KNOW YOUR CUSTOMER (KYC) DIRECTION, 2023

In terms of the provisions of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-
Laundering (Maintenance of Records) Rules, 2005, as amended from time to time by the Government of India as
notified by the Government of India, Regulated Entities (REs) are required to follow certain customer
identification procedures 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 35A of the Banking Regulation Act, 1949, the
Banking Regulation Act (AACS), 1949, read with Section 56 of the Act ibid, Rule 9(14) of Prevention of Money-
Laundering (Maintenance of Records) Rules, 2005 and all other laws enabling the Reserve Bank in this regard,
the RBI being satisfied that it is necessary and expedient in the public interest to do so, hereby issues the
Directions hereinafter specified.

1. Applicability

The guidelines apply to the branches and majority owned subsidiaries located abroad, to the extent

they are not contradictory to the local laws in the host country. In case there is a variance in KYC/AML

standards prescribed by the RBI and the host country regulators, branches of Bank are required to

adopt the more stringent regulation of the two. Provided this rule shall not .

2. Definitions :

i. Beneficial Owner (BO)

a. Where the customer is a company, the beneficial owner is the natural person(s), or
through one or more juridical persons, has/have a controlling ownership interest (10% or More
shares). Exemption from identification of BO : An entity listed on stock exchange , subsidiary of
such listed entities.

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 10% of capital or profits of the partnership or who exercises
control through other means

c. Where the customer is an unincorporated association or body of individuals, 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 (person holding the position of senior
managing official).
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 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 10% 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.(HOP&D Cir 240dated 09.06.2023)

ii. “Officially Valid Document” (OVD) means the passport, the driving license, proof of possession of
Aadhaar number, the Voter's Identity Card, job card issued by NREGA and letter issued by the
National Population Register containing details of name and address. Introduction is not necessary
for opening of accounts under PML Act and Rules or RBI.

iii. “Principal Officer” mean an offi er nominated the ank re pon i le for f rni hing information
as per rule 8 of the PML Rules (should belong to management level).

iv. “Common Reporting Standards” (CR ) mean reporting tandard et for implementation of
multilateral agreement signed to automatically exchange information based on Article 6 of the
Convention on Mutual Administrative Assistance in Tax Matters.
v. “FATCA” mean Foreign A o nt Ta Complian e A t of the nited tate of Ameri a ( A) hi h
inter alia, requires foreign financial institutions to report about financial accounts held by U.S.
taxpayers.

vi. “IGA” mean nter o ernmental Agreement between the Governments of India and the USA to
improve international tax compliance and to implement FATCA of the USA.

vii. KYC identifier means the unique number or code assigned to a customer by Central KYC Record
Registry.
Purpose :

The purpose of KYC policy is to put in place customer identification procedures for opening of accounts and
monitoring transactions in the accounts for detection of transactions of suspicious nature for the purpose of
reporting to Financial Intelligence Unit-India [FIU-IND] as per recommendations of Financial Action Task Force
(FATF) and the paper issued on Customer Due Diligence (CDD) for banks by the Basel Committee on Banking
Supervision (BCBS) on AML standards and on CFT measures.

For this Policy, the term Mone a ndering o ld al o o er finan ial tran a tion here the end-use of
funds is for financing terrorism, irrespective of the source of funds.

Know Your Customer (KYC) norms are aimed at:

(a) Establishing bonafide identification of individuals / corporate / others who are desirous of opening
an account.
(b) Underlining processes / procedures to monitor transactions of suspicious nature in accounts.
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 (c) Prescribing systems of conducting due diligence and reporting of such transactions.

Objective

To prevent Bank from being used, intentionally or unintentionally, by criminal elements for Money
Laundering or Terrorist Financing activities. KYC procedures also enable the Bank to know/understand
their customers & to comply with all the legal and regulatory obligations in respect of KYC norms / AML
standards / CFT measures / Bank ligation nder PM A

The KYC policy shall include following four key elements:

(a) Customer Acceptance Policy;
(b) Customer Identification Procedures (CIP)
(c) Risk Management; and
(d) Monitoring of Transactions

ank hall arr o t Mone a ndering (M ) and Terrori t Finan ing (TF) Ri k A e ment e er i e
periodically and take effective measures to mitigate terrorist financing risk.
Designated Director:
A “ e ignated ire tor” mean a per on de ignated the ank to en re o erall omplian e ith the
obligations imposed under Chapter IV of the PML Act and the Rules and shall include The Managing Director
or a whole-time Director, duly authorized by the Board of Directors.

CUSTOMER ACCEPTANCE POLICY

The main objective of the Customer Acceptance Policy is to lay down explicit criteria for acceptance of
customers.:

 No account is opened in anonymous or fictitious /benami name, where the bank is

unable to apply appropriate CDD measures, either due to non-cooperation of the
customer or non-reliability of the documents/information furnished by the customer.
The bank may also consider closing an existing account under similar circumstances.

 Branches should ENSURE 100% KYC Compliance in all accounts. Bank to ensure that
the Customer Acceptance Policy shall not result in denial of banking.

CUSTOMER IDENTIFICATION PROCEDURE (CIP)

Customer Identification Procedure means undertaking client due diligence measures including identifying
and verifying the customer and the beneficial owner. Banks need to obtain sufficient information to
establish, to their satisfaction, the identity of each new customer and risk profile .
 Commencement of an account-based relationship with the customer.
 Carrying out any international money transfer operations for a person who is not an account holder of
the bank.
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  When there is a doubt about the authenticity or adequacy of the customer identification data it has
obtained.
 Selling third party products as agents, selling their own products, payment of dues of credit cards/sale
and reloading of prepaid/travel cards and any other product for more than rupees fifty thousand.
 Carrying out transactions for a non-account-based customer, that is a walk-in customer, where the
amount involved is equal to or exceeds rupees fifty thousand (for single or multiple transfer).
 When a bank has reason to believe that a customer (account- based or walk-in) is intentionally
structuring a transaction into a series of transactions below the threshold of rupees fifty thousand.

The ultimate responsibility for customer due diligence and undertaking enhanced due diligence measures, as
applicable, will be with the Bank.

CUSTOMER DUE DILIGENCE (CDD) PROCEDURE

Part I - Customer Due Diligence (CDD) Procedure in case of Individuals

a. A certified copy of any OVD or the equivalent e-document thereof containing details of his identity
and address, One recent photographs, PN/FORM60 and at least one document in support of the
declared Profession / activity, nature of business or financial status or the equivalent e-document
thereof, annual income, turnover (in case of business).

Bank shall obtain the Aadhaar number from an individual who is Desirous of receiving any benefit or
subsidy under any scheme or Decides to submit his Aadhaar number voluntarily to the bank. In case
biometric e-KYC authentication cannot be performed for an individual desirous of receiving any benefit or
subsidy under any scheme owing to injury, illness or infirmity on account of old age or otherwise, and
similar causes, Banks shall, perform identification preferably by carrying out offline verification or
alternatively by obtaining the certified copy of any other OVD from the customer. In case the OVD
submitted by a foreign national does not contain the details of address, in such case the documents issued
by the Government departments of foreign jurisdictions and letter issued by the Foreign Embassy or
Mission in India shall be accepted as proof of address.
For the purpose of CDD, Bank can obtain KYC identifier with explicit customer consent to download KYC
records from CKYCR,in case the validity of KYC documents has lapsed same are not used for KYC purpose.
b. Accounts opened using OTP based e-KYC, in non-face-to-face mode are subject to the following
conditions:

i) There must be a specific consent from the customer for authentication through OTP.
ii) The aggregate balance of all the deposit accounts of the customer shall not exceed Rs.1,00,000/-.
iii) The aggregate of all credits in a financial year, in all the deposit accounts taken together, shall not
exceed Rs.2,00,000/-.
iv) For borrowal accounts, only term loans shall be sanctioned upto Rs.60,000/- in a year.
v) Accounts, both Deposit and borrowal, opened using OTP based e-KYC shall not be allowed for more
than one year within which identification is to be carried out otherwise accounts need to be closed
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 immediately.
vi) A declaration shall be obtained from the customer to the effect that no other account has been
opened nor will be opened using OTP based KYC in non-face-to-face mode with any other Bank.
Further, while uploading KYC information to CKYCR, Bank shall clearly indicate that such accounts
are opened using OTP based e-KYC and other Bank shall not open accounts based on the KYC
information of accounts opened with OTP based e-KYC procedure in non-face-to-face mode.
vii) Bank to ensure that OTP, Transaction alerts are sent only to the mobile number of the customer
registered with Aadhaar.
c. Bank may undertake V-CIP to carry out:

(a) V-CIP Procedure:

i) Bank shall formulate a clear work flow and standard operating procedure for V-CIP and ensure
adherence to it. The V-CIP process shall be operated only by officials of the Bank.

ii) The authorised official of the Bank performing the V-CIP shall record audio-video as well as capture
photograph of the customer present for identification and obtain the identification information using
any one of the following:

a) OTP based Aadhaar e-KYC authentication

b) Offline Verification of Aadhaar for identification

c) KYC records downloaded from CKYCR, in accordance with Section 58, using the KYC identifier
provided by the customer

d) Equivalent e-document of Officially Valid Documents (OVDs) including documents issued through
Digilocker

Bank shall ensure to redact or blackout the Aadhaar number in terms of Section 14.
In case of offline verification of Aadhaar using XML file or Aadhaar Secure QR Code, it shall be ensured
that the XML file or QR code generation date is not older than 3 days from the date of carrying out V-
CIP.

d. In case an individual customer who does not possess any of the OVDs and desires to open a bank
, which entails the following limitations:

i) the aggregate of all credits in a financial year does not exceed rupees one lakh;
ii) The aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand;
and

iii) The balance at any point of time does not exceed rupees fifty thousand.
Provided, that this limit on balance shall not be considered while making deposits through Government
grants, welfare benefits and payment against procurements.
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 n a e the addre mentioned a per proof of addre ndergoe a hange fre h proof of address is to
be submitted to the bank/FI within a period of six months.

In case of close relatives, e.g. husband, wife, son, daughter and parents, etc. who live with their wife,
husband, father/mother, daughter and son, who do not have officially valid document for address
verification, then, in such cases, banks/FIs should obtain OVD for proof of address and identity of the
relative with whom the prospective customer is living together with a declaration from the relative that
the said person (prospective customer) proposing to open an account is a relative and is staying with
her/him.

e. Basic Savings Bank Deposit Account: It offers following minimum common facilities to all their customers:

a. The account shall not have the requirement of any minimum balance.
b. The services available in the account will include deposit and withdrawal of cash at bank branch as
well as ATMs; receipt/credit of money through electronic payment channels or by means of
deposit/collection of cheques drawn by Central/State Government agencies and departments.

c. While there will be no limit on the number of deposits that can be made in a month, account
holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals.

d. Facility of ATM card or ATM-cum-Debit Card

older of ai a ing ank epo it A o nt ill not e eligi le for opening an other a ing ank
deposit account in any branch of the Bank. Further, an account of the student beneficiary could be opened
a a“ a i a ing ank epo it A o nt” if he/she submits documents issued by the School Authorities
or parents of the student for KYC purpose.

Part II - CDD Measures for Sole Proprietary firms

f. For opening an account in the name of a sole proprietary firm, CDD of the individual (proprietor) shall be
carried out. Documents or the equivalent e-document thereof as a proof of business/ activity in the name
of the proprietary firm shall also be obtained:

a. Registration certificate, Certificate/ licence issued by the municipal authorities under Shop and
Establishment Act/Udyam Registration Certificate.

b. Sales and income tax returns. CST/VAT/ GST certificate (provisional/final).

c. IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT

d. Complete Income Tax Return (not just the acknowledgement) in the name of the sole proprietor
where the firm's income is reflected, duly authenticated/acknowledged by the Income Tax
authorities.

e. Utility bills such as electricity, water, landline, telephone bills, etc.

f. Aadhaar number and PAN or equivalent e-document thereof or Form 60 as defined in
the Income-tax rules, 1962.
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 Part III- CDD Measures for Legal Entities

g. For opening an account of a company, certified copies of each of the following documents or the
equivalent e-document thereof shall be obtained:

a. Certificate of incorporation ,Memorandum and Articles of Association

b. Permanent Account Number of the company , A resolution from the Board of Directors and power
of attorney granted to its managers, officers or employees to transact on its behalf

c. The names of the relevant persons holding senior management , the registered office & principal
place of business if different .

h. Documents, as specified in Section 14, of the managers, officers or employees,

i. For opening an account of a partnership firm, the certified copies of each of the following documents or
the equivalent e-document thereof shall be obtained:

a. Registration certificate , Partnership deed ,Permanent Account Number of the partnership firm, names
of all partners, address of registered office and the principal place of business if different.

b. Documents, as specified in Section 14, of the person holding an attorney to transact on its behalf.

Corporation: A Corporation is a body corporate having come into existence through a specified Act /
Notification of the Central / State Govt. While opening an account of a Corporation, the following
additional information should be obtained in addition to that required in case of a partnership firm:

a) Copy of the notification of Act by virtue of which the corporation has come into existence.
b) Memorandum and Articles of incorporation / relevant Rules / Regulations / Schemes, if any.
c) Resolution of the governing body authorizing Corporation to open an account with the bank and
naming the persons authorized to operate it.

d) Identification of those who have authority to operate the account.

j. For opening an account of a trust, certified copies of each of the following documents or the equivalent e-
document thereof shall be obtained:

a. Registration certificate, Trust deed, Permanent Account Number or Form No.60 of the trust

b. Documents, as specified in CDD,of the person holding an attorney to transact on its behalf

c. Copy of By laws, Resolution from trustees ,Telephone bill

d. KYC compliance of all management committee members

e. The names of the beneficiaries , trustees , settlers and authors the trust , the registered office\\

f. List of trustees and authorized to transact on behalf of the trust.

k. For opening an account of an unincorporated association or a body of individuals, certified copies of each
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 of the following documents or the equivalent e-document thereof shall be obtained:

a. Resolution of the managing body of such association or body of individuals

b. Permanent Account Number or Form No. 60 of the unincorporated association or a body of

individuals

c. Power of attorney granted to transact on its behalf.

d. Documents, as specified in Section 14, of the person holding an attorney to transact on its behalf
and such information as may be required by the bank to collectively establish the legal existence of
such an association or body of individuals.

l. For opening accounts of juridical persons not specifically covered in the earlier part, such as societies,
universities and local bodies like village panchayats, certified copies of the following documents or the
equivalent e-document thereof shall be obtained:

a. Document showing name of the person authorized to act on behalf of the entity;
b. Documents, as specified in Section 14, of the person holding an attorney to transact on its behalf
and such documents as may be required by the bank to establish the legal existence of such an
entity/juridical person.

m. For opening an account of Hindu Undivided Family, certified copies of each of the following documents or
the equivalent e-document thereof shall be obtained:

a. Identification information as mentioned under Section 14 in respect of the Karta andMajor

Coparceners, Declaration of HUF and its Karta, Recent Passport photographs duly self-attested by
major co-parceners along withtheir names and addresses.

b. Permanent Account Number or the equivalent e-document thereof or Form No. 60 as defined in
Income-tax Rules, 1962.

Part VI - Enhanced and Simplified Due Diligence Procedure

A. Enhanced Due Diligence

n. Accounts of non-face-to-face customers: In the case of non-face-to-face customers, apart from applying
the usual customer identification procedures, there must be specific and adequate procedures to mitigate
the higher risk involved. Certification of all the documents presented should be insisted upon and, if
necessary, additional documents may be called for.

Bank shall ensure that the first payment is to be effected through the customer's KYC-complied account
with another bank, for enhanced due diligence of non-face-to-face customers (other than Aadhaar OTP
based on-boarding). Section 40- Customer shall be categorized as high risk customer and shall be
subjected to enhanced monitoring until the identity is verified in face to face manner or through-CIP, etc.
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o. Accounts of Politically Exposed Persons (PEPs)
a. Bank shall have the option of establishing a relationship with PEPs provided that:

i. sufficient information including information about the sources of funds accounts of family
members and close relatives/Associates is gathered on the PEP

ii. The identity of the person shall have been verified before accepting the PEP as a customer; The
de i ion to open an a o nt for a P P i taken at a enior le el in a ordan e ith the ank
Customer Acceptance Policy;
iii. The CDD measures as applicable to PEPs including enhanced monitoring on an on- going basis
are applicable.
b. These instructions shall also be applicable to acco unts where PEP is the beneficial owner

c. Further, all the above norms, as are applicable to PEPs, should also be applied to the accounts of their
family members or close relatives. Such Accounts would be categorized as 'High Risk' and enhanced
due diligence be exercised.

p. Client accounts opened by professional intermediaries- Pooled Accounts:

Bank shall ensure while opening client accounts through professional intermediaries, that:
a. Clients shall be identified when client account is opened by a professional intermediary on
behalf of a single client.

b. Bank shall have option to hold 'pooled' accounts managed by professional intermediaries on
behalf of entities like mutual funds, pension funds or other types of funds.

c. Bank shall not open accounts of such professional intermediaries who are bound by any client
confidentiality that prohibits disclosure of the client details to the bank.

d. All the beneficial owners shall be identified where funds held by the intermediaries are not co-
mingled at the level of Bank, and there are 'sub-accounts', each of them attributable to a
beneficial owner, or where such funds are co-mingled at the level of Bank, the Bank shall look
for the beneficial owners.

e. Bank shall, at their discretion, rely on the 'customer due diligence' (CDD) done by an
intermediary, provided that the intermediary is a regulated and supervised entity and has
adequate systems in place to comply with the KYC requirements of the customers.

f. The ultimate responsibility for knowing the customer lies with the Bank.

q. Multi-Level Marketing (MLM) firms

It is observed by RBI that certain firms posing as Multi-Level Marketing (MLM) agencies for consumer
goods and services have been actually mobilizing large amounts of deposits from the public with promise
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 of high returns.

Where such above said features are noticed by the branches and in case they find such unusual operations
in their accounts, the matter shall be immediately reported to Reserve Bank and other appropriate
authorities such as FIU-IND through HO KYC and AML Cell.

B. Simplified Due Diligence

r. Simplified norms for Self Help Groups (SHGs) Simplified

a. CDD of all the members of SHG shall not be required while opening the savings bank account of the
SHG. CDD of all the office bearers shall suffice.

b. Customer Due Diligence (CDD) of all the members of SHG may be undertaken at the time of credit
linking of SHGs

s. 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 III
below, 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 III will be submitted.

RISK MANAGEMENT
t. For Risk Management, Bank shall have a risk based approach which includes the following.
a. Customers shall be categorized as low, medium and high risk category, based on the assessment
and risk perception of the Bank.
b. Ri k ategori ation hall e ndertaken a ed on parameter ha tomer identit
o ial finan ial tat nat re of ine a ti it and information a o t the lient ine and
their location etc. , covering delivery channels for delivery of products /services offered, type of
transaction undertaken-cash/wire transfer/ cheque forex etc.
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.

Based on the above criteria, the customers have been classified into three Money Laundering Risk Levels,
as tabulated herein below:

Risk Categories of different Class of Customers

Risk Class of Customers
Category

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 High Risk (a) Politically Exposed Persons(PEPs) and their Close relatives,
Customers
(d) Countries without adequate anti-money laundering standards
(e) Persons who live in High Risk countries (nationality is irrelevant).
(f) Non Resident Indians (NRIs),
(g) High Networth Individuals (HNIs)
(h) Customers engaged in certain professions where possibilities of money
laundering are high.
(i) Firms with sleeping partner(s),

(j) Companies having close family shareholding or beneficial ownership

(k) Trusts, charities, NGOs / NPOs, / religious / social organizations and the
organizations receiving donations.
(l) Where accounts are opened / operated through a mandate or power of Attorney.
(m) Persons / entities with dubious reputation as per the information available in
public domain.
(n) Non-face-to-face customers
(b) Bullion dealers (including sub-dealers) and Jewellers

Medium (a) Businessman having no Permanent place of activity

Risk (b) Professionals
Customers (c) Migrant customers
(d) Private Limited companies
(e) Partnership accounts
(f) Current Account customers where credit or debit summations exceed Rs 50 lakh
per annum in their accounts but they do not provide sufficient documentary
proof {viz. (i) balance sheet, profit and loss account, or (ii) receipt and payment
of funds, income and expenditure statement, or (iii)
income tax returns / assessment order, as the case may be}
(g) Other deposit account customers where credit or debit summations exceed Rs 10
lakh per annum in their accounts but they do not provide sufficient documentary
proof, such as, salary slip, income tax return /
assessment order, etc.
Low Risk (a) All customers not falling under the category of High / Medium Risks are to be
Customers
classified under Low Risk Category i.e. Salaried employees, accounts with small
balance and low turnover, Government Departments, Government owned
companies, regulatory and statutory bodies etc.
(b) Customers having substantial known fixed assets and having permanent
residence, Customers having satisfactory operational account for a long time,
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 Well known persons of the branch, All borrowal customers, where due diligence
is done at the time of granting the credit facilities, will fall under the category of
low risk,

(c) Customers of low Economic strata having nominal transactions i.e. Small accounts
(No Frill Accounts) where a customer intends to keep balance not exceeding Rs
50,000/- in all his / her accounts taken together in the Bank; the aggregate of all
withdrawals and transfers in a month does not exceed Rs.10,000/-; and the total
credit in all the accounts taken together
in the bank not expecting to exceed Rs 1 lakh in a year.
Note:
 Individuals (other than High Net Worth) and entities whose identifies and
sources of wealth can be easily identified and transactions in whose accounts
by and large conform to the known profile may be categorized as low risk.
The above list is indicative

A. 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 from the date of opening or last KYC
B. Freezing and closure of accounts:
i. In case of non-compliance of KYC requirements by the customers despite repeated reminders by
ank ank ma impo e partial free ing on h C non-compliant accounts in a phased
manner.
ii. During the course of such partial freezing, the account holders can revive their accounts by
submitting the KYC documents as per instructions in force.
iii. hile impo ing partial free ing ank ha e to en re that the option of partial free ing i
exercised after giving due notice of three months initially to the customers to comply with KYC
requirements to be followed by a reminder giving a further period of three months.
iv. Thereafter ank ma impo e partial free ing allo ing all redit and di allo ing all de it
with the freedom to close the accounts.
v. If the accounts are still KYC non- ompliant after i month of impo ing initial partial free ing
banks should disallow all debits and credits from/to the accounts thereby, rendering them
inoperative.
vi. Further, it would always be open to the bank to close the account of such customers after issuing
due notice to the customer explaining the reasons for taking such a decision. Such decisions,
however, need to be taken at a reasonably senior level.
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 In the circumstances when a bank believes that it would no longer be satisfied about the true identity of
the account holder, the bank should file a Suspicious Transaction Report (STR) with

Financial Intelligence Unit India (FIU-IND) under Department of Revenue, Ministry of Finance, Government
of India.
RECORD MANAGEMENT

u. The following steps shall be taken regarding maintenance, preservation and reporting of customer
account information, with reference to provisions of PML Act and Rules. Bank shall,

a. maintain all necessary records of transactions between the bank 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. In case of customers who are non profit organizations, the details of such customers are registered
on the DARPAN Portal of NITI Ayog.

Reporting Requirements to Financial Intelligence Unit India

v. Bank 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.
w. 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 Bank 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

x. 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. Bank shall not put any restriction on operations in the
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 accounts where an STR has been filed. Banks 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.

y. Reports to be furnished to Financial Intelligence Unit India.

(1) Cash Transaction Report (CTR).
i. Report of all cash transactions of the value of more than rupee ten lakhs or its equivalent in
foreign currency and all series of cash transactions integrally connected to each other which have
been valued below rupees ten lakhs or its equivalent in foreign currency where such series of
transactions have taken place within a month and the aggregate value of such transaction exceeds
Rupees ten lakh. However, individual entries below Rs. 50,000/- will not be reported in the Cash
Transaction Report.
ii. The CTR for each month will be submitted to FIU-IND by 15th of the succeeding month.

(2) Suspicious Transaction Reports (STR)

i. While determining suspicious transactions, bank will be guided by the definition of
pi io tran a tion a ontained in PM A R le a amended from time to time "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
appears to be made in circumstances of unusual or unjustified complexity; or
b) appears to not have economic rationale or bona-fide purpose; or
c) Gives rise to a reasonable ground of suspicion that it may involve financing of the
activities relating to terrorism.

(3) Non-Profit Organisations Transaction Report (NTR)

The report of all transactions involving receipts by non- profit organizations of value more than rupees
ten lakh or its equivalent in foreign currency should be submitted every month to the Director, FIU-IND
by 15th of the succeeding month in the prescribed format. Branches should obtain and keep as record
the following information, to the extent possible, in all bigger transactions in particular: -
 Name, address and account number of the person who initiated the remittance, the beneficiary
name, address and account number.
 Branches should ensure that the remittance of funds by way of Demand Draft, M/T, T/T or any
other mode for value of Rs. 50000/- and above is affected by debit to customer account or
against cheque and not against cash payment.
 Branches should endeavor to track transaction chains, which could give rise to suspicion.
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 (4) Cross-border Wire Transfer Report (CBWTR):
Cross-border Wire Transfer Report (CWTR) is required to be filed with FIU-IND by the Principal Officer by
15th of succeeding month for all cross border wire transfers of the value of more than five lakh rupees
or its equivalent in foreign currency where either the origin or destination of fund is in India.

(5) Counterfeit Currency Reporting (CCR):

All cash transactions, where forged or counterfeit Indian currency notes have been used as genuine
should be reported by the Principal Officer of the bank to FIU-IND in the specified format (Counterfeit
Currency Report CCR), by 15th day of the next month.

z. 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. 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.

c. 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.

d. The exceptions to the said rule shall be as under:

i. Where disclosure is under compulsion of law
ii. Where there is a duty to the public to disclose,
iii. The interest of bank requires disclosure and
iv. Where the disclosure is made with the express or implied consent of the customer.

e. NBFCs shall maintain confidentiality of information as provided in Section 45NB of RBI Act 1934.

aa. Monitoring of Newly opened accounts

(i) Branches should not establish business relationship until all the relevant parties to the relationship are
identified and the nature of business they expect to conduct is established. Branches should at the time
of commencement of an account-based relationship, identify its clients.
(ii) Branches shall exercise ongoing due diligence with respect to the business relationship with every client
and closely examine the transactions in order to ensure that they are consistent with their knowledge of
the client, his business and risk profile and where necessary, the source of funds.
(iii) Special care shall be exercised by branches while passing transactions through newly opened accounts
especially when a customer deposits high value cheques / drafts in a newly opened current / saving
account and is anxious to withdraw the amount involved or substantial part thereof quickly and in haste. 66
(iv) Newly opened accounts should remain under the close watch of the Incumbent Incharge of Small,
Medium and large branches at least for an initial period of six months during which all the withdrawals of
Rs.25,000/- and above from newly opened Savings Banks Account

(v) Reserve Bank of India vide their letter dated 30.11.2012 has informed that it is absolutely necessary for
banks as well as customers to comply with the measures prescribed for KYC / AML purposes. Drastic
measures like closing of accounts may be taken only after sending out sufficient discernible warning
signals having regard to the level of customer education and public awareness on the subject. In all such
cases, where the account holders are either not responding over a period of time / not found at the given
addresses, banks may take such action as deemed necessary to comply with KYC/AML guidelines without
denying basic banking facilities.

bb. Adherence to Foreign Contribution and Regulation Act (FCRA), 1976

Branches should adhere to the provisions of the Foreign Contribution Regulation Act, 1976, as amended
from time to time, and the guidelines issued by the Reserve Bank of India from time to time.
Adherence to guidelines for Authorized Money Changers
Authorized branches undertaking the business of moneychanger should adhere to the provisions of Anti-
Money Laundering guidelines of the Reserve Bank of India issued from time to time.
Countries which do not or insufficiently apply the recommendations of Financial Action Task Force
(FATF)

Branches should, in addition to FATF statements circulated from to time, also consider publicly available
information for identifying countries, which do not or insufficiently apply FATF recommendations. Further,
Branches should give special attention to business relations and transactions with persons (including legal
persons and other financial institutions) from or in countries that do not or insufficiently apply FATF
recommendations and jurisdiction included in FATF statements.

cc. Remittance towards Participation In Lottery, Money Circulation Schemes, Other Fictitious Offers Of
Cheap Funds Etc.

Please refer P&D Circular No. 2502 dated 21.07.2010 , P&D Circular No. 2565 dated 07.04.2011 & P&D
Cir lar o dated regarding “Fi titio ffer of Cheap F nd from A road Awareness
Campaign” here ran he ere ad i ed to reate a arene ampaign among customers and guide
them properly during interactions with regard to fraudulent communications being received by
individuals, trusts, educational trusts etc.

dd. CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR) Bank shall
capture the KYC information for sharing with the CKYCR in the manner mentioned in the Rules, as required
the re i ed C template prepared for indi id al and egal ntitie a the a e ma be.
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 a. 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.
b. Branches shall capture the KYC information for sharing with the CKYCR in the manner mentioned
in the R le a per the C template prepared for ndi id al and egal ntitie ( ) a the
case may be. The templates may be revised from time to time, as may be required and released by
CERSAI.
c. Bank shall ensure that during periodic updation, the customers are migrated to the current CDD
standard.
Exemption to upload KYC records onto CKYCRR:

i. In light of Central KYC Record Registry (CKYCRR) circular No. CKYC/2022/01 dated 19.01.2022
Wherein CKYCRR informed that “Bank need not upload FPI related KYC records to CKYCRR” a
the provisions of sub-rule (1A) of rule 9 of the Prevention of Money-laundering (Maintenance of
Records) Rules, 2005 shall not apply to the Foreign Portfolio Investor (FP )”

ii. In light of Central KYC Record Registry (CKYCRR) circular No. CKYC/2022/02 dated 20.01.2022
herein C CRR informed that “Bank need not upload Self Help Groups (SHGs) and Joint
as Government of India has exempted
from uploading SHG and JLG related KYC records to CKYCRR.

iii. In light of Central KYC Record Registry (CKYCRR) circular No. CKYC/2022/04 dated 21.04.2022
herein C CRR informed that “Bank need not upload KYC records of Central/State
Government Ministries/Departments and Statutory Organizations and their authorized
signatories to CKYCRR” a o ernment of ndia ha e empted C re ord of Central tate
Government Ministries/Departments and Statutory Organizations and their authorized
signatories to CKYCRR.

ee. Reporting requirement under Foreign Account Tax Compliance Act (FATCA) and Common Reporting
Standards (CRS)

Under FATCA and CRS, Banks 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. mit online report ing the digital ignat re of the e ignated ire tor
68
ff. Operation of Bank Accounts & Money Mules
The instructions on opening of accounts and monitoring of transactions shall be strictly adhered to, in
order to minimi e the operation of “Mone M le ” hi h are ed to la nder the pro eed of fra d
schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by
re r iting third partie hi h a t a “mone m le ” f it i e ta li hed that an a o nt opened and
operated is that of a Money Mule, it shall be deemed that the bank has not complied with these
dire tion Mone M le an be classified under two categories:

a) Persons who are unaware of their accounts being used by third parties and the criminals gain
illegal access to these deposit accounts through phishing and identity thefts and use these
accounts for their illegal gains.
b) Persons, who are aware of their accounts being used by third party. Sometimes, these persons are
recruited as agents and they get remuneration by way of commission from the third party.
In case of money mule accounts of category (b), who knowingly become money mules, the third party on
ho e ehalf the ork ma e treated a enefi ial ner The third part i e enefi ial o ner i to e
subjected to compliance of all the KYC guidelines In case, the beneficial owner refuses to comply with KYC
guidelines, such account may be closed as per extant guidelines.
gg. Correspondent Banking
Corre pondent anking i the pro i ion of anking er i e one ank (the “ orre pondent ank”) to
another ank (the “re pondent ank”) The e er i e ma in l de a h f nd management, international
wire transfers, drawing arrangements for demand drafts and mail transfers, payable-through-accounts,
cheques clearing etc. The Bank may take the following precautions while entering into a correspondent
banking relationship:
i. Gather sufficient information to fully understand the nature of business of the bank including
information on management, major business activities, reputation, the quality of supervision, level of
AML/CFT compliance whether the respondent institution has been subjected to any investigation or
regulatory action relating to Money laundering/ Terrorist Financing , purpose of opening the account,
identity of any third party entities that will use the correspondent banking services, and
regulatory/supervisory framework in the ank home o ntr
ii. The responsibilities of each bank with whom correspondent banking relationship is established
should be clearly documented.
iii. In 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.
iv. The correspondent bank should ensure that the respondent bank is able to provide the relevant
customer identification data immediately on request.
69
 v. The Bank should be cautious while continuing relationships with correspondent banks located in
jurisdictions which have strategic deficiencies or have not made sufficient progress in
implementation of FATF Recommendations.
vi. The Bank shall ensure that their respondent banks have KYC/AML policies and procedures in place
and apply enhanced 'due diligence' procedures for transactions carried out through the
correspondent accounts.
vii. The Bank shall not enter into a correspondent relation hip ith a “ hell ank” (i e a ank hi h i
incorporated in a country where it has no physical presence and is not affiliated to any regulated
financial group).
viii. The correspondent bank should not permit its accounts to be used by shell banks.

The accounts of the correspondent banks shall be opened through HO Forex Department on getting
approval from the Board.
hh. Shell Banks:
Shell Bank is 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.

ii. Wire transfer

Banks shall ensure the following while effecting wire transfer:
a. All cross-border wire transfers including transactions using credit or debit card shall be accompanied
by accurate and meaningful originator information and Domestic wire transfers of rupees fifty
thousand and above where originator is not an account holder shall be accompanied by originator
information such as name, address and account number.
b. Customer Identification shall be made if a customer is intentionally structuring wire transfer below
rupees fifty thousand else STR to be generated.
c. Complete originator information relating to qualifying wire transfers shall be preserved at least for a
period of five years by the ordering bank
d. The receiving intermediary bank shall transfer full originator information accompanying a cross-
border wire transfer and preserve the same for at least five years, if the same cannot be sent with a
related domestic wire-transfer, due to technical limitations.
e. All the information on the originator of wire transfers shall be immediately made available to
appropriate law enforcement and/or prosecutorial authorities on receiving such requests.

f. Effective risk-based procedures to identify wire transfers lacking complete originator information
shall be in place at a beneficiary bank and Beneficiary bank shall report transaction lacking complete
originator information to FIU-IND as a suspicious transaction.

( Detail amendments as per HO KYC/AML Cir 243 dt 09.06.2023- discussed with RBI guidelines )
70
jj. 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. Branches 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. The United Nations periodically circulates the following two lists of individuals and entities,
suspected of having terrorist links, and as approved by its Security Council (UNSC).

 The “Al- aida an tion i t” in l de name of indi id al and entitie a o iated ith the Al aida
The Updated Al-Qaida Sanctions List is available at
http://www.un.org/securitycouncil/committees/1267/aq_sanctions_list.shtml
 The “ an tion i t” on i ting of indi id al ( e tion A of the on olidated li t) and entitie
(Section B) associated with the Taliban which is available at
http://www.un.org/securitycouncil/sanctions/1988
Further, the updated list of such individuals/entities can be accessed in the United Nations website at
http://www.un.org/securitycouncil/sanctions/1267
The United Nations Security Council Resolutions (UNSCRs), received from Government of India, are
circulated by the Reserve Bank to all banks and FIs. Bank is required to update the lists and take them
into account for implementation of Section 51A of the Unlawful Activities (Prevention) (UAPA) Act,
1967, discussed below.

Before opening any new account it should be ensured that the name/s of the proposed customer does
not appear in the list. Further, all existing accounts to be scanned to ensure that no account is held by or
linked to any of the entities/individuals in the list. Full details of the individuals/entities with
resemblance in the list to be intimated to RBI/FIU-IND ..

kk. 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 i e of tra eler he e for al e of r pee fift tho and and a o e hall e effe ted de it to
the tomer a o nt or again t he e and not again t a h payment. Further, the name of the
purchaser shall be incorporated on the face of the demand draft pa order anker he e et the
issuing bank. These instructions shall take effect for such instruments issued on or after September 15,
2018.
ll. Quoting of PAN
Permanent account number (PAN) of customers shall be obtained and verified while undertaking 71
 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 or equivalent e- document thereof.
mm. Selling Third party products
Bank 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. Transactions involving rupees fifty thousand and above shall be undertaken only by:

 e it to tomer a o nt or again t he e and

 Obtaining and verifying the PAN given by the account-based as well as walk-in customers.

nn. At-par cheque facility availed by co-operative banks

Some commercial banks have arrangements with co-operative banks under which the latter open current
a o nt ith the ommer ial ank and e the he e ook fa ilit to i e at par

cheques to their constituents and walk-in- customers ,The at par he e fa ilit offered ommer ial
banks to co-operative banks shall be monitored

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.

a. Cooperative Banks shall:

i. en re that the at par he e fa ilit i tili ed only:

 for their own use,

 for their account-holders who are KYC complaint, provided that all transactions of rupees
fift tho and or more are tri tl de it to the tomer accounts,

 for walk-in customers against cash for less than rupees fifty thousand per individual.

ii. maintain the following:

 re ord pertaining to i an e of at par he e o ering inter alia appli ant name and
a o nt n m er enefi iar detail and date of i an e of the at par he e

 Sufficient balances/drawing arrangements with the commercial bank extending such facility
for purpose of honoring such instruments.

iii. en re that At par he e i ed are ro ed a o nt pa ee irre pe ti e of the amo nt

involved.

the audit function with persons adequately trained and well-versed in AML/CFT policies of the Bank, 72
 regulation and related issues shall be ensured.

oo. Adherence to Know Your Customer (KYC) guidelines by NBFCs/RNBCs and persons authorized by
NBFCs/RNBCs including brokers/agents etc.

Persons authorized by NBFCs/ RNBCs for collecting the deposits and their brokers/agents or the
like, shall be fully compliant with the KYC guidelines applicable to NBFCs/RNBCs.

pp. Memorandum of Instructions governing Money Changing Activities

A. Purchase of foreign exchange from customers
i. For p r ha e of foreign rren note and or Tra eler Che e from tomer for an amount
equal to or in excess of Rs.50,000/- or it e i alent tomer identit and addre (a pe ified
in CDD) should be verified and copies retained.
ii. If the branch has reason to believe that a customer is intentionally structuring a transaction into a
series of transactions below the threshold of Rs.50000/-, the branch should verify identity and
address else consider STR filing
iii. (a) Requests for payment in cash in Indian Rupees to resident customers towards purchase of
foreign currency notes and/ or Tra eler Che e from them ma e a eded to the e tent of onl
US $ 1000 or its equivalent per transaction.
(b) Requests for payment in cash by foreign visitors / Non-Resident Indians may be acceded to the
extent of only US $ 3000 or its equivalent.
(c) All purchases within one month, i.e. within 30 days from the date of last transaction, may be
treated as single transaction for the above purpose and also for reporting purposes.

B. Sale of foreign exchange to customers

a. In all cases of sale of foreign exchange, irrespective of the amount involved, for identification
purpose the passport of the customer should be insisted upon and sale of foreign exchange
should be made only on personal application and after verification of the identification
document. A copy of the identification document should be retained by the branches.
b. Encashment Certificate, wherever required, should also be insisted upon.

qq. Freezing of Assets under Section51A of Unlawful Activities (Prevention) Act, 1967
a. The Unlawful Activities (Prevention) Act, 1967 (UAPA) has been amended by the Unlawful Activities
(Prevention) Amendment Act, 2008. Government has issued an Order dated August 27, 2009 detailing
the procedure for implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967
relating to the purposes of prevention of, and for coping with terrorist activities. In terms of Section
51A, the Central Government is empowered to freeze, seize or attach funds and other financial assets or
73
 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 and
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. Financial assets of the
designated individuals/entities enlisted in the UNSCRs and especially, in regard to funds, financial assets
or economic resources or related services held in the form of bank accounts.

b. In terms of Para 4 of the Order, in regard to funds, financial assets or economic resources or
related services held in the form of bank accounts, the RBI would forward the designated lists to
the banks 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 (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 with them.
(ii) In case, the particulars of any of their customers match with the particulars of designated
individuals/entities, the branches 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, held by such customer .

Digital KYC Process

Bank shall develop an application for digital KYC process which shall be made available at customer touch
points for undertaking KYC of their customers and the KYC process shall be undertaken only through this
authenticated application of the Banks.

The Bank must ensure that the Live photograph of the customer is taken by the authorized officer and the
same photograph is embedded in the Customer Application Form (CAF). Further, the system Application of
the Bank shall put a watermark in readable form having CAF number, GPS oordinate a thori ed offi ial
name, unique employee Code (assigned by Banks) and Date (DD:MM:YYYY) and time stamp (HH:MM:SS) on
the captured live photograph of the customer. Other details to be filled in as per the master directions of
the Bank.
(i) Once the above mentioned process is completed, a One Time Password (OTP) message containing the text
that Plea e erif the detail filled in form efore haring TP hall e ent to tomer o n mo ile
number. Upon successful validation of the OTP, it will be treated as customer signature on CAF. However, if
the customer does not have his/her own mobile number, then mobile number of his/her
family/relatives/known persons may be used for this purpose and be clearly mentioned in CAF. In any case,
the mobile number of authorized officer registered with the Bank shall not be used for customer signature.
The Bank must check that the mobile number used in customer signature shall not be the mobile number of
the authorized officer.
(ii)
Ref.:- HO KYC & AML :(KYC) Policy -V1.4 (2023)01 dt 17.04.2023,(Updated up to
16.03.2023), Cir No 242 dated 09.06.2023, 243 dated 09.06.2023, Cir 564 dt 20.10.2023).
74