CBI to Regulate Inactive Accounts

EghtesadOnline: An official of the Central Bank of Iran has announced the details of regulations related to dormant accounts that were passed by the Money and Credit Council in early August.

News ID: ۷۷۹۰۶۴

10 September 2017

“The large number of inactive bank accounts without any financial circulation has been on the agenda of the Iranian banking system in recent years, which has inflicted extra cost on banks for data maintenance while the big volume of these accounts raises the risk of abuse,” Hamidreza Ghani-Abadi was also quoted as saying by Mehr News Agency.

The regulations concern identifying and managing the inactive accounts of banks and credit institutions, as well as protecting the rights of account owners and preventing any attempt to misuse those accounts.

The regulations also urge banks to set up a unified accounting system regarding dormant accounts, which also helps improve the transparency of their financial statements, according to Financial Tribune.

According to Ghani-Abadi, the head of CBI’s Banking Research & Regulations Department, short-term deposits will be considered as dormant if they remain active for two years while the period for savings and current accounts has been set at three years and one year respectively.

He added that if an account is considered dormant, the bank is obligated to notify the owner of the annulment of the account via text message.

“After two years, if the owner of the account does not come to resolve the case, the bank should find another active account for the owner and move the money to that account,” he said.

The CBI official noted that it takes nearly seven years for a savings account, five years of inactivity for short-term deposits and four years for a current account to be considered dormant, following which CBI can set maintenance fees—say under 500,000 rials ($13)—so that the accounts’ balances gradually diminish.

Snowballing Problem

In recent years, deposit accounts of banks and credit institutions have increased, with a considerable number of them remaining inactive for a long time. For instance, many of these accounts have lost their value due to rising inflation or because the owner has stopped using the account.

Ghani-Abadi emphasized that the balance of each of these accounts might be meager but they are large in terms of number, so the overall value is a considerable amount that creates a good opportunity for money launderers to hide their operations behind the shadow of dormant accounts.

“These regulations only concern deposits under 20 million rials ($520), as we believe if the value of someone’s account is higher than that, they will most probably come back for it,” he added.

This is the first time Iranian banking policymakers have devised a set of firm regulations to manage banks’ dormant accounts while earlier, there was only a few obscure bylaws.

The CBI official announced that as per the new regulations, an individual is only allowed to have one solo and one joint current account, one solo and one joint short-term deposit account and one solo and one joint savings account in each bank and credit institution.

He noted that decentralized accounts (traditional accounts) will also be closed within six months of the regulations’ enforcement.

“Banks and credit institutions must report the figures on their dormant accounts to CBI’s board of directors, supervisory department and internal auditors every six months,” he said.

According to Ghani-Abadi, the implementation of new regulations is mandatory within three months of its notification.