Iran given four months to tighten laws against money laundering

Financial Action Task Force extends deadline for Tehran to be in compliance with global norms

Iranian protesters hold up their palms with writing that reads "No to FATF" during a protest in October against the passage of a bill to counter financing of terrorism. AP

Iran has until June to strengthen its anti-money laundering legislation, or financial institutions operating there will face increased international scrutiny, a global watchdog said on Friday.

Last October, the Paris-based Financial Action Task Force (FATF) watchdog had already given Iran until February to complete reforms that would bring it in line with global norms, or face consequences.

The FATF concluded this week at a meeting that "there are still items not completed" and said in a statement it "expects Iran to proceed swiftly in the reform path".

"If by June 2019, Iran does not enact the remaining legislation in line with FATF Standards, then the FATF will require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran," it said.

Iran's parliament passed a bill on combating the financing of terrorism in October but the FATF's proposed reforms have faced strong opposition in Tehran on the grounds that compliance with the watchdog's guidelines would expose Iran to foreign meddling.

Foreign businesses say compliance and Iran's removal from the FATF's blacklist is key for making investments in the country, especially after the United States re-imposed sanctions on Iran.

France, Britain and Germany have tied this compliance angle with the use of a new channel for non-dollar trade with Iran to bypass US sanctions.

Those countries have said they expected Iran would swiftly put into place all elements of its FATF action plan.