New Delhi: The Reserve Bank of India has cautioned banks and other financial institutions to be more careful while dealing with Iran and North Korea as they may pose terror-financing risks and money laundering problems. 

The warning comes ahead of a fresh global caution notice issued by the Financial Action Task Force (FATF) on Iran and Democratic People’s Republic of Korea.

The FATF deals in making policies at national and international levels to combat money laundering and terror-financing.

FATF issued a fresh public statement on February 25, 2011, “calling its members and other jurisdictions to apply counter-measures to protect the international financial system from the ongoing and substantial money laundering and terrorist financing (ML/FT) risks emanating from Iran and the Democratic People’s Republic of Korea (DRRK).”

"All banks and all-India financial institutions are accordingly advised to take into account risks arising from the deficiencies in AML/CFT regime of these countries, while entering into business relationships and transactions with persons (including financial institutions) from or in these countries/jurisdictions," the RBI said in a March 24 circular.

Market regulator SEBI is likely to issue similar circular warning market entities against their dealings with funds and entities related to these countries.

The RBI and SEBI had last issued such a warning in January about Iran, pursuant to a directive from the FATF.

Last year India became the member of the FATF. 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.

As per the FATF warning, all financial institutions have been advised to give special attention to business relationships and transactions with Iran and North Korea, as well as their companies and financial institutions.

The FATF has urged 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.

(Agencies)