What changed
FATF updated its statement on June 25, 2010, dividing deficient jurisdictions into two groups: Iran (subject to countermeasures) and DPRK and Sao Tome and Principe (strategic deficiencies without committed action plans). RBI now requires banks to factor these risks into all relationships and transactions with entities from these countries.
What it means for you
Banks must reassess and potentially tighten controls for any exposure to Iran, DPRK, or Sao Tome and Principe. For Iran, this means applying countermeasures like enhanced monitoring or transaction restrictions. For the other two, a risk-based approach is needed, but the absence of FATF action plans signals higher scrutiny.
What you must do
- Update your AML/CFT risk assessment to include the three flagged jurisdictions.
- Apply enhanced due diligence for all new and existing relationships with persons or entities from Iran, DPRK, and Sao Tome and Principe.
- Implement appropriate countermeasures for Iran-related transactions as per FATF call.
- Ensure Principal Officer acknowledges receipt of this circular and briefs relevant teams.
- Monitor FATF updates for any changes to these jurisdictions' status.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Local Area Banks, All India Financial Institutions, Principal Officers of banks
What specific countermeasures are required for Iran?
The circular does not list specific countermeasures; it directs banks to apply measures to protect the financial system from ongoing ML/FT risks. Banks should refer to FATF guidance and their own risk frameworks for appropriate actions.
Does this apply to existing customers from these countries?
Yes, the circular advises banks to consider risks while entering into business relationships and transactions, which implies both new and existing relationships should be reviewed.
What if a customer is only indirectly linked to these jurisdictions?
The circular covers transactions with persons from or in these countries, including legal persons and financial institutions. Banks should assess beneficial ownership and transaction chains for any indirect links.