Perception versus reality: Iranian banks and international anti-money laundering expectations

Abstract

Purpose Iran has been ranked by the Basel Committee on Banking Supervision and the Financial Action Task Force (FATF) as one of the foremost countries in the world for money laundering. However, Iranian banks claim that they comply with international standards for reporting suspicious activity, risk management and training. This paper aims to investigate this dichotomy between perception and reality. Design/methodology/approach A Wolfsberg-style questionnaire was sent to partners in Iranian accounting firms, which have audited domestic banks over the past five years to investigate the adequacy of risk management systems. Findings Most Iranian banks have anti-money laundering (AML) systems, which compare favourably with those of international counterparties. Banks take a risk-based approach to potential criminal behaviour. The negative perception of Iranian banks is principally attributable to the government’s unwillingness to accede to “touchstone” international conventions. In spite of having in place AML laws, which are comparable in intent with those of the UK and the United States of America (USA), weak enforcement remains a significant impediment of which the political establishment is aware. Practical implications Measures required to bring Iranian banks into compliance with international standards may be less extensive than perceptions suggest. However, failure of the government to accede to conventions stipulated by the FATF means that banks may remain ostracised by foreign counterparties for the foreseeable future. Originality/value This study provides a unique insight into the extent of AML compliance in Iranian banks as verified by external auditors.

A Systematic Literature Review on the Roles and Ethical Dilemmas of Professional Accountant in Money Laundering

“…The auditor is also responsible for reviewing the actions of entities to obtain reasonable assurance of observing the money laundering laws, assessing their effectiveness, and obtaining management approval regarding observing the laundering regulations during the financial statements audit (Mohammadi et al, 2020). Additionally, auditors are expected to provide an independent appraisal of the effectiveness of AML systems in Iranian banks, offering their opinions on whether the entities have AML policies, practices, and procedures in place (Imeny et al, 2021b). The assessment confirmed that internal risk management systems in Iranian banks align satisfactorily with international AML expectations as outlined by the Wolfsberg criteria.…”

The sustainability of the international AML regime and the role of the FATF. The objectivity of the greylisting process of developing jurisdictions like Pakistan

“…Moreover, the consistent and massive imposition of fines also arguably represents not achieving the intended outcome of deterring FIs from facilitating ML (Halliday et al , 2019). This divergence has contributed to the jurisdiction’s greylisting; it is attached to a political decision instead of risk management weaknesses in the financial sector (Imeny et al , 2020).…”

The effect of social and intellectual capital on fraud and money laundering in Iraq

“…Schneider and Barone (2019) confirm the effectiveness of anti-money laundering regulations and state that these regulations have increased the cost of criminal organisations and consequently have been effective in reducing money laundering. Salehi et al (2019) and Molla Imeny et al (2020a, 2020b) examine the anti-money laundering structure of Iranian banks and state that Iranian banks have a proper anti-money laundering structure. But so far, the impact of intellectual and social capital on reducing money laundering and fraud in Iraq has not been studied.…”