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RBI tells bank chiefs to remain vigilant

Reserve Bank of India on Friday met chief executives of banks and reiterated the need to reinforce the existing instructions on "know your customer" and "cash transactions" with a view to safeguard banks from being used unwittingly for transfer or deposit of funds derived from criminal activity or for financing terrorism.

Taking into account the recent developments on domestic and international front, the apex bank decided to reiterate and consolidate the instructions in a meeting chaired by RBI Deputy Governor G P Muniappan in Mumbai.

Highlighting some of the norms, RBI said banks were required to keep a close watch on cash withdrawals and deposits of Rs 10 lakh (Rs 1 million) and above in deposit, cash credit or overdraft accounts and keep record of details of these large cash transactions in a separate register.

In order to check possible abuse of banking channels for illegal and anti-national activities, the board should clearly lay down a policy for adherence to these requirements comprising internal control systems, financing terrorism, internal audit/inspection and identification and reporting of suspicious transactions.

On terror finance, RBI said it had been circulating lists of terrorist entities notified by government of India to banks so that they may exercise caution if any transaction was detected with such entities.

There should be a system at branch level to ensure that such lists were consulted in order to determine whether a person/organisation involved in a prospective or existing business relationship appears on such a list.

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