In June, the Financial Action Task Force, which is an inter-governmental body responsible for setting global anti-money laundering standards, issued its quarterly public statement on high-risk and non-cooperative jurisdictions. Somewhat surprisingly, FATF suspended its call for member states to employ countermeasures against Iran for a period of twelve months. Since 2008, FATF has called for states to apply enhanced due diligence and counter-measures against Iran in order to “protect the international financial system from the on-going and substantial money laundering and terrorist financing risks” emanating from Iran.

In this journal article for Survival, Aaron Arnold argues that the success of financial sanctions rests largely on the dominance of the US dollar and the correspondent banking system. Yet emerging trends could undermine Washington’s capacity to employ this tool.

In this op-ed for The Diplomat, MTA Associate Aaron Arnold argues that the key to ensuring long-run stability of the nuclear agreement will be reintegrating Iran’s banks in the global system.

Aaron Arnold, Associate of the Project on Managing the Atom at the Belfer Center, writes in The Diplomat that a key threat to the ongoing implementation of the Iran nuclear deal is the risky nature of the Iranian financial sector. While Iran is banking on receiving greater foreign investment, continued problems with the Iranian financial sector, including lack of sufficient regulatory controls and the potential ties to terrorist financing, have made companies cautious about investing in Iran. He suggests that the United States work with Iran to bring its banking system up to the same standard as the global economy, and to consider closer integration of Iran into the world economy in order to preserve the effects of the nuclear agreement.

The Iran nuclear deal was officially implemented on Saturday, as Iran successfully fulfilled its initial key nuclear commitments and the international community relieved major sanctions, including unfreezing about $100 billion of Iranian money. Implementation Day was met with applause from deal supporters in the U.S. and Iran, while critics have raised questions about whether Iran will adhere to its requirements and how it will flex its newfound economic power. Also in recent days, the U.S. and Iran agreed to a prisoner swap that led to the freedom of Washington Post reporter Jason Rezaian and others, and negotiated the release of American sailors detained in Iran. What does the arrival of Implementation Day mean for Iran’s nuclear program and nuclear nonproliferation, and how does it bode for the future of U.S.-Iran relations? We asked Belfer Center experts to weigh in on these and related questions.

Aaron Arnold, Associate with the Project on Managing the Atom at the Belfer Center, writes in The Hill that while Iran will soon be getting sanctions relief as the nuclear accord with the P5+1 is enacted, it has not yet taken steps to update its banking system and bring it up to international money laundering and counter-terror financing. He also suggests that in order to balance the competing political and financial concerns at play with sanctions, the international community led by the United States should make clear conditions for both exclusion and rejoining of the international financial system.

"At a press conference in Vienna this week, Yukiya Amano, director general of the International Atomic Energy Agency, delivered the agency’s final assessment on Iran’s nuclear program. The result of a 12-year investigation, the report concludes that Iran undertook a range of activities prior to the end of 2003 relevant to the development of nuclear weapons and some activities after 2003. The agency also concludes that there are no “credible indications of activities in Iran relevant to the development of a Nuclear explosive device after 2009.” This is hardly unexpected news, especially considering the U.S. intelligence community came to the same conclusion in its 2010 National Intelligence Estimate on Iran. Probably more important than the findings, however, is that the conclusion of the IAEA’s investigation is an important first step to Iran re-establishing financial relations with the rest of the world..."

"In a speech before the UN General Assembly on September 28, Iran’s President Hassan Rouhani heralded the Joint Comprehensive Plan of Action as a new chapter in Iran’s relations with the rest of the world. After a heated and largely politicized national debate, Congress is set to move forward with nuclear agreement. This treaty limits Iran’s nuclear enrichment capabilities over the next decade in exchange for sanctions relief."

Aaron Arnold, Associate with the Project on Managing the Atom at the Belfer Center, and Nikos Passas, Professor of Criminal Justice at Northeastern University, argue in The Conversation that Iran's reintegration into the global financial system may in fact make it easier, not more difficult, to monitor Iranian financial activities for illicit transactions. They point to the fact that banks can monitor transactions for entities designated as involved in terrorist or weapons of mass destruction activities by the U.S. Treasury. They also suggest that Iran may adopt stricter money laundering standards in order to increase economic integration. While challenges remain, they suggest that building a public-private partnership between banks and regulators will ensure that Iran will be caught in any illicit financial actions after the nuclear deal.

Aaron Arnold, Associate at the Belfer Center for Science and International Affairs, writes in The National Interest that contrary to what some have argued, the more Iran is connected the to global economy, the more vulnerable it is to the snapback sanctions measures built into the Iranian nuclear deal. He argues that as Iran becomes more connected to the global economy, the American dominance of financial markets and the importance of the dollar as a global currency will mean that in the event of snapback, companies will be deterred from action in Iran. As a result, the more Iran reconnects its economy to the world, the more vulnerable it will be to snapback measures.