IIEffective Insolvency and Creditor Rights Systems
In 2003, a press release from the United Nations Commission on International Trade Law (UNCITRAL) listed Iran as a participant in the UNCITRAL Working Group drafting provisions for the UNCITRAL Legislative Guide on Insolvency Law. However, Iran is not listed on the UNCITRAL website as having enacted legislation based on the UNCITRAL Model Law on Insolvency. There is no other publicly available information that directly addresses Iran's insolvency regime or its compliance with the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. The International Bank for Development and Reconstruction (IBRD), in conjunction with the World Bank, produces an annual report and a summary "Doing Business" guide, both available on the World Bank website, in which 181 countries are evaluated, inter alia, on aspects of their procedures for business closings. Three indicators are used to compare country performance: the average time to bring a business closing to completion (in years), the average cost (as a percentage of the estate), and the average recovery rate, provided in terms of cents on the dollar. For this category, the World Bank ranks Iran as 107th. On all three aspects of closing a business as tracked by the IBRD and the World Bank (time required, cost, and recovery rate), Iran's performance significantly lags behind the performance of member states of the Organization for Economic Co-operation and Development, but outperforms the regional averages for cost, while lagging behind the region for the factors of time required and recovery rate.
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IDInternational Financial Reporting Standards
As stated on the website of the Islamic Republic of Iran Audit Organization (IRIAO), the IRIAO sets the National Accounting Standards (NASs) in accordance with International Financial Reporting Standards (IFRSs), formerly known as International Accounting Standards or IASs, issued by the International Accounting Standards Board (IASB). IFRSs are being constantly revised to keep up with changes in global financial practices and trends. Consequently, to maintain the level of compliance, the IRIAO has also been introducing new projects for incorporating IFRSs revisions into NASs. According to the IRIAO website, as of February 2009, amendments of NASs aimed at harmonization with international standards were in process. On its website, in a chart comparing NASs and IFRSs, the IRIAO accounted for 9 NASs which made "minor departures" from the revised IASs, and 10 IFRSs that had not been adopted as of February 2009.
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IIPrinciples of Corporate Governance
A 2000 publication on doing business in Iran reported that Iran's business and investment environment is governed by unclear and unpredictable laws. According to a 2005 IMF Article IV Consultation report with Iran, investor protection is weak, as measured by an index including different aspects of corporate governance. However, according to the Tehran Stock exchange website, the 2006 Securities Act is intended to protect investors against unfair practices and fraud, and ensure the adequate and timely disclosure to the public of information on companies issuing securities. The 2008 IMF Article IV Consultation report with Iran states that in 2007, new corporate governance regulations for listed companies, as well as regulations on the supervision of investment companies were being drafted. Meanwhile, the Central Bank of the Islamic Republic of Iran has issued new guidelines on liquidity management, internal controls, and corporate governance. However, it remains unclear from publicly available sources whether these measures will bring Iran closer to compliance with the Organization for Economic Co-operation and Development's Principles of Corporate Governance.
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IDInternational Standards on Auditing
In consultation with the Iranian Association of Certified Public Accountants (IACPA) and other regulatory bodies, the IRIAO issues standards and guidelines on accounting, auditing, code of professional ethics, as well as code of ethics for personnel in accordance with Islamic rule. In a May 2007 self-assessment report prepared for the International Federation of Accountants, the Iranian Institute of Certified Accountants (IICA) noted that the IRIAO had established convergence of national auditing standards with the International Auditing and Assurance Board (IAASB) pronouncements as a formal objective. In 1998, thirty auditing standards based on the International Standards on Auditing (ISAs) were adopted with effective date of March 20, 1999. However, since then the IAASB has revised the standards. To keep up with the revisions to ISAs, the IRIAO, according to a 2005 Iran Daily article on accounting standards, prepared seven new standards and was in the process of revising existing standards. As of February 2009, however, there is insufficient publically available information as to whether the revisions to ISAs have been incorporated into the Iranian requirements.
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NCAnti-Money Laundering/Combating Terrorist Financing Standard
Iran does not have a functioning Anti-Money Laundering (AML) framework in place, according to the IMF's 2006 Article IV Consultation report (published in 2007) and a 2008 report by the U.S. Department of State (DoS). The IMF's Article IV report identified two key flaws: first, the lack of an AML framework; second, major shortcomings in Iran's framework for combating the financing of terrorism (CFT). The IMF also made reference to the inadequacies in a draft law that the authorities were working on at the time of the 2007 report. The report noted that this draft law did not adequately address the Financial Actions Task Force's (FATF) requirements. The IMF's report makes three key recommendations, namely, Iran should properly criminalize money laundering, expand the number of entities covered by the AML framework, and establish a functioning Financial Intelligence Unit. According to a subsequent 2008 IMF Report, Iran enacted the Anti-Money Laundering Law effective January 2008, though the report cautioned that it was merely a summary framework that will require implementing regulation. According to the 2008 report by the U.S. DoS, the U.S. has designated Iran a State Sponsor of Terrorism. The FATF issued a press release in October 2007 stating its concern that the weak AML/CFT regime in Iran poses a significant vulnerability within the international financial system. In accordance with those concerns, the FATF advised its members to take into account, for enhanced due diligence, the risk that deficiencies in Iran's AML/CFT regime pose. The 2008 U.S. DoS report emphasized that "Iran is currently the only country for which the FATF has publicly identified such significant AML/CTF vulnerabilities."
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IICore Principles for Systemically Important Payment Systems
The IMF, in its 2005 Article IV Consultation report on Iran mentions that a real time gross settlement (RTGS) system referred to as the Rial interbank market was expected to become operational in 2006-2007. The CBI states in its Economic Report & Balance Sheet for 2006/07 that the RTGS system was launched in 2006. It is a large-value transfer payment system developed, adopted and overseen by the CBI. The CBI report also mentions two other payment systems, namely, the Retail Funds Transfer System (SAHAB) and the Interbank Information Transfer Network (SHETAB). The CBI, however, does not identify which of these systems are systemically important in Iran. As the CBI report notes, cash is still the predominant payment instrument, however, there has been an expansion in the use of electronic payment instruments in recent years. The report also noted that the Interbank Clearing House, where various checks are collected and settled, has not been automated yet, and the settlement process might take at least 48 hours. The CBI has stressed the need to standardize the payment and settlement systems in Iran and develop value-added services in line with international best practices. Nevertheless, there is insufficient information publicly available on Iran's compliance with the Committee for Payment and Settlements Systems' Core Principles for Systematically Important Payment Systems.
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