Should the U.S. Intelligence Community Provide Congress a Report on Iranian Corruption? (H.R. 1441)

What is H.R. 1441?

(Updated September 11, 2019)

This bill — the Stop Corrupt Iranian Oligarchs and Entities Act — would direct the Treasury Secretary, in consultation with the Director of National Intelligence (DNI) and the Secretary of State, to submit a report to the appropriate Congressional committees on Iranian oligarchs and entities that are profiting off the Iranian people. This report would be due within 180 days of this bill’s passage, and it would be required to be submitted in an unclassified form (but it may contain a classified annex).

This report’s contents would be required to include details on:

• An identification of the most significant senior foreign political figures and oligarchs in Iran, as determined by their closeness to the Iranian government, and assessments of: 1) their net worths, 2) relationships to Iranian President Hassan Rouhani or other members of the Iranian ruling elite, 3) an identification of any indices of these individuals’ corruption, 4) these individuals’ known sources of income, as well as the known sources of income of their family members (including spouses, children, parents, and siblings), and 5) an identification of these individuals’ non-Iranian business affiliations.
  
• An identification of Iranian parastatal entities, including assessments on: 1) their emergence and their roles in the Iranian economy, 2) their leadership structures and beneficial ownership, and 3) such entities’ non-Iranian business affiliations.
  
• Information on key U.S. economic sectors’ (e.g., banking, securities, insurance, and real estate) exposure to Iranian politically affiliated persons, Iranian parastatal entities, and Iranian state-owned enterprises.
  
• Information on the likely effects of imposing debt and equity restrictions on Iranian parastatal entities, as well as the anticipated effects of adding these entities to the list of Specially Designated Nationals maintained by the Treasury Dept.’s Office of Foreign Assets Control.
  
• Information on the potential impacts of imposing sanctions of debt and equity restrictions in addition to any existing sanctions or restrictions on Iranian oligarchs, Iranian parastatal entities, or Iranian state-owned enterprises, including impacts on the oligarchs, entities, and enterprises and on the Iranian economy, as well as those of the U.S. and its allies.

“Iranian parastatal entities” are defined as entities that are at least 25 percent owned by the Iranian state, and which had 2016 revenues of approximately $2 billion or more.

Argument in favor

Endemic corruption in Iran enriches the ruling class while keeping ordinary Iranians impoverished. It also provides the Iranian state funds to support region-destabilizing terrorism across the Middle East. A better understanding of Iranian corruption is needed to combat it.

Argument opposed

Serious Iran scholars already know where the sources of corruption in the country are. A further report on this issue isn’t needed to give Congress the information it needs to understand the sources and causes of corruption in the country.

Impact

Treasury Secretary; Director of National Intelligence (DNI); Secretary of State; corruption in Iran; Iranian oligarchs; and Iranian parastatal entities.

Cost of H.R. 1441

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Rep. David Kustoff (R-TN) reintroduced this bill from the 115th Congress to direct the Treasury Dept., in consultation with the State Dept. and Director of National Intelligence (DNI), to identify and compile a list of Iranian oligarchs and entities that are profiting off the Iranian people:

“Over the past forty years since the Islamic Revolution in Iran, we have seen Iran become a leading state sponsor of terrorism, build up its nuclear weapons capability, and endanger countries in the Middle East, including Israel, with acts of terrorism. Due to years of mismanagement by the government, Iran is economically crumbling. While the regime refuses to address corruption within their own spheres, the Iranian middle class struggles every day to pay their bills and even feed their family. It is unacceptable that the leaders in Iran have continued to accumulate hundreds of millions of dollars of wealth from their positions as their people suffer. It is essential we stand up to and place maximum pressure on Iran and its leaders to help expose the corrupt nature of this dangerous regime.”

Rep. Josh Gottheimer (D-NJ), an original cosponsor of this bill, adds:

“In recent years, Iran has capitalized on sanctions relief, bankrolling terrorist organizations like Hezbollah, Hamas and military adventurism across the region, while enriching corrupt, regime-connected officials back at home. I am glad to join Rep. Kustoff, my colleague on the House Financial Services Committee, to introduce this bipartisan legislation which will create a public report shedding light on the Khamenei regime’s corruption, distortion, and mismanagement of Iran’s economy.”

Last year, the Arab Center Washington DC noted that it’s unclear whether the information this bill requires would be useful:

“It is not a lack of support that would hinder the bill, but there are questions about the usefulness of such reporting requirements when most serious Iran scholars already recognize who the true economic powers are in Iran and how corrupt actors like the Iranian Revolutionary Guard Corps (IRGC) actually stand to profit more when the United States sanctions the Iranian economy because they control so much of the black market.”

This bill has one cosponsor, Rep. Josh Gottheimer (D-NJ), in the 116th Congress. Last Congress, it didn’t have any cosponsors and didn’t receive a committee vote.

Of Note: Iran’s corruption is among the worst in the world. In Transparency International’s 2018 annual corruption report, the country ranked 138th among 180 countries surveyed (a drop of eight places, from 130th in 2017). GAN Integrity’s Business Anti-Corruption Portal notes, “A powerful system of political patronage, nepotism and cronyism pervade all sectors of the economy. Irregular payments and bribes are often exchanged to obtain services, permits or public contracts.”

A 2007 estimate of the Islamic Revolutionary Guard Corps’ (IRGC) smuggling operations offered by an Iranian member of parliament suggested annual revenues of $12 billion. The parliamentarian described a sophisticated, large smuggling business of “such a magnitude that it can not be done by donkeys or by passengers…This volume is entering the country through containers and via illegal and unofficial channels [such as] ‘invisible jetties’ supervised by strongmen and men of wealth.”

In September 2018, Ali Alfoneh, a visiting scholar at the Arab Gulf States Institute in Washington, D.C. observed that Iranian oligarchs “bask in wealth” while ordinary Iranians suffer:

“While many Iranians suffer because the rial is in free fall and cut expenses drastically but still can’t make ends meet, they see the oligarchs of the Islamic Republic live life large. The oligarchs flaunt their fabulous wealth on the internet, use family connections to promote their careers and to further enrich themselves from public funds. For the Iranian public, this is a sad reminder of the ‘thousand families’ (Hezar Famil), or the oligarchy, which allegedly ruled Iran prior to the revolution. It is also a reminder of the revolutionary regime’s promise to replace the oligarchic system with equality and meritocracy. It appears the oligarchy remains intact, with the ‘thousand families’ of the Pahlavi era giving way to another “thousand families” in control of the country’s wealth. Worse, the newly rich Iranians have set aside any pretence of modesty and display their wealth with unprecedented vulgarity… Iranians are watching the luxurious lifestyle of the sons and daughters of the revolutionary regime in bitter silence but that may be the calm before the storm.”