What changed
The Prevention of Money-laundering Rules were amended in November 2009, introducing a definition for 'non-profit organization' and requiring banks to record all NPO receipts exceeding ₹10 lakh. The record retention period was extended to 10 years, and the requirement to verify identity for non-account based customers (walk-ins) for transactions of ₹50,000 or more was added. The earlier provision allowing identity verification within a reasonable time after the transaction was removed.
What it means for you
UCBs must now systematically monitor and report large NPO transactions, increasing compliance costs and operational focus on anti-money laundering. The stricter walk-in customer verification rule closes a loophole, requiring immediate KYC for cash transactions above ₹50,000. Banks need to update their systems to flag connected transactions and ensure confidentiality of STR filings.
What you must do
- Update internal AML policies to include the new NPO definition and ₹10 lakh reporting threshold.
- Configure transaction monitoring systems to flag walk-in transactions of ₹50,000 or more and connected smaller transactions.
- Train staff on immediate identity verification for non-account based customers and on maintaining confidentiality of STR submissions.
- Ensure monthly reporting to FIU-IND of all NPO transactions above ₹10 lakh by the 15th of the succeeding month.
- Extend record retention for all client and transaction records to 10 years as per amended Rule 6.
Who it affects
All Primary (Urban) Co-operative Banks, Compliance and AML teams, Branch staff handling cash transactions, Non-profit organization account holders
What is the new reporting requirement for non-profit organizations?
UCBs must maintain records of all transactions involving receipts by non-profit organizations exceeding ₹10 lakh (or equivalent in foreign currency) and report these to FIU-IND every month by the 15th of the succeeding month.
How should we handle walk-in customers under the amended rules?
For any transaction of ₹50,000 or more by a non-account based customer, you must verify their identity and address immediately. If you suspect a customer is splitting a larger transaction into smaller ones to avoid this threshold, you must still verify identity and consider filing a Suspicious Transaction Report.
What is the new record retention period?
All records referred to in Rule 3 (including transaction records and client identity documents) must be maintained for a period of ten years from the date of the transaction.