Why is the Iranian regime concerned about cooperating with the Financial Action Task Force?

Gholamali Haddad Adel, a senior advisor to the Iranian leader and a member of the Expediency Council, reacted to what he called 'currency restrictions' imposed by some state banks on institutions affiliated with the Islamic Revolutionary Guard Corps (IRGC), stating that 'the people and leadership will not tolerate such humiliations, interventions, and submissions.' Additionally, Ali Akbar Velayati, the leader's advisor on international affairs, also deems Iran's cooperation with the international anti-money laundering organization as 'not in the country's interest.' He stated after meeting with Stephen O'Brien, the UN Under-Secretary-General, that 'our own should not follow the enemies' plans.' The fight against money laundering is an economic reform that should naturally be a priority for the leader and officials of the Iranian regime, as it contributes to the transparency and efficiency of Iran's economy. A crucial question arises as to why the Iranian regime—despite its need for the international banking system and its use—fears cooperation with the international anti-money laundering organization and is unwilling to adhere to conventional and accepted international rules? Previously, the Financial Action Task Force (FATF) announced that Iran had committed to taking actions to combat money laundering and terrorist financing. Now, Abdollah Ganji, the editor-in-chief of the newspaper Javan, close to the IRGC, has announced that Sepah and Mellat banks have reduced their services to the IRGC's Khatam al-Anbia Headquarters. Some other media outlets close to the IRGC assess this action as 'against national security' and 'a tool for limiting' the IRGC and its activities in the region. However, the eleventh government seeks to remove Iran from the list of high-risk countries in international trade and financial matters and supports an agreement with the FATF. The condition for expanding cooperation between global banks and Iran's banking system in the post-JCPOA era is the compliance of Iranian banks with global regulations, including the fight against money laundering. Otherwise, these global banks are unwilling to open their doors to the financial and credit systems of Iranian banks, as this system is exposed to the risk of money laundering and abuse. The current structure of the banking system in Iran is such that it is ready to become a conduit for the entry of tainted money into the global banking system. International banks are concerned that by increasing cooperation with Iran's banking system, they may inadvertently become a tool for money laundering and face legal, judicial, and major crime repercussions in the countries where they operate. Strict international regulations governing international banking activities require banks to adhere to specific rules and regulations. Otherwise, the global banking system could become a highway for financing illegal activities, including terrorism. Conversely, institutions managed by the Iranian leadership, such as the IRGC, try to avoid accountability, transparency, and public scrutiny while simultaneously utilizing the international banking network. The dual banking and economic system of Iran and the world: The banking system in the European Union and North America is under strict supervision and possesses the minimum necessary transparency. In contrast, it cannot be denied that the level of adherence to these standards in Iran's banking system is not very satisfactory, and the banking sector in Iran is corrupt and rent-seeking. Perhaps the most significant problem with Iran's banking system is that the Central Bank does not have comprehensive and complete oversight over banks and credit institutions. For instance, according to the Central Bank's president, there are many active credit institutions, such as savings funds, in the country that do not comply with banking and credit regulations and are not under the bank's supervision. This network, which is often informal, belongs to religious, charitable, military, and security institutions that are neither transparent nor accountable. These institutions are indeed suitable channels and outlets for money laundering. This duality in adhering to banking standards is one of the reasons that make Iran's banking system susceptible to money laundering. However, the problem does not stop there. According to reports from the Joint Commission of the Parliament and the National Tax Administration, nearly 60% of Iran's economy does not pay taxes, and of this 60%, 40% are exempt from paying taxes, while 20% engage in tax evasion. Part of the tax evasion is related to the opaque and informal sector of the economy. According to these statistics, a significant portion of tax non-payment is related to institutions such as the economic institutions of the IRGC and the Astan Quds Razavi and similar entities, which are rent-seeking institutions directly managed by the leader and are exempt from taxes. Furthermore, nearly $20 billion of Iran's imports occur through smuggling. There are about 38 million suspicious bank accounts in Iran, of which 36 million have been closed, but over 6 million are still considered suspicious. Additionally, about 20% to 25% of Iran's banking and credit system is not under the supervision of the Central Bank. Ultimately, according to the latest report from the Basel Institute, Iran ranks first in international money laundering. Therefore, Iran's banking system has a high risk of money laundering. This high risk is currently one of the obstacles to expanding banking relations between Iran and the world. The media onslaught from the authoritarian faction of the regime and threats from the judiciary, coupled with the demands of international banks for transparency and adherence to laws, have now placed Iranian banks under additional pressure. Meanwhile, despite the Iranian government's desire to utilize international banking and credit facilities, it is unwilling to act transparently and accountably. The demand from global banks is that if Iran uses the facilities of the global banking system, it must—like other countries—comply with regulations governing money laundering. In conclusion, although the fight against money laundering is one of the necessities of economic reforms in Iran and the Supreme Anti-Money Laundering Council has been established, this institution and other supervisory bodies essentially lack power and effectiveness in Iran. Firstly, the volume of Iran's underground economy is very large; secondly, some military and quasi-military security institutions such as the IRGC and affiliated entities, as well as influential individuals involved in money laundering, are unaccountable and circumvent the laws. Additionally, the inefficacy of the law and other supervisory bodies, such as the Inspection Organization or even the Central Bank, is another constraint in the fight against money laundering. Adhering to laws related to money laundering and preventing terrorist financing is also a necessary condition for accountability and transparency in Iran's banking system. The problem of money laundering in Iran is multifaceted, and solving it is contingent upon structural reforms of many institutions. While administrative restructuring is possible, the issues surrounding the IRGC and the institutions related to the leader of the regime remain. As long as the IRGC and other institutions related to the leadership of the regime are not transparent and subject to the law and supervisory bodies, the problem persists.