What changed
RBI issued this circular on May 20, 2011, referencing FATF's February 25, 2011 statement, which called for counter-measures to protect the international financial system from money laundering and terrorist financing risks from Iran and DPRK. It supersedes earlier guidance from April 6, 2011, and mandates that authorised persons consider the FATF statement and apply enhanced due diligence.
What it means for you
Banks and authorised persons must treat transactions linked to Iran and DPRK as high-risk and apply counter-measures such as enhanced customer due diligence, transaction monitoring, and reporting. Non-compliance with these AML/CFT guidelines attracts penal provisions under FEMA and PMLA. This raises compliance costs and operational scrutiny for lenders dealing with these jurisdictions.
What you must do
- Review and update your AML/CFT policies to incorporate FATF counter-measures for Iran and DPRK.
- Screen all existing and new customers for any links to Iran or DPRK and apply enhanced due diligence.
- Train staff on identifying and reporting suspicious transactions involving these jurisdictions.
- Ensure your Principal Officer acknowledges receipt of this circular and maintains records.
- Report any suspicious transactions to the Financial Intelligence Unit (FIU-IND) promptly.
Who it affects
All authorised persons (banks, forex dealers, money changers), Compliance and AML/CFT teams, Principal Officers of authorised entities, Customers with exposure to Iran or DPRK
What specific counter-measures does FATF require for Iran and DPRK?
The circular does not list specific counter-measures but refers to FATF's February 25, 2011 statement. Banks should refer to that statement for details, which typically include enhanced due diligence, transaction restrictions, and reporting obligations.
Does this circular apply to all types of authorised persons?
Yes, it applies to all authorised persons under FEMA, including banks, forex dealers, and money changers, as per the definition in the circular.
What are the penalties for non-compliance?
Non-compliance attracts penal provisions under the Foreign Exchange Management Act, 1999, and the Prevention of Money Laundering Act, 2002, as amended.