A powerful financial watchdog group meeting in Valencia, Spain, this week will take actions that could bolster the Iran nuclear deal — or put it in further jeopardy.
In the aftermath of the 2015 agreement, the Financial Action Task Force (FATF) — a Paris-based intergovernmental organization that sets standards for banks worldwide — agreed last year to suspend so-called countermeasures against Iran. These sanctions, warning financial institutions against dealing with countries that have poor records on terrorism financing and money laundering, had kept Iran on a blacklist along with North Korea and were an additional disincentive to Western and Asian banks contemplating resuming or initiating business with Iranian counterparts.
A plenary session of the FATF is expected on Thursday or Friday to decide whether to extend that suspension for another year, giving Iran more time to implement an action plan it announced last year to come into compliance with global norms. At a meeting in June 2016 in South Korea, the FATF praised Iran for its efforts.
In an interview with Al-Monitor in October 2016, Iranian Minister of Economic Affairs and Finance Ali Tayebnia described the progress he said Iran had made, such as passing laws against terrorist financing and money laundering and installing software in banks to track suspicious transactions. Tayebnia said at the time that he was confident Iran would fulfill the action plan within a year.
Iran would prefer a permanent removal of sanctions, but the most it can hope for is continuing the suspension. Three European diplomats who spoke on condition of anonymity told Al-Monitor that European countries favor extending the suspension for another year. They argue that keeping Iran in a gray zone — rather than returning it to the blacklist — will encourage Tehran to take further steps to improve banks’ performance and bolster confidence that the nuclear deal will endure among European executives who have already signed deals or are contemplating new business with Iran.
“The renewal of the suspension of FATF countermeasures is imperative for European companies and banks doing business with Iran,” Ellie Geranmayeh, a senior policy fellow with the London-based European Council on Foreign Relations, told Al-Monitor in an email. “Without it, the handful of deals that are currently happening and taking shape would be placed on halt.”
Geranmayeh continued, “Major Russian and Chinese banks also require FATF compliance and green light before undertaking big deals with Iran.”
Meanwhile, US opponents of the Joint Comprehensive Plan of Action have been lobbying for the sanctions against Iran to be reinstated. The FATF makes decisions by consensus, so the Donald Trump administration could block the renewal of the sanctions waiver.
Writing in the Wall Street Journal on Monday, former US Sens. Joseph Lieberman, I-Conn., and Mark Kirk, R-Ill., called for reimposing FATF countermeasures against Iran. Lieberman chairs the anti-deal lobby group United Against Nuclear Iran, while Kirk is an adviser to the group.
“Iran remains the world’s leading state-sponsor of terrorism [and] has done little to enact the anti-money laundering policies requested by the FATF,” their op-ed states. “Over the past year, Iran has continued to provide money, weapons, training and troops to the cause of terrorism throughout the Middle East. From the Houthis in Yemen to propping up Bashar [al-]Assad’s forces in Syria, Hezbollah in Lebanon and supporting Shiite militias in Iraq, there’s no shortage of examples of Iranian influence over some of the most violent groups in the world.”
While Iran has long provided support to militant organizations on the US State Department’s list of terrorist organizations, the money it gives generally does not go through banks.
State Department and White House officials contacted by Al-Monitor did not reply to requests about the Trump administration’s position on renewing the suspension. The administration has continued to implement the nuclear deal by renewing waivers of US nuclear-related sanctions, but it has harshly criticized Tehran for its policies in the region and called for a “peaceful transition” of the Iranian system of government.
Despite the FATF suspension, major Western financial institutions have remained wary of working with Iranian counterparts for fear of incurring huge penalties from the US Justice Department. Large fines have been imposed in the past on banks such as HSBC for misrepresenting transactions with Iran. Nevertheless, European and Asian companies are finding ways to finance some large deals with Iran.
US-based Boeing, which has been granted an exception to export to Iran under the nuclear deal, has signed agreements to sell Iran dozens of new civilian airliners. Germany's Siemens has agreed to upgrade Iran’s rail network, and Britain's Vodafone is modernizing Iranian telecommunications.
Overall, foreign direct investment has been much less robust than Iranians had hoped for after the nuclear deal was implemented in January 2016. However, Iranian Oil Minister Bijan Namdar Zangeneh said recently that Iran was in the final stages of reaching a contract with the French oil company Total for development of the South Pars gas field.
The FATF was established in 1989 to combat “money laundering, terrorist financing and other related threats to the integrity of the international financial system,” according to its website. It has been providing expertise to Iran to help it reform and bring more transparency to its banks. The FATF Plenary, the organization’s decision-making body, meets three times a year.