RBI
/2007- 2008 /250
RPCD.CO.RF.AML.BC. No.51/ 07.40.00/ 2007- 08 February
28, 2008
Phalguna 9 Saka (1929) All State and District Central Co-operative
Banks 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 RPCD.AML.BC.No.80/07.40.00/
2004-05 dated February 18, 2005 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 the 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 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, 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 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 guidelines enclosed with 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. 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.
Combating financing of terrorism a. In terms
of PMLA Rules, suspicious transactions 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 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
banks and financial institutions. Banks/Financial Institutions 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.
Banks are advised that before opening any new account it should be ensured that
the name/s of the proposed customer/s does/do 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 (As Applicable To Co-operative Societies)
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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