Revised KYC Guidelines from RBI: Strengthening Anti-Money Laundering Practices

Introduction

This document references RBI circular RPCD.CORRB.AML.BC.No.31/03.05.33(E)/2010-11 issued on December 6, 2010, which highlights the revised 'Know Your Customer' (KYC) Guidelines concerning Anti-Money Laundering (AML) measures applicable to banks.

Background

In the earlier circular RPCD. No. RRB. BC. 81/03.05.33(E)/2004-05 dated February 18, 2005, an indicative list of documents for customer identification and address verification was provided to facilitate the opening of bank accounts.

Clarification on KYC Practices

It has come to the attention of the Reserve Bank of India (RBI) that some banks depend solely on certificates or letters from employers as the only KYC document for verifying identity and address when opening accounts for salaried employees. This practice poses significant risks for misuse.

To mitigate such risks, it is clarified that:

• Banks should accept identity verification documents only from reputable corporates and entities.
• They must identify the competent authority designated by the employer to issue any such certificates or letters.
• In addition to the employer’s certificate, Regional Rural Banks (RRBs) must require at least one officially valid document for KYC purposes. Acceptable documents include:
  • Passport
  • Driving Licence
  • PAN Card
  • Voter’s Identity Card
  • Utility Bills

Regulatory Authority

These guidelines are issued under the authority of:

• Section 35A of the Banking Regulation Act, 1949.
• Rule 7 of the Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005.

Non-compliance with the provisions set out may lead to penalties under the Banking Regulation Act.