By Patrick Goodenough
February 27, 2020
The Iranian regime’s devotion to supporting violent groups from Hezbollah to Hamas to anti-U.S. militias in Iraq is set to take a further toll on its already precarious financial situation.
A global anti-money laundering and terror-financing watchdog announced it will impose “countermeasures” for Iran’s failure to clean up its act.
Since 2016 the Financial Action Task Force (FATF) has held off on taking the step, giving Iran time to comply with international standards on countering terror finance. After several extensions and a final warning last October, the 39-member FATF at a meeting on Friday decided to act.
Even FATF members who have previously pushed for giving Iran more time, such as Russia and China, are no longer doing so.
Among the steps the regime has not taken are criminalizing terrorist financing, identifying and freezing terrorist assets, and dropping an exemption for groups “attempting to end foreign occupation, colonialism and racism.”
That loophole enables Tehran to continue its significant support for its allies in the “resistance front” – including Hezbollah in Lebanon, Hamas and the Palestinian Islamic Jihad in Gaza, and militia proxies in Iraq and Yemen.
The countermeasures being put in place include requirements for enhanced surveillance and reporting of financial transactions, measures that can significantly impact investment.
Aside from Iran, only North Korea is currently on the FATF blacklist. Eighteen countries, including Pakistan, Yemen, and Syria’s Assad regime, are on a second-tier “gray list.”
Iranian President Hassan Rouhani condemned the watchdog’s decision, pointing a finger at the United States and Israel.
“We were trying not to let America and the Zionist regime announce us as the violator of these actions despite the fact that we are pioneer of fighting money laundering and terrorism,” the Mehr news agency quoted him as saying on Sunday.
Rouhani said Iran’s Central Bank and economic and trade bodies have taken the necessary planning steps and would try to minimize the negative effects of the FATF decision on the country’s trade.
Secretary of State Mike Pompeo commended the FATF decision, saying the regime “must face consequences for its continued failure to abide by international norms.”
“The regime needs to adhere to the basic standards that virtually every other country in the world agrees to,” Pompeo said. “Iran must cease its reckless behavior and act like a normal nation if it wants its isolation to end.”
Foundation for Defense of Democracies (FDD) senior vice president for government relations and strategy Toby Dershowitz said the FATF move “sends a clear message to bank and corporate risk managers and others responsible for ensuring their institutions are not exposed to Iran’s illicit activities that they must reassess ties to Iran’s entire financial sector.”
The FATF requirements not met by Iran include the ratifying of two key conventions, the 1999 Terrorist Financing Convention, and the 2000 U.N. Palermo Convention on Transnational Organized Crime.
Iran’s parliament in late 2018 passed bills on ratification but including wording that provides for the foreign occupation exception.
The bills have not in any case advanced, since the Guardian Council, an unelected body whose powers include screening legislation, rejected them. The Expediency Council, whose role includes settling disputes between the Guardian Council and parliament, has yet to rule on the matter.
Dershowitz said the foreign occupation “loopholes are not simply legal oversights or small matters.”
“Iran openly funds Hamas and Hezbollah,” she said. “In addition, as noted in successive State Department Country Reports on Terrorism since 2012, Iran has permitted al-Qaeda facilitators to operate a core facilitation pipeline through Iran since at least 2009, enabling the terrorist group to move funds and fighters to South Asia and Syria.”
The FATF was established by G7 leaders in 1989 to counter money laundering. Its mandate was expanded after al-Qaeda’s 9/11 terror attack to including combating terrorist financing.