RBI/2009-10/494
DBOD. AML.BC. No. 111/14.01.001/2009-10
June 15, 2010
The Chairmen and Chief Executive Officers
All Scheduled Commercial Banks excluding RRBs/
All India Financial institutions/ Local Area Banks
Dear Sir,
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.
Please refer to the Master Circular DBOD.AML.BC. No.2/14.01.001/ 2009-10 dated
July 01, 2009 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.
Countries which do not or insufficiently apply the FATF recommendations.
- In paragraph 2.11 ( c ) of the Master circular dated July 1, 2009 referred to
above, banks have been advised to take into account risks arising from the
deficiencies in AML/CFT regime of the jurisdictions included in the FATF
Statement. It is further advised that banks should, in addition to FATF
Statements circulated by Reserve Bank of India from time to time, 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.
- In terms of paragraph 2.7 of the Master Circular dated July 1, 2009, ongoing
monitoring is an essential element of effective KYC procedures. It is advised
that 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.
Shell Banks
- In terms of instructions contained in Para 2.12(b) of the Master Circular
dated July 1, 2009 referred to above, banks should guard against establishing
relationships with respondent foreign financial institutions that permit their
accounts to be used by shell banks. It is clarified that 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.
- These guidelines are issued under Section 35A of the Banking Regulation Act,
1949. Any contravention thereof or non-compliance shall attract penalties under
Banking Regulation Act.
Yours faithfully,
(Vinay Baijal)
Chief General Manager