Money changers told to follow KYC norms

The Reserve Bank of India (RBI) has made Know Your Customer (KYC) guidelines applicable to authorised money changers . The guidelines. part of the anti-money laundering measures, will have to be implemented before March 31, 2006.

According to an RBI circular, "The anti-money laundering (AML) measures formulated should include customer identification procedure - KYC norms, disclosure of suspicious transactions and appointment of a money laundering reporting officer."

Money changers have also been asked to implement additional measures such as staff training, maintenance of records and audit of transactions. The central bank said the measures should be formulated only after seeking board approval.

A money changer could appoint an MLRO to monitor transactions and ensure compliance with AML guidelines. The MLRO would also be responsible for reporting of suspicious transaction/s to the financial intelligence unit (FIU).

Money laundering is a process through which money or other assets obtained as proceeds of crime, are exchanged for "clean money" or other assets with no obvious link to their criminal origins.

The RBI said money changers, henceforth, must undertake transactions only after ensuring customer's credentials. For this purpose, it has been suggested that they retain photocopies of proof of identification after verifying the documents in original. Money changers now have to insist on the presentation of passports for identification in all cases of sale of foreign exchange.

The money changers also need to furnish details pertaining to transactions involving purchase of foreign exchange against payment, in cash exceeding Rs 10 lakh from inter-related persons during the one month.

Money changers have also been told to keep an eye on suspicious activity indicators such as reluctance on part of the customer to provide details on frivolous grounds, large cash transactions and change in the pattern of business transacted.

For the purpose of staff training, the money changers need to ensure that the staff bring to notice suspicious transactions by questioning customers about the source of funds, checking the identification documents carefully, reporting immediately to the MLRO, et al. They also should have an ongoing training programme for consistent implementation of the AML measures

AMCs have also been asked to obtain a certificate from the statutory auditor on the compliance with AML guidelines at the time of preparation of the annual report and kept it on record.