Iran’s Financial Rebranding Efforts and the FATF Plenary

The Plenary and Working Group of the Financial Action Task Force (FATF) – a global body for combatting money laundering and terror and proliferation finance – will meet from February 18 to 24 in Paris. While Iran is not on the agenda, it could figure prominently in discussions at the gathering.

In June 2016, FATF announced it would keep Iran on its blacklist, citing concern over the terrorist financing risks. It warned of the threat that Iran posed to the international financial system, and advised the business community to conduct expanded due diligence when considering business relationships and transactions with Tehran.

Still, FATF suspended mandatory countermeasures on Iran for a year. This was based on the promise that Tehran would take steps to address “deficiencies” and seek “technical assistance” to implement the Action Plan that it had struck with the organization. In four months, FATF will announce whether Iran’s place on the blacklist will change.

Iran claims it is making progress. For example, Iran asserts that it passed a counterterrorism law last year that will enable it to comply with FATF standards and that would “send a message of goodwill” to financial bodies worldwide over doing business with its banks. An Iranian Central Bank official also recently asserted that Iranian banks have been equipped with the necessary tools to conform to international money laundering regulations, combat terror financing, and gather better information on clients. But while Iran may have implemented some technical aspects of its Action Plan, which is the standard against which it will be measured by FATF, it has declined to abandon its continued support for Hezbollah, Hamas, al-Qaeda, and other terrorist organizations.

For example, in December 2016, then-UN Secretary General Ban Ki-moon reported that Hezbollah leader Hassan Nasrallah gave a speech in June 24, 2016 – the same day FATF suspended mandatory countermeasures – in which he proudly proclaimed that that the budget of Hezbollah, its salaries, expenses, weapons, and missiles are derived from the Islamic Republic of Iran. Such activity has deterred legitimate businesses from engaging in commercial and financial activities in the Islamic Republic.

As Acting Undersecretary for Terrorism and Financial Intelligence Adam Szubin noted last June, “These are all real concerns. And it’s up to Iran to address them – by modernizing its economy, increasing transparency, and moderating its conduct.”

This is not likely to happen. Indeed, Iran’s Central Bank deputy for anti-money laundering affairs recently made the regime’s views clear: “liberation organizations are not subject to this law and the Supreme National Security Council decides who is a terrorist.”

Iran may one day be a worthy participant in the global monetary ecosystem. For now, however, it has yet to make the course correction needed to gain international confidence. It has neither abandoned its illicit activities nor adopted the kind of transparent system that should merit FATF removing the country from its blacklist.

Toby Dershowitz is Vice President for Government Relations and Strategy at the Foundation for Defense of Democracies