Other Obligations on RE under AML/CFT- RBI, India
RBI, India has issued guidance on various issues related to AML/CFT from time to time.
Unique Customer Identification Code
A Unique
Customer Identification Code (UCIC) will help banks to identify the customers,
avoid multiple identities, track the facilities availed, monitor financial
transactions in a holistic manner and enable banks to have a better approach to
risk profiling of customers. Banks have been advised to allot UCIC while
entering into new relationships with individual customers as also the existing
customers
Correspondent Relationship with a “Shell Bank”
Banks should refuse to enter into a correspondent relationship with a “shell bank” (i.e. a bank which is incorporated in a country where it has no physical presence and is unaffiliated to any regulated financial group). Shell banks are not permitted to operate in India. Banks should not enter into relationship with shell banks and before establishing correspondent relationship with any foreign institution, banks should take appropriate measures to satisfy themselves that the foreign respondent institution does not permit its accounts to be used by shell banks. Banks should be extremely cautious while continuing relationships with correspondent banks located in countries with poor KYC standards and countries identified as 'non-cooperative' in the fight against money laundering and terrorist financing. Banks should ensure that their respondent banks have anti money laundering policies and procedures in place and apply enhanced 'due diligence' procedures for transactions carried out through the correspondent accounts.
Branches Abroad
The guidelines contained in this master circular shall apply to the branches and majority owned subsidiaries located abroad, especially, in countries which do not or insufficiently apply the FATF Recommendations, to the extent local laws permit. When local applicable laws and regulations prohibit implementation of these guidelines, the same should be brought to the notice of Reserve Bank. In case there is a variance in KYC/AML standards prescribed by the Reserve Bank and the host country regulators, branches/overseas subsidiaries of banks are required to adopt the more stringent regulation of the two.
The instructions on opening of accounts and monitoring of transactions shall be strictly adhered to, in order to minimise the operations of “Money Mules” which are used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties which act as “money mules.” Banks shall undertake diligence measures and meticulous monitoring to identify accounts which are operated as Money Mules and take appropriate action, including reporting of suspicious transactions to FIU-IND. Further, if it is established that an account opened and operated is that of a Money Mule, but no STR was filed by the concerned bank, it shall then be deemed that the bank has not complied with these directions.
Walk-in Customer
In case of
transactions carried out by a non-account based customer, that is a walk-in
customer, where the amount of transaction is equal to or exceeds Rs. 50,000/-,
whether conducted as a single transaction or several transactions that appear
to be connected, the customer's identity and address should be verified. If a
bank has reason to believe that a customer is intentionally structuring a
transaction into a series of transactions below the threshold of Rs.50,000/-
the bank should verify the identity and address of the customer and also
consider filing a Suspicious Transactions Report (STR) to Financial
Intelligence Unit – India (FIU-IND). In terms of Clause (b) (ii) of sub-Rule
(1) of Rule 9 of the PML Rules, 2005 banks and financial institutions are
required to verify the identity of the customers for all international money
transfer operations.
Issue of Demand Drafts, etc, for more than Rs.50,000/-
Banks should ensure that any remittance of funds by way of demand draft, mail/telegraphic transfer or any other mode and issue of travellers’ cheques for value of Rs.50,000/- and above is effected by debit to the customer’s account or against cheques and not against cash payment.
Period for presenting payment instruments
Payment of cheques/drafts/pay
orders/banker’s cheques, if they are presented beyond the period of three
months from the date of such instruments, shall not be made.
Collection
of Account Payee Cheques
Account payee cheques for any person other than the payee constituent shall not be collected. Banks shall, at their option, collect account payee cheques drawn for an amount not exceeding rupees fifty thousand to the account of their customers who are co-operative credit societies, provided the payees of such cheques are the constituents of such co-operative credit societies.
(a) A
Unique Customer Identification Code (UCIC) shall be allotted while entering
into new relationships with individual customers as also the existing
individual customers by REs.
(b) The
REs shall, at their option, not issue UCIC to all walk-in/occasional customers
provided it is ensured that there is adequate mechanism to identify such
walk-in customers who have frequent transactions with them and ensure that they
are allotted UCIC.
Introduction
of New Technologies
REs
shall identify and assess the ML/TF risks that may arise in relation to the
development of new products and new business practices, including new delivery
mechanisms, and the use of new or developing technologies for both new and
preexisting products. Further, REs shall ensure:
(a)
to undertake the ML/TF risk assessments prior to the launch or use of such
products, practices, services, technologies; and
(b)
adoption of a risk-based approach to manage and mitigate the risks through
appropriate EDD measures and transaction monitoring, etc
Dealing with Uunregulated Entities
in the process of Wire Transfer
Obligations in respect of REs’ engagement or involvement with unregulated
entities in the process of wire transfer REs shall be cognizant of their
obligations under these instructions and ensure strict compliance, in respect
of engagement or involvement of any unregulated entities in the process of wire
transfer. More specifically, whenever there is involvement of any unregulated
entities in the process of wire transfers, the concerned REs shall be fully
responsible for information, reporting and other requirements and therefore
shall ensure, inter alia, that,
i) There
is unhindered flow of complete wire transfer information, as mandated under
these directions, from and through the unregulated entities involved;
ii)
The agreement / arrangement, if any, with such unregulated entities by REs
clearly stipulates the obligations under wire transfer instructions; and
iii)
A termination clause is available in their agreement / arrangement, if any,
with such entities so that in case the unregulated entities are unable to
support the wire information requirements, the agreement / arrangement can be
terminated. Existing agreements / arrangements, if any, with such entities
shall be reviewed within three months to ensure aforementioned requirements.
ii. REs’ responsibility while undertaking cross-border wire transfer with
respect to name screening (such that they do not process cross-border
transactions of designated persons and entities) REs are prohibited from
conducting transactions with designated persons and entities and accordingly,
in addition to compliance with Chapter IX of the Master Direction, REs shall
ensure that they do not process cross-border transactions of designated persons
and entities.
iv. REs’
responsibility to fulfil record management requirements Complete originator and
beneficiary information relating to wire transfers shall be preserved by the
REs involved in the wire transfer, in accordance with Section 46 of the Master
Direction. 65. Issue and Payment of Demand Drafts, etc., Any remittance of funds
by way of demand draft, mail/telegraphic transfer/NEFT/IMPS or any other mode
and issue of travelers’ cheques for value of rupees fifty thousand and above
shall be effected by debit to the customer’s account or against cheques and not
against cash payment. Further, the name of the purchaser shall be incorporated
on the face of the demand draft, pay order, banker’s cheque, etc., by the
issuing bank. These instructions shall take effect for such instruments issued
on or after September 15, 2018.
Quoting
of PAN Permanent account number (PAN) or equivalent e-document thereof of
customers shall be obtained and verified while undertaking transactions as per
the provisions of Income Tax Rule 114B applicable to banks, as amended from
time to time. Form 60 shall be obtained from persons who do not have PAN or
equivalent e-document thereof.
Selling Third party products
REs acting as agents while selling third party products as
per regulations in force from time to time shall comply with the following
aspects for the purpose of these directions:
(a) The identity and address of the
walk-in customer shall be verified for transactions above rupees fifty thousand
as required under Section 13(e) of this Directions.
(b) Transaction details of sale of
third-party products and related records shall be maintained as prescribed in
Section 46 of Chapter VII.
(c) AML software capable of capturing,
generating and analysing alerts for the purpose of filing CTR/STR in respect of
transactions relating to third party products with customers including walk-in
customers shall be available.
(d) Transactions involving rupees fifty
thousand and above shall be undertaken only by:
· Debit to
customers’ account or against cheques; and
· Obtaining and
verifying the PAN given by the account-based as well as walk-in customers.
(e) Instruction at ‘d’ above shall also
apply to sale of REs’ own products, payment of dues of credit cards/sale and
reloading of prepaid/travel cards and any other product for rupees fifty
thousand and above.
At-par
cheque facility availed by Co-operative banks
(a) The ‘at par’ cheque facility offered
by commercial banks to co-operative banks shall be monitored and such
arrangements be reviewed to assess the risks including credit risk and
reputational risk arising therefrom.
(b) The right to verify the records
maintained by the customer cooperative banks/ societies for compliance with the
extant instructions on KYC and AML under such arrangements shall be retained by
banks.
(c) Cooperative Banks shall:
i.
ensure that the ‘at par’ cheque facility is utilised only:
a.
for their own use,
b.
for their account-holders who are KYC complaint, provided that all transactions
of rupees fifty thousand or more are strictly by debit to the customers’
accounts,
c.
for walk-in customers against cash for less than rupees fifty thousand per
individual.
ii. Maintain the following:
a.
records pertaining to issuance of ‘at par’ cheques covering, inter alia,
applicant’s name and account number, beneficiary’s details and date of issuance
of the ‘at par’ cheque,
b.
sufficient balances/drawing arrangements with the commercial bank extending
such facility for purpose of honouring such instruments.
iii. ensure that ‘At par’ cheques issued are crossed ‘account payee’
irrespective of the amount involved.
Issuance
of Prepaid Payment Instruments (PPIs):
PPI issuers shall ensure that the
instructions issued by Department of Payment and Settlement System of Reserve
Bank of India through their Master Direction are strictly adhered to.
(a) Adequate screening mechanism,
including Know Your Employee / Staff policy, as an integral part of their
personnel recruitment/hiring process shall be put in place.
(b) REs shall endeavour to ensure that the
staff dealing with / being deployed for KYC/AML/CFT matters have:
high integrity and ethical standards, good
understanding of extant KYC/AML/CFT standards, effective communication skills
and ability to keep up with the changing KYC/AML/CFT landscape, nationally and
internationally. REs shall also strive to develop an environment which fosters
open communication and high integrity amongst the staff.
(c)
On-going employee training programme shall be put in place so that the members
of staff are adequately trained in KYC/AML/CFT policy. The focus of the
training shall be different for frontline staff, compliance staff and staff
dealing with new customers. The front desk staff shall be specially trained to
handle issues arising from lack of customer education. Proper staffing of the
audit function with persons adequately trained and well-versed in KYC/AML/CFT
policies of the RE, regulation and related issues shall be ensured.
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