Master Direction - Know Your Customer (KYC) Direction, 2016 (Updated as on December 08, 2016) - ആർബിഐ - Reserve Bank of India
Master Direction - Know Your Customer (KYC) Direction, 2016 (Updated as on December 08, 2016)
RBI/DBR/2015-16/18 February 25, 2016 Master Direction - Know Your Customer (KYC) Direction, 2016 In terms of the provisions of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, Regulated Entities (REs) are required to follow certain customer identification procedure while undertaking a transaction either by establishing an account based relationship or otherwise and monitor their transactions. Accordingly, in exercise of the powers conferred by Sections 35 A of the Banking Regulation Act, 1949 and the Banking Regulation Act (AACS), 1949, read with Section 56 of the Act ibid and Rule 9(14) of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest to do so, hereby, issues the Directions hereinafter specified. CHAPTER – I 1. Short Title and Commencement. (a) These Directions shall be called the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016. (b) These directions shall come into effect on the day they are placed on the official website of the Reserve Bank of India. 2. Applicability (a) The provisions of these Directions shall apply to every entity regulated by Reserve Bank of India, more specifically as defined in 3 (b) (xiii) below, except where specifically mentioned otherwise. (b) These directions shall also apply to those branches and majority owned subsidiaries of the REs which are located abroad, to the extent they are not contradictory to the local laws in the host country, provided that: i. where local applicable laws and regulations prohibit implementation of these guidelines, the same shall be brought to the notice of the Reserve Bank of India. ii. in case there is a variance in KYC/AML standards prescribed by the Reserve Bank of India and the host country regulators, branches/overseas subsidiaries of REs are required to adopt the more stringent regulation of the two. Branches/subsidiaries of foreign incorporated bank may adopt the stringent regulation of the two i.e. standards prescribed by the Reserve Bank of India and their host country regulators. Provided this rule shall not apply to ‘small accounts’ referred to in Section 23 of Chapter VI. 3. Definitions In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below: (a) Terms bearing meaning assigned in terms of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005: i. “Act” and “Rules” means the Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, respectively and amendments thereto. ii. Beneficial Owner (BO) a. Where the customer is a company, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have a controlling ownership interest or who exercise control through other means. Explanation- For the purpose of this sub-clause- 1. “Controlling ownership interest” means ownership of/entitlement to more than 25 per cent of the shares or capital or profits of the company. 2. “Control” shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. b. Where the customer is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15 per cent of capital or profits of the partnership. c. Where the customer is an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15 per cent of the property or capital or profits of the unincorporated association or body of individuals. Explanation: Term ‘body of individuals’ includes societies. Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official. d. Where the customer is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership. iii. “Central KYC Records Registry” (CKYCR) means an entity defined under Rule 2(1)(aa) of the Rules, to receive, store, safeguard and retrieve the KYC records in digital form of a customer. iv. “Designated Director" means a person designated by the RE to ensure overall compliance with the obligations imposed under chapter IV of the PML Act and the Rules and shall include:- a. the Managing Director or a whole-time Director, duly authorized by the Board of Directors, if the RE is a company, b. the Managing Partner, if the RE is a partnership firm, c. the Proprietor, if the RE is a proprietorship concern, d. the Managing Trustee, if the RE is a trust, e. a person or individual, as the case may be, who controls and manages the affairs of the RE, if the RE is an unincorporated association or a body of individuals, and f. a person who holds the position of senior management or equivalent designated as a 'Designated Director’ in respect of Cooperative Banks and Regional Rural Banks. Explanation. - For the purpose of this clause, the terms "Managing Director" and "Whole-time Director" shall have the meaning assigned to them in the Companies Act, 2013. v. “Non-profit organisations” (NPO) means any entity or organisation that is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or a company registered under Section 8 of the Companies Act, 2013. vi. “Officially valid document” (OVD) means the passport, the driving licence, the Permanent Account Number (PAN) Card, the Voter's Identity Card issued by the Election Commission of India, job card issued by NREGA duly signed by an officer of the State Government, letter issued by the Unique Identification Authority of India containing details of name, address and Aadhaar number. Explanation: Customers, at their option, shall submit one of the six OVDs for proof of identity and proof of address. Provided that where ‘simplified measures’ are applied for verifying the identity of the customers the following documents shall be deemed to be OVD:
Provided further that where ‘simplified measures’ are applied for verifying, for the limited purpose of, proof of address the following additional documents are deemed to be OVDs :
vii. “Person” has the same meaning assigned in the Act and includes:
viii. “Principal Officer” means an officer nominated by the RE, responsible for furnishing information as per rule 8 of the Rules. ix. “Suspicious transaction” means a “transaction” as defined below, including an attempted transaction, whether or not made in cash, which, to a person acting in good faith,: a. gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act, regardless of the value involved; or b. appears to be made in circumstances of unusual or unjustified complexity; or c. appears to not have economic rationale or bona-fide purpose; or d. gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism. Explanation: Transaction involving financing of the activities relating to terrorism includes transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist acts or by a terrorist, terrorist organization or those who finance or are attempting to finance terrorism. x. A ‘Small Account' means a savings account in which: a. the aggregate of all credits in a financial year does not exceed rupees one lakh; b. the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand; and c. the balance at any point of time does not exceed rupees fifty thousand. xi. “Transaction” means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes: a. opening of an account; b. deposit, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by cheque, payment order or other instruments or by electronic or other non-physical means; c. the use of a safety deposit box or any other form of safe deposit; d. entering into any fiduciary relationship; e. any payment made or received, in whole or in part, for any contractual or other legal obligation; or f. establishing or creating a legal person or legal arrangement. (b) Terms bearing meaning assigned in this Directions, unless the context otherwise requires, shall bear the meanings assigned to them below: i. “Common Reporting Standards” (CRS) means reporting standards set for implementation of multilateral agreement signed to automatically exchange information based on Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters. ii. “Customer” means a person who is engaged in a financial transaction or activity with a Regulated Entity (RE) and includes a person on whose behalf the person who is engaged in the transaction or activity, is acting. iii. “Walk-in Customer” means a person who does not have an account based relationship with the RE, but undertakes transactions with the RE. iv. “Customer Due Diligence (CDD)” means identifying and verifying the customer and the beneficial owner using ‘Officially Valid Documents’ as a ‘proof of identity’ and a ‘proof of address’. v. “Customer identification” means undertaking the process of CDD. vi. “FATCA” means Foreign Account Tax Compliance Act of the United States of America (USA) which, inter alia, requires foreign financial institutions to report about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest. vii. “IGA” means Inter Governmental Agreement between the Governments of India and the USA to improve international tax compliance and to implement FATCA of the USA. viii. “KYC Templates” means templates prepared to facilitate collating and reporting the KYC data to the CKYCR, for individuals and legal entities. ix. “Non-face-to-face customers” means customers who open accounts without visiting the branch/offices of the REs or meeting the officials of REs. x. “On-going Due Diligence” means regular monitoring of transactions in accounts to ensure that they are consistent with the customers’ profile and source of funds. xi. “Periodic Updation” means steps taken to ensure that documents, data or information collected under the CDD process is kept up-to-date and relevant by undertaking reviews of existing records at periodicity prescribed by the Reserve Bank. xii. “Politically Exposed Persons” (PEPs) are individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads of States/Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc. xiii. “Regulated Entities” (REs) means a. all Scheduled Commercial Banks (SCBs)/ Regional Rural Banks (RRBs)/ Local Area Banks (LABs)/ All Primary (Urban) Co-operative Banks (UCBs) /State and Central Co-operative Banks (StCBs / CCBs) and any other entity which has been licenced under Section 22 of Banking Regulation Act, 1949, which as a group shall be referred as ‘banks’ b. All India Financial Institutions (AIFIs) c. All Non-Banking Finance Companies (NBFC)s, Miscellaneous Non-Banking Companies (MNBCs) and Residuary Non-Banking Companies (RNBCs). d. All Payment System Providers (PSPs)/ System Participants (SPs) and Prepaid Payment Instrument Issuers (PPI Issuers) e. All authorised persons (APs) including those who are agents of Money Transfer Service Scheme (MTSS), regulated by the Regulator. xiv. “Simplified procedure” means the procedure for undertaking customer due diligence in respect of customers, who are rated as low risk by the RE and who do not possess any of the six officially valid documents, with the alternate documents prescribed under the two provisos of Section 3(a)(vi) of this Directions. xv. “Shell bank” means a bank which is incorporated in a country where it has no physical presence and is unaffiliated to any regulated financial group. xvi. “Wire transfer” means a transaction carried out, directly or through a chain of transfers, on behalf of an originator person (both natural and legal) through a bank by electronic means with a view to making an amount of money available to a beneficiary person at a bank. xvii. “Domestic and cross-border wire transfer”: When the originator bank and the beneficiary bank is the same person or different person located in the same country, such a transaction is a domestic wire transfer, and if the ‘originator bank’ or ‘beneficiary bank’ is located in different countries such a transaction is cross-border wire transfer. (c) All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Banking Regulation Act or the Reserve Bank of India Act, or the Prevention of Money Laundering Act and Prevention of Money Laundering (Maintenance of Records) Rules, any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be. CHAPTER – II 4. There shall be a Know Your Customer (KYC) policy duly approved by the Board of Directors of REs or any committee of the Board to which power has been delegated. 5. The KYC policy shall include following four key elements:
6. Designated Director:
7. Principal Officer:
8. Compliance of KYC policy REs shall ensure compliance with KYC Policy through:
CHAPTER – III 9. REs shall frame a Customer Acceptance Policy. 10. Without prejudice to the generality of the aspect that Customer Acceptance Policy may contain, REs shall ensure that :
11. Customer Acceptance Policy shall not result in denial of banking/financial facility to members of the general public, especially those, who are financially or socially disadvantaged. CHAPTER – IV 12. For Risk Management, REs shall have a risk based approach which includes the following.
Provided that various other information collected from different categories of customers relating to the perceived risk, is non-intrusive and the same is specified in the KYC policy. Explanation: FATF Public Statement, the reports and guidance notes on KYC/AML issued by the Indian Banks Association (IBA), guidance note circulated to all cooperative banks by the RBI etc., may also be used in risk assessment. Chapter V 13. REs shall undertake identification of customers in the following cases:
14. For the purpose of verifying the identity of customers at the time of commencement of an account-based relationship, REs, shall at their option, rely on customer due diligence done by a third party, subject to the following conditions:
15. While undertaking customer identification, REs shall ensure that :
Chapter VI Part I - CDD Procedure in case of Individuals 16. REs shall obtain the following documents from an individual while establishing an account based relationship:
Provided that information collected from customers for the purpose of opening of account shall be treated as confidential and details thereof shall not be divulged for the purpose of cross selling, or for any other purpose without the express permission of the customer. Explanation: Customers, at their option, shall submit one of the six OVDs for proof of identity and proof of address. 17. The e-KYC service of Unique Identification Authority of India (UIDAI) shall be accepted as a valid process for KYC verification under the PML Rules, as
Provided REs/ Business Correspondents (BCs)/ Business Facilitators (BFs) shall obtain authorisation from the individual user authorising UIDAI by way of explicit consent to release his/her identity/address through biometric authentication to the REs. Provided further that a RE may provide an option for One Time Pin (OTP) based e-KYC process for on-boarding of customers. Accounts opened in terms of this proviso i.e., using OTP based e-KYC, are subject to the following conditions:
18. REs shall print/download directly, the prospective customer’s e-Aadhaar letter from the UIDAI portal, if such a customer knows only his/her Aadhaar number or if the customer carries only a copy of Aadhaar downloaded from a place/source elsewhere, provided, the prospective customer is physically present in the branch of the RE. 19. A copy of the marriage certificate issued by the State Government or Gazette notification indicating change in name together with a certified copy of the ‘officially valid document’ in the existing name of the person shall be obtained for proof of address and identity, while establishing an account based relationship or while undertaking periodic updation exercise in cases of persons who change their names on account of marriage or otherwise. 20. In case the person who proposes to open an account does not have an OVD as ‘proof of address’, such person shall provide OVD of the relative as provided at sub-section 77 of Section 2 of the Companies Act, 2013, read with Rule 4 of Companies (Specification of definitions details) Rules, 2014, with whom the person is staying, as the ‘proof of address’. Explanation: A declaration from the relative that the said person is a relative and is staying with him/her shall be obtained. 21. In cases where a customer categorised as ‘low risk’, expresses inability to complete the documentation requirements on account of any reason that the REs consider to be genuine, and where it is essential not to interrupt the normal conduct of business, REs shall, at their option, complete the verification of identity of the customer within a period of six months from the date of establishment of the relationship. 22. In respect of customers who are categorised as ‘low risk’ and are not able to produce any of the OVDs mentioned at Section 3(a)(vi) of Chapter I and where ‘simplified procedure’ is applied, REs shall, accept any one document from each of the two additional sets of documents listed under the two provisos of sub-Rule 2(1)(d). Explanation: During the periodic review, if the ‘low risk’ category customer for whom simplified procedure is applied, is re-categorised as ‘moderate or ‘’high’ risk category, then REs shall obtain one of the six OVDs listed at Section 3(a)( vi) of these Directions for proof of identity and proof of address immediately. In the event such a customer fails to submit such an OVD, REs shall initiate action as envisaged in Section 39 of these Directions. 23. In case an individual customer who does not possess either any of the OVDs or the documents applicable in respect of simplified procedure (as detailed at Section 22 above) and desires to open a bank account, banks shall open a ‘Small Account’, subject to the following:
24. Simplified procedure for opening accounts by Non-Banking Finance Companies (NBFCs): In case a person who desires to open an account is not able to produce documents mentioned in 3(a)(vi) of Chapter I, NBFCs may at their discretion open accounts subject to the following conditions:
25. If an existing KYC compliant customer of a RE desires to open another account with the same RE, there shall be no need for a fresh CDD exercise. 26. KYC verification once done by one branch/office of the RE shall be valid for transfer of the account to any other branch/office of the same RE, provided full KYC verification has already been done for the concerned account and the same is not due for periodic updation and a self-declaration from the account holder about his/her current address is obtained in such cases. Part II - CDD Measures for Sole Proprietary firms 27. For opening an account in the name of a sole proprietary firm, a certified copy of an OVD as mentioned at Section 3(a) (vi) of Chapter I, containing details of identity and address of the individual (proprietor) shall be obtained. 28. In addition to the above, any two of the following documents as a proof of business/ activity in the name of the proprietary firm shall also be obtained:
29. In cases where the REs are satisfied that it is not possible to furnish two such documents, REs may, at their discretion, accept only one of those documents as proof of business/activity. Provided REs undertake contact point verification and collect such other information and clarification as would be required to establish the existence of such firm, and shall confirm and satisfy itself that the business activity has been verified from the address of the proprietary concern. Part III- CDD Measures for Legal Entities 30. For opening an account of a company, one certified copy of each of the following documents shall be obtained:
31. For opening an account of a partnership firm, one certified copy of each of the following documents shall be obtained:
32. For opening an account of a trust, one certified copy of each of the following documents shall be obtained:
33. For opening an account of an unincorporated association or a body of individuals, one certified copy of each of the following documents shall be obtained:
33A For opening accounts of juridical persons not specifically covered in the earlier part, such as Government or its Departments, societies, universities and local bodies like village panchayats, one certified copy of the following documents shall be obtained.:
Part IV - Identification of Beneficial Owner 34. For opening an account of a Legal Person who is not a natural person, the beneficial owner(s) shall be identified and all reasonable steps in terms of Rule 9(3) of the Rules to verify his/her identity shall be undertaken keeping in view the following:
Part V - On-going Due Diligence 35. REs shall undertake on-going due diligence of customers to ensure that their transactions are consistent with their knowledge about the customers, customers’ business and risk profile; and the source of funds. 36. Without prejudice to the generality of factors that call for close monitoring following types of transactions shall necessarily be monitored:
37. The extent of monitoring shall be aligned with the risk category of the customer. Explanation: High risk accounts have to be subjected to more intensified monitoring.
Explanation: Cases where a large number of cheque books are sought by the company and/or multiple small deposits (generally in cash) across the country in one bank account and/or where a large number of cheques are issued bearing similar amounts/dates, shall be immediately reported to Reserve Bank of India and other appropriate authorities such as FIU-IND. 38. Periodic Updation Periodic updation shall be carried out at least once in every two years for high risk customers, once in every eight years for medium risk customers and once in every ten years for low risk customers subject to the following conditions:
39. Partial freezing and closure of accounts (a) Where REs are unable to comply with the CDD requirements mentioned at Part I to V above, they shall not open accounts, commence business relations or perform transactions. In case of existing business relationship which is not KYC compliant, banks shall ordinarily take step to terminate the existing business relationship after giving due notice. (b) As an exception to the Rule, banks shall have an option to choose not to terminate business relationship straight away and instead opt for a phased closure of operations in this account as explained below:
(c) When an account is closed whether without ‘partial freezing’ or after ‘partial freezing’, the reason for that shall be communicated to account holder. Part VI - Enhanced and Simplified Due Diligence Procedure A. Enhanced Due Diligence 40. Accounts of non-face-to-face customers: REs shall include additional procedures i.e., certification of all the documents presented, calling for additional documents and the first payment to be effected through the customer's KYC-complied account with another RE, for enhanced due diligence of non-face to face customers. 41. Accounts of Politically Exposed Persons (PEPs) A. REs shall have the option of establishing a relationship with PEPs provided that:
B. These instructions shall also be applicable to accounts where a PEP is the beneficial owner 42. Client accounts opened by professional intermediaries: REs shall ensure while opening client accounts through professional intermediaries, that:
B. Simplified Due Diligence 43. Simplified norms for Self Help Groups (SHGs)
44. Procedure to be followed by banks while opening accounts of foreign students (a) Banks shall, at their option, open a Non Resident Ordinary (NRO) bank account of a foreign student on the basis of his/her passport (with visa & immigration endorsement) bearing the proof of identity and address in the home country together with a photograph and a letter offering admission from the educational institution in India.
(b) The account shall be treated as a normal NRO account, and shall be operated in terms of Reserve Bank of India’s instructions on Non-Resident Ordinary Rupee (NRO) Account, and the provisions of FEMA. 1999. (c) Students with Pakistani nationality shall require prior approval of the Reserve Bank for opening the account. 45. Simplified KYC norms for Foreign Portfolio Investors (FPIs) Accounts of FPIs which are eligible/ registered as per SEBI guidelines, for the purpose of investment under Portfolio Investment Scheme (PIS), shall be opened by accepting KYC documents as detailed in Annex II, subject to Income Tax (FATCA/CRS) Rules. Provided that banks shall obtain undertaking from FPIs or the Global Custodian acting on behalf of the FPI that as and when required, the exempted documents as detailed in Annex II will be submitted. Chapter VII 46. The following steps shall be taken regarding maintenance, preservation and reporting of customer account information, with reference to provisions of PML Act and Rules. REs shall, (a) maintain all necessary records of transactions between the RE and the customer, both domestic and international, for at least five years from the date of transaction; (b) preserve the records pertaining to the identification of the customers and their addresses obtained while opening the account and during the course of business relationship, for at least five years after the business relationship is ended; (c) make available the identification records and transaction data to the competent authorities upon request; (d) introduce a system of maintaining proper record of transactions prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005); (e) maintain all necessary information in respect of transactions prescribed under PML Rule 3 so as to permit reconstruction of individual transaction, including the following:
(f) evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities; (g) maintain records of the identity and address of their customer, and records in respect of transactions referred to in Rule 3 in hard or soft format. Chapter VIII 47. REs shall furnish to the Director, Financial Intelligence Unit-India (FIU-IND), information referred to in Rule 3 of the PML (Maintenance of Records) Rules, 2005 in terms of Rule 7 thereof. Explanation: In terms of Third Amendment Rules notified September 22, 2015 regarding amendment to sub rule 3 and 4 of rule 7, Director, FIU-IND shall have powers to issue guidelines to the REs for detecting transactions referred to in various clauses of sub-rule (1) of rule 3, to direct them about the form of furnishing information and to specify the procedure and the manner of furnishing information. 48. The reporting formats and comprehensive reporting format guide, prescribed/ released by FIU-IND and Report Generation Utility and Report Validation Utility developed to assist reporting entities in the preparation of prescribed reports shall be taken note of. The editable electronic utilities to file electronic Cash Transaction Reports (CTR) / Suspicious Transaction Reports (STR) which FIU-IND has placed on its website shall be made use of by REs which are yet to install/adopt suitable technological tools for extracting CTR/STR from their live transaction data. The Principal Officers of those REs, whose all branches are not fully computerized, shall have suitable arrangement to cull out the transaction details from branches which are not yet computerized and to feed the data into an electronic file with the help of the editable electronic utilities of CTR/STR as have been made available by FIU-IND on its website http://fiuindia.gov.in. 49. While furnishing information to the Director, FIU-IND, delay of each day in not reporting a transaction or delay of each day in rectifying a mis-represented transaction beyond the time limit as specified in the Rule shall be constituted as a separate violation. REs shall not put any restriction on operations in the accounts where an STR has been filed. REs shall keep the fact of furnishing of STR strictly confidential. It shall be ensured that there is no tipping off to the customer at any level. 50. Robust software, throwing alerts when the transactions are inconsistent with risk categorization and updated profile of the customers shall be put in to use as a part of effective identification and reporting of suspicious transactions. Chapter IX 51. REs shall ensure that in terms of Section 51A of the Unlawful Activities (Prevention) (UAPA) Act, 1967, they do not have any account in the name of individuals/entities appearing in the lists of individuals and entities, suspected of having terrorist links, which are approved by and periodically circulated by the United Nations Security Council (UNSC). The details of the two lists are as under: (a) The “ISIL (Da’esh) & Al-Qaida Sanctions List”, which includes names of individuals and entities associated with the Al-Qaida. The updated ISIL & Al-Qaida Sanctions List is available at (b) The “1988 Sanctions List”, consisting of individuals (Section A of the consolidated list) and entities (Section B) associated with the Taliban which is available at 52. Details of accounts resembling any of the individuals/entities in the lists shall be reported to FIU-IND apart from advising Ministry of Home Affairs as required under UAPA notification dated August 27, 2009. 53. In addition to the above, other UNSCRs circulated by the Reserve Bank in respect of any other jurisdictions/ entities from time to time shall also be taken note of. 54. Freezing of Assets under Section 51A of Unlawful Activities (Prevention) Act, 1967 The procedure laid down in the UAPA Order dated August 27, 2009 (Annex I of this Master Direction shall be strictly followed and meticulous compliance with the Order issued by the Government shall be ensured. 55. Jurisdictions that do not or insufficiently apply the FATF Recommendations
Chapter X 56. Secrecy Obligations and Sharing of Information: (a) Banks shall maintain secrecy regarding the customer information which arises out of the contractual relationship between the banker and customer. (b) While considering the requests for data/information from Government and other agencies, banks shall satisfy themselves that the information being sought is not of such a nature as will violate the provisions of the laws relating to secrecy in the banking transactions. (c) The exceptions to the said rule shall be as under:
(d) NBFCs shall maintain confidentiality of information as provided in Section 45NB of RBI Act 1934. 57. CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR) REs shall capture the KYC information for sharing with the CKYCR in the manner mentioned in the Rules, as required by the revised KYC templates prepared for ‘individuals’ and ‘Legal Entities’ as the case may be. Government of India has authorised the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the CKYCR vide Gazette Notification No. S.O. 3183(E) dated November 26, 2015. The ‘live run’ of the CKYCR would start with effect from July 15, 2016 in phased manner beginning with new ‘individual accounts’. Accordingly, REs shall take the following steps:
58. Reporting requirement under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) Under FATCA and CRS, REs shall adhere to the provisions of Income Tax Rules 114F, 114G and 114H and determine whether they are a Reporting Financial Institution as defined in Income Tax Rule 114F and if so, shall take following steps for complying with the reporting requirements: (a) Register on the related e-filling portal of Income Tax Department as Reporting Financial Institutions at the link https://incometaxindiaefiling.gov.in/ post login --> My Account --> Register as Reporting Financial Institution, (b) Submit online reports by using the digital signature of the ‘Designated Director’ by either uploading the Form 61B or ‘NIL’ report, for which, the schema prepared by Central Board of Direct Taxes (CBDT) shall be referred to. Explanation: REs shall refer to the spot reference rates published by Foreign Exchange Dealers’ Association of India (FEDAI) on their website at http://www.fedai.org.in/RevaluationRates.aspx for carrying out the due diligence procedure for the purposes of identifying reportable accounts in terms of Rule 114H. (c) Develop Information Technology (IT) framework for carrying out due diligence procedure and for recording and maintaining the same, as provided in Rule 114H. (d) Develop a system of audit for the IT framework and compliance with Rules 114F, 114G and 114H of Income Tax Rules. (e) Constitute a “High Level Monitoring Committee” under the Designated Director or any other equivalent functionary to ensure compliance. (f) Ensure compliance with updated instructions/ rules/ guidance notes/ Press releases/ issued on the subject by Central Board of Direct Taxes (CBDT) from time to time and available on the web site http://www.incometaxindia.gov.in/Pages/default.aspx. REs may take note of the following:
59. Period for presenting payment instruments Payment of cheques/drafts/pay orders/banker’s cheques, if they are presented beyond the period of three months from the date of such instruments, shall not be made. 60. Operation of Bank Accounts & Money Mules The instructions on opening of accounts and monitoring of transactions shall be strictly adhered to, in order to minimise the operations of “Money Mules” which are used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties which act as “money mules.” If it is established that an account opened and operated is that of a Money Mule, it shall be deemed that the bank has not complied with these directions. 61. Collection of Account Payee Cheques Account payee cheques for any person other than the payee constituent shall not be collected. Banks shall, at their option, collect account payee cheques drawn for an amount not exceeding rupees fifty thousand to the account of their customers who are co-operative credit societies, provided the payees of such cheques are the constituents of such co-operative credit societies. 62. (a) A Unique Customer Identification Code (UCIC) shall be allotted while entering into new relationships with individual customers as also the existing customers by banks and NBFCs. (b) The banks/NBFCs shall, at their option, not issue UCIC to all walk-in/occasional customers such as buyers of pre-paid instruments/purchasers of third party products provided it is ensured that there is adequate mechanism to identify such walk-in customers who have frequent transactions with them and ensure that they are allotted UCIC. 63. Introduction of New Technologies – Credit Cards/Debit Cards/ Smart Cards/Gift Cards/Mobile Wallet/ Net Banking/ Mobile Banking/RTGS/ NEFT/ECS/IMPS etc. Adequate attention shall be paid by REs to any money-laundering and financing of terrorism threats that may arise from new or developing technologies and it shall be ensured that appropriate KYC procedures issued from time to time are duly applied before introducing new products/services/technologies. Agents used for marketing of credit cards shall also be subjected to due diligence and KYC measures. 64. Correspondent Banks Banks shall have a policy approved by their Boards, or by a committee headed by the Chairman/CEO/MD to lay down parameters for approving correspondent banking relationships subject to the following conditions:
65. Wire transfer REs shall ensure the following while effecting wire transfer:
66. Issue and Payment of Demand Drafts, etc., Any remittance of funds by way of demand draft, mail/telegraphic transfer/NEFT/IMPS or any other mode and issue of travellers’ cheques for value of rupees fifty thousand and above shall be effected by debit to the customer’s account or against cheques and not against cash payment. 67. Quoting of PAN Permanent account number (PAN) of customers shall be obtained and verified while undertaking transactions as per the provisions of Income Tax Rule 114B applicable to banks, as amended from time to time. Form 60 shall be obtained from persons who do not have PAN. 68. Selling Third party products REs acting as agents while selling third party products as per regulations in force from time to time shall comply with the following aspects for the purpose of these directions: (a) the identity and address of the walk-in customer shall be verified for transactions above rupees fifty thousand as required under Section 13(e) of this Directions. (b) transaction details of sale of third party products and related records shall be maintained as prescribed in Chapter VII Section 46. (c) AML software capable of capturing, generating and analysing alerts for the purpose of filing CTR/STR in respect of transactions relating to third party products with customers including walk-in customers shall be available. (d) transactions involving rupees fifty thousand and above shall be undertaken only by:
(e) Instruction at ‘d’ above shall also apply to sale of REs’ own products, payment of dues of credit cards/sale and reloading of prepaid/travel cards and any other product for rupees fifty thousand and above. 69. At-par cheque facility availed by co-operative banks (a) The ‘at par’ cheque facility offered by commercial banks to co-operative banks shall be monitored and such arrangements be reviewed to assess the risks including credit risk and reputational risk arising therefrom. (b) The right to verify the records maintained by the customer cooperative banks/ societies for compliance with the extant instructions on KYC and AML under such arrangements shall be retained by banks. (c) Cooperative Banks shall: i. ensure that the ‘at par’ cheque facility is utilised only:
ii. maintain the following:
iii. ensure that ‘At par’ cheques issued are crossed ‘account payee’ irrespective of the amount involved. 70. Issuance of Prepaid Payment Instruments (PPIs): PPI issuers shall ensure that the instructions issued by Department of Payment and Settlement System of Reserve Bank of India through their Master Direction are strictly adhered to. 71. Hiring of Employees and Employee training
72. Adherence to Know Your Customer (KYC) guidelines by NBFCs/RNBCs and persons authorised by NBFCs/RNBCs including brokers/agents etc.
Chapter XI 73. With the issue of these directions, the instructions / guidelines contained in the circulars mentioned in the Appendix, issued by the Reserve Bank stand repealed. 74. All approvals / acknowledgements given under the above circulars shall be deemed as given under these directions. 75. All the repealed circulars are deemed to have been in force prior to the coming into effect of these directions. Government Order on Procedure for Implementation File No.17015/10/2002-IS-VI New Delhi, Dated 27th August, 2009 To, 1. Governor, Reserve Bank of India, Mumbai Order Procedure for Implementation of Section 51A of The Unlawful Activities (Prevention) Act, 1967 (UAPA) was amended and notified on 31.12.2008, which, inter-alia, inserted Section 51A to the Act. Section 51A reads as under : "51A. For the prevention of, and for coping with terrorist activities, the Central Government shall have power to - (a) freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the individuals or entities Listed in the Schedule to the Order, or any other person engaged in or suspected to be engaged in terrorism; (b) prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of the individuals or entities Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism; (c) prevent the entry into or the transit through India of individuals Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism", The Unlawful Activities (Prevention) Act define "Order" as under : "Order" means the Prevention and Suppression of Terrorism (Implementation of Security Council Resolutions) Order, 2007, as may be amended from time to time. In order to expeditiously and effectively implement the provisions of Section 51A, the following procedures shall be followed :- Appointment and Communication of Details of UAPA Nodal Officers 2. As regards appointment and communication of details of UAPA nodal officers - (i) The UAPA nodal officer for IS-I division would be the Joint Secretary (IS.I), Ministry of Home Affairs. His contact details are 011-23092736 (Tel), 011-23092569 (Fax) and jsis@nic.in (e-mail id). (ii) The Ministry of External affairs, Department of Economic affairs, Foreigners Division of MHA, FIU-IND; and RBI, SEBI, IRDA (hereinafter referred to as Regulators) shall appoint a UAPA nodal officer and communicate the name and contact details to the IS-I Division in MHA. (iii) The States and UTs should appoint a UAPA nodal officer preferably of the rank of the Principal Secretary / Secretary, Home Department and communicate the name and contact details to the IS-I Division in MHA. (iv) The IS-I Division in MHA would maintain the consolidated list of all UAPA nodal officers and forward the list to all other UAPA nodal officers. (v) The RBI, SEBI, IRDA should forward the consolidated list of UAPA nodal officers to the Banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies respectively (vi) The consolidated list of the UAPA nodal officers should be circulated to the nodal officer of IS-I Division of MHA in July every year and on every change. Joint Secretary (IS-I), being the nodal officer of IS-I Division of MHA, shall cause the amended list of UAPA nodal officers to be circulated to the nodal officers of Ministry of External Affairs, Department of Economic affairs, Foreigners Division of MHA, RBI, SEBI, IRDA and FIU-IND. Communication of the List of Designated Individuals / Entities 3. As regards communication of the list of designated individuals / entities - (i) The Ministry of External Affairs shall update the list of individuals and entities subject to UN sanction measures on a regular basis. On any revision, the Ministry of External Affairs would electronically forward this list to the Nodal officers in Regulators, FIU-IND, IS-I Division and Foreigners' Division in MHA. (ii) The Regulators would forward the list mentioned in (i) above (referred to as designated lists) to the banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies respectively. (iii) The IS-I Division of MHA would forward the designated lists to the UAPA nodal officer of all States and UTs. (iv) The Foreigners Division of MHA would forward the designated lists to the immigration authorities and security agencies. Regarding Funds, Financial Assets or Economic Resources or related Services held in the Form of Bank Accounts, Stocks or Insurance Policies etc. 4. As regards funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or Insurance policies etc., the Regulators would forward the designated lists to the banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies respectively. The RBI, SEBI and IRDA would issue necessary guidelines to banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies requiring them to - (i) Maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether individuals or entities listed in the schedule to the Order, herein after, referred to as designated individuals / entities are holding any funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or Insurance policies etc., with them. (ii) In case, the particulars of any of their customers match with the particulars of designated individuals / entities, the banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies shall immediately, not later than 24 hours from the time of finding out such customer, inform full particulars of the funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or Insurance policies etc., held by such customer on their books to the Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail id :jsis@nic.in (iii) The banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies shall also send a copy of the communication mentioned in (ii) above to the UAPA nodal officer of the state / UT where the account is held and Regulators and FIU-IND, as the case may be. (iv) In case, the match of any of the customers with the particulars of designated individuals / entities is beyond doubt, the banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies would prevent designated persons from conducting financial transactions, under intimation to the Joint Secretary (lS.I), Ministry of Home Affairs, at Fax No.011-23092569 and also convey over telephone on 011- 23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail id :jsis@nic.in (v) The Banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies, shall file a Suspicious Transaction Report (STR) with FIU-IND covering all transactions in the accounts covered by paragraph (ii) above, carried through or attempted as per the prescribed format. 5. On receipt of the particulars referred to in paragraph 3 (ii) above, IS-I Division of MHA would cause a verification to be conducted by the State Police and / or the Central Agencies so as to ensure that the individuals / entities identified by the Banks, stock exchanges / depositories, intermediaries regulated by SEBI and Insurance Companies are the ones listed as designated individuals / entities and the funds, financial assets or economic resources or related services, reported by banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies are held by the designated individuals / entities. This verification would be completed within a period not exceeding 5 working days from the date of receipt of such particulars. 6. In case, the results of the verification indicate that the properties are owned by or are held for the benefit of the designated individuals / entities, an order to freeze these assets under section 51A of the UAPA would be issued within 24 hours of such verification and conveyed electronically to the concerned bank branch, depository, branch of insurance company branch under intimation to respective Regulators and FlU-IND. The UAPA nodal officer of IS-I Division of MHA shall also forward a copy thereof to all the Principal Secretary / Secretary, Home Department of the States or UTs, so that any individual or entity may be prohibited from making any funds, financial assets or economic resources or related services available for the benefit of the designated individuals / entities or any other person engaged in or suspected to be engaged in terrorism. The UAPA nodal officer of IS-I Division of MHA shall also forward a copy of the order under section 51A, to all Directors General of Police / Commissioners of Police of all states / UTs for initiating action under the provisions of Unlawful Activities (Prevention) Act. The order shall take place without prior notice to the designated individuals / entities. Regarding Financial Assets or Economic Resources of the Nature of Immovable Properties 7. IS-I Division of MHA would electronically forward the designated lists to the UAPA nodal officer of all States and UTs with the request to have the names of the designated individuals / entities, on the given parameters, verified from the records of the office of the Registrar performing the work of registration of immovable properties in their respective jurisdiction. 8. In case, the designated individuals / entities are holding financial assets or economic resources of the nature of immovable property and if any match with the designated individuals / entities is found, the UAPA nodal officer of the state / UT would cause communication of the complete particulars of such individual / entity along with complete details of the financial assets or economic resources of the nature of immovable property to Joint Secretary (IS.I), Ministry of Home Affairs, immediately within 24 hours at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post would necessarily be conveyed on e-mail id :jsis@nic.in. 9. The UAPA nodal officer of the state / UT may cause such inquiry to be conducted by the State Police so as to ensure that the particulars sent by the Registrar performing the work of registering immovable properties are indeed of these designated individuals / entities. This verification would be completed within a maximum of 5 working days and should be conveyed within 24 hours of the verification, if it matches with the particulars of the designated individual / entity to Joint Secretary (IS-I), Ministry of Home Affairs at the Fax, telephone numbers and also on the e-mail id given below. 10. A copy of this reference should be sent to Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No.011-23092569 and also convey over telephone on 011- 23092736. The particulars apart from being sent by post would necessarily be conveyed on e-mail id :jsis@nic.in. MHA may have the verification also conducted by the Central Agencies. This verification would be completed within a maximum of 5 working days. 11. In case, the results of the verification indicate that the particulars match with those of designated individuals / entities, an order under section 51A of the UAPA would be issued within 24 hours, by the nodal officer of IS-I Division of MHA and conveyed to the concerned Registrar performing the work of registering immovable properties and to FIU-IND under intimation to the concerned UAPA nodal officer of the state / UT. The order shall take place without prior notice, to the designated individuals/entities. 12. Further, the UAPA nodal officer of the state / UT shall cause to monitor the transactions / accounts of the designated individual / entity so as to prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of the individuals or entities Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism. The UAPA nodal officer of the state / UT shall upon coming to his notice, transactions and attempts by third party immediately bring to the notice of the DGP / Commissioner of Police of the State / UT for also initiating action under the provisions of Unlawful Activities (Prevention) Act. Implementation of Requests Received from Foreign Countries under U.N. Security Council Resolution 1373 of 2001 13. U.N. Security Council Resolution 1373 obligates countries to freeze without delay the funds or other assets of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities owned or controlled directly or indirectly by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds or other assets derived or generated from property owned or controlled, directly or indirectly, by such persons and associated persons and entities. Each individual country has the authority to designate the persons and entities that should have their funds or other assets frozen. Additionally, to ensure that effective cooperation is developed among countries, countries should examine and give effect to, if appropriate, the actions initiated under the freezing mechanisms of other countries. 14. To give effect to the requests of foreign countries under U.N. Security Council Resolution 1373, the Ministry of External Affairs shall examine the requests made by the foreign countries and forward it electronically, with their comments, to the UAPA nodal officer for IS-I Division for freezing of funds or other assets. 15. The UAPA nodal officer of IS-I Division of MHA, shall cause the request to be examined, within 5 working days, so as to satisfy itself that on the basis of applicable legal principles, the requested designation is supported by reasonable grounds, or a reasonable basis, to suspect or believe that the proposed designee is a terrorist, one who finances terrorism or a terrorist organization, and upon his satisfaction, request would be electronically forwarded to the nodal officers in Regulators, FIU-IND and to the nodal officers of the States / UTs. The proposed designee, as mentioned above would be treated as designated individuals / entities. 16. Upon receipt of the requests by these nodal officers from the UAPA nodal officer of IS-I Division, the procedure as enumerated at paragraphs 4 to 12 above shall be followed. The freezing orders shall take place without prior notice to the designated persons involved Procedure for Unfreezing of Funds, Financial Assets or Economic Resources or related Services of Individuals / Entities Inadvertently affected by the Freezing Mechanism upon Verification that the Person or Entity is not a Designated Person 17. Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets or economic resources or related services, owned / held by them has been inadvertently frozen, they shall move an application giving the requisite evidence, in writing, to the concerned bank, stock exchanges / depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State / UT nodal officers. 18. The banks, stock exchanges / depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State / UT nodal officers shall inform and forward a copy of the application together with full details of the asset frozen given by any individual or entity informing of the funds, financial assets or economic resources or related services have been frozen inadvertently, to the nodal officer of IS-I Division of MHA as per the contact details given in paragraph 4 (ii) above, within two working days. 19. The Joint Secretary (IS-I), MHA, being the nodal officer for IS-I Division of MHA shall cause such verification as may be required on the basis of the evidence furnished by the individual / entity and if he is satisfied, he shall pass an order, within 15 working days, unfreezing the funds, financial assets or economic resources or related services, owned / held by such applicant, under intimation to the concerned bank, stock exchanges / depositories, intermediaries regulated by SEBI, insurance company and the nodal officers of States / UTs. However, if it is not possible for any reason to pass an Order unfreezing the assets within 15 working days, the nodal officer of IS-I Division shall inform the applicant. Communication of Orders under Section 51A of Unlawful Activities (Prevention) Act 20. All Orders under section 51A of Unlawful Activities (Prevention) Act, relating to funds, financial assets or economic resources or related services, would be communicated to all the banks, depositories / stock exchanges, intermediaries regulated by SEBI, insurance companies through respective Regulators, and to all the Registrars performing the work of registering immovable properties, through the state / UT nodal officer by IS-I Division of MHA. Regarding Prevention of Entry into or Transit through India 21. As regards prevention of entry into or transit through India of the designated individuals, the Foreigners Division of MHA, shall forward the designated lists to the immigration authorities and security agencies with a request to prevent the entry into or the transit through India. The order shall take place without prior notice to the designated individuals / entities. 22. The immigration authorities shall ensure strict compliance of the Orders and also communicate the details of entry or transit through India of the designated individuals as prevented by them to the Foreigners' Division of MHA. Procedure for Communication of Compliance of Action taken under Section 51A 23. The nodal officers of IS-I Division and Foreigners Division of MHA shall furnish the details of funds, financial assets or economic resources or related services of designated individuals / entities frozen by an order, and details of the individuals whose entry into India or transit through India was prevented, respectively, to the Ministry of External Affairs for onward communication to the United Nations. 24. All concerned are requested to ensure strict compliance of this order. (D. Diptivilasa) Annex II
* Not required while opening the bank account. However, FPIs concerned may submit an undertaking that upon demand by Regulators/Law Enforcement Agencies the relative document/s would be submitted to the bank. @@ FPIs from certain jurisdictions where the practice of passing Board Resolution for the purpose of opening bank accounts etc. is not in vogue, may submit ‘Power of Attorney granted to Global Custodian/Local Custodian in lieu of Board Resolution’.
Appendix List of Circulars Repealed Partially, with the issuance of Master Direction
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