Why in the News?

Iran has officially ratified the UN International Convention for the Suppression of the Financing of Terrorism (CFT), signalling a major policy shift toward international financial reintegration.

Why such move by Iran?

Economic Isolation: Iran’s blacklisting by FATF in 2020 and U.S.-led sanctions have severely restricted its banking access, trade, and foreign investment.
Reformist Agenda: President Pezeshkian’s government seeks economic stabilization through engagement, not confrontation, with Western institutions.
Trade Barriers: Even traditional allies like Russia and China face difficulty trading with Iran due to its non-compliance with FATF norms.
Diplomatic Leverage: CFT accession signals willingness to reform and could help Tehran negotiate sanction relief or trade facilitation.
Political Balance: The government faces domestic opposition from hardliners who fear the law will expose Iran’s support for groups like Hezbollah and Hamas, but reformists view it as essential for economic recovery.

About the International Convention for the Suppression of the Financing of Terrorism (CFT):

Adopted: 1999 by the UN General Assembly; entered into force in 2002.
Parties: Ratified by 188 countries including India, making it one of the most widely accepted anti-terror treaties.
Objective: To criminalize, prevent, and punish the financing of terrorism and enhance international cooperation against terror-linked financial networks.
Definition: Financing terrorism includes collecting or providing funds—directly or indirectly—with intent or knowledge that they will be used for terrorist acts causing death or injury to civilians or non-combatants.
Key Provisions:
- States must criminalize terror financing in domestic law.
- Freeze, seize, and confiscate assets linked to terrorism.
- Ban misuse of banking secrecy to block investigations.
- Facilitate extradition, legal cooperation, and mutual assistance.
- Ensure political or ideological motives cannot justify terrorist financing.
Legal Mechanism: Creates obligations for states to report suspicious transactions and cooperate across jurisdictions for enforcement.

FATF and CFT: Complementary Global Frameworks

CFT (1999): Provides the legal foundation, obligating states to define and criminalize terror financing under international law.
FATF (1989): Provides the operational and policy framework, setting 40 detailed recommendations for implementation, monitoring, and compliance.
Interaction:
- FATF requires its members to implement CFT obligations in national systems.
- CFT establishes criminalization and cooperation, while FATF ensures compliance, enforcement, and evaluation.
Iran’s Case:
- FATF blacklisted Iran for failure to adopt CFT and AML standards.
- Ratification of CFT is Iran’s first step toward FATF re-evaluation and possible removal from the blacklist.
- Compliance would enable Iranian banks to restore correspondent relations and resume limited international transactions.