WASHINGTON — The Donald Trump administration expressed support today for an intergovernmental watchdog’s decision that rewards the Iranian financial system for its relative progress combating money laundering and terrorism financing.
The Financial Action Task Force (FATF) voted last week to continue suspending countermeasures on Iran indefinitely, while keeping the country on the banking advisory body’s black list. State and Treasury officials told Al-Monitor they welcomed the decision to warn about the risks of doing business with Iran, even as Tehran also applauded a move that curtails the threat of new sanctions.
Experts said the June 23 decision, made at the FATF’s plenary meeting in Valencia, Spain, to suspend countermeasures was appropriate — “the triumph of the technical over the political” — given that Iran had made improvements but still had a long way to go to bring its banking sector in line with international standards. The agency last year suspended countermeasures for 12 months as Iran, in the wake of the 2015 nuclear deal, sought to engage the group and accept technical help on how to clean up its banking sector.
The FATF’s “decision in Valencia seems technical and sober to me,” said Elizabeth Rosenberg, a former Treasury Department official who is now with the Center for a New American Security. “It would have been political if they reinstated sanctions … or took a step to downgrade their cautionary notation to countries about dealings with Iran.”
The June 23 decision avoids coupling Iran with North Korea on a list of countries against which FATF members are asked to “apply counter-measures to protect the international financial system.” Being on the less restrictive blacklist, by contrast, means Iran can expect to see FATF members “apply enhanced due diligence measures” due to the risk of doing business in the country.
Rosenberg said the FATF decision notes “that Iran is making progress, which it is, but has more work to do to get a better grade from FATF.”
“It is still in the same camp with North Korea from a financial sector integrity standpoint and threats for terrorist financing and money laundering moving through its banking institutions,” she said.
The Paris-based anti-money laundering agency makes its decisions by consensus. The United States in particular has significant influence given the global power of the US financial sector, Rosenberg said.
The United States was represented at the Valencia meeting by the Treasury Department acting Assistant Secretary for Terrorist Financing Jennifer Fowler, the Treasury Department said. The FATF holds plenary meetings three times a year and could reinstate countermeasures at any of them.
“In light of Iran’s demonstration of its political commitment and the relevant steps it has taken in line with its Action Plan, the FATF has decided to continue the suspension of counter-measures,” the FATF said in a statement on the outcomes of the Valencia meeting. “The FATF will keep monitoring progress in the implementation of the Action Plan and consider next steps.”
The State Department said it supported the decision.
“We support the FATF's decision, under which Iran will remain on the latest FATF Public Statement — which is commonly known as the ‘FATF blacklist’ — and countermeasures will be suspended,” a State Department official told Al-Monitor. “The United States shares FATF's concerns about the terrorist financing threat emanating from Iran.”
The Treasury Department said it welcomed the FATF’s continued advisory role so financial institutions can apply enhanced due diligence to business relationships in Iran.
“Given the deficiencies in Iran’s anti-money laundering and countering the financing of terrorism [AML/CFT] regime, the FATF decided not to lift countermeasures, extending a temporary suspension of countermeasures instead,” a Treasury Department official told Al-Monitor. “The FATF will continue to monitor Iran’s progress on its action plan to address its AML/CFT deficiencies and take additional steps if necessary.”
“The FATF review of Iran is a technical and rigorous process that is assessing Iran’s [AML/CFT] regime against internationally agreed standards,” the official added.
“The United States will continue to address Iran’s troubling behavior throughout the Middle East, which continues to pose a serious and growing threat to our collective interests,” the Treasury Department official said. “We will continue to work with partners to curb Iran’s development and testing of ballistic missiles, support for terrorism, destabilizing activities in the region and human rights abuses.”
Former nuclear negotiator and State Department Iran sanctions expert Richard Nephew said US judgments on the FATF and Iran were largely made by Treasury Department officials and experts based on technical, not political, criteria. It has long been largely a “technical judgment to be made by technical experts at Treasury” in which the State Department and the National Security Council rarely got involved.
“It was evaluated based on the technical merits of the case. It was a technical judgment, less political,” Nephew, now with Columbia University, told Al-Monitor. “The technical judgments of the Treasury experts prevailed here. Treasury is always very protective and defensive about this [and insists this is an area] where we don’t play politics. I did not hear of any serious effort to push back.”
While the United States welcomed the FATF’s decision to keep Iran on its watch list, Iran, for its part, said it was encouraged that the United States joined the global agency’s decision to suspend countermeasures on Iran. Former US lawmakers affiliated with the hawkish United Against Nuclear Iran lobbied against the sanctions reprieve, to no avail.
“Despite the call by US radical circles to Trump to block the decision, US joined [the] consensus and acknowledged Iran's effective measures,” Iran’s ambassador to the UK, Hamid Baeidinejad, who previously headed the Iranian delegation’s technical expert team at the nuclear talks, wrote on Twitter.
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