Global watchdog Financial Action Taskforce (FATF) placed Iran on its blacklist on Friday.
The reason pointed out was that Iran failed to comply with international anti-terrorism financing norms. This move is considered as one that will deepen the country's isolation from financial markets and thus intensify Iran’s financial woes.
For the past three years, FATF has been compelling Iran to stop terro funding. "Given Iran's failure to enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, the FATF fully lifts the suspension of counter-measures and calls on its members and urges all jurisdictions to apply effective counter-measures," the group's 39 members said in a statement after a week-long plenary session.
These would entail more scrutiny of transactions with Iran, tougher external auditing of financing firms operating in the country and extra pressure on the few foreign banks and businesses still dealing with Iran.
"The consequence of (Iran's) inaction is higher costs of borrowing and isolation from the financial system," a Western diplomat told Reuters.
The United States commended the task force's action after what it said was Tehran's failure to adhere to FATF's standards.
Iran "must face consequences for its continued failure to abide by international norms," US Secretary of State Mike Pompeo said in a statement.
Iran's central bank chief dismissed FATF's decision. "(It) is politically motivated and not a technical decision," the state news agency IRNA quoted Abdolnasser Hemmati as saying. "I can assure our nation that it will have no impact on Iran's foreign trade and the stability of our exchange rate."