In a commentary, Mohammad Mehdi Behkish wrote: “The importance of the FATF framework for Iran is immense; while it opens the international financial space to Iran, it also provides a window through which part of Iran’s negotiations with the West can be incorporated. More importantly, the invitation to negotiate comes at a time when a new secretary of Iran’s Supreme National Security Council has been appointed.

The Financial Action Task Force, or FATF, is an intergovernmental organisation created in 1989 by the G7 industrialised nations, headquartered in Paris. Its mission is to safeguard the global financial system by formulating international standards and policies to counter money laundering (AML), terrorist financing (CFT), and, more recently, the financing of the proliferation of weapons of mass destruction (PF).

Any country that incorporates these rules and requirements into its domestic laws, joins the related conventions such as Palermo and CFT, and ultimately commits to their enforcement, can be placed on the FATF’s regular list and benefit from its advantages. This intergovernmental body operates a grey list and a blacklist. Iran has never been a formal member of FATF, and since 2008, on the grounds of posing high risks in money laundering and terrorist financing, has been placed on the FATF blacklist alongside North Korea. Following the nuclear deal (JCPOA), Iran’s blacklisting was suspended for about two years to allow time for relevant legislation to be passed. During that period, some of the required laws or permissions to join conventions were independently or implicitly approved by parliament, but the Guardian Council and higher authorities blocked the process, resulting in Iran’s return to the blacklist.

Countries on the blacklist are effectively excluded from international banking transactions, as dealings with them are considered extremely high risk. Even transactions with countries on the grey list are advised with caution under international law. By contrast, transactions with countries on the FATF regular list are carried out normally, though still subject to standard risk assessment methods by relevant institutions.

It is crucial to distinguish between sanctions and FATF blacklisting. Sanctions restrict or prohibit commercial, economic, or political relations with specific individuals, institutions, or countries, and may lead to the freezing of their assets abroad. When imposed by the UN Security Council, all member states are obliged to comply. By contrast, FATF blacklisting severely hampers a country’s ability to operate in global financial markets. It prompts banks and international financial institutions to refrain from engaging with the country or its institutions.

That said, the two issues—sanctions and FATF blacklisting—are deeply interlinked. While removal from the FATF blacklist does not eliminate sanctions, an agreement with FATF would undermine much of the justification the United States uses to sanction Iran. For example, FATF regulations on countering the financing of proliferation of weapons of mass destruction are closely tied to the Islamic Republic’s challenges in enrichment negotiations and related disputes with the US and Europe. Therefore, negotiations with FATF in the coming weeks are considered highly important; not only could they pave the way for Iran’s re-entry into international financial markets, but they might also foster exchanges that could smooth the path towards talks with the United States and the easing or lifting of sanctions.

The evidence suggests that the West has opened the door to negotiations through FATF as a way of testing the impact of Iran’s new Supreme National Security Council secretary and its new economy minister on the country’s international policies. From the Western perspective, the arrival of figures such as Mr. Larijani and Mr. Madanizadeh on the political scene may reduce the influence of entrenched interest groups and, consequently, limit hard-line, anti-Western policies in Iran’s political sphere. Since the presence of these individuals increases the likelihood of more balanced foreign policies, it is recommended that the Iranian negotiating team possess at least three qualities:

1. Fluent command of English.
2. Sufficient expertise in FATF regulations and the country’s financial laws.
3. Adequate authority to negotiate and make decisions in dealings with foreign counterparts.”

FATF