Iran Has Squandered its Chance to Avoid Sanctions

By Joe Lieberman and Mark Kirk

Wall Street Journal

June 19, 2017

As the Financial Action Task Force convenes for its annual meeting this week in Spain, it’s an opportunity for the international governing body on combating money laundering and terrorism financing to call for a reinstatement of sanctions against Iran.

This year’s meeting marks a critical moment for Iran, which along with North Korea are the only two countries in the world identified by the FATF as serious risks to global financial security. Iran received a 12-month reprieve from sanctions at last year’s FATF meeting following the nuclear deal. It was an opportunity for Tehran to prove its commitments to fiscal propriety and to distance itself from funding acts of terror.

That reprieve has been for naught. One year later, Iran remains the world’s leading state-sponsor of terrorism. It has done little to enact the anti-money laundering policies requested by the FATF. With no proof of tangible results, the FATF must call on its members to bring back the sanctions against Iran.

Iran’s duplicity stems from the power dynamic between President Hassan Rouhani and the Supreme Leader Ali Khamenei. Politics and policy are controlled by Ayatollah Khamenei and enforced via the Islamic Revolutionary Guard Corps. Mr. Rouhani doesn’t have much of an independent policy legacy to speak of, despite his efforts to project a moderate and more democratic veneer. Even agreeing to the nuclear deal was ultimately Mr. Khamenei’s decision.

The powers in control in Tehran loathe what it considers to be the West’s meddling in its domestic affairs, and often lashes out in response to external pressure. We see this with every joint Iranian-North Korean missile test that violates United Nations Resolution 2231. And it has been much the same for the FATF, with no change in either Iran’s money-laundering policies or in winding down its terror funding over the past year.

Some countries still wish to give Iran a free pass, even though the FATF recommends that “countries should criminalise terrorist financing on the basis of the Terrorist Financing Convention, and should criminalise not only the financing of terrorist acts but also the financing of terrorist organisations and individual terrorists even in the absence of a link to a specific terrorist act or acts.”

Over the past year, Iran has continued to provide money, weapons, training and troops to the cause of terrorism throughout the Middle East. From the Houthis in Yemen to propping up Bashar Assad’s forces in Syria, Hezbollah in Lebanon and supporting Shiite militias in Iraq, there’s no shortage of examples of Iranian influence over some of the most violent groups in the world.

When it comes to its role in funding terrorism, Iran has gone so far as to dub organizations such as Hezbollah a “liberation movement” to create a loophole in its 2015 terrorist-financing legislation. This is unacceptable. The FATF should reinstate sanctions against Tehran until it adopts a credible legal architecture to combat the financing of terrorism. Reinstating this global label would warn the financial community to avoid business with Iran.

Money laundering poses its own business risks and is a threat to the safety and soundness of Western financial institutions. The Iranian regime uses its network of ostensibly legitimate business supporters to conceal the origins of illegally obtained money. This potentially makes financial institutions unwitting participants in a money-laundering operation, tarnishing their reputation and increasing their liability for massive fines and penalties.

The FATF is primed to provide a thorough and just assessment of Iran’s efforts in the past year. We hope it does so. The nuclear deal provided the space and opportunity for Iran to demonstrate its commitment to stopping the flow of funds to terror groups and rolling back its money-laundering operations. But Iran squandered this opportunity.

We encourage the FATF to not only call on its members to reinstate sanctions against Iran, but that they implement more-stringent resolutions as the organization itself recommends for every jurisdiction that poses a threat to the global financial system.