Follow us on social

Shutterstock_1512330623-scaled

Trump administration pressures global financial watchdog to 'blacklist' Iran

The designation gives the Trump administration another justification for its "maximum pressure" campaign.

Analysis | Middle East

The Financial Action Task Force (FATF), a global body that sets standards to combat money laundering and terrorist finance, has placed Iran back on its infamous “blacklist,” following the failure of Iranian policymakers to enact two key bills in accordance with an action plan set in 2016.

The FATF statement, issued on Friday at the conclusion of the body’s latest plenary meeting, calls on members to “to apply effective countermeasures” following Iran’s failure to implement “the Palermo and Terrorist Financing Conventions in line with the FATF Standards.”

Such countermeasures include increase monitoring, reporting, and auditing of Iran-related financial transactions for all financial institutions worldwide. While members can decide how to reimpose the countermeasures, the decision taken by FATF serves as a kind of external validation of the Trump administration’s claims that the Iranian financial system is regularly used to facilitate money laundering and terrorist finance on a massive scale. This characterization is a principle justification for the administration’s “maximum pressure” sanctions campaign and U.S. officials had been dogged in pressuring FATF to call “time out” on Iran’s reform process.

The FATF decision will be deeply disappointing to many officials in the Rouhani administration who had expended extraordinary political capital to try and get the necessary legislation enacted, succeeding in getting four key bills passed by parliament, but only managing to have two bills enacted into law. Opposition by hardliners had been fierce — the FATF issue was linked to the slow-rolling crisis around the nuclear deal and the Trump administration’s sanctions campaign. The politicization of the action plan reforms — both in Tehran and in Washington — was perhaps unprecedented in the history, putting “the task force is between a rock and a hard place,” as Tom Keatinge, as RUSI Director of the Centre for Financial Crimes and Security Studies, has recently observed.

The FATF’s decision could have a significant impact on Iran’s economy, but likely indirectly. Iranian officials who advocated for implementation of the action plan insisted that failure to do so would lead to international banks, including banks in Russia and China, to cut ties with Iran. More precisely, the reimpositon of countermeasures means that it will be exceedingly difficult for Iran to open any new cross-border financial channels. But the countermeasures set to be reimposed, including FATF’s exhortation of its members to impose enhanced supervision and reporting requirements for financial institutions handling Iran-related payments reflect a level of oversight already adopted by the few global financial institutions that continue to transact with Iran. For example, European officials do not expect the FATF decision to interfere with the operationalization of INSTEX, the mechanism established to support European trade with Iran, given the longstanding policies of the banks on which INSTEX will rely.

Existing banking channels are unlikely to be constricted for the express reason that Iran is back on the blacklist — although this does not preclude that the FATF decision will be used as a timely excuse to stop handling Iran-related payments by some banks.

The more likely damage to Iran’s economy will arise from the setback that FATF’s decision represents for the wider push for financial transparency reforms in Iran, which including everything from calls for greater fiscal transparency to the adoption of international standards for accounting. In May of last year, I wrote about how this broad campaign was suffering under the pressures of a “financial war” waged by the Trump administration. Although “transparency has become a discourse and ongoing demand” in Iran, to use the words of one reformist parliamentarian, a pervading paranoia got in the way of reforms, including those required by the FATF.

As I wrote at the time, many Iranians increasingly feared that when sanctions were being applied too aggressively, any increase in financial transparency was “akin to exposing the location of a piece of critical infrastructure and leaving it vulnerable to attack.” The Trump administration sought to actively stoke this paranoia through its use of public messaging and sanctions designations, causing a significant rift with European partners engaged in a technical dialogue with the Rouhani administration over the reform process.

I have been closely following the FATF issue for three years, during which time I have had the opportunity to discuss the action plan and its implementation with American, European, and Iranian officials as well as business leaders engaged in trade between Europe and Iran. There remain many unknowns about the economic impact and the damage the countermeasures will have. But what is profoundly clear is how easy it was for the Trump administration to seek to interfere with the apolitical work of FATF and the fragile process of financial transparency reforms in Iran, even though that process was driven in large part by the concerns of the Iranian electorate around systemic corruption.

In this way, the FATF experience offers a cautionary tale. To whatever extent the current nuclear deal will remain resilient in the face of the Trump administration’s maximum pressure and reduced compliance from Iran, and to whatever extent a new deal may be strengthened to avoid a repeat of the current crisis, any diplomatic reset with Iran will require greater protection of the myriad technical processes of reconnection and reform that will be necessary to ensure that promises are delivered. We promised to give Iran a chance. We failed those who tried to take it.


Analysis | Middle East
Kim Jong Un
Top photo credit: North Korean leader Kim Jong Un visits the construction site of the Ragwon County Offshore Farm, North Korea July 13, 2025. KCNA via REUTERS

Kim Jong Un is nuking up and playing hard to get

Asia-Pacific

President Donald Trump’s second term has so far been a series of “shock and awe” campaigns both at home and abroad. But so far has left North Korea untouched even as it arms for the future.

The president dramatically broke with precedent during his first term, holding two summits as well as a brief meeting at the Demilitarized Zone with the North’s Supreme Leader Kim Jong-un. Unfortunately, engagement crashed and burned in Hanoi. The DPRK then pulled back, essentially severing contact with both the U.S. and South Korea.

keep readingShow less
Why new CENTCOM chief Brad Cooper is as wrong as the old one
Top photo credit: U.S. Navy Vice Admiral Brad Cooper speaks to guests at the IISS Manama Dialogue in Manama, Bahrain, November 17, 2023. REUTERS/Hamad I Mohammed

Why new CENTCOM chief Brad Cooper is as wrong as the old one

Middle East

If accounts of President Donald Trump’s decision to strike Iranian nuclear facilities this past month are to be believed, the president’s initial impulse to stay out of the Israel-Iran conflict failed to survive the prodding of hawkish advisers, chiefly U.S. Central Command (CENTCOM) chief Michael Kurilla.

With Kurilla, an Iran hawk and staunch ally of both the Israeli government and erstwhile national security adviser Mike Waltz, set to leave office this summer, advocates of a more restrained foreign policy may understandably feel like they are out of the woods.

keep readingShow less
Putin Trump
Top photo credit: Vladimir Putin (Office of the President of the Russian Federation) and Donald Trump (US Southern Command photo)

How Trump's 50-day deadline threat against Putin will backfire

Europe

In the first six months of his second term, President Donald Trump has demonstrated his love for three things: deals, tariffs, and ultimatums.

He got to combine these passions during his Oval Office meeting with NATO Secretary General Mark Rutte on Monday. Only moments after the two leaders announced a new plan to get military aid to Ukraine, Trump issued an ominous 50-day deadline for Russian President Vladimir Putin to agree to a ceasefire. “We're going to be doing secondary tariffs if we don't have a deal within 50 days,” Trump told the assembled reporters.

keep readingShow less

LATEST

QIOSK

Newsletter

Subscribe now to our weekly round-up and don't miss a beat with your favorite RS contributors and reporters, as well as staff analysis, opinion, and news promoting a positive, non-partisan vision of U.S. foreign policy.