What changed
This master circular updates and consolidates all prior KYC/AML/CFT instructions issued up to June 30, 2013, replacing the July 2012 circular. It aligns guidelines with FATF recommendations and Basel Committee's Customer Due Diligence paper, emphasizing customer identification, transaction monitoring, and reporting obligations.
What it means for you
Urban co-operative banks must ensure their KYC policies are Board-approved and cover customer acceptance, identification, risk management, and monitoring. They need to maintain records of transactions and report cash/suspicious transactions to FIU-India. Failure to comply can lead to penalties under the Banking Regulation Act.
What you must do
- Review and update your bank's KYC/AML/CFT policy with Board approval, incorporating FATF and Basel CDD guidelines.
- Implement robust customer identification procedures for all account openings and beneficial owners.
- Set up transaction monitoring systems to detect suspicious activities and ensure timely reporting to FIU-India.
- Train staff on KYC norms, AML measures, and CFT obligations, and maintain proper records as per PMLA.
Who it affects
Primary (Urban) Co-operative Banks, Chief Executive Officers of these banks, Compliance and risk management teams, Branch managers handling account openings
What is the legal basis for these KYC guidelines?
These guidelines are issued under Section 35A of the Banking Regulation Act, 1949 (as applicable to co-operative societies). Non-compliance can attract penalties under the same Act.
Who is considered a 'customer' under this KYC policy?
A customer includes any person or entity maintaining an account or business relationship with the bank, beneficial owners, and beneficiaries of transactions by professional intermediaries like stock brokers or chartered accountants.
What are the key reporting obligations for banks?
Banks must report cash transactions and suspicious transactions to the Financial Intelligence Unit-India (FIU-India) using prescribed formats, and maintain records as per PMLA, 2002.