Countries/Jurisdictions of Primary Concern - Iran
Iran is not a financial hub, but the imminent lifting of sanctions, including financial sector sanctions, pursuant to the Joint Comprehensive Plan of Action (JCPOA), could expand Iran’s regional financial significance, as investors and companies explore opportunities for new deals in Iran. Iran has a large underground economy, spurred by restrictive taxation, widespread smuggling, sanctions evasion, currency exchange controls, capital flight, and a large Iranian expatriate community. Iran is also a major transit route for opiates smuggled from Afghanistan through Pakistan to the Persian Gulf, Turkey, Russia, and Europe. At least 40 percent of opiates leaving Afghanistan enter or transit Iran for domestic consumption or for consumers in Russia and Europe. Iran’s Minister of Interior estimated in February 2015 that the combined value of narcotics trafficking and sales in Iran is worth $6 billion annually. Narcotics traffickers use illicit proceeds to purchase goods in the domestic Iranian market, often for exportation to and sale in Dubai. Iran’s merchant community makes active use of money and value transfer systems, including hawala and moneylenders. Counter-valuation in hawala transactions is often accomplished via trade, thus trade-based transactions are a prevalent form of money laundering. Many hawaladars and traditional bazaari have ties to the regional hawala hub in Dubai. Around 400,000 Iranians reside in Dubai, with an estimated 50,000 Iranian-owned companies based there. According to media reporting, Iranians have invested billions of dollars in capital in the United Arab Emirates, particularly in Dubai real estate. Money launderers also use Iran’s real estate market to hide illicit funds. There is pervasive corruption within Iran’s ruling and religious elite, government ministries, and government-controlled business enterprises.
On November 21, 2011, the U.S. Government identified Iran as a state of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act. The FATF has repeatedly warned of Iran’s failure to address the risks of terrorist financing, urging jurisdictions around the world to impose countermeasures to protect their financial sectors from illicit finance emanating from Iran.
In 1984, the Department of State designated Iran as a State Sponsor of Terrorism. Iran continues to provide material support, including resources and guidance, to multiple terrorist organizations and other groups that undermine the stability of the Middle East and Central Asia, such as the Houthi group Ansarallah in Yemen, the Asad regime in Syria, and multiple Shia militia groups in Iraq. Hamas, Lebanese Hizballah, and the Palestinian Islamic Jihad (PIJ) maintain representative offices in Tehran, in part to help coordinate Iranian financing and training.
Following the lifting of sanctions pursuant to JCPOA, Iranian financial institutions are expected to have access to financial messaging services. In recent years, international sanctions had curtailed Iran’s ability to send and receive international wires. While nuclear sanctions will be lifted following JCPOA implementation, the United States will continue to enforce sanctions targeting Iran’s support for terrorism, destabilizing regional activities, and ballistic missile activities.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: Not available
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: Not available Domestic: Not available
KYC covered entities: All legal entities, including the central bank, banks, financial and credit institutions, insurance companies, state regulator and reinsurance provider, the Central Insurance, interest-free funds, charity foundations and institutions, municipalities, notaries, lawyers, auditors, accountants, official experts of the Ministry of Justice, and legal inspectors
Number of STRs received and time frame: Not available
Number of CTRs received and time frame: Not applicable
STR covered entities: All legal entities, including the central bank, banks, financial and credit institutions, insurance companies, state regulator and reinsurance provider, the Central Insurance, interest-free funds, charity foundations and institutions, municipalities, notaries, lawyers, auditors, accountants, official experts of the Ministry of Justice, and legal inspectors
money laundering criminal Prosecutions/convictions:
Prosecutions: Not available
Convictions: Not available
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: NO
With other governments/jurisdictions: Not available
Iran is not a member of a FATF-style regional body. In 2014, it applied for observer status in the Eurasian Group (EAG).
Enforcement and implementation issues and comments:
For nearly two decades the United States has undertaken targeted financial actions against key Iranian financial institutions, entities, and individuals that include legislation and more than a dozen Executive Orders (E.O.s). Noteworthy actions taken against Iran under E.O.s include designating one state-owned Iranian bank (Bank Saderat and its foreign operations), which were designated for funneling money to terrorist organizations (E.O. 13224); the Qods Force, a branch of Iran’s Islamic Revolutionary Guard Corps (IRGC), designated for providing material support to the Taliban, Lebanese Hizballah, and PIJ (E.O. 13224); and the Martyrs Foundation (also known as Bonyad Shahid), an Iranian parastatal organization that channels financial support from Iran to several terrorist organizations in the Levant, including Hizballah, Hamas, and the PIJ, designated along with Lebanon- and U.S.-based affiliates (E.O. 13224).
In October 2007, the FATF issued its first public statement expressing concern over Iran’s lack of a comprehensive AML/CFT framework. Since 2009, the FATF has urged all jurisdictions to apply effective countermeasures to protect their financial sectors from the money laundering/terrorist financing risks emanating from Iran and also stated that jurisdictions should protect against correspondent relationships being used to bypass or evade countermeasures or risk mitigation practices. Most recently, in October 2015, the FATF reiterated its call for countermeasures, urging all members and jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions. The FATF, in its October 2015 Public Statement, said it remains concerned about Iran’s failure to address the risk of terrorist financing, and the threat this poses to the integrity of the international financial system. The FATF continues to urge Iran to immediately and meaningfully address its AML/CFT deficiencies, in particular by criminalizing terrorist financing and effectively implementing suspicious transaction reporting requirements.