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:

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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.

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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.

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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.

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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.

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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.

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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.

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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.