What changed
RBI reiterated that professional intermediaries like lawyers and chartered accountants cannot hold accounts on behalf of clients if their confidentiality obligations prevent the bank from knowing and verifying the true client identity or beneficial ownership. This reinforces existing KYC/AML guidelines from 2004, closing any ambiguity on pooled accounts.
What it means for you
UCBs must now reject account opening requests from any intermediary who cannot disclose the underlying client's identity due to professional secrecy. 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 held by professional intermediaries (lawyers, CAs, stockbrokers) to ensure beneficial owners are identified and verified.
- Update customer acceptance policy to explicitly prohibit accounts where the intermediary cannot disclose client identity due to confidentiality.
- Train branch staff on identifying and rejecting such accounts during account opening process.
- Ensure pooled accounts with co-mingled funds still require look-through to beneficial owners.
Who it affects
Primary (Urban) Co-operative Banks, Professional intermediaries (lawyers, chartered accountants, stockbrokers) opening client accounts, Compliance and AML teams at UCBs
Can a lawyer open an account for a client if the lawyer refuses to name the client?
No. If the lawyer's professional confidentiality prevents disclosing the client's identity, the bank must not open the account. The bank must know and verify the beneficial owner.
What about pooled accounts for mutual funds or pension funds?
These are allowed only if the intermediary can identify each beneficial owner. For co-mingled funds, the bank must still look through to the underlying owners.
What happens if we already have such accounts?
Review them immediately. If the intermediary cannot provide beneficial owner details, you must close the account or face penalties under the Banking Regulation Act.