The Financial Action Task Force (FATF) said on Friday Iran will remain on its list of high-risk countries for failing to fully accept the body's rules days after Iran's conditional accession to a UN convention against terror financing.
Tehran had hoped the move would grant it greater access to the global banking system as renewed international sanctions have dented its already creaky economy.
Iranian President Masoud Pezeshkian on Wednesday ratified the country’s conditional accession to the United Nations Convention for the Suppression of the Financing of Terrorism (CFT), but only within the limits of Iran’s constitution and laws.
In a statement on Friday, the Paris-based watchdog said it “acknowledges Iran’s re-engagement with the FATF... and that it aims to address deficiencies in its AML/CFT regime.”
But, it added, “Iran has failed to address the majority of its action plan since 2016,” when it first committed to reforming its financial system.
In February 2020, following Iran’s continued non-compliance, the FATF formally blacklisted the country and called for “effective countermeasures."
“Iran will remain on the FATF High Risk Jurisdictions Subject to a Call for Action statement until the full Action Plan has been completed,” the statement said.
The watchdog said the suspension of countermeasures will only be considered once Iran ratifies and implements the Palermo and Terrorist Financing Conventions in line with the FATF standards.
In May, Iran’s Expediency Council, conditionally approved the country’s accession to the Palermo Convention, one of the two key legislative items tied to the FATF standards, alongside the CFT.
Iranian reservations not in line with FATF standards
The FATF said that in September 2025, Iran reported the ratification of the United Nations Convention against Transnational Organized Crime (Palermo), but the FATF assessed that “the reservations Iran has made to Palermo are overly broad” and that “Iran’s domestic compliance with Palermo is not in line with the FATF standards.”
Referring to United Nations Security Council resolutions over what it called Iran’s lack of compliance with its nuclear non-proliferation obligations, the FATF reminded all jurisdictions of their duty to address proliferation financing risks emanating from Iran.
The organization also urged Tehran to urgently criminalize terrorist financing “by removing the exemption for designated groups 'attempting to end foreign occupation, colonialism and racism,'" to improve mechanisms for freezing terrorist assets, and to ensure effective monitoring of unlicensed money transfer services.
Its wording quoted Tehran's own language citing support for armed groups in the region opposed to Israel. Hamas, Hezbollah, the Houthis and Iraqi militias are accused of terrorism in the West and are under strict sanctions.
“The FATF strongly encourages Iran to work with the FATF to urgently make further progress on its action plan,” the statement added in its Friday announcement.
The statement was released after the FATF plenary in Paris on October 22–24, where delegates from over 200 jurisdictions discussed mutual evaluations and global efforts to combat money laundering and terror financing.
Iran’s Financial Intelligence Unit chief, Hadi Khani, traveled to Paris to attend the meeting for the first time in six years at the group’s official invitation, state media reported.
Water inflow to dams stood at about 780 million cubic meters as of Oct. 18, a 39% decline from the 1.29 billion cubic meters recorded a year earlier, according to data reported by ILNA news agency. Despite a 29% cut in water discharge to conserve supplies, total storage in the country’s reservoirs fell to 17.7 billion cubic meters from 23.3 billion, leaving national reserves around one-third full.
Twenty-two major dams are in critical condition, holding less than 15% of their designed capacity, wrote ILNA. In Tehran province, the five dams supplying the capital’s drinking and agricultural water are among the hardest hit. Amir Kabir Dam is at 11% capacity, an 80% drop from last year, while Lar Dam has fallen to just 2%, and Latyan, Mamlu and Taleghan dams each recorded declines of more than a third.
Reservoirs in other key provinces, Khuzestan in the southwest, Fars and Kerman in the south, and East and West Azarbaijan in the northwest, have registered deficits ranging from 20% to 70%, while some dams in Golestan province in the north, including Voshmgir and Bustan, have run completely dry, the report said.
Average rainfall since late September has been just 1.9 millimeters, far below the long-term average of 56 millimeters, and no measurable rain has been recorded in 21 provinces, including Tehran, Isfahan, Khuzestan, Kerman, and Kurdistan. Officials have warned of growing risks to both drinking water and crop irrigation in the coming months.
Drought altering rural life in Isfahan
In the central province of Isfahan, the water crisis has gone beyond agriculture to reshape entire communities. “Water scarcity has had deep effects on land subsidence, migration, and the changing character of rural areas,” said Gholamreza Goudarzi, head of Iran’s Statistical Center, in remarks published on Friday.
Census data collected during last year’s agricultural survey, he said, show that prolonged drought has altered crop diversity and forced some residents to abandon villages.
Experts warn that without immediate conservation measures, technological upgrades in irrigation, and coordinated drought management, Iran faces escalating water shortages that could endanger both rural livelihoods and urban supply in the months ahead.
Speaking during a visit to West Azarbaijan province, Pezeshkian acknowledged that raising fuel prices is unavoidable to address Iran’s worsening energy shortages but cautioned that any decision would require “careful planning” to avoid deepening economic hardship.
“There is no question that gasoline must become more expensive,” he said, according to state media. “But it is not a simple decision. We cannot act overnight or create more difficulties for people.”
His comments came amid intensifying debate over Tehran’s plans to introduce a new pricing system aimed at curbing soaring fuel consumption and smuggling.
Over the past two weeks, Iranian media have reported that the government is reviewing several reform scenarios, including multiple pricing tiers and possible changes to fuel quotas.
Last week, Khaneh Eghtesad published what it said was a leaked cabinet decree outlining a roadmap for “gradual correction” of gasoline prices. The government initially denied the report but later confirmed that the issue was under study by cabinet working groups.
Cabinet secretary Kamal Taghavi-Nejad said this week that fuel reform had been discussed but “no final decision” had been taken. A lawmaker, Amirhossein Sabeti, said the debate over introducing three fuel price tiers had become serious in parliament.
Energy officials say domestic gasoline consumption has surged well beyond refining capacity, forcing costly imports and draining subsidies that analysts estimate at more than $30 billion annually.
Pezeshkian has pledged to overhaul Iran’s energy subsidy system, arguing that maintaining the current artificially low prices is unsustainable. “Even water costs more than gasoline in Iran,” he said earlier this week.
The last major fuel price hike in November 2019 sparked nationwide protests that were met with a violent crackdown. Rights groups and Reuters reported that at least 1,500 people were killed.
Officials have since stressed that any future reform would be gradual and paired with compensation measures for low-income households. The administration insists it will not repeat the sudden price shock of 2019.
Economists warn that aligning prices with real production costs could sharply raise inflation but may also help reduce smuggling and waste. The government is expected to unveil its energy reform framework before submitting next year’s budget in December.
Mohammad Noursalehi, head of Isfahan’s City Council, told the Iranian Labor News Agency (ILNA) that the Zayandehrud Dam -- the main source of water for central Iran -- is reaching critically low levels.
“If the current trend continues, even drinking water for citizens will be at risk within the next 45 days,” he said.
According to Noursalehi,the dam is releasing several times more water than it receives, and much of that flow never reaches Isfahan’s main treatment plant because a large portion is diverted or lost along the route through both legal and illegal withdrawals.
Five million people at risk
He warned that more than five million people in Isfahan, Yazd, Chaharmahal and Bakhtiari, and Qom provinces depend on the Zayandehrud for drinking, agricultural, and industrial water.
“This is no longer just an agricultural or industrial problem. People’s drinking water is in danger,” he said, calling for the immediate suspension of non-drinking water use.
Noursalehi urged the government to accelerate long-stalled water transfer projects such as the Kouhrang-3 tunnel and the southern Isfahan pipeline, saying that decades of delay had compounded the crisis.
“If these projects had been completed on time, we would not be facing this situation today,” he said.
The council head also warned of severe environmental consequences, noting that the complete drying of the Gavkhouni Wetland -- once a UNESCO-listed ecosystem -- threatens the region’s biodiversity.
Land subsidence is already visible across Isfahan’s plains, Noursalehi said, warning that groundwater depletion has caused the ground to sink in several northern districts, prompting the evacuation of some schools.
“If this continues, Isfahan’s centuries-old monuments could face serious structural threats,” he said.
Officials in Iran have recently acknowledged that 19 major dams across the country are below 20 percent of capacity, with some hydropower plants -- including Tehran’s Amir Kabir Dam -- forced to halt operations.
Environmental researchers say the country is nearing “water bankruptcy,” driven by decades of overuse, unscientific dam-building, and poor water management.
Autumn remains dry, reservoirs at record lows
The first month of autumn passed with almost no rainfall across most provinces, according to the national meteorological organization. Officials said precipitation this year has dropped up to 45% below seasonal averages, leaving many regions facing possible rationing of drinking water.
Ahad Vazifeh, head of the National Center for Climate and Drought Crisis Management, said on Thursday that “no significant rain is forecast for at least the next three weeks,” warning that water shortages in major cities, including Tehran and Isfahan, will persist.
“Even if winter brings above-average rain, it will not compensate for the current deficit,” he said.
Government data show that total water stored in Iran’s 193 main dams has fallen to 17.6 billion cubic meters -- just 34% of full capacity and down nearly a quarter from last year.
Inflows since the start of the new water year have dropped 39%, while the outflow from reservoirs has declined by 29%.
The Zayandehrud dam in Isfahan is now only 13% full, the Lar dam near Tehran 2%, and the Independence dam in Hormozgan 6%, according to the Energy Ministry.
Many southern and central reservoirs have reached “dead storage” levels, rendering water unusable for supply or power generation.
Experts say Iran’s worsening drought, coupled with climate change and policy missteps, is transforming water shortages into a potential national security concern. Hundreds of villages now rely on water deliveries by tanker, while protests over shortages have erupted periodically in several provinces.