Revision to the Master Direction on KYC

To combat Money Laundering India has enacted Prevention of Money Laundering Act, 2002 and Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. According to the framework Regulated Entities (REs) have been mandated to adhere to certain customer identification procedures for any transaction either by establishing an account-based relationship or otherwise and monitor their transactions.

The Master Direction (MD) on KYC dated February 25, 2016, and subsequent amendments, requires Regulated Entities (REs) to conduct Customer Due Diligence (CDD) for their customers, following the process outlined in the directive.

Amendments to the above Master Direction has been made vide circular bearing reference number RBI/2023-24/107, DOR.AML.REC.66/14.01.001/2023-24 dated January 4, 2024.

The definition of Politically Exposed Persons (PEPs) can be found in sub-clause (xvii) of clause (a) of Section 3 of the MD on KYC. However, for better clarity, under the revised Master Direction, the definition of PEPs has been added in the explanation to Section 41 of the Master Direction which states that PEPs are individuals who are or have been entrusted with prominent public functions by a foreign country, including the Heads of States/Governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials.

Consequently, the sub-clause (xvii) of clause (a) of Section 3 of the Master Direction mentioned above has been deleted.

The circular shall apply to all Regulated Entities (REs).