Iran

Sanctions

UN, EU and US sanctions are in force

FATF AML Deficient List

Yes

Higher Risk

Compliance with FATF 40 + 9 Recommendations  (mutual evaluation not yet undertaken)

US Dept of State Money Laundering assessment

Weakness in Government Legislation to combat Money Laundering

Supporter of / Safe Haven for International Terrorism

Not on EU White list equivalent jurisdictions

Corruption Index (Transparency International & W.G.I.)

World Governance Indicators (Average Score)

Failed States Index (Political Issues)(Average Score)

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ANTI-MONEY LAUNDERING

 

FATF Status

Iran is subject to a FATF call on its members and other jurisdictions to apply enhanced due diligence measures proportionate to the risks arising from the jurisdiction.

Latest FATF Statement  -  23 October 2020 (unchanged from last Statement - February 21, 2020)​

In June 2016, Iran committed to address its strategic deficiencies. Iran’s action plan expired in January 2018. In February 2020, the FATF noted Iran has not completed the action plan.[1]

In October 2019, the FATF called upon its members and urged all jurisdictions to: require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran; introduce enhanced relevant reporting mechanisms or systematic reporting of financial transactions; and require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran.

Now, given Iran’s failure to enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, the FATF fully lifts the suspension of counter-measures and calls on its members and urges all jurisdictions to apply effective counter-measures, in line with Recommendation 19.[2]

Iran will remain on the FATF statement on [High Risk Jurisdictions Subject to a Call for Action] until the full Action Plan has been completed. If Iran ratifies the Palermo and Terrorist Financing Conventions, in line with the FATF standards, the FATF will decide on next steps, including whether to suspend countermeasures. Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism-financing in the Action Plan, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system.


[1] In June 2016, the FATF welcomed Iran’s high-level political commitment to address its strategic AML/CFT deficiencies, and its decision to seek technical assistance in the implementation of the Action Plan. Since 2016, Iran established a cash declaration regime, enacted amendments to its Counter-Terrorist Financing Act and its Anti-Money Laundering Act, and adopted an AML by-law.

In February 2020, the FATF noted that there are still items not completed and Iran should fully address: (1) adequately criminalizing terrorist financing, including by removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism”; (2) identifying and freezing terrorist assets in line with the relevant United Nations Security Council resolutions; (3) ensuring an adequate and enforceable customer due diligence regime; (4) demonstrating how authorities are identifying and sanctioning unlicensed money/value transfer service providers; (5) ratifying and implementing the Palermo and TF Conventions and clarifying the capability to provide mutual legal assistance; and (6) ensuring that financial institutions verify that wire transfers contain complete originator and beneficiary information.

[2] Countries should be able to apply appropriate countermeasures when called upon to do so by the FATF. Countries should also be able to apply countermeasures independently of any call by the FATF to do so. Such countermeasures should be effective and proportionate to the risks.

The Interpretative Note to Recommendation 19 specifies examples of the countermeasures that could be undertaken by countries. 

 

Compliance with FATF Recommendations

Iran has not yet undertaken a Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards.

 

US Department of State Money Laundering assessment (INCSR)

Iran is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

OVERVIEW

 

Iran has a large underground economy, spurred in part by uneven taxation, widespread Islamic Revolutionary Guard Corps (IRGC) corruption and smuggling, sanctions evasion, currency exchange controls, and a large Iranian expatriate community.  Pervasive corruption continues within Iran’s ruling and religious elite, the IRGC, government ministries, and governmentcontrolled business enterprises.  
 
Iran remains a major transit route for opiates smuggled from Afghanistan through Pakistan to the Persian Gulf, Turkey, Russia, and Europe.  Most drugs are smuggled into Iran across its land borders with Afghanistan and Pakistan, although maritime smuggling has increased as traffickers seek to avoid Iranian border interdiction efforts.  In 2015, Iran’s minister of interior estimated the combined value of narcotics trafficking and sales in Iran at $6 billion annually.  
 
In 2011, the U.S. government identified Iran as a state of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act.  On October 25, 2019, the U.S. government issued a final rule under this authority prohibiting the opening or maintaining of a correspondent account in the United States for, or on behalf of, an Iranian financial institution.  The rule also prohibits foreign financial institutions’ correspondent accounts at covered U.S. financial institutions from processing transactions involving Iranian financial institutions.  Additionally, the FATF has repeatedly warned of the terrorist financing risk Iran poses and the resulting threat to the international financial system.  In June 2016, Iran agreed to implement an action plan to address its AML/CFT strategic deficiencies.  Iran’s action plan expired in January 2018, and as of October 2019, Iran had not completed the action plan. At the October 2019 FATF plenary, the FATF called upon FATF members and jurisdictions to apply certain countermeasures to protect the international financial system from abuse.

 

 

SANCTIONS

On 10 January 2020, the US confirmed that "After an initial wind-down period, the United States will be fully reinstating its nuclear-related sanctions waived under that agreement, including banning foreign subsidiaries of U.S. companies from dealing with Iran and imposing secondary sanctions on foreign companies that engage in certain Iran-related transactions.​"

On November 2018, President Trump announced that the remaining sanctions that had been lifted or waived pursuant to the JCPOA come back into full effect on November 5, 2018. OFAC has published updated additional frequently asked questions (FAQs) that provide guidance on the sanctions that are to be reimposed and the relevant wind-down periods.

Read FAQs

On 6 August 2018, President Trump announced the Executive Order, “Reimposing Certain Sanctions With Respect to Iran”. Frequently Asked Questions and Amendments to Existing Iran-related Frequently Asked Questions were published

Read FAQs

 

On 8 May, 2018, President Trump announced that the United States is withdrawing from the Joint Comprehensive Plan of Action, under which certain sanctions were suspended in exchange for limitations on Iran’s nuclear program.

After an initial wind-down period, the United States will be fully reinstating its nuclear-related sanctions waived under that agreement, including banning foreign subsidiaries of U.S. companies from dealing with Iran and imposing secondary sanctions on foreign companies that engage in certain Iran-related transactions.

Sanctions Fully Effective August 6.

 

After a 90-day wind-down period, which ends on August 6, 2018, non-U.S. persons will once again become potentially subject to secondary sanctions for certain transactions involving the following activities:

 

Purchase or acquisition of U.S.-dollar banknotes by the government of Iran;

 

Trade with Iran in gold or precious metals;

 

Sale or supply to Iran of coal, certain metals and software for integrating industrial processes;

 

Significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds denominated in rials outside Iran;

 

Purchase of, subscription to or facilitation of issuance of Iranian sovereign debt; and

 

Sale or supply of goods and services to Iran’s automotive sector.

 

Certain primary sanctions against Iran will also be reimposed on the same day:

 

General and specific licenses related to export of aircraft and aircraft parts from the United States to Iran will be revoked; and

 

Importation of Iranian carpets and foodstuffs to the United States will once again be banned.

 

Sanctions Fully Effective November 4.

 

After a 180-day wind-down period ending on November 4, 2018, General License H, which authorizes foreign entities owned or controlled by a U.S. person to engage in certain dealings with Iran, will come to an end. This means that any transactions by such subsidiaries with persons in Iran must be brought to a close by that date.

On the same day, the remainder of the nuclear-related secondary sanctions become effective, including sanctions targeting foreign persons engaged in:

Certain transactions with Iran’s port operators, shipping and shipbuilding sectors;

 

Certain petroleum-related transactions, including the purchase of petroleum, petroleum products or petrochemical products from Iran;

 

Significant transactions by foreign financial institutions with the Central Bank of Iran and Iranian financial institutions, as well as the provision of financial messaging services to those institutions;

 

Insurance, reinsurance and underwriting services related to the Iranian petroleum sector and certain other activities;

 

Certain investments in and other dealings involving Iran’s energy sector; and

Significant dealings with the government of Iran and entities that it controls. In this regard, numerous Iranian state-owned entities will be moved from the “Executive Order 13,599 List,” created after the JCPOA was adopted, back to the Specially Designated Nationals List.

Read FAQs

On October 11, 2018, FinCEN published the following advisory: -

Advisory on the Iranian Regime’s Illicit and Malign Activities and Attempts to Exploit the Financial System

 

Read Advisory here

 

 

On 16 January 2016, the UN, USA and EU lifted all nuclear-related economic and financial sanctions against Iran. This follows verification by the International Atomic Energy Agency (IAEA) on 16 January 2016 that Iran has implemented the agreed nuclear-related measures as set out in the Joint Comprehensive Plan of Action (JCPOA).

On 14 July 2015, China, France, Germany, Russia, the United Kingdom and the United States, with the High Representative of the European Union for Foreign Affairs and Security Policy, agreed the JCPOA aimed at ensuring the exclusively peaceful nature of the Iranian nuclear programme while providing for the comprehensive lifting of all UN Security Council sanctions as well as EU and US sanctions related to Iran's nuclear programme following an agreed sequence of actions.

The Council on 18 October 2015 adopted the legal acts providing for the lifting of these sanctions upon verification by the IAEA of the implementation of Iran's commitments under the JCPOA.

A limited number of EU sanctions against Iran were already suspended after China, France, Germany, Russia, the United Kingdom and the United States, with the High Representative of the European Union for Foreign Affairs and Security Policy, reached an interim agreement with Iran; the Joint Plan of Action of 24 November 2013 set out an approach towards reaching a long-term comprehensive solution to the Iranian nuclear issue. The lifting of all EU economic financial sanctions taken in connection with the Iranian nuclear programme will supersede this limited sanctions relief.

Proliferation-related sanctions and restrictions will remain in place after Implementation Day. These concern the arms embargo, sanctions related to missile technology, restrictions on certain nuclear-related transfers and activities, provisions concerning certain metals and software which are subject to an authorisation regime, as well as related listings which remain in force after Implementation Day.

Measures concerning inspection of cargoes to and from Iran and those related to the provision of bunkering or ship supply services continue to apply after Implementation Day in relation to items which will continue to be prohibited.

 

BRIBERY & CORRUPTION

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           26

World Governance Indicator – Control of Corruption             16

Companies operating or planning to invest in Iran face a very high risk of corruption. A powerful system of political patronage, nepotism and cronyism pervades all sectors of the economy. Irregular payments and bribes are often exchanged to obtain services, permits or public contracts. The Rouhani government has addressed the need to curtail corruption but fails to exert enough pressure on hardliners in control of key state institutions, including the Islamic Revolutionary Guards Corps (IRGC) and the judiciary. While there are multiple laws in place that criminalize various forms of corruption in both the public and private sectors, they are not effectively enforced in practice and impunity is pervasive. For further information - GAN Integrity Business Anti-Corruption Portal

 

ECONOMY

Iran's economy is marked by statist policies, inefficiencies, and reliance on oil and gas exports, but Iran also possesses significant agricultural, industrial, and service sectors. The Iranian government directly owns and operates hundreds of state-owned enterprises and indirectly controls many companies affiliated with the country's security forces. Distortions - including inflation, price controls, subsidies, and a banking system holding billions of dollars of non-performing loans - weigh down the economy, undermining the potential for private-sector-led growth.

 

Private sector activity includes small-scale workshops, farming, some manufacturing, and services, in addition to medium-scale construction, cement production, mining, and metalworking. Significant informal market activity flourishes and corruption is widespread.

 

Fiscal and monetary constraints, following the expansion of international sanctions in 2012 on Iran's Central Bank and oil exports, significantly reduced Iran's oil revenue, forced government spending cuts, and sparked a sharp currency depreciation. Iran’s economy contracted for the first time in two decades during both 2012 and 2013, but growth resumed in 2014. Iran continues to suffer from high unemployment and underemployment. Lack of job opportunities has prompted many educated Iranian youth to seek employment overseas, resulting in a significant "brain drain."

 

In June 2013, the election of President Hasan RUHANI generated widespread public expectations of economic improvement and greater international engagement. Almost two years into his term, RUHANI has achieved some success, including reining in inflation and, in July of 2015, securing the promise of sanctions relief for Iran by signing the Joint Comprehensive Plan of Action (JCPOA) with the P5+1. The JCPOA, which severely limits Iran’s nuclear program in exchange for unfreezing Iranian assets and reopening Iran to international trade, should bolster foreign direct investment, increase trade, and stimulate growth. In spite of RUHANI’s efforts, Iran’s growth was tepid in 2015, and significant economic improvement resulting from sanctions relief will take months or years to materialize.

 

Agriculture - products:

wheat, rice, other grains, sugar beets, sugarcane, fruits, nuts, cotton; dairy products, wool; caviar

Industries:

petroleum, petrochemicals, gas, fertilizers, caustic soda, textiles, cement and other construction materials, food processing (particularly sugar refining and vegetable oil production), ferrous and nonferrous metal fabrication, armaments

Exports - commodities:

petroleum 80%, chemical and petrochemical products, fruits and nuts, carpets, cement, ore

Exports - partners:

China 22.2%, India 9.9%, Turkey 8.4%, Japan 4.5% (2015)

Imports - commodities:

industrial supplies, capital goods, foodstuffs and other consumer goods, technical services

Imports - partners:

UAE 39.6%, China 22.4%, South Korea 4.7%, Turkey 4.6% (2015)

 

 

Country Links

The Central Bank of the Islamic Republic of Iran

Securities and Exchange Organization of Iran

Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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