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.

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 ?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.

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 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.  .

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

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 ?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.

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 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.

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 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.

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 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.

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 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.

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 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.

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 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.

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 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 (buttlegging)
- providing immigrant workers to avoid taxes

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 • 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
Finland)
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• 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.

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 • 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" or turned against the
Organizatsiya, but also the individual's family.

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 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.

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 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)

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 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.

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 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

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 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.

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 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.  Making use of
official authorities to transfer money to the pocket of specific
individuals instead of actually building schools or establishing
projects.

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 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 per minute. One can get a feel for the size of the narcoeconomy by
the fact that in 1990 approximately 20 per cent of Peru's Gross National
Product was generated by narcotics, whereas legitimate exports accounted
for only 14 per cent.

35
 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.

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

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 • 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
 Money Laundering 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
2. Ownerless Properties
3. 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
institutions

62
 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
• Iran Free Industrial &Commercial Zones

63
 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
• 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
pirates

65
 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
• Foreign currency transaction by Hawala

68
 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 their
families which had stayed behind. With the increasing
77 migration that passed the borders, the system changed from
a domestic to an international dimension.
 • 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 business abroad or in Iran.(1500 Iranian Co with
more than $250 Billion assets in UAE)

91
 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 out its
managers.

92
 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 there is a shuttle business.

94
 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 money is not so widely used in Iran as
in foreign countries because of many other more simple ones.

96
 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 and cooperation
with international forums on issues related to good governance, money
laundering, drug trafficking, terrorism and international banking.
 

100
 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

102