Iran’s Accession on CFT Law

Regulation Name: Law on the Accession to the Terrorist Financing Convention (CFT)
Date Of Release: 18 Oct 2025
Region: Iran
Agency: Iranian Government

Iran’s CFT Accession Law: A Turning Point in AML-CFT Compliance

Iran has long faced pressure from the international community to align its anti-money laundering (AML) and counter-terrorist financing (CTF) framework with global standards. The Financial Action Task Force (FATF) has repeatedly identified deficiencies in Iran’s legal and institutional mechanisms for combating financial crime. One of the FATF’s key requirements was Iran’s ratification of two United Nations conventions — the UN Convention against Transnational Organized Crime (Palermo Convention) and the International Convention for the Suppression of the Financing of Terrorism (CFT). While the Palermo Convention was previously ratified, the CFT had remained stalled due to political disagreements and constitutional concerns.

The CFT, adopted by the United Nations in 1999, obliges member states to criminalize terrorist financing, freeze and confiscate assets linked to terrorism, and strengthen international cooperation. Iran’s attempt to accede to this convention dates back several years, with earlier versions of the bill being approved by Parliament but delayed by the Expediency Discernment Council (EDC). The recent forwarding of the law under Article 123 of Iran’s Constitution marks a renewed effort to bring the country’s AML-CFT laws closer to global norms.

The Law and Its Constitutional Path

The law titled “Law on the Accession of the Government of the Islamic Republic of Iran to the Terrorist Financing Convention (CFT)” has now been officially forwarded for implementation. The process began when the Iranian Parliament (Majlis) approved the bill in December 2018. The Expediency Discernment Council, which mediates between Parliament and the Guardian Council, reviewed and endorsed it in October 2025 with certain amendments and conditions.

On 18 October 2025, Parliament Speaker Mohammad Baqer Qalibaf sent the law to the President’s office for enforcement under Article 123 of the Constitution. This constitutional provision requires the President to sign and issue any law passed by Parliament and approved through the prescribed process. Subsequently, on 22 October 2025, President Masoud Pezeshkian signed the decree and directed the Judiciary, the Central Bank of Iran, and the Ministries of Interior, Intelligence, Justice, Foreign Affairs, and Economic Affairs and Finance to implement the law.

Key Features and Iran’s Reservations

Iran’s accession to the CFT comes with seven specific reservations that aim to preserve its constitutional and political autonomy. The most prominent reservation clarifies that Iran’s accession does not imply any recognition of or relationship with the “Zionist regime,” a phrase commonly used in Iranian legal documents to refer to Israel. Furthermore, Iran has declared that the provisions of the CFT will be implemented only within the framework of its Constitution and domestic laws. Should there be any conflict between the convention and national legislation, domestic law will take precedence.

Another condition instructs the government to assess the progress of its cooperation with the FATF six months after submitting the instrument of accession. If Iran’s name is not removed from the FATF’s list of non-cooperative jurisdictions within that period, the government retains the right to reconsider its membership. These reservations are designed to balance Iran’s international commitments with domestic political sensitivities and the country’s broader foreign policy stance.

Legal and Institutional Implications

By acceding to the CFT, Iran legally commits to criminalizing the financing of terrorism in accordance with international definitions, seizing or freezing assets associated with terrorism, and strengthening its mechanisms for cross-border legal cooperation. The law also expands the scope of reporting obligations for Iranian financial institutions, which must now implement stricter due diligence measures, enhance transaction monitoring, and cooperate more closely with national and international enforcement authorities.

Under Article 123, the directive for implementation has already been issued to the relevant ministries and agencies. This includes ensuring that domestic legislation aligns with the obligations of the CFT and that supervisory authorities establish clear mechanisms for detecting and preventing terrorist financing. The Central Bank of Iran, in particular, will play a crucial role in ensuring compliance within the financial sector, while the Judiciary and Ministry of Intelligence are expected to handle enforcement and prosecution of related offences.

Strategic Significance and FATF Context

Iran’s CFT accession is seen as a major step toward addressing the FATF’s concerns. The FATF had previously placed Iran on its blacklist due to persistent strategic deficiencies in its AML-CFT regime. By joining the CFT, Iran signals to the global financial system its intent to improve transparency, strengthen its financial oversight framework, and potentially restore confidence among international banks and investors.

However, the reservations attached to the law may limit the practical impact of Iran’s commitments. The clause prioritizing domestic law could restrict the extent to which CFT provisions are enforced in cases where they conflict with local legislation. Additionally, Iran’s complex geopolitical environment, coupled with ongoing international sanctions, continues to pose challenges for reintegration into the global financial network. While accession to the CFT is a positive move, its effectiveness will depend on how comprehensively Iran implements its obligations and how the FATF assesses these actions in its upcoming mutual evaluations.

Relevance for AML and Compliance Stakeholders

For global financial institutions, regulators, and compliance professionals, Iran’s CFT accession introduces both opportunities and cautionary considerations. Enhanced legal alignment with FATF standards could lead to improved risk transparency for Iranian counterparties. Financial institutions conducting due diligence or correspondent banking activities involving Iran should monitor updates from the FATF, the Central Bank of Iran, and international regulators to evaluate shifts in risk classification.

At the same time, given Iran’s conditional accession, compliance officers must continue to apply heightened scrutiny when dealing with Iranian-related transactions. The FATF’s response and subsequent evaluation will be crucial in determining whether Iran remains on its blacklist or progresses toward partial normalization within the international financial system.

The forwarding and implementation of the Law on the Accession of the Government of the Islamic Republic of Iran to the Terrorist Financing Convention (CFT) represents a landmark moment in Iran’s ongoing efforts to modernize its AML-CFT regime. It fulfills a key step toward meeting international expectations and potentially improving the country’s financial credibility. Yet, Iran’s seven reservations — particularly its insistence on constitutional primacy and political conditions — mean that its compliance will be closely scrutinized by both the FATF and the global community.

If effectively implemented, the law could enhance Iran’s ability to combat terrorist financing and improve its standing within the international financial system. But if its conditions limit operational enforcement, Iran may find itself still navigating the complex terrain between international compliance and domestic sovereignty. The coming months will determine whether this legislative milestone marks a genuine transformation or a symbolic gesture in Iran’s long road toward FATF compliance.

Read about the law here.

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