FATF Impartiality Test

The deadline of the 18-month action plan prepared by the Financial Action Task Force for Iran ended in February 2018 and was extended for four months, in view of Iran's initiatives and fulfillment of commitments.

The extension was reflected by vested groups as an exceptional move. However, a quick glance at the names of countries which are listed or have managed to get delisted from FATF's list from 2016 to 2018 on FATF's website indicates that this has been a common procedure to help countries fulfill their commitments.

Some of these countries are as follows: (for some of these countries the reason is said to be the security situation; which apparently would not have been applied if Iran was in their position; the dates in parentheses indicate the time these countries made their political commitment.)

- Iraq (October 2013) remains on the grey list and has not been moved to the countermeasure list;

- Syria (February 2010) remains on the grey list and has not been moved to the countermeasure list;

- Vanuatu (February 2016) remains on the grey list and has not been moved to the countermeasure list;

- Yemen (February 2010) remains on the grey list and has not been moved to the countermeasure list;

- Bosnia and Herzegovina (June 2015) was delisted in February 2018 (2 years and 8 months);

- Uganda (February 2014) was delisted in November 2017 (3 years and 9 months);

- Afghanistan (June 2012) was delisted in June 2017 (5 years).

- Lao PDR (January 2015) was delisted in June 2017 (2 years and 5 months);

- Myanmar (February 2010) was delisted in June 2016 (6 years and 4 months);

- Algeria (October 2011) was delisted in February 2016 (4 years and 4 months).

- Angola (June 2010 and Feb 2013) was delisted in February 2016 (5 years and 8 months).

If this has been the common procedure of FATF to give countries enough time to fulfill their commitments before moving them to the countermeasure list, depriving Iran of this opportunity would have exposed FATF to charges of discrimination.

FATF emphasizes that it is a technical and not a political body and that all countries are treated equally. The world of politics is very complicated and a lot of countries are having problems with other countries due to geopolitical and other reasons. However, they gather under the umbrella of FATF, assured that other countries cannot politically undermine them. So, this is a big test of FATF's impartiality as a global standard-setting body.  

The black list of FATF is the informal name for the list of “Non-Cooperative Countries and Territories (NCCT)”. The common practice in recent years has been to apply "countermeasures" against “non-cooperative countries” and “enhanced due diligence” (subject of FATF's recommendation 19) against “high-risk countries”.

Upon giving its political commitment, Iran was removed from the list of non-cooperative countries and moved to the list of countries subject to enhanced due diligence.

Therefore, as per the FATF procedure, Iran can only be taken back to the countermeasure list, if it proves to be non-cooperative. At present, it seems that this cannot be attributed to Iran since it has accepted the FATF action plan and remains committed to fulfilling it.

Iran has attended its face-to-face meetings and answered numerous questions. The government has approved four laws in line with the action plan: Two of which have already been approved by the parliament and the rest are being discussed by the legislature.

The country has been fully or largely compliant with regard to some of the items of the action plan, as admitted by FATF itself. Therefore, it does not seem logical for the country to be called non-cooperative.

If Iran is declared non-cooperative, what would be the difference between Iran and another country that, say, has neither approached FATF nor accepted any action plan? Or, what if Iran had pledged its political commitment in word only, but had not taken a single step to act upon it?

Moreover, throughout the FATF recommendations, six laws have been mentioned: Criminalizing money laundering (i.e. the AML law), Criminalizing financing of terrorism (i.e. the CFT law) and four other laws regarding joining four UN conventions.

These are among the most difficult recommendations that engage governments, parliaments and other supervisory bodies, whereas other FATF recommendations can be fulfilled solely by the government or a small body within the government.

Out of these six laws, Iran already had in place two laws (the country has joined the UN anti-corruption and Vienna conventions) and FATF asked for the ratification or amendment of the other four laws. So in all fairness, it seems that the action plan of Iran has been a difficult one.

One single law may need 18 months, as it needs to be reviewed by the committees of the government and the Cabinet, parliamentary commissions and then the parliament itself, and finally the powerful Guardians Council. And this is besides lots of other executive measures sought by FATF to be carried out by Iran. Therefore, Iran should be given more time to fulfill its action plan.

In February 2018, FATF placed the action plan of Iran in its public statement and this facilitates comparison with other countries.

We mention one country as an example (you may refer to the FATF website about the details of this country). The mutual evaluation report of this country was issued in 2016 and it was delisted from the so-called grey list in 2017.

Item No. 1 of the public statement dated 23 Feb. 2018 concerning Iran mentions: “adequately criminalizing terrorist financing”, which implies Iran has in fact criminalized TF (subject of recommendation 5 of FATF) but in the viewpoint of FATF, it should be completed.

This is while the country mentioned above had received the rating of “non-compliant”, which means absolutely no compliance with recommendation 5.

Item 2 in the public statement reads: “identifying and freezing terrorist assets in line with the relevant United Nations Security Council resolutions”, which refers to recommendation 6 of FATF. The rating of the abovementioned country on this recommendation was again “non-compliant”. With regard to item 3, i.e. customer due diligence (subject of recommendation 10), that country’s rating was “partially compliant”.

The same applies to item 4, i.e. with regard to recommendation 29 on Financial Intelligence Unit, on which they have been partially compliant; with regard to item 5 on money or value transfer services (recommendation 14), they have been partially compliant; regarding item 7 on wire transfer (recommendation 16), that country was declared non-complaint and finally it has been considered partially compliant on recommendation 3 dealing with money laundering (item 8).

It is clear that this particular country has had much more serious weaknesses on the very same items mentioned in Iran’s action plan, but its name was never included in the blacklist of FATF and they were delisted from the grey list as well. This raises the question: Is FATF applying double standards against Iran?

The power of FATF comes from the number of countries that have trusted it as a technical body. Therefore, this is not only a sensitive juncture for Iran, but also for the legitimacy of FATF to see whether it can preserve its reputation as an impartial technical body that treats all countries equally.