RBI/2007-2008/372
RPCD.CO.RRB.No. BC. 77/03.05.33
(E)/2007-08 June 18, 2008 The Chairmen of all Regional
Rural Banks Dear Sir Prevention
of Money Laundering Act, 2002 – Obligation of banks in terms of Rules notified
there under Please refer to our circular RPCD.CO.
RRB.AML.BC.68/ 03.05.33(E)/2005-06 dated March 9, 2006. In Paragraph 3 of
the said circular, it was advised that banks are required to maintain and preserve
information in respect of transactions with its client referred to in rule
3 in hard and soft copies. It is further clarified that banks should also
report information in respect of all transactions referred to in Rule 3 ibid
to the Director, Financial Intelligence Unit-India (FIU-IND). 2.
In terms of instructions contained in paragraph 2 of the guidelines on ‘Know Your
Customer (KYC) Guidelines- Anti-Money Laundering Standards enclosed to our circular
dated February 18, 2005, RRBs are required to prepare a profile for each customer
based on risk categorization. Further, vide paragraph 4 of our circular dated
February 27, 2008, the need for periodical review of risk categorization has been
emphasized. It is, therefore, reiterated that banks, as a part of transaction
monitoring mechanism, are required to put in place an appropriate software application
to throw alerts when the transactions are inconsistent with risk categorization
and updated profile of customers. It is needless to add that a robust software
throwing alerts is essential for effective identification and reporting of suspicious
transactions. 3. In paragraph 6 of our circular dated March
9, 2006, referred to above, RRBs were advised to initiate urgent steps to ensure
electronic filing of cash transaction report (CTR) and Suspicious Transaction
Reports (STR) to FIU-IND. It has been reported by FIU-IND that many banks are
yet to file electronic reports. It is, therefore, advised that in case of banks,
where all the branches are not yet fully computerized, the Principal Officer of
the bank should cull out the transaction details from branches which are not computerized
and suitably arrange to feed the data into an electronic file with the help of
the editable electronic utilities of CTR/STR as have been made available by FIU-IND
on their website http://fiuindia.gov.in.
4. In paragraph 6(I)(a) of our circular dated March 9,
2006, referred to above, RRBs were advised to make Cash Transaction Reports (CTR)
to FIU-India for every month latest by 15th of the succeeding month. It is further
clarified that cash transaction reporting by branches to their Principal Officer
should invariably be submitted on monthly basis (not on fortnightly basis)
and the Principal Officer, in turn, should ensure to submit CTR for every month
to FIU-IND within the prescribed time schedule. 5. In regard
to CTR, it is reiterated that the cut-off limit of Rupees ten lakh is applicable
to integrally connected cash transactions also. Further, after consultation with
FIU-IND, it is clarified that: a) For determining integrally
connected cash transactions, banks should take into account all individual cash
transactions in an account during a calendar month, where either debit
or credit summation, computed separately, exceeds Rupees ten lakh during
the month. However, while filing CTR, details of individual cash transactions
below rupees fifty thousand may not be indicated. Illustration of integrally connected
cash transactions is furnished in Annex-I
to this circular. b) CTR should contain only the transactions
carried out by the bank on behalf of their clients/customers excluding
transactions between the internal accounts of the bank c)
All cash transactions, where forged or counterfeit
Indian currency notes have been used as genuine should be reported by the Principal
Officer to FIU-IND immediately in the format (Counterfeit Currency Report – CCR)
as per Annex-II
and Annex III.
Electronic data structure has been furnished in Annex-IV
to enable banks to generate electronic CCRs. These cash transactions should also
include transactions where forgery of valuable security or documents has taken
place and may be reported to FIU-IND in plain text form.
6. In paragraph 4 of the Guidelines on KYC Norms/AML Measures
annexed to our circular RPCD.No.RRB.BC.81/03.05.33
(E)/2004-05 dated February 18, 2005, RRBs have been advised to pay special
attention to all complex, unusual large transactions and all unusual patterns
of transactions, which have no apparent economic or visible lawful purpose.
It is further clarified that the background including all documents/office records/memorandums
pertaining to such transactions and purpose thereof should, as far as possible,
be examined and the findings at branch as well as Principal Officer level should
be properly recorded. These records are required to be preserved for ten years
as is required under PMLA, 2002. Such records and related documents should be
made available to help auditors in their work relating to scrutiny of transactions
and also to Reserve Bank/other relevant authorities. 7.
In paragraph 7 of our March 9, 2006 circular, RRBs have been advised that the
customer should not be tipped off on the STRs made by them to FIU-IND. It is likely
that in some cases transactions are abandoned /aborted by customers on being asked
to give some details or to provide documents. It is clarified that banks should
report all such attempted transactions in STRs, even if not completed by
customers, irrespective of the amount of the transaction. 8.
While making STRs, RRBs should be guided by the definition of 'suspicious transaction'
as contained in Rule 2(g) of Rules ibid. It is further clarified that RRBs
should make STRs if they have reasonable ground to believe that the transaction
involve proceeds of crime generally irrespective of the amount of transaction
and/or the threshold limit envisaged for predicate offences in part B of Schedule
of PMLA, 2002 . 9. In the context of creating KYC/AML awareness
among the staff and for generating alerts for suspicious transactions, RRBs may
consider the indicative list of suspicious activities contained in Annexure-E
of the 'IBA's Guidance Note for Banks, 2005'. (copy enclosed) 10.
These guidelines are issued under Section 35A of the Banking Regulation Act, 1949
and Rules ibid. Any contravention of the said guidelines may attract penalties
under the relevant provisions of the Act. Yours faithfully (G.Srinivasan)
Chief General Manager-in-Charge
Annexure
E An Indicative List of Suspicious Activities Transactions
Involving Large Amounts of Cash
- Exchanging an unusually large amount of small denomination
notes for those of higher denomination;
- Purchasing
or selling of foreign currencies in substantial amounts by cash settlement despite
the customer having an account with the bank;
- Frequent
withdrawal of large amounts by means of cheques, including traveller’s cheques;
- Frequent
withdrawal of large cash amounts that do not appear to be justified by the customer’s
business activity;
- Large cash withdrawals from a previously
dormant/inactive account, or from an account which has just received an unexpected
large credit from abroad;
- Company transactions, both
deposits and withdrawals, that are denominated by unusually large amounts of cash,
rather than by way of debits and credits normally associated with the normal commercial
operations of the company, e.g. cheques, letters of credit, bills of exchange
etc.;
- Depositing cash by means of numerous credit slips
by a customer such that the amount of each deposit is not substantial, but the
total of which is substantial.
Transactions that
do not make Economic Sense - A
customer having a large number of accounts with the same bank, with frequent transfers
between different accounts;
- Transactions in which assets
are withdrawn immediately after being deposited, unless the customer’s business
activities furnish a plausible reason for immediate withdrawal.
Activities
not consistent with the Customer’s Business - Corporate
accounts where deposits or withdrawals are primarily in cash rather than cheques.
- Corporate
accounts where deposits & withdrawals by cheque/telegraphic transfers/foreign
inward remittances/any other means are received from/made to sources apparently
unconnected with the corporate business activity/dealings.
- Unusual
applications for DD/TT/PO against cash.
- Accounts with
large volume of credits through DD/TT/PO whereas the nature of business does not
justify such credits.
- Retail deposit of many cheques
but rare withdrawals for daily operations.
Attempts
to avoid Reporting/Record-keeping Requirements
- A customer who is reluctant to provide information
needed for a mandatory report, to have the report filed or to proceed with a transaction
after being informed that the report must be filed.
- Any
individual or group that coerces/induces or attempts to coerce/induce a bank employee
not to file any reports or any other forms.
- An account
where there are several cash deposits/withdrawals below a specified threshold
level to a avoid filing of reports that may be necessary in case of transactions
above the threshold level, as the customer intentionally splits the transaction
into smaller amounts for the purpose of avoiding the threshold limit.
Unusual
Activities - An account of a customer
who does not reside/have office near the branch even though there are bank branches
near his residence/office.
- A customer who often visits
the safe deposit area immediately before making cash deposits, especially deposits
just under the threshold level.
- Funds coming from the
list of countries/centers which are known for money laundering.
Customer
who provides Insufficient or Suspicious Information - A
customer/company who is reluctant to provide complete information regarding the
purpose of the business, prior banking relationships, officers or directors, or
its locations.
- A customer/company who is reluctant
to reveal details about its activities or to provide financial statements.
- A
customer who has no record of past or present employment but makes frequent large
transactions.
Certain Suspicious Funds Transfer Activities
- Sending or receiving frequent or large volumes of remittances
to/from countries outside India.
- Receiving large TT/DD
remittances from various centers and remitting the consolidated amount to a different
account/center on the same day leaving minimum balance in the account.
- Maintaining
multiple accounts, transferring money among the accounts and using one account
as a master account for wire/funds transfer.
Certain
Bank Employees arousing Suspicion - An
employee whose lavish lifestyle cannot be supported by his or her salary.
- Negligence
of employees/willful blindness is reported repeatedly.
Some
examples of suspicious activities/transactions to be monitored by the operating
staff- - Large Cash Transactions
- Multiple
accounts under the same name
- Frequently converting
large amounts of currency from small to large denomination notes
- Placing
funds in term Deposits and using them as security for more loans
- Large
deposits immediately followed by wire transfers
- Sudden
surge in activity level
- Same funds being moved repeatedly
among several accounts
- Multiple deposits of money orders,
Banker’s cheques, drafts of third parties
- Transactions
inconsistent with the purpose of the account
- Maintaining
a low or overdrawn balance with high activity
Check
list for preventing money-laundering activities: - A
customer maintains multiple accounts, transfer money among the accounts and uses
one account as a master account from which wire/funds transfer originates or into
which wire/funds transfer are received (a customer deposits funds in several accounts,
usually in amounts below a specified threshold and the funds are then consolidated
into one master account and wired outside the country).
- A
customer regularly depositing or withdrawing large amounts by a wire transfer
to, from, or through countries that are known sources of narcotics or where Bank
secrecy laws facilitate laundering money.
- A customer
sends and receives wire transfers (from financial haven countries) particularly
if there is no apparent business reason for such transfers and is not consistent
with the customer’s business or history.
- A customer
receiving many small incoming wire transfer of funds or deposits of cheques and
money orders, then orders large outgoing wire transfers to another city or country.
- A
customer experiences increased wire activity when previously there has been no
regular wire activity.
- Loan proceeds unexpectedly are
wired or mailed to an offshore Bank or third party.
- A
business customer uses or evidences or sudden increase in wired transfer to send
and receive large amounts of money, internationally and/ or domestically and such
transfers are not consistent with the customer’s history.
- Deposits
of currency or monetary instruments into the account of a domestic trade or business,
which in turn are quickly wire transferred abroad or moved among other accounts
for no particular business purpose.
- Sending or receiving
frequent or large volumes of wire transfers to and from offshore institutions.
- Instructing
the Bank to transfer funds abroad and to expect an equal incoming wire transfer
from other sources.
- Wiring cash or proceeds of a cash
deposit to another country without changing the form of the currency
- Receiving wire transfers and immediately purchasing monetary
instruments prepared for payment to a third party.
- Periodic
wire transfers from a person’s account/s to Bank haven countries.
- A
customer pays for a large (international or domestic) wire transfers using multiple
monetary instruments drawn on several financial institutions.
- A
customer or a non-customer receives incoming or makes outgoing wire transfers
involving currency amounts just below a specified threshold, or that involve numerous
Bank or travelers cheques
- A customer or a non customer
receives incoming wire transfers from the Bank to ‘Pay upon proper identification’
or to convert the funds to bankers’ cheques and mail them to the customer or non-customer,
when
- The amount is very large (say over Rs.10lakhs)
- The
amount is just under a specified threshold (to be decided by the Bank based on
local regulations, if any)
- The funds come from a foreign
country or
- Such transactions occur repeatedly.
- A customer or a non-customer arranges large wire transfers
out of the country which are paid for by multiple Bankers’ cheques (just under
a specified threshold)
A Non-customer sends numerous
wire transfers using currency amounts just below a specified threshold limit.
|