March 15, 2019
In June 2016, the Paris-based FATF acknowledged Iran’s pledge to bring its banking laws up to FATF’s standards, which are intended to block money-laundering and the financing of terrorist activities through the international banking system.
It gave Iran a deadline in which to come into compliance. It has now extended that deadline for a fifth time, giving Iran until June to change its laws to comply with FATF’s standards—a total of three years.
But, FATF said in a statement issued February 22, “If by June 2019, Iran does not enact the remaining legislation in line with FATF standards, then the FATF will require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran.”
It did not say, however, that it would put Iran fully back on its blacklist with North Korea, which is now the only country effectively kept completely out of the international banking community.
FATF now tells banks around the world to keep an especially close watch on transactions coming through Iranian banks. As a practical matter, this makes it very difficult for Iran to conduct international banking transactions.
What’s more, Britain, France and Germany have said that they will not start up their recently created mechanism to help Iran around US sanctions until Iran meets the FATF standards.
The Islamic Republic has made several changes in its banking system as demanded by FATF. The last two pieces of legislation to meet FATF standards have passed the Majlis, but were then vetoed by the Council of Guardians, the 12-man group that must approve all legislation as in compliance with the Constitution and Sharia law. The Majlis then appealed to the Expediency Council, which has been mulling the two pieces of legislation for months.
On February 16, just six days before the latest FATF deadline, the council said it was deadlocked and postponed all further consideration for two weeks—in what appeared to be a last-minute effort to challenge FATF to back off its demands.
Days after FATF gave Iran more time, the Expediency Council yet again postponed action. It said it wouldn’t take the legislation up until it meets in May—just weeks before the new deadline.
A member of the council, Ayatollah Mohsen Mojtahed Shabestari, told reporters there were two reasons for the delay. First, he said, since the bills are related, the council wants to take them up at the same time. Second, he said, the council wants to see whether the Europeans abide by their commitments—although the Europeans have already said they won’t do anything on trade until Iran commits to the FATF standards.
Meanwhile, both the Fars news agency and the Islamic Republic News Agency (IRNA) have reported that Supreme Leader Ali Khamenehi decreed that approval of the bill will require a two-thirds majority in the council. Under the council’s rules, however, only a declaration that the president is no longer fit to serve requires a two-thirds majority.
Many think the Supreme Leader recently laid the foundation for foregoing further efforts with FATF. In a speech February 18, as FATF members assembled in Paris, he warned the Rohani Administration not to be deceived by European countries that say they want to salvage the nuclear deal by setting up a special trade mechanism with Iran—the mechanism that requires Iran to meet FATF standards.
“America’s enmity toward Iran is obvious,” Khamenehi said. “Europeans also practice deception today…. The enemy sometimes shows his teeth, sometimes his fists, and sometimes his smile. All these tactics are the same. Even their smile is out of animosity.”
As for FATF, Khamenehi said, “I am not telling officials what to do. But I am advising them to exercise caution so they will not be tricked by them [Europeans] and cause problems for the country.”
FATF was set up in 1989 by the Group of Seven and includes 36 governments and several international organizations among its members.