Due Diligence Crucial in Financial Transactions to Combat Money Laundering and Terrorism Financing in Iran
In an effort to combat money laundering and terrorism financing, the Iranian government has issued a directive outlining the importance of customer due diligence in financial institutions. This move aims to implement the Anti-Money Laundering Act adopted by the Islamic Consultative Assembly in 2008.
Definition of Key Terms and Phrases
The directive defines key terms and phrases used in the context of anti-money laundering regulations, including:
- Central Bank: The central authority responsible for regulating and overseeing financial institutions.
- Financial Institution: Any entity that provides banking or credit services.
- Customer: A natural or legal person who has an account with a financial institution or is in another banking or credit service relationship.
Importance of Full Identification
The directive emphasizes the importance of full identification, which involves precise identification of customers at the time of providing basic services. Basic services include:
- Opening bank accounts
- Providing facilities and leasing transactions
- Issuing various withdrawal and payment cards
For natural persons requesting these services, financial institutions must perform due diligence by verifying their identity through self-proclamation and supporting documents, such as:
- Account turnover report in another financial institution
- Letter of introduction from an employer or corporation
- Previous year’s audited financial statements
For legal persons, financial institutions must also verify their identity through self-proclamation and supporting documents, including:
- Type of business
- Sales forecasts
- Cost and revenue in the company’s business plan
- Previous year’s audited financial statements
Annual Updates and Reporting Requirements
The directive emphasizes the importance of updating customer due diligence annually, according to regulations set forth by the central bank. Financial institutions are also required to report any transactions that are disproportionate with determined due diligences to the Financial Intelligence Unit.
Technology Requirements
Financial institutions must design their computer software to:
- Identify and report suspicious transactions
- Update the due diligence of customers
The directive has been approved in the eighth session of the High Council on Anti-Money Laundering and is effective from the date of notification. This crucial step is expected to have a significant impact on Iran’s financial sector, helping to combat money laundering and terrorism financing.