Banks requested that KYC take a risk-based approach.

The Reserve Bank strengthened the requirements surrounding customer due diligence (or CDD). The central bank has revised the Know Your Customer (KYC) Master Direction (MD) following an evaluation.

According to the procedure for their customers, Regulated Entities (REs) are required to perform customer due diligence (CDD).

The modifications adhere to the most recent directives from the government regarding the Weapons of Mass Destruction and Their Delivery Systems (Prohibition of Unlawful Activities) Act, the Unlawful Activities (Prevention) Act (UAPA), and the Prevention of Money-Laundering Rules.

According to the Reserve Bank, it has also revised some guidelines to reflect the recommendations made by the FATF.

“REs shall adopt a risk-based approach for periodic updation of KYC ensuring that the information or data collected under CDD is kept up-to-date and relevant, particularly where there is high-risk,” states the most recent Master Directions, which amend the risk-based approach for periodic KYC updates.

It went on to say that in order to reduce the activities of “Money Mules,” which are criminals who obtain unauthorized access to deposit accounts and use them to launder the proceeds of fraud schemes (such as phishing and identity theft), stringent adherence to instructions on opening accounts and monitoring transactions is necessary.

“Banks shall undertake diligence measures and meticulous monitoring to identify accounts, which are operated as Money Mules and take appropriate action, including reporting of suspicious transactions to FIU-IND,” according to the revised Master Direction. The definition of customer due diligence (also known as CDD) is expanded.

The Reserve Bank announced that the updated Master Direction provisions will take effect right away.