What changed
RBI identified specific MLM firms (e.g., Fine India Sales, Lakshya Levels Marketing) that used bank accounts to pool small cash deposits from the public, promising high returns. These funds were then diverted for illegal or risky purposes, with banks unknowingly facilitating the scheme via CBS and excessive cheque book issuance. RBI now mandates stricter KYC/AML compliance and ongoing monitoring for such accounts.
What it means for you
Urban co-operative banks face heightened scrutiny on account opening for marketing/trading firms. They must ensure cheque book issuance aligns with customer profiles and business needs, and actively monitor for suspicious patterns like large volumes of small cash deposits. Failure to comply could expose banks to reputational damage if MLM schemes collapse and depositors lose money.
What you must do
- Review all existing accounts of marketing agencies, retail traders, and investment firms for KYC/AML compliance.
- Limit cheque book issuance to only what is justified by customer profile and business operations, and document requests.
- Implement ongoing monitoring for accounts with high volumes of small cash deposits, especially those linked to MLM-like activities.
- Report any suspicious transactions or patterns to the appropriate authorities as per AML guidelines.
Who it affects
Primary (Urban) Co-operative Banks, Branches handling accounts of marketing/trading agencies, Compliance and KYC teams at banks
What specific MLM firms did RBI flag in this circular?
RBI named seven firms: Fine India Sales Pvt. Ltd., Lakshya Levels Marketing, Eve Industries, Trident Advertising & Trade Links Pvt. Ltd., Super Life Link Distributors, Lue Brain Education Society, and Manya Mantra Marketing.