What changed
RBI brought Authorised Persons under MTSS within the purview of the Prevention of Money Laundering Act, 2002 (as amended in 2009). Detailed KYC/AML/CFT guidelines were prescribed for cross-border inward remittance activities, aligning with FATF recommendations. These rules also apply to all sub-agents, with Indian Agents held solely responsible for compliance.
What it means for you
Banks and other Authorised Persons acting as Indian Agents under MTSS must now formally adopt and enforce Board-approved KYC/AML/CFT policies. They are accountable for ensuring their sub-agents also comply, and non-compliance invites penal action under PMLA and FEMA. This tightens the regulatory framework for inward remittances to prevent money laundering and terrorist financing.
What you must do
- Get your Board to approve a comprehensive KYC/AML/CFT policy framework for cross-border inward remittance activities under MTSS.
- Ensure all sub-agents under your MTSS network adhere to the same KYC/AML/CFT guidelines; you are solely responsible for their compliance.
- Communicate these circular contents to all concerned constituents, including sub-agents and overseas principals.
- Review and update your internal processes to align with FATF recommendations on AML/CFT standards.
Who it affects
Authorised Persons (Indian Agents) under Money Transfer Service Scheme, Sub-agents of Indian Agents under MTSS, Overseas Principals with tie-up arrangements for inward remittances
What is the legal basis for these KYC/AML/CFT guidelines?
The guidelines are issued under Section 10(4) and Section 11(1) of FEMA, 1999, and under the Prevention of Money Laundering Act, 2002 as amended in 2009, along with the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005.
Are sub-agents directly covered by these rules?
Yes, the guidelines apply mutatis mutandis to all sub-agents. However, the Indian Agent (Authorised Person) bears sole responsibility for ensuring sub-agent compliance.
What happens if we do not comply with these guidelines?
Non-compliance will attract penal provisions under the relevant Acts (PMLA, FEMA) or Rules made thereunder.