RBI Master Circular No: RBI/2012-13/45 (02-Jul-12) Master Circular â Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002
DBOD. AML. BC. No. 11/14.01.001/2012-13
The Chairmen/Chief Executive Officers
All Scheduled Commercial Banks (excluding RRBs) / All India Financial Institutions/ Local Area Banks
Dear Sir,
Master Circular -- Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002
Please refer to our Master Circular DBOD.AML.BC.No.2/14.01.001/2011 -- 12 dated July 01, 2011 consolidating instructions/guidelines issued to banks till June 30, 2011 on Know Your Customer (KYC) norms /Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002. This Master Circular is a consolidation of the instructions on Know Your Customer (KYC) norms /Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002 issued up to June 30, 2012.
2. The Master Circular has been placed on the RBI website: (http://www.rbi.org.in)
Yours faithfully,
Sudha Damodar
Chief General Manager
Master Circular on Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under Prevention of Money Laundering Act, (PMLA), 2002
Purpose
Previous instructions
Application
The instructions, contained in the master circular, are applicable to All India Financial Institutions, all scheduled commercial banks (excluding RRBs) and Local Area Banks.
These guidelines are issued under Section 35A of the Banking Regulation Act, 1949 and Rule 7 of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act.
This Master Circular consolidates all the circulars issued on the subject up to June 30, 2012.
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.
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)
a) 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.
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].
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
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.
2.4 Customer Identification Procedure (CIP)
2.5 Customer Identification Requirements -- Indicative Guidelines
i) 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. 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
ii) Salaried Employees
iii) Trust/Nominee or Fiduciary Accounts
iv) Accounts of companies and firms
vi) Accounts of Politically Exposed Persons (PEPs) resident outside India
vii) Accounts of non-face-to-face customers
viii) Accounts of proprietary concerns
2.6 Accounts with Introduction
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 as 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.
2.7 Small Accounts
A. Small Accounts
a) In terms of Rule 2 clause (fb) of the Notification '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) 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
2.8 Operation of Bank Accounts & Money Mules
2.9 Bank No Longer Knows the True Identity
2.10 Monitoring of Transactions
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...
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