Iran’s FATF Stalemate

For over three years, the Financial Action Task Force (FATF) has welcomed Iran’s high-level political commitment to address its structural deficiencies in anti-money laundering and countering the financing of terrorism (AML/CFT).  During this period, Iran’s elected state—the presidential administration and some in parliament—has attempted to placate the international community.  But the mullahcracy’s deep state—for example, the Guardian Council and the Islamic Revolutionary Guard Corps (IRGC)—has resisted meaningful reform.  Iran’s implementation of the FATF’s action plan has remained incomplete because the debate is a proxy for a more existential decision that Iran has yet to make: whether it is a country or a cause.

The FATF is an intergovernmental body charged with setting standards and monitoring implementation of AML/CFT policies around the world.  Prior to June 2016, the FATF had imposed countermeasures on Iran—calling on member-states to do so because “of the risk of terrorist financing emanating from [Iran] and the threat it poses to the international financial system.”  But since June 2016, the FATF has suspended those countermeasures, as Iran, in keeping with its action plan, established a cash declaration regime and passed amendments to its Counter-Terrorist Financing and Anti-Money Laundering Acts. 

Yet Iran still hasn’t joined the U.N. Convention Against Transnational Organized Crime (Palermo Convention) and the Terrorist Financing Convention (CFT Convention).  Additionally, to date, Tehran hasn’t made sufficient progress in multiple areas, including freezing terrorist assets in line with U.N. Security Council Resolutions and criminalizing terrorist financing by “removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism.””

But nixing such exemptions would effectively change the very revolutionary fabric of the regime.  Iran views its resistance axis—Hezbollah, Hamas, Houthis—as both a hedge and a tool for hegemony across the Middle East.  Tehran has invested heavily in such groups—according to the State Department, in the past, the Iranian government has provided around $700 million annually to Hezbollah.  That’s not to mention recent reports that Iran has been poised to increase funding to Hamas in exchange for intelligence on Israeli missiles to the tune of $30 million per month.  Thus, the debate over the FATF action plan is not something the government takes lightly.

This is why the decision is still stalled in the Expediency Council—after a disagreement between parliament and the Guardian Council over joining the accords.  Like the Guardian Council, the Expediency Council is also part of Iran’s deep state—it is tasked with resolving disputes between both the legislature and the Guardian Council.  Former Chief Justice Sadegh Larijani, a hardliner, presides over the Expediency Council, and its membership is appointed directly by the supreme leader.  As a result, elements of Iran’s deep state have delayed and dodged the decision endorsed by Iran’s elected state.

The frustration has been palpable in Iran.  Reformist lawmaker Abdolreza Hashemzai recently said “[u]nder U.S. sanctions imposed on Iran, the Chinese companies have already stopped dealing with us.  Even friendly countries, such as Russia and China will stop dealing with Iran if the Palermo bills are not passed by the Expediency Council.”  This was after the secretary of Iran’s Expediency Council and a former head of the IRGC, Mohsen Rezaei, indicated in March that a majority of the Council was against joining the FATF under current sanctions.  On Monday, Rezaei tweeted that the Expediency Council said the government is not permitted to join the Palermo Convention because it would help the United States identify the ways in which Iran is circumventing sanctions.

The clock is ticking with the FATF’s plenary taking place in Paris this week.  Iran’s foreign minister said on Tuesday that “considerable measures have been taken to get prepared for the next FATF summit and the foreign ministry will do its best to prevent the country from incurring losses.”  Given the language about the potential for “losses” and Rezaei’s tweet, barring any dramatic announcement, Tehran’s decision on the FATF action plan will likely continue to be held hostage to more fundamental, existential debates within Iran.  This will make it more difficult for the FATF to justify the continued suspension of countermeasures on Iran.

Jason M. Brodsky is the policy director of United Against Nuclear Iran (UANI).