RBI Guide Lines

Anti-Money Laundering Guidelines for Authorized Money Changers

1. Money Laundering
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”. In common man’s language, 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.

 

2. Anti-Money laundering Guidelines
The purpose of prescribing Anti-Money Laundering Guidelines is to prevent the system of Authorized Money Changers (AMCs0 engaged in the purchase and / or sale of foreign currency notes/Travelers cheques from being used for money laundering. Therefore, Anti-money Laundering (AML) measures should include.

 

a. Identification of Customer according to ‘; Know Your Customer’; norms,
b. Recognition, handling and disclosure of suspicious transactions,
c. Appointment of money Laundering Reporting Officer (MLRO),
d. D. Staff Training,
e. Maintenance of records,
f. Audit of transactions.



The following paragraphs contain broad guidelines to enable AMCs to formulate and put in place a proper policy framework for AML measures.

 

3. Know your Customer (KYC)- Identification of Customers
All transactions should be undertaken only after proper identification of the customer. Photocopies of proof of identification should invariably be retained by the AMC after verifying the document in original. Full details of name and address as well as details of the identity document provided should also be kept on record. If a transaction is being undertaken on behalf of another person, identification evidence of all the persons concerned should be obtained and kept on record.

 

4. Guidelines For Purchase of Foreign Currency
a) For encashment of foreign currency notes and/or Travels Cheques up to USD 500 or its equivalent, production of passport need not be insisted upon and any
their suitable document of identification like ration card, driving license etc. can also be accepted.
b) For verification of the identity of customer for encashment in excess of USD 500 or its equivalent, a photo identity document such as passport, driving license, PAN Card, voter identity card issued by the Election Commission, etc. should be obtained.
c) Requests for payment of sale proceeds in cash may be acceded to the extent of USD 1000 or its equivalent per transaction. All encashment within one month may be treated as single transaction for the purpose. In all other cases AMCs should make payment by way of ‘Account Payee’ cheque /demand draft only.
d) Where the amount of forex tendered for encashment by a non-resident or a person returning from abroad from abroad exceeds the limits prescribed for Currency Declaration Form (CDF) i.e. 5000 USD or equivelent, the AMC should invariably insist for production of declaration in CDF.
e) For encashment of foreign currency notes and/or Travels Cheques (In Case of Foreign Nationalists) up to USD 3000 or its equivalent, payment can be made in cash only on production of Foreign passport and no other suitable document of identification can be accepted.

 

5. ESTABLISHMENT OF BUSINESS RELATIONSHIP
Relationship with a business entity like a company / firm should be established only after obtaining and verifying suitable documents in support of name, address and business activity such as certificate of incorporation under the Companies Act. 1956, moa AND AOA, registration certificate of a firm (if registered), partnership deed , etc. A list of employees who would be authorized to transact on behalf of the company/firm and documents of their identification together with their signatures, should also be called for.
Copies of all documents called for verification should be kept on record.

 

6. SUSPICIOUS TRANSACTIONS
The AMC must ensure that its staff is vigilant against money laundering transactions at all times. An imported part of the AML measures is determining whether a transaction is suspicious or not. A transaction may be of suspicious nature irrespective of the amount involved.
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 cash transations.
• Size and frequency of transactions is high considering the normal business of the customer.
• Change in the pattern of business transacted.



The above list is only indicative and not exhaustive.

 

7. Appointment of A Money Laundering Reporting Officer (MLRO)
a. An MLRO may be appointed by every AMC for monitoring transactions and ensuring compliance with the AML Guidelines issued by the Reserve Bank from time to time. The MLRO will also be responsible for reporting of suspicious transaction/s to the Financial Intelligence Unit (FIU).
Any suspicious transaction/s, if undertaken, should have prior approval of MLRO.
b. The MLRO shall have reasonable access to all the necessary information/ documents, which would help him in effective discharge of his responsibilities.
c. The responsibility of the MLRO may include:
• Putting in place necessary controls for detection of suspicious transactions.
• Receiving disclosures related to suspicious transactions from the staff or otherwise.
• Deciding whether a transaction should be reported to the appropriate authorities.
• Training of staff and preparing detailed guidelines/handbook for detection of suspicious transactions.
• Preparing annual reports on the adequacy or otherwise of systems and procedures in place to prevent money laundering and submit it to the Top Management within 3 months of the end of the financial year.



8. Reporting of Suspicious Activity
• To the extent possible, all suspicious transactions should be reported to the MLRO before they are undertaken.
• Full details of all suspicious transactions, whether put through or not, should be reported, in writing, to the MLRO.
• Any transaction which seems suspicious may be undertaken only with prior approval of MLRO.
• If the MLRO is reasonably satisfied that the suspicious transaction has / may have resulted in money laundering, he should make a report to the appropriate authority viz. the FIU.

 

9. Staff Training
All the managers and staff of the AMC must be 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 money changing. 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 MLRO, etc.) should be carefully formulated by the AMC and suitable procedure laid down. The AMCs should have an ongoing training program for consistent implementation of the AML measures.

 

10. Audit/Compliance
The concurrent auditor should check all transactions to verify that they have been done in compliance with the anti-money laundering guidelines and have been reported as required. Compliance on the lapses, if any, recorded by the concurrent auditor should be put up to the Board. A certificate from the Statutory Auditor on the compliance with AML guidelines should be obtained at the time of preparation of the Annual Report and kept on record.

 

11. Maintenance of records
The following documents should be preserved for a minimum period of five years.
• Records including identification obtained in respect of all transactions.
• Statements / Registers prescribed by the Reserve Bank from time to time.
• All Inspection / Audit / Concurrent Audit Reports.
• Annual reports of the MLRO submitted to the Top Management in terms of paragraph 8 above.
• Detail of all suspicious transactions reported in writing or otherwise to the MLRO.
• Details of all transactions involving purchase of foreign exchange against payment in cash exceeding Indian Rupees 10,00,000 from inter-related persons during one month.
• All correspondence / reports with the appropriate authority in connection with suspicious transactions.
• References from Law Enforcement Authorities, including FIU, should be preserved until the cases are adjudicated and closed.