What changed
RBI issued a circular on April 30, 2010, updating the list of jurisdictions with strategic AML/CFT deficiencies as per FATF's February 18, 2010 statement. It categorizes these jurisdictions into three groups: those requiring countermeasures (Iran), those with unaddressed deficiencies (Angola, DPRK, Ecuador, Ethiopia), and those previously identified with lingering issues (Pakistan, Turkmenistan, Sao Tome and Principe). NBFCs and RNBCs must now consider risks from these countries in their KYC/AML processes.
What it means for you
NBFCs and RNBCs must enhance due diligence for any transactions or relationships involving these jurisdictions, as they pose higher money laundering and terrorist financing risks. This could lead to stricter screening, additional documentation, or even rejection of business from these countries. Lenders should update their risk assessment frameworks and ensure compliance officers are aware of these specific geographies.
What you must do
- Update your KYC/AML risk assessment policies to include the listed jurisdictions: Iran, Angola, DPRK, Ecuador, Ethiopia, Pakistan, Turkmenistan, and Sao Tome and Principe.
- Train compliance and operations teams to flag transactions or customers linked to these countries for enhanced due diligence.
- Submit an acknowledged receipt of this circular to your respective DNBS Regional Office via the Compliance Officer or Principal Officer.
- Review existing customer portfolios for any exposure to these jurisdictions and apply appropriate risk mitigation measures.
Who it affects
All Non-Banking Financial Companies (NBFCs), Residuary Non-Banking Companies (RNBCs), Compliance Officers and Principal Officers of NBFCs/RNBCs, Regional Offices of the Department of Non-Banking Supervision (DNBS)
Which jurisdictions require countermeasures according to this circular?
Iran is the only jurisdiction where FATF calls for countermeasures to protect the international financial system from ongoing and substantial money laundering and terrorist financing risks.
What should NBFCs do if they have existing customers from these high-risk jurisdictions?
NBFCs should conduct enhanced due diligence on such customers, reassess the risk profile, and consider applying additional monitoring or restrictions as per their AML/CFT policies.
Is there a deadline for submitting the receipt of this circular?
The circular does not specify a deadline, but it advises that an acknowledged receipt be submitted by the Compliance Officer/Principal Officer to the concerned DNBS Regional Office.