International Watchdog Cracks Down on Iran Over Money Laundering, Terror Financing

The United States and other members of an international financial watchdog called Thursday for new financial pressure on Iran, saying the Islamic regime hasn't done enough to fight money laundering and financing of terrorism.

The Financial Action Task Force, in a statement from its annual meeting in Paris, pressed its 34 members to advise banks to monitor their dealings in Iran and urged nonmember nations to follow suit.

"It's tightening the screws," said Daniel Glaser, the top U.S. envoy to the Paris meeting, and the Treasury Department deputy assistant secretary for terrorist financing and financial crimes.

"What it's going to mean is that financial institutions around the world are going to take a closer look at their transactions involving Iran," he said, adding it's a call for a "global response — a response without any holes in it."

The statement Thursday signals increased concern about legal loopholes that make the Islamic republic a risk. But in its statement, the task force also welcomed efforts by Iran, acknowledging it has sought the agency's advice on improving its laws.

The stepped-up call for vigilance comes against the backdrop of intense pressure from some Western nations on Iran over its nuclear program, amid fears that it could mask plans to build bombs. Tehran insists its ambitions are peaceful, to generate electricity.

The agency has no enforcement power, and it relies on the pressure of member states. Its warnings can drive up the cost of doing business in the countries it targets, by forcing financial institutions to examine their transactions more closely.

It does not judge specific actions by a country — such as U.S. allegations that Iran is a state sponsor of terrorism — but looks at the legal and technical safeguards in a country against terror financing and money laundering.

The task force includes 32 nations — the U.S., China, Russia and much of Europe — as well as the European Union and the Gulf Cooperation Council. Iran is not a member, and was not represented at the Paris meeting.

In October, the task force advised member countries to advise banks to inspect their dealings with Iran more closely. The agency said gaps in Iranian law cause a "significant vulnerability" in the global financial system, and urged banks to use extra caution in dealing with Iran's financial institutions.

But some task force members did not abide by that call to step up monitoring of dealings with Iran — and Thursday's statements were aimed partly at getting them to renew their commitments, officials said.

In the meantime, Iran held secret talks with top task force officials — including Glaser — last month in Paris, which were seen as a bid to blunt or block any new recommendations by the agency.

Last week, the Iranian parliament passed a law creating a council to apply the task force's recommendations. But its officials say the law did not go far enough.

"Iran has, to our knowledge, no law in place at the moment dealing with terrorist financing," the task force's executive secretary, Rick McDonell, said. "It has one in relation to money laundering — very recently — but that's deficient."

The task force also said it was worried about Uzbekistan. It said the central Asian country risks becoming a channel for money laundering and terror financing, and warned that a governmental decision there last week effectively repealed its reporting of suspicious financial transactions.