What changed
RBI now requires authorised persons to conduct a formal risk assessment for money changing activities, covering customers, countries, geographical areas, products, services, transactions, and delivery channels. This goes beyond earlier guidelines that only required customer profiling and enhanced due diligence for higher-risk customers. The change stems from the government-accepted recommendations of the National Money Laundering/Financing of Terror Risk Assessment Committee.
What it means for you
Banks and other authorised persons must now implement a comprehensive, board-approved risk management framework for money changing activities. This means allocating resources more efficiently by focusing on higher-risk areas, and adopting enhanced measures for medium or high-risk customers and products. The risk-based approach aims to strengthen the AML/CFT regime without imposing uniform burdens on all transactions.
What you must do
- Identify and assess ML/TF risks for customers, countries, products, services, transactions, and delivery channels in money changing activities.
- Develop board-approved policies, controls, and procedures to manage and mitigate these risks using a risk-based approach.
- Apply enhanced due diligence measures for customers, products, or services rated medium or high risk.
- Design risk parameters tailored to your activities for risk-based transaction monitoring.
- Ensure all agents and franchisees comply with these guidelines, with franchisers taking full responsibility.
Who it affects
All authorised persons (banks, money changers, etc.) handling money changing transactions, Agents and franchisees of authorised persons, Compliance and risk management teams in financial institutions
What is the key difference from the 2009 circular?
The 2009 circular required customer profiling and enhanced due diligence for higher-risk customers. This circular adds a formal risk assessment covering customers, countries, products, and delivery channels, with board-approved policies to manage those risks.
Do these rules apply to our agents and franchisees?
Yes, the guidelines apply mutatis mutandis to all agents and franchisees. The franchiser is solely responsible for ensuring their compliance.
What should we do if a customer or product is rated medium or high risk?
You must adopt enhanced due diligence measures for such customers, products, or services, as part of your risk-based approach.