RBI Mater Direction – Know Your Customer (KYC) Direction, 2016
(Dated 2/2/2016 – Updated 6/11/2024) (https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD18KYCF6E92C82E1E1419D87323E3869BC9F13.PDF)
Objective
Operational instructions for RBI regulated entities – regarding PMLA/PMLR obligations
Scope
RBI regulated entities, their foreign branches, majority subsidiaries (within host country laws)
Key Terms
- Walk-in Customer: not having an account-based relationship undertakes transactions
- KYC Templates: prepared to facilitate collating and reporting KYC data to CKYCR
- Non-face-to-face customers: open accounts without visiting branch/offices or meeting officials of REs
- Regulated Entities: By RBI viz. banks, AIFIs, NBFCs, MNBCs, RNBCs, ARCs, PSPs, SPs, Aps, MTSS Agents
- Wire transfer: any transfer of funds for an originator by electronic means to transfer funds to a beneficiary at a beneficiary financial institution
Highlights of Directions
Organisational Framework:
- Set-up: Specify Designated Director and Principal Officer, Have AML Team
- KYC Policy: Comprising – Customer Acceptance Policy, Risk Management, Customer Identification Procedures (CIP), Monitoring of Transactions
- Risk Assessment: Internal ML-TF risk assessment (EWRA)
- (Refer Guidance Note on Internal Risk Assessment Guidance for Money Laundering/ Terrorist Financing Risks at – https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1278)
- Roles of various functions: Senior Management, Compliance Audit, etc.
Operational Measures:
- Customer Acceptance Policy: Prohibitions, Conditions, CDD, etc.
- Risk Management: Risk based approach, Customer risk categorisation
- Customer Identification Procedure (CIP): Account based, Walk-in customers, Use of third parties
- Customer Due Diligence (CDD) Procedure: Various types of customers, Various modes for Individuals, CKYCR Procedure
- Video – Customer Identification Procedure (V-CIP): For individuals (as per RBI)
- Digital KYC Process: For Individuals (as per PMLR)
- Small Account: Savings account for Individuals (without any document)
- Periodic Updation: For Individuals and entities – different risk categories
- Enhanced Due Diligence: Non-face-to-face, Politically Exposed Persons, Professional intermediaries – for client funds, Correspondent Banking – Payable through Account
- FCRA Obligations, Reporting under FATCA and CRS
- Simplified Due Diligence: Self Help Groups, Accounts of foreign students, Foreign Portfolio Investors
- Wire Transfers: Requirements, Responsibilities at various stages
- Record Management: Retention period for various types of records, providing to authorities, Registration of NGOs on DARPAN
- Reporting to FIU-Ind: Templates specified by FIU-Ind, Robust software for detection of inconsistent transactions
- UAPA Obligations: Reporting matches to FIU-Ind and MHA
- WMD Act Obligations: Reporting matches to the Central Nodal Officer i.e. FIU-Ind
- UNSCR Lists: Democratic People’s Republic of Korea Order, 2017, Other lists, UAPA 1967 – first and fourth schedules
- Detection of Matches: Use latest technological innovations and tools
- FATF identified countries: Additional due diligence
Miscellaneous Aspects
- Secrecy Obligations and Sharing of Information
- Other Aspects: UCIC, PAN requirement, Third Party A/c Payee Cheques, Selling TPPs, Issuing PPIs