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Article
Publication date: 22 July 2020

Vahid Molla Imeny, Simon D. Norton, Mahdi Salehi and Mahdi Moradi

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…

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.

Details

Journal of Money Laundering Control, vol. 24 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 25 September 2020

Vahid Molla Imeny, Simon D. Norton, Mahdi Salehi and Mahdi Moradi

This study aims to identify the sources of laundered money in Iran and the destinations to which it is transferred, independently verified by auditors. Based on such data…

Abstract

Purpose

This study aims to identify the sources of laundered money in Iran and the destinations to which it is transferred, independently verified by auditors. Based on such data, the study aims to develop a simple model of endogenous and exogenous factors facilitating money laundering in developing countries, which can inform domestic and international legislative and regulatory responses.

Design/methodology/approach

Questionnaires were sent to Iranian certified public accountants who worked for auditing firms in 2019 and who have encountered suspected money laundering during their work with clients.

Findings

The government and public officials are the primary sources of money laundering activity in Iran. The main destinations of laundered funds are investments abroad, gold, foreign currencies, real estate and purchases of luxury goods. Domestic legislation, while bearing similarities with that found in other jurisdictions such as the UK and the USA, is flawed in several ways, including an inability to determine beneficial ownership of funds and weak enforcement.

Originality/value

Because of international sanctions and the prevailing political situation, it is difficult to obtain data for money laundering and other financial crimes in Iran. The data obtained is of importance to international bodies in understanding the nature of money laundering in Iran, and how to negotiate in the future to address mutual concerns. Given the country’s perceived high association with money laundering, the data obtained is of value in identifying the specific characteristics of the problem.

Details

Journal of Money Laundering Control, vol. 24 no. 2
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 19 March 2021

Simon D. Norton and Vahid Molla Imeny

This paper aims to compare products traded in secular and Islamic banking environments prior to the credit crunch of 2007–2008; to locate the comparison in a Schumpeterian…

Abstract

Purpose

This paper aims to compare products traded in secular and Islamic banking environments prior to the credit crunch of 2007–2008; to locate the comparison in a Schumpeterian model of creative destruction of dynamic innovation in the capital markets; and to evaluate the implications for diversity of investor product choice.

Design/methodology/approach

Financial products are critiqued using qualitative criteria, including underestimation of risk implicit in mortgage-backed securities and securitisation, excessive speculative activity in credit default swaps and the magnification of leverage and volatility. Comparable Islamic products are considered for the extent to which they facilitate the same precursors of market crises.

Findings

Innovation in secular financial markets has traditionally led to asset bubbles, underestimation of risks and market exuberance. Islamic banking constrains creativity by prohibiting risk transference and disconnection of financing activity from social context and economic purpose. As such, the latter reduces Schumpeterian creative destruction but at the cost of reduced investor choice and market liquidity. Restriction of the reallocation of risk between those who do not wish to hold it and those who do dampens innovation but would have prevented the trading of products which contributed to the credit crunch.

Originality/value

The constraining effect of Islamic banking upon creativity and innovation is considered alongside its capacity to reduce market volatility, speculation and systemic instability. Schumpeterian theory deepens the analysis in terms of the drivers of innovation and market collapse.

Details

Qualitative Research in Financial Markets, vol. 13 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 8 February 2021

Vahid Molla Imeny, Simon D. Norton, Mahdi Moradi and Mahdi Salehi

This study aims to compare judicial and auditor expectations of audit in the detection and reporting of money laundering in Iran. It also aims to assess the implications…

Abstract

Purpose

This study aims to compare judicial and auditor expectations of audit in the detection and reporting of money laundering in Iran. It also aims to assess the implications of expectations gap for the reliability of data provided to the Financial Action Task Force (FATF) in its blacklisting policy.

Design/methodology/approach

Questionnaires were administered to auditors to determine perceptions of their anti-money laundering (AML) reporting obligations. These were also completed by Iranian judges who hear money laundering prosecutions and who agreed to participate in the research. The group was created through the “snowballing” technique.

Findings

There is significant divergence between judges and auditors regarding the latter’s AML reporting obligations. Self-perception among auditors regarding investigative duties is insufficiently aligned with expectations of the FATF, particularly where there is use of corporate structures, charities and trusts in which identity of true owners, of payers and payees of funds cannot be accurately verified. This gap presents a significant terrorist financing risk.

Practical implications

The expectations gap makes training in forensic accounting, as well as compliance with international reporting expectations, a matter of urgency for the Iranian auditing profession. The judiciary needs to be more aware of international expectations.

Originality/value

Data regarding judicial expectations of auditors’ AML reporting obligations is difficult to obtain and of a highly sensitive nature. This research has obtained such data which has relevance to the FATF blacklisting policy, and to international organisations tasked with disrupting terrorist financing networks.

Details

Journal of Money Laundering Control, vol. 24 no. 4
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 15 January 2020

Mahdi Salehi, Vahid Molla Imeny and Ahmad Khaleghi Baygi

According to the last public statement of FATF (2018), Iran has some significant deficiencies in its anti-money laundering (AML) regime, especially in suspicious…

Abstract

Purpose

According to the last public statement of FATF (2018), Iran has some significant deficiencies in its anti-money laundering (AML) regime, especially in suspicious transaction reporting. In this research, the author tries to empirically show that Iranian auditors do not a response to AML cases effectively and adopting an AML standard is required for Iranian auditors. Therefore, it helps to improve one of the deficiencies of Iran’s AML regime.

Design/methodology/approach

To collect data, the author designed and developed a questionnaire and the questionnaire sent to all partners of Iranian auditing firms, which have authorization from the Iranian Association of Certified Public Accountants on December 2018.

Findings

The finding shows most of the sample auditors’ claim that it is necessary to have an AML standard and it can be helpful for them. Furthermore, most of the Iranian auditors in money laundering cases, which companies are involved do nothing except filling the checklist of Anti-Money Laundering Implementing Regulations for Business and Non-business Companies (2012).

Originality/value

The results of the current research make clear the necessity of adopting an AML standard for Iranian auditors and recommend Iranian authorities to improve Iran’s AML regime.

Details

Journal of Money Laundering Control, vol. 23 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 5 June 2019

Mahdi Salehi and Vahid Molla Imeny

Money laundering has become a global concern in recent years, and many countries attempt to employ some preventive measures to cope with this phenomenon. Anti-money…

Abstract

Purpose

Money laundering has become a global concern in recent years, and many countries attempt to employ some preventive measures to cope with this phenomenon. Anti-money laundering (AML) controls vary in different countries, and consequently many studies, to date, have taken account of these differences along with the AML efforts. In this regard, financial institutions play an important role to tackle money laundering by involving in all three stages of money laundering (placement, layering and integration). The purpose of this paper is to investigate the AML situation of the Iranian banks and also study some related variables.

Design/methodology/approach

Using the Wolfsberg questionnaire, a survey consisting of 24 Iranian authorized banks in 2017 was conducted.

Findings

We conclude that Iranian banks have proper AML controls in place. Furthermore, it is concluded that banks with more staffs and more experienced employees are more likely to establish strong AML controls; conversely, banks with more branches are less likely to set up strong AML controls.

Originality/value

The present study is the first study conducted in Iran, and the outcomes of the study may be helpful to the Iranian and also International Banking System to establish stronger AML controls.

Details

Qualitative Research in Financial Markets, vol. 11 no. 4
Type: Research Article
ISSN: 1755-4179

Keywords

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