| RBI / 2007- 08 / 239
DBOD.AML.BC. No.63/ 14.01.001
/ 2007- 08 February 18, 2008 All Scheduled Commercial
Banks/FIs
(Excluding RRBs) Dear Sir,
Know Your Customer (KYC) Norms / Anti-Money Laundering (AML)
Standards / Combating of Financing of Terrorism (CFT) Banks
have been advised vide our circular DBOD.NO.AML.BC.58/14.01.001
/2004-05 dated November 29, 2004 that the adoption of customer acceptance
policy and its implementation should not result in denial of banking services
to general public, especially to those, who are financially or socially disadvantaged.
It was also clarified to the banks that a risk based approach has been followed
in the KYC guidelines issued by Reserve Bank to avoid disproportionate cost to
banks and a burdensome regime for the customers. Banks were accordingly advised
that customer identification means identifying the customer and verifying his/her
identity by using reliable, independent source documents, data or information
to their satisfaction. 2. It was further clarified to banks that 'being
satisfied' means that the bank must be able to satisfy the competent
authorities that due diligence was observed based on the risk profile of the customer
in compliance with the extant guidelines in place. An indicative list
of the nature and type of documents/ information that may be relied upon for customer
identification was also given in the Annex-II
to the aforesaid circular. It has been brought to our notice that Annex-II,
which was clearly termed as an indicative list, is being treated by some banks
as an exhaustive list as a result of which a section of public is being
denied access to banking services. Banks are, therefore, advised to take a review
of their extant internal instructions in this regard.
3.
It is clarified that permanent correct address, as referred to in Annex-II of
our said circular, means the address at which a person usually resides and can
be taken as the address as mentioned in a utility bill or any other document accepted
by the bank for verification of the address of the customer. It has been observed
that some close relatives, e.g. wife, son, daughter and parents etc. who live
with their husband, father/mother and son, as the case may be, are finding it
difficult to open account in some banks as the utility bills required for address
verification are not in their name. It is clarified, that in such cases, banks
can obtain an identity document and a utility bill of the relative with whom the
prospective customer is living along with a declaration from the relative that
the said person (prospective customer) wanting to open an account is a relative
and is staying with him/her. Banks can use any supplementary evidence such as
a letter received through post for further verification of the address. While
issuing operational instructions to the branches on the subject, banks should
keep in mind the spirit of instructions issued by the Reserve Bank and avoid undue
hardships to individuals who are, otherwise, classified as low risk customers. 4.
The instructions contained in paragraph
4 of the circular dated November 29, 2004, also require banks to put
in place a system of periodical review of risk categorisation of accounts and
the need for applying enhanced due diligence measures in case of higher risk perception
on a customer. Banks are further advised that such review of risk categorisation
of customers should be carried out at a periodicity of not less
than once in six months. Banks should also introduce a system of periodical updation
of customer identification data (including photograph/s) after the account is
opened. The periodicity of such updation should not be less than once in
five years in case of low risk category customers and not less than once in two
years in case of high and medium risk categories. 5. Banks have been further
advised, vide paragraph
9 of our circular dated November 29, 2004, that KYC/AML guidelines issued
by Reserve Bank of India shall also apply to their branches and majority owned
subsidiaries located outside India, especially, in countries which do not or insufficiently
apply the FATF Recommendations, to the extent local laws permit. It is further
clarified that 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.
6. Combating financing of terrorism a)
In terms of PMLA Rules, suspicious transaction should include inter alia
transactions which give rise to a reasonable ground of suspicion that these may
involve financing of the activities relating to terrorism. Banks are, therefore,
advised to develop suitable mechanism through appropriate policy framework for
enhanced monitoring of accounts suspected of having terrorist links and swift
identification of the transactions and making suitable reports to the Financial
Intelligence Unit – India (FIU-IND) on priority. b) As and
when list of individuals and entities, approved by Security Council Committee
established pursuant to various United Nations' Security Council Resolutions (UNSCRs),
are received from Government of India, Reserve Bank circulates these to all banks
and financial institutions. Banks/Financial Institutions should ensure to update
the consolidated list of individuals and entities as circulated by Reserve Bank.
Further, the updated list of such individuals/entities can be accessed in the
United Nations website at http://www.un.org/sc/committees/1267/consolist.shtml.
Banks are advised that before opening any new account it should be ensured that
the name/s of the proposed customer does not appear in the list. Further, banks
should scan all existing accounts to ensure that no account is held by or linked
to any of the entities or individuals included in the list. Full details
of accounts bearing resemblance with any of the individuals/entities in the list
should immediately be intimated to RBI and FIU-IND. 7. It may be
appreciated that KYC norms/AML standards/CFT measures have been prescribed to
ensure that criminals are not allowed to misuse the banking channels. It
would, therefore, be necessary that adequate screening mechanism is put in place
by banks as an integral part of their recruitment/hiring process of personnel.
8. These guidelines are issued under Section 35A of the Banking Regulation
Act, 1949 and any contravention thereof may attract penalties under the relevant
provisions of the Act. Yours faithfully, (
Vinay Baijal )
Chief General Manager |