RBI/2007-2008
/248
RPCD.CO.RRB.No. BC. 50 /03.05.33 (E)/2007-08 February
27, 2008 The Chairmen of all Regional Rural Banks
Dear Sir
Know Your Customer (KYC) Norms / Anti-Money Laundering
(AML)
Standards / Combating of Financing of Terrorism (CFT)-
RRBs Regional Rural Banks (RRBs) have been
advised, vide our circular RPCD.CO.RRB.No.BC.81
/03.05.33 (E)/2004-05 dated February 18, 2005, that 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 the Reserve Bank to avoid disproportionate cost
to banks and a burdensome regime for the customers. RRBs were accordingly advised
that customer identification means identifying the customer and verifying his/her
identity by using reliable, and 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. RRBs are, therefore, advised to review their
extant internal instructions in this regard. 3. It
is clarified that permanent correct address, as referred to in Annex-II to 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 or parents, who live with
their husband, father/mother and son, as the case may be, are finding it difficult
to open an account with 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. RRBs 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 February 18, 2005, 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. RRBs are further advised that such a review of risk categorisation
of customers should be carried out at a periodicity of not less
than once in six months. RRBs should also introduce a system of updating the customer
identification data (including photograph/s) at a periodicity of not less than
once in five years after the account is opened in case of low risk category customers,
and not less than once in two years in case of high and medium risk categories. 5.
Combating financing of terrorism a) In
terms of PMLA Rules, suspicious transactions should include transactions which
give rise to a reasonable ground of suspicion that these may involve financing
of the activities relating to terrorism. RRBs 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 lists 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, the Reserve Bank circulates these to all
RRBs. Regional Rural Banks should ensure to update the consolidated list of individuals
and entities as circulated by the 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.
RRBs 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 the Reserve Bank and FIU-IND.
6. 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. 7. 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 (C.S.Murthy)
Chief General Manager-in-Charge
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