FATF holds firm on Iran re: AML/CFT Compliance


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Iran still listed as high risk for AML/CFT Compliance

News of Boeing’s big deal with Iran—a deal currently in the MOA stage—made headlines last week, but financial institutions curious about AML/CFT Compliance risk related to Iran will probably see few changes in the short term.

Reuters reported this morning that the international Financial Action Task Force (FATF) is expected to vote this week to keep Iran on its list of countries blacklisted for high risk of money laundering and terror financing.

The Boeing deal was made possible by negotiations last year related to the West easing some economic sanctions in exchange for Iran slowing down its nuclear program. For the Boeing deal to proceed fully, OFAC will need to approve the sale but Boeing noted in its statement that the talks with Iran Air were conducted “under authorizations from the U.S. government following a determination that Iran had met its obligations under the nuclear accord reached last summer.” Airbus, Boeing’s European competitor, initiated a similar deal early this year.

Members of FATF are meeting this week in South Korea, and representatives have said they will publish an updated list of countries classified as high-risk. The Reuters analysis emphasized the degree to which financial institutions in Europe and the U.S. remain reluctant to get involved with potential customers based in Iran.

In addition to the FATF designation and other sanctions still in effect, the outcome of the U.S. presidential election could affect the new treaty with Iran. Additionally, Iran’s Islamic Revolutionary Guard is known to have “a strong hold” on the economy and is described by Reuters as being “the driving force behind Iran’s nuclear program, its money laundering activities and its foreign military activities, and remains subject to extensive international sanctions.”

Moreover, FATF, which represents 37 member states, reiterated in February of this year that it “remains particularly and exceptionally concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system.”

The FATF statement went on to say that it urges “jurisdictions to protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices and to take into account ML/FT risks when considering requests by Iranian financial institutions to open branches and subsidiaries in their jurisdiction. Due to the continuing terrorist financing threat emanating from Iran, jurisdictions should consider the steps already taken and possible additional safeguards or strengthen existing ones.”

Iranian authorities have been lobbying for removal from the blacklist or at least a softening of the language, but FATF’s unequivocal statement from just a few months ago shows that to be both unlikely and unwarranted.

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