RBI Circular No: RBI/2012-13/55 (02-Jul-12) Master Circular on Know Your Customer (KYC) Norms/Anti-Money Laundering (AML) Measures/Combating of Financing of Terrorism (CFT) / Obligations of banks under Prevention of Money Laundering Act (PMLA), 2002
UBD.BPD. (PCB).MC.No. 16/12.05.001/2012-13
Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Madam/Dear Sir,
Please refer to our Master Circular UBD.BPD. (PCB).MC No. 16/ 12.05.001/2011-12 dated July 1, 2011 on the captioned subject (available at RBI website www.rbi.org.in). The enclosed Master Circular consolidates and updates all the instructions / guidelines on the subject issued up to June 30, 2012 and mentioned in the Appendix.
Yours faithfully,
A. Udgata
Chief General Manager-in-Charge
Encl: As above
Know Your Customer (KYC) Norms/Anti-Money Laundering (AML) Measures/Combating of Financing of Terrorism (CFT) / Obligations of banks under Prevention of Money Laundering Act (PMLA), 2002
1. Introduction
For the purpose of KYC policy, a ''Customer'' is defined as:
2. Guidelines
2.1 General
2.2 KYC Policy
Banks should frame their KYC policies incorporating the following four key elements:
Customer Acceptance Policy;
Customer Identification Procedures;
Monitoring of Transactions; and
Risk Management.
2.3 Customer Acceptance Policy (CAP)
No account is opened in anonymous or fictitious/benami name(s);
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;
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;
Not to open an account or close an existing 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. 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;
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
2.4 Customer Identification Procedure (CIP)
(e) 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.
2.5 Customer Identification Requirements -- Indicative Guidelines
(i) Trust/Nominee or Fiduciary Accounts
(ii) Accounts of companies and firms
(i) Identity as also the address proof of the proprietor, such as passport, PAN card, Voter ID card, Driving Licence, Ration Card with photo, etc. -- any one of the document is obtained.
(ii) 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 and Establishment act, sales and income tax returns, CST / VAT certificate, Licence issued by the registering authority like Certificate of Practice issued by the Institute of Chartered Accountants of India, Institute of Companies Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, any certificate / registration document issued by Sales Tax / Service Tax / Professional Tax authorities, etc. any two of the documents are to be obtained. These documents should be in the name of the proprietary concern. Further, 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 are also included in the indicative list of required documents for opening accounts of proprietary concerns.
(iii) Client accounts opened by professional intermediaries
(iv) Accounts of Politically Exposed Persons (PEPs) resident outside India
(v) Accounts of non-face-to-face customers
(vi) Opening of bank accounts -- Salaried Employees
(i) Although flexibility in the requirements of documents of identity and proof of address has been provided in the above mentioned KYC guidelines, it has been observed that a large number of persons, especially, those belonging to low income group both in urban and rural areas are not able to produce such documents to satisfy the bank about their identity and address. This would lead to their inability to access the banking services and result in their financial exclusion. Accordingly, the KYC procedure also provides for opening accounts for those persons who intend to keep balances not exceeding Rupees Fifty Thousand ( ` 50,000/-) in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed Rupees One Lakh (` 1,00,000/-) in a year. In such cases, if a person who wants to open an account and is not able to produce documents mentioned in Annex I of this Master Circular, banks should open an account for him, subject to:
Introduction from another account holder who has been subjected to full KYC procedure. The introducer''s account with the bank should be at least six months old and should show satisfactory transactions. Photograph of the customer who proposes to open the account and also his address need to be certified by the introducer,
or
any other evidence as to the identity and address of the customer to the satisfaction of the bank.
(ii) While opening accounts as described above, the customer should be made aware that if at any point of time, the balances in all his/her accounts with the bank (taken together) exceeds Rupees Fifty Thousand (` 50,000/-) or total credit in the account exceeds Rupees One Lakh (`1,00,000/-) in a year, no further transactions will be permitted until the full KYC procedure is completed. In order not to inconvenience the customer, the bank must notify the customer when the balance reaches Rupees Forty Thousand (`40,000/-) or the total credit in a year reaches Rupees Eighty thousand (` 80,000/-) that appropriate documents for conducting the KYC must be submitted otherwise operations in the account will be stopped.
Further, banks were advised to open accounts with reduced KYC standards in respect of persons affected by floods to enable them to credit the grant received from the Government. These accounts shall also be treated at par with the accounts opened as per above instructions. However, the maximum balance in such accounts may be permitted as the amount of grant received from the Government or `50,000 whichever is more and the initial credit of the grant amount shall not be counted towards the total credit.
(iii) In terms of Government of India, Notification No. 14/2010/F.No.6/2/2007-E.S dated December 16, 2010, thePrevention 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 has been amended. The notification is reproduced at Annex IV of this circular.
A. Small Accounts
b) Rule (2A) of the Notification lays down the detailed procedure for opening 'small accounts'. Banks are advised to ensure adherence to the procedure provided in the Rules for opening of small accounts.
B. Officially valid documents
2.7 Monitoring of Transactions
(i) Ongoing monitoring is an essential...
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