Iran’s Khamenei orders review of FATF legislation

ERBIL, Kurdistan Region — Iran’s Supreme Leader Ayatollah Ali Khamenei has agreed to a request from President Hassan Rouhani’s government to let a top conservative body once again review legislations that, if approved, would potentially make Tehran comply with international rules on money laundering and terrorist financing.

In February, Iran was placed on the blacklist of the Paris-based Financial Action Task Force (FATF), the top international watchdog on money laundering and financing of terrorism, after four pieces of legislation proposed by Rouhani’s government were blocked by the country’s hardline bodies.

The government sent a request last week in the form of a letter to the supreme leader, the ultimate decision maker in the country, explaining the dire situation of the Iranian financial sector, calling on him to order a review of the legislation amid increasing economic isolation. 

“We requested an extension to study the remaining legislation,” vice president of legal affairs Laaya Joneidi told the governments Iran newspaper in an interview published on Monday.  “While in agreement, he [Khamenei] referred the issue back to the respected Council,” referring to the Expediency Discernment Council - a top body that adjudicates on differences between the parliament and the hardline Guardian Council, which can block legislation. 

Joneidi said that the main concern of the council members was about the implication of FATF legislations on US sanctions, imposed following President Trump administration unilateral withdrawal from the 2015 nuclear deal in 2018.

“We responded to the questions of the respected Council on September 22, 2019. Irrespective of this, the government is ready to offer the required cooperation to answer any other question that the Council may have,” the Vice President said. “I hope that with the cooperation of all of us a critical problem of the country is resolved.”

Iran’s efforts to comply with FATF conditions began in 2007. A deadline of February this year was set for Iran to adopt the required legislation.  

In May 2016, the economy minister said that Iran had to pass 41 recommendations from FATF related to Combating the Financing of Terrorism (CFT) and the UN Convention against Transnational Organized Crime. In 2016, Rouhani’s government said that it did not need approval from the parliament to enact 37 of the recommendations. It prepared the remaining four articles and presented them in two bills to the parliament.

The Guardian Council ,however, took issue with the legislation and became further opposed following the US withdrawal from the nuclear deal. The issue was referred to the Expediency Council to be resolved by the final deadline of February 2020. The failure to resolve the matter essentially placed the whole of Iran's financial institutions on an FATF blacklist.

Opponents say the country is already suffering from the repercussions of making disclosures to FATF, and enacting the remaining four articles would make Iran hostage to the FATF with countries like Israel and the United States taking advantage of Iran’s disclosures.

They further argued that signing the nuclear deal has not brought any meaningful benefit to the country and introducing further legislation would make it impossible to bypass the US-imposed sanctions and provide assistance to Islamic Revolutionary Guard Corps (IRGC) allies across the region.

Since February, Rouhani and his ministers have repeatedly chided hardliners for making financial transactions impossible with countries that support Iran, including China and Russia.

It is unclear if President Rouhani will succeed in getting the hardliners to agree to enact the legislation but Joneidi said that the government has agreed to take into account some of the reservations of the members of the Expediency Council and explain the current action plan and amendments made to the FATF recommendations.

Iran’s possible compliance with the FATF legislation, would be a welcome move for the US President-elect Joe Biden's administration, which has said publicly that it is prepared to return to the landmark nuclear deal if Iran complies with its obligations.

“Our commercial and financial relations will be restricted more than ever,” Joneidi warned of not enacting the legislation. “The costs of these relations would go up and it affects the growth of commerce, promotion of business, employment and economic development.”