Reserve Bank Of India RBI/2012-1
Reserve Bank Of India
A.P. (DIR Series) Circular No. 89
March 12, 2013
To
All Authorised Persons, who are Indian Agents under Money Transfer Service
Scheme
Madam / Sir,
Money Transfer Service Scheme – Revised Guidelines
Attention of all Authorised Persons (APs), who are Indian Agents under the Money
Transfer Service Scheme (MTSS) is invited to the Notification dated June 4, 2003
on MTSS, as amended from time to time and the specific permission accorded to
them under FEMA, 1999 by the Reserve Bank to undertake inward cross-border money
transfer activities in India, through tie-up arrangements with Overseas
Principals.
- The MTSS Guidelines have been revised in consultation with the Government of
India and the revised MTSS Guidelines are in the Annex-I.
- All other instructions issued vide the said Notification ibid, as amended
from time to time remain unchanged.
- These guidelines would also be applicable mutatis mutandis to all Sub Agents
of the Indian Agents under MTSS and it will be the sole responsibility of the
APs (Indian Agents) to ensure that their Sub Agents also adhere to these
guidelines.
- Authorised Persons (Indian Agents) may bring the contents of this circular to
the notice of their constituents concerned.
- The directions contained in this Circular have been issued under Sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions/approvals if any, required under any other
law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager--in-Charge
RBI/2012-13/436
Annex-I
Revised Guidelines on Money Transfer Service Scheme
PART-A
SECTION I
Guidelines for permitting(authorising) Indian Agents under Money Transfer
Service Scheme (MTSS):
- Introduction
1.1 Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring
personal remittances from abroad to beneficiaries in India. Only inward personal
remittances into India such as remittances towards family maintenance and
remittances favouring foreign tourists visiting India are permissible. No
outward remittance from India is permissible under MTSS. The system envisages a
tie-up between reputed money transfer companies abroad known as Overseas
Principals and agents in India known as Indian Agents who would disburse funds
to beneficiaries in India at ongoing exchange rates. The Indian Agent is not
allowed to remit any amount to the Overseas Principal. Under MTSS the remitters
and the beneficiaries are individuals only.
Statutory Basis
1.2 In terms of the powers granted under Section 10 (1) of the Foreign Exchange
Management Act (FEMA), 1999, the Reserve Bank of India may accord necessary
permission (authorization) to any person to act as an Indian Agent under the
Money Transfer Service Scheme. No person can handle the business of cross-border
money transfer to India in any capacity unless specifically permitted by the
Reserve Bank.
1.3 These guidelines lay down basic conditions for grant of permission
(authorisation) to Indian Agents and renewal of existing MTSS permissions given
to them. These guidelines also include guidelines for Overseas Principals and
appointment of Sub-Agents by the Indian Agents. The guidelines are not
exhaustive and other relevant information, security considerations, etc., will
be factored into the decision of permitting an entity. These guidelines will
apply to all applications pending with the Reserve Bank for new arrangements,
renewal of permissions given to Indian Agents, etc. Existing Indian Agents who
do not meet the eligibility norms will have to meet the norms in a phased manner
with the approval of the Reserve Bank or wind up the business of money transfer
immediately.
- Guidelines
Entry Norms
(i)
The applicant to become an Indian Agent should be an Authorised Dealer
Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money
Changer (FFMC), as defined in the A.P. (DIR Series) Circular No. 25 [A.P. (FL
Series) Circular No. 02] dated March 6, 2006, or a Scheduled Commercial Bank or
the Department of Posts.
(ii)
The applicant should have minimum Net Owned Funds of Rs.50 lakh.
Note :- (i) Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit
balance in Profit & Loss A/c) minus (Accumulated balance of loss, Deferred
revenue expenditure and Other intangible assets)
(ii) Net Owned Funds :- Owned funds minus the amount of investments in shares of
its subsidiaries, companies in the same group, all (other) non-banking financial
companies as also the book value of debentures, bonds, outstanding loans and
advances made to and deposits with its subsidiaries and companies in the same
group in excess of 10 per cent of the Owned funds.
- Procedure for making Applications to the Reserve Bank
Application for necessary permission to act as an Indian Agent may be made to
the Chief General Manager-in-Charge, Forex Markets Division, Foreign Exchange
Department, Reserve Bank of India, Central Office, Amar Building, Fort,
Mumbai-400 001 and should be accompanied by the documents pertaining to its
proposed Overseas Principal, as detailed in Section II below and the following
documents:
- A declaration to the effect that no proceedings have been initiated by / are
pending with the Directorate of Enforcement (DoE) / Directorate of Revenue
Intelligence (DRI) or any other law enforcing authorities, against the applicant
or its directors and that no criminal cases are initiated / pending against the
applicant or its directors.
- A declaration to the effect that proper policy framework on KYC / AML / CFT, in
accordance with the guidelines issued vide A.P.(DIR Series) Circular No. 18[
A.P.(FL/RL Series) Circular No. 05] dated November 27, 2009, as amended from
time to time, will be put in place on obtaining permission (authorization) of
the Reserve Bank and before commencement of money transfer operations.
- Name and address of the Overseas Principal with whom the MTSS will be conducted.
- Full details of the operation of the scheme by the Overseas Principal.
- List of branches in India and their addresses where MTSS will be conducted by
the applicant.
- Estimated volume of business per month/year under the scheme.
- Audited Balance Sheet and Profit and Loss Account for the last two financial
years of the applicant, if available or a copy of the latest audited accounts,
with a certificate from Statutory Auditors regarding the position of the Net
Owned Funds as on the date of application.
- Memorandum and Articles of Association of the applicant where either a provision
exists for taking up money transfer business or an appropriate amendment thereto
has been filed with the Company Law Board.
- Confidential Report from at least two of the applicant's bankers in sealed
cover.
- Details of sister/ associated concerns of the applicant functioning in the
financial sector.
- A certified copy of the board resolution for undertaking money transfer business
by the applicant.
- A letter from the proposed Overseas Principal, agreeing to enter into tie up
with the applicant and also to provide necessary collateral.
- Collateral requirement
Collateral equivalent to 3 days' average drawings or US $ 50,000, whichever is
higher, may be kept by the Overseas Principal in favour of the Indian Agent with
a designated bank in India. The minimum amount of US $ 50,000 shall be kept as a
foreign currency deposit while the balance amount may be kept in the form of a
Bank Guarantee. The adequacy of collateral should be reviewed by Indian Agents
at quarterly intervals on the basis of remittances received during the past
three months.
- Other conditions
- Only cross-border personal remittances, such as, remittances towards family
maintenance and remittances favouring foreign tourists visiting India shall be
allowed under this arrangement. Donations/contributions to charitable
institutions/trusts, trade related remittances, remittance towards purchase of
property, investments or credit to NRE Accounts shall not be made through this
arrangement.
- A cap of US $ 2500 has been placed on individual remittance under the scheme.
Amounts up to Rs.50,000/- may be paid in cash to a beneficiary in India. Any
amount exceeding this limit shall be paid by means of account payee cheque/
demand draft/ payment order, etc., or credited directly to the beneficiary's
bank account only. However, in exceptional circumstances, where the beneficiary
is a foreign tourist, higher amounts may be disbursed in cash. Full details of
such transactions should be kept on record for scrutiny by the auditors/
inspectors.
- Only 30 remittances can be received by a single individual beneficiary under the
scheme during a calendar year.
6. Criteria for RBI decisions (i) The Indian Agents need to have strength and efficiency to function
profitably in a highly competitive environment. As a number of Indian Agents are
already functioning, permission (authorization) will be issued on a very
selective basis to those who meet the above requirements, have necessary
outreach and who are likely to conform to the best international and domestic
standards of customer service and efficiency.
(ii) The Indian Agent should commence its money transfer operations under the
scheme within a period of six months from the date of issuance of
permission(authorization) and inform the Central Office and the Regional Office
concerned of the Foreign Exchange Department of the Reserve Bank. SECTION II
Guidelines for Overseas Principals:
Indian Agents entering into arrangements with Money Transfer Operators overseas,
known as Overseas Principals, may note that Overseas Principals with adequate
volume of business, track record and outreach will only be considered under the
scheme. Further, since the primary objective of permitting the business of money
transfer business in the country is to facilitate cheaper and more efficient
means of receipt of remittances, operators with limited outreach in terms of
branch network in the country and localized operations overseas will not be
entertained.
Applicant Indian Agents should submit the following documents / comply with the
following requirements, in respect of their Overseas Principals:
- The Overseas Principal should obtain necessary authorisation from the Department
of Payment and Settlement Systems, Reserve Bank of India under the provisions of
the Payment and Settlement Systems Act (PSS Act), 2007 to commence/ operate a
payment system. Prior to such authorization, the Reserve Bank will verify the
background and antecedents of the Overseas Principal with the help of Govt. of
India,
- The Overseas Principal should be a registered entity, licenced by the Central
Bank / Government or financial regulatory authority of the country concerned for
carrying on Money Transfer Activities. The country of registration of the
Overseas Principal should be AML compliant.
- The minimum Net Worth of Overseas Principals should be at least US $ 1 million
as per the latest audited balance sheet, which should be maintained at all
times. However, the Reserve Bank may consider relaxing the minimum Net Worth
criterion in case of Overseas Principals incorporated in FATF member countries
and are supervised by the concerned Central Bank/ Government or financial
regulatory authority.
- The Overseas Principal should be well established in the money transfer business
with a track record of operations in well regulated markets.
- The arrangement with Overseas Principal should result in considerably increasing
access to formal money transfer facilities at both ends.
- The Overseas Principal should be registered with the overseas trade / Industry
bodies.
- The Overseas Principal should have a good rating from one of the international
credit rating agencies.
- The Overseas Principal should submit confidential reports from at least two of
its bankers.
- The Overseas Principal should submit a report certified by independent Chartered
Accountants, regarding steps taken to comply with anti money laundering norms in
the home/ host country.
- The Overseas Principals will be fully responsible for the activities of their
Agents and Sub Agents in India.
- Proper records of remitters as also beneficiaries pertaining to all pay-outs in
India are to be maintained by the Overseas Principals. All records must be made
accessible on demand to the Reserve Bank or other agencies of the Government of
India, viz., Ministry of Finance, Ministry of Home Affairs, FIU-IND, etc. Full
details of the remitters and the beneficiaries should be provided by the
Overseas Principals, if called for.
SECTION III Guidelines for appointment of Sub Agents by Indian Agents:
- The Scheme
Under the Scheme, Indian Agents can enter into Sub Agency agreements with
entities, fulfilling certain conditions, for the purpose of undertaking money
transfer business.
- Sub Agents
A Sub Agent should have a place of business, and whose bonafides are acceptable
to the Indian Agent. Indian Agents are free to decide on the tenor of the
arrangement as also the commission or fee through mutual agreement with the Sub
Agent. The audit and on-site inspection of premises and records of the Sub
Agents by the Indian Agent to be conducted at least once in a month and in a
year respectively.
- Procedure for Submission of information in respect of Sub Agents by Indian
Agents
Indian Agents should submit necessary information in the prescribed format
(Annex-III) in soft copy form pertaining to their existing Sub Agents within one
month of the date of this circular, to the respective Regional Offices of the
Foreign Exchange Department of the Reserve Bank under whose jurisdiction the
registered office of the Indian Agent falls, for onward submission to the
Ministry of Home Affairs (MHA), Govt. of India (GoI) through the Ministry of
Finance (MoF), Govt. of India (GoI). Thereafter, Indian Agents should submit on
a quarterly basis necessary information in the prescribed format (Annex-III) in
soft copy form pertaining to their Sub Agents appointed during a quarter within
15 days of the end of the quarter, to the respective Regional Offices of the
Foreign Exchange Department of the Reserve Bank under whose jurisdiction the
registered office of the Indian Agent falls for onward submission to the
Ministry of Home Affairs (MHA), Govt. of India (GoI) through the Ministry of
Finance (MoF), Govt. of India (GoI). In case of any objection by the MHA, the
Sub Agency arrangement concerned should be terminated immediately.
Indian Agents should also furnish certificates along with the information in
Annex-III that the Sub Agents appointed by them comply with the eligibility
norms and also they have done due diligence, wherever applicable, in respect of
them.
- Due Diligence of Sub Agents
The Indian Agents and the Overseas Principals should undertake the following
minimum checks while conducting due diligence of the Sub Agents, other than ADs
Cat-I, ADs Cat-II, Scheduled Commercial Banks, FFMCs and the Deptt. of Posts.
- existing business activities of the Sub Agent/ its position in area
- Shop & Establishment/ other applicable municipal certification in favour of the
Sub Agent
- verification of physical existence of location of the Sub Agent
- conduct certificate of the Sub Agent from the local police authorities.
(certified copy of Memorandum and Articles of Association and Certificate of
Incorporation in respect of incorporated entities).
Note: Although obtaining of conduct certificate of the Sub Agent from the local
police authorities is non-mandatory for the Indian Agents, the Indian Agents
must take due care to avoid appointing individuals/ entities as Sub Agents who
have cases / proceedings initiated / pending against them by any law enforcing
agencies.
- declaration regarding past criminal cases, cases initiated/ pending against the
Sub Agent and/or its directors/ partners by any law enforcing agency, if any
- PAN Card of the Sub Agents and its directors/ partners
- Photographs of the directors/ partners and the key persons of the Sub Agent
The above checks should be done on a regular basis, at least once in a year. The
Indian Agents should obtain from the Sub Agents proper documentary evidence
confirming the location of the Sub Agents in addition to personal visits to the
site. The Indian Agents should discontinue agreements with Sub Agents who do not
meet the criteria laid down above within three months from the date of this
circular.
- Selection of Centers
The Indian Agents are free to select centers for operationalising the Scheme.
However, this may be advised to the Reserve Bank.
- Training
The Indian Agents would be expected to impart training to the Sub Agents as
regards operations and maintenance of records.
- Reporting, Audit and Inspection
The Indian Agents would be expected to put in place adequate arrangements for
reporting of transactions by the Sub Agents to the Indian Agents (on a regular
basis) in a simple format to be prescribed by them, say at monthly intervals.
Regular spot audits of all locations of Sub Agents, at least on a monthly basis,
should be conducted by Indian Agents. Such audits should involve a dedicated
team and 'mystery customer'(Individuals acting as potential customers to
experience and measure the extent up to which people and process perform as they
should) concept should be used to test the compliance carried out by Sub Agents.
As mentioned above, a system of inspection of the books of the Sub Agents should
be put in place. The purpose of such inspection, which should be done at least
once a year, would be to ensure that the money transfer business is being
carried out by the Sub Agents in conformity with the terms of
agreement/prevailing RBI guidelines and that necessary records are being
maintained by the Sub Agents.
Note:- As of now, the Indian Agents are fully responsible for the activities of
their Sub Agents. While the Indian Agents will be encouraged to act as
self-regulated entities, the onus of ensuring the conduct of activities of the
Sub Agents in the prescribed manner will lie solely on the Indian Agents
concerned and Reserve Bank of India can in no way be held responsible for the
activities of the Sub Agents. Each Indian Agent would be required to conduct due
diligence before appointing a Sub Agent and any irregularity observed could
render the Indian Agent’s permission liable for cancellation.
SECTION IV Guidelines for renewal of permission(authorization) of existing Indian Agents:
- Necessary permission to Indian Agents will be issued initially for a period
of one year, which may be renewed for one to three years at a time on the basis
of fulfilment of all conditions and other directions/ instructions issued by the
Reserve Bank from time to time by Indian Agents.
- The applicant should be an Authorised Dealer Category-I bank or an Authorised
Dealer Category-II or a Full Fledged Money Changer (FFMC), as defined in the
A.P. (DIR Series) Circular No. 25 [A.P. (FL Series) Circular No. 02] dated March
6, 2006, or a Scheduled Commercial Bank or the Department of Posts.
- The Indian Agent should have minimum Net Owned Funds of Rs.50 lakh.
- Application for renewal of permission should be submitted to the Regional
Office concerned of the Foreign Exchange Department of the Reserve Bank under
whose jurisdiction the registered office of the Indian Agent falls along-with
the documents pertaining to the Overseas Principal as detailed in Section II
above and the following documents:
- A declaration to the effect that no proceedings have been initiated by / are
pending with the Directorate of Enforcement (DoE) / Directorate of Revenue
Intelligence (DRI) or any other law enforcing authorities, against the Indian
Agent or its directors and that no criminal cases are initiated / pending
against the Indian Agent or its directors.
- A write up on the KYC / AML / CFT, risk management and internal control policy
framework, put in place by the Indian Agent.
- Audited Balance Sheet and Profit and Loss Account for the last two financial
years of the Indian Agent, if available or a copy of the latest audited
accounts, with a certificate from statutory auditors regarding the position of
the Net Owned Funds as on the date of application.
- Confidential Reports from at least two of the bankers of the Indian Agent in
sealed cover.
- Details of sister/ associated concerns of the Indian Agent functioning in the
financial sector.
- A certified copy of the board resolution for renewal of permission.
Note :- An application for the renewal of permission under MTSS shall be made
not later than one month, or such other period as the Reserve Bank may
prescribe, before the expiry of the permission. Where an entity submits an
application for the renewal of its MTSS permission, the permission shall
continue in force until the date on which the permission is renewed or the
application for renewal of permission is rejected, as the case may be. No
application for renewal of MTSS permission shall be made after the expiry of the
permission.
SECTION V
Inspection of Indian Agents
Inspections of the Indian Agents may be conducted by the Reserve Bank under the
provisions of Section 12(1) of the FEMA, 1999.
SECTION VI
KYC/ AML/ CFT Guidelines for the Indian Agents
Detailed instructions on Know Your Customer (KYC) norms/Anti-Money Laundering
(AML) standards/Combating the Financing of Terrorism (CFT) for Indian Agents
under MTSS in respect of cross-border inward remittance activities, in the
context of the FATF Recommendations on Anti Money Laundering standards and on
Combating the Financing of Terrorism have been prescribed (Annex-II).
SECTION VII
General Instructions
All Overseas Principals are required to submit their annual audited balance
sheet along with a certificate on Net Worth from their Statutory Auditors to the
Central Office of the Foreign Exchange Department and the Department of Payment
and Settlement Systems of the Reserve Bank. Similarly, all Indian Agents are
required to submit their annual audited balance sheet along with a certificate
from their Statutory Auditors on Net Owned Funds to the Regional offices
concerned of the Foreign Exchange Department of the Reserve Bank. As the
Overseas Principals and the Indian Agents are expected to maintain minimum Net
Worth and Net Owned Funds respectively on an ongoing basis, they are required to
bring it to the notice of the Reserve Bank immediately along with a detailed
plan of restoring the Net Worth/ Net Owned Funds to the minimum required level,
if there is any reduction in their Net Worth/ Net Owned Funds below the minimum
level.
PART-B Reports / Statements
- A quarterly statement of the quantum of remittances received, as per the
enclosed format (Annex-IV) should be furnished by the Indian Agents to the
Regional Offices (ROs) concerned of the Foreign Exchange Department (FED) of the
Reserve Bank, under whose jurisdiction their registered offices fall and Foreign
Exchange Department, Forex Markets Division, Central Office, Amar Building,
Fort, Mumbai-400001 within 15 days from the close of the quarter to which it
relates.
- List of their additional locations should be furnished by the Indian Agents
to the ROs concerned of the FED of the Reserve Bank, under whose jurisdiction
their registered offices fall, on quarterly basis within 15 days from the close
of the quarter to which it relates.
- Indian Agents should forward the list of their Sub Agents, Overseas
Principal-Indian Agent wise along with the addresses of all the locations of
their Sub Agents in excel format in soft form by emailing the same. Indian
Agents should e-mail in excel format in soft form and to the concerned FED
Regional Office, full updated list (names and addresses of all the locations) of
the Sub Agents, whenever they appoint/ remove any Sub Agent. Indian Agents
should visit the RBI website and verify the list of Sub Agents on regular
intervals and any aberration to the list observed may immediately be brought to
the notice of the concerned FED ROs and FED Central Office (CO). Further, Indian
Agents should confirm the veracity on quarterly basis of the list placed on RBI wesbite to FED CO either in form of a letter or by e-mail within 15 days of the
end of a quarter.
3. A half-yearly statement of the collateral held as at the end of June and
December every year, as per the enclosed format (Annex-V) should be furnished by
the Indian Agents to the ROs concerned of the FED of the Reserve Bank, under
whose jurisdiction their registered offices fall and Foreign Exchange
Department, Forex Markets Division, Central Office, Amar Building, Fort,
Mumbai-400001 within 15 days from the close of the half-year to which it
relates.
Annex-II
KYC/ AML/ CFT Guidelines for Indian Agents
SECTION-I
Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating
the Financing of Terrorism (CFT)/Obligation of Authorised Persons (Indian
Agents) under Prevention of Money Laundering Act, (PMLA), 2002, as amended by
Prevention of Money Laundering (Amendment) Act, 2009 - Cross Border Inward
Remittance under Money Transfer Service Scheme
- Introduction
The offence of Money Laundering has been defined in Section 3 of the Prevention
of Money Laundering Act, 2002 (PMLA) as "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 and
projecting it as untainted property shall be guilty of offence of money
laundering". Money Laundering can be called a process by 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 objective
The objective of prescribing KYC/AML/CFT guidelines is to prevent the system of
cross border inward money transfer into India from all over the world under the
MTSS from being used, intentionally or unintentionally, by criminal elements for
money laundering or terrorist financing activities. KYC procedures also enable
Authorised Persons, who are Indian Agents under MTSS [referred as APs (Indian
Agents) hereinafter] to know/understand their customers and their financial
dealings better, which in turn help them manage their risks prudently.
- Definition of Customer
For the purpose of KYC policy, a ‘Customer’ is defined as :
- a person who receives occasional/ regular cross border inward remittances under
MTSS;
- one on whose behalf a cross border inward remittance under MTSS is received
(i.e., the beneficial owner)
[In view of Government of India Notification dated February 12, 2010 - Rule 9,
sub-rule (1A) of PML Rules - 'Beneficial Owner' means the natural person who
ultimately owns or controls a client and or the person on whose behalf a
transaction is being conducted, and includes a person who exercises ultimate
effective control over a juridical person].
- Guidelines
4.1 General
APs (Indian Agents) should keep in mind that the information collected from the
customer while making payment of cross border inward remittances is to be
treated as confidential and details thereof are not to be divulged for cross
selling or any other like purposes. APs (Indian Agents) should, therefore,
ensure that information sought from the customer is relevant to the perceived
risk, is not intrusive, and is in conformity with the guidelines issued in this
regard. Any other information from the customer, wherever necessary, should be
sought separately with his/her consent.
4.2 KYC Policy
APs (Indian Agents) should frame their KYC policies incorporating the following
four key elements:
- Customer Acceptance Policy;
- Customer Identification Procedures;
- Monitoring of Transactions; and
- Risk Management.
4.3 Customer Acceptance Policy (CAP)
- Every AP (Indian Agent) should develop a clear Customer Acceptance Policy
laying down explicit criteria for acceptance of customers. The Customer
Acceptance Policy must ensure that explicit guidelines are in place on the
following aspects of customer relationship in the AP (Indian Agent).
- No remittance is received in anonymous or fictitious/ benami name(s). [APs
(Indian Agents) should not allow any transaction in any anonymous or fictitious
name (s) or on behalf of other persons whose identity has not been disclosed or
cannot be verified in view of Government of India Notification dated June 16,
2010 Rule 9, sub-rule (1C)].
- Parameters of risk perception are clearly defined in terms of the nature of
business activity, location of customer and his clients, mode of payments,
volume of turnover, social and financial status, etc. to enable categorisation
of customers into low, medium and high risk (APs may choose any suitable
nomenclature, viz., level I, level II and level III). Customers requiring very
high level of monitoring, e.g., Politically Exposed Persons (PEPs) may, if
considered necessary, be categorised even higher.
- Documentation requirements and other information to be collected in respect of
different categories of customers depending on perceived risk and keeping in
mind the requirements of Prevention of Money Laundering Act, (PMLA), 2002, as
amended by Prevention of Money Laundering (Amendment) Act, 2009, Prevention of
Money-Laundering (Maintenance of Records of the Nature and Value of
Transactions, the Procedure and Manner of Maintaining and Time for Furnishing
Information and Verification and Maintenance of Records of the Identity of the
Clients of the Banking Companies, Financial Institutions and Intermediaries)
Rules, 2005, as amended from time to time, as well as instructions / guidelines
issued by the Reserve Bank, from time to time.
- Not to make payment of any remittance where the AP (Indian Agent) is unable to
apply appropriate customer due diligence measures, i.e., AP (Indian Agent) is
unable to verify the identity and /or obtain documents required as per the risk
categorisation due to non-cooperation of the customer or non reliability of the
data/information furnished to the AP (Indian Agent). It is, however, necessary
to have suitable built in safeguards to avoid harassment of the customer. In the
circumstances when an AP (Indian Agent) believes that it would no longer be
satisfied that it knows the true identity of the customer, the AP (Indian Agent)
should file an STR with FIU-IND.
- Circumstances, in which a customer is permitted to act on behalf of another
person/entity, should be clearly spelt out, the beneficial owner should be
identified and all reasonable steps should be taken to verify his identity.
- APs (Indian Agents) should prepare a profile for each new customer, where
regular cross-border inward remittances are/ expected to be received, based on
risk categorisation. The customer profile may contain information relating to
customer’s identity, social / financial status, etc. The nature and extent of
due diligence will depend on the risk perceived by the AP (Indian Agent).
However, while preparing customer profile, APs (Indian Agents) should take care
to seek only such information from the customer, which is relevant to the risk
category and is not intrusive. The customer profile is a confidential document
and details contained therein should not be divulged for cross selling or any
other purposes.
- For the purpose of risk categorisation, individuals (other than High Net
Worth) and entities whose identities and sources of wealth can be easily
identified and transactions by whom by and large conform to the known profile,
may be categorised as low risk. Customers that are likely to pose a higher than
average risk should be categorised as medium or high risk depending on
customer's background, nature and location of activity, country of origin,
sources of funds and his client profile, etc. APs(Indian Agents) should apply
enhanced due diligence measures based on the risk assessment, thereby requiring
intensive ‘due diligence’ for higher risk customers, especially those for whom
the sources of funds are not clear. Examples of customers requiring enhanced due
diligence include (a) nonresident customers; (b) customers from countries that
do not or insufficiently apply the FATF standards; (c) high net worth
individuals; (d) politically exposed persons (PEPs); (e) non-face to face
customers; and (f) those with dubious reputation as per public information
available, etc.
- It is important to bear in mind that the adoption of customer acceptance
policy and its implementation should not become too restrictive and must not
result in denial of cross border inward remittance facilities to general public.
- With a view to preventing the system of cross border inward money transfer
into India from all over the world under the MTSS from being used, intentionally
or unintentionally, by criminal elements for money laundering or terrorist
financing activities, whenever there is suspicion of money laundering or
terrorist financing or when other factors give rise to a belief that the
customer does not, in fact, pose a low risk, APs (Indian Agents) should carry
out full scale customer due diligence (CDD) before making payment of any
remittance.
4.4 Customer Identification Procedure (CIP)
- The policy approved by the Board of APs (Indian Agents) should clearly spell
out the Customer Identification Procedure while making payment to a beneficiary
or when the AP has a doubt about the authenticity/veracity or the adequacy of
the previously obtained customer identification data. Customer identification
means identifying the customer and verifying his/her identity by using reliable,
independent source documents, data or information. APs (Indian Agents) need to
obtain sufficient information necessary to establish, to their satisfaction, the
identity of each new customer, whether regular or occasional. Being satisfied
means that the AP must be able to satisfy the competent authorities that due
diligence was observed based on the risk profile of the customer in compliance
with the extant guidelines in place. Such risk based approach is considered
necessary to avoid disproportionate cost to APs (Indian Agents) and a burdensome
regime for the customers. The APs (Indian Agents) should obtain sufficient
identification data to verify the identity of the customer and his
address/location. For customers that are natural persons, the APs (Indian
Agents) should obtain sufficient identification document /s to verify the
identity of the customer and his address/location. For customers that are legal
persons, the AP (Indian Agent) should (i) verify the legal status of the legal
person through proper and relevant documents; (ii) verify that any person
purporting to act on behalf of the legal person is so authorised and identify
and verify the identity of that person; and (iii) understand the ownership and
control structure of the customer and determine who are the natural persons who
ultimately control the legal person. Customer identification requirements in
respect of a few typical cases, especially, legal persons requiring an extra
element of caution are given in paragraph 4.5 below for guidance of APs (Indian
Agents). APs (Indian Agents) may, however, frame their own internal guidelines
based on their experience of dealing with such persons, their normal prudence
and the legal requirements as per established practices. If the AP (Indian
Agent) decides to undertake such transactions in terms of the Customer
Acceptance Policy, the AP (Indian Agent) should take reasonable measures to
identify the beneficial owner(s) and verify his/her/their identity in a manner
so that it is satisfied that it knows who the beneficial owner(s) is/are [in
view of Government of India Notification dated June 16, 2010 - Rule 9 sub-rule
(1A) of PML Rules].
Note: Rule 9(1A) of Prevention of Money Laundering Rules, 2005 requires that
every AP (Indian Agent) under MTSS shall identify the beneficial owner and take
all reasonable steps to verify his identity. The term "beneficial owner" has
been defined as the natural person who ultimately owns or controls a client
and/or the person on whose behalf the transaction is being conducted, and
includes a person who exercises ultimate effective control over a juridical
person. Government of India has since examined the issue and has specified the
procedure for determination of Beneficial Ownership. The procedure as advised by
the Government of India is as under:
- Where the client is a person other than an individual or trust, the AP
(Indian Agents) shall identify the beneficial owners of the client and take
reasonable measures to verify the identity of such persons, through the
following information:
- The identity of the natural person, who, whether acting alone or together, or
through one or more juridical person, exercises control through ownership or who
ultimately has a controlling ownership interest.
Explanation: Controlling ownership interest means ownership of/entitlement to
more than 25 percent of shares or capital or profits of the juridical person,
where the juridical person is a company; ownership of/entitlement to more than
15% of the capital or profits of the juridical person where the juridical person
is a partnership; or, ownership of/entitlement to more than 15% of the property
or capital or profits of the juridical person where the juridical person is an
unincorporated association or body of individuals.
- In cases where there exists doubt under (i) as to whether the person with the
controlling ownership interest is the beneficial owner or where no natural
person exerts control through ownership interests, the identity of the natural
person exercising control over the juridical person through other means.
Explanation: Control through other means can be exercised through voting rights,
agreement, arrangements, etc.
- Where no natural person is identified under (i) or (ii) above, the identity of
the relevant natural person who holds the position of senior managing official.
- Where the client is a trust, the AP (Indian Agent) shall identify the
beneficial owners of the client and take reasonable measures to verify the
identity of such persons, through the identity of the settler of the trust, the
trustee, the protector, 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.
- Where the client or the owner of the controlling interest is a company listed
on a stock exchange, or is a majority-owned subsidiary of such a company, it is
not necessary to identify and verify the identity of any shareholder or
beneficial owner of such companies.
- Some close relatives, e.g., wife, son, daughter and parents, etc., who live
with their husband, father / mother and son / daughter, as the case may be, may
find it difficult to undertake transactions with APs (Indian Agents) as the
utility bills required for address verification are not in their name. It is
clarified, that in such cases, APs (Indian Agents) can obtain an identity
document and a utility bill of the relative with whom the prospective customer
is living along with a declaration from the relative that the said person
(prospective customer) wanting to undertake a transaction is a relative and is
staying with him/her. APs (Indian Agents) can use any supplementary evidence
such as a letter received through post for further verification of the address.
While issuing operational instructions to the branches on the subject, APs
(Indian Agents) should keep in mind the spirit of instructions issued by the
Reserve Bank and avoid undue hardships to individuals who are, otherwise,
classified as low risk customers.
- APs (Indian Agents) should introduce a system of periodical updation of
customer identification data, if there is a continuing relationship.
- An indicative list of the type of documents / information that may be relied
upon for customer identification is given in SECTION-II. It is clarified that
permanent correct address, as referred to in SECTION-II means the address at
which a person usually resides and can be taken as the address as mentioned in a
utility bill or any other document accepted by the AP for verification of the
address of the customer. When there are suspicions of money laundering or
financing of the activities relating to terrorism or where there are doubts
about the adequacy or veracity of previously obtained customer identification
data, APs (Indian Agents) should review the due diligence measures including
verifying again the identity of the client and obtaining information on the
purpose and intended nature of the business relationship, as the case may be.
[In view of Government of India Notification dated June 16, 2010- Rule 9
sub-rule (1D) of PML Rules].
- Payment to Beneficiaries
- For payment to beneficiaries, the identification documents, as mentioned at
SECTION-II, should be verified and a copy retained. The copy of identification
documents obtained should contain current and legible photograph of
beneficiaries. This shall continue for a period of next six months from the date
of this circular, subject to submission of a copy of the identifications
documents during every payment. Further, in the event of a beneficiary being
discovered to have received funds on the basis of a photo ID which did not sport
his/ her photograph, action would also be initiated against the Agent/ Sub
Agent. Thereafter, in addition to this, the identification requirements for cash
payment to beneficiary shall also include biometric identification of the
beneficiary. This stipulation will ultimately be linked to UID when it is fully
implemented.
- A cap of US $ 2500 has been placed on individual remittances under the
scheme. Amounts up to Rs.50,000 may be paid in cash. Any amount exceeding this
limit shall be paid only by means of cheque/D.D. /P.O., etc., or credited
directly to the beneficiary's bank account. However, in exceptional
circumstances, where the beneficiary is a foreign tourist, higher amounts may be
disbursed in cash. Only 30 remittances can be received by a single individual
during a calendar year.
4.5 Customer Identification Requirements – Transactions by Politically Exposed
Persons (PEPs) - Indicative Guidelines
Politically exposed persons are individuals who are or have been entrusted with
prominent public functions in a foreign country, e.g., Heads of States or of
Governments, senior politicians, senior government/judicial/military officers,
senior executives of state-owned corporations, important political party
officials, etc. APs (Indian Agents) should gather sufficient information on any
person/customer of this category intending to undertake a transaction and check
all the information available on the person in the public domain. APs (Indian
Agents) should verify the identity of the person and seek information about the
source /s of wealth and source /s of funds before accepting the PEP as a
customer. The decision to undertake a transaction with a PEP should be taken at
a senior level which should be clearly spelt out in the Customer Acceptance
Policy. APs (Indian Agents) should also subject such transactions to enhanced
monitoring on an ongoing basis. The above norms may also be applied to
transactions with the family members or close relatives of PEPs. The above norms
may also be applied to customers who become PEPs subsequent to establishment of
the business relationship. These instructions are also applicable to
transactions where a PEP is the ultimate beneficial owner. Further, in regard to
transactions in case of PEPs, it is reiterated that APs (Indian Agents) should
have appropriate ongoing risk management procedures for identifying and applying
enhanced CDD to PEPs, customers who are family members or close relatives of
PEPs and transactions of which a PEP is the ultimate beneficial owner.
4.6 Monitoring of Transactions
Ongoing monitoring is an essential element of effective KYC procedures. APs
(Indian Agents) can effectively control and reduce their risk only if they have
an understanding of the normal and reasonable receipt of remittances of the
beneficiary so that they have the means of identifying receipts that fall
outside the regular pattern of activity. However, the extent of monitoring will
depend on the risk sensitivity of the remittance. APs (Indian Agents) should pay
special attention to all complex, unusually large receipts and all unusual
patterns which have no apparent economic or visible lawful purpose. APs (Indian
Agents) may prescribe threshold limits for a particular category of receipts and
pay particular attention to the receipts which exceed these limits. High-risk
receipts have to be subjected to intense monitoring.
Every AP (Indian Agent) should set key indicators for such receipts, taking note
of the background of the customer, such as the country of origin, sources of
funds, the type of transactions involved and other risk factors. APs (Indian
Agents) should put in place a system of periodical review of risk categorization
of customers and the need for applying enhanced due diligence measures. Such
review of risk categorisation of customers should be carried out periodically.
APs (Indian Agents) should 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 [In view of
Government of India Notification dated June 16, 2010 -Rule 9, sub-rule (1B)]
APs (Indian Agents) should examine the background and purpose of transactions
with persons (including legal persons and other financial institutions) from
jurisdictions included in the FATF Statements and countries that do not or
insufficiently apply the FATF Recommendations. Further, if the transactions have
no apparent economic or visible lawful purpose, the background and purpose of
such transactions should, as far as possible, be examined and written findings
together with all the documents should be retained and made available to the
Reserve Bank/ other relevant authorities, on request.
4.7 Attempted transactions
Where the AP (Indian Agent) is unable to apply appropriate KYC measures due to
non-furnishing of information and /or non-cooperation by the customer, the AP
should not undertake the transaction. Under these circumstances, APs should make
a suspicious transactions report to FIU-IND in relation to the customer, even if
the transaction is not put through.
4.8 Risk Management
- The Board of Directors of the AP (Indian Agent) should ensure that an
effective KYC programme is put in place by establishing appropriate procedures
and ensuring effective implementation. It should cover proper management
oversight, systems and controls, segregation of duties, training and other
related matters. Responsibility should be explicitly allocated within the AP
(Indian Agent) for ensuring that the APs’ policies and procedures are
implemented effectively. APs (Indian Agents) should, in consultation with their
Boards, devise procedures for creating risk profiles of their existing and new
customers and apply various anti money laundering measures keeping in view the
risks involved in a transaction.
- APs’ (Indian Agents) internal audit and compliance functions have an
important role in evaluating and ensuring adherence to the KYC policies and
procedures. As a general rule, the compliance function should provide an
independent evaluation of the AP’s (Indian Agent’s) own policies and procedures,
including legal and regulatory requirements. APs (Indian Agents) should ensure
that their audit machinery is staffed adequately with individuals who are
well-versed in such policies and procedures. The concurrent auditors should
check all cross border inward remittance transactions under MTSS to verify that
they have been undertaken in compliance with the anti-money laundering
guidelines and have been reported whenever required to the concerned
authorities. Compliance on the lapses, if any, recorded by the concurrent
auditors should be put up to the Board. A certificate from the Statutory
Auditors on the compliance with KYC / AML / CFT guidelines should be obtained at
the time of preparation of the Annual Report and kept on record.
4.9 Introduction of New Technologies
APs (Indian Agents) should pay special attention to any money laundering threats
that may arise from new or developing technologies including transactions
through internet that might favour anonymity and take measures, to prevent their
use for money laundering purposes and financing of terrorism activities.
4.10 Combating Financing of Terrorism
- In terms of PML Rules, suspicious transaction should include inter alia
transactions which give rise to a reasonable ground of suspicion that these may
involve the proceeds of an offence mentioned in the Schedule to the PMLA,
regardless of the value involved. APs (Indian Agents) should, therefore, develop
suitable mechanism through appropriate policy framework for enhanced monitoring
of transactions suspected of having terrorist links and swift identification of
the transactions and making suitable reports to the FIU-IND on priority.
- APs (Indian Agents) are advised to take into account risks arising from the
deficiencies in AML/CFT regime of certain jurisdictions, viz., Iran, Uzbekistan,
Pakistan, Turkmenistan, Sao Tome and Principe, Democratic People’s Republic of
Korea (DPRK), Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, Turkey
and Nigeria, as identified in FATF Statement (www.fatf-gafi.org) issued from
time to time, while dealing with individuals from these jurisdictions. In
addition to FATF Statements circulated by the Reserve Bank of India from time to
time, (latest as on February 14, 2013, circulated vide the A.P. (DIR Series)
Circular No. 71 dated January 10, 2013), APs (Indian Agents) should also
consider using publicly available information for identifying countries, which
do not or insufficiently apply the FATF Recommendations. All APs (Indian Agents)
are accordingly advised to take into account risks arising from the deficiencies
in AML/CFT regime of these countries, while entering into business relationships
and transactions with persons (including legal persons and other financial
institutions) from or in these countries/ jurisdictions and give special
attention to these cases.
4.11 Principal Officer
- APs (Indian Agents) should appoint a senior management officer to be
designated as Principal Officer. Principal Officer shall be located at the
head/corporate office of the AP and shall be responsible for monitoring and
reporting of all transactions and sharing of information as required under the
law. The role and responsibilities of the Principal Officer should include
overseeing and ensuring overall compliance with regulatory guidelines on KYC/
AML/ CFT issued from time to time and obligations under the Prevention of Money
Laundering Act, 2002, as amended by Prevention of Money Laundering (Amendment)
Act, 2009, rules and regulations made there under, as amended from time to time.The Principal Officer should also be responsible for developing appropriate
compliance management arrangements across the full range of AML/CFT areas (e.g.
CDD, record keeping, etc.). He will maintain close liaison with enforcement
agencies, APs (Indian Agents) and any other institution which are involved in
the fight against money laundering and combating financing of terrorism. To
enable the Principal Officer to discharge his responsibilities, it is advised
that the Principal Officer and other appropriate staff should have timely access
to customer identification data and other CDD information, transaction records
and other relevant information. Further, APs (Indian Agents) should ensure that
the Principal Officer is able to act independently and report directly to the
senior management or to the Board of Directors.
- The Principal Officer will be responsible for timely submission of CTR and
STR to the FIU-IND.
4.12 Maintenance of records of transactions/Information to be preserved/
Maintenance and preservation of records/ Cash and Suspicious Transactions
Reporting to Financial Intelligence Unit- India (FIU-IND)
Section 12 of the Prevention of Money Laundering Act (PMLA), 2002, as amended by
Prevention of Money Laundering (Amendment) Act, 2009, casts certain obligations
on the APs (Indian Agents) in regard to preservation and reporting of
transaction information. APs (Indian Agents) are, therefore, advised to go
through the provisions of Prevention of Money Laundering Act, (PMLA), 2002, as
amended by Prevention of Money Laundering (Amendment) Act, 2009 and the Rules
notified there under and take all steps considered necessary to ensure
compliance with the requirements of Section 12 of the Act ibid.
- Maintenance of records of transactions
APs (Indian Agents) should introduce a system of maintaining proper record of
transactions prescribed under Rule 3, as mentioned below:
- all cash transactions of the value of more than Rupees ten lakh or its
equivalent in foreign currency;
- all series of cash transactions integrally connected to each other which have
been valued below Rupees ten lakh or its equivalent in foreign currency where
such series of transactions have taken place within a month and the aggregate
value of such transactions exceeds Rupees ten lakh;
- all transactions involving receipts by non-profit organisations of value more
than Rupees ten lakh or its equivalent in foreign currency [In view of
Government of India Notification dated November 12, 2009 - Rule 3, sub-rule (1)
clause (BA) of PML Rules];
- all cash transactions where forged or counterfeit currency notes or bank notes
have been used as genuine and where any forgery of a valuable security or a
document has taken place facilitating the transaction; and
- All suspicious transactions whether or not made in cash and by way of as
mentioned in the Rules.
- Information to be preserved
APs (Indian Agents) are required to maintain all necessary information in
respect of transactions referred to in Rule 3 to permit reconstruction of
individual transactions including the following information:
- the nature of the transaction;
- the amount of the transaction and the currency in which it was denominated;
- the date on which the transaction was conducted; and
- the parties to the transaction.
- Maintenance and Preservation of Records
- APs (Indian Agents) are required to maintain the records containing
information of all transactions including the records of transactions detailed
in Rule 3 above. APs (Indian Agents) should take appropriate steps to evolve a
system for proper maintenance and preservation of transaction information in a
manner that allows data to be retrieved easily and quickly whenever required or
when requested by the competent authorities. Further, APs (Indian Agents) should
maintain for at least ten years from the date of transaction between the AP and
the client, all necessary records of transactions, both with residents and
non-residents, which will permit reconstruction of individual transactions
(including the amounts and types of currency involved, if any) so as to provide,
if necessary, evidence for prosecution of persons involved in criminal activity.
- APs (Indian Agents) should ensure that records pertaining to the
identification of the customer and his address (e.g. copies of documents like
passport, driving license, PAN card, voter identity card issued by the Election
Commission, utility bills, etc.) obtained while undertaking the transaction, are
properly preserved for at least ten years from the date of cessation of the
business relationship. The identification records and transaction data should be
made available to the competent authorities upon request.
- In paragraph 4.6 of this Circular, APs (Indian Agents) have been advised to
pay special attention to all complex, unusual large transactions and all unusual
patterns of transactions, which have no apparent economic or visible lawful
purpose. It is further clarified that the background including all
documents/office records / memoranda pertaining to such transactions and purpose
thereof should, as far as possible, be examined and the findings at branch as
well as Principal Officer’s level should be properly recorded. Such records and
related documents should be made available to help auditors in their day-to-day
work relating to scrutiny of transactions and also to Reserve Bank/other
relevant authorities. These records are required to be preserved for ten years
as is required under Prevention of Money Laundering Act, (PMLA), 2002, as
amended by Prevention of Money Laundering (Amendment) Act, 2009 and Prevention
of Money-Laundering (Maintenance of Records of the Nature and Value of
Transactions, the Procedure and Manner of Maintaining and Time for Furnishing
Information and Verification and Maintenance of Records of the Identity of the
Clients of the Banking Companies, Financial Institutions and Intermediaries)
Rules, 2005, as amended from time to time.
- Reporting to Financial Intelligence Unit – India
- In terms of the PML rules, APs (Indian Agents) are required to report
information relating to cash and suspicious transactions to the Director,
Financial Intelligence Unit-India (FIU-IND) in respect of transactions referred
to in Rule 3 at the following address:
The Director,
Financial Intelligence Unit-India (FIU-IND),
6th Floor, Hotel Samrat,
Chanakyapuri, New Delhi-110021.
Website - http://fiuindia.gov.in/
- APs (Indian Agents) should carefully go through all the reporting formats.
There are altogether four reporting formats, as detailed in SECTION-III, viz. i)
Cash Transactions Report (CTR); ii) Electronic File Structure-CTR; iii)
Suspicious Transactions Report (STR); and iv) Electronic File Structure-STR. The
reporting formats contain detailed guidelines on the compilation and
manner/procedure of submission of the reports to FIU-IND. It would be necessary
for APs (Indian Agents) to initiate urgent steps to ensure electronic filing of
all types of reports to FIU-IND. The related hardware and technical requirement
for preparing reports in an electronic format, the related data files and data
structures thereof are furnished in the instructions part of the formats
concerned.
- In terms of instructions contained in paragraph 4.3(b) of this Circular, APs
(Indian Agents) are required to prepare a profile for each customer based on
risk categorisation. Further, vide paragraph 4.6, the need for periodical review
of risk categorisation has been emphasized. It is, therefore, reiterated that
APs (Indian Agents), as a part of transaction monitoring mechanism, are required
to put in place an appropriate software application to throw alerts when the
transactions are inconsistent with risk categorization and updated profile of
customers. It is needless to add that a robust software throwing alerts is
essential for effective identification and reporting of suspicious transactions.
4.13 Cash and Suspicious Transaction Reports
A) Cash Transaction Report (CTR)
While detailed instructions for filing all types of reports are given in the
instructions part of the related formats, APs (Indian Agents) should
scrupulously adhere to the following:
- The Cash Transaction Report (CTR) for each month should be submitted to the
FIU‑IND by 15th of the succeeding month. Cash transaction reporting by branches
to their controlling offices should, therefore, invariably be submitted on a
monthly basis and APs (Indian Agents) should ensure to submit CTR for every
month to FIU-IND within the prescribed time schedule.
- While filing CTR, details of individual transactions below Rs.50,000 need
not be furnished.
- CTR should contain only the transactions carried out by the AP on behalf of
their customers excluding transactions between the internal accounts of the AP
- A cash transaction report for the AP as a whole should be compiled by the
Principal Officer of the AP every month in physical form as per the format
specified. The report should be signed by the Principal Officer and submitted to
the FIU-IND.
- In case of Cash Transaction Reports (CTR) compiled centrally by APs (Indian
Agents) for the branches at their central data centre level, APs (Indian Agents)
may generate centralised Cash Transaction Reports (CTR) in respect of branches
under central computerized environment at one point for onward transmission to
FIU-IND, provided:
- The CTR is generated in the format prescribed by Reserve Bank in Para
4.12(iv)(b) of this Circular.
- A copy of the monthly CTR submitted on its behalf to the FIU-IND is available at
the branch concerned for production to auditors/inspectors, when asked for.
- The instruction on ‘Maintenance of records of transactions’, ‘Information to be
preserved’ and ‘Maintenance and Preservation of records’ as contained above in
this circular at Para 4.12 (i), (ii) and (iii) respectively are scrupulously
followed by the branch.
However, in respect of branches not under central computerized environment, the
monthly CTR should be compiled and forwarded by the branch to the Principal
Officer for onward transmission to the FIU-IND.
- Suspicious Transaction Reports (STR)
- While determining suspicious transactions, APs (Indian Agents) should be
guided by definition of suspicious transaction contained in PML Rules, as
amended from time to time.
- It is likely that in some cases, transactions are abandoned/ aborted by
customers on being asked to give some details or to provide documents. It is
clarified that APs (Indian Agents) should report all such attempted transactions
in STRs, even if not completed by customers, irrespective of the amount of the
transaction.
- APs (Indian Agents) should make STRs if they have reasonable ground to
believe that the transaction, including an attempted transaction, involves
proceeds of crime generally irrespective of the amount of transaction and/or the
threshold limit envisaged for predicate offences in part B of Schedule of
Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of
Money Laundering (Amendment) Act, 2009.
- The Suspicious Transaction Report (STR) should be furnished within 7 days of
arriving at a conclusion that any transaction, including an attempted
transaction, whether cash or non-cash, or a series of transactions integrally
connected are of suspicious nature. The Principal Officer should record his
reasons for treating any transaction or a series of transactions as suspicious.
It should be ensured that there is no undue delay in arriving at such a
conclusion once a suspicious transaction report is received from a branch or any
other office. Such report should be made available to the competent authorities
on request.
- In the context of creating KYC/ AML awareness among the staff and for
generating alerts for suspicious transactions, APs (Indian Agents) may consider
the following indicative list of suspicious activities.
Some possible suspicious activity indicators are given below:
- Customer is reluctant to provide details / documents on frivolous grounds.
- The transaction is undertaken by one or more intermediaries to protect the
identity of the beneficiary or hide their involvement.
- Large amount of remittances.
- Size and frequency of transactions is high considering the normal business of
the customer.
The above list is only indicative and not exhaustive.
- APs (Indian Agents) should not put any restrictions on payment to
beneficiaries where an STR has been made. Moreover, it should be ensured that
employees of APs shall keep the fact of furnishing such information as strictly
confidential and there is no tipping off to the customer at any level.
4.14 Customer Education/Employees’ Training/Employees’ Hiring
- Customer Education
Implementation of KYC procedures requires APs (Indian Agents) to demand certain
information from customers which may be of personal nature or which has hitherto
never been called for. This can sometimes lead to a lot of questioning by the
customer as to the motive and purpose of collecting such information. There is,
therefore, a need for APs (Indian Agents) to prepare specific literature/
pamphlets, etc., so as to educate the customer of the objectives of the KYC
programme. The front desk staff needs to be specially trained to handle such
situations while dealing with customers.
- Employees’ Training
APs (Indian Agents) must have an ongoing employee training programme so that the
members of the staff are adequately trained to be aware of the policies and
procedures relating to prevention of money laundering, provisions of the PMLA
and the need to monitor all transactions to ensure that no suspicious activity
is being undertaken under the guise of remittances. Training requirements should
have different focuses for frontline staff, compliance staff and staff dealing
with new customers. It is crucial that all those concerned fully understand the
rationale behind the KYC policies and implement them consistently. The steps to
be taken when the staff come across any suspicious transactions (such as asking
questions about the source of funds, checking the identification documents
carefully, reporting immediately to the Principal Officer, etc.) should be
carefully formulated by the APs (Indian Agents) and suitable procedure laid
down. The APs (Indian Agents) should have an ongoing training programme for
consistent implementation of the AML measures.
- Hiring of Employees
It may be appreciated that KYC norms/AML standards/CFT measures have been
prescribed to ensure that criminals are not allowed to misuse the system of
money transfer under MTSS. It would, therefore, be necessary that adequate
screening mechanism is put in place by APs (Indian Agents) as an integral part
of their recruitment/hiring process of personnel to ensure high standards.
Note:- (i) The Government of India had constituted a National Money Laundering /
Financing of Terror Risk Assessment Committee to assess money laundering and
terror financing risks, a national AML/CFT strategy and institutional framework
for AML/CFT in India. Assessment of risk of Money Laundering /Financing of
Terrorism helps both the competent authorities and the regulated entities in
taking necessary steps for combating ML / FT adopting a risk-based approach.
This helps in judicious and efficient allocation of resources and makes the AML
/ CFT regime more robust. The Committee has made recommendations regarding
adoption of a risk-based approach, assessment of risk and putting in place a
system which would use that assessment to take steps to effectively counter ML /
FT. The recommendations of the Committee have since been accepted by the
Government of India and need to be implemented. Accordingly, APs (Indian Agents)
should take steps to identify and assess their ML/TF risk for customers,
countries and geographical areas as also for products/ services/
transactions/delivery channels, in addition to what has been prescribed in the
paragraph 4 above. APs (Indian Agents) should have policies, controls and
procedures, duly approved by their boards, in place to effectively manage and
mitigate their risk adopting a risk-based approach as discussed above. As a
corollary, APs (Indian Agents) would be required to adopt enhanced measures for
products, services and customers with a medium or high risk rating. APs (Indian
Agents) may design risk parameters according to their activities for risk based
transaction monitoring, which will help them in their own risk assessment.
(ii) The above KYC/ AML/ CFT Guidelines would also be applicable mutatis
mutandis to all Sub Agents of the Indian Agents under MTSS and it will be the
sole responsibility of the APs (Indian Agents) to ensure that their Sub Agents
also adhere to these guidelines.
Section -II
Customer Identification Procedure Features to be verified and documents that may
be obtained from customers
Features |
Documents |
- Legal name and any other names used
|
(i) Passport (ii) PAN card (iii) Voter’s Identity Card (iv) Driving licence (v)
Identity card (subject to the AP’s satisfaction) (vi) Letter from a recognized
public authority or public servant verifying the identity and residence of the
customer to the satisfaction of the AP(Indian Agent) |
- Correct permanent address |
(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized
public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer
(subject to satisfaction of the AP).
(any one of the documents, which provides customer information to the
satisfaction of the AP (Indian Agent) will suffice).
Note :- If the address on the document submitted for identity proof by the
prospective customer is same as that declared by him/her, the document may be
accepted as a valid proof of both identity and address. If the address indicated
on the document submitted for identity proof differs from the current address
declared by the customer, a separate proof of address should be obtained. |
Section-III
List of various reports and their formats
- Cash Transaction Report (CTR)
- Electronic File Structure- CTR
- Suspicious Transaction Report (STR)
- Electronic File Structure-STR
Note: FIU-IND have now advised that the 'go-live' date is October 20, 2012 and
that Authorised Persons, who are Indian agents under MTSS may discontinue
submission of reports in CD format after October 20, 2012, using only FINnet
gateway for uploading of reports in the new XML reporting format. Any report in
CD format received after October 20, 2012 will not be treated as a valid
submission by FIU-IND.
Annex-III
Format for Sub Agents of Indian
Agents of MTSS
1. |
Name of the Sub Agent |
|
2. |
Sub Agent Category (AD Cat-I bank/ AD Cat-II/ Other Scheduled Commercial Bank/
Full Fledged Money Changer/ Department of Posts/ Registered NBFC/ Others) |
|
3. |
Address of the registered/corporate/administrative office with telephone
number/s, Fax number/s and e-mail id/s. |
|
4. |
Registered with |
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5. |
Registration Number |
|
6. |
Details of Registration (papers to be attached as at Annex-IIIa) |
|
7. |
PAN Number (copy as at Annex-IIIa) |
|
8. |
Name/s of Banker/s and Bank Account Number/s (enclosures as at Annex-IIIa) |
|
9. |
Details (Name, Nationality, Residential address, Controlling interest in any
other company, PAN Number) of each promoter with more than 10% equity holding |
|
10. |
Paid up capital in Rs. and Number of shares |
|
11. |
Accounts certified by which Chartered Accountant? Details (Enclosures as at
Annex-IIIa) |
|
12. |
Whether prosecuted/ convicted for criminal/ economic offence? If yes,
particulars thereof (Enclosures as at Annex-IIIa) |
|
13. |
Whether the Sub Agent is solvent as on date |
|
14. |
Details (Name, Designation, Nationality, Residential address, PAN No., Name/s of
other company/ies in which the person has held any post, Details of equity
shareholding in the company, if any) of Chairman/Managing
Director/Director/Chief Executive Officer (Details as at Annex-IIIa) |
|
Note: With reference to point 9, ownership of the Sub Agent should be detailed
up to the last layer of equity holding ending in mentioning the name of the
individual/ entity that owns beneficial interest in the company.
Date:
Place:
Signature of Chartered Accountant
Signature of Managing Director
Annex-IIIa : List of Certified copies of Documents to be submitted
- Certificate of Incorporation
- Memorandum (up-to-date) and Articles of Association
- Board resolution for conducting money transfer activities, submission of
application and its contents including authorization of an official to make the
application.
- Details of associates, group companies, etc.
- PAN Card/s of the Director/s.
- Bank Account details and sealed confidential reports from banks.
- A certificate from Chartered Accountant certifying Net Owned Funds
- Balance Sheet and P&L A/c statement for the last three years.
- Business plan for the next three years.
- Conduct certificate from the local police authorities.
- Declaration regarding past criminal cases, cases initiated/ pending against the
company or its Directors by any law enforcing agencies.
- Photographs of the Directors and key persons.
- Information about the management.
- Shop and establishment certificate/ other municipal certificate.
Annex-IV
Statement showing details of quantum of remittances received through Money
Transfer Service Scheme during the quarter ended __________
Name of the Indian Agent ____________
Name of the Overseas Principal |
Total quantum of remittances received in US $
|
INR equivalent |
|
|
|
Note: This statement is required to be submitted to the Regional Office
concerned of the Foreign Exchange Department of the Reserve Bank and Foreign
Exchange Department, Forex Markets Division, Central Office, Amar Building,
Fort, Mumbai-400001 within 15 days from the close of the quarter to which it
relates.
Annex-V
Statement of Collateral kept by Indian Agents
Name of the Indian Agent ________________
Name of the Overseas Principal |
Total quantum of remittances received during the past 6 months in US $
|
Amount of collateral held in US $ |
Collateral kept in various forms (Foreign Currency Deposit/ Bank Guarantee)
|
Last review of adequacy of collateral along with observations |
|
|
|
|
|
Note: This statement as at the end of June and December every year is required
to be submitted to the Regional Office concerned of the Foreign Exchange
Department of the Reserve Bank and Foreign Exchange Department, Forex Markets
Division, Central Office, Amar Building, Fort, Mumbai-400001 within 15 days from
the close of the half year to which it relates.
|