What changed
FATF issued a further statement on February 25, 2011, calling members and other jurisdictions to apply counter-measures to protect the international financial system from ongoing and substantial ML/FT risks from Iran and DPRK. RBI now advises RRBs to take into account risks from AML/CFT deficiencies of these countries when entering into business relationships and transactions with persons from or in these jurisdictions, referencing earlier January 2011 circular.
What it means for you
RRBs must tighten due diligence for any transaction or relationship involving Iran or DPRK. This increases compliance burden and may restrict business with counterparties linked to these jurisdictions. Failure to comply could expose banks to regulatory action and reputational risk.
What you must do
- Update AML/CFT policies to include enhanced scrutiny for Iran and DPRK-related transactions.
- Train staff to identify and flag transactions involving persons or entities from these countries.
- Ensure Principal Officer acknowledges receipt of this circular to the concerned RBI Regional Office.
- Review existing relationships with counterparties from Iran and DPRK for potential ML/FT risks.
Who it affects
All Regional Rural Banks (RRBs), Principal Officers of RRBs, Compliance and AML teams at RRBs
What specific counter-measures does FATF require for Iran and DPRK?
The circular does not detail specific counter-measures but refers to FATF's February 25, 2011 statement. RRBs are advised to apply measures to protect the financial system from ML/FT risks from these jurisdictions.
Does this circular apply to existing customers from Iran or DPRK?
Yes, the circular advises RRBs to consider AML/CFT deficiencies when entering into business relationships and transactions with persons from these countries, which includes ongoing relationships.
What happens if an RRB does not comply with this directive?
The circular does not specify penalties, but non-compliance with AML/CFT standards can lead to regulatory action, including fines or restrictions, as per RBI's supervisory framework.