ERBIL, Kurdistan Region – Iranian President Hassan Rouhani’s government is facing bitter opposition from hardliners as it tries to pass legislation on money laundering and terrorism financing while Washington geared up on Friday to impose new restrictive measures making it difficult for Tehran to conduct legitimate humanitarian trade with foreign governments and financial institutions.
Rouhani’s government has tried in recent years to pass the required legislation necessary to ratify international recommendations to combat money laundering and terrorism financing, overseen by the Paris-based Financial Action Task Force (FATF). Bolstered by Washington’s increasing crippling sanctions due to Tehran’s nuclear program and the activities of the Islamic Revolutionary Guard Corps (IRGC) in the region, Iran’s hardliners have become more upbeat about their opposition to the 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, which was convened in Palermo in Italy and thus is known as the Palermo convention. The Rouhani government said in 2016 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.
Hardliners have staunchly opposed the legislation. “Enacting the remaining two bills of the FATF recommendations brings us closer to be drowned,” Mohammad Dehghan, one of the six legal experts sitting on the powerful Guardian Council said on Iranian national TV on Thursday. “It also closes the ways of bypassing the sanctions.”
Rouhani’s government claims that if these articles are not passed, the whole of Iran’s financial system, already reeling from American sanctions, would be blacklisted and the government would face a financial meltdown.
Opponents say the country is already suffering from the repercussions of making disclosures to FATF as part of the 37 articles, 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.
Since 2016, the parliament and the Guardian Council have been at loggerheads over the four articles and have referred the issue to the Expediency Discernment Council, which adjudicates between the parliament and the Guardian Council when disagreement arises.
The two bills have been stuck in the Expediency Council for more than a year, angering Rouhani and his officials.
“Why doesn’t the Expediency Council hold its sessions publicly about Palermo and CFT so people know what their reasons are for saying no,” Eshaq Jahangiri, first vice president of Rouhani’s government, said recently. “Twice during the meeting of the three organs of the state [Judiciary, Executive and Legislative], we agreed that these bills are very important for the country and on both occasions Agha said these bills should be enacted,” Jahangiri added, referring to Supreme Leader.
The Expediency Council, a hardline body, put out a statement on Wednesday rejecting Jahangiri’s assertion, stating Agha “has made no comment or written correspondence to consent with the enactment and the execution of the bills in relation to Palermo or CFT.”
Washington has piled devastating sanctions on Iran after withdrawing unilaterally from the 2015 nuclear deal last year, creating an extra burden on average Iranians, though humanitarian aid was supposed to be exempt from the sanctions. Facing pressure from below, Rouhani’s government has tried to alleviate the suffering by being receptive to European demands for more transparency in its financial system and the enactment of the FATF bills.
The EU has promised to open a financial mechanism that would allow Iran to buy humanitarian goods and medicine using oil money. But that mechanism has been stalled, and pressure is mounting on Rouhani’s government. The FATF put out a statement earlier this week giving Iran a final deadline of early next year to abide by its recommendations or it will introduce punitive measures.
“If before February 2020, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, then the FATF will fully lift the suspension of counter-measures and call on its members and urge all jurisdictions to apply effective counter-measures, in line with recommendation 19,” the watchdog said in a statement.
This was followed by a US Treasury statement on Friday in which its Financial Crimes Enforcement Network (FinCEN) identified Iran as a jurisdiction of primary money laundering concern. “Iran is a jurisdiction of primary money laundering concern that deliberately ensures that there is no transparency in their economy so they can export terrorism around the world. FinCEN’s action further exposes the characteristics of Iran’s deceptive financial conduct to the international community as part of our maximum pressure campaign to shut off the Iranian regime’s illicit sources of revenue,” Treasury Secretary Steven T. Mnuchin said.
He added that a new humanitarian mechanism would be introduced to help the international community perform enhanced due diligence on humanitarian trade with Iran to “ensure that they do not run afoul of sanctions.”
Iran has worked with the FATF since 2007, but in more than a decade has not been able to implement the recommendations.
“The Iranian regime oversees a vast network of corruption designed to evade sanctions, generate money for terrorists, and enrich Iran’s clerics,” said Brian Hook, State Department Special Envoy to Iran. “A new humanitarian channel will make it easier for foreign governments, financial institutions, and private companies to engage in legitimate humanitarian trade on behalf of the Iranian people while reducing the risk that money ends up in the wrong hands. The U.S. will continue to stand with the Iranian people.”
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