RBI revises norms to monitor money laundering

Mumbai: The Reserve Bank (RBI) has asked banks to put in place revised norms with regard to the existing `know your customer' and `anti-money laundering' guidelines, with the approval of their boards, within the next three months.

The revised norms to monitor transactions of a questionable nature, are aimed at monitoring the antecedents of those opening new bank accounts and would also keep the banks vigilant about existing accounts in order to preclude money laundering and prevent the financing of terrorism. RBI has earlier asked banks to implement the new norms within three months.

As per the notification issued by the central bank, the new norms are based on recommendations made by the 'financial action task force' on anti-money laundering, which have become the international benchmark and have to be compulsorily followed by all banks in the world.

The revised norms state that banks should monitor "all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose." The bank, accordingly, may devise threshold limits for a particular category of accounts and pay attention to the transactions, which exceed these limits. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer should now attract the attention of the bank.

Very high account turnovers, inconsistent with the size of the balance maintained, may indicate that funds are being "washed" through the account. High-risk accounts have to be subjected to intensified monitoring and the banks will report the same to the concerned authority.

Banks should continue to ensure that any remittance of funds by way of demand draft, mail telegraphic transfer or any other mode and issue of travellers cheques for value of Rs50,000 and above is effected by debit to the customer's account or against cheques and not against cash payment, the apex bank has said.

RBI has also told banks to prepare a profile for new customers based on risk categorisation like low risk, medium risk, high risk, etc. and may include those under high risk category for whom the sources of funds are not clear. High-risk accounts have to be subjected to intensified monitoring.

Banks may prescribe threshold limits for a particular category of accounts and pay particular attention to the transactions, which exceed these limits. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer should particularly attract the attention of the bank. Very high account turnover inconsistent with the size of the balance maintained may indicate that funds are being `washed' through the account.

According to RBI, customers requiring higher due diligence may include non-resident customers, high net worth individuals, trusts, charities, NGOs and organisations receiving donations, companies having close family shareholding, firms with 'sleeping partnerss', politically exposed persons (PEPs) of foreign origin, and those with dubious reputation as per public information available.

RBI has, however, warned banks that the adoption of customer acceptance policy should not become too restrictive and must not result in denial of banking services to the general public. In the circular, RBI has said that banks may ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard.

Banks should also put in place a system of periodical review of risk categorisation of accounts.