Last month, the Financial Action Task Force – an inter-governmental body designed by its Member-States to set and promote standards for combating money laundering and terrorist financing – once again issued a public statement identifying Iran as a “high-risk, non-cooperative” jurisdiction for its “AML/CFT deficiencies” and called upon States “to advise their financial institutions to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions.” As I pointed out in yesterday’s post, the identification of Iran as a “high-risk, non-cooperative” jurisdiction for its failure to combat terrorist financing and the call for States “to apply effective counter-measures to protect their financial sectors” from AML/CFT risks emanating from Iran continues to pose significant problems for Iran’s re-integration into the global financial system.

Nonetheless, there are notable developments occurring in Iran’s banking sector for which the FATF and its Member-States – the United States, in particular – should be welcoming, if not encouraging. Not too long ago, in fact, the FATF was indeed publicly encouraging such developments, only to be thwarted by the escalation of the nuclear dispute between world powers and Iran. It may now well be time to work more cooperatively with Iran as it seeks to develop internationally-recognized AML/CFT standards to combat money laundering and the financing of terrorism and to reassert financial integrity in Iran’s financial institutions.

By all appearances, Iran is taking steps to beef up its AML/CFT regulations in order to allow its banks greater access to the global financial system.

Speaking at a business conference in Tehran this past week, Iran’s Deputy Foreign Minister Majid Takht Ravanchi noted that legislation aimed at addressing Iran’s AML/CFT deficiencies is awaiting approval before the Guardian Council and will soon take effect. According to reports, Takht Ravanchi also provided examples of the Rouhani administration’s attempts to address Iran’s AML/CFT deficiencies, including an amendment to pre-existing AML legislation.

In tandem with these remarks, Hamid Tehranfar – the Central Bank of Iran’s Vice-Governor – stated at this same conference that Iran has “asked the International Monetary Fund to review our regulations so other countries’ banks feel reassured. The IMF will announce its assessment in 2018.”

Close observers will know what Tehranfar is talking about. In April 2014, the IMF released its staff report for the 2014 Article IV Consultation with Iran, in which it noted that “the recent progress on the external environment [read: the then-ongoing nuclear negotiations] provided a good chance to advance on the AML/CFT legislation.” Specifically, the IMF staff report noted that “some progress [had] been made in strengthening [Iran’s] regulatory framework, most notably the adoption by the AML High Council of fourteen new AML instructions, the establishment of an economic crime prosecutor office, and a defined roadmap for improving the AML system [in Iran].” Moreover, the IMF staff report stated that “while a bill on countering the financing of terrorism (CFT) had been prepared and approved by Parliament in 2012, the authorities reported that it is currently pending before the judiciary for an opinion.” In sum, the IMF staff report concluded that “there was scope to move towards a risk-based AML/CFT supervision [in Iran] and encouraged the authorities to adopt a CFT law that is improved regarding the criminalization of terrorism financing and related activities, the freezing and confiscation of assets, the reporting and analysis of suspicious transactions, and international cooperation.”

The IMF’s latest consultative report further noted that “bolstering the AML/CFT framework [in Iran] would facilitate [Iran’s] re-integration of the domestic financial system into the global economy, lower transaction costs, and reduce the size of the informal sector.” The Rouhani administration “expressed commitment to advancing reforms to [Iran’s] AML/CFT framework…[and] have requested a Fund assessment of the AML/CFT regime against the FATF standard, which they intend to use for joining the Eurasian AML/CFT group.” (Evidently, this is the IMF assessment of which Tehranfar is speaking and which is due in 2018.)

So far, neither the FATF nor the United States have publicly taken note of these developments. It is not even clear to me whether OFAC, et. al., are even aware of what is taking place in Iran. That is unfortunate. Even if Iran’s recent steps are wholly inadequate to addressing its AML/CFT deficiencies, U.S. authorities should be observing them closely and pointing out how to remedy any such shortcomings. If the U.S. policy goal was to foster transparency and integrity in Iran’s financial sector, then U.S. authorities should be encouraging the ongoing developments in Iran’s AML/CFT standards, if not altogether working with Iran to develop and promote such standards. As Iran seeks re-integration into the global financial system, it will be important for the FATF and the United States to point out exactly what steps are needed to make that a reality, rather than sitting it out on the sidelines and hoping for (or possibly against) the best.