Media began to report on suitcases filled with dollars flowing through Tehran’s Imam Khomeini International Airport and suspicious truckloads of Iranian gold being seized in Turkey. A barter system was created with willing international partners, and Iran began to make extensive use of a motley but effective network of middlemen and front companies to facilitate transactions. Under such a secretive system designed specifically for survival, corruption expanded exponentially and a culture of circumvention of basic financial legal standards took root.
It didn’t take long for the FATF to notice, and in 2008 the group began to list Iran as a “high-risk” financial jurisdiction. Its recommendation to the world’s banks was explicit: Beware of any transactions having to do with Iran. Barely a month after international sanctions were removed against Iran, FATF issued a statement reiterating its warning to global financial institutions that Iran had yet to meet its regulatory standards. As long as Iran was under international sanctions, the ability to circumvent them by any means possible was considered a point of strength.
Now that sanctions have been lifted, Iran’s inability to adapt to global transparency standards is a problem not only for Tehran, but also for the world’s financial capitals. Iran’s continued inclusion on the FATF blacklist has given critics of the nuclear deal ammunition in their efforts deter international banks from dealing with Iran.
It will likely take a long time to implement the reforms needed, and progress must be measured incrementally — but there are signs that the administration of President Hassan Rouhani recognizes the negative impact of the FATF’s classification on its post-nuclear deal ambitions.