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In order to safeguard Indian markets from money laundering and terror financing risks from Iran, watchdog Sebi has asked market players to be cautious in dealing with entities and funds from that country.

The warning has been issued to stock exchanges and other market intermediaries by Sebi through a circular, containing a global financial market caution notice on Iran by the Financial Action Task Force (FATF).

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FATF is an inter-governmental body responsible for making policies at national and international levels to combat money laundering and terror financing.

The stock exchanges, in turn, have asked brokers to ensure compliance with the Sebi circular.

As per the warning, all the financial institutions have been advised "to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions."

India became a member of FATF last year, following which the country needs to follow the global standards set by it against money laundering and terror financing activities.

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Paris-based FATF informs the central government of its member countries about all its caution notices and policies, which in turn are forwarded to the concerned enforcement and regulatory agencies.

The latest caution notice on Iran was issued by FATF late last year to Indian government, which later forwarded the same to Sebi and the regulator has now forwarded to market intermediaries.

Iran has been subjected to various sanctions from the US and some European countries to thwart the flow of funds for financing the country's nuclear ambitions and terror-related activities.

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There have been demands in the US for asking all the listed companies to mandatorily disclose their Iran links.

In its latest public notice, FATF has named Iran as a 'jurisdiction' for which the countries need to apply counter- measures to protect the international financial system from substantial money laundering and terror financing risks.

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The FATF has also asked its members, including India, "to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism risks emanating from Iran."

Besides, such risks would need to be taken into account when considering requests by Iranian financial institutions to open branches and subsidiaries in the country.

FATF said it would consider asking its members to its members to strengthen counter-measures in February 2011, if Iran fails to take any concrete steps in this regard.