FATF Not Iran’s Main Banking Issue

TEHRAN (Iran News) Hariri emphasized that U.S. policies are designed to increase pressure on Iran. However, he pointed out that, so far, these pressures have been mostly theoretical rather than practical. He noted that Iran’s strategies for circumventing sanctions and selling oil to China remain crucial in determining the real impact of the restrictions.

According to Hariri, signals from former U.S. President Donald Trump indicated a greater willingness to negotiate with Iran rather than simply applying pressure. However, he acknowledged that both pressure and negotiation serve as tools for both countries. He suggested that the U.S.-China tariff conflict might push China to be less stringent regarding U.S. sanctions on Iran, particularly concerning oil exports.

Since 2018, the method of transporting Iranian oil to China has changed. Previously, large Chinese refineries were Iran’s primary customers, but after 2018, smaller refineries took over this role. The ongoing tariff dispute could, therefore, prevent further tightening of sanctions on Iranian oil exports to China.

Hariri discussed the possibility of negotiations between Iran and the U.S., stating that neither side has historically rejected sitting at the negotiation table. However, he noted that the U.S. has a poor track record of honoring agreements, while Iran has never unilaterally withdrawn from a deal. He also pointed out that Trump’s unpredictable behavior complicates the negotiation process. Moreover, Iran and the U.S. perceive negotiations differently: Iran insists on negotiations based on dignity and national interest, while the U.S. prefers to pressure Iran into a weaker position before engaging in talks.

Addressing the influence of Trump’s presidency on the BRICS alliance (Brazil, Russia, India, China, and South Africa), Hariri dismissed the idea that BRICS was significantly affected by Trump. He pointed out that BRICS was established long before Trump entered politics and will continue beyond his tenure. While Trump has vowed to prevent the weakening of the U.S. dollar, Hariri argued that BRICS members have not formally pursued a unified currency. He suggested that any serious steps toward a BRICS currency would not materialize before 2030, by which time Trump would no longer be a political figure of significance.

Discussing Iran’s banking system, Hariri argued that the Financial Action Task Force (FATF) is not the primary challenge for Iran’s banking relations with the world. He stated that while FATF compliance is a necessary condition for integration into the global banking system, it is not a sufficient condition. The real issue, he claimed, is the impact of economic sanctions, which prevent Iranian banks from participating in international transactions regardless of FATF status.

Even if Iran were to comply fully with FATF regulations, Hariri maintained that the global banking system would still be reluctant to engage with Iranian banks due to sanctions. Moreover, even in a sanction-free scenario, structural weaknesses in Iran’s banking system—including inadequate capital adequacy ratios, problematic balance sheets, and inefficient management—would deter foreign banks from partnering with Iranian institutions.

Hariri explained that FATF is an international financial watchdog that provides recommendations rather than mandates. Although FATF does not explicitly prohibit banks from working with Iran, it advises institutions to apply strict scrutiny when dealing with Iranian transactions. The fact that Iran has not signed agreements such as the Palermo Convention and the Countering the Financing of Terrorism (CFT) treaty has led global banks to take FATF’s recommendations seriously, making it more difficult for Iran to engage in global financial markets.

While the U.S.-China tariff war could offer Iran some relief in trade with China, deeper structural issues continue to hinder Iran’s banking sector. Hariri’s insights suggest that while FATF compliance may be necessary for international banking integration, sanctions and internal financial weaknesses are the primary barriers preventing Iran from engaging effectively with the global financial system.