IIBF ANTI-MONEY LAUNDERING & KNOW YOUR CUSTOMER 2024

IIBF ANTI-MONEY LAUNDERING & KNOW YOUR CUSTOMER 2024

RBI GUIDELINES ON THE SYSTEM ADEQUACY TO COMBAT MONEY LAUNDERING ISSUES

Money Laundering is a serious offense & is becoming a global concept as it is becoming more & more sophisticated and complex. To combat this practice in India, the Indian Government has come up with a law, ‘Prevention of Money Laundering Act, 2002’ which in short is known by its initials, PMLA. 

In this article, we will basically read the guidelines that have been issued by the Reserve Bank of India to combat the said issue. But before we get to the main part, we first need to understand what is Money Laundering & why is necessary to put a stop to it.

MONEY LAUNDERING 

It basically the act of disguising financial assets produced from illegal activities so as to use them without getting under the eyes of law. In the process of money laundering, the criminal proceeds are transformed into funds with an apparently legal source. 

FINANCING OF TERRORISM 

Most of the money laundering activities are performed to provide financial support to terrorism or those who plan or engage in terrorism.

Although the sources of terrorism might or might not be legitimate but the two activities are linked in the way that the techniques used to launder money are essentially the same as those employed to conceal the sources and used for terrorist financing. 

MONEY LAUNDERING OFFENCE

Like Governments around the world, the Indian Government has also come up with the rules & regulations to prevent the money laundering.

Under the Prevention of Money Laundering Act, 2002 (PMLA), whosoever directly or indirectly attempts to indulge or knowingly is a party or knowingly assists or is actually involved in any process or activity connected with the proceeds of crime & projecting it as untainted property shall be guilty of offence of money laundering.

RBI GUIDELINES ON THE SYSTEM ADEQUACY TO COMBAT MONEY LAUNDERING ISSUES

Requirements or obligation under International Agreements & Communication from International Agencies:

• No bank branch must have any account in the name of individuals or entities who appear in the lists of individuals & entities, suspected of having terrorist links, that get approved by United Nations Security Council (UNSC) (and periodically circulated).

In addition, there are other UNSCRs that are circulated by RBI from time to time.  Therefore, the bank branches 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. If there is any resemblance with any of the individuals/entities in the list, they should immediately be intimated to Compliance Officer at ROs / Principal Officer.

• As per the PMLA Rules, any suspicious transaction will include inter alia transactions that have a reasonable ground of suspicion of involvement in terrorism. 

Therefore, banks are advised to develop a suitable mechanism having appropriate policy framework to enhance the monitoring of suspected accounts and thereby, enabling the swift identification of the transactions & reporting to the FIU-IND on priority basis.

• As per the FATF (Financial Action Task Force), the strategic AML / CFT deficient jurisdiction are categorized into 3 groups as under:

• Jurisdictions that are subject to FATF
• Jurisdictions with strategic AML/CFT deficiencies
• Jurisdictions that were previously publicly identified by the FATF as having strategic AML/CFT deficiencies,

Read Also:- IIBF KYC AML EXAM NOTIFICATION 2024

• Freezing of Assets: The assets must be freezed as per the procedure laid down in the UAPA Order dated 21.02.2021 & any meticulous compliance with the Order issued by the MHA, GoI.

• Suspicious transaction: Following are the transactions that fall under the category of suspicious transactions including an attempted transaction (may or may not be in cash), to a person acting in good faith:

1. there is a reasonable ground of suspicion that it might involve crime irrespective of the value involved in the transactions or 
2. It appears that the transaction has arisen from unusual or unjustified complex circumstances; 
3. It does not appear to have any economic rationale or bonafide purpose; 
4. There is reasonable ground of suspicion that it might involve terrorism financing
5. it is unable to verify the identity and/or obtain documents required or there is no reliability on the furnished data or information & is unable to apply appropriate customer due diligence measures and therefore, could not satisfy the true identity of the customer, should also file an STR with FIU-IND.

There is a full-fledged indicative list of suspicious activities provided as a standard to identify & report the mentioned activities in STR.

• Issue or Payment of DD/TT etc., Sale of Gold Coins & Sale of Third-Party Products:

To curb the misuse of banking channels to violate the fiscal laws & evasion of taxes: 

• Demand Drafts, Sale of Gold Coin, Telegraphic transfers and Third-Party Products  = or > Rs. 50,000/- must be issued only by debit to the customer’s account or against cheque or other instruments tendered by the purchaser and not against cash payment. 

• Similarly, payments of the above-mentioned instruments & products = or > Rs. 50,000.00 must be made through banking channels only & not in cash. 

And all the transactions that are carried out by a single customer during a day should be aggregated to a ceiling of Rs. 50,000.00. 

Further transactions that involve Rs.50,000.00 & more shall be undertaken only after getting & verifying PAN given by the bank customers as well as walk-in customers of the bank. It also applies to sale of Bank’s own products, reloading of prepaid/travel cards, payment of dues of credit cards/sale & any other product for Rs. 50,000.00 and more. 

Important Topic:- IIBF AML KYC STUDY MATERIAL 2024

Further, the name of the purchaser shall be incorporated on the face of the demand draft, pay order, banker‘s cheques, etc., by the issuing branch. These instructions takes effect for such instruments issued on or after September 15, 2018.

Branches 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 3 of this Policy

(b) Transaction details of sale of third party products and related records shall be maintained as prescribed in Section 10.5 ―PRESERVATION OF RECORDS‖ of this Policy.

(c)AML software capable of capturing, generating and analyzing 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.