TEHRAN – The ongoing dispute between the Islamic Republic of Iran and the Financial Action Task Force (FATF) took another frustrating turn this week, with the global financial watchdog once again deciding to keep Iran on its “high risk” list. This decision was taken despite continued efforts by Iran to engage in the FATF process and amid opposition from some political factions within the country.
The argument advanced by FATF is one of Iranian non-compliance. In a statement released on Friday, the Paris-based watchdog claimed it “acknowledges Iran’s re-engagement with the FATF… and aims to address the deficiencies in its AML/CFT regime.”
It added that “Iran has not committed to the majority of the Action Plan since 2016” and that “until the full Action Plan is completed, Iran will remain in the FATF’s high-risk jurisdiction subject to the Call to Action Statement.”
A few days before this statement, Iranian President Masoud Pezeshkian formally ratified the law on Iran’s accession to the International Convention for the Suppression of the Financing of Terrorism (CFT) and communicated it to the relevant enforcement agencies.
In May, Iran’s Expediency Council approved the country’s accession to the Palermo Convention, one of the two key pieces of legislation related to FATF standards, along with the CFT.
These two treaties, the Palermo Convention and the CFT, were among the major legislative requirements that Iran had not yet met. Iran has ratified these in accordance with its constitution and law, a step taken despite growing criticism from domestic conservatives. These factions argue that the financial watchdog is not a technical institution but a political tool wielded by Western countries, similar to the International Atomic Energy Agency (IAEA).
history
FATF is an intergovernmental body that is supposed to set international standards for combating money laundering and terrorist financing. In theory, its goal is to protect the world’s financial system. But from the point of view of many countries, including Iran, it often functions as a political tool for Western countries to apply economic pressure on countries they deem not to abide by their rules. Critics argue that decisions are often influenced by Western interests rather than purely technical assessments.
Iran was first placed on the FATF’s “blacklist” in 2007. The “blacklist” targets jurisdictions that the FATF considers to be completely uncooperative. From 2016 to 2020, Iran was placed on the “grey list.” This means that while the country is committed to addressing the alleged deficiencies, the necessary reforms have not yet been completed. The situation escalated again in February 2020, with the FATF calling on member states to step up due diligence and apply effective countermeasures against Iran, citing insufficient progress.
When a country is placed on a gray list or blacklist, international banks and financial institutions become reluctant to process transactions with that country. As a result, humanitarian trade in goods such as medicine and food will be affected, making it more difficult for countries to integrate into the global economy. But economic expert Hossein Samsami said these challenges will continue for Iran even if it is removed from the high-risk list, mainly due to tough US sanctions.
“It has always been clear that delisting by the FATF will not be a major change in terms of the financial pressures that Iran is experiencing, because the pressures will continue to exist as long as the US continues to impose sanctions,” the expert explained. “However, despite being on a high-risk list and subject to severe US sanctions, Iran continues to export. Last year, we sold $100 billion worth of products and will continue to do so, whether or not we are on such a list.”
This situation has led many analysts to believe that Iran’s efforts to resolve differences with financial watchdogs were simply done in good faith.