TEHRAN (Oct 7): Iran’s parliament approved a bill on Sunday to bring the country’s banks in line with global standards on anti-terrorism financing and reduce their exposure as the Islamic Republic enters another new era of tough US sanctions.

The legislation, which includes reforms of Iran’s anti-money laundering laws, has been the focus of a tug of war between Iran’s governing moderates and their hardline conservative opponents, who say it represents a capitulation to Western dictates and risks Iran’s support for Lebanon’s Hezbollah, considered a terrorist group by the US.

The law still needs final approval from Iran’s Guardian Council – a top constitutional body that vets legislation and elections. 

International Policies

Moderates say the legislation is key to drawing much-needed foreign investment into Iran because it fulfills criteria set by the Paris-based Financial Action Task Force, an international body dedicated to combat money laundering and terrorism financing. Compliance with the organization’s guidelines, they say, significantly reduces the risk for international lenders of working with Iran’s banks and executing trade and project finance deals.

Foreign Minister Mohammad Javad Zarif said failure to ratify the legislation would give the US. “more excuses to create more problems for Iran.” The US withdrew from the multipower nuclear deal with Iran in May, and in August began reimposing sanctions that are set to expand next month. US restrictions already prohibit banks exposed to American lenders from working with the Islamic Republic.

Even after international sanctions were eased under the 2015 accord, Iran’s banks were regarded as too risky for large global banks, some of which previously paid multibillion dollar fines for violating US sanctions. Separate US sanctions that remained in effect after the agreement took force continued to be a deterrent, as did Iran’s years of isolation from global financial markets, weak standards on money-laundering, lack of adherence to international standards and high ratio of non-performing loans.