What changed
RBI now requires co-operative banks to conduct a formal risk assessment of money laundering and terror financing across customers, countries, products, services, and delivery channels. This goes beyond earlier guidance that only asked for customer risk profiling and enhanced due diligence on high-risk cases. Banks must also implement board-approved policies and controls to manage these risks using a risk-based approach.
What it means for you
Co-operative banks must now systematically evaluate and document ML/TF risks across all business dimensions, not just customer profiles. This will require investment in risk assessment frameworks, training, and monitoring systems. Non-compliance can attract regulatory action under the Banking Regulation Act and PMLA rules.
What you must do
- Conduct a comprehensive ML/TF risk assessment covering customers, geographies, products, services, and delivery channels.
- Develop and get board approval for policies, controls, and procedures to manage and mitigate identified risks.
- Apply enhanced due diligence for all medium and high-risk customers, products, and services.
- Use IBA's guidance on Risk Based Transaction Monitoring as a reference for your own risk assessment.
- Ensure compliance with Section 35A of the Banking Regulation Act and PMLA Rules, 2005.
Who it affects
State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), All co-operative banks regulated by RBI
What is the key new requirement in this circular?
Co-operative banks must now formally assess ML/TF risk across customers, countries, products, services, and delivery channels, and have board-approved policies to manage these risks.
Can we use the IBA guidance for our risk assessment?
Yes, RBI explicitly allows StCBs/DCCBs to use the IBA's Report on Parameters for Risk Based Transaction Monitoring as guidance for their own risk assessment.
What happens if we don't comply?
Non-compliance is a contravention under Section 35A of the Banking Regulation Act and PMLA Rules, which can lead to regulatory action.