RBI/2007-2008/247
UBD.
CO. BPD. (PCB). No.32 /09.39.000/2007-08 February 25 , 2008 The
Chief Executive Officers,
All Primary (Urban) Co-operative Banks Dear
Sir, Know your Customer (KYC) Norms / Anti-Money Laundering
(AML) Standards / Combating of Financing of Terrorism Primary
(Urban) Co-operative Banks (UCBs) have been advised vide our circular UBD.
PCB.Cir.30/09.161.00/2004-05 dated December 15, 2004 that the adoption of
customer acceptance policy and its implementation should not result in denial
of banking services to general public, especially to those, who are financially
or socially disadvantaged. It was also clarified to the banks that a risk based
approach has been followed in the KYC guidelines issued by Reserve Bank to avoid
disproportionate cost to banks and a burdensome regime for the customers. UCBs
were accordingly advised that customer identification means identifying the customer
and verifying his/her identity by using reliable, independent source documents,
data or information to their satisfaction. 2. It was further
clarified to banks that 'being satisfied' means that the bank must be able
to satisfy the competent authorities that due diligence was observed based on
the risk profile of the customer in compliance with the extant guidelines in place.
An indicative list of the nature and type of documents/ information that
may be relied upon for customer identification was also given in the Annex-II
to the aforesaid circular. It has been brought to our notice that Annex-II,
which was clearly termed as an indicative list, is being treated by some banks as
an exhaustive list as a result of which a section of public is being denied
access to banking services. Banks are, therefore, advised to take a review of
their extant internal instructions in this regard. 3.
It is clarified that permanent correct address, as referred to in Annex-II of
our said circular, means the address at which a person usually resides and can
be taken as the address as mentioned in a utility bill or any other document accepted
by the bank for verification of the address of the customer. It has been observed
that some close relatives, e.g. wife, son, daughter and parents etc. who live
with their husband, father/mother and son, as the case may be, are finding it
difficult to open account in some banks as the utility bills required for address
verification are not in their name. It is clarified, that in such cases, banks
can obtain an identity document and a utility bill of the relative with whom the
prospective customer is living along with a declaration from the relative that
the said person (prospective customer) wanting to open an account is a relative
and is staying with him/her. Banks can use any supplementary evidence such as
a letter received through post for further verification of the address. While
issuing operational instructions to the branches on the subject, banks should
keep in mind the spirit of instructions issued by the Reserve Bank and avoid undue
hardships to individuals who are, otherwise, classified as low risk customers. 4.
The instructions contained in paragraph
5 of guidelines on 'Know Your Customer' norms and Anti-Money Laundering Measures
of our circular dated December 15, 2004, also require banks to put in
place a system of periodical review of risk categorization of accounts and the
need for applying enhanced due diligence measures in case of higher risk perception
on a customer. Banks are further advised that such review of risk categorization
of customers should be carried out at a periodicity of not less
than once in six months. Banks should also introduce a system of periodical updation
of customer identification data (including photograph/s) after the account is
opened. The periodicity of such updation should not be less than once in
five years in case of low risk category customers and not less than once in two
years in case of high and medium risk categories. 5. Combating
financing of terrorism a) In terms of PMLA Rules,
suspicious transaction should include inter alia transactions which give
rise to a reasonable ground of suspicion that these may involve financing of the
activities relating to terrorism. UCBs are, therefore, advised to develop
suitable mechanism through appropriate policy framework for enhanced monitoring
of accounts suspected of having terrorist links and swift identification of the
transactions and making suitable reports to the Financial Intelligence Unit –
India (FIU-IND) on priority. b)
As and when list of individuals and entities, approved by Security Council Committee
established pursuant to various United Nations' Security Council Resolutions (UNSCRs),
are received from Government of India, Reserve Bank circulates these to all banks
and financial institutions. UCBs should ensure to update the consolidated list
of individuals and entities as circulated by Reserve Bank. Further, the updated
list of such individuals/entities can be accessed in the United Nations website
at http://www.un.org/sc/committees/1267/consolist.shtml.
UCBs are advised that before opening any new account it should be ensured that
the name/s of the proposed customer does not appear in the list. Further, UCBs
should scan all existing accounts to ensure that no account is held by or linked
to any of the entities or individuals included in the list. Full details
of accounts bearing resemblance with any of the individuals/entities in the list
should immediately be intimated to RBI and FIU-IND.
6. It may be appreciated that KYC norms/AML standards/CFT
measures have been prescribed to ensure that criminals are not allowed to misuse
the banking channels. It would, therefore, be necessary that adequate screening
mechanism is put in place by UCBs as an integral part of their recruitment/hiring
process of personnel. 7. These guidelines are issued under
Section 35A of the Banking Regulation Act, 1949 (AACS) and any contravention thereof
may attract penalties under the relevant provisions of the Act. Yours
faithfully, (A.K.Khound)
Chief General Manager
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