Description

SEBI communication regarding FATF report on Complex Proliferation Financing and Sanctions Evasion Schemes, highlighting high-risk jurisdictions DPRK and Pakistan for enhanced monitoring.

Summary

NSE has communicated SEBI’s notification regarding FATF’s report on Complex Proliferation Financing and Sanctions Evasion Schemes (CPFSES) released on June 20, 2025. The circular highlights specific high-risk jurisdictions - Democratic People’s Republic of Korea (DPRK) and Pakistan - that require enhanced monitoring and risk assessment by intermediaries.

Key Points

  • FATF released “Complex Proliferation Financing and Sanctions Evasion Schemes” report on June 20, 2025
  • Report identifies strategies, typologies and lessons from multiple jurisdictions for sanctions evasion
  • DPRK identified as high-risk due to UN Security Council sanctions
  • Pakistan flagged based on Indian PF-linked investigations and sanctions evasion by state-owned enterprises
  • Intermediaries must update Institutional Risk Assessments under Rule 9(13) of Prevention of Money Laundering Rules

Regulatory Changes

  • Enhanced focus on proliferation financing risks from specific jurisdictions
  • Updated risk assessment requirements for intermediaries dealing with DPRK and Pakistan-related transactions
  • Strengthened compliance mechanisms for sanctions evasion prevention

Compliance Requirements

  • Update internal risk policies to account for identified high-risk jurisdictions
  • Ensure Institutional Risk Assessments comply with Rule 9(13) of Prevention of Money Laundering Rules
  • Implement enhanced monitoring for transactions involving DPRK and Pakistan
  • Regular monitoring of SEBI website for updates on this matter

Important Dates

  • FATF report release date: June 20, 2025
  • Office memorandum date: July 31, 2025
  • NSE circular date: August 25, 2025

Impact Assessment

  • All market intermediaries must review and update their risk assessment frameworks
  • Enhanced due diligence requirements for transactions involving specified high-risk jurisdictions
  • Potential operational impact on compliance processes and monitoring systems
  • Critical for maintaining regulatory compliance and avoiding sanctions violations

Impact Justification

Critical compliance update on anti-money laundering and proliferation financing risks affecting all market intermediaries