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 Pakistans 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 Pakistans 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 Irans 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 Irans 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. The FATF urged jurisdictions to protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices,and to take into account ML/FT risks when considering requests by Iranian financial institutions to open branches and subsidiaries in their jurisdiction. If Iran fails to take concrete steps to improve its AML/CFT regime,the FATF will consider calling on its members and urging all jurisdictions to strengthen counter-measures in February 2010, it said. The FATF said the measures taken up by Uzbekistan would be under watch. The FATF also expressed concern about the absence of a Financial Intelligence Unit in Turkmenistan and urged the country to take appropriate steps to implement a regime that is of international standards.
