What changed
RBI reiterated that professional intermediaries bound by client confidentiality (e.g., lawyers, CAs) cannot hold accounts on behalf of clients. Banks must ensure they can identify the beneficial owner; if confidentiality prevents this, the account must not be opened or maintained.
What it means for you
StCBs and DCCBs must now reject or close any account where a professional intermediary refuses to reveal the client's identity due to confidentiality. 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
- Review all existing accounts opened by professional intermediaries (lawyers, CAs, stockbrokers) to ensure beneficial owners are identified and verified.
- Update KYC/AML policies to explicitly prohibit accounts where intermediaries cite client confidentiality to hide beneficial ownership.
- Train branch and compliance staff to identify pooled or escrow accounts and apply look-through to beneficial owners.
- Implement a monitoring mechanism to flag accounts where beneficial owner details are incomplete or undisclosed.
Who it affects
State and District Central Co-operative Banks (StCBs/DCCBs), Professional intermediaries (lawyers, chartered accountants, stockbrokers) managing client funds, Compliance and KYC teams at co-operative banks
Can a lawyer open an account for a client if they disclose the client's identity?
Yes, if the lawyer can and does disclose the true identity of the beneficial owner, the account can be opened. The bank must verify the client's identity as per KYC norms.
What happens if a professional intermediary refuses to share client details due to confidentiality?
The bank must not open or maintain such an account. Continuing to hold it would violate AML/CFT guidelines and attract penalties under the Banking Regulation Act.
Does this apply to pooled accounts managed by stockbrokers?
Yes. For pooled accounts where funds are co-mingled, the bank must still identify the beneficial owners. If the intermediary cannot disclose them, the account cannot be held.