What changed
RBI issued this circular on May 2, 2011, updating earlier guidance from March 17, 2011. It incorporates FATF's February 25, 2011 statement urging members to apply counter-measures against Iran and DPRK due to ongoing money laundering and terrorist financing risks.
What it means for you
Urban Co-operative Banks must now explicitly assess and mitigate AML/CFT risks linked to Iran and DPRK before entering any business relationship or transaction. This adds a layer of due diligence for cross-border dealings with these jurisdictions, potentially increasing compliance costs and scrutiny for affected accounts.
What you must do
- Review and update your bank's AML/CFT policies to specifically address risks from Iran and DPRK.
- Train compliance staff to identify and flag transactions or relationships involving persons or entities from these countries.
- Ensure the Compliance Officer/Principal Officer acknowledges receipt of this circular to the respective RBI Regional Office.
- Monitor FATF updates regularly to stay aligned with evolving counter-measures.
Who it affects
All AD Category I Primary (Urban) Co-operative Banks, Compliance Officers and Principal Officers of UCBs, Customers or counterparties with links to Iran or DPRK
What triggered this circular from RBI?
The circular follows FATF's February 25, 2011 statement calling for counter-measures against Iran and DPRK due to deficiencies in their AML/CFT regimes, which pose ongoing money laundering and terrorist financing risks.
Do these requirements apply to all transactions or only new ones?
The circular advises banks to consider these risks while entering into business relationships and transactions, implying both new and existing relationships should be reviewed for exposure to Iran or DPRK.
What should a UCB do if it already has customers from Iran or DPRK?
Banks should reassess those relationships for AML/CFT risks and apply enhanced due diligence or counter-measures as appropriate, in line with FATF guidance and RBI's instructions.