BSE, NSE warn market entities about Iran money in stocks

Iran has failed to address the risk of terrorist financing and money laundering

Top stock exchanges BSE and NSE have asked market participants to exercise caution in dealing with entities linked to Iran, pursuant to a fresh warning from market regulator Sebi about possible money laundering and terror financing risks from that country.

In a circular issued today, BSE told its member brokers that the exchange has been informed by Sebi about a FATF public statement against the jurisdictions having strategic AML/CFT (Anti-Money Laundering/Combating Financing of Terrorism) deficiencies.

FATF (Financial Action Task Force) is a global inter-governmental body for making policies for combating money laundering, terrorist financing and other related threats to the international financial system.

The BSE has asked its members to ensure compliance with the FATF statement about Iran's persisting failure to address the risk of terrorist financing and money laundering. The NSE has also issued a similar circular to its members.

Sebi's direction to the stock exchanges follows an FATF warning, dated June 22, on Iran and North Korea in its tri- annual compliance status of various countries to its AML/CFT standards.

FATF reviews the status of various jurisdictions in complying with these standards thrice a year -- February, June and October -- and accordingly issues warnings to all the member countries, including India, about dealings with jurisdictions with deficiencies in mechanism to check money laundering and terror funding risks.

As per an established process, the FATF warning on Iran and North Korea is forwarded by the Indian government to its key financial sector regulators, including Sebi and RBI, which subsequently advise the institutions in their respective areas to apply caution in dealings with the entities and funds from the FATF-identified high-risk jurisdictions.

Earlier this year, the 36-member FATF had appreciated the Indian government's efforts to combat money laundering and financing of terrorism.

India became a member of FATF in June, 2010, while its other member countries include the US, UK, Russia, South Korea, Japan, China, Brazil, Argentina, Italy, Germany and Australia.

In its latest warning, the FATF has asked India and other countries to "apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/TF) risks" emanating from Iran and North Korea.

It has said that the "FATF remains particularly and exceptionally 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".