RBI Clarifies KYC/AML Rules: Suspicion, STR Filing, PEPs & Principal Officer

RBI/2009-10/488 DBOD.AML.BC.No.108/14.01.001/2009-10 June 9, 2010 The Chairmen and Chief Executive Officers All Scheduled Commercial Banks excluding RRBs/ All India Financial institutions/ Local Area Banks Dear Sir, Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under Prevention of Money Laundering Act (PMLA), 2002. Please refer to the Master Circular DBOD.AML.BC. No.2/14.01.001/ 2009-10 dated July 01, 2009 on Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT) /Obligation of banks under Prevention of Money Laundering Act (PMLA), 2002. Suspicion of money laundering/terrorist financing 2. With a view to preventing banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing, it is clarified that whenever there is suspicion of money laundering or terrorist financing or when other factors give rise to a belief that the customer does not, in fact, pose a low risk, banks should carry out full scale customer due diligence (CDD) before opening an account. Filing of STR 3. Kind attention is invited to the instructions contained in Para 2.3(a)(iv) and also Para 2.8 of the Master Circular dated July 1, 2009 referred to above, in terms of which a bank should not open an account (or should consider closing an existing account) when it is unable to apply appropriate CDD measures. It is clarified that in the circumstances when a bank believes that it would no longer be satisfied that it knows the true identity of the account holder, the bank should also file an STR with FIU-IND. Politically Exposed Persons (PEPs) 4. In terms of instructions contained in Para 5 of circular dated September 11, 2009 on the subject, in the event of an existing customer or the beneficial owner of an existing account, subsequently becoming a PEP, banks should obtain senior management approval to continue the business relationship and subject the account to the CDD measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis. It is clarified that the instructions contained in paragraph 5 of the circular dated September 11, 2009, are also applicable to accounts where a PEP is the ultimate beneficial owner. Further, in regard to PEP accounts, it is reiterated that banks should have appropriate ongoing risk management procedures for identifying and applying enhanced CDD to PEPs, customers who are close relatives of PEPs, and accounts of which a PEP is the ultimate beneficial owner. Principal Officer 5. With reference to Para 2.15 of the Master Circular dated July 1, 2009 referred to above, regarding appointment and responsibility of the Principal Officer, it is clarified that the role and responsibilities of the Principal Officer should include overseeing and ensuring overall compliance with regulatory guidelines on KYC/AML/CFT issued from time to time and obligations under the Prevention of Money Laundering Act, 2002, rules and regulations made thereunder, as amended form time to time. 6. These guidelines are issued under Section 35A of the Banking Regulation Act, 1949. Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act. Yours faithfully, (Vinay Baijal) Chief General Manager

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/488 · issued 09 Jun 2010. The plain-English explanation above is BankPulse’s own independent summary.

🖨 Print / Save as PDF 🔗 Copy link☆ Save for later