The link between the FATF and domestic and foreign transactions

some medical supplies related to COVID-19 qualify as permissible exports under general licenses, but the financial transactions cannot be secured as Iran is barred from access to the international financial system.

Zeynab Malakoutikhah

Almost all activities which involve money have a direct or indirect linkage with the FATF and its recommendations. These activities or specific professions/entities include gambling, corruption, sanctions, lawyers, dealers, accountants, non-profit organisations, notaries, real estate agencies, trust and company service providers, and all formal and informal financial institutions. The reason behind these broad categories of activities or professions/entities is the issue of international financial transactions. The main and most important part of the FATF is the preventive measures which if these are applied, the risk of money-laundering/terrorism financing can be reduced.  The effectiveness of the preventive measures is mostly based on the Risk-Based Approach (RBA), as a central issue in the FATF’s recommendations set out in recommendation (1). This recommendation includes four main criteria: to identify, assess and understand risks; to designate an authority or mechanism for coordination; to ensure the adopted measures are commensurate with the identified risks; and to be an essential foundation in allocating AML/CFT resources efficiently. These preventive measures mostly include customer due diligence (CDD), record-keeping, and suspicious transaction reports (STRs). So, with this background in mind, if the FATF’s recommendations are applied in a country, some criminal activities such as money laundering and terrorism financing might be reduced. However, it must be mentioned that even though the FATF’s recommendations are soft law, in practice the adopted counter-measures by the FATF have led to impediments for Iran engaging in international businesses with other countries; these businesses can range from selling oil to buying the Covid-19 virus vaccine. There are three major reasons for the counter-measures against Iran adopted by the FATF, including 1) the unilateral sanctions imposed by the US, 2) the non-cooperation of Iran with the FATF in order to join the Financing Convention (1999) and the Palermo Convention (2000) and 3) the request of the FATF for revision of the existing anti-money laundering and counter-terrorism financing laws to be in line with the FATF’s recommendations. In terms of the access to the Covid-19 virus vaccine, the main problem is still the imposition of the US sanctions, however, the FATF is another barrier.
 Although Iran has received limited humanitarian aid, and the US has declared that the humanitarian goods are exempt from sanctions, the lack of global cooperation to counter COVID-19 in Iran is because of the US’s unilateral sanctions and their threat against non-US companies. The following two aspects can be regarded as key illustrations of the plight of Iranians. Firstly, some medical supplies related to COVID-19 qualify as permissible exports under general licenses, but the financial transactions cannot be secured as Iran is barred from access to the international financial system. Secondly, other medical supplies and devices need authorisation from the US Office of Foreign Assets Control (OFAC), but the process is time-consuming. Thus, the pandemic has shown the failure of US humanitarian concessions.