Obligations of Urban Co-op Banks under Prevention of Money Laundering Act.
Under Prevention of Money Laundering Act, 2002 obligations are cast on “Reporting Entities”. Urban Co-op Banks are reporting entities under PMLA. The obligations which are cast on Urban Co-op banks are given below:
1. Appointment of Principal Officer & registration on the FINNET Gateway portal of FIU IND:
Every urban co-op bank is required to appoint a Principal Officer as the liason point for FIU IND. The brief guidelines for appointment of Principal Officer are as follows:
a. The Principal Officer should be a senior banking employee preferably with more than 15 years of relevant experience in banking laws, credit appraisal, banking administration and experience of handing statutory audit and RBI inspections.
b. He should be independently incharge of separate department and must be provided with adequate staff for carrying his functions as Principal Officer
c. He must be given independence in decision making and allied matters relating to monitoring of accounts.
d. His appointment as “Principal officer” shall be noted by proper resolution passed in the Board meeting.
e. The Principal Officer should be registered on the FINNET Gateway with the relevant FIUREID (Unique code issued by FIU IND) of the bank. He must have a Class II make Digital signature certificate preferably while uploading returns, although not mandatory.
2. Nomination of Designated Director to FIU IND
Every urban co-op bank is required to nominate details of “Designated Director” to FIU IND. The designated director is a person nominated from the Board who is responsible for overseeing the compliance under PMLA. Brief guidelines are:
a. The “Designated Director” shall be a wholetime director on the Board.
b. He shall be responsible for overseeing the compliance under PMLA and must possess knowledge in one of the areas of accounts, finance, banking or laws to carry out his functions.
c. He shall be nominated by passing a resolution in the Board meeting and only his details will be forwarded to FIU IND. Designated Director will not be registered on the FINNET gateway.
d. The Designated Director should oversee compliance under this act and inform the Board members in the meetings regarding the status of compliance under PMLA in co-ordination with the Principal Officer.
3. Furnishing of Information:
Urban Co-op banks are required to furnish the following information to FIU IND electronically on the FINNNET gateway. The returns required to be furnished are as follows:
1. Cash Transaction Report (CTR)
2. Suspicious Transaction Report (STR)
3. Counterfeit Currency Report (CCR)
4. Non Profit Organisation Transaction Report (NTR)
5. Cross Border Wire Transfer Report (CBWTR)
1. Unique Customer Identification Number (UCIN)
RBI has mandated urban co-op banks to issue UCIN, normally termed as “Unique Customer Id” for all the customers. This has assumed much importance now, since it will compute TDS on all interest bearing deposits irrespective of number of accounts. UCB’s are advised to finish the task of allotting the UCIN at the earliest.
2. Risk profiling of accounts
According to RBI guidelines customer’s accounts should be classified into High, medium, low risk categories depending on various parameters. The risk profile of a customer should also be periodically (semi annually, i.e twice in a year) updated depending on transactions in the account.
3. Retention and preservation of records
Urban Co-op banks will have to maintain and preserve records of all transactions for a period of 10 years from the date of transactions. Whenever FIU IND calls for additional information, such records shall have to be submitted to them within the prescribed time.
4. Due Diligence and Re-KYC
While opening new accounts, the urban co-op banks must carry due diligence (I.e external third party verification and confirmation) of customers OVD (Officially valid documents).
For very old accounts which are operational, refresh KYC, i.e taking new KYC documents is also prescribed by RBI. For dormant accounts whose balance is transferred to RBI, KYC shall have to be conducted if there is activity in the account or while claiming death claims of deceased accountholders.
5. Transactions Monitoring
Urban co-op banks are required to monitor any suspicious activity in accounts and report vide STR. Certain RFI’s (Red Flag Indicators) have been formulated by Indian Bankers Association, they must be incorporated in the CBS by UCB’s and proper records of all such alerts/reports must be kept.
If the list of any accountholder matches with UN sanctions list or banned organizations/blacklisted terrorists or terrorist groups, such information shall be sent to Ministry of Home Affairs, New Delhi under Unlawful Activity Prevention Act (UAPA).
6. Staff training
Periodic staff training is advised by RBI as well as FIU IND to equip the staff in routine matters pertaining to KYC and AML. The staff training should be carried out by third party expert and must deal with practical aspects of Urban Co-op banking.
All these obligations are cast upon Urban Co-op Banks in India. Non compliance of provisions may lead to punitive action by RBI as well as FIU IND. Urban Co-op banking is considered “high risk domain” by the regulators and if we ensure compliance, there will be no threat to our organization.
ARCON: Amit Retharekar & Consultants
We provide Consulting for compliance in AML matters especially returns filing and detecting “exceptional” transactions for safeguard of the urban co-op banks. We also provide staff training to urban co-op banks to create awareness and equip them with the latest working knowledge of KYC and AML.
Amit Retharekar
Under Prevention of Money Laundering Act, 2002 obligations are cast on “Reporting Entities”. Urban Co-op Banks are reporting entities under PMLA. The obligations which are cast on Urban Co-op banks are given below:
1. Appointment of Principal Officer & registration on the FINNET Gateway portal of FIU IND:
Every urban co-op bank is required to appoint a Principal Officer as the liason point for FIU IND. The brief guidelines for appointment of Principal Officer are as follows:
a. The Principal Officer should be a senior banking employee preferably with more than 15 years of relevant experience in banking laws, credit appraisal, banking administration and experience of handing statutory audit and RBI inspections.
b. He should be independently incharge of separate department and must be provided with adequate staff for carrying his functions as Principal Officer
c. He must be given independence in decision making and allied matters relating to monitoring of accounts.
d. His appointment as “Principal officer” shall be noted by proper resolution passed in the Board meeting.
e. The Principal Officer should be registered on the FINNET Gateway with the relevant FIUREID (Unique code issued by FIU IND) of the bank. He must have a Class II make Digital signature certificate preferably while uploading returns, although not mandatory.
2. Nomination of Designated Director to FIU IND
Every urban co-op bank is required to nominate details of “Designated Director” to FIU IND. The designated director is a person nominated from the Board who is responsible for overseeing the compliance under PMLA. Brief guidelines are:
a. The “Designated Director” shall be a wholetime director on the Board.
b. He shall be responsible for overseeing the compliance under PMLA and must possess knowledge in one of the areas of accounts, finance, banking or laws to carry out his functions.
c. He shall be nominated by passing a resolution in the Board meeting and only his details will be forwarded to FIU IND. Designated Director will not be registered on the FINNET gateway.
d. The Designated Director should oversee compliance under this act and inform the Board members in the meetings regarding the status of compliance under PMLA in co-ordination with the Principal Officer.
3. Furnishing of Information:
Urban Co-op banks are required to furnish the following information to FIU IND electronically on the FINNNET gateway. The returns required to be furnished are as follows:
1. Cash Transaction Report (CTR)
2. Suspicious Transaction Report (STR)
3. Counterfeit Currency Report (CCR)
4. Non Profit Organisation Transaction Report (NTR)
5. Cross Border Wire Transfer Report (CBWTR)
1. Unique Customer Identification Number (UCIN)
RBI has mandated urban co-op banks to issue UCIN, normally termed as “Unique Customer Id” for all the customers. This has assumed much importance now, since it will compute TDS on all interest bearing deposits irrespective of number of accounts. UCB’s are advised to finish the task of allotting the UCIN at the earliest.
2. Risk profiling of accounts
According to RBI guidelines customer’s accounts should be classified into High, medium, low risk categories depending on various parameters. The risk profile of a customer should also be periodically (semi annually, i.e twice in a year) updated depending on transactions in the account.
3. Retention and preservation of records
Urban Co-op banks will have to maintain and preserve records of all transactions for a period of 10 years from the date of transactions. Whenever FIU IND calls for additional information, such records shall have to be submitted to them within the prescribed time.
4. Due Diligence and Re-KYC
While opening new accounts, the urban co-op banks must carry due diligence (I.e external third party verification and confirmation) of customers OVD (Officially valid documents).
For very old accounts which are operational, refresh KYC, i.e taking new KYC documents is also prescribed by RBI. For dormant accounts whose balance is transferred to RBI, KYC shall have to be conducted if there is activity in the account or while claiming death claims of deceased accountholders.
5. Transactions Monitoring
Urban co-op banks are required to monitor any suspicious activity in accounts and report vide STR. Certain RFI’s (Red Flag Indicators) have been formulated by Indian Bankers Association, they must be incorporated in the CBS by UCB’s and proper records of all such alerts/reports must be kept.
If the list of any accountholder matches with UN sanctions list or banned organizations/blacklisted terrorists or terrorist groups, such information shall be sent to Ministry of Home Affairs, New Delhi under Unlawful Activity Prevention Act (UAPA).
6. Staff training
Periodic staff training is advised by RBI as well as FIU IND to equip the staff in routine matters pertaining to KYC and AML. The staff training should be carried out by third party expert and must deal with practical aspects of Urban Co-op banking.
All these obligations are cast upon Urban Co-op Banks in India. Non compliance of provisions may lead to punitive action by RBI as well as FIU IND. Urban Co-op banking is considered “high risk domain” by the regulators and if we ensure compliance, there will be no threat to our organization.
ARCON: Amit Retharekar & Consultants
We provide Consulting for compliance in AML matters especially returns filing and detecting “exceptional” transactions for safeguard of the urban co-op banks. We also provide staff training to urban co-op banks to create awareness and equip them with the latest working knowledge of KYC and AML.
Amit Retharekar