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11/08/2018

How can we trust the FATF again? A new political headache for Iran

How can we trust the FATF again? A new political headache for Iran

It was a tense day in the Iranian parliament, with government opposition even calling it a “black day”. This day marks the anniversary of the day nuclear deal with the 5+1 Group (Joint Comprehensive Plan of Action) was ratified, a day that divided Iranian domestic politics into two sides: supporters and opponents of engagement with the United States.

The story goes as follows: The Financial Action Task Force (FATF), which is responsible for reviewing anti-money laundering laws in markets around the world, provides the results of its reviews to member countries every four months, so that they can measure the risk of investing in the reviewed country’s market. One of the most important reasons for Iran’s failure to reach the international markets after the nuclear agreement with the 5+1 Group (JCPoA) was this FATF report. The report bases its review on a country’s financial connections to terrorist organizations and their ability to prevent money laundering via financial transparency. Following these rubrics, the organization blacklisted Iran, and suggested that other countries refuse to carry out any financial transactions with them. The FATF then provided Iran with a specific executive plan, and told the country implement this plan in order to be removed from the blacklist. The FATF included forty-one separate proposals.

Four of the forty-one FATF proposals require that Iran adopt the adjustment as a national law. Iran’s ascension to the “Convention Against Transnational Organized Crime” or Palermo, the “International Terrorist Financing Convention” or CFT, the “Amendments to the Anti-Terrorism Financing Act” and the Amendments to the “Anti-Money Laundering Law”, were voted for approval in the Iranian parliament as quadruple bills. The latest and most controversial bill, the CFT, which relates to the fight against the financing of terrorist organizations, was approved last week.

However, there are three crucial reasons for Iran to oppose the requested FATF adjustments:

First:

The FATF’s definition of terrorism is different from the definition understood by the Islamic Republic of Iran, and, accordingly, what each considers as manifestations of terrorism differ. The FATF has provided a list of legal and natural names that include the names of individuals associated with international terrorism, along with the countries and businesses that interact with them with financially. The names of many organizations and influential people in Iran are mentioned in the list, including the Islamic Revolutionary Guard Corps, Islamic Republic of Iran Broadcasting (IRIB) and General Qasem Soleimani (a high ranking military official in Iran who played a very important role in fight against ISIS in Syria and Iraq). Accordingly, the financial intermediation of Iran’s banks with these individuals and organizations places these banks on the SDM’s list as well.

Second:

The FIU of Iran, which is responsible for controlling financial and banking transactions aimed at preventing money laundering, is required to cooperate with the FIUs of other countries and provide information about bank transactions of all people who are suspected by the other countries’ FIUs. Iran, due to the outrageous sanctions placed on them by the United States, is naturally attempting to circumvent the sanctions, which means that by providing financial and banking information to FIUs in other countries, they would be turning in themselves.

Third:

The FATF has explicitly stated that, even after implementation of all the executive plans recommended to Iran, there is no guarantee that Iran will be removed from the list, which means that all of Iran’s actions could have been carried out in vein. If all of the FATF recommendations are implemented, Iran’s removal from the blacklist must still be approved by the members of the FATF, and it is clear that the United States will not endorse the removal, since they are the ones creating barriers to Iran’s financial transactions in the global market to begin with.

It must be acknowledged that the FATF is attempting to provide Iran’s banking and financial information exchange infrastructure to other countries, and the spread of this information will ultimately end in harsher and more outrageous sanctions by the United States. The ultimate goal of the United States is to implement sanctions inside of Iran itself, forcing a boycott of Iranian organizations by Iranian banks. The FATF’s program is just one vehicle for the United States to use to push its agenda.

The program is similar to the plan Pakistan put into place in 2015. At that time, Pakistan began reforming its economic policy based on the FATF recommendations in order to gain the confidence of FATF member countries and be removed from the organization’s blacklist… However, in 2018, Pakistan was re-listed nonetheless. The FATF’s excuse was the release of the head of a political group in Pakistan, showing that, contrary to what the FATF claims, it has a political function, and the terms of its politics are set by Washington.

It is interesting to note that the leader of the Islamic Republic of Iran, Ayatollah Seyyed Ali Khamenei, had repeatedly warned authorities about the adoption and implementation of such international conventions, especially the FATF, and considered them contrary to the national interests of Iran.

Regardless of his protestations, the four bills were ratified in Iran’s parliament. Proponents of the approval of these bills claimed that the FATF proposals would complement the Joint Comprehensive Plan of Action (JCPoA), and open the way for foreign investors to do work with Iran, while facilitating financial interactions between banks in Iran and international banks.

Opponents of the FATF proposals claim that the United States cannot serve as a reliable partner in such negotiations. We saw how the U.S. unlawfully and unilaterally violated the JCPoA agreement, therefore, we should not simply execute the FATF requests in the hope that the United States will reduce its sanctions in turn: they can’t be trusted to adhere to their agreements. Immediately after the adoption of the quadruple bills in Parliament, FATF officials noted that even after the implementation of all forty-one proposals, there will be no guarantee that Iran would be removed from the list of countermeasures, nor the blacklist. This once again made the issue of negotiating or not negotiating with the United States the topic of the day in Iran’s domestic political sphere.

At the FATF meeting in Paris in October, David Lewis implied that Iran’s response to the FATF proposals during the past two years had been positive, but Iran’s removal from the countermeasures list is still be based on members’ votes. Lewis pointed out that to remove Iran from the list of “risky” investment countries, the 35 FATF members would need to vote to this regard, and specifically, the United States, which is itself responsible for blacklisting Iran in first place, and obviously would not agree to the removal.

Representatives of the Iranian parliament earlier this year met with Iran’s Foreign Minister Mohammad Zarif. One of the representatives claims that Zarif said in a private meeting that if there are objections to the implementation of the FATF proposals within the country, the United States will have more excuses to accuse the country of sponsoring terrorism, despite the fact that the FATF and Iran’s definition of terrorism itself is fundamentally different! This representative also says that Zarif, like Lewis, has not provided any guarantee that Iran will actually be removed from the FATF’s countermeasure list upon meeting the agreements. Parliament’s reaction was that, under the JCPoA, the US had assured Iran that sanctions would be lifted, and yet, this agreement eventually ended with the unilateral withdrawal of the United States and continued sanctions… without even a guarantee from the FATF, the end results already seem clear!

The FATF issue has created a stark division in the Iranian political sphere, those pushing for dialogue and interaction with the United States and those opposing it. These two sides of the political spectrum were exactly the same at the time of the JCPoA as they are at present. Within the next four months, these two sides will have to make a decision about interaction with the United States, a country that has established all of its foreign policy principles on attaining advantage over other countries. Any course of action the United States agrees to ultimately aims at the same end: strengthening sanctions against Iran.

Mani Mehrabi
Senior international affairs analyst, Faculty member at the Think tank of International Relations (Tehran, Iran)