The Dual Impact of International Sanctions and FATF Requirements on the Independence and Effectiveness of Government Financial Supervision in Iran’s Public Law System

Abstract

Financial supervision is a core function of the modern administrative state, ensuring legality, accountability, transparency, and the proper management of public resources. In Iran, this function operates under sustained external regulatory pressure arising from international sanctions and the requirements of the Financial Action Task Force. This article examines how the simultaneous presence of these two external forces reshapes the independence and effectiveness of government financial supervision within Iran’s public law system. Using a scientific narrative review and descriptive legal analysis, the study explores the structural consequences of sanctions for domestic financial governance, including restricted access to financial data, limited international cooperation, institutional distortion, and the expansion of informal financial mechanisms. It also analyzes FATF standards as a normative and regulatory framework that promotes transparency, risk-based supervision, and enhanced detection capabilities while imposing compliance costs and influencing domestic regulatory priorities. The findings demonstrate that sanctions and FATF obligations operate through opposing yet interacting logics: sanctions encourage opacity, emergency governance, and centralization, whereas FATF requirements incentivize formalization, disclosure, and procedural oversight. Together, they generate a complex regulatory environment in which supervisory institutions may gain technical tools but lose functional autonomy. The article argues that supervisory independence in this context cannot be assessed solely on the basis of formal legal status, as functional independence is deeply shaped by external constraints and resource limitations. Ultimately, the study highlights the need for a public law perspective that recognizes financial supervision as a dynamic institution situated between sovereignty, global regulatory integration, and domestic accountability.