diff --git a/erpnext/accounts/doctype/bank_account/bank_account.py b/erpnext/accounts/doctype/bank_account/bank_account.py
index 3c679fa215a..20ce7ca9a4c 100644
--- a/erpnext/accounts/doctype/bank_account/bank_account.py
+++ b/erpnext/accounts/doctype/bank_account/bank_account.py
@@ -21,11 +21,39 @@ class BankAccount(Document):
 
 	def validate(self):
 		self.validate_company()
+		self.validate_iban()
 
 	def validate_company(self):
 		if self.is_company_account and not self.company:
 			frappe.throw(_("Company is manadatory for company account"))
 
+	def validate_iban(self):
+		'''
+		Algorithm: https://en.wikipedia.org/wiki/International_Bank_Account_Number#Validating_the_IBAN
+		'''
+		# IBAN field is optional
+		if not self.iban:
+			return
+
+		def encode_char(c):
+			# Position in the alphabet (A=1, B=2, ...) plus nine
+			return str(9 + ord(c) - 64)
+
+		# remove whitespaces, upper case to get the right number from ord()
+		iban = ''.join(self.iban.split(' ')).upper()
+
+		# Move country code and checksum from the start to the end
+		flipped = iban[4:] + iban[:4]
+
+		# Encode characters as numbers
+		encoded = [encode_char(c) if ord(c) >= 65 and ord(c) <= 90 else c for c in flipped]
+
+		to_check = int(''.join(encoded))
+
+		if to_check % 97 != 1:
+			frappe.throw(_('IBAN is not valid'))
+
+
 @frappe.whitelist()
 def make_bank_account(doctype, docname):
 	doc = frappe.new_doc("Bank Account")
diff --git a/erpnext/accounts/doctype/bank_account/test_bank_account.py b/erpnext/accounts/doctype/bank_account/test_bank_account.py
index 43a3298ec4a..f3bb086fa96 100644
--- a/erpnext/accounts/doctype/bank_account/test_bank_account.py
+++ b/erpnext/accounts/doctype/bank_account/test_bank_account.py
@@ -4,9 +4,46 @@
 from __future__ import unicode_literals
 
 import frappe
+from  frappe import _
+from  frappe import ValidationError
 import unittest
 
 # test_records = frappe.get_test_records('Bank Account')
 
 class TestBankAccount(unittest.TestCase):
-	pass
+
+	def test_validate_iban(self):
+		valid_ibans = [
+			'GB82 WEST 1234 5698 7654 32',
+			'DE91 1000 0000 0123 4567 89',
+			'FR76 3000 6000 0112 3456 7890 189'
+		]
+
+		invalid_ibans = [
+			# wrong checksum (3rd place)
+			'GB72 WEST 1234 5698 7654 32',
+			'DE81 1000 0000 0123 4567 89',
+			'FR66 3000 6000 0112 3456 7890 189'
+		]
+
+		bank_account = frappe.get_doc({'doctype':'Bank Account'})
+
+		try:
+			bank_account.validate_iban()
+		except AttributeError:
+			msg = _('BankAccount.validate_iban() failed for empty IBAN')
+			self.fail(msg=msg)
+
+		for iban in valid_ibans:
+			bank_account.iban = iban
+			try:
+				bank_account.validate_iban()
+			except ValidationError:
+				msg = _('BankAccount.validate_iban() failed for valid IBAN {}'.format(iban))
+				self.fail(msg=msg)
+
+		for not_iban in invalid_ibans:
+			bank_account.iban = not_iban
+			msg = _('BankAccount.validate_iban() accepted invalid IBAN {}'.format(not_iban))
+			with self.assertRaises(ValidationError, msg=msg):
+				bank_account.validate_iban()