KYC SHORT NOTES:1
47.
Role of
Ordering, Intermediary and Beneficiary banks
(i) Ordering Bank
: An ordering bank is the one that originates a wire transfer as per the order
placed by its customer. The ordering bank must ensure that qualifying wire
transfers contain complete originator information. The bank must also verify
and preserve the information at least for a period of five years.
(ii)
Intermediary
bank : For both cross-border and domestic wire transfers,
a bank processing an intermediary element of a chain of wire transfers must
ensure that all originator information accompanying a wire transfer is retained
with the transfer. Where technical limitations prevent full originator
information accompanying a cross-border wire transfer from remaining with a
related domestic wire transfer, a record must be kept at least for five years
(as required under Prevention of Money Laundering Act, 2002) by the receiving
intermediary bank of all the information received from the ordering bank.
(iii)
Beneficiary
bank :A beneficiary bank should have effective risk-based
procedures in place to identify wire transfers lacking complete originator
information. The lack of complete originator information may be considered as a
factor in assessing whether a wire transfer or related transactions are
suspicious and whether they should be reported to the Financial Intelligence Unit-India.
The beneficiary bank should also take up the matter with the ordering bank if a
transaction is not accompanied by detailed information of the fund remitter. If
the ordering bank fails to furnish information on the remitter, the beneficiary
bank should consider restricting or even terminating its business relationship
with the ordering bank.
48.
Maintenance
of records of transactions : Banks/FIs should
introduce a system of maintaining proper record of transactions prescribed
under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules,
2005 (PML Rules, 2005), as mentioned below:
(i) All
cash transactions of the value of more than Rupees Ten Lakh or its equivalent
in foreign currency.
(ii)Series of all cash transactions individually
valued below Rupees Ten Lakh, or its equivalent in foreign currency which are
that have taken place within a month and the monthly aggregate which exceeds
rupees ten lakhs or its equivalent in foreign currency. It is clarified that
for determining ‘integrally connected transactions’ ‘all accounts of the same
customer’ should be taken into account.
1.
All transactions involving receipts by
non-profit organisations of value more than rupees ten lakh or its equivalent
in foreign currency [Ref: Government of India Notification dated November 12,
2009- Rule 3,subrule (1) clause (BA) of PML Rules]
2.
All cash transactions ; where forged or
counterfeit currency notes or bank notes have been used as genuine and where
any forgery of a valuable security or a document has taken place facilitating
the transaction and
3.
All
suspicious transactions, whether or not in cash, made as mentioned in the Rules
49.
Banks/FIs are required to maintain all
necessary information in respect of transactions prescribed under PML Rule 3 so
as to permit reconstruction of individual transaction, including the following
information: (i) the nature of the transactions; (ii) the amount of the
transaction and the currency in which it was denominated; (iii) the date on
which the transaction was conducted; and (iv) the parties to the transaction.
50.
In terms of PML Amendment Act 2012,
banks/FIs should maintain for at least five years from the date of transaction
between the bank/FI and the client, all necessary records of transactions, both
domestic or international, which will permit reconstruction of individual
transactions (including the amounts and types of currency involved, if any) so
as to provide, if necessary, evidence for prosecution of persons involved in
criminal activity.
51.
Banks/FIs should ensure that records
pertaining to the identification of the customers and their address (e.g.
copies of documents like passports, identity cards, driving licenses, PAN card,
utility bills, etc.) obtained while opening the account and during the course
of business relationship, are properly preserved for at least five years after
the business relationship is ended as required under Rule 10 of the Rules ibid.
The identification of records and transaction data should be made available to
the competent authorities upon request.
52. Banks/FIs
may maintain records of the identity of their clients, and records in respect
of transactions referred to in Rule 3 in hard or soft format.
53.
Combating Financing of Terrorism : The
United Nations periodically circulates the following two lists of individuals
and entities, suspected of having terrorist links, and as approved by its
Security Council (UNSC).
(a) The
“Al-Qaida Sanctions List”, includes names of individuals and entities
associated with the Al-Qaida.
(b)
The “1988 Sanctions List”, consisting of
individuals (Section A of the consolidated list) and entities.
54.
The United Nations Security Council
Resolutions (UNSCRs), received from Government of India, are circulated by the
Reserve Bank to all banks and FIs. Banks/FIs are required to update the lists
and take them into account for implementation of Section 51A of the Unlawful
Activities (Prevention) (UAPA) Act, 1967, discussed below. Banks/FIs should
ensure that they do not have any account in the name of individuals/entities
appearing in the above lists. Details of accounts resembling any of the
individuals/entities in the list should be reported to FIUIND.
55.
Freezing of
Assets under Section 51A of Unlawful Activities (Prevention) Act, 1967 :
(a)
The
Unlawful Activities (Prevention) Act, 1967 (UAPA) has
been amended by the Unlawful Activities
(Prevention) Amendment Act, 2008. Government has issued an Order dated August 27, 2009 (Annex II of
this circular) detailing the procedure for implementation of Section 51A of the
Unlawful Activities (Prevention) Act, 1967 for prevention of, and for coping
with terrorist activities.
In terms of Section 51A, the Central Government is
empowered to freeze, seize or attach funds and other financial assets or
economic resources held by, on behalf of or at the direction of the individuals
or entities listed in the Schedule to the Order, or any other person engaged in
or suspected to be engaged in terrorism and prohibit any individual or entity
from making any funds, financial assets or economic resources or related servicesavailable
for the benefit of the individuals or entities listed in the Schedule to the
Order or any other person engaged in or suspected to be engaged in terrorism.
57.
Jurisdictions
that do not or insufficiently apply the FATF Recommendations:
(a)
Banks/FIs are required to take into
account risks arising from the deficiencies in AML/CFT regime of the
jurisdictions included in the FATF Statement. In addition to FATF Statements
circulated by Reserve Bank of India from time to time, banks/FIs should also
consider publicly available information for identifying countries, which do not
or insufficiently apply the FATF Recommendations. It is clarified that
banks/FIs should also give special attention to business relationships and
transactions with persons (including legal persons and other financial
institutions) from or in countries that do not or insufficiently apply the FATF
Recommendations and jurisdictions included in FATF Statements. (b) Banks/FIs
should examine the background and purpose of transactions with persons
(including legal persons and other financial institutions) from jurisdictions
included in FATF Statements and countries that do not or insufficiently apply
the FATF Recommendations. Further, if the transactions have no apparent
economic or visible lawful purpose, the background and purpose of such
transactions should, as far as possible be examined, and written findings
together with all documents should be retained and made available to Reserve
Bank/other relevant authorities, on request.
58.
In terms of the Rule 3 of the PML
(Maintenance of Records) Rules, 2005, banks/FIs are required to furnish
information relating to cash transactions, cash transactions integrally
connected to each other, and all transactions involving receipts by non-profit
organisations (NPO means any entity or organisation that is registered as a
trust or a society under the Societies Registration Act, 1860 or any similar
State legislation or a company registered (erstwhile Section 25 of Companies
Act, 1956 ) under Section 8 of the Companies Act, 2013), cash transactions
;where forged or counterfeit currency notes or bank notes have been used as
genuine, cross border wire transfer, etc. to the Director, Financial
Intelligence Unit-India (FIU-IND).
59.
FIU-IND has released a comprehensive reporting
format guide to describe the specifications of prescribed reports to FIU-IND.
FIU-IND has also developed a Report Generation Utility and Report Validation
Utility to assist reporting entities in the preparation of prescribed reports.
The Office Memorandum issued on Reporting Formats under Project FINnet dated 31st
March, 2011 by FIU containing all relevant details are available on FIU’s
website. Banks/FIs should carefully go through all the reporting formats
prescribed by FIU-IND.
60.
FIU-IND have placed on their website
editable electronic utilities to file electronic Cash Transactions Report
(CTR)/ Suspicious Transactions Report (STR) to enable banks/FIs which are yet
to install/adopt suitable technological tools for extracting CTR/STR from their
live transaction data base. It is, therefore, advised that in cases of those
banks/FIs, where all the branches are not fully computerized, the Principal
Officer of the bank/FI should cull out the transaction details from branches
which are not yet 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.
In terms of Rule 8, while furnishing information to
the Director, FIU-IND, delay of each day in not reporting a transaction or
delay of each day in rectifying a misrepresented transaction beyond the time
limit as specified in the Rule shall constitute a separate violation. Banks/FIs
are advised to take note of the timeliness of the reporting requirements.
62.
Reports to be
furnished to FIU-IND :
1)
Cash
Transaction Report (CTR)
2)
Suspicious
Transaction Reports (STR)
3)
Non-Profit
Organisation
4)
Cross-border
Wire Transfer
63. The
CTR for each month should be submitted to FIU-IND by 15th of the succeeding
month. Cash transaction reporting by branches to their controlling offices
should, therefore, invariably be submitted on monthly basis and banks/FIs
should ensure to submit CTR for every month to FIU-IND within the prescribed
time schedule.
64.
All cash transactions, where forged or
counterfeit Indian currency notes have been used as genuine should be reported
by the Principal Officer of the bank to FIU-IND in the specified format(Counterfeit
Currency Report – CCR), by 15thday of the next month. 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.
65.
While filing CTR, details of individual
transactions below Rupees Fifty thousand need not be furnished. 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.
66.
A summary of cash transaction reports
for the bank as a whole should be compiled by the Principal Officer of the bank
every month in physical form as per the format specified. The summary should be
signed by the Principal Officer and submitted to FIU-IND. In case of CTRs
compiled centrally by banks for the branches having Core Banking Solution (CBS)
at their central data centre, banks may generate centralised CTRs in respect of
the branches under core banking solution at one point for onward transmission
to FIU-IND, provided the CTR is to be generated in the format prescribed by
FIU-IND.
67.
A copy of the monthly CTR submitted to
FIU-India in respect of the branches should be available at the branches for
production to auditors/inspectors, when asked for; and instruction on
‘Maintenance of records of transactions’; and ‘Preservation of records’ should
be scrupulously followed by the branches. However, in respect of branches not
under CBS, the monthly CTR should continue to be compiled and forwarded by the branch
to the Principal Officer for onward transmission to FIU-IND.
68. 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/FIs should report all such attempted transactions in STRs, even if not
completed by the customers, irrespective of the amount of the transaction.
69.
The STR should be furnished within seven
days of arriving at a conclusion that any transaction, whether cash or
non-cash, or a series of transactions integrally connected are of suspicious
nature. The Principal Officer should record his reasons for treating any
transaction or a series of transactions as suspicious. It should be ensured
that there is no undue delay in arriving at such a conclusion once a suspicious
transaction report is received from a branch or any other office. Such report
should be made available to the competent authorities on request.
70. Banks/FIs
should not put any restrictions on operations in the accounts where an STR has
been filed. Banks/FIs and their employees should keep the fact of furnishing of
STR strictly confidential, as required under PML Rules. It should be ensured
that there is no tipping off to the customer at any level.
71.
The report of all transactions involving
receipts by non- profit organizations of value more than rupees ten lakh or its
equivalent in foreign currency should be submitted every month to the Director,
FIU-IND by 15th of the succeeding month in the prescribed format.
72.
Cross-border Wire Transfer Report (CWTR)
is required to be filed with FIU-IND by 15th of succeeding month for all cross
border wire transfers of the value of more than five lakh rupees or its
equivalent in foreign currency where either the origin or destination of fund is
in India.
73.
Banks/FIs may nominate a Director on
their Boards as “designated Director”, as required under provisions of the
Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (Rules), to
ensure compliance with the obligations under the Act and Rules. The name,
designation and address of the Designated Director may be communicated to the
FIU-IND. UCBs/ State Cooperative Banks / Central Cooperative Banks can also
designate a person who holds the position of senior management or equivalent as
a 'Designated Director'. However, in no case, the Principal Officer should be
nominated as the 'Designated Director'.
74.
Principal Officer: Banks/FIs may appoint
a senior officer as Principal Officer (PO). The PO should be independent and
report directly to the senior management or to the Board of Directors. The PO
shall be responsible for ensuring compliance, monitoring transactions, and
sharing and reporting information as required under the law/regulations. The
name, designation and address of the Principal Officer may be communicated to
the FIU-IND.
75.
The
Unlawful Activities (Prevention) Act, 1967 (UAPA) has
been amended and notified on 31.12.2008,
which, inter-alia, inserted Section 51A to the Act. Section 51A reads as
under:-"51A. For the prevention of, and for coping with terrorist
activities, the Central Government shall have power to – (a) freeze, seize or
attach funds and other financial assets or economic resources held by, on
behalf of or at the direction of the individuals or entities Listed in the Schedule
to the Order, or any other person engaged in or suspected to be engaged in
terrorism; (b) prohibit any individual or entity from making any funds,
financial assets or economic resources or related services available for the
benefit of the individuals or entities Listed in the Schedule to the Order or
any other person engaged in or suspected to be engaged in terrorism; (c)
prevent the entry into or the transit through India of individuals Listed in
the Schedule to the Order or any other person engaged in or suspected to be
engaged in terrorism.
76. The
Unlawful Activities (Prevention) Act define "Order" as under:-
"Order" means the Prevention and Suppression of Terrorism
(Implementation of Security Council Resolutions) Order, 2007, as may be amended
from time to time. In order to expeditiously and effectively implement the
provisions of Section 51A, the following procedures shall be followed:-
77.
Appointment
and Communication of details of UAPA nodal officers
As regards
appointment and communication of details of UAPA nodal officers -
(i) The UAPA nodal
officer for IS-I division would be the Joint Secretary (IS.I), Ministry of Home
Affairs. His contact details are 01123092736(Tel), 011-23092569(Fax) and
e-mail. (ii) The Ministry of External Affairs, Department of Economic Affairs,
Foreigners Division of MHA, FIU-IND; and RBI, SEBI, IRDA (hereinafter referred
to as Regulators) shall appoint a UAPA nodal officer and communicate the name
and contact details to the IS-I Division in MHA. (iii) The States and UTs
should appoint a UAPA nodal officer preferably of the rank of the Principal
Secretary/Secretary, Home Department and communicate the name and contact
details to the IS-I Division in MHA. (iv) The IS-I Division in MHA would
maintain the consolidated list of all UAPA nodal officers and forward the list
to all other UAPA nodal officers. (v) The RBI, SEBI, IRDA should forward the
consolidated list of UAPA nodal officers to the banks, stock
exchanges/depositories, intermediaries regulated by SEBI and insurance companies
respectively. (vi) The consolidated list of the UAPA nodal officers should be
circulated to the nodal officer of IS-I Division of MHA in July every year and
on every change. Joint Secretary(IS-I), being the nodal officer of IS-I
Division of MHA, shall cause the amended list of UAPA nodal officers to be
circulated to the nodal officers of Ministry of External Affairs, Department of
Economic Affairs, Foreigners Division of MHA, RBI, SEBI, IRDA and FIU-IND.
78.
Regarding funds, financial assets or
economic resources or related services held in the form of bank accounts,
stocks or insurance policies etc.
(i)
Maintain updated designated lists in
electronic form and run a check on the given parameters on a regular basis to
verify whether individuals or entities listed in the schedule to the Order
(referred to as designated individuals/entities) are holding any funds,
financial assets or economic resources or related services held in the form of
bank accounts, stocks or insurance policies etc. with them.
(ii)
In case, the particulars of any of their
customers match with the particulars of designated individuals/entities, the
banks, stock exchanges/ depositories, intermediaries regulated by SEBI and
insurance companies shall immediately, not later than 24 hours from the time of
finding out such customer, inform full particulars of the funds, financial
assets or economic resources or related services held in the form of bank
accounts, stocks or insurance policies etc.
(iii)
The banks, stock exchanges/
depositories, intermediaries regulated by SEBI and insurance companies shall
also send by post a copy of the communication mentioned in (ii) above to the
UAPA nodal officer of the state/ UT where the account is held and Regulators
and FIU-IND, as the case may be.
(iv) In
case, the match of any of the customers with the particulars of designated
individuals/entities is beyond doubt, the banks stock exchanges / depositories,
intermediaries regulated by SEBI and insurance companies would prevent
designated persons from conducting financial transactions, under intimation to
Joint Secretary (IS.I), Ministry of Home Affairs.
(v) The
banks, stock exchanges/depositories, intermediaries regulated by SEBI and
insurance companies shall file a Suspicious Transaction Report (STR) with
FIU-IND covering all transactions in the accounts
79.
In case, the results of the verification
indicate that the properties are owned by or held for the benefit of the
designated individuals/entities, an order to freeze these assets under section
51A of the UAPA would be issued within 24 hours of such verification and
conveyed electronically to the concerned bank branch, depository, branch of
insurance company branch under intimation to respective Regulators and FIU-IND.
80. In
case, the designated individuals/entities are holding financial assets or
economic resources of the nature of immovable property and if any match with
the designated individuals/entities is found, the UAPA nodal officer of the
State/UT would cause communication of the complete particulars of such
individual/entity along with complete details of the financial assets or
economic resources of the nature of immovable property to the Joint Secretary
(IS.I), Ministry of Home Affairs, immediately within 24 hours.
