Iran's International Standing in Money Laundering

According to the fourth report of the so-called "Anti-Money Laundering Index" published by the Basel Institute on Governance based in Switzerland, Iran ranked first in the world in money laundering among 152 countries surveyed in the last year (2015). Afghanistan, Tajikistan, Guinea-Bissau, Mali, and Uganda followed Iran in the subsequent ranks of the money laundering index. Finland, Estonia, Slovakia, Lithuania, and New Zealand were described as countries with the lowest levels of money laundering according to the international money laundering index. The mentioned index symbolizes the extent of money laundering and terrorist financing in the world. Money laundering typically occurs in a three-stage process. First, liquidity obtained from illegal activities is introduced into legal activities. In the second stage, through numerous and complex transactions, illegal liquidity is embedded within new activities and accounts, and finally, illegal liquidity is mixed with liquidity that has been legally obtained. From a legal perspective, according to the first clause of Article 2 of Iran's Anti-Money Laundering Law, money laundering is defined as: "Acquisition, possession, maintenance, or use of proceeds derived from illegal activities with the knowledge that they have been obtained directly or indirectly as a result of a crime." The second clause of this law defines money laundering more explicitly: "Conversion, exchange, or transfer of proceeds to conceal the illegal source with the knowledge that they have been derived directly or indirectly from a crime or assisting the perpetrator in a way that they are not subject to the legal consequences of committing that crime." Therefore, money laundering is a crime to cover up the original crime and, more precisely, is a secondary and derivative crime used to conceal the primary crime. For example, liquidity obtained from illegal activities such as drug trafficking, human trafficking, extortion, fraud, embezzlement, bribery, is injected and transferred into formal legal activities and is recorded legally as their profits using specific accounting methods. According to an estimate by the International Monetary Fund, the dirty money that is laundered in various ways amounts to between $500 million to $1.5 billion annually, which is nearly 5% of the total GDP of all countries in the world. Generally, the main factor of money laundering is the lack of transparency in the economy of a society. The consequences of money laundering include the loss of community control over its economic resources, economic disruption and instability, and disruption of exchange rates and interest. Economic resources in societies with high levels of money laundering are diverted from productive sectors to speculative and short-term matters. Additionally, money laundering distributes liquidity and economic resources in a non-transparent and illegal manner, concentrating them in a small group. Since money laundering is one of the barriers to competitive conditions in a country's economy, it acts as an obstacle to attracting foreign investment. The emergence of money laundering is not random within an economy and is a result of specific economic structures and contexts such as the inefficiency of the economic and management system, the extensive volume of smuggling, and the prevalence of informal and so-called grey and brown activities in the economy. The economic system and management in Iran are outdated and have failed to adapt to international conditions. Signs of this disorganized management include inadequate laws and inefficiencies in legal and real terms. However, this is not the only problem. Simultaneously with this issue, there exists an informal and opaque sector in Iran's economy that is unregulated. Institutions under the supervision of the Supreme Leader, such as the Revolutionary Guards and Basij, and various foundations and the Astan Quds Razavi, despite their economic activities, are not subject to trade laws and tax laws and are considered part of this opaque sector. According to reports from the Joint Commission of the Parliament and the Tax Affairs Organization, nearly 60% of Iran's economy does not pay taxes, and of this 60%, 40% are exempt from paying taxes, and 20% are tax evaders. Part of the tax evasion is also related to the opaque and informal sector of the economy. According to these statistics, the major share of tax non-payment relates to institutions such as the economic institutions of the Revolutionary Guards and the Astan Quds Razavi and similar entities that are rent-seeking institutions directly overseen by the leader of the government, exempt from taxes, and not under the supervision of relevant institutions. The inefficiency of the tax and supervisory system is one of the problems of Iran's economy in the tax arena due to the lack of an efficient and up-to-date statistical system in the field of taxation. The extent of tax evasion is not very clear. For example, the Deputy Minister of Economic Affairs claims that 20 to 25% of the GDP is in the grey and black economy, which has tax evasion. This number is, of course, questionable because other statistics have been presented in this regard. Simultaneously, the Minister of Economic Affairs has recently stated that tax exemptions are estimated to be around 43% of the total GDP. In international terms, these figures are very large. It is natural that institutions that are not subject to tax laws and are not under the supervision of tax organizations have extensive opportunities for money laundering. Various figures regarding the volume of smuggling goods into Iran have been published. For example, Ali Larijani states: "Smuggling, like a worm, destroys the resistant economy; about $20 billion worth of smuggled goods enter the country annually, with this figure no production is created, and the economic problems of the country stem from this issue." However, the basis for the official estimate of the volume of smuggling goods, which was conducted by the working group estimating the volume of smuggled goods, indicates that the total volume of smuggling in the country in 2015 cost about $15.5 billion, showing a decrease of $4.3 billion compared to 2014, when this amount was $19.8 billion. The majority of this smuggling is carried out by those referred to as "smuggler brothers" who operate under the umbrella of military and security institutions using unauthorized docks.