Iran blacklisted by 200 member nations of Financial Action Task Force

As the citizens of Iran flocked to the voting booths, the Iranian economy took a painful hit on Friday at the conclusion of the Financial Action Task Force (FATF) plenary, when the organization decided to return Iran to the ‘blacklist’ of countries involved in bankrolling and financing terror.

The result: More than 200 member nations and territories will comply with FATF sanctions on the Islamic Republic.

The ban will likely end talks between Iran and the European Union about exploiting the INSTEX vehicle for promoting trade in a way that circumvents United States sanctions.

Furthermore, it will more generally widen the expanding chasm between Tehran and the EU, pushing Europe closer to the US in the standoff.

The FATF moved the Islamic Republic from a blacklist to a sort of gray-list in 2016, which meant much greater access to the international banking system, but a ticking clock to come into compliance with anti-terrorism financial measures.

In addition to re-blacklisting Iran, a large number of new countries entered the gray-list of non-compliant countries, from which Iran has just been ousted, including Albania, Barbados, Jamaica, Mauritius, Myanmar, Nicaragua and Uganda. Trinidad and Tobago was the only country te be taken off of the gray-list without landing in the blacklist.

Pakistan won an extra four months to meet international anti-terrorism financing norms, as the FATF decided to keep it on the gray-list for now despite missing recent deadlines to comply with their own internationally agreed-upon deals.

Until Friday’s decision, the only other country on the FATF blacklist was North Korea.

The Israeli delegation to the FATF plenum was led by by Dr. Shlomit Wagman-Ratner and other representatives of the Money Laundering and Terrorist Prohibition Authority in the Ministry of Justice.

Wagman-Ratner served during the meeting as chairman of the operative working group of the organization. This is the first appointment of an Israeli representative in this important international organization.

Wegman-Ratner said that Iran “does not meet the required conditions and does not correct their mistakes and deficiencies.”Today’s decision to call on world countries to impose effective economic sanctions on Iran represents an important and courageous decision, demonstrating the organisation’s professionalism and determination to fight global terrorist financing risks,” she said. “I would like to thank the dedicated authority staff, and the coordinator of the International Division’s delegation, headed by Adv. Elad Vader, for their significant contribution to Israel’s excellent professional activity in the organization, which is highly regarded internationally.”

Toby Dershowitz, senior VP for government relations at the non-partisan Foundation for Defense of Democracies in Washington D.C, told The Jerusalem Post that “FATF is sending a clear message to bank and corporate risk managers and all those responsible for ensuring their institutions are not exposed to Iran’s illicit activities that they must reassess ties to Iran’s entire financial sector. Given Iran’s willful failure to uphold international anti-money laundering and terror finance standards, doing business with any Iranian bank, insurance or other financial institution, whether sanctioned or not, comes with heavy risks and high costs that will deter even more entities from transacting with Iran.”

She added that  “FATF is a technical, not political body aimed at protecting the international financial system. The ‘countermeasures’ are akin to due diligence measures, and are steps FATF urges entities to take in their own self-interest. The goal is to ensure all those who are part of the financial sector do not get entangled in a web of malign actors that could put the integrity and safety of their own interests at risk.”

After more than three years of Tehran ignoring threats that time was running short on its chance to come into compliance with combating terror financing, the FATF issued in October 2019 what turned out to be a final ultimatum to the Islamic Republic, one with which Iran was ultimately unsuccessful in complying.

Although Iran has passed some laws and moderates like Iran President Hassan Rouhani and Iran Central Bank Governor Abdolnasser Hemmati have made public promises, the parliament has failed to pass key legislation.

Within the Iranian parliament, many officials have blocked the new legislation for years and as late as January, Iran Chairman of the Expediency Council Ayatollah Sadeq Amoli Larijani called the new legislation “dangerous.”

Hemmati explained in December that if Iran was placed back on the FATF blacklist, they would finally be somewhat separated from their key economic allies Russia and China.

Though Russian and Chinese economic support have been a major reason why the ayatollahs running Iran have survived the US’s “maximum pressure” campaign, Hemmati said that those countries banks would have trouble working with Iran if there was an FATF ban.

Those like Larijani who oppose the legislation make multiple points.

They say that committing to the legislation would require Iran to expose how it is circumventing US sanctions.

Since Iran views US sanctions as immoral, it does not feel the obligation to reveal this information which is keeping its economy on life support.

Dershowitz, who has written extensively about FATF, said “Iran’s Guardian Council has not approved legislation the Majles has passed so the action plan remains incomplete. Even so, the legislation that was passed has had loopholes for terrorist organizations Iran wants to continue to bankroll. FATF has told Iran these carve outs are not permitted.”

She continued that ““It’s not only Hamas and Hezbollah that Iran openly funds but as noted in successive State Department’s Country Reports on Terrorism since 2012 during the Obama administration, that “Iran has allowed [al-Qaeda] facilitators to operate a core facilitation pipeline through Iran since at least 2009, enabling [al-Qaeda] to move funds and fighters to South Asia and Syria.”

In addition, those opposing the legislation link the FATF’s threats to the US and say that such a move would be condoning (what they view as the unfair) US maximum pressure campaign.

Finally, those against the legislation say that until US sanctions are removed, whether Iran is blacklisted or not is a secondary issue. They cite the fact that the Islamic Republic survived being blacklisted from around 2009-2016, with the point at which the country’s economy really struggled being related to other global sanctions, not the FATF.

Going into the conference, a leading Iranian parliamentary official who had supported passing the new legislation to help join the FATF was even disqualified from running, appearing to send a clear message that Tehran will not bend more at this time.

All of this follows in the shadow of new IAEA chief Rafael Grossi starting to press Iran harder about its failure to date to fully cooperate with the IAEA’s investigation into processed uranium particles found at a site in Iran.

At a November 7 meeting of the IAEA’s Board of Governors, then acting IAEA Director-General Cornel Feruta publicly confirmed the presence of uranium.

This IAEA confirmation came more than a year after Prime Minister Benjamin Netanyahu first revealed the Iranian violation at a Turquzabad warehouse during his September 2018 UN speech.

Grossi publicly pressed Iran on the issue both on December 3, calling its answers to date unsatisfactory and again on February 5 when he said that Iranian Deputy Foreign Minister Abbas Araghchi had not explained the violation.

In his February 5 statement, Grossi hinted at confronting Iran soon, emphasized the need for states to provide “the necessary support when moments of difficulty come” since he soon “may have to ask Iran to do the right thing.”

Grossi again pressed Iran in public statements on February 10, though he has poured cold water on taking punitive action against Iran, such as snapback sanctions as long as it is keeping its nuclear violations down to a level that does not get too close to being able to develop a nuclear weapon.