The Reserve Bank of India has imposed a monetary penalty of Rs5.00 lakh (Rupees five lakh only) on National Central Co-operative Bank Ltd., Bettiah , Bihar for non-adherence to Know Your Customers (KYC) norms and Anti Money Laundering (AML) guidelines.
The objective of KYC/AML/CFT guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities.
KYC procedures are designed to enable banks know/understand their customers and their financial dealings better which in turn help them manage their risks prudently.
Who is a ‘Customer’ for KYC Policy?
For the purpose of KYC policy, RBI defines a ‘Customer’ as:
- a person or entity that maintains an account and/or has a business relationship with the bank;
- one on whose behalf the account is maintained (i.e. the beneficial owner). [Ref: Government of India Notification dated February 12, 2010 – Rule 9, sub-rule (1A) of PMLA 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 exercise ultimate effective control over a juridical person]
- beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and
- any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.