A former banking official says if Iran wants to be permanently removed from the black list of the Financial Action Task Force, coordination among all state institutions is crucial to effectively use the one year window provided by the organization’s recent move.
FATF (an intergovernmental organization founded in 1989 to combat money laundering) announced last month that while Iran will be kept on its blacklist of high-risk countries, it is calling for a one-year suspension of some restrictions on Tehran. The decision was meant to encourage Iran for the steps it has taken in passing anti-money laundering and counter terrorism financing laws.
“This gives Iran a one-year window that should be utilized to the country’s benefit subject to collaboration that goes beyond just the government and the Central Bank of Iran”, says Ahmad Hatami Yazd, a former banker.
“If we decide to implement the existing laws in full and in its entirety, we could take advantage of the one- year window that we have”, he added, as reported by the news website of Iran’s Chamber of Commerce, Industries, Mines and Agriculture.
Recalling the tortuous path that the Anti-Money-Laundering Bill took before becoming law, he recalled the time when the law was to be passed under the moniker of Informal Money Markets that was rejecte4d by the Guardian Council.
“It was approved eventually,” he said,”but it shows that government institutions aren’t fully united around these issues.
“So they tell us to decide within a year. If anti-money-laundering regulations are not implemented by the banks and the CBI does a poor job of overseeing the process, then we will be on the blacklist again next year.”
Strong Will Needed
Noting that stringent rules have been put in place throughout the world to stop transactions that involve money obtained by illegal activities such as human trafficking, terrorism and drug trafficking, Hatami said such regulations are not always upheld in Iran.
“According to rules, if anyone wants to transfer money to someone else, the bank needs to obtain information regarding the source and application of the money, but our banks don’t possess such mechanisms.”
“Banks have no obligation regarding small amounts of money, even up to $5,000 which is almost 150 million rials. But anything higher than that must be checked. The CBI has devised regulations according to which the banks need to inquire about the purpose of money going beyond 150 million rials. In practice, these regulations are not implemented. Because no such controls exist in Iran, they put the names of our banks on the blacklist, expecting us to respect the regulations.”
The former banker reiterated that the country has the necessary regulations in place, but implementing them is not easy for the “dirty banks that are mired in corruption and venality.” According to Hatami “we need a healthy system that is capable of putting the laws into practice.”
Moving on to “another important issue that they have branded terrorism,” he said Iran supports liberation movements such as the Lebanon-based Hezbollah, but they count this backing as money-laundering.
“They (international bodies) seek to stop narcotics and other types of smuggling,” says Hatami, “but they also want to block Iran aiding liberation movements. That is why they proceed with caution in their dealings with us and warn countries to do likewise.”
Another reason as to why the international regulations are not upheld in Iran is that the banks are overwhelmed with non-performing loans (NPLs) and combating money-laundering has little significance for them at this stage, he was quoted as saying.
The latest official data puts the banking system’s bad debts at 794 trillion rials ($25.8 billion).
“Banks are under intense pressure and this is not the main issue for them. Money-laundering is not even their tenth priority and maybe this is why the laws are not executed. Their main problem now is bad loans incurred by powerful lobbies and individuals affiliated to vested interests who have borrowed money and cannot return it, “he said.
As long as this huge capital is not returned, the banks will remain in a state of bankruptcy, he said, concluding that before the banks bother about money-laundering “they worry about their own survival.”
