Long live free and united Balochistan

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RBI alerts banks on transactions with Pakistan, Iran, 3 others

The Reserve Bank of India (RBI) has alerted banks to keep a watch on transactions of customers of five countries — including Pakistan and Iran — as concerns have been raised about rules there in combating terror funding. “All banks and financial institutions are advised to take into account risks arising from the deficiencies in anti-money laundering (AML), combating of financing of terrorism (CFT) regime of Iran, Uzbekistan, Pakistan, Turkmenistan and Sao Tome and Principe,” the RBI said in a circular to chairmen and CEOs of all commercial banks and financial institutions. The notification follows concerns raised by the Financial Action Task Force (FATF), an inter-governmental body, regarding AML and CFT norms in these countries. “FATF had issued a further statement on October 16, 2009, on the subject,” the RBI said in the circular.

While the FATF welcomed Pakistan’s close co-operation with the Asia/Pacific Group on Money Laundering (APG), it remained concerned regarding the money laundering and financing of terrorism (ML/FT) risks posed by the south Asian nation and reaffirmed its public statement of February 28, 2008, regarding these risks. The FATF expressed concern that Pakistan’s Anti-Money Laundering Ordinance (AMLO) will expire on November 28, 2009. The FATF noted that Pakistan has initiated a legislative process to address this. The FATF strongly urged Pakistan to implement a permanent AML/CFT framework before the expiration of the AMLO and establish a comprehensive AML/CFT framework. “Failing concrete progress, the FATF will consider taking action in February 2010 to protect the financial system from the ML/FT risks emanating from Pakistan,” it said.

The FATF is also concerned over Iran’s lack of engagement with the FATF and its failure to meaningfully address the ongoing and substantial deficiencies in its anti-money laundering and combating the financing of terrorism regime. The FATF was particularly concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system. The FATF urged Iran to immediately address its AML/CFT deficiencies, in particular by criminalising terrorist financing and effectively implementing suspicious transaction reporting (STR) requirements.

The FATF urged all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions. In addition to enhanced scrutiny, the FATF urged all jurisdictions to apply effective counter-measures to protect their financial sectors from ML/FT risks emanating from Iran.

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