FCC RegUpdate

On October 17, 2023, the Reserve Bank of India (RBI) issued amendments to the Master Direction on KYC (MD-KYC). These amendments provide updates based on changes to the Prevention of Money Laundering (PML) Rules, 2005, the Unlawful Activities (Prevention) Act (UAPA), and the Weapons of Mass Destruction (WMD) Act, 2005.

To know more, read here https://www.fcctimes.com/2023/10/17/important-update-amendment-to-master-direction-on-kyc-regulations/

The changes made in the Master Direction on KYC are detailed in the annexure attached to the circular.

The significant modifications include:

  • Enhanced PEP Diligence: This involves implementing systems to screen and identify Politically Exposed Persons (PEPs), verifying the source of funds, and requiring senior management approval to open an account for a PEP.
  • Criteria for Beneficial Owners (BO) in partnership firms have been reduced to 10% of capital or profits.
  • Conducting Customer Due Diligence (CDD) using ‘reliable and independent sources of identification.
  • Implementing ongoing due diligence, which mandates Regulated Entities (REs) to ensure that transactions align with their knowledge of customers, business, risk profile, and source of funds/wealth.
  • Expanding the scope of Regulated Entities (REs) to include Asset Reconstruction Companies (ARCs).
  • Requiring trusts to disclose their status when establishing an account-based relationship or conducting specific transactions.
  • Mandating REs to implement countermeasures as per international organizations approved by the Central Government, with enhanced due diligence required for entities from countries named by the Financial Action Task Force (FATF).
  • Requiring Regulated Entities as part of a group to implement group-wide programs against Money Laundering and Terrorist Financing (ML/TF), including group-wide policies for sharing required information.
  • REs are required to adopt a Risk-Based Approach for risk mitigation and management, based on their own or national risk assessment, requiring board-approved policies and controls.