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RBI Tightens AML/CFT Screening for Iran, DPRK & 8 Other Nations

Current · Source: Reserve Bank of India · RBI/2011-12/185 · issued 19 Sep 2011 · ~2 min read
Quick answerRBI directs authorised persons to factor in AML/CFT deficiencies of Iran, DPRK, and eight other jurisdictions when onboarding or transacting. This follows FATF's June 2011 call for counter-measures. Legitimate trade with Iran remains permitted.
The rule, in the simplest words
How it plays out — a real example

A KYC & compliance officer in Indore must apply enhanced due diligence when onboarding a new customer who has business ties with Iran. This includes verifying the customer's identity, assessing their financial history, and monitoring their transactions for any suspicious activity. The officer must also ensure that the customer's business relationships with Iran are legitimate and compliant with RBI regulations.

What changed

RBI updated its earlier May 2011 advisory to reflect FATF's June 24, 2011 statement, which explicitly calls for counter-measures against Iran and DPRK due to ongoing ML/FT risks. It also added eight jurisdictions (Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, Turkey) that have strategic AML/CFT deficiencies and insufficient progress. The circular mandates authorised persons to assess risks from these countries before entering business relationships.

What it means for you

Banks and authorised persons must now apply enhanced due diligence for any transaction or relationship involving Iran, DPRK, or the eight listed jurisdictions. While legitimate trade with Iran is not prohibited, the risk weightage for these countries has increased significantly. Non-compliance with these AML/CFT guidelines could invite penal action under FEMA and PMLA.

What you must do

Who it affects

All authorised persons (banks, forex dealers, money changers), Compliance and AML/CFT teams, Principal Officers of authorised entities, Constituents (corporate clients) dealing with Iran, DPRK, or the eight listed countries

❓ Common questions

Does this circular ban all transactions with Iran?

No. The circular explicitly states it does not preclude legitimate trade and business transactions with Iran. However, it requires authorised persons to account for the heightened ML/FT risks from Iran and apply appropriate counter-measures.

Which eight additional countries are flagged for strategic AML/CFT deficiencies?

Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, and Turkey. These jurisdictions have not made sufficient progress in addressing deficiencies or committed to a FATF action plan.

What are the consequences of non-compliance with this circular?

Non-compliance attracts penal provisions under the Foreign Exchange Management Act, 1999, and the Prevention of Money Laundering Act, 2002, as amended.

📜 Read the original circular — full text as issued by RBI
RBI/2011-12/185 A.P. (DIR Series) Circular No. 21            September 19, 2011 To All Authorised Persons Madam/ Sir Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT) Standards - Money changing activities Attention of the Authorised Persons is invited to A.P.(DIR Series) Circular No. 63 dated May 20, 2011 on risks arising from the deficiencies in AML/CFT regime of Iran and Democratic People’s Republic of Korea (DPRK). 2. Financial Action Task Force (FATF) has issued a further Statement on June 24, 2011 on the subject ( copy enclosed ) calling its members and other jurisdictions to apply counter-measures to protect the international financial system from the ongoing and substantial money laundering and terrorist financing (ML/FT) risks emanating from Iran and Democratic People’s Republic Korea (DPRK).    3. This advisory does not preclude Authorised Persons entering into legitimate trade and business transactions with Iran.   4. FATF has also identified Jurisdiction with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies. The FATF calls on its members to consider the risks arising from the deficiencies associated with each jurisdiction as described in the Statement : Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria and Turkey. 5. Authorised Persons are accordingly advised to take into account risks arising from the deficiencies in AML/CFT regime of these countries, while entering into business relationships and transactions with persons (including legal persons and other financial institutions) from or in these countries/ jurisdictions. 6. Authorised Persons may bring the contents of this circular to the notice of their constituents concerned. 7. Please advise your Principal Officer to acknowledge receipt of this circular letter. 8. The directions contained in this Circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and also under the Prevention of Money Laundering Act (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 and Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 as amended from time to time. Non-compliance with the guidelines would attract penal provisions of the Acts concerned or Rules made there under. Yours faithfully, (Meena Hemchandra) Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/185 · issued 19 Sep 2011. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
🏦 Branch Manager
  • Ensure your Principal Officer formally acknowledges receipt of this circular and disseminates it to all relevant branches and departments.
💻 IT / Systems
  • Review and, if necessary, strengthen transaction monitoring systems to flag high-risk activity from these countries.
📜 Compliance
  • Update your AML/CFT risk assessment framework to include the specific deficiencies of Iran, DPRK, Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, and Turkey.
  • Instruct relationship managers and compliance teams to apply enhanced due diligence for all new and existing customers linked to these jurisdictions.
  • Communicate the circular's contents to your constituents (e.g., corporate clients) who may have exposure to these jurisdictions.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All authorised persons (banks, forex dealers, money changers), Compliance and AML/CFT teams, Principal Officers of authorised entities, Constituents (corporate clients) dealing with Iran, DPRK, or the eight listed countries), your first concrete step on “RBI Tightens AML/CFT Screening for Iran, DPRK & 8 Other Nations” is: “Update your AML/CFT risk assessment framework to include the specific deficiencies of Iran, DPRK, Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, and Turkey.” (RBI issued this 19 Sep 2011).

  1. Circular: RBI/2011-12/185 -- RBI Tightens AML/CFT Screening for Iran, DPRK & 8 Other Nations
  2. Issued: 19 Sep 2011
  3. Action required: Update your AML/CFT risk assessment framework to include the specific deficiencies of Iran, DPRK, Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, and Turkey.
  4. Action required: Instruct relationship managers and compliance teams to apply enhanced due diligence for all new and existing customers linked to these jurisdictions.
  5. Action required: Ensure your Principal Officer formally acknowledges receipt of this circular and disseminates it to all relevant branches and departments.
  6. Action required: Review and, if necessary, strengthen transaction monitoring systems to flag high-risk activity from these countries.
  7. Action required: Communicate the circular's contents to your constituents (e.g., corporate clients) who may have exposure to these jurisdictions.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6717&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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