FATF and the Unfinished Story of Turkmanchai Perception

In the past week, the confrontation between supporters and opponents of the government regarding the Financial Action Task Force (FATF) has intensified. Critics, mainly from the conservative camp and forces known as loyalists, have attacked Hassan Rouhani and the Ministers of Economy and Foreign Affairs, as well as the Central Bank Governor, accusing them of secretly negotiating to impose a 'second Turkmanchai' without the oversight of the Parliament and the National Security Council. It seems that the series of Turkmanchai simulations and reliance on historical procrastination to pursue political goals is endless. Not long ago, extremist conservatives and some opposition forces labeled the flawed formulation of the JCPOA as a 'second Turkmanchai.' Now, FATF has entered the scene. All conservatives have taken a stance against Iran's accession, and in this regard, the moderate government has fewer supporters and more opponents compared to the comprehensive nuclear agreement within the power bloc. Of course, opponents have mainly based their positions on a distorted image of the FATF's responsibilities, which is more rhetorical in nature. The lack of an alternative and the acute problem of the country's reliance on foreign exchanges make the likelihood of complete non-cooperation with FATF seem unrealistic, and the Islamic Republic has no escape from minimal interaction with this intergovernmental body to exit its blacklist. The FATF was established in 1989 to develop and expand policies for combating money laundering and terrorist financing. This body is a policymaking and monitoring entity that operates to implement national legal and regulatory reforms in the field of combating money laundering and terrorist financing. It continuously assesses the progress and commitment of its member and cooperating countries. It also collaborates with other international bodies in the field of combating money laundering and terrorist financing to identify vulnerabilities at the national level of countries and thereby protect the global financial system from violations and threats. This intergovernmental organization has 36 members, most of whom are Western countries. Other major countries such as Russia, India, and China are also among the members. Saudi Arabia and Israel are also observer members. The Gulf Cooperation Council is also a member. Since its inception, FATF has provided recommendations regarding the fight against money laundering and terrorist financing, all of which, including special recommendations, are not mandatory. The first version of these recommendations was published in 1990, consisting of 40 items. Then, in 1996, these 40 recommendations were revised. However, in 2004, in addition to a complete revision, 9 additional recommendations were added. Currently, 198 countries have accepted to implement the FATF's recommendations, a number greater than the members of the United Nations. The aforementioned organization has a special evaluation system and categorizes countries into several groups. The first group consists of countries that fully implement FATF regulations, which are very few. The second group includes countries that partially implement FATF regulations. The third group consists of countries that do not fully implement FATF regulations but to a reasonable extent, and the last group includes countries that do not implement FATF regulations at all, with Iran falling into this category. In the past, Cuba was also in this category but was removed from the blacklist by implementing laws. Contrary to the propaganda of the government's opponents, efforts to resolve issues with FATF began before Rouhani's government during Mahmoud Ahmadinejad's presidency. In this framework, due to the lack of a law to combat terrorism and its financial backers, the ninth Parliament approved the Anti-Terrorism Law. However, a clause was included in the above law stating that 'nations, groups, and liberation organizations fighting against occupation, colonialism, and racism' are not considered terrorists and criminals. Currently, the fate of agreements with FATF has been entrusted to the National Security Council. Opponents have launched a widespread advertising campaign against the government at this stage, and extremist factions are seeking to exploit it for the 96 presidential elections. Hardline forces have raised the issue of dismissing Zarif, Tabibian, and Seif, accusing them of treason. They feel strategically vulnerable to the integration into the global banking and economic system. This parliamentary resolution, after the Guardian Council's objections and the amendments made, ultimately became official law during Rouhani's presidency. One of the factors that led to the FATF temporarily removing Iran from the blacklist for a year in July 2016, after the JCPOA and the West's leniency, was the approval and implementation of this law. At that time, conservatives did not oppose the above law and efforts to engage with FATF. Protests began after the delayed opposition of Sepah and Mellat banks to foreign banking activities of Khatam al-Anbiya headquarters, and conservatives used harsh rhetoric to accuse Rouhani's government of self-sanctioning and internalizing the structure of Western sanctions. Despite the explanations of the aforementioned banks and the Central Bank's directive stating that the presence of individuals and entities on the US and EU sanctions lists does not prevent them from operating within the country's banking system, and banks can only provide banking services to all customers based on the current laws of the country, this did not work, and conservatives have coordinatedly called for the cessation and annulment of agreements with FATF. The government rightly states that FATF is primarily a legislator and does not interfere in the executive affairs of countries. Furthermore, it does not receive information about the financial transactions of countries. The FATF focuses on the policies, procedures, laws, and regulations in countries to ensure that banks have complete identification of their customers and that the identities of those who benefit from and are affected by financial transactions are clarified. For the FATF, it is essential that countries have effective national laws to combat money laundering and terrorist financing. The exchange of financial information between countries also requires a mutual legal assistance treaty. Therefore, the financial and military information of countries is not provided to this group, and critics either do not understand this reality or seek to distort the issues. However, regarding sanctions and the issue of terrorism, the matter is not as simple as government officials explain. FATF has not defined a specific case for terrorism, and its definition is based on the conventions of the Vienna Convention, the Palermo Convention, the United Nations Convention against Corruption (Mérida Convention), and the Convention on the Suppression of the Financing of Terrorism. Additionally, the seventh principle of its recommendations stipulates that in implementing United Nations Security Council resolutions related to the prevention, suppression, and cessation of the proliferation of weapons of mass destruction and their financing, countries must implement targeted financial sanctions. Thus, there are similarities in the general definition of terrorism between the provisions included in the FATF's recommendations and the law passed by Parliament, but there are significant differences in content and the determination of cases. FATF has asked the Islamic Republic to amend the part that excludes groups like Hezbollah from the definition of terrorism. The Minister of Economy has explained the problem at this level, stating that the group seeks only to include affirmative definitions of terrorism, not to determine which group is not considered a terrorist. However, examining the issues, especially Iran's non-membership in some of the conventions desired by FATF, reveals a significant gap. Although all recommendations are not mandatory, those related to the definition of terrorism and the associated sanctions are sensitive. Even in the best-case scenario, if the FATF shows flexibility, Iran will only be removed from the blacklist, but financial transactions with it will still be considered significantly risky. Monitoring the positions of government officials and considering Rouhani's strategy in pursuing programs while respecting the interests of the system suggests that the government's plan is to categorize the country's banks into two groups. The first group refrains from transacting with entities that have global sensitivities. The second group works with them. On the other hand, the government is forced to gain FATF's trust, and without it, the country's banking system will not be able to establish suitable and efficient relationships with foreign banks and will incur additional costs without justification. However, at the same time, the Rouhani government has no plan to stop supporting foreign Islamists aligned with the system and is in search of finding intermediate solutions. In fact, there are differences of opinion between moderates and conservatives regarding the methods of implementation, the scope of cooperation, and the prioritization of issues. The challenge of returning to the international financial system after several years of interruption has complicated the calculations of moderate statesmen. Moreover, exaggerating the negative impact of nuclear sanctions on Iran's economy has also played an undeniable role in this assessment. Even if the FATF endorses the Islamic Republic's banking system, which is unlikely, the existence of primary US sanctions and the rampant money laundering in Iran, along with the overwhelming spread of corruption, will still make extensive economic exchanges with Iran risky and reduce its attractiveness. The existence of problems in dollar transactions has led to the unlocking of transactions with second and third-tier banks in the post-JCPOA period. Currently, the fate of agreements with FATF has been entrusted to the National Security Council. Opponents have launched a widespread advertising campaign against the government at this stage, and extremist factions are seeking to exploit it for the 96 presidential elections. Hardline forces have raised the issue of dismissing Zarif, Tabibian, and Seif, accusing them of treason. They feel strategically vulnerable to the integration into the global banking and economic system. In a pessimistic view, the use of money laundering proceeds and concerns about the deterrent impact of financial transparency against economic corruption are also noteworthy. Their superficial and simplistic solution in drafting bilateral financial treaties with Russia and China is ineffective. This solution only saves the country's banking system from complete paralysis but does not have an effective capacity to remedy its critical functioning. The dominant power in the JCPOA negotiations, in a paradoxical approach, while not allowing negotiations to expand into non-nuclear areas with the US, simultaneously demanded the lifting of all sanctions. Now, the institution of the Supreme Leader and allied forces want to utilize the benefits of normalizing relations with the global community for a specific period while maintaining overarching confrontational policies. This need, pursued by the leadership with an emphasis on resistant economy and continued heroic flexibility until the vulnerability to heavy external pressure is remedied, does not allow the system to be indifferent to being on the FATF blacklist. However, at the same time, it cannot fully comply with it either. Therefore, moving towards intermediate solutions and fragile short-term agreements seems more likely. Overall, adhering to FATF recommendations and improving Iran's ranking in it is beneficial for the country and its people, but in a situation where there is a significant gap between 'ideological interests and considerations related to the survival of the political system' and 'a rational view of national interests,' this clear issue has turned into a political struggle within the power bloc and also a threat to the country's development and economic growth.