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Money Laundering in Iran is Pervasive

It was reported that the Expediency Council has approved a bill paving the way for Iran to join the FATF, but Gholamreza Mesbahi Moghaddam, a member of the council, was quoted by Fars News Agency saying “The bill approved by the council was an amendment to the internal mechanism set up for countering money laundering and contrary to what has been quoted by some media is has no connection with the Islamic Republic to FATF.”

Corruption through money laundering is rampant in Iran. Among some indexes, Iran ranks 1st in the world in money laundering, ahead of Afghanistan and Tajikistan.

In a recent interview with state television, Mohammad Javad Zarif admitted, “Money laundering is a fact in our country.” He added: “I know people who, for example, earned a profit of 30 trillion tomans ($7 billion) in a transfer deal.”

This is not a new phenomenon. On March 2016, Rahmani Fazli, Iran’s interior minister, said: “Undoubtedly part of the dirty money of drug trafficking will enter politics, elections and the transfer of political power in the country.”

Of course, it is not clear exactly how much money is laundered in Iran, but statistics suggest that it is astronomical.

Pedram Soltani, vice president of the Chamber of Commerce, confirms the regime’s estimate at $35 billion, while other sources put the number closer to $42 billion.

“The money from organized crime or drug trafficking is now an integral element within the banking system and we do not know the source and destination of money from organized crimes,” said Jonaidi, legal advisor to President Rouhani.

Besides money, the smuggling of goods is also problematic for the regime. At least 40% of the goods are imported into Iran by smugglers.

Failure to return dollars earned from exports is part of the process of money laundering in Iran. “Since the beginning of the year, we had $27 billion worth of non-oil exports, but less than $7 billion is back to the system, and I don’t know where the rest of it is,” said Amir Hemmati, the head of Iran’s Central Bank, in an interview with state television in November.

The obvious question now is who is the biggest culprit? It is undoubtedly the Revolutionary Guards Corps (IRGC). “We have documented statistics; many exporters took the dollar at 5-6 thousand tomans. There are a total of 250 exporters who have not yet brought back their currencies to the economic cycle since the beginning of this year.”

While neither Hemmati nor Zarif, specifically identified those who “benefit from money laundering,” the reaction of some members of parliament made it clear that Zarif was referring to the Revolutionary Guards Corps. Zolnour, a former IRGC commander, responded immediately to Zarif’s interview and demanded that he produce evidence for his claims.

Another member of parliament affiliated with the IRGC also demanded clarification from Zarif. “If Zarif does not prove money laundering, the prosecutor has the right to prosecute him,” said MP Karimi Ghoddoosi.

Morteza Saffari-Natanzai, another MP, said: “Money laundering is an economic issue related to internal affairs, and is not in the field of foreign policy that the Minister has commented on.”

Within the regime, disputes are intensifying to adopt laws that would bring Iran into compliance with the anti-money laundering standards of the French-headquartered Financial Action Task Force (FATC). In early December, President Rouhani suggested that the IRGC’s continued opposition to such laws would cost the Iranian economy.

But the IRGC says that if Iran cooperates with the FATF, its money laundering networks will be identified and placed on the sanctions list, meaning it’s better to pay the cost of money laundering than to risk increased international isolation.

Money-laundering activities of IRGC are not only limited to Iran. Recently, a judicial investigation was launched to identify the IRGC money laundering network in Bahrain. The network is accused of money laundering with drug trafficking networks. The network operated in some parts of the region by secretly selling drugs abroad.