What changed
RBI clarified that NBFCs cannot allow professional intermediaries (like lawyers and chartered accountants) to open or hold accounts on behalf of clients if those intermediaries are bound by confidentiality that prevents disclosing the client's identity. For pooled accounts, NBFCs must identify all beneficial owners, even if funds are co-mingled. This modifies the earlier Master Circular No. 184 dated July 1, 2010.
What it means for you
NBFCs must now reject account-opening requests from intermediaries who cannot reveal the true client due to professional secrecy. This closes a loophole where pooled accounts could mask beneficial ownership. Non-compliance invites penalties under the RBI Act. Lenders need to update their customer acceptance policies and KYC procedures to ensure they can verify beneficial owners in all cases.
What you must do
- Update your Customer Acceptance Policy to explicitly prohibit accounts opened by professional intermediaries bound by client confidentiality (e.g., lawyers, CAs) on behalf of clients.
- Review all existing pooled accounts managed by intermediaries; identify and verify beneficial owners for each sub-account or co-mingled fund.
- Train relationship managers and compliance teams on the new rule: no account if the intermediary cannot disclose the true owner's identity.
- Ensure your KYC/AML software can flag accounts where beneficial ownership is obscured by professional confidentiality obligations.
Who it affects
All Non-Banking Financial Companies (NBFCs), Residuary Non-Banking Companies (RNBCs), Compliance and KYC teams at NBFCs, Professional intermediaries (lawyers, chartered accountants, stockbrokers) managing client funds at NBFCs
Can a lawyer open an escrow account at an NBFC for multiple clients?
No, if the lawyer is bound by client confidentiality that prevents disclosing each client's identity to the NBFC. The NBFC must know and verify the beneficial owner(s) of any account, including pooled or escrow accounts.
What happens if an NBFC already has such accounts from intermediaries?
NBFCs must review existing accounts and identify beneficial owners. If the intermediary cannot disclose the true owner, the account should not be held. Non-compliance may attract penalties under the RBI Act.
Does this apply to mutual fund or pension fund pooled accounts?
Yes, but with a nuance. For pooled accounts managed by professional intermediaries on behalf of funds like mutual funds or pension funds, NBFCs must identify beneficial owners if funds are not co-mingled (sub-accounts). If co-mingled, NBFCs must still look through to beneficial owners.