What changed
The Master Direction on KYC has been amended to align with the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 amendments notified on July 19, 2024, and to incorporate instructions from the corrigendum dated April 22, 2024 to the UAPA Section 51A procedure order. Specific changes include: CDD now applies at the UCIC level, so existing KYC-compliant customers don't need fresh CDD for new accounts or services; the explanation on intensified monitoring for high-risk accounts has been shifted to apply to both sub-paragraphs (a) and (b) of paragraph 37; the phrase 'updation' has been added alongside 'periodic updation' in several clauses of paragraph 38 for clarity; and paragraph 56 now mandates incremental upload of KYC records to CKYCR at periodic updation or earlier, with a seven-day timeline for furnishing updated information to CKYCR.
What it means for you
Banks and other regulated entities must immediately update their KYC processes to reflect these changes. The UCIC-level CDD reduces duplication for existing customers, but requires systems to track UCIC across products. The CKYCR upload mandate means REs must ensure timely data sharing within seven days of obtaining updated customer information, and retrieve updates from CKYCR when notified. This enhances efficiency but demands robust IT integration and compliance monitoring.
What you must do
- Update internal KYC policies and procedures to reflect UCIC-level CDD, avoiding fresh CDD for existing KYC-compliant customers opening new accounts or availing new services.
- Ensure systems are configured to upload/update KYC records to CKYCR incrementally at periodic updation or earlier, and within seven days of receiving updated customer information.
- Train staff on the revised paragraph 38 clauses to correctly apply 'updation' alongside 'periodic updation' for KYC updates.
- Review and adjust monitoring protocols for high-risk accounts to ensure intensified monitoring applies as per the shifted explanation in paragraph 37.
- Coordinate with IT and compliance teams to enable automatic retrieval of updated KYC records from CKYCR when notified.
Who it affects
All regulated entities (banks, NBFCs, payment system operators, etc.), Compliance and KYC teams, Customer onboarding and relationship management staff, IT and data management departments
What is the key change regarding CDD for existing customers?
CDD now applies at the UCIC level. If an existing KYC-compliant customer wants to open another account or avail any other product or service from the same RE, no fresh CDD exercise is needed for identification purposes.
What is the new timeline for uploading updated KYC information to CKYCR?
When an RE obtains additional or updated information from a customer, it must furnish the updated information to CKYCR within seven days (or such period as notified by the Central Government). CKYCR will then update the records and inform all reporting entities dealing with that customer.
When do these amendments take effect?
The amended provisions in the Master Direction come into force with immediate effect from November 6, 2024.