in mind that diplomatic concerns, such as a desire to incentivize compliance with the Iran nuclear deal, in no way justify lowering the organization’s standards. Europe, in particular, should not look the other way at a time when Iran continues to use its financial system to engage in counterfeiting, terror finance, and systemic money laundering.

Absent dramatic changes in Iranian behavior and unmitigated compliance with FATF requirements, the organization should do what is best to uphold the integrity of the financial system by maintaining Iran on its blacklist.

Toby Dershowitz is senior vice president for government relations and strategy at the Foundation for Defense of Democracies, where Saeed Ghasseminejad is a senior advisor. Follow them on Twitter @tobydersh and @SGhasseminejad.

Follow FDD on Twitter @FDD and follow FDD’s Center on Sanctions and Illicit Finance @FDD_CSIF. FDD is a Washington-based, nonpartisan research institute focusing on national security and foreign policy.

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