TaxTMI 
TaxTMI 
Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002
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....ict adherence to the same. ANNEXURE Sr. No. Particulars Existing Instructions After amendment to PML Rules Change in Instructions of the RBI 1 Definition of Designated Director - Rule 2 (ba) New definition added in the PML Rules. Designated Director" means a person designated by the reporting entity to ensure overall compliance with the obligations imposed under chapter IV of the Act and the Rules and includes -- (i) the Managing Director or a whole-time Director duly authorized by the Board of Directors if the reporting entity is a company, (ii) the managing partner if the reporting entity is a partnership firm, (iii) the proprietor if the reporting entity is a proprietorship concern, (iv) the managing trustee if the reporting entity is a trust, (v) a person or individual, as the case may be, who controls and manages the affairs of the reporting entity if the reporting entity is an unincorporated association or a body of individuals, and (vi) such other person or class of persons as may be notified by the Government if the reporting entity does not fall in any of the categories above. Explanation. - For the purpose of this clause,....
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....entering into any fiduciary relationship; (v) any payment made or received in whole or in part of any contractual or other legal obligation; (vi) any payment made in respect of playing games of chance for cash or kind including such activities associated with casino; and (vii) establishing or creating a legal person or legal arrangement.' Banks are required to take note of these changes. 4 Rule 14(i) and Proviso to Rule 2(d) New instructions Rule 14(i) provides that the 'Regulator' may prescribe enhanced or simplified measures to verify the identity of the customers taking into consideration the type of customer, business relationship, nature and value of transactions based on the overall money laundering and terrorist financing risks involved A proviso has been added to the definition of 'officially valid document' at Rule 2(d), which states that where 'simplified measures' are applied for verifying the identity of customers the following documents shall be deemed to be 'officially valid documents: i. identity card with applicant's Photograph issued by Central/State Government Departments, Statutory/Regulatory Autho....
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....ntity of clients, and records in respect of transactions with its client referred to in rule 3 in hard or soft format. 8 Rule 10(2) (2) The records of the identity of clients shall be maintained in hard and soft copies in a manner as may be specified by its regulators from time to time. (2) The records of the identity of clients shall be maintained in a manner as may be specified by its regulators from time to time. Regulator has to specify the procedure and manner of maintaining the records of the identity of clients. 9 Rule 7(1) New addition The name, designation and address of the Designated Director is to be communicated to the Director, FIU-IND. In addition, it shall be the duty of every reporting entity, its Designated Director, officers and employees to observe the procedure and manner of furnishing and reporting information on transactions referred to in Rule 3. Reserve Bank vide circular DBOD.AML.BC. No.80/14.01.001/2013-14 dated December 31, 2013, has advised banks to nominate a Designated Director. The banks are, therefore, advised to adhere to the reporting requirements as per this new rule. 10 Rule 8 (1) All Cash transactions (in ter....
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.... entity takes adequate steps to satisfy itself that copies of identification data and other relevant documentation relating to the client due diligence requirements will be made available from the third party upon request without delay; (c) the reporting entity is satisfied that such third party is regulated, supervised or monitored for, and has measures in place for compliance with client due diligence and record-keeping requirements in line with the requirements and obligations under the Act; (d) the third party is not based in a country or jurisdiction assessed as high risk; and (e) the reporting entity is ultimately responsible for client due diligence and undertaking enhanced due diligence measures, as applicable. Banks may rely on third party verification subject to conditions at (a) to (e) of Rule 9(2) 14 Rule 9(3) Procedure for determining beneficial owner A. Where the client is a person other than an individual or trust, the banking company and financial institution, as the case may be, shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the following information: (i) The id....
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....ling ownership interest" means ownership of or entitlement to more than twenty-five percent of shares or capital or profits of the company; 2. "Control" shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements; (b) where the client is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of/entitlement to more than fifteen percent of capital or profits of the partnership; (c) where the client is an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of or entitlement to more than fifteen percent of the property or capital or profits of such association or body of individuals; (d) where no natural person is identified under (a) or (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official; (e) where the ....
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....s purpose. 16 Rule 9(6) Accounts of companies (i) Certificate of incorporation and Memorandum & Articles of Association (ii) Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account (iii) Power of Attorney granted to its managers, officers or employees to transact business on its behalf (iv) Copy of PAN allotment letter (v) Copy of the telephone bill (a) Certificate of incorporation; (b) Memorandum and Articles of Association; (c) A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf; and (d) An officially valid document in respect of managers, officers or employees holding an attorney to transact on its behalf. Banks to take note of the list of documents to be accepted as specified in the Rules. 17 Rule 9(7) Accounts of partnership firms (i) Registration certificate, if registered (ii) Partnership deed (iii) Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf (iv) Any officially valid document identifying the partners and the pe....
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....14.01.001 / 13-14 dated July 01, 2013 consolidating instructions/guidelines issued to banks till June 30, 2013 on Know Your Customer (KYC) norms /Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002. This Master Circular is a consolidation of the instructions on Know Your Customer (KYC) norms /Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002 issued up to June 30, 2014. 2. The Master Circular has been placed on the RBI website: (http://www.rbi.org.in) Yours faithfully, (Lily Vadera) Chief General Manager बैंकिंग परिचालन और विकास विà¤à¤¾à¤—, केंदà¥à¤°à¥€à¤¯ कारà¥à¤¯à¤¾à¤²à¤¯, केंदà¥à¤°à¥€à¤¯ कारà¥à¤¯à¤¾à¤²à¤¯ à¤à¤µà¤¨, 13वीं मंजिल, शहीद à¤à¤—त सिंà....
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.... website (http://www.rbi.org.in). Previous instructions A list of circulars issued in this regard is given in Annex - IV 3 Application i) The instructions, contained in the master circular, are applicable to All India Financial Institutions, all scheduled commercial banks (excluding RRBs) and Local Area Banks. ii) iii) These guidelines are issued under Section 35A of the Banking Regulation Act, 1949 and Rule 7 of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act. This Master Circular consolidates all the circulars issued on the subject up to June 30, 2014. 4 Index 1 1.1 1.2 2 Introduction KYC/AML/CFT/Obligation of banks under PMLA, 2002 Definition of Customer Guidelines 2.1 General 2.2 KYC Policy 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 Customer Acceptance Policy Customer Identification Procedure Customer Identification Requirements – Indicative guidelines Selling Third Party Products Due Diligence in correspondent ban....
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....e 9, sub-rule (1A) of PMLA Rules - 'Beneficial Owner' means the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercise ultimate effective control over a juridical person] beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction. Guidelines 2.1. General i) Banks should keep in mind that the information collected from the customer for the purpose of opening of account is to be treated as confidential and details thereof are not to be divulged for cross selling or any other like purposes. Banks should, therefore, ensure that information 7 sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other information from the c....
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....depending on perceived risk and keeping in mind the requirements of PML Act, 2002 and instructions/guidelines issued by Reserve Bank from time to time; iv) Not to open an account where the bank is unable to apply appropriate customer due diligence measures, i.e., bank is unable to verify the identity and /or obtain documents required as per the risk categorisation due to non-cooperation of the customer or non-reliability of the data/information furnished to the bank. Bank may also consider closing an existing account under similar circumstances. It is, however, necessary to have suitable built in safeguards to avoid harassment of the customer. For example, decision by a bank to close an account should be taken at a reasonably high level after giving due notice to the customer explaining the reasons for such a decision. v) Circumstances, in which a customer is permitted to act on behalf of another person/entity, should be clearly spelt out in conformity with the established law and practice of banking as there could be occasions when an account is operated by a mandate holder or where an account is opened by an intermediary in fiduc....
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.... by banks as 'high risk' requiring enhanced due diligence. Other examples of customers requiring higher due diligence include (a) nonresident customers; (b) high net worth individuals; (c) trusts, charities, NGOs and organizations receiving donations; (d) companies having close family shareholding or beneficial ownership; (e) firms with 'sleeping partners'; (f) politically exposed persons (PEPs) of foreign origin, customers who are close relatives of PEPs and accounts of which a PEP is the ultimate beneficial owner; (g) non-face to face customers and (h) those with dubious reputation as per public information available etc. However, NPOS/NGOs promoted by United Nations or its agencies may be classified as low risk customers. d) In addition to what has been indicated above, banks/Fls should take steps to identify and assess their ML/TF risk for customers, countries and geographical areas as also for products/ services/ transactions/delivery channels. Banks/Fls should have policies, controls and procedures, duly approved by their boards, in place to effectively manage and mitigate their risk adopting a risk-based approach. As a corol....
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....so his recent photograph. For customers that are legal persons or entities, the bank should (i) verify the legal status of the legal person/entity through proper and relevant documents; (ii) verify that any person purporting to act on behalf of the legal person/entity is so authorised and identify and verify the identity of that person; (iii) understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person. b) Banks may seek ‘mandatory' information required for KYC purpose which the customer is obliged to give while opening an account or during periodic updation. Other ‘optional' customer details/additional information, if required may be obtained separately after the account is opened only with the explicit 12 consent of the customer. The customer has a right to know what is the information required for KYC that she/he is obliged to give, and what is the additional information sought by the bank that is optional. Further, it is reiterated that banks should keep in mind that the information (both 'mandatory' before opening the account as wel....
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....ks in implementing UCIC for their customers, for various reasons, and keeping in view the constraints, the time for completing the process of allotting UCIC to existing customers was extended up to March 31, 2014. In this regard a further extension upto December 31, 2014 has been allowed. Banks have been advised to expedite the procedure and complete the work of allotting UCIC to all the existing individual customers, within the stipulated timeframe. They may chalk out a plan for completing the work and furnish the monthly progress report to their Board. Considering the fact that a period of two years has been allotted for completion of the task, no further extension in this regard would be considered. Further, it is reiterated that UCIC should be allotted to all customers while entering into new relationships. f) When there are suspicions of money laundering or financing of the activities relating to terrorism or where there are doubts about the adequacy or veracity of previously obtained customer identification data, banks should review the due diligence measures including verifying again the identity of the client and obtaining inf....
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....nts by customers when customers approach them for transferring their account from one branch of the bank to another branch of the same bank. Banks are advised that KYC once done by one branch of the bank should be valid for transfer of the account within the bank as long as full KYC has been done for the concerned account. The customer should be allowed to transfer his account from one branch to another branch without restrictions. Banks may transfer existing accounts at the transferor branch to the transferee branch without insisting on fresh proof of address and on the basis of a self-declaration from the account holder about his/her current address. 15 j) Banks should carry out periodical updation of KYC information of every customer, which may include the following: i) Full KYC exercise may be done at least every two years for high risk customers, every eight years for medium risk customers and every ten years for low risk customers. Full KYC may include all measures for confirming identity and address and other particulars of the customer that the bank may consider reasonable and necessary based on the risk profile of the c....
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....l international money transfer operations b) Salaried Employees In case of salaried employees, it is clarified that with a view to containing the risk of fraud, banks should rely on certificate/letter of identity and/or address issued only from corporate and other entities of repute and should be aware of the competent authority designated by the concerned employer to issue such certificate/letter. Further, in addition to the certificate/letter issued by the employer, banks should insist on at least one of the officially valid documents as provided in the Prevention of Money Laundering Rules (viz. passport, driving licence, PAN Card, Voter's Identity card, etc.) or utility bills for KYC purposes for opening bank accounts of salaried employees of corporate and other entities. c) Trust/Nominee or Fiduciary Accounts There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the customer identification procedures. Banks should determine whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so, banks should insist on receipt of satisfactory 17 ....
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....ustomer lies with the bank. ii) Under the extant AML/CFT framework, therefore, it is not possible for professional intermediaries like Lawyers and Chartered Accountants, etc. who are bound by any client confidentiality that prohibits disclosure of the client details, to hold an account on behalf of their clients. It is reiterated that banks should not allow opening and/or holding of an account on behalf of a client/s by professional intermediaries, like Lawyers and Chartered Accountants, etc., who are unable to disclose true identity of the owner of the account/funds due to any professional obligation of customer confidentiality. Further, any professional intermediary who is under any obligation that inhibits bank's ability to know and verify the true identity of the client on whose behalf the account is held or beneficial ownership of the account or understand true nature and purpose of transaction/s, should not be allowed to open an account on behalf of a client. f) Accounts of Politically Exposed Persons (PEPS) resident outside India i) Politically exposed persons are individuals who are or have been entrusted with prominent pub....
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....se of cross-border customers, there is the additional difficulty of matching the customer with the documentation and the bank may have to rely on third party certification/introduction. In such cases, it must be ensured that the third party is a regulated and supervised entity and has adequate KYC systems in place. h) Accounts of proprietary concerns Apart from following the extant guidelines on customer identification procedure as applicable to the proprietor, banks should call for and verify the following documents before opening of accounts in the name of a proprietary concern: 20 20 Proof of the name, address and activity of the concern, like registration certificate (in the case of a registered concern), certificate/licence issued by the Municipal authorities under Shop & Establishment Act, sales and income tax returns, CST/VAT certificate, certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities, Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Sec....
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....) Account, and the provisions of Schedule 3 of FEMA Notification 5/2000 RB dated May 3, 2000. v) Students with Pakistani nationality will need prior approval of the Reserve Bank for opening the account. Selling Third party products When banks sell third party products as agents, the responsibility for ensuring compliance with KYC/AML/CFT regulations lies with the third party. However, to mitigate reputational risk to bank and to enable a holistic view of a customer's transactions, banks are advised as follows: (a) Even while selling third party products as agents, banks should verify the identity and address of the walk-in customer. (b) Banks should also maintain transaction details with regard to sale of third party products and related records for a period and in the manner prescribed in paragraph 2.24 below. (c) Bank's AML software should be able to capture, generate and analyse alerts for the purpose of filing CTR/STR in respect of transactions relating to third party products with customers including walk-in customers. (d) Sale of third party products by banks as agents to customers, including walk-in customers, for Rs.50,0....
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.... - 23 25 i.the aggregate of all credits in a financial year does not exceed rupees one lakh; ii.the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand; and iii. the balance at any point of time does not exceed rupees fifty thousand. (a) A 'small account' may be opened on the basis of a self-attested photograph and affixation of signature or thumb print. Such accounts may be opened and operated subject to the following conditions: i) the designated officer of the bank, while opening the small account, certifies under his signature that the person opening the account has affixed his signature or thumb print, as the case may be, in his presence; ii) a small account shall be opened only at Core Banking Solution linked bank branches or in a branch where it is possible to manually monitor and ensure that foreign remittances are not credited to the account and that the stipulated limits on monthly and annual aggregate of transactions and balance in such accounts are not breached, before a transaction is allowed to take place; iii) a small account shall remain operational initially for a peri....
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....s mentioned in paragraph (b) above; or confirm identity and address of the resident through simple authentication service of UIDAI. 2.11. Operation of Bank Accounts & Money Mules a) It has been brought to our notice that "Money Mules" can be used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties to act as "money mules." In some cases these third parties may be innocent while in others they may be having complicity with the criminals. 25 25 b) In a money mule transaction, an individual with a bank account is recruited to receive cheque deposits or wire transfers and then transfer these funds to accounts held on behalf of another person or to other individuals, minus a certain commission payment. Money mules may be recruited by a variety of methods, including spam e-mails, advertisements on genuine recruitment web sites, social networking sites, instant messaging and advertisements in newspapers. When caught, these money mules often have their bank accounts suspended, causing inconvenience and potential financial loss, ....
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....ctions involved and other risk factors. High risk associated with accounts of bullion dealers (including sub-dealers) & jewelers should be taken into account by banks to identify suspicious transactions for filing Suspicious Transaction Reports (STRs) to Financial Intelligence Unit- India (FIU-IND). Banks should put in place a system of periodical review of risk categorization of accounts and the need for applying enhanced due diligence measures. Such review of risk categorisation of customers should be carried out at a periodicity of not less than once in six months. b) It has come to our notice that accounts of Multi-level Marketing (MLM) Companies were misused for defrauding public by luring them into depositing their money with the MLM company by promising a high return. Such depositors are assured of high returns and issued post-dated cheques for interest and repayment of principal. So long as money keeps coming into the MLM company's account from new depositors, the cheques are honoured but once the chain breaks, all such post-dated instruments are dishonoured. This results in fraud on the public and is reputational risk for banks ....
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....priate procedures and ensuring their effective implementation. It should cover proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibility should be explicitly allocated within the bank 28 28 for ensuring that the bank's policies and procedures are implemented effectively. Banks should, in consultation with their boards, devise procedures for creating risk profiles of their existing and new customers, assess risk in dealing with various countries, geographical areas and also the risk of various products, services, transactions, delivery channels, etc. Banks' policies should address effectively managing and mitigating these risks adopting a risk-based approach as discussed in Para 2.3 (d) above. b) Banks' internal audit and compliance functions have an important role in evaluating and ensuring adherence to the KYC policies and procedures. As a general rule, the compliance function should provide an independent evaluation of the bank's own policies and procedures, including legal and regulatory requirements. Banks should ensure that their audit machinery is staffed a....
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....ity Council has adopted Resolutions 1988 (2011) and 1989 (2011) which have resulted in splitting of the 1267 Committee's Consolidated List into two separate lists, namely: i) "Al-Qaida Sanctions List", which is maintained by the 1267 / 1989 Committee. This list shall include only the names of those individuals, groups, undertakings and entities associated with Al-Qaida. The Updated Al-Qaida available Sanctions List is http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml at ii) "1988 Sanctions Listâ€, which is maintained by the 1988 Committee. This list consists of names previously included in Sections A ("Individuals associated with the Taliban") and B ("Entities and other groups and undertakings associated with the Talibanâ€) of the Consolidated List. The Updated 1988 Sanctions list is http://www.un.org/sc/committees/1988/list.shtml available at It may be noted that both "Al-Qaida Sanctions List" and "1988 Sanctions List" are to be taken into account for the purpose of implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967. Banks are advised that before op....
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....held in the form of bank accounts, the RBI would forward the designated lists to the banks requiring them to: i) Maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether individuals or entities listed in the schedule to the Order (referred to as designated individuals/entities) are holding any funds, financial assets or economic resources or related services held in the form of bank accounts with them. ii) In case, the particulars of any of their customers match with the particulars of designated individuals/entities, the banks shall immediately, not later than 24 hours from the time of finding out such customer, inform full particulars of the funds, financial assets or economic resources or related services held in the form of bank accounts, held by such customer on their books to the Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail. iii) Banks shall also send by post, a copy of the communication men....
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....tice to the designated individuals/entities. f) Implementation of requests received from foreign countries under U.N. Security Council Resolution 1373 of 2001. i) U.N. Security Council Resolution 1373 obligates countries to freeze without delay the funds or other assets of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities or controlled directly or indirectly 33 by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds or other assets derived or generated from property owned or controlled, directly or indirectly, by such persons and associated persons and entities. ii) To give effect to the requests of foreign countries under U.N. Security Council Resolution 1373, the Ministry of External Affairs shall examine the requests made by the foreign countries and forward it electronically, with their comments, to the UAPA nodal officer for IS-I Division for freezing of funds or other assets. iii) The UAPA nodal officer of IS-I Division of MHA, shall cause the request to be exam....
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....Division shall inform the applicant. h) Communication of Orders under Section 51A of Unlawful Activities (Prevention) Act. All Orders under Section 51A of Unlawful Activities (Prevention) Act, relating to funds, financial assets or economic resources or related services, would be communicated to all banks through RBI. 2.19. Jurisdictions that do not or insufficiently apply the FATF Recommendations a) Banks are required to take into account risks arising from the deficiencies in AML/CFT regime of the jurisdictions included in the FATF Statement. In addition to FATF Statements circulated by Reserve Bank of India from time to time, (latest as on June 30, 2014, being our circular DBOD. AML.No.15245/14.01.001/2013-14 dated March 05, 2014) banks should also consider publicly available information for identifying countries, which do not or insufficiently apply the FATF Recommendations. It is clarified that banks should also give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries that do not or insufficiently apply the FATF Recommen....
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.... of payable-through-accounts, the correspondent bank should be satisfied that the respondent bank has verified the identity of the customers having direct access to the accounts and is undertaking ongoing 'due diligence' on them. The correspondent bank should also ensure that the respondent bank is able to provide the relevant customer identification data immediately on request. b) Correspondent relationship with a "Shell Bank" Banks should refuse to enter into a correspondent relationship with a "shell bank†(i.e. a bank which is incorporated in a country where it has no physical presence and is unaffiliated to any regulated financial group). Shell banks are not permitted to operate in India. Banks should not enter into relationship with shell banks and before establishing correspondent relationship with any foreign institution, banks should take appropriate measures to satisfy themselves that the foreign respondent institution does not permit its accounts to be used by shell banks. Banks should be extremely cautious while continuing relationships with correspondent banks located in countries with poor KYC standards and countrie....
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....located in another country. iv) The originator is the account holder, or where there is no account, the person (natural or legal) that places the order with the bank to perform the wire transfer. b) Wire transfer is an instantaneous and most preferred route for transfer of funds across the globe and hence, there is a need for preventing terrorists and other criminals from having unfettered access to wire transfers for moving their funds and for detecting any misuse when it occurs. This can be achieved if basic information on the originator of wire transfers is immediately available to appropriate law enforcement and/or prosecutorial authorities in order to assist them in detecting, investigating, prosecuting terrorists or other criminals and 38 38 - tracing their assets. The information can be used by Financial Intelligence Unit India (FIU-IND) for analysing suspicious or unusual activity and disseminating it as necessary. The originator information can also be put to use by the beneficiary bank to facilitate identification and reporting of suspicious transactions to FIU-IND. Owing to the potential terrorist financing threat pos....
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....ansfers contain complete originator information. The bank must also verify and preserve the information at least for a period of ten years. ii) Intermediary bank For both cross-border and domestic wire transfers, a bank processing an intermediary element of a chain of wire transfers must ensure that all originator information accompanying a wire transfer is retained with the transfer. Where technical limitations prevent full originator information accompanying a cross-border wire transfer from remaining with a related domestic wire transfer, a record must be kept at least for ten years (as required under Prevention of Money Laundering Act, 2002) by the receiving intermediary bank of all the information received from the ordering bank. iii) Beneficiary bank A beneficiary bank should have effective risk-based procedures in place to identify wire transfers lacking complete originator information. The lack 40 of complete originator information may be considered as a factor in assessing whether a wire transfer or related transactions are suspicious and whether they should be reported to the Financial Intelligence Unit-India. Th....
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....information, transaction records and other relevant information. 2.24. Maintenance of records of transactions/Information to be preserved/Maintenance and preservation of records/Cash and Suspicious transactions reporting to Financial Intelligence Unit- India (FIU-IND) Section 12 of the PMLA, 2002 casts certain obligations on the banking companies in regard to preservation and reporting of customer account information. Banks are, therefore, advised to go through the provisions of PMLA, 2002 and the Rules notified there under and take all steps considered necessary to ensure compliance with the requirements of Section 12 of the Act ibid. a) Maintenance of records of transactions Banks should introduce a system of maintaining proper record of transactions prescribed under Rule 3 of PML Rules, 2005, as mentioned below: i) All cash transactions of the value of more than Rupees Ten Lakh or its equivalent in foreign currency; ii)All series of cash transactions integrally connected to each other which have been valued below Rupees Ten Lakh or its equivalent in foreign currency where such series of transactions have taken place within a ....
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....volve a system for 43 proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, in terms of PML Amemdment Act 2012 notified on February 15, 2013, banks should maintain for at least five years from the date of transaction between the bank and the client, all necessary records of transactions, both domestic or international, which will permit reconstruction of individual transactions (including the amounts and types of currency involved if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity. ii) Banks should ensure that records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills etc.) obtained while opening the account and during the course of business relationship, are properly preserved for at least five years after the business relationship is ended as required under Rule 10 of the Rules ibid. The identification records and trans....
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....ect FINnet dated 31st March, 2011 by FIU containing all relevant details are available on FIU's website. Banks In this regard, a reference is also invited to circulars DBOD.AML.BC.No.39/14.01.001/2012-13 and DBOD.AML.BC.No.49/14.01.001/2012-13 dated September 7, 2012 and October 11, 2012 respectively. Accordingly, banks should carefully go through all the reporting formats prescribed by FIU-IND. Accordingly, banks should carefully go through all the reporting formats prescribed by FIU-IND. 45 iii) FIU-IND have placed on their website editable electronic utilities to enable banks to file electronic CTR/STR who are yet to install/adopt suitable technological tools for extracting CTR/STR_from their live transaction data base. It is, therefore, advised that in cases of banks, where all the branches are not fully computerized, the Principal Officer of the bank should cull out the transaction details from branches which are not yet computerized and suitably arrange to feed the data into an electronic file with the help of the editable electronic utilities of CTR/STR as have been made available by FIU-IND on their website http....
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....ed by the Principal Officer and submitted to FIU-India. vi) In case of Cash Transaction Reports (CTR) compiled centrally by banks for the branches having Core Banking Solution (CBS) at their central data centre level, banks may generate centralised Cash Transaction Reports (CTR) in respect of branches under core banking solution at one point for onward transmission to FIU-IND, provided: a) The CTR is to be generated in the format prescribed by FIU-IND; b) A copy of the monthly CTR submitted on its behalf to FIU-India is available at the concerned branch for production to auditors/inspectors, when asked for; and c) The instruction on 'Maintenance of records of transactions'; 'Information to be preserved' and 'Maintenance and Preservation of records' as contained above in this Master Circular at Para 2.24 47 b) (a), (b) and (c) respectively are scrupulously followed by the branch. However, in respect of branches not under CBS, the monthly CTR should continue to be compiled and forwarded by the branch to the Principal Officer for onward transmission to FIU-IND. Suspicious Transaction Reports (STR) i) While determining s....
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....der wire transfers of the value of more than five lakh rupees or its equivalent in foreign currency where either the origin or destination of fund is in India. 2.26. Customer Education/Employee's Training/Employee's Hiring a) Customer Education Implementation of KYC procedures requires banks to demand certain information from customers which may be of personal nature or which has hitherto never been called for. This can sometimes lead to a lot of questioning by the customer as to the motive and purpose of collecting such information. There is, therefore, a need for banks to prepare specific literature/ pamphlets etc. so as to educate the customer of the objectives of the KYC programme. The front desk staff needs to be specially trained to handle such situations while dealing with customers. b) Employees' Training Banks must have an ongoing employee training programme so that the members of the staff are adequately trained in KYC procedures. Training requirements should have different focuses for frontline staff, compliance staff and staff dealing with new customers. It is crucial that all those concerned fully understand the ....
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.... partner or an Names of all partners and employee of the firm to transact their addresses business on its behalf (iv) Any officially Telephone numbers of the valid document identifying the partners firm and partners Accounts of trusts & foundations Names of trustees, settlors, beneficiaries and signatories Names and addresses of the founder, the managers/directors and the beneficiaries Telephone/fax numbers Accounts of Proprietorship Concerns Proof of the name, address and activity of the concern and the persons holding the Power of Attorney and their addresses (v) Telephone bill in firm/partners the name of (i) Certificate of registration, if registered (ii) Power of Attorney granted to transact business on its behalf (iii) Any officially valid document to identify the trustees, settlors, beneficiaries and those holding Power of Attorney, founders/managers/ directors and their addresses (iv) Resolution of the managing body of the foundation/association (v) Telephone bill • • • Registration certificate (in the case of a registered concern) Certifica....
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....ervices available for the benefit of the individuals or entities Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism; (c) prevent the entry into or the transit through India of individuals Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism", The Unlawful Activities (Prevention) Act define "Order" as under:- 53 "Order" means the Prevention and Suppression of Terrorism (Implementation of Security Council Resolutions) Order, 2007, as may be amended from time to time. In order to expeditiously and effectively implement the provisions of Section 51A, the following procedures shall be followed:- 2. Appointment and Communication of details of UAPA nodal officers As regards appointment and communication of details of UAPA nodal officers - (i) The UAPA nodal officer for IS-I division would be the Joint Secretary (IS.I), Ministry of Home Affairs. His contact details are 011- 23092736(Tel), 011-23092569(Fax) and e-mail. (ii) The Ministry of External Affairs, Department of Economic Affairs, Foreigners Division of MHA, F....
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....l assets or economic resources or related services held in the form of bank accounts, stocks or insurance policies etc., the Regulators would forward the designated lists to the banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies respectively. The RBI, SEBI and IRDA would issue necessary guidelines to banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies requiring them to - (i) Maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether individuals or entities listed in the schedule to the Order (referred to as designated individuals/entities) are holding any funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or insurance policies etc. with them. (ii) In case, the particulars of any of their customers match with the particulars of designated individuals/entities, the banks, stock exchanges/ depositories, intermediaries regulated by SEBI and insurance companies shall immediately, not later than 24 hours from the time of finding ou....
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....ipt of such particulars. 6. In case, the results of the verification indicate that the properties are owned by or held for the benefit of the designated individuals/entities, an order to freeze these assets under section 51A of the UAPA would be issued within 24 hours of such verification and conveyed electronically to the concerned bank branch, depository, branch of insurance company branch under intimation to respective Regulators and FIU-IND. The UAPA nodal officer of IS-I Division of MHA shall also forward a copy thereof to all the Principal Secretary/Secretary, Home Department of the States or UTs, so that any individual or entity may be prohibited from making any funds, financial assets or economic assets or economic resources or related services available for the benefit of the designated individuals/entities or any other person engaged in or suspected to be engaged in terrorism. The UAPA nodal officer of IS-I Division of MHA shall also forward a copy of the order under Section 51A, to all Directors General of Police/Commissioners of Police of all states/UTs for initiating action under the provisions of Unlawful Activities (Preven....
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....t the particulars match with those of designated individuals/entities, an order under Section 51A of the UAPA would be issued within 24 hours, by the nodal officer of IS-I Division of MHA and conveyed to the concerned Registrar performing the work of registering immovable properties and to FIU-IND under intimation to the concerned UAPA nodal officer of the State/UT. The order shall take place without prior notice, to the designated individuals/entities. 57 57 12. Further, the UAPA nodal officer of the State/UT shall cause to monitor the transactions/accounts of the designated individual/entity so as to prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of the individuals or entities listed in the schedule to the order or any other person engaged in or suspected to be engaged in terrorism. The UAPA nodal officer of the State/UT shall upon coming to his notice, transactions and attempts by third party immediately bring to the notice of the DGP/Commissioner of Police of the State/UT for also initiating action under the provisions of Unlawf....
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....ted persons involved. Procedure for unfreezing of funds, financial assets or economic resources or related services of individuals/entities inadvertently affected by the freezing mechanism upon verification that the person or entity is not a designated person 17. Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets or economic resources or related services, owned/held by them has been inadvertently frozen, they shall move an application giving the requisite evidence, in writing, to the concerned bank, stock exchanges/depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State/UT nodal officers. 18. The banks stock exchanges/depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State/UT nodal officers shall inform and forward a copy of the application together with full details of the asset frozen given by any individual or entity informing of the funds, financial assets or economic resources or related services have been frozen inadvertently, to the nodal officer of IS-I Div....
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....es frozen by an order, and details of the individuals whose entry into India or transit through India was prevented, respectively, to the Ministry of External Affairs for onward communication to the United Nations. 24. All concerned are requested to ensure strict compliance of this order. Joint Secretary to Government of India (D.Diptivilasa) 60 60 Annex - III Government of India Ministry of Finance (Department of Revenue) Notification GSR New Delhi, the 16th December 2010 (E) - In exercise of the powers conferred by sub-section (1) read with clauses (h) (i), (j) and (k) of sub-section (2) of Section 73 of the Prevention of Money-laundering Act, 2002 (15 of 2003), the Central Government hereby makes the following amendments to the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, namely::- (1) 1. These rules may be called the....
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.... in sub-rule (2), an individual who desires to open a small account in a banking company may be allowed to open such an account on production of a self-attested photograph and affixation of signature or thumb print, as the case may be, on the form for opening the account. Provided that - 62 62 (i) the designated officer of the banking company, while opening the small account, certifies under his signature that the person opening the account has affixed his signature or thumb print, as the case may be, in his presence; (ii) a small account shall be opened only at Core Banking Solution linked banking company branches or in a branch where it is possible to manually monitor and ensure that foreign remittances are not credited to a small account and that the stipulated limits on monthly and annual aggregate of transactions and balance in such accounts are not breached, before a transaction is allowed to take place; (iii) a small account shall remain operational initially for a period of twelve months, and thereafter for a further period of twelve months if the holder of such an account provides evidence before the banking ....
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....ount should enable identification of the proper person opening an account so that the 3 4 person can be traced if the account is misused. DBOD.BP.BC.1 14/C.469 (81) 91 dated 19th April, 1991 Misuse of banking channels for violation of fiscal laws and evasion of taxes Issue and payment of demand drafts for Rs.50,000 and Banks to issue travellers cheques, demand drafts, mail transfers, telegraphic transfers for Rs. 50,000/- and above by debit to customers accounts or against cheques only and not against cash. above. DBOD.BC.20/17 .04.001/92 dated Committee enquire to into various aspects 25th August, 1992 relating to frauds Banks advised to adhere to the prescribed norms and safeguards while opening accounts etc. Sr. Circular No. and date 65 55 No. Subject Gist of instructions 50 DBOD.BP.BC.6 0/21.01.023/92 dated 21st December, 1992 and malpractices in banks. Diversion of Banks to ensure that withdrawals credit/overdraft working capital from cash funds. DBOD.FMC.No. 153/27.01.003/....
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....ks - Monitoring of deposit accounts. Monitoring 02/21.01.001/95 Deposit 12 dated 20th September, 1995 Accounts. fixed/recurring/cumulative deposit accounts and also to those persons authorised to operate the accounts. Banks to examine every request for opening joint accounts very carefully, look into the purpose, other relevant aspects relating to business, the financial position of the account holders and whether number of account holders are large. 'Generally crossed' cheques and payable to 'order' should be collected only on proper endorsement by the payee. Banks to exercise care in collection of cheques of large amounts and ensure that joint accounts are not used for benami transactions. Banks to introduce system of close watch of new deposit accounts and monitoring of cash withdrawals and deposits for Rs. 10 lakh and above in deposit, cash credit and overdraft accounts. Banks to keep record of details of these large cash transactions in a separate register. of Reporting of all cash deposits and withdrawals of Rs.10 lakhs and above with full details in f....
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....lementation thereof. DBOD.AML.BC. 89/14.01.001/20 01-02 dated 15th April, 2002 DBOD.AML.BC. 19 No. 102/14.01.00 1/2001-02 20 dated May,2002 terrorist organisations listed in the Schedule to the Ordinance. Violations of the extant Acts or normal banking operations must be reported to the appropriate authorities under the Ordinance under advice to RBI. Banks to undertake 'due diligence' in respect of the 'KYC' principle. and Freezing of funds Accounts of individuals pursuant to entities listed should be United Nations immediately frozen as informed Security Council by the Security Council Sanctions Resolution, 1390. Committee of the UN. If any transaction is detected involving any of these entities, banks to report to RBI promptly for necessary action. Monitoring accounts compliance with 10th instructions. DBOD.AML.BC. 18/14.01.001/20 02-03 dated August 16, 2002 - Guidelines on "Know Your Customer" norms and "Cash transactions" of Banks should ensure that no new accounts are opened by banned organisations. Banks to strictly adhere to....
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....t cash and suspicious transactions to Financial Intelligence Unit- India (FIU-IND). Banks were advised to ensure that all wire transfers involving domestic and cross border fund transfers are accompanied by full originator information. Revised guidelines on KYC/AML issued on review of risk categorization of customers; periodical updation of customer identification data and screening mechanism for recruitment /hiring process of personnel. of Terrorism Sr. Circular No. and date 70 70 No. Subject Gist of instructions 26 27 28 DBOD.AML.BC. No. 85/ 14.01.001/ 2007 -08 dated May 22, 2008 DBOD.AML.BC. No.12/14.01.001 /2008-09 dated July 1, 2008 DBOD.AML.BC. No.2/14.01.001/ 2009-10 dated July 1, 2009 29 DBS.CO.FrMC. No. 2605/23.04.001/ 2009-10 dated August 18, 2009 DBOD.AML.BC. No.43/14.01.001 of Revised guidelines issued on CTR and STR by banks to FIU- IND. (CFT) Prevention Money Laundering Act, 2002 Obligation of banks in terms of Rules notified thereunder. Master Circular - The Master Circular consolidates ....
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....rocedure issued for account opening by proprietary concerns. of Government of India Notification dated February 12, 2010 amended the Prevention of Money of Laundering (Maintenance of records of the Intermediaries) Rules 2005 Money Laundering (Maintenance records of the ...Intermediaries) Amendment Rules, 2010 Obligation banks - of KYC norms/AML standards/CFT/ Obligation of banks under PMLA, 2002 KYC norms/AML standards/CFT/ Obligation of banks under PMLA, 2002 KYC norms/AML standards/CFT/ 37 1/2009-10 dated Obligation banks No.111/14.01.00 June 15, 2010 88 38 DBOD.AML.BC. No.113/14.01.00 PMLA, 2002 of under Prevention of Money Further clarifications issued to banks in regard to: suspicion of money laundering or terrorist financing; filing of STRS; PEPS and Principal Officer. Guidelines reiterated for Client accounts opened by professional intermediaries Banks advised to take into account risks arising from deficiencies in AML/CFT regime of the Jurisdictions included in FATE Statement and also publicly ....
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.... by banks as high risk'. dated December 16, 2011 amended the Prevention of Money Laundering (Maintenance of Sr. Circular No. and date 2011 No. Subject 44 DBOD.AML.BC. No.36/14.01.001 /2011-12 dated September 28, 2011. 73 Gist of instructions Know Your Customer Norms Letter issued by Unique Identification Authority of India (UIDAI) containing details of name, and number address Aadhaar records of the Intermediaries) Rules 2005 to include definition of 'Small Account' and the detailed procedure for opening 'small accounts'. Letter issued by the UIDAI is accepted as an officially valid document for opening all types of bank accounts 45 DBOD.AML BC.No.47/14.01. 001/2011-12 dated November 04, 2011 Payment of Cheques/Drafts/ Pay Orders/ Banker's Cheques Know Your Customer (KYC) norms/Anti- 46 DBOD. AML.BC. No.65 /14.01.001/2011 -12 dated Money December 19, Laundering 2011 (AML) standards/Comba ting of Financing of Terrorism (CFT)/Obligation of banks under Prevention Money ....
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.... norms/Anti- Money Laundering Banks to introduce Unique Customer Identification system to track all facilities availed, monitor transactions in a holistic manner and to have better risk-profiling of customers. System should be in place by May 2013. Banks advised to complete the work of risk categorization and updation of risk profile of all customers by March 2013. FIU-IND has advised that all banks should initiate submission of reports on the FINnet Gateway in TEST MODE from August 31, 2012 to test their ability to upload the report electronically. FIU-IND has advised that all banks should 'go-live' from October 20, 2012 and banks may discontinue submission of reports in CD format and use only FINnet Gateway for uploading of reports in the new XML reporting format. KYC norms were further simplified by issuing following instructions : (i) to have only one document for both identity and address if the address on the document 75 75 Sr. Circular No. Subject No. and date 2012 Gist of instructions (AML) Standards/Comb ating of Financing of Terrorism (CF....
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....of a self- declaration from the account holder about his/her current address, subject to submitting proof of address within a period of six months. Further, banks were also advised to accept rent agreement duly registered with State Government or similar registration authority indicating the address of the customer, in addition to other documents listed as proof of address in Annex I of our Master Circular on dated July 2, KYC/AML/CFT 2012. KYC verification of all the members of SHG need not be done while opening the savings bank account of the SHG and KYC verification of all the office bearers would suffice. As regards KYC verification at the time of credit linking of SHGS, no separate KYC verification of the members or office bearers is necessary Considering the difficulties experienced in implementation the time for completing the process of allotting UCIC to existing customers was extended up to March 31, 2014. To reiterate and Investigations by the Reserve Bank in the light of alleged violation of KYC/AML guidelines by several banks have shown that these guidelines....
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....and date 2013 63 DBOD.AML.BC. No.63/14.01.001 /2013-14 October 2013 Due diligence in correspondent banking 29, relationship 49 64 DBOD.AML.BC. No.80/14.01.001 Amendment to Section 13(2) of details/additional information, if - required may be obtained separately after the account is opened only with the explicit consent of the customer. Further, it was reiterated that banks should keep in mind that the information (both 'mandatory' before opening the account as well as 'optional'- after opening the account with the explicit consent of the customer) collected from the customer is to be treated as confidential and details thereof are not to be divulged for cross selling or any other like purposes Some commercial banks have arrangements with co-operative banks wherein the latter open current accounts with the commercial banks and use the cheque book facility to issue 'at par' cheques to their constituents and walk-in- customers for facilitating their remittances and payments. Since the 'at par' facility offered by commercial banks to co-operati....
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.... No. and date 80 80 Gist of instructions 67 68 DBOD.AML.BC. No.103/14.01.00 1/2013-14 dated April 3, 2014 DBOD.AML.BC. No. 119/14.01.001/2 013-14 dated June 9, 2014 Harmonization of KYC norms for Foreign Portfolio Investors (FPIs) Clarification on Proof of Address entity is required to maintain the record of all transactions including the record of all cross border wire transfers of more than Rs. 5 lakh or its equivalent in foreign currency, where either the origin or destination of the fund is in India. KYC norms in case of FPIs for opening bank accounts were rationalised of along the lines of instructions issued by SEBI. Norms for furnishing proof of address have been relaxed to allow submitting only one documentary proof of address (either current or permanent) while opening a bank account or while undergoing periodic updation. It was also advised that in case the address mentioned as per ‘proof of address' undergoes a change, fresh proof of address may be submitted to the branch within a period of six months. In case the proof of ....