On February 21, a global financial watchdog returned Iran to its blacklist. The Financial Action Task Force (FATF), an inter-governmental body of 36 countries that sets standards for countering the financing of terrorism and money laundering, cited Iran’s failure to comply with international norms. The FATF called on member states to apply enhanced due diligence measures on transactions involving Iran, such as by closing subsidiaries of Iranian banks or limiting broader business relationships. “Given Iran’s failure to enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, the FATF fully lifts the suspension of counter-measures and calls on its members and urges all jurisdictions to apply effective counter-measures,” the group said after a week-long plenary session.
In a statement, Secretary of State Mike Pompeo commended the FATF. “The regime must face consequences for its continued failure to abide by international norms, in particular its inaction in ratifying the Palermo and Terrorist Financing Conventions. Since Iran’s FATF action plan expired in 2018, Iran has failed to fulfill its commitments to adhere to the FATF’s anti-money laundering and combating the financing of terrorism standards, including ratifying the UN Palermo and Terrorist Financing Conventions. The regime needs to adhere to the basic standards that virtually every other country in the world agrees to. Iran must cease its reckless behavior and act like a normal nation if it wants its isolation to end.”
Iran’s central bank chief called the FATF’s decision “politically motivated.” President Hassan Rouhani’s government had succeeded in pushing through two bills out of four bills that would have implemented the necessary reforms to keep Iran off the blacklist. The Council for the Discernment of Expediency was still reviewing the two remaining bills as of February 2020. Some hardliners had opposed the FATF reforms over concerns that Iran’s ability to support Hezbollah, Hamas, Palestinian Islamic Jihad and other militant groups would be constrained.
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The following are statements by the FATF and Secretary Pompeo.
High-Risk Jurisdictions subject to a Call for Action – 21 February 2020
In June 2016, Iran committed to address its strategic deficiencies. Iran’s action plan expired in January 2018. In February 2020, the FATF noted Iran has not completed the action plan.
In October 2019, the FATF called upon its members and urged all jurisdictions to: require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran; introduce enhanced relevant reporting mechanisms or systematic reporting of financial transactions; and require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran.
Now, given Iran’s failure to enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, the FATF fully lifts the suspension of counter-measures and calls on its members and urges all jurisdictions to apply effective counter-measures, in line with Recommendation 19.
Iran will remain on the FATF statement on [High Risk Jurisdictions Subject to a Call for Action] until the full Action Plan has been completed. If Iran ratifies the Palermo and Terrorist Financing Conventions, in line with the FATF standards, the FATF will decide on next steps, including whether to suspend countermeasures. Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism-financing in the Action Plan, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system.
United States Commends FATF for Re-imposition of Countermeasures on Iran
The United States commends the Financial Action Task Force (FATF)’s February 21st call for all jurisdictions to swiftly enact effective countermeasures to protect the international financial system from the terrorist financing threats emanating from Iran. The regime must face consequences for its continued failure to abide by international norms, in particular its inaction in ratifying the Palermo and Terrorist Financing Conventions.
Since Iran’s FATF action plan expired in 2018, Iran has failed to fulfill its commitments to adhere to the FATF’s anti-money laundering and combating the financing of terrorism standards, including ratifying the UN Palermo and Terrorist Financing Conventions. The regime needs to adhere to the basic standards that virtually every other country in the world agrees to. Iran must cease its reckless behavior and act like a normal nation if it wants its isolation to end.