Iran’s Amendments to CFT Law, a Step in Right Direction – Part 2

In the article titled “Amendments to CFT Law, a Step in Right Direction” published on Monday, Article 1 of Iran’s new CFT law was assessed against parts of the Financial Action Task Force's Recommendation 5 and its interpretive notes. Article 1 is followed by four notes that will be elaborated at this stage.

FATF's interpretive note to Recommendation 5 stipulates that:

“It should also be an offence to attempt to commit the offence of terrorist financing … Terrorist financing offences should not require that the funds or other assets were actually used to carry out or attempt a terrorist act(s)”.

Notes 1 and 2 of Article 1 of the CFT law cover these issues, which state that any person who collects or provides funds or assets for the purposes mentioned at the outset of the article, and before these funds and assets are put to use or presented to terrorist individual/s and organization/s, the intention is suspended due to factors beyond one's control [that person] is considered the financer of terrorism. Note 2 determines the punishment for such a person.

Besides, it should be noted that the issue of attempting a crime has been extensively covered by Iran’s Penal Code, Section Three (Crimes), Chapter 1 (Attempting Crimes) and this chapter applies to all crimes defined in all other laws, including the CFT law.

Furthermore, the interpretive note to Recommendation 5 reads as follows:

“Terrorist financing offences should apply, regardless of whether the person alleged to have committed the offence(s) is in the same country or a different country from the one in which the terrorist(s)/terrorist organization(s) is located or the terrorist act(s) occurred/will occur."

This has been covered in note 3 of Article 1 of CFT law, which states: Prosecution under the title of financing of terrorism against natural and legal persons will be carried out based on this law, regardless of the place where the crime is committed or where the offender is located and what his/her nationality is.

In the former law, note 2 of Article 1 stated that the acts of liberation groups fighting against foreign occupation, etc. are not considered financing of terrorism. In the amended law, the focus is on introducing terrorists rather than the exceptions.

Based on United Nations Resolution 1373, a national committee shall be established, which will publish the national list of terrorists and decide about related details. The national committees of each country have their own criteria for their designations at the national level and Iran’s Supreme National Security Council will act accordingly based on the Iranian Constitution and its Article 154.

The interpretive note to Recommendation 5 asserts that:

“Effective, proportionate and dissuasive criminal sanctions should apply to natural persons convicted of terrorist financing.”

 Article 2 of Iran’s CFT law introduces a range of punishments starting from the harshest penalty to imprisonment, fines and confiscation of funds and assets. An important point is that as per the FATF Action Plan, “confiscation of the property of corresponding value” has also been covered in this article, which meets one of the items of the Action Plan.

The interpretive note to Recommendation 5 also points out that:

 “Criminal liability and sanctions, and, where that is not possible …, civil or administrative liability and sanctions, should apply to legal persons. Such measures should be without prejudice to the criminal liability of natural persons.” 

Article 4 of the CFT law mentions that legal persons who commit these crimes will be punished as per the Penal Code. In the Penal Code, there is a thorough range of punishments, including dissolution, confiscation of property, lifetime prohibition on pursuing certain occupational and social activities, fines, etc. for legal persons. It has also been expressly mentioned that this does not preclude punishment of natural persons.

Freezing, seizure and confiscation are very important issues for a successful combating financing of terrorism regime.  These are mainly covered in Recommendation 4 and its interpretive note.

The quotations, reproduced below from Recommendation 4 (and other recommendations), are based on the latest version of FATF recommendations (2012). It should be pointed out that Iran’s Action Plan is based on the older version of recommendations. So complying with the former “special recommendations” should be technically adequate for Iran to claim it has met the requirements.

However, in order to have a more powerful and strong CFT law, Iran has attempted to align its CFT law with the latest version of standards. The former generation of recommendations included fewer details in this respect. For example, the Special Recommendation 3 asserted that:

“Each country should adopt and implement measures, including legislative ones, which would enable the competent authorities to seize and confiscate property that is the proceeds of, or used in, or intended or allocated for use in, the financing of terrorism, terrorist acts or terrorist organizations.”

Recommendation 4 (2012) asks countries to adopt legislative measures “to enable their competent authorities to freeze or seize and confiscate the following, …: (a) property laundered, (b) proceeds from, or instrumentalities used in or intended for use in money laundering or predicate offences, (c) property that is the proceeds of, or used in, or intended or allocated for use in, the financing of terrorism, terrorist acts or terrorist organizations, or (d) property of corresponding value."

Recommendation 4 continues:

“Such measures should enable the authority to: (a) identify, trace and evaluate property that is subject to confiscation; (b) carry out provisional measures, such as freezing and seizing …"

Article 5 of the CFT law makes it obligatory for the judiciary and law enforcement forces to: a) identify, b) detect, c) freeze, or seize: 1) funds used, 2) funds allocated for, 3) proceeds derived, 4) properties that are the subject of the law , 5) proceeds that, in full or in part, have been transferred into other property, 6) property and proceeds that have been intermingled with legitimate property.

As can be seen, most topics relating to financing of terrorism in the new recommendation have been covered in Article 5. It is also in line with the CFT convention, Article 8 of which states: “… identification, detection and freezing or seizure of any funds used or allocated for the purpose of committing the offences…” (Here, the emphasis is on item “b” above: “proceeds from, or instrumentalities used in or intended for use in money laundering or predicate offences.

As is evident, instrumentalities used in money laundering and predicate offences have been mentioned and the instrumentalities used or intended for use in terrorist financing have not been mentioned. The same has not been prescribed by the CFT convention either and shall not be included in Iran’s Action Plan as well.)

The interpretive note to Recommendation 5 asks countries to consider “organizing or directing others to commit an offence” as an offence. Article 7 of the CFT law has covered this issue with more severe punishments for such persons.

Recommendations 10, 11 and 20, which respectively deal with Customer Due Diligence, Record Keeping and Suspicious Transactions Reporting, are reflected in articles 13 and 14 of the CFT law.

Recommendation 35 of FATF states:

“Countries should ensure that there is a range of effective, proportionate and dissuasive sanctions, whether criminal, civil or administrative, available to deal with natural or legal persons …. that fail to comply with AML/CFT requirements."

Note 1 of Article 14 of the CFT law considers punishments for both natural and legal persons who fail to carry out their legal obligations.

Recommendation 14 dealing with “tipping off” has also been covered in note 2 of Article 14 of the CFT law.

The last issue covered by this article emphasizes on “including terrorist financing offences as predicate offences for money laundering”. This has been included in Article 15 of Iran’s amended CFT law.

More details can be covered in this article, but the comparisons made above give enough information to readers to get a sense of the amended law and how it complies with international standards. The related bylaws will cover more details.

Technically speaking, we should keep in mind that no law should incorporate all details of standards, otherwise this may indicate that it is not going to be implemented!

Considering the fact that Iran has been the victim of numerous terrorist activities and internationally known terrorists stalk its borders, Iran is determined to combating terrorism and financing of terrorism. This determination deserves the acknowledgment and appreciation of the international community.