Iran Cited by International Body for Failing to Address Terror Financing

Tehran not abiding by anti-money laundering plan

Iranian President Hassan Rouhani
Iranian President Hassan Rouhani / Getty Images

Iran has again failed to implement international agreements to crack down on money laundering and terror financing, according to the Financial Action Task Force, or FATF, an inter-governmental body that oversees economic reformation.

Iran agreed in 2016 to work with FATF to implement a series of economic improvements meant to eradicate itself from its financial system's widespread instances of money laundering and financing of terrorist groups.

The Islamic Republic has so far failed to implement key portions of the reformation plan, prompting FATF to cite Tehran and threaten to reimpose measures meant to isolate the Islamic Republic's economy starting in 2020.

There are few signs at this point that Tehran is willing to abide by the FATF reformation plan, as it continues to send money and military hardware to numerous terror factions. A significant portion of this funding is being channeled through the country's Islamic Revolutionary Guard Corps (IRGC), the paramilitary fighting force, which was recently subjected to new U.S. sanctions.

"In October 2019, the FATF noted that there are still items not completed and Iran should fully address," the organization said in a statement.

Iran still is not "adequately criminalizing terrorist financing, including by removing the exemption for designated groups ‘attempting to end foreign occupation, colonialism and racism,'" according to FATF. Tehran also is not "identifying and freezing terrorist assets in line with the relevant United Nations Security Council resolutions."

Additionally, Iran has failed to ensure "an adequate and enforceable customer due diligence regime," and has failed to demonstrate "how authorities are identifying and sanctioning unlicensed money/value transfer service providers."

Iran will face repercussions if it fails to address these items, FATF warned in its statement on the matter.

"If before February 2020, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, then the FATF will fully lift the suspension of counter-measures and call on its members and urge all jurisdictions to apply effective counter-measures," the international body said.

Even though Iran has not complied with FATF's orders, it is still being shielded from the full weight of penalties the body can issue.

Toby Dershowitz, senior vice president for government relations and strategy at the Foundation for Defense of Democracies think tank, said FATF's actions prove it is serious about forcing Tehran to reform its permissive terror-financing environment.

"Iran has failed—for the sixth time—to complete its action plan," Dershowitz said. "FATF today took two important actions. It not only reimposed two additional countermeasures—enhanced reporting of financial transactions and increased external audit requirements for financial groups regarding any of their branches and subsidiaries located in Iran—it also said it would reimpose all countermeasures in February if by then Iran has not taken the required action."

The international financial sector should take note of Tehran's failure and agree to stop doing business with Iran until it commits to addressing terror financing and money laundering matters, Dershowitz said.

"This signals to the global banking sector and the wider market that it is not safe to do business with Iran," she said. "It also means that Iran is more interested in continuing its illicit money-laundering and terror financing than integrating into the global financial system. Tehran will have a difficult time convincing its own people that they, not Iran's terrorism, are the government's priority."