RBI warns banks against dealings with Iran, North Korea funds

New Delhi, Mar 27 (PTI) Fearing possible money laundering
and terror-financing risks from Iran and North Korea, RBI has
asked banks and other financial entities to be cautious in
dealings with entities and funds from these countries.
The RBI warning follows a fresh global caution notice
issued by the Financial Action Task Force (FATF) on Iran and
Democratic People's Republic of Korea.
The FATF is an inter-governmental body responsible for
making policies at national and international levels to combat
money laundering and terror-financing.
The RBI said the FATF has issued a fresh public statement
on February 25, 2011, "calling its members and other
jurisdictions to apply counter-measures to protect the
international financial system from the ongoing and
substantial money laundering and terrorist financing (ML/FT)
risks emanating from Iran and the Democratic People's Republic
of Korea (DPRK)."
"All banks and all-India financial institutions are
accordingly advised to take into account risks arising from
the deficiencies in AML/CFT regime of these countries, while
entering into business relationships and transactions with
persons (including financial institutions) from or in these
countries/jurisdictions," the RBI said in a March 24 circular.
A similar circular could be issued soon by market
regulator Sebi to warn market entities against their dealings
with funds and entities related to these two countries.
An FATF public statement in this regard is always
followed up by various regulators in India and other member
countries asking the entities regulated by them to exercise
extra caution in dealings with countries where anti-money
laundering and terror-financing regulations have deficiencies.
The RBI and Sebi had last issued such a warning in
January about Iran, pursuant to a directive from the FATF.
India became a member of the FATF last year. Following
the nation's accession into the global body, it is required to
follow the global standards prescribed by the FATF to check
money laundering and terror-financing activities.
As per the FATF warning, all financial institutions have
been advised to give special attention to business
relationships and transactions with Iran and North Korea, as
well as their companies and financial institutions.
The FATF has urged member countries to take into account
the risk of money laundering and terror-financing when
considering requests by Iranian and North Korean financial
institutions to open branches and subsidiaries.
Iran and North Korea have been subjected to various
sanctions by the US and some European countries to thwart the
flow of funds allegedly used to finance their nuclear weapon
ambitions and sponsor terror-related activities.