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Banks: Iran

Volume 478: debated on Thursday 26 June 2008

To ask the Chancellor of the Exchequer what steps are planned to be taken through the Financial Action Task Force to ensure that certain Iranian banks cannot abuse the international banking system to support proliferation activities and terrorism. (212044)

The Financial Action Task Force (FATF) has expressed concern that the Islamic Republic of Iran’s lack of a comprehensive regime for anti-money laundering and combating the financing of terrorism (AML/CFT) represents a significant vulnerability within the international financial system. In addition to its role in setting and monitoring standards for AML/CFT in general, the FATF has warned the financial sector of the risks posed by Iran and advised jurisdictions on implementation of the financial provisions of UN Security Council Resolutions relating to Iran’s nuclear activities.

The FATF issued statements on Iran in October 2007 and February 2008. These statements warn businesses in the financial sector about the heightened risks of money laundering or terrorist financing arising from the deficiencies in Iran’s AML/CFT regime, and recommend that they apply increased scrutiny and due diligence to transactions associated with Iran. The FATF has also met Iranian authorities to discuss measures to improve Iran’s AML/CFT regime. The FATF is keeping the risk posed by Iran under review and discussed progress at its meetings in London this month. In response to these FATF statements, HM Treasury has issued advisory notices to UK businesses on the heightened risk of money laundering or terrorist financing from Iran.

At its June 2008 meeting in London, the FATF reaffirmed its public statement of 28 February 2008 regarding the anti-money laundering and countering the financing of terrorism risks posed by Uzbekistan, Iran, Pakistan, Turkmenistan and São Tomé and Principe, and the northern part of Cyprus. It welcomed the actions taken by its members to advise their financial institutions of these risks, and noted it was concerned about the lack of progress by, in particular, Uzbekistan and Iran. The FATF will continue to assess the situation and take further actions in October, as necessary, to protect the international financial system.

The FATF has also produced guidance on implementation of the financial provisions of UN Security Council Resolutions relating to Iran’s nuclear activities. The FATF published Guidance in July 2007 on “Implementing Financial Provisions Of UN Security Council Resolutions To Counter Proliferation Of Weapons Of Mass Destruction”, including guidance on implementing targeted asset freezes as required by UNSCR 1747. In October 2007 the FATF published “Guidance Regarding The Implementation Of Activity-Based Financial Prohibitions Of United Nations Security Council Resolution 1737”; advising jurisdictions on preventive measures to guard against the use of the financial system to support Iran’s nuclear programmes.

A new mandate for the FATF has been agreed under the UK presidency which recognises its increased role in combating proliferation finance. The FATF will shortly publish a typology study on proliferation finance, detailing the extent of the threat and the methodologies used by proliferators.