1.1. Know Your Customer (KYC) Norms/Anti-Money
Laundering (AML) Measures/Combating of Financing of Terrorism (CFT)/Obligations
of banks under PMLA, 2002
The objective of KYC/AML/CFT guidelines is to
prevent banks from being used, intentionally or unintentionally, by criminal
elements for money laundering or terrorist financing activities. KYC procedures
also enable banks to know/understand their customers and their financial
dealings better which in turn help them manage their risks prudently.
1.2. Definition of Customer
For the purpose of KYC policy, a ‘Customer’ is defined as:
a
a person or
entity that maintains an account and/or has a business relationship with the
bank;
b one on whose behalf the account is maintained
(i.e. the beneficial owner). [Ref: Government of India Notification dated
February 12, 2010 - Rule 9, sub-rule (1A) of PMLA Rules - 'Beneficial Owner'
means the natural person who ultimately owns or controls a client and or the
person on whose behalf a transaction is being conducted, and includes a person
who exercise ultimate effective control over a juridical person]
c
beneficiaries
of transactions conducted by professional intermediaries, such as Stock
Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and
d any person or entity connected with a financial
transaction which can pose significant reputational or other risks to the bank,
say, a wire transfer or issue of a high value demand draft as a single
transaction.
2
Guidelines
1 1.General
(c) Banks
should keep in
mind that the
information collected from
the customer for the purpose of opening of account is to be treated as
confidential and details thereof are not to be divulged for cross selling or
any other like purposes. Banks should, therefore, ensure that information
sought from the customer is relevant to the
perceived risk, is not intrusive, and is in conformity with the guidelines
issued in this regard. Any other information from the customer should be sought
separately with his/her consent and after opening the account
26. Banks should ensure that any remittance of funds
by way of demand draft, mail/telegraphic transfer or any other mode and issue
of travellers’ cheques for value of Rupees fifty thousand and above is effected
by debit to the customer’s account or against cheques and not against cash
payment
27. With effect from April 1, 2012, banks should not
make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or
any subsequent date, if they are presented beyond the period of three months
from the date of such instrument.
28. Banks should ensure that the provisions of
Foreign Contribution (Regulation) Act, 2010, wherever applicable, are strictly
adhered to.
2.2. KYC Policy
Banks
should frame their KYC policies incorporating the following four key elements:
1
Customer Acceptance Policy;
2
Customer Identification Procedures;
3
Monitoring of Transactions; and
iv)Risk Management.
2.3. Customer Acceptance
Policy (CAP)
1 Every bank should develop a clear Customer
Acceptance Policy laying down explicit criteria for acceptance of customers.
The Customer Acceptance Policy must ensure that explicit guidelines are in
place on the following aspects of customer relationship in the bank.
(iii)
No account is opened in anonymous or
fictitious/benami name.
[Ref:
Government of India Notification dated June 16, 2010 Rule 9, sub-rule (1C) -
Banks should not allow the opening of or keep any
anonymous account or accounts in fictitious name
or account on behalf of other persons whose identity has not been disclosed or
cannot be verified].
1 Parameters of risk perception are clearly
defined in terms of the nature of business activity, location of customer and
his clients, mode of payments, volume of turnover, social and financial status
etc. to enable categorisation of customers into low, medium and high risk
(banks may choose any suitable nomenclature viz. level I, level II and level
III). Customers requiring very high level of monitoring, e.g. Politically
Exposed Persons (PEPs) may, if considered necessary, be categorised even
higher;
iii)Documentation requirements and other
information to be collected in respect of different categories of customers
depending on perceived risk and keeping in mind the requirements of PML Act,
2002 and instructions/guidelines issued by Reserve Bank from time to time;
iv)Not to open an account where the bank is
unable to apply appropriate customer due diligence measures, i.e., bank is
unable to verify the identity and /or obtain documents required as per the risk
categorisation due to non-cooperation of the customer or non-reliability of the
data/information furnished to the bank. Bank may also consider closing an
existing account under similar circumstances. It is, however, necessary to have
suitable built in safeguards to avoid harassment of the customer. For example,
decision by a bank to close an account should be taken at a reasonably high
level after giving due notice to the customer explaining the reasons for such a
decision.
28. Circumstances, in which a customer is permitted
to act on behalf of another person/entity, should be clearly spelt out in
conformity with the established law and practice of banking as there could be
occasions when an account is operated by a mandate holder or where an account
is opened by an intermediary in fiduciary capacity and
(i) Necessary checks before opening a new account so
as to ensure that the identity of the customer does not match with any person
with known criminal background or with banned entities such as individual
terrorists or terrorist organisations etc.
30. Banks should prepare a profile for each new
customer based on risk categorisation. The customer profile may contain
information relating to customer’s identity, social/financial status, nature of
business activity, information about his clients’ business and their location
etc. The nature and extent of due diligence will depend on the risk perceived
by the bank. However, while preparing customer profile banks should take care
to seek only such information from the customer, which is relevant to the risk
category and is not intrusive. The customer profile is a confidential document
and details contained therein should not be divulged for cross selling or any
other purposes.
31. For the purpose of risk categorisation,
individuals (other than High Net Worth) and entities whose identities and sources
of wealth can be easily identified and transactions in whose accounts by and
large conform to the known profile, may be categorised as low risk.
Illustrative examples of low risk
customers could be salaried employees whose salary structures are well
defined, people belonging to lower economic
strata of the society whose accounts show small balances and low turnover,
Government Departments and Government owned companies, regulators and statutory
bodies etc. In such cases, the policy may require that only the basic
requirements of verifying the identity and location of the customer are to be
met. Customers that are likely to pose a higher than average risk to the bank
should be categorised as medium or high risk depending on customer's
background, nature and location of activity, country of origin, sources of
funds and his client profile, etc. Banks should apply enhanced due diligence
measures based on the risk assessment, thereby requiring intensive ‘due
diligence’ for higher risk customers, especially those for whom the sources of
funds are not clear. In view of the risks involved in cash intensive
businesses, accounts of
bullion dealers (including sub-dealers) &
jewelers should also be categorized by banks as 'high risk' requiring enhanced
due diligence. Other examples of customers requiring higher due diligence
include (a) nonresident customers;
32. high net worth individuals; (c) trusts,
charities, NGOs and organizations receiving donations; (d) companies having
close family shareholding or beneficial ownership; (e) firms with 'sleeping
partners';
(f) politically exposed persons (PEPs) of
foreign origin, customers who are close relatives of PEPs and accounts of which
a PEP is the ultimate beneficial owner; (g) non-face to face customers and (h)
those with dubious reputation as per public information available etc. However,
NPOs/NGOs promoted by United Nations or its agencies may be classified as low
risk customers.
41. In addition to what has been indicated above,
banks/FIs should take steps to identify and assess their ML/TF risk for
customers, countries and geographical areas as also for products/ services/
transactions/delivery channels. Banks/FIs should have policies, controls and
procedures, duly approved by their boards, in place to effectively manage and
mitigate their risk adopting a risk-based approach. As a corollary, banks would
be required to adopt enhanced measures for products, services and customers
with a medium or high risk rating. In this regard, banks may use for guidance
in their own risk assessment, a Report on Parameters for Risk-Based Transaction
Monitoring (RBTM) dated March 30, 2011 which was issued by Indian Banks'
Association as a supplement to their guidance note on Know Your Customer (KYC)
norms / Anti-Money Laundering (AML) standards issued in July 2009. The IBA
guidance also provides an indicative list of high risk customers, products,
services and geographies.
42. It is important to bear in mind that the
adoption of customer acceptance policy and its implementation should not become
too restrictive and must not result in denial of banking services to general
public, especially to those, who are financially or socially disadvantaged.
2.4. Customer Identification Procedure (CIP)
47. The policy approved by the Board of banks should
clearly spell out the Customer Identification Procedure to be carried out at
different stages, i.e., while establishing a banking relationship; carrying out
a financial transaction or when the bank has a doubt about the authenticity/veracity
or the adequacy of the previously obtained customer identification data.
Customer identification means identifying the customer and verifying his/her
identity by using reliable, independent source documents, data or information.
Banks need to obtain sufficient information necessary to establish, to their
satisfaction, the identity of each new customer, whether regular or occasional,
and the purpose of the intended nature of banking relationship. 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. Such risk-based approach is considered
necessary to avoid disproportionate cost to banks and a burdensome regime for
the customers. Besides risk perception, the nature of information/documents
required would also depend on the type of customer (individual, corporate
etc.). For customers that are natural persons, the banks should obtain sufficient
identification data to verify the identity of the customer, his
address/location, and also his recent photograph. For customers that are legal
persons or entities, the bank should (i) verify the legal status of the legal
person/entity through proper and relevant documents;
(i) verify that any person purporting to act on
behalf of the legal person/entity is so authorised and identify and verify the
identity of that person; (iii)
understand the ownership and control structure
of the customer and determine who are the natural persons who ultimately
control the legal person.
(iii) Banks may seek ‘mandatory’ information required
for KYC purpose which the customer is obliged to give while opening an account
or during periodic updation. Other ‘optional’ customer details/additional
information, if required may be obtained separately after the account is opened
only with the explicit
consent of the customer. The customer has a
right to know what is the information required for KYC that she/he is obliged
to give, and what is the additional information sought by the bank that is
optional. Further, it is reiterated that banks should keep in mind that the
information (both ‘mandatory’ – before opening the account as well as
‘optional’- after opening the account with the explicit consent of the
customer) collected from the customer is to be treated as confidential and
details thereof are not to be divulged for cross selling or any other like
purposes.
49. Customer identification requirements in respect
of a few typical cases, especially, legal persons requiring an extra element of
caution are given in paragraph 2.5 below for guidance of banks. Banks may,
however, frame their own internal guidelines based on their experience of
dealing with such persons/entities, normal bankers’ prudence and the legal
requirements as per established practices. If the bank decides to accept such
accounts in terms of the Customer Acceptance Policy, the bank should take
reasonable measures to identify the beneficial owner(s) and verify
his/her/their identity in a manner so that it is satisfied that it knows who
the beneficial owner(s) is/are [Ref: Government of India Notification dated
June 16, 2010 - Rule 9 sub-rule (1A) of PML Rules].
d) In this connection, a reference may be made
to the circular DBOD.AML.BC.
No. 71/14.01.001/2012-13 dated January 18, 2013 wherein the procedure for
determination of Beneficial Ownership, as advised by Government of India has
been specified.
57. The increasing complexity and volume of
financial transactions necessitate that customers do not have multiple
identities within a bank, across the banking system and across the financial
system. This can be achieved by introducing a unique identification code for
each customer. The Unique Customer Identification Code (UCIC) will help banks
to identify customers, track the facilities availed, monitor financial
transactions in a holistic manner and enable banks to have a better approach to
risk profiling of customers. It would also smoothen banking operations for the
customers. While some
banks already use UCIC for their customers by
providing them a relationship number, etc., other banks have not adopted this
practice. Banks were therefore, advised to initiate steps for allotting UCIC to
all their customers while entering into any new relationships for individual
customers to begin with. Existing individual customers were required to be
allotted UCIC by end-May 2013. However, in view of difficulties expressed by
some banks in implementing UCIC for their customers, for various reasons, and
keeping in view the constraints, the time for completing the process of
allotting UCIC to existing customers was extended up to March 31, 2014. In this
regard a further extension upto December
31, 2014 has been allowed. Banks have been advised to expedite the
procedure and complete the work of allotting UCIC to all the existing
individual customers, within the stipulated timeframe. They may chalk out a
plan for completing the work and furnish the monthly progress report to their
Board. Considering the fact that a period of two years has been allotted for
completion of the task, no further extension in this regard would be
considered. Further, it is reiterated that UCIC should be allotted to all
customers while entering into new relationships.
62. When there are suspicions of money laundering or
financing of the activities relating to terrorism or where there are doubts
about the adequacy or veracity of previously obtained customer identification
data, banks should review the due diligence measures including verifying again
the identity of the client and obtaining information on the purpose and
intended nature of the business relationship. [Ref: Government of India
Notification dated June 16, 2010- Rule 9 sub-rule (1D) of PML Rules].
63. 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.
71. Norms for furnishing proof of address have been
relaxed to allow submitting only one documentary proof of address (either
current or permanent) while opening a bank account or while undergoing periodic
updation. In case the address mentioned as per ‘proof of address’ undergoes a
change, fresh proof of address may be submitted to the branch within a period
of six months. In case the proof of address furnished by the customer is not
the local address or address where the customer is currently residing, the bank
may take a declaration of the local address on which all correspondence will be
made by the bank with the customer. No proof is required to be submitted for
such address for correspondence/local address. This address may be verified by
the bank through ‘positive confirmation’ such as acknowledgment of receipt of
(i) letter, cheque books, ATM cards; (ii) telephonic conversation;
(i)
visits; etc. In the event of change in this
address due to relocation or any
other
reason, customers may intimate the new address for correspondence to the bank
within two weeks of such a change.
78. Some banks insist on opening of fresh accounts
by customers when customers approach them for transferring their account from
one branch of the bank to another branch of the same bank. Banks are advised
that KYC once done by one branch of the bank should be valid for transfer of
the account within the bank as long as full KYC has been done for the concerned
account. The customer should be allowed to transfer his account from one branch
to another branch without restrictions.Banks may transfer existing accounts at
the transferor branch to the transferee branch without insisting on fresh proof
of address and on the basis of a self-declaration from the account holder about
his/her current address.
81. Banks should carry out periodical updation of
KYC information of every customer, which may include the following:
· Full KYC exercise may be done at least every two
years for high risk customers, every eight years for medium risk customers and
every ten years for low risk customers. Full KYC may include all measures for
confirming identity and address and other particulars of the customer that the
bank may consider reasonable and necessary based on the risk profile of the
customer.
· Positive confirmation (obtaining KYC related
updates through e-mail/ letter/ telephonic conversation/ forms/ interviews/
visits, etc.), may be completed at least every two years for medium risk and at
least every three years for low risk individuals and entities.
· Fresh photographs to be obtained from minor
customer on becoming major.
· The time limits prescribed above would apply
from the date of opening of the account/ last verification of KYC.
82. An indicative list of the nature and type of
documents/information that may be may be relied upon for customer
identification is given in Annex-I to this Master Circular.
83. If the address on the document submitted for
identity proof by the prospective customer is same as that declared by him/her
in the account opening form, the document may be accepted as a valid proof of
both identity and address.
84. A rent agreement indicating the address of the
customer duly registered with State Government or similar registration
authority may also be accepted as a proof of address.
n) It has been brought to our notice that the said
indicative list furnished in Annex - I, 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.
84.
Walk-in Customers
In case of transactions carried out by a
non-account based customer, that is a walk-in customer, where the amount of
transaction is equal to or exceeds rupees fifty thousand, whether conducted as
a single transaction or several transactions that appear to be connected, the
customer's identity and address should be verified. However, if a bank has
reason to believe that a customer is intentionally structuring a transaction
into a series of transactions below the threshold of Rs.50,000/- the bank
should verify the identity and address of the customer and also consider filing
a suspicious transaction report (STR) to FIU-IND.
NOTE: In
terms of Clause (b) (ii) of sub-Rule (1) of Rule 9 of the PML Rules, 2005 banks
and financial institutions are required to verify the identity of the customers
for all international money transfer operations
b) Salaried Employees
In case of salaried employees, it is clarified
that with a view to containing the risk of fraud, banks should rely on
certificate/letter of identity and/or address issued only from corporate and
other entities of repute and should be aware of the competent authority designated
by the concerned employer to issue such certificate/letter. Further, in addition to the
certificate/letter issued by the employer, banks should insist on at least one
of the officially valid documents as provided in the Prevention of Money
Laundering Rules (viz. passport, driving licence, PAN Card, Voter’s Identity
card, etc.) or utility bills for KYC purposes for opening bank accounts of
salaried employees of corporate and other entities.
c) Trust/Nominee or Fiduciary Accounts
There exists the possibility that trust/nominee
or fiduciary accounts can be used to circumvent the customer identification
procedures. Banks should determine whether the customer is acting on behalf of
another person as trustee/nominee or any other intermediary. If so, banks should
insist on receipt of satisfactory evidence of the identity
of the intermediaries and of the persons on whose behalf they are acting, as
also obtain details of the nature of the trust or other arrangements in place.
While opening an account for a trust, banks should take reasonable precautions
to verify the identity of the trustees and the settlors of trust (including any
person settling assets into the trust), grantors, protectors, beneficiaries and
signatories. Beneficiaries should be identified when they are defined. In the
case of a 'foundation', steps should be taken to verify the founder managers/
directors and the beneficiaries, if defined.
d) Accounts of companies and firms
Banks need to be vigilant against business
entities being used by individuals as a ‘front’ for maintaining accounts with
banks. Banks should examine the control structure of the entity, determine the
source of funds and identify the natural persons who have a controlling
interest and who comprise the management. These requirements may be moderated
according to the risk perception e.g. in the case of a public company it will
not be necessary to identify all the shareholders.
i Client accounts opened by
professional intermediaries
v. When the bank has knowledge or reason to believe
that the client account opened by a professional intermediary is on behalf of a
single client, that client must be identified. Banks may hold 'pooled' accounts
managed by professional intermediaries on behalf of entities like mutual funds,
pension funds or other types of funds. Banks also maintain 'pooled' accounts
managed by lawyers/chartered accountants or stockbrokers for funds held 'on
deposit' or 'in escrow' for a range of clients. Where funds held by the
intermediaries are not co-mingled at the bank and there are 'sub-accounts',
each of them attributable to a beneficial owner, all the beneficial owners must
be identified. Where such funds are co-mingled at the bank, the bank should
still look through to the beneficial owners. Where the banks rely on the
'customer due diligence' (CDD) done by an intermediary, they should satisfy
themselves that the intermediary is regulated and supervised and has adequate
systems in place to comply
with the KYC requirements. It should be
understood that the ultimate responsibility for knowing the customer lies with
the bank.
ix. Under the extant AML/CFT framework, therefore,
it is not possible for professional intermediaries like Lawyers and Chartered
Accountants, etc. who are bound by any client confidentiality that prohibits
disclosure of the client details, to hold an account on behalf of their
clients. It is reiterated that banks should not allow opening and/or holding of
an account on behalf of a client/s by professional intermediaries, like Lawyers
and Chartered Accountants, etc., who are unable to disclose true identity of
the owner of the account/funds due to any professional obligation of customer
confidentiality. Further, any professional intermediary who is under any
obligation that inhibits bank's ability to know and verify the true identity of
the client on whose behalf the account is held or beneficial ownership of the
account or understand true nature and purpose of transaction/s, should not be
allowed to open an account on behalf of a client.
f) Accounts of Politically
Exposed Persons (PEPs) resident outside India
i) Politically
exposed persons are
individuals who are
or have been entrusted with prominent public
functions in a foreign
country, e.g., Heads of
States or of
Governments, senior politicians,
senior government/judicial/military
officers, senior executives
of state-owned corporations,
important political party officials, etc. Banks should gather sufficient
information on any person/customer of this category intending to establish a
relationship and check all the information available on the person in the
public domain. Banks should verify the identity of the person and seek
information about the sources of funds before accepting the PEP as a customer.
The decision to open an account for a PEP should be taken at a senior level
which should be clearly spelt out in Customer Acceptance Policy. Banks should
also subject such accounts to enhanced monitoring on an ongoing basis. The
above norms may also
ii) In the event of an existing customer or the
beneficial owner of an existing account, subsequently becoming a PEP, banks
should obtain senior management approval to continue the business relationship
and subject the account to the CDD measures as applicable to the customers of
PEP category including enhanced monitoring on an ongoing basis. These
instructions are also applicable to accounts where a PEP is the ultimate
beneficial owner.
iii) Further, banks should have appropriate ongoing
risk management procedures for identifying and applying enhanced CDD to PEPs,
customers who are close relatives of PEPs, and accounts of which a PEP is the
ultimate beneficial owner.
g) Accounts of
non-face-to-face customers
With the introduction of telephone and
electronic banking, increasingly accounts are being opened by banks for
customers without the need for the customer to visit the bank branch. In the
case of non-face-to-face customers, apart from applying the usual customer
identification procedures, there must be specific and adequate procedures to
mitigate the higher risk involved. Certification of all the documents presented
should be insisted upon and, if necessary, additional documents may be called
for. In such cases, banks may also require the first payment to be effected
through the customer's account with another bank which, in turn, adheres to
similar KYC standards. In the case of cross-border customers, there is the
additional difficulty of matching the customer with the documentation and the
bank may have to rely on third party certification/introduction. In such cases,
it must be ensured that the third party is a regulated and supervised entity
and has adequate KYC systems in place.
h) Accounts of proprietary concerns
Apart from following the extant guidelines on
customer identification procedure as applicable to the proprietor, banks should
call for and verify the following documents before opening of accounts in the
name of a proprietary concern:
Proof of the name, address and activity of the
concern, like registration certificate (in the case of a registered concern),
certificate/licence issued by the Municipal authorities under Shop &
Establishment Act, sales and income tax returns, CST/VAT certificate,
certificate/registration document issued by Sales Tax/Service Tax/Professional
Tax authorities, Licence issued by the Registering authority like Certificate
of Practice issued by Institute of Chartered Accountants of India, Institute of
Cost Accountants of India, Institute of Company Secretaries of India, Indian
Medical Council, Food and Drug Control Authorities, registration/licensing
document issued in the name of the proprietary concern by the Central
Government or State Government Authority/Department. Banks may also accept IEC
(Importer Exporter Code) issued to the proprietary concern by the office of
DGFT, the complete Income Tax Return (not just the acknowledgement) in the name
of the sole proprietor where the firm's income is reflected, duly
authenticated/acknowledged by the Income Tax authorities and utility bills such
as electricity, water, and landline telephone bills in the name of the
proprietary concern as required documents for opening of bank accounts of
proprietary concerns.
Any
two of the above documents would suffice. These documents should be in the name
of the proprietary concern.
j) Procedure to be followed in
respect of foreign students:
Banks may follow the following procedure for foreign students studying in
India.
i) Banks may open a Non Resident Ordinary (NRO)
bank account of a foreign student on the basis of his/her passport (with
appropriate visa & immigration endorsement) which contains the proof of
identity and address in the home country along with a photograph and a letter
offering admission from the educational institution.
ii) Within a period of 30 days of opening the
account, the foreign student should submit to the branch where the account is
opened, a valid address proof giving local address, in the form of a rent
agreement or a letter from the educational institution as a proof of living in
a facility
provided by the educational institution. Banks
should not insist on the landlord visiting the branch for verification of rent
documents and alternative means of verification of local address may be adopted
by banks.
iii) During the 30 days period, the account should be
operated with a condition of allowing foreign remittances not exceeding USD
1,000 into the account and a cap of monthly withdrawal to Rs. 50,000/-, pending
verification of address.
iv) On submission of the proof of current address,
the account would be treated as a normal NRO account, and will be operated in
terms of instructions contained in the Reserve Bank of India’s instructions on
Non-Resident Ordinary Rupee (NRO) Account, and the provisions of Schedule 3 of
FEMA Notification 5/2000 RB dated May 3, 2000.
v)
Students
with Pakistani nationality
will need prior
approval of the
Reserve Bank for opening the account.
2.6. Selling Third party products
When banks sell third party products as agents,
the responsibility for ensuring compliance with KYC/AML/CFT regulations lies
with the third party. However, to mitigate reputational risk to bank and to
enable a holistic view of a customer’s transactions, banks are advised as
follows:
(a) Even while selling third party products as
agents, banks should verify the identity and address of the walk-in customer.
(b) Banks should also maintain transaction details
with regard to sale of third party products and related records for a period
and in the manner prescribed in paragraph 2.24 below.
(c) Bank’s AML software should be able to capture,
generate and analyse alerts for the purpose of filing CTR/STR in respect of
transactions relating to third party products with customers including walk-in
customers.
(d) Sale of third party products by banks as agents
to customers, including walk-in customers, for Rs.50,000 and above must be (a)
by debit to customers’ account or against cheques and (b) obtention &
verification of the PAN given
by the account based as well as walk-in
customers. This instruction would also apply to sale of banks’ own products,
payment of dues of credit cards/sale and reloading of prepaid/travel cards and
any other product for Rs. 50,000/- and above.
2.7. Due Diligence in correspondent banking
relationship
Some commercial banks have arrangements with
co-operative banks wherein the latter open current accounts with the commercial
banks and use the cheque book facility to issue ‘at par’ cheques to their
constituents and walk-in- customers for facilitating their remittances and
payments. Since the ‘at par’ facility offered by commercial banks to
co-operative banks is in the nature of correspondent banking arrangements, banks
should monitor and review such arrangements to assess the risks including
credit risk and reputational risk arising therefrom. For this purpose, banks
should retain the right to verify the records maintained by the client
cooperative banks/ societies for compliance with the extant instructions on KYC
and AML under such arrangements.
2.8. Simplified KYC norms for Foreign Portfolio
Investors (FPIs)
In terms of Rule 9 (14)(i) of the PML Rules,
simplified norms have been prescribed for those FPIs who have been duly
registered in accordance with SEBI guidelines and have undergone the required
KYC due diligence/verification prescribed by SEBI through a Custodian/Intermediary
regulated by SEBI. Such eligible/registered FPIs may approach a bank for
opening a bank account for the purpose of investment under Portfolio Investment
Scheme (PIS) for which KYC documents prescribed by the Reserve Bank (as detailed
in Annex II of
the circular DBOD.AML.BC.No.103/14.01.001/2013-14 dated April 3, 2014) would be
required. For this purpose, banks may rely on the KYC verification done by the
third party (i.e. the Custodian/SEBI Regulated Intermediary) subject to the
conditions laid down in Rule 9 (2) [(a) to (e)] of the Rules.
2.9. Small Accounts
In terms of Government of India, Notification
No. 14/2010/F.No.6/2/2007-E.S dated December 16, 2010, (Annex - III a 'small
account' means a savings account in a banking company where-
ii.the aggregate of all withdrawals and transfers in a month does
not exceed rupees ten thousand; and
iii.
the balance
at any point of time does not
exceed rupees fifty thousand.
(a) A ‘small account’ may be opened on the basis of
a self-attested photograph and affixation of signature or thumb print. Such accounts
may be opened and operated subject to the following conditions:
i) the designated officer of the bank, while
opening the small account, certifies under his signature that the person
opening the account has affixed his signature or thumb print, as the case may
be, in his presence;
ii) a small account shall be opened only at Core
Banking Solution linked bank branches or in a branch where it is possible to
manually monitor and ensure that foreign remittances are not credited to the
account and that the stipulated limits on monthly and annual aggregate of
transactions
and
balance in such accounts are not breached, before a transaction is allowed to
take place;
iii)a small account shall remain operational
initially for a period of twelve months, and thereafter for a further period of
twelve months if the holder of such an account provides evidence before the
banking company of having applied for any of the officially valid documents
within twelve months of the opening of the said account, with the entire relaxation
provisions to be reviewed in respect of the said account after twenty four
months;
iv)a small account shall be monitored and when
there is suspicion of money laundering or financing of terrorism or other high
risk scenarios, the identity of customer shall be established through the
production of “officially valid documents”; and
v) foreign remittance shall not be allowed to be
credited into a small account unless the identity of the customer is fully
established through the production of “officially valid documents”.
(a) The notifications further state that job card
issued by NREGA duly signed by an officer of the State Government and the
letters issued by the Unique Identification Authority of India containing
details of name, address and Aadhaar number can now be accepted as an
‘Officially Valid Document’.
(b) E-KYC service of Unique Identification Authority
of India (UIDAI) may be accepted as a valid process for KYC verification under
the PML Rules. The information containing demographic details and photographs
made available from UIDAI as a result of e-KYC process may be treated as an
‘Officially Valid Document’. However, the individual user has to authorize to
UIDAI, by explicit consent, to release her or his identity/address through
biometric authentication to the bank branches/business correspondents.
(c) Further, e-Aadhaar downloaded from UIDAI website
may be accepted as an officially valid document subject to the following:
i. If the prospective customer knows only his/her
Aadhaar number, the bank may print the prospective customer’s e-Aadhaar letter
in the bank directly from the UIDAI portal; or adopt e-KYC procedure as
mentioned in paragraph (b) above.
ii. If the prospective customer carries a copy of
the e-Aadhaar downloaded elsewhere, the bank may print the prospective
customer’s e-Aadhaar letter in the bank directly from the UIDAI portal; or
adopt e-KYC procedure as mentioned in paragraph (b) above; or confirm identity
and
address of the resident through simple authentication service of UIDAI.
2.11. Operation of Bank Accounts & Money Mules
a) It has been brought to our notice that “Money
Mules” can be used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by
criminals who gain illegal access to deposit accounts by recruiting third
parties to act as “money mules.” In some cases these third parties may be
innocent while in others they may be having complicity with the criminals.
b) In a money mule transaction, an individual with
a bank account is recruited to receive cheque deposits or wire transfers and
then transfer these funds to accounts held on behalf of another person or to
other individuals, minus a certain commission payment. Money mules may be
recruited by a variety of methods, including spam e-mails, advertisements on
genuine recruitment web sites, social networking sites, instant messaging and
advertisements in newspapers. When caught, these money mules often have their
bank accounts suspended, causing inconvenience and potential financial loss,
apart from facing likely legal action for being part of a fraud. Many a times
the address and contact details of such mules are found to be fake or not up to
date, making it difficult for enforcement agencies to locate the account
holder.
c) The operations of such mule accounts can be
minimised if banks follow the guidelines on opening of accounts and monitoring
of transactions contained in this Master Circular. Banks are, therefore,
advised to strictly adhere to the guidelines on KYC/AML/CFT issued from time to
time and to those relating to periodical updation of customer identification
data after the account is opened and also to monitoring of transactions in
order to protect themselves and their
customers from misuse by such fraudsters.
2.12. Bank No Longer Knows the True Identity
In the circumstances when a bank believes that
it would no longer be satisfied that it knows the true identity of the account
holder, the bank should also file an STR with FIU-IND.
2.13. Monitoring of Transactions
a) Ongoing monitoring is an essential element of
effective KYC procedures. Banks can effectively control and reduce their risk
only if they have an understanding of the normal and reasonable activity of the
customer so that they have the means of identifying transactions that fall
outside the regular pattern of activity. However, the extent of monitoring will
depend on the risk sensitivity of the account. Banks should pay special
attention to all complex, unusually large transactions and all unusual patterns
which have no apparent economic or visible lawful purpose. Banks may prescribe
threshold limits for a particular category of
accounts and pay particular attention to the transactions which exceed these
limits. Transactions that involve large amounts of cash inconsistent with the
normal and expected activity of the customer should particularly attract the
attention of the bank. Very high account turnover inconsistent with the size of
the balance maintained may indicate that funds are being 'washed' through the
account. High-risk accounts have to be subjected to intensified monitoring. Every
bank should set key indicators for such accounts, taking note of the background
of the customer, such as the country of origin, sources of funds, the type of
transactions involved and other risk factors. High risk associated with
accounts of bullion dealers (including sub-dealers) & jewelers should be
taken into account by banks to identify suspicious transactions for filing
Suspicious Transaction Reports (STRs) to Financial Intelligence Unit- India
(FIU-IND). Banks should put in place a system of periodical review of risk
categorization of accounts and the need for applying enhanced due diligence
measures. Such review of risk categorisation of customers should be carried out
at a periodicity of not less
than once in six months.
b) It has come to our notice that accounts of
Multi-level Marketing (MLM) Companies were misused for defrauding public by
luring them into depositing their money with the MLM company by promising a
high return. Such depositors are assured of high returns and issued post-dated
cheques for interest and repayment of principal. So long as money keeps coming
into the MLM company’s account from new depositors, the cheques are honoured
but once the chain breaks, all such post-dated instruments are dishonoured.
This results in fraud on the public and is a reputational risk for banks
concerned. Further, banks should closely monitor the transactions in accounts
of marketing firms. In cases where a large number of cheque books are sought by
the company, there are multiple small deposits (generally in cash) across the
country in one bank account and where a large number of cheques are issued
bearing similar amounts/dates, the bank should carefully analyse such data and
in case they find such unusual operations in accounts, the matter
should be immediately reported to Reserve Bank
and other appropriate authorities such as Financial Intelligence Unit India
(FIU-Ind) under Department of Revenue, Ministry of Finance.
c) Banks should exercise ongoing due diligence with
respect to the business relationship with every client and closely examine the
transactions in order to ensure that they are consistent with their knowledge
of the client, his business and risk profile and where necessary, the source of
funds [Ref: Government of India Notification dated June 16, 2010 -Rule 9,
sub-rule (1B)]
d) The risk categorization of customers as also
compilation and periodic updation of customer profiles and monitoring and
closure of alerts in accounts by banks are extremely important for effective
implementation of KYC/AML/CFT measures. It is, however, observed that there are
laxities in effective implementation of the Reserve Bank’s guidelines in this
area, leaving banks vulnerable to operational risk. Banks should, therefore,
ensure compliance with the regulatory guidelines on KYC/AML/CFT both in letter
and spirit. Accordingly, banks were advised to complete the process of risk
categorization and compiling/updating profiles of all of their existing
customers in a time-bound manner, by end-March 2013.
2.14. Closure of accounts
Where the bank is unable to apply appropriate
KYC measures due to non-furnishing of information and /or non-cooperation by
the customer, the bank should consider closing the account or terminating the
banking/business relationship after issuing due notice to the customer
explaining the reasons for taking such a decision. Such decisions need to be
taken at a reasonably senior level.
2.15. Risk Management
a) The Board of Directors of the bank should ensure
that an effective KYC programme is put in place by establishing appropriate
procedures and ensuring their effective implementation. It should cover proper
management oversight, systems and controls, segregation of duties, training and
other related matters. Responsibility should be explicitly allocated within the
bank
for ensuring that the bank’s policies and
procedures are implemented effectively. Banks should, in consultation with
their boards, devise procedures for creating risk profiles of their existing
and new customers, assess risk in dealing with various countries, geographical
areas and also the risk of various products, services, transactions, delivery
channels, etc. Banks’ policies should address effectively managing and
mitigating these risks adopting a risk-based approach as discussed in Para 2.3
(d) above.
b) Banks’ internal audit and compliance functions
have an important role in evaluating and ensuring adherence to the KYC policies
and procedures. As a general rule, the compliance function should provide an
independent evaluation of the bank’s own policies and procedures, including
legal and regulatory requirements. Banks should ensure that their audit
machinery is staffed adequately with individuals who are well-versed in such
policies and procedures. Concurrent/ Internal Auditors should specifically
check and verify the application of KYC procedures at the branches and comment
on the lapses observed in this regard. The compliance in this regard should be
put up before the Audit Committee of the Board on quarterly intervals.
2.16. Introduction
of New Technologies – Credit Cards/Debit Cards/ Smart Cards/Gift Cards
Banks should pay special attention to any money
laundering threats that may arise from new or developing technologies including
internet banking that might favour anonymity, and take measures, if needed, to
prevent their use in money laundering schemes. Many banks are engaged in the
business of issuing a variety of Electronic Cards that are used by customers
for buying goods and services, drawing cash from ATMs, and can be used for
electronic transfer of funds. Banks are required to ensure full compliance with
all KYC/AML/CFT guidelines issued from time to time, in respect of add-on/
supplementary cardholders also. Further, marketing of credit cards is generally
done through the services of agents. Banks should ensure that appropriate KYC
procedures are duly applied before issuing the cards to the customers. It is
also desirable that agents are also subjected to KYC measures.
2.17. Combating Financing of Terrorism
a. 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 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 lists of individuals
and entities as circulated by Reserve Bank. The UN Security Council has adopted
Resolutions 1988 (2011) and 1989 (2011) which have resulted in splitting of the
1267 Committee's Consolidated List into two separate lists, namely:
i) “Al-Qaida
Sanctions List”, which is
maintained by the 1267 / 1989 Committee.
This list shall include only the names of those individuals, groups,
undertakings and entities associated with Al-Qaida. The Updated
Al-Qaida
Sanctions List is available at http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml
ii) “1988
Sanctions List”, which is
maintained by the 1988 Committee. This list
consists of names previously included in Sections A (“Individuals associated
with the Taliban”) and B (“Entities and other groups and undertakings
associated with the Taliban”) of the Consolidated List. The
It may be noted that both “Al-Qaida Sanctions
List” and “1988 Sanctions List” are to be taken into account for the purpose of
implementation of Section 51A of the Unlawful Activities (Prevention) Act,
1967.
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 lists. 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.
2.18. 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 detailing the
procedure for implementation of Section 51A of the Unlawful Activities
(Prevention) Act, 1967 relating to the purposes of 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
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.
b) Banks are required to strictly follow the
procedure laid down in the UAPA Order dated August 27, 2009 (Annex II) and
ensure meticulous compliance to the Order issued by the Government.
c) On receipt of the list of individuals and
entities subject to UN sanctions (referred to as designated lists) from RBI,
banks should ensure expeditious and effective implementation of the procedure
prescribed under Section 51A of UAPA in regard to freezing/unfreezing of
financial assets of the designated individuals/entities enlisted in the UNSCRs
and especially, in regard to funds, financial assets or economic resources or
related services held in the form of bank accounts.
d) In terms of Para 4 of the Order, in regard to funds, financial assets or economic resources or related services held
in the form of bank accounts, the RBI would forward the designated lists to
the banks requiring them to:
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
with them.
ii)
In
case, the particulars
of any of
their customers match
with the
particulars of designated individuals/entities,
the banks 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, held
by such customer on their books to the Joint Secretary (IS.I), Ministry of Home
Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736.
The particulars apart from being sent by post should necessarily be conveyed on
e-mail.
iii) Banks shall also send by post, a copy of the
communication mentioned in (ii) above to the UAPA nodal officer of RBI, Chief
General Manager, Department of Banking Operations and Development, Central
Office, Reserve Bank of India, Anti Money Laundering Division, Central Office
Building, 13th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai - 400 001 and also
by fax at No.022-22701239. The particulars, apart from being sent by post/fax
should necessarily be conveyed on e-mail.
iv) Banks shall also send a copy of the
communication mentioned in (ii) above to the UAPA nodal officer of the state/UT
where the account is held as the case may be and to FIU-India.
v) In case, the match of any of the customers with
the particulars of designated individuals/entities is beyond doubt, the banks would
prevent designated persons from conducting
financial transactions, under intimation to Joint Secretary (IS.I), Ministry of
Home Affairs, at Fax No. 011-23092569 and also convey over telephone on
011-23092736. The particulars apart from being sent by post should necessarily
be conveyed on e-mail.
vi) Banks shall also file a Suspicious Transaction
Report (STR) with FIU-IND covering all transactions in the accounts covered by
paragraph (ii ) above, carried through or attempted, as per the prescribed
format.
e)
Freezing of financial assets
i) On receipt of the particulars as mentioned in
paragraph d(ii)) above, IS-I Division of MHA would cause a verification to be
conducted by the State Police and /or the Central Agencies so as to ensure that
the individuals/ entities identified by the banks are the ones listed as
designated individuals/entities and the funds, financial assets or economic
resources or related services , reported by banks are held by the designated
individuals/entities. This verification would be completed within a period not
exceeding five working days from the date of receipt of such particulars.
ii) 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 under intimation to
Reserve Bank of India and FIU-IND.
iii) The order shall take place without prior notice
to the designated individuals/entities.
f)
Implementation of requests received from foreign
countries under U.N. Security Council Resolution 1373 of 2001.
i) U.N.
Security Council Resolution
1373 obligates countries
to freeze without delay
the funds or other assets of persons
who commit, or attempt
to commit, terrorist
acts or participate
in or facilitate
the commission of terrorist acts; of entities or controlled directly or
indirectly
by such persons; and of persons and entities
acting on behalf of, or at the direction of such persons and entities,
including funds or other assets derived or generated from property owned or
controlled, directly or indirectly, by such persons and associated persons and
entities.
ii) To give effect to the requests of foreign
countries under U.N. Security Council Resolution 1373, the Ministry of External
Affairs shall examine the requests made by the foreign countries and forward it
electronically, with their comments, to the UAPA nodal officer for IS-I
Division for freezing of funds or other assets.
iii) The UAPA nodal officer of IS-I Division of MHA,
shall cause the request to be examined, within five working days so as to
satisfy itself that on the basis of applicable legal principles, the requested
designation is supported by reasonable grounds, or a reasonable basis, to suspect
or believe that the proposed designee is a terrorist, one who finances
terrorism or a terrorist organization, and upon his satisfaction, request would
be electronically forwarded to the nodal officers in RBI. The proposed
designee, as mentioned above would be treated as designated
individuals/entities.
iv) Upon receipt of the requests from the UAPA nodal
officer of IS-I Division, the list would be forwarded to banks and the
procedure as enumerated at paragraphs 2.18[(c), (d) and (e)] shall be followed.
v) The freezing orders shall take place without
prior notice to the designated persons involved.
g)
Procedure for unfreezing of funds, financial
assets or economic resources or related services of individuals/entities
inadvertently affected by the freezing mechanism upon verification that the
person or entity is not a designated person
Any individual or entity, if it has evidence to
prove that the freezing of funds, financial assets or economic resources or
related services, owned/held by them has been inadvertently frozen, they shall
move an application giving the requisite evidence, in writing, to the concerned
bank. The banks shall inform and forward a copy of the application together
with
full details of the asset frozen given by any
individual or entity informing of the funds, financial assets or economic
resources or related services have been frozen inadvertently, to the nodal
officer of IS-I Division of MHA as per the contact details given in paragraph
(d)(ii) above within two working days. The Joint Secretary (IS-I), MHA, being
the nodal officer for (IS-I) Division of MHA, shall cause such verification as
may be required on the basis of the evidence furnished by the individual/entity
and if he is satisfied, he shall pass an order, within fifteen working days,
unfreezing the funds, financial assets or economic resources or related
services, owned/held by such applicant under intimation to the concerned bank.
However, if it is not possible for any reason to pass an order unfreezing the
assets within fifteen working days, the nodal officer of IS-I Division shall
inform the applicant.
h) Communication
of Orders under Section 51A of Unlawful Activities (Prevention) Act.
All Orders under
Section 51A of
Unlawful Activities (Prevention)
Act,
relating
to funds, financial assets or economic resources or related services, would be
communicated to all banks through RBI.
2.19. Jurisdictions
that do not or insufficiently apply the FATF Recommendations
a) Banks 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, (latest as on June 30, 2014, being our circular DBOD.
AML.No.15245/14.01.001/2013-14 dated March 05, 2014) banks should also consider
publicly available information for identifying countries, which do not or
insufficiently apply the FATF Recommendations. It is clarified that banks
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 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.
2.20. Correspondent Banking and Shell Bank
a) Correspondent banking is the provision of
banking services by one bank (the “correspondent bank”) to another bank (the
“respondent bank”). These services may include cash/funds management,
international wire transfers, drawing arrangements for demand drafts and mail
transfers, payable-through-accounts, cheques clearing etc. Banks should gather
sufficient information to understand fully the nature of the business of the
correspondent/respondent bank. Information on the other bank’s management,
major business activities, level of AML/CFT compliance, purpose of opening the
account, identity of any third party entities that will use the correspondent
banking services, and regulatory/supervisory framework in the
correspondent's/respondent’s country may be of special relevance. Similarly,
banks should try to ascertain from publicly available information whether the
other bank has been subject to any money laundering or terrorist financing
investigation or regulatory action. While it is desirable that such
relationships should be established only with the approval of the Board, in
case the Boards of some banks wish to delegate the power to an administrative
authority, they may delegate the power to a committee headed by the
Chairman/CEO of the bank while laying down clear parameters for approving such
relationships. Proposals approved by the Committee should invariably be put up
to the Board at its next meeting for post facto approval. The responsibilities
of each bank with whom correspondent banking relationship is established should
be clearly documented. In the case
of payable-through-accounts, the correspondent
bank should be satisfied that the respondent bank has verified the identity of
the customers having direct access to the accounts and is undertaking ongoing
'due diligence' on them. The correspondent bank should also ensure that the
respondent bank is able to provide the relevant customer identification data
immediately on request.
b)
Correspondent relationship with a “Shell Bank”
Banks should refuse to enter into a
correspondent relationship with a “shell
bank” (i.e. a bank which is
incorporated in a country where it has no physical presence and is unaffiliated
to any regulated financial group). Shell banks are not permitted to operate in
India. Banks should not enter into relationship with shell banks and before
establishing correspondent relationship with any foreign institution, banks
should take appropriate measures to satisfy themselves that the foreign
respondent institution does not permit its accounts to be used by shell banks.
Banks should be extremely cautious while continuing relationships with
correspondent banks located in countries with poor KYC standards and countries
identified as 'non-cooperative' in the fight against money laundering and
terrorist financing. Banks should ensure that their respondent banks have anti
money laundering policies and procedures in place and apply enhanced 'due
diligence' procedures for transactions carried out through the correspondent
accounts.
2.21. Applicability to branches and subsidiaries
outside India
The guidelines contained in this master circular
shall apply to the branches and majority owned subsidiaries located abroad,
especially, in countries which do not or insufficiently apply the FATF
Recommendations, to the extent local laws permit. When local applicable laws
and regulations prohibit implementation of these guidelines, the same should be
brought to the notice of Reserve Bank. 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.
Banks use wire transfers as an expeditious
method for transferring funds between bank accounts. Wire transfers include
transactions occurring within the national boundaries of a country or from one
country to another. As wire transfers do not involve actual movement of
currency, they are considered as rapid and secure method for transferring value
from one location to another.
a)
The salient features of a wire transfer
transaction are as under:
i) Wire transfer is a transaction carried out on
behalf of an originator person (both natural and legal) through a bank by
electronic means with a view to making an amount of money available to a beneficiary
person at a bank. The originator and the beneficiary may be the same person.
ii) Cross-border transfer means any wire transfer
where the originator and the beneficiary bank or financial institutions are
located in different countries. It may include any chain of wire transfers that
has at least one cross-border element.
iii) Domestic wire transfer means any wire transfer
where the originator and receiver are located in the same country. It may also
include a chain of wire transfers that takes place entirely within the borders
of a single country even though the system used to effect the wire transfer may
be located in another country.
iv) The originator is the account holder, or where
there is no account, the person (natural or legal) that places the order with
the bank to perform the wire transfer.
b) Wire transfer is an instantaneous and most
preferred route for transfer of funds across the globe and hence, there is a
need for preventing terrorists and other criminals from having unfettered
access to wire transfers for moving their funds and for detecting any misuse
when it occurs. This can be achieved if basic information on the originator of
wire transfers is immediately available to appropriate law enforcement and/or
prosecutorial authorities in order to assist them in detecting, investigating,
prosecuting terrorists or other criminals and
tracing their assets. The information can be
used by Financial Intelligence Unit - India (FIU-IND) for analysing suspicious
or unusual activity and disseminating it as necessary. The originator
information can also be put to use by the beneficiary bank to facilitate
identification and reporting of suspicious transactions to FIU-IND. Owing to
the potential terrorist financing threat posed by small wire transfers, the
objective is to be in a position to trace all wire transfers with minimum
threshold limits. Accordingly, banks must ensure that all wire transfers are
accompanied by the following information:
1. Cross-border wire transfers
i)
All
cross-border wire transfers must be accompanied by accurate and meaningful
originator information.
ii) Information accompanying cross-border wire
transfers must contain the name and address of the originator and where an
account exists, the number of that account. In the absence of an account, a
unique reference number, as prevalent in the country concerned, must be
included.
iii) Where several individual transfers from a single
originator are bundled in a batch file for transmission to beneficiaries in
another country, they may be exempted from including full originator
information, provided they include the originator’s account number or unique
reference number as at (ii) above.
2. Domestic wire transfers
i)
Information
accompanying all domestic wire transfers of Rs.50000/- (Rupees Fifty Thousand)
and above must include complete originator information i.e. name, address and
account number etc., unless full originator information can be made available
to the beneficiary bank by other means.
ii) If a bank has reason to believe that a customer
is intentionally structuring wire transfer to below Rs. 50000/- (Rupees Fifty
Thousand) to several beneficiaries in order to avoid reporting or
monitoring, the bank must insist on complete
customer identification before effecting the transfer. In case of
non-cooperation from the customer, efforts should be made to establish his
identity and Suspicious Transaction Report (STR) should be made to FIU-IND.
iii) When a credit or debit card is used to effect
money transfer, necessary information as (i) above should be included in the
message.
c)
Exemptions
Interbank transfers and settlements where both
the originator and beneficiary are banks or financial institutions would be
exempted from the above requirements.
d)
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
ten 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 ten 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.
2.23. Designated Director and Principle Officer
a)
Designated Director
Banks are required to nominate a Director on
their Boards as “Designated Director”, as per the provisions of the Prevention
of Money Laundering (Maintenance of Records) Rules, 2005 (Rules), to ensure
overall compliance with the obligations under the Act and Rules. The name,
designation and address of the Designated Director is to be communicated to the
Director, Financial Intelligence Unit – India (FIU-IND).
b)
Principal Officer
Banks should appoint a senior management officer
to be designated as Principal Officer. Banks should ensure that the Principal Officer
is able to act independently and report directly to the senior management or to
the Board of Directors. Principal Officer shall be located at the
head/corporate office of the bank and shall be responsible for monitoring and
reporting of all transactions and sharing of information as required under the
law. He will maintain close liaison with enforcement agencies, banks and any
other institution which are involved in the fight against money laundering and
combating financing of terrorism
Further, the role and responsibilities of the
Principal Officer should include overseeing and ensuring overall compliance
with regulatory guidelines on KYC/AML/CFT issued from time to time and
obligations under the Prevention of Money Laundering Act, 2002, rules and regulations
made thereunder, as amended form time to time. The Principal Officer will also
be responsible for timely submission of CTR, STR and reporting of counterfeit
notes and all transactions involving
receipts by non-profit organisations of value
more than Rupees Ten Lakh or its equivalent in foreign currency to FIU-IND.With
a view to enabling the Principal Officer to discharge his responsibilities
effectively, the Principal Officer and other appropriate staff should have
timely access to customer identification data and other CDD information,
transaction records and other relevant information.
2.24. Maintenance
of records of transactions/Information to be preserved/Maintenance and
preservation of records/Cash and Suspicious transactions reporting to Financial
Intelligence Unit- India (FIU-IND)
Section 12 of the PMLA, 2002 casts certain
obligations on the banking companies in regard to preservation and reporting of
customer account information. Banks are, therefore, advised to go through the
provisions of PMLA, 2002 and the Rules notified there under and take all steps
considered necessary to ensure compliance with the requirements of Section 12
of the Act ibid.
a) Maintenance of records of
transactions
Banks
should introduce a system of maintaining proper record of transactions
prescribed under Rule 3 of 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)All series of cash transactions integrally
connected to each other which have been valued below Rupees Ten Lakh or its
equivalent in foreign currency where such series of transactions have taken
place within a month and the aggregate value of such transactions exceeds
Rupees Ten Lakh;
Explanation - Integrally
connected cash transactions referred to at (ii) above
The
following transactions have taken place in a branch during the month of April
2008:
Date
|
Mode
|
Dr (in Rs.)
|
Cr (in Rs.)
|
Balance (in
|
Rs.) BF -
|
||||
8,00,000.00
|
||||
02/04/2008
|
Cash
|
5,00,000.00
|
3,00,000.00
|
6,00,000.00
|
07/04/2008
|
Cash
|
40,000.00
|
2,00,000.00
|
7,60,000.00
|
08/04/2008
|
Cash
|
4,70,000.00
|
1,00,000.00
|
3,90,000.00
|
Monthly
|
10,10,000.00
|
6,00,000.00
|
summation
iii) As per above clarification, the debit
transactions in the above example are integrally connected cash transactions
because total cash debits during the calendar month exceeds Rs. 10 lakhs
iv) 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,sub-rule (1) clause (BA) of PML Rules]
v) 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
vi) All suspicious transactions whether or not made
in cash and by way of as mentioned in the Rules.
vii) All the credit transactions in the above example
would not be treated as integrally connected, as the sum total of the credit
transactions during the month does not exceed Rs.10 lakh and hence credit
transaction dated 02, 07 & 08/04/2008 should not be reported by banks.
b) Information to be preserved
Banks are required to maintain all necessary
information in respect of transactions referred to in PML Rule 3 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.
c) Maintenance and
Preservation of Records
i) Banks are required to maintain the records
containing information of all transactions including the records of
transactions detailed in Rule 3 above. Banks should take appropriate steps to
evolve a system for
proper maintenance and preservation of account
information in a manner that allows data to be retrieved easily and quickly whenever
required or when requested by the competent authorities. Further, in terms of
PML Amemdment Act 2012 notified on February 15, 2013, banks should maintain for
at least five years from the date of transaction between the bank 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.
ii) Banks should ensure that records pertaining to
the identification of the customer and his 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
records and transaction data should be made available to the competent
authorities upon request.
iii) In paragraph 2.13 of this Master Circular, banks
have been advised to pay special attention to all complex, unusual large
transactions and all unusual patterns of transactions, which have no apparent
economic or visible lawful purpose. It is further clarified that the background
including all documents/office records/memorandums pertaining to such
transactions and purpose thereof should, as far as possible, be examined and
the findings at branch as well as Principal Officer level should be properly
recorded. Such records and related documents should be made available to help
auditors in their day-to-day work relating to scrutiny of transactions and also
to Reserve Bank/other relevant authorities. These records are required to be
preserved for ten years as is required under PMLA, 2002.
d) Reporting to Financial
Intelligence Unit - India
i) In terms of the PMLA Rules, banks are required
to report information relating to cash and suspicious transactions and all transactions
involving receipts by non-profit organisations
of value more than rupees ten lakh or its equivalent in foreign currency to the
Director, Financial Intelligence Unit-India (FIU-IND) in respect of
transactions referred to in Rule 3 at the following address:
Director, FIU-IND,
Financial Intelligence Unit-India,
6th Floor, Hotel Samrat,
Chanakyapuri,
New Delhi -110021
Explanation:
Government of India Notification dated November
12, 2009- Rule 2 sub-rule (1) clause
(ca) defines Non-Profit Organization (NPO). 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
under section 25 of the Companies Act, 1956.
ii) The earlier prescribed multiple data files
reporting format has been replaced by a new single XML file format. 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 OM issued on Reporting Formats
under Project FINnet dated 31st March,2011 by FIU containing all relevant
details are available on FIU’s website. Banks In this regard, a reference is
also invited to
circulars DBOD.AML.BC.No.39/14.01.001/2012-13
and DBOD.AML.BC.No.49/14.01.001/2012-13 dated September 7, 2012 and October 11,
2012 respectively. Accordingly, banks should carefully go through all the
reporting formats prescribed by FIU-IND. Accordingly, banks should carefully go
through all the reporting formats prescribed by FIU-IND.
iii) FIU-IND have placed on their website editable
electronic utilities to enable banks to file electronic CTR/STR who 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 banks,
where all the branches are not fully computerized, the Principal Officer of the
bank 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 instructions contained in paragraph
2.3(b) of this Master Circular, banks are required to prepare a profile for
each customer based on risk categorisation. Further, vide paragraph 2.13(d),
the need for periodical review of risk categorisation has been emphasized. It
is, therefore, reiterated that banks, as a part of transaction monitoring mechanism,
are required to put in place an appropriate software application to throw
alerts when the transactions are inconsistent with risk categorization and
updated profile of customers. It is needless to add that a robust software
throwing alerts is essential for effective identification and reporting of
suspicious transaction.
2.25. Various Reporting Formats
a)
Cash Transaction Report (CTR)
While detailed instructions for filing all types
of reports are given in the instructions part of the related formats, banks
should scrupulously adhere to the following:
i) The Cash Transaction Report (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 (not on fortnightly basis)
and banks should ensure to submit CTR for every month to FIU-IND within the
prescribed time schedule.
ii)
All cash
transactions, where forged or counterfeit Indian currency notes have been used
as genuine should be reported by the Principal Officer to FIU-IND in the
specified format not later than seven working days from the date of occurrence
of such transactions (Counterfeit Currency Report – CCR). 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.
iii) While filing CTR, details of individual
transactions below Rupees Fifty thousand need not be furnished.
iv) 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.
v) A summary of cash transaction report 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-India.
vi) In case of Cash Transaction Reports (CTR)
compiled centrally by banks for the branches having Core Banking Solution (CBS)
at their central data centre level, banks may generate centralised Cash
Transaction Reports (CTR) in respect of branches under core banking solution at
one point for onward transmission to FIU-IND, provided:
a)
The CTR is to be generated in the format
prescribed by FIU-IND;
b) A copy of the monthly CTR submitted on its
behalf to FIU-India is available at the concerned branch for production to
auditors/inspectors, when asked for; and
c) The
instruction on ‘Maintenance
of records of
transactions’; ‘Information to be preserved’ and ‘Maintenance and Preservation of records’ as
contained above in this Master Circular at Para 2.24
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.
b)
Suspicious Transaction Reports (STR)
i) While determining suspicious transactions, banks
should be guided by definition of suspicious transaction contained in PMLA
Rules as amended from time to time.
ii) 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 should report all such attempted
transactions in STRs, even if not completed by customers, irrespective of the
amount of the transaction.
iii) Banks should make STRs if they have reasonable
ground to believe that the transaction involve proceeds of crime generally
irrespective of the amount of transaction and/or the threshold limit envisaged
for predicate offences in part B of Schedule of PMLA, 2002.
iv) 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.
v) In the context of creating KYC/AML awareness
among the staff and for generating alerts for suspicious transactions, banks
may consider the indicative list of suspicious activities contained in Annex-E
of the 'IBA's
Guidance Note for Banks, January 2012’.
vi)
Banks
should not put any restrictions on operations in the accounts where an STR has
been made. Banks 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.
c)
Non-Profit Organisation
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.
d)
Cross-border Wire Transfer
Cross-border Wire Transfer Report (CWTR) is
required to be filed 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.
2.26. Customer Education/Employee's Training/Employee's
Hiring
a)
Customer Education
Implementation of KYC procedures requires banks
to demand certain information from customers which may be of personal nature or
which has hitherto never been called for. This can sometimes lead to a lot of questioning
by the customer as to the motive and purpose of collecting such information.
There is, therefore, a need for banks to prepare specific literature/ pamphlets
etc. so as to educate the customer of the objectives of the KYC programme. The
front desk staff needs to be specially trained to handle such situations while
dealing with customers.
b)
Employees’ Training
Banks must have an ongoing employee training
programme so that the members of the staff are adequately trained in KYC
procedures. Training requirements should have different focuses for frontline
staff, compliance staff and staff dealing with new customers. It is crucial
that all those concerned fully understand the rationale behind the KYC policies
and implement them consistently.
c)
Hiring of Employees
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
is put in place by banks as an integral part of their recruitment/hiring
process of
personnel.
Annex- I
Customer
Identification Procedure
Documents that
may be obtained from customers
Features
|
Documents
|
Accounts of individuals
(i) Passport (ii)
PAN card (iii) Voter’s
- Proof of Identity Identity Card (iv) Driving
License (v)Job Card issued by NREGA duly signed by an officer of the State Govt
(vi) The letter issued by the Unique Identification Authority of India ( UIDAI)
containing details of name, address and Aadhaar number (vii) Identity card
(subject to the bank’s satisfaction) (viii) Letter from a recognized public
authority or public servant verifying the identity and residence of the
customer to the satisfaction of bank
-
Proof of Address
|
Any one of
|
the documents from
|
the
|
|
above submitted as
proof of identity
|
||||
which contains an address or any of
|
||||
the following:
|
||||
(i) Telephone bill
(ii) Bank account
|
||||
statement (iii) Letter
from any
|
||||
recognized
|
public
|
authority
|
(iv)
|
|
Electricity bill (v) Ration card (vi) Letter
|
||||
from employer (subject to satisfaction
|
||||
of the bank)
((vii) A rent
agreement
|
||||
indicating the address of the customer
|
||||
duly registered with State Government
|
||||||||
or similar registration authority.
|
||||||||
Accounts of companies
|
(i) Certificate of
incorporation and
|
|||||||
- Name of the
company
|
Memorandum & Articles of Association
|
|||||||
- Principal
place of business
|
(ii) Resolution of the Board of Directors
|
|||||||
- Mailing
|
address of
|
the
|
to open an account and identification of
|
|||||
company
|
those who have
authority to operate
|
|||||||
-
|
Telephone/Fax Number
|
the account (iii)
Power of Attorney
|
||||||
granted to its
managers, officers or
|
||||||||
employees to transact business on its
|
||||||||
behalf (iv) Copy of PAN allotment letter
|
||||||||
(v) Copy of the telephone bill
|
||||||||
Accounts of partnership
firms
|
(i) Registration certificate, if registered
|
|||||||
-
|
Legal name
|
(ii) Partnership deed
(iii) Power of
|
||||||
-
|
Address
|
Attorney granted to
a partner or
an
|
||||||
-
|
Names of all
partners and
|
employee of the
firm to transact
|
||||||
their addresses
|
business on its behalf (iv) Any officially
|
|||||||
-
|
Telephone
|
numbers of
|
the
|
valid document identifying the partners
|
||||
firm and partners
|
and the persons holding the Power of
|
|||||||
Attorney and their
addresses (v)
|
||||||||
Telephone bill in
the name of
|
||||||||
firm/partners
|
||||||||
Accounts of trusts &
foundations
|
(i) Certificate of
registration, if
|
|||||||
-
|
Names
|
of
|
trustees,
settlors,
|
registered (ii) Power
of Attorney
|
||||
beneficiaries and signatories
|
granted to transact
business on its
|
|||||||
behalf (iii) Any officially valid document
|
||||||||
- Names and
addresses of the
|
to identify the
trustees, settlors,
|
|||||||
founder, the
|
beneficiaries and those holding Power
|
|||||||
managers/directors and the
|
of
|
Attorney,
|
founders/managers/
|
|||||
beneficiaries
|
directors and their
addresses (iv)
|
|||||||
Resolution of the managing body of the
|
||||||||
-
|
Telephone/fax numbers
|
foundation/association (v) Telephone
|
||||||
bill
|
||||||||
Accounts
|
of
|
Proprietorship
|
·
|
Registration
|
certificate
|
(in the
|
||
Concerns
|
case of a registered concern)
|
|||||||
Proof of the
name, address and
|
·
|
Certificate/licence issued by the
|
||||||
activity of the concern
|
Municipal
|
authorities
|
under
|
|||||
Shop & Establishment Act,
|
||||||||
· Sales and income tax returns
|
||||||||
·
|
CST/VAT certificate
|
|||||||
· Certificate/registration document issued by
Sales Tax/Service Tax/Professional Tax authorities
·
Licenceissuedbythe
Registering authority like Certificate of
Practice issued by
Institute of Chartered Accountants of India,
Institute of Cost Accountants of India, Institute of Company Secretaries of
India, Indian Medical Council, Food and Drug Control Authorities,
registration/licensing document issued in the name of the proprietary concern
by the Central Government or State
Government Authority/ Department, etc. Banks may
also accept IEC (Importer Exporter Code) issued to the proprietary concern by
the office of DGFT as an identity document for opening of the bank account etc.
· The complete Income Tax return (not just the
acknowledgement) in the name of the sole proprietor where the firm's income is
reflected, duly authenticated/ acknowledged by the Income Tax Authorities.
· Utility bills such as electricity, water, and
landline telephone bills in the name of the proprietary concern.
Any two of the above documents would
suffice. These documents should be in
the name of the proprietary concern.
Annex -II
File
No.17015/10/2002-IS-VI
Government of
India
Ministry of
Home Affairs
Internal
Security-I Division
New Delhi, dated 27th August, 2009
ORDER
Subject : Procedure for implementation of
Section 51A of the Unlawful Activities (Prevention)Act, 1967
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",
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:-
Appointment and
Communication of details of UAPA nodal officers
2.
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 011-23092736(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.
Communication of the list
of designated individuals/entities
3.
As regards communication of the list of
designated individuals/entities-
(i)
The Ministry of
External Affairs shall update the list of individuals and entities subject to
UN sanction measures on a regular basis. On any revision, the Ministry of
External Affairs would electronically forward
this
list to the Nodal Officers in Regulators, FIU-IND, IS-I Division and
Foreigners' Division in MHA.
(ii)
The Regulators
would forward the list mentioned in (i) above (referred to as designated lists)
to the banks, stock exchanges/depositories, intermediaries regulated by SEBI
and insurance companies respectively.
(iii)
The IS-I
Division of MHA would forward the designated lists to the UAPA nodal officer of
all States and UTs.
(iv) The Foreigners Division of MHA would forward the
designated lists to the immigration authorities and security agencies.
Regarding
funds, financial assets or economic resources or related services held in the
form of bank accounts, stocks or insurance policies etc.
4.
As regards
funds, financial assets or economic resources or related services held in the
form of bank accounts, stocks or insurance policies etc., the Regulators would
forward the designated lists to the banks, stock exchanges/depositories,
intermediaries regulated by SEBI and insurance companies respectively. The RBI,
SEBI and IRDA would issue necessary guidelines to banks, stock
exchanges/depositories, intermediaries regulated by SEBI and insurance
companies requiring them to -
(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. held by such
customer on their books to the Joint Secretary (IS.I), Ministry of Home
Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736.
The particulars apart from being sent by post should necessarily be conveyed on
e-mail.
(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, at Fax No.
011-23092569 and also convey over telephone on 011-23092736. The particulars
apart from being sent by post should necessarily be conveyed on e-mail.
(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 covered by paragraph (ii) above ,
carried through or attempted, as per the prescribed format.
5.
On receipt of
the particulars referred to in paragraph 3(ii) above, IS-I Division of MHA
would cause a verification to be conducted by the State Police and/or the
Central Agencies so as to ensure that the individuals/entities identified by
the banks, stock exchanges/depositories, intermediaries regulated by SEBI and
Insurance Companies are the ones listed as designated individuals/entities and
the funds, financial assets or economic resources or related services, reported
by banks, stock exchanges/depositories, intermediaries regulated by SEBI and
insurance companies are held by the designated individuals/entities. This
verification would be completed within a period not exceeding 5 working days
from the date of receipt of such particulars.
6.
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. The UAPA nodal officer of IS-I Division of MHA shall
also forward a copy thereof to all the Principal Secretary/Secretary, Home
Department of the States or UTs, so that any individual or entity may be
prohibited from making any funds, financial assets or economic assets or
economic resources or related services available for the benefit of the
designated individuals/entities or any other person engaged in or suspected to
be engaged in terrorism. The UAPA nodal officer of IS-I Division of MHA shall
also forward a copy of the order under Section 51A, to all Directors General of
Police/Commissioners of Police of all states/UTs for initiating action under
the provisions of Unlawful Activities (Prevention) Act.
The order shall take place without prior notice
to the designated individuals/entities.
Regarding financial assets or economic resources
of the nature of immovable properties.
7.
IS-I Division
of MHA would electronically forward the designated lists to the UAPA nodal
officer of all States and UTs with the request to have the names of the
designated individuals/entities, on the given parameters, verified from the
records of the office of the Registrar performing the work of registration of
immovable properties in their respective jurisdiction.
8.
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 at Fax
No.011-23092569 and also convey over telephone on 011-23092736. The particulars
apart from being sent by post should necessarily be conveyed on e-mail.
9.
The UAPA nodal
officer of the State/UT may cause such inquiry to be conducted by the State
Police so as to ensure that the particulars sent by the Registrar performing
the work of registering immovable properties are indeed of these designated
individuals/entities. This verification would be completed within a maximum of
5 working days and should be conveyed within 24 hours of the verification, if
it matches with the particulars of the designated individual/entity to Joint
Secretary(IS-I), Ministry of Home Affairs at the Fax telephone numbers and also
on the e-mail id given below.
10.
A copy of this
reference should be sent to the Joint Secretary (IS.I), Ministry of Home
Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736.
The particulars apart from being sent by post would necessarily be conveyed on e-mail.
MHA may have the
verification also conducted by the Central Agencies. This verification would be
completed within a maximum of 5 working days.
11.
In case, the
results of the verification indicate that the particulars match with those of
designated individuals/entities, an order under Section 51A of the UAPA would
be issued within 24 hours, by the nodal officer of IS-I Division of MHA and
conveyed to the concerned Registrar performing the work of registering immovable
properties and to FIU-IND under intimation to the concerned UAPA nodal officer
of the State/UT.
The order shall take place without prior notice,
to the designated individuals/entities.
12.
Further, the
UAPA nodal officer of the State/UT shall cause to monitor the
transactions/accounts of the designated individual/entity so as to 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. The UAPA nodal officer of the State/UT
shall upon coming to his notice, transactions and attempts by third party
immediately bring to the notice of the DGP/Commissioner of Police of the
State/UT for also initiating action under the provisions of Unlawful Activities
(Prevention) Act.
Implementation of requests received from foreign
countries under U.N. Security Council Resolution 1373 of 2001.
13.
U.N. Security
Council Resolution 1373 obligates countries to freeze without delay the funds
or other assets of persons who commit, or attempt to commit, terrorist acts or
participate in or facilitate the commission of terrorist acts; of entities
owned or controlled directly or indirectly by such persons; and of persons and
entities acting on behalf of, or at the direction of such persons and entities,
including funds or other assets derived or generated from property owned or
controlled, directly or indirectly, by such persons and associated persons and
entities. Each individual country has the authority to designate the persons
and entities that should have their funds or other assets frozen. Additionally,
to ensure that effective cooperation is developed among countries, countries
should examine and give effect to, if appropriate, the actions initiated under
the freezing mechanisms of other countries.
14.
To give effect
to the requests of foreign countries under U.N. Security Council Resolution 1373,
the Ministry of External Affairs shall examine the requests made by the foreign
countries and forward it electronically, with their comments, to the UAPA nodal
officer for IS-I Division for freezing of funds or other assets.
15.
The UAPA nodal
officer of IS-I Division of MHA, shall cause the request to be examined, within
5 working days so as to satisfy itself that on the basis of applicable legal
principles, the requested designation is supported by reasonable grounds, or a
reasonable basis, to suspect or believe that the proposed designee is a
terrorist, one who finances terrorism or a terrorist
organization, and upon his satisfaction, request would be electronically
forwarded to the nodal officers in Regulators. FIU-IND and to the nodal
officers of the States/UTs. The proposed designee, as mentioned above would be
treated as designated individuals/entities.
16.
Upon receipt of
the requests by these nodal officers from the UAPA nodal officer of IS-I
Division, the procedure as enumerated at paragraphs 4 to 12 above shall be
followed.
The freezing orders shall take place without
prior notice to the designated persons involved.
Procedure
for unfreezing of funds, financial assets or economic resources or related
services of individuals/entities inadvertently affected by the freezing
mechanism upon verification that the person or entity is not a designated
person
17.
Any individual
or entity, if it has evidence to prove that the freezing of funds, financial
assets or economic resources or related services, owned/held by them has been
inadvertently frozen, they shall move an application giving the requisite
evidence, in writing, to the concerned bank, stock exchanges/depositories,
intermediaries regulated by SEBI, insurance companies, Registrar of Immovable
Properties and the State/UT nodal officers.
18.
The banks stock
exchanges/depositories, intermediaries regulated by SEBI, insurance companies,
Registrar of Immovable Properties and the State/UT nodal officers shall inform
and forward a copy of the application together with full details of the asset
frozen given by any individual or entity informing of the funds, financial
assets or economic resources or related services have been frozen
inadvertently, to the nodal officer of IS-I Division of MHA as per the contact
details given in paragraph 4(ii) above within two working days.
19.
The Joint
Secretary (IS-I), MHA, being the nodal officer for (IS-I) Division of MHA,
shall cause such verification as may be required on the basis of the evidence
furnished by the individual/entity and if he is satisfied, he shall pass an
order, within 15 working days, unfreezing the funds, financial assets or
economic resources or related services, owned/held by such applicant under
intimation to the concerned bank, stock exchanges/depositories, intermediaries
regulated by SEBI, insurance company and the nodal officers of States/UTs.
However, if it is not possible for any reason to pass an order unfreezing the
assets within fifteen working days, the nodal officer of IS-I Division shall
inform the applicant.
Communication of Orders under section 51A of
Unlawful Activities (Prevention) Act.
20.
All Orders
under section 51A of Unlawful Activities (Prevention) Act, relating to funds,
financial assets or economic resources or related services, would be
communicated to all banks, depositories/stock exchanges, intermediaries
regulated by SEBI, insurance companies through respective Regulators, and to
all the Registrars performing the work of registering immovable properties,
through the State/UT nodal officer by IS-I Division of MHA.
Regarding prevention of
entry into or transit through India
21. As regards prevention of entry into or transit
through India of the designated individuals, the Foreigners Division of MHA,
shall forward the designated lists to the immigration authorities and security
agencies with a request to prevent the entry into or the transit through India.
The order shall take place without prior notice to the designated
individuals/entities.
22.
The immigration
authorities shall ensure strict compliance of the Orders and also communicate
the details of entry or transit through India of the designated individuals as
prevented by them to the Foreigners' Division of MHA.
Procedure for communication of compliance of
action taken under Section 51A.
23.
The nodal
officers of IS-I Division and Foreigners Division of MHA shall furnish the
details of funds, financial assets or economic resources or related services of
designated individuals/entities frozen by an order, and details of the
individuals whose entry into India or transit through India was prevented,
respectively, to the Ministry of External Affairs for onward communication to
the United Nations.
24.
All concerned are requested to ensure strict
compliance of this order.
(D .Diptivilasa)
Joint Secretary to Government of India
Annex - III
Government of India
Ministry of Finance
(Department of Revenue)
Notification
New Delhi, the 16th December 2010
GSR ------ (E) – In exercise of
the powers conferred by sub-section (1)
read with clauses (h) (i), (j) and (k) of
sub-section (2) of Section 73 of the
Prevention of Money-laundering Act, 2002 (15 of
2003), the Central Government hereby makes the following amendments to the
Prevention
of Money-laundering (Maintenance of Records of the Nature and Value of
Transactions, the Procedure and Manner of Maintaining and Time for
Furnishing Information and Verification and
Maintenance of Records of the Identity of the Clients of the Banking Companies,
Financial Institutions and Intermediaries) Rules, 2005, namely::-
1.
(1)These
rules may be
called the Prevention
of Money-
laundering
(Maintenance of Records
of the Nature
and Value of
Transactions,
the Procedure and Manner of Maintaining and Time for Furnishing Information and
Verification and Maintenance of Records of the Identity of the Clients of the
Banking Companies, Financial
Institutions and Intermediaries) Third Amendment
Rules, 2010.
(2) They shall come into force on the date of their
publication in the Official Gazette.
2.
In the
Prevention of Money-laundering (Maintenance of Records of the Nature and Value
of Transactions, the Procedure and Manner of
Maintaining and Time for Furnishing Information
and Verification and Maintenance of Records of the Identity of the Clients of
the Banking
Companies, Financial Institutions and Intermediaries) Rules, 2005, -
(a) in rule 2,-
(i) after clause (b), the following clause shall be inserted, namely:-
“(bb) “Designated Officer” means any officer or
a class of officers authorized by a banking company, either by name or by
designation, for the purpose of opening small accounts”.
(ii) in clause (d), for the words
“the Election Commission of India or
any other document as may be required by the
banking company or financial institution or intermediary”, the words “Election
Commission of India, job card issued by NREGA duly signed by an officer of the
State Government, the letter issued by the Unique Identification Authority of
India containing details of name, address and Aadhaar number or any other
document as notified by the Central Government in consultation with the Reserve
Bank of India or any other document as may be required by the banking
companies, or financial institution or intermediary” shall be substituted;
(iii) after clause (fa), the following clause shall be inserted,
namely:-
“(fb)
“small account” means a savings account in a banking company where-
(i)
the aggregate
of all credits in a financial year does not exceed rupees one lakh,
(ii)
the aggregate of all withdrawals and transfers
in a month does not exceed rupees ten thousand, and;
(iii)
the balance at any point of time does not exceed
rupees fifty thousand”.
(b)
In rule 9,
after sub-rule (2), the following sub-rule shall be inserted, namely:-
“(2A) Notwithstanding anything contained in
sub-rule (2), an individual who desires to open a small account in a banking
company may be allowed to open such an account on production of a self-attested
photograph and affixation of signature or thumb print, as the case may be, on
the form for opening the account.
Provided that –
(i)
the designated
officer of the banking company, while opening the small account, certifies
under his signature that the person opening the account has affixed his
signature or thumb print, as the case may be, in his presence;
(ii)
a small account
shall be opened only at Core Banking Solution linked banking company branches
or in a branch where it is possible to manually monitor and ensure that foreign
remittances are not credited to a small account and that the stipulated limits
on monthly and annual aggregate of transactions and balance in such accounts
are not breached, before a transaction is allowed to take place;
(iii) a small account shall remain operational
initially for a period of twelve months, and thereafter for a further period of
twelve months if the holder of such an account provides evidence before the
banking company of having applied for any of the officially valid documents
within twelve months of the opening of the said account, with the entire
relaxation provisions to be reviewed in respect of the said account after
twenty four months.
(iv) a small account shall be monitored and when
there is suspicion of money laundering or financing of terrorism or other high
risk scenarios, the identity of client shall be established through the
production of officially valid documents, as referred to in sub rule ( 2) of
rule 9"; and
(v)
foreign
remittance shall not be allowed to be credited into a small account unless the
identity of the client is fully established through the production of
officially valid documents, as referred to in sub-rule (2) of rule 9.”
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