RBI Notification No: RBI/2010-11/292 (30-Nov-10) Know Your Customer (KYC) norms/ Anti-Money Laundering (AML) standards/ Combating the Financing of Terrorism (CFT)/ Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as

A.P. (DIR Series) Circular No.20
A.P. (FL/RL Series) Circular No.03

To,

All Authorised Persons

Madam/ Sir,

Know Your Customer (KYC) norms/ Anti-Money Laundering(AML) standards/ Combating the Financing of Terrorism (CFT)/Obligation of Authorised Persons under Prevention of MoneyLaundering Act, (PMLA), 2002, as amended by Prevention of MoneyLaundering (Amendment) Act, 2009- Money changingactivities

Attention of the Authorized Persons is invited to the A.P. (DIRSeries) Circular No. 17 [A.P.(FL/ RL Series) Circular No. 04] datedNovember 27, 2009 on Know Your Customer (KYC) norms/ Anti-MoneyLaundering (AML) standards/ Combating the Financing of Terrorism(CFT)/ Obligation of Authorised Persons under Prevention of MoneyLaundering Act, (PMLA), 2002, as amended by Prevention of MoneyLaundering (Amendment) Act, 2009 in respect of money changingactivities.

Countries which do not or insufficiently apply the FATFrecommendations

2. In F-Part-I, paragraph 4.10 (b) of the circular datedNovember 27, 2009 referred to above, Authorised Persons (APs) havebeen advised to take into account the risks arising from thedeficiencies in the AML/ CFT regime of certain jurisdictions, asidentified in the Financial Action Task Force (FATF) Statement,issued from time to time, while dealing with the individuals orbusinesses from these jurisdictions. It is advised that APs should,in addition to the FATF Statements, issued from time to time, alsoconsider using publicly available information for identifyingcountries, which do not or insufficiently apply the FATFRecommendations. Further, it is clarified that APs should also givespecial attention to business relationships and transactions withpersons (including legal persons and other financial institutions)from or in countries that do not or insufficiently apply the FATFrecommendations and jurisdictions included in FATF Statements.

3. In terms of F-Part-I, paragraph 4.6 of the circular datedNovember 27, 2009 referred to above, it is advised that ongoingmonitoring is an essential element of effective KYC procedures. Inthis regard, it is advised that APs should examine the backgroundand purpose of transactions with persons (including legal personsand other financial institutions) from jurisdictions included inFATF Statements and countries that do not or insufficiently applythe FATF Recommendations. Further, if the transactions have noapparent economic or visible lawful purpose, the background andpurpose of such transactions should, as far as possible, beexamined and written findings together with all the documentsshould be retained and made available to the Reserve Bank/ otherrelevant authorities, on request.

4. These guidelines would also be applicable mutatis mutandis toall agents/ franchisees of Authorised Persons and it will be thesole responsibility of the Authorised Persons (franchisers) toensure that their agents/ franchisees also adhere to theseguidelines.

5. Authorised Persons should bring the contents of this circularto the notice of their constituents concerned.

6. The directions contained in this Circular are issued underSection 10(4) and Section 11(1) of the Foreign Exchange ManagementAct, 1999 (42 of 1999) and also under the Prevention ofMoney Laundering Act, (PMLA), 2002, as amended by Prevention ofMoney Laundering (Amendment) Act, 2009 and Prevention ofMoney-Laundering (Maintenance of Records of the Nature and Value ofTransactions, the Procedure and Manner of Maintaining and Time forFurnishing Information and Verification and Maintenance of Recordsof the Identity of the Clients of the Banking Companies, FinancialInstitutions and Intermediaries) Rules, 2005, as amended from timeto time. Non-compliance with the guidelines would attract penalprovisions of the Acts concerned or Rules made there under.

Yours faithfully,

(Salim Gangadharan)
Chief General Manager-in-Charge