Who is Responsible for the Loss of Victims' Assets?

In recent weeks, streets in several cities in Iran, such as Tehran, Mashhad, Ahvaz, Zahedan, Abadan, Gorgan, Amol, Bushehr, Ardabil, Arak, and Khorramabad, have witnessed protests by depositors of certain credit institutions like Arman and Caspian. These protesters, referred to by the media as 'victims', chanted slogans against the Central Bank and its governor. However, Central Bank officials have repeatedly described the activities of these institutions as unauthorized and have warned about the loss of depositors' savings. Some of these protests also saw clashes between depositors and law enforcement forces. While some depositors hold the Central Bank responsible for the current situation, the problem is much deeper, involving various institutions, individuals, and power factions contributing to the loss of victims' assets. The inefficiency and widespread corruption of Iran's credit and banking system, particularly its unauthorized sector, is structural, with many upstream and downstream institutions playing a role in its emergence and continuation. Although the establishment of unauthorized credit institutions has a long history under the current regime, their mushrooming occurred during the ninth and tenth governments. It was during this government that the involvement of the Revolutionary Guards, police, and Basij in credit institutions increased. With the onset of sanctions, that same government attempted to circumvent the sanctions by utilizing unauthorized credit institutions. The number of unauthorized credit institutions, which are quite scattered, is high, and they hold a significant portion of the country's total liquidity. Accurate statistics on the number of these institutions and the liquidity they control are not clearly defined, with various figures provided. According to the latest report from the Parliament Research Center, out of 7,333 financial institutions in the country, only 1,000 have licenses, and only six 'unauthorized' credit institutions hold about 133 trillion tomans, which is approximately six percent of the total assets of both authorized and unauthorized banking systems. Furthermore, the government's and Central Bank's efforts over several years to stop or merge these institutions with official ones have not been successful. Central Bank officials and the Minister of Economy have acknowledged several times that they have not made significant progress in resolving this issue. Influential circles and institutions support the activities of these institutions. Ahmad Hatami Yazd, a former banking official, believes that 'powerful entities stand behind these financial and credit institutions; entities that the Central Bank cannot confront. They are so powerful that they can change the relevant resolutions of the Money and Credit Council if needed.' Various officials in the country have made different statements regarding credit institutions. In one of these statements, Mohammad Reza Pourabrahimi, a member of the tenth Parliament and a member of the Money and Credit Council, stated: 'The existence of legal gaps and shortcomings in supervision by the Central Bank, regardless of a specific time period, is the cause of the current conditions in the unstructured monetary market and Iran's economy. About 90 percent of the volume of deposits belongs to 10 to 15 institutions, while the remaining institutions consist of small and family funds that make up a maximum of 10 percent of the local unstructured market. Therefore, the priority for organizing the country's monetary market is addressing the situation of the 10 to 15 major and main institutions.' This former member of the Money and Credit Council stated in an interview with the 'House of the Nation News Agency' that 'in addition to institutions, there are interest-free loan funds and seemingly charitable institutions that have no oversight over their operations, are not transparent, and do not even have a single audit report about them.' Farshad Heydari, the Deputy of the Central Bank, says: 'Some credit institutions... engage in violations such as fictitious transactions, falsifications, and paying unreal interest rates.' However, the violations of these institutions are not limited to the mentioned cases. The disruptions these institutions cause in the economic sphere are extensive and numerous. The illegal activities of these institutions mean a violation of monetary and banking law, commercial law, and also the country's tax laws. These institutions circumvent laws under the guise of charitable, religious, or interest-free activities. Thus, despite utilizing public facilities, they not only do not pay taxes for their activities but also gain an upper hand in competition with banks by using rent and accessing state resources at low prices while offering high interest rates to depositors. Consequently, the wandering liquidity attracted by these institutions is utilized in speculative matters. One reason for the high interest rates on bank loans in Iran is this unequal competition between the official banking system and informal institutions. The consequences of this situation include the use of rent, administrative corruption, and the destruction of equal competitive conditions, directing the flow of credit and money into non-transparent matters. The lack of oversight in this sector makes it susceptible to money laundering and diverts resources in undesirable directions. Therefore, it is not surprising that Iran ranks first in the world for money laundering. However, this network of unauthorized credit institutions has significant implications in the distribution of resources, political, and social spheres as well. The impact of the activities of unauthorized banking and monetary institutions, which are often linked to power factions and military and paramilitary institutions, negatively affects the equitable distribution of financial, credit, and banking liquidity resources. These institutions allocate the country's monetary and financial resources, which are public and communal assets, to a small group that benefits from military power and political influence. The concentration of power and wealth in a small group has destructive political and social consequences and indicates the emergence of a new class that has taken control of various domains from military power to politics and economics. The officials responsible for the loss of victims' assets each play a role and share in the loss of depositors. Government officials themselves acknowledge that the laws formulated and approved by the Parliament have gaps and loopholes. Therefore, the way for circumventing them, especially by power factions, military personnel, and security forces supported by clerics and institutions, is not very difficult. The Central Bank, which is neither independent nor powerful, with ineffective regulations, organization, and management, does not have sufficient capability to prevent the activities of unauthorized banks. Other supervisory institutions such as the Judiciary, the National Inspection Organization, and the Supreme Council for Combating Money Laundering also suffer from similar weaknesses. These institutions are practically unable to take serious action against the power factions supported by institutions managed by the leadership, such as the Revolutionary Guards and Basij.