RBI issues warning on banking transactions with Iran

New Delhi, Jan 18 (PTI) Perceiving a threat of money
laundering and terror-financing in banking transactions with
Iran, the Reserve Bank of India (RBI) has asked banks and
other financial entities to be cautious in their dealings with
entities and funds from the Middle East country.
The RBI circular issued to banks and other entities
operating payment systems in India contained a global market
caution notice issued by the Financial Action Task Force
(FATF) on Iran.
The FATF is an inter-governmental body responsible for
making policies at national and international levels to combat
money laundering and terror-financing.
As per the FATF warning, all financial institutions have
been advised "to give special attention to business
relationships and transactions with Iran, including Iranian
companies and financial institutions."
The FATF has also warned against efforts to bypass or
evade counter-measures and risk mitigation practices and urged
financial institutions to take into account the risk of money
laundering and terror-financing when considering requests by
Iranian financial institutions to open branches and
subsidiaries in their jurisdiction.
A similar circular has been issued by market regulator,
Securities and Exchange Board of India (SEBI), to the stock
exchanges, with the objective of ensuring that Indian markets
are not used by Iran-based firms for money laundering or
terror-financing activities.
In turn, the stock exchanges have asked brokers to ensure
compliance with the SEBI circular.
India became a member of FATF last year. Following the
nation's accession into the global body, it is required to
follow the global standards prescribed by the FATF to check
money laundering and terror-financing activities.
Paris-based FATF informs the central government of its
member countries about all its cautionary notices and
policies, which in turn are forwarded to the concerned
enforcement and regulatory agencies.
The latest caution notice on Iran was issued by the FATF
to the Indian government late last year. The notice was later
forwarded to SEBI, based on which the regulator issued a
circular to market intermediaries.
Iran has been subjected to various sanctions by the US
and some European countries to thwart the flow of funds
allegedly used to finance the country's nuclear weapon
ambitions and sponsor terror-related activities. There have
been demands in the US for all listed companies to mandatorily
disclose their links with Iran.
In its latest notice, FATF has named Iran as a
'jurisdiction' for which the countries need to apply counter-
measures to protect the international financial system from
substantial money laundering and terror financing risks.
FATF said it will consider asking its members to
strengthen counter-measures in February, 2011, if Iran fails
to take any concrete steps in this regard. PTI BSP
RCJ