RBI/2010-11/287
A.P. (DIR Series) Circular No.18
A.P. (FL/RL Series) Circular No.01
November 25, 2010
To,
All Authorized Persons
Madam/ 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- Money changing activities
Attention of the Authorized persons is invited to the A.P. (DIR Series)
Circular No. 17 [A.P.(FL/ RL Series) Circular No. 04] dated November 27, 2009 on
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 the Prevention
of Money Laundering (Amendment) Act, 2009 in respect of money changing
activities.
Suspicion of money laundering/terrorist financing
- With a view to preventing the system of purchase and/ or sale of foreign
currency notes/ Travellers’ Cheques by Authorised Persons (APs) from being used,
intentionally or unintentionally, by criminal elements for money laundering or
terrorist financing, it is clarified that whenever there is suspicion of money
laundering or terrorist financing or when other factors give rise to a belief
that the customer does not, in fact, pose a low risk, APs should carry out full
scale customer due diligence (CDD) before undertaking any money changing
transaction.
Filing of STR
- In terms of the instructions contained in Para 4.3 (iv) of the circular
dated November 27, 2009 referred to above, APs should not undertake any
transaction where they are unable to apply appropriate customer due diligence
measures. Similarly, in terms of instructions contained in Para 4.4 (g) of the
circular dated November 27, 2009, relationship with a business entity/ ies like
a company/ firm / trusts and foundations should be established only after
conducting due diligence by obtaining and verifying prescribed suitable
documents. When a business relationship is already in existence and it is not
possible to perform customer due diligence on the customer in respect of the
business relationship, APs should terminate the business relationship and make a
Suspicious Transaction Report to FIU-IND. It is clarified that in the
circumstances when an AP believes that it would no longer be satisfied that it
knows the true identity of the customer (individual/ business entity), the AP
should also file an STR with FIU-IND.
Politically Exposed Persons (PEPs)
- In terms of instructions contained in Para 4.5 (iii) of the circular dated
November 27, 2009 referred to above, the decision to undertake a transaction
with a PEP should be taken at a senior level which should be clearly spelt out
in the Customer Acceptance Policy. APs should also subject such transactions to
enhanced monitoring on an ongoing basis. Similarly, where a customer
subsequently becomes a PEP after a business relationship has already been
established, enhanced CDD should be performed on such customers and decision to
continue business relationship with the PEP should be taken at a sufficiently
senior level. It is clarified that the instructions contained in paragraph 4.5
(iii) of the circular dated November 27, 2009 referred to above are also
applicable to individual transactions/ business relationship where a PEP is the
ultimate beneficial owner. Further, in regard to individual transactions/
business relationship in case of PEPs, it is reiterated that APs should have
appropriate ongoing risk management procedures for identifying and applying
enhanced CDD to PEPs, customers who are family members or close relatives of
PEPs and individual transactions/ business relationship of which a PEP is the
ultimate beneficial owner.
Principal Officer
- With reference to Para 4.12 of the circular dated November 27, 2009
referred to above, regarding appointment and responsibility of the Principal
Officer, it is clarified that 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, as amended by Prevention of
Money Laundering (Amendment) Act, 2009, rules and regulations made there under,
as amended from time to time.
- These guidelines would also be applicable mutatis mutandis to all agents/
franchisees of Authorised Persons and it will be the sole responsibility of the
franchisers to ensure that their agents/ franchisees also adhere to these
guidelines.
- Authorised Persons should bring the contents of this circular to the notice
of their constituents concerned.
- The directions contained in this Circular are issued under Section 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, 2009andPrevention 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. Non-compliance with the guidelines
would attract penal provisions of the Acts concerned or Rules made there under.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager-in-Charge