corporate law

IRDAI Updates KYC Compliance Guidelines for Insurers in 2024

Introduction

On August 12, 2024, the Insurance Regulatory and Development Authority of India (IRDAI) issued a circular to inform insurers about recent amendments to the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. These changes, published in Gazette Notification No. GSR 419 (E) on July 19, 2024, impact the Master Guidelines concerning Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).

Key Updates to the Guidelines

The amended guidelines bring significant updates to Know Your Customer (KYC) compliance. Insurers must implement the following changes:

  • KYC Procedures: Insurers must now follow the procedures outlined in Rule 9(1C) of the PML Rules for KYC compliance.

  • Removal of Previous Documentation Requirements: Customers will not be required to resubmit KYC documents if:

    • The KYC identifier is provided.
    • The KYC record is complete and up to date.

    However, customers are required to submit KYC documents if:

    • There is any change in their information.
    • The KYC record is incomplete.
    • The validity of their documents has expired.
    • The insurer needs it for verification, enhanced due diligence, or risk profiling.

  • KYC Information Management:

    • Insurers must submit any new or updated KYC information to the Central KYC Registry (CKYCR) as per Rule 9(1D).
    • If the CKYCR provides updates regarding existing clients' KYC records, insurers are obliged to retrieve and update their own KYC records accordingly.

Adhering to these amendments is essential.

Important Provisions

  • Time-Bound KYC Updates: Insurers are required to submit updated KYC information to the CKYCR within seven days or as specified by the government, replacing the previous "as soon as possible" requirement.

  • Expanded Role of the CKYCR: The CKYCR must now notify insurers of any updates to client KYC records. Insurers are responsible for acting on these notifications to maintain accurate records.

Modifications to the Master Guidelines

Recent amendments include:

  • Update to Paragraph 12.2: The text now states: “12.2 To comply with KYC norms, Insurers shall follow the procedure specified in Rule 9(1C) of the PML Rules.”

  • Omission of Paragraph 12.3: This section has been removed as it is no longer applicable.

  • Introduction of New Sections:

    • “12.10 Insurers shall provide any additional or updated KYC information obtained under Rule 9(1C) to the CKYCR in accordance with Rule 9(1D).”
    • “12.11 Upon receiving updates from the CKYCR about an existing client’s KYC records, Insurers must retrieve these updated records and adjust their records as necessary.”

Conclusion

Insurers are encouraged to thoroughly understand these amendments to the PML Rules and take the necessary actions as specified in the Master Guidelines. By adhering to these updates, insurers will enhance KYC practices and contribute to the integrity of financial transactions.