A Controversial Resolution: CFT in Three Minutes

Whenever Europe talks about its willingness to continue trade cooperation with Iran, it simultaneously encourages Tehran to align itself with the international financial system. One of the ways to achieve this alignment is to comply with the demands of the Financial Action Task Force (FATF). Among the long list of what FATF requires from Iran, issues related to combating the financing of terrorism (CFT) are addressed in two ways: one is the approval of laws in this area, which has been passed and approved by the Guardian Council, and the other is joining the Convention on the Financing of Terrorism. On October 7, in a controversial session in the Islamic Consultative Assembly, representatives voted in favor of joining the Convention on the Financing of Terrorism, CFT; a resolution that must now also be approved by the Guardian Council. What is CFT and why has joining it become controversial? FATF and its approach towards Iran Financial institutions must comply with a series of laws regarding anti-money laundering and combating the financing of terrorism to connect to the international financial system. One of the minimum standards in this regard is the FATF blacklist. (Of course, companies and banks also pay special attention to the OFAC list of the U.S. Department of the Treasury to maintain their connections with the global financial network and especially to avoid severing ties with the U.S.) The FATF is an intergovernmental body that sets international standards for anti-money laundering and combating the financing of terrorism (AML/CFT). This organization, headquartered in Paris, provides recommendations to countries to improve their monetary and banking systems to protect the international financial system. The FATF has a blacklist that Iran was included in alongside North Korea until recently, and following Iran's agreement with six world powers on the JCPOA, Tehran concluded that to normalize its financial relations with the outside world in the post-sanctions era, it needed to make reforms in the laws that hindered these goals. About two years ago, with Tehran's acceptance of political commitments, Iran's presence on the blacklist was suspended. However, in the last report that FATF published about Iran in June 2018, it criticized Iran for not progressing on its political commitments and not turning them into practical actions. The organization urged Iran to implement these actions, which include multiple aspects of combating money laundering and terrorism financing, as soon as possible. One of these actions was Iran's joining the Convention on the Financing of Terrorism or CFT. Actions that Iran must take to satisfy the FATF include criminalizing the financing of terrorism without exempting those terrorist groups that 'strive against foreign occupation, colonialism, and racism.' [The Iranian parliament, however, in its October 7 resolution still does not consider 'legitimate popular struggles against colonial domination and foreign occupation' as terrorist actions.] Identifying and blocking the assets of terrorists in accordance with UN Security Council resolutions. Ensuring the implementation of a reliable regime regarding 'appropriate assessment.' Ensuring the complete independence of the financial intelligence unit and the necessity of reporting suspicious financial transactions if such transactions occur. Demonstrating how officials identify and punish unauthorized financial service providers. Approving and implementing the Palermo Conventions and the Convention on the Financing of Terrorism and clarifying the ability to provide legal services. Ensuring that financial institutions register all financial transactions with complete information about the sender and receiver. Considering penalties for violators of laws related to money laundering. Ensuring the approval of necessary laws and procedures for the confiscation of assets as appropriate. What is CFT? The Convention on the Financing of Terrorism (CFT) dates back to 1999 (19 years ago); a convention with 28 articles that came into force three years later in 2002. This convention states that its basis is the goals and principles of maintaining international peace and security and promoting friendly relations and cooperation among countries, and the concern over the increase of terrorist acts in various parts of the world was the motivation for creating this convention. Additionally, the preamble of this convention states that at that time (1999), countries concluded that multilateral legal instruments were insufficient for this purpose. More than 180 countries have joined this convention, but a brief look at how these countries joined shows that in several cases, joining this convention has been declared conditional regarding Article 24, which refers to the dispute resolution mechanism between two or more countries, and the second paragraph of this article allows countries not to comply with this mechanism. The significance of words in 'CFT' Financing evokes the transfer of money from one source to a destination. However, as defined by the convention, 'assets' do not only include bank checks, money, stocks, or bonds, but also include any movable and immovable property, tangible or intangible assets such as life insurance, documents, and legal instruments in any form, including electronic or digital. Also, in the 'limited definition' of terrorism in CFT, it states: 'An act designed to cause death or serious bodily injury to civilians or anyone not participating in military conflict, and the aim of this act is to influence a demographic group, a government, or an international organization to refrain from taking action.' Among the issues that legal analysts of the convention focus on is Article 2 of this convention. This article states that any individual who transfers assets 'legally or illegally' with a motivation related to terrorism falls under this definition. In the UN texts explaining this convention, it is stated that transferring money to terrorists may occur legally and as a transfer in the normal financial space, and this should not be interpreted as the legality of this action. Furthermore, this convention emphasizes the necessity of 'intentionality' in these transactions, as it explains that the criminalization of financing terrorism should not include those financial transfers that a terrorist group accidentally benefits from. The long road to Iran's complete exit from the FATF blacklist FATF holds meetings twice a year to report on the progress of countries in combating money laundering and terrorism financing. One of these meetings will be held at the end of this month, in about three weeks. For countries to exit the FATF's monitoring and reporting process, they must effectively address all components of the action plan defined for them. When FATF observes this progress, it visits the country to assess progress on-site to ensure that there is political commitment and capacity to implement these actions. Only after that does this intergovernmental organization decide to remove a country from the list. Then a country can normally continue its relationship with the FATF in the area of combating money laundering and terrorism financing.