Combating Financing Terrorism-RBI, India
Combating Financing of Terrorism
The United Nations periodically circulates the following two lists of individuals and entities, suspected of having terrorist links, and as approved by its Security Council (UNSC).
(a) The “Al-Qaida Sanctions List”, includes names of individuals and entities associated with the Al-Qaida. The Updated Al-Qaida Sanctions List is available at http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml.
(b) The “1988 Sanctions List”, consisting of individuals (Section A of the consolidated list) and entities (Section B) associated with the Taliban which is available at http://www.un.org/sc/committees/ 1988/list.shtml. The United Nations Security Council Resolutions (UNSCRs), received from Government of India, are circulated by the Reserve Bank to all banks and FIs.
REs
shall also ensure to refer to the lists as available in the Schedules to the
Prevention and Suppression of Terrorism (Implementation of Security Council
Resolutions) Order, 2007, as amended from time to time. The aforementioned
lists, i.e., UNSC Sanctions Lists and lists as available in the Schedules to
the Prevention and Suppression of Terrorism (Implementation of Security Council
Resolutions) Order, 2007, as amended from time to time, shall be verified on
daily basis and any modifications to the lists in terms of additions, deletions
or other changes shall be taken into account by the REs for meticulous
compliance.
Details of accounts resembling any of the individuals/entities in the lists shall be reported to FIU-IND apart from advising Ministry of Home Affairs (MHA) as required under UAPA notification dated February 2, 2021 (Annex II of thisMaster Direction).Banks/FIs are required to update the lists and take them into account for implementation of Section 51A of the Unlawful Activities (Prevention) (UAPA) Act, 1967. Banks/FIs should ensure that they do not have any account in the name of individuals/entities appearing in the above lists. Details of accounts resembling any of the individuals/entities in the list should be reported to FIU-IND.
Freezing of Assets under Section 51A of Unlawful Activities (Prevention) Act, 1967
(a) The Unlawful Activities (Prevention) Act, 1967 (UAPA) has been amended by the Unlawful Activities (Prevention) Amendment Act, 2008. Government has issued an Order dated August 27, 2009 (Annex II of this circular) detailing theprocedure for implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967 for prevention of, and for coping with terrorist activities. In terms of Section 51A, the Central Government is empowered to freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the individuals or entities listed in the Schedule to the Order, or any other person engaged in or suspected to be engaged in terrorism and prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of the individuals or entities listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism.
(b) Banks/FIs are required to strictly follow the procedure laid down in the UAPA Order dated August 27, 2009 (Annex II of this Master Circular) and ensure meticulous compliance to the Order issued by the Government.
Obligations under Weapons of Mass
Destruction (WMD) and their Delivery Systems (Prohibition of Unlawful
Activities) Act, 2005 (WMD Act, 2005):
(a)
REs shall ensure meticulous compliance with the “Procedure for Implementation
of Section 12A of the Weapons of Mass Destruction (WMD) and their Delivery
Systems (Prohibition of Unlawful Activities) Act, 2005” laid down in terms of
Section 12A of the WMD Act, 2005 vide Order dated September 1, 2023, by the
Ministry of Finance, Government of India (Annex III of this Master Direction).
(b)
In accordance with paragraph 3 of the aforementioned Order, REs shall ensure
not to carry out transactions in case the particulars of the individual /
entity match with the particulars in the designated list.
c). Further,
REs shall run a check, on the given parameters, at the time of establishing a
relation with a customer and on a periodic basis to verify whether individuals
and entities in the designated list are holding any funds, financial asset,
etc., in the form of bank account, etc.
(d)
In case of match in the above cases, REs shall immediately inform the
transaction details with full particulars of the funds, financial assets or
economic resources involved to the Central Nodal Officer (CNO), designated as
the authority to exercise powers under Section 12A of the WMD Act, 2005. A copy
of the communication shall be sent to State Nodal Officer, where the account /
transaction is held and to the RBI. It may be noted that in terms of Paragraph
1 of the Order, Director, FIU-India has been designated as the CNO.
(e)
REs may refer to the designated list, as amended from time to time, available
on the portal of FIU-India.
(f)
In case there are reasons to believe beyond doubt that funds or assets held by
a customer would fall under the purview of clause (a) or (b) of sub-section (2)
of Section 12A of the WMD Act, 2005, REs shall prevent such individual/entity
from conducting financial transactions, under intimation to the CNO by email,
FAX and by post, without delay.
(g)
In case an order to freeze assets under Section 12A is received by the REs from
the CNO, REs shall, without delay, take necessary action to comply with the
Order.
(h)
The process of unfreezing of funds, etc., shall be observed as per paragraph 7
of the Order. Accordingly, copy of application received from an
individual/entity regarding unfreezing shall be forwarded by RE along with full
details of the asset frozen, as given by the applicant, to the CNO by email,
FAX and by post, within two working days.
REs
shall verify every day, the ‘UNSCR 1718 Sanctions List of Designated
Individuals and Entities‘, as available at
https://www.mea.gov.in/Implementationof-UNSC-Sanctions-DPRK.htm, to take into
account any modifications to the list in terms of additions, deletions or other
changes and also ensure compliance with the ‘Implementation of Security Council
Resolution on Democratic People’s Republic of Korea Order, 2017’, as amended
from time to time by the Central Government.
In
addition to the above, REs shall take into account – (a) other UNSCRs and (b)
lists in the first schedule and the fourth schedule of UAPA, 1967 and any
amendments to the same for compliance with the Government orders on
implementation of Section 51A of the UAPA and Section 12A of the WMD Act.
REs shall undertake countermeasures when called upon to do so by any international or intergovernmental organisation of which India is a member and accepted by the Central Government.
The Reserve Bank of India issued three revised Master Directions dated 16 July , 2024 on Fraud Risk Management for the Regulated Entities, namely for:
Commercial Banks (including Regional Rural Banks) and All India Financial Institutions;
Cooperative Banks (Urban Cooperative Banks / State Cooperative Banks / Central Cooperative Banks);
Non-Banking Finance Companies (including Housing Finance Companies).
The purpose of these directives is to encourage improved fraud risk management frameworks and systems in regional rural banks, housing finance companies, and rural cooperative banks
In order to maintain uniformity and consistency when banks report fraud incidences to RBI via the web portal by filing Fraud Monitoring Returns (FMRs), they must select the most relevant category from the list below:
(i) Misappropriation of funds and criminal breach of trust;
(ii) Fraudulent encashment through forged instruments;
(iii) Manipulation of books of accounts or through fictitious accounts, and conversion of property;
(iv) Cheating by concealment of facts with the intention to deceive any person and cheating by impersonation;
(v) Forgery with the intention to commit fraud by making any false documents/electronic records;
(vi) Wilful falsification, destruction, alteration, mutilations of any book, electronic record, paper, writing, valuable security or account with intent to defraud;
(vii) Fraudulent credit facilities extended for illegal gratification;
(viii) Cash shortages on account of frauds;
(ix) Fraudulent transactions involving foreign exchange;
(x) Fraudulent electronic banking / digital payment related transactions.
Jurisdictions that do not or insufficiently apply the FATF Recommendations
(a)
FATF Statements circulated by Reserve Bank of India from time to time, and
publicly available information, for identifying countries, which do not or
insufficiently apply the FATF Recommendations, shall be considered. REs shall
apply enhanced due diligence measures, which are effective and proportionate to
the risks, to business relationships and transactions with natural and legal
persons (including financial institutions) from countries for which this is
called for by the FATF.
(b)
Special attention shall be given to business relationships and transactions
with persons (including legal persons and other financial institutions) from or
in countries that do not or insufficiently apply the FATF Recommendations and
jurisdictions included in FATF Statements. Explanation: The processes referred
to in (a) & (b) above do not preclude REs from having legitimate trade and
business transactions with the countries and jurisdictions mentioned in the
FATF statement.
(c)
The background and purpose of transactions with persons (including legal
persons and other financial institutions) from jurisdictions included in FATF
Statements and countries that do not or insufficiently apply the FATF
Recommendations shall be examined, and written findings together with all documents
shall be retained and shall be made available to Reserve Bank/other relevant
authorities, on request.
REs
are encouraged to leverage latest technological innovations and tools for
effective implementation of name screening to meet the sanctions requirements
Happy Reading,
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