What changed
RBI clarified that Indian Agents under MTSS must conduct full CDD whenever money laundering or terrorist financing is suspected, even if the customer appears low risk. If identity verification fails, agents must file a Suspicious Transaction Report with FIU-IND. PEP-related rules now explicitly cover transactions where a PEP is the ultimate beneficial owner, and enhanced monitoring applies to PEPs, their family, and close associates.
What it means for you
Banks acting as Indian Agents must tighten their AML/KYC processes for cross-border inward remittances, especially for suspicious cases. The requirement to file STRs when identity cannot be verified adds a clear compliance obligation. Enhanced due diligence for PEPs as beneficial owners increases operational burden but strengthens India's anti-money laundering framework.
What you must do
- Update your KYC/AML policies to mandate full CDD for any suspicious MTSS remittance, regardless of perceived risk level.
- Ensure your systems flag transactions where identity verification fails and trigger automatic STR filing with FIU-IND.
- Extend enhanced monitoring to all PEPs, including those who become PEPs after account opening, and their family members or close associates.
- Review your Customer Acceptance Policy to require senior-level approval for PEP transactions, including those where PEP is beneficial owner.
- Confirm that your Principal Officer's role explicitly covers oversight of all KYC/AML/CFT compliance and PMLA obligations.
Who it affects
Authorised Persons (Indian Agents) under MTSS, Sub-agents of Indian Agents under MTSS, Compliance and AML teams in banks handling cross-border remittances, Principal Officers responsible for KYC/AML compliance
When must we file a Suspicious Transaction Report under this circular?
You must file an STR with FIU-IND whenever you cannot verify the customer's identity or obtain required documents, and you believe you no longer know the true identity of the customer.
Does the PEP requirement apply only to the account holder?
No. It also applies when a PEP is the ultimate beneficial owner of the transaction, and to family members or close relatives of PEPs. Enhanced monitoring is required for all such cases.
Are sub-agents covered by these guidelines?
Yes. These guidelines apply mutatis mutandis to all sub-agents, and the Indian Agent is solely responsible for ensuring sub-agent compliance.