The reporting obligations under the RBI’s KYC guidelines require Regulated Entities (REs) to systematically report certain types of transactions to the Financial Intelligence Unit – India (FIU-IND) as part of India’s efforts to prevent money laundering and combat terrorism financing. Here’s a detailed explanation:
1. Types of Reports to FIU-IND
REs must furnish reports for transactions specified under Rule 3 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. These include:
- Cash Transaction Reports (CTR): For all cash transactions exceeding ₹10 lakh (or its equivalent in foreign currency). REs must aggregate smaller transactions that may cumulatively cross the threshold.
- Suspicious Transaction Reports (STR): For transactions that appear suspicious or unusual, even if the amount is small. This could involve potential money laundering, terrorist financing, or transactions lacking any economic rationale.
- Counterfeit Currency Reports (CCR): When counterfeit currency is detected and handled.
- Non-Profit Organisation Transaction Reports (NTR): Special reports for transactions related to Non-Profit Organisations that meet certain thresholds.
- Cross-Border Wire Transfer Reports: For international transactions above certain limits involving non-account holders.
2. How Information is Furnished
- Reports must be filed electronically using formats prescribed by FIU-IND, ensuring completeness and accuracy.
- Editable electronic utilities such as CTR/STR are available on FIU-IND’s official website for entities to prepare and validate reports.
- REs must deploy software capable of flagging alerts for transactions inconsistent with a customer’s risk profile and risk categorization.
- Reporting delays are penalized, as each day of delay is treated as a separate violation.
3. Confidentiality Requirements
REs must:
- Maintain strict confidentiality regarding the fact that they are filing reports.
- Ensure staff discretion in reporting and avoid “tipping off” customers whose transactions are being flagged as suspicious.
- Allow operations of accounts even if STRs are filed, unless advised otherwise by competent authorities.
4. Role of Principal Officer
Each RE must appoint a Principal Officer responsible for:
- Monitoring transactions.
- Ensuring compliance with reporting obligations.
- Sharing information with FIU-IND and law enforcement agencies.
5. Robust Transaction Monitoring
REs must utilize advanced monitoring systems to identify unusual transactions promptly.
- Alerts must be generated automatically when transactions deviate from customer profiles.
- REs are encouraged to adopt technologies such as AI and machine learning for more efficient monitoring and flagging of suspicious activities.
6. Linkage to International Agreements
- REs must comply with obligations under international frameworks such as FATF Recommendations (Financial Action Task Force) and agreements like the Unlawful Activities (Prevention) Act (UAPA) for combating terrorist financing.
- Lists from international bodies like the United Nations Security Council must be screened daily to ensure compliance.
Why Reporting is Crucial
These reporting obligations form a critical part of India’s Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) efforts, ensuring that the financial system remains safe, transparent, and trustworthy.
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