September 06, 2019
A senior member of the Expediency Council says that body has decided at this time not to approve the last two requirements to bring Iran into compliance with the financial rules of the Financial Action Task Force (FATF)—and may even decide to rescind the FATF rules the government has already approved.
The decision would place Iran completely outside the international financial system. The EU has already said it will not open trade with Iran if Iran does not sign up for all the FATF banking standards, which are designed to fight money laundering and the financing of international terrorism.
The Expediency Council, a body of three dozen senior statesmen of the Islamic Republic, ranging from right to left, is appointed by the Supreme Leader. One of its tasks is to resolve disputes between the Majlis and the Council of Guardians over legislation. The Majlis has passed all the bills needed to bring Iran into compliance with the FATF standards, but the Council of Guardians vetoed two pieces of legislation.
The Majlis insisted on those bills—thus sending the dispute last year to the Expediency Council.
The Council has issued no statement recently on the legislation, which it has repeatedly postponed voting on. But on September 1, Mohammad-Reza Bahonar, a conservative former Majlis deputy who now sits on the Expediency Council, told a news conference the Council had decided to put those two bills aside for the time being.
“On the issue of conventions related to FATF, members of the Expediency Council have arrived at the conclusion that, first of all, the Council should determine Iran’s adherence to all elements of the FATF, including those previously approved. The Council will review them and decide if Iran has benefitted from them or not. Then we would address the remaining two issues.” But he said the Council “sees no need” to ratify those two provisions as of now.
The FATF has given Iran a deadline of October to decide whether it will comply with all of FATF’s standards. Bahonar said the Council “does not care” about the FATF deadline.
It remains unclear if Bahonar and the Council are playing a game of chicken with the FATF. Four times FATF has given Iran a deadline for coming into compliance, only to extend the deadline when Iran has failed to act. Some think FATF will back off again when challenged by Iran.
Iran and North Korea are the only countries in the world still not agreeing to FATF’s banking standards. A few years ago, faced by the fact that few banks would deal with it, the Islamic Republic promised to bring itself into compliance. FATF then eased up its pressure on Iran, but said it would not fully lift all the sanctions on Iranian banks until Iran had come into compliance.
The danger for Iran is that FATF will decide in October Iran has had plenty of opportunity to come into compliance, and tell the world’s banks to cut off all contact with Iran. That action would in many ways supersede US sanctions and be far worse for Iran.