What changed
RBI issued a circular on January 1, 2014, referencing FATF's October 18, 2013 update on high-risk and non-cooperative jurisdictions. It refers to the earlier July 23, 2013 guidance and provides a new FATF statement for NBFCs to consider.
What it means for you
NBFCs must stay alert to AML/CFT risks from jurisdictions flagged by FATF. While legitimate transactions are not prohibited, lenders need to factor these risks into their due diligence and compliance frameworks to avoid regulatory penalties.
What you must do
- Review the enclosed FATF statement and update your AML/CFT risk assessment for relevant jurisdictions.
- Ensure your compliance team monitors FATF updates regularly for changes in high-risk country lists.
- Do not restrict legitimate trade transactions but apply enhanced due diligence where needed.
- Document your review process and any actions taken for audit and regulatory inspection.
Who it affects
All Non-Banking Financial Companies (NBFCs) excluding Residuary Non-Banking Companies
Does this circular ban transactions with FATF-flagged jurisdictions?
No, the circular explicitly states it does not preclude legitimate trade and business transactions with those countries. However, NBFCs must consider the risks outlined in the FATF statement.
What should NBFCs do with the FATF statement?
NBFCs are advised to consider the information in the statement for their AML/CFT compliance. This includes updating risk assessments and due diligence processes for transactions involving listed jurisdictions.