The Hindu Business Line : RBI directive on `Know Your Customer', money laundering

THE Reserve Bank of India has asked banks to put in place a proper policy framework on the `Know Your Customer' guidelines and `Anti-Money Laundering' measures with the approval of their boards, within the next three months.

In a circular issued to the chiefs of all commercial banks, RBI has said, 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.

Any other information from the customer should be sought separately with his or her consent and after opening the account.

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 Rs 50,000 and above is effected by debit to the customer's account or against cheques and not against cash payment, the apex bank has said.

The RBI has emphasised that banks can effectively control and reduce their risks only if they have an understanding of the normal and reasonable activity of the customer so that they have the means of identifying transactions that fall outside the regular pattern of activity. However, the extent of monitoring will depend on the risk sensitivity of the account. Banks should pay special attention to all complex, unusually large transactions and all unusual patterns, which have no apparent economic or visible lawful purpose, the central bank has said.

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.

High-risk accounts have to be subjected to intensified monitoring.

Every bank should set key indicators for such accounts, taking note of the background of the customer, such as the country of origin, sources of funds, the type of transactions involved and other risk factors.

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

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