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

Vahid Molla Imeny (Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran)
Simon D. Norton (Department of Accounting and Finance, Cardiff Business School, Cardiff University, Cardiff, UK)
Mahdi Salehi (Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran)
Mahdi Moradi (Department of Economics and Administrative Sciences, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran)

Journal of Money Laundering Control

ISSN: 1368-5201

Article publication date: 22 July 2020

Issue publication date: 25 May 2021

158

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.

Keywords

Acknowledgements

This research was assisted by Vania Nic Tadbir Co. (an Iranian accountancy firm). The authors would like to thank all the Certified Public Accountants who participated in this research by completing the questionnaire and providing insight and expertise. The authors especially thank Dr. Khaleghi for his support and encouragement.

The authors confirm that they have no competing interests to declare.

This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.

Citation

Molla Imeny, V., Norton, S.D., Salehi, M. and Moradi, M. (2021), "Perception versus reality: Iranian banks and international anti-money laundering expectations", Journal of Money Laundering Control, Vol. 24 No. 1, pp. 63-76. https://doi.org/10.1108/JMLC-06-2020-0064

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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