RBI's Master Direction on KYC Gets update on 28th April, 2023

RBI has released Amendment to the Master Direction on KYC as on 28th April, 2023, majorly around strengthening compliances for Money laundering, Terror financing, WMD act and UAPA compliances. Summary of amendments are as below:

• Beneficial Ownership:

The threshold for "controlling ownership interest" for determining the Beneficial Owner (BO) has been revised to 10% for companies and trusts from th earlier threshold of 25% and 15% respectively. The exemption from BO identification has been aligned with that provided in the PML Rules.

• GST Verification: ?

REs are advised to verify the GST number through the search/verification facility provided by the GSTN Portal as part of strengthening the Customer Acceptance Policy.

• “Udyam Registration Certificate (URC)" is allowed as “Registration certificate” as a proof of business/ activity for sole prop firms.
• V-CIP Process :?

1. The validity of Aadhaar XML file/Aadhaar Secure QR Code and the requirement to undertake the video process has been amended to three "working" days.
2. REs using cloud deployment models must ensure that the ownership of data rests solely with them and all data, including video recording, is transferred to the RE’s exclusively owned/leased servers immediately after the V-CIP process is completed.
3. Disruptions such as pausing video, reconnecting calls, etc., should not result in the creation of multiple video files. However, in case of call drop / disconnection, fresh session shall be initiated.
4. The PAN details can be verified from the database of the issuing authority, including through Digi-Locker.

• Introduction of new technologies:

1. REs shall undertake risk assessments prior to launching or using new products, practices, services, and technologies and take appropriate measures to manage and mitigate associated risks with ML/TF.
2. For ongoing due diligence, REs may consider adopting appropriate innovations, such as AI & ML, to support effective monitoring.
3. A new section requires REs to leverage the latest technological innovations and tools for effective implementation of name screening to meet the sanctions requirements.

• Sanction Lists Verification:

Requirements/obligations regarding verification of UNSC sanction list, Prevention & Suppression of Terrorism list, Weapons of Mass Destruction & their Delivery Systems have been added for meticulous compliance.

• Risk-Categorization:

The indicative list of parameters for risk categorization has been expanded to include geographical risk, type of products/services offered, delivery channel used for delivery of products/services, types of transactions undertaken, etc. REs shall treat the risk categorization and reasons for risk categorization of customers as confidential

• Enhanced Due Diligence:

1. Additional information of senior management personnel, names of all partners or trustees shall be obtained in case of companies, partnership firms, and trusts.
2. Enhanced due diligence for non-face to face customer onboarding is added & detailed out in Master Direction and such customers shall be categorized as high-risk customers until the identity of the customer is verified in face-to-face manner or through V-CIP.

• ?Others:

1. REs shall file an STR to FIU-IND where they suspect money laundering or terrorist financing and believe that performing the CDD process will tip-off the customer.
2. Definitions of ‘Shell Banks’, ‘correspondent banking’, ‘payable-through accounts’, ‘Group’, ‘Politically exposed persons’ and ‘Non-profit organisation’ have been added/amended mainly from the context of added supervision from Money laundering/Terrorist financing context.
3. RE shall enter the details of Non-Profit organisation on the DARPAN Portal
4. The requirement to allot UCIC to customers has been extended to all REs.
5. Aadhaar OTP based e-KYC in non-face to face mode has been permitted to be used for periodic updation, REs shall, however, ensure that the mobile number for Aadhaar authentication is same as the one available with them in the customer’s profile, in order to prevent any fraud.
6. As a risk mitigation for Accounts opened using Aadhaar OTP based e-KYC, in non-face-to-face mode, REs shall ensure that transaction alerts, OTP, etc., are sent only to the mobile number of the customer registered with Aadhaar. REs shall have a board approved policy delineating a robust process of due diligence for dealing with requests for change of mobile number in such accounts.

?

These amendments aim to enhance KYC compliance and mitigate risks associated with money laundering and terrorist financing. REs are advised to comply with these changes and undertake appropriate measures to manage associated risks.?

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=12497

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