FATF’s Iran Suspension and Same Old Mistakes

(Picture: Screenshot of FATF's interactive map that shows high-risk and non-cooperative jurisdictions. Iran and North Korea are marked in red.)

By: Hessam Emami

A policy-making international body that monitors money-laundry decided on Friday to keep Iran blacklisted as a high-risk country but welcomed Iran’s promises to improve and called for a one-year suspension of some restrictions on Tehran, Reuters reported.

In a statement issued on June 24, 2016 following its latest regular plenary, the Financial Action Task Force (FATF) said it “welcomes Iran’s adoption of, and high-level political commitment to, an Action Plan” aimed to address the country’s strategic Anti-Money Laundering and Countering Financing of Terrorism deficiencies. According to the statement, Iran has informed FATF of its decision to seek technical assistance in the implementation of the Action Plan. “The FATF therefore has suspended counter-measures for twelve months in order to monitor Iran’s progress in implementing the Action Plan,” the statement added. “FATF’s call for counter-measures will be reimposed” against Iran if the country fails to make the expected progress. If it succeeds, however, the FATF says it “will consider next steps”.

Many had voiced their support for the removal of Iran from the so-called blacklist. Iranian officials were backed in their demand with the like of Michael Kemmer, head of the German banking association BDB, who had noted to Reuters recently, “[i]t is really important for banks that the FATF re-evaluates the situation in Iran.” International media outlets had also encouraged getting Iran off of the FATF blacklist as a key step in addressing major international banks’ continued reluctance to engage with Iranian counterparts considered to be a threat to the nuclear deal itself.

However, the taskforce fell short. In fact, before the full Action Plan has been completed, “the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system” and thus keeps Iran on its Public Statement. The body also called on its members to “continue to advise their financial institutions to apply enhanced due diligence to business relationships and transactions” with Iranian individuals and firms. The statement puts special emphasis on terrorist financing but does not provide any explanation on the details of the agreed Action Plan and why the country is still the only country, beside North Korea, listed as a “non-cooperative jurisdiction”.

A total of 19 countries were labeled as high-risk and non-cooperative jurisdictions by FATF. Counter-measures were in force only for Iran and North Korea while the list of countries on FATF statement has thinned since 2012. Myanmar was the last country to vanish from the list in 2016.

The FATF story has prompted international and domestic backlashes. “Global financial institutions understand that this illicit conduct, not empty expressions of intent, must be changed before risking business with Iran,” said Mark Dubowitz, an Iran sanctions expert at the Washington-based Foundation for Defense of Democracies, referring to what the west sees as Iran’s support of terrorists groups, an allegation Iran denies based on its own definition of terrorism.

In a press release issued only hours after the news, American Israel Public Affairs Committee, one of the most powerful pro-Israel lobbies in the US, criticized the trust-building measure, too. AIPAC argued that Iran’s pledge to FATF that it would improve its performance exempted what the lobby called "terrorist" organizations like Hezbollah and Hamas, both of which are funded by Iran. “Even if one imagined Iran would give up funding these organizations, Iran’s pledge to FATF remains only a promise,” the press release said. “The net result is that FATF has dropped countermeasures against Iran in exchange for a deficient pledge by the world’s leading sponsor of terror.”

Opponents of Rouhani have also joined in what appears to be an orchestrated move to slam his administration’s gradual steps to make a global financial comeback.

Anaj, a Tabriz-based website affiliated with Principlists, said Iran cannot get itself into the clear from the Public Statement while insisting on its own reading of terrorism in a body in which the Saudis have an observer status. Enumerating other downsides of Iran’s commitment to FATF, Anaj wrote that Rouhani administration's decision will facilitate Washington's access to data on Iran’s financial and monetary transactions, potentially a threat against the country’s armed forces, intelligence services and the elite Revolutionary Guards Corps. “Of course, Sayyed Hassan Nasrallah’s unprecedented remarks made a few days ago in which he said Hezbollah is not intimidated by any sanctions because Hezbollah’s funds, money and missiles are all sponsored by Iran can be seen in the same light,” the Anaj report added. Anaj continued that Iran’s removal from the blacklist sounds illogical if the country still insists on its own definition of the terrorism, unless there is a secret “give and take” at work, resembling the win-win game the Rouhani administration run during the nuclear talks and seeks to pursue in a ‘regional deal’ as well. The outlet analyzed Iran’s dismissal of Hossein Amirabdollahian, ex-FM deputy for Arab and African affairs and US’ labeling of the Bahraini Shia revolutionary leader as a moderate in the same line of thought.

Just like other Principlist media, Tasnim was also solicitous. “While senior administration officials have repeatedly insisted on the confidentiality of citizens’ financial accounts, details of the recent FATF-administration agreement indicate that a binding instruction of the international body is to provide access to information regarding nationals of the member states upon request, which could bring irreparable damage for Iran,” wrote Tasnim. In a separate article published on Monday, the news agency drew an analogy between FATF and the International Atomic Energy Agency, warning that the Task Force follows political codes and goals in the guise of a technical organization and could demand unprecedented access to monitor Iran’s financial activity in the same way the IAEA did. Tasnim grounded the theory on remarks made by Iran’s Central Bank chief Valliollah Seif in which he said Iran’s delisting should be a political decision as it was included in the Public Statement for political reasons in the first place. In yet another article published one day earlier, Tasnim called the administration’s move making the perfect the enemy of goods as it puts a stupid political choice forward for Iranian banks: to either boycott the IRGC and Hezbollah in overt self-mutilation or to forget a return to the global financial system.

An article penned by Mahdi Mohammadi, a former member of the Supreme National Security Council’s secretariat and also a fiery critic of Rouhani’s nuclear policies, published by Vatan-e Emrouz on Tuesday, says the United States’ main strategy is to impair Iran’s resistance in the region through a series of means including “intelligence and negotiations”. The strategy particularly targets IRGC and Hezbollah at an organizational level and Syria in its geographical aspects, according to Vatan-e Emrouz. “At the moment, no goal is more important for the US than to get Iran involved in a series of processes the outcome of which will be to weaken the role of Iran in the ‘axis of resistance’ and to weaken the role of the axis of resistance in the region,” writes Mohammadi. The article then goes ahead to challenge Tehran to publish the Action Plan agreed upon by FATF, so to shed light on the modality of the deal. Supposing the FATF agreement as a ‘side agreement’ of the nuclear deal, it also brings up the “dreadful question” of what lies behind the puzzle of a larger deal between the Rouhani and Obama administrations. The article asks what data-collecting, monitoring, verifying and reporting mechanisms FATF is supposed to employ in Iran, highlighting security concerns that the information will be delivered to Western services. Mohammadi went even so far as to note that FATF recommendations might move Iran toward crippling the IRGC with its own hands if the international body’s definition of terrorism is accredited.

Yasser Jebraeili, political commentator and a bellwether of Principlist outlets, also drew a parallel between the FATF file and the nuclear dossier, on a message he uploaded to his Telegram channel. “That there are individuals who seek to make FATF recommendations operational in Iran cannot have but two motives,” he wrote. The first, he elaborated, was “to accept the accusation of financing terrorism and to stop financing the resistance”, resembling it with the accusation of pursuing the achievement of nuclear weapons [implicitly] accepted (!) during the nuclear talks. The second motivation, according to Jebraeili, was to “open a rift in Iran’s political structure, accept part of governmental institutions as terrorist supporters and help sustain international sanctions to isolate institutions backing Resistance inside the country”. He further theorized that a dossier of terrorism is prepared for Iran, carbon copied from the nuclear dossier, with only some of the phrases changed. This time, however, he said, the goal is to constrict power-generating and protective Iranian institutions such as the elite IRGC. 

The Students Basij of Tehran University also demanded that the CBI provides explanation on the deal with FATF as the Principlist association believes it has been achieved at the cost of overlooking the Islamic Republic’s ‘strategic depth in the whole region’.

Despite the fact that there are signs of a national consensus in favor of such reforms, as there was for the nuclear talks, the Principlists have already started to use the recent development as a pretext for propaganda against the administration. Supporters of transparency and cooperation with global systems are less heard amid the loud buzz of rival media. On his Instagram account, Hamid Baeidinejad, the Director-General for Political Affairs and International Security Affairs in the Ministry of Foreign Affairs, has called the FATF move a “significant step” and “an appropriate reaction” to the onset of effective measures on the part of Iran.

Baeidinejad’s reference is made to the Guardian Council’s move to ratify a long-pending bill to counter money laundering and financing of terrorism in early March. As Iran’s English language daily Financial Tribune writes: the bill, drafted by the government in 2010, had undergone a tortuous path, as it was passed by the parliament in 2011 but was rejected by the Guardian Council. It was sent for revision to the judiciary and was once again tabled in the parliament where lawmakers ratified it as a law. Iran has voluntarily asked the International Monetary Fund to review the anti-money laundering regulations so other countries' banks feel reassured. The IMF will announce its assessment in 2018, a CBI official said.

Baeidinejad also expressed hope FATF will normalize Iran’s status if Tehran succeeds in its nation-wide measures during the one-year suspension. Living up to international banking standards to prevent transactions from illegal sources, he wrote, are not only an international mandate but also a public demand in combating corruption based on increased banking transparency.

Even if the suspension of FATF restrictions goes in vain a year later, it could be artificial respiration for the stagnant economy of Iran in a year Rouhani so dearly needs to show some tangible economic breakthroughs to guarantee reelection while his rivals are busy repeating old mistakes. A majority of Iranians have already demonstrated their support for peaceful collaboration with the world and their aversion towards the isolationist camp. However, the Principlist front is impatient to lose yet another race. Seeing Washington cementing the nuclear deal and making it harder for future administrations to unravel the deal, they have changed course in rapping the sitting moderate administration but the new ground they have found is too shaky.