RBI/2011-12/415
A.P. (DIR Series) Circular No. 86
February 29, 2012
To
All Authorised Persons
Madam/ Dear Sir,
Know Your Customer (KYC) norms / Anti-Money Laundering
(AML) standards / Combating the Financing of Terrorism (CFT) / Obligation of
Authorised Persons under Prevention of Money Laundering Act (PMLA), 2002, as
amended by Prevention of Money Laundering (Amendment) Act, 2009- Assessment and
Monitoring of Risk – Money Changing Activities
Attention of all the Authorised Persons (APs) is invited to the Anti-Money
Laundering Guidelines governing money changing transactions, issued vide
A.P. (DIR Series) Circular No. 17 [A.P. (FL/RL Series) Circular No. 04]
dated November 27, 2009, as amended from time to time.
2. In terms of paragraph 4.3 (b) and (c) of the aforesaid
circular, APs should prepare a profile for each customer, where a business
relationship is established, based on risk categorisation and apply enhanced due
diligence measures on higher risk customers. Some illustrative examples of
customers requiring higher due diligence have also been provided in the
paragraph under reference. Further, paragraph 4.8 (a) of the aforesaid circular
requires APs to put in place policies, systems and procedures for risk
management keeping in view the risks involved in a transaction or business
relationship.
3. The Government of India had constituted a National Money Laundering /
Financing of Terror Risk Assessment Committee to assess money laundering and
terror financing risks, a national AML / CFT strategy and institutional
framework for AML/CFT in India. Assessment of risk of Money Laundering
/Financing of Terrorism helps both the competent authorities and the regulated
entities in taking necessary steps for combating ML / FT adopting a risk-based
approach. This helps in judicious and efficient allocation of resources and
makes the AML/CFT regime more robust. The Committee has made recommendations
regarding adoption of a risk-based approach, assessment of risk and putting in
place a system which would use that assessment to take steps to effectively
counter ML/FT. The recommendations of the Committee have since been accepted by
the Government of India and need to be implemented.
4. Accordingly, APs 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, in addition to what has been prescribed in the
aforesaid circular, referred to in paragraph 4 of the above-mentioned circular
dated November 27, 2009. APs 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 discussed above. As a corollary, APs would be
required to adopt enhanced measures for products, services and customers with a
medium or high risk rating.
5. APs may design risk parameters according to their activities for risk
based transaction monitoring, which will help them in their own risk assessment.
6. All the other instructions contained in the A.P. (DIR Series) Circular No.
17 [A.P. (FL/RL Series) Circular No. 04] dated November 27, 2009, as amended
from time to time, shall remain unchanged.
7. These guidelines would also be applicable mutatis mutandis to all
agents/franchisees of the APs and it will be the sole responsibility of the
franchisers to ensure that their agents/ franchisees also adhere to these
guidelines.
8. Authorised Persons should bring the contents of this circular to the
notice of their constituents concerned.
9. The directions contained in this circular have been issued under sections
10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of
1999) and also under the Prevention of Money Laundering Act (PMLA), 2002 as
amended by Prevention of Money Laundering (Amendment) Act, 2009 and 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, as amended from time to time and are without prejudice to
permissions / approvals, if any, required under any other law.
Yours faithfully,
(Meena Hemchandra)
Chief General Manager-in-Charge