Challenge In Money

Laundering
By: Dr Gholamhossein Davani

Member of High Council of Iranian Association Of Certified Accountants

(IACPA)
IMA,AAA,IIA,CFE,BAA,EAA,CAAA,AIA,FMA
Chairman of Dayarayan Auditing&Finanacial Services Firm (Provisional member of RSM
International)

1
 Challenge In Money
Laundering

Part one

2
 Money Laundering

Money laundering is all about deception. Its aim is

to deceive the authorities as to the origination,
existence and/or application of illegal sources of
income and the subsequent processing of that
income to make it appear to have been
legitimately earned. Money laundering plays a
fundamental role in facilitating the ambitions of
the drug trafficker, the terrorist, the organized
criminal, the inside dealer, the tax evader as well
as the many others who need to avoid the kind of
attention from the authorities that sudden wealth
brings from illegal activities. This 'facility' is the
placing of the proceeds of such activities beyond
the reach of asset forfeiture laws.
3
 ?What is money laundering
• Money laundering is the process by which the
proceeds of crime, and the true ownership of
those proceeds, is changed so that the proceeds
appear to come from a legitimate source.
• The ability to launder the proceeds of crime is
vital to the success of criminal operations. Anti
Money Laundering (“AML”) laws and systems are
aimed at preventing criminals from being able to
benefit from their actions, and at taking the profit
out of crime.

4
 • The term "Money laundering" is often said to have
originated at the time of the famous American
gangsters that arose originally out of Prohibition - the
banning of alcoholic drinks. Several mechanisms were
used to disguise the origins of the large amounts of
money generated by the import and sale of alcohol
and other "rackets" such as gambling, some of which
was illegal.
• Ironically, one of the methods of concealing the source
of the money was legal gambling. The major headache
that gangsters faced was that the money was in cash,
often in small denomination coins. If the coins were
put into the bank, the questions would be asked. But
the storage of large amounts of money in low value
coins is a storage nightmare. So they created
businesses, one of which was slot machines, and
another of which was laundries - so, it is said, that the
term "Money laundry" was born.
5
 Money laundry is considered one of the most
serious financial crimes due to its different
effects on the mental, economic, social and
ethical aspects whether on the level of
individuals, society or institutions.  It is one of
the most complicated economic problems. 
Balance and settlement are the basic
components in achieving a luxurious society. 
Any phenomenon that affects balance and
settlement will affect the future of the society’s
development and progress.  .

6
 Organized Crime in the
21.Century
• The trans-national problem
• International problem
• Dynamical problem
• Material – technical problem
• Global problem

7
 ?Why Study Money Laundering
Governments are now realizing that the pursuit
and confiscation of illegal monies from crime is
as effective a way of attacking crime as
arresting the felons, perhaps even more so
given that many drug barons are able to
continue to conduct business from their prison
cells e.g. Pablo Escobar. So by seizing the
rewards from crime it is hoped that such rent
seeking activity is discouraged. The extent to
which money laundering enables criminals to
engage in activities harmful to the economy
validates its study so as to prevent such
activity.
8
 Most financial institutions are unaware of the
extent to which the world financial markets and
banking system are being used to process illegal
monies. Banks and financial institutions are at
risk from being used for such activities as failure
to observe their new legal responsibilities in
combating money laundering leaves many of
them open to criminal prosecution and the
subsequent adverse publicity.

9
 Therefore the study of money laundering as a
means to countering crime, which imposes huge
economic resource costs on society and threatens
the proper functioning of the economy, as well as
threatening the stability of the banking system, is
a fully justified area of research.

10
 It should be noted that money laundering is not
merely confined to criminals. Many governments
and their agencies engage in money laundering
activities to provide a cover for various covert
operations. The Central Intelligence Agency (CIA)
is known to have used money laundering to
forward money to support the Iran-Contra Rebels,
while the British Government use of it in the
Matrix Churchill Affair is widely known. However
the size of such activities is dwarfed by illegal
ones.

11
 Money laundry generally means a group of
procedures, methods or means that aim at hiding
the real source of the money or possessions
which come from criminal acts so that this money
becomes legitimate and is used again in the
economy. Generally speaking, the financial sector
could be the most influenced sectors by the
operations of money laundry.  This is because this
sector is the medium used by money launderers
to hide the real source of the money and its
profits.

12
 Some researchers define money laundry as the
operation of transferring and transporting money,
which has been gained by illegal methods, has
evaded legal obligations, or has any other form of
keeping wealth, to cover up its source. In Islamic
countries religious charities are involve in
economic activities specially illegally and black
market business.

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 The Money Laundering Cycle
Money laundering is the process that
disguises illegal profits without compromising
the criminals who wish to benefit from the
proceeds. There are two reasons why
criminals -- whether drug traffickers,
corporate embezzlers or corrupt public
officials -- have to launder money: the money
trail is evidence of their crime and the money
itself is vulnerable to seizure and has to be
protected. Regardless of who uses the
apparatus of money laundering, the
operational principles are essentially the
same.

14
 Stages of Money Laundry
Placement:
It represents placing the dirty money into the financial
or bank system by deposits.  They are placed in
different accounts in one or more banks whether in one
or more countries.
Layering:
It means hiding the real source of this money,
separating it from its suspicious source and giving it a
legal and honest cover.  Then, it is to be transported to
professional companies.  The money, thus, will be
legally good for use in economic projects.
Integration:
This last stage represents giving the legal quality to the
illegal money.  It will be ready for investment for it will
not be easy to discover it except by secret investigation
through complicated channels.

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16
 Organized Crime
Criminal groups have established international
networks to carry out their activities more
effectively through sophisticated technology
and by exploiting today's open borders. The
Global Programme against Transnational
Organized Crime maps the latest trends among
organized criminal groups and highlights their
potential worldwide danger so that preventive
action can take place.

17
 Organized crime can be categorized:
Theft and Fraud:
• Victimizing business:
- Hijacking of cargo trucks
- robbery
- Bankruptcy fraud (also known as "bust-out")
- Insurance fraud
- stock fraud (Inside trading)
• Victimizing individual persons:
- Car theft (either for dismantling at “Chop shops" or
for export)
- burglary
- Credit cards
- stock fraud (“pump and dump" scam)
• Victimizing state:
- bid-rigging public projects
- money counterfeiting
- smuggling, manufacturing illegally (counterfeiting) or
trading in untaxed alcohol (bootlegging) or cigarettes
18 (buttlegging)
- providing immigrant workers to avoid taxes
 • Providing illegal services and goods:
- Loansharking
- Gambling
- Prostitution
- Pornography
- Drug trafficking
- Weapons trafficking
- Murder for hire
- Toxic waste dumping (in Japan)
- People smuggling
- Trafficking in human beings
• Business and labor racketeering:
- casino skimming (in Las Vegas)
- setting up monopolies in rigid market low-tech industries
(e.g. garbage collecting, cement pouring)
- bid-rigging
-abusing labor unions (in eastern USA):
extortion (e.g. construction, transport, garment industry,
longshoremen)
getting "no-show" and "no-work" jobs
using non-union labor and pocketing the wage difference
- monopolizing the supply of immigrant workers with the
associated people smuggling (Russian-Estonian Obtshak in
19 Finland)
• Money laundering
 Groups and of post-conflict and
transitional societies
Terrorism
Terrorism constitutes a threat to international
peace and security, and it is contrary to the
purposes and principles of the United Nations.
UNODC's Global Programme against Terrorism is
an integral part of the United Nations' collective
action against terrorism. The Programme,
working closely with the Counter-Terrorism
Committee of the Security Council, provides
technical assistance to Member States and
promotes international cooperation against
terrorism.

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 Corruption

Corruption is a complex social, political and

economic phenomenon. The Global Programme
against Corruption targets countries with
vulnerable developing or transitional economies
by promoting anti-corruption measures in the
public sphere, private sector and in high-level
financial and political circles. The Judicial Integrity
Programme identifies means of addressing the
key problem of a corrupt judiciary.

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 Forms or aspects of
corruption
• Cronyism and crony capitalism
• Bribery
• Nepotism
• Political Sleaze (UK Politics)
• Rent seeking
• Lobbying without public scrutiny
• Kleptocracy- a government so corrupt that no
pretense of honesty remains

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 Examples of corruption
• Political scandals of the United States
• Hired Trucking Scandal
• Corruption scandals in the Paris region
• Illegal Logging
• Tangentopoli
• Corruption in Latin America
• Corruption in South Korea& Russian
• Sponsorship scandal

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 Trafficking in Human Beings
The smuggling of migrants and the trafficking of
human beings for prostitution and slave labour
have become two of the fastest growing
worldwide problems in recent years. The Global
Programme against Trafficking in Human Beings
will enable countries of origin, transit and
destination to develop joint strategies and
practical action against the trade in human
beings.

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 • The Mafia, also referred to in Italian as Cosa
Nostra, which is generally translated this thing of
ours in the Italian language, is an organized
criminal secret society which evolved in mid-19th
century Sicily. An offshoot emerged on the East
Coast of the United States during the late 19th
century following waves of Italian immigration to
that country.
• A member of the mafia is called in Italian a
mafioso, and the plural is mafiosi. In Sicilian the
word is mafiusu and mafiusi, respectively. Mafiosi
like to think of themselves as a special society of
"men of honor".
• "Mafia" is often used by extension to refer to any
large group of people engaged in criminal
racketeering activities, such as the Russian
Mafia, Mexican Mafia, Japanese Yakuza, Irish Mob,
Chinese Triads, Indian mafia, and the allegedly
extinct Indian Thuggee.
25
 • The Russian Mafia "Red Mafia" is a name
given abroad to groups of organized criminals
of various ethnicity which appeared from the
Soviet Union after its disintegration. Apart
from ethnic Russians, the term comprises the
Chechen, the Georgian, the Ukrainian, the
Armenian, the Azeri mafiosi, as well as so
called "mafia" groups from other former USSR
republics. [For sake of the article, the terms
"mafia" and "mafiya" will both be used.]
• The Russian Mafia appears to be organized in
similar ways to the legendary Italian mafia. It
is believed, however, to be a very loose
organization with internal feuds and murders
being commonplace.
• A particularly brutal practice rumored to be
utilized by the Russian Mafia is the killing of
not only of the individual who has "snitched"
26
or turned against the Organizatsiya, but also
 Many of the bosses and main members of the
Russian mafia are believed to be ex-Soviet Army
and ex-KGB officers who lost their posts in the
reduction of forces that began in 1993 after the
end of the Cold War. It is also believed that many
of the groups' enforcers are ex-Russian Spetsnaz
special forces, an organisation renowned for its
brutality. Russian mobsters recruit sportsmen, too
- boxers, martial artists, weightlifters, [as funding
for sports had decreased sharply] and other
olympic athletes. In some cases, the Russian
Mafiya has recruited olympic sharpshooters to
carry out hits.

27
 Known Russian Mafia Personalities
• Zeev "Zevik" Rosenstein (extradited to the U.S. from
Israel)
• Viktor Bout (former KGB Major turned arms merchant)
• Konstantin Golikov(notorious assassin, now has been
killed)
• Sergei Mikhas Mikhailov
• Grigory Lushansky (leader of Nordex)
• Evsei "Little Don" Agron (killed)
• Ludwig "Tarzan" Fainberg (incarcerated in an Israeli
prison)
• Valentin Chpelivia (involved in the Kremlingate according
to Lucy Komisar)
• Vyacheslav "Yaponchik" Ivankov (incarcerated in an
American prison)
• Alimzhan Tokhtakhounov (accused of fixing figure skating
at the 2002 Salt Lake City Olympics).
• Sergei Belov (Boss of eurocorp)
28
 Factors that affect money
laundry are divided into two
types
1- Factors that contribute in its appearance.
   Examples: confusion that affects the local
economy, weak economic policies which are
used, chaos that accompanies economic and
security imbalances.

2- Factors that contribute in its increase.

   Examples :open-door policies, distorting the
continued economic frame, open-door relation
with international monetary markets.  The
international markets lead to money laundry
prosperity by 25% of the size of operations
which reached to US$250 billion per year.
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 Money Laundry Effects
Effects on politics, administration, and
institutions
Corruption poses a serious development challenge. In
the political realm, it undermines democracy and good
governance by flouting or even subverting formal
processes. Corruption in elections and in legislative
bodies reduces accountability and distorts
representation in policymaking; corruption in the
judiciary compromises the rule of law; and corruption
in public administration results in the unfair provision
of services. More generally, corruption erodes the
institutional capacity of government as procedures are
disregarded, resources are siphoned off, and public
offices are bought and sold. At the same time,
corruption undermines the legitimacy of government
and such democratic values as trust and tolerance
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 Economic effects

• Corruption also undermines economic development by

generating considerable distortions and inefficiency. In the
private sector, corruption increases the cost of business
through the price of illicit payments themselves, the
management cost of negotiating with officials, and the risk
of breached agreements or detection. Although some claim
corruption reduces costs by cutting red tape, the availability
of bribes can also induce officials to contrive new rules and
delays. Where corruption inflates the cost of business, it also
distorts the playing field, shielding firms with connections
from competition and thereby sustaining inefficient firms.
• Corruption also generates economic distortions in the public
sector by diverting public investment into capital projects
where bribes and kickbacks are more plentiful. Officials may
increase the technical complexity of public sector projects to
conceal or pave way for such dealings, thus further
distorting investment. Corruption also lowers compliance
with construction, environmental, or other regulations,
reduces the quality of government services and
infrastructure, and increases budgetary pressures on
government.

31
 Economists argue that one of the factors behind
the differing economic development in Africa and
Asia is that in the former, corruption has primarily
taken the form of rent extraction with the
resulting financial capital moved overseas rather
invested at home (hence the stereotypical, but
sadly often accurate, image of African dictators
having Swiss bank accounts). Corrupt
administrations in Middle East like Iran have
often taken a cut on everything (requiring bribes),
but otherwise provided more of the conditions for
development

32
 Measuring corruption
• Measuring corruption - in the statistical sense - is naturally not a
straight-forward matter, since the participants are generally not
forthcoming about it. Transparency International, the leading anti-
corruption NGO, provides three measures, updated annually: a
Corruption Perceptions Index (based on experts' opinions of how
corrupt different countries are); a Global Corruption Barometer
(based on a survey of general public attitudes toward and experience
of corruption); and a Bribe Payers Survey, looking at the willingness
of foreign firms to pay bribes. Transparency International also
publishes the Global Corruption Report. The World Bank collects a
range of data on corruption, including a set of Governance Indicators.
• Transparency International has performed perception surveys from
time to time. The 10 least corrupt countries, according to one
conducted in 2005, are (in alphabetical order): Australia, Austria,
Denmark, Finland, Iceland, New Zealand, Norway, Singapore,
Sweden, and Switzerland.
• According to the same survey, the 9 most corrupt countries are (in
alphabetical order): Angola, Bangladesh, Chad, Côte d'Ivoire,
Equatorial Guinea, Haiti, Myanmar, Nigeria, and Turkmenistan
• The rank of Iran for 2005 was 92
• However, the value of that survey is disputed, as it is based on
subjective perceptions. Sophisticated technology may be available to
those countries considered by the public as "least corrupt" to conceal
corruption from public view or disguise it as legitimate dealings.
• According to independed research Tehran,Mashhad,Shiraz and
Isfehan are the four most corrupt states within the Iran.

33
 Sources of illegal Money
• Money laundry is considered a complicated operation that has
multiple sources.  There are activities that seem to be the
sources of money laundry, such as:
- Smuggling goods without paying duties.
- Trafficking in illegal and immoral goods and services.
- Trafficking in human captives through kidnapping persons
to get ransoms or benefits.
- Bribes and administrative corruption and benefiting from
public jobs.
- Tax evasion and hiding the sources of profit.
- Commissions gained by individuals or projects in return for
striking big bargains in return for facilities and speed by
ignoring times and conditions.
- Incomes from fraudulence, deception and forgery of
documents.
- Trade fraud, trading spoiled goods, foreign trademarks
counterfeit, stealing mental creativity and abusing
individual ownership.
- Embezzlement and stealing from public property under the
pretext of reconstruction, projects or security reasons. 
34 Making use of official authorities to transfer money to the
pocket of specific individuals instead of actually building
schools or establishing projects.
 The Magnitude of Money
Laundering
• By its deceptive nature, the full extent of money laundering
is unknown; estimates range from $500 billion to $1500
billion( US banks launder over $500 billion a year in dirty
money)

• That is $5 trillion over 10 years. Internationally the figure is

$1.5 trillion a year.
• The main bulk of monies to be laundered originate from the
narcoeconomy and so by estimating the size of the
narcoeconomy a good approximation of the size of global
money laundering may be achieved.

• The Financial Action Task Force, (FATF), established in 1989

by the G7 and European Community to assess the problem of
money laundering and prevent the financial system being
used for its purposes, estimated in 1990 that in the US and
Western Europe drug trafficking generated $85 billion
annually from laundering and investment. Thus almost $233
million in drug money is available daily for laundering. The
task force concluded in 1990 that, in the US and Western
Europe, drug traffickers' profits probably yielded $232,115
35 per minute. One can get a feel for the size of the
narcoeconomy by the fact that in 1990 approximately 20 per
 In America, Citibank is the biggest money
launderer followed by JP Morgan Chase. Not
only do they set up offshore accounts for
their clients, they also launder trillions of
dollars through correspondent banking.
That's when a bank opens a correspondent
account with an existing US bank and
through that account offers services, which
.are bookkeeping entries
The International Monetary Fund (IMF)
estimates that between 2 and 5 percent of
global GDP may be involved in money
laundering, making it the world's largest
industry. The United Nations estimates that
anywhere from US$100 billion to US$1 trillion
in dirty money is funneled through the
international banking system annually, with
Asia accounting for at least US$100 billion to
.US$200 billion
36
 ?What is the Government's strateg

It is difficult to estimate how much money is laundered in

the IRAN every year, but it is likely to be $5-6 billions .
Money laundering is also a global problem. At one end of
the scale it can involve the very simple conversion of
criminal proceeds and at the other, the routing of complex
transactions through many countries to disguise the illegal
origin of the money. Accordingly AML in Iran controls have
to be international if they are to be effective. Some of the
recent changes to the Iran legislation covered in this
Guidance flow from anti-money laundry. This Directive aims
at improving AML controls throughout world-wide. The
Persian Gulf (Specially UAE ) are major international
financial and legal centre, with a high reputation for
honesty and integrity. This means that the Persian Gulf
financial and professional firms are attractive to money
laundries. I amen's sure the local government wants to
ensure that these firms are not used by launderers in spite
of all of these countries have approved Anti-money Laundry
Law.
37
 • Good governance

• Rule of law

• Transparency (humanities)

• Accountability

• Comitology

38
 Which Countries are involve in
Money Laundry
• Swiss
• UK
• USA
• Russian
• UAE
• Iran
• Qatar
• Turkey
• Luxemburg
• Offshore
Zones

39
 • The Reputed Cocaine Bank Money Laundry Wizard For
George
Bush Family Arrested In Chicago
By Sherman H. Skolnick <skolnick@ameritech.net>1-
28-2000

• The reputed cocaine bank money laundry wizard for

former President George Herbert Walker Bush and two
of his sons has been arrested in Chicago. The matter is
tied as well reportedly to corrupt top IRS Officials,
Chicago Region Office fingered by our work.

• Giorgio Pelossi, a prominent Swiss accountant, was

arrested January 20, 2000, at O'Hare International
Airport, after officials of the U.S. Immigration and
Naturalization Service, INS, found he was wanted on an
international arrest warrant issued in Milan, Italy, about
a year previous. Pelossi, 61, was somehow actually
traveling under his own name.
40
 The Functional Construction of Organize
Criminal Structures
Criminal
area

Terrorism Gambling

Theft,
robbery Prostitutio
Little n

Bosses
Brain
Alcohol and
Racketeerin drug trade
g

LEADER
Bribing,
relations with
Money
administration
laundry
and state
center

Manager Entrepreneurship
Lawyer s

Legal
business
Consultant

Shadow area

41
 The "Golden Rules" remain the
same as set out in earlier
guidance
• The "Golden Rules" remain the same as set
out in earlier guidance:
• Know the legislation;
• Know the professional guidelines;
• Know your client;
• Know your business;
• Train your staff;
• Monitor compliance.

42
 Source: www.amlcft.com

43
 MoneyLaundering In Iran

Part 2

44
 Iran new law & regulation

1-Regulations on Avoidance of Money Laundering(2004)

2- E. commerce law 2003

3- The Law of Using the Professional Services of the Certified Public

Accountants (1993)

4- Bill Text of VAT in Iran (Non approved)

5- Article 49 of constitution law

6- Article 662 of Islamic criminal law

7- Convention Against Illicit Trafficking in Narcotic Drugs and

Psychotropic Substances 1988

45
 The constitution of the
Islamic republic of Iran
Article 49- The Government shall be required
to take wealth derived from usury, usurpation,
bribery, embezzlement, theft, gambling,
misuse of pious endowments, misuse of
Government contracts and transactions, sale
of original Mavat(1) and Mubahat(2) centers of
corruption and other illegitimate acts, and to
return it to its rightful owner; in case the
owner is not known, to return it to the
Treasury. This provision shall be carried out by
the Government by examining, investigating
and substantiating the proof in accordance
with the provisions of Sharia(3).
1. Ownerless barren lands

1. Ownerless Properties
2. Religious law

46
 Legislation to combat money laundering in Iran
was submitted to the Parliment on 8 October
2002 by Minister of Economic Affairs and
Finance. The issue has attracted more
attention from observers of Iran outside the
country than from the Iranian public. Yet the
decision to counter money laundering is of
economic, domestic and foreign policy
significance for Iranians. Moreover, it could
play a crucial role in advancing the agenda of
Iran’s reform movement. On 25 April,2006 the
Parliment passed the act and it is now awaiting
the approval of the hard line-dominated upper
house, the Guardian Council. This article will
elaborate on different aspects of countering
money laundering in Iran. Iran Focus will
elaborate on the content of the bill, its
advantages and shortcomings in later issues.
47
 Money laundering in Iran has been
increasing since the end of the 1980–88 Iran–
Iraq war. According to Iranian newspaper
sources, the amount laundered in Iran rose
from about 6% of GDP in the mid-1970s to
close to 25-30% in the 2005. In 2003,
a prominent Iranian banking official
estimated that money laundering
encompassed 20% of Iran’s economy.
Money laundering, although not confined to
developing countries, arises from extensive
underground financial activities that are
made easier when financial institutions are
underdeveloped as is the case in Iran. From
the $11.3 billion a year that is spent on
smuggling commodities in Iran, some $6.1
billion is laundered by international criminal
networks.

48
 The decision to initiate an anti-money-
laundering campaign falls under the Khatami
government’s policies of improving the
underdeveloped economy. In this effort, the
government’s economic team has sought to
strengthen the national currency, control
inflation, promote the private sector, enact
stringent banking regulation and monitor
policies, and expand social and job-related
insurance. All this marks the government’s
intention of clamping down on illegal financial
activities, a strategy that it considers
necessary to counter underground economic
activities. However, what is in question is the
extent to which such policies will face
resistance from monopolists and those
engaged in rent-seeking activities.

49
 Iran’s specifics
Drug trafficking one area where money laundering is
extensively used is in drug deals, to which Iran is
highly exposed. There are two main illicit opium-
producing areas in Asia, the Golden Crescent (Iran,
Pakistan and Afghanistan) and the Golden Triangle
(Burma, Laos and Thailand). Iran has central strategic
significance in the former but also serves as a transit
route to the latter as a gateway to Europe, Turkey
and Russia.
The Islamic Republic has been zealously trying to
combat drug trafficking in Iran. Against all the odds,
this did not diminish after the fall of the Taliban,
which used the cultivation of poppies in Afghanistan
to destroy the younger generation in the West and
among Iranian Shiites.

50
 In the past 10 years, some 1,600 members of the
Iranian law enforcement forces have been killed in
the battle against drug trafficking. Despite an
extensive assault on the drugs trade, opium
addiction in Iran is vast, with some 2% of the
population of almost 70 million citizens addicted.
The UN Office on Drugs and Crime estimates that
2.8% of the Iranian population aged over 15 used
opiates in 2001. That makes Iran the third
consumer worldwide. In 2002, the number of
deaths from drug abuse increased by 370%,
reflecting a shift in Iran to abuse of heroin. Opiate
drug seizures during 2005 in Iran included almost
340 tones of opium. In that level of seizure, Iran
ranked first in the world.

51
 Illegal jetties Because of deficient trade regulations, 
many commodities are being smuggled into Iran. Some 
62 jetties in Iran have been identified as illegal and are 
not supervised by customs authorities. So not only has 
there been a failure to stop illegal business but certain 
monopolists have been encouraged to import 
commodities. The fact that these commodities are illegal 
for import – for the sake of protection of domestic 
industry – but legal for trade at the market has 
encouraged unofficial economic activities for some 
monopolists and influential rent seekers.

52
 Traditional interest-free funds Another factor that encourages Iran
to tackle the issue of money laundering are the aspects of
traditional economic activity that are deeply rooted in Iranian
society. Even if traditional business systems do not necessarily
mean that a society based on it is more exposed to fraud or
corruption than a modern economy, the existence of such
“interest-free funds” is a handicap for a country that is already
suffering from all kinds of prejudice, accusations and lack of
international legitimacy. These unofficial institutes, known as
“Sandoq-e Qarzolhasaneh”, work parallel to the country’s official
economic infrastructure. Their activities have reduced the
government’s control over liquidity and financial and monetary
markets. These “interest-free funds” lack any operation permit
from the Central Bank of Iran. This state of affairs has seriously
undermined the government’s monetary policies to contain
inflation just as it has prevented the government from making
efficient use of the people’s savings. Especially, the rising inflation
rate has been a source of concern for international financial
institutions such as the IMF.
53
 
 The dilemma of Hawala  is other
component of the conventional
economy is the use of the Hawala.
This is an alternative remittance
system. It operates outside Western
banking or conventional financial
channels. It is based on trust and
extensive use of family connections
or regional affiliations.
54
 The source of the money is, however, not always
illegitimate. Nor are recipients necessarily
engaged in illicit activities. Yet, as against “white
Hawala”, the term “Black Hawala” refers to
illegitimate transactions, specifically money
laundering. “Black Hawala” transactions are
almost always associated with some serious
offence such as narcotics trafficking, fraud or
money laundering. However, what makes
Western observers skeptical about the use of
Hawala is that it has the underlying potential to
offer channels for money laundering. Money
laundering consists of three phases: placement,
layering and integration. Since Hawala is a
remittance system, it can be used at any of these
phases.
55
 Hawala across borders is endorsed by most of the 
Islamic banks as it is founded in the Quran. The threat to 
the non-Muslim international community lies in the fact 
that Islamic banks are becoming large enough to operate 
with Japanese and European banks. Moreover, the 
Islamic banks are now big enough to resist pressure 
from the US. Some observers are confident that the US 
will not be able to crack into the Islamic banks after the 
9/11 incidents. The US economy, many Arabs believe, 
will be adversely affected if Islamic funds are touched. 

56
 Today, in Washington circles, Hawala is
associated with the systematic money
transactions used by outlaws such as Osama bin
Laden for his business with diamonds and gold.
The Hawala is today considered illegal not only in
the US but also in Pakistan and India where it was
very widely used. Also, World Trade Organization
membership requirements specifically demand a
ban on Hawala. It is noteworthy that Iran has
already applied 16 times for WTO membership,
but the US has vetoed this on every occasion.
•  

57
 The process of money laundering in
Iran
The procedure for money laundering in Iran is
different from that in the West. For example, the
international criminal networks in the Golden
Crescent and Golden Triangle transfer the sums
received from drug smuggling from local
currencies to different types of commodities.
These commodities are then transferred to their
registered companies in the UAE, Hong Kong or
Singapore. These firms place these products at
the disposal of Iranian criminal operators who
then use the illegal jetties to import them into
Iran. These commodities or drugs are sold in the
Iranian market. The amounts raised from these
transactions are transferred to the traditional
“interest-free funds” which through the Hawala or
otherwise transfer these monies out of Iran.
58
 operators who then use the illegal jetties
to import them into Iran. These
commodities or drugs are sold in the
Iranian market. The amounts raised from
these transactions are transferred to the
traditional “interest-free funds” which
through the Hawala or otherwise transfer
these monies out of Iran.
All this could explain why the unofficial
economic sector (money laundering is part
of it) in Iran contributes to something
between 45% and 52% of GDP.
59
 Iran, the international community
and money laundering
Iran-US The 9/11 attacks brought new
dimensions to security issues since the
attacks related money laundering to
terrorism. US President George W Bush’s
State of the Union Speech in 2002, in
which he designated Iran as part of an
Axis of Evil, and the subsequent intensified
accusations of terrorism against Iran, have
placed the Islamic Republic in a difficult
situation in various fields such as nuclear
proliferation, money laundering and drug
smuggling.

60
 The mafia groups use an unusual mechanism for
laundering dirty money in Iran. They spend
money earned from drug trafficking to purchase
goods on the domestic market and then export
the goods to and sell
them in Dubai, Afghan and CIS countries. Thus
this money re-enters the same cycle.

The total value of organized smuggling is

estimated at $11.8 billion per annum. Some six
billion dollars of this amount goes directly to
foreign mafia networks. It is very unfortunate for
a country with $23 billion of annual oil revenues
to have $11.8 billion involved in smuggling.

61
 The IMF and the World Bank focus on the degree
of transparency in states’ economic policies.
Several Middle Eastern states have voluntarily
participated in IMF–World Bank-initiated
processes of assessment of fiscal, monetary and
financial policy transparency. Iran is among those
whose legislation is assessed on anti-money
laundering and combating of terrorist financing.
Despite Iran’s hostility to the US, the Islamic
Republic has been relentlessly trying to engage
with the IMF, World Bank and WTO. Moreover,
many of the Khatami government’s economic
policies have been in harmony with IMF criteria.
Iran sees the end of its political isolation in an
economic opening assisted by these multilateral
institutions. (For more on Iran and these
62 institutions
 Simple Money Laundry in Iran
• Finance& refinance from Middle East bank
especial UAE
• The Letter of credit without transfer money
• Over-invoice in Foreign transaction
• Tehran Stock exchange transaction
• Real state transaction
• Gun transaction (Iran-Contra)
• Drug (Opium)
• Non-bank financial institute (Gharzal-hasaneh
funds)
• Religious Non-profit institutes
• Religious Charities
• Religious societies & Mission
63 • Iran Free Industrial &Commercial Zones
 Foreign Businessmen and the
Iran
financial Mafia
• An unknown number of foreign businessmen,
believed to be in the low thousands, mostly
entrepreneurs and other high risk venture
capitalists arrived in Iran during the early and
mid 1990's, from all over the world, to seek
their fortune and to cash in on the transition
from a Governmental to a free
market/capitalist society. This period in time
in Iran was referred to by many of the
businessmen as the “Construction period“
• Annual import from Dubai in 2005 was $ 21
Billion

64
 Operation Scope of Translational
(Organized Criminal Groups (1
• Drug business industry
• Organization of human trafficking and illegal
migration
• The development of sexual industry
• The development of human body part and tissues
trade and biomedicine
• Car theft and smuggling
• Modified racketeering
• Smuggling and illegal circulation of arms, ammo
and explosives
• Terrorism
• Illegal circulation of nuclear and weapons of mass
destruction (WMD)
• Organization and controlling of gambling business
• Armed attack to traffic transference, including sea
65 pirates
 Operation Spheres of Trans-nationa
(Organized Criminal Groups (2

• Controlling of transit business sphere

• Cyber technology criminalization
• Fraudulence in crediting and insurance
• Smuggling or theft of cultural objects and
artwork
• Copyright objects illegal using, selling and
copying
• Exotic animal and plant contraband
• Radioactive and other hazardous waist
gathering, storing un destroying
• Money laundering

66
 In Iran, this phenomenon was not known before. 
Yet now it exists due to the rotating of the
international economy and growth of
international currency markets.  It is one of the
effects of the change that took place after 2003.

67
 How money laundry do in Iran
• Buy-Sell Real state
• Tehran stock Exchange
• Private banking transaction
• Non-Banking institutions
• Drug market
• Arms smuggling  
• Buy-Sell Governmental Bound (1997-2005 $14.1 Billion )
• Co-operatives of frontier inhabitants ($ 6.5 Billion )
• Tax shelter (Tax haven)-Iran Free zones
• Oil Swap with Iraq &CIS countries
• Establish a company out of Iran(Foreign Co.),sell goods
&Services to Iran with over invoice
• Religious Charities
• Establish Holding company
• Traveler's Cheque for financial transactions
68
• Foreign currency transaction by Hawala
 Why charities & religious groups are
vulnerable to Money laundry &
Corruption
Religious groups vary widely on the requirements
of accountability - from audits on the regional
level, to individual entity audits, to no audits at
all. The reasons for the lack of accountability to
national organizations frequently have their roots
in theology or group history so it may cause
problems to increase centralized oversight.
Similarly, independent audits may be too
expensive for some. According with Iran tax act
&civil code and base of Islam theory all religious
centers, foundations of the Islamic revolution,
charities institution, and Islamic science schools
have tax exemption and they are under hand of
High Spiritual Leadership. Charities & Religious
groups often lack independent audits or outside
accountability.
69
 General Circular of Money
Laundry
• A drug dealer, has a large load of cash coming in from a
sale but he first has to wash the soiled money. One of
his agents, Alahmad, transports in Kish Free Zone,
redenominated, and stores the money at a bank at the
country's border. Alahmad later transfers the money to
another agent, Alghassem, across the border through
another bank. Yet another agent, Jassem, transfers the cash
back across the border to the launderer's account in a third
bank.
• This scheme, the cross-border cash movement, is just one
of the several that money launderers use to bleach the
stains out of dirty cash.

70
 Millions of Afghan, Filipinos, Indians, Iranians,
Pakistanis, and other people from Asia working in
foreign countries use the system to send money
home to relatives through the Hawala route.
Intelligence officials believe that Hawala, in
recent years happens to be the safest and fastest
means to militants for transferring money across
the globe as it leaves no evidence of its
movement and is difficult to track. In most cases,
only couriers get apprehended; they are merely a
small part of a long chain

71
 • In regard to the Iran experience, there were
basically two types of foreign businessmen, the
lucky ones and the unlucky ones.
• For the lucky ones, huge fortunes were made and
they were able to return to their native homeland
with their life, limbs and money. Many clever
foreign businessmen made huge profits early on,
by good timing, chiefly by buying up products in
nearly worthless Rubles, storing them for a time
and after the introduction of the free market
economy, later selling the same products for hard
currency such as US Dollars. Many became
millionaires, literally overnight.
72
 • Hawala has been in existence for a long time in
Iran and other Asian countries especially in
Persian gulf countries same UAE. Some Hawala
operators feel that it is an extension of the
‘Hundi’ system of money transfer that came into
existence during the Mughal rule in India. This
was started by the Sindhi community to avoid
dacoity and highway robberies during money
transfers. Later, sometime around World War II,
Muslims going from Kerala to the Persian Gulf
adopted the system of giving a coded message
sent by post to deliver the money to people in
Kerala. Since the Indian Rupee was legal tender
in the entire region, the transaction did not suffer
from cross currency exchange rates.
• With the revolution in communications,
messages through post got replaced by
telephone and later by fax; and, now by e-mail. In
the process, the scope of Hawala transactions
got enlarged.
73
 • Hawala transactions have been prevalent in Iran
and Persian Gulf specially between worker class
in Persian Gulf countries in one form or another
for a long time. Operators of this illegal activity
attracted little attention till it came to light that
this mode of fund transfer was being used to fund
terrorist activities in India and many other parts
of the world. This paper focuses on the origin and
growth of Hawala, its modus operandi, major
cases and successes despite various flaws. The
paper also throws light on the shortcomings in
the legal, banking and commercial practices and
the difficulties faced by the enforcement systems.

74
 • Hawala is an alternative banking system hundreds of years old, and is 
known in Iran, the Middle East and Pakistan as hundi. 

• It involves Hawala brokers - often local small businessmen - all over the 
world who know each other. 

• It enables people to transfer money from one part of the world to the other 
without having to go through banks. 

• There is no paper trail and no money ever crosses a border. 

• Discrepancies in the two-way flow are settled up at the end of the month, or 
perhaps every six month. 

75
 Hawala is an alternative banking system
hundreds of years old, and is known in
Iran, the Middle East and Pakistan as
hundi.
It involves Hawala brokers - often local
small businessmen - all over the world
who know each other.
It enables people to transfer money
from one part of the world to the other
without having to go through banks.
There is no paper trail and no money
ever crosses a border.
Discrepancies in the two-way flow are
settled up at the end of the month, or
perhaps every half year.
76
 Hawala-The Invisible Financing System of Terrorism
There are two historical systems, namely the Hawala/hundi
and the fei ch’ien. Hawala/hundi will be discussed later in
this paper to a larger extent, but to compare and contrast
the two, a closer look at the Chinese system fei ch’ien will
be helpful.
As most other systems, the fei ch’ien arose as a result of
trade. During the Tang Dynasty , “merchants from the
southern part of China sold their tea … at the Capital and
transferred their money to … liaison offices or agencies of
provincial governments located at the Imperial Capital
where these revenues were used to pay taxes due from
these provinces to the central government. These ‘courts’
issued certificates indicating amount paid by the merchants
who, upon their return, would present them to their
provincial government for payment of an equivalent sum of
money” . This system benefits both the local government
and the merchants since neither had to travel with cash. As
I will demonstrate later in the case of Hawala, with the
migration to other regions of China, the system spread as
well. Migrants sent part of their salary home to support
77
their families which had stayed behind. With the increasing
migration that passed the borders, the system changed
 • The events of September 11, 2001 have changed the
world’s perception of terrorism and brought focus on
terrorist support structures and funding. The attacks of
September 11 could not have taken place without the
movement of funds through the global financial system.

• Terrorist groups need money to motivate people to join

their activities, to procure materials like arms and
ammunition and to keep their network going.

• The experience of the Indian subcontinent in dealing with

terrorist outfits operating in Jammu and Kashmir shows that
they get their resources mainly from two sources-from the
intelligence agencies of Pakistan and the Kashmir diaspora
spread across the world. It is now an open secret that
Kashmiri organizations located in places like London and
New York raise resources through donations, extortions and
collections in mosques. In addition, they also channel
money from agencies of countries like Pakistan.

78
 • sourcing agencies adopt two methods: by
personally carrying through the land borders by
couriers; secondly, through the traditional Hawala
method.
• Hawala is a system through which money is
transferred from one part of the world to another
without following the normal banking channels.
Though no one perhaps knows how and when this
method of money transfer started, it appears, it is
as old as the beginning of monetary transactions
themselves.
• This system has been in existence for a long time
in Iran and other Asian countries especially in
Persian Gulf countries same UAE & Iran.

79
 • The Hawala system is known to be exploited
by militants all over the world for financing
their activities, to purchase arms, to send
funds (ISI, Mohammed Atta, Ibrahim,
Mohammed Ansari(Dubai), etc. are a few well
known names who have exploited this system
for overt or covert funding of terrorist
activities), and to finance films.
• Hawala code words used are khokas, paties,
etc which mean crores (10 million) and lakhs
(1,000,000) respectively. But these can and do
change.

80
 Methods of Hawala
As an alternative remittance system working in
parallel with the normal banking channels, Hawala
has two categories.
(1) Domestic Hawala.
(2) Transnational Hawala.

81
 Domestic Hawala
In the course of normal business transactions
between two parties located in different cities
within Iran, unaccounted payments are made
through Hawaladars (Hawala operators) in these
cities. This job is normally done by Saraf who are
people who run shops. These shops are unofficial
institutions that act as Coins, postal couriers for
letters, parcels and money, among different
cities. They also make Hawala payments for the
concerned parties located in different cities
without carrying the money through various cash
holdings/transfers.

82
 Transporter Hawala
(International Hawala)
• In transporter Hawala, money moves across international
borders without being physically carried. The payments are
made by Hawaladars located in Iran to the friends and
relatives of expatriates working abroad. The Iranian Hawala
operator has his counterpart outside Iran who receives
payments in foreign currency from these expatriates and
passes on instructions for distribution in Iran in Iranian
Rails.
• Similarly, unaccounted payments are made from Iran to
foreign parties through this system, particularly in cases of
under-valuation of imports. People in Iran & UAE having
large unaccounted tax-evaded money also transfer money
outside Iran through Hawala to safe places abroad. Such
monies may finally find a place in banks located in tax
havens; and, may be transferred to other places in due
course of time depending upon business requirements or
may find its way to Iran as legitimate inflow after
undergoing the laundering process.
83
 Both the inward and the outward systems are
complementary to each other. Besides evading
tax, the system is fast, cost-effective, reliable and
conceals the trail. In the war period between Iran
& Iraq (1981-89), the black market rate of the
local currency was very higher than the bank rate.
It was therefore advantageous to resort to the
Hawala route to transfer funds. In Iran, Hawala
business centers are in Tehran, Shiraz, Mashhad,
Isfehan,Kish and Qeshm .. Their share of the
business is different and relate to other countries.
For example 1 US Hawala from Iran to Dubai is
cost 20-25 Rails
(1 USD=9110 Rails,2006)
84
 $4 billion to $6 billion moved through the Hawala
system annually between Iran and Dubai, USA,
Canada, UK, Germany and Kabul. It is more than
the amount of foreign transfers through the
country’s banking system. Totally import from
Dubai in 2005 was $ 21 Billion that estimated $
USD 7-9 Billion have been transited to Pakistan,
Afghanistan and CIS countries.
Total amounts of Money Laundry in Iran is about
%25 GDP

85
 Principles underlying our handling of allegations
of charities' involvement with Terrorism , Money
Laundry & Corruption. Some of charities in Iran
has airplane, shipping, holding investment, chain
market and …..
Unfortunately Muslim Money Launder pay some
part of their profit under the plea of Islamic tax
”Khums” to religious authority and then their
money will be clean& ceremonially clean. The
government has no control on these amounts
because the religious authority hierarchy
ascertain by Muslim people and Khums is
economy poverty of religious leaders.

86
 Islamic Tax
Khums:
• A religious tax imposed under the Islamic Law
on Muslims"Khums" literally means "one-fifth or
20%". In Islamic legal terminology, it means
"one-fifth of certain items which a person
acquires as wealth, and which must be paid as
an Islamic tax". The Qur'an mentions it in the
following verse:
• Know that whatever of a thing you acquire, a
fifth of it is for Allah, for the Messenger, for the
near relative, and the orphans, the needy,

87
 Items which are eligible for khums
are seven

• The profit or the surplus of the income.

• The legitimate wealth which is mixed with some
illegitimate wealth.
• Mines and minerals.
• The precious stones obtained from sea by
diving.
• treasures.
• The land which a dhimmi kafir (Dry farming)
buys from a Muslim.
• The spoils of war.

88
 Zakat

• A religious tax levied under the Islamic law on the

Muslims Zakat is the amount of money that every
adult, mentally stable, free, and financially able
Muslim, male and female, has to pay to support
specific categories people.
• Any owner of gold and silver who does not deliver
from them their right, on the Day of Quiyamat (Day
of Judgment), (the gold and silver) will be shaped as
foils of fire. Then it will be heated in the fire of Hell;
(and) then with it he will be ironed on his side, his
forehead, and his back" (narrated by Muslim).
• Zakat is obligatory after a time span of one lunar
year passes with the money in the control of it's
owner. Then the owner needs to pay 2.5% (or 1/40)
of the money as Zakat. (A lunar year is
approximately 355 days).

89
 )Financial Mafia Gang in Iran) $ 4.5-6 Billion 2005

• Case of “123 Billion Tomans”(1 USD=340 Toman)

Saderat bank,1996
• Case of “Shahram Jazayeri” 2002 (12,000,000 $)
• Smuggled goods yearly (4-5 billion $)
• Smuggled drug yearly (150 Million $)
• Drug transit in East&West yearly(1.3 Billion&)
• Oil Swap from CIS Countries yearly (250 Million &)
• Gas oil & Fuel import yearly (500 Million $)
• Weapon transactions (West $ South of Iran)??
• Gas oil Import & Export yearly (400 million $)
• Antiques Export ???
90
 Export and import operations
The scheme of money laundering through import
operations is as follows. Illegally acquired funds
are remitted to accounts of dummy firms and
then foreign currency is transferred abroad to pay
import contracts. The further bankroll
manipulations take place there. Money is
transferred from one account to another until it
become legal.
Among well-known ways of illegal enrichment are
to embezzle credits , deceive partners, make
"pyramids", attract public funds and cause a bank
failure, privatize industry and trade, etc. Those
banks developing in a rapid way during a primary
accumulation of capital and then failing, in
reality, transferred some money to foreign bank
accounts. Then these funds were put in a legal
91 business abroad or in Iran.(1500 Iranian Co with
more than $250 Billion assets in UAE)
 As a rule, criminals officially register "fictitious" or "transit"
firms for dummies, military men, prisoners, as well as
needy and mentally ill persons. Real machination
organizers transfer money to their accounts on legal
grounds. Further, these firms vanish and organizers make
no claims (or at least formal ones) on breaking contracts.
These firms are of a short-term nature. Tax bodies start
showing interest in their activity only in three months when
it is time to check the accounts. Tax officers can suspend
the movement of funds to the account that is practically not
required by that time and carry out the revision. Fictitious
firms are taken under the currency control after ninety
days. All computations should be accomplished within this
time. Information on breakers is obtained too late because
of an imperfect mechanism of the interaction between
Iran's local bank and commercial banks. By this, the firm
had ceased to exist for a long time, its managers
disappeared and documents are lacking. In such cases, it is
impossible to audit an enterprise, impose a fine and search
92 out its managers.
 According to the export operation scheme,
goods are delivered to bought or
established firms abroad. As a rule, foreign
firms are supplied with raw materials but
Iranian ones obtain no money. Funds do not
return to Iran and they are legalized
abroad. False firms can be also used in
these cases. Many of import are transit to
Afghanistan & CIS countries. They are easy
to replace in 45 days, guilty persons being
difficult to find then. This channel is widely
used because it results in decreasing export
prices.

93
 Fictitious services and transfer
It is quite risky to establish dummy firms. Therefore,
swindlers often use a fictitious service payment scheme.
The currency control cannot be taken of this sphere
because the criminal can be arrested if the whole scheme
of obtaining illegal revenues is exposed before their
legalization.
As a rule, cash money is illegally transferred when locally
exchanging Rails or foreign currency to obtain it abroad.
Foreigners who are engaged in a "shuttle" business derive
considerable incomes from import. However, they cannot
bring back their receipts in RIALS or foreign currency unless
they were declared. Therefore, firms or banks with partial
or full foreign capital are set up. Further, the scheme is very
simple. Trade earnings are exchanged and then firms
transfer them to their native bank accounts abroad through
import contracts. When the audit starts, documents are
destroyed or vanish, foreigners leave Iran and it is
impossible to find managers. This problem will remain while
94 there is a shuttle business.
 Cash Circulation
Taking into account a severe control of cash
currency and the legalization of an economic life
(first of all, shady circulation), breakers often use
the following scheme of encashing foreign
exchange. Iranian businesspersons buy or
establish firms abroad, open their representative
offices or branches in Iran and transfer large
sums of foreign exchange to these accounts
through foreign contracts. Although
representative offices must not realize an
economic activity, they do it in a very active way.
Some cash money is given to foreigners to pay
traveling or other expenses because they can get
cash exchange on legal grounds. After encashing,
a part of funds is put into a shady use or exported
abroad.
95
 Very large money is put into a shady circulation through
external economic activities of enterprises (price and
import volume manipulations, illegal customs registration).
In such cases, customs duty discharge is considerably
reduced. It appears that many goods are illegally imported.
In Iran, they are for overpriced sale and delta plus receipts
resulted from selling unregistered goods are partially or
fully put into a shady circulation and cannot be taken under
control. Funds remain to be in a shady use to evade taxes
and avoid a penalty.
Finally, some cash funds are legalized, for example, by
contributing them as individual deposits to the enterprise
capital stock. As a rule, they are partly deposited in large
sums. In the same way, money is transferred to local or
foreign deposit bank accounts; shares or other securities
are purchased. Other ways of legalizing illegal incomes are
connected to definite losses. When a firm fixes ill-gotten
money as commercial receipts, it will have to pay many
taxes. We suppose that at present this way of legalizing
96 money is not so widely used in Iran as in foreign countries
because of many other more simple ones.
 Conclusion
Underground economic activities in Iran
have an effect on the underdeveloped
state of the economy, dual foreign policy
standards and the protracted democratic
movement in the domestic arena. Simply
put, the economic mafia has managed to
influence certain power centers as well as
decision-makers in all areas of
governance. The influence of many
political activists derives from their rents,
monopolies and connections
97
 The establishment is aware of this reality
and some political leaders from both ends
of the political spectrum have been trying
to change this state of affairs, despite the
existing associations with the operators of
the underground economy. The reason for
this is that even these political leaders are
losing control over the activities of these
operators, once loyal associates of the
revolution. Moreover, the spillover effect of
the growing unofficial sector in Iran has not
only severely undermined the economy but
has led to the creation of “new” power
centers that are actively affecting the
country’s foreign and domestic policies.

98
 The paradox lies in the fact that with the
given family and tribal connections a
serious attempt to eradicate roots of
underground economic operations seems, at
least under the current circumstances, a
difficult task, if not an impossible one.
Nevertheless, the legislation against money
laundering indicates that there are
incentives to reform the traditional
economic system. If the Guardian Council
approves the act, one can assume that it
has the blessing of the country’s highest
institutions.

99
 What observers should take note of, however, is the content of the
act once turned into law and efforts to change it. Both the
Guardian Council and the Expediency Council can contribute to
changes in this act. Moreover, the advantages and shortcomings
of the act/law may as well indicate to which extent this effort will
manage to address the hazard of underground economic activities
in Iran.

This law will probably not succeed in eradicating the roots of

money laundering, let alone other underground activities that
adversely affect the economy. To attain significant results in this
area, Iran will primarily need an efficient, depoliticized and
unbiased judicial system, something that is seriously lacking. The
best that can be hoped of the new legislation is that it might give
rise to a new trend that will put limits on certain illicit operations
and accelerate the pace of economic reforms in Iran which is at
the root of all the country’s political hazards.

What serves as a signpost to an evaluation of the degree to which

money laundering will be tackled in Iran are Tehran’s interaction
100 and cooperation with international forums on issues related to
good governance, money laundering, drug trafficking, terrorism
 What will these new requirements
?mean to accountants
These proposals, if implemented, will bring many
consequences to the profession. One consequence,
for example, is the likely damage to the auditor-
client relationship—a client might not be as open
with an auditor if he or she knows that the auditor
will report even suspected money laundering to the
government. The government will probably argue
that auditors will, instead, benefit their clients by
assisting them in identifying money-laundering
problems before they “get out of control” and cause
major damage to clients’ reputations. Historically,
the vast majority of money laundering has been
carried out by individual employees without top
management’s knowledge.

101
 Sources
1- Anti money Laundry & Corruption lecture by Dr. Gh. Davani, Tehran.2002
2- Money laundry, Countering Drugs & Organized Crime in the Baltic region,
Andreis Vilks (ECAD)
3- Money laundry, Special report ML WLA-Magazine Money laundry, A banker’s
guide to avoiding problem Dec. 2002.
4- Financial action Task force on ML 2004
5- Hawala, Anti money laundering strategy Oct. 2004 HM Treasury.
6- Business integrity & Anti-corruption initiatives of the world bank Sep. 2004,
US department of the treasury Anti terrorism.
7- Money laundry and banking system Farideh Tazhibi, 2005
8- Organized crime & the international strategist against it by: Shahal Moazami
9- Law review “An academic & primitive Journal on international law, vol. 29,
Fall 2003
10- Money laundering the journal of Iran parliament research centre, Vol. 10,
No- 37, spring 2003
11- Transnational organized crimes By: Dr. Sadegh Salami 2003
12- Mafia for beginners by Arnd Scheder & Oscar Zarat 1994
13- Switzerland the largest Money Laundering centre in the world, by: Dr. Medi
Sahraean(the UN representative for GPLM in Iran) 2002
14- Special report Money Laundering, Val Magazine
15- www.iranfocus.com

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