To,
All Authorized Money Changers
Madam / Sir,
Anti-Money Laundering Guidelines for Authorized Money Changers
Attention of the Authorized Money Changers (AMCs) is invited
to the Memorandum of Instructions containing the procedural instructions for
adherence by AMCs while undertaking money changing transactions.
2. In view of the increased concerns regarding money laundering
activities and to prevent AMCs from being misused for such activities, it is
necessary for all AMCs to formulate suitable policies and procedures in this
regard. The Anti-Money Laundering (AML) measures so formulated should include
(i) Customer Identification procedure - "Know Your Customer" norms
(ii) Recognition, handling and disclosure of suspicious transactions (iii) Appointment
of Money Laundering Reporting Officer (MLRO) (iv) Staff Training (v) Maintenance
of records (vi) Audit of transactions.
3. To enable AMCs to put in place the policy framework
and systems for prevention of money laundering while undertaking money changing
transactions, the Reserve Bank has brought out detailed Anti-Money Laundering
(AML) guidelines. All AMCs are, therefore, advised to ensure that a proper policy
framework on "Know Your Customer" and Anti Money Laundering measures,
in accordance with the annexed guidelines, is formulated with
the approval of the Board of Directors and put in place before March 31,
2006.
4. AMCs may bring the contents of this circular to the
notice of their constituents concerned.
5. The AML guidelines would be applicable mutatis mutandis
to all franchisees of AMCs and it will be the sole responsibility of the AMC
concerned to ensure that their franchisees also adhere to the AML guidelines.
6. Necessary amendments to the Memorandum of Instructions
to AMCs are being issued separately.
7. The directions contained in this circular have been
issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management
Act, 1999 (42 of 1999). Non-compliance with the guidelines would attract penal
provisions of Section 11(3) of the Act ibid.
Yours faithfully,
(Vinay Baijal)
Chief General Manager
Annex
Anti-Money Laundering Guidelines for Authorised Money Changers
1. Money Laundering
The offence of Money Laundering has been defined in Section
3 of the Prevention of Money Laundering Act, 2002 (PMLA) as "whosoever
directly or indirectly attempts to indulge or knowingly assists or knowingly
is a party or is actually involved in any process or activity connected with
the proceeds of crime and projecting it as untainted property shall be guilty
of offence of money-laundering". In common man’s language, Money Laundering
can be called a process by which money or other assets obtained as proceeds
of crime are exchanged for "clean money" or other assets with no obvious
link to their criminal origins.
2. Anti-Money Laundering Guidelines
The purpose of prescribing Anti-Money Laundering Guidelines
is to prevent the system of Authorised Money Changers (AMCs) engaged in the
purchase and / or sale of foreign currency notes/Travelers cheques from being
used for money laundering. Therefore, Anti-Money Laundering (AML) measures should
include
a. Identification of Customer according to "Know Your
Customer" norms,
b. Recognition, handling and disclosure of suspicious transactions,
c. Appointment of Money Laundering Reporting Officer (MLRO),
d. Staff Training,
e. Maintenance of records,
f. Audit of transactions.
The following paragraphs contain broad guidelines to enable
AMCs to formulate and put in place a proper policy framework for AML measures.
3. Know Your Customer (KYC) – Identification of Customers
All transactions should be undertaken only after proper identification
of the customer. Photocopies of proof of identification should invariably
be retained by the AMC after verifying the document in original. Full details
of name and address as well as the details of the identity document provided
should also be kept on record. If a transaction is being undertaken on behalf
of another person, identification evidence of all the persons concerned should
be obtained and kept on record.
4. Purchase of Foreign Exchange
a) For encashment of foreign currency notes and/or Travelers
Cheques upto USD 500 or its equivalent, production of passport need not be insisted
upon and any other suitable document of identification like ration card, driving
licence etc. can also be accepted.
b) For verification of the identity of customer for encashment
in excess of USD 500 or its equivalent, a photo identity document such as passport,
driving licence, PAN Card, voter identity card issued by the Election Commission,
etc. should be obtained
c) Requests for payment of sale proceeds in cash may be
acceded to the extent of USD 1000 or its equivalent per transaction. All encashment
within one month may be treated as single transaction for the purpose. In all
other cases AMCs should make payment by way of 'Account Payee' cheque / demand
draft only.
d) Where the amount of forex tendered for encashment by
a non-resident or a person returning from abroad exceeds the limits prescribed
for Currency Declaration Form (CDF), the AMC should invariably insist for production
of declaration in CDF.
5. In all cases of sale of foreign exchange,
irrespective of the amount involved, for identification purpose the passport
of the customer should be insisted upon. The sale of forex should be made only
on personal application and identification. Payment in excess of Rs. 50,000/-
towards sale of foreign exchange should be received only by account payee cheque
/ demand draft. All purchases by a person within one month may be treated as
single transaction for the purpose. Encashment Certificate, wherever required,
should also be insisted upon.
6. Establishment of business relationship
Relationship with a business entity like a company / firm should
be established only after obtaining and verifying suitable documents in support
of name, address and business activity such as certificate of incorporation
under the Companies Act, 1956, MOA and AOA, registration certificate of a firm
(if registered), partnership deed, etc. A list of employees who would be authorised
to transact on behalf of the company/ firm and documents of their identification
together with their signatures, should also be called for.
Copies of all documents called for verification should be kept
on record.
7. Suspicious Transactions
The AMC must ensure that its staff is vigilant against money
laundering transactions at all times. An important part of the AML measures
is determining whether a transaction is suspicious or not. A transaction may
be of suspicious nature irrespective of the amount involved.
Some possible suspicious activity indicators are given below:
- Customer is reluctant to provide details/documents on frivolous grounds.
- The transaction is undertaken by one or more intermediaries to protect the
identity of the beneficiary or hide their involvement.
- Size and frequency of transactions is high considering the normal business
of the customer.
- Change in the pattern of business transacted.
The above list is only indicative and not exhaustive.
8. Appointment of a Money Laundering Reporting Officer
(MLRO)
a. An MLRO may be appointed by every AMC for monitoring
transactions and ensuring compliance with the AML Guidelines issued by the
Reserve Bank from time to time. The MLRO will also be responsible for reporting
of suspicious transaction/s to the Financial Intelligence Unit (FIU). Any
suspicious transaction/s, if undertaken, should have prior approval of MLRO.
b. The MLRO shall have reasonable access to all the necessary
information/ documents, which would help him in effective discharge of his
responsibilities.
c. The responsibility of the MLRO may include :
- Putting in place necessary controls for detection of suspicious transactions.
- Receiving disclosures related to suspicious transactions from the staff
or otherwise.
- Deciding whether a transaction should be reported to the appropriate authorities
- Training of staff and preparing detailed guidelines / handbook for detection
of suspicious transactions.
- Preparing annual reports on the adequacy or otherwise of systems and procedures
in place to prevent money laundering and submit it to the Top Management
within 3 months of the end of the financial year.
9. Reporting of Suspicious Activity
- To the extent possible, all suspicious transactions should be reported
to the MLRO before they are undertaken.
- Full details of all suspicious transactions, whether put through or not,
should be reported, in writing, to the MLRO.
- Any transaction which seems suspicious may be undertaken only with prior
approval of MLRO.
- If the MLRO is reasonably satisfied that the suspicious transaction has
/ may have resulted in money laundering, he should make a report to the
appropriate authority viz. the FIU.
10. Staff Training
All the managers and staff of the AMC must be trained to be
aware of the policies and procedures relating to prevention of money laundering,
provisions of the PMLA and the need to monitor all transactions to ensure that
no suspicious activity is being undertaken under the guise of money changing.
The steps to be taken when the staff come across any suspicious transactions
(such as asking questions about the source of funds, checking the identification
documents carefully, reporting immediately to the MLRO, etc.) should be carefully
formulated by the AMC and suitable procedure laid down. The AMCs should have
an ongoing training programme for consistent implementation of the AML measures
11. Audit/Compliance
The concurrent auditor should check all transactions to verify
that they have been done in compliance with the anti-money laundering guidelines
and have been reported as required. Compliance on the lapses, if any, recorded
by the concurrent auditor should be put up to the Board. A certificate from
the Statutory Auditor on the compliance with AML guidelines should be obtained
at the time of preparation of the Annual Report and kept on record.
12. Maintenance of records
The following documents should be preserved for a minimum period
of five years.
- Records including identification obtained in respect of all transactions.
- Statements / Registers prescribed by the Reserve Bank from time to time.
- All Inspection / Audit / Concurrent Audit Reports.
- Annual reports of the MLRO submitted to the Top Management in terms of paragraph
8 above.
- Details of all suspicious transactions reported in writing or otherwise
to the MLRO.
- Details of all transactions involving purchase of foreign exchange against
payment in cash exceeding Indian Rupees 10,00,000 from inter-related
persons during one month.
- All correspondence/ reports with the appropriate authority in connection
with suspicious transactions.
- References from Law Enforcement Authorities, including FIU, should be preserved
until the cases are adjudicated and closed.