Iran Faces Long-Term Banking Woes Under Terror-Finance Watchdog Action
24 Feb 2020

Iran is facing long-term financial isolation under new sanctions levied by the global terror-finance watchdog Friday, sending a stout warning to Pakistan, which was given additional time to put its own house in order.

The Financial Action Task Force’s action against Iran was made more permanent by a little-noticed clause that gives the U.S. and its allies the ability to block removal of the sanctions even if Tehran adopts new antiterror and money-laundering regulations. The blacklisting and associated sanctions are expected to further choke Iran’s remaining financial and trade ties and politically isolate the country.

Although the FATF gave Pakistan a reprieve from its own blacklisting, the action against Tehran puts Islamabad on notice of the consequences it risks if it fails to meet the Paris-based watchdog’s recommendations.

The FATF said it may take action if Pakistan doesn’t make progress by June in prosecuting and imposing criminal penalties in terrorist-financing cases. The watchdog could advise financial institutions to place transactions with Pakistan under additional scrutiny, it said.

The FATF, which was established in 1989 by the Group of Seven leading nations, sets standards and monitors anti-money-laundering and counterterrorism-financing laws.

Under the restrictions placed on Iran, FATF member countries, which represent all the world’s most important financial centers, will now need to report back to the watchdog on how exactly they are complying with the group’s sanctions, a senior U.S. administration official told The Wall Street Journal.

Many countries, including some in the West, still allow Iranian banks to operate branches. These include a small number of institutions that haven’t been targeted by the U.S. in its pressure campaign against Iran as well as others it has labeled as conduits used by Tehran to fund terror groups and its weapons of mass-destruction programs.

Germany, Qatar, the United Arab Emirates, Russia and China have allowed Iran to maintain financial ties to their countries. Swift, the financial messaging service that connects the global banking system, has kept several unsanctioned Iranian banks linked to the international financial network. A spokesman for Swift didn’t immediately provide a comment.

Failure to enforce the FATF sanctions will bring increased scrutiny and pressure by Washington, the senior U.S. administration official said. The U.S. can leverage its power as the world’s largest economy and most important financial market, as well as the U.S. dollar’s hegemony as a global reserve currency, to strong-arm countries into acquiescing to its demands.

By Ian Talley and Kristin Broughton, The Wall Street Journal, 21 February 2020

Read more at The Wall Street Journal

Photo (edited): Blondinrikard Fröberg [CC BY 2.0] via Flickr

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