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TMI BlogMaster Circular on Money Transfer Service SchemeX X X X Extracts X X X X X X X X Extracts X X X X ..... INDEX PART-A SECTION I Guidelines for permitting(authorising) Indian Agents under Money Transfer Service Scheme (MTSS) SECTION II Guidelines for overseas principals SECTION III Guidelines for appointment of Sub-Agents by Indian Agents SECTION IV Guidelines for renewal of permission (authorization) of existing Indian Agents SECTION V Inspection of Indian Agents SECTION VI KYC / AML / CFT guidelines for Indian Agents SECTION VII General Instructions PART B Reports / Statements Annex I : KYC / AML / CFT guidelines for Indian Agents Annex II : Format for Sub-Agents of Indian Agents of MTSS Annex III : Statement showing details of quantum of remittances received through Money Transfer Scheme during the quarter ended Annex IV : Statement of collaterals kept by Indian Agents Appendix PART-A SECTION I Guidelines for permitting (authorising) Indian Agents under Money Transfer Service Scheme (MTSS): 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et Owned Funds of Rs.50 lakh. Note :- (i) Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit balance in Profit Loss A/c) minus (Accumulated balance of loss, Deferred revenue expenditure and Other intangible assets) (ii) Net Owned Funds :- Owned funds minus the amount of investments in shares of its subsidiaries, companies in the same group, all (other) non-banking financial companies as also the book value of debentures, bonds, outstanding loans and advances made to and deposits with its subsidiaries and companies in the same group in excess of 10 per cent of the Owned funds. 3. Procedure for making Applications to the Reserve Bank Application for necessary permission to act as an Indian Agent may be made to the Chief General Manager-in-Charge, Forex Markets Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Amar Building, Fort, Mumbai-400 001 and should be accompanied by the documents pertaining to its proposed Overseas Principal, as detailed in Section II below and the following documents: a. A declaration to the effect that no proceedings have been initiated by / are pending with the Directorate of Enforcement (DoE) / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Only cross-border personal remittances, such as, remittances towards family maintenance and remittances favouring foreign tourists visiting India shall be allowed under this arrangement. Donations/contributions to charitable institutions/trusts, trade related remittances, remittance towards purchase of property, investments or credit to NRE Accounts shall not be made through this arrangement. b. A cap of US $ 2500 has been placed on individual remittance under the scheme. Amounts up to Rs. 50,000/- may be paid in cash to a beneficiary in India. Any amount exceeding this limit shall be paid by means of account payee cheque/ demand draft/ payment order, etc. , or credited directly to the beneficiary's bank account only. However, in exceptional circumstances, where the beneficiary is a foreign tourist, higher amounts may be disbursed in cash. Full details of such transactions should be kept on record for scrutiny by the auditors/ inspectors. c. Only 30 remittances can be received by a single individual beneficiary under the scheme during a calendar year. 6. Criteria for RBI decisions (i) The Indian Agents need to have strength and efficiency to function profitably in a hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and are supervised by the concerned Central Bank/ Government or financial regulatory authority. d. The Overseas Principal should be well established in the money transfer business with a track record of operations in well regulated markets. e. The arrangement with Overseas Principal should result in considerably increasing access to formal money transfer facilities at both ends. f. The Overseas Principal should be registered with the overseas trade / Industry bodies. g. The Overseas Principal should have a good rating from one of the international credit rating agencies. h. The Overseas Principal should submit confidential reports from at least two of its bankers. i. The Overseas Principal should submit a report certified by independent Chartered Accountants, regarding steps taken to comply with anti money laundering norms in the home/ host country. j. The Overseas Principals will be fully responsible for the activities of their Agents and Sub Agents in India. k. Proper records of remitters as also beneficiaries pertaining to all pay-outs in India are to be maintained by the Overseas Principals. All records must be made accessible on demand to the Reserve Bank or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them. 4. Due Diligence of Sub Agents The Indian Agents and the Overseas Principals should undertake the following minimum checks while conducting due diligence of the Sub Agents, other than ADs Cat-I, ADs Cat-II, Scheduled Commercial Banks, FFMCs and the Deptt. of Posts. existing business activities of the Sub Agent/ its position in area Shop Establishment/ other applicable municipal certification in favour of the Sub Agent verification of physical existence of location of the Sub Agent conduct certificate of the Sub Agent from the local police authorities. (certified copy of Memorandum and Articles of Association and Certificate of Incorporation in respect of incorporated entities). Note: Although obtaining of conduct certificate of the Sub Agent from the local police authorities is non-mandatory for the Indian Agents, the Indian Agents must take due care to avoid appointing individuals/ entities as Sub Agents who have cases / proceedings initiated / pending against them by any law enforcing agencies. declaration regarding past criminal cases, cases initiated/ pending against the Sub Agent and/or its directors/ partners by any law enforcing agency, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointing a Sub Agent and any irregularity observed could render the Indian Agent s permission liable for cancellation. SECTION IV Guidelines for renewal of permission(authorization) of existing Indian Agents : 1. Necessary permission to Indian Agents will be issued initially for a period of one year, which may be renewed for one to three years at a time on the basis of fulfilment of all conditions and other directions/ instructions issued by the Reserve Bank from time to time by Indian Agents. 2. The applicant should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC), as defined in the A.P. (DIR Series) Circular No. 25 [A.P. (FL Series) Circular No. 02] dated March 6, 2006 , or a Scheduled Commercial Bank or the Department of Posts. 3. The Indian Agent should have minimum Net Owned Funds of Rs. 50 lakh. 4. Application for renewal of permission should be submitted to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the Indian Agent falls along-with the documents pertaining to the Overseas Principal as detailed in Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate on Net Worth from their Statutory Auditors to the Central Office of the Foreign Exchange Department and the Department of Payment and Settlement Systems of the Reserve Bank. Similarly, all Indian Agents are required to submit their annual audited balance sheet along with a certificate from their Statutory Auditors on Net Owned Funds to the Regional offices concerned of the Foreign Exchange Department of the Reserve Bank. As the Overseas Principals and the Indian Agents are expected to maintain minimum Net Worth and Net Owned Funds respectively on an ongoing basis, they are required to bring it to the notice of the Reserve Bank immediately along with a detailed plan of restoring the Net Worth/ Net Owned Funds to the minimum required level, if there is any reduction in their Net Worth/ Net Owned Funds below the minimum level. PART-B Reports / Statements 1. A quarterly statement of the quantum of remittances received, as per the enclosed format (Annex-III) should be furnished by the Indian Agents to the Regional Offices (ROs) concerned of the Foreign Exchange Department (FED) of the Reserve Bank, under whose jurisdiction their registered offices fall and Foreign Excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering". Money Laundering can be called a process by which money or other assets obtained as proceeds of crime are exchanged for "clean money" or other assets with no obvious link to their criminal origins. 2. The objective The objective of prescribing KYC/AML/CFT guidelines is to prevent the system of cross border inward money transfer into India from all over the world under the MTSS from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC procedures also enable Authorised Persons, who are Indian Agents under MTSS [referred as APs (Indian Agents) hereinafter] to know/understand their customers and their financial dealings better, which in turn help them manage their risks prudently. 3. Definition of Customer For the purpose of KYC policy, a Customer is defined as : a person who receives occasional/ regular cross border inward remittances under MTSS; one on whose behalf a cross borde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., Politically Exposed Persons (PEPs) may, if considered necessary, be categorised even higher. iii. Documentation requirements and other information to be collected in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009, Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, as amended from time to time, as well as instructions / guidelines issued by the Reserve Bank, from time to time. iv. Not to make payment of any remittance where the AP (Indian Agent) is unable to apply appropriate customer due diligence measures, i.e., AP (Indian Agent) is unable to verify the identity and /or obtain documents required as per the risk categorisation due to non-cooperation of the customer or non reliability of the data/information furnished to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that the adoption of customer acceptance policy and its implementation should not become too restrictive and must not result in denial of cross border inward remittance facilities to general public. e) With a view to preventing the system of cross border inward money transfer into India from all over the world under the MTSS from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities, whenever there is suspicion of money laundering or terrorist financing or when other factors give rise to a belief that the customer does not, in fact, pose a low risk, APs (Indian Agents) should carry out full scale customer due diligence (CDD) before making payment of any remittance. 4.4 Customer Identification Procedure (CIP) a) The policy approved by the Board of APs (Indian Agents) should clearly spell out the Customer Identification Procedure while making payment to a beneficiary or when the AP has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data. Customer identification means identifying the customer and verifying his/her identity by using reliable, indep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial owner" has been defined as the natural person who ultimately owns or controls a client and/or the person on whose behalf the transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person. Government of India has since examined the issue and has specified the procedure for determination of Beneficial Ownership. The procedure as advised by the Government of India is as under: A. Where the client is a person other than an individual or trust, the AP (Indian Agents) shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the following information: (i) The identity of the natural person, who, whether acting alone or together, or through one or more juridical person, exercises control through ownership or who ultimately has a controlling ownership interest. Explanation: Controlling ownership interest means ownership of/entitlement to more than 25 percent of shares or capital or profits of the juridical person, where the juridical person is a company; ownership of/entitlement to more than 15% of the capital or profits of the juridical person wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian Agents) should keep in mind the spirit of instructions issued by the Reserve Bank and avoid undue hardships to individuals who are, otherwise, classified as low risk customers. c) APs (Indian Agents) should introduce a system of periodical updation of customer identification data, if there is a continuing relationship. d) An indicative list of the type of documents / information that may be relied upon for customer identification is given in SECTION-II. It is clarified that permanent correct address, as referred to in SECTION-II means the address at which a person usually resides and can be taken as the address as mentioned in a utility bill or any other document accepted by the AP for verification of the address of the customer. When there are suspicions of money laundering or financing of the activities relating to terrorism or where there are doubts about the adequacy or veracity of previously obtained customer identification data, APs (Indian Agents) should review the due diligence measures including verifying again the identity of the client and obtaining information on the purpose and intended nature of the business relationship, as the case may be. [In view of Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spelt out in the Customer Acceptance Policy. APs (Indian Agents) should also subject such transactions to enhanced monitoring on an ongoing basis. The above norms may also be applied to transactions with the family members or close relatives of PEPs. The above norms may also be applied to customers who become PEPs subsequent to establishment of the business relationship. These instructions are also applicable to transactions where a PEP is the ultimate beneficial owner. Further, in regard to transactions in case of PEPs, it is reiterated that APs (Indian Agents) should have appropriate ongoing risk management procedures for identifying and applying enhanced CDD to PEPs, customers who are family members or close relatives of PEPs and transactions of which a PEP is the ultimate beneficial owner. 4.6 Monitoring of Transactions Ongoing monitoring is an essential element of effective KYC procedures. APs (Indian Agents) can effectively control and reduce their risk only if they have an understanding of the normal and reasonable receipt of remittances of the beneficiary so that they have the means of identifying receipts that fall outside the regular pattern of activity. However, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Agent) should ensure that an effective KYC programme is put in place by establishing appropriate procedures and ensuring effective implementation. It should cover proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibility should be explicitly allocated within the AP (Indian Agent) for ensuring that the APs policies and procedures are implemented effectively. APs (Indian Agents) should, in consultation with their Boards, devise procedures for creating risk profiles of their existing and new customers and apply various anti money laundering measures keeping in view the risks involved in a transaction. b) APs (Indian Agents) internal audit and compliance functions have an important role in evaluating and ensuring adherence to the KYC policies and procedures. As a general rule, the compliance function should provide an independent evaluation of the AP s (Indian Agent s) own policies and procedures, including legal and regulatory requirements. APs (Indian Agents) should ensure that their audit machinery is staffed adequately with individuals who are well-versed in such policies and procedures. The concurrent aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iciencies in AML/CFT regime of these countries, while entering into business relationships and transactions with persons (including legal persons and other financial institutions) from or in these countries/ jurisdictions and give special attention to these cases. 4.11 Principal Officer a) APs (Indian Agents) should appoint a senior management officer to be designated as Principal Officer. Principal Officer shall be located at the head/corporate office of the AP and shall be responsible for monitoring and reporting of all transactions and sharing of information as required under the law. The role and responsibilities of the Principal Officer should include overseeing and ensuring overall compliance with regulatory guidelines on KYC/ AML/ CFT issued from time to time and obligations under the Prevention of Money Laundering Act, 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009, rules and regulations made there under, as amended from time to time.The Principal Officer should also be responsible for developing appropriate compliance management arrangements across the full range of AML/CFT areas (e.g. CDD, record keeping, etc.). He will maintain close liais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security or a document has taken place facilitating the transaction; and e. All suspicious transactions whether or not made in cash and by way of as mentioned in the Rules. (ii) Information to be preserved APs (Indian Agents) are required to maintain all necessary information in respect of transactions referred to in Rule 3 to permit reconstruction of individual transactions including the following information: a. the nature of the transaction; b. the amount of the transaction and the currency in which it was denominated; c. the date on which the transaction was conducted; and d. the parties to the transaction. (iii) Maintenance and Preservation of Records a) APs (Indian Agents) are required to maintain the records containing information of all transactions including the records of transactions detailed in Rule 3 above. APs (Indian Agents) should take appropriate steps to evolve a system for proper maintenance and preservation of transaction information in a manner that allows data to be retrieved easily and quickly whenever required or when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND) in respect of transactions referred to in Rule 3 at the following address: The Director, Financial Intelligence Unit-India (FIU-IND), 6th Floor, Hotel Samrat, Chanakyapuri, New Delhi-110021. Website - http://fiuindia.gov.in/ b) APs (Indian Agents) should carefully go through all the reporting formats. There are altogether four reporting formats, as detailed in SECTION-III, viz. i) Cash Transactions Report (CTR); ii) Electronic File Structure-CTR; iii) Suspicious Transactions Report (STR); and iv) Electronic File Structure-STR. The reporting formats contain detailed guidelines on the compilation and manner/procedure of submission of the reports to FIU-IND. It would be necessary for APs (Indian Agents) to initiate urgent steps to ensure electronic filing of all types of reports to FIU-IND. The related hardware and technical requirement for preparing reports in an electronic format, the related data files and data structures thereof are furnished in the instructions part of the formats concerned. c) In terms of instructions contained in paragraph 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n asked for. c. The instruction on Maintenance of records of transactions , Information to be preserved and Maintenance and Preservation of records as contained above in this circular at Para 4.12 (i), (ii) and (iii) respectively are scrupulously followed by the branch. However, in respect of branches not under central computerized environment, the monthly CTR should be compiled and forwarded by the branch to the Principal Officer for onward transmission to the FIU-IND. B) Suspicious Transaction Reports (STR) i) While determining suspicious transactions, APs (Indian Agents) should be guided by definition of suspicious transaction contained in PML Rules, as amended from time to time. ii) It is likely that in some cases, transactions are abandoned/ aborted by customers on being asked to give some details or to provide documents. It is clarified that APs (Indian Agents) should report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction. iii) APs (Indian Agents) should make STRs if they have reasonable ground to believe that the transaction, including an attempted transaction, involves proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the objectives of the KYC programme. The front desk staff needs to be specially trained to handle such situations while dealing with customers. b) Employees Training APs (Indian Agents) must have an ongoing employee training programme so that the members of the staff are adequately trained to be aware of the policies and procedures relating to prevention of money laundering, provisions of the PMLA and the need to monitor all transactions to ensure that no suspicious activity is being undertaken under the guise of remittances. Training requirements should have different focuses for frontline staff, compliance staff and staff dealing with new customers. It is crucial that all those concerned fully understand the rationale behind the KYC policies and implement them consistently. The steps to be taken when the staff come across any suspicious transactions (such as asking questions about the source of funds, checking the identification documents carefully, reporting immediately to the Principal Officer, etc .) should be carefully formulated by the APs (Indian Agents) and suitable procedure laid down. The APs (Indian Agents) should have an ongoing training programme for consist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guidelines. Section -II Customer Identification Procedure: Features to be verified and documents that may be obtained from customers Features Documents - Legal name and any other names used (i) Passport (ii) PAN card (iii) Voter s Identity Card (iv) Driving licence (v) Identity card (subject to the AP s satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the AP(Indian Agent) - Correct permanent address (i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the AP). (any one of the documents, which provides customer information to the satisfaction of the AP (Indian Agent) will suffice). Note :- If the address on the document submitted for identity proof by the prospective customer is same as that declared by him/her, the document may be accepted as a valid proof of both identity and address. If the address indicated on the document submitted for identity proof differs from the cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Note: With reference to point 9, ownership of the Sub Agent should be detailed up to the last layer of equity holding ending in mentioning the name of the individual/ entity that owns beneficial interest in the company. Date: Signature of Chartered Accountant Place: Signature of Managing Director Annex-IIa : List of Certified copies of Documents to be submitted Certificate of Incorporation Memorandum (up-to-date) and Articles of Association Board resolution for conducting money transfer activities, submission of application and its contents including authorization of an official to make the application. Details of associates, group companies, etc. PAN Card/s of the Director/s. Bank Account details and sealed confidential reports from banks. A certificate from Chartered Accountant certifying Net Owned Funds Balance Sheet and P L A/c statement for the last three years. Business plan for the next three years. Conduct certificate from the local police authorities. Declaration regarding past criminal cases, cases initiated/ pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November 30, 2010 5. A.P. (DIR Series) Circular No. 24 [ A.P.(FL Series) Circular No. 05] December 13, 2010 6. A.P.(DIR Series) Circular No.26 [A.P.(FL Series) Circular No. 07] December 22, 2010 7. A.P.(DIR Series) Circular No.28 [A.P.(FL Series) Circular No. 09] December 22, 2010 8. A.P.(DIR Series) Circular No.50 [A.P.(FL Series) Circular No. 12] April 6, 2011 9. A.P.(DIR Series) Circular No. 52[A.P.(FL Series) Circular No. 14] April 6, 2011 10. A.P. (DIR Series) Circular No. 62 May 16, 2011 11. A.P. (DIR Series) Circular No. 64 May 20, 2011 12. A.P.(DIR Series) Circular No. 66 May 20, 2011 13. A.P.(DIR Series) Circular No. 22 September 19, 2011 14. A.P.(DIR Series) Circular No. 24 September 19, 2011 15. A.P.(DIR Series) Circular No. 78 February 15, 2012 16. A.P.(DIR Series) Circular No. 87 February 29, 2012 17. A.P.(DIR Series) Circular No. 108 April 17, 2012 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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