What changed
RBI issued a circular on May 4, 2011, updating earlier guidance from January 2011. It now specifically requires NBFCs to apply countermeasures against Iran and DPRK due to ongoing ML/FT risks flagged by FATF.
What it means for you
NBFCs must treat business relationships and transactions involving Iran and North Korea as high-risk. This means enhanced due diligence, stricter monitoring, and potentially refusing transactions to protect the financial system.
What you must do
- Update your AML/CFT policies to explicitly flag Iran and DPRK as high-risk jurisdictions.
- Conduct enhanced due diligence on all customers, legal entities, and financial institutions from or linked to these countries.
- Monitor existing accounts and transactions for any exposure to Iran or DPRK and apply appropriate countermeasures.
- Train compliance and front-line staff on the updated FATF guidance and RBI's expectations.
Who it affects
All Non-Banking Financial Companies (NBFCs), Residuary Non-Banking Companies (RNBCs), Compliance and AML teams at NBFCs
Which countries are specifically mentioned for countermeasures?
Iran and the Democratic People's Republic of Korea (DPRK) are the two countries for which FATF called for countermeasures due to ongoing money laundering and terrorist financing risks.
Does this circular apply to banks as well?
No, this circular is addressed only to NBFCs and RNBCs. Banks would have received separate instructions from RBI on similar AML/CFT measures.
What should we do if we already have business with entities from Iran or DPRK?
You must immediately review those relationships, apply enhanced due diligence, and consider whether to terminate or restrict transactions to comply with the countermeasures advised by FATF and RBI.