Blacklist in place
Last week, the FATF voted to keep Iran on a blacklist, which means that banks are being advised that they may want to treat financial transactions from Iran with heightened scrutiny.
It’s an interesting decision because Iran is, in many ways, more transparent that many other countries that appear to have no FATF issues. In other ways it may not be on par.
A former member of the US Treasury said in early May in public that John Kerry is asking global banks to re-engage with Iran but their board members are refusing because of the risks of fines from US regulators if they do, arising from the uncertainly created by the position of the FATF.
Central bank of Iran
Iran actually has a modern, online banking system that, if anything, is ultra transparent.
For example, the FATF put forward a soft recommendation a few months ago that central banks consider becoming involved in the on-boarding process of commercial banks and that they have ties to their banks for identification. It was advanced as the ideal way for countries to become FATF compliant.
Iran’s central bank does on-board clients at the same time as the commercial bank does. A person, whether they are foreign or Iranian, cannot open a bank account in Iran until the central bank clears the person first – the central bank runs a check on the person to ensure they are not a terrorist, a money launderer, a debtor or have an outstanding judgement against them in Iran. Even a debtor is denied the privilege of a bank account in Iran until the debt is settled and the national records are corrected to reflect that.
Trade-based transparency & beneficial ownership data in trade transactions
Another example, Iran has transparency in respect of trade that no other country has – to wit, they have an online foreign trade database that delivers data on trade transactions in real time.
The database shows imported / exported goods, evaluations of the traded goods, tax receipts paid, licenses issued in respect of the traded goods, transit permits, trade-based invoices, and tax reports.
It also includes information in respect of the products imported, any legal issues with the importer and discloses the beneficial ownership of the importer or exporter (who controls the company involved in trade and is the authorized signatory).
The database can be used as an anti-financial crime tool to mitigate against money laundering, including trade-based money laundering, and for beneficial ownership disclosure. It allows Iran, and law enforcement to have real-time data on trades and the financing thereof, and act as a powerful tool to mitigate against financial crimes occurring as Iran opens up its trade system to the rest of world in conjunction with the lifting of sanctions.