- Although the FATF decided to continue its suspension of countermeasures against Iran, Iran remains on the FATF’s ‘high risk’ banking jurisdiction list.
- Iran is highly unlikely to fulfil its requirements under the FATF action plan, meaning the suspension of FATF countermeasures against Iran is not sustainable.
- Iran is likely to face increasing banking difficulties in the one-year outlook, as it is unlikely to adopt meaningful reforms to address FATF concerns and as the US is likely to adopt a more stringent enforcement of its existing sanctions, increasing financial pressure on Iran and raising contract risks and borrowing costs.
On 23 February 2018, the intergovernmental organisation, the Financial Action Task Force (FATF) announced that it will extend its suspension of countermeasures against Iran for another six months.
There are three major factors impeding Iran’s ability to reconnect to major international banks: residual primary US sanctions that ban Iranian access to the US financial system and therefore complicate dollar currency conversion and transactions; Iran’s deficient anti-money laundering and counter terrorism-financing (AML/CTF) infrastructure and consequent status as a “high-risk jurisdiction” by the FATF; and the widespread and opaque influence of commercial and banking entities affiliated to Iran’s Islamic Revolution Guards Corps (IRGC), designated under secondary US sanctions for sponsorship of terrorism and Iran’s ballistic missile programme.
The FATF angle
The FATF, the multilateral body setting international AML/CTF standards, reiterated on 23 February that Iran remains a “high-risk jurisdiction”, advising its members to observe “enhanced due diligence” in Iran-related transactions. The FATF revealed that Iran had failed to complete the majority of its action items under an agreed plan by the 31 January 2018 deadline. Nevertheless, the FATF decided to continue the suspension of its countermeasures against Iran given the ongoing Iranian commitment to address its AML/CTF deficiencies, specifically citing draft legislation before Iran’s parliament.
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