What changed
RBI reiterated that RRBs must not allow professional intermediaries bound by client confidentiality (e.g., lawyers, chartered accountants) to open or hold accounts on behalf of clients. The earlier 2005 circular's guidance on pooled accounts and beneficial owner identification is now explicitly applied to bar such intermediaries who cannot reveal the true account owner.
What it means for you
RRBs must now reject account applications from lawyers, CAs, or similar professionals if they cite confidentiality to hide the beneficial owner. This tightens AML/CFT compliance and prevents misuse of pooled accounts for money laundering. Banks face penalties under the Banking Regulation Act for non-compliance.
What you must do
- Update account opening policies to explicitly prohibit accounts held by professional intermediaries who cannot disclose client identity.
- Train branch staff to identify and reject such applications from lawyers, CAs, and similar professionals.
- Review existing accounts for any held by such intermediaries and close them if confidentiality obligations prevent beneficial owner identification.
- Ensure all pooled accounts (e.g., for mutual funds, escrow) comply with beneficial owner identification rules as per the 2005 circular.
Who it affects
Regional Rural Banks (RRBs), Lawyers and Chartered Accountants acting as professional intermediaries, Clients using pooled accounts through intermediaries
Can an RRB still hold a pooled account for a mutual fund or pension fund?
Yes, but only if the intermediary can identify all beneficial owners. If the intermediary is bound by confidentiality (e.g., a lawyer), the account is not allowed.
What happens if an RRB already has such an account?
The bank must review and close the account if the intermediary cannot disclose the true owner. Non-compliance may attract penalties under the Banking Regulation Act.
Does this apply to all professional intermediaries or only lawyers and CAs?
It applies to any professional intermediary (e.g., stockbrokers, accountants) who is under an obligation that prevents the bank from knowing the beneficial owner.