New York Sun: In a move that could cripple Iran’s banking sector, the world’s premier anti-money-laundering body warned its 34 member states yesterday to advise their banks of the risks of doing business with Iranian banks, citing worries about the Islamic nation’s financing of terrorism. The New York Sun
By ELI LAKE
Staff Reporter of the Sun
WASHINGTON – In a move that could cripple Iran’s banking sector, the world’s premier anti-money-laundering body warned its 34 member states yesterday to advise their banks of the risks of doing business with Iranian banks, citing worries about the Islamic nation’s financing of terrorism.
While the Paris-based Financial Action Task Force suggests only a warning, the seriousness with which the world’s banks will respond to its official statement has the potential to starve Iran of much of its legitimate capital.
American officials saw the FATF’s statement as a victory in their financial war against Iran. “It was a great result,” America’s chief envoy to the task force, Daniel Glaser, said in a phone interview from Paris. “What this action does is call upon all countries in the world to inform their financial institutions of the significant anti-money-laundering financial risk Iran represents. As a result of this action, financial authorities around the world will be requiring their financial institutions to conduct enhanced scrutiny on Iran-related transactions.”
In the last two years, the Treasury Department has designated Iranian banks as terrorist-financing entities, charging that major banks in the country often deceive other international banks about the true recipients and purposes of financial transactions.
The task force’s action is important in part because it technically compels both the Chinese and Russians – the two great powers who have been most ambivalent about Iran’s enrichment of uranium for nuclear fuel – to warn their banks of the risks associated with doing business with the banks in Iran. To date, American pressure on European and East Asian banks to end business in Iran has driven Iranian business to Chinese and Russian banks as well as financial institutions in Dubai and elsewhere in the Islamic world.
Mr. Glaser, who is a deputy assistant secretary of the Treasury for terrorist financing and financial crimes, said the FATF’s action was more robust than a warning, but he played his cards closely when asked about China. “I think that China is an important and constructive member of the Financial Action Task Force. I think China is going to respond,” he said.
In January, the Iranians mounted a full-court press to dissuade the task force from issuing the warning. Ultimately, the Iranians made their presentation to the body and lost their appeal following a milder warning in October. While the statement issued by the task force acknowledges some recent legislation passed in January on terrorist financing, the passage of the legislation was not enough to lift the warning.
The director of the counterterrorism and intelligence program at the Washington Institute for Near East Policy, Matthew Levitt, said yesterday that the designation, combined with the likely passage next month of a third U.N. Security Council resolution against Iran’s nuclear program, sends “a crystal-clear message about the nature of Iran’s financial support for illicit activity through state-owned banks.”
But Mr. Levitt, who is also a former deputy assistant secretary of the Treasury, said this alone would not cause Iran’s banks to fail. “Iranian banks will not fail because of this, but it identifies them as pariah institutions and will have a significant impact,” he said. “This is going to complicate Iran’s ability to finance these illicit activities, but it will not solve the nuclear question or Iran’s support for terrorism. It is another point of leverage.”
For their part, the Iranians have yet to complain. Indeed the semiofficial Iranian Press TV yesterday carried a story that reported the task force had “praised” the country’s recent legislation against money laundering.
