IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS

SUBMISSION TO THE WORKING GROUP ON BUSINESS & HUMAN RIGHTS: CONNECTING THE BUSINESS AND HUMAN RIGHTS AND ANTI-CORRUPTION AGENDAS

February 2020

has a specialised business and human rights programme that aims to aims that programme rights human and business specialised a has participates in human rights advocacy through the UN and the EU. JFI and awareness public raises further It cases. individual litigates and reports, documents, researches, JFI mission, its achieve To actions. tions inside and outside of Iran, and to hold them accountable for their viola rights human widespread perpetrate to Iran of Republic Islamic the of officials empowers that impunity of practice the eradicate and address to is mission JFI’s UK. London, in 2010 in established isation Justice for Iran investments and development projects in and from Iran. from and in projects development and investments businesses and financial actors engaging in export of goods or services, among rights human for respect and accountability corporate increase ( Email: [email protected] Tel: +44(0)2072819940 United Kingdom Address: Bickerton 25-27 Road, N19 5JT London, Twitter: @Justice4Iran/@Justice4IranEn Website: justiceforiran.org JFI ) is a not-for-profit, non-governmental organ non-governmental not-for-profit, a is ) - - ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 1 ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 2 RECOMMENDATIONS: WHISTLEBLOWERS d c b. AND WHISTLEBLOWERS 7 6 5 4 3 2 1 ABOUT THISSUBMISSION CONTENTS . . LACK OFTRANSPARENCY ANDPROTECTION FORJOURNALISTS . LACK OFINDEPENDENTWATCHDOGS ANDTRIBUNALS . FRONT (PRIVATE!) COMPANIES ANDLONG CHAINS . CORRUPT BANKINGSYSTEM . UNDUEINFLUENCE ANDCORRUPTION INPUBLICENTITIES . a BUSINESSES CONTROLLED BY THESUPREMELEADEROFIRAN PROBLEMATIC OWNERSHIPS ANDCORRUPT PRACTICES . WITHHOLDINGINFORMATION ANDIGNORINGTHELAW . RELEASINGUNUSABLEINFORMATION ANDDOCUMENTDUMP . THREATS ANDINTIMIDATION AGAINST JOURNALISTS AND RELEASING MISLEADINGINFORMATION

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DESTRUCTION AND RECONSTRUCTION OF SYRIA DESTRUCTION AND RECONSTRUCTION OF SYRIA deeper underlying aim of the submission, however, is to contribute to a better un better a to contribute to is however, submission, the of aim underlying deeper The Iran. in projects development and investments services, or goods of export in engage may who actors financial and businesses foreign for useful be can that Iran in corruption of overview brief a as serve can submission the level, superficial a At Iran. in corruption of scope and extent immense the here are far from exhaustive and the present submission cannot possibly do justice to discussed issues the that outset the at stressed be must It Iran. in systems financial and legal the in flaws systematic as well as businesses, and actors state of practices corrupt the of some on light shed to Iran for Justice by effort an is submission This ABOUT THISSUBMISSION broadly to connecting corruption and business and human rights. human and business and corruption connecting to broadly more applicable be to seem which research, this from emerge to begin that dations recommen of number a provide to attempt we Finally, whistleblowers. and nalists an independent watchdog, as well as transparency and effective protections for jour of lack the highlight sections two final The market. Iran’s in entities military and tal governmen of role the conceal to order in ownership of chains and companies front using of practice well-known and common a discusses section next The corruption. Iran’s banking system which is one of the main contributors to the country’s financial and corrupt practices that are rife in many public entities. Section four touches upon corruption internal examines section third The entities. such to afforded privileges and advantages undue the and Iran of Republic Islamic the of Leader Supreme the by controlled entities the of overview an gives section second The forces. security or panies as well as the identity of shareholders and directors and their ties with military rights violations. The first section focuses on issues of ownership and control of com tutions and practices that embody systematic corruption in Iran and facilitate human This submission has seven sections seeking to address some of the problematic insti agendas. human rights,andanti-corruption and business the Group’s workonconnecting ing Work the to helpful be will submission this hope We account. into taken be should abuses rights human facilitate or allow corruption, of because who actors, complicit effectively protected, a be wide range of enabling factors, including practices, legal framework and to rights human for that underscore to seeks particularly It abuses. rights human to linked be or contribute cause, may corruption how of derstanding ------▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 3 ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 4 lie” Spebr 2 20, vial (n as) t < at: Farsi) (in 3 available 2009, 12, September plained”, 2 < at: available 2013, 11, Nov seizures, property on built empire financial massive controls Khamenei Reuters, See: abroad. living Iranians other and dissidents political as well as Baha'i, like minorities religious of members to belonging properties of thousands of seizure systematic the on empire 1 “practically that stated rules, competition of violations blatant such with concerned 4 jected the claim, the reason for its removal was revealed as lack of security clearance. announced that PKY withdrew from the competition. However, after PKY publicly Organisation re Privatisation Iran’s of head the first, At IRGC. by controlled is which organisation paramilitary Basij the to belonged which company another by replaced one of the bidders Pishgaman Kavir Yazd (PKY), was removed from competition and nies claimed the auction was rigged in favor of the Consortium. the bidding became an immediate cause of controversy, as a number of other compa (TCI) and won the bid. In addition to the problematic credentials of the Consortium, Iran of Company Telecommunication of shareholding majority the buy to bid a in companies pursued in 2009 by the government of the time, the Consortium took part IRGC. the by controlled and owned inantly Imam of preme Leader of Iran Execution the Su the by with controlled foundation a Setad), as known together also (EIKO, Order Khomeini’s companies, IRGC-owned two 2009, In issues: such of nature problematic and scope the of example one only is Below contracts. profitable win to influence military and political using and takeovers; and practices bidding rupt cor violations; rights human gross to linked entities other or (IRGC), Corps Guard Revolutionary Islamic the e.g. forces, security or military with connections rectors; di and shareholders of identity the include: These companies. of control and ership own of issues connected but various concerns here noteworthy is that area first The 4 at: Farsi) (in available 2009, 26, Oct < CEO” PKY’s with Conversation In Auction:

Ironically, the head of the Competition Council, who supposedly should have been have should supposedly who Council, Competition the of head the Ironically,

http://www.ictna.ir/report/archives/023756.html http://www.reuters.com/investigates/iran/#article/part1 ICTNA, “The Characteristics of Etemad Mobin Consortium as the Buyer of Communications Stocks Ex Stocks Communications of Buyer the as Consortium Mobin Etemad of Characteristics “The ICTNA, A 2013ReutersinvestigativereporthasdocumentedhowSetad hasbuiltamultibilliondollar ICTNA, “Behind the Curtain of Security-related Disqualification of Pishgamana-Kavir-Yazd in the TCI the in Pishgamana-Kavir-Yazd of Disqualification Security-related of Curtain the “Behind ICTNA, https://bit.ly/2vklEsa CORRUPT PRACTICES 1 . PROBLEMATIC OWNERSHIPS AND 1 , formed a consortium called Tose’e Etemad Mobin, itself dom > 2 In a wave of “privatizations” of public of “privatizations” of wave a In > http://www.ictna.ir/id/022937/ 3 Among other issues, >. ------record of gross violations of human rights by the IRGC. the by rights human of violations gross of record track the given concerning extremely is This telecommunications. landline example for areas, certain over monopoly with Iran in sector telecom the of part major a ly jority share of TCI, the IRGC-controlled Consortium now controls TCI, and effective IRGC. the by controlled are which of majority the Iran, in sector ICT the across companies of network complex a of dominance the of account detailed a gives also report The Setad. and IRGC by owned is TCI of share majority the purchased that Consortium the that doubt no is there that stresses and TCI of ‘privatization’ so-called the icizes the revealed journal ICT breakdown of the shareholders of TCI following the 2009 purchase. specialist Iran-based an by published report a 2016, In tervention”. in our for ground no was there therefore and deal this in competition no was there 8 7 peivast.com/month-report/ 6 5 public of scrutiny the from excluded are entities such exemptions, tax to addition In exemption. an such of grant the ordered had he which in IRI of Leader Supreme the by order an to refers Nourbakhsh minister the order, his In taxes. paying from Setad of exemption the stressing order administrative an sued is Finance and Affairs Economic of minister the 1993, July in example, For needed. was clarification further where occasions some been have there well-established, are preme-Leader-controlled businesses and companies. Although the above exemptions Su the to advantages huge give arrangements special Such exemptions. tax and transparen cy of lack supervision, and audit from exemptions their as such Iran, of Republic Islamic the of Leader Supreme the by controlled entities to afforded ileges priv and advantages extraordinary the concerns herec issue significant second The

7 Meysam Qasemi, “Humble Owners of ICT”, Peyvast Monthly, Sep 2016, (in Farsi) at:< available Sep Monthly, ICT”, Peyvast of Owners “Humble Qasemi, Meysam https://bit.ly/3bv6yAP http://www.intamedia.ir/Pages/Action/LawsDocShow/2/1/1/4/1052 Ibid. Having purchased 50% plus one of the shares, and therefore holding the ma the holding therefore and shares, the of one plus 50% purchased Having 5 SUPREME LEADEROFIRAN 2 . BUSINESSES CONTROLLED BY THE فروتــن مالــکان رتـ -ict/ > 8 6 The report crit http:// ------▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 5 ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 6 $1.7 billion). (around Rials billion 2,500 worth contracts advertising its for auction IRIB 2015 the influencing in organisations these of role the mentions also Sarafraz inspector. IRIB one of assassination attempted the even and Organisation, Intelligence IRGC the by deputies his of interrogation and persecution the to led this that claims further He were granted to companies owned by military and semi-governmental organisations. which budgets significant with IRIB within projects several into investigation his of fraz claims that his downfall and removal from his high ranking position was because Sara companies. semi-private their through market business Iran’s in entities these of role the stresses Sarafraz entities. semi-governmental and governmental of level every in corruption systematic and pervasive is there that admits (IRIB) entity ing Broadcast state-run of head former the Sarafraz Mohammad interview, revealing a In entities. public many in corruption internal the is aspect problematic Another treasury. government’s the to ited in selling oil shipments worth $180 million, the proceeds of which were never depos foundation this of involvement the indicated case The Leader. Supreme the by rectly di appointed is commander whose force, Police the to belongs that giants financial the of one Foundation), Cooperative (Police NAJA of Ta’avon Bonyad in corruption of case a reported press the 2015, April In funds. public than other places in up end a chance of making financial transactions through such entities, the benefits of which always is there scrutiny public Without permission. his without Leader Supreme the of control under organisations the investigating from members its preventing tions, regula internal its amended parliament Iranian the 2008 in instance, For bodies. 10 See also: in-Iran-says-ex-police-chief.html 9

https://bit.ly/31LFdpe https://www.telegraph.co.uk/news/worldnews/middleeast/iran/11676847/Money-can-buy-anything- https://www.bbc.com/persian/tv-and-radio-4071336 10 CORRUPTION INPUBLICENTITIES 3 . UNDUEINFLUENCE AND 9 8

- - - - - independent monitoring systems contribute to structural and systematic corruption. of lack and policy monetary improper with along operations financial covert Such into a means of circumventing the sanctions through untraceable financial activities. system banking Iranian the turned has banks, state-owned the over entities military and governmental of influence the and bank central the of dependency of lack The nepotism. and patronage favouring banks state-owned of policies lending the in corruption institutionalised the indicates This circle. inner Republic’s Islamic the to ties close with entities or als individu by inobtainingloansandfinancialcredits influence concerns undue cases, court anti-corruption some been have there which about example, typical A ruption. Iran’s banking system is among the major contributors to the country’s financial cor 12 ment-scandal/2011/09/28/gIQAhhK14K_story.html 11 entities. tary mili and governmental Iranian the of behalf on companies multinational and eign for with cooperation professional and partnerships business international establish organisations. these on sanctions impose that states the to especially undetected, entities military and governmental of activities financial the keep to and sanctions the circumvent to is others, among practice, a ties in Iran’s market is a common and well-known practice. The main reason for such Using front companies in order to conceal the role of governmental and military enti ing system. bank Iranian the within corruption of examples few a only are 2014-2018, between cases fraud banking numerous and 2011, in scandal embezzlement billion $2.6 The

https://wikileaks.org/plusd/cables/10RPODUBAI41_a.html https://www.washingtonpost.com/world/middle-east/top-iranian-banker-flees-amid-embezzle 11 4 AND LONG CHAINS 5 . CORRUPT BANKINGSYSTEM . FRONT (PRIVATE!) COMPANIES 12 Front companies are mostly used to used mostly are companies Front ------▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 7 ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 8 favor. their in trial a move can or prosecution from spared either are authorities rank high to links with figures influential and Rich services. intelligence of influence the under act often courts the and corruption systemic by affected deeply is itself judiciary The Leader. Supreme the by appointed directly is corruption, of cases major with deal to judges senior the appoints who judiciary, the of head The operations. ti-corruption current an judiciary, whichisincharge ofthe however, isthe The mostproblematic Leader. Supreme the of either unwilling to investigate or prevented from thorough investigation by the Office ganisations under control of the Supreme Leader, the existing monitoring bodies are or the to linked are cases corruption the of most as above, explained As economy. Iran’s in corruption tackling to obstruction main the is tribunals and bodies toring moni independent and impartial of lack the that argued safely be therefore can It law. the by touched ever hardly are perpetrators major the and rife are corruption scale large of cases numerous where impunity, of culture a created has This wrongdoers. the is the lack of impartial independent tribunals that would hear such cases and punish Iran in corruption of prevalence the to contributes significantly that point further A proxies. foreign other entities, such entities establish business cooperation with foreign companies through IRGC various by used companies front of case the in including cases, some In cult. diffi extremely Iran in organisations military and governmental with ties business real their and activities their of nature the of detection the make Iran, outside and bined with a long chain of further companies involved in business cooperation inside What is significant for our discussion is that such use of front companies, when com 13

13 https://www.bti-project.org/fileadmin/files/BTI/Downloads/Reports/2016/pdf/BTI_2016_Iran.pdf WATCHDOGS ANDTRIBUNALS 6 . LACK OFINDEPENDENT - - - - - techniques are as follows: as are techniques such of examples Some information. and records their to access hinder indirectly or directly to techniques numerous use entities state-controlled and governmental The activities. business their of nature and scale the about blackout information total a to led has accountability and transparency of lack The expression. of freedom and entities in Iran’s economy has contributed to gross violations of freedom of the press military-controlled and governmental in institutionalised corruption systemic The 15 14 creation program job in the rural form of 31 the unsearchable PDFs for with more than dollars) 1.5 million billion data units. one of (equivalent loans its of recipients Iran’s Ministry of Cooperatives, Labour and Social Welfare released its records of the increases the costs and duration of usually time sensitive investigations. For instance, drastically tactic This relevant. are fraction a only which of documents, of avalanche In other cases, entities under scrutiny bury the journalists and investigators under an organisation. each for budget total the calculate to difficult more it making tables numerous in hidden and scattered intentionally been has organisation each of budget the which in format, PDF unsearchable in budget annual the releasing on insists government the press, the from requests multiple despite instance, For data. irrelevant of piles the among information important the hide to order in way fusing able to the investigators and journalists. Alternatively, they release the data in a con us not is which format or way a in documents relevant the release intentionally tion informa their to access press give to law by obliged are which Iran in entities Many

DOCUMENT DUMP a . RELEASINGUNUSABLEINFORMATION AND https://karafarini.mcls.gov.ir/fa/tarehtahsilateshteghal https://bit.ly/37DMMRa AND WHISTLEBLOWERS PROTECTION FORJOURNALISTS 7 . LACK OFTRANSPARENCY AND

14 15 - - - ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 9 ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 10 D8%B1%DA%AF%D8%A7%D9%86%DB%8C-4/3484519-%D8%AE%D8%B7%D8%A7%DB%8C-%D9%85%D8 16 organisations. these of part the on pressure political under or Leader Supreme the of order direct the by either stopped been has Leader Supreme the of control the under entities the into investigation parliament’s ment’s administrative organisations have released this information. organisations that receive public funds, none of the organisations outside the govern revolutionary and governmental para governmental, all of managers ranking high of data salary the release and database a establish to ex government the obliges pressly Act Program Development Sixth the of 29 Article while instance, For mation. infor their to access bodies monitoring parliamentary or press give to them oblige Supreme leader or those controlled by IRGC, can easily ignore the laws that expressly the of supervision direct under those particularly entities, profile high addition, In an inquiry by a journalist, on the grounds that such information is top secret. following tax, wealth paid who individuals of number the release to refuses istration Admin Tax National Iran example, another In individuals. of privacy the protecting its sale contract of the public enterprises to the private sector based on the pretext of information. Privatisation Organisation, for instance, does not release the content of the to access press block Iran in entities state-owned and governmental the of Most public bodies in order to hide the real value of exported goods. lished a report warning against the manipulation and misuse of statistics and data by release of misleading information. For instance, Tehran Chamber of Commerce pub the and statistics of misuse the to led has bodies monitoring dependent of lack The 18 17 %D8%B1%DB%8C-%D8%A2%D9%85%D8%A7%D8%B1 %AD%D8%A7%D8%B3%D8%A8%D9%87-%DB%8C%D8%A7-%D8%AF%D8%B3%D8%AA%DA%A9%D8%A7

LAW c b . WITHHOLDINGINFORMATION ANDIGNORINGTHE . RELEASINGMISLEADINGINFORMATION https://donya-e-eqtesad.com/%D8%A8%D8%AE%D8%B4-%D8%A8%D8%A7%D8%B2% https://www.alef.ir/news/3970426004.html https://www.s-rahkar.org/1398/09/04/1127/ 16 18 In many cases, - 17 - - - - - ran Municipality to a number of people, journalist Yashar Soltani was arrested based Teh the by properties of transfer controversial the on Office Inspection General the In September 2016, following the publication of a set of declassified reports involving practices. corrupt exposing for prosecution and reprisal of acts to subjected been have whistleblowers and journalists Many punishment. extrajudicial and judicial harsh facing are information leaked the publish who journalists the also and whistleblowers the wrongdoing, government’s the and corruption expose who gative journalists or leaked by whistleblowers. Without any legal protection for those investi by disclosed been has what to limited is transactions their and entities these In the circumstances mentioned above, the little and rare information available about 20 ist-draws-huge-public-backlash-tehran-corruption 19 harm national security”. to intent the with documents “secret publishing for prison in years five to sentenced on released bail in November 2016. However, in January 2019 the verdict was issued and he was then and months two for jail in remained Soltani parliament, of bers mem and society civil by protest of letters numerous despite and properties the of judiciary expressly confirmed that the municipality had acted illegally in the transfer Council. City Tehran of head and mayor the by filed lawsuit the on

AND WHISTLEBLOWERS d . THREATS ANDINTIMIDATION AGAINST JOURNALISTS https://cpj.org/2019/01/iran-sentences-journalist-to-five-years-over-corru.php https://www.theguardian.com/world/iran-blog/2016/nov/04/silencing-iranian-journal 20 19 Although the Although - - - - 11 ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS 12 2. 1. 3. sations, and given the government’s willingness to conceal such relation lengths to hide their connections with governmental and military organi great to go would Iran in companies and entities that fact The tivities. ac business their of range and context the and partners business their into investigation thorough a without undetectable therefore, and ships violations might be indirect or through a long chain of business relation rights human in businesses Iranian of involvement the that understand to is Iran, with relations business for assessment risk and investigation any of part important most The violations. rights human of petrators per main the with ties and corruption of record track companies’ the to regards with inadequate are assessment risk of methods ordinary the mon practice of data manipulation in contexts like Iran. This means that diligence: A more comprehensive risk assessment and heightened due population. the of majority vast the of detriment the to Republic Islamic the of circle inner the of interests the tions of economic and social rights, by draining public funds and serving viola widespread to contribute also practices corrupt Such equipment. and technology funding, required the providing by rights human abuse linked to human rights abusers and in many cases enable them to further often are practices corrupt of stakeholders and actors The abuses. rights human to contribute and cause practices corrupt that levels, individual and institutional governmental, at corruption of cases the from evident Connection between corruption and human rights abuses: and knowledge. As the companies’ risk assessment is mostly focused on focused mostly is assessment risk companies’ the As knowledge. and skills human specialist require would Iran in as such contexts complicit in violations rights being to regards with businesses of assessment Consultation with civil society and human rights groups: investors. and businesses for contexts such ness relations. This would lead to heightened due diligence obligations in busi its into investigations thorough and in-depth through assessment risk comprehensive more a for case strong a constitute would it ships, There is a lack of transparency and accountability, and com RECOMMENDATIONS: Risk It is ------before and during their business relations. business their during and before with stakeholders and engage with civil society and human rights groups consult should investors and businesses foreign why is This overlooked. be might violations rights human of risks potential many sanctions), al with internation compliance (e.g. dimensions financial and economic - 13 ▼ IRAN: THE MEETING POINT OF CORRUPTION AND HUMAN RIGHTS VIOLATIONS Cover photo: A room in Chah Abbas village, South Khorasan, Iran, 2017. The picture on the wall shows the former and current Supreme Leaders of the Islamic Republic of Iran (Original photo by Mohsen Noferesti / Mehr News Agency)