Charities and Foundations: The Paradise of Money Laundering in Iran / Abbas Dehghani
Ibn Khaldun, the famous Arab historian and sociologist, believes that the main cause of the rise and fall of civilizations is extravagance, wastefulness, and corruption within the government by rulers and leaders. Throughout the centuries, there has always been an inverse relationship between the proper use of power and territory and the spread of corruption. When power was used properly, the level of corruption decreased.
One of the main components of corruption that has been widely covered in recent years is the issue of money laundering. Money laundering is essentially the process in which money obtained from illegal activities is transformed into money or assets that appear to have been acquired through legal means. This way, corruption is disguised and money from activities such as smuggling, theft, and embezzlement is introduced into the economy legally. In other words, money laundering occurs in order to keep the true origin of the money unknown, making it a criminal act.
Iran is one of the countries where the highest level of money laundering is carried out. Although the Islamic Republic of Iran passed the Anti-Money Laundering Act in February 2008 after joining the “Palermo Convention” and has taken measures to combat this crime, it is still among the countries with the highest risk of money laundering in the world. In Iran, news of major corruption, embezzlement, and bribery has become a daily occurrence. The Financial Action Task Force (FATF), which is the supervisory body for anti-money laundering regulations, has stated that Iran is the worst country in the world in terms of the extent of money laundering and is listed on this group’s blacklist along with North Korea. The issue of Iran’s accession to this international financial institution in recent years has become a controversial issue and has intensified the power struggle among the main factions governing the country.
In recent years, top government officials have repeatedly expressed concerns about money laundering risks in Iran. The former Minister of Foreign Affairs of Iran had said in an interview with the “Khabaronline” website: “Money laundering is widespread in the country.” He emphasized that some individuals who launder billions of tomans in Iran are behind the scenes of opposition and propaganda against anti-money laundering laws. He said: “These individuals have laundered billions of tomans in one case. They have enough financial power to spend an amount equal to the entire budget of the Ministry of Foreign Affairs on just one propaganda campaign.” Mohammad Javad Zarif’s remarks about widespread money laundering in Iran had sparked strong reactions from media close to the Revolutionary Guards and some members of the Islamic Consultative Assembly.
The reputable newspaper “Wall Street Journal” reported on the transfer of one hundred million dollars between sixty-one bank accounts affiliated with Iran’s underground network in twenty-eight foreign banks in Turkey, China, Hong Kong, the United Arab Emirates, and Singapore, based on documents obtained by them. According to this report, there is a hidden money laundering network within Iran that involves multiple financial institutions for the purpose of obtaining foreign currency, and also includes cover companies, affiliated companies, and numerous accounts in commercial banks outside of Iran.
Chapaul.
This word does not have a direct translation in English. It is a Persian slang term that can have different meanings depending on the context. It can refer to someone who is cunning or manipulative, or it can also mean to deceive or trick someone.
Organized
Economic corruption in Iran is systematic and benefits from the backing of political power. According to Ahmad Tavakoli, former head of the research center of the parliament and responsible for the non-governmental organization “Transparency and Justice Watch”, corruption in the Islamic Republic is systematic and systemic; therefore, any effort to combat corruption and monitor institutions, organizations, or individuals accused of corruption is a highly selective, political, and relative matter. To understand the extent and scope of corruption in the Islamic Republic and the issue of money laundering as one of its most important and complex dimensions, it is necessary to properly understand the nature and structure of power in the political system governing Iran.
From the beginning of the establishment of the Islamic Republic and the occurrence of the revolution, the contamination of religious, cultural, and military institutions with corruption and misuse of public property began with the allocation of confiscated property to Shia clerics and their supervised institutions. Until the end of the first term of leadership in the Islamic Republic, government institutions did not directly inject money into these institutions within the framework of the official budget, but indirectly allocated resources such as confiscated goods at customs, found property, ownerless land, and gray bank accounts to them. The eight-year war during Khomeini’s era and the sale of oil at seven to ten dollars, which its facilities were constantly under Saddam’s bombardment, did not provide the opportunity and conditions for the official embezzlement of public property, but with the end of the war and the beginning of the second term of leadership in the Islamic Republic, this situation fundamentally changed.
Ali Khamenei, the president at the time, who lacked political and religious legitimacy to rely on for his leadership position during that period, and had the least charisma compared to Ayatollah Khomeini, resorted to pouring public resources towards the main power centers, namely the “Sepah” and “traditional clergy”, in order to gain their support. From the beginning of this period, a flood of official and public resources was directed towards various religious institutions, with various justifications and from different budget categories. All clerics received free government health insurance and even companies and businesses were attached to influential clerics. Immediately after the clergy, seminaries, mourning groups, mosques, shrines, and Sharia enforcement centers (prayer, charity, enjoining good and forbidding evil) tasted the free land, free government services, and easy budget and resources, they abandoned their efforts to obtain resources through previous means and became part of the government; although this was kept secret from the public
Structural corruption does not happen overnight and has historical roots and cultural reasons. Political tyranny, or the rule from top to bottom, is the most important reason for structural corruption. As Daron Acemoglu states in his book, “Why Nations Fail,”
Why do nations fail?
Indicating that the most important factor in poverty and corruption in countries is due to the fact that economic and political institutions are monopolized and people do not have real and deep participation in these institutions. If the opportunity for people to participate and exert their power in the economic and political spheres is not provided, poverty and corruption will engulf the entire society.
According to Ajamoghlu, all common economic policies, regardless of their type, should be considered secondary issues. The main issue is the relationship between the government and the people. The government’s behavior in this regard has been completely dualistic and accompanied by a security-oriented and pessimistic approach, as the main fear is the independence of public institutions and transparency in the media and freedom of the press. The government prefers corruption to exist, but not for independent and free public institutions to form in society; therefore, the government’s policies and rule in the past two decades, which emphasized the necessity of public participation in managing society and was supported and welcomed by reformists, have led to the development of people’s institutions and organizations, but have also been accompanied by strict control and surveillance. However, these strict measures and pressures from the government have not been directed towards preventing financial deviations and the possibility of corruption in these institutions, but rather have had more security and political implications.
Monopoly
And.
Concentration.
Economic activities.
The monopoly of public activities, such as charities, within affiliated institutions is desired by the core of power and its related political movements, in order to prevent independent social activities, control the financial aid of the people, and gain political control in exchange for helping the deprived.
Money laundering methods are very complex and diverse, and depend on factors such as the type of illegal activity, the type of economic system, the laws and regulations of the country where the illegal activity took place, and the regulations of the country where the money is being laundered. Money launderers are always trying to clean their dirty money through activities such as buying and selling stocks, establishing fraudulent charities, shell companies, and purchasing antiques.
The mechanism of forming charitable institutions in Iran has a long history. From the population of “Lion and Red Sun” before the revolution to the charity of “Imam Ali Society” which was recently declared illegal due to its non-compliance with the government’s executive strategies, all show the antiquity and backgrounds that these institutions possess. Most people know these institutions as endowments, but few expect these humanistic and philanthropic organizations to be involved in corruption and profiteering cases, becoming economic enterprises or even receiving large sums of money as aid from major financial centers in the country.
The number of charity institutions in the country is increasing day by day, but what has been thought-provoking in recent years is the rapid growth of these charities, especially the religious ones. In just one year, 45,000 agreements were made to establish charity institutions and 68,000 activity licenses were issued for charities that had applied for establishment before 97. Charities and public benefit organizations are exempt from taxes, making them a good platform for money laundering by profit-seekers. According to information from Iran’s tax media, in accordance with Article 139 of the Direct Taxes Law (July 2015), donations and gifts received in cash or non-cash by registered charity and public benefit organizations, provided that they are spent according to their bylaws and the country’s tax organization monitors their income and expenses, are exempt from paying taxes.
People’s organizations for charity activities in Iran can obtain licenses from three institutions: the Ministry of Interior, the Law Enforcement Force, and the Welfare Organization. However, due to lack of cooperation and coordination between these institutions, the situation of charities and non-governmental organizations in the country is chaotic. According to Mohammad Ali Koozehgar, former deputy of public participation and empowerment at the Welfare Organization, the number of charities in Iran does not correspond with their performance. Only 8,200 registered charities are currently active under the supervision of the Welfare Organization. According to statistics from the Charity and Non-Governmental Organizations Information Center, there are a total of 55,140 registered and updated people’s organizations, charities, and NGOs as of April 25, 2022.
According to official reports, there are approximately twenty to thirty thousand active charities in Iran, which have been involved in many controversies in recent years. According to the head of the Economic Commission of the Parliament, about half of these charities in Iran are non-transparent. Some of these non-governmental organizations, under the name of charities, have been involved in illegal activities, money laundering, and financial corruption. Unofficial statistics estimate that the money transfers in these institutions amount to thirty to forty billion tomans per year.
Religious money laundering.
And.
Cultural.
One of the most scandalous cases of money laundering and corruption in Iran is related to the “Imam Reza Beneficence” charity, which is managed by Zahra Meshir, the wife of Mohammad Bagher Ghalibaf, former mayor of Tehran and current head of the Iranian parliament. In recent years, this charity has been repeatedly reported by media outlets for corruption and money laundering. In the latest case, the footprint of Ghalibaf’s wife’s charity is seen in a 250 billion tomans money laundering scheme. According to a document published on the “Eskan News” website, “Pajohab Hasti” company purchased a piece of land with a green space designation from the Tehran Municipality for 400 billion tomans on August 16, 2016, and sold it on the same day to “Rasa Tejarat” company for 250 billion tomans. Interestingly, “Rasa Tejarat” is a subsidiary of
However, the issue of corruption and money laundering is not limited to charitable institutions and sometimes manifests itself in the form of cultural and educational institutions. In the famous case of astronomical properties, which has caused a lot of controversy in the political and social sphere of Iran in recent years, corruption and money laundering are evident through some so-called cultural and university institutions, which are interesting and noteworthy in their own way. Corruption in the Tehran municipality is carried out through these very institutions and organizations that appear to be involved in cultural, artistic, educational, or religious activities.
According to a report published by the Fifth Council of Tehran, only in the sixth district, around 10,000 square meters of land belonging to the municipality has been given to various individuals and institutions. 5,516 square meters of these properties are in the possession of the House of Human Sciences Scholars, whose board members, like the charity organization “Motavaselin Imam Reza”, are counted among the advisors of Ghalibaf. This institution was founded in 2011, at the suggestion of Barzin Zarqami, the former CEO of Tehran Beautification Organization, by Mohammad Javad Shoushtari, the head of Ghalibaf’s office at the Tehran Municipality. The budget of this cultural institution, which was established with the aim of honoring and celebrating various professors and scholars of human sciences, is provided through financial assistance from the municipality and the rental of halls in this complex in Varshe Park. Paying large salaries to board members, which is done
This is while people’s organizations should essentially be self-sustaining or their budget should be provided through the cooperation of members and public assistance. The use of such institutions in the world of politics has also been widely experienced. Holding various ceremonies under the pretext of charity during elections and distributing cash and non-cash aid to influence the target community is an example of these abuses. The use of sacred names and resorting to religious issues to influence society is another method that is widely used, and as we have seen in the case of illegal financial and credit institutions, this trick has gone so far that the central bank has ultimately banned the use of these names for all financial institutions; therefore, charities that have been established in Iran are mainly considered problematic due to the corruption that takes place within them.
Economic and commercial activities of some religious charities, which are beneficiaries of extensive rent and connected to centers of power, depict another form of money laundering and corruption in the Islamic Republic. Religious rent-seekers have created organizations and institutions to distribute these rents and have turned rent-seeking into an institution in the country. For example, among the long list of recipients of government currency published by the Central Bank of Iran in April 2019, the name of the educational, research, scientific and religious charity “Maktab Amir al-Mu’minin” was also present. This charity, affiliated with Ayatollah Musavi Ardabili, holds a strong position in the educational and religious sphere of Iran. According to the Central Bank’s report, “Maktab Amir al-Mu’minin” was able to receive $6,067,649 at the exchange rate of 4,200 tomans in 71 budget lines. At the same time, it had also received 2,
Some charities or institutions that are primarily religious in nature are also often established to cover up corruption, such as money laundering or receiving special privileges. The growth of some religious institutions, accompanied by a lack of transparency and necessary oversight, only strengthens the suspicion and presence of corruption and money laundering in relation to them. The activities of Imamzadehs as traditional religious institutions in Iran have also been met with much doubt and skepticism. In 1357, there were approximately 1,500 Imamzadehs active in the country, a number that reached around 11,000 in 1394. Part of the activities of these Imamzadehs are related to the economic affairs of those in charge, or they may be established for such purposes. Although according to the Waqf law, Imamzadehs must operate under the supervision of the Waqf Organization, this organization itself is also accused of widespread corruption and misconduct. The behavior of land grabbers in some rural areas seems to be
Monitoring and control mechanisms.
In Iran, there is no specific institution responsible for overseeing the performance of charity organizations. The police force, Ministry of Interior, and Welfare Organization are the three bodies that grant licenses to charity centers, but each one separately and not in coordination with each other, which leads to disjointed supervision over the performance of these institutions. All of these organizations are exempt from paying taxes to the government, regardless of their performance, work balance, and level of success in achieving their charitable goals. According to paragraph “v” of note 17 of the 1400 budget law, all charity institutions in the country must make all their payments and cash support through electronic transfers via SATNA/PAYA and include a 14-digit number (110 and the charity institution’s national ID) in the “for” section, and register in the system.
The main reason for the lack of effectiveness and development of charitable activities in Iran is that the actors in this field, namely the people, the government, and charitable institutions, have not yet accepted charitable activities in a modern way. In the discussion of oversight of charities, there is still no clear law and framework, and in fact, legal authorities and the government have not yet designated a specific organization for overseeing charities, resulting in lack of transparency, lack of accountability of charitable institutions in Iran, and a decrease in people’s trust in these institutions. This also creates a platform for the emergence of some economic crimes, such as tax evasion, money laundering, fraud, and breach of trust.
Charitable institutions are required by law to be under the supervision of the government and its representatives, meaning the Tax Organization. These institutions are under the microscope of governments all over the world, as they are generally susceptible to corruption and money laundering. In the system of supervision over charitable and non-profit institutions in Iran, there is so much poverty of information and oversight that even accurate statistics on the number of charities are not available. This is while in advanced countries like the United States and England, a commission is responsible for monitoring and controlling the activities of charitable institutions, and they must obtain a license from this commission and provide reports on their performance in various forms; in fact, this monitoring system is similar to the one used by the Bar Association in Iran. This type of oversight is useful in that it does not compromise the independence of civil institutions and charities; however, this does not mean that there are no violations in charitable institutions in England, but what is clear is that charitable activities in this country are within
However, passing transparent laws and establishing a specific organization to monitor civil institutions and charities alone is not sufficient to control corruption and money laundering in these institutions. As previously mentioned in relation to the causes and roots of corruption and money laundering in the country, in situations where corruption is structural and systematic, even monitoring institutions will become contaminated with corruption. The monitoring system of civil institutions in England is effective because the power structure is transparent and lawful, and the final decision-making authority is the same constitution; something that does not apply to Iran due to the complex power structure and distribution of rent among military and religious institutions, making it impossible for legal and transparent monitoring. Therefore, there is a strong need for consensus at the top of the government to make fundamental and structural changes in the power distribution structure and to establish the constitution as the only respected authority for decision-making for the government, institutions, and individuals in society. But if we continue on the same path we have been witnessing, no law or monitoring system will be
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