PARIS: The global dirty money watchdog placed Iran on its blacklist on Friday after it failed to comply with international anti-terrorism financing norms, a move that will deepen the country’s isolation from financial markets.

The decision came after more than three years of warnings from the Paris-based Financial Action Taskforce (FATF) urging the Islamic Republic to either enact terrorist financing conventions or see its reprieve from the blacklist lifted and some counter-measures imposed.

The international financial watchdog also placed Myanmar on its money-laundering watchlist, urging the country at the heart of Asia’s illicit drug-producing “Golden Triangle” to boost its efforts to seize crime proceeds.

“Given Iran’s failure to enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, the FATF fully lifts the suspension of counter-measures and calls on its members and urges all jurisdictions to apply effective counter-measures,” the group’s 39 members said in a statement after a week-long plenary session.

These would entail more scrutiny of transactions with Iran, tougher external auditing of financing firms operating in the country and extra pressure on the few foreign banks and businesses still dealing with Iran.

“The consequence of (Iran’s) inaction is higher costs of borrowing and isolation from the financial system,” a Western diplomat said.

Iran’s central bank chief dismissed FATF’s decision. “(It) is politically motivated and not a technical decision,” the state news agency IRNA quoted Abdolnasser Hemmati as saying. “I can assure our nation that it will have no impact on Iran’s foreign trade and the stability of our exchange rate.”

The FATF appeared to leave the door open for some engagement with Iran saying in its statement: “Countries should also be able to apply countermeasures independently of any call by the FATF to do so.” “It’s a middle solution. A sort of a fudge to leave the door open for the Iranians,” said one of the diplomats.

Foreign businesses say Iran’s compliance with FATF rules is essential if it wants to attract investors, especially since the United States reimposed sanctions on Tehran in 2018 after quitting a 2015 nuclear deal with Iran and other big powers. Iran’s leaders have been divided over approach to the FATF.

Supporters of cooperation say it could ease foreign trade with Europe and Asia, offsetting US sanctions. Hardliners argue that passing legislation to join the FATF could hamper Iran’s support for its allies, including Lebanon’s Hezbollah.

Washington has since pushed a policy of “maximum pressure” on Iran, saying a broader deal should be negotiated to encompass nuclear issues, Iran’s ballistic missile programme and Iranian support for proxy forces around the Middle East.

Published in Dawn, February 22nd, 2020