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
- 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.
- Ensure your Principal Officer formally acknowledges receipt of this circular and disseminates it to all relevant branches and departments.
- Review and, if necessary, strengthen transaction monitoring systems to flag high-risk activity from these countries.
- Communicate the circular's contents to your constituents (e.g., corporate clients) who may have exposure to these jurisdictions.
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
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.