WHAT EFFECT WILL DOLLARIZATION IN IRAN HAVE ON ANTI-MONEY LAUNDERING AND SANCTIONS ENFORCEMENT?

Reports that it is a real possibility Iran may, either officially or unofficially, adopt the US Dollar as a second currency, are disturbing, due to the potential adverse effect such a move might have on global AML/CFT efforts,as well as the enforcement of international sanctions against Iran's ballistic missile and WMB programs. This could present a dilemma for both American law enforcement as well as a boon for the world's professional money launderers, who are constantly seeking to change criminal proceeds in other currencies into something they can use to clean their clients' profits.

The unchecked downward spiral of Iran's national currency, in large part caused by effective US sanctions, has reportedly resulted in the country's affluent to protect themselves by holding large amounts of Dollars, and the fact that the Central Bank of Iran earns fifteen per cent on currency demands of private banks for Dollars may just be a benefit to the Islamic Republic to unofficially, but really officially,to encourage dollarization.

How American law enforcement might deal with this enforcement nightmare is not known. We know that there are more US Dollars in circulation abroad than domestically, but those greenbacks are essentially moving due to market demands for stable hard currency, and not subject to any American controls. Just thinking about the possibilities of increased global money laundering opportunities, when a large cache of Dollars become readily available to criminal elements, is enough to keep both our law enforcement, as well as Treasury officials, sleepless and up at night.

Even if dollarization in Iran remains only a de facto reality, on the part of Iran's affluent, it represents a clear and present danger on many fronts. The US government had better start planning on how it can respond to such a development, before it becomes a reality, and the world's laundrymen and sanctions evaders reap the benefits.