The document discusses key aspects of know your customer (KYC) policies and procedures according to the Prevention of Money Laundering Act, 2002 in India. It outlines that the Financial Action Task Force sets international standards for combating money laundering and terrorist financing. The Prevention of Money Laundering Act requires reporting entities to verify customer identity, monitor transactions, and maintain records. Reporting entities must implement risk-based KYC programs and conduct ongoing customer due diligence to comply with KYC regulations.

1. CA. UDAY KULKARNI
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2. 2

3. • FINANCIAL ACTION TASK FORCE
• Inter governmental body set up in 1989
• Members 34 Countries + Gulf Co-operation Council +
EU
• Objectives-
– Setting up Standards & Effective Implementation of legal,
regulatory & operational measures for combating –
• Money laundering
• Terrorist Financing
• Threats to integrity of International financial system

4. A. AML / CFT Policies
B. Money Laundering & Confiscation
C. Terrorist Financing & Financing of Proliferation
D. Preventive Measures
E. Transparency & Beneficial Ownership of Legal
persons.
F. Powers & Responsibilities of Competent Authorities
G. International Cooperation

5. A. AML / CFT Policies
– Risk Assessment & Risk Based Approach
– Coordination of different authorities
B. Money Laundering & Confiscation
– criminalize money laundering
– Countries should apply the crime of money
laundering to all serious offences

6. C. Terrorist Financing & Financing of Proliferation
– Criminalize terrorist financing
– Countries should implement targeted financial
sanctions regimes to comply with United Nations
Security Council resolutions relating to the prevention
and suppression of terrorism and terrorist financing.
– Review the adequacy of laws and regulations that
relate to entities that can be abused for the financing
of terrorism- e.g. NGO

7. D. Preventive Measures
– Customer due diligence
– Record Keeping
– Politically Exposed Persons
– Cross border correspondent banking
– Money Value Transfer & Wire Transfer
– Reporting of Suspicious Transactions

8. • To Prevent Money Laundering
• Confiscation of property derived from or
involved in money laundering.
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9. • Came into force W.e.f. 1st July 2005.
• Financial Intelligence Unit- FIU-IND set up in November 2004 as central national agency
• Responsible for receiving, processing, analyzing and disseminating information relating to suspect
financial transactions.
• FIU-IND is also responsible for coordinating and strengthening efforts of national and international
intelligence, investigation and enforcement agencies in pursuing the global efforts against money
laundering and related crimes.
• FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by
the Finance Minister.
• Director, FIU-IND and Director (Enforcement) have been conferred with exclusive and concurrent powers
under relevant sections of the Act to implement the provisions of the Act.

10. KYC
Know Your Customer
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11. • Section 12 (1)-
– (a) maintain a record of all transactions, including information relating to transactions covered
under clause (b), in such manner as to enable it to reconstruct individual transactions;
– (b) furnish to the Director within such time as may be prescribed, information relating to such
transactions, whether attempted or executed, the nature and value of which may be
prescribed;
– (c) verify the identity of its clients in such manner and subject to such conditions, as may be
prescribed;
– (d) identify the beneficial owner, if any, of such of its clients, as may be prescribed;
– (e) maintain record of documents evidencing identity of its clients and beneficial owners as
well as account files and business correspondence relating to its clients.
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12. • Section 12 of the Prevention of Money Laundering Act, 2002 and rules there under
require every reporting entity to verify and maintain the records of the identity of
all its clients including beneficial owners.
• Prevention of Money-laundering (Maintenance of Records) Rules- 2005
provide for verification and maintenance of the records of the identity of clients.
• Officially valid document" means the passport, the driving licence, the
Permanent Account Number (PAN) Card, the Voter's Identity Card issued by
the Election Commission of India or any other document as may be required
by the banking company, or financial institution or intermediary;
– Job card of NREGA
– Adhaar Card - if applicable
– E-Adhaar Card
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13. • Section 12 (3)-
– The record referred to clause (a) of sub section 1 shall
be maintained for a period of 5 years from the date
of transaction between client and reporting entity.
• Section 12 (4)-
– The record referred to clause ( e) of the sub section 1
shall be maintained for a period of 5 years after the
business relationship of client and reporting entity
ended or account has been closed whichever is later.
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14. • No reporting entity shall allow the opening of or keep any anonymous
account or account in fictitious names or account on behalf of other
persons whose identity has not been disclosed or cannot be verified.
• Rule 9 - Every reporting entity 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.
• Rule 13 (i) - Every reporting entity shall carry out risk assessment to
identify, assess and take effective measures to mitigate its money
laundering and terrorist financing risk for clients, countries or geographic
areas, and products, services, transactions or delivery channels that is
consistent with any national risk assessment conducted by a body or
authority duly notified by the Central Government.
• The risk assessment mentioned in clause (i) shall—
(a) be documented;
(b) consider all the relevant risk factors before determining the level of overall
risk and the appropriate level and type of mitigation to be applied;
(c) be kept up to date; and
(d) be available to competent authorities and self-regulating bodies.
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15. • KYC Policy framing-
– i) Customer Acceptance Policy;
– ii) Customer Identification Procedures;
– iii)Monitoring of Transactions; and
– iv)Risk Management.
• Beneficial Owner
• Risk Profiling
• Customer Type-
– PEP
– Non Face to Face
– Small Account Holder
– Government Scheme Beneficiary
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16. • Transaction- means a purchase, sale, loan, pledge, gift, transfer, delivery
or the arrangement thereof and includes:
• a. opening of an account;
• b. deposit, withdrawal, exchange or transfer of funds in whatever
currency, whether in cash or by cheque, payment order or other
instruments or by electronic or other non-physical means;
• c. the use of a safety deposit box or any other form of safe deposit;
• d. entering into any fiduciary relationship;
• e. any payment made or received, in whole or in part, for any contractual
or other legal obligation; or
• f. establishing or creating a legal person or legal arrangement.
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17. • Client - means a person who is engaged in a financial
transaction or activity with a reporting entity and includes a
person on whose behalf the person who engaged in the
transaction or activity, is acting.
• Beneficial Owner - means an individual who ultimately
owns or controls a client of a reporting entity or the person
on whose behalf a transaction is being conducted and
includes a person who exercises ultimate effective control
over a juridical person.
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18. • In Case of Company-
– the beneficial owner is the natural person(s), who, whether acting
alone or together, or through one or more juridical person, has/have
a controlling ownership interest or who exercise control through
other means.
• 1. “Controlling ownership interest” means ownership of/entitlement to
more than 25 per cent of the shares or capital or profits of the company.
• 2. “Control” shall include the right to appoint majority of the directors or to
control the management or policy decisions including by virtue of their
shareholding or management rights or shareholders agreements or voting
agreements.
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19. • In case of Partnership Firm-
– the beneficial owner is the natural person(s), who, whether acting alone
or together, or through one or more juridical person, has/have
ownership of/entitlement to more than 15 per cent of capital or profits
of the partnership.
• In case of Trust-
– the author of the trust, the trustee, the beneficiaries with 15% or more
interest in the trust and any other natural person exercising ultimate
effective control over the trust through a chain of control or ownership.
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20. • Unique Customer Identification Code –UCIC.
– will help banks to identify customers
– track the facilities availed
– monitor financial transactions in a holistic manner
– better approach to risk profiling of customers
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21. • Every reporting entity shall at the time of commencement of an account-based relationship, identify its clients, verify
their identity and obtain information on the purpose and intended nature of the business relationship.
• identity should be verified while carrying out—
– (a) Commencement of an account-based relationship with the customer.
– (b) Carrying out any international money transfer operations for a person who is not an account holder of the
bank.
– (c) When there is a doubt about the authenticity or adequacy of the customer identification data it has obtained.
– (d) 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.
– (e) 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, whether conducted as a single transaction or several
transactions that appear to be connected.
– (f) When a RE 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.
– (g) REs shall ensure that introduction is not to be sought while opening accounts.
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22. • (i) identify its clients, verify their identity, obtain
information on the purpose and intended nature of the
business relationship; and
(ii) determine whether a client is acting on behalf of a
beneficial owner, and identify the beneficial owner and
take all steps to verify the identity of the beneficial owner.
• reporting entity may rely on a third party subject to the
conditions.
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23. • i) Banks shall obtain the Aadhaar number from an individual who is desirous of receiving any
benefit or subsidy under any scheme notified under section 7 of the Aadhaar (Targeted
Delivery of Financial and Other subsidies, Benefits and Services) Act, 2016 (18 of 2016).
• Banks, at receipt of the Aadhaar number from the customer may carry out authentication of
the customer’s Aadhaar number using e-KYC authentication facility provided by the Unique
Identification Authority of India upon receipt of the customer’s declaration that he is
desirous of receiving any benefit or subsidy under any scheme notified 14 under section 7 of
the Aadhaar (Targeted Delivery of Financial and Other Subsidies Benefits and Services) Act,
2016 (18 of 2016) in his account.
• ii) Banks may carry out Aadhaar authentication/ offline-verification of an individual who
voluntarily uses his Aadhaar number for identification purpose. Further, REs other than banks
may carry out offline verification of a customer if he is desirous of undergoing Aadhaar
offline verification for identification purpose
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24. • ‘12AA. (1) Every reporting entity shall, prior to the commencement of each specified transaction,—
– (a) vertify the identity of the clients undertaking such specified transaction by authentication under the Aadhaar (Targeted
Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 in such manner and subject to such conditions, as
may be prescribed.
– (b) take additional steps to examine the ownership and financial position, including sources of funds of the client, in such
manner as may be prescribed.
– (c) take additional steps as may be prescribed to record the purpose behind conducting the specified transaction and the
intended nature of the relationship between the transaction parties.
• (2) Where the client fails to fulfil the conditions laid down under sub-section (1), the reporting entity shall not
allow the specified transaction to be carried out.
• (3) Where any specified transaction or series of specified transactions undertaken by a client is considered
suspicious or likely to involve proceeds of crime, the reporting entity shall increase the future monitoring of the
business relationship with the client, including greater scrutiny or transactions in such manner as may be
prescribed.
• (4) The information obtained while applying the enhanced due diligence measures under sub-section (1) shall be
maintained for a period of five years from the date of transaction between a client and the reporting entity.
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25. • "specified transaction" means—
• (a) any withdrawal or deposit in cash, exceeding such amount;
• (b) any transaction in foreign exchange, exceeding such
amount;
• (c) any transaction in any high value imports or remittances;
• (d) such other transaction or class of transactions, in the
interest of revenue or where there is a high risk or money-
laundering or terrorist financing,
– as may be prescribed.
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26. • INDIVIDUALS-
– One certified copy of an ‘officially valid document’
containing details of his identity and address
– One recent photograph and
– Such other documents including in respect of the
nature of business and financial status of the client as
may be required by the reporting entity.
• An individual who desires to open a small
account in a banking company may be allowed to
open such an account on production of a self-
attested photograph and affixation of signature
or thumb print, as the case may be,
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27. • Accounts of proprietary concerns-
– Registration certificate
– Certificate/license issued by the Municipal
authorities under Shop & Establishment Act
– sales and income tax returns
– CST/VAT certificate
– License issued by the Registering authority
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28. • COMPANY-
– Certificate of incorporation;
– Memorandum and Articles of Association;
– A resolution from the Board of Directors and
power of attorney granted to its managers,
officers or employees to transact on its behalf;
and
– An officially valid document in respect of
managers, officers or employees holding an
attorney to transact on its behalf.
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29. • PARTNERSHIP FIRM-
– Registration certificate;
– Partnership deed; and
– An officially valid document in respect of the person
holding an attorney to transact on its behalf.
• TRUST-
– Registration certificate;
– Trust deed; and
– An officially valid document in respect of the person
holding an attorney to transact on its behalf.
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30. • Unincorporated Association (UA) or Body of
Individuals (BOI)-
– Resolution of the managing body of such association
or body of individuals;
– Power of attorney granted to him to transact on its
behalf;
– An officially valid document in respect of the person
holding an attorney to transact on its behalf; and
– Such information as may be required by the banking
company or the financial institution or the
intermediary to collectively establish the legal
existence of such an association or body of
individuals.
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31. • Banks should prepare a profile for each new
customer based on risk categorization.
– Customer identity
– Social/financial status
– Nature of business activities
– Information about client & its business.
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32. • Periodic Risk Assessment
• Risk Assessment for
– Clients
– Countries
– Products, Services
– Geographical Area
– Transactions
– Delivery channels etc.
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33. • High Risk –
– Cash intensive businesses
– accounts of bullion dealers (including sub-dealers) &
jewelers
– nonresident customers
– high net worth individuals
– trusts, charities, NGOs and organizations receiving
donations
– firms with 'sleeping partners
– politically exposed persons
– non-face to face customers
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34. • “Politically Exposed Persons” (PEPs) are individuals who are or have been entrusted with prominent
public functions in a foreign country, e.g., Heads of States/Governments, senior politicians, senior
government/judicial/military officers, senior executives of state-owned corporations, important
political party officials, etc.
• (a) sufficient information including information about the sources of funds accounts of family
members and close relatives is gathered on the PEP;
• (b) the identity of the person shall have been verified before accepting the PEP as a customer;
• (c) the decision to open an account for a PEP is taken at a senior level in accordance with the REs’
Customer Acceptance Policy;
• (d) all such accounts are subjected to enhanced monitoring on an on-going basis;
• (e) in the event of an existing customer or the beneficial owner of an existing account subsequently
becoming a PEP, senior management’s approval is obtained to continue the business relationship;
• (f) the CDD measures as applicable to PEPs including enhanced monitoring on an on-going basis are
applicable.
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35. • “Non-face-to-face customers” means customers who open accounts without visiting the
branch/offices of the REs or meeting the officials of REs.
• There must be a specific consent from the customer for authentication through OTP.
• The aggregate balance of all the deposit accounts of the customer shall not exceed rupees one lakh.
In case, the balance exceeds the threshold, the account shall cease to be operational, till CDD as
mentioned at (v) below is complete.
• The aggregate of all credits in a financial year, in all the deposit accounts taken together, shall not
exceed rupees two lakh.
• As regards borrower accounts, only term loans shall be sanctioned. The aggregate amount of term
loans sanctioned shall not exceed rupees sixty thousand in a year.
• Accounts, both deposit and borrower, opened using OTP based e-KYC shall not be allowed for more
than one year within which identification as per Section 16 is to be carried out.
• If the CDD procedure as mentioned above is not completed within a year, in respect of deposit
accounts, the same shall be closed immediately. In respect of borrower accounts no further debits
shall be allowed.
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36. • small account' means a savings account in a
banking company.
– The aggregate of all credits in a financial year does
not exceed rupees one lakh.
– the aggregate of all withdrawals and transfers in a
month does not exceed rupees ten thousand.
– the balance at any point of time does not exceed
rupees fifty thousand.
– The entire relaxation provisions shall be
reviewed after twenty four months.
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37. • Periodic updation of KYC information-
– High Risk- at least every two years
– Medium Risk- every eight years
– Low Risk- every ten years
• Positive confirmation (obtaining KYC related
updates through e-mail/ letter/ telephonic
conversation/ forms/ interviews/ visits, etc.), may
be completed at least every two years for
medium risk and at least every three years for
low risk individuals and entities.
• Fresh photographs to be obtained from minor
customer on becoming major.
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38. • REs shall undertake on-going due diligence of customers to ensure that their transactions are
consistent with their knowledge about the customers, customers’ business and risk profile; and
the source of funds.
• close monitoring following types of transactions shall necessarily be monitored:
– (a) Large and complex transactions including RTGS transactions, and those with
unusual patterns, inconsistent with the normal and expected activity of the customer,
which have no apparent economic rationale or legitimate purpose.
– (b) Transactions which exceed the thresholds prescribed for specific categories of
accounts.
– (c) High account turnover inconsistent with the size of the balance maintained.
– (d) Deposit of third party cheques, drafts, etc. in the existing and newly opened
accounts followed by cash withdrawals for large amounts.
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39. • Central KYC Records Registry
– Scheduled Commercial Banks (SCBs) shall invariably upload the KYC
data pertaining to all new individual accounts opened on or after
January 1, 2017 with CERSAI in terms of the provisions of
the Prevention of Money Laundering (Maintenance of Records) Rules,
2005. SCBs are, however, allowed time upto February 1, 2017 for
uploading date in respect of accounts opened during January 2017.
– REs other than SCBs shall upload the KYC data pertaining to all new
individual accounts opened on or after from April 1, 2017 with CERSAI
in terms of the provisions of the Prevention of Money
Laundering (Maintenance of Records) Rules, 2005.
– Digitalization of KYC documents
• Reporting requirement under Foreign Account Tax Compliance Act
(FATCA) and Common Reporting Standards (CRS)
– Under FATCA and CRS, REs shall adhere to the provisions of Income Tax
Rules 114F, 114G and 114H and determine whether they are a
Reporting Financial Institution as defined in Income Tax Rule 114F.
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40. AML Reporting
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41. • Property – Any property or assets of every description,(property of
any kind), whether corporeal or incorporeal, movable or
immovable, tangible or intangible, and includes deeds and
instruments evidencing title to or interest in such property or assets
wherever located.
• Scheduled Offences –
– (i) Offences specified under Part A of the schedule
– (ii) Offences specified under Part B of the schedule if the total
value involved in such offences is One Crore rupees or more.
– (iii) Offences Specified under Part C of the Schedule
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42. • Proceeds of Crime – Any Property derived or obtained, directly or indirectly,
by any person as a result of criminal activity relating to a scheduled offences
or the value of such property, or where such property is taken or held
outside the country, then the property equivalent in value held within the
country or abroad.
• Explanation -For the removal of doubts, it is hereby clarified that "proceeds
of crime" include property not only derived or obtained from the scheduled
offence but also any property which may directly or indirectly be derived or
obtained as a result of any criminal activity relatable to the scheduled
offence;'. (Finance Act 2019)
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43. • OFFENCES UNDER THE INDIAN PENAL CODE
• OFFENCES UNDER THE NARCOTIC DRUGS AND PSYCHOTROPIC SUBSTANCES ACT,
1985
• OFFENCES UNDER THE EXPLOSIVE SUBSTANCES ACT, 1908
• OFFENCES UNDER THE UNLAWFUL ACTIVITIES (PREVENTION) ACT, 1967
• OFFENCES UNDER THE ARMS ACT, 1959
• OFFENCES UNDER THE WILDLIFE (PROTECTION) ACT, 1972
• OFFENCES UNDER THE IMMORAL TRAFFIC (PREVENTION’) ACT, 1956
• OFFENCES UNDER THE PREVENTION OF CORRUPTION ACT, 1988
• OFFENCES UNDER THE EXPLOSIVES ACT, 1884
• OFFENCES UNDER THE ANTIQUITIES AND ARTS TREASURES
• ACT, 1972
• OFFENCES UNDER THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992
• OFFENCES UNDER THE CUSTOMS ACT, 1962
• OFFENCES UNDER THE BONDED LABOUR SYSTEM (ABOLITION) ACT, 1976
• OFFENCES UNDER THE CHILD LABOUR (PROHIBITION AND REGULATION) ACT,
1986
• OFFENCES UNDER THE TRANSPLANTATION OF HUMAN ORGANS ACT, 1994
• OFFENCES UNDER THE JUVENILE JUSTICE (CARE AND PROTECTION OF CHILDREN)
ACT, 2000
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44. • OFFENCES UNDER THE EMIGRATION ACT, 1983
• OFFENCES UNDER THE PASSPORTS ACT, 1967
• OFFENCES UNDER THE FOREIGNERS ACT, 1946
• OFFENCES UNDER THE COPYRIGHT ACT, 1957
• OFFENCES UNDER THE TRADE MARKS ACT, 1999
• OFFENCES UNDER THE INFORMATION TECHNOLOGY ACT, 2000
• OFFENCES UNDER THE BIOLOGICAL DIVERSITY ACT, 2002
• OFFENCES UNDER THE PROTECTION OF PLANT VARIETIES
• AND FARMERS’ RIGHTS ACT, 2001
• OFFENCES UNDER THE ENVIRONMENT PROTECTION ACT, 1986
• OFFENCES UNDER THE WATER (PREVENTION AND CONTROL OF POLLUTION) ACT, 1974
• OFFENCES UNDER THE AIR (PREVENTION AND CONTROL OF POLLUTION) ACT, 1981
• OFFENCES UNDER THE SUPPRESSION OF UNLAWFUL ACTS AGAINST
• SAFETY OF MARITIME NAVIGATION AND FIXED PLATFORMS ON CONTINENTAL SHELF ACT, 2002
• Corporate Frauds - Section 447 of Companies Act is being included as scheduled offence
under PMLA so that Registrar of Companies in suitable cases would be able to report such
cases for action by Enforcement Directorate under the PMLA provisions.
• The offence of willful attempt to evade any tax, penalty or interest referred to in section 51
of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,
2015
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45. • “Reporting Entity” means a banking company, financial institution, intermediary or a person carrying
on a designated business or profession [Section 2(1)(wa)].
(i) a person carrying on activities for playing games of chance for cash or kind, and includes such activities
associated with casino;
(ii) a Registrar or Sub-Registrar appointed under Section 6 of the Registration Act, 1908, as may be notified
by the Central Government.
(iii) real estate agent, as may be notified by the Central Government.
(iv) dealer in precious metals, precious stones and other high value goods, as may be notified by the
Central Government.
(v) person engaged in safekeeping and administration of cash and liquid securities on behalf of other
persons, as may be notified by the Central Government; or
(vi) person carrying on such other activities as the Central Government may, by notification, so designate,
from time to time [Section 2(1)(sa)].
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46. • Financial Institutions-
– Financial Institution as defined in clause (c) of section 45-I of RBI act 1934 and includes chit
fund company, housing finance institution, an authorised person, a payment system operator,
NBFC, and department of Post of GOI.
• Intermediary –
– Stock Broker, sub broker, share transfer agent, banker to an issue, trustee of trust deed,
registrar to an issue, merchant banker, underwriter, portfolio manager, investment advisor, any
other intermediary associated with securities market and registered under section 12 of SEBI
act.
– An association recognised or registered under forward contracts (Regulation ) act 1952 or any
member association
– Intermediary registered by the Pension Fund Regulatory and Development Authority
– A recognised stock exchange referred to in clause (f) of section 2 of Securities Contracts
( Regulation ) Act 1956.
46

47. • Section 3 – Offence of Money Laundering-
– Whosoever directly or indirectly attempts to indulge
or knowingly assists or knowingly is a party or is
actually involved in any process or activity connected
with the proceeds of crime including its concealment,
possession, acquisition or use and projecting or
claiming it as untainted property shall be guilty of
offences of money laundering.
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48. • (i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly
attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the
following processes or activities connected with proceeds of crime, namely:—
– (a) concealment; or
– (b) possession; or
– (c) acquisition; or
– (d) use; or
– (e) projecting as untainted property; or
– (f) claiming as untainted property,
– in any manner whatsoever;
• (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time
a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or acquisition
or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever.
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49. • Cash Transactions Report-
– every reporting entity to furnish to FIU-IND
information relating to -
• All cash transactions of the value of more than rupees
ten lakhs or its equivalent in foreign currency;
• All series of cash transactions integrally connected to
each other which have been individually valued below
rupees ten lakh or its equivalent in foreign currency
where such series of transactions have taken place
within a month and the monthly aggregate exceeds an
amount of ten lakh rupees or its equivalent in foreign
currency.
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50. • Suspicious Transaction Reports-
– Every reporting entity shall furnish to FIU-IND information
of all suspicious transactions whether or not made in cash.
– Suspicions transaction means a transaction referred to in
clause (h) of the rules, including an attempted transaction,
whether or not made in cash which, to a person acting in
good faith -
• (a) gives rise to a reasonable ground of suspicion that it may
involve proceeds of an offence specified in the Schedule to the
Act, regardless of the value involved; or
• (b) appears to be made in circumstances of unusual or unjustified
complexity; or
• (c) appears to have no economic rationale or bonafide purpose; or
• (d) gives rise to a reasonable ground of suspicion that it may
involve financing of the activities relating to terrorism;
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51. • Broad categories of reason for suspicion and examples of suspicious transactions for a
banking company are indicated as under:
– False identification documents
– Identification documents which could not be verified within reasonable time
– Accounts opened with names very close to other established business entities
– Suspicious background or links with known criminals
– Large number of accounts having a common account holder, introducer or authorized signatory
with no rationale
– Unexplained transfers between multiple accounts with no rationale
– Unusual activity compared with past transactions
– Sudden activity in dormant accounts
– Activity inconsistent with what would be expected from declared business
– Unusual or unjustified complexity
– No economic rationale or bonafide purpose
– Frequent purchases of drafts or other negotiable instruments with cash
– Nature of transactions inconsistent with what would be expected from declared business
– Value just under the reporting threshold amount in an apparent attempt to avoid
reporting
– Value inconsistent with the client’s apparent financial standing
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52. • Counterfeit Currency Reports
– require every banking company, financial
institution and intermediary, to furnish to FIU-IND
information relating to all cash transactions where
forged or counterfeit currency notes or bank notes
have been used as genuine or where any forgery
of a valuable security or a document has taken
place facilitating the transactions.
– Establishment of Forged Notes Vigilance Cell at
Head Office of Bank.
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53. • Cross Border Wire Transfer Reports
– report of 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.
• Report on sale/purchase of immovable property
– report on all purchase and sale by any person of
immovable property valued at fifty lakh rupees or more
that is registered by the reporting entity as the case may
be.
• NTR-
– All transactions involving receipts by non profit
organizations of value more than Rs. Ten lakhs or, its
equivalent in foreign currency
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54. • Banks should not allow opening and/or holding of
an account on behalf of a client/s by professional
intermediaries, like Lawyers and Chartered
Accountants, etc., who are unable to disclose true
identity of the owner of the account/funds due to
any professional obligation of customer
confidentiality.
• The decision to open an account for a PEP should
be taken at a senior level which should be clearly
spelt out in Customer Acceptance Policy.
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55. !! THANK YOU !!
CA. Uday Kulkarni
kulday@rediffmail.com
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