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Steps to check money laundering

Our Bureau

MUMBAI, June 5

AN expert group of the Reserve Bank of India has recommended that banks create `customer profiles' on individual customers and also review the non-resident deposit schemes as a measure to check money laundering.

The review of NRI deposit schemes is to be done with special emphasis on establishing the source of funds.

In a report submitted to the Chairman of the Standing Committee on International Financial Standards and Codes, RBI's Internal Technical Group on Market Integrity provides an assessment of India's position with respect to G-7 principles on market integrity and recommendations of the financial action task force (FATF) on anti-money laundering and terrorist financing.

Endorsing most of FATF's suggestions, the group said account-opening forms should capture additional customer information than being done at present.

Relying fundamentally on the "know your customer'' principle for anti-money laundering measures, the report said the recommendations of a working group set up last year by Indian Banks' Association (IBA) are expected to serve as the "self regulatory'' code for banks.

The IBA working group had suggested that the background details of customers such as salary structure and amount deposited should be scrutinised and inconsistencies reported.

It had also suggested appointment of a money laundering reporting officer by every bank to whom all dubious activities will be reported.

The group had prepared an indicative list of transactions requiring due diligence to assist banks in detecting questionable activities.

The other measures suggested by FATF and endorsed by RBI's market integrity group include:

  • Creation of a data bank for suspicious transactions and circulation of indicative list of suspicious activities to assist banks in detecting suspicious patterns of behaviour of their customers.

  • Suspicious activity reporting by banks in formats prescribed by the regulator.

  • Observance of safeguards by banks to ensure protection of customers' rights to privacy.

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