What changed
This circular reiterates and clarifies existing KYC/AML/CFT guidelines for State and District Central Co-operative Banks. It emphasizes that suspicion of money laundering or terrorist financing triggers full CDD before account opening. It also clarifies that STRs must be filed when a bank cannot confirm the true identity of an account holder, and that PEP-related instructions apply to beneficial owners and close relatives.
What it means for you
Co-operative banks must strengthen their due diligence processes, especially when red flags arise. Failure to apply appropriate CDD measures now explicitly requires filing a Suspicious Transaction Report (STR) with FIU-IND. Enhanced monitoring for PEPs, including beneficial owners and relatives, is mandatory, with senior management approval needed for continuing such relationships.
What you must do
- Implement full-scale CDD before opening accounts when suspicion of money laundering or terrorist financing exists.
- File STRs with FIU-IND if you cannot verify the true identity of an account holder or beneficial owner.
- Obtain senior management approval and apply enhanced CDD for existing customers who become PEPs, including beneficial owners and close relatives.
- Ensure the Principal Officer oversees compliance with all KYC/AML/CFT guidelines and PMLA obligations.
Who it affects
State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), Principal Officers of these banks, Compliance and AML teams
When must we file a Suspicious Transaction Report (STR) under this circular?
You must file an STR with FIU-IND when you believe you can no longer be satisfied that you know the true identity of the account holder, such as when you are unable to apply appropriate CDD measures.
What additional steps are required for Politically Exposed Persons (PEPs)?
For existing customers who become PEPs, obtain senior management approval to continue the business relationship and apply enhanced CDD measures, including ongoing monitoring. This also applies to accounts where a PEP is the ultimate beneficial owner or a close relative.