FATF and the list that is still black for Iran

The Financial Action Task Force (FATF) announced on Friday February ۲۳ that the name of the Islamic Republic of Iran remains on the blacklist of this international organization a decision that was apparently not far from expected for the authorities of our country and according to the statements of the Governor of the Central Bank the day before the publication of this statement due to the sanctions
27 February 2024
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Mohammad Mehdi Mazaheri

The Financial Action Task Force (FATF) announced on Friday, February 23, that the name of the Islamic Republic of Iran remains on the blacklist of this international organization; a decision that was apparently not far from expected for the authorities of our country and according to the statements of the Governor of the Central Bank the day before the publication of this statement, due to the sanctions, Iran is currently looking for its own FATF, as it uses other tools instead of Society for Worldwide Interbank Financial Telecommunication (SWIFT). Based on this, it seems that while in this period, the United Arab Emirates and the previous period of review, i.e., June 2023, Lebanon was removed from the grey list of this organization, the Islamic Republic of Iran does not make a special effort and will to leave the FATF blacklist but what kind of organization is FATF, why are some in Iran against joining it? And what is the way out of this situation?

The Financial Action Task Force (on Money Laundering), or FATF for short, is the name of an intergovernmental organization that was established in 1989 at the initiative of the Group of Seven countries with the aim of combating money laundering. In 2001, this organization joined the campaign against the financing of terrorism. FATF in Iran has two main opponents; a group of its opponents believes that since Iran is currently under international sanctions, joining FATF can prevent the bypass of sanctions in the country because, according to the rules of this organization, the financial transactions of countries must be clear and transparent. If this happens, Iran will no longer be able to bypass the sanctions.

The other opposition group concerns the financial support of pro-Iranian groups. They believe that if the names of resistance and pro-Iranian front groups are included in the list of terrorist groups by the United States and Western countries, the banks of the Islamic Republic of Iran, if they are members of FATF, cannot have financial transactions with them.

Although these concerns are important and worthy of consideration, it should also be noted that placing Iran's name on the FATF blacklist has a significant effect on Iran's foreign policy and economy. In addition to damaging Iran's credibility and soft power in international forums, this has imposed many restrictions and costs on the country's trade and financial transactions and keeps important business partners away from Iran because the most important restriction due to being on the FATF blacklist is the loss of the possibility of transferring money with foreign banks. All eastern and western countries will be involved in heavy fines if they do business with Iran even friendly and neighboring countries like Iraq are very serious about sanctions against Iran. Countries such as Russia and China always emphasize that the continuation and progress of their economic relations with our country depend on Iran's joining FATF. In this regard, the successful development of relations with BRICS and Shanghai member countries also depends on getting out of the FATF blacklist.

In the current situation, no activity in international trade can be carried out normally for Iranian businessmen, and the cost of economic exchanges and financial transactions in Iran is many times the normal level. In fact, Iran's non-cooperation with FETF has taken most of the country's financial and banking transactions out of the normal process and transferred them to the brokerage field. In this situation, although Iran's work can be done without FATF, this is associated with huge brokerage costs, the burden and cost of which is imposed on the country's economy and people. As a result, in the current situation where the people of Iran are under severe economic pressure, it seems necessary to find alternative ways to solve the problems of joining FATF.

As an example, more than 50 countries of the world, including some Islamic countries, have become members of the Convention on Countering the Financing of Terrorism (CFT) with a right of reservation. The Islamic Republic of Iran can also use the right of reservation in the international law system in cases where it feels a threat to the country's interests, which means to declare that the clauses accepted by Iran cannot be in conflict with national interests and security of Islamic Republic of Iran. Any article (including article 6 of the CFT) that prevents Iran from reserving, the government of Islamic Republic of Iran will not join it.

Another important point is that although FATF is part of the financial mechanisms in the world, whose main title is the fight against money laundering, many countries, after joining it and avoiding the damages caused by not joining, continue to do what they want. For example, more than half of money laundering in the world takes place in China and the United States, which are among the most active actors in FATF. Saudi Arabia is also one of the other members of this organization, which never stopped providing financial support to radical and terrorist groups during the height of the Arab revolutions and regional tensions. Thus, another solution is to reduce the obstacles in our international activities by joining FATF and, at the same time, advance our financial affairs.

Another point is that the Islamic Republic of Iran, in order to become a member of the Shanghai Treaty, also accepted complex regulations in line with the organization's access to Iran's financial information. The acceptance of the Shanghai regulations was done with the trick of attaching a series of Iranian conditions, and the same pattern can be implemented in the case of the FATF. The problem is that Iran has never received such responsibility and loyalty from its eastern allies in historically important situations. Therefore, if the cooperation with these countries continues in various forms of security, intelligence, and economy, the anti-Western approach of some personalities should not be allowed to prevent the advancement of the country's goals and interests in the international arena and its costs should be burdened on the thin shoulders of the Iranian people.

International relations have never been based on trust in practice, and therefore, Iran cannot and should not trust the East as well as the West. Still, it can and should promote the interests of the country through the revival of diplomacy and political exchanges and prevent any action that weakens Iran's economy in international forums and damages the country's prestige and credit. Iran's membership in this financial institution not only removes international pressure from Iran and introduces our country as a responsible and law-abiding actor, but also, considering some recent embezzlements, it can prevent financial offenders from escaping to take over the country and somehow prevent the transfer of a lot of money from inside the country to a country like Canada, and even the possibility of returning part of the lost money is provided.

Mohammad Mehdi Mazaheri, University Professor

(The opinions expressed are those of the authors and do not purport to reflect the opinions or views of the IPIS)

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