The Reserve Bank asked banks and regulated companies to adopt a risk-based strategy for the periodic updating of KYC on Tuesday, tightening the standards for customer due diligence (CDD). The Master Direction (MD) on Know Your Customer (KYC) has been modified by the central bank after evaluation.
According to the procedure for their clients, Regulated Entities (REs) are required to do customer due diligence (CDD). The modifications are in accordance with the most recent directives from the government on the Prevention of Money Laundering Rules, the Unlawful Activities (Prevention) Act (UAPA), and the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act.
According to the Reserve Bank, it has also changed several guidelines to reflect the FATF’s recommendations. The risk-based approach for periodic KYC updates has been changed, according to the most recent Master Directions, to read as follows: “REs shall adopt a risk-based approach for periodic KYC updates, ensuring that the information or data collected under CDD is kept up-to-date and relevant, particularly where there is high-risk.”
In order to minimize the activities of “Money Mules,” who are employed by criminals who illegally access deposit accounts to launder the proceeds of fraud schemes (like phishing and identity theft), it was further stated that the instructions on opening accounts and monitoring transactions should be strictly followed.
According to the revised Master Direction, “Banks shall take diligence measures and meticulous monitoring to identify accounts, which are operated as Money Mules and take appropriate action, including reporting of suspicious transactions to FIU-IND.”
Additionally, it broadens the meaning of CDD (client due diligence). The Reserve Bank said that the Master Direction’s modified clauses will take effect right away.
