CATF Reports Aug. 13, 2015, 9:16am


On July 22, the US House of Representatives’ Financial Services Committee held a hearing to examine the impact of the recent nuclear agreement (“Joint Comprehensive Plan of Action” or JCPOA) between Iran and the P5+1 nations on terrorism financing. The upshot of the panel’s statements was disquieting. Ilan Berman, Vice President of the American Foreign Policy Council, declared that “Iran seems undeterred in its mission to confront the ‘enemies of Islam’ and create new centers of non-Western power around the world. The resources at Iran’s disposal to do so are now poised to expand exponentially as a result of the sanctions relief it has successfully negotiated with the P5+1.”

Iran has long been identified by the US government as the world’s leading “state sponsor of terror”. This view is shared by the Financial Action Task Force, a multilateral organization established within the OECD after 9/11 to set international standards for combating money laundering and terror financing. As recently as June 26, the organization issued a public statement stressing that governments should remain “particularly and exceptionally concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system.”

Indeed, despite chronic and crippling budget shortfalls over the past few years, Tehran has continued to fund a vast number of terrorist organizations including Hezbollah, Hamas and the Houthi rebels, as well as the Assad regime in Syria. The regime is not shy about their intention to continue doing so. Preaching at a Tehran mosque on July 18, Iranian Supreme Leader Ayatollah Khameini stated that Iran “will never stop supporting [its] friends in the region and the people of Palestine, Yemen, Syria, Iraq, Bahrain and Lebanon, even after this deal.”

It will only get easier for the regime to do so once the JCPOA has been implemented, given that $100 billion in previously frozen assets will immediately flow into the Iranian government’s coffers as a result of sanctions relief. And that is before the phenomenal boost in tax revenue that the government can expect thanks to the resumption of Iran’s trade relations with the rest of the world. But these measures will not only increase the amount of funding that Iran is able to make available to the terrorist organizations and rogue governments with which it sympathizes, they will also open wide the channels through which the funding can flow.

SWIFT, the Society for Worldwide Interbank Financial Telecommunication is the world’s financial circulatory system. It allows more than 10,800 banking institutions worldwide to transfer funds securely. In March 2012, the United States and European Union pressured SWIFT into excluding the 15 most important Iranian banks from the network, including the Iranian Central Bank, as part of their effort to deter Tehran from pursuing its nuclear ambitions. The move dealt an unprecedented blow to the Iranian economy – international trade was all but shut down. Ejection of Iranian banks from SWIFT membership was the single most effective sanction put in place to date, not least due to the damage it did the oil trade. This move played a great part in bringing Iran back to the negotiating table in mid-2012, through back-channels initially, then in public talks beginning in October 2013.

In addition to the reintegration of Iran’s banks into the SWIFT system, the deal contains a provision that cancels out the 2011 Patriot Act provision designating Iran as a jurisdiction of “primary money laundering concern”. This will likely lead to the removal of all but one Iranian financial institution (Bank Saderat) from the US Treasury’s blacklist.

Finally, the JCPOA calls for the EU sanctions on Iran’s Islamic Revolutionary Guard Corps to be progressively lifted. This is especially problematic given that the IRGC openly aims to promote violent political militancy in the region, notably through its external arm, the Quds Force.

In sum, the financial sanctions relief contained in the JCPOA will not only increase the resources that Iran is able to dedicate to funding its “friends” (in the words of the Supreme Leader), it will also allow the funds to reach terror organizations much more easily. Lowering the risk of nuclear proliferation should not come at such a price.

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