(Washington Institute for Near East Policy) Patrick Clawson - On March 22, Supreme Leader Ali Khamenei declared that "the Americans have not acted on their promises and only removed the sanctions on paper." Although he is correct about Iran's ongoing difficulties with accessing the international financial system, he misdiagnoses the cause. The real problem is that Iranian banks are out of step with international banking regulations established over the past two decades. Strict anti-money laundering and counter-terrorist financing rules have been adopted across the world, and regulations were tightened after the 2007-2008 global financial crisis to meet the "Basel III" standards covering risk management, corporate governance, bankruptcy laws, and other bank safety requirements. At a meeting of the Financial Action Task Force (FATF) in February, the 37 member governments - including Russia and China - gave consensus approval for a statement warning about the risks of doing business with Iran and North Korea. "The FATF remains particularly and exceptionally concerned about Iran's failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system." "The FATF reaffirms its call on members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions. In addition to enhanced scrutiny, the FATF...urges all jurisdictions to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism risks emanating from Iran." Past penalties have also made many banks cautious about how much risk to take with Iran. Having been subject to more than $15 billion in U.S. fines for poor enforcement of sanctions and regulations, and tens of billions more for other deceptive practices, major banks have adopted a "derisking" strategy predicated on leaving markets where they judge the risk of violating rules - inadvertently or not - is too high to be worth the limited returns.
2016-04-06 00:00:00Full ArticleBACK Visit the Daily Alert Archive