“[Iran’s] objective is to ensure that no legitimate company or government knows that they are being used to achieve Iran’s illicit aims. … To those in the private sector, I urge you to also take additional steps to ensure Iran and its proxies are not exploiting your companies to support their nefarious activities. You may think your clients and counter parties are legitimate, but they may be in fact part of the Iranian regime’s deceptive schemes to fund terrorism and human rights abuses.”
– Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker, June 5, 2018
Conducting business with the Islamic Republic of Iran continues to entail profound risk, especially following the reinstatement of all U.S. sanctions suspended in accordance with the 2015 nuclear deal formally known as the Joint Comprehensive Plan of Action (JCPOA). After the U.S. announced its withdrawal from the JCPOA and its reinstatement of sanctions, major multinational corporations such as Total, General Electric, Maersk-Moller, and Siemens have announced they will be winding down their business in Iran.
Even before the reinstatement of sanctions, the risks of doing business in Iran were substantial, because of pervasive corruption, legal risk, systemic human rights violations, and persistent support for foreign terrorist organizations. In May, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) designated the governor of the Central Bank of Iran (CBI) for covertly funneling millions of dollars to Hezbollah on behalf of the Islamic Revolutionary Guard Corps’ Quds Force. The involvement of the central bank governor in money laundering and illicit finance illustrates the extreme degree to which Iran’s entire financial system has been compromised.
The purpose of this resource guide is to provide extensive information about the many different kinds of risk that foreign financial institutions face in Iran. The information is instructive for policymakers and the national security community, as well. The guide brings together independent rankings of the Iranian business environment, statements of senior U.S. officials, information about U.S. sanctions, reports from human rights monitoring organizations, major media coverage, and other credible sources. Readers may consult original material directly by following the links included in the guide’s footnotes.
Although Iran seeks to dispel its reputation as a hub of illicit finance, it has taken very little but cosmetic measures to cease its malign activities. The Financial Action Task Force (FATF) placed Iran on its “blacklist” in 2008, but suspended mandatory countermeasures in 2016, when Tehran agreed to fulfill the requirements of an Action Plan to deal with pervasive money laundering and terror finance. In February, FATF noted that again, Iran had failed to meet the terms of its Action Plan, but agreed to review Iran’s status at the organization’s June 2018 meeting. However, the statement by Iran’s Supreme Leader on June 20, declaring his opposition to joining international conventions to counter money laundering and terror financing, signals Iran’s unwillingness to comply with international standards. Ayatollah Ali Khamenei has final say on all state matters.
Iran has taken a number of measures designed to address FATF’s concerns, yet insists on carving out exceptions that would serve as a pretext for illicit actions. For example, Iran has sought to determine its own definition of terrorism, so that funding for Hezbollah, Hamas, and other Iranian clients would remain permissible.
Corruption and illicit finance are integral means for the Iranian government to maintain its hold on power and pursue its interests abroad. Extensive study is necessary to understand the myriad ways in which involvement with Iranian entities may compromise foreign financial businesses transacting with Iran. FDD hopes that this resource guide will provide an indispensable starting point for all those with an interest in this key issue.
Read more in the complete document available for download below.