Master Circular on Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under Prevention of Money Laundering Act, (PMLA),  2002

Purpose

Banks were advised to follow certain customer identification procedure for opening of accounts and monitoring transactions of a suspicious nature for the purpose of reporting it to appropriate authority. These ‘Know Your Customer’ guidelines have been revisited in the context of the Recommendations made by the Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards and on Combating Financing of Terrorism (CFT). Detailed guidelines based on the Recommendations of the Financial Action Task Force and the paper issued on Customer Due Diligence (CDD) for banks by the Basel Committee on Banking Supervision, with indicative suggestions wherever considered necessary, have been issued. Banks have been advised to ensure that a proper policy framework on ‘Know Your Customer’ and Anti-Money Laundering measures with the approval of the Board is formulated and put in place.

2. This Master Circular aims at consolidating all the instructions/guidelines issued by RBI on Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards. The Master Circular has been placed on the RBI website (http://www.rbi.org.in).

Previous instructions

A list of circulars issued in this regard is given in Annex – III.

Application

i) The instructions, contained in the master circular, are applicable to all Financial  Institutions and all the scheduled commercial banks excluding RRBs. The said  guidelines shall also apply to the branches and majority owned subsidiaries located abroad, especially, in countries which do not or insufficiently apply the FATF Recommendations, to the extent local laws permit. When local applicable laws and regulations prohibit implementation of these guidelines, the same should be brought to the notice of Reserve Bank. In case there is a variance in KYC/AML standards prescribed by the Reserve Bank and the host country regulators, branches/overseas subsidiaries of banks are required to adopt the more stringent regulation of the two.

ii) These guidelines are issued under Section 35A of the Banking Regulation Act, 1949 and Rule 7 of Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005. Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act.

iii) This Master Circular consolidates all the circulars issued on the subject up to June 30, 2008.

Structure

1. Introduction

1.1 KYC/AML/CFT
1.2 Definition of Customer

2. Guidelines

2.1 General
2.2 KYC Policy
2.3 Customer Acceptance Policy
2.4 Customer Identification Procedure
2.5 Customer Identification Requirements – Indicative guidelines
2.6 KYC guidelines for small deposit accounts
2.7 Monitoring of transactions
2.8 Closure of Accounts
2.9 Risk Management
2.10 Introduction of new technology – credit/debit/smart/gift cards
2.11 Combating Financing of Terrorism
2.12 Correspondent Banking
2.13 Wire Transfers
2.14 Principal Officer
2.15 Maintenance of records of transactions/Information to be preserved/ Maintenance and preservation  of  records/Cash and Suspicious transactions reporting to Financial Intelligence Unit-India (FIU-IND)
2.16 Cash and Suspicious Transaction Report
2.17 Customer Education/ Training of Employees /Hiring of Employees

3. Annex

3.1 Annex - I - Indicative List of documents required for opening of accounts
3.2 Annex – II – List of reporting formats
3.3 Annex – III – List of circulars superseded by the Master Circular1 Introduction

1.1 Know Your Customer (KYC)/Anti-Money Laundering (AML) /
Combating of Financing of Terrorism (CFT)

The objective of  KYC/AML/CFT guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC procedures also enable banks to know/understand their customers and their financial dealings better which in turn help them  manage their risks prudently.  

(i) Although flexibility in the requirements of documents of identity and proof of address has been provided in the above mentioned KYC guidelines, it has been observed that a large number of persons, especially, those belonging to low income group both in urban and rural areas are not able to produce such documents to satisfy the bank about their identity and address. This would lead to their inability to access the banking services and result in their financial exclusion. Accordingly, the KYC procedure also provides for opening accounts for those persons who intend to keep balances not exceeding Rupees Fifty Thousand (Rs. 50,000/-) in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed Rupees One Lakh (Rs. 1,00,000/-) in a year.  In such cases, if a person who wants to open an account and is not able to produce documents mentioned in Annex I of this master circular, banks should open an account for him, subject to:

Introduction from another account holder who has been subjected to full KYC procedure. The introducer’s account with the bank should be at least six months old and should show satisfactory transactions. Photograph of the customer who proposes to open the account and also his address need to be certified by the introducer, 

or

any other evidence as to the identity and address of the customer to the satisfaction of the bank.

ii) While opening accounts as described above, the customer should be made aware that if at any point of time, the balances in all his/her accounts with the bank (taken together) exceeds Rupees Fifty Thousand (Rs. 50,000/-) or total credit in the account exceeds Rupees One Lakh (Rs. 1,00,000/-) in a year, no further transactions will be permitted until the full KYC procedure is completed. In order not to inconvenience the customer, the bank must notify the customer when the balance reaches Rupees Forty Thousand (Rs. 40,000/-) or the total credit in a year reaches Rupees Eighty thousand (Rs. 80,000/-) that appropriate documents for conducting the KYC must be submitted otherwise operations in the account will be stopped.

2.7 Monitoring of Transactions

Ongoing monitoring is an essential element of effective KYC procedures.  Banks can effectively control and reduce their risk 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. 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 categorization of accounts   and the need for applying enhanced due diligence measures.   Such review of risk categorisation of customers should be carried out at a periodicity of  not less than once in six months.

2.8 Closure of accounts

Where  the bank is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer,  the bank should consider closing the account or terminating the banking/business relationship after issuing due notice to the customer explaining the reasons for taking such a decision. Such decisions need to be taken at a reasonably senior level. 

2.9 Risk Management

a) The Board of Directors of the bank should ensure that an effective KYC programme is put in place by establishing appropriate procedures and ensuring their effective implementation.  It should cover proper management oversight, systems and controls, segregation of duties, training and other related matters.  Responsibility should be explicitly allocated within the bank for ensuring that the bank’s policies and procedures are implemented effectively. Banks should, in consultation with their boards, devise procedures for creating risk profiles of their existing and new customers and apply various anti money laundering measures keeping in view the risks involved in a transaction, account or banking/business relationship.

b) Banks’ internal audit and compliance functions have an important role in evaluating and ensuring adherence to the KYC policies and procedures.  As a general rule, the compliance function should provide an independent evaluation of the bank’s own policies and procedures, including legal and regulatory requirements. Banks should ensure that their audit machinery is staffed adequately with individuals who are well-versed in such policies and procedures.  Concurrent/ Internal Auditors should specifically check and verify the application of KYC procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard should be put up before the Audit Committee of the Board on quarterly intervals.

2.10 Introduction of New Technologies – Credit cards/debit cards/ smart cards/gift card

Banks should pay special attention to any money laundering threats that may arise from new or developing technologies including internet banking that might favour anonymity, and take measures, if needed, to prevent their use in money laundering schemes. Many banks are engaged in the business of issuing a variety of Electronic Cards that are used by customers for buying goods and services, drawing cash from ATMs, and can be used for electronic transfer of funds.   Further, marketing of these cards is generally done through the services of agents. Banks should ensure that appropriate KYC procedures are duly applied before issuing the cards to the customers. It is also desirable that agents are also subjected to KYC measures.

2.11 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.  Banks 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. Banks/Financial Institutions 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. Banks 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, banks 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.

2.12 Correspondent Banking

a) Correspondent banking is the provision of banking services by one bank (the “correspondent bank”) to another bank (the “respondent bank”). These services may include cash/funds management, international wire transfers, drawing arrangements for demand drafts and mail transfers, payable-through-accounts, cheques clearing etc. Banks should gather sufficient information to understand fully the nature of the business of the correspondent/respondent bank. Information on the other bank’s management, major business activities, level of AML/CFT compliance, purpose of opening the account, identity of any third party entities that will use the correspondent banking services, and regulatory/supervisory framework in the correspondent's/respondent’s country may be of special relevance. Similarly, banks should try to ascertain from publicly available information whether  the other bank has been subject to any money laundering or terrorist financing investigation or regulatory action.  While it is desirable that such relationships should be established only with the approval of the  Board, in case the Boards of some banks wish to delegate the power to an administrative authority, they may delegate the power to a committee headed by the Chairman/CEO of the bank while laying down clear parameters for approving such relationships. Proposals approved by the Committee should invariably be put up  to the Board at its next meeting for post facto approval. The responsibilities of each bank with whom correspondent banking relationship is established should be clearly documented. In the case of payable-through-accounts, the correspondent bank should be satisfied that the respondent bank has verified the identity of the customers having direct access to the accounts and is undertaking ongoing 'due diligence' on them. The correspondent bank should also ensure that the respondent bank is able to provide the relevant customer identification data immediately on request.

b) Correspondent relationship with a “Shell Bank”

Banks should refuse to enter into a correspondent relationship with a “shell bank” (i.e. a bank which is incorporated in a country where it has no physical presence and is unaffiliated to any regulated financial group). Shell banks are not permitted to operate in India. Banks should also guard against establishing relationships with respondent foreign financial institutions that permit their accounts to be used by shell banks. Banks should be extremely cautious while continuing relationships with respondent banks located in countries with poor KYC standards and countries identified as 'non-cooperative' in the fight against money laundering and terrorist financing. Banks should ensure that their respondent banks have anti money laundering policies and procedures in place and apply enhanced 'due diligence' procedures for transactions carried out through the correspondent accounts.

2.13 Wire Transfers

Banks use wire transfers as an expeditious method for transferring funds between bank accounts. Wire transfers include transactions occurring within the national boundaries of a country or from one country to another. As wire transfers do not involve actual movement of currency, they are considered as a rapid and secure method for transferring value from one location to another.

i) The salient features of a wire transfer transaction are as under :

a) Wire transfer is a transaction carried out 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. The originator and the beneficiary may be the same person.  b) Cross-border transfer means any wire transfer where the originator and the beneficiary bank or financial institution are located in different countries. It may include any chain of wire transfers that has at least one cross-border element.

c) Domestic wire transfer means any wire transfer where the originator and receiver are located in the same country. It may also include a chain of wire transfers that takes place entirely within the borders of a single country even though the system used to effect the wire transfer may be located in another country.

d) The originator is the account holder, or where there is no account, the person (natural or legal) that places the order with the bank to perform the wire transfer.

ii) Wire transfer is an instantaneous and most preferred route for transfer of funds across the globe and hence, there is a need for preventing terrorists and other criminals from having unfettered access to wire transfers for moving their funds and for detecting any misuse when it occurs. This can be achieved if basic information on the originator of wire transfers is immediately available to appropriate law enforcement and/or prosecutorial authorities in order to assist them in detecting, investigating, prosecuting terrorists or other criminals and tracing their assets. The information can be used by Financial Intelligence Unit - India (FIU-IND) for analysing suspicious or unusual activity and disseminating it as necessary. The originator information can also be put to use by the beneficiary bank to facilitate identification and reporting of suspicious transactions to FIU-IND. Owing to the potential terrorist financing threat posed by small wire transfers, the objective is to be in a position to trace all wire transfers with minimum threshold limits. Accordingly, banks must ensure that all wire transfers are accompanied by the following  information :

( A ) Cross-border wire transfers

a) All cross-border wire transfers must be accompanied by accurate and meaningful originator information.

b) Information accompanying cross-border wire transfers must contain the name and address of the originator and where an account exists, the number of that account. In the absence of an account, a unique reference number, as prevalent in the country concerned, must be included.

c) Where several individual transfers from a single originator are bundled in a batch file for transmission to beneficiaries in another country, they may be exempted from including full originator information, provided they include the originator’s account number or unique reference number as at (b) above.

(B) Domestic wire transfers

a) Information accompanying all domestic wire transfers of Rs. 50000/- (Rupees Fifty Thousand)  and  above    must  include  complete  originator  information i.e. name, address and account number etc., unless full originator information can be made available to the beneficiary bank by other means.

b) If a bank has reason to believe that a customer is intentionally structuring wire transfers to below Rs. 50000/- (Rupees Fifty Thousand) to several beneficiaries in order to avoid reporting or monitoring, the bank must insist on complete customer identification before effecting the transfer. In case of non-cooperation from the customer, efforts should be made to establish his identity and Suspicious Transaction Report (STR) should be made to FIU-IND. 

c) When a credit or debit card is used to effect money transfer, necessary information as (a) above should be included in the message.

(iii) Exemptions

Interbank    transfers  and  settlements  where  both  the  originator  and  beneficiary  are    banks  or financial institutions would be exempted from the above requirements.

(iv) Role of Ordering, Intermediary and Beneficiary banks

(a) Ordering bank

An ordering bank is the one that originates a wire transfer as per the order placed by its customer. The ordering bank must ensure that qualifying wire transfers contain complete originator information. The bank must also verify and preserve the information at least for a period of ten years.

(b) Intermediary bank

For both cross-border and domestic wire transfers, a bank processing an intermediary element of a chain of wire transfers must ensure that all originator information accompanying a wire transfer is retained with the transfer. Where technical limitations prevent full originator information accompanying a cross-border wire transfer from remaining with a related domestic wire transfer, a record must be kept at least for ten years (as required under Prevention of Money Laundering Act, 2002) by the receiving intermediary bank of all the information received from the ordering bank.

(c) Beneficiary bank

A beneficiary bank should have effective risk-based procedures in place to identify wire transfers lacking complete originator information. The lack of complete originator information may be considered as a factor in assessing whether a wire transfer or related transactions are suspicious and whether they should be reported to the Financial Intelligence Unit-India. The beneficiary bank should also take up the matter with the ordering bank if a transaction is not accompanied by detailed information of the fund  remitter. If the ordering bank fails to furnish information on the remitter, the beneficiary bank should consider restricting or even terminating its business relationship with the ordering bank.

2.14 Principal Officer

a) Banks should appoint a senior management officer to be designated as Principal Officer. Principal Officer shall be located at the head/corporate office of the bank and shall be responsible for monitoring and reporting of all transactions and sharing of information as required under the law. He will maintain close liaison with enforcement agencies, banks and any other institution which are involved in the fight against money laundering and combating financing of terrorism.

b) The Principal Officer will be responsible for timely submission of CTR, STR and reporting of counterfeit notes to  FIU-IND.

2.15 Maintenance of records of transactions/Information to be preserved / Maintenance and preservation  of  records/Cash and Suspicious transactions reporting to Financial Intelligence Unit- India (FIU-IND)

Government of India, Ministry of Finance, Department of Revenue, vide its notification dated July 1, 2005 in  the Gazette of India, has notified the  Rules under the  Prevention of Money Laundering Act (PMLA), 2002. In terms of the said Rules, the provisions of PMLA, 2002   came into effect from July 1, 2005.   Section 12 of the PMLA, 2002 casts certain obligations on the banking companies in regard to preservation and reporting of customer account information. Banks are, therefore, advised to go through the provisions of PMLA, 2002  and the Rules notified there under and take all steps considered necessary to ensure   compliance with the requirements of Section 12 of the Act ibid.

(i) Maintenance of records of transactions 

Banks should introduce a system of maintaining proper record of transactions prescribed  under  Rule 3,  as mentioned below: 

a) all cash transactions of the value of more than Rupees Ten Lakh or its equivalent in foreign currency;

b) all series of cash transactions integrally connected to each other which have been valued below Rupees Ten Lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds Rupees Ten Lakh;

c) all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security or a document has taken place facilitating the transaction;

d) all suspicious transactions whether or not made in cash and by way of as mentioned in the Rules.

e) Explanation - Integrally connected cash transactions referred to at (b) above

The following transactions have taken place in a branch during the
month of  April , 2008:

(ii) Information to be preserved

Banks are required to maintain the following information in respect of transactions  referred to in Rule 3:

a) the nature of the transactions;

b) the amount of the transaction and the currency in which it was denominated;

c) the date on which the transaction was conducted; and

d) the parties to the transaction.

(iii) Maintenance and Preservation of records

a) Banks are required to maintain  the records containing information in respect of transactions  referred to in Rule 3 above.  Banks should take appropriate steps to 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. Further, banks should maintain for at least ten years from the date of cessation of transaction between the bank and the client, all necessary records of transactions, both domestic or international, which will permit   reconstruction of individual transactions (including the amounts and types of currency involved if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.

b) Banks  should ensure that  records pertaining to  the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN, card, utility bills etc.) obtained while opening the account and during the course of business relationship,  are properly preserved  for at least ten years after the business relationship is ended.  The identification records and transaction data should be made available to the competent authorities upon request.  

c) In paragraph  2.7 of this Master Circular, banks have been advised to pay special attention to all complex, unusual large transactions and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose.  It is further clarified that the background including all documents/office records/memorandums pertaining to such transactions and purpose thereof should, as far as possible, be examined and the findings at branch as well as Principal Officer level should be properly recorded. Such records and related documents should be made available to help auditors in their day-to-day work relating to scrutiny of transactions and also to Reserve Bank/other relevant authorities.  These records are required to be preserved for ten years as is required under PMLA, 2002.

(iv) Reporting to Financial Intelligence Unit-India

a)  In terms of the PMLA rules, banks are required to report  information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND)  in  respect of transactions  referred to in Rule 3 at the following address:

Director, FIU-IND,
Financial Intelligence Unit-India,
6th Floor, Hotel Samrat,
Chanakyapuri, 
New Delhi-110021.
Website - http://fiuindia.gov.in/

b) Banks should carefully go through all the reporting formats. There are  altogether  eight  reporting  formats, as detailed in Annex II, viz. i) Cash  Transactions  Report (CTR); ii)  Summary  of CTR iii) Electronic File Structure-CTR; iv) Suspicious Transactions Report (STR); v) Electronic File Structure-STR; vi) Counterfeit Currency Report (CCR); vii) Summary of CCR and viii) Electronic File Structure-CCR. The reporting formats contain detailed guidelines on the compilation and manner/procedure of submission of the reports to FIU-IND.  It would be necessary for banks to initiate urgent steps to ensure electronic filing of all types of reports to FIU-IND. The related hardware and technical requirement for preparing reports in an electronic format, the related data files and data structures thereof are furnished in  the instructions part of the concerned formats.

c) FIU-IND have placed on their website editable electronic utilities to enable banks to file electronic CTR/STR who are yet to install/adopt suitable technological tools for extracting CTR/STR from their live transaction data base.It is, therefore, advised that in cases of banks, where all the branches are not fully computerized, the Principal Officer of the bank should cull out the transaction details from branches which are not yet computerized and suitably arrange 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 in their website http://fiuindia.gov.in. 

d) In terms of instructions contained in paragraph 2.3(b) of this Master Circular, banks are required to prepare a profile  for each customer based on risk categorisation. Further, vide paragraph 2.7, the need for periodical review of risk categorisation has been emphasized. It is, therefore, reiterated that banks, as a part of transaction monitoring mechanism, are required to put in place an appropriate software application to throw alerts when the transactions are inconsistent with  risk categorization and updated profile of customers. It is needless to add that a robust software throwing alerts is essential for effective identification and reporting of suspicious transactions.

2.16 Cash Transaction Reports (CTR)

a) While detailed instructions for filing all types of reports are given in the instructions part of the related formats, banks should scrupulously adhere to the  following: 
 
i) The Cash  Transaction Report (CTR) for each month should be submitted to FIU-IND by 15th of the succeeding month. Cash transaction reporting by branches to their controlling offices should, therefore, invariably be submitted on monthly basis (not on fortnightly basis) and banks should ensure to submit CTR for every month to FIU-IND within the prescribed time schedule.

ii) All cash transactions, where forged or counterfeit Indian currency notes have been used as genuine should be reported by the Principal Officer to FIU-IND immediately in the specified format (Counterfeit Currency Report – CCR). These cash transactions should also include transactions where forgery of valuable security or documents has taken place and may be reported to FIU-IND in plain text form.

iii) While filing CTR, details of individual transactions below Rupees    Fifty Thousand need not be furnished.

iv) CTR should contain only the transactions carried out by the bank on behalf of their clients/customers excluding transactions between the internal accounts of the bank.

v) A summary of cash transaction report for the bank as a whole should be compiled  by the  Principal Officer of the bank  in physical form as per the format specified. The summary  should be  signed by the Principal Officer and submitted.

b) Suspicious Transaction Reports (STR)

i) While determining suspicious transactions, banks should be guided by definition of suspicious transaction contained in PMLA Rules as amended from time to time.

ii) It is likely that in some cases transactions are abandoned/aborted by customers on being asked to give some details or to provide documents. It is clarified that banks should report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction.

iii) Banks should make STRs  if they have reasonable ground to believe that the transaction involve proceeds of crime generally irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of PMLA, 2002 .

iv) The Suspicious Transaction Report (STR) should be furnished within 7 days of arriving at a conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature.  The Principal Officer should record his reasons for treating any transaction or a series of transactions as suspicious. It should be ensured that there is no undue delay in arriving at such a conclusion once a suspicious transaction report is received from a branch or any other office. Such report should be made available to the competent authorities on request.

v) In the context of creating KYC/AML awareness among the staff and for generating alerts for suspicious transactions, banks may consider the indicative list of suspicious activities contained in Annex-E of the 'IBA's Guidance Note for Banks, 2005'.

vi) Banks should not put    any restrictions on  operations in the  accounts where an STR has been made.  Moreover, it should be ensured  that there is no tipping  off  to the customer at any level.

2.17 Customer Education/Employee’s Training/Employee’s Hiring

a) Customer Education

The front desk staff needs to be specially trained to handle such situations while dealing with customers.

b) Employees’ Training

Banks must have an ongoing employee training programme so that the members of the staff are adequately trained in KYC procedures. Training requirements should have different focuses for frontline staff, compliance staff and staff dealing with new customers. It is crucial that all those concerned fully understand the rationale behind the KYC policies and implement them consistently.

c) Hiring of Employees

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 banks as an integral part of their recruitment/hiring process of personnel.

Annex- I

Customer Identification Procedure
Features to be verified and documents that may be obtained from customers

Annex – II

(List of various reports and their formats)

1. Cash Transaction Report (CTR)
2. Summary of CTR
3. Electronic File Structure - CTR
4. Suspicious Transaction Report (STR)
5. Electronic File Structure - STR
6. Counterfeit Currency Report (CCR)
7. Summary of CCR
8. Electronic File Structure - CCR

ANNEX - III

(List of Circulars on ‘Know your customer’ and monitoring of cash transactions)