RBI revises its KYC rules to strengthen money laundering prevention

The Reserve Bank of India has revised its master direction on Know Your Customer (KYC) for regulated entities to incorporate amendments to the Prevention of Money Laundering rules. These changes also deal with the requirement of beneficial owner (BO) identification for "partnership firms".

The revised norms clarify the standing of principal officers (PO) in regulated entities (RE) who are responsible for furnishing information. Under the revised definition, "Principal Officer" means an officer at the management level nominated by the RE.

It also fine-tuned the definition of Customer Due Diligence (CDD). This would cover the identification of the customer and verification of their identity using reliable and independent sources. REs would have to obtain information on the purpose and intended nature of the business relationship.

 

Now, REs and concerned officials would have to take reasonable steps to understand the nature of the customer's business, and its ownership and control structure. They would have to determine whether a customer is acting on behalf of a beneficial owner and identify that beneficial owner. They would be required to take all steps to verify the identity of the beneficial owner, using reliable and independent sources, RBI said.

The definition of "Ongoing Due Diligence" has been amended, directing REs to ensure that transactions in the account are consistent with RE's knowledge about the customers, the customers' business and risk profile, and the source of funds or wealth.