What changed
FATF updated its statement on June 24, 2011, reiterating counter-measures against Iran and DPRK for substantial money laundering and terrorist financing risks. It also identified Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, and Turkey as jurisdictions with strategic AML/CFT deficiencies lacking sufficient progress.
What it means for you
Urban co-operative banks must reassess their AML/CFT risk frameworks for transactions involving Iran, DPRK, and the eight flagged jurisdictions. While legitimate trade with Iran is not prohibited, banks need to apply enhanced scrutiny and consider the risks from these countries' deficiencies when onboarding or transacting with entities from those jurisdictions.
What you must do
- Update your AML/CFT policies to incorporate FATF's June 2011 statement on Iran and DPRK.
- Conduct enhanced due diligence for business relationships and transactions involving persons or entities from Iran, DPRK, Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, and Turkey.
- Ensure your Compliance Officer/Principal Officer acknowledges receipt of this circular to the respective RBI Regional Office.
- Review and document risk assessments for any existing exposures to the flagged jurisdictions.
Who it affects
All AD Category I Primary (Urban) Co-operative Banks, Compliance Officers and Principal Officers of UCBs, Branches handling cross-border transactions with flagged jurisdictions
Does this circular prohibit all transactions with Iran?
No. The circular explicitly states it does not preclude legitimate trade and business transactions with Iran. However, banks must apply counter-measures and enhanced due diligence due to the ongoing money laundering and terrorist financing risks identified by FATF.
Which new jurisdictions are flagged for strategic AML/CFT deficiencies?
FATF identified Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, and Turkey as jurisdictions with strategic deficiencies that have not made sufficient progress. Banks must consider these risks when dealing with entities from these countries.
What action is required from the Compliance Officer?
The Compliance Officer or Principal Officer must acknowledge receipt of this circular to the concerned RBI Regional Office. This ensures the bank has formally noted the updated AML/CFT guidance.