Iran's Amendments to CFT Law, a Step in Right Direction (Part 1)

Amendments to the CFT (Combating Financing of Terrorism) Law of the Islamic Republic of Iran were finally approved by the Guardians Council on Aug. 1 and have been notified by the president to related ministries on Aug. 11.

The Cabinet had approved the bill for making amendments to the CFT law on Oct. 29, 2017, and after a great deal of tug of war, thanks to the “government’s continued efforts” (as acknowledged by most members of the Financial Action Task Force and reflected in FATF's Public Statement), amendments to the CFT law were finalized and passed.

These amendments were one of the main pillars of Iran’s Action Plan, followed by amendments to the AML law and accession to Palermo and CFT conventions. The purpose of this article is to evaluate the new law vis-à-vis international standards on combating financing of terrorism.

However, before dealing with technical issues, facts about the Iranian legislation should be stipulated:

Firstly, the laws in Iran are not usually amended soon after their ratification. Laws dating back 90 years are still in force. However, Iran’s CFT law was passed only one year and nine months before the Cabinet started the process for its amendment, which is rather unprecedented in the history of the country’s legislation. This was carried out in order to show Iran’s good faith and determination in combating the financing of terrorism.

Besides, it should be mentioned that the legislation procedure in Iran is focused on writing concise and succinct laws, followed by several bylaws, directives, etc. Usually, the important and general points are covered by the law and details are left for executive regulations. However, in the exceptional case of the CFT law, sufficient details were included to ensure Iran’s CFT law is in compliance with international standards.

It is possible that there might still be some details missing, which will be covered in the related implementing regulations. At this point, it should be noted that there are very few countries whose CFT laws have managed to meet all the required international standards and get the “Compliant” rating in FATF's assessment.

Reviewing the FATF assessment reports of countries (updated in July 2018 and available on FATF's website) indicates that out of 50 countries, only 11 countries have been “compliant” with FATF recommendation 5 (criminalizing terrorist financing, the main pillar of CFT law), while the other 39 members of FATF and FSRBs have not managed to get a rating better than “Partially Compliant” or “Largely Compliant”.

Considering the above, it is worth taking a look at FATF recommendation and Iran’s amendments to the CFT law.

FATF's recommendation 5 and its interpretative notes stipulate that: “Terrorist financing offences should extend to any person who willfully provides or collects funds or other assets by any means, directly or indirectly, with the unlawful intention that they should be used, or in the knowledge that they are to be used, in full or in part: (a) to carry out a terrorist act(s); (b) by a terrorist organization; or (c) by an individual terrorist”.

It also adds: “Terrorist financing offences should extend to any funds or other assets, whether from a legitimate or illegitimate source”.

Article 1 of the amended CFT law reads as follows (unofficial translation):

“Providing or collecting funds or assets, by any means, whether from a legitimate or illegitimate source and or using financial resources derived from [some examples are mentioned here: author] in full or in part, for carrying out any economic activity by oneself or another to carry out the following activities [a list of terrorist activities are mentioned in the law: author], or to provide them to terrorist individuals or terrorist organizations is considered financing of terrorism and is a crime”.

As can be seen, the main core of this law, which is to criminalize the financing of terrorism, is in line with FATF standards. The objection raised by FATF over the former law was the phrase “providing and collecting” that has now been amended to “providing or collecting”. The other issue was that FATF inferred from the former law that only financing of terrorists who carry out terrorist activities was criminalized and they asked for financing of terrorism offence not to be linked to any specific terrorist acts. Specifying the three categories of “terrorist activities”, “terrorist individuals” and “terrorist organizations” has totally removed any ambiguity, which meets the requirement of the FATF Action Plan.

Furthermore, FATF requests countries to criminalize financing of terrorism on the basis of Article 2 of the Terrorist Financing Convention that states:

“Any person commits an offence within the meaning of this Convention if that person by any means, directly or indirectly, unlawfully and willfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out:

(A) An act which constitutes an offence within the scope of and as defined in one of the treaties listed in the annex;

This item refers to nine conventions and each of these conventions reflects one category of terrorist activities (like unlawful seizure of aircraft, taking of hostages, unlawful acts against the safety of maritime navigation, etc.). Iran has already joined eight of these conventions (many countries have joined fewer conventions) and have introduced these terrorist activities in paragraphs (b) and (c) of Article 1 of its CFT law.

(B) Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act”.

With regard to this item, item (a) of Article 1 of Iran’s CFT Law reads as follows:

“Committing or threatening to commit any violent act, including murder, violent act causing serious bodily injury [with some elaboration on the level of seriousness: author], unlawful seizure and taking of hostage and/or knowingly committing a violent act against a population or endangering their lives or freedom in order to influence the policies, decisions and measures of the Islamic Republic of Iran, other countries and or international organizations”.

Financing such measures are considered financing of terrorism. In the former law, reference was made to international organizations that had an office in Iran. This limitation has now been removed. Therefore, this requirement of the FATF Action Plan has also been met.

Comparing FATF standards and their interpretive notes and Article 1 of Iran’s CFT law indicates that Iran is complaint with recommendation 5, which underpinned some of the items of the FATF Action Plan.

Part 2