What changed
RBI expanded the scope of risk assessment for money changing activities: Authorised Persons must now use publicly available information, in addition to FATF statements, to identify countries that insufficiently apply FATF recommendations. Ongoing monitoring of transactions from such jurisdictions is reinforced, requiring examination of background and purpose, with written findings retained for authorities.
What it means for you
Banks and money changers must adopt a more proactive, risk-based approach to KYC/AML compliance. They cannot rely solely on FATF lists; they need to independently screen jurisdictions using public sources. This increases operational burden but strengthens India's anti-money laundering framework, reducing exposure to illicit flows.
What you must do
- Update internal KYC/AML policies to include public information sources for identifying high-risk jurisdictions beyond FATF statements.
- Implement enhanced due diligence and ongoing monitoring for all transactions involving persons or entities from countries with weak AML/CFT regimes.
- Document written findings on transactions lacking apparent economic or lawful purpose and retain records for RBI/authority inspection.
- Ensure all agents and franchisees comply with these enhanced KYC/AML guidelines, with franchisers taking full responsibility.
Who it affects
Authorised Persons (banks, money changers, forex dealers), Agents and franchisees of Authorised Persons, Compliance and AML teams in financial institutions, Customers transacting with high-risk jurisdictions
What does 'publicly available information' mean for identifying high-risk countries?
It refers to credible sources like government sanctions lists and international body reports (e.g., FATF, UN) that indicate a country's AML/CFT deficiencies. Banks must use these alongside FATF statements.
Are these rules applicable to all foreign exchange transactions or only money changing?
The circular specifically addresses money changing activities by Authorised Persons. The enhanced due diligence and monitoring requirements apply only to transactions related to money changing activities involving high-risk jurisdictions.