The Securities and Exchange Board of India (SEBI) has cautioned the country's bourses against dealing with funds and entities from Iran and North Korea in view of the possible risk of black money flow and terror financing.
In a circular to all members of the bourse, the investigation department of the National Stock Exchange (NSE) on Tuesday said that SEBI had informed it in a letter dated May 5 that Iran and North Korea did not have appropriate norms on ‘anti-money laundering and combating the financing of terrorism (AML/CFT)'
SEBI's directive to the bourses was on the basis of a global caution notice against the two countries it received from the FATF (Financial Action Task Force), which is an inter-governmental body that formulates policies to combat money laundering and terror funding activities. A similar warning was sent by the Reserve Bank of India (RBI) to all banks and financial institutions in March.
Money laundering
In its warning issued on February 25, the FATF had asked its member countries “to apply counter-measures to protect the international financial system from the ongoing and substantial money laundering and terrorist financing risks emanating from Iran and the Democratic People's Republic of Korea (DPRK).”
Since India became a member of the FATF last year, all its regulatory bodies are required to ensure that the entities under their jurisdiction follow the global standards prescribed by the global body to check money laundering and terror-financing activities.
As per FATF's warning on Iran and North Korea, all financial institutions have been advised to give special attention to business relationships and transactions with these two countries as well as their companies and financial institutions. It has asked member-countries to take into account the risk of money laundering and terror-financing when considering requests by Iranian and North Korean financial institutions to open branches and subsidiaries.
