The Iranian government has announced that the International Financial Task Force (FATF) has accepted Tehran’s request to remove Iran from one of its warning categories.

Iran has been on the financial watchdog’s ‘blacklist’ in recent years for not adhering to transparency and international conventions against money laundering and terrorism financing. The Iranian government sent a letter to FATF earlier this month requesting Iran’s removal from its worst category that only two other countries in the world share: Myanmar and North Korea.

According to Iranian state media on Sunday, and an official post on X, the government has received a written response from the head of the FATF, confirming that it has instructed members to remove Iran from recommendation number 7. However, it seems that this does not mean Iran has been removed from the inter-state agency’s blacklist.

Recommendation #7 pertains to non-proliferation only. FATF website describes it as, “FATF Recommendation 7 requires countries to implement targeted financial sanctions to comply with the United Nations Security Council Resolutions (UNSCRs) relating to the prevention, suppression and disruption of proliferation of weapons of mass destructions (WMD) and its financing.”

While this could have affected Iran because of the JCPOA nuclear agreement it concluded with world powers in 2015, and the subsequent UN Security Council Resolution 2231 restricting Tehran’s nuclear activities, Iran’s status on the blacklist is mainly due to its non-compliance with international financial standards.

Despite these preliminary determinations, the issue of the FATF letter allegedly received by Iran remains murky. First, a copy of Iran’s earlier letter to the agency has not been published and it is not clear what Tehran exactly asked FATF. Second, the response Iran says to have received has also not been published as of the time of this report, and it remains unclear what FATF has exactly said. 

FATF identifies problematic countries, and high-risk countries, in terms of financial dealings. It lists countries, “with serious strategic deficiencies to counter money laundering, terrorist financing, and financing of proliferation. For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence, and in the most serious cases, countries are called upon to apply counter-measures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks emanating from the country.”

FATF is an international organization formed by G7 member countries to protect the international financial system and its recommendations shape banking policies of most countries and businesses who want to protect their own integrity and reputations. Thus, Iran’s international banking is severely impacted by its status in the FATF blacklist.

To what extent the modification of Recommendation 7, if true, would have a positive impact on Iran remains to be seen. Iranian media presents the FATF letter, as claimed, to be a significant victory for Tehran, but it is too soon to reach a definitive assessment.