What changed
This master circular updates and consolidates all previous instructions on KYC/AML/CFT issued up to June 30, 2011, replacing the July 1, 2010 version. It incorporates FATF recommendations and Basel Committee's Customer Due Diligence paper, with detailed guidelines on customer acceptance, identification, risk management, and reporting of cash/suspicious transactions.
What it means for you
Urban co-operative banks must ensure their KYC policies are board-approved and align with updated AML/CFT standards. Banks need to implement robust customer identification procedures, monitor transactions for suspicious activity, and report to FIU-IND. Non-compliance can lead to penalties under the Banking Regulation Act, 1949.
What you must do
- Review and update your bank's KYC/AML/CFT policy with board approval, incorporating FATF and Basel CDD guidelines.
- Ensure customer identification procedures cover beneficial owners and high-risk transactions like wire transfers.
- Set up systems to monitor transactions and report cash/suspicious transactions to FIU-IND as per prescribed formats.
- Train staff on KYC norms and appoint a Principal Officer for AML compliance.
- Maintain records of transactions as per PMLA requirements and preserve them for the mandated period.
Who it affects
Primary (Urban) Co-operative Banks, Board of Directors of Urban Co-operative Banks, Compliance and risk management teams, Branch managers and customer-facing staff
What is the legal basis for these KYC guidelines?
The guidelines are issued under Section 35A of the Banking Regulation Act, 1949 (AACS). Non-compliance may attract penalties under relevant provisions of the Act.
Who is considered a 'customer' under this circular?
A customer includes any person or entity maintaining an account or business relationship with the bank, beneficial owners, beneficiaries of professional intermediaries, and anyone connected with a financial transaction posing reputational risk.
What are the key reporting requirements?
Banks must report cash transactions and suspicious transactions to the Financial Intelligence Unit – India (FIU-IND) using prescribed formats, and maintain records as per PMLA, 2002.