The global dirty money watchdog placed Iran on its blacklist on Friday after it failed to comply with international anti-terrorism financing norms, a move that will deepen the country’s isolation from financial markets.
The decision came after more than three years of warnings from the Paris-based Financial Action Taskforce (FATF) urging Iran to either enact terrorist financing conventions or see its reprieve from the blacklist lifted and some counter-measures imposed.
“Given Iran’s failure to enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, the FATF fully lifts the suspension of counter-measures.
It also called on its members and urges all jurisdictions to apply effective counter-measures,” the group’s 39 members said in a statement after a week-long plenary session.
These would entail more scrutiny of transactions with Iran, tougher external auditing of financing firms operating in the country and extra pressure on the few foreign banks and businesses still dealing with Iran.
“The consequence of (Iran’s) inaction is higher costs of borrowing and isolation from the financial system.
“Iran’s central bank chief dismissed FATF’s decision. It is politically motivated and not a technical decision.
“I can assure our nation that it will have no impact on Iran’s foreign trade and the stability of our exchange rate,” a Western diplomat said.
The FATF appeared to leave the door open for some engagement saying in its statement: “Countries should also be able to apply countermeasures independently of any call by the FATF to do so.”
“It’s a middle solution. A sort of a fudge to leave the door open for the Iranians,” said one of the diplomats.
Foreign businesses say Iran’s compliance with FATF rules is essential if it wants to attract investors, especially since the U.S. reimposed sanctions on Tehran in 2018 after quitting a 2015 nuclear deal with Iran and other big powers.
The country’s leaders have been divided over approach to the FATF.
Supporters of cooperation said it could ease foreign trade with Europe and Asia, offsetting U.S. sanctions.
Hardliners argued that passing legislation to join the FATF could hamper Iran’s support for its allies, including Lebanon’s Hezbollah.
France, Britain and Germany have tried to salvage the nuclear accord but have faced growing pressure from the U.S. to join its efforts to isolate Iran.
“The U.S. was pushing for the toughest position (by FATF), while other countries like China and Russia preferred something more flexible,” said a European official.
U.S. sanctions have crippled Iran’s economy, decimating its oil exports and largely sealing it off from the international financial system.
Iran’s action plan to meet with the FATF requirements, implemented in 2016, expired in Jan. 2018.
In another important decision on Friday, the FATF granted Pakistan an extra four months to meet anti-terrorism financing norms, keeping Islamabad for now on its “grey list” of countries that do not adequately comply with its rules. (Reuters/NAN)