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Two solid proofs that budget is going to be expansionary. How far fiscal deficit is desirable for India? Classroom by. APs should obtain information on the purpose and intended nature of the business relationship. APs should 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 customer, its business and risk profile. APs should ensure that documents, data or information collected under the Customer Due Diligence process is kept up-to-date and relevant by undertaking reviews of existing records, particularly for higher risk categories of customers or business relationships.

When a business relationship is already in existence and it is not possible to perform customer due diligence on the customer in respect of business relationship, APs should terminate the business relationship and make a Suspicious Transaction Report to FIU-IND. If so, APs should insist on receipt of satisfactory document of identity of the intermediaries and of the persons on whose behalf they are acting, as also obtain details of the nature of the trust or other arrangements in place.

While undertaking a transaction for a trust, APs should take reasonable precautions to verify the identity of the trustees and the settlers of trust including any person settling assets into the trust , grantors, protectors, beneficiaries and signatories. In all cases beneficiaries should be identified with reference to necessary documents. APs should examine the control structure of the entity, determine the source of funds and identify the natural persons who have a controlling interest and who comprise the management. These requirements may be moderated according to the risk perception e.

Politically exposed persons are individuals who are or have been entrusted with prominent public functions in a foreign country, e. APs should verify the identity of the person and seek information about the source of wealth and source of funds before accepting the PEP as a customer.

The decision to undertake a transaction with a PEP should be taken at a senior level which should be clearly spelt out in Customer Acceptance Policy. APs should also subject such transactions to enhanced monitoring on an ongoing basis. The above norms may also be applied to transactions with the family members or close relatives of PEPs. The above norms may also be applied to customers who become PEPs subsequent to establishment of the business relationship. Where a customer subsequently becomes a PEP after a business relationship has already been established, enhanced CDD should be performed on such customers and decision to continue business relationship with the PEP should be taken at a sufficiently senior level.

Ongoing monitoring is an essential element of effective KYC procedures. APs 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 transaction.

APs should pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. APs may prescribe threshold limits for a particular category of transaction and pay particular attention to the transactions which exceed these limits. High-risk transactions have to be subjected to intensified monitoring. Every AP should set key indicators for such transactions, 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.

APs should put in place a system of periodical review of risk categorization of customers and the need for applying enhanced due diligence measures. Such review of risk categorisation of customers should be carried out periodically. It should cover proper management oversight, systems and controls, segregation of duties, training and other related matters. APs 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 or business relationship.

APs should ensure that their audit machinery is staffed adequately with individuals who are well-versed in such policies and procedures. The concurrent auditors should check all transactions to verify that they have been undertaken in compliance with the anti-money laundering guidelines and have been reported whenever required to the concerned authorities. Compliance on the lapses, if any, recorded by the concurrent auditors should be put up to the Board. APs should pay special attention to any money laundering threats that may arise from new or developing technologies, that might favour anonymity and take measures, to prevent their use in money laundering purposes.

Certain AD Category-I banks are engaged in issuance of Foreign currency denominated pre-paid cards to travelers going abroad. It is also desirable that, certain APs, who are not eligible to issue such cards but are involved in marketing these cards on behalf of card issuing banks, as well as their customers, are also subjected to KYC measures. APs should, therefore, develop suitable mechanism through appropriate policy framework for enhanced monitoring of transactions 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.

The guidelines contained in this circular shall 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.

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When local applicable laws and regulations prohibit implementation of these guidelines, the same should be brought to the notice of the Reserve Bank. CDD, record keeping, etc. He will maintain close liaison with enforcement agencies, APs and any other institution which are involved in the fight against money laundering and combating financing of terrorism. With a view to enable the Principal Officer to discharge his responsibilities, it is advised that that the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information.

Further, APs should ensure that the Principal Officer is able to act independently and report directly to the senior management or to the Board of Directors. APs are, therefore, advised to go through the provisions of Prevention of Money Laundering Act, PMLA , , as amended by Prevention of Money Laundering Amendment Act, 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.

APs should introduce a system of maintaining proper record of transactions prescribed under Rule 3, as mentioned below :. APs are required to maintain the following information in respect of transactions referred to in Rule APs should take appropriate steps to evolve a system for proper maintenance and preservation of transaction information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, APs should maintain for at least ten years from the date of transaction between the AP and the client, all necessary records of transactions, both with residents and non-residents, 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.

The identification records and transaction data should be made available to the competent authorities upon request. 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 formats concerned. Further, vide paragraph 4. It is, therefore, reiterated that APs, 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 categorisation 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. While detailed instructions for filing all types of reports are given in the instructions part of the related formats, APs should scrupulously adhere to the following :. Cash transaction reporting by branches to their controlling offices should, therefore, invariably be submitted on a monthly basis and APs should ensure to submit CTR for every month to FIU-IND within the prescribed time schedule. However, in respect of branches not under central computerized environment, the monthly CTR should continue to be compiled and forwarded by the branch to the Principal Officer for onward transmission to the FIU-IND.

It is clarified that APs should report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction.

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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. Moreover, it should be ensured that employees of APs shall keep the fact of furnishing such information as strictly confidential and there is no tipping off to the customer at any level. Implementation of KYC procedures requires APs to demand certain information from customers which may be of personal nature or which has hitherto never been called for.

This can sometimes lead to a lot of questioning by the customer as to the motive and purpose of collecting such information. The front desk staff needs to be specially trained to handle such situations while dealing with customers. APs must have an ongoing employee training programme so that the members of the staff are adequately trained to be aware of the policies and procedures relating to prevention of money laundering, provisions of the PMLA and the need to monitor all transactions to ensure that no suspicious activity is being undertaken under the guise of money changing.

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. The steps to be taken when the staff come across any suspicious transactions such as asking questions about the source of funds, checking the identification documents carefully, reporting immediately to the Principal Officer, etc.

Customer Identification Procedure Features to be verified and documents that may be obtained from customers. Copy of Memorandum of Association together with a letter indicating the clause which provides for taking up money changer's business. A copy of the latest Audited Balance Sheet of the applicant company together with a certificate from their Statutory Auditors certifying their Net Owned Funds as on the date of application and calculation thereof is to be enclosed.

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If so, the particulars thereof. Place: Date:. Bankers' confidential Report 2. Attested copies of audited accounts for the past 3 years. Conduct certificate of the franchisee from the local police authorities. Opening Balance II. Add: Purchases. B : In cases where forged notes etc. Add: 1 Purchases from the public 2 Purchases from others including fresh stock received. FLM 3 Register of purchases of foreign currencies from the public.

Details of Identification documents. NOTES : 1 If the money-changer is dealing in a large number of currencies, two or more registers currency- wise or otherwise may be maintained, as convenient. FLM 5 Register of sales of foreign currencies to the public.

Name of the sponsoring Organisation. Duration of stay abroad No. Cash Memo No. NOTES : 1 If the money-changer is dealing in a large number of currencies, two or more registers currency-wise or otherwise may be maintained, as convenient. Note : - Necessary entries in the register should be made before the funds are taken out of the premises, not after delivery of funds. We hereby certify that the statement is a true and correct account of all transactions undertaken during the month in accordance with the Foreign Exchange Regulations.

All the above transactions have been effected in accordance with the current Foreign Exchange regulations ; and. Encashment certificates have been issued in respect of all purchases from the public wherever applicable. Note :- Fully utilized CDF received from tenderers should be enclosed with the statement.