RBI amends the Master Direction on Know Your Customer (KYC)

Apr 22, 2020 | by Avantis RegTech Legal Research Team

Industry Specific Compliance

The Reserve Bank of India (RBI) on April 20, 2020, amends the Master Direction (MD) on Know Your Customer (KYC) Direction, 2016 dated February 25, 2016.

RBI has decided to insert a new Section 5A related to “Money Laundering and Terrorist Financing Risk Assessment by Res” namely:-

(a) Regulated Entities (REs) shall carry out ‘Money Laundering (ML) and Terrorist Financing (TF) Risk Assessment’ exercise periodically to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk for clients, countries or geographic areas, products, services, transactions or delivery channels, etc. The assessment process should consider all the relevant risk factors before determining the level of overall risk and the appropriate level and type of mitigation to be applied. While preparing the internal risk assessment, REs shall take cognizance of the overall sector-specific vulnerabilities, if any, that the regulator or supervisor may share with REs from time to time.

(b) The risk assessment by the RE shall be properly documented and be proportionate to the nature, size, geographical presence, complexity of activities or structure, etc. of the RE. Further, the periodicity of risk assessment exercise shall be determined by the Board of the RE, in alignment with the outcome of the risk assessment exercise. However, it should be reviewed at least annually.

(c) The outcome of the exercise shall be put up to the Board or any committee of the Board to which power in this regard has been delegated and should be available to competent authorities and self-regulating bodies.

REs shall apply a Risk Based Approach (RBA) for mitigation and management of the identified risk and should have Board approved policies, controls and procedures in this regard. Further, REs shall monitor the implementation of the controls and enhance them if necessary.

[Notification No. DOR.AML.BC.No.66/14.01.001/2019-20]


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