The Iranian Foreign Ministry has released a statement to answer a number of frequently asked questions regarding the Islamic Republic of Iran’s engagement with the Financial Action Task Force (FATF).
What follows are these questions and answers:
1. Is the nature of the Financial Action Task Force (FATF) operational or one that aims to build standards?
The Financial Action Task Force is an intergovernmental institution established in 1989. Its function is to exchange views and set standards through the participation of all governments (by holding rotating general meetings as well as meetings of pertinent regional groups) mainly to counter money laundering and financing terrorism as crimes that threaten the soundness of the financial system. This group seeks to promote the enforcement of these standards in the country and urge international cooperation to counter efforts aimed at cashing in on economic enterprises and the financial system in a bid to commit the above-said crimes. Most activities are discussed in general meetings held three times a year as well in the meetings of regional groups. The network working with this institution is comprised of 205 countries and regional organizations.
2. Are governments obliged to observe these standards?
The FATF’s standards are drawn up within the framework of recommendations and principles aimed at combating financial crimes in countries and based on international cooperation between them. Financial and legal experts of all relevant countries have a say in this process and are duty-bound to abide by these requirements. Failure to respect these requirements, especially countries’ lack of a legal and statutory foundation to deal with financial offenses, are conducive to restrictions for interaction with those countries, which, in the most severe case, will result in taking counteractions against the country in question. As this situation will lead to serious harm to the international financial and banking transactions of the country in question, all governments will try their utmost to observe these requirements as much as they can in order to preserve their financial and banking transactions.
3. Has the United Nations Security Council made the FATF’s recommendations legally binding?
Since 2005 and with the issuance of UN Security Council Resolution 1617, governments have been obliged to observe these standards based on Article 7 of the UN Charter. The same issue is constantly repeated in other binding resolutions of the UN Security Council, namely UN Security Council 2368 in 2017. As for sponsoring terrorism, the commitments under UNSC Resolution 1373 in 2001, which has led to the formation of a regime at the UN to fight terrorism, are similar to the FATF’s requirements.
4. Does compliance with these standards mean all countries will enact similar laws?
The FATF seeks to observe these standards in its bylaws in any form or shape deemed advisable. The most basic request is that these countries have comprehensive laws and regulations on fighting money laundering and sponsoring terrorism within their legal systems. In our country, these two crimes fall under the Law on Fighting Money Laundering (approved in 2007) and the Law on Fighting the Sponsoring of Terrorism (approved in 2015).
5. Why should the Islamic Republic of Iran engage with the FATF?
Almost all governments are interacting with this institution in order to maintain their banking and financial links with the world, and all parties believe they need interaction when it comes to the requirements of the fight against financial crimes within the framework of the FATF. The Islamic Republic of Iran has always been one of the countries playing an active role in regional and international institutions with regards to all key issues. A prerequisite to international banking and financial transactions is to comply with the FATF’s requirements, and no restrictions are acceptable in this regard. On the other hand, the Supreme Council on Fighting Money Laundering, which is comprised of representatives from supervisory and financial policy-making organizations as well as all institutions tasked with combating corruption, is of the conviction that abidance by the requirements of this institution within the framework of bylaws is a necessary tool in the fight against corruption and financial offenses. Banks in neighbouring countries as well as banks in countries which are the main trade partners such as China, India and Russia, all raise questions about compliance with the FATF’s standards as a precondition.
6. Do all countries really observe these requirements?
No country overtly supports money laundering or sponsoring terrorism. This, in the first place, is known by the numerous laws which these governments have and which conform to everyday needs. All countries seek to take the lead when it comes to making laws and establishing leading monitoring systems. To what extent these regulations are observed is the second issue and is considered during periodical evaluations. The first step in having interaction with the FATF is to enjoy efficient national laws, and, fortunately, ground is mostly prepared for this in our country.
7. How was Iran placed on the institution’s black list?
The Islamic Republic of Iran began serious cooperation in the early 1980s. The Law on Fighting Money Laundering was ratified in 2007, the Supreme Council on Fighting Money Laundering was founded, and a financial information institution was formed as the centre for the consistent monitoring of financial activities. Directives had also been issued by high-level state institutions that obliged all government bodies to cooperate in observing the recommendations of the FATF. The drawing up and ratification of the Law on Fighting the Sponsoring of terrorism was repeatedly delayed and interactions with the FATF came to a halt. At the end of the day, the circumstances at the time saw Iran placed on the list of non-cooperative governments (black list) in 2009, and has remained on the list ever since. Restrictive counteractions were also taken against Iran.
8. Was this move (putting Iran on the black list) politically motivated?
Definitely there is a political side to all bilateral and multilateral activities of governments. However, the politicization of an issue needs justification. Hostile governments and enemies seek to put shortcomings under the microscope and build a consensus on them. Technical and legal flaws existed then, which served as a pretext to impose restrictive measures against Iran during the time when the country was under the most severe international sanctions. All governments try to overtake one another when it comes to making laws and creating monitoring systems and announcing them publicly. A lack of enough attention to this issue together with unwarranted procrastinations in making and reforming laws in accordance with the viewpoints of relevant experts in the country led to Iran being placed on the black list.
9. Have other countries also been on the institution’s supervisory lists?
Yes. The list of countries under the supervision of this institution as well as the list of non-cooperative countries has included many countries, and it has been shortlisted gradually. Countries such as Russia, Cuba and even Iraq and Syria could prudently keep their opponents, especially the US government, from using this as a pretext. Now, Russia, for example, is one of the key players in the meetings and mechanisms of this institution. Russia plays an important role in the regional group, Eurasia. In mid-2017, Iraq was removed from the list of countries monitored by this institution. Syria, too, is on the verge of being removed from the list.
10. What measures has the government adopted in recent years in order to rectify this flaw?
Since around 2001, Iran has adopted measures to adapt itself to the regulations of this institution. However, specifically in early 2016, a fresh round of engagement with the institution began after an existing flaw, i.e. a lack of a national law on fighting the sponsoring of terrorism, was removed. In accordance with the AFTF’s standard operating procedure, the finance minister or an official at the same level or higher should offer a letter of political commitment in order to implement the action plan. Therefore, the then economy minister undertook to implement the provisions stipulated in the action plan in cooperation with all pertinent institutions within the framework of the Constitution. Afterwards, the AFTF suspended counteractions against Iran and conditioned the definitive removal of Iran from the list to the full implementation of the action plan. During the 18 months allocated to the implementation of the action plan, the government’s technical teams adopted all necessary measures within the framework of the Supreme Council on Fighting Money Laundering. The Iranian parliament put on its agenda bills on reforming the Law on Fighting Money Laundering and the Law on Fighting the Sponsoring of Terrorism together with bills on joining a convention on fighting ultra-national organized crime known as Palermo and the convention on fighting the sponsoring of terrorism. During an almost eight-month period from early 2018 onward, all bills except the one on reforming the Law on Fighting the Sponsoring of Terrorism still remain on the legislature’s agenda, and they are expected to be finalized soon.
11. Do you think as a result of Iran’s cooperation in implementing the FATF’s standards, the banking information of Iranian individuals and institutions might be revealed to foreign parties and be subject to abuse?
The FATF is an institution which sets standards in cooperation with governments and publishes them in the form of recommendations and guidelines. This institution is not a non-governmental international authority and does not have the capacity to control information on countries’ financial transactions. It is simply a consultative authority to set standards and monitor their implementation. The institution basically does not have a centralized secretariat, and only a limited number of experts (17 people) are responsible for arranging and holding the FATF’s seasonal meetings in Paris and in other member states. Governments conclude memoranda of understanding between their financial information centres in accordance with their considerations and domestic rules and regulations, so that they will be able to cooperate and exchange information if need be in order to counter financial offenses. Governments can also work together within the framework of multilateral legal mechanisms such as the UN convention on fighting corruption.
12. What mechanisms can countries employ to identify cases of terrorism?
Every country has a national terror list, and updates the list monthly or annually by introducing the individuals and groups it considers as terrorists. Iran, too, should determine and announce its own list in accordance with law and with the approval of the Supreme National Security Council. The preliminary arrangements for that are underway. There is an international terror list on which there is consensus. Terrorists are clearly categorized on that list and include three main groups of terrorists: The Taliban, al-Qaeda and ISIS as well as those affiliated with these groups. Under a Chapter Seven resolution of the UN Security Council, all countries are duty-bound to abide by the list. Respecting the national list of other countries is a state matter which depends on the viewpoint of the country in question as well as the mechanisms of cooperation between countries. From Iran’s perspective, the United States and a handful of its allies’ policy of putting the “terrorist” stigma on the resistance front lacks any legal value. The Islamic Republic of Iran has always objected to Washington and its allies’ support for terrorist groups and individuals who are adversaries of the Iranian nation.
13. Why didn’t counteractions end, and what does extending the suspension of counteractions for two four-month periods mean?
The process of studying and finalizing the legal bills presented by the government has been going on in parliament. There is a standards operating procedure at parliament for reviewing bills, which should be observed according to the law. During the plenary sessions of the FATF in Paris in early and mid-2018, the representatives of the member states of the institution were informed of the continuation of the legal procedure at the legislature. Representatives of the Trump administration and a handful of governments which have aligned themselves with the US have aggrandized the failure to complete the legal procedure in order to prevent the normalization of the situation in our country. Finally, with the pressure of governments backing the Islamic Republic of Iran, Iran was given more time. Now, the deadline for the second four-month term is about to end.
14. What is the timing of the upcoming meetings where the issue of Iran is to be discussed by member states?
Based on the announced schedule, the answers to some written questions were sent last week by the Secretariat of the Supreme Council on Fighting Money Laundering. An expert meeting will also be held in late September to review the answers and the latest status of the implementation of the action plan, namely the progress made in finalizing the remaining bills. Also, the main session of the FATF will be held in Paris on October 15, 2018 to make decisions on our country.
15. How is it that a radical person who has a high rank at the US Treasury and has obvious anti-Iran stances has been chosen as the head of the FATF?
This institution is chaired periodically on an annual basis. The country which holds the presidency of the institution introduces an individual as the chairperson. After the US, China will take over the FATF’s rotating presidency next year. China’s representative is currently the vice chairperson. The chair is responsible for running the meetings, and the decisions made should be confirmed by the members that make decisions.
16. What will happen if Iran fails to take all the actions it is supposed to take?
Being aware of the situation and issues inside Iran, US officials are making every effort to create the impression that the Islamic Republic of Iran is basically not willing to take all the actions it is supposed to, and, hence, the countermeasures suspended for two years now should be reinstated against Iran. On the other hand, the governments which have the most trade and economic transactions with Iran are trying in different ways to keep this from happening. The normalization of banking relations is an objective pursued by the government and all pertinent institutions while observing the country’s rules and interests. It is hoped that this goal will be achieved through the cooperation of the legislature.