To be or not to be part of FATF:
What opponents and proponents say
Iran is among three countries named by the Financial Action Task Force (FATF) as high-risk jurisdictions. The sanctions and the failure to join the FATF have resulted in the country being unable to utilize its revenues abroad, making it necessary to incur additional costs for transferring these funds. The only way to capitalize on the economic opportunities available globally is by joining the FATF. The FATF comprises four conventions, all of which approved by Iran’s Parliament but two are on hold in the Expediency Council [a legislative body with supervisory powers over all branches of government]. It seems that over the past few years, failure to approve these two remaining conventions has piled up significant costs for the country. Staying out of the FATF has not completely deprived Iran of banking transfers and the like; rather, the issue is that the costs associated with Iran’s economic ties have soared significantly.
By Zohreh Qanadi
Staff writer
Masoud Pezeshkian’s government announced upon taking office in mid-summer that it would seek to sort out differences with the FATF as part of efforts to open up to the world and fix the country’s economic problems.
The opponents and proponents of aligning with the task force’s requirements have, in the meantime, presented their respective viewpoints, each of which may deserve consideration in its own right.
Supporters of the alignment have expressed that the country need not be concerned about fully adopting the FATF rules, as the country has strict controls on money laundering and financing of terrorism.
That comes as some in the country still believe that certain governments, especially the United States which maintains a harsh regime of sanctions on Iran, would benefit from Iran’s decision to completely accept all FATF conventions and rules.
Opponents argue that the FATF is merely a two-faced coin, presenting itself as a transparent room for combating money laundering and terrorism while being a black box for recording financial information and monitoring the monetary transactions of governments and numerous economic entities. They view it as a radar that claims to fight money laundering and track illicit funds from trafficking, bribery, and drug sales on paper, but its effectiveness in preventing these funds from entering the global monetary and financial systems is questionable.
On the other hand, proponents of Iran’s full accession to the FATF argue that there are numerous benefits to joining this global treaty. They believe that the FATF, in its essence, aims to combat money laundering as an economic crime that significantly and negatively impacts the economic growth and development of countries worldwide. By joining the task force, proponents argue, Iran can prevent unequal income distribution, financial market disruption, illegal capital flight, exchange and interest rate instability, deterioration of the country’s foreign economic relations, reduced money demand, private sector bankruptcy, declining economic productivity, and increased privatization risks. Additionally, they believe that accession will lead to enhanced economic and financial transparency, increased tax revenues, foreign investment growth, and higher economic growth rates.
However, is there any hope that the Expediency Council will soon resolve the ongoing debate about whether to join the FATF? Political figures in the country have voiced their opinions both in support of and against this issue.
Sadeq Amoli Larijani, the head of the Expediency Council, commented on joining the FATF, stating: “Joining the FATF is a technical issue. If it comes to the council, we will examine it. However, it must be clarified how much benefit we will gain from accepting it.” He added, “In a sanctions environment that has created numerous problems for Iranian traders, including in currency transfers, will the US lift its restrictions if we accept the FATF?”
Certainly, Larijani is not the first member of the council to raise concerns about the risks associated with this bill. Many members of this body have spoken out regarding the FATF and its drawbacks.
Saeed Jalili, a member of the council, stated on January 1, “At the end of 2018, the then-government wrote a letter saying that if the FATF was not signed, we wouldn’t even be able to pay the salaries for a month. If you do not define the subject and the scene correctly, your analysis will also be flawed. We need to look at the dimensions of these issues precisely and clarify them for discussion.”
In Parliament, Amir Hossein Sabeti, a representative from Tehran, has invited the Minister of Economy Abdolnaser Hemmati to debate the FATF. Additionally, Vahid Ahmadi, a member of the National Security Commission of the parliament, remarked: “Some of our officials have repeatedly stated in previous years that we must comply with the FATF; it should be noted that we have adhered to 39 out of 41 of its requirements. The question is, what benefits have we gained from complying with 39 FATF stipulations that some are now waiting for us to implement the remaining two?”
Mostafa Mir Salim, another member of the Expediency Council, has also stated, “If our joining this treaty leads to a setback for liberation movements, then naturally, joining these programs would not be correct. However, if everyone collaborates and acts against programs that genuinely combat terrorism, and if these treaties are not used as tools to suppress those who are genuinely fighting against terrorism, the chances of success will increase. This is the main issue, and we must not fall into the US’ trap.”
Banking transactions pending decisions
on FATF
Mostafa Hashemi Taba, a reformist politician, pointed to the positive aspects of relations with neighboring countries, identifying economic exchanges as the primary focus in this regard. In the Shargh newspaper, he writes that a look at Iran’s neighbors reveals that the potential of these neighboring countries to enhance the level of trade is not particularly significant, especially at the level and extent required by Iran. This is particularly true given that banking transactions are stalled pending decisions regarding the FATF, and even a country like Iraq is using this as an excuse for not settling its debts to Iran.
The former minister of industries states, “We want to focus on the positive aspects of neighboring relations. The primary thought in this regard is economic exchanges that neighbors can easily carry out, as proximity has resolved many transportation and communication issues. However, for us, neighbors have largely become intermediaries for purchases and smuggling from other countries, such as the UAE, which sells goods from those who have imposed sanctions on Iran. We either pay them in cash or provide goods, such as agricultural products that conceal significant water content, or, in the case of Iraq, our couriers resort to the informal market for goods.
Development hinges on global exchanges
Morteza Alviri, a reformist figure, in an interview with Khabar Online acknowledges the significant risks of not joining the FATF.
“There is no doubt that the continuation of the current situation will lead the country towards devastation, and Iran will face complete bankruptcy. Even friendly countries can no longer engage with us, and our cooperation with Europe must be completely disregarded.”
The former parliament member finds the arguments of opponents unconvincing, stating that “Some believe that if we implement contractionary policies and adopt a self-sufficiency strategy, we can achieve development by relying solely on ourselves. However, global experiences demonstrate this undeniable reality: development depends on international exchanges. In other words, if we do not engage with the global community and fail to expose our products to the global market, and conversely, do not define our domestic products in competition with advanced technologies, we will face chronic underdevelopment.”
“The FATF is an intergovernmental organization that has the capacity to monitor money laundering and the financing of terrorism. Almost all countries in the world are defined within this framework, and if they do not accept such arrangements, their banking operations and trade with one another will encounter difficulties. Unfortunately, for various reasons, Iran was not included in this framework and ultimately ended up on the FATF’s blacklist. As a result, our exchanges with the world have become significantly more challenging. However, the issues we face in global transactions are not solely due to the FATF; sanctions themselves are another factor contributing to these problems. In other words, even if we accept the FATF but remain under sanctions, our global trading issues will persist. However, accepting the FATF is a significant step, as even countries under sanctions have recognized the FATF and have overcome some hurdles.”
The reformist politician, in response to the opponents, who say that the country’s development should not be tied to global exchanges or sanctions, states that “If we look at various countries around the world, we can see how those countries, like Cuba or North Korea that have been caught in global sanctions have remained off the path of development.”
Alviri warns that rejecting membership in the Palermo Convention, the UN Convention Against Transnational Organized Crime, could lead to not only economic constraints but also security challenges for Iran. “While we do not assert that joining will solve all of the country’s problems, it can at least facilitate the process of addressing issues and moving towards a more normalized situation.”
Increasing costs of exchanges
Davood Danesh-Jafari, a member of the Expediency Council, believes that resolving the FATF issue does not necessarily lead to the lifting of sanctions; however, failing to address it could cast a shadow over Iran’s economy even after sanctions are lifted, increasing the costs of economic exchanges with the outside world by about fifteen to twenty percent.
Hamid Mirzadeh, the former head of the Organization of Planning and Budget, writes in Etemad newspaper that removing Iran from the FATF blacklist would improve banking standards, reduce both trade costs and risks associated with Iran, and prevent the re-imposition of countermeasures.
He lists several advantages of this development, including enhancing Iran’s financial legitimacy, gaining access to international financial systems, lowering commercial risks, facilitating foreign investment, and strengthening economic relations. He also points to the improvement of the sanction’s environment as another benefit of Iran’s membership in this international organization.
Membership could alleviate impact of sanctions
Although Mirzadeh agrees that joining the FATF will not lead to the lifting of sanctions, he states, “it can open avenues for negotiation and dialogue concerning existing economic sanctions, potentially leading to more favorable conditions.” Furthermore, he notes that FATF membership would diminish the effects and scope of new sanctions and neutralize the justifications used by sanctioning entities.
According to Mirzadeh, joining the FATF would enable foreign purchases with greater selection and lower costs, eliminating the burden of higher expenses, which currently can reach up to 30%. He identifies securing new financial resources for the government as the final advantage of FATF membership, suggesting that it could facilitate the reintegration of Iran’s economy into the global economy and strengthen its economic ties with other countries, thereby creating more opportunities for national growth and development and providing new financial resources for the government.
Lastly, he expresses concern that some analysts advocate for unilateral policies that are certainly contrary to the country’s independence. These individuals passionately argue for Iran’s membership in a specific bloc while perceiving FATF membership as a plunge into the embrace of the West. In reality, joining an intergovernmental body accepted by 200 countries, much like Iran’s participation in various international organizations, serves to protect national interests and unlock economic barriers, particularly regarding the banking system. Currently, only three countries—Iran, North Korea, and Myanmar—are not members of this organization and are on its blacklist.
In contrast, as mentioned, critics of joining the FATF, despite supporting the fight against money laundering and wanting increased financial and economic transparency in the country, believe that given Iran’s struggle against the United States and the sanctions imposed upon it, the country is inevitably forced to circumvent these sanctions. They argue that joining the FATF and accepting all its conditions would essentially mean shackling ourselves and exposing our strategies for evading sanctions.
Nailing one’s own foot
Mehr News Agency, quoting critics of FATF membership, states that despite rising import costs, as long as the issue of the unilateral sanctions imposed by the United States and the pressure on other countries to avoid economic cooperation with Iran remain unresolved, accepting all the FATF stipulations is merely “nailing one’s own foot.” They also contend that joining the FATF and adhering to all its conditions would effectively complicate support for groups, forces, and nations fighting for legitimate self-defense against Western powers and aggressors in the region.
Critics assert that even with the implementation of FATF provisions by countries worldwide, the level of money laundering in international economic transactions remains high, with approximately 5% of global GDP being laundered—significantly occurring within Western nations themselves. Therefore, they argue that this treaty, contrary to its proclaimed goals, has not effectively addressed financial crime and money laundering. They believe that, similar to the United Nations and the Nuclear Non-Proliferation Treaty within the atomic agency, the FATF exhibits a double standard and a colonial approach to issues, not only failing to assist independent nations but also trapping them in self-imposed constraints.
Opponents of joining this convention express grievances regarding the lack of transparency surrounding the Financial Action Task Force, claiming that accepting FATF is a form of significant and compounded self-sanctioning.
Despite these considerations, the head of the government’s information council states that Iran’s accession to the FATF should be examined away from political controversies and should rely on specialized discussions among economic experts.
Elias Hazrati wrote on his account on the social media platform X: “I humbly invite all political activists to avoid political polarization for the dignity of Iran and to take steps towards convergence. Together, we stand for Iran.”