Once again FATF

Once again, FATF

Once again, FATF

The news of Iran’s acceptance for a review of its membership in FATF by the leadership has revived the hope of opening the blocked financial paths of Iran and the world. Although the path to opening is long and full of obstacles, Iran spends 25% of its income each year to circumvent sanctions. This income has been declining since the beginning of the 90s and has mainly been spent on meeting basic needs such as food and medicine. Iran’s removal from the global financial transaction network or SWIFT and its entry into FATF’s blacklist are the two main factors causing a decline in income.

If Iran is not removed from the blacklist, major economic goals, the most important of which are 8% growth and inflation control, will not be achieved. There is an undeniable link between economic growth and foreign investment, and if these investments do not reach the predicted target of $300 billion, the goal of economic growth remains only on paper.

The reality of the direct relationship between financial relations with the world and improving the economic situation has become clear to many decision-makers in recent years.

Masoud Pezeshkian has emphasized the need for more harmony since his candidacy with the knowledge of the fact and has highlighted the importance of opening doors and connecting with the world. Based on this, internal conflicts that have hindered the approval of bills related to Iran’s accession to the FATF and Palermo Special Financial Action Task Force in recent years must find more alignment. Since 2016, when Iran accepted the 40 recommendations of FATF and began implementing an action plan with scheduled guidelines until today, when Iran’s rejoining this group is under review, several stages of review and non-agreement have been passed.

The Financial Action Task Force issued statements following Iran’s acceptance of membership in 2016, suspending Iran from the list of countries that should be subject to reciprocal action for 12 months. However, within the specified period, these bills were not approved. The Financial Action Task Force announced that, considering Iran’s progress in implementing financial monitoring programs and verifying these advancements, it agrees to continue suspending countermeasures against Iran without a specific timeframe.

The organization emphasized in its statement that it will not permanently remove Iran from the blacklist until all necessary actions to address the identified deficiencies are implemented. Despite all the measures taken in Iran, the financial action group that was supposed to be approved in Iran was not realized. As a result, on March 11, 2020, the special FATF task force officially returned Iran’s financial action group to the blacklist.

In the FATF statement, countries around the world are urged to take preventive measures to protect their banking system from money laundering and financing terrorism in financial transactions with Iran. After Iran was blacklisted, significant efforts and obstacles were made to pass the bill.

Eventually, instead of persuading opponents, the authorities at the time chose an internal FATF solution and believed that they would create an internal FATF to track money laundering and terrorism financing. However, FATF is a global framework that only makes sense when there are international transactions and Iran is connected to the SWIFT system.

Therefore, financial analysts believe that the internal FATF is a way to downplay and trivialize the issue.

If we do not comply with FATF requirements, no bank will be willing to transfer funds, and if a bank agrees to establish financial relations with Iran, it will charge the transfer risk cost from Iranian banks.

Banks also pass on this cost to traders, and ultimately it is the people who bear the burden or heaviness of this additional cost.

The FATF issue primarily relates to foreign trade and the interaction of banks with foreign banks, and if we fail to adhere to the framework recommended by FATF, banks cannot have relationships with global banks.

This event also incurs costs that people pay in the end.

Currently, out of 41 FATF recommendations, only two recommendations, CFT and Palermo, have not been implemented.

CFT and Palermo are two bills out of four bills presented to the parliament during the administration of Hassan Rouhani, but they were not accepted by the Guardian Council.

Ultimately, these two bills were sent to the Expediency Discernment Council, and no results were obtained from their review. Before Iran was placed on the FATF blacklist, the deadline for reviewing these bills was extended six times.