Iran seeks to get off FATF blacklist amid domestic political divisions | Financial Markets News

Tehran, Iran – Iran says it will continue efforts to get off a blacklist from a prominent global watchdog over money laundering and “terrorism” financing despite “20 years of obstruction” of domestic rivals.

The statement by the Financial Intelligence Unit of Iran’s Ministry of Economic Affairs came on Sunday, two days after the Paris-based Financial Action Task Force (FATF) renewed its long-standing blacklist of Iran, according to a report by the official IRNA news agency.

The FATF also increased measures aimed at isolating Iran from global financial markets with a specific focus on virtual asset service providers (VASPs) and cryptocurrencies.

It recommended member states and financial institutions around the world to:

• Refuse to establish representative offices of Iranian financial institutions and VASPs or consider the non-compliance risks involved.
• Ban financial institutions and VASPs from establishing offices in Iran.
• Limit on a risk basis business relationships or financial transactions, including virtual asset transactions, with Iran or people inside the country.
• Prohibits financial institutions and VASPs from establishing new correspondent banking relationships and requires them to undertake a risk-based review of existing ties.

Even the flow of funds involving humanitarian assistancefood and health supplies as well as diplomatic operational costs and personal remittances are recommended to be “handled on a risk basis, taking into account the “terrorist” financing or proliferation financing risks emanating from Iran.

What does the FATF move mean?

Iran was blacklisted by the FATF for years and is currently on the list in the company of only two other countries: North Korea and Myanmar.

Since October 2019, Iran has recommended “enhanced measures” such as supervisory scrutiny and external audit requirements against it and has been subject to “effective countermeasures” since February 2020.

This has contributed to making access to international transactions increasingly difficult or impossible for Iranian banks and citizens and has made the country more dependent on more expensive shadowy third-party intermediaries for transactions.

The new countermeasures highlight existing frameworks, but also specifically mention virtual assets, indicating a greater focus.

The fact that the FATF is also urging countries and global institutions to remain wary of risks in having any dealings with Iran could mean even more limited transaction opportunities for Iranian entities and citizens.

Small banks that maintain old correspondent relations with Iranian counterparts may also reconsider after being advised to re-evaluate existing links.

The isolation has stemmed state-owned or private revenue streams and contributed to the ongoing depreciation of the Iranian rial over the years.

Links to Iran’s nuclear dilemmas

The FATF, formerly known by its French name, was established in 1989 by the Group of Seven (G7) countries to combat money laundering, but later expanded its mandate to counter the financing of “terrorism” and weapons of mass destruction.

It has formally raised concerns about Iran since the late 2000s, which is also when it began calling for countermeasures as international tensions rose over Iran’s nuclear program and the country was sanctioned by the United Nations Security Council.

But a year after Iran signed a landmark 2015 nuclear deal with world powers that lifted sanctions, the FATF also recognized a “high-level political commitment” from Iran and agreed to an action plan for the country to address its compliance requirements.

The centrist government of President Hassan Rouhani, which brokered the accords, went ahead with the ratification of various laws needed to implement the action plan despite opposition from hardliners strongly against greater financial transparency and international oversight.

But US President Donald Trump unilaterally repudiated the nuclear deal in 2018 and a “maximum pressure” campaign which has remained in force to this day. The move empowered the argument of the hardliners in Tehran, who managed to block the ratification of the rest of the FATF-linked legislation, leaving the issue dormant for years.

Washington has maintained the sanctions over the years with some of the latest – including the blacklisting in January of two British-based cryptocurrency exchanges – allegedly linked to Iran’s Islamic Revolutionary Guard Corps.

The UN Security Council sanctions were also reimposed against Iran in September when Western powers gave the impetus “snapback” mechanism of the core agreement. These include an arms embargo, asset freeze and travel ban as well as nuclear, missile and banking sanctions that are binding on all UN member states.

Support for ‘Axis of Resistance’

The Iranian hardliners who oppose any progress on FATF-related legislation have raised two main concerns.

They claim that full compliance with the watchdog’s guidelines will limit Tehran’s ability to support its “axis of resistance” of aligned armed groups in Lebanon, Iraq, Yemen and Palestine. The ash lost its base in Syria with the fall of President Bashar al-Assad in December 2024.

Hardliners have also suggested that Iran’s ability to circumvent US sanctions could be significantly impaired by disclosing all the information required by the FATF.

Iran sold most of its oil to China at steep discounts, using a shadow fleet of ships which turn off their transponders to avoid detection in international waters. The country has also for years been forced to rely on a capillary network of currency exchanges and intermediaries, some of them based in neighboring countries, such as Türkiye and the United Arab Emirates.

To allay some of the domestic concerns, two FATF-related laws ratified by Iran in 2025 were approved with special “conditions” and reservations inserted into the text.

One of the main conditions was that the ratified regulations must not “impair the legitimate right of peoples or groups under colonial rule and/or foreign occupation to fight against aggression and occupation and exercise their right to self-determination” and “will not in any way be construed as recognition of the Zionist regime of occupation”, a reference to Israel.

Iran also said it would not accept any referral to the International Court of Justice and claimed that its own Supreme National Security Council would determine which groups qualify as “terrorist” outfits.

These conditions were rejected by the FATF, which led to the increased countermeasures.

The watchdog also said it expects Iran to identify and freeze “terrorist assets” in accordance with relevant UN Security Council resolutions. Some of Iran’s nuclear and military authorities are among individuals sanctioned by those resolutions.